UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2012
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to
______
Commission file number:
000-52161
Jammin Java Corp.
(Exact name of registrant as specified in
its charter)
Nevada
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26-4204714
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(State or other
jurisdiction of
incorporation or
organization)
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(IRS Employer
Identification
No.)
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8200 Wilshire
Blvd., Suite 200
Beverly Hills,
CA
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90211
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(Address of
principal
executive offices)
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(Zip Code)
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Registrant’s telephone number, including
area code:
(323) 556-0746
Securities registered pursuant to Section 12(b)
of the Act:
None
Securities registered pursuant to Section 12(g)
of the Act:
Common stock, par value $0.001 per share
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
Yes
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No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
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No
x
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes
x
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
x
No
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Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
¨
Indicate by checkmark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer
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Accelerated filer
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Non-accelerated
filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
x
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes
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No
x
The aggregate market value of the registrant's voting and non-voting
common equity held by non-affiliates computed by reference to the closing price of such common equity on the Over-The-Counter Bulletin
Board as of July 29, 2011, the last business day of the registrant’s most recently completed second fiscal quarter,
was approximately $36,692,960.
At April 23, 2012, there were 76,744,150
shares of the registrant's common stock outstanding.
TABLE OF CONTENTS
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Page
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PART I
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Item 1.
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Business
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1
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Item 1A.
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Risk Factors
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6
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Item 1B.
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Unresolved Staff Comments
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12
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Item 2.
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Properties
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12
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Item 3.
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Legal Proceedings
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12
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Item 4.
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Mine Safety Disclosures
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12
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PART II
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Item 5.
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Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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13
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Item 6
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Selected Financial Data
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14
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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14
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Item 7A.
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Quantitative and Qualitative Disclosure About Market Risk
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17
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Item 8.
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Financial Statements and Supplementary Data
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17
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Item 9.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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17
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Item 9A.
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Controls and Procedures
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Item 9B.
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Other Information
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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20
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Item 11.
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Executive Compensation
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22
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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25
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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26
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Item 14.
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Principal Accounting Fees and Services
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27
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PART IV
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Item 15.
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Exhibits and Financial Statement Schedules
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28
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PART I
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (“Form 10-K”), particularly
in Item 1, “Business,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results
of Operations,” and the documents incorporated by reference, includes “forward-looking statements” that involve
risks and uncertainties, as well as assumptions that, if they prove incorrect or never materialize, could cause our results to
differ materially and adversely from those expressed or implied by such forward-looking statements. Examples of forward-looking
statements include, but are not limited to any statements, predictions and expectations regarding our earnings, revenue, sales
and operations, operating expenses, anticipated cash needs, capital requirements and capital expenditures, needs for additional
financing, use of working capital, plans for future products, services and distribution channels, anticipated growth strategies,
planned capital raises, ability to attract distributors and customers, sources of net revenue, anticipated trends and challenges
in our business and the markets in which we operate, the impact of economic and industry conditions on our customers and our business,
customer demand, our competitive position, the outcome of any litigation against us, critical accounting policies and the impact
of recent accounting pronouncements. Additional forward-looking statements include, but are not limited to, statements pertaining
to other financial items, plans, strategies or objectives of management for future operations, our financial condition or prospects,
and any other statement that is not historical fact. Forward-looking statements are often identified by the use of words such as
“may,” “might,” “will,” “intend,” “should,” “could,” “can,”
“would,” “continue,” “expect,” “believe,” “anticipate,” “estimate,”
“predict,” “potential,” “plan,” “seek” and similar expressions and variations or
the negativities of these terms or other comparable terminology.
These forward-looking statements are based on the expectations,
estimates, projections, beliefs and assumptions of our management based on information currently available to management, all of
which is subject to change. Such forward-looking statements are subject to risks, uncertainties and other factors that are difficult
to predict and could cause actual results to differ materially from those stated or implied by our forward-looking statements.
Factors that could cause or contribute to such differences include, but are not limited to, those identified under “Risk
Factors” in Item 1A in this Form 10-K. We undertake no obligation to revise or update publicly any forward-looking statements
to reflect events or circumstances after the date of such statements for any reason except as otherwise required by law.
The information contained in this Form 10-K is not a complete
description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and
consider the various disclosures made by us in this Annual Report and in our other reports filed with the Securities and Exchange
Commission (the “SEC”).
Unless the context requires otherwise, references to “the
Company,” “we,” “us,” “our,” “Jammin Java” and “Jammin Java Corp.”
refer specifically to Jammin Java Corp. You should carefully consider the risk factors described below, as well as the other information
included in this Annual Report on Form 10-K prior to making a decision to invest in our securities.
ITEM 1. BUSINESS.
HISTORY
The Company was incorporated in Nevada on September 2004 under
the name “Global Electronic Recovery Corp.” In February 2008, we changed our name to “Marley Coffee Inc.”
when we merged our then newly-formed subsidiary, “Marley Coffee Inc.” into the Company. In July 2009, we changed our
name to “Jammin Java Corp.” when we merged our newly-formed subsidiary, Jammin Java Corp., into our Company. Our
common stock is quoted on the Over-The-Counter Bulletin Board (“OTCBB”), a regulated quotation service that displays
real-time quotes, last-sale prices, and volume information in over-the-counter equity securities, under the symbol “JAMN.”
CURRENT BUSINESS OPERATIONS
In July 2009, we decided to pursue the business of providing
premium roasted coffee on a wholesale level to the service, hospitality, office coffee service and “big box” store
market. We intend to develop a significant market share of the category and achieve a leadership position by capitalizing on the
global recognition of the Marley name through a co-branding relationship with Marley Coffee, LLC (“MCL”). MCL
is a private limited liability company of which (i) Rohan Marley, one of our Directors, has a 33% ownership interest (and
collectively with his family, has a controlling interest) and serves as a Manager, and (ii) Shane Whittle, our former chief
executive officer and formerly one of our directors, has a 29% ownership interest and serves as a Manager. This co-branding
relationship is planned to coincide with our strategy to develop additional lines of consumer products. In addition, we intend
to be responsive to current consumer demand for sustainable coffee products by providing organically grown coffee, as well as “fair
trade” or “equal exchange” coffee (coffee that is purchased directly from small farmers or farmer-cooperatives,
generally included in the International Fair Trade Coffee Register).
We are party to a Trademark License Agreement (the “License
Agreement”) with MCL that was effective on March 31, 2010.
With respect to the License Agreement, Fifty Six Hope Road Music
Limited, a Bahamas international business company (“Fifty Six Hope Road”), owns and controls the intellectual property
rights in and to the late reggae performer, Robert Nesta Marley p/k/a Bob Marley, including “Marley Coffee” (the “Trademark”).
Fifty Six Hope Road granted a worldwide, exclusive, terminable oral license to MCL to utilize the Trademark and further granted
the right for MCL to grant to the Company an exclusive, terminable sub-license to use the Trademark.
Effective on August 5, 2011, the License Agreement was amended
(the “Amended License Agreement”). In consideration for MCL entering into the Amended License Agreement, the Company
agreed to assume $126,000 of obligations of MCL or its managing members by paying MCL or creditors identified by MCL or by MCL’s
managing members. Upon the signing of the Amended License Agreement, the Company paid $55,000 with the
balance to be paid thereafter in equal monthly installments over a period of 18 months, commencing with the first business day
of the first month following the effective date.
Under the Amended License Agreement, MCL granted to the Company
an exclusive right (the “Exclusive License”) to manufacture and market the name “Marley Coffee” within
and to the United States of America (inclusive of its territories and possessions, the “U.S.”), Canada, U.S. and Canadian
government and military facilities and installations worldwide, the United Mexican States (“Mexico”), and the nations
of the Caribbean Sea (the foregoing countries and U.S. and Canadian government and military facilities are collectively referred
to as the “Territory”), coffee in all its forms and derivations, regardless of portions, sizes or packaging (the “Licensed
Products”) through “Licensed Distribution Channels” (defined as hotels, chain motels and similar lodging establishments,
restaurants, companies engaged in providing on-site coffee services to for-profit or non-profit offices and other establishments,
large chain (“big box”) retail stores, specialty grocery stores, food distributors and supply services, gas and other
automotive/truck service stations, Internet-based wholesalers and retailers, and other businesses engaged in the sale of coffee
products (either whole or ground beans or beverages) and accessories, excluding “coffee houses”).
MCL also granted to the Company an exclusive license to use,
reproduce, and sublicense the use of and right to reproduce, the Trademark (whether directly or through affiliated or nonaffiliated
sublicensees, in association with the manufacture, marketing, advertisement, promotion, performance, sale, supply and distribution
of Licensed Products through the Licensed Distribution Channels. MCL granted to the Company a non-exclusive right to distribute,
within and to the Territory, through the Licensed Distribution Channels, tea products and ready-to-use (or “instant”)
coffee products (the “Non-Exclusive License,” and with the Exclusive License, the “License”). During the
time of effectiveness of the License, MCL granted to the Company a revocable right to use the name “Marley Coffee”
and reasonably similar variations thereof, subject to MCL’s consent, as its “doing business as” or “DBA”
name but solely in connection with the Licensed Products and Services in the Licensed Distribution Channels in the Territory.
Under the Amended License Agreement, the Company has no right
to establish, as a franchisor, franchising relationships for the retail sale of Licensed Products and Services. However, if MCL
or an affiliate decides to franchise the right to sell Licensed Products and Services on a retail basis, following the development
of such retail entities through the completion of up to 3 prototype establishments, the Company shall have a right of first refusal
to develop new franchises in the territories identified by MCL as being available for franchisees in the U.S. The Company plans
to utilize its relationship as a licensee of MCL to create products and distribute them, through our Roasting Agreement with Canterbury
and the NCSV Agreement (see below), to the grocery, retail, online, service, hospitality, office coffee service and big box store
industry market segments in the U.S., Canada and the Caribbean.
On April 25, 2011, the Company entered into an Exclusive Sales
and Marketing Agreement (the “NCSV Agreement”) with National Coffee Service & Vending (“NCSV”). Pursuant
to the NCSV Agreement, we agreed to appoint NCSV as our exclusive agent and distributor of “Jammin Java Coffee” brand
roasted coffee within the U.S. in the office coffee vending, office products, water, and other industries featuring a “break
room,” and divisions and offshoots thereof. Pursuant to the NCSV Agreement, we compensate NCSV based on a percentage of net
profits (as defined) on sales fulfilled by NCSV.
Pursuant to the NCSV Agreement, NCSV is responsible for marketing
and distributing the Products and we agreed to refer all inquiries for purchase of the Products to NCSV (subject to small quantities
of Products being referred to separate sub-agents). We also agreed not to compete with NCSV for sales and to refer to NCSV any
sales relating to the Products and segments covered by the NCSV Agreement.
The NCSV Agreement can be terminated by either party during
the first year of the agreement (subject to the terms of the NCSV Agreement) and thereafter continues in effect, automatically
renewing if not terminated as provided in the NCSV Agreement at the end of each successive year, for additional 2 year periods
on a rolling basis. After the first year of the NCSV Agreement, the NCSV Agreement can only be terminated in the event of a breach
of the NCSV Agreement (and then only by the non-breaching party) or if the terminating party pays the non-terminating party a lump
sum equal to the estimated net profit which would have been due to the non-terminating party if the NCSV Agreement had remained
in effect for an additional 24 months from the termination date of the NCSV Agreement (based on the prior 12 months’ net
profit).
The Company primarily receives its coffee from 2 main suppliers;
Canterbury Coffee Corporation (“Canterbury”) and European Roasterie, Inc. The Company generally provides these suppliers
with desired taste profiles for various Company products, as well as related packaging and marketing materials, and the suppliers
are generally responsible for sourcing and supplying the roasted beans for those products in quantities the Company orders from
time to time.
In April 2010, we entered into a Supply and Toll Agreement (as
amended, the “Supply Agreement”) with Canterbury, whereby Canterbury agreed to produce coffee products for the Company.
Effective as of January 1, 2012, we entered Roasting and Distribution Agreement (the “Roasting Agreement”) with Canterbury
which replaces the Supply Agreement and establishes the terms under which Canterbury will supply certain of the Company’s
current coffee product offerings.
The Roasting Agreement is terminable by either party on 30 days’
notice. Pursuant to the Roasting Agreement, we provide Canterbury with pre-made bags bearing our logo and the Trademarks licensed
through the License Agreement. Canterbury obtains the coffee beans and other ingredients, roasts, and prepares the coffee beans
and packages our products in the bags we provide. Under the Roasting Agreement, we are responsible for carrying out sales and marketing
for our products, provided that Canterbury pays the actual shipping costs to our licensed distributors and customers and receives
the gross proceeds from the sale of our products, and we receive the net difference between the total cost of production and shipping
of our products and the amount that Canterbury receives from the sale of such products to our distributors and customers. The prices
set forth in the Roasting Agreement are subject to change based on prevailing market prices, with 30 days’ written notice.
We bear all of the cost of bad debts or uncollectable accounts.
We operate with European Roasterie, Inc. under an oral contract
with substantially similar terms to those of the Roasting Agreement.
SALES INITIATIVES
The Company’s objective is to position Marley Coffee as
the premiere brand across all of the Licensed Distribution Channels. A major element of our strategy has been the amendment of
the License Agreement with MCL discussed above. Prior to the Amended License Agreement, the Company had a non-exclusive
license to manufacture and market coffee through the office coffee service (“OCS”), hospitality, service and big box
store industries. Additionally, the Company also received a non-exclusive license to create cold, ready-to-make coffee drinks,
teas and merchandise. The Amended License Agreement gives the Company an exclusive license in the U.S. (including its territories
and possessions), Canada, Mexico and the nations of the Caribbean Sea to manufacture and market the name “Marley Coffee”
and the responsibility for developing the brand based on the vision and core values of Rohan Marley and the Marley family movement,
which is the creation of an organization that produces products in a sustainable way. The Amended License Agreement allows the
Company to grow its existing line of business alongside the Marley Coffee brand and to add MCL’s current distribution business
outlets, which include grocery, retail, merchandise and on-line businesses, to the Company’s existing distribution channels.
The Company has added all of MCL’s product lines (the
5 SKUs of Organic, Fair Trade, Kosher Certified 12oz Whole Bean bags) to its distribution business. The Company launched a lineup
of 8oz ground and whole bean bags for the retail grocery market. The coffees are “Mystic Morning,” “Lively Up
Espresso Blend,” “One Love Single Origin Ethiopian Yirgacheffe,” “Simmer Down (organic SWISS WATER®
Decaf),” “Buffalo Soldier” and the Company’s latest breakfast blend “Get Up Stand Up.”
Sales to customers in the U.S. and Canada commenced in the
fourth quarter of 2010. The Company has entered into informal sale arrangements, not documented by definitive agreements, with
several coffee distributors, beverage services and retailers. In Canada, the Company has distribution channels directly to certain
retailers and through the Canadian unit of United National Foods, Inc., a large publicly-traded wholesale distributor to the natural,
organic, and specialty industry in the United States and Canada.
In the United States, for the commercial break room segment,
the Company uses its national sales representatives National Coffee Service & Vending (NCS&V) to distribute to various
retailers and distributors. These break-room distributors and their primary markets include First Choice Coffee Services (national
distributor), Evans Coffee (Greater New York City), U.S. Coffee (Long Island), Javasmart (Delaware), Distillata (Ohio), Blue Tiger
Coffee (Seattle and Los Angeles), Springtime Coffee (Philadelphia) and Coffee Perks (Florida). BC Coffee will serve as the Company’s
re-distributor for the Florida market and Vistar will provide the Company’s products to its New England and Ohio customers.
Within the U.S. grocery and specialty retail segment, the Company
is distributed through several distributors as well as going direct to certain retailers. Distributors include GMI for Southern
California, Renaissance Foods for Northern California and Mulvadi for Hawaii. The Company’s products are sold through various
retailers, including Whole Foods Market, Dean and Deluca, Molley Stones and other co-ops and various specialty grocers.
The Company has been building its distribution throughout the
Caribbean. The Company recently announced its preferred OCS distribution deal with Coffee Works in Bermuda. A key goal of the Company
is to saturate the Caribbean market with distribution of its products.
The Company has strengthened its on-line presence through the
consolidation of MCL’s and the Company’s product lines. Cooking.com and Amazon.com carry the Company’s entire
line of coffee. Our products are also being sold by other major on-line coffee retailers such as coffeewiz.com, bettercoffee.com,
tikihutcoffee.com and coffeecow.com.
The Company also is in the recurring monthly program/coffee
of the month business with its “Marley Coffee Monthly” program at www.MarleyCoffee.com. This program will allow consumers
to select from its six sustainable, organic, ethically produced coffee bean offerings and the frequency with which they would
like to receive the beans: in one-month, two-month, three-month or six-month intervals.
On October 11, 2011, the Company celebrated
the kickoff of its Food Service program at Union County College in Cranford, New Jersey, with an event dubbed “Marley Coffee
Day.” The company hopes to use this opportunity to launch into other college campuses and other food service marketplaces.
The Company is exploring the development of other business channels,
including lodging and hospitality. The Company is developing products for the lodging/hospitality channel to facilitate the ability
of travelers to use our coffee products in their hotel rooms. The Company continues to expand in the single serve arena and has
developed a regionalized food service program that its existing customers can offer to this channel.
