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Marley Coffee swaps company shares to pay down debt

Published:Wednesday | March 20, 2013 | 12:00 AM
A Marley Coffee bike stall.

Steven Jackson, Business Reporter

Jammin Java Corp, which trades as Marley Coffee, has settled a US$1-million (J$98m) legal claim by swapping equity for the debt owed to an American trading company.

Both parties described the settlement in percolated terms more akin 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," said Rohan Marley, founder and chairman of Marley Coffee in a statement filed with the US Securities and Exchange Commission (SEC).

"We are impressed with what Rohan and the team at Marley Coffee have achieved so far," commented John Kirkland, managing director of Ironridge Global IV Limited. "We believe Marley Coffee is the epitome of what speciality coffee is."

The statement follows a court-approved settlement two weeks ago, on March 6, of a US$1-million claim filed by trading company Ironridge Global against Jammin Java.

Mutual financing decision

Last night, Marley Coffee CEO Brent Toevs said the US$1-million debt swap was not over a legal fight. He said the company had to go to court to apply to offer the shares.

"It's not a claim against Jammin Java. This was a mutual financing decision that was agreed upon by both companies - based on SEC regulations, you have to go get court approval to buy debt," said Toevs.

A Jammin Java release said the court's Order and the Stipulation for Settlement of Claims, dated March 6, 2013, between Jammin Java and Ironridge "provides for the full and final settlement of Ironridge's $1,017,744 claim against the company in connection with past due amounts owed to various creditors in connection with trade payables, the purchase of property and equipment, prior credit agreements, and attorney fees, which Ironridge purchased from such third parties pursuant to a receivable purchase agreement, dated on or around March 5, 2013".

Toevs added: "We never owed Ironridge money before this deal, nor did we owe them money after the deal. This is a financing deal in which Ironridge came in and bought up the company's accounts payables to clean off debt off our balance sheet."

The settlement, endorsed by a Los Angeles court, will give Ironridge some 8.8 million shares in Jammin Java, a rapidly growing company which sells gourmet coffee, including Jamaica Blue Mountain.

The deal expressively states that "at no time shall shares of common stock be issued to Ironridge and its affiliates which would result in them owning or controlling more than 9.99 per cent of the company's outstanding common stock".

The 8.8 million shares issued to Ironridge represent less than 5.0 per cent of the company," Toevs said.

The retail value of the US coffee market is estimated at US$30 billion, with speciality coffee comprising approximately 37 per cent volume share but nearly a 50 per cent value share, according to figures in the release.

Jammin Java recorded a US$2.8-million loss on US$1.4 million in revenues over nine months ending October 2012, or nearly twice the loss recorded a year earlier.

The deepening loss occurred despite the tenfold rise in revenues for the start-up company, because of high compensation and benefits costs.

Jammin Java said the settlement with Ironridge would likely increase Marley Coffee's future cash flows and strengthen its balance sheet.

"This transaction is critically important for us and comes at a great time for our company. We have a very aggressive and rapidly growing sales push ahead of us," said Toevs in the market release.

"This transaction frees up a lot of cash for us to put right back into that sales push, which we hope will allow us to bring in large and small accounts."