UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

R	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended April 30, 2016

  

q	TRANSITION REPORT PURSUANT TO 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		26-4204714
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

 

4730 Tejon St., Denver, Colorado 80211

(Address of principal executive offices and Zip Code)

 

Registrant’s telephone number, including area code: (323) 556-0746

  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  R    No  q

 

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  R    No  q

 

Indicate by check mark 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.

  

	Large accelerated filer q	Accelerated filer q
	Non-accelerated filer q	Smaller reporting company R
	(Do not check if a smaller reporting company)

  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  q    No  R

 

At June 21, 2016, there were 130,384,439 shares of the issuer’s common stock outstanding.

 

 

Jammin Java Corp.

 

For the Three months Ended April 30, 2016 and 2015

 

INDEX  

 

		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	F-1
	Balance Sheets as of April 30, 2016 (unaudited) and January 31, 2016	F-1
	Statements of Operations (unaudited) - For the three months ended April 30, 2016 and 2015	F-2
	Statements of Cash Flows (unaudited) - For the three months ended April 30, 2016 and 2015	F-3
	Notes to Financial Statements (unaudited)	F-4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	14
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	21
Signatures		22

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Jammin Java Corp.

BALANCE SHEETS

 

		April 30, 2016				January 31, 2016
		(Unaudited)
Assets
Current Assets:
Cash and cash equivalents		$	193,002			$	231,021
Accounts receivable, net			1,436,015				1,415,559
Prepaid expenses			6,382				30,171
Other current assets			3,840				8,000
Total Current Assets			1,639,239				1,684,751
Property and equipment, net			148,307				187,838
Intangible assets, net			578,663				593,325
Other assets			23,567				23,567
Total Assets		$	2,389,776			$	2,489,481
Liabilities and Stockholders’ Deficit
Current Liabilities:
Accounts payable		$	3,635,442			$	3,611,257
Accrued expenses			936,457				497,431
Convertible and other notes payable, net of discount, current			928,971				1,029,558
Conversion feature - derivative liability			782,603				778,951
Total Current Liabilities			6,283,473				5,917,197
Long Term Liabilities
Convertible and other notes payable, net of discount and current portion			250,363				—
			250,363				—
Total Liabilities			6,533,836				5,917,197
Commitments & Contingencies
Stockholders’ Deficit:
Common stock, $.001 par value, 5,112,861,525 shares authorized; 130,134,439 and 126,455,312 shares issued and outstanding, as of April 30, 2016 and January 31, 2016, respectively			130,134				126,455
Additional paid-in-capital			26,459,125				25,691,579
Accumulated deficit			(30,733,319	)			(29,245,750	)
Total Stockholders’ Deficit			(4,144,060	)			(3,427,716	)
Total Liabilities and Stockholders’ Deficit		$	2,389,776			$	2,489,481

 

See accompanying notes to condensed financial statements

 

 

JAMMIN JAVA CORP.

STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended April 30,
		2016				2015
Sales, net		$	2,727,999			$	2,581,427
Cost of sales			1,786,870				1,784,812
Gross Profit			941,129				796,615
Operating Expenses:
Compensation and benefits			970,703				972,806
Selling and marketing			600,709				521,116
General and administrative			771,303				492,824
Total operating expenses			2,342,715				1,986,746
Other expense:
Other expense			(7,650	)			—
Changes in fair value of derivative liability			75,914				—
Gain on extinguishment of debt			362,506				—
Interest expense			(516,753	)			(7,105	)
Total other expense			(85,983	)			(7,105	)
Net Loss		$	(1,487,569	)		$	(1,197,236	)
Net loss per share:
Basic and diluted loss per share		$	(0.01	)		$	(0.01	)
Weighted average common shares outstanding - basic and diluted			127,748,811				124,879,545

 

See accompanying notes to condensed financial statements

 

 

JAMMIN JAVA CORP.

statements OF CASH FLOWS

(Unaudited)

 

		Three Months Ended April 30,
		2016				2015
Cash Flows From Operating Activities:
Net loss		$	(1,487,569	)		$	(1,197,236	)
Adjustments to reconcile net loss to net cash used in operating activities:
Common stock issued for services			—				156,381
Shared-based compensation			771,225				368,046
Depreciation			35,757				41,273
Amortization of intangibles			14,662				16,325
Changes in fair value of derivative liability			(75,914	)			—
Gain on sale of fixed asset			3,774				—
Changes in operating assets and liabilities:
Accounts receivable			(20,456	)			(577,995	)
Inventory			—				43,713
Prepaid expenses and other current assets			27,949				7,689
Accounts payable			24,185				737,723
Accrued expenses			439,026				(210,502	)
Net cash used in operating activities			(267,361	)			(614,583	)
Cash Flows From Investing Activities:
(Loss) disposal of property and equipment			—				(55,523	)
Net cash provided by (used in) investing activities			—				(55,523	)
Cash Flows From Financing Activities:
Repayments on short term debt			(214,071	)			—
Borrowings on long term debt			443,413				298,948
Net cash provided by financing activities			229,342				298,948
Net change in cash and cash equivalents			(38,019	)			(371,158	)
Cash and cash equivalents at beginning of period			231,021				443,189
Cash and cash equivalents at end of period		$	193,002			$	72,031
Non-Cash Transactions:
Addition of capital leases		$	—			$	73,000

 

See accompanying notes to condensed financial statements

 

 

NOTES TO CONDENSED FINANCIAL STATEMENTS

APRIL 30, 2016 

(Unaudited)

 

Note 1. Basis of Presentation

 

The accompanying unaudited interim financial statements of Jammin Java Corp. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Company’s Annual Report on Form 10-K have been omitted. The accompanying balance sheet at April 30, 2016 has been derived from the audited balance sheet at January 31, 2016 contained in such Form 10-K.

 

As used in this Quarterly Report, the terms “we,” “us,” “our,” “Jammin Java” and the “Company” mean Jammin Java Corp., unless otherwise indicated. All dollar amounts in this Quarterly Report are in U.S. dollars unless otherwise stated.

 

Note 2. Going Concern and Liquidity

 

These financial statements have been prepared by management assuming that the Company will be able to continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments to the recoverability of recorded asset amounts or the amounts or classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The Company incurred a net loss of $1,487,569 for the three months ended April 30, 2016, and has an accumulated deficit since inception of $30,733,319. The Company has a history of losses and has only recently begun to generate revenue as part of its 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 sale of its common stock. The Company will, in the future, need to secure additional funds through future equity sales or other fund raising activities. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company.

 

The Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to sell its 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 the Company’s product offerings, expanding its direct sales force and expanding its domestic and international distributor relationships.

 

There can be no assurance that the Company will be able to increase sales, reduce expenses or obtain additional financing, if necessary, at a level to meet its current obligations. As a result, the opinion the Company received from its independent registered public accounting firm on its January 31, 2016 financial statements contains an explanatory paragraph stating that there is a substantial doubt regarding the Company’s ability to continue as a going concern.

 

 

Note 3. Business Overview and Summary of Accounting Policies

 

Jammin Java, doing business as Marley Coffee, is a United States (U.S.)-based company that provides sustainably grown, ethically farmed and artisan roasted gourmet coffee through multiple U.S. and international distribution channels, using the Marley Coffee brand name. U.S. and international grocery retail channels have become the Company’s largest revenue channels, followed by online retail, office coffee services (referred to herein as OCS), food service outlets and licensing. The Company intends to continue to develop these revenue channels and achieve a leadership position in the gourmet coffee space by capitalizing on the global recognition of the Marley name through the licensing of the Marley Coffee trademarks.

 

Reclassifications. Certain prior period amounts have been reclassified to conform with the current period 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 those estimates.

 

Cash and Cash Equivalents. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of April 30, 2016, the Company had $193,002 of cash and cash equivalents. Additionally, no interest income was recognized for the three months ended April 30, 2016.

 

Revenue Recognition. Revenue is derived from the sale of coffee products and is recognized on a gross basis upon shipment to the customer. All revenue is recognized when (i) persuasive evidence of an arrangement exists; (ii) the service or sale is completed; (iii) the price is fixed or determinable; and (iv) the ability to collect is reasonably assured. Revenue is recognized as the net amount estimated to be received after deducting estimated amounts for discounts, trade allowances and product terms. We record promotional and return allowances based on recent and historical trends. Promotional allowances, including customer incentive and trade promotion activities, are recorded as a reduction to sales based on amounts estimated being due to customers, based primarily on historical utilization and redemption rates. Discounts and promotional allowances deducted from sales for the three months ended April 30, 2016 and 2015 were $355,560 and $156,952, respectively.

 

The Company utilizes third parties for the production and fulfillment of orders placed by customers. The Company, acting as principal, takes title to the product and assumes the risks of ownership; namely, the risks of loss for collection, delivery and returns.

 

Accounts Receivable due from Roasters. We source coffee that we sell to our roaster, Mother Parkers Tea & Coffee Inc. (“Mother Parkers”), a related party and shareholder of the Company, who in turn sells it to its own customers. This is especially the case with Jamaican Blue Mountain coffee secured by us. Mother Parkers is also a shareholder of the Company. At April 30, 2016, we are owed $463,906 by Mother Parkers. We also utilize the services of Mother Parkers, to roast coffee to our specifications for sale to the Company’s customers. As a result, at April 30, 2016, we owe $2,232,088 to Mother Parkers for roasting services.

 

Financial assets and liabilities are subject to offset and presented as net amounts in the statement of financial position when, and only when, the Company currently has a legally enforceable right to offset amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. The Company does not have offset rights with respect to Mother Parkers due to/due from amounts at April 30, 2016.

 

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 terms for each customer, and the length of time accounts receivable are outstanding. Management provides an allowance for accounts receivable whenever it is evident that they become uncollectible. The Company has reserved an allowance of $78,760 and $71,168, respectively for doubtful accounts at April 30, 2016 and January 31, 2016. Because our accounts receivable are concentrated in a relatively few number of customers, a significant change in the liquidity or financial position of any one of these customers could have a material adverse effect on the collectability of our accounts receivable and our future operating results.

 

 

Property and Equipment. Equipment is stated at cost less accumulated depreciation and amortization. Maintenance and repairs, as incurred, are charged to expense. Renewals and enhancements 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 $35,757 and $41,273, for the three months ended April 30, 2016 and 2015, respectively.

 

Impairment of Long-Lived Assets. Long-lived assets consist primarily of a license agreement that was recorded at the estimated cost to acquire the asset. 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 (see Note 4). 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 long-lived assets including the license and determined that no impairment existed at April 30, 2016.

 

Stock-Based Compensation. Pursuant to the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718-10, “Compensation – Stock Compensation,” which establishes accounting for equity instruments exchanged for employee service, management utilizes 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 recorded based on the value of the services or the value of the common stock, whichever is more clearly determinable. Whenever the value of the services is not determinable, the measurement date occurs generally at the date of issuance of the stock. In more limited cases, it occurs when a commitment for performance has been reached with the counterparty and nonperformance is subject to significant disincentives. If the total value of stock issued exceeds the par value, the value in excess of the par value is added to the additional paid-in-capital. 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. 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 net 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.

 

Loss Per Common Share. Basic loss per common share equals net loss divided by the weighted average of shares outstanding during the reporting period. Diluted loss per share includes 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 three months ended April 30, 2016 and 2015, respectively. In addition, basic and diluted loss per share for such periods are the same because all potential common equivalent shares totaling 21,580,195 shares have been excluded from the calculation of diluted loss per share as their inclusion would be anti-dilutive.

 

Recently Issued Accounting Pronouncements. Accounting standards that have been issued 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.

 

 

Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU 2016-02 “Leases (Topic 842)” - In February 2016, the FASB issued ASU 2016-02, which will require lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after December 18, 2018, including interim periods within those fiscal years. We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.

  

FASB ASU 2014-09 “Revenue from Contracts with Customers (Topic 606),” or ASU 2014-09 - In May 2014, the FASB issued ASU 2014-09, which supersedes the revenue recognition requirements of Accounting Standards Codification, or ASC, Topic 605 “Revenue Recognition.” This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2017. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.

 

Note 4. Trademark License Agreements and Intangible Assets

 

Intangible assets include our License Agreement, and intangibles and goodwill arising from our BikeCaffe acquisition. The amortization periods are fifteen years and ten years for the license agreement and intangible assets, respectively. Amortization expense consists of the following:

 

License agreement, net consists of the following:

 

		April 30, 2016				January 31, 2016
License Agreement		$	730,000			$	730,000
Accumulated amortization			(182,499	)			(170,332	)
License Agreement, net		$	547,501			$	559,668

 

The amortization period is fifteen years. Amortization expense consists of the following: 

 

		For the three months ending April 30,
		2016				2015
License Agreement		$	(12,167	)		$	(12,166	)
Intangible assets			(2,495	)			(4,159	)
Total License Agreement Amortization Expense		$	(14,662	)		$	(16,325	)

 

As of January 31, 2016, the remaining useful life of the Company's license agreement was approximately 11.5 years. The following table shows the estimated amortization expense for such assets for each of the five succeeding fiscal years and thereafter.

