Marley Bizness

Marley company says prospects improving despite auditor's concern

Published: Wednesday | October 5, 2011

Jammin Java Corp is countering the signal from its Wall Street auditor about its viability as a 'going concern', saying it recently signed a vending machine deal worth US$2.5 million (J$215 million) annually and has nearly US$2 million (J$172 million) in the bank.

The auditor's concern for the company chaired by Rohan Marley is that its revenue intake at US$71,700 (J$6.2 million) over six months ending July are insufficient to cover its expenses to date, unless financed externally.

"The company has an accumulated deficit of US$1.2 million and working capital of US$1.96 million at July 31, 2011. In connection with our January 31, 2011 audit, our auditor has raised substantial doubt about the company's ability to continue as a going concern," read the accompanying statements in the financials sent to shareholders at the end of September.

Jammin Java, a subsidiary of Marley Coffee LLC, is listed on the US Over the Counter Exchange. The company's auditor is listed on its website as KBL, LLP Certified Public Accountants and Advisors.

Jammin Java CEO Brent Toevs, in response to Wednesday Business queries last Friday, said the auditor was conservative and cautious.

"Most auditors ... take a very defensive position as to the viability of all start-up businesses, which is why you see language like that. The reality is that we launched our business into the market around December of 2010 and it's only this last quarter that we deemed ourselves a non-development stage company," said Toevs.

"Since our launch, though, we feel as though we've done quite a bit for any start-up company. At the end of last quarter we had nearly US$2 million in the bank, which shows that we have the necessary funds to continue operations for a while. That coupled with the fact we're constantly growing our business operations," he said.

External funding totalling some US$2.5 million was secured for Jammin Java earlier this year from a company called Straight Path. It allowed Jammin Java to hold US$1.8 million cash at the end of period. Toevs also said numerous distribution deals were recently signed.

No timeline given

"To give you some highlights, we signed a long-term deal with First Choice Coffee Services to roll out 1,000 Marley Branded Bunn machines across offices throughout the US that's worth an estimated US$2.5 million per year," said the CEO.

Toevs declined to state a planned timeline for breaking even. He said that the company would try to raise more capital to grow faster.

"Right now, we're looking to effectively and efficiently grow revenues through entering multiple lines of business. We're always looking to make a profit on every deal, but in this hyper competitive industry it takes a lot to launch a product and it could take a while to turn a true profit. The beauty with the coffee industry is that once you get a client, you usually hold on to them for a very long time," he said.

The company in its financials revealed that it would spend US$595,000 over the next 12 months on marketing/advertising and administrative expenses. It added that additional capital would be sought as deemed necessary.

"In the future, we may be required to seek additional capital by selling debt or equity securities, selling assets, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then shareholders. We provide no assurance that financing will be available in amounts or on terms acceptable to us, or at all," read the statement.

Jammin Java during the quarter embarked on hiring and compensating talent. In May, it began paying president Anh Tran and Marley each US$10,000 a month. "Prior to such date, neither Tran nor Marley received any salary or bonus for their services to the company," it stated.

In August - just outside the review quarter - it began paying Shane Whittle, a director, US$10,000 a month and hired Toevs as CEO for an annual basic salary of US$155,000.

Toevs is a coffee veteran with over 25 years of executive management experience.

business@gleanerjm.com

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