Stockhouse Short Report: Short sellers jammin on JAMN

Peter Kennedy Peter Kennedy, Stockhouse
0 Comments| May 26, 2011


Jammin Java Corp. (OTC:BB: JAMN, Stock Forum), a heavily promoted coffee company that was recently cease traded by the British Columbia Securities Commission, has seen its stock price crash after rising all the way to $6.35 from under 20 cents last November.

At Wednesday’s $2.07 close, the company has a market value of $146 million, based on the roughly 71 million shares outstanding, meaning that many investors have taken a bath while short sellers have been making a killing.

Statements filed with the U.S. Securities & Exchange Commission say Jammin Java set out to go head to head with Starbucks Corp. (NASDAQ: SBUX, Stock Forum), Seattle’s Best, Tully’s and other giants in the retail coffee industry. But the Los Angeles, California-based company, has historically generated only $42,000 in sales, including $1,307 for the year ended January 31, 2011.

According to regulatory filings, Jammin Java had only $2,467 in cash as of January 31, 2011, meaning they probably couldn’t afford one month’s rent let alone run a business. The company’s principal executive office is located at 8200 Wilshire Blvd, in the Beverly Hills area of Los Angeles.

The stock market tumble came just before the BCSC issued a cease trading order on May 20th, 2011 saying the company had failed to file numerous documents, including financial statements from as far back as October 31, 2008, as well as news releases and material change reports that should have contained details of changes to the company’s corporate structure.

Those changes include: 

  • A trademark licensing agreement with Marley Coffee, a private company headed by Rohan Marley, the son of the Jamaican reggae music legend Bob Marley. Rohan Marley remains a company director with 14.8 million shares or 21% of the company, according to regulatory filings.
  • A financing deal with Straight Path Capital under which SPC purchased 6.25 million common shares of Jammin at 40 cents a share for proceeds of $2.5 million. Straight Path Capital was incorporated in the Republic of the Marshall Island, regulatory filings show.

BCSC spokesman Richard Gilhooley said the cease trading order was issued in B.C. under rule 51-509 which requires U.S. over-the-counter market issuers with substantial connections to B.C. to make certain required disclosures. This rule does not apply in other Canadian provinces.

The order was issued on the first anniversary of the resignation of Shane Whittle, a B.C. stock promoter, and former Jammin Java chief executive officer, treasurer, secretary and director.

He was replaced by Anh Tran, who prior to his appointment was involved in online movie distribution as CEO of San Francisco-based GreenCine.com, regulatory filings show.

Investors who bought in at the peak of the recent rally must now wait and hope that the company can suddenly deliver on the original business plan which involved trying to capitalize on the Marley name, and create other product lines.

Meanwhile, in recent regulatory filings, Jammin Java said it has become aware of “unauthorized and unaffiliated internet stock promoters who are promoting short-term investments in the company’s common stock in their stock reports’’ and on their websites.

Jammin Java said these promoters have been paid by third parties “with whom the company has no knowledge or affiliation.’’

For example, a paid advertisement on the Beacon Equity website, lists five reasons why Jammin Java is getting so much attention.

A second paid advertisement noted that many of Beacon’s members were making huge gains on the stock, pointing out that Jammin has a knack for rolling out press releases and news to keep its trading active. 

Those reports don’t mention the company’s miniscule sales revenue or the fact that the company posted a net loss of $151,235 for the year ended January 31, 2011, an increase from the year earlier loss of $129, 487.

The company said people should thoroughly research any investment prior to making a financial commitment and or seek the advice of a licensed broker prior to investing in this or any other stock.

It said investors should never rely upon unsolicited email or phone calls, or third party “stock reports’’ or websites recommending extreme profits in only a short period of time in connection with any investment decision.


Tags: RESTAURANTS CONFECTIONERS FINANCIAL STATEMENTS REGULATORS

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