PATENTS, TRADEMARKS AND LICENSES
As discussed above, effective on March 31, 2010, the Company
entered into the Asset Purchase Agreement and the License Agreement with MCL. Fifty Six Hope Road owns and controls the intellectual
property rights in and to the late reggae performer, Robert Nesta Marley, professionally known as Bob Marley, including the Trademark.
Fifty Six Hope Road granted a worldwide exclusive, non-terminable oral license to MCL to utilize the Trademark and further granted
the right for MCL to grant to the Company a non-exclusive, terminable sub-license to use the Trademark. In accordance with the
License Agreement, MCL granted to the Company a non-exclusive transferable sub-license for the worldwide rights to use the Trademark
for the licensed products and distribution channels.
Consideration for the license of the Trademarks is as follows:
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The Company entered into the Asset Purchase Agreement to sell all its interests in its Branding Development and Business Plan
Development to MCL;
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(2)
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The Company assigned an agreement entered into with Rohan Marley, proprietor of farmland and improvements thereon located in
Jamaica (the “Farm”) to lease the Farm commencing February 15, 2008 (the “Farm Lease Agreement”) to MCL
and transferred to MCL all its interest in the Farm Lease Agreement and leasehold improvements on the Farm;
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(3)
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The Company agreed to issue to MCL ten million (10,000,000) shares of common stock of the Company as follows:
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One Million (1,000,000) shares upon the execution of the License Agreement; and
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One Million (1,000,000) shares on each yearly anniversary of the execution of the License Agreement for the following nine
years.
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On June 15, 2010, the Company retained DS Enterprises, an independent
business valuation service, to provide financial advisory assistance in the accounting for the Trademark license acquisition, in
accordance with ASC 820 (FASB 157) guidelines, and to assist the Company in one or more of the following: (i) determining the Trademark
value and (ii) determining the fair valuation of the consideration (common stock) provided for in the acquisition using income,
market and cost-oriented methods according to ASC 820. According to the valuation report dated June 19, 2010, the following factors
were taken into consideration by DS Enterprises:
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The nature of the business and the history of the Company since inception;
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The economic outlook in general and the condition or outlook of the coffee industry;
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The book value of the business and the financial condition of the Company;
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The relief from royalty payments associated with using trademarks;
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The dividend-paying capacity of the Company;
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Sales of stock and the size of the block of stock to be valued; and
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The market prices of securities of corporations engaged in the same or a similar line of business and actively traded in a
free and open market, either on an exchange or over-the-counter basis.
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Based on DS Enterprises’ analysis, management estimated
that the fair market value of this transaction was $640,000. The License Agreement has an indefinite life and is therefore
not being amortized.
Management of the Company reviewed the valuation report and
is satisfied that the report fairly values the transaction. Management evaluated the carrying value of the license and determined
that no impairment existed at January 31, 3012 or 2011.
We entered into the License Agreement because we were of the
view that MCL is better positioned to continue developing the Farm in a sustainable manner. The License Agreement also secures
our rights to use the Trademarks. We also believed that the Company would be better suited to focus on the service, hospitality,
office coffee services and “big box” market segments, whereas MCL would focus on the high-end retail market.
As discussed above, effective August 5, 2011, the Company and
MCL entered into an Amended License Agreement with MCL. In consideration for the amended terms, the Company agreed to assume $126,000
of obligations of MCL or its managing members by paying MCL or creditors identified by MCL or by MCL’s managing members $55,000,
with the balance to be paid in equal monthly installments over a period of eighteen months. The Amended License Agreement provided
for the following:
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Expanded the definition of “Licensed Distribution
Channels” to include specialty grocery stores, food distributors and supply services, gas and other automotive/truck service
stations, Internet-based wholesalers and retailers, and other business engaged in the sale of coffee products (whole or ground
beans or beverages) and accessories (excluding “coffee houses”).
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Expanded the definition of “Licensed Products,” to include “the non-exclusive right to merchandise other
items including, but not limited to, coffee cups, coffee mugs, coffee glasses, saucers, milk steamers, machines for brewing coffee,
espresso, and/or cappuccino, grinders, water treatment products, tea products and chocolate products.”
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Amended the initial License Agreement’s nonexclusive worldwide right to grant the Company an exclusive right to distribute,
through the Licensed Distribution Channels, the Licensed Products and Services within and to the U.S., Canada, Mexico and the Caribbean,
as well as to U.S. and Canadian government and military facilities worldwide (the “Territory”).
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Granted the Company a non-exclusive right to distribute tea products and instant coffee in the Territory.
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Granted the Company a revocable right (subject to MCL’s consent) to use the term “Marley Coffee,” and reasonably
similar variations, as the Company’s “doing business as” name solely in connection with the Licensed Products
and Services, for the Licensed Distribution Channels, in the Territory. If MCL, or an affiliate thereof, opens up to three
franchise establishments to retail the Licensed Products and Services, following the completion of such franchises the Company
shall have a right of first refusal to develop new franchises in the U.S. The Amendment added an arbitration clause to the Agreement
for an efficient dispute resolution scheme.
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COMPETITION
Competition in the hospitality and coffee markets is intense
and we expect it to increase. Our most significant competitors, include premium coffee companies such as Starbucks, Tully’s,
Seattle’s Best, Peet’s Coffee, Green Mountain Coffee, Farmer’s Brothers and other national, local and regional
companies in the grocery retail and office coffee service and hospitality industry market, many of which have substantially greater
financial, sales, marketing and human resources than we do.
We believe that our customers choose among coffee brands based
on the total value proposition that includes quality, variety, convenience, personal taste preference and price. We believe that
our market share in the category is driven by the quality of our product, while being competitively priced in the premium category.
Our strategy is to enter into regional markets and concentrate our marketing efforts into those areas. If we are able to increase
our market penetration in those regional markets, we expect to expand our marketing efforts into additional regional markets.
PRODUCT RESEARCH AND DEVELOPMENT
We did not expend any significant funds on research and development
activities for the fiscal years ending January 31, 2012 or January 31, 2011.
EMPLOYEES
As of April 30, 2012, we had three full-time employees and no
part-time employees. We also utilize independent contractors and consultants to assist us with key functions. Our agreements with
these independent contractors and consultants are usually short-term. We believe that our relations with our employees, independent
contractors and consultants are good. None of our employees are represented by a union or covered by a collective bargaining agreement.
AVAILABLE INFORMATION
We are subject to the information and reporting requirements
of the Securities Exchange Act of 1934, or the Exchange Act, under which we file periodic reports, proxy and information statements
and other information with the United States Securities and Exchange Commission, or SEC. Copies of the reports, proxy statements
and other information may be examined without charge at the Public Reference Room of the SEC, 100 F Street, N.E., Room 1580, Washington,
D.C. 20549, or on the Internet at http://www.sec.gov. Copies of all or a portion of such materials can be obtained from the Public
Reference Room of the SEC upon payment of prescribed fees. Please call the SEC at 1-800-SEC-0330 for further information about
the Public Reference Room.
Financial and other information about Jammin Java is available
on our website (www.jamminjavacorp.com). Information on our website is not incorporated by reference into this report. We make
available on our website, free of charge, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as
soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC.
ITEM 1A. RISK FACTORS.
RISK FACTORS
An investment in our common stock is highly speculative, and
should only be made by persons who can afford to lose their entire investment in us. You should carefully consider the following
risk factors and other information in this annual report before deciding to become a holder of our common stock. If any of the
following risks actually occur, our business and financial results could be negatively affected to a significant extent.
We cannot make any assurance that material sales will develop.
We generated sales of approximately of $402,700 for the fiscal
year ended January 31, 2012; however, we had a net loss of $2,466,039 for the fiscal year ended January 31, 2012. We believe that
we will have sufficient capital to continue our business operations for the next 12 months with receipts from sales generated and
funds that we raised through the May 2011 Straight Path Investment (see Part II of this Report on Form 10-K under the caption “Recent
Sales of Unregistered Securities – Straight Path Capital.”). However, we have never generated net income through the
sale of our products and can make no assurances that net income will develop in the future, if at all. Moving forward, we hope
to build awareness of our redesigned and updated website, www.jamminjavacorp.com and www.marleycoffee.com to in turn create demand
for our products and sales, of which there can be no assurance.
Our auditors have expressed substantial doubt as to whether
our Company can continue as a going concern.
We have not generated sufficient revenues to support our operations
to date and have incurred substantial losses. The Company has an accumulated deficit of $3,040,865 and working capital of $968,463,
at January 31, 2012. In connection with our January 31, 2012 audit, our auditor has raised substantial doubt about the Company’s
ability to continue as a going concern.
We may not be able to successfully manage our growth, which
could lead to our inability to implement our business plan.
Our growth is expected to place a significant strain on our
managerial, operational and financial resources, especially considering that we currently only have two executive officers –Brent
Toevs, CEO and Anh Tran, President, Chief Operating Officer, Secretary and Treasurer. Further, as we enter into additional contracts,
we will be required to manage multiple relationships with various businesses and other third parties. These requirements will be
exacerbated in the event of our further growth. There can be no assurance that our systems, procedures and/or controls will be
adequate to support our operations or that our management will be able to achieve the rapid execution necessary to successfully
implement our business plan. If we are unable to manage our growth effectively, our business, results of operations and financial
condition will be adversely affected, which could lead to us being forced to abandon or curtail our business plan and operations.
We may be forced to abandon our business plan if we do not
generate sufficient revenues.
We have generated minimal revenues to date. There is a risk
that we will not generate increased revenues moving forward, and that your investment in us will not appreciate. If we do not generate
sufficient revenues in the future, we may be forced to abandon our business plan and your securities may become worthless.
Shareholders may be diluted significantly through our efforts
to obtain financing and satisfy obligations through the issuance of additional shares of our common stock.
Wherever possible, our board of directors will attempt to use
non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted
shares of our common stock. Our board of directors has authority, without action or vote of the shareholders, to issue all or part
of the authorized but unissued shares of common stock. In addition, we may attempt to raise capital by selling shares of our common
stock, possibly at a discount to market. These actions will result in dilution of the ownership interests of existing shareholders,
may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing
management’s ability to maintain control of the Company because the shares may be issued to parties or entities committed
to supporting existing management.
We lack an operating history which you can use to evaluate
us, making any investment in our Company risky.
We lack significant operating history which investors can use
to evaluate our previous earnings. The Company was a shell company as recently as November 2011. Therefore, an investment in us
is risky because we have little business history and it is hard to predict what the outcome of our business operations will be
in the future.
We rely upon key personnel and if they leave us, our business
plan and results of operations could be adversely affected.
We rely heavily on our Chief Executive Officer, Brent Toevs,
our President, Chief Operating Officer, Secretary and Treasurer, Anh Tran, and the Chairman of our Board of Directors, Rohan Marley,
for our success. Their experience and input create the foundation for our business and are responsible for the directorship and
control over our activities. Moving forward, should we lose the services of these individuals for any reason, we will incur costs
associated with recruiting a replacement and delays in our operations. If we are unable to replace such principal with another
suitably trained individual or individuals, we may be forced to scale back or curtail our business plan and activities. As a result
of this, your investment in us could become devalued or worthless. We currently have an aggregate of $1 million in Directors and
Officers’ liability insurance in place covering our officers and directors.
We rely on our Amended License Agreement with Marley Coffee,
our Roasting Agreement with Canterbury and the NCSV Agreement for our operations and revenues.
Effective March 31, 2010, we entered into the License Agreement
with MCL, a private limited liability company of which Rohan Marley, one of our directors, has a 33% ownership interest and serves
as a Manager, and one of our former Directors and former majority shareholders has a 29% ownership interest and serves as a Manager.
The License Agreement was amended on August 5, 2011. Fifty Six Hope Road owns and controls the intellectual property rights in
and to the late reggae performer, Robert Nesta Marley, professionally known as Bob Marley, including the Trademark. Fifty Six Hope
Road granted a worldwide exclusive, terminable oral license to MCL to utilize the Trademark and further granted the right for MCL
to grant to the Company an exclusive, terminable sub-license to use the Trademark for the licensed products and distribution channels.
In January 2012, we and Canterbury entered into a Roasting Agreement
with Canterbury, which is terminable by either party on 30 days written notice. Pursuant to the Roasting Agreement, we provide
Canterbury with pre-made bags bearing our logo and the Trademarks licensed through the License Agreement. Canterbury obtains the
beans and other ingredients for, roasts, prepares and packages the coffee beans for our products and packages them in the bags
which we provide to Canterbury. Under the Roasting Agreement, we are responsible for carrying out sales and marketing for our products,
provided that Canterbury pays the actual shipping costs to our licensed distributors and customers and receives the gross proceeds
from the sale of our products, and we receive the net difference between the total cost of production and shipping of our products
and the amount that Canterbury receives from the sale of such products to our distributors and customers.
On April 25, 2011, the Company entered into an Exclusive Sales
and Marketing Agreement (the “NCSV Agreement”) with National Coffee Service & Vending (“NCSV”). Pursuant
to the NCSV Agreement, we agreed to appoint NCSV as our exclusive agent and distributor of “Jammin Java Coffee” brand
roasted coffee within the U.S. in the office coffee vending, office products, water, and other industries featuring a “break
room,” and divisions and offshoots thereof. Pursuant to the NCSV Agreement, we compensate NCSV based on a percentage of net
profits (as defined) on sales fulfilled by NCSV.
We anticipate generating revenue moving forward solely as a
result of the sale of coffee bearing the Trademarks, which we source primarily under our Roasting Agreement with Canterbury and
European Roasterie, Inc. and which we distribute primarily through the NCSV Agreement. As a result, if the Amended License Agreement
was to be terminated, the Roasting Agreement, or the NCSV Agreement were terminated or not renewed, our operations could be adversely
effected, our revenues (if any), could be adversely affected and we could be forced to curtail or abandon our operations, causing
any investment in the Company to decline in value or become worthless.
Competition for coffee products and coffee brands is intense
and could affect our future sales and profitability.
The coffee industry is highly fragmented. Competition in coffee
products and brands are increasingly intense as relatively low barriers to entry encourage new competitors to enter the marketplace.
In addition, we believe that maintaining and developing our brands is important to our success and the importance of brand recognition
may increase to the extent that competitors offer products similar to ours. Many of our current and potential competitors have
substantially greater financial, marketing and operating resources and access to capital than we do. Our primary competitors include
Starbucks, Tully’s, Seattle’s Best, Peet’s Coffee, Green Mountain Coffee, Farmer’s Brothers and other companies
in the office coffee service and hospitality industry market. If we do not succeed in effectively differentiating ourselves from
our competitors in the coffee industry, including by developing and maintaining our brands, or our competitors adopt our strategies,
then our competitive position may be weakened and our sales of coffee, and accordingly our future revenues (if any), may be materially
adversely affected.
Our business is dependent on sales of coffee, and if demand
for coffee decreases, our business would suffer.
All of our revenues are planned to be generated through the
sale of coffee. Demand for coffee is affected by many factors, including:
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Changes in consumer tastes and preferences;
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Changes in consumer lifestyles;
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National, regional and local economic and political conditions;
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Perceptions or concerns about the environmental impact of our products;
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Demographic trends; and
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Perceived or actual health benefits or risks.
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Because we are highly dependent on consumer demand for coffee,
a shift in consumer preferences away from coffee would harm our business more than if we had more diversified product offerings.
If customer demand for our coffee decreases, our sales, if any, would decrease and we would be materially adversely affected.
If we fail to continue to develop and maintain our brand,
our business could suffer
.
We believe that maintaining and developing our brand is critical
to our success and that the importance of brand recognition may increase as a result of competitors offering products similar to
ours. Our brand building initiative involves increasing the availability of our products on the Internet, in grocery stores, licensed
locations and foodservice locations to increase awareness of our brand and create and maintain brand loyalty. If our brand building
initiative is unsuccessful, we may never recover the expenses incurred in connection with these efforts and we may be unable to
increase our future revenue or implement our business strategy. As part of our brand building initiative, we may revise our packaging
or make other changes from time to time. If these changes are not accepted by customers, our business could suffer.
Our success in promoting and enhancing our brand will also depend
on our ability to provide customers with high quality products and customer service. Although we take measures to ensure that we
sell only high-quality coffee, we have no control over our coffee products once purchased by customers. Accordingly, customers
may prepare coffee from our products in a manner inconsistent with our standards, store our coffee for long periods of time or
resell our coffee without our consent, which in each case, potentially affects the quality of the coffee prepared from our products.
If customers do not perceive our products to be of high quality, then our reputation and the value of our brand may be diminished
and, consequently, our ability to implement our business strategy may be adversely affected.
Coffee costs have been very volatile over the last two years
and increases in the cost of high-quality coffee beans could impact the profitability of our business
.
In the past two years, we have experienced a dramatic increase
in the price volatility of Arabica coffee traded on New York Board of Trade. While we do not purchase coffee on the commodity markets,
price movements in the commodity trading of Arabica coffee beans impact the prices we pay. We expect the coffee commodity market
to continue to be challenging as it continues to be influenced by worldwide supply and demand, the relative strength of the United
States Dollar and speculative trading. Coffee prices can also be affected by multiple factors in the producing countries, including
weather, natural disasters, political and economic conditions, export quotas or similar factors.
Decreases in the availability of high-quality coffee beans
could impact the profitability and growth of our business
.
If we are not able to purchase sufficient quantities of high-quality
coffee beans due to any of the above factors, we may not be able to fulfill the demand for our coffee, our revenue may decrease
and our ability to expand our business may be negatively impacted.
