Steven Jackson, business journalist
Jammin Java Corp, which does business as Marley Coffee, has settled a US$1 million (J$98 million) legal claim by exchanging shares for debt owed to a US trading company.
Both parties have described the settlement in terms that are closer to an investment than a legal settlement.
“I would like to thank Ironridge for their confidence in Marley Coffee and we look forward to continuing to work with them,” Rohan Marley, founder and chairman of Marley Coffee said in a statement filed with the US Securities and Exchange Commission (SEC). United States.
“We are impressed with what Rohan and the team at Marley Coffee have accomplished so far,” commented John Kirkland, Managing Director of Ironridge Global IV Limited. “We believe Marley Coffee is the epitome of specialty coffee.”
The statement follows a court-approved settlement two weeks ago, on March 6, of a US$1 million claim filed by trading firm Ironridge Global against Jammin Java.
Mutual financing decision
Last night Marley Coffee CEO Brent Toevs said the $1million debt swap was not a legal battle. He said the company must go to court to seek the share offering.
“This is not a claim against Jammin Java. This was a mutual funding decision that was agreed to by the two companies – based on SEC regulations, you need to get court approval to buy debt,” Toevs said.
A statement from Jammin Java said the Court Order and Stipulation for Settlement of Claims, dated March 6, 2013, between Jammin Java and Ironridge “provides for the full and final settlement of the $1,017,744 claim of Ironridge against the Company in connection with outstanding amounts owed to various creditors in connection with trade payables, purchases of goods and equipment, prior credit arrangements and attorneys’ fees, which Ironridge has purchased from such third parties pursuant to a receivables purchase agreement, dated on or about March 5, 2013”.
Toevs added: “We never owed Ironridge any money before this deal, nor did we owe them after the deal. This is a financing deal that Ironridge entered into and bought out the company’s accounts payable to eliminate debt from our balance sheet.”
The settlement, approved by a Los Angeles court, will give Ironridge some 8.8 million shares in Jammin Java, a fast-growing company that sells gourmet coffee, including Jamaica Blue Mountain.
The agreement expressly states that “at no time will common stock be issued to Ironridge and its affiliates which would result in them owning or controlling more than 9.99% of the outstanding common stock of the company” .
The 8.8 million shares issued to Ironridge represent less than 5.0% of the company,” Toevs said.
The retail value of the U.S. coffee market is estimated at $30 billion, with specialty coffee accounting for around 37% volume share but nearly 50% value share, according to figures in the release.
Jammin Java recorded a loss of US$2.8 million on revenue of US$1.4 million in the nine months ending October 2012, nearly double the loss recorded a year earlier.
The worsening loss came despite the startup’s revenue surging tenfold, due to high compensation and benefits costs.
Jammin Java said the settlement with Ironridge would likely increase Marley Coffee’s future cash flow and strengthen its balance sheet.
“This transaction is critically important to us and comes at an ideal time for our business. We have a very aggressive and rapidly growing sales push ahead of us,” Toevs said in the press release.
“This transaction frees up a lot of money that we can reinvest in this sales campaign, which we hope will allow us to attract large and small accounts.”