Jammin Java Corp (JAMN)

[Brophtron]

EWolf, a "couple hundred K here or there" matters a lot for a company that does less than $2.5 million in sales per quarter! Let me explain why these numbers are a concern.

In South Korea, they did $60,000 less in business than the prior year - at a time when "Marley Coffee" opened up 3 cafes (I think 2 were opened up by the end of January). Last year they did $286K of business, so 60K is 20% of that - business in South Korea is down 20% in one year! And yet they state in the report "We anticipate over $1.5 million of revenue from our South Korean distributor this year with the goal of doubling that the following year." How are they going to suddenly have 6 times the business in this year when business dropped by 20% last year?!

Marley Coffee, Ltd. Sold 277,000 of coffee last year that was included in the preliminary report as revenue for JAMN. When was this error caught? When was the coffee sold? If it was all sold in Q4, this represents 10% of the coffee that was listed for revenue for JAMN in the quarter - if the revenues were reduced by 10%, how do we know that the COGS weren't reduced by the same amount when the error was found? How long has Marley Coffee, Ltd. sold coffee on the side, using the licensed name that JAMN is supposed to have exclusively? JAMN already competes with Starbucks, Green Mountain, Peets, etc. - why are they competing with Rohan's private company?! And what assurances do we have that the COGS listed in the financials don't include coffee that was sold by that company? Is JAMN paying all the bills for that company?

The revenues were reduced by $300K because of late shipments due to bad weather. The same thing happened last year and I still don't understand that. Revenue is recognized when the product ships, so why was it put on the books before it shipped? What triggers the recognition of the revenue - shouldn't it be done when the bill of lading is produced? And again - if the revenue was reduced, was the COGS also reduced since until the sale is made, the COGS is a cash flow statement event and not in income statement event?

The revenue for Marley Coffee Ltd. and the late shipment total $577K. If they had been included in the final figures, the quarterly sales would have been $2.762 million (and not the $3 million stated in the initial letter to shareholders), but as it stands, quarterly sales were 2.185 million, which is 21% less than what had been stated in February; that's a pretty significant drop!

In Fiscal 2014, they spent $1 million in sales and marketing (more on this below); in Fiscal 2015, they spent $3 million in sales and marketing - an increase of $2 million! And in that time, they only had 1 quarter where sales were more than Q3 of last year - and even then it was only 15% more than that quarter. Why did they spend $3 million in sales and marketing to have essentially no effect on sales?! $3 million is more than they got in revenue for their best quarter! It represents 1/3 of revenue for the entire year!

OK, here's one that you've got to find interesting. Remember the letter to shareholders? They said that annual sales were $10 million, with quarterly sales of $3 million (they had announce the $3 million "goal" on Dec. 22nd, BTW - interesting that they astonishingly "met" that goal in their shareholder letter). If you look at the prior quarterly reports and add $3 million to the last 3 quarters, we get $9.716 million, which doesn't add up to $10 million first of all. But isn't it interesting that in their first report of the quarter that they met this goal of $3 million when $577K of that was for revenues not actually earned?

Selling and marketing. Selling and marketing for the years ended January 31, 2015 and 2014 was $3,150,274 and $1,012,789, respectively, which represents an increase of $2,137,485

If you look at last year's annual report, it says that selling and marketing was only $182K for the year. Since the filing of last year's 10-K, they actually reclassified expenses for General/Administrative into Sales and Marketing; why was this? Was it just to make the $3 million spent this year less shocking? Again - $3 million spent on sales and marketing and only 1 quarter where sales were more than Q3 of last year and even then not that much more!

Both last year's and this years' reports say "As the business has developed, the customer base has increased and sales have grown more organically." Why did they spend $3 million in sales and marketing if the growth is "organic"? Do they just like the word organic?