Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2015

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

For the transition period from to

Jamba, Inc.

(Exact name of registrant as specified in its charter)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of common stock, $0.001 par value, of Jamba, Inc. issued and outstanding as of August 3, 2015 was 16,140,542.

JAMBA, INC.

QUARTERLY REPORT ON FORM 10-Q

QUARTERLY PERIOD ENDED JUNE 30, 2015

Item		Page

	PART I
	FINANCIAL INFORMATION

1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	3
	CONDENSED CONSOLIDATED BALANCE SHEETS	3
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	5
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	6
2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	25
4.	CONTROLS AND PROCEDURES	26

	PART II
	OTHER INFORMATION

1.	LEGAL PROCEEDINGS	27
1A.	RISK FACTORS	27
2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	27
3.	DEFAULTS UPON SENIOR SECURITIES	27
4.	MINE SAFETY DISCLOSURES	27
5.	OTHER INFORMATION	27
6.	EXHIBITS	28

	SIGNATURES	29

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

JAMBA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share amounts)

	June 30,			December 30,
	2015			2014

ASSETS
Current Assets:
Cash and cash equivalents	$	13,918		$	17,750
Receivables, net of allowances of $366 and $280		18,928			16,977
Inventories		2,177			2,300
Prepaid and refundable taxes		217			474
Prepaid rent		2,501			504
Assets held for sale		20,456			26,626
Prepaid expenses and other current assets		6,293			8,105

Total current assets		64,490			72,736
Property, fixtures and equipment, net		13,512			15,236
Goodwill		897			982
Trademarks and other intangible assets, net		1,154			1,294
Other long-term assets		1,899			2,241

Total assets	$	81,952		$	92,489

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	1,471		$	3,926
Accrued compensation and benefits		4,985			6,325
Workers’ compensation and health insurance reserves		1,754			1,311
Accrued jambacard liability		31,431			38,184
Other current liabilities		18,604			16,454

Total current liabilities		58,245			66,200
Deferred rent and other long-term liabilities		9,021			9,544

Total liabilities		67,266			75,744

Commitments and contingencies (Note 9)

Stockholders’ equity:
Common stock, $0.001 par value—30,000,000 shares authorized; 17,686,163 and 16,134,765 shares issued and outstanding at June 30, 2015, respectively, and 17,478,616 and 16,567,803 shares issued and outstanding at December 30, 2014, respectively		18			17
Additional paid-in capital		399,945			396,629
Treasury shares, at cost		(21,814	)		(11,991	)
Accumulated deficit		(363,463	)		(368,041	)

Total equity attributable to Jamba, Inc.		14,686			16,614
Noncontrolling interest		-			131

Total stockholders’ equity		14,686			16,745

Total liabilities and stockholders’ equity	$	81,952		$	92,489

See accompanying notes to the unaudited condensed consolidated financial statements.

JAMBA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)

	13-Week Period Ended						26-Week Period Ended
	June 30, 2015			July 1, 2014			June 30, 2015			July 1, 2014
Revenue:
Company stores	$	48,360		$	58,632		$	96,088		$	105,904
Franchise and other revenue		5,766			5,566			10,542			9,927

Total revenue		54,126			64,198			106,630			115,831

Costs and operating expenses:
Cost of sales		11,474			13,587			23,881			25,169
Labor		14,876			16,243			30,964			30,573
Occupancy		6,131			6,899			12,966			13,866
Store operating		8,059			8,495			16,093			15,897
Depreciation and amortization		1,344			2,680			3,217			5,298
General and administrative		8,427			9,582			17,390			17,932
Gain on disposal of assets		(4,480	)		(979	)		(5,258	)		(1,046	)
Other operating, net		1,834			1,085			2,584			1,755

Total costs and operating expenses		47,665			57,592			101,837			109,444

Income from operations		6,461			6,606			4,793			6,387

Other income (expense), net:
Interest income		14			18			29			34
Interest expense		(68	)		(48	)		(109	)		(94	)

Total other expense, net		(54	)		(30	)		(80	)		(60	)