 

 

Years Ending January 31,
2017		$	36,501
2018			48,668
2019			48,688
2020			48,688
2021			48,688
Thereafter			316,328
Total		$	547,501

 

Note 5. Outstanding debt

 

Convertible and Other Notes Payable are as follows:

 

						Outstanding
						as of				Available				Accrued				Debt				Interest
		Commitment				April 30, 2016				Proceeds				Interest				Discount				Rate				Maturity
Colorado Medical Finance Services, LLC *		$	500,000			$	99,949			$	400,051			$	23,599			$	—				17.5	%			September 26, 2016
JSJ			275,000				275,000				—				5,815				(111,049	)			12.0	%			December 6, 2016
Typenex **			1,005,000				105,000				900,000				16,401				(55,320	)			10.0	%			May 14, 2017
JMJ **			900,000				385,000				515,000				51,968				(252,686	)			12.0	%			September 16, 2017
Vis Vires			250,000				225,000				—				11,969				(137,537	)			8.0	%			December 9, 2016
Duck Duck Spruce			550,000				550,000				—				5,558				(279,240	)			5.0	%			December 15, 2016
Third party loan			260,311				259,907				—				—				—				32.0	%			December 1, 2016
		$	3,740,311			$	1,899,856			$	1,815,051			$	115,310			$	(835,832	)			—				—
Derivative liability			—				782,603				—				—				—				—				—
		$	3,740,311			$	2,682,459			$	1,815,051			$	115,310			$	(835,832	)			—				—

  

*Line of Credit.

**Long term note.

 

Revolving Line of Credit – Colorado Medical Finance Services, LLC

 

Effective on February 16, 2015, The Company entered into an unsecured Revolving Line of Credit Agreement with Colorado Medical Finance Services, LLC, dba Gold Gross Capital LLC. The line of credit allows the Company the right to borrow up to $500,000 from the lender from time to time. Amounts borrowed under the line of credit accrue interest at the rate of 17.5% per annum and can be repaid at any time without penalty. A total of 10% of the interest rate is payable in cash and the other 7.5% of the interest rate is payable in cash, or as a reduction of accounts receivable related to coffee sales/services, at the option of the lender, with our consent. We have paid or intend to pay all related interest in cash. The line of credit expires, and all amounts are due under the line of credit on September 26, 2016. Upon the occurrence of an event of default the amounts owed under the line of credit bear interest at the rate of 20% per annum. Proceeds from the line of credit can be solely used for working capital purposes. The lender has no relationship with the Company or its affiliates. As of April 30, 2016 there was $123,548 outstanding which included $99,949 in principal and $23,599 in interest due. The payments due on this line of credit have been made on a monthly basis.

 

Convertible Note Payable – JSJ

 

On September 9, 2015, we entered into a 12% Convertible Note to JSJ Investments Inc. (“JSJ” and the “JSJ Convertible Note”) in the amount of $275,000. On March 1, 2016, we amended the JSJ Convertible Note through a side letter agreement. Amounts owed under the JSJ Convertible Note accrue interest at the rate of 12% per annum (18% upon an event of default). The JSJ Convertible Note is due in December 2016. We have the right to repay the JSJ Convertible Note (a) from March 1, 2016 to through September 9, 2016, provided we pay a redemption premium of 135% of the principal amount of such note together with accrued interest thereon, and (b) from September 10, 2016 to the maturity date, provided we pay a redemption premium of 150% of the principal amount of such note together with accrued interest thereon.

 

 

The JSJ Convertible Note and all accrued interest is convertible at the option of the holder thereof into the Company’s common stock at any time after September 9, 2016. The conversion price of the JSJ Convertible Note is the greatest of a) 60% (a 40% discount) to the third lowest intra-day trading price of the Company’s common stock during the 10 trading days prior to any conversion date of the note, or b) $0.00005. The variable conversion price was accounted for as a derivative liability. Upon initial issuance, the Company recorded a discount of approximately $233,000 relating to the derivative liability. The goal is for the Company to utilize this debt as growth capital to help accelerate projects that generate revenue. We hope to repay the JSJ Convertible Note prior to any conversion. In the event that the JSJ Note is not repaid in cash in its entirety, Company shareholders may suffer dilution if and to the extent that the balance of the JSJ Note is converted into common stock. As of April, 30 2016, the balance of the note was $280,815 of which $275,000 was principal and $5,815 was accrued interest. In connection with the side letter agreement, we paid $96,250 in consideration to extend the due date of the JSJ Note (which represents the prepayment penalty which would have been due had we repaid the JSJ Note when due). The side letter agreement was considered to be a debt extinguishment and the Company recorded a gain of approximately $133,000 relating to such extinguishment.

 

Convertible Promissory Notes Payable - with Typenex Co-Investment, LLC

 

On September 14, 2015 (the “Closing Date”), the Company entered into a Securities Purchase Agreement (the “Typenex SPA”) with Typenex Co-Investment, LLC (“Typenex”). Pursuant to the Typenex SPA, the Company issued to Typenex convertible promissory notes in with a total the principal amount of $1,005,000 in the form of: (a) an initial tranche of $255,000 in cash (the “Typenex Note”), and (b) three promissory notes of $250,000 each. The Typenex Note has a term of 20 months and an interest rate of 10% per annum (22% upon an event of default). The gross proceeds to the Company from the transactions contemplated by the Typenex SPA were $1,005,000, in the form of: (a) an initial tranche of $250,000 in cash, and (b) three promissory notes of $250,000 each (collectively, the “Investor Notes”). Typenex and the Company must mutually agree to fund one or more of the three additional Investor Notes. As of April 30, 2016, none of the additional three tranches only $255,000 had been funded. The Typenex Note has a term of 20 months, matures in May 2017, and has and an interest rate of 10% per annum (22% upon an event of default). Each of the Investor Notes accrue interest at the rate of 10% per annum until paid and are secured by a Membership Interest Pledge Agreement. Beginning in March 2016, and on the same day of each month thereafter until the maturity date, the Company is required to pay to Typenex monthly installments of principal equal to $75,000 (or such lesser principal amount as is then outstanding), plus the sum of any accrued and unpaid interest. Alternatively, Typenex or the Company may elect to convert an installment amount into Common Stock at the lower of (a) $0.30 per share, and (b) if the Company’s market capitalization falls below $3,000,000, the Market Price conversion price shall be adjusted to the market price as of the applicable date applying a discount of 40%. The Typenex Note also includes repricing features whereby if the Company sells or issues any common stock or other securities exercisable for, or convertible into, Common Stock for a price per share that is less than the conversion price applicable under the Typenex Note, then such lower price will apply to all subsequent conversions by Typenex. The repricing feature of the conversion feature was considered to be derivative liabilities and accordingly, the Company recorded approximately $55,320 discount to debt. The Company has the right to prepay the Typenex Note under certain circumstances, subject to payment of a 35% prepayment penalty during the first six months the note is outstanding and 50% thereafter. In the event that the Typenex Note is not repaid in cash in its entirety, Company shareholders may suffer dilution if and to the extent that the balance of the Typenex Note is converted into common stock. As of April 30, 2016, the outstanding balance of the Typenex Note was $121,401 of which $105,000 was principal and $16,401 was interest payable. With the principal payment during the quarter ended April 30, 2016, a portion of the related derivative liability was also extinguished and the Company recorded approximately $44,000 as a gain on extinguishment of debt. The remaining derivative liability associated with the outstanding debt balance was approximately $61,382.

 

 

Convertible Promissory Note with JMJ Financial

 

On September 16, 2015, we entered into a Convertible Promissory Note with JMJ Financial (“JMJ”) in the principal amount of up to $900,000 (the “JMJ Convertible Note”). Upon entering into this arrangement, the total face amount of the JMJ Convertible Note was initially $385,000 and we received $350,000 in cash, as all amounts borrowed under the note include a 10% original issue discount. Moving forward, JMJ may loan us additional funds (up to $900,000 in aggregate) if mutually agreed by both parties, provided that JMJ has the right in its sole discretion to approve any future request for additional funding. Each advance under the JMJ Convertible Note is due two years from the date of such advance, with the amount initially funded under the note due on September 16, 2017.

 

The JMJ Convertible Note (including principal and accrued interest and where applicable other fees) is convertible into our common stock, at any time, at the lesser of (a) $0.75 per share or (b) 65% (a 35% discount) of the two lowest closing prices of our common stock in the 20 trading days prior to the date of any conversion, subject to certain adjustments described in the JMJ Convertible Note. The variable conversion term was considered to be a derivative liability and the Company recorded approximately $253,000 of debt discount upon issuance. The derivative liability had a fair value of approximately $132,000 as of April 30, 2016.

 

A one-time interest charge of 12% was applied to the principal amount of the note, which remains payable regardless of the repayment (or conversion) date of the note.

 

The goal is for the Company to utilize this debt as growth capital to help accelerate projects that generate revenue. We hope to repay the JMJ Convertible Note prior to any conversion. In the event that the JMJ Note is not repaid in cash in its entirety, Company shareholders may suffer dilution if and to the extent that the balance of the JMJ Note is converted into common stock. At April 30, 2016, the amount owed JMJ Financial was $436,968 of which $385,000 was principal and $51,968 was interest payable.

 

Convertible Notes Payable –Vis Vires

 

On September 24, 2015, we sold Vis Vires Group, Inc. (“Vis Vires”) a Convertible Promissory Note (with an issuance date of September 9, 2015) in the principal amount of $254,000 (the “Vis Vires Convertible Note”). The Vis Vires Convertible Note bears interest at the rate of 8% per annum (22% upon an event of default) and is due and payable on June 11, 2016. The principal amount of the Vis Vires Convertible Note and all accrued interest is convertible at the option of the holder at the greater of (a) 65% (a 35% discount) multiplied by the average of the lowest five closing bid prices of our common stock during the ten trading days immediately prior to the date of any conversion and (b) $0.00009. The Vis Vires Convertible Note conversion price also includes price protection features in the event we issue or are deemed to have issued common stock or convertible securities at a price equal to less than the conversion price, the conversion price of the Vis Vires Convertible Note is automatically reduced to such lower price. The variable conversion term was considered to be a derivative liability and the Company recorded approximately $224,000 of debt discount upon issuance. There is a prepayment penalty on the note ranging from 108% to 133% of the then outstanding balance, depending on when such prepayment is made. In March 2016, we paid $347,172 to satisfy the amount outstanding under the Vis Vires Convertible Note in full. With the payment of the note, the related derivative liability was also extinguished and the Company recorded approximately $133,000 as a gain on extinguishment of debt.

 

On March 16, 2016, we sold Vis Vires an additional Convertible Promissory Note in the principal amount of $225,000 (the “New Vis Vires Convertible Note”). The New Vis Vires Convertible Note bears interest at the rate of 8% per annum (22% upon an event of default) and is due and payable on December 15, 2016. The principal amount of the New Vis Vires Convertible Note and all accrued interest is convertible at the option of the holder thereof into our common stock at any time after September 2016. The conversion price of the New Vis Vires Convertible Note is equal to the greater of a) 65% (a 35% discount) multiplied by the average of the lowest five closing bid prices of our common stock during the ten trading days immediately prior to the date of any conversion, and (b) $0.00009. The New Vis Vires Convertible Note conversion price also includes price protection such that in the event we issue or are deemed to have issued common stock or convertible securities at a price equal to less than the conversion price of the New Vis Vires Convertible Note, the conversion price of the New Vis Vires Convertible Note is automatically reduced to such lower price. The repricing feature of the conversion feature was considered to be derivative liabilities and accordingly, the Company recorded approximately $130,000 discount to debt. The Company revalued the derivative liability at approximately $166,000 as of April 30, 2016. We may prepay in full the unpaid principal and interest on the New Vis Vires Convertible Note, upon notice, any time after September 2016. Any prepayment is subject to payment of a prepayment amount ranging from 108% to 133% of the then outstanding balance on the New Vis Vires Convertible Note, depending on when such prepayment is made. We hope to repay the New Vis Vires Convertible Note prior to any conversion. In the event that the New Vis Vires Convertible Note is not repaid in cash in its entirety, Company shareholders may suffer dilution if and to the extent that the balance of the New Vis Vires Convertible Note is converted into common stock At April 30, 2016, the amount owed Vis Vires was $236,969 of which $225,000 was principal and $11,969 was interest payable.

 

 

Convertible Promissory Convertible Promissory Notes with Duck Duck Spruce

 

In March 2016, we sold Duck Duck Spruce, LLC (“Duck Duck”) two 5% Convertible Promissory Notes with total principal face amounts of $550,000 and received $500,000 in cash, with the difference representing an original issue discount (collectively, the “Duck Duck Notes”). The Duck Duck Notes accrue interest at the rate of 5% per annum (the lesser of 10% per annum and the highest rate allowed per law upon an event of default), and are due in December 2016.

 

The Duck Duck Notes can be repaid prior to September 2016 with a prepayment penalty of between 105% and 130% of the principal amount owed thereunder, plus interest. After September 2016, the notes cannot be repaid without the written consent of Duck Duck. The amounts owed under the Duck Duck Notes are convertible into shares of our common stock in September 2016 at a 35% discount the average of the two lowest closing prices of our common stock during the 10 consecutive trading days prior to the date of conversion, subject to a floor of $0.05 per share. The variable conversion terms of the note were accounted for as derivative liabilities and the Company recorded a discount to the note of approximately $279,000. We hope to repay the Duck Duck Notes prior to any conversion. In the event that the Duck Duck Notes are not repaid in cash in their entirety, Company shareholders may suffer dilution if and to the extent that the balance of the Duck Duck Notes is converted into common stock. At April 30, 2016 the balance of these loans total $555,558 of which $550,000 is principal and $5,558 is interest payable.

