Company: IPST
Filing Date: 2025-08-26
Form Type: S-1
Source: 0001213900-25-080839
Chunk: 126

Company: Heritage Distilling Holding Company, Inc.
Filing Date: 2025-08-26
Form: S-1
Chunk 126
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 a material effect on our gross margin for those products. Continued Investment and Innovation Our performance is dependent on our ability to continue to develop products that resonate with consumers. It is essential that we continually identify and respond to rapidly -evolvingconsumer trends, develop and introduce innovative new products, enhance our existing products, and generate consumer demand for our products. Management believes that investment in beverage product innovation will contribute to long -termrevenue growth, especially in the premium and ultra -premiumsegments. Key Components of Results of Operations Net Sales Our net sales consist primarily of the sale of spirits and services domestically in the United States. Customers consist primarily of wholesale distributors and direct consumers. Substantially all revenue is recognized from products transferred at a point in time when control is transferred, and contract performance obligations are met. Service revenue represents fees for distinct value -addedservices that we provide to third parties, including production, bottling, marketing, consulting and other services, including for the TBN, aimed at growing and improving brands and sales. Service revenue is recognized over the period in which the service is provided. 73 Cost of Sales We recognize the cost of sales in the same manner that the related revenue is recognized. Our cost of sales consists of product costs, including manufacturing costs, duties and other applicable importing costs, shipping and handling costs, packaging, warranty replacement costs, fulfillment costs, warehousing costs, and certain allocated costs related to management, facilities and personnel -relatedexpenses associated with supply chain logistics. Gross Profit and Gross Margin Our gross profit is the difference between our revenues and cost of sales. Gross margin percentage is obtained by dividing gross profit by our revenue. Our gross profit and gross margin are, or may be, influenced by several factors, including: •Market conditions that may impact our pricing; •Our cost structure for manufacturing operations, including contract manufacturers, relative to volume, and our product support obligations; •Our capacity utilization and overhead cost absorption rates; •Our ability to maintain our costs on the components that go into the manufacture of our products; and •Seasonal sales offerings or product promotions in conjunction with plans created with our distributors or retail channels. We expect our gross margins to fluctuate over time, depending on the factors described above. Sales and Marketing Sales and marketing expenses consist primarily of employee -relatedcosts for individuals working in our sales and marketing departments, our tasting room general managers and Cask Club directors, our hourly tasting room sales associates, the executives to whom all general managers report, and the executives whose primary function is sales or marketing