Besides coffee, we face exposure to other commodity cost
fluctuations, which could impair our profitability
.
In addition to the increase in coffee costs discussed above,
we are exposed to cost fluctuation in other commodities, including milk and gasoline. In addition, an increase in the cost of fuel
could indirectly lead to higher electricity costs, transportation costs and other commodity costs. Much like coffee costs, the
costs of these commodities depend on various factors beyond our control, including economic and political conditions, foreign currency
fluctuations and global weather patterns. To the extent that we are unable to pass along such costs to our customers through price
increases, our margins and profitability will decrease.
Adverse public or medical opinion about caffeine may harm
our business
.
Our coffee contains significant amounts of caffeine and other
active compounds, the health effects of some of which are not fully understood. A number of research studies conclude or suggest
that excessive consumption of caffeine may lead to increased heart rate, nausea and vomiting, restlessness and anxiety, depression,
headaches, tremors, sleeplessness and other adverse health effects. An unfavorable report on the health effects of caffeine or
other compounds present in coffee could significantly reduce the demand for coffee, which could harm our business and reduce our
sales and profits. Also, we could become subject to litigation relating to the existence of such compounds in our coffee; any such
litigation could be costly and could divert management attention.
Adverse publicity regarding product quality or food and beverage
safety, whether or not accurate, may harm our business
.
We may be the subject of complaints or litigation from customers
alleging beverage and food-related illnesses or other quality, health or operational concerns. Adverse publicity resulting from
such allegations may materially adversely affect us, regardless of whether such allegations are true or whether we are ultimately
held liable. In addition, any litigation relating to such allegations could be costly and could divert management attention.
We face a risk of a change in control due to the fact that
our current officers and directors do not own a majority of our outstanding voting stock.
Our current officers and our directors do not hold voting control
over the Company. As a result, our shareholders who are not officers and directors of us may be able to obtain a sufficient number
of votes to choose who serves on our board of directors and/or to remove our current directors from the board of directors. Because
of this, the current composition of our board of directors may change in the future, which could in turn have an effect on those
individuals who currently serve in management positions with us. If that were to happen, our new management could affect a change
in our business focus and/or curtail or abandon our business operations, which in turn could cause the value of our securities,
if any, to decline or become worthless.
We believe that our future success will depend in part on
our ability to obtain and maintain protection of our intellectual property and brand names.
Our success will depend in part on our ability to maintain and
enforce the Trademark we license through the License Agreement (described above) and additional trademarks and service marks (together
with the Trademark, the “Marks”) registered by the Company. In the future, competitors or other third parties could
claim that the Marks infringe on their rights, which could force us to defend infringement actions or challenge the validity of
the third parties’ trademarks in court. Furthermore, we may have to take action, file lawsuits and expend significant resources
in the future to protect the Marks and stop other parties from infringing on the use of such Marks and we cannot assure you that
we will have sufficient resources to pursue such litigation or actions. Any expenses we are forced to expend in defending our Marks
or stopping third parties from infringing on such Marks will decrease the amount of working capital we have available for our business
activities and could cause us to curtail or abandon our operations.
There is currently a volatile, sporadic and illiquid market
for our common stock on the Over-The-Counter Bulletin Board.
Our securities are currently quoted on the OTCBB under the symbol
“JAMN,” however, we currently have a volatile, sporadic and illiquid market for our common stock, which is subject
to wide fluctuations in response to several factors, including, but not limited to:
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actual or anticipated variations in our results of operations;
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our ability or inability to generate new revenues;
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increased competition; and
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conditions and trends in the market for medical testing products.
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Furthermore, our stock price may be impacted by factors that
are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political
and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market
price and liquidity of our common stock.
The market and value of our common stock may be negatively
affected by various unauthorized and unaffiliated internet stock promoters and the SEC’s investigation of such promoters.
In May 2011, we learned that unauthorized and unaffiliated Internet-based
stock promoters have been promoting short-term investments of the Company’s common stock in publications that they characterize
as “stock reports” and on their websites. Such websites often suggest that significant short-term profits can be made
by purchasing the Company’s common stock. The SEC has been conducting a non-public and confidential inquiry in order to determine
whether these activities violate securities laws. The Company believes that neither the Company nor anyone affiliated with it is
a target of the SEC’s investigation.
The activities of the unauthorized and unaffiliated internet
stock promoters have been promoting short-term investments in the company’s common stock may have created artificial demand
for, and artificially inflated the price of, the Company’s common stock. Such activities may therefore lead to a decline
in the price of the Company’s common stock and increased trading volume and volatility of the Company’s common stock.
Additionally, the activities of these stock promoters and the resulting SEC investigation may be perceived negatively by potential
investors and therefore could adversely affect the market for and/or the value of our stock.
Because until recently we were a “shell company,”
shareholders who hold shares of our common stock that are deemed restricted securities may not yet resell those shares pursuant
to Rule 144.
In various private placements we have issued shares of our common
stock that are deemed restricted securities, which may not be resold absent the registration of such shares with the SEC or an
exception from such registration. Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), may
permit a person who owns restricted shares to sell those shares without registration with the SEC, provided that various conditions
are met, including that such person has held the shares for a prescribed period, which will be 6 months or 1 year, depending on
various factors. However, because we were previously a “shell company” (a company that has no or nominal operations;
and, either no or nominal assets; assets consisting solely of cash and cash equivalents; or assets consisting of any amount of
cash and cash equivalents and nominal other assets), holders of restricted shares of our common stock may only sell their shares
under Rule 144 if we meet (and continue to meet) the following additional conditions:
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We have ceased to be a shell company;
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We are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
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We have filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or
such shorter period that the issuer was required to file such reports and materials), other than current reports on Form 8-K; and
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At least one year has elapsed from the time that we filed current comprehensive disclosure known as “Form 10 Information”
with the SEC reflecting our status as an entity that is not a shell company.
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We currently do not meet the condition described in the fourth
bullet point above and therefore holders of restricted shares of our common stock may not resell those shares under Rule 144. Upon
the filing of this annual report on Form 10-K, the Company believes it will have filed the required Form 10 Information with the
SEC reflecting the Company’s status as an entity that is not a shell company. Any stockholder of the Company who received
our restricted securities will not be able to sell them pursuant to Rule 144 without registration under the Securities Act, as
amended, until we have met all of the above-listed conditions, and then only for so long as we continue to meet those conditions
and are not a shell company. No assurance can be given that we will meet each these conditions or that, if we have met each of
them, we will continue to do so, or that we will not again be a shell company. Further, it may be harder for us to fund our operations
and pay our employees and consultants with our securities instead of cash, and to raise funding through the sale of debt or equity
securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the
future. Until greater liquidity with respect to our restricted securities is achieved, we may face difficulties in raising additional
funds, hiring employees, engaging consultants and using our securities to pay for any acquisitions, which could materially and
negatively affect our business and the value of shares of the Company’s common stock.
Investors may face significant restrictions on the resale
of our common stock due to federal regulations of “penny stocks.”
We are subject to the requirements of Rule 15(g)9, promulgated
under the Exchange Act, as long as the price of our common stock is below $5.00 per share. Under such rule, broker-dealers who
recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales
practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser
and receive the purchaser’s consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform
Act of 1990, also requires additional disclosure in connection with any trades involving a stock defined as a penny stock. Generally,
the SEC defines a penny stock as any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less
than $5.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule
explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity
of the securities and the ability of purchasers to sell their securities in the secondary market.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
As of April 23, 2012, we rent a virtual executive suite for
our corporate headquarters in Beverly Hills, California. Under the agreement, we are not allocated any specific amount of office
space but have access to office and conference room space on an as needed basis. Our monthly rental costs vary based on our actual
space and office service usage. Mr. Anh Tran, our president, has personally guaranteed our obligations under the virtual executive
suites agreement. If we fail to pay our obligations under the virtual executive suites agreement and Mr. Tran pays such amounts
pursuant to his personal guarantee, we will be obligated to repay Mr. Trans for any such amounts paid by him. We believe that our
current facilities are sufficient for the current operations of our business and we believe that suitable additional space in various
applicable local markets is available to accommodate any needs that may arise.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information and Holders
Our common stock is traded on the OTCBB
under the symbol “JAMN.”
The table below shows the high and low
per-share bid information for our common stock for the periods as indicated as reported by the OTCBB. These prices are
based on quotations between dealers, which do not reflect retail mark-up, markdown or commissions, and do not necessarily represent
actual transactions. Our common stock trades on a limited, sporadic and volatile basis.
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PRICE RANGES
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QUARTER ENDED
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HIGH
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LOW
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Fiscal Year Ended January 31, 2012
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January 31, 2012
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$
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0.46
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$
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0.24
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October 31, 2011
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$
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1.23
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$
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0.37
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July 31, 2011
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$
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6.35
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$
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0.55
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April 30, 2011
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$
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2.41
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$
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0.53
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Fiscal Year Ended January 31, 2011
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January 31, 2011*
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$
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0.65
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$
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0.65
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October 31, 2010*
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$
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0.17
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$
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0.17
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July 31, 2010
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$
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1.25
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$
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0.10
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April 30, 2010
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$
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1.01
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$
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0.89
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*
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Our common stock was briefly delisted from the OTCBB in
September 2010, automatically due to Rule 15c2-11, but our common stock was re-quoted on the OTCBB in January 2011.
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Approximate Number of Equity Security Holders
As of April 23, 2012, there were 19 shareholders of record of
the common stock. This number does not include stockholders for whom shares were held in “nominee” or “street
name”.
In addition to being quoted on the OTCBB, the Company’s
common stock was previously traded on a public securities market in British Columbia, Canada. Because the Company did not comply
with certain Canadian securities filings requirements, the Company’s common stock is no longer eligible to trade on the British
Columbia market and is subject to a Cease Trade Order. At this stage in the Company’s development, the Company has determined
to invest its resources in other aspects of its business rather than incurring the significant expense to regain compliance with
the British Columbia market’s requirements.
Dividends
We have never declared or paid any cash
dividends on our common stock, and we do not anticipate paying any dividends on our common stock in the foreseeable future. We
intend to retain all earnings, if any, for the foreseeable future for use in the operation of our business and to fund future growth
of our business.
Securities Authorized for Issuance Under Equity Compensation
Plans
The following table sets forth information,
as of January 31, 2012, with respect to our compensation plans under which common stock is authorized for issuance. We grant
options to officers, directors, employees and consultants under our Equity Compensation Plan. We believe that the exercise price
for all of the options set forth below reflects at least 100% of the fair market value on the dates of grant for the options at
issue.
Equity Compensation Plan Information
Plan Category
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Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(A)
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Weighted-average
exercise price of
outstanding options,
warrants and rights
(B)
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Number of securities
available for future
issuance under equity
compensation plans
(excluding securities
reflected in column A)
(C)
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Equity compensation plans approved by shareholders
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20,000,000
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$
|
0.40
|
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12,800,000
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|
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Equity compensation plans not approved by shareholders
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-0-
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-0-
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-0-
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|
|
|
|
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Total
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20,000,000
|
|
|
$
|
0.40
|
|
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12,800,000
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2011 Equity Compensation Plan
The 2011 Equity Compensation Plan
(the “Equity Compensation Plan”) is intended to secure for the Company the benefits arising from ownership of the
Company's common stock by the employees, officers, directors and consultants of the Company, all of whom are and will be
responsible for the Company's future growth. The Equity Compensation Plan is designed to help attract and retain
for the Company and its affiliates personnel of superior ability for positions of exceptional responsibility, to reward
employees, officers, directors and consultants for their services and to motivate such individuals through added incentives
to further contribute to the success of the Company and its affiliates.
Pursuant to the Equity Compensation Plan, the Board of Directors
(or a committee thereof) has the ability to award grants of incentive or non-qualified options, restricted stock awards, performance
shares and other securities as described in greater detail in the Equity Compensation Plan to the Company’s employees, officers,
directors and consultants.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion
and analysis in conjunction with our Consolidated Financial Statement and related Notes thereto included in Part II, Item 8 of
this Report and the “Risk Factors” included in Part I, Item IA of this Report, before deciding to purchase, hold or
sell our common stock.
Overview
We are in the business of providing premium roasted coffee through
all of our distribution channels, which include, but are not limited to, the service, hospitality, office coffee service and “big
box” store markets. We intend to develop a significant market share of the category and achieve a leadership position by
capitalizing on the global recognition of the Marley name through a co-branding relationship with MCL. Through a licensing
agreement with MCL, the Company has the worldwide right to use, and sublicense, the intellectual property rights in and to the
late reggae performer, Robert Nesta Marley, professionally known as Bob Marley, including “Marley Coffee”.
Pursuant to the Company’s Amended License Agreement with
MCL, the Company markets the name “Marley Coffee” within the U.S. (including its territories and possessions), Canada,
Mexico and the nations of the Caribbean Sea to sell coffee in any form or derivation through any distribution channel, provided
that the Company may not use the brand “Marley Coffee” through coffee houses or coffee shop franchises.
The Company also may distribute tea products and instant coffee
products. During the time of effectiveness of the License, MCL granted to the Company a revocable right to use the name “Marley
Coffee” and reasonably similar variations thereof, subject to MCL’s consent, as its “doing business as”
or “DBA” name but solely within the scope of the License.
On April 25, 2011, the Company entered into an Exclusive Sales
and Marketing Agreement (the “NCSV Agreement”) with National Coffee Service & Vending (“NCSV”). Pursuant
to the NCSV Agreement, we agreed to appoint NCSV as our exclusive agent and distributor of “Jammin Java Coffee” brand
roasted coffee within the U.S. in the office coffee vending, office products, water, and other industries featuring a “break
room,” and divisions and offshoots thereof. Pursuant to the NCSV Agreement, we compensate NCSV based on a percentage of net
profits (as defined) on sales fulfilled by NCSV.
During the year ended January 31, 2012 (“Fiscal 2012”)
we grew from a development stage company to a fully functional organization. We raised $2,525,000 in private placements, which
allowed us to hire additional personnel, more effectively market our products and increase our business lines.
Results of Operations
Year Ended January 31, 2012 Compared with Year Ended January
31, 2011
Sales Revenue.
Sales revenue for the
for the fiscal year ended January 31, 2012 was $402,700, an increase of $401,661, as compared with sales revenue of $1,037
for the fiscal year ended January 31, 2011. Sales revenue increased as a result of the Company’s continued
maturation from its development stage.
Cost of Sales
. Cost of sales for the fiscal year ended
January 31, 2012 was $340,395, an increase of $338,704 as compared to $1,691 for the fiscal year ended January 31, 2011. The increase
in the cost of sales was in direct correlation to the Company’s growth.
Compensation and Benefit Expenses.
Compensation and benefits
for the fiscal year ended January 31, 2012, were $939,317 as compared to $-0- for the fiscal year ended January 31, 2011. The increase
was a result of stock compensation expenses associated with options granted.
Selling and Marketing Expenses
. Selling and marketing
expenses for the fiscal year ended January 31, 2012, were $221,888, an increase of $217,895, as compared to $3,993 in expenses
for the fiscal year ended January 31, 2011. The increase was principally the result of marketing expenses related to
the ramping up of sales operations.
General and Administrative Expenses.
General and
administrative expenses for the fiscal year ended January 31, 2012, were $1,369,372, an increase of $1,222,784, as compared to
$146,588 in expenses for the fiscal year ended January 31, 2011. The increase was principally the result of increased
professional fees, payroll and corporate reporting expenses.
Net Loss.
We incurred a net loss of $2,466,039
for the fiscal year ended January 31, 2012, compared to $151,235 for the fiscal year ended January 31, 2011. The principal reason
for the increase was an increase in professional fees, payroll, selling expenses, corporate reporting expenses and stock compensation
expenses associated with options granted.
Rising coffee commodity prices generally negatively affects
our net income. However, in the latter part of the fiscal quarter ended January 31, 2012, coffee commodity prices fell, resulting
in a positive impact on our net income.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2012, we had total assets of $1,832,849, consisting
of current assets of $1,056,946, including cash of $835,878, prepaid expenses and other current assets of $221,068 and long-term
assets including property and equipment of $9,903 and license agreement of $766,000. This compares to total assets of $861,185
on January 31, 2011.
At January 31, 2012, we had total liabilities consisting solely
of current liabilities of $88,483 and $71,997 as of January 31, 2011. Current liabilities included $51,275 of notes
payable in connection with the amended license agreement with Marley Coffee, discussed in Note 4 of the Footnotes to the Financial
Statements, and $37,208 of accounts payable.
At January 31, 2012, we had working capital of $986,463 and
a total accumulated deficit of $3,040,865.
For the fiscal year ended January 31, 2012, although we generated
sales of approximately of $402,700, we had a net loss of $2,466,039. We believe that we will have sufficient capital to continue
our business operations for the next 12 months with receipts from sales generated and funds that we raised in the private placement
with Straight Path Capital in 2011. However, we have never generated net income through the sale of our products and can make no
assurances that net income will develop in the future, if at all.
Our ability to meet our obligations in the ordinary course of
business is dependent upon our ability to sell our products directly to end-users and through distributors, establish profitable
operations through increased sales and decreased expenses, and obtain additional funds when needed. Management intends to increase
sales by increasing our product offerings, expanding our direct sales force and expanding our distributor relationships both domestically
and internationally.
There can be no assurance that we will be able to increase sales,
reduce expenses, or obtain additional financing, if necessary, at a level to meet our current obligations. As a result, the opinion
we have received from our independent registered public accounting firm on our consolidated financial statements contains an explanatory
paragraph stating that there is a substantial doubt regarding our ability to continue as a going concern.
