My Take - highlighted in RED - Today's news releaseSANTA MONICA, Calif. and TORONTO, Aug. 19, 2019 (GLOBE NEWSWIRE) -- The Tinley Beverage Company Inc. (the “Company" or "Tinley") is pleased to confirm that it has fulfilled its planned Q2 deliveries to distributors, and is providing an update on its cannabis licensing, bottling, business development and overall corporate operations.
Product Production The Company has confirmed that the manufacturer of the Tinley-branded products (“Manufacturer”) shipped more than $200,000 of products to distributors’ facilities in June and July, plus additional amounts for sales and marketing samples. This quantity of inventory, which represents all five of the Company’s products, was shipped based on the quantity of products requested by various distributors prior to the pause in manufacturing that had occurred in late 2018. As previously disclosed, the Company would not recognize revenue immediately upon shipping to distributors, despite such products not being returnable or refundable. The Company is instead recognizing revenue once the relevant distributors provide payment, which allows for the variability of portions of inventory used for sales and other samples, as well as the timing of distributors’ sales and payments.
- No shipments in May of 2019. As per 1st May, 2019 NR, all the product had passed testing. I am not sure what the hiccup was but no shipment of products in May.
- Additional amount is less than $50,000 otherwise they would have mentioned the amount of $250,000 worth of product are shipped and not $200,000 only.
- Revenue: As per company policy, they will not recognize revenue immediate upon shipping. So, it means they cannot guarantee the revenue during June & July will be $200,000. They will recognize once the stores confirm that the product is sold. They might not recognize June portion of the revenue till July which will mean that 2nd quarter (April-June) might be low like first quarter. I think this is very important point which this management is communicating as vaguely as possible.
- It took 2 months for Tinley to produce and ship product worth of $200,000. As per Company’s old NR, the phase 2 facility production capacity is 250,000 bottles per month. So, it means there was certainly some other hiccups. I am not sure if that was one time thing or regular delays for each production batch. Because, $200,000 was on backorder and was known since last year as per old NRs.
The Company is pleased with its progress towards restocking stores that had carried its products prior to the Fall 2018 production pause, as well as with obtaining listings in new stores. As a result, the Company’s products are now available in dispensaries in most key markets throughout California. These products are also available via home delivery throughout the San Francisco Bay Area, including Silicon Valley, as well as in portions of Los Angeles. Additionally, the Company’s products are available for on premise consumption in licensed cannabis lounges in San Francisco and the Palm Springs area. Requests for Company products have also been received from several cannabis lounges that are expected to be among the first to open in Los Angeles later this year.
- Covers most of San Francisco and portion of LA. Hopefully, they will cover whole LA sooner than later.
- Licensed Cannabis lounges are opening up in California. We are in two lounges already and more to follow in LA by end of the year.
Long Beach Facility Buildout and Licensing The Company is conducting the buildout of a state of the art, purpose-built bottling facility under local authorization, which has been successfully granted by the City of Long Beach. The Company’s application for a California State Type N Manufacturing license remains in process and, as previously disclosed, is expected to extend beyond the completion of equipment installation and tenant improvements at the facility. The Company is pleased to be progressing through its licensing process as, and in certain respects, faster than expected. However, as previously disclosed, the process is still projected to extend somewhat beyond the completion of the buildout. This completion of the buildout is now anticipated in the coming weeks and, as a result, the date of the final commissioning of this facility is not impacted by elements of the buildout that remain in progress.
- The company does not acknowledge the delays in buildout of Phase 3 facility. But, it is certainly delayed if you go back and read the old NRs.
- Anyways, now the management says the build out will be completed in coming weeks. I would assume it might 2-4 weeks. But, the licensing process will extend after the buildout time, so it’s safe to assume, the phase 3 facility won’t be licensed till 4-8 weeks.
The Manufacturer continues to have ample capacity with its Phase 2 licensed manufacturing and bottling facility agreement in place for the Tinley-branded products as well as for those of co-packing clients.
- Meanwhile, the management thinks that Phase 2 has enough capacity to meet the demand including for co-packing. So, phase 3 facility delay should not affect company's California plans. It will affect our Nevada expansion timeline assuming that it is the next state in line for expansion.
Co-Packing Clients The Company has formulated products for two prospective co-packing services clients, both of which are widely known brands. The Company has also received substantial inbound interest in facilitating cannabis-infused co-packing services from other companies, most of which are currently operating in the beverage alcohol, health beverage and cannabis industries.
- Tinley has formulated products for two well-known clients. I am guessing that the two clients are still contemplating and yet to do definitive agreement for co-packing with Tinley. Please, keep in mind, we are not the only company who can provide co-packing services in California. So, no revenue from Co-packing yet. Many players are interested for co-packing, although management has been saying this for months. Please, check old NRs.
Territorial Expansion The Company has entered into agreements with two Canadian cannabis companies to facilitate the negotiation of definitive agreements for production and sale of Tinley’s products in Canada. As a result, the Company expects to begin making presentations to various Canadian provincial cannabis boards and other prospective cannabis buyers this Fall. While cannabis beverages are expected to become legal in October of this year, it remains uncertain when licenses specific to manufacturing will be finalized for Canadian companies or when retailers will be in a position to make such products available for sale.
- Preliminary agreement with Two Canadian Cannabis companies. Definitive agreement to follow in future. I am not sure about the company’s strategy here. Does this agreement mean they are going to use two different bottling facilities (e.g. one east and one in west etc.) ?
- This might be stretched out process, I am thinking Tinley’s products won’t be out in Canada till next year. (I don’t think it’s a bad thing as long as we have them out for summer 2020.)
Distribution Service Tinley has begun providing value-added services to existing cannabis distributors in California. Beverage distribution typically requires a broader range of services than distribution of other consumer products, namely services related to Direct Store Delivery (DSD) distribution. Such services typically encompass high weight and cube logistics, in-store display and shelf merchandising, in-depth shopkeeper education and incentives, and more frequent restocking to reduce back-room storage requirements for large beverage cases in stores. Tinley is uniquely positioned to help existing cannabis distributors offer these additional services, thanks to Rick Gillis’ previous role as President of the Western USA’s second-largest beverage alcohol DSD distributor. As a component of this suite of services, Tinley has two dedicated beverage-specific delivery vehicles that offer existing licensed distributors the ability to deploy these for beverage-only deliveries.
- This is new revenue stream which this company has now. Thanks to experienced Rick Gillis.
- They have two delivery vehicles for beverage only deliveries, which can be used by licensed distributors.
- I think this revenue stream should have good margin. Although, the revenue itself might be very low.