Income before income taxes		6,407			6,576			4,713			6,327
Income tax expense		(57	)		(223	)		(83	)		(218	)

Net income		6,350			6,353			4,630			6,109
Less: Net income attributable to noncontrolling interest		21			17			52			17

Net income attributable to Jamba, Inc.		6,329			6,336		$	4,578			6,092

Weighted-average shares used in computation of earnings per share attributable to Jamba, Inc.:
Basic		16,073,667			17,200,698			16,222,276			17,182,893
Diluted		16,573,444			17,611,007			16,723,127			17,604,395

Net income per share attributable to common stockholders attributable to Jamba, Inc.
Basic	$	0.39		$	0.37		$	0.28		$	0.35
Diluted	$	0.38		$	0.36		$	0.27		$	0.35

See accompanying notes to the unaudited condensed consolidated financial statements.

JAMBA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	26-Week Period Ended
	June 30, 2015			July 1, 2014
Cash flows (used in) provided by operating activities:
Net income	$	4,630		$	6,109
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		3,217			5,298
Impairment, store closure costs and disposals		(6,140	)		(893	)
Jambacard breakage income		(1,996	)		(1,327	)
Gain on contingent consideration		(156	)		-
Gain on sale of investment in joint venture		(662	)		-
Stock-based compensation		2,626			1,403
Bad debt, purchase obligation reserve and trade credits		1,009			202
Deferred rent		(631	)		(2,553	)
Equity loss		204			-
Changes in operating assets and liabilities:
Receivables		(779	)		796
Inventories		(80	)		202
Prepaid and refundable taxes		257			246
Prepaid rent		(1,997	)		(2,647	)
Prepaid expenses and other current assets		1,332			320
Other long-term assets		(55	)		(1,915	)
Accounts payable		(2,842	)		(276	)
Accrued compensation and benefits		(1,340	)		1,892
Workers’ compensation and health insurance reserves		443			465
Accrued jambacard liability		(4,757	)		(2,579	)
Other current liabilities		2,174			1,703
Other long-term liabilities		299			336

Net cash (used in) provided by operating activities		(5,244	)		6,782

Cash flows provided by (used in) investing activities:
Capital expenditures		(2,102	)		(9,050	)
Proceeds from sale of stores		12,191			1,175

Net cash provided by (used in) investing activities		10,089			(7,875	)

Cash flows (used in) provided by financing activities:
Payments for treasury shares		(9,823	)		-
Proceeds pursuant to stock issuance		1,222			333
Payment to noncontrolling interest		(52	)		-
Proceeds from sale to noncontrolling interest		(24	)		750

Net cash (used in) provided by financing activities		(8,677	)		1,083

Net decrease in cash and cash equivalents		(3,832	)		(10	)

Cash and cash equivalents at beginning of period		17,750			32,386

Cash and cash equivalents at end of period	$	13,918		$	32,376

Supplemental cash flow information:
Cash paid for interest	$	20		$	15
Cash paid for income taxes	$	-		$	47

Noncash investing and financing activities:
Property, fixtures and equipment in accounts payable	$	387		$	635

See accompanying notes to the unaudited condensed consolidated financial statements.

JAMBA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Description of Business

Jamba, Inc., a Delaware corporation (“Jamba” or the “Company”), and its wholly-owned subsidiary, Jamba Juice Company, is a healthy, active lifestyle brand with a robust expanding global business driven by a portfolio of franchised and company-owned Jamba Juice® stores and licensed JambaGO® and Jamba Smoothie Station^TM formats. The Jamba® brand includes innovative product platforms and both licensed and company driven consumer packaged goods. The Company is a leading restaurant retailer of “better-for-you” specialty food and beverage offerings which include great tasting, whole fruit smoothies, fresh squeezed juices and juice blends, Energy Bowls^TM, hot teas, and a variety of food items, including hot oatmeal, breakfast wraps, sandwiches, Artisan Flatbreads^TM , baked goods, and snacks. The Company continues to expand the Jamba brand by direct selling of consumer packaged goods (“CPG”), and by licensing its trademarks for CPG products sold through retail channels such as grocery stores, warehouse clubs and convenience stores. The Company’s headquarters are located in Emeryville, California.