The accompanying financial statements have been prepared on
a going concern basis that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The financial statements do not include adjustments relating to the recoverability of recorded asset amounts or the amounts or
classification of liabilities that might be necessary should we be unable to continue as a going concern.
Cash Requirements For Next 12 Months
During the next 12 months, we estimate our required funding
expenditures to be $595,000 consisting of $345,000 in Marketing and Advertising Costs and $250,000 in General and Marketing Costs.
From time to time, we may attempt to raise capital
through either equity or debt offerings. Our capital requirements will depend on many factors, including, among other things,
the rate at which our business grows, with corresponding demands for working capital and expansion capacity. We could be
required, or may elect, to seek additional funding through public or private equity, debt financing or bank financing.
However, a credit facility, or additional funds through public or private equity or other debt financing, may not be
available on terms acceptable to us or at all, or that any such financing activity would not be dilutive to our stockholders.
Without additional funds and/or increased revenues, we may not have enough cash or financial resources to operate for the
next twelve months.
Obligation to Issue Additional Shares
MCL currently beneficially owns 3,000,000 restricted shares
of our Common Stock pursuant to our obligation in the License Agreement to issue a total of 10,000,000 restricted share of our
Common Stock to MCL in annual installments of 1,000,000 share installments on March 31 of each year through March 31, 2019. As
such, the License Agreement obligates us to issue MCL an additional 7,000,000 shares. The securities issued to MCL under the License
Agreement were offered and sold in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act,
and thus have not been registered under the Securities Act.
Consolidated Cash Flows
We had net cash flows used in operating activities
of $1,479,739 for the fiscal year ended January 31, 2012, which was mainly due to $2,466,039 of net loss and an increase in prepaid
expenses and other current assets of $47,280 offset by $939,317 of stock issued for services and accounts payable of $13,147.
We had net cash provided by financing activities of $2,324,839
for the fiscal year ended January 31, 2012, of which $2,460,000 was from the sale of common stock attributable to the Investment
by Straight Path.
Off Balance Sheet Arrangements:
None.
Critical Accounting Policies
Our discussion and analysis of our financial
condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting
principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience
and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting
policies affect our most significant judgments and estimates used in preparation of our financial statements.
Stock-Based Compensation.
On January 1, 2006, we
adopted the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718 which establishes
accounting for equity instruments exchanged for employee service. We utilize the Black-Scholes option pricing model to estimate
the fair value of employee stock based compensation at the date of grant, which requires the input of highly subjective assumptions,
including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated
fair value of our share-based compensation. These assumptions are subjective and generally require significant analysis and judgment
to develop. When estimating fair value, some of the assumptions will be based on, or determined from, external data and other assumptions
may be derived from our historical experience with stock-based payment arrangements. The appropriate weight to place on historical
experience is a matter of judgment, based on relevant facts and circumstances.
We estimated volatility by considering historical stock volatility.
We have opted to use the simplified method for estimating the expected term of stock options equal to the midpoint between the
vesting period and the contractual term.
Revenue Recognition.
All revenue is recognized when persuasive
evidence of an arrangement exists, the service or sale is complete, the price is fixed or determinable and ability to collect is
reasonably assured. Revenue is derived from the sale of coffee products and is recognized on a gross basis upon shipment. The Company
utilizes a third party for the production and fulfillment of orders placed by customers. Customers order directly from the Company
and accordingly, the Company acts as a principal, takes title to the products, and has the risks and rewards of ownership, such
as the risk of loss for collection, delivery and returns.
Impairment of Long-Lived Assets
. Long-lived assets consist
of a license agreement that was recorded at the estimated cost to acquire the asset (See Note 3). The license agreement is reviewed
for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and
its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of
the assets, the assets are written down to their estimated fair values. Management evaluated the carrying value of the license
and determined that no impairment existed at January 31, 2012 or 2011.
Recently Issued Accounting Pronouncements
In September 2011, the FASB issued ASU 2011-08, Goodwill and
Other (Topic 350): Testing Goodwill and Other Assets for Impairment, which simplifies goodwill and other asset impairment tests.
The new guidance states that a qualitative assessment may be performed to determine whether further impairment testing is necessary
and is effective beginning fiscal years and interim periods beginning after December 15, 2011. The Company is evaluating the impact
of adopting this ASU on the Company’s financial position or results of operations.
Other accounting standards and exposure drafts, such as exposure
drafts related to revenue recognition, lease accounting, loss contingencies, comprehensive income and fair value measurements,
that have been issued or proposed by the FASB or other standards setting bodies that do not require adoption until a future date
are being evaluated by the Company to determine whether adoption will have a material impact on the Company’s financial statements
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our
financial statements and supplementary data, along with reports of independent registered public accounting firms thereon,
are presented beginning on page F-3 of this annual report on Form
10-K and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the reports that we file with the SEC under the Securities Exchange Act
of 1934, as amended is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms and that such information is accumulated and communicated to our management, including our principal executive and financial
officers, as appropriate, to allow for timely decisions regarding required disclosure. As required by SEC Rule 15d-15(b), we carried
out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal
financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934, as amended (“Exchange Act”) Rules 13a-15(e) and 15d-15(e)) as of the end
of the period covered by this report. Based on the foregoing, our principal executive and principal financial officer
concluded that our disclosure controls and procedures are not effective to ensure the information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded, processed and reported within the time periods specified in the
SEC’s rules and forms.
Management’s Annual Report on Internal Control over
Financial Reporting
The management of the Company is responsible for establishing
and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange
Act. The Company's internal control over financial reporting is a process designed under the supervision of the Company's Chief
Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the Company's financial statements for external purposes in accordance with accounting principles generally
accepted in the United States of America (US GAAP) and includes those policies and procedures that:
|
•
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions
of our assets;
|
|
•
|
provide reasonable assurance that the transactions are recorded as necessary to permit the preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only
in accordance with authorizations of our management and Directors;
|
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our
assets that could have a material effect on the financial statements;
|
|
•
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions
of our assets;
|
|
•
|
provide reasonable assurance that the transactions are recorded as necessary to permit the preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only
in accordance with authorizations of our management and Directors; and
|
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our
assets that could have a material effect on the financial statements.
|
Internal control over financial reporting cannot provide absolute
assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting
is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human
failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because
of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore,
it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for
establishing and maintaining adequate internal control over financial reporting for the Company.
Management has used the framework set forth in the report entitled
Internal Control-Integrated Framework
published by the Committee of Sponsoring Organizations of the Treadway Commission,
known as COSO, to evaluate the effectiveness of our internal control over financial reporting. Based on this assessment, management
has concluded that our internal control over financial reporting were not effective as of January 31, 2011.
A material weakness is a deficiency, or combination of deficiencies,
that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be
prevented or detected. In connection with the assessment described above, management identified the following control deficiencies
that represent material weaknesses at January 31, 2012:
|
(1)
|
lack of a functioning audit committee and lack of a majority of outside directors on the Company's board of directors capable
to oversee the audit function;
|
|
(2)
|
inadequate segregation of duties due to limited number of personnel, which makes the reporting process susceptible to management
override;
|
|
(3)
|
insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application
of GAAP and SEC disclosure requirements; and
|
|
(4)
|
ineffective controls over period end financial disclosure and reporting processes.
|
Management believes that the material weaknesses set forth in
items (1) through (4) above did not have an effect on the Company's financial reporting during the year ended January 31, 2012.
We are committed to improving our financial organization. As
part of this commitment, moving forward, we plan to hire additional outside accounting personnel and take action to consolidate
check writing and financial controls. Additionally, as soon as funds are available, we plan to make a determination
as to whether it is in the Company’s best interest to (1) appoint one or more outside directors to our board of directors
who shall be appointed to the audit committee of the Company resulting in a fully functioning audit committee who will undertake
the oversight in the establishment and monitoring of required internal controls and procedures; (2) create a position to segregate
duties consistent with control objectives and will increase our personnel resources; (3) hire independent third parties to provide
expert advice; and (4) prepare and implement sufficient written policies and checklists which will set forth procedures for accounting
and financial reporting with respect to the requirements and application of GAAP and SEC disclosure requirements.
We will continue to monitor and evaluate the effectiveness of
our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to
taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
This annual report does not include an attestation report of
our independent registered public accounting firm regarding internal control over financial reporting. Management’s report
was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide
only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
There was no change in internal control over financial reporting
(as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during our fourth fiscal quarter that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Our executive officers and directors are as follows:
Name
|
|
Age
|
|
Position
|
Brent Toevs
|
|
46
|
|
Chief Executive Officer and Director
|
Anh Tran
|
|
35
|
|
President, Chief Operating Officer, Secretary, Treasurer and Director
|
Rohan Marley
|
|
39
|
|
Director
|
Biographical information for our officer and Directors are set
forth below:
Brent Toevs
has served as Chief Executive Officer and
Director since August 2011. From 2001 to 2011 Mr. Toevs was co-founder and partner of National Coffee Service & Vending (NCSV),
a consulting firm providing sales agents and consultants in the office coffee and foodservice industries. NCSV represents and directs
sales nationally and regionally for numerous coffee brands. From 1999 to 2001, Mr. Toevs served as the Vice President of Sales
for USRefresh Coffee & Vending where he was responsible for OCS sales and marketing in the United States and Canada. From 1996
to 1999 Mr. Toevs held senior positions of increasing responsibility at USRefresh at its headquarters in Ottawa, Ontario. While
at USRefresh, Mr. Toevs served as the president where he oversaw sales, marketing and customer service and established the Canadian
division for the parent company and in sales management where he expanded sales and increased sales revenue. As our Chief Executive
Officer, Mr. Toevs is directly involved in all aspects of our operations. Mr. Toevs’ extensive experience in corporate
business development within the coffee foodservice industry, in addition to executive leadership and management experience, provide
valuable insight to the board of directors.
Anh Tran
has served as President, Chief Operating Officer,
Secretary, Treasurer and Director since August 2011. Mr. Tran began working for the Company in February 2010 and served as Chief
Executive Officer, President, Principal Financial Officer, Secretary and Director of the Company from May 2010 to August 2011. From
January 2005 to February 2010, Mr. Anh served as the chief executive officer of Greencine.com, an online independent movie distribution
service. During his tenure with Greencine.com, Mr. Tran led the company to numerous awards and was one of the first
in its field to distribute paid content online. Prior to that, he was a technology strategy consultant for Arthur Andersen.
Mr. Tran was involved with business process reengineering for Fortune 500 technology companies and worked closely with corporate
executives to strategically plan for the future. As a consultant for Arthur Andersen, Mr. Tran worked on Siebel Systems’
customer relationship management implementations. Mr. Tran received a fellowship at the prestigious Coro Fellowship Program in
San Francisco and holds a B.A. from the University of California at Los Angeles. As our President, Chief Operating Officer, Secretary
and Treasurer, Mr. Tran has extensive experience leading start-up companies. He also has a history working with consumer
products and international markets and utilizes those experiences to run the day to day operation of the Company as well as to
work to grow the Company on an international level. Mr. Tran’s experience with the Company’s operations and his
ability to provide operational insight led the board to conclude that Mr. Tran should serve as a director.
Rohan Marley
has served as a Director of the Company
since March 2008. Mr. Marley is the son of late reggae artist Bob Marley and is heavily involved in all of the family businesses
including 56 Hope Road Music, Bob Marley Music, Zion Rootswear as well as various land and resort holdings across the globe.
From July 2010 to the present, Mr. Marley has served as Chairman
of Marley Coffee, Ltd., a limited company formed under the laws of Jamaica in July 2010 with a principal place of business in Kingston,
Jamaica. Marley Coffee is in the business of producing coffee and selling it through various distribution outlets
including through Marley Coffee, LLC. Since February 2009, Mr. Marley has served as Co-Manager of MCL, which is in the business
of producing coffee and selling it through various distribution outlets including through Jammin Java pursuant to a license from
Marley Coffee. From January 2006 to February 2009, Mr. Marley was an entrepreneur principally engaged in planning and developing
the business plan for MCL and the Marley Coffee brand. Mr. Marley has been in the coffee business since 1999 when he
bought a farm in the Blue Mountain region of Jamaica and began his career in the business of organic coffee farming.
In addition, during the past 15 years, Mr. Marley has been deeply involved in Marley family businesses which seek to spread the
message of his father, music icon, Bob Marley, through numerous product distribution and co-branding arrangements and other strategic
alliances. In 2004 Mr. Marley founded Tuff Gong Clothing, a privately held clothing designer. Mr. Marley believes strongly in giving
back to human causes and communities in need. To help promote happiness and prosperity, Marley Coffee created and continues
to support the Kicks For Cause Foundation, a youth soccer program that helps enrich and inspire the lives of underprivileged children.
Mr. Marley’s leadership in creating the vision for the Company and his experience helping run his family’s businesses
are of great value to the board.
Our Director(s) are elected annually and hold office until our
next annual meeting of the shareholders and until their successor(s) are elected and qualified. Officers will hold their positions
at the pleasure of the Board of Directors, absent any employment agreement. Our officers and Directors may receive compensation
as determined by us from time to time by vote of the Board of Directors. Such compensation might be in the form of stock options.
Directors may be reimbursed by the Company for expenses incurred in attending meetings of the Board of Directors. Vacancies in
the Board are filled by majority vote of the remaining Directors.
Committees of the Board
Our Company currently does not have nominating, compensation
or audit committees or committees performing similar functions nor does our Company have a written nominating, compensation or
audit committee charter.
Our Company does not have any defined policy or procedural requirements
for shareholders to submit recommendations or nominations for Directors. The Board of Directors believes that, given the stage
of our development, a specific nominating policy would be premature and of little assistance until our business operations develop
to a more advanced level. Our Company does not currently have any specific or minimum criteria for the election of nominees to
the Board of Directors and we do not have any specific process or procedure for evaluating such nominees. The Board of Directors
will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
A shareholder who wishes to communicate with our Board of Directors
may do so by directing a written request addressed to our President, at the address appearing on the first page of this filing.
Code of Ethics
Effective October 1, 2008, our Company’s Board of Directors
adopted a Code of Business Conduct and Ethics that applies to, among other persons, our officers and Directors. We have posted
the text of the Code of Business Conduct and Ethics on our Internet website at www.jamminjavacoffee.com and have filed it with
the U.S. Securities and Exchange Commission on May 17, 2011 as Exhibit 14.1 to the Company’s Annual Report on Form 10-K.
A copy of the Code of Business Conduct and Ethics can also be obtained free of charge by writing to Anh Tran, Jammin Java Corp.,
8200 Wilshire Blvd., Suite 200, Beverly Hills, CA 90211.
Corporate Governance
The Company promotes accountability for adherence to honest
and ethical conduct; endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and documents that
the Company files with the Securities and Exchange Commission (the “SEC”) and in other public communications made by
the Company and strives to be compliant with applicable governmental laws, rules and regulations.
In lieu of an Audit Committee, the Company’s Board of
Directors is responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope,
results and effectiveness of the annual audit of the Company's financial statements and other services provided by the Company’s
independent public accountants. The Board of Directors reviews the Company's internal accounting controls, practices and policies.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Exchange Act requires our directors
and executive officers, and persons who beneficially own more than 10% of a registered class of our equity securities, to file
with the SEC initial reports of ownership and reports of changes in ownership. These reporting persons are required by SEC regulations
to furnish us with copies of all such reports they file. To our knowledge, based solely on our review of the copies of such reports
furnished to us and written representations from certain insiders that no other reports were required, we believe all of the reporting
persons complied with all applicable Section 16(a) filing requirements applicable to them with respect to transactions during
the fiscal year ended January 31, 2012.
ITEM 11. EXECUTIVE COMPENSATION.
Executive Officer Compensation
The following table sets forth certain information concerning
compensation earned by or paid to certain persons who we refer to as our “Named Executive Officers” for services provided
for the fiscal year ended January 31, 2012. Our Named Executive Officers include persons who (i) served as our principal
executive officer or acted in a similar capacity during 2011, (ii) were serving at fiscal year-end as our two most highly
compensated executive officers, other than the principal executive officer, whose total compensation exceeded $100,000, and (iii)
if applicable, up to two additional individuals for whom disclosure would have been provided as a most highly compensated executive
officer, but for the fact that the individual was not serving as an executive officer at fiscal year-end.
Summary Compensation Table
Name & Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Options
Awards
(1)
|
|
|
All Other
Compensation
|
|
|
Total
|
|
Brent R. Toevs
|
|
|
2012
|
|
|
$
|
63,239
|
|
|
$
|
0
|
|
|
$
|
861,211
|
|
|
$
|
0
|
|
|
$
|
924,450
|
|
Chief Executive Officer (Principal Executive Officer)
|
|
|
2011
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Anh T. Tran
|
|
|
2012
|
|
|
$
|
80,000
|
|
|
$
|
0
|
|
|
$
|
1,563,448
|
|
|
$
|
0
|
|
|
$
|
1,643,448
|
|
President, Chief Operating Officer, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer)
|
|
|
2011
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
(1)
|
Amounts in this column represent the aggregate grant date
fair value of awards computed in accordance with FASB ASC Topic 718. See Note 9 to our financial statements included in this annual
report on Form 10-K for assumptions underlying the valuation of equity awards. These amounts do not represent the actual amounts
paid to or realized by any of the Named Executive Officers during the respective periods. See Note 9 to our financial statements
included in this annual report on Form 10-K for assumptions underlying the valuation of equity awards.
|
Executive Employment Agreements
Brent R. Toevs -
We entered into an employment agreement
on August 8, 2011 with Brent R. Toevs pursuant to which he serves as our Chief Executive Officer. Pursuant to the agreement,
which was effective as of August 1, 2011 and terminates on August 1, 2014, Mr. Toevs is currently paid $159,000 per year.
