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EAST: Third quarter net revenue spot on our estimate but operating expenses were much higher than expected. Azunia made a significant contribution to the quarter.

By Ian Gilson, PhD, CFA

NASDAQ:EAST

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The third quarter results were announced today. Net sales were $4.43 million as compared to our $4.45 million estimate. Since Eastside Distilling (NASDAQ:EAST) is no longer considered a craft distillery based on alcohol volume the company paid excise taxes in 3Q19. Gross margins were slightly higher than expected.

Redneck Riviera Whisky case sales increased to 10,577 from second quarter sales of 4,271 in 2Q19 and 3,547 in 3Q18. The whisky sold 604 cases into liquor controlled states.

Azunia contributed revenue of $232,571 in the 19 days it was part of Eastside. This is a significant amount considering the short time of ownership. Premium spirits are very profitable and the tequila brands could be the company's most profitable line in 2020.

Operating expenses were much higher than we had estimated. This was, in part, due to increased headcount. We anticipate further increases in 4Q19.

We expect Eastside Distilling to make greater use of lines of credit based on its significant volume of spirits in inventory and the level of account receivable.

Mr. Larry Firestone, a member of the Board of Directors since September 2019, was appointed Chief Executive Officer on Nov. 13, 2019. The Board will now move on to appointing a Chief Financial Officer.

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