Jamba Juice 2007 Annual Report Download - page 99

Table of Contents
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The Company recognized a tax benefit for various state tax credits. The tax benefit for these credits will not be finalized until an examination of the
Company’s state returns is complete. Accordingly, the Company has recorded a reserve of $579,000 for the estimated future resolution of these uncertain tax
matters. While the Company believes the recorded reserve is adequate, the ultimate resolution of these uncertain tax matters may exceed or be below the recorded
reserve.
As of November 28, 2006, Jamba Juice Company had utilized all of its net operating loss carryforwards for both federal and California state tax
purposes of approximately $1.4 million and $623,000, respectively.
As of November 28, 2006, Jamba Juice Company had credit carryforwards for state tax purposes of approximately $619,000, which do not expire.
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From 1994 through 2002, Jamba Juice Company sold 3,000,000, 2,250,053, 7,415,206, 10,028,905, and 2,482,726 shares of Series A, Series B,
Series C, Series D, and Series E convertible redeemable preferred stock (the “Preferred Stock”), respectively, at prices of $1.00, $1.33, $2.00, $2.47, and
$2.00 per share, as adjusted respectively, and received $49.6 million in net proceeds. In December of 2001, when Jamba Juice Company completed its Series
E offering, the conversion price for the Series C and Series D were reduced to $2.00 and $2.47 from $2.18 and $2.50, respectively. This reduction in the
conversion price was a result of the Series E offering being less than the conversion price of the Series C and Series D. The difference between the redemptive
value of $52.2 million and the net proceeds received was $2.6 million. In fiscal 2006, Jamba Juice Company, in accordance with Accounting Principles
Board Opinion No. 20,  , modified its accounting for the accretion of its convertible redeemable preferred stock to conform to Securities
and Exchange Commission (“SEC”) public company reporting requirements. Previously, Jamba Juice Company did not accrete the carrying value of its
convertible redeemable preferred stock. These financial statements reflect the accretion of the convertible redeemable preferred stock to its redemption value at
September 2003 (date of redemption) through a charge to accumulated deficit. The accretion amount was $0, $0, $0, and $240,000 in the 22 Week Period and
fiscal 2006, 2005, and 2004, respectively. The cumulative accretion prior to fiscal 2004 was $2.4 million.
The Series E offering in December 2001 was composed of 2,482,726 shares of Series E Preferred Stock and 2,482,726 warrants, with a purchase
price of $2.00. The Series E Preferred Stock was valued at $1.61 per share, and warrants were valued at $0.39 per warrant. The fair value of the warrants
was estimated using the Black-Scholes model with the assumption of risk free interest rate of 5.05%, ten year expected life, a dividend rate of 0%, and
volatility of 67%. The warrant entitled the holder to purchase a one-third share of Jamba Juice Company’s common stock at an exercise price of $0.75, or
$2.25 for each full share (the “Warrant”). The Warrants are exercisable for a period of 10 years following the issuance date of the Warrants and will be
adjusted as needed to account for stock splits, combinations, reclassifications, and reorganizations. Net proceeds from this offering were allocated to
convertible redeemable preferred stock and additional paid in capital in the amounts of $3.7 million and $1.0 million, respectively.
Upon completion of the Series E offering, Jamba Juice Company filed Amended Articles of Incorporation with the California Secretary of State. Upon
this filing, Series A, B, C, D, and E Preferred Stock have the following rights and preferences:
Conversion—All outstanding shares of Preferred Stock have the right to convert their shares into common stock at any time. The conversion ratio is
approximately one for one. Under the anti-dilution provisions applicable to all shares of Preferred Stock, the conversion price of all series will be subject to
adjustment in the event of any stock split, dividend or combination or reclassification or reorganization of Jamba Juice Company’s
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