In addition, the Company has agreed to provide Mr. Toevs up to $10,000 cash per year Individual Retirement Account contribution
and four weeks’ vacation. The Company has also granted Mr. Toevs a 6-year stock option to purchase 1,000,000 shares of common
stock with an exercise price of $0.40 per share that vests annually in equal amounts over three years. Mr. Toevs may also
be eligible for an annual cash bonus at the discretion of the Board of Directors. In addition, we provide Mr. Toevs with standard
benefits and insurance coverage as generally provided to our management, as well as contractual indemnification rights by reason
of his service as an officer and employee. If his employment is terminated by the Board without cause, as defined in the agreement,
Mr. Toevs will be entitled to receive a severance payment equal to six months of his base salary, all deferred compensation,
if any, and all salary and bonuses accrued up to and including the date of termination, all unused vacation and all unreimbursed
expenses. There has been no bonus or IRA contribution made to date.
Anh T. Tran
– We entered into an employment agreement
on August 5, 2011 with Anh T. Tran pursuant to which he serves as our President. Pursuant to the agreement, which was effective
as of August 1, 2011 and terminates on August 1, 2014, Mr. Tran is currently paid $120,000 per year. In addition, the Company
has agreed to provide Mr. Tran up to $10,000 cash per year Individual Retirement Account contribution and three weeks’
vacation. The Company granted Mr. Tran a 6-year stock option to purchase 2,000,000 shares of common stock with an exercise
price of $0.40 per share that vests annually in equal amounts over three years. Mr. Tran may also be eligible for an annual cash
bonus at the discretion of the Board of Directors. In addition, we provide Mr. Tran with standard benefits and insurance
coverage as generally provided to our management, as well as contractual indemnification rights by reason of his service as an
officer and employee. If his employment is terminated by the Board without cause, as defined in the agreement, Mr. Tran will
be entitled to receive a severance payment equal to two months of his base salary, all deferred compensation, if any, and
all salary and bonuses accrued up to and including the date of termination, all unused vacation and all unreimbursed expenses.
There has been no bonus or IRA contribution made to date.
2012 Grants of Plan Based Awards
The following table presents information
regarding stock options granted during the fiscal year ended January 31, 2012 pursuant to our Equity Compensation Plan to
our Named Executive Officers.
Name
|
|
Grant Date
|
|
Number of
Securities
Underlying
Options
|
|
|
Exercise Price
of Option
Awards
|
|
|
Grant Date
Fair Value of
Options
(1)
|
|
Brent R. Toevs
|
|
08/10/11
|
|
|
1,000,000
|
(2)
|
|
$
|
0.40
|
|
|
$
|
861,211
|
|
Anh T. Tran
|
|
08/05/11
|
|
|
2,000,000
|
(2)
|
|
$
|
0.40
|
|
|
$
|
1,563,448
|
|
|
(1)
|
Amounts in this column represent the aggregate grant date fair value of awards computed in accordance with Financial Accounting
Standards Board Accounting Standards Codification Topic 718. See Note 9 to our financial statements included in this annual report
on Form 10-K for assumptions underlying the valuation of equity awards.
|
|
(2)
|
The shares vest annually over a three-year period from the grant date.
|
2012 Outstanding Equity Awards at Fiscal Year-End
The following table presents information
regarding outstanding equity awards at January 31, 2012 for each of the Named Executive Officers.
|
|
Option Awards
|
|
|
|
|
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
|
|
|
Option
Expiration
Date
|
Brent R. Toevs
|
|
|
—
|
|
|
|
1,000,000
|
(1)
|
|
$
|
0.40
|
|
|
08/10/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anh T. Tran
|
|
|
—
|
|
|
|
2,000,000
|
(1)
|
|
$
|
0.40
|
|
|
08/05/17
|
|
(1)
|
The shares vest annually over a three-year period from the grant date.
|
2012 Director Compensation
The following table presents summary information
regarding compensation of the non-employee members of our Board of Directors who served during any part of the fiscal year ended
January 31, 2012.
Name
|
|
Fees Earned
or Paid
in Cash
|
|
Options
Awards
(1)
|
|
|
Total
|
|
Rohan A. Marley
|
|
$
|
75,750
|
|
$
|
1,563,448
|
((2)
(3) (4)
|
|
$
|
1,639,198
|
|
|
(1)
|
Amounts in this column represent the aggregate grant date fair value of awards computed in accordance with Financial Accounting
Standards Board Accounting Standards Codification Topic 718. See Note 9 to our financial statements included in this annual report
on Form 10-K for assumptions underlying the valuation of equity awards.
|
|
(2)
|
As compensation for Board services, Mr. Marley was issued the options on August 5, 2011 to purchase 2,000,000 shares of our
common stock at an exercise price of $0.40 per share which shares vest annually over a three-year period from the grant date.
|
|
(3)
|
The aggregate number of shares underlying outstanding option awards as of January 31, 2012 was 2,000,000 shares.
|
|
(4)
|
Compensation for services as Chairman of the Board of Directors.
|
COMPENSATION DISCUSSION AND ANALYSIS
Executive Compensation Philosophy
Our Board of Directors determines the compensation given to
our executive officers in its sole determination. Our Board of Directors also reserves the right to pay our executives a salary,
and/or issue them shares of common stock in consideration for services rendered and/or to award incentive bonuses which are linked
to our performance, as well as to the individual executive officer’s performance. This package may also include long-term
stock based compensation to certain executives which is intended to align the performance of our executives with our long-term
business strategies.
Incentive Bonus
The Board of Directors may grant incentive bonuses to our executive
officers in its sole discretion, if the Board of Directors believes such bonuses are in the Company’s best interest, after
analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which
revenue is a direct result of the actions and ability of such executives.
Long-term, Stock Based Compensation
In order to attract, retain and motivate executive talent necessary
to support the Company’s long-term business strategy we may award certain executives with long-term, stock-based compensation
in the future, in the sole discretion of our Board of Directors.
Criteria for Compensation Levels
The Company seeks to attract and retain qualified executives
and employees to positively contribute to the success of the Company for the benefit of its various stakeholders, the most important
of which is its shareholders, but also including its officers, employees, and the communities in which the Company operates.
The Board of Directors (in establishing compensation levels
for the Company’s Chief Executive Officer, if any) and the Company (in establishing compensation levels for other executives,
if any) may consider many factors, including, but not limited to, the individual’s abilities and performance that results
in: the advancement of corporate goals of the Company, execution of the Company’s business strategies, contributions to positive
financial results, and contributions to the development of the management team and other employees. In determining compensation
levels, the Board of Directors may also consider the experience level of each particular individual and/or the compensation level
of executives in similarly situated companies in our industry.
Compensation levels for executive officers are generally reviewed
annually, but may be reviewed more often as deemed appropriate.
Compensation Philosophy and Strategy
In addition to the “Criteria for Compensation Levels”
set forth above, the Company has a “Compensation Philosophy” for all employees of the Company (set forth below).
Compensation Philosophy
The Company’s compensation philosophy is as follows:
|
•
|
The Company believes that compensation is an integral component of its overall business and human resource strategies. The
Company’s compensation plans will strive to promote the hiring and retention of personnel necessary to execute the Company’s
business strategies and achieve its business objectives.
|
|
•
|
The Company’s compensation plans will be strategy-focused, competitive, and recognize and reward individual and group
contributions and results. The Company’s compensation plans will strive to promote an alignment of the interests of employees
with the interests of the shareholders by having a portion of compensation based on financial results and actions that will generate
future shareholder value.
|
|
•
|
In order to reward financial performance over time, the Company’s compensation programs generally will consist of base
compensation, and may also consist of short-term variable incentives and long-term variable incentives, as appropriate.
|
|
•
|
The Company’s compensation plans will be administered consistently and fairly to promote equal opportunities for the
Company’s employees.
|
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth, as of April 23, 2012, the number
and percentage of outstanding shares of our common stock beneficially owned by: (a) each person who is known by us to be the
beneficial owner of more than 5% of our outstanding shares of common stock; (b) each of our directors; (c) the Named
Executive Officers; and (d) all current directors and executive officers, as a group. As of April 23, 2012 there were 76,744,150
shares of common stock issued and outstanding.
Beneficial ownership has been determined in accordance with
Rule 13d-3 under the Exchange Act. Under this rule, certain shares may be deemed to be beneficially owned by more than one person
(if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant)
within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the
amount of shares is deemed to include the amount of shares beneficially owned by such person by reason of such acquisition rights.
As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the
person’s actual voting power at any particular date.
To our knowledge, except as indicated in the footnotes to this
table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned by them.
Name and Address of Beneficial Owner
(1)
|
|
Number of Shares
Owned
|
|
|
Percentage of
Class
(2)
|
|
Beneficial Owners of more than 5%:
|
|
|
|
|
|
|
|
|
Straight Path Capital
(3)
(4)
|
|
|
6,250,000
|
(5)
|
|
|
8.14
|
%
|
|
|
|
|
|
|
|
|
|
Officers and Directors:
|
|
|
|
|
|
|
|
|
Rohan A. Marley
|
|
|
15,897,500
|
(6))
|
|
|
20.71
|
%
|
Brent Toevs
|
|
|
0
|
|
|
|
0.0
|
%
|
Anh T. Tran
|
|
|
1,000,000
|
(7)
|
|
|
1.30
|
%
|
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group (3 persons)
|
|
|
16,897,500
|
|
|
|
22.02
|
%
|
|
(1)
|
Unless otherwise indicated in the footnotes, the mailing address of the beneficial owner is c/o Jammin Java Corp., 8200 Wilshire
Blvd, Suite 200, Beverly Hills, CA 90211.
|
|
(4)
|
The mailing address of the beneficial owner is 10 Great George Street, London SW103Ae, England.
|
|
(5)
|
Consisting of 6,250,000 shares of common stock issued to Straight Path Capital pursuant to the Share Issuance Agreement.
|
|
(6)
|
Consists of 12,987,500 shares of common stock owned by Rohan A. Marley and 3,000,000 shares beneficially owned by Marley Coffee
LLC for which Mr. Marley exercises shared voting and dispositive power. The information in this footnote is primarily based on
information reported on the Schedule 13G filed with the SEC on May 17, 2011 by Rohan A. Marley and other information available
to us.
|
|
(7)
|
Consisting of 1,000,000 shares of common stock.
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE.
Certain Relationships and Related Transactions
Advanced Funds
Shane Whittle, a manager and equity holder
of MCL and a former chief executive officer and director of the Company, made payments from time to time on behalf of the Company
or advanced funds to the Company for its operational needs. The Company repaid Mr. Whittle for any remaining outstanding amounts
in July 2011.
Nicole Whittle
During the fiscal year ended January 31,
2012, the Company paid $66,868 to Nicole Whittle, Mr. Whittle’s sister, who serves as the Company’s Creative Director,
for ongoing creative design costs services.
Marley Coffee, LLC
On March 31, 2010, we entered into the License Agreement with
Marley Coffee, LLC (“MCL”), a private limited liability company, of which (i) Rohan Marley, one of our Directors,
has a 33% ownership interest (and collectively with his family, has a controlling interest) and serves as a Manager, and (ii) Shane
Whittle, our former chief executive officer and formerly one of our directors, has a 29% ownership interest and serves as a Manager.
The License Agreement is described in greater detail above under the caption “Business - Current Business Operations”.
Pursuant to the License Agreement, we have issued MCL 2,000,000
restricted shares of our Common Stock and have agreed to issue MCL an additional 8,000,000 restricted shares of our Common Stock,
to be issued in annual installments of 1,000,000 shares. Of the 2,000,000 shares we have already issued to MCL pursuant to the
License Agreement, 1,000,000 shares were issued in December 2010 and another 1,000,000 shares were issued in April 2011. A third
installment of 1,000,000 shares was payable on March 31, 2012, however MCL requested that the Company postpone the issuance while
MCL considered certain tax matters.
On August 5, 2011, the Company and MCL agreed to amend the License
Agreement. In consideration for the License Agreement Amendment, the Company agreed to assume $126,000 of obligations of MCL or
its managing members by paying MCL or creditors identified by MCL or by MCL’s managing members $55,000, with the balance
to be paid in equal monthly installments over a period of eighteen months. The balance payable at January 31, 2012 is $51,275.
(see Note 9 of the Notes to Financial Statements of the Company contained in this report).
Lease Agreement
As of April 23, 2012, we rent a virtual executive suite for
our corporate headquarters in Beverly Hills, California. Under the agreement, we are not allocated any specific amount of office
space but have access to office and conference room space [on an as needed basis. Our monthly rental costs vary based on our actual
space and office service usage. Mr. Anh Tran, our president, has personally guaranteed the virtual executive suites agreement.
If we fail to pay our obligations under the virtual executive suites agreement and Mr. Tran pays such amounts pursuant to his personal
guarantee, we will be obligated to repay Mr. Trans for any such amounts paid by him. The Company paid all monthly rent amounts
for our virtual executive suite, which amounts totaled $5,965 during the fiscal year ended January 31, 2012.
Independence of Directors
Our common stock is quoted for trading on the Over-The-Counter
Bulletin Board and we are not required to have independent members of our Board of Directors. We do not identify any of our directors
as being independent.
Review, Approval and Ratification of Related Party Transactions
Given our small size and limited financial resources, we have
not adopted formal policies and procedures for the review, approval or ratification of transactions, such as those described above,
with our executive officers, Directors and significant stockholders. However, all of the transactions described above
were approved and ratified by the Board of Directors and one or more officers of the Company. In connection with the
approval of the transactions described above, the Board of Directors took into account several factors, including its fiduciary
duty to the Company; the relationships of the related parties described above to the Company; the material facts underlying each
transaction; the anticipated benefits to the Company and related costs associated with such benefits; whether comparable products
or services were available; and the terms the Company could receive from an unrelated third party.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table presents the estimated aggregate fees incurred
for services performed during our last two fiscal years, all of which were approved by our Board of Directors.
|
|
Fiscal Year Ended
January 31,
|
|
|
|
2012
|
|
|
2011
|
|
Audit fees
(1)
|
|
$
|
64,048
|
|
|
$
|
28,423
|
|
Audit-related fees
(2)
|
|
|
-0-
|
|
|
|
-0-
|
|
Tax fees
(3)
|
|
|
-0-
|
|
|
|
-0-
|
|
All other fees
|
|
|
-0-
|
|
|
|
-0-
|
|
Total fees
|
|
$
|
64,048
|
|
|
$
|
28,423
|
|
|
(1)
|
Audit fees include professional services rendered for the audit and/or reviews of our financial statements and in connection with statutory and regulatory filings or engagements.
|
|
(2)
|
Audit-related fees include assurance and related services that were reasonably related to the performance of the audit or review of our financial statements that are not included under footnote (1) above
|
|
(3)
|
Tax fees include professional services relating to preparation of the annual tax return.
|
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) 1. Financial
Statements
Report of Independent Registered Public Accounting Firm
|
|
Report of Independent Registered Public Accounting Firm
|
|
Balance Sheets as of January 31, 2012 and January 31, 2011
|
|
Statements of Operations for the Years Ended January 31, 2012 and January 31, 2011,
|
|
Statements in Changes of Stockholders' Equity for the Years Ended January 31, 2012 and January 31, 2011
|
|
Statements of Cash Flows for the Years Ended January 31, 2012 and January 31, 2011
|
|
Notes to Financial Statements
|
2. Financial Statement Schedules
All financial statement schedules for which
provision is made in Regulation S-X are omitted because they are not required under the related instructions, are inapplicable,
or the required information is given in the financial statements, including the notes thereto.
