Einstein Bros 2007 Annual Report Download - page 21

http://www.sec.gov/Archives/edgar/data/949373/000104746908002111/a2183061z10-k.htm[9/11/2014 10:12:02 AM]
ownership change for purposes of Section 382 or will significantly increase the likelihood that we will undergo an additional ownership change in
the future (which could occur as a result of transactions involving our stock that are outside of our control). In either event, the occurrence of an
additional ownership change would limit our ability to utilize the approximately $46.6 million of our NOLs that are not currently subject to
limitation, and could further limit our ability to utilize our remaining NOLs and possibly other tax attributes. Limitations imposed on our ability to
use NOLs and other tax attributes to offset future taxable income could cause us to pay U.S. federal income taxes earlier than we otherwise would
if such limitations were not in effect, and could cause such NOLs and other tax attributes to expire unused, in
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each case reducing or eliminating the benefit of such NOLs and other tax attributes to us and adversely affecting our future cash flow. We are in
the process of filing a request with the Internal Revenue Service to review our methodology for determining ownership changes in accordance with
Internal Revenue Code Section 382. Upon acceptance of our request, we believe that our NOLs will be available for utilization. In the event that
our request is not accepted, approximately $17.9 million of NOLs will be at risk to expire prior to utilization. There can be no assurance that we
will realize any U.S. federal income tax benefit from any of our net operating loss carryforwards. Similar rules and limitations may apply for state
income tax purposes as well.
Risk Factors Relating to Our Common Stock
We have a majority stockholder.
Greenlight Capital, L.L.C. and its affiliates beneficially own approximately 67.6% of our common stock. As a result, Greenlight has sufficient
voting power, without the vote of any other stockholders, to determine what matters will be submitted for approval by our stockholders, to approve
actions by written consent without the approval of any other stockholders, to elect all of the members of our board of directors, and to determine
whether a change in control of our company occurs. Greenlight's interests on matters submitted to stockholders may be different from those of
other stockholders. Greenlight is not involved in our day-to-day operations, but Greenlight has voted its shares to elect our current board of
directors. The chairman of our board of directors is a current employee of Greenlight.
We have listed our common stock on the NASDAQ Global Market. NASDAQ rules will require us to have an audit committee consisting
entirely of independent directors. However, under NASDAQ rules, if a single stockholder holds more that 50% of the voting power of a listed
company, that company is considered a controlled company, and is exempt from several other corporate governance rules, including the
requirement that companies have a majority of independent directors and independent director involvement in the selection of director nominees
and in the determination of executive compensation. As a result, our stockholders will not have, and may never have, the protections that these
rules are intended to provide. The Company currently has a majority of independent directors on the board of directors.
Future sales of shares of our common stock by our stockholders could cause our stock price to fall.
If a substantial number of shares of our common stock are sold in the public market, the market price of our common stock could fall. The
perception among investors that these sales will occur could also produce this effect. Our majority stockholder, Greenlight, beneficially owns
approximately 67.6% of our common stock and sales by Greenlight or a perception that Greenlight will sell could cause a decrease in the market
price of our common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
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ITEM 2. PROPERTIES
Our Current Restaurants
The following table details our restaurant openings and closings for each respective fiscal year:
Fiscal
2005
Fiscal
2006
Fiscal
2007
Einstein Bros. Bagels