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Tinley Beverage (TNY.C) spikes 14% on cannabis margarita rollout

04/05/2018

Equity Guru principal Chris Parry first wrote about Tinley Beverage (TNY.C) on Oct 2, 2016:

“Imagine, if you will, an alcoholic beverage that tastes like a Friday afternoon summer patio drinky, but instead of getting you drunk, it gets you gently stoned,” wrote Parry. “That’s phase II of Tinley’s big plan, in which they’re putting out three products…that are de-alcoholized and infused with THC.”

“A week ago, you could have snapped up this stock for $0.06 a throw. Today? $0.115. That’s a near double, and the story isn’t even really out there yet.”

At that time, we didn’t own any stock and Tinley wasn’t a client.

Tinley is a client now, we do own stock, and we’ve been tracking them closely since that initial article.

April 04, 2018 TNY announced that it has “produced an initial batch of its Tinley Cocktails cannabis margarita.”

The market liked the news: TNY spiked 14% to .80 on 2.3 million shares traded.

Tinley is also announced that a licensed distributor has “agreed in principle” to carry Tinley cannabis-infused products throughout California.

Tinley is in discussions to finalise a definitive distribution agreement with this unnamed company.

As we wrote late last year:  “there is an opportunity brewing in the weed space for beverage companies.”

  • According to Transparency Market Research, the $1.6 trillion global non-alcoholic beverage market will reach $1.9 trillion by 2020 – expanding about 4% a year over that time.
  • In 2017, The North American marijuana market reached $9.7 billion – up 35% from 2016, according to ArcView Market Research.

It doesn’t take a genius to predict that when these two mega-trends collide someone is going to make a shit load of money.

There are a couple of things to keep in mind here.  The reason the Canadian weed market is more attractive to investors is that we have federal support for legalised recreational marijuana.

Yes, Canadian provinces have their own distribution protocols and taxation schemes – but for the most part it’s: one country – one market.

If you bake a weed cookie in Alberta, it’s not that hard to get permission to sell it in Ontario.

U.S. President Trump is a life-long tea-totaller and drug abstainer; his Attorney General Jeff Sessions is convinced that pot smoking leads to pedophilia, cannibalism and eventually…crude language.

Selling cannabis in the U.S. is a state-by-state battle – which cuts the nuts off any national advertising campaign – creating 52 problems (one for every state) to achieve wide distribution.

But here’s what you have to remember: Trump and Sessions are moving in opposition to the general sentiment of the U.S. electorate.

According to a recent Gallup poll 64% of Americans support marijuana legalization. The pro-pot contingent has doubled in the last 15 years.  In 2017, a majority of Republicans (51%) express support for legalizing marijuana.  Republican support for pot is up 9% in the last three years.

You can see which way the wind is blowing here.

Worrying about the negative health effects of cannabis is like fretting about a pimple when you’ve got an ulcer the size of medicine ball lodged in side of your neck.

In the last 15 years, 500,000 people died of drug overdoses, the majority of it coming from opioids.  Death toll from cannabis: zero.

The U.S. will eventually legalise pot at a federal level.  In the mean-time Tinley can only sell its products in California.

That “only” requires clarification.

California’s GDP is 70% higher than Canada’s GDP.

In fact, if California were a country, it would have the 6th highest GDP in the world.

Tinley has produced an initial batch of the “ready-to-drink Margarita”.

The product is infused with 10mg of cannabis.  This dosage echoes the vibe of a late afternoon highball.

The website The Green Joint states that a dosage of 10-15 milligrams is appropriate for “Weekend Warriors & Occasional Users”.  It notes that, “10mg has been established as a single dose amount. Eating more than 10mg is not recommended for everyone.”

Tinley’s April 4, 2018 press release confirms that the cannabis margarita contains “a level of psychoactive intensity comparable to a single alcohol-based cocktail.”

Tinley’s product is made with typical margarita ingredients and also containing terpenes commonly found in sativa strains.

The margarita is currently being testing with the expectation it will eventually be packaged and released for retail distribution.