3. List of Exhibits
Exhibit
Number
|
|
Description
|
|
|
|
Exhibit 3.1
|
|
Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form SB-2 filed August 3, 2005)
|
|
|
|
Exhibit 3.2
|
|
Bylaws (incorporated by reference to Exhibit 3.3 of the Company’s Registration Statement on Form SB-2 filed August 3, 2005)
|
|
|
|
Exhibit 3.3
|
|
Certificate of Change Pursuant to NRS 78.209 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K/A filed October 25, 2007)
|
|
|
|
Exhibit 3.4
|
|
Articles of Merger (incorporated by reference to Exhibit 3.1 of the Company’s Current Report onForm8-K filed March 12, 2008)
|
|
|
|
Exhibit 3.5
|
|
Articles of Merger (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed September 17, 2009)
|
|
|
|
Exhibit 3.6
|
|
Certificate of Change Pursuant to NRS 78.209 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed March 4, 2010)
|
|
|
|
Exhibit 4.1
|
|
Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form SB-2 filed August 3, 2005)
|
|
|
|
Exhibit 10.1
|
|
Trademark License Agreement, dated as of March 31, 2010, by and between Marley Coffee, LLC and the Company (incorporated by reference to the Company’s Annual Report on Form 10-K filed May 17, 2011)
|
|
|
|
Exhibit 10.2**
|
|
Supply and Toll Agreement, dated as of April 28, 2010, between Canterbury Coffee Corporation and the Company (incorporated by reference to Exhibit 10.2 of the Company’s Annual Report on Form 10-K filed May 17, 2011)
|
Exhibit 10.3
|
|
Exclusive Sales and Marketing Agreement, dated as of April 25, 2011, by and between National Coffee Service & Vending and the Company (incorporated by reference to Exhibit 10.3 of the Company’s Annual Report on Form 10-K filed May 17, 2011)
|
|
|
|
Exhibit 10.4
|
|
Share Issuance Agreement, dated as of December 22, 2010, between Straight Path Capital and the Company (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed January 5, 2011)
|
|
|
|
Exhibit 10.5**
|
|
First Amendment to Supply and Toll Agreement, dated as of May 12, 2011, by and between Canterbury Coffee Corporation and the Company (incorporated by reference to Exhibit 10.5 of the Company’s Annual Report on Form 10-K filed May 17, 2011)
|
|
|
|
Exhibit 10.6
|
|
Amendment to Trademark License Agreement, dated as of August 5, 2011, by and between Marley Coffee, LLC and the Company (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed August 10, 2011)
|
|
|
|
Exhibit 10.7
|
|
Consulting Agreement, dated as of August 6, 2011, by and between Shane Whittle and the Company (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed August 10, 2011)
|
|
|
|
Exhibit 10.8
|
|
Grant of Contractor Stock Option, dated as of August 11, 2011,from the Company to Shane Whittle(incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K/A filed August 11, 2011)
|
|
|
|
Exhibit 10.9
|
|
Jammin Java Corp. Equity Compensation Plan(incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed August 10, 2011)
|
|
|
|
Exhibit 10.10
|
|
Employment Agreement, dated as of August 5, 2011, by and between Anh Tran and the Company (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed August 10, 2011)
|
|
|
|
Exhibit 10.11
|
|
Employment Agreement, dated as of August 8, 2011, by and between Brent Toevs and the Company (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed August 10, 2011)
|
|
|
|
Exhibit 10.12
|
|
Grant of Employee Stock Option dated as of August 5, 2011, from the Company to Anh Tran (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed August 10, 2011)
|
|
|
|
Exhibit 10.13
|
|
Grant of Employee Stock Option, dated as of August 5, 2011, from the Company to Rohan Marley(incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed August 10, 2011)
|
|
|
|
Exhibit 10.14
|
|
Grant of Employee Stock Option, dated as of August 10, 2011, from the Company to Brent Toevs (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed August 10, 2011)
|
|
|
|
Exhibit 10.15**
|
|
Roasting and Distribution Agreement, dated as of January 1, 2012, by and between the Company and Canterbury Coffee Corporation
|
|
|
|
Exhibit 14.1
|
|
Code of Business Conduct and Ethics, adopted October 1, 2008 (incorporated by reference to Exhibit 14.1 of the Company’s Annual Report on Form 10-K filed May 17, 2011)
|
|
|
|
Exhibit 31.1*
|
|
Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a)
|
|
|
|
Exhibit 31.2*
|
|
Certification of the Principal Accounting Officer pursuant to Rule 13a-14(a) and 15d-14(a)
|
|
|
|
Exhibit 32.1*
|
|
Certification by the Principal Executive Officer pursuant to 18 O.K. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
Exhibit 32.2*
|
|
Certification by the Principal Financial Officer pursuant to 18 O.K. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
* Filed herewith
** The Company has requested confidential treatment
of certain portions of this agreement which have been omitted and filed separately with the U.S. Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
JAMMIN JAVA CORP.
|
|
|
|
By:
/s/ Brent Toevs
|
|
Brent Toevs
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
By:
/s/ Anh Tran
|
|
Anh Tran
|
|
President, Chief Operating Officer, Secretary and Treasurer
|
|
(Principal Financial Officer and Principal Accounting Officer)
|
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Brent Toevs
|
|
Chief Executive Officer
|
|
May 14, 2012
|
Brent Toevs
|
|
(Principal Executive Officer)
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/ Anh Tran
|
|
President, Chief Operating Officer,
|
|
May 14, 2012
|
Anh Tran
|
|
Secretary and Treasurer
|
|
|
|
|
(Principal Financial Officer and
|
|
|
|
|
Principal Accounting Officer)
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/ Rohan Marley
|
|
Chairman of the Board of Directors
|
|
May 14, 2012
|
Rohan Marley
|
|
|
|
|
INDEX TO FINANCIAL STATEMENTS
|
Page
|
|
|
Report of Independent Registered Public Accounting Firm - Squar, Milner, Peterson, Miranda & Williamson, LLP
|
F-2
|
|
|
Report of Independent Registered Public Accounting Firm - LBB & Associates, Ltd. LLP
|
F-3
|
|
|
Balance Sheets as of January 31, 2012 and January 31, 2011
|
F-4
|
|
|
Statements of Operations for the Years Ended January 31, 2012 and January 31, 2011
|
F-5
|
|
|
Statements in Changes of Stockholders' Equity for the Years Ended January 31, 2012 and January 31, 2011
|
F-6
|
|
|
Statements of Cash Flows for the Years Ended January 31, 2012 and January 31, 2011
|
F-7
|
|
|
Notes to Financial Statements
|
F-8
|
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
We have audited the accompanying balance sheet of Jammin Java
Corp. as of January 31, 2012, and the related statements of operations, stockholders’ equity and cash flows for the year
then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Jammin Java Corp as of January 31, 2012, and the results of its operations
and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2, as of January 31, 2012 the Company has incurred operating
losses from inception and has recently generated revenues from its principal operations. These factors, among others, raise substantial
doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are
described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ SQUAR, MILNER, PETERSON, M IRANDA & WILLIAMSON, LLP
Newport Beach, California
May 14, 2012
LBB & ASSOCIATES LTD., LLP
10260 Westheimer Road, Suite 310
Houston, TX 77042
Phone: (713) 800-4343 Fax: (713) 456-2408
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors
Jammin Java Corp.
Beverly Hills, CA
We have audited the accompanying balance
sheet of Jammin Java Corp. (the “Company”) as of January 31, 2011, and the related statements of operations, stockholders'
equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Jammin Java Corp. as of January 31, 2011,
and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Note 2 to the financial
statements, the Company's absence of significant revenues, and recurring losses from operations raise substantial doubt about its
ability to continue as a going concern. The 2011 financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ LBB & Associates Ltd., LLP
LBB & Associates Ltd., LLP
Houston, Texas
May 17, 2011
JAMMIN JAVA CORP.
BALANCE SHEETS
As of January 31, 2012 and 2011
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2012
|
|
|
2011
|
|
Assets
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
835,878
|
|
|
$
|
2,467
|
|
Accounts receivable
|
|
|
34,782
|
|
|
|
326
|
|
Prepaid expenses
|
|
|
144,726
|
|
|
|
211,130
|
|
Other current assets
|
|
|
41,560
|
|
|
|
6,707
|
|
Total Current Assets
|
|
|
1,056,946
|
|
|
|
220,630
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
9,903
|
|
|
|
555
|
|
License agreement
|
|
|
766,000
|
|
|
|
640,000
|
|
Total Assets
|
|
$
|
1,832,849
|
|
|
$
|
861,185
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
37,208
|
|
|
$
|
24,061
|
|
Notes payable - related party
|
|
|
51,275
|
|
|
|
-
|
|
Advances from related parties
|
|
|
-
|
|
|
|
47,936
|
|
Total Current Liabilities
|
|
|
88,483
|
|
|
|
71,997
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
88,483
|
|
|
|
71,997
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value, 5,112,861,525 shares authorized;
|
|
|
|
|
|
|
|
|
76,744,150 and 69,297,650 shares issued and outstanding,
|
|
|
76,744
|
|
|
|
69,297
|
|
as of January 31, 2012 and January 31, 2011 respectively
|
|
|
|
|
|
|
|
|
Additional paid-in-capital
|
|
|
4,708,487
|
|
|
|
1,294,717
|
|
Accumulated deficit
|
|
|
(3,040,865
|
)
|
|
|
(574,826
|
)
|
Total Stockholders' Equity
|
|
|
1,744,366
|
|
|
|
789,188
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
1,832,849
|
|
|
$
|
861,185
|
|
See accompanying notes to financial statements
JAMMIN JAVA CORP.
STATEMENTS OF OPERATIONS
Years ended January 31, 2012 and 2011
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
402,698
|
|
|
$
|
1,037
|
|
|
|
|
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
Cost of sales products
|
|
|
340,395
|
|
|
|
1,691
|
|
Total cost of sales
|
|
|
340,395
|
|
|
|
1,691
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
62,303
|
|
|
$
|
(654
|
)
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
Compensation and benefits
|
|
|
939,317
|
|
|
|
-
|
|
Selling and marketing
|
|
|
221,888
|
|
|
|
3,993
|
|
General and administrative
|
|
|
1,369,372
|
|
|
|
146,588
|
|
Total operating expenses
|
|
|
(2,530,577
|
)
|
|
|
(150,581
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2,474
|
|
|
|
-
|
|
Interest (expense)
|
|
|
(239
|
)
|
|
|
-
|
|
Total other income (expense)
|
|
|
2,235
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(2,466,039
|
)
|
|
$
|
(151,235
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted
|
|
|
74,393,386
|
|
|
|
95,508,310
|
|
See accompanying notes to financial statements
JAMMIN JAVA CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY
Years ended January 31, 2012 and 2011
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-In Capital
|
|
|
Subscription
Receivable
|
|
|
Accumulated
Deficit
|
|
|
Totals
|
|
Balance, January 31, 2010
|
|
|
98,910,594
|
|
|
$
|
98,910
|
|
|
$
|
358,604
|
|
|
$
|
(50,000
|
)
|
|
$
|
(423,591
|
)
|
|
$
|
(16,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for license acquisition (Note 3)
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
639,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
640,000
|
|
Subscriptions received
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
50,000
|
|
Shares returned to treasury
|
|
|
(30,922,944
|
)
|
|
|
(30,923
|
)
|
|
|
30,923
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Proceeds from sales of common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
65,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,000
|
|
Issuance of common stock for services
|
|
|
310,000
|
|
|
|
310
|
|
|
|
201,190
|
|
|
|
-
|
|
|
|
-
|
|
|
|
201,500
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(151,235
|
)
|
|
|
(151,235
|
)
|
Balance, January 31, 2011
|
|
|
69,297,650
|
|
|
|
69,297
|
|
|
|
1,294,717
|
|
|
|
-
|
|
|
|
(574,826
|
)
|
|
|
789,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash
|
|
|
6,426,500
|
|
|
|
6,427
|
|
|
|
2,452,573
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,459,000
|
|
Shares issued as part of license acquisition (Note 3)
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,000
|
|
Issuance of common stock for services
|
|
|
20,000
|
|
|
|
20
|
|
|
|
21,880
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,900
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
939,317
|
|
|
|
-
|
|
|
|
-
|
|
|
|
939,317
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,466,039
|
)
|
|
|
(2,466,039
|
)
|
Balance, January 31, 2012
|
|
|
76,744,150
|
|
|
$
|
76,744
|
|
|
$
|
4,708,487
|
|
|
$
|
-
|
|
|
$
|
(3,040,865
|
)
|
|
$
|
1,744,366
|
|
See accompanying notes to financial statements
JAMMIN JAVA CORP.
STATEMENTS OF CASH FLOWS
Years ended January 31, 2012 and 2011
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2012
|
|
|
2011
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,466,039
|
)
|
|
$
|
(151,235
|
)
|
Adjustments to reconcile net loss to net
|
|
|
|
|
|
|
|
|
cash used in operating activities:
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
21,900
|
|
|
|
6,500
|
|
Option expenses
|
|
|
939,317
|
|
|
|
-
|
|
Depreciation
|
|
|
2,341
|
|
|
|
740
|
|
Amortization of common stock for services
|
|
|
56,875
|
|
|
|
-
|
|
Changes in:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(34,456
|
)
|
|
|
-
|
|
Prepaid expenses and other current assets
|
|
|
(12,824
|
)
|
|
|
(23,163
|
)
|
Accounts payable
|
|
|
13,147
|
|
|
|
17,087
|
|
Net cash used in operating activities
|
|
|
(1,479,739
|
)
|
|
|
(150,071
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows Used in Investing Activities:
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(11,689
|
)
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
(11,689
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
Capitalization
|
|
|
|
|
|
|
|
|
(Repayment) advances from related parties
|
|
|
(47,936
|
)
|
|
|
10,025
|
|
Repayment of notes payable -related party
|
|
|
(74,725
|
)
|
|
|
-
|
|
Proceeds from sale of common shares
|
|
|
2,460,000
|
|
|
|
115,000
|
|
Repayment of short term debt
|
|
|
(12,500
|
)
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
2,324,839
|
|
|
|
125,025
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
833,411
|
|
|
|
(25,046
|
)
|
Cash at beginning of period
|
|
|
2,467
|
|
|
|
27,513
|
|
Cash at end of period
|
|
$
|
835,878
|
|
|
$
|
2,467
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
103
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-Cash Investing and Financing Transactions:
|
|
|
|
|
|
|
|
|
Acquisition of perpetual license with common shares (Note 3)
|
|
$
|
-
|
|
|
$
|
640,000
|
|
Financed insurance policy
|
|
$
|
-
|
|
|
$
|
195,500
|
|
See accompanying notes to financial statements
JAMMIN JAVA CORP.
NOTES TO FINANCIAL STATEMENTS
January 31, 2012 and 2011
NOTE 1—BUSINESS OVERVIEW AND SUMMARY OF ACCOUNTING
POLICIES
Jammin Java Corp. (the “Company” or “Jammin
Java”), operates as a United States (U.S.) based company providing premium roasted coffee on a wholesale level to the grocery,
retail, online, service, hospitality, office coffee service and big box store industry. Through the use of distributor partnerships,
we have the exclusive right to manufacture and market our coffee lines to gourmet, natural and independent grocery markets in the
U.S., Canada, Mexico and the Caribbean and the non-exclusive right worldwide.
As used in this Annual Report, the terms “we,” “us,”
“our,” and “Company” mean Jammin Java Corp., unless otherwise indicated. All dollar amounts in these financial
statements are in U.S. dollars unless otherwise stated.
Jammin Java was incorporated on September 27, 2004 in Nevada
under its former name “Global Electronic Recovery Corp.” On October 23, 2007, our Board of Directors (the “Board”)
approved a 22.723829 for one (1) forward stock split of our authorized, issued and outstanding shares of common stock (the “2007
Forward Split”) and amended our Articles of Incorporation by the filing of a Certificate of Change with the Secretary of
State of Nevada on September 11, 2007. As a result of the 2007 Forward Split, our authorized capital increased from 75,000,000
to 1,704,287,175 shares of common stock with a par value of $0.001 each.
On February 5, 2008, we incorporated a subsidiary named Marley
Coffee Inc. On February 25, 2008, we changed our name from “Global Electronic Recovery Corp.” to “Marley Coffee
Inc.” when we merged our subsidiary, Marley Coffee Inc., into our Company. Effective July 13, 2009, we formed and merged
our then newly-formed subsidiary, Jammin Java Corp., into our Company and changed our name from “Marley Coffee Inc.”
to “Jammin Java Corp.” Our common stock has, since September 17, 2009, been quoted on the Over-the-Counter Bulletin
Board (“OTCBB”) under the symbol “JAMN.”
On January 10, 2010, the Board approved a three (3) for one
(1) forward stock split of our authorized, issued and outstanding shares of common stock (the “2010 Forward Split”
and, collectively with the 2007 Forward Split, the “Stock Splits”). We amended our Articles of Incorporation by the
filing of a Certificate of Change with the Nevada Secretary of State, effective on February 2, 2010. As a result, our authorized
capital increased from 1,704,287,175 to 5,112,861,525 shares of common stock with a par value of $0.001 each.
Unless otherwise stated, the shares of common stock disclosed
throughout these financial statements have been retroactively reflected for the Stock Splits.
Basis of Presentation.
Jammin Java’s
financial statements have been prepared on a going concern basis in accordance with accounting principles generally accepted in
the United States of America (“GAAP”). This contemplates the realization of assets and satisfaction of liabilities
in the ordinary course of business.
Reclassifications.
Certain prior year amounts have been
reclassified to conform with the current year presentation for comparative purposes.
Use of Estimates in Financial Statement Preparation.
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (“GAAP”)
requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses,
as well as certain financial statement disclosures. While management believes that the estimates and assumptions used in the preparation
of the financial statements are appropriate, actual results could differ from these estimates.
Development Stage
. As of the second quarter of fiscal
year 2012, the Company is no longer deemed a development stage enterprise because the Company is generating revenue from its planned
principal operations and has obtained capital to conduct such operations for the next 12 months. Accordingly, the Company no longer
presents its results of operations and cash flows from inception.
Fair Value of Financial Instruments
. The carrying amount
of the Company’s cash, accounts receivables, accounts payables, and accrued expenses approximates their estimated fair values
due to the short-term maturities of those financial instruments.
The Company has adopted a single definition of fair value, a
framework for measuring fair value, and expanded disclosures concerning fair value. In this valuation, the exchange price is the
price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date and
fair value is a market-based measurement and not an entity-specific measurement.
