The announced investor relations firm sounds decent, only that JAMN profile has not yet appeared on its website yet. The further positive news that Jammin Java has cured its zero cash position as of end-October 2010 through an equity financing agreement also hyped traders and eventually provided some market for the stock. Here, the problem is that the funds actually received amount $40,000, not the stated in the press release $2.5 million.
Reading the 8-k raises even more uncertainty. The agreement is actually a draw-down one, the exact terms being that the company has the right from time to time to request the investors to purchase shares of common stock for a total amount of $2.5 million by the end of the current year. One more condition under the contract is worth mentioning. The investors may explicitly refuse the investment request at any time, or terminate the agreement entirely if not satisfied with the “business affairs of the company”.
That business affairs are still only intentions. Jammin Java intends to sell premium roasted coffee on a wholesale basis. Last March, the company signed a Trademark License Agreement with a private company named Marley Coffee LLC and got the right to use the “Marley Coffee” for its future products. This is how JAMN only substantial asset appeared on its balance sheet: the license was valued at $640,000, but was paid with 10 million shares of the company’s common stock. One million were already issued and one million will be issued each year over the next nine years.
Thus, roughly estimated 7.25 million new shares of JAMN could be outstanding by the end of the year, taking into account that the purchase price under the above mentioned draw-down agreement has been set at $0.40 per share. The dilution percentage does not seem so high for a start-up company, but the same cannot be said for its current market value of almost $50 million. Yesterday, JAMN closed at $0.705 for a share, with a 15.57% price increase from the previous session. The reason for the exploding trading volume exactly yesterday remains a mystery.