 

The second Duck Duck Note also (a) required us to issue 250,000 shares of restricted common stock to Duck Duck in consideration for agreeing to the sale of such note; and (b) the conversion price also includes price protection such that in the event we issue or are deemed to have issued common stock or convertible securities at a price equal to less than the conversion price, the conversion price is automatically reduced to such lower price. The Company recorded a debt discount associated with this note totaling approximately $279,000.

 

Third Party Loan

 

In October 2015, we borrowed $150,000 from a third-party lender. The October 2015 loan has a seven-month term, a total payback amount of $202,500 and is payable by way of 147 daily payments of $1,378. In November 2015, we borrowed $65,000 from the same lender. The November 2015 loan has a term of six months, a total payable amount of $89,700 and is payable by way of 126 daily payments of $712. In January 2016, we borrowed $220,000 from the same lender (of which $91,887.70 was new lending and $128,112.30 was used to repay the balance on the October 2015 loan). The January 2016 loan has a term of ten months, a total payback amount of $290,400 and is payable by way of 210 daily payments of $1,383. There was $215,173 outstanding as of January 31, 2016. In February 2016, we borrowed $100,000 from the same lender which has a six-month term, a total payback amount of $130,000 and is payable by way of 126 daily payments of $1,032. In April 2016, we borrowed $115,000 from the same lender (of which $90,000 was new lending and the remainder was used to pay back the balance on the November 2015 loan). The April 2016 loan has a term of eight months, a total payable amount of $158,700 and is payable by way of 168 daily payments of $945. The loans are secured by a security interest in all of our accounts, equipment, inventory and investment property. We have the right to repay the loans within the first 30 days after the effective date of each loan at the rate of 85% of the applicable repayment amount and between 31 and 90 days after the effective date of each loan at the rate of 90% of the applicable repayment amount. The interest rate on these loans range from 30-38% per annum. As of April 30, 2016, $259,907 is payable under the outstanding loans.

 

 

Note 6. Related Party Transactions

 

Transactions with Marley Coffee Ltd.

 

During the three months ended April 30, 2016 and 2015, the Company made purchases of $0 and $161,645, respectively, from Marley Coffee Ltd. (“MC”) a producer of Jamaican Blue Mountain coffee that the Company purchases in the normal course of its business. The Company’s Chairman, Rohan Marley, is an owner of approximately 25% of the equity of MC.

 

The Company also received $0 and $45,200 in rebates from MC during the three months ended April 30, 2016 and 2015, respectively, on the Jamaican green coffee purchased. We buy JBM coffee at the most favorable market rate in the market. For the majority of transactions, we buy raw unroasted beans from MC and then resell them to customers around the world. From time to time, it is more economically favorable for the Company to allow MC to sell to our customers directly and then receive a rebate.

 

License with Fifty-Six Hope Rd

 

As of April 30, 2016 and 2015, the Company incurred license fees payable to Fifty-Six Hope Road Music Limited (“56 Hope Road”) of $77,653 and $59,113, respectively. For the three months ended April 30, 2016 and 2015, there were licensing fees accrued and payable of $297,324 in our accounts payable balance and $118,700, respectively, to 56 Hope Road, for the license to use the name “Marley Coffee”.

 

Other Related Party Transactions

 

The following describe transactions with entities which are licensees of Hope Road Merchandising, LLC a company in which Rohan Marley is a beneficiary. During the three months ended April 30, 2016 and 2015, the Company made net purchases of $77, and $2,483, respectively, from House of Marley. House of Marley produces headphones and speakers that the Company uses for promotions and trade shows. During the three months ended April 30, 2016 and 2015, the Company made purchases of $0 and $521, respectively from Zion Rootswear. The purchases from Zion Rootswear were for Bob Marley apparel and gifts that were used for marketing and promotions purposes.

 

The Company has made sales to related parties for the three months ending April 30, 2016 of $3,198 to Lions of Marley, $420 to Delivery Agent (for product that is sold on the Bob Marley Website) and for the three months ending April 30, 2015, the Company made no sales to related parties. The companies above are licensees of Hope Road Merchandising, LLC, a company in which Rohan Marley is a beneficiary.

 

During the three months ended April 30, 2016, the Company paid Rohan Marley Enterprises $93,668 of which $93,428 was paid through stock compensation for director’s fees and bonus and $240 was paid in cash for reimbursable expenses. During the three months ended April 30, 2015, the Company paid Rohan Marley Enterprises $47,482 for directors consulting fees and expense reimbursements. Rohan Marley Enterprises is the personal S-Corporation of Rohan Marley which he uses to record all of his business transactions

 

The total owed to Mother Parkers at April 30, 2016 was $2,232,088 and at April 30, 2015 $2,480,206 was due to Mother Parkers for coffee purchases. The total accounts receivable due from Mother Parkers as of April 30, 2016 and 2015 is $463,906 and $810,498, respectively.

 

During the three months ended April 30, 2016 and 2015, the Company paid Sondra Toevs, $1,832 and $2,524, respectively and Ellie Toevs, $1,922 and $858, respectively, for part-time employment. Sondra Toevs is the wife of the Company’s CEO, Brent Toevs, and Ellie Toevs is the daughter of Mr. Toevs.

 

 

Note 7. Stockholders’ Equity

 

Share-based Compensation:

 

On August 5, 2011, the Board of Directors approved the Company’s 2011 Equity Compensation Plan (the “2011 Plan”). The 2011 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 2011 Plan, to the Company’s employees, officers, directors and consultants. A total of 20,000,000 shares are authorized for issuance under the 2011 Plan, which has not been approved by the stockholders of the Company as of April 30, 2016. A total of 16,333,333 shares are available for issuance under the 2011 Plan.

 

On October 14, 2012, the Board of Directors approved the Company’s 2012 Equity Incentive Plan, which was amended and restated on September 19, 2013 (as amended and restated, the “2012 Plan”). The 2012 Plan authorizes the issuance of various forms of stock-based awards, including incentive or non-qualified options, restricted stock awards, restricted units, stock appreciation rights, performance shares and other securities as described in greater detail in the 2012 Plan, to the Company’s employees, officers, directors and consultants. A total of 12,000,000 shares are authorized for issuance under the 2012 Plan, which has been approved by the stockholders of the Company, and as of April 30, 2016, a total of 436,907 shares are available for issuance under the 2012 Plan.

 

On September 10, 2013, the Board of Directors approved the Company’s 2013 Equity Incentive Plan (the “2013 Plan”). The 2013 Plan authorizes the issuance of various forms of stock-based awards, including incentive or non-qualified options, restricted stock awards, restricted units, stock appreciation rights, performance shares and other securities as described in greater detail in the 2013 Plan, to the Company’s employees, officers, directors and consultants. A total of 12,000,000 shares are authorized for issuance under the 2013 Plan, which has been approved by the stockholders of the Company to date, and as of April 30, 2016, a total of 1,717,652 shares are available for issuance under the 2013 Plan.

 

On June 30, 2015, the Board of Directors approved and adopted the Company’s 2015 Equity Incentive Plan, which was amended and restated by the Board of Directors on March 10, 2016 (the Amended and Restated 2015 Equity Incentive Plan, the “2015 Plan”). The sole amendment to the 2015 Plan which was affected by the entry into the amended and restated plan was to clarify and confirm that no awards under the 2015 Plan can be issued or granted to any person under the 2015 Plan in connection with, or in consideration for, the offer or sale of securities in a capital-raising transaction, or where such services directly or indirectly promote or maintain a market for the Company’s securities. The 2015 Plan authorizes the issuance of various forms of stock-based awards, including incentive or non-qualified options, restricted stock awards, restricted units, stock appreciation rights, performance shares and other securities as described in greater detail in the 2015 Plan, to the Company’s employees, officers, directors and consultants. Subject to adjustment in connection with the payment of a stock dividend, a stock split or subdivision or combination of the shares of common stock, or a reorganization or reclassification of the Company’s common stock, the maximum aggregate number of shares of common stock which may be issued pursuant to awards under the 2015 Plan is 17,500,000 shares, and as of April 30, 2016, a total of 8,927,182 shares are available for issuance under the 2015 Plan.

 

The Plans are administered by the Board of Directors in its discretion. The Board of Directors interprets the Plans and has broad discretion to select the eligible persons to whom awards will be granted, as well as the type, size and terms and conditions of each award, including the exercise price of stock options, the number of shares subject to awards, the expiration date of awards, and the vesting schedule or other restrictions applicable to awards.

  

 

Activity in stock options during the three month period ended April 30, 2016 and related balances outstanding as of that date are set forth below:

  

		Number of Shares				Weighted Average Exercise Price				Weighted Average Reaming Contract Term (# of years)
Outstanding at January 31, 2016			23,590,000			$	0.25				3.19
Granted			—				—
Exercised			—				—
Forfeited and canceled			—				—
Outstanding at April 30, 2016			23,590,000			$	0.25				2.94
Exercisable at April 30, 2016			14,246,666			$	0.28				2.05

 

Note 8. Commitments and Contingencies

 

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business.

 

On September 30, 2014, Shane Whittle, individually, a former significant shareholder and officer and director of the Company (“Whittle”), and derivatively on behalf of Marley Coffee LLC (“MC LLC”) filed a complaint against Rohan Marley, Cedella Marley, the Company, Hope Road Merchandising, LLC (“HRM”), Fifty-Six Hope Road Music Limited (“56 Hope Road”), and Marley Coffee Estate Limited (“Marley Coffee Estate”) in the United States District Court for the District of Colorado (Civil Action No. 2014-CV-2680).

 

The complaint alleged that Whittle entered into a partnership with Rohan Marley, the son of the late reggae music legend Robert Nesta Marley p/k/a Bob Marley, to sell premium coffee products branded after the name and likeness of Rohan Marley. The causes of action set forth in the complaint included, among others, racketeering activity, trademark infringement, breach of fiduciary duty, civil theft, and civil conspiracy (some of which causes of action were not directly alleged against the Company), which were alleged to have directly caused Whittle and MCL substantial financial harm. Damages claimed by Whittle and MCL included economic damages to be proven at trial, profits made by defendants, treble damages, punitive damages, attorneys’ fees and pre and post judgment interest.

 

Effective on May 19, 2016, Whittle, MCL, Rohan Marley, Cedella Marley, the Company, HRM and 56 Hope Road entered into a Settlement Agreement in connection with the proceeding described above (at the same time Whittle entered into a separate settlement agreement with Marley Coffee Estate). Pursuant to the Settlement Agreement, (a) Whittle agreed to resign as a manager of MCL, assign his approximate 29% membership interest in MCL to MCL for $1.00 of total consideration, and also consented to the redemption of certain other outstanding membership interests in such entity; (b) Whittle agreed to cancel and terminate the options to purchase 2 million shares of the Company’s common stock which he held as of the date of the parties’ entry into the Settlement Agreement for $1.00 of total consideration; (c) Whittle agreed to release and waive any rights to any past due or future due payments owed by the Company under the Settlement described above, including releasing the remaining amount of $10,000 which Whittle was due pursuant to such Settlement; (d) Whittle provided a general release to each of the defendants (including the Company and Rohan Marley) from all claims, liability and obligations which Whittle had against such defendants; and (e) each of the defendants (including the Company and Rohan Marley) provided Whittle a general release from all claims, liability and obligations which such defendants had against Whittle.

 

In connection with the entry into the Settlement Agreement and the settlement of the lawsuit, the lawsuit described above and the prior Colorado state court lawsuit were dismissed.

 

  

On November 17, 2015, the SEC filed a complaint against us (Case 2:15-cv-08921) in the United States District Court Central District of California Western Division. Also included as defendants in the complaint were Shane G. Whittle (our former Chief Executive Officer and Director) and parties unrelated to us, Wayne S. P. Weaver, Michael K. Sun, Rene Berlinger, Stephen B. Wheatley, Kevin P. Miller, Mohammed A. Al-Barwani, Alexander J. Hunter, and Thomas E. Hunter (collectively, the “Defendants”). Pursuant to the complaint, the SEC alleged that Mr. Whittle orchestrated a “pump and dump” scheme with certain other of the Defendants in connection with our common stock. The scheme allegedly involved utilizing our July 2009 reverse merger transaction to secretly gain control of millions of our shares, spreading the stock to offshore entities, and dumping the shares on the unsuspecting public after the stock price soared following fraudulent promotional campaigns undertaken by Mr. Whittle and certain other of the Defendants in or around 2011. The complaint also alleges that to boost our stock price and provide cash to the Company, Mr. Whittle and certain other of the Defendants orchestrated a sham financing arrangement designed to create the false appearance of legitimate third-party interest and investment in the Company through a non-existent entity, Straight Path Capital, pursuant to which we raised approximately $2.5 million through the sale of 6.25 million shares of common stock in 2011. The SEC also alleges that Mr. Whittle and others caused us to make public announcements which caused our stock price to rise, which helped facilitate the alleged frauds among other allegations spelled out more completely in the complaint. The SEC’s complaint charges us, Mr. Whittle, Mr. Weaver, Mr. Sun, Mr. Berlinger, Mr. Wheatley, Mr. Miller, and Mr. Al-Barwani with conducting an illegal offering in violation of Sections 5(a) and 5(c) of the Securities Act. The complaint further alleges that Mr. Whittle, Mr. Weaver, Mr. Sun, Mr. Berlinger, and the Hunters violated Section 10(b) of the Exchange Act and Rule 10b-5, and Mr. Whittle, Mr. Weaver, Mr. Sun, and Mr. Berlinger violated Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 thereunder. Mr. Whittle is additionally charged with violating Section 16(a) of the Exchange Act and Rule 16a-3, and the Hunters are charged with violations of Sections 17(b) of the Securities Act, which prohibits fraudulent touting of stock. The SEC is seeking injunctions, disgorgement, prejudgment interest, and penalties as well as penny stock bars against all of the individual Defendants and an officer-and-director bar against Mr. Whittle.

