Jamba Juice 2006 Annual Report Download - page 32

Effective income tax rate $84,933 6.8%
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes, together with net operating loss and tax credit carry-forwards. Significant components of the Company’s
deferred tax assets and liabilities at December 31, 2005 are as follows:
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Deferred tax assets (liabilities):
Net operating loss carryforwards $56,916
Organizational costs 38,218
95,134
Valuation allowance (95,134)
Net deferred taxes $—
The valuation allowance for deferred taxes increased by approximately $95,134 during 2005, respectively, providing a full valuation allowance against the
Company’s net deferred tax assets as a result of the uncertainty as to whether the Company will acquire an operating entity and utilize these tax benefits.
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The Company has agreed to pay up to $7,500 a month in total for office space and general and administrative expense to a related entity and two
stockholders. Upon completion of a business combination or liquidation, the Company will no longer be required to pay these monthly fees. The monthly fee
started on July 6, 2005.
As part of the Offering, the stockholders prior to the initial public offering agreed that after the Offering was completed and within the first twenty trading
days after separate trading of the warrants has commenced, they or certain of their affiliates or designees would collectively purchase up to 1,000,000 warrants
in the public marketplace at prices not to exceed $1.20 per warrant. They further agreed that any warrants purchased by them or their affiliates or designees
will not be sold or transferred until the completion of a business combination. In addition, subject to any regulatory restrictions and subsequent to the
completion of the purchase of the 1,000,000 warrants described above and within the first twenty trading days after separate trading of the warrants has
commenced, the representative of the underwriter, or certain of its principals, affiliates or designees has to purchase up to 500,000 warrants in the public
marketplace at prices not to exceed $1.20 per warrant. The Units separated on July 28, 2005; as per the preceding sentence, the shareholders prior to the initial
public offering purchased 1,000,000 warrants at an average price of $1.01375 and the underwriter or its affiliates purchased 500,000 warrants at an average
price of $0.99.
The Company has sold to the representative of the underwriter, for $100, an option to purchase up to a total of 750,000 units. The units issuable upon
exercise of this option are identical to those offered by this prospectus except that the warrants included in the option have an exercise price of $7.50 (125% of
the exercise price of the warrants included in the units sold in the offering). This option is exercisable at $10.00 per unit commencing on the later of the
consummation of a business combination and one year from the date of this prospectus and expiring five years from the date of this prospectus. The option
and the 750,000 units, the 750,000 shares of common stock and the 750,000 warrants underlying such units, and the 750,000 shares of common stock
underlying such warrants, have been deemed compensation by the National Association of Securities Dealers (“NASD”) and are therefore subject to a 180-day
lock-up pursuant to Rule 2710(g)(1) of the NASD Conduct Rules. Additionally, the option may not be sold, transferred, assigned, pledged or hypothecated
for a one-year period (including the foregoing 180-day period) following the date of this prospectus. However, the option may be transferred to any underwriter
and selected dealer participating in the offering and their bona fide officers or partners. The aggregate fair value of these units is approximately $2,800,000.
Such amount was included in deferred offering costs and charged to additional paid-in capital upon completion of the Offering.
The Company has engaged Broadband Capital Management LLC to act as the representative of the underwriters, on a non-exclusive basis, as our agent for the
solicitation of the exercise of the warrants. To the extent not inconsistent with the guidelines of the NASD and the rules and regulations of the Securities and
Exchange Commission, we have agreed to pay the representative for bona fide services rendered a commission equal to 5% of the exercise price for each
warrant exercised after June 29, 2006 if the exercise was solicited by the underwriters. In addition to soliciting, either orally or in writing, the exercise of the
warrants, the representative’s services may also include disseminating information, either orally or in writing, to warrant holders about us or the market for
our securities, and assisting in the processing of the exercise of the warrants. No compensation will be paid to the representative upon the exercise of the
warrants if:
• the market price of the underlying shares of common stock is lower than the exercise price;
• the holder of the warrants has not confirmed in writing that the underwriters solicited the exercise;
• the warrants are held in a discretionary account;
• the warrants are exercised in an unsolicited transaction; or
• the arrangement to pay the commission is not disclosed in the prospectus provided to warrant holders at the time of exercise.
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