JMBA Jamba, Inc. (delisted)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of report (date of earliest event reported):

June 9, 2015

 

 

Jamba, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware		001-32552		20-2122262
(State or other jurisdiction of incorporation)		(Commission File No.)		(I.R.S. Employer Identification No.)

 

6475 Christie Avenue, Suite 150, Emeryville, California 94608

(Address of principal executive offices)

 

Registrant's telephone number, including area code:

(510) 596-0100

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.01. Completion of Acquisition or Disposition of Assets.

 

On June 9, 2015, Jamba Juice Company, a California corporation and wholly-owned subsidiary of Jamba, Inc. (the “Company”) completed the refranchising of a group of Company-owned stores located in Southern California as part of the Company’s refranchising initiative. In connection with the refranchising transaction, Jamba Juice Company transferred to J’s Juice Masters, Inc. all machinery, equipment, computer hardware (including point of sale equipment), furniture, fixtures, tools, signs, other tangible personal property, all marketable inventory and all goodwill associated with the stores for a purchase price of $2,100,000 plus payment for cash on hand at each of the stores. J’s Juice Masters, Inc. agreed to enter into the Company’s standard franchise agreement with a ten-year term in connection with entering into the transaction.

 

The accompanying unaudited pro forma condensed consolidated financial statements give effect to the disposition of the assets in the above referenced refranchising transaction.

 

Item 9.01. Financial Statements and Exhibits

 

(b)

Pro Forma Financial Information

 

The unaudited pro forma condensed consolidated financial statements of the Company, which reflect the disposition described in Item 2.01 and all prior disposals during the current fiscal year ending December 29, 2015, under the Company’s refranchising initiative, are furnished as Exhibit 99.1 to this Current Report on Form 8-K and are incorporated by reference herein.

 

Exhibit 99.1 also includes updates to the pro forma financial statements furnished previously as Exhibit 99.1 to the Current Report on Form 8-K filed on May 4, 2015 and the Current Report on Form 8-K filed on May 26, 2015. The updates related to the amounts refundable to purchasers contingent upon landlords not extending the lease terms for certain store locations and were reflected in the deferred rent and other long-term liabilities in the unaudited pro forma condensed consolidated balance sheets.

 

(d)

Exhibits

 

99.1

Unaudited pro forma condensed consolidated financial statements of the Company.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	JAMBA, INC.
Date: June 15, 2015	By:	/s/ Karen L. Luey
		Karen L. Luey Chief Financial Officer, Chief Administrative Officer, Executive Vice President and Secretary

 

 

 

Exhibit 99.1

 

JAMBA, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share amounts)

 