 

On or around May 31, 2016, the Company entered into a ‘Consent of Defendant Jammin Java Corp.’ (the “Consent”), in connection with the SEC’s complaint (the “Complaint”). Pursuant to the Consent, without admitting or denying the allegations of the Complaint (except as specifically set forth in such Consent mainly relating to personal and subject matter jurisdiction, which we admitted), we consented to the entry of a final judgment (the “Final Judgment”), which, among other things: (a) permanently restrains and enjoins us from violating Section 5 of the Securities Act, and (b) orders us to pay disgorgement in the amount of $605,330.73, plus prejudgment interest thereon in the amount of $94,669.27, totaling an aggregate of $700,000, of which (1) $200,000 is due within 14 days of the entry of the Final Judgment, which funds are currently held in an attorney’s trust account for payment; and (2) $500,000 is due within 90 days of the entry of the Final Judgment.

 

The Final Judgment was approved by the SEC on or around May 31, 2016 and is awaiting a file stamped copy of the Final Judgement from the court, which is anticipated by the end of June 2016. The Company has accrued $700,000 for estimated settlement expense in the first quarter, which is offset by a $400,000 insurance settlement which was received in May 2016.

 

In addition to the above, we may become involved in other material legal proceedings in the future.

 

Note 9. Concentrations

 

A significant portion of our revenue is derived from our relationships with a limited number of vendors and distributors. The loss of one or more of our significant vendors or distributors would have a material impact on our revenues and results of operations. During the three-month periods ended April 30, 2016 and 2015, three customers accounted for 49.3% and 47% of net revenues, respectively.

 

During the three month periods ended April 30, 2016 and 2015, two vendors accounted for 44% and 35% of purchases. The same two vendors accounted for 75% and 86% of the accounts payable as of April 30, 2016 and 2015, respectively.

 

For the three month periods ended April 30, 2016 and 2015, total sales in Canada totaled $157,077 and $219,803, respectively.

 

For the three month periods ended April 30, 2016 and 2015, sales in South Korea sales totaled $0 and $295,759, respectively.

 

For the three month periods ended April 30, 2016 and 2015, sales in Chile totaled $213,420 and $184,240, respectively.

 

  

Note 10. Subsequent Event

 

On May 12, 2016, we paid $75,000 to Typenex and on June 7, 2016 we paid off the remaining balance of $45,920 owed to Typenex.

 

In June 2016, we increased the net amount owed to a third party by $92,000. We currently owe $418,500 to such third party as a result of these transactions.

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “Jammin Java” and “Jammin Java Corp.” refer specifically to Jammin Java Corp.

 

In addition, unless the context otherwise requires and for the purposes of this report only:

 

●		“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
●		“SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and
●		“Securities Act” refers to the Securities Act of 1933, as amended.

 

You should carefully consider the risk factors described below, if any, and those described in our Annual Report on Form 10-K for the year ended January 31, 2016, filed with the SEC on May 5, 2016 (the “Annual Report”), as well as the other information included in this Quarterly Report on Form 10-Q, the Annual Report and in our other reports filed with the SEC, prior to making a decision to invest in our securities.

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q and the documents incorporated by reference, include “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, revenues, 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,” “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 of our Annual Report. 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.

 

In this Form 10-Q, we may rely on and refer to information regarding the market for our products and our industry in general, which information comes from market research reports, analyst reports and other publicly available information. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it.

   

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the unaudited financial statements and notes thereto and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended January 31, 2016.

 

Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our consolidated financial statements included above under “Part I - Financial Information” - “Item 1. Financial Statements”.

 

Overview

 

We provide premium roasted coffee and specialty coffee on a wholesale level to the service, hospitality, office coffee service and big box store markets, as well as to a variety of other business channels. Specifically, we currently provide award winning sustainably grown, ethically-farmed and artisan roasted gourmet coffee through multiple United States and international distribution channels. We intend to develop a significant share of these markets and achieve a leadership position by capitalizing on the global recognition of the “Marley” brand name. We hope to capitalize on the guidance and leadership of our Chairman, Rohan Marley, and to increase our sales through the marketing of products using the likeness of, and reflecting the personality of, Mr. Marley. Additionally, through a licensing agreement with the family of the late reggae performer, Robert Nesta Marley, professionally known as Bob Marley (whose family members include Rohan Marley, our Chairman and the son of Bob Marley)(as described below), we are provided the worldwide right to use the name “Marley Coffee” and reasonably similar variations thereof.

 

We believe the key to our growth is a multichannel distribution and sales strategy. Since August 2011, we have been introducing a wide variety of coffee products through multiple distribution channels using the Marley Coffee brand name. The main channels of revenue for the Company are now and are expected to continue to be domestic retail in both grocery and away from home (for example, consumption at the office and on the go), international distribution, and online retail.

 

In order to market our products in these channels, we have developed a variety of coffee products in varying formats. The Company offers an entire line of coffee in whole bean and ground form with varying sizes including 2.5 ounce (oz), 8oz, 12oz and 2 pound (lbs) sizes. The Company also offers a “single serve” solution with its compostable Single-Serve Pods for Bunn® and other pod-based home and office brewers. The Company recently launched its Marley Coffee recyclable RealCup; compatible cartridges, for use in most models of Keurig®’s K-Cup brewing system.

 

License Agreement with Fifty-Six Hope Road Music Limited

 

On September 13, 2012, the Company entered into a fifteen (15) year license agreement (renewable for two additional fifteen (15) year terms thereafter in the option of the Company) with an effective date of August 7, 2012 with Fifty-Six Hope Road Music Limited, a Bahamas international business company (“56 Hope Road” and the “56 Hope Road License Agreement”). Rohan Marley, our Chairman, owns an interest in and serves as a director of 56 Hope Road. Pursuant to the 56 Hope Road License Agreement, 56 Hope Road granted the Company a worldwide, exclusive, non-transferable license to utilize the “Marley Coffee” trademarks (the “Trademarks”) in connection with (i) the manufacturing, advertising, promotion, sale, offering for sale and distribution of coffee in all its forms and derivations, regardless of portions, sizes or packaging (the “Exclusive Licensed Products”) and (ii) coffee roasting services, coffee production services, and coffee sales, supply, distribution and support services, provided that the Company may not open retail coffee houses utilizing the Trademarks. 56 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 Trademarks. In addition, 56 Hope Road granted the Company the right to use the Trademarks on advertising and promotional materials that pertain solely to the sale of coffee cups, coffee mugs, coffee glasses, saucers, milk steamers, machines for brewing coffee, espresso and/or cappuccino, grinders, water treatment products, tea products, chocolate products, and ready-to-use (instant) coffee products (the “Non-Exclusive Licensed Products”, and together with the Exclusive Licensed Products, the “Licensed Products”). Licensed Products may be sold by the Company pursuant to the 56 Hope Road License Agreement through all channels of distribution, provided that, subject to certain exceptions, the Company cannot sell the Licensed Products by direct marketing methods (other than the Company’s website), including television, infomercials or direct mail without the prior written consent of 56 Hope Road. Additionally, 56 Hope Road has the right to approve all Licensed Products, all advertisements in connection therewith and all product designs and packaging. The agreement also provides that 56 Hope Road shall own all rights to any domain names (including marleycoffee.com), incorporating the Trademarks.

 

  

In consideration for the foregoing licenses, the Company agreed to pay royalties to 56 Hope Road in an amount equal to 3% of the net sales of all Licensed Products on a quarterly basis. In addition, such royalty payments are to be deferred during the first 20 months of the term of the 56 Hope Road License Agreement, and such deferred payments shall be paid on a quarterly-basis thereafter until paid in full. For the three months ended April 30, 2016 and 2015, $77,653 and $58,609, respectively, was payable for such royalty fees. The total accounts payable to 56 Hope Road, a related party, as of April 30, 2016 is $297,324.

 

We have been notified by 56 Hope Road of our alleged breach of certain of the terms of the License Agreement, including, but not limited to, our failure to deliver quarterly statements in a timely manner, our failure to timely make licensing payments, and our failure to deliver audited financial statements in a timely manner. Some of these breaches are due to cash flow issues and corporate governance matters. We are working with 56 Hope Road in an effort to resolve the alleged breaches and we are optimistic that we will be able to resolve the issues and will be able to put in place corporate governance procedures to alleviate certain of the issues raised moving forward.

 

Mother Parkers License Agreement

 

On May 20, 2014, we entered into an Amended and Restated License Agreement with Mother Parkers Tea & Coffee Inc. (“Mother Parkers” and the “MP Agreement”), which amended and restated a prior license agreement entered into between the parties in October 2011. A significant portion of the Company’s revenue comes from sales to and through Mother Parkers. As described in greater detail in the Current Report on Form 8-K filed with the Commission on April 30, 2014, the Company also entered into a Subscription Agreement with Mother Parkers in April 2014, pursuant to which Mother Parkers purchased 7,333,529 units from the Company for $2.5 million, each unit consisting of one share of the Company’s common stock; and one warrant to purchase one share of common stock at $0.51135 per share for a term of three years.

 

Pursuant to our relationship with Mother Parkers, Mother Parkers produces Marley Coffee RealCups for us. For direct sales of RealCups (e.g., in jurisdictions in which Mother Parkers does not have exclusive rights as described below) we purchase the RealCups from Mother Parkers and handle all aspects of selling, merchandising and marketing products to retailers. Pursuant to the MP Agreement, the Company granted Mother Parkers the exclusive right to manufacture, process, package, label, distribute and sell single serve hard capsules (which excludes single serve soft pods) (the “Product”) on behalf of the Company in Canada, the United States of America and Mexico. The rights granted under the MP Agreement are subject to certain terms and conditions of our license agreement with 56 Hope Road. Pursuant to the MP Agreement, Mother Parkers is required to, among other things, supply all ingredients and materials, labor, manufacturing equipment and other resources necessary to manufacture and package the Product, develop coffee blends set forth in specifications provided by the Company from time to time, procure coffee beans in the open market (or from the Company’s designee) at favorable prices, set prices for the Product in a manner that is competitive in the market place and deliver Product logo/brand designs to the Company for approval prior to manufacturing any such Product. We are required to, among other things, cross-promote the Product, use Product images and marketing materials provided by Mother Parkers to promote the Product, and provide the services of Rohan Marley (our Chairman) at a minimum of five locations per year at the Company’s sole cost and expense. There are no minimum volume or delivery requirements under the MP Agreement. Pursuant to the MP Agreement, Mother Parkers agreed to pay us a fee of $0.06 per capsule for Talkin’ Blues products and $0.04 per capsule for all other Product sold by Mother Parkers under the terms of the agreement, which payments are due in monthly installments. The MP Agreement has a term of five years, provided that it automatically renews thereafter for additional one year periods if not terminated by the parties, provided further that we are not able to terminate the agreement within the first 12 months of the term of the agreement and if we terminate the agreement or take any action that lessens or diminishes Mother Parkers’ exclusive rights under the agreement during months 12 through 36 of the agreement, we are required to pay Mother Parkers a fee of $600,000 and reimburse Mother Parkers for any out of pocket costs incurred by Mother Parkers for inventory and other materials that are unsalable or unusable after such termination. We also receive revenues through the sale by Mother Parkers of our roast coffee in Canada, whereby we receive a portion of the gross revenues of such sales.

 

  

Sales and Distribution Agreements and Understandings

 

The Company has entered into informal sales arrangements, not documented by definitive agreements, with several coffee distributors, beverage services and retailers around the world.

 

In Canada, Mother Parkers Tea & Coffee Inc. is the Company’s distributor for the food service channel, which sells to restaurant chains like Milestones, Original Joe’s and Elephant and Castle. Mother Parkers Tea & Coffee also brings the Company’s products into retailers such as Loblaw’s, Sobey’s, ID Foods, COOP and Metro. Their success has led to about a 60% ACV for the entire country.

 

In the United States, for the commercial break room channel, the Company uses its national sales representatives, National Coffee Service & Vending (NCS&V), to distribute to various retailers and distributors.

