Company: IPST
Filing Date: 2025-11-18
Form Type: 10-Q
Source: 0001788230-25-000175
Chunk: 278

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-11-18
Form: 10-Q
Item: Part II, Item 8
Chunk 278
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 unabsorbed overhead to be greatly reduced on a full year basis in 2026. (See also below for our discussion on Gross Margins related to unabsorbed overhead in Non-GAAP Financial Measures).

The approximately $43,000 decrease in net products cost of sales period over period is further detailed as follows:

Cost of Sales Products Sales - Spirits BusinessThree Months Ended September 30,(rounded to $000’s)20252024ChangeSpirits – Wholesale$175,000 $347,000 $(172,000)Spirits – Retail159,000 210,000 (51,000)Spirits – Third Party— 21,000 (21,000)Merchandise and Prepared Food13,000 57,000 (44,000)Unabsorbed Overhead728,000 482,000 246,000  $1,075,000 $1,117,000 $(42,000)

•The approximately $172,000 decrease in wholesale product cost of sales to approximately $175,000 for the three months ended September 30, 2025 compared to approximately $347,000 for the three months ended September 30, 2024 was primarily the result of the shifting of some wholesale orders from quarter to quarter 

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based on timing of reorders in the wholesale channel and the continued reduction of focus on our part on low margin items as we shift focus to higher margin items.

•The decrease to $0 in third-party production costs is due to no such activity in the three months ended September 30, 2025. 

•Our unabsorbed overhead, which is a measure of our capacity relative to our current utilization, increased by approximately $246,000 to approximately $728,000 for the three months ended September 30, 2025 compared to approximately $482,000 for the three months ended September 30, 2024. The unabsorbed overhead expense indicates our underutilization of current production capacity as we move away from low-margin, high volume products into higher margin products. Our goal continues to be the reduction of unabsorbed overhead over time as our production volumes increase with increased sales and as we reduce overhead costs associated with excess production capacity, warehouse space and other real estate. The combined efforts of increasing high margin product sales and reducing general overhead costs are geared toward reducing our overhead expenses to have our remaining overhead right-sized to our strategy of focusing on producing and selling