						PRO FORMA ADJUSTMENTS
		Reported December 30,				April Disposal				April Disposal				May				June Disposal				Other				Total				Pro Forma December 30,
		2014				1				2				Disposal				1				Disposals				Adjustments				2014
ASSETS
Current assets:
Cash and cash equivalents		$	17,750			$	1,499			$	2,760			$	2,300			$	1,840			$	2,347			$	10,746	(a)		$	28,496
Receivables, net of allowances			16,977				-				-				-				-				-				-				16,977
Inventories			2,300				(83	)			(48	)			(56	)			(67	)			(25	)			(279	)(b)			2,021
Prepaid and refundable income taxes			474				-				-				-				-				-				-				474
Prepaid rent			504				-				-				-				-				-				-				504
Assets held for sale			11,221				(2,427	)			-				(1,311	)			-				(191	)			(3,929	)(c)			7,292
Prepaid expenses and other current assets			8,105				-				(95	)			-				-				-				(95	)(b)			8,010
Total current assets			57,331				(1,011	)			2,617				933				1,773				2,131				6,443				63,774
Property, fixtures and equipment, net			29,575				-				(829	)			-				(964	)			(208	)			(2,001	)(c)			27,574
Goodwill			982				(7	)			(11	)			(9	)			(8	)			-				(35	)(c)			947
Trademarks and other intangible assets, net			2,360				-				-				-				-				-				-				2,360
Other long-term assets			2,241				-				-				-				-				-				-				2,241
Total assets		$	92,489			$	(1,018	)		$	1,777			$	924			$	801			$	1,923			$	4,407			$	96,896
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	3,926			$	-			$	-			$	-			$	-			$	-			$	-			$	3,926
Accrued compensation and benefits			6,325				-				-				-				-				-				-				6,325
Workers’ compensation and health insurance reserves			1,311				-				-				-				-				-				-				1,311
Accrued jambacard liability			38,184				-				-				-				-				-				-				38,184
Other current liabilities			16,454				-				-				-				-				-				-				16,454
Total current liabilities			66,200				-				-				-				-				-				-				66,200
Deferred rent and other long-term liabilities			9,544				210				-				295				-				-				505	(d)			10,049
Total liabilities			75,744				210				-				295				-				-				505				76,249
Stockholders’ equity:
Common stock		$	17			$	-			$	-			$	-			$	-			$	-			$	-			$	17
Additional paid-in-capital			396,629				-				-				-				-				-				-				396,629
Treasury Shares at cost			(11,991	)			-				-				-				-				-				-				(11,991	)
Accumulated deficit			(368,041	)			(1,228	)			1,908				629				801				1,923				4,033	(e)			(364,008	)
Total equity attributable to Jamba, Inc.			16,614				(1,228	)			1,908				629				801				1,923				4,033				20,647
Noncontrolling interest			131				-				(131	)			-								-				(131	)(f)			-
Total stockholders’ equity			16,745				(1,228	)			1,777				629				801				1,923				3,902				20,647
Total liabilities and stockholders’ equity		$	92,489			$	(1,018	)		$	1,777			$	924			$	801			$	1,923			$	4,407			$	96,896

 

  

JAMBA, INC.

UNAUDITED PRO FORMA CONDENDED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)

 

						PRO FORMA ADJUSTMENTS
		Reported Fiscal Year Ended December 30,				April Disposal				April Disposal				May				June Disposal				Other				Total				Pro Forma Fiscal Year Ended December 30,
		2014				1				2				Disposal				1				Disposals				Adjustments				2014
Revenue:
Company Stores		$	198,737			$	(9,563	)		$	(6,551	)		$	(7,219	)		$	(6,543	)		$	(3,404	)		$	(33,280	)A		$	165,457
Franchise and other revenue			19,311				526				360				397				360				187				1,830	B			21,141
Total revenue			218,048				(9,037	)			(6,191	)			(6,822	)			(6,183	)			(3,217	)			(31,450	)			186,598
Costs and operating expenses (income):
Cost of sales			52,236				(2,418	)			(1,634	)			(1,851	)			(1,677	)			(870	)			(8,450	)C			43,786
Labor			61,749				(3,164	)			(1,808	)			(2,198	)			(2,002	)			(959	)			(10,131	)C			51,618
Occupancy			27,630				(1,192	)			(813	)			(843	)			(824	)			(305	)			(3,977	)C			23,653
Store operating			33,089				(1,473	)			(846	)			(1,106	)			(1,024	)			(465	)			(4,914	)C			28,175
Depreciation and amortization			10,084				(501	)			(149	)			(323	)			(279	)			(72	)			(1,324	)C			8,760
General and administrative			37,278				-				-				-				-				-				-				37,278
Other operating, net			(718	)			-				-				-				-				-				-				(718	)
Total costs and operating expenses			221,348				(8,748	)			(5,250	)			(6,321	)			(5,806	)			(2,671	)			(28,796	)			192,552
Loss from operations			(3,300	)			(289	)			(941	)			(501	)			(377	)			(546	)			(2,654	)			(5,954	)
Other income (expense):
Interest income			74				-				-				-				-				-				-				74
Interest expense			(195	)			-				-				-				-				-				-				(195	)
Total other expense, net			(121	)			-				-				-				-				-				-				(121	)
Loss before income taxes			(3,421	)			(289	)			(941	)			(501	)			(377	)			(546	)			(2,654	)			(6,075	)
Income tax expense			(168	)			-				-				-								-				-				(168	)
Net loss			(3,589	)			(289	)			(941	)			(501	)			(377	)			(546	)			(2,654	)			(6,243	)
Less: Net income attributable to noncontrolling interest			43				-				(43	)			-				-				-				(43	)D			-
Net loss attributable to common stockholders		$	(3,632	)		$	(289	)		$	(898	)		$	(501	)		$	(377	)		$	(546	)		$	(2,611	)		$	(6,243	)