As of June 30, 2015, there were 875 Jamba Juice stores globally, consisting of 206 Company-owned and operated stores (“Company Stores”), 601 franchisee-owned and operated stores (“Franchise Stores”) in the United States, and 68 Franchise Stores in international locations (“International Stores”).

2. Summary of Significant Accounting Policies

Basis of presentation and consolidation

The accompanying unaudited condensed consolidated financial statements of Jamba, Inc. have been prepared pursuant to generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for Form 10-Q. The December 30, 2014 condensed consolidated balance sheet was derived from the audited financial statements, but does not include all disclosures required by U.S. GAAP. Certain information and note disclosures normally included in annual financial statements have been condensed or omitted pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results of the 13-week or 26-week periods ended June 30, 2015 are not necessarily indicative of the results of operations to be expected for the entire fiscal year.

The condensed consolidated financial statements include the accounts of the Company and its direct or indirect subsidiaries, Jamba Juice Company and Jamba Juice Company’s 88% owned subsidiary, Jamba Juice Southern California, LLC (“JJSC”). On April 28, 2015, the Company sold its 88% interest in JJSC to the holder of JJSC’s noncontrolling interest, pursuant to its refranchising initiative. All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications were made to the Company’s prior financial statements to conform to current year presentation. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 30, 2014.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.

Advertising fund

The Company participates with its franchisees in an advertising fund to collect and administer funds contributed for use in advertising and promotional programs designed to increase sales and enhance the reputation of the Company and its franchise owners. Contributions to the advertising fund are required for the Company Stores and traditional Franchise Stores, and are generally based on a percentage of store revenue. The Company has control of the advertising fund. The fund is consolidated and the Company reports all assets and liabilities of the fund.

The advertising fund assets, consisting primarily of accounts receivable from franchisees, can only be used for selected purposes and are considered restricted. The advertising fund liabilities represent the corresponding obligation arising from the receipts of the marketing program. The receipts from the franchisees are recorded as a liability against which specified advertising costs are charged. The Company does not reflect franchisee contributions to the fund in its condensed consolidated statements of operations.

Advertising fund assets as of June 30, 2015 include $1.9 million of receivables from franchisees, which is recorded in receivables on the condensed consolidated balance sheet. Advertising fund liabilities as of June 30, 2015 of $1.1 million are reported in other current liabilities and accounts payable on the condensed consolidated balance sheet.

Advertising fund assets as of December 30, 2014 include $1.2 million of receivables from franchisees, which is recorded in receivables on the condensed consolidated balance sheet. Advertising fund liabilities as of December 30, 2014 of $1.0 million are reported in other current liabilities and accounts payable on the condensed consolidated balance sheet.

Assets held for sale

The Company classifies assets as held for sale and suspends depreciation and amortization when approval has been provided for disposal, the assets can be immediately removed from operations, an active program has begun to locate a buyer, the assets are being actively marketed for sale at or near their current fair value, significant changes to the plan of sale are not likely and the sale is probable within one year. Upon classification as held for sale, long-lived assets are no longer depreciated, and an assessment of impairment is performed to identify and expense any excess of carrying value over fair value less costs to sell. Subsequent changes to the estimated fair value less the costs to sell will impact the measurement of assets held for sale. To the extent fair value increases, any impairment previously taken is reversed. If the carrying value of the assets held for sale exceeds the fair value less costs to sell, the Company will record an expense for the amount of the excess. The Company also reclassifies the associated prior year balances.

Earnings per share

Earnings per share is computed in accordance with Accounting Standards Codification (“ASC”) 260. Basic earnings per share is computed based on the weighted-average of common shares outstanding during the period. Diluted earnings per share is computed based on the weighted-average number of common shares and potentially dilutive securities, which includes outstanding warrants and outstanding options and restricted stock awards granted under the Company’s stock compensation plans.

Anti