 

In addition to distributions through NCS&V, the Company conducts sales directly to retailers as well as to distributors. In order to get in front of retail and distributor accounts, we rely on the experience and relationships of our staff to acquire both groups. Our marketing efforts are comprised of in store promotions, in store demos, external marketing programs, public relations, social media, tradeshows and general advertising.

 

Within the U.S. grocery and specialty retail channel, the Company utilizes two national brokerage companies to represent, market and merchandise its products in the conventional grocery market. The Company works with Alliance Sales & Marketing, a private food broker based in Charlotte, North Carolina, to increase its new market penetration nationally in the grocery and natural foods retail sector. The Company also uses Harlow HRK to help manage its Kroger business.

 

Within the U.S. grocery and specialty retail channel, the Company’s products are distributed through several distributors such as UNFI, Kehe, C&S and DPI and we also distribute directly to certain retailers.

 

The Company has strengthened its online presence by selling through a multitude of online retailers such as Amazon.com, Cooking.com, coffeeicon.com, ecscoffee.com, officedepot.com and coffeewiz.com.

 

Products, Plan of Operations and Business Growth

 

During Fiscal 2015 and 2016, we established a national grocery distribution network, increased our brand awareness and strengthened our international presence. Two of the Company’s SKUs have now made it into 1/3 of U.S. grocery stores. For Fiscal 2017, our primary goal is to increase our velocity rate per store instead of increasing the number of our accounts.

 

We prepared and organized the operations of the Company to scale to $40 million in revenue without materially increasing our staffing needs from where they are currently.

 

The Company is organized around our three pillars of growth, which are domestic grocery, international and ecommerce.

 

  

Domestic Grocery

 

Domestic grocery is the core focus of the Company with the strategy of continuing to expand into key markets and gaining new accounts and building on the base of accounts we have already. Within the U.S. grocery and specialty retail channel, the Company’s products are distributed through several distributors such as UNFI, Kehe, C&S and DPI and we also distribute directly to certain customers. We sell to retailers such as Krogers, HEB, Wegmans, Safeway, Albertsons, Sprouts, Target, Jewel-Osco, Market Basket, Whole Foods, South Eastern Grocers, Ahold, Hannafords, Shaw’s, Fairways, Ingles, Acme, Meijers, Lucky’s Markets and Farm Fresh. During the past year we have expanded our distributor relationships nationally in the United States. We expect our ongoing discussions with retailers will enable us to place our products in more chains throughout the year and we continue to seek to expand our product placement with grocery retailers and distributors throughout the United States and internationally.

 

Over the course of the last few years, we gained distribution in over 11,500 stores in the United States, which represents 35% of all commodity volume (ACV) for all grocery. Throughout fiscal 2017, while we will still look to gain additional distribution, we are not pursuing it at the same pace we did during the past 18 months. Our objective for our existing distribution is to add more SKUs (Stock Keeping Units) to our current distribution, increase our turn rate (velocity), and build brand awareness to drive further growth.

 

One of our primary drivers is to enhance our brand and increase our turn rate on shelves. In order to accomplish that we will continue to promote the Marley Coffee brand as well as our Recyclable RealCup™. In July of fiscal 2015, we launched a new version of the Marley Coffee RealCup™ capsule that is compatible with the Keurig Green Mountain K2.0. The recyclable RealCup™ utilizes a recyclable capsule that is accepted by many curbside recycling programs. The technology and intellectual property is owned by Mother Parkers, however we are one of the first and primary super premium product to launch in market amongst Mother Parkers portfolio of brands especially at our scale.

 

Based on our current distribution in the U.S. and an average of three SKUS of RealCups™ per store, if we can get an additional customer to purchase one SKU per store, per week, within our existing distribution, we believe we can generate approximately ~$8 million in additional revenue per year. Our next objective is to get all nine Recyclable RealCup™ Marley Coffee SKUs within our current distribution. SKUs or Stock Keeping Units are a store’s or catalog’s product and service identification code, often portrayed as a machine-readable bar code that helps items be tracked for inventory.

 

We believe that our recyclable RealCup™ capsule (Ecocup) has been one of the most innovative and sustainable single serve products to hit the market and we’ve seen material growth results because of it. Keurig Green Mountain, the largest company in the single serve space in North America has expressed their belief that there should be a recyclable solution for K-Cups, however they have only set a 2020 target for their commitment to making 100% of their K-Cup packs recyclable, which we believe both validates what we’re doing and gives us a 5 year first mover competitive advantage.

 

Based on the positive feedback from retailers and customers as well as some preliminary sales information, EcoCup has had a very positive impact on our operations. We’ve even been nominated by the Nexty Awards and Beverage Awards for our innovation and packaging. Our preliminary data has shown that EcoCups by themselves have helped with incremental growth in accounts like Market Basket and Kroger.

 

International

 

Our international business is one of the key components of our revenues. For our international accounts, we rely on first in class operators to take our brand to market and handle all of the distribution and marketing for the products. We provide brand support to our international accounts. We currently have key distribution in several countries, which include Canada, the United Kingdom, South Korea, Mexico and Chile. These countries primarily sell to the food service industry, which includes hotels, restaurants and cafes. From their success in food service, they have expanded distribution into retail distribution. Mother Parkers takes our products to market in Canada through both a licensing agreement and buy-sell relationship. Our U.K. distributor roasts and packs Company approved coffee and resells it to customers throughout Europe.

 

  

The International Coffee Organization recently reported that it expects global coffee demand to rise 25% by 2021. We believe that we are in a strong position to capitalize on that growth and our goal is to continue finding top-tier operators like the ones we have in place in Canada, South Korea, Chile, Mexico and the United Kingdom. Through a distribution arrangement we have in place with C&V International (which has no relation to 56 Hope Road), we generate revenue through coffee sold to Marley Coffee branded coffee shops in Korea (which we have no ownership or management in) and also general licensing fees through such coffee sales.

 

Through a distribution arrangement we have in place with C&V International, we generate revenue through coffee sold to Marley Coffee branded coffee shops in Korea (which we have no ownership in) and also general licensing fees through such coffee sales.

 

Canada

 

In Canada, through Mother Parkers, the Company is distributed in grocery retail, OCS and food service.

 

Mother Parkers distributes our products in over 2,000 stores, including some of the largest retail chains in Canada, which include Loblaw’s, Sobey’s, ID Foods, COOP, London Drugs and Metro. Our goal is to establish distribution of RealCups in grocery stores for the next two years and then to introduce our bagged coffee by 2017. We estimate that Mother Parkers will sell approximately 15 million RecyclableRealCup™ through grocery retail, OCS and food service within this fiscal year.

 

Mother Parkers has also found success in bringing our coffee into its food service business. They have been able to establish our products in several large restaurant chains and expect to expand the business over the next few years. For its food service business, Mother Parkers currently buys 8 ounce, 2.5 ounce fractional packs and 2 pound bags directly from the Company. The projected volume for this year is approximately 140,000 pounds of coffee with plans to get to 500,000 pounds by 2017.

 

For fiscal 2016 total sales in Canada totaled $922,517 and total RealCup licensing was $572,612 and total sales for the year ended January 31, 2015 was $1,546,422. For the years ended January 31, 2016 and 2015 the total sales and total licensing with Mother Parker’s was equal to $1,495,128 and $1,546,422, respectively. For the three month periods ended April 30, 2016 and 2015, total sales in Canada totaled $157,077 and $219,803, respectively. The total owed to Mother Parkers at April 30, 2016 is $2,232,088 and at April 30, 2015 $2,480,206 was due to Mother Parkers for coffee purchases. The total accounts receivable due from Mother Parkers as of April 30, 2016 and 2015 is $463,906 and $810,498, respectively.

 

United Kingdom/ Europe

 

Our U.K. partners are still finding success in distribution at specialty and natural grocery stores throughout Europe.

 

South Korea

 

We have several initiatives that have launched or are launching this year. Being successful in South Korea has the potential to echo throughout Asia and we believe our success in South Korea will be a springboard to getting meaningful distribution elsewhere in Asia. Our South Korean partners currently buy green beans and roasted products from the Company.

 

For fiscal 2016 sales in South Korea totaled $828,723 for green coffee and whole bean coffee and for fiscal 2015 sales in South Korea totaled $227,751. For the three month periods ended April 30, 2016 and 2015, sales in South Korea sales totaled $0 and $295,759, respectively.

 

Chile

 

Chile is a great example of a distributor who has been a brand champion for us in the region. Through their guerilla marketing efforts by sponsoring surf competitions and music festivals like Lollapalooza, they have gained distribution in food service as well as retail grocery.

 

  

In food service, our distributor has secured over 350 accounts in the region from boutiques to large restaurant chains. They recently secured Castaño, one of the largest coffee chains in all of Chile with over 80 stores that can in total do ~132,000 lbs. of coffee per year (which began in summer 2015). In December of 2014, they gained distribution in 44 Subway sandwich stores and they have goals to be in 53 stores by the end of the year and to potentially expand into other countries.

 

Their success in food service has helped them quickly expand into grocery retail. They recently placed our products into 100 Unimarc and 50 Tottus supermarkets, two big retail chains in Chile. However, their biggest customer to date is Walmart, which they just landed. Walmart will be bringing in 3 bags of 227 grams (8oz) coffees into stores in an early summer launch in the 30 biggest stores, with the goal of getting to the other 120 stores in Chile within six months.

 

For fiscal 2016 sales in Chile totaled $808,658 and for fiscal 2015 sales in Chile totaled $196,099. For the three month periods ended April 30, 2016 and 2015, sales in Chile totaled $213,420 and $184,240, respectively.

 

Online

 

During the fourth quarter of calendar 2014, we launched an innovative Coffee of the Month subscription service as well an online retail platform at https://shop.marleycoffee.com/. We anticipate this to be a key revenue driver in the upcoming year. The total online sales for the year ended January 31, 2016 were $49,900 compared to $-0- for the year ended January 31, 2015.

 

Our online business and social media presence is also critical in driving consumers to retail grocery stores. We have a robust social media presence with an aggregate of more than 2 million followers through Marley Coffee’s own accounts as well as our Chairman’s account. We believe we have the ability to connect with everyone from Baby Boomers who grew up listening to Bob Marley’s music to the Millennials who still connect with Bob Marley and the next generation of Marley music both offline and online. We believe the Company is naturally positioned to talk to all of these consumers digitally through our social media and at the shelf through our products and brand positioning.

 

Commitment to Reduce Cash Compensation

 

Throughout fiscal 2016, the Company issued shares of common stock as partial consideration for services rendered to its officers, directors and employees in an effort to maximize its cash on hand and improve liquidity. During the remainder of fiscal 2017, the Company plans to pay the salaries of its officers and employees in cash, provided that where possible, the Company intends to continue to use common stock in lieu of cash consideration, and has continued to pay certain of its employees in stock instead of cash during fiscal 2017. As the Company continues to grow it will need to raise additional cash in order to maintain its growth and fund its operations. If the Company is unable to access additional capital moving forward, it will hurt our ability to maintain growth and possibly jeopardize our ability to maintain our current operations. We may not be able to increase sales, reduce expenses or obtain additional financing, if necessary, at a level to meet our current obligations to continue as a going concern.

 

The Company is focused on growing revenue while working to lower cost of sales and operating expenses, with the ultimate goal of generating net income.

 

RESULTS OF OPERATIONS

 

Comparison of the Three Months Ended April 30, 2016 and 2015

 

Revenue. Revenue for the three months ended April 30, 2016 and 2015 was $3,083,559 and $2,738,379, respectively, which represents an increase of $345,180 or 12.6% from the previous period. Revenue increased as a result of the Company’s continued expansion into the retail grocery market and its continued growth of other business verticals.

 

  

Discounts and allowances. Discounts and allowances for the three months ended April 30, 2016 and 2015 were $355,560 and $156,952, respectively, which represents an increase of $198,608 or 127% from the previous period. Discounts and allowances increased as a result of the corresponding increase in sales.

 

Net revenue. Net revenue for the three months ended April 30, 2016 and 2015 was $2,727,999 and $2,581,427, respectively, which represents an increase of $146,572 or 5.7% from the previous period.

 

Total cost of sales. Total cost of sales for the three months ended April 30, 2016 and 2015 was $1,786,870 and $1,784,812, respectively, which represents an increase of $2,058 from the previous period. The increase in total cost of sales was mainly the result of the increased sales offset by a reduction in cost of goods compared to the prior year.

 

Gross Profit. Gross Profit was $941,129 and $796,615, respectively, for the three months ended April 30, 2016 and 2015, which represents an increase of $144,514 or 18%. Gross profit as a percentage of net sales was 34.5% and 30.9% for the three months ended April 30, 2016 and 2015, respectively. Gross profit increased as a result of better managing our costs.

 

Compensation and benefits expenses. Compensation and benefits expenses were $970,703 and $972,806, respectively, for the three months ended April 30, 2016 and 2015, which represents a decrease of $2,103. Compensation and benefits expenses decreased as a result of decreased staff and more efficient operations.