 

 

Jamba, Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

December 30, 2014

 

1.

Description of Refranchising Transactions

 

On April 28, 2015, Jamba Juice Company, a California corporation and wholly-owned subsidiary of Jamba, Inc. (the “Company”) completed the refranchising of a group of Company-owned stores located in the San Francisco Bay Area and Southern California as part of the Company’s refranchising initiative in two separate transactions.

 

In connection with the first refranchising transaction, the Company transferred to M5 Partners, Inc. all machinery, equipment, computer hardware (including point of sale equipment), furniture, fixtures, tools, signs, vehicles, other tangible personal property and all goodwill associated with stores for a purchase price of $1,850,000 plus payment for all marketable inventory and cash on hand at each of the stores. M5 Partners, Inc. agreed to enter into the Company’s standard franchise agreement with a ten-year term in connection with entering into the transaction (“April Disposal 1”).

 

In another refranchising transaction completed on April 28, 2015, the Company sold its 88% membership interest in Jamba Juice Southern California LLC (“JJSC”) to Strategic Marketing Sciences, Inc., its minority partner in the joint venture. JJSC was formed to operate a group of stores in Southern California. The purchase price for the membership interest was $3,000,000 plus payment for all marketable inventory and cash on hand at each of the stores. Strategic Marketing Sciences, Inc. agreed to enter into the Company’s standard franchise agreement with a ten-year term in connection with entering into the transaction (“April Disposal 2”).

 

On May 19, 2015, the Company completed the refranchising of a group of Company-owned stores located in the San Francisco Bay Area. In connection with the refranchising transaction, the Company transferred to Blended Star NorCal, Inc. all machinery, equipment, computer hardware (including point of sale equipment), furniture, fixtures, tools, signs, vehicles, other tangible personal property and all goodwill associated with stores for a purchase price of $2,500,000 plus payment for all marketable inventory and cash on hand at each of the stores. Blended Star NorCal, Inc. agreed to enter into the Company’s standard franchise agreement with a ten-year term in connection with entering into the transaction (“May Disposal”).

 

On June 9, 2015, the Company completed the refranchising of a group of Company-owned stores located in Southern California as part of its refranchising initiative. In connection with the refranchising transaction, the Company transferred to J’s Juice Masters, Inc. all machinery, equipment, computer hardware (including point of sale equipment), furniture, fixtures, tools, signs, other tangible personal property, all marketable inventory and all goodwill associated with the stores for a purchase price of $2,100,000 plus payment for cash on hand at each of the stores. J’s Juice Masters, Inc. agreed to enter into the Company’s standard franchise agreement with a ten-year term in connection with entering into the transaction (“June Disposal 1”).

 

In addition to the transactions mentioned above, the Company entered into multiple individually insignificant agreements and refranchised a small group of stores located in Southern California and in the San Francisco Bay Area during the 13 week period ended March 31, 2015. In connection with the refranchising transactions, the Company received aggregate proceeds of $2,352,000 and the purchasers entered into the Company’s standard franchise agreements with ten-year terms in connection with entering into the transactions (“Other Disposals”).

 

2.