The Company utilizes the following hierarchy in fair value measurements:
|
·
|
Level 1 – Inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
|
|
·
|
Level 2 – Inputs use other inputs that are observable, either directly or indirectly. These inputs include quoted prices for similar assets and liabilities in active markets as well as other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.
|
|
·
|
Level 3 – Inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability
|
Cash and Cash Equivalents
. The Company considers all
highly liquid investments with original maturities of three months or less cash equivalents. At January 31, 2012, the Company invested
approximately $0.8 million in a money market account with an average market yield of 0.20%. Interest income of $2,474 was recognized
for the year ended January 31, 2012 in the Statements of Operations. As of January 31, 2012, the Company held no auction rate securities.
Revenue Recognition
. All revenue is recognized when persuasive
evidence of an arrangement exists, the service or sale is complete, the price is fixed or determinable and ability to collect is
reasonably assured. Revenue is derived from the sale of coffee products and is recognized on a gross basis upon shipment.
The Company utilizes a third party for the production and fulfillment
of orders placed by customers. The Company acts as a principal, takes title to the products, and has the risks and rewards of ownership,
such as the risk of loss for collection, delivery and returns.
Allowance for Doubtful Accounts.
The Company does
not require collateral from its customers with respect to accounts receivable. The Company determines any required allowance by
considering a number of factors, including the length of time accounts receivable are past due. Jammin Java provides reserves for
accounts receivable when they become uncollectible. The Company has determined that no allowance for doubtful accounts was required
at January 31, 2012 and 2011.
Property and Equipment.
Equipment is stated at cost less
accumulated depreciation and amortization. Maintenance and repairs, as incurred, are charged to expense. Renewals and betterments
which extend the life or improve existing equipment are capitalized. Upon disposition or retirement of equipment, the cost and
related accumulated depreciation are removed and any resulting gain or loss is reflected in operations. Depreciation is provided
using the straight-line method over the estimated useful lives of the assets, which are three years.
Depreciation was $2,341 and $740 for the years ended January
31, 2012 and 2011 respectively.
Impairment of Long-Lived Assets
. Long-lived assets consist
of a license agreement that was recorded at the estimated cost to acquire the asset (See Note 3). The license agreement is reviewed
for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and
its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of
the assets, the assets are written down to their estimated fair values. Management evaluated the carrying value of the license
and determined that no impairment existed at January 31, 2012 or 2011.
Stock-Based Compensation.
Pursuant to the provisions
of FASB ASC 718-10, “Compensation – Stock Compensation,” which establishes accounting for equity instruments
exchanged for employee service, we utilize the Black-Scholes option pricing model to estimate the fair value of employee stock
option awards at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and
expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based
compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating
fair value, some of the assumptions will be based on, or determined from, external data and other assumptions may be derived from
our historical experience with stock-based payment arrangements. The appropriate weight to place on historical experience is a
matter of judgment, based on relevant facts and circumstances.
Common stock issued for services to non-employees is valued
at the market value of the stock on the date of issuance. If the total value exceeds the par value of the stock issued, the value
in excess of the par value is added to the additional paid-in-capital account.
We estimate volatility of our publicly-listed common stock by
considering historical stock volatility.
Income Taxes
. The Company follows Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification No 740,
Income Taxes
. Deferred tax assets or liabilities
are recorded to reflect the future tax consequences of temporary differences between the financial reporting basis of assets and
liabilities and their tax basis at each year-end. These amounts are adjusted, as appropriate, to reflect enacted changes in tax
rates expected to be in effect when the temporary differences reverse.
The Company records deferred tax assets and liabilities based
on the differences between the financial statement and tax bases of assets and liabilities and on operating loss carry forwards
using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided
when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Earnings or Loss Per Common Share
. Basic earnings per
common share equals net earnings or loss divided by the weighted average of shares outstanding during the year. Diluted earnings
per share include the impact on dilution from all contingently issuable shares, including options, warrants and convertible securities.
The common stock equivalents from contingent shares are determined by the treasury stock method. The Company incurred a net loss
for the years ended January 31, 2012 and 2011 respectively and therefore, basic and diluted earnings per share for those periods
are the same as all potential common equivalent shares would be anti-dilutive including 7,200,000 options for fiscal year 2012.
Recently Issued Accounting Pronouncements
. In September
2011, the FASB issued ASU 2011-08, Goodwill and Other (Topic 350): Testing Goodwill and Other Assets for Impairment, which simplifies
goodwill and other asset impairment tests. The new guidance states that a qualitative assessment may be performed to determine
whether further impairment testing is necessary and is effective beginning fiscal years and interim periods beginning after December
15, 2011. The Company is evaluating the impact of adopting this ASU on the Company’s financial position or results of operations.
Other accounting standards and exposure drafts, such as exposure
drafts related to revenue recognition, lease accounting, loss contingencies, comprehensive income and fair value measurements,
that have been issued or proposed by the FASB or other standards setting bodies that do not require adoption until a future date
are being evaluated by the Company to determine whether adoption will have a material impact on the Company’s financial statements
NOTE 2 – GOING CONCERN
These financial statements have been prepared by management
assuming that the Company will be able to continue as a going concern and realize its assets and discharge its liabilities in the
normal course of business. However, certain conditions noted below currently exist which raise substantial doubt about the Company’s
ability to continue as a going concern. These financial statements do not include any adjustments to the amounts and classifications
of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company incurred a net loss of $2,466,039 for the year ended
January 31, 2012, and has an accumulated deficit of $3,040,865. In addition, the Company has a history of losses and has recently
begun to generate revenue as part of its planned principal operations. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The operations of the Company have primarily been funded by the issuance of common stock.
Continued operations of the Company are dependent on the Company’s ability to complete equity financings or generate profitable
operations in the future. Management’s plan in this regard is to secure additional funds through future equity sales. Such
sales may not be available or may not be available on reasonable terms. Management is trying to grow the existing business, but
may need to raise additional capital through sales of common stock or convertible instruments as well as obtain financing from
third parties. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable
to the Company. If adequate working capital is not available, the Company may be required to curtail its operations.
NOTE 3 – ASSET PURCHASE AND SALE AGREEMENT
On March 31, 2010, the Company entered into an asset purchase
and sale agreement (the “Asset Purchase Agreement”) with MCL, a private limited liability company of which Rohan Marley,
a Director of the Company, and his family has a combined controlling interest.
The Company also entered into a Trademark License Agreement
(the “License Agreement”) with MCL, effective on March 31, 2010. Fifty Six Hope Road Music Limited, a Bahamas international
business company (“Fifty Six Hope Road”), owns and controls the intellectual property rights in and to the late reggae
performer, Robert Nesta Marley p/k/a Bob Marley, including “Marley Coffee” (the “Trademark”). Fifty Six
Hope Road granted a worldwide exclusive, terminable oral license to MCL to utilize the Trademark and further granted the right
for MCL to grant to the Company an exclusive, terminable sub-license to use the Trademark. The consideration for the License Agreement
was as follows:
(1)
|
The Company entered into the Asset Agreement to sell all its interests in its Branding Development and Business Plan Development to MCL;
|
|
(2)
|
The Company assigned an agreement entered into with Rohan Marley, proprietor of farmland and improvements thereon located in Jamaica (the “Farm”) to lease the Farm commencing February 15, 2008 (the “Farm Lease Agreement”) to MCL and transferred to MCL all its interest in the Farm Lease Agreement and leasehold improvements on the Farm;
|
(3)
|
The Company agreed to issue to MCL ten million (10,000,000) shares of common stock of the Company as follows:
|
|
|
•
|
One Million (1,000,000) shares upon the execution of the License Agreement; and
|
|
•
|
One Million (1,000,000) shares on each anniversary of the execution of the License Agreement for the following nine years. (See Note 4).
|
|
|
|
|
|
|
In accordance with FASB ASC 505-25- “ Share-Based payments
to Non Employees”, management recorded the transaction based on the estimated fair value of the perpetual license at the
measurement date of March 2010 (the date when the license, the underlying rights were delivered to the company in March 2010 and
MCL’s performance was completed). There are no further performance conditions required by MCL. Management believes the
value of the license is more clearly determinable.
On June 15, 2010, the Company retained DS Enterprises, Inc.,
an independent business valuation service (“DS Enterprises”), to provide financial advisory assistance in the accounting
for the acquisition of the Trademark license, in accordance with FASB ASC Topic 820 guidelines, and to assist the Company in one
or more of the following: (i) determining the Trademark value and (ii) determining the fair valuation of the consideration (common
stock) provided for in the acquisition using income, market and cost-oriented methods according to FASB ASC Topic 820. According
to the valuation report dated June 19, 2010, the following factors were taken into consideration by DS Enterprises:
•
|
the nature of the business and the history of the Company since inception;
|
•
|
the economic outlook in general and the condition or outlook of the coffee industry;
|
•
|
the book value of the business and the financial condition of the Company;
|
•
|
the relief from royalty payments associated with using trademarks;
|
•
|
the dividend-paying capacity of the Company;
|
•
|
sales of stock and the size of the block of stock to be valued; and
|
•
|
the market prices of securities of corporations engaged in the same or a similar line of business and actively traded in a free and open market, either on an exchange or over-the-counter basis.
|
Based on DS Enterprises’ analysis, management estimated
that the fair market value of this transaction related to the License Agreement was $640,000. The License Agreement has an
indefinite life and is therefore not being amortized. Management of the Company reviewed the valuation report and was satisfied
that the report fairly values the transaction. Management evaluated the carrying value of the license and determined that no impairment
existed at January 31, 2012 or 2011.
Effective on August 5, 2011, the License Agreement was amended
(the “Amended License Agreement”). In consideration for MCL agreeing to the Amended License Agreement, the Company
agreed to assume $126,000 of obligations of MCL or its managing members by paying MCL or creditors identified by MCL, or by MCL’s
managing members acting with full authority. Upon the signing of the Amended License Agreement, the Company paid $55,000 upon the
signing of the Amended License Agreement, with the balance to be paid thereafter in equal monthly installments over a period of
18 months, commencing with the first business day of the first month following the effective date.
Under the Amended License Agreement, MCL granted the Company
an exclusive right (the “Exclusive License”) to distribute, within and to the United States of America (inclusive of
its territories and possessions, the “U.S.”), Canada, U.S. and Canadian government and military facilities and installations
worldwide, the United Mexican States (“Mexico”), and the nations of the Caribbean Sea (the foregoing countries and
U.S. and Canadian government and military facilities are collectively referred to as the “Territory”), coffee in all
its forms and derivations, regardless of portions, sizes, or packaging (the “Licensed Products”). through “Licensed
Distribution Channels” (defined as hotels, chain motels and similar lodging establishments, restaurants, companies engaged
in providing on-site coffee services to for-profit or non-profit offices and other establishments, large chain (“big box”)
retail stores, specialty grocery stores, food distributors and supply services, gas and other automotive/truck service stations,
Internet-based wholesalers and retailers, and other businesses engaged in the sale of coffee products (either whole or ground beans
or beverages) and accessories, but for avoidance of doubt, excluding “coffee houses”).
MCL also granted the Company an exclusive license to use, reproduce,
and sublicense the use of and right to reproduce, the Trademark (whether directly or through affiliated or nonaffiliated sublicensees,
in association with the manufacture, marketing, advertisement, promotion, performance, sale, supply and distribution of Licensed
Products and Services through the Licensed Distribution Channels. MCL granted the Company a non-exclusive right to distribute,
within and to the Territory, through the Licensed Distribution Channels, tea products and ready-to-use (or “instant”)
coffee products (the “Non-Exclusive License,” and with the Exclusive License, the “License”). During the
effectiveness of the License, MCL granted the Company a revocable right to use the name “Marley Coffee” and reasonably
similar variations thereof, subject to MCL’s consent, as its “doing business as” or “DBA” name but
solely in connection with the Licensed Products and Services in the Licensed Distribution Channels in the Territory.
NOTE 4 – RELATED PARTY TRANSACTIONS
On November 11, 2010, Alan Lewis was offered a voting seat on
the Company’s board of directors and paid $2,000 per month as its Director of Corporate Development. Mr. Lewis was a director
from November 11, 2010 until February 11, 2011 at which time he resigned as a board member.. Mr. Lewis was paid a total of $5,000
for his director services during the fiscal year ended January 31, 2011.
In December 2010, Anh Tran, the President and a Director of
the Company, purchased 1,000,000 shares of the Company’s common stock from David O’Neill, a then greater than 10% shareholder
of the Company and the former President and Director of the Company in consideration for $12,500 or $0.0125 per share.
In December 2010, Rohan Marley, a Director of the Company purchased
12,897,500 shares of the Company’s common stock from Mr. O’Neill, in consideration for $3,000 or $0.0002 per share.
In December 2010, Mr. O’Neill, Shane Whittle, a manager
and equity holder of MCL and a former chief executive officer and director of the Company, and a third party cancelled an aggregate
of 30,922,944 shares of common stock which they held. There was no consideration paid to either party for these shares that were
returned to the Company.
During the fiscal year ended January 31, 2011, Anh Tran, the
Company’s President, entered into a lease agreement on behalf of the Company for office space. The Company has been making
monthly rent payments for the office in accordance with the amounts specified in the lease agreement. Because the lease is signed
by Mr. Tran, it is not a commitment of the Company. The Company made rent expense payments of $5,965 during the fiscal year ended
January 31, 2012, related to this arrangement.
In April 2011, the Company issued one million (1,000,000) common
shares in connection with the terms of the License Agreement, discussed in Note 3 above, pursuant to which MCL, a private limited
liability company of which Rohan Marley, a Director of the Company, and his family has a combined controlling interest, granted
the Company a non-exclusive transferable sub-license for the worldwide rights to use the Trademark for the licensed products and
distribution channels.
Effective May 1, 2011, the Company began to pay Anh Tran, at
that time the Company’s Chief Executive Officer, Secretary and Director, $10,000 per month as compensation for his services.
Effective May 1, 2011, the Company began to pay Mr. Rohan Marley $10,000 per month for his services as Chairman of the Company’s
board of directors. Prior to such date, neither Mr. Tran nor Mr. Marley received any compensation for their services to the Company.
On August 5, 2011, the Company and MCL agreed to amend the License
Agreement by and between the Company and MCL. In consideration for the License Agreement Amendment, the Company agreed to assume
$126,000 of obligations of MCL or its managing members by paying MCL or creditors identified by MCL or by MCL’s managing
members $55,000, with the balance to be paid in equal monthly installments over a period of eighteen months. The balance payable
(reflected as notes payable in the accompanying balance sheet) at January 31, 2012 is $51,275. (see Note 9). MCL is a private limited
liability company of which Rohan Marley, a director of the Company, has a thirty-three percent (33%) ownership interest and serves
as a Manager.
Shane
Whittle, a manager and equity holder of MCL and a former chief executive officer and director of the Company, made payments from
time to time on behalf of the Company or advanced funds to the Company for its operational needs. The advance was unsecured, non-interest
bearing and had no specific terms of repayment. The Company repaid Mr. Whittle for any remaining outstanding amounts in July 2011.
During the year ended January 31, 2012,
the Company paid $66,868 to Nicole Whittle, Shane Whittle’s sister, who serves as the Company’s Creative Director,
for ongoing creative design costs services.
NOTE 5 – STOCKHOLDER’S EQUITY
Holders of common stock are entitled to one vote for each share
held. There are no restrictions that limit the Company's ability to pay dividends on its common stock. The Company has not declared
any dividends since incorporation.
In December 2009, the Company issued 1,200,000 common shares
at $0.075 per share for total proceeds of $90,000, of which $40,000 was received in cash at that time and the remaining $50,000
was reflected as a subscription receivable. The $50,000 was collected during the nine months ended October 31, 2010.
On January 10, 2010, the Company completed a three for one forward
stock split of the Company's authorized, issued and outstanding shares of common stock. As a result, the Company's authorized capital
increased from 1,704,287,175 to 5,112,861,525 shares of common stock with a par value of $0.001 each, and issued and outstanding
share capital increased from 32,970,198 shares of common stock to 98,910,594 shares of common stock.
On March 31, 2010, the Company signed the Asset Agreement with
MCL to acquire a license agreement from MCL by agreeing to issue ten million shares of the Company’s common
stock valued at $640,000. In December 2010, the Company issued 1,000,000 common shares per the execution of the License Agreement.
In April 2011, the Company issued one million (1,000,000) common shares in connection with the terms of the License Agreement.
(See Note 3).
On November 9, 2010, Wilson Capital, a non-U.S. person, subscribed
to purchase 62,500 shares of the Company’s common stock in a private placement pursuant to Regulation S under the Securities
Act of 1933, as amended (the “Securities Act”), which shares are subject to restrictions on their subsequent disposition.
The purchase price was $25,000 or $0.40 per share. These shares were issued by the Company in April 2011.
In December 2010, 30,922,944 shares of common stock were returned
to the Company. There was no consideration paid to the parties returning these shares. (See Note 4).
On December 22, 2010, the Company entered into a Share Issuance
Agreement (the “Share Issuance Agreement”) with Straight Path Capital, a non-U.S. person (“Straight Path”).
Pursuant to the Share Issuance Agreement, the Company has the right to request Straight Path to purchase, in a private placement
pursuant to Regulation S under the Securities Act, up to an amount of $2,500,000 of what the Share Issuance Agreement describes
as “common shares” of the Company at a price of $0.40 per share, until December 22, 2011, unless extended by either
the Company or Straight Path for an additional twelve (12) months, and subject to the terms of the Share Issuance Agreement.