 

Selling and marketing expenses. Selling and marketing expenses for the three months ended April 30, 2016 and 2015 was $600,709 and $521,116, respectively, which represents an increase of $79,593 or 15.3% from the previous period. Selling and marketing expenses increased as a result of selling and brokerage expenses of $262,156 for new placement in grocery stores during the first quarter offset by a decrease of $187,702 in advertising campaigns in new markets in the current period. We anticipate experiencing marketing expenses relative to our cash flow availabilities throughout fiscal 2017 as we will seek to expand our customer base even more and build out the Company brand.

 

General and administrative expenses. General and administrative expenses for the three months ended April 30, 2016 and 2015 was $771,303 and $492,824, respectively, which represents an increase of $278,479 or 56% from the previous period. The Company has accrued $700,000 for estimated settlement expense in the first quarter, which is offset by a $400,000 insurance settlement which was received in May 2016.

 

Total operating expenses. Total operating expenses for the three months ended April 30, 2016 and 2015 was $2,342,715 and $1,986,746, respectively, which represents an increase of $355,969 or 17.9% from the previous period. Total operating expenses increased as a result of the increases in legal fees and general and administrative expenses described above.

 

Other expense. Other expense for the three months ended April 30, 2016 and 2015 was $7,650 and $-0-, respectively. Other expense increased as a result of the financing expenses associated with our current liabilities, offset by the sale of fixed assets.

 

Interest expense. Interest expense for the three months ended April 30, 2016 and 2015 was $516,753 and $7,105, respectively, which represents an increase of $509,648 from the previous period. Interest expense increased as a result of our short term financing agreements incurred in the quarter, as described in greater detail in Note 5 to the financial statements included herein.

 

Change in Derivative liability. The change in fair value of derivative liability was $75,914 and $-0-, respectively, for the three months ended April 30, 2016 and 2015, which represents an increase of $75,914 or 100%.

 

  

Gain and Extinguishment of debt. We had $362,506 of gain on extinguishment of debt for three months ended April 30, 2016, compared to no gain on extinguishment of debt for the three months ended April 20, 2015.

 

Net Loss. Net Loss was $1,487,569 and $1,197,236, respectively, for the three months ended April 30, 2016 and 2015, which represents an increase of $290,333 or 24%. Net Loss increased as a result of the reasons described above, primarily due to the $700,00 settlement with the SEC which was offset by a $400,000 insurance settlement.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Since our inception, we have financed our operations primarily through the issuance of our common stock and debt agreements.

 

The following table presents details of our working capital deficit and cash and cash equivalents:

 

		April 30, 2016				January 31, 2016				Increase / (Decrease)
Working Capital		$	(4,644,234	)		$	(4,232,446	)		$	(411,788	)
Cash		$	193,002			$	231,021			$	(38,019	)

 

At April 30, 2016, we had total assets of $2,389,776 and total liabilities of $6,533,836. Our current sources of liquidity include our existing cash and cash equivalents and borrowings under convertible promissory notes and other loans. For the three months ended April 30, 2016, we generated gross sales of $3,083,559 and we had a net loss of $1,487,569.

 

Total current assets of $1,639,239 as of April 30, 2016 included cash of $193,002, accounts receivable of $1,436,015 (which included $463,906 due from Mother Parkers), other current assets of $3,840 and $6,382 of prepaid expenses.

 

We had total assets as of April 30, 2016 of $2,389,776 which included the total current assets of $1,639,239, $148,307 of property and equipment, net, $578,663 of intangible assets and $23,567 of other assets.

 

We had total liabilities of $6,533,836 as of April 30, 2016, of which $6,283,473 were current liabilities, including, $3,635,442 of accounts payable (which included $2,232,088 of accounts payable to Mother Parkers, $297,324 royalty – related party relating to amounts accrued in connection with the 56 Hope Road License Agreement (described above)), $936,457 of accrued expenses, and $928,971 of notes payable, net of discount, in connection with short term financing agreements and a capital lease we entered into, as described in greater detail in Notes 5 and 8 to the financial statements included herein, and $782,603 conversion feature – derivative liability. Long term liabilities included convertible notes payable, net of discount, of $250,363.

 

We source coffee that we sell to our roaster, Mother Parkers, a related party and shareholder of the Company, who in turn sells it to its own customers. This is especially the case with Jamaican Blue Mountain coffee secured by us. At April 30, 2016, we are owed $463,906 by Mother Parkers. We also utilize the services of Mother Parkers, to roast coffee to our specifications for sale to the Company’s customers. As a result, at April 30, 2016, we owe $2,232,088 to Mother Parkers for roasting services.

 

As of the filing of this report, we believe that our cash position, funds we may raise through offerings and sales of convertible notes, the line of credit described below, and the revenues we generate will be sufficient to meet our working capital needs for approximately the next twelve months based on our projections.

 

  

Although our sales and revenues have increased significantly on an annual basis, the Company incurred a net loss of $5,201,917 and $10,280,985 for the years ended January 31, 2016 and 2015, respectively and had an accumulated deficit of $29,245,750 at January 31, 2016, compared to a net loss of $1,487,569 and $1,197,236 for the three months ended April 30, 2016 and 2015, respectively, and an accumulated deficit of $30,733,319 as of April 30, 2016. In addition, the Company has a history of losses and has not generated net income from 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 sale of common stock and debt financing. The Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to sell its products directly to end-users and through distributors, establish profitable operations through increased sales and decreased expenses, and obtain additional funds when needed. We may not be able to increase sales or reduce expenses to a level necessary to meet our current obligations or continue as a going concern. As a result, the opinion the Company received from its independent registered public accounting firm on its January 31, 2016 financial statements contains an explanatory paragraph stating that there is substantial doubt regarding the Company’s ability to continue as a going concern. If we become unable to continue as a going concern, we may have to liquidate our assets, and may realize significantly less than the values at which they are carried on our financial statements, and stockholders may lose all or part of their investment in our common stock. The accompanying financial statements do not contain any adjustments for this uncertainty.

 

Cash Flows

 

		Three months ending April 30,
		2016				2015
Net cash used in operating activities		$	(267,361	)		$	(614,583	)
Net cash (used in) provided by investing activities		$	—			$	(55,523	)
Net cash provided by financing activities		$	229,342			$	439,026

  

Operating Activities

 

Compared to the corresponding period in 2015, net cash used in operating activities decreased by $347,222 for the three months ended April 30, 2016. Net cash used in operating activities for the three months ended April 30, 2016 was primarily due to $1,487,569 of net loss and $439,026 of increase in accrued expenses, offset by $75,914 change in fair value of derivative liability and share-based employee compensation of $771,225.

 

Investing Activities

 

We had no net cash used for investing activities for the three months ended April 30, 2016. Net cash used in investing activities for the three months ended April 30, 2015, was solely due to the purchase and disposal of property and equipment.

 

Financing Activities

 

Compared to the corresponding period in fiscal 2015, net cash provided by financing activities decreased by approximately $69,600 for the three months ended April 30, 2016 due to increased repayments on debt.

 

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.

 

Funding and Financing Agreements

 

Mother Parker’s Investment

 

On April 24, 2014, the Company entered into a Subscription Agreement with Mother Parkers Tea & Coffee Inc. (“Mother Parkers” and the “Subscription”). Pursuant to the Subscription, Mother Parkers purchased 7,333,529 units from the Company, each consisting of (a) one share of the Company’s common stock, $0.001 par value per share (the “Shares”); and (b) one (1) warrant to purchase one share of the Company’s common stock (the “Warrants” and collectively with the Shares, the ”Units”) at a price per Unit equal to the fifty day weighted-average price per share of the Company’s common stock on the OTCQB market, for the fifty trading days ending March 7, 2014 (the date the parties first discussed the transactions contemplated by the Subscription), which was $0.3409 (the “Per Unit Price”). The total purchase price paid for the Units was $2,500,000.

 

  

Pursuant to the Subscription, we provided Mother Parkers a right of first refusal for a period of two (2) years following the Subscription (which has now expired), to purchase up to 10% of any securities (common stock, options or warrants exercisable for common stock) we propose to offer and sell in a public or private equity offering (the “ROFO Securities”), exercisable for 48 hours from the time we provide Mother Parkers notice of such proposed sale of ROFO Securities (subject where applicable to Mother Parkers meeting any prerequisites to participation in the offering). The right of first refusal does not apply to the issuance of (a) shares of common stock or options to employees, officers, directors or consultants of the Company in consideration for services, (b) securities exercisable or exchangeable for or convertible into shares of common stock issued and outstanding on the date of the Subscription, (c) securities issued pursuant to acquisitions or strategic transactions approved by the directors of the Company, provided that any such issuance shall provide the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital, and (d) any debt securities (other than any debt securities exchangeable for or convertible into shares of common stock).

 

The Warrants have an exercise price equal to 150% of the Per Unit Price ($0.51135 per share), a term of three years and prohibit Mother Parkers from exercising such Warrants to the extent such exercise would result in the beneficial ownership of more than 9.99% of the Company’s common stock, subject to Mother Parkers’ right to waive such limitation with 61 days prior written notice.

 

As described above, we also had $463,906 of accounts receivable due from, and $2,232,088 of accounts payable owed to, Mother Parkers, as of April 30, 2016.

 

Line of Credit

 

The Company entered into an unsecured Revolving Line of Credit Agreement with Colorado Medical Finance Services, LLC, dba Gold Gross Capital LLC on June 9, 2015, with an effective date of February 16, 2015. The line of credit allows the Company the right to borrow up to $500,000 from the lender from time to time. On March 26, 2015, the lender advanced $250,000 to us under the terms of the line of credit. Amounts owed under the line of credit are to be memorialized by revolving credit notes in the form attached to the line of credit, provided that no formal note has been entered into to advance amounts borrowed to date. Amounts borrowed under the line of credit accrue interest at the rate of 17.5% per annum and can be repaid at any time without penalty. A total of 10% of the interest rate is payable in cash and the other 7.5% of the interest rate is payable in cash, or at the option of the lender and with our consent, or by a reduction in amounts owed to us by the lender in connection with the sale of coffee or other promotional activities. The line of credit expires, and all amounts are due under the line of credit on September 26, 2016. The line of credit contains customary events of default, and upon the occurrence of an event of default the lender can suspend further advances and require the Company to declare the entire amount then owed immediately due, subject to a 10 day period pursuant to which we have the right to cure any default. Upon the occurrence of an event of default the amounts owed under the line of credit bear interest at the rate of 20% per annum. Proceeds from the line of credit can be solely used for working capital purposes. The lender has no relationship with the Company or its affiliates. The balance due on the Line of Credit was $123,548 as of April 30, 2016.

 

Convertible Promissory Notes

 

As described in greater detail in Note 5 to the financial statements included herein and under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” – “Liquidity and Capital Resources” - “Funding and Financing Agreements” in our Annual Report on Form 10-K for the year ended January 31, 2016, as filed with the Securities and Exchange Commission on May 6, 2016, we have sold various convertible notes to date, which allow the holders thereof, subject to the terms thereof, to convert the amount owed into shares of our common stock at a discount to the then trading prices of our common stock. The total amount of the Convertible Promissory Notes is $1.63 Million as of April 30, 2016.

 

 

Third Party Loan

 

In October 2015, we borrowed $150,000 from a third-party lender. The October 2015 loan has a seven-month term, a total payback amount of $202,500 and is payable by way of 147 daily payments of $1,378. In November 2015, we borrowed $65,000 from the same lender. The November 2015 loan has a term of six months, a total payable amount of $89,700 and is payable by way of 126 daily payments of $712. In January 2016, we borrowed $220,000 from the same lender (of which $91,887.70 was new lending and $128,112.30 was used to repay the balance on the October 2015 loan). The January 2016 loan has a term of ten months, a total payback amount of $290,400 and is payable by way of 210 daily payments of $1,383. There was $215,173 outstanding as of January 31, 2016. In February 2016, we borrowed $100,000 from the same lender which has a six-month term, a total payback amount of $130,000 and is payable by way of 126 daily payments of $1,032. In April 2016, we borrowed $115,000 from the same lender (of which $90,000 was new lending and the remainder was used to pay back the balance on the November 2015 loan). The April 2016 loan has a term of eight months, a total payable amount of $158,700 and is payable by way of 168 daily payments of $945. The loans are secured by a security interest in all of our accounts, equipment, inventory and investment property. We have the right to repay the loans within the first 30 days after the effective date of each loan at the rate of 85% of the applicable repayment amount and between 31 and 90 days after the effective date of each loan at the rate of 90% of the applicable repayment amount. The interest rate on these loans range from 30-38% per annum. As of April 30, 2016, $259,907 is payable under the outstanding loans.

 

Factoring Agreement

 

In June 2016, we received $310,000 from a third-party lender as part of a factoring arrangement, where the third party purchased $418,500 of our receivables.

 

Off-Balance Sheet Arrangements

 

As part of our on-going business, we have not participated in transactions that generate material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of April 30, 2016, we are not involved in any unconsolidated SPEs.

 

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 include a license agreement that was recorded at the estimated cost to acquire the asset (See Note 4 to the financial statements included in this report). 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 April 30, 2016 or 2015.

 

Accounts Receivable allowance. A provision for doubtful accounts is provided based on a combination of historical experience, specific identification and customer credit risk where there are indications that a specific customer may be experiencing financial difficulties.

