Jamba Juice 2013 Annual Report Download - page 69

TABLE OF CONTENTS
JAMBA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2013, JANUARY 1, 2013 AND
JANUARY 3, 2012
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
expenses. The Company received advertising contributions from its franchisees, which contributions were recorded as an offset to
advertising expense, and were $4.8 million, $3.1 million and $2.8 million for fiscal 2013, fiscal 2012 and fiscal 2011, respectively.
Store Pre-opening Costs — Costs incurred in connection with start-up and promotion of new store openings as well as rent from
possession date to store opening date are expensed as incurred.
Comprehensive Income — Comprehensive income is defined as the change in equity during a period from transactions and other
events, excluding changes resulting from investments from owners and distributions to owners. The Company currently has no components
of Comprehensive Income other than net income, therefore no separate statement of comprehensive income is presented.
Income Taxes — Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are
measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. Any effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income in the period that
includes the enactment date. In establishing deferred income tax assets and liabilities, judgments and interpretations are made based on
enacted tax laws and published tax guidance applicable to our operations. The Company records deferred tax assets and liabilities and
evaluate the need for valuation allowances to reduce deferred tax assets to amounts more likely than not of being realized. Changes in the
valuation of the deferred tax assets or changes in the income tax provision may affect the Company’s annual effective income tax rate.
Uncertain tax positions are recognized as the greatest amount more than 50% likely of being sustained upon audit based on the technical
merits of the position. On a quarterly basis, the Company reviews and updates its inventory of tax positions as necessary to add any new
uncertain tax positions taken, or to remove previously identified uncertain positions that have been effectively settled. Additionally, uncertain
positions may be re-measured as warranted by changes in facts or law. Accounting for uncertain tax positions requires significant
judgments, including estimating the amount, timing and likelihood of ultimate settlement. Although the Company believes that these
estimates are reasonable, actual results could differ from these estimates. The Company classifies interest and penalties related to income
taxes as a component of income taxes in the consolidated statements of operations.
Earnings (Loss) Per Share — Basic earnings (loss) per share is computed based on the weighted-average of common shares
outstanding during the period. Diluted earnings (loss) per share is computed based on the weighted-average number of common shares and
potentially dilutive securities, which includes preferred stock outstanding, outstanding warrants and outstanding options and restricted
stock awards granted under the Company’s stock option plans.
For purposes of determining the net income available (loss attributable) to common stockholders used in the computation of earnings
(loss) per share, the amount of the income (loss) was increased (decreased) by the preferred stock dividends and deemed dividends. The
deemed dividend represents the accretion of the issuance costs and beneficial conversion feature of the Company’s preferred stock.
All outstanding shares of preferred stock were converted to shares of common stock as of June 14, 2013. For fiscal 2013, the impact of
the assumed conversion of preferred stock is anti-dilutive and the incremental shares from assumed exercise of restricted stock awards,
warrants and stock options were dilutive. The number of incremental shares from the assumed exercise of restricted stock awards, warrants
and options was calculated by applying the treasury stock method. Shares and per share data have been adjusted for all periods presented to
reflect the Reverse Stock Split effective May 31, 2013.
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