Basis of Presentation

 

The effect of the refranchising transactions on a cumulative basis is reflected in the unaudited pro forma condensed consolidated financial statements.

 

The unaudited pro forma condensed consolidated financial statements were prepared in accordance with U.S. GAAP and pursuant to U.S. Securities and Exchange Commission Regulation S-X Article 11, and present the pro forma financial position and results of operations of the Company based upon the historical information after giving effect to the disposal and adjustments described in the notes to the unaudited pro forma condensed consolidated financial statements. The unaudited pro forma condensed consolidated balance sheet is presented as if the refranchising had occurred on December 30, 2014, and the unaudited pro forma condensed consolidated statement of operations for the fiscal year ended December 30, 2014 is presented as if the disposal had occurred on January 1, 2014.

 

  

The unaudited pro forma condensed consolidated financial information is presented for informational purposes only and is not indicative of the Company’s financial results or financial position as if the transactions reflected herein had occurred, or been in effect during the pro forma periods. This unaudited pro forma condensed consolidated financial information should not be viewed as indicative of the Company’s expected financial results for future periods.

 

3.

Adjustments to Unaudited Pro Forma Condensed Consolidated Balance Sheet

 

Adjustments in the columns titled “Pro Forma Adjustments” represent the following:

 

(a) - Represents the pro forma adjustments for the proceeds received offset by store-related cash balances at the end of the fiscal year (in thousands).

 

		Amount
Proceeds received		$	11,888
Cost to sell			(1,088	)
Store-related cash at hand			(54	)
		$	10,746

 

(b) - Represents the pro forma adjustments for the assets that will no longer be on the Company’s balance sheet as a result of the disposal of the stores to franchise partners.

  

(c) - Represents the pro forma adjustments for the estimated net book value of the assets purchased by the franchise partners from the Company.

 

(d) - Represents the pro forma adjustments for the effect of amounts refundable to purchasers contingent upon landlords not extending the lease terms for certain store locations.

 

(e) - Represents the pro forma adjustments for the impact of the refranchising transaction on the Company’s accumulated deficit (in thousands).

 

		Amount
Proceeds received		$	11,888
Less: Cost to sell			(1,088	)
Assets held for sale			(3,929	)
Property, fixtures and equipment, net			(2,001	)
Goodwill and current assets			(463	)
Amounts contingently refundable			(505	)
Noncontrolling interest			131
		$	4,033

 

(f) - Represents the pro forma adjustment to eliminate the 12% noncontrolling interest in JJSC, since the purchaser is acquiring the remaining interest in the JJSC stores.

 

4.

Adjustments to Unaudited Pro Forma Condensed Consolidated Statement of Operations

 

A - Reflects the pro forma adjustments for the revenue during the fiscal year ended December 30, 2014 from the stores sold to franchise partners.

 

B - Reflects the pro forma adjustments for estimated royalty income that would have been earned had the stores been owned by franchisees for the 2014 fiscal year.

 

C - Reflects the pro forma adjustments for the expenses related to the stores sold to franchise partners.

 

D - Reflects the pro forma adjustments to eliminate the 12% noncontrolling interest in JJSC, since the owner of the noncontrolling interest is acquiring the remaining interest in the JJSC stores.

 

  

JAMBA, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share amounts)

 

