Jamba Juice 2006 Annual Report Download - page 30

combination with an operating company. As used herein, a “target business” shall include an operating business that provides services and a “business
combination” shall mean the acquisition by the Company of such a target business.
The Company’s efforts in identifying a prospective business target are not limited to a particular industry, although management intends to focus on high
margin service businesses with recurring revenue. The success and ongoing profitability of such business will not necessarily be predicated on continually
generating new revenue, but rather on forging a valued bond for which switching costs may be high or alternatives of lower value. Within this context, the
Company expects to seek companies displaying a number of characteristics: recurring revenues, focus on a service rather than a product, high gross margins,
stable cash flow and opportunities for organic and acquisition growth.
Upon the closing of the Company’s offering, $126,720,000 was placed in a trust account at JP Morgan Chase NY Bank maintained by Continental Stock
Transfer & Trust Company to be invested until the earlier of (i) the consummation of the Company’s first business combination or (ii) the liquidation of the
Company. As of December 31, 2005, the balance in the trust account was $128,174,091. The remaining proceeds are available to the Company to pay for
business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses.
The Company, after signing a definitive agreement for the acquisition of a target business, will submit such transaction for stockholder approval. In the event
that stockholders owning 20% or more of the outstanding stock excluding, for this purpose, those persons who were stockholders prior to the Offering, vote
against the business combination, the business combination will not be consummated. All of the Company’s stockholders prior to the Offering, including all
of the officers and directors of the Company (“Initial Stockholders”), have agreed to vote their 3,750,000 founding shares of common stock in accordance
with the vote of the majority in interest of all other stockholders of the Company (“Public Stockholders”) with respect to any business combination. After
consummation of the Company’s first business combination, all of these voting safeguards will no longer be applicable.
With respect to the first business combination, which is approved and consummated, any Public Stockholder who voted against the business combination
may demand that the Company redeem his or her shares. The per share redemption price will equal the amount in the Trust Fund as of the record date for
determination of stockholders entitled to vote on the business combination divided by the number of shares of common stock held by Public Stockholders at
the consummation of the Offering. Accordingly, Public Stockholders holding 19.99% of the aggregate number of shares owned by all Public Stockholders
may seek redemption of their shares in the event of a business combination. Such Public Stockholders are entitled to receive their per share interest in the
Trust Fund computed without regard to the shares held by Initial Stockholders. Accordingly the Company has set up a liability on the balance sheet for the
possible redemption of 3,448,275 shares of common stock in the amount of $25,241,373
F-6
The Company’s Certificate of Incorporation provides for mandatory liquidation of the Company, without stockholder approval, in the event that the Company
does not consummate a business combination within 18 months from the date of the consummation of the Offering, or 24 months from the consummation of
the Offering if certain extension criteria have been satisfied. In the event of liquidation, it is likely that the per share value of the residual assets remaining
available for distribution (including Trust Fund assets) will be less than the offering price per share in the Offering (assuming no value is attributed to the
Warrants contained in the Units to be offered in the Offering discussed in Note 3.)
Cash Equivalents
The Company considers all highly liquid money market investments to be cash equivalents.
Common Stock
In March 2005, the Board of Directors of the Company approved a stock dividend of 1.5714 shares of common stock for each outstanding share of common
stock to all shareholders of record on March 28, 2005. The sole purpose for such dividend was to maintain the existing shareholders’ collective ownership at
20% of issued and outstanding shares immediately after the Company’s initial offering of 15.0 million units at $8.00 per unit. Subsequent to the initial
offering, the underwriters exercised their over-allotment option of 2.25 million units effectively lowering the founder’s ownership to approximately 17.86%. All
transactions and disclosures in the financial statements, related to the Company’s common stock, have been adjusted to reflect the results of the stock
dividend.
Income Per Common Share
The Company complies with SFAS No. 128, “Earnings Per Share” which requires dual presentation of basic and diluted income per share for all periods
presented. Basic income per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted income per share reflects the potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the issuance of common stock that then share in the income of the Company.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
expenses during the reporting period. Actual results could differ from those estimates.
Income Taxes
The Company complies with SFAS No. 109, “Accounting for Income Taxes,” which requires an asset and liability approach to financial accounting and
reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and