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PDFTo be sure, the 10-K offered investors little reason to sing. For starters, the filing reveals, this once-hot “coffee company” sells no coffee of its own at all. JAMN relies on a supplier based in frigid Canada – far away from the tropical Jamaican home of its co-founder Rohan Marley – to provide the company with an actual product to sell to its customers instead.
Back in April of 2010, JAMN inked a “supply and toll agreement” with Canterbury Coffee of British Columbia that gave it access to some brew. According to that agreement, JAMN relies on Canterbury to fulfill every role – save a minor one – normally satisfied by a firm that classifies itself as a coffee company. Canterbury purchases the coffee beans. It roasts them. And it then packages them in bags supplied by JAMN – the company’s only real product – for sale to the public.
JAMN signed this deal more than a year ago, right before Shane Whittle – a notorious Vancouver stock promoter – officially resigned as CEO of the company. But the company never mentioned that agreement, seemingly material enough to warrant at least a quiet 8-K report, in a single regulatory filing until now.
Even today, however, JAMN has failed to share important details that would allow investors to determine just how much money the company can expect to generate for its modest role in this arrangement. Instead, JAMN vaguely notes that Canterbury will subtract its own costs – for the beans, the roasting, the packaging, the shipping – from the finished product, once it’s sold, and then give JAMN whatever money is left. That exact amount, or even a percentage, cannot be estimated since JAMN replaced those crucial figures with meaningless “Xs” and withheld an actual un-redacted version of the agreement supplied to the U.S. Securities and Exchange Commission ahead of its official (and less forthcoming) annual report.
Originally, the new filing reveals, JAMN arranged for Canterbury to supply three types of coffee with rather generic names: Jammin Java, Jammin Java Espresso and Jammin Java Decaf. By the time that JAMN had amended its agreement a few weeks ago, however, the company had adopted more suggestive (but potentially more deceptive) names for the coffee instead. Thanks to that change, JAMN now markets three colorful brands of coffee – Lion’s Blend, Kingston City Roast Espresso and Mountain Roast SWP Decaf – that it peddles as its own.
What does JAMN contribute to the production of this very special (and rather expensive) coffee? The company supplies … bags. Specifically, it provides bags emblazoned with the Jammin Java name and the trademark lion and slogan – “Marley Coffee, Stir It Up” – licensed from a separate company, Marley Coffee LLC (MCL), that Rohan Marley and his sidekick Whittle largely control.
To be fair, JAMN did unveil a second agreement that actually ranks as new. According to its 10-K, JAMN has signed an exclusive contract with National Coffee Service and Vending (NSCV) of Nevada to market and sell its product to offices that provide coffee service to their employees. (Whittle personally pitched this service to TheStreetSweeper -- while promising a sample of high-end Marley Coffee “free of charge, of course” – after fielding softball questions, still unanswered, from TheStreetSweeper ahead of a big investigative report on the company. TheStreetSweeper promptly declined that generous offer.)
For JAMN, the new filing indicates, the second arrangement works like this. Once JAMN receives the coffee supplied by Canterbury but packaged in its own bags, the company will then provide that rebranded coffee to NSCV for distribution to its office-based clients. JAMN actually offered some quantifiable details about this particular deal, indicating that it will receive 60% of any profits with NSCV collecting the rest.
With luck, that deal suggests, faux Jamaican brew could soon be available in the vending machines of office break rooms all across the land!
To be sure, JAMN still needs to cover most of the globe before that can begin to happen. The company barely generated $1,000 in revenue over the course of its latest fiscal year. It added only $42,000 more in sales in the three months since that time, despite a loudly celebrated sellout of its product on Amazon.com, and could potentially owe a big cut of that total to its actual coffee supplier.
Meanwhile, the new 10-K shows, JAMN has redefined the licensing agreement that allowed the company to enter the coffee business in the first place. When JAMN originally inked its trademark deal with MCL, past filings show, the company claimed that it had secured “an exclusive, transferrable, sub-licensable, worldwide license” from the second well-named firm.
Exclusive? Maybe not so much any more. In its new 10-K, JAMN now portrays its right to use the Marley Coffee trademarks – the company’s core asset – as non-exclusive instead.
While JAMN says that it is seeking to amend its license with MCL to insure exclusivity, the company warns of potentially serious repercussions even if it happens to succeed. Specifically, JAMN states that it would likely need to issue more stock to MCL – which could result in “substantial dilution” to the stock held by current shareholders – in order to secure the exclusive rights that the company had previously suggested that it already controlled.