						PRO FORMA ADJUSTMENTS
		Reported March 31,				April Disposal				April Disposal				May				June Disposal				Other				Total				Pro Forma March 31,
		2015				1				2				Disposal				1				Disposals				Adjustments				2015
ASSETS
Current assets:
Cash and cash equivalents		$	8,116			$	1,499			$	2,760			$	2,300			$	1,840			$	-			$	8,399	(a)		$	16,515
Receivables, net of allowances			16,226				-				-				-				-				-				-				16,226
Inventories			2,267				(90	)			(44	)			(63	)			(62	)			-				(259	)(b)			2,008
Prepaid and refundable income taxes			329				-				-				-				-				-				-				329
Prepaid rent			2,931				-				-				-				-				-				-				2,931
Assets held for sale			22,875				(2,427	)			(804	)			(1,311	)			(846	)			-				(5,388	)(c)			17,487
Prepaid expenses and other current assets			7,554				-				(95	)			-				-				-				(95	)(b)			7,459
Total current assets			60,298				(1,018	)			1,817				926				932				-				2,657				62,955
Property, fixtures and equipment, net			16,002				-				-				-								-				-				16,002
Goodwill			897				(7	)			(11	)			(9	)			(8	)			-				(35	)(c)			862
Trademarks and other intangible assets, net			1,295				-				-				-				-				-				-				1,295
Other long-term assets			1,969				-				-				-				-				-				-				1,969
Total assets		$	80,461			$	(1,025	)		$	1,806			$	917			$	924			$	-			$	2,622			$	83,083
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	2,310			$	-			$	-			$	-			$	-			$	-			$	-			$	2,310
Accrued compensation and benefits			4,813				-				-				-				-				-				-				4,813
Workers’ compensation and health insurance reserves			1,680				-				-				-				-				-				-				1,680
Accrued jambacard liability			32,368				-				-				-				-				-				-				32,368
Other current liabilities			21,005				-				-				-				-				-				-				21,005
Total current liabilities			62,176				-				-				-				-				-				-				62,176
Deferred rent and other long-term liabilities			8,643				210				-				295				-				-				505	(d)			9,148
Total liabilities			70,819				210				-				295				-				-				505				71,324
Stockholders’ equity:
Common stock		$	18			$	-			$	-			$	-			$	-			$	-			$	-			$	18
Additional paid-in-capital			397,928				-				-				-				-				-				-				397,928
Treasury Shares at cost			(18,674	)			-				-				-				-				-				-				(18,674	)
Accumulated deficit			(369,792	)			(1,235	)			1,968				622				924				-				2,279	(e)			(367,513	)
Total equity attributable to Jamba, Inc.			9,480				(1,235	)			1,968				622				924				-				2,279				11,759
Noncontrolling interest			162				-				(162	)			-				-				-				(162	)(f)			-
Total stockholders’ equity			9,642				(1,235	)			1,806				622				924				-				2,117				11,759
Total liabilities and stockholders’ equity		$	80,461			$	(1,025	)		$	1,806			$	917			$	924			$	-			$	2,622			$	83,083

 

  

JAMBA, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)

 

						PRO FORMA ADJUSTMENTS
		Reported 13 week period ended March 31,				April Disposal				April Disposal				May				June Disposal				Other				Total				Pro Forma 13 week period ended March 31,
		2015				1				2				Disposal				1				Disposals				Adjustments				2015
Revenue:
Company Stores		$	47,728			$	(2,350	)		$	(1,644	)		$	(1,737	)		$	(1,681	)		$	(667	)		$	(8,079	)A		$	39,649
Franchise and other revenue			4,776				129				90				96				92				37				444	B			5,220
Total revenue			52,504				(2,221	)			(1,554	)			(1,641	)			(1,589	)			(630	)			(7,635	)			44,869
Costs and operating expenses (income):
Cost of sales			12,407				(585	)			(428	)			(428	)			(431	)			(177	)			(2,049	)C			10,358
Labor			16,088				(822	)			(477	)			(557	)			(518	)			(233	)			(2,607	)C			13,481
Occupancy			6,835				(301	)			(207	)			(222	)			(211	)			(49	)			(990	)C			5,845
Store operating			8,034				(376	)			(224	)			(244	)			(239	)			(54	)			(1,137	)C			6,897
Depreciation and amortization			1,873				(51	)			(32	)			(68	)			(55	)			(76	)			(282	)C			1,591
General and administrative			8,963				-				-				-				-				-				-				8,963
Other operating, net			(28	)			-				-				-				-				1,924				1,924	D			1,896
Total costs and operating expenses			54,172				(2,135	)			(1,368	)			(1,519	)			(1,454	)			1,335				(5,141	)			49,031
Loss from operations			(1,668	)			(86	)			(186	)			(122	)			(135	)			(1,965	)			(2,494	)			(4,162	)
Other income (expense):
Interest income			15				-				-				-				-				-				-				15
Interest expense			(41	)			-				-				-				-				-				-				(41	)
Total other expense, net			(26	)			-				-				-				-				-				-				(26	)
Loss before income taxes			(1,694	)			(86	)			(186	)			(122	)			(135	)			(1,965	)			(2,494	)			(4,188	)
Income tax expense			(26	)			-				-				-								-				-				(26	)
Net Loss			(1,720	)			(86	)			(186	)			(122	)			(135	)			(1,965	)			(2,494	)			(4,214	)
Less: Net income attributable to noncontrolling interest			31				-				(31	)			-				-				-				(31	)E			-
Net Loss attributable to common stockholders		$	(1,751	)		$	(86	)		$	(155	)		$	(122	)		$	(135	)		$	(1,965	)		$	(2,463	)		$	(4,214	)