Under the terms of the Share Issuance Agreement, the Company
may from time to time request Straight Path to make investments in the Company of up to $40,000 (each an “Investment”
and such request, an “Investment Request”) to fund operating expenses, acquisitions, working capital and other general
corporate activities. Straight Path has the right to agree to make such Investment or, following receipt of any Investment Request,
decide not to make an Investment in its sole discretion. Furthermore, Straight Path may, in its sole discretion, refuse an Investment
Request at any time or rescind its offer to make investments in the Company if it is not satisfied with the business affairs of
the Company.
The Company is required to issue shares of its common stock
to Straight Path at $0.40 per share in connection with such Investment Request, and Straight Path is required to enter into a subscription
agreement evidencing such Investment. Said shares shall not be registered with the Securities and Exchange Commission or any state
securities agency and their transfer or further disposition shall be restricted. In the event the Company has requested and received
Investments from Straight Path for the entire $2,500,000 available under the Share Issuance Agreement, Straight Path has an option
to subscribe for an additional 500,000 of shares of the Company’s common stock at $0.40 per share.
On January 4, 2011, the Company received $40,000 in connection
with an Investment by Straight Path, which was used for development and operating expenses. In February and March 2011, the
Company received two additional investments of $40,000 each. In April 2011, in consideration of the $120,000 received in January,
February, and March of 2011, the Company issued 300,000 shares to Straight Path, 100,000 shares of common stock for each of the
investments in January 2011, February 2011 and March 2011.
On May 5, 2011, pursuant to a share issuance request by the
Company, Straight Path agreed to make an investment of $2,380,000, the remaining amount available under the Share Issuance Agreement
referred to above in consideration for 5,950,000 shares of restricted common stock of the Company. The Company received the $2,380,000
on May 19, 2011 and the shares were issued on June 8, 2011. Because the Company is receiving the entire $2,500,000 of funding agreed
to by Straight Path available under the Share Issuance Agreement, Straight Path has an option to subscribe for an additional $500,000
worth of shares of the Company’s common stock at $0.40 per share.
On May 9 and May 10, 2011, the Company issued 38,000 restricted
shares (“Restricted Stock”) and 76,000 restricted shares respectively, of its common stock to White Lion Capital, an
entity controlled by Shane Whittle, a manager and equity holder of MCL and a former chief executive officer and director of the
Company, pursuant to White Lion Capital’s November 2008 subscription in consideration of $47,500 ($0.4166 per share).
On January 18, 2011, the Company entered into a one year agreement
(“Consulting Agreement”) with Investor Relations Group, Inc. (“IRG”), under which IRG would provide the
Company with certain corporate communications services. Under the terms of the Consulting Agreement, the Company issued IRG 310,000
common shares at $0.65 per share. Pursuant to the terms of the Consulting Agreement, 300,000 shares represented the “Origination
Shares” and were to be earned each full month during the term of the Consulting Agreement and, should the Consulting Agreement
terminate prior to January 19, 2012, any unearned shares would be returned to the Company. In addition, IRG earns 10,000 shares
of common stock per month as part of the Consulting Agreement. IRG received a total of 20,000 common shares for the nine months
ended October 31, 2011.
Effective April 15, 2011, IRG and the Company entered into a
revised consulting agreement (the “New Consulting Agreement”), which replaced and superseded the Consulting Agreement,
with a new term through April 15, 2012 (automatically renewable thereafter unless terminated by either party for additional 12
month periods). The New Consulting Agreement offered additional services to be provided by IRG, including the answering of shareholder
calls. The monthly fees due to IRG were increased to $4,500 per month plus 12,000 shares of the Company’s restricted common
stock (both effective as of March 15, 2011). The New Consulting Agreement also provided that the Company has the right after the
first year of the agreement to pay IRG an additional cash fee of $2,000 per month in lieu of the monthly shares due to IRG, and
that IRG has the right to require the Company to pay IRG such monthly shares in cash, in the event the volume weighted average
trading price of the Company’s common stock on the first five days of any month falls below $0.50 per share. The New Consulting
Agreement did not affect the 310,000 shares of common stock issued to IRG, which are still subject to forfeiture as described above
and based on the first year term of the Consulting Agreement. The New Consulting Agreement provided that it can be terminated by
either party at any time with written notice to the other party, and if terminated prior to the end of the initial term, any unvested
shares issued to IRG is to be returned to the Company and cancelled.
In a letter dated May 19, 2011, IRG exercised its right to terminate
the New Consulting Agreement. During nine months ended April 30, 2011, the Company incurred $11,900 in Maintenance and Expense
Account fees to IRG. In connection with the termination of the New Consulting Agreement IRG has agreed, but to date has not returned,
330,000 common shares issued to them by the Company in connection with the Consulting Agreement, 310,000 of which were issued
January 19, 2011, and an additional 20,000 shares of which were issued in February and March of 2011.
In addition to being quoted on the OTCBB, the Company’s
common stock was previously traded on a public securities market in British Columbia, Canada. Because the Company did not
comply with certain Canadian securities filings requirements, the Company’s common stock is no longer eligible to trade on
the British Columbia market and is subject to a Cease Trade Order. At this stage in the Company’s development, the Company
has determined to invest its resources in other aspects of its business rather than incurring the significant expense to regain
compliance with the British Columbia market’s requirements.
As of January 31, 2012, the Company had 5,112,861,525 common
shares authorized and 76,744,150 shares issued and outstanding, respectively.
NOTE 6 – OPTIONS
Share-based Compensation:
On August 5, 2011, the Board approved the 2011 Equity Compensation
Plan (the “Equity Compensation Plan”). The Equity Compensation Plan authorizes the issuance of various forms of stock-based
awards, including incentive or non-qualified options, restricted stock awards, performance shares and other securities as described
in greater detail in the Equity Compensation Plan, to the Company’s employees, officers, directors and consultants.
Options to purchase a total of twenty million (20,000,000) shares of common stock are authorized to be issued under the Equity
Compensation Plan. As of January 31, 2012, seven million two hundred thousand (7,200,000) shares of common stock have been granted
under this plan.
Options
In August 2011, options to purchase an aggregate of four million
(4,000,000) shares of common stock were granted to a certain named executive and to a board member at an exercise price of $0.40
per share. The options have a six year term and vested annually on the anniversary date of grant. A fair value of $3,126,903 was
recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model for the options
issued during the three month period ended October 31, 2011 include (1) discount rate of 1.23%, (2) expected term of 4 years,
(3) expected volatility of 242.7% and (4) zero expected dividends.
In August 2011, options to purchase an aggregate of two million
(2,000,000) shares of common stock were granted to a consultant at an exercise price of $0.40 per share. The options have a six
year term and vested annually on the anniversary date of grant. A fair value of $1,563,452 was recorded using the Black-Scholes
option-pricing model. Variables used in the Black-Scholes option-pricing model for the options issued include: (1) discount rate
of 1.23%, (2) expected term of 4 years, (3) expected volatility of 242.7% and (4) zero expected dividends.
In August 2011, options to purchase an aggregate of one million
(1,000,000) shares of common stock were granted to a certain named executive at an exercise price of $0.40 per share. The options
have a six year term and vested annually on the anniversary date of grant. A fair value of $861,206 was recorded using the Black-Scholes
option-pricing model. Variables used in the Black-Scholes option-pricing model for the options issued include: (1) discount rate
of 0.93%, (2) expected term of 4 years, (3) expected volatility of 242.4% and (4) zero expected dividends.
In December 2011, options to purchase an aggregate of two hundred
thousand (200,000) shares of common stock were granted to an employee were granted at an exercise price of $0.26 per share. The
options have a six year term. 100,000 options vest immediately on date of grant and 100,000 options vest annually on the anniversary
date of grant. A fair value of $50,906 was recorded using the Black-Scholes option-pricing model. Variables used in the Black-Scholes
option-pricing model for the options issued include: (1) discount rate of 0.86%, (2) expected term of 4 years, (3) expected
volatility of 230.1% and (4) zero expected dividends.
During the year ended January 31, 2012, the Company recognized
share-based compensation expense of $939,317. The remaining amount of unamortized options expense at January 31, 2012 is $4,663,146.
The intrinsic value of outstanding as well as exercisable options at January 31, 2012 is $-0-.
As of January 31, 2012, there was approximately $4.7 million
of total unrecognized compensation expense related to unvested share-based compensation arrangements granted under the option plans.
This cost is expected to be recognized over a weighted average period of 2.52 years.
Activity in options during the year ended January 31, 2012 and
related balances outstanding as of that date are reflected below:
|
|
Number of
Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining Contract
Term (# years)
|
|
Outstanding at February 1, 2011
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
Granted
|
|
|
7,200,000
|
|
|
|
0.40
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Forfeited and canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 31, 2012
|
|
|
7,200,000
|
|
|
$
|
0.40
|
|
|
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at January 31, 2012
|
|
|
100,000
|
|
|
$
|
0.26
|
|
|
|
5.9
|
|
NOTE 7 - INCOME TAXES
Pursuant to the provisions of FASB ASC740 “Income Taxes,”
deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for
financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carryforwards. No net provision
for refundable Federal income taxes has been made in the accompanying statement of operations because no recoverable taxes were
paid previously. Similarly, no deferred tax asset attributable to the net operating loss carryforward has been recognized, as it
is not deemed likely to be realized.
The Company has not filed federal or state income tax returns
but it is in the process of preparing the appropriate forms and submitting them to appropriate governmental agency.
The provision for refundable income taxes consists of the following:
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2012
|
|
|
2011
|
|
Federal income tax benefit
|
|
$
|
764,000
|
|
|
$
|
51,000
|
|
State income tax benefit
|
|
|
222,000
|
|
|
|
-
|
|
Less change in valuation allowance
|
|
|
(986,000
|
)
|
|
|
(51,000
|
)
|
Net refundable amount
|
|
$
|
-
|
|
|
$
|
-
|
|
The cumulative tax effect of significant items comprising our
net deferred tax amount is as follows:
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2012
|
|
|
2011
|
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
1,215,000
|
|
|
$
|
195,000
|
|
Less, valuation allowance
|
|
|
(1,215,000
|
)
|
|
|
(195,000
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
As of January 31, 2012, we have not yet completed our analysis
of the deferred tax assets relating to federal and state net operating losses.
At January 31, 2012, the Company had unused net operating loss
carryovers of approximately $3,040,000 that are available to offset future federal and state taxable income which expires beginning
in 2025. Both the federal and state net operating loss carryovers at January 31, 2012 may be adjusted once tax returns are filed.
The provision for income taxes on earnings subject to income
taxes differs from the statutory federal rate at January 31, 2012 and 2011, due to the following (in thousands):
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2012
|
|
|
2011
|
|
Federal income taxes at 34%
|
|
$
|
(839,000
|
)
|
|
$
|
(51,000
|
)
|
State income tax, net of federal benefit
|
|
|
(147,000
|
)
|
|
|
-
|
|
Tax effect on non-deductible expenses and credits
|
|
|
-
|
|
|
|
-
|
|
Increase in valuation allowance
|
|
|
986,000
|
|
|
|
51,000
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Pursuant to Internal Revenue Code Sections 382, use of our net
operating loss carryforwards could be limited if a cumulative change in ownership of more than 50% occurs within a three-year period.
We plan to complete a Section 382 analysis regarding whether there are limitations of the net operating loss prior to utilizing
any net operating losses.
On July 13, 2006, the FASB issued FIN 48, subsequently codified
in ASC 740, Income Taxes, which clarifies the accounting for uncertainty in income taxes recognized in an entity's financial, and
prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected
to be taken on a tax return. Under ASC 740, the impact of an uncertain income tax position on the income tax return must be recognized
at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income
tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740 provides guidance
on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. ASC 740 is
effective for fiscal years beginning after December 15, 2006.
We follow the provisions of ASC 740 relating to uncertain tax
provisions and have commenced analyzing filing positions in all of the federal and state jurisdictions where it is required to
file income tax returns, as well as all open tax years in these jurisdictions. As a result of adoption, no additional tax liabilities
have been recorded. There are no unrecognized tax benefits as of January 31, 2012 or January 31, 2011.
NOTE 8 – AGREEMENTS
In January 2012, the Company entered into a Roasting and Distribution
Agreement (the “Roasting Agreement”) with Canterbury Coffee Corporation (“Canterbury”). The Roasting Agreement
is terminable by either party on 30 days’ notice. Pursuant to the Roasting Agreement, we provide Canterbury with pre-made
bags bearing our logo and the Trademarks licensed through the License Agreement. Canterbury obtains the beans and other ingredients,
roasts and prepares the coffee beans and packages our products in the bags which we provide to Canterbury. Under the Roasting Agreement,
we are responsible for carrying out sales and marketing for our products, provided that Canterbury pays the actual shipping costs
to our licensed distributors and customers and receives the gross proceeds from the sale of our products, and we receive the net
difference between the total cost of production and shipping of our products and the amount that Canterbury receives from the sale
of such products to our distributors and customers.
On April 25, 2011, the Company entered into an Exclusive Sales
and Marketing Agreement (the “NCSV Agreement”) with National Coffee Service & Vending (“NCSV”). Pursuant
to the NCSV Agreement, we agreed to appoint NCSV as our exclusive agent and distributor of “Jammin Java Coffee” brand
roasted coffee within the U.S. in the office coffee vending, office products, water, and other industries featuring a “break
room,” and divisions and offshoots thereof. Pursuant to the NCSV Agreement, we compensate NCSV based on a percentage of net
profits (as defined) on sales fulfilled by NCSV.
The Company entered into a Trademark License Agreement (the
“License Agreement”) with MCL, effective on March 31, 2010 and on August 5, 2011, the Company and MCL agreed to amend
the License Agreement (the “License Agreement Amendment”). In consideration for the License Agreement Amendment, the
Company agreed to assume $126,000 of obligations of MCL or its managing members by paying MCL or creditors identified by MCL or
by MCL’s managing members $55,000, with the balance to be paid in equal monthly installments over a period of eighteen months.
The License Agreement Amendment instituted several important changes. The definition of “Licensed Distribution Channels”
was expanded from “hotels, restaurants, office coffee services industry, and large (big box) retail stores” to include
specialty grocery stores, food distributors and supply services, gas and other automotive/truck service stations, Internet-based
wholesalers and retailers, and other business engaged in the sale of coffee products (whole or ground beans or beverages) and accessories
(excluding “coffee houses”).
The definition of “Licensed Products,” which originally
meant “coffee in portion sizes of 5 lb. bags, 1Kg bags and 2.5 oz. portion packs, related goods and goods related to the
Licensed Services” (
i.e
., coffee roasting services, coffee production services and coffee sale, supply distribution
and support services) was also augmented and clarified to mean “coffee in all its forms and derivations, regardless of portion
sizes, or packaging.” This definition also now includes “the non-exclusive right to merchandise other items including,
but not limited to, coffee cups, coffee mugs, coffee glasses, saucers, milk steamers, machines for brewing coffee, espresso, and/or
cappuccino, grinders, water treatment products, tea products and chocolate products.”
The License Agreement granted the Company a non-exclusive worldwide
license to use and reproduce MCL’s trademarks. The License Agreement Amendment provides that MCL grants the Company an exclusive
right to distribute, through the Licensed Distribution Channels, the Licensed Products and Services within and to the U.S., Canada,
Mexico and the Caribbean, as well as to U.S. and Canadian government and military facilities worldwide (the “Territory”).
A non-exclusive right is granted to distribute tea products and instant coffee in the Territory.
Pursuant to the License Agreement Amendment, MCL also grants
the Company a revocable right (subject to MCL’s consent) to use the term “Marley Coffee,” and reasonably similar
variations, as the Company’s “doing business as” name solely in connection with the Licensed Products and Services,
for the Licensed Distribution Channels, in the Territory. If MCL, or an affiliate thereof, opens up to three franchise establishments
to retail the Licensed Products and Services, following the completion of such franchises the Company shall have a right of first
refusal to develop new franchises in the U.S. The License Agreement Amendment added an arbitration clause to the License Agreement
for an efficient dispute resolution scheme.
NOTE 9 – NOTES PAYABLE – RELATED PARTY
As discussed in Note 8 above, the Company entered into the License
Agreement with MCL, a private limited liability company of which (i) Rohan Marley, one of the Company’s directors, has
a 33% ownership interest (and collectively with his family, has a controlling interest) and serves as a Manager, and (ii) Shane
Whittle, a former chief executive officer and director of the Company, has a 29% ownership interest and serves as a Manager. In
consideration for the License Agreement Amendment, the Company agreed to assume $126,000 of obligations by paying MCL $55,000,
with the balance being paid, with no interest, in equal monthly installments over a period of eighteen months. The balance payable
(reflected as Notes payable in the accompanying balance sheet) at January 31, 2012 is $51,275.
NOTE 10 – SUBSEQUENT EVENTS
On February 3rd, 2012 MCL, LLC and its officers received a termination
letter from Blue Mountain Coffee Europe Limited (BMCE), a UK company, terminating a previously dormant "sales and marketing"
agreement signed on December 22, 2010. From December 22, 2010 until its termination, no business activities commenced between
the two companies. On February 3rd, 2012 MCL granted an oral sublicense to the Company to expand its territory to include
the UK and Ireland. On March 22nd, the Company signed a Trademark Licensing Agreement with BMCE to sublicense the use
of the Trademarks to BMCE for a licensing fee for the use in connection with certain licensed products subject to the rights and
limitations of the 56 License and in the MCL License. The grant of this sublicense is contingent upon BMCE obtaining certain
annual sales objectives.
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