JAMN offered another startling revelation, this one involving a crucial (but mysterious) financing partner, as well. Back in December, filings indicate, JAMN reached an agreement with Straight Path Capital – originally identified as “a United Kingdom company” – that would allow the company to raise up to $2.5 million by selling Straight Path up to $40,000 worth of stock a day at 40 cents a share. More than four months later, the new filing states, JAMN has raised just $120,000 – a sum that could have been generated over the course of three short days – by selling cheap stock, fetching up to $3 on the open market, from its funding partner. JAMN did secure a pledge from Straight Path on May 5 (after its stock broke past the $3 mark) to fork over the remaining $2.38 million in exchange for another 5.95 million of its then-highflying stock. However, the filing reveals, JAMN has yet to receive those promised funds – with the two parties still engaged “in continuing discussions” at the moment – and may, in fact, never receive that money at all.
As highlighted by TheStreetSweeper earlier this week, Straight Path Capital has never filed any documents with the official agency (Companies House) that registers companies in the U.K. In its new 10-K, filed just one day afterTheStreetSweeper exposed that curious detail, JAMN now describes Straight Path as a firm incorporated in the Marshall Islands instead.
For those unfamiliar with that location, the Marshall Islands consist of a group of atolls (as warm and picturesque as Marley’s beloved Jamaica itself!) that form a tiny nation out in the Pacific Ocean. Despite its modest size, this miniature nation has actually joined the modern world with a company registry of its own. Like Companies House in the U.K., this smaller registry lacks any filings from Straight Path Capital as well.
The new annual report delivers yet another surprise to boot. According to the official “risk factors” outlined in the 10-K, JAMN recently fielded a warning from the British Columbia Securities Commission (BCSC) indicating that the agency may soon issue a cease-trade order for its stock in that Canadian province. JAMN must satisfy conditions applied to any U.S.-based issuer with a “significant connection to British Columbia,” which require separate corporate documents filed with Canada’s version of Edgar, in order to overcome this hurdle. For its part, JAMN has assured investors that it is trying to do just that.
JAMN has sounded another alarm in the meantime. Specifically, JAMN states that “unauthorized and unaffiliated Internet stock promoters” have generated artificial demand for its stock and potentially “artificially inflate(d)” the prices for its shares. JAMN issued a similar warning last week, when it quietly filed an 8-K overlooked by investors loudly courted by paid promoters who kept touting the stock regardless.
On Monday, with JAMN plummeting on TheStreetSweeper’s investigative report, one of those promoters – the infamous “John Bell” -- boldly pushed forward with his aggressive publicity campaign even after his Internet hosting service pulled the plug on his website. That day, Bell feverishly issued emails to investors blaming the “temporary downturn” in JAMN shares on market “manipulation” (of all things) and urged them to buy the plunging stock for almost guaranteed gains.
JAMN kept falling like a knife, anyway, wounding investors who followed Bell’s advice and tried to catch it along the way. The stock, which fetched $5.17 when TheStreetSweeper published its big report, had lost more than half of its value even before the company dropped all of the bombshells packed into its new annual report.
JAMN investors, bleary-eyed after combing through that after-market report or – even worse – wide-eyed after waking up to discover the devastating news that it contained – suffered through more bloodshed on Wednesday. JAMN swiftly plummeted another 35% to $1.50 a share, down more than 75% from the $6.35 peak it had reached (on the very day that Bell’s website disappeared) just one week earlier, as stockholders rushed to dump millions of their rapidly fading shares.
At least some of those shareholders, influenced by Bell’s latest – and arguably most egregious – tout had been banking on surefire gains instead.
“There will be millions of dollars of buying coming into JAMN,” Bell assured investors as the stock spiraled lower on Monday. And “when millions of dollars of buying come into a small-cap company, there is only one way the price can go. Up. It’s guaranteed. It’s mandated by law.
“This is as close as you’ll ever get to a ‘sure thing’ in investing … (And) you and I both know it’s going to happen.”
As it turns out, however, those faithful investors knew far less than they ever imagined. Thanks to promoters like Bell, they clearly thought they were buying stock in a hot coffee company. Instead, they woke up to the eye-opening discovery that they had placed huge bets on nothing more than a bag maker – still classified as a mere “shell” company – and wound up becoming misled bag-holders in the end.
* Important Disclosure: Prior to the publication of its original investigative report on JAMN, TheStreetSweeper (through its members) effected a “short sale” of 30,000 shares of the company's stock, beginning on May 4, 2011, at an average price of $2.98 a share, with the intent of profiting from decreases in the price of the stock. TheStreetSweeper covered its entire position on May 18 at $1.51 a share.* Update: Due to the threat of a "forced buy-in," TheStreetSweeper covered its short position of 40,500 shares at an average price of 2.08.