“The Company intends to distribute the initial batch to a relatively small and defined group of consumers, primarily for product feedback, logistic/supply chain control and verification, and additional forms of structured and lifestyle product testing.  The Company intends to produce additional batches in the coming weeks factoring in feedback from the initial controlled distribution.”

The unnamed distributor is “one of the first to receive both state and local distribution licenses in a major Southern California metropolitan area and has warehouses throughout the state.”

Two months ago, TNY announced that its intended Phase I cannabis production facility has completed a municipal cannabis inspection in Riverside County, California.

A recent research report suggests that alcohol sales have dropped 13% in states where cannabis has become legal.

“Tinley believes consumers will switch to cannabis to an even larger extent as cannabis products improve in taste and quality.”

A 620% stock price appreciation in 17 months is nothing to sneeze at.

But let’s be honest: investors are getting antsy.

Tinley needs to start generating fat juicy revenues.

Can they do it?

To quote ex Black Flag singer and current radio host, Henry Rollins: “My optimism wears heavy boots and is loud.”

With a market cap of $67 million, Tinley has ample opportunity to grow value as it gains traction in the massive Californian market place.

Full Disclosure:  Tinley is an Equity Guru marketing client and we own stock.

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Comments 5

  1. Jason Starchuk says:

    Hi Lukas, great article on Tinley, thanks for introducing me to them….and great site by the way. I have a good feeling about the product and feel strongly that cannabis infused CBD and TCH drinks will really take off. I read Tinley’s last financial statement and noticed they have accumulated a deficit of $26 million. Is this a concern? Thanks!!

    • Lukas Kane says:

      Jason, thanks for reading, and thumbs up for persuing the financials, and not just being dazzled by the “story” – which is indeed compelling. In general, when companies are chasing a big prize in a frontier industry – we expect deficit. Tesla borrowed BILLIONS before it made a single car. But I thought your question deserved a specific, detailed, informed answer, so I asked the CEO Jeff Masser and this is what he told me: “That number is the accumulated loss of the company since inception. The vast majority of that amount was accumulated by prior management while the company was a mining company. There was no way to reset it to zero when we took over the company. However it does not need to be paid back. It’s just an accounting record.” So Jason, the answer to your question is “No” – the $26 million is not a concern.”

      • Jason Starchuk says:

        Hi Lukas, hey thanks so much for asking the CEO the question! I haven’t seen many news releases from Tinley and was digging through the archieves only just now to realize you replied. Sounds like the coconut rum extract is about to be realeased which is great to hear. While I got you on the line, I’d like to ask if you know much about the onset/offset time of the Tinley THC beverages? Listening to the CEO of Sproutly speak, the 5 minute onset / 90 minute offset seems to be one of the main advantages of their process which he states cannot be achieved with oil based beverages. So just wondering, if Sproutly claims to have the superior process (water soluable) where does that leave Tinley (oil extract based)? And then I think to myself, man are you overthinking things because the average consumer is likely not to care. Still, it would be good to know…and I did pick up on the fact that Sproutly does not hold the patent to the APP process in the US, so I do wonder who does?

        • Lukas Kane says:

          Jason,
          The Tinley products are aimed squarely at the rec user, as the packaging and branding echo the good vibes of a California cocktail. Once you’ve starting knocking back high-balls, onset-time and off-set time – are not high priorities. If Sproutly’s tech becomes industry standard, then I imagine they’ll be licensing it to other weed beverage manufacturers. Many consumers won’t care about water-soluble – but others will. Regarding your question about U.S. rights. Jason, there are two important things here: firstly I can’t be running off and bugging the CEO every time you have a question; secondly, I ran off and bugged the CEO with your question and he said this: “IBS parent owns the rights for the US so it is still closely held as their two founding partners will become employees of Sproutly at the transaction. We decided not to pursue the US rights or acquisition as we wanted to stay away from any involvement or tie into the US for the time being. We will look to expand there when the federal regulations ease and the IBS parent co will remain very close to us.” Jason, it’s worth noting that the Sproutly CEO, is a good, clear, responsive communicator. In my opinion, this is very important.

          • Jason Starchuk says:

            Thank you very much Lucas for the effort put into your reply, made me chuckle. I promise no more CEO questions!

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