On or
around May 31, 2016, the Company entered into a ‘Consent of Defendant Jammin Java Corp.’ (the
“
Consent
”), in connection with the complaint filed on November 17, 2015, by the Securities and Exchange
Commission (the “
SEC
”) against us in the United States District Court Central District of California
Western Division (the “
Court
”) (Case 2:15-cv-08921), as previously disclosed by the Company
(the “
Complaint
”). The Complaint also included as defendants, Shane G. Whittle (our former Chief
Executive Officer and Director) and parties unrelated to us, Wayne S. P. Weaver, Michael K. Sun, Rene Berlinger, Stephen B.
Wheatley, Kevin P. Miller, Mohammed A. Al-Barwani, Alexander J. Hunter, and Thomas E. Hunter (collectively,
the “
Defendants
”). Pursuant to the Complaint, the SEC alleged that Mr. Whittle orchestrated
a “
pump and dump
” scheme with certain other of the Defendants in connection with our common stock.
The scheme allegedly involved utilizing our July 2009 reverse merger transaction to secretly gain control of millions of
our shares, spreading the stock to offshore entities, and dumping the shares on the unsuspecting public after the stock
price soared following fraudulent promotional campaigns undertaken by Mr. Whittle and certain other of the Defendants in or
around 2011. The complaint also alleges that to boost our stock price and provide cash to the Company, Mr. Whittle and
certain other of the Defendants orchestrated a sham financing arrangement designed to create the false appearance of
legitimate third-party interest and investment in the Company through a non-existent entity, Straight Path Capital, pursuant
to which we raised approximately $2.5 million through the sale of 6.25 million shares of common stock in 2011. The SEC also
alleges that Mr. Whittle and others caused us to make public announcements which caused our stock price to rise, which helped
facilitate the alleged frauds among other allegations spelled out more completely in the complaint. The SEC’s complaint
charges us, Mr. Whittle, Mr. Weaver, Mr. Sun, Mr. Berlinger, Mr. Wheatley, Mr. Miller, and Mr. Al-Barwani with conducting an
illegal offering in violation of Sections 5(a) and 5(c) of the Securities Act. The complaint further alleges that Mr.
Whittle, Mr. Weaver, Mr. Sun, Mr. Berlinger, and the Hunters violated Section 10(b) of the Exchange Act and Rule 10b-5, and
Mr. Whittle, Mr. Weaver, Mr. Sun, and Mr. Berlinger violated Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2
thereunder. Mr. Whittle is additionally charged with violating Section 16(a) of the Exchange Act and Rule 16a-3, and the
Hunters are charged with violations of Sections 17(b) of the Securities Act, which prohibits fraudulent touting of stock. The
SEC sought injunctions, disgorgement, prejudgment interest, and penalties as well as penny stock bars against all of the
individual Defendants and an officer-and-director bar against Mr. Whittle in connection with the Complaint.
Pursuant to
the Consent, without admitting or denying the allegations of the Complaint (except as specifically set forth in such Consent relating
to 17 C.F.R. § 202.5(e) and except as to personal and subject matter jurisdiction, which we admitted), we consented to the
entry of a final judgment (the “
Final Judgment
”), which, among other things:
(a)
permanently
restrains and enjoins us from violating Section 5 of the Securities Act of 1933, as amended (“
Securities Act
”),
by, directly or indirectly, in the absence of any applicable exemption:
(i)
unless a registration
statement is in effect as to a security, making use of any means or instruments of transportation or communication in interstate
commerce or of the mails to sell such security through the use or medium of any prospectus or otherwise;
(ii)
unless a registration
statement is in effect as to a security, carrying or causing to be carried through the mails or in interstate commerce, by any
means or instruments of transportation, any such security for the purpose of sale or for delivery after sale; or
(iii)
making use
of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer
to buy through the use or medium of any prospectus or otherwise any security, unless a registration statement has been filed with
the SEC as to such security, or while the registration statement is the subject of a refusal order or stop order or (prior to
the effective date of the registration statement) any public proceeding or examination under Section 8 of the Securities Act;
and
(b)
orders us to pay disgorgement
in the amount of $605,330.73, plus prejudgment interest thereon in the amount of $94,669.27, totaling an aggregate of
$700,000, of which (1) $200,000 is due within 14 days of the entry of the Final Judgment, which funds are currently held in
an attorney’s trust account for payment; and (2) $500,000 is due within 90 days of the entry of the Final Judgment.
The Final Judgment was approved
by the SEC on or around May 31, 2016 and is awaiting a file stamped copy of the Final Judgement from the court, which is
anticipated within the next few days.