 

Inventory Reserves. We estimate any required write-downs for inventory obsolescence by examining our inventories on a quarterly basis to determine if there are indicators that the carrying values could exceed net realizable value. Indicators that could result in additional inventory write-downs include age of inventory, damaged inventory, slow moving products and products at the end of their life cycles. While significant judgment is involved in determining the net realizable value of inventory, we believe that inventory is appropriately stated at the lower of cost or market.

 

Deferred Tax Asset Valuation Allowance. 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 we are 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. The Company files income tax returns in the U.S. federal jurisdiction and in certain state jurisdictions. The Company has not been subjected to tax examinations for any year and the statute of limitations has not expired. The Company recognizes deferred tax assets and liabilities for the expected future tax benefits or consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and liabilities. These include establishing a valuation allowance related to the ability to realize certain deferred tax assets. To the extent future taxable income against which these assets may be applied is not sufficient, some portion or all of our recorded deferred tax assets would not be realizable.

 

 

Recent Accounting Pronouncements

 

For the three months ended April 30, 2016 and 2015, there were no accounting standards or interpretations adopted, and management is still evaluating if adoption of the new accounting standards shown below are expected to have a material impact on our financial position, operations or cash flows.

 

Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU 2016-02 “Leases (Topic 842)” - In February 2016, the FASB issued ASU 2016-02, which will require lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after December 18, 2018, including interim periods within those fiscal years. We are currently evaluating the potential impact this standard will have on our consolidated financial statements and related disclosures.

 

ASB ASU 2014-09 “Revenue from Contracts with Customers (Topic 606),” or ASU 2014-09 - In May 2014, the FASB issued ASU 2014-09, which supersedes the revenue recognition requirements of Accounting Standards Codification, or ASC, Topic 605 “Revenue Recognition.” This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2017. We are currently assessing the impact of adoption of this ASU on our consolidated results of operations, cash flows and financial position.

 

In June 2014, the FASB issued ASU No. 2014-12, Compensation – Stock Compensation: Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period (“ASU 2014-12”). The guidance requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. The guidance will be effective for the Company in the fiscal year beginning January 1, 2016, and early adoption is permitted. The Company is currently evaluating the impact of this guidance, if any, on its financial statements.

 

Management is evaluating the significance of the recent accounting pronouncement ASU 2014-15, Presentation of Financial Statements – Going Concern (subtopic 205-40); disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, and has not yet concluded whether the pronouncement will have a significant effect on the Company’s future financial statements. Such standard is effective for the Company for the fiscal year beginning February 1, 2017.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Principal Executive Officer and Principal Accounting and Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

 

Based on our evaluation, our Principal Executive Officer and Financial Officer concluded that our disclosure controls and procedures were 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.

 

Internal Control Over Financial Reporting

 

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.

 

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, 2016:

 

	(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; and
	(2)	ineffective controls over period end financial disclosure and reporting processes.

 

Management believes that the material weaknesses set forth in items (1) and (2) above did not have an effect on the Company’s financial reporting during the three months ended April 30, 2016.

 

Internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of our financial reporting and the preparation of our financial statements in accordance with U.S. generally accepted accounting principles, or GAAP. Disclosure controls generally include controls and procedures designed to ensure that information required to be disclosed by us in the reports we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

 

Effective internal controls over financial reporting and disclosure controls and procedures are necessary for us to provide reliable financial and other reports and effectively prevent fraud. If we cannot maintain effective internal controls or provide reliable financial or SEC reports or prevent fraud, investors may lose confidence in our SEC reports, our operating results and the trading price of our common stock could suffer and we might become subject to litigation.

 

Because we are a small company, the requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act and the Dodd-Frank Act, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

 

 

As a public reporting company, we must comply with the federal securities laws, rules and regulations, including certain corporate governance provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act and the Dodd-Frank Act, related rules and regulations of the SEC, with which a private company is not required to comply. Complying with these laws, rules and regulations will occupy a significant amount of time of our sole director and management and will significantly increase our costs and expenses, which we cannot estimate accurately at this time. Among other things, we must:

 

	●	establish and maintain a system of internal control over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;
	●	prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;
	●	maintain various internal compliance and disclosures policies, such as those relating to disclosure controls and procedures and insider trading in our common stock; and
	●	involve and retain to a greater degree outside counsel and accountants in the above activities.

 

We are committed to improving our financial organization. As part of this commitment, moving forward, at such time as we are able to raise additional funding, 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 to 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.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the three months ended April 30, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

 From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business.

 

  On July 28, 2014, Shane Whittle, individually, a former significant shareholder and officer and director of the Company (“Whittle”) filed a complaint against the Company in the District Court, City and County of Denver, State of Colorado (Case No. 2014-CV-032991 Division: 209). The complaint alleged that Whittle entered into a consulting agreement with the Company for which the Company failed to make payments and that Rohan Marley, as both a director of the Company and of Marley Coffee Canada, Inc., additionally agreed that, as part of Whittle’s consulting compensation, the Company would assume a debt owed by Marley Coffee Canada to Whittle. The cause of action set forth in the complaint included breach of contract. Damages claimed by Whittle included $60,000 under the consulting agreement and $19,715 related to payments assumed by the Company.

 

  Effective on March 31, 2015, the Company and Mr. Whittle entered into a Settlement Agreement and Release of Claims (the “Settlement”), pursuant to which the parties agreed to dismiss their claims associated with the District Court, City and County of Denver, State of Colorado (Case No. 2014-CV-032991 Division: 209), lawsuit described above. Pursuant to the terms of the Settlement, the Company agreed to pay Mr. Whittle $80,000 which was accrued as of January 31, 2015 (to be paid in equal payments of $10,000 per month beginning on April 1, 2015), the Company agreed to withdraw from a joinder in connection with the Federal Action pending between the parties (and certain other parties) as described below, the parties provided each other mutual releases and the parties agreed to mutually dismiss, with prejudice, their claims, which have since been dismissed with prejudice.

 

  On September 30, 2014, Shane Whittle, individually, a former significant shareholder and officer and director of the Company (“Whittle”), and derivatively on behalf of Marley Coffee LLC (“MC LLC”) filed a complaint against Rohan Marley, Cedella Marley, the Company, Hope Road Merchandising, LLC (“HRM”), Fifty-Six Hope Road Music Limited (“56 Hope Road”), and Marley Coffee Estate Limited (“Marley Coffee Estate”) in the United States District Court for the District of Colorado (Civil Action No. 2014-CV-2680).

 

  The complaint alleged that Whittle entered into a partnership with Rohan Marley, the son of the late reggae music legend Robert Nesta Marley p/k/a Bob Marley, to sell premium coffee products branded after the name and likeness of Rohan Marley. The causes of action set forth in the complaint included, among others, racketeering activity, trademark infringement, breach of fiduciary duty, civil theft, and civil conspiracy (some of which causes of action were not directly alleged against the Company), which were alleged to have directly caused Whittle and MCL substantial financial harm. Damages claimed by Whittle and MCL included economic damages to be proven at trial, profits made by defendants, treble damages, punitive damages, attorneys’ fees and pre and post judgment interest.

 

Effective on May 19, 2016, Whittle, MCL, Rohan Marley, Cedella Marley, the Company, HRM and 56 Hope Road entered into a Settlement Agreement in connection with the proceeding described above (at the same time Whittle entered into a separate settlement agreement with Marley Coffee Estate). Pursuant to the Settlement Agreement, (a) Whittle agreed to resign as a manager of MCL, assign his approximate 29% membership interest in MCL to MCL for $1.00 of total consideration, and also consented to the redemption of certain other outstanding membership interests in such entity; (b) Whittle agreed to cancel and terminate the options to purchase 2 million shares of the Company’s common stock which he held as of the date of the parties’ entry into the Settlement Agreement for $1.00 of total consideration; (c) Whittle agreed to release and waive any rights to any past due or future due payments owed by the Company under the Settlement described above, including releasing the remaining amount of $10,000 which Whittle was due pursuant to such Settlement; (d) Whittle provided a general release to each of the defendants (including the Company and Rohan Marley) from all claims, liability and obligations which Whittle had against such defendants; and (e) each of the defendants (including the Company and Rohan Marley) provided Whittle a general release from all claims, liability and obligations which such defendants had against Whittle.

 

In connection with the entry into the Settlement Agreement and the settlement of the lawsuit, the lawsuit described above and the prior Colorado state court lawsuit with Whittle were dismissed.

 

 

On November 17, 2015, the SEC filed a complaint against us (Case 2:15-cv-08921) in the United States District Court Central District of California Western Division. Also included as defendants in the complaint were Shane G. Whittle (our former Chief Executive Officer and Director) and parties unrelated to us, Wayne S. P. Weaver, Michael K. Sun, Rene Berlinger, Stephen B. Wheatley, Kevin P. Miller, Mohammed A. Al-Barwani, Alexander J. Hunter, and Thomas E. Hunter (collectively, the “Defendants”). Pursuant to the complaint, the SEC alleged that Mr. Whittle orchestrated a “pump and dump” scheme with certain other of the Defendants in connection with our common stock. The scheme allegedly involved utilizing our July 2009 reverse merger transaction to secretly gain control of millions of our shares, spreading the stock to offshore entities, and dumping the shares on the unsuspecting public after the stock price soared following fraudulent promotional campaigns undertaken by Mr. Whittle and certain other of the Defendants in or around 2011. The complaint also alleges that to boost our stock price and provide cash to the Company, Mr. Whittle and certain other of the Defendants orchestrated a sham financing arrangement designed to create the false appearance of legitimate third-party interest and investment in the Company through a non-existent entity, Straight Path Capital, pursuant to which we raised approximately $2.5 million through the sale of 6.25 million shares of common stock in 2011. The SEC also alleges that Mr. Whittle and others caused us to make public announcements which caused our stock price to rise, which helped facilitate the alleged frauds among other allegations spelled out more completely in the complaint. The SEC’s complaint charges us, Mr. Whittle, Mr. Weaver, Mr. Sun, Mr. Berlinger, Mr. Wheatley, Mr. Miller, and Mr. Al-Barwani with conducting an illegal offering in violation of Sections 5(a) and 5(c) of the Securities Act. The complaint further alleges that Mr. Whittle, Mr. Weaver, Mr. Sun, Mr. Berlinger, and the Hunters violated Section 10(b) of the Exchange Act and Rule 10b-5, and Mr. Whittle, Mr. Weaver, Mr. Sun, and Mr. Berlinger violated Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 thereunder. Mr. Whittle is additionally charged with violating Section 16(a) of the Exchange Act and Rule 16a-3, and the Hunters are charged with violations of Sections 17(b) of the Securities Act, which prohibits fraudulent touting of stock. The SEC is seeking injunctions, disgorgement, prejudgment interest, and penalties as well as penny stock bars against all of the individual Defendants and an officer-and-director bar against Mr. Whittle.

 

On or around May 31, 2016, the Company entered into a ‘Consent of Defendant Jammin Java Corp.’ (the “Consent”), in connection with the SEC’s complaint (the “Complaint”). Pursuant to the Consent, without admitting or denying the allegations of the Complaint (except as specifically set forth in such Consent mainly relating to personal and subject matter jurisdiction, which we admitted), we consented to the entry of a final judgment (the “Final Judgment”), which, among other things: (a) permanently restrains and enjoins us from violating Section 5 of the Securities Act, and (b) orders us to pay disgorgement in the amount of $605,330, plus prejudgment interest thereon in the amount of $94,670, totaling an aggregate of $700,000, of which (1) $200,000 is due within 14 days of the entry of the Final Judgment, which funds are currently held in an attorney’s trust account for payment; and (2) $500,000 is due within 90 days of the entry of the Final Judgment.

 

The Final Judgment was approved by the SEC on or around May 31, 2016 and we are awaiting a file stamped copy of the Final Judgement from the court, which is anticipated by the end of June 2016. The Company has accrued $700,000 for estimated settlement expense in the quarter ended April 30, 2016, which is offset by a $400,000 insurance settlement which was received in May 2016.  

 

The Company believes that the Final Judgment is a positive outcome for the Company as it settles the SEC’s outstanding action against the Company and removes the uncertainty surrounding such action moving forward. The Company continues to take action in the best interests of the shareholders to create shareholder value which includes assisting the SEC in its continued investigation.

 

Item 1A. Risk Factors.

 

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended January 31, 2016, filed with the Commission on May 6, 2016, except as discussed below, and investors are encouraged to review such risk factors prior to making an investment in the Company.

 

56 Hope Road can terminate the 56 Hope Road License Agreement under certain circumstances.

 

Pursuant to the terms and conditions of the 56 Hope Road License Agreement, 56 Hope Road can terminate that agreement under certain circumstances, subject where applicable and as described in the agreement, our right to cure such breaches and other events, including: in the event the Securities and Exchange Commission or any similar government agency in any country, territory or possession makes any negative or unlawful finding regarding our activities. In the event the Final Judgment (described below under “Part II - Other Information” - “Item 1. Legal Proceedings”), constitutes a “negative or unlawful finding regarding our activities”, 56 Hope Road can terminate the License Agreement pursuant to its terms.