 

  

Jamba, Inc.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

March 31, 2015

 

1.

Description of Refranchising Transactions

 

On April 28, 2015, Jamba Juice Company, a California corporation and wholly-owned subsidiary of Jamba, Inc. (the “Company”) completed the refranchising of a group of Company-owned stores located in the San Francisco Bay Area and Southern California as part of the Company’s refranchising initiative in two separate transactions.

 

In connection with the first refranchising transaction, the Company transferred to M5 Partners, Inc. all machinery, equipment, computer hardware (including point of sale equipment), furniture, fixtures, tools, signs, vehicles, other tangible personal property and all goodwill associated with stores for a purchase price of $1,850,000 plus payment for all marketable inventory and cash on hand at each of the stores. M5 Partners agreed to enter into the Company’s standard franchise agreement with a ten-year term in connection with entering into the transaction (“April Disposal 1”).

 

In another refranchising transaction completed on April 28, 2015, the Company sold its 88% membership interest in Jamba Juice Southern California LLC (“JJSC”) to Strategic Marketing Sciences, Inc., its minority partner in the joint venture. JJSC was formed to operate a group of stores in Southern California. The purchase price for the membership interest was $3,000,000 plus payment for all marketable inventory and cash on hand at each of the stores. Strategic Marketing Sciences, Inc. agreed to enter into the Company’s standard franchise agreement with a ten-year term in connection with entering into the transaction (“April Disposal 2”).

 

On May 19, 2015, the Company completed the refranchising of a group of Company-owned stores located in the San Francisco Bay Area. In connection with the refranchising transaction, the Company transferred to Blended Star NorCal, Inc. all machinery, equipment, computer hardware (including point of sale equipment), furniture, fixtures, tools, signs, vehicles, other tangible personal property and all goodwill associated with stores for a purchase price of $2,500,000 plus payment for all marketable inventory and cash on hand at each of the stores. Blended Star NorCal, Inc. agreed to enter into the Company’s standard franchise agreement with a ten-year term in connection with entering into the transaction (“May Disposal”).

 

On June 9, 2015, the Company completed the refranchising of a group of Company-owned stores located in Southern California as part of its refranchising initiative. In connection with the refranchising transaction, the Company transferred to J’s Juice Masters, Inc. all machinery, equipment, computer hardware (including point of sale equipment), furniture, fixtures, tools, signs, other tangible personal property, all marketable inventory and all goodwill associated with the stores for a purchase price of $2,100,000 plus payment for cash on hand at each of the stores. J’s Juice Masters, Inc. agreed to enter into the Company’s standard franchise agreement with a ten-year term in connection with entering into the transaction (“June Disposal 1”).

