Jamba Juice 2008 Annual Report Download - page 43

Table of Contents
for goodwill and trademarks. For more information, please see the “Critical Accounting Policies and Estimates” section of Management’s Discussion and
Analysis of Financial Condition and Results of Operations. No goodwill or trademark impairment was recognized by the Company on a proforma or reported
basis in fiscal 2006.
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Gain from derivative instruments of $59.4 million and loss of $57.4 million (reported) for fiscal 2007 and fiscal 2006, respectively, represents the
unrealized gain or loss due to the change in the fair value of the Company’s warrants. The Company’s warrants are recorded as derivative liabilities, instead of
equity instruments. For more information, please see the “Critical Accounting Policies and Estimates” section of Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
Interest income decreased to $3.5 million for fiscal 2007 from $4.2 million (reported) and $3.7 million (proforma) for fiscal 2006. Interest income
represents interest earned on cash held in the Company’s investment account. The decrease in interest income was primarily due to the deployment of cash to
fund new Company Stores openings and the acquisition of stores from franchisees. Cash on hand as of January 1, 2008 was $23.0 million.
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The Company’s income tax benefit (expense) was $52.1 million in fiscal 2007 and $2.5 million (reported) and $(0.4) million (proforma) in fiscal 2006.
The effective tax rates were (31.5)%, (4.1)% and 0%, respectively. The two most significant items affecting the Company’s effective tax rate for fiscal 2007 are
the unrealized gain on our derivative liability of $59.4 million and the impairment of goodwill of $91.5 million which is the portion of the goodwill
impairment that does not have a future tax benefit. The most significant item affecting the 2006 effective tax rate was the unrealized loss on our derivative
liability of $57.4 million. The unrealized change in the fair value of derivatives and the impairment of goodwill recorded in the consolidated financial
statements do not result in taxable income or tax deductible expenses.
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The 10-day transition period of the Company from January 1, 2006 to January 10, 2006 is not material to the consolidated financial statements as a
whole. During this 10-day period, we earned approximately $92,000 in interest income from cash held in the Company’s trust account and recorded a gain on
derivative liabilities of $173,000 representing the change in fair value of the Company’s warrants.
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As noted above, the Company’s results of operations for fiscal 2005 do not include the results of Jamba Juice Company. The Company was formed on
January 6, 2005, to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar merger with an operating business that
provides services. From January 6, 2005 (inception) until December 31, 2005, we had net income of approximately $3.3 million, derived from dividend and
interest income of $1.5 million and a gain on derivative liabilities of $2.1 million, less operating expenses of $197,000 and income tax provision of $85,000.
On July 6, 2005, we consummated our initial public offering of 15,000,000 units. On July 7, 2005, we consummated the closing of an additional
2,250,000 units that were subject to the underwriters’ over-allotment option. Each unit consists of one share of common stock and one redeemable common
stock purchase warrant. Each warrant entitles the holder to purchase one share of common stock at an exercise price of $6.00. Our
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