 

 

We have been notified by 56 Hope Road of our alleged breach of certain of the terms of the License Agreement, including, but not limited to, our failure to deliver quarterly statements in a timely manner, our failure to timely make licensing payments, and our failure to deliver audited financial statements in a timely manner. Some of these breaches are due to cash flow issues and corporate governance matters. We are working with 56 Hope Road in an effort to resolve the alleged breaches and we are optimistic that we will be able to resolve the issues and will be able to put in place corporate governance procedures to alleviate certain of the issues raised moving forward.

 

The termination of the 56 Hope Road License Agreement would have a material adverse effect on our results of operations and assets, could force us to scale back and/or abandon our business operations, or force us to seek bankruptcy protection and could cause the value of our common stock to decline in value or become worthless.

 

The Company owes a significant amount of money to Mother Parkers.

 

As of April 30, 2016, the Company owed a significant amount of accounts payable and the Company owed approximately $2.2 million to Mother Parkers in consideration for distribution services rendered. Mother Parkers has previously advised us that if we are not able to pay them amounts due past the 120 day net terms they have provided us, they will not provide additional credit and will stop distributing our products. We currently owe Mother Parkers invoices from October 2015 and are not below the 120 days. As described above, Mother Parkers is one of our largest distributors, representing over half of our revenues for the year ended January 31, 2016 and the three months ended April 30, 2016, and in the event they stop distributing our products our results of operations will be materially adversely effected and we may be forced to curtail or abandon our business operations. We recently raised funding through the sale of convertible notes, as described above, to pay down a portion of the amounts we owed to Mother Parkers, provided that in the future we may be required to raise additional debt or equity funding (including in order to repay such convertible notes), which may not be available on favorable terms, if at all.

 

The Final Judgment could have a material adverse effect on our ability to raise funding and create additional liability for us.

 

Pursuant to the Final Judgment, described above under “Legal Proceedings”, we agreed to a permanent enjoinment from violating the Securities Act in future, which once accepted by the court, will cause us to be deemed to be a ‘bad actor’ under Rule 506 of the Securities Act and disqualified by the requirements of Rule 262 of Regulation A, which will prevent us from relying on an exemption from registration for the sale and issuance of securities under Regulation D and A, respectively. This could make it harder for us to sell shares privately and negatively affect our ability to raise capital. Additionally, for the three years following the court’s acceptance of the Final Judgment, we will be unable to avail ourselves of the statutory safe harbor for forward-looking statements under the Private Securities Litigation Reform Act of 1995. As a result, we may face additional liability for our forward-looking statements. Both of which could have a material adverse effect on our operations and cash flows, and could cause the value of our securities to decline in value.

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

As described above under “Note 5. Convertible and Other Notes Payable” – “Convertible Note with JSJ Investments Inc.” to the unaudited financial statements included herein, on March 1, 2016, we entered into the JSJ side letter agreement which amended the terms of the JSJ Note as discussed above. To the extent such transaction is deemed the offer or sale of unregistered equity securities, we plan to claim an exemption from registration pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the foregoing did not involve a public offering, the recipient was (i) an “accredited investor”; and/or (ii) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act, and the recipient acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any general solicitation by us or our representatives. No underwriters or agents were involved in the foregoing issuance and we paid no underwriting discounts or commissions. The securities are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

 

As described above under “Note 5. Convertible and Other Notes Payable” – “Convertible Notes with Duck Duck Spruce” to the unaudited financial statements included herein, on March 8, 2016 and March 15, 2016, we sold Duck Duck the Duck Duck Notes. The notes are convertible into our common stock at a discount to the trading price of our common stock as described in greater detail above. We also agreed pursuant to the March 15, 2016 Duck Duck Note to issue Duck Duck 250,000 restricted shares of common stock, which shares have been issued to date. We claim an exemption from registration for the issuance of such convertible notes and shares pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the foregoing issuances did not involve a public offering, the recipient was (i) an “accredited investor”; and/or (ii) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act, and the recipient acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any general solicitation by us or our representatives. No underwriters or agents were involved in the foregoing issuance and we paid no underwriting discounts or commissions. The securities sold are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws. 

 

As described above under “Note 5. Convertible and Other Notes Payable” – “Convertible Promissory Notes with Vis Vires Group” to the unaudited financial statements included herein, on March 13, 2016, we sold Vis Vires the New Vis Vires Convertible Note. The note is convertible into our common stock at a discount to the trading price of our common stock as described in greater detail above. We claim an exemption from registration for the issuance of such convertible note pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the foregoing issuance did not involve a public offering, the recipient was (i) an “accredited investor”; and/or (ii) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act, and the recipient acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities were offered without any general solicitation by us or our representatives. No underwriters or agents were involved in the foregoing issuance and we paid no underwriting discounts or commissions. The securities sold are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

 

On March 11, 2016, our Board of Directors approved the re-pricing of stock options to purchase an aggregate of 6 million shares of our common stock (2 million each to each of our executive officers and Chairman). To the extent such re-pricings constituted the offer and sale of securities, we believe that such transactions were exempt from registration pursuant to (a) Section 4(a)(2) of the Securities Act; and/or (b) Rule 506 of the Securities Act, and the regulations promulgated thereunder. With respect to the transactions described above, no general solicitation was made either by us or by any person acting on our behalf. The transactions were all privately negotiated, and none involved any kind of public solicitation. No underwriters or agents were involved in the foregoing grants and we paid no underwriting discounts or commissions. The securities sold are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom. All recipients were officers and directors of the Company.

 

 

Use of Proceeds From Sale of Registered Securities

 

None.

 

Issuer Purchases of Equity Securities

 

As part of the May 19, 2016, settlement agreement entered into between Whittle, MCL, Rohan Marley, Cedella Marley, the Company, HRM and 56 Hope Road, as described above under “Legal Proceedings”, among other things Whittle agreed to cancel and terminate the options to purchase 2 million shares of the Company’s common stock which he held as of the date of the parties’ entry into the Settlement Agreement for $1.00 of total consideration, which options have been purchased and cancelled to date.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None. 

 

Item 6. Exhibits.

 

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

 

 

SIGNATURES

 

Pursuant to the requirements 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.
Dated: June 23, 2016	By:	/s/ Brent Toevs
		Brent Toevs
		Chief Executive Officer
		(Principal Executive Officer)

  

	JAMMIN JAVA CORP.
Dated: June 23, 2016	By:	/s/ Anh Tran
		Anh Tran
		President, Secretary and Treasurer
		(Principal Accounting and Financial Officer)

 

 

Exhibit Index
Exhibit Number		Description
3.1		Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed April 1, 2014)
3.2		Amended and Restated Bylaws of Jammin Java Corp. (May 23, 2014) (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed May 30, 2014)
10.1+		2011 Equity Compensation Plan (incorporated by reference to Exhibit 10.4 of the Company’s Form 8-K filed August 10, 2011)
10.2+		Amended and Restated 2012 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 of the Company’s Form S-8/A Registration Statement filed October 17, 2013)
10.3+		2013 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-8 filed October 17, 2013)
10.4**		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)
10.5		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)
10.6**		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)
10.7+		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)
10.8+		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)
10.9+		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)
10.10+		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)
10.11**		Roasting and Distribution Agreement, dated as of January 1, 2012, by and between the Company and Canterbury Coffee Corporation, (incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K filed May 14, 2012)
10.12		License Agreement with Fifty-Six Hope Road Music Limited dated September 13, 2012 (incorporated by reference to Exhibit 10.7 of the Company’s Amended Report on Form 10-Q/A, filed on October 4, 2012)
10.13+		Amended and Restated Employment Agreement with Brent Toevs (August 2013) (incorporated by reference to Exhibit 10.24 of the Company’s Quarterly Report on Form 10-Q filed September 12, 2013)
10.14+		Amended and Restated Employment Agreement with Anh Tran (August 2013) (incorporated by reference to Exhibit 10.25 of the Company’s Quarterly Report on Form 10-Q filed September 12, 2013)
10.15		Lease Agreement (June 2013) – 4730 Tejon Street, Denver, Colorado 80211 (incorporated by reference to Exhibit 10.26 of the Company’s Quarterly Report on Form 10-Q filed September 12, 2013)
10.16		Form of Subscription Agreement July/August 2013 Offering (incorporated by reference to Exhibit 10.28 of the Company’s Annual Report on Form 10-K filed May 16, 2014)
10.17		Form of Common Stock Purchase Warrant Agreement July/August 2013 Offering (incorporated by reference to Exhibit 10.29 of the Company’s Annual Report on Form 10-K filed May 16, 2014)
10.18		Amended and Restated License Agreement with Mother Parkers Tea & Coffee Inc. (May 20, 2014) (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed May 30, 2014)

 

 

10.19		Form of 2013 Equity Incentive Plan Stock Option Agreement (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on August 29, 2014)
10.20+		Form of Amended and Restated 2012 Equity Incentive Plan Stock Option Agreement (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on August 29, 2014)
10.21+		Form of Restricted Stock Grant Agreement to Advisory Board Members (June 2014) (incorporated by reference to Exhibit 10.33 of the Company’s Quarterly Report on Form 10-Q filed on September 15, 2014)
10.22+		First Amendment to Amended and Restated Employment Agreement with Brent Toevs (June 30, 2015) (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on July 31, 2015)
10.23+		First Amendment to Amended and Restated Employment Agreement with Anh Tran (June 30, 2015) (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on July 31, 2015)
10.24+		Form of 2013 Equity Incentive Plan Stock Option Agreement (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on August 29, 2014)
10.25+		Form of 2015 Equity Incentive Plan Stock Option Agreement (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed on July 31, 2015)
10.26		$275,000 12% Convertible Note Issued September 9, 2015, by Jammin Java Corp. in favor of JSJ Investments Inc. (incorporated by reference to Exhibit 10.31 of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2015, filed with the SEC on September 21, 2015)
10.27		Securities Purchase Agreement dated September 14, 2015, by Jammin Java Corp. and Typenex Co-Investment, LLC (incorporated by reference to Exhibit 10.32 of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2015, filed with the SEC on September 21, 2015)
10.28		Secured Convertible Promissory Note dated September 14, 2015 ($1,005,000), by Jammin Java Corp. in favor of Typenex Co-Investment, LLC (incorporated by reference to Exhibit 10.33 of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2015, filed with the SEC on September 21, 2015)
10.29		Membership Interest Pledge Agreement dated September 14, 2015, by and between Typenex Co-Investment, LLC and Jammin Java Corp. (incorporated by reference to Exhibit 10.34 of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2015, filed with the SEC on September 21, 2015)
10.30		Secured Investor Note #1 dated September 14, 2015 by and between Typenex Co-Investment, LLC and Jammin Java Corp. (incorporated by reference to Exhibit 10.35 of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2015, filed with the SEC on September 21, 2015)
10.31		Security Agreement dated September 14, 2015, by Jammin Java Corp. in favor of Typenex Co-Investment, LLC (incorporated by reference to Exhibit 10.36 of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2015, filed with the SEC on September 21, 2015)
10.32		Convertible Promissory Note dated September 16, 2015, by Jammin Java Corp. in favor of JMJ Financial (incorporated by reference to Exhibit 10.37 of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2015, filed with the SEC on September 21, 2015)
10.33		Securities Purchase Agreement dated September 9, 2015, by and between Jammin Java Corp. and Vis Vires Group, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on October 2, 2015)
10.34		$254,000 Convertible Promissory Note dated September 9, 2015, by Jammin Java Corp. in favor of Vis Vires Group, Inc. (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on October 2, 2015)
10.35		March 1, 2016 Side Letter Agreement with JSJ Investments, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed March 24, 2016)
10.36		5% Convertible Promissory Note ($330,000) with Duck Duck Spruce, LLC dated March 8, 2016 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed March 24, 2016)
10.37+		Amended and Restated 2015 Equity Incentive Plan of Jammin Java Corp. (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed March 24, 2016)
10.38+		Option Agreement of Rohan Marley effective June 30, 2015 (as amended) (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed March 24, 2016)

 

 

10.39+		Option Agreement of Brent Toevs effective June 30, 2015 (as amended) (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed March 24, 2016)
10.40+		Option Agreement of Anh Tran effective June 30, 2015 (as amended) (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed March 24, 2016)
10.41		Securities Purchase Agreement dated March 11, 2016, by and between Jammin Java Corp. and Vis Vires Group, Inc. (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed March 24, 2016)
10.42		$225,000 Convertible Promissory Note dated March 11, 2016, by Jammin Java Corp. in favor of Vis Vires Group, Inc. (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed March 24, 2016)
10.43		5% Convertible Promissory Note ($220,000) with Duck Duck Spruce, LLC dated March 15, 2016 (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed March 24, 2016)
31.1*		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of the Principal Accounting and Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1****		Certifications of the Principal Executive Officer and the Principal Accounting and Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS***		XBRL Instance Document
101.SCH***		XBRL Taxonomy Extension Schema Document
101.CAL***		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF***		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB***		XBRL Taxonomy Extension Label Linkbase Document
101.PRE***		XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith.

 

** The Company has obtained confidential treatment of certain portions of this agreement which have been omitted and filed separately with the U.S. Securities and Exchange Commission.

 

*** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.

 

**** Furnished herewith.

 

+ Indicates management contract or compensatory plan or arrangement.

 

25