 

In addition to the transactions mentioned above, the Company entered into multiple individually insignificant agreements and refranchised a small group of stores located in Southern California and in the San Francisco Bay Area during the 13 week period ended March 31, 2015. In connection with the refranchising transactions, the Company received aggregate proceeds of $2,352,000 and the purchasers entered into the Company’s standard franchise agreements with ten-year terms in connection with entering into the transactions (“Other Disposals”).

 

2.

Basis of Presentation

 

The unaudited pro forma condensed consolidated financial statements were prepared in accordance with GAAP and pursuant to U.S. Securities and Exchange Commission Regulation S-X Article 11, and present the pro forma financial position and results of operations of the Company based upon the historical information after giving effect to the disposal and adjustments described in the notes to the unaudited pro forma condensed consolidated financial statements. The unaudited pro forma condensed consolidated balance sheet is presented as if the refranchising had occurred on March 31, 2015, and the unaudited pro forma condensed consolidated statement of operations for the 13 week period ended March 31, 2015 is presented as if the disposal had occurred on January 1, 2014 and carried forward through the 13 week period ended on March 31, 2015.  As a result, pro forma adjustments for refranchising of the small group of stores completed during the 13 week period ended March 31, 2015 were reflected in the unaudited pro forma condensed consolidated statement of operations only.

 

 

The unaudited pro forma condensed consolidated financial information is presented for informational purposes only and is not indicative of the Company’s financial results or financial position as if the transactions reflected herein had occurred, or been in effect during the pro forma periods. This unaudited pro forma condensed consolidated financial information should not be viewed as indicative of the Company’s expected financial results for future periods.

 

3.

Adjustments to Unaudited Pro Forma Condensed Consolidated Balance Sheet

 

Adjustments in the columns titled “Pro Forma Adjustments” represent the following:

 

(a) - Represents the pro forma adjustments for the proceeds received offset by store-related cash balances at the end of the 13 week period ended March 31, 2015 (in thousands).

 

		Amount
Proceeds received		$	9,536
Cost to sell			(1,088	)
Store-related cash at hand			(49	)
		$	8,399

 

(b) - Represents the pro forma adjustments for the assets that will no longer be on the Company’s balance sheet as a result of the disposal of the stores to franchise partners.

  

(c) - Represents the pro forma adjustments for the estimated net book value of the assets purchased by the franchise partners from the Company.

 

(d) - Represents the pro forma adjustments for the effect of amounts refundable to purchasers contingent upon landlords not extending the lease terms for certain store locations.

 

(e) - Represents the pro forma adjustments for the impact of the refranchising transaction on the Company’s accumulated deficit (in thousands).

 

		Amount
Proceeds received		$	9,536
Less: Cost to sell			(1,088	)
Assets held for sale			(5,388	)
Goodwill and current assets			(438	)
Amounts contingently refundable			(505	)
Noncontrolling interest			162
		$	2,279

 

(f) - Represents the pro forma adjustment to eliminate the 12% noncontrolling interest in JJSC, since the purchaser is acquiring the remaining interest in the JJSC stores.

 

4.

Adjustments to Unaudited Pro Forma Condensed Consolidated Statement of Operations

 

A - Reflects the pro forma adjustments for the revenue during the 13 week period ended March 31, 2015 from the stores sold to franchise partners.

 

B - Reflects the pro forma adjustments for estimated royalty income that would have been earned had the stores been owned by franchisees for the 13 week period ended March 31, 2015.

 

C - Reflects the pro forma adjustments for the expenses related to the stores sold to franchise partners.

 

D - Reflects the pro forma adjustments to remove the effect of the gain on refranchising the small group of stores during the 13 week period ended March 31, 2015.

 

E - Reflects the pro forma adjustment to eliminate the 12% noncontrolling interest in JJSC, since the owner of the noncontrolling interest is acquiring the remaining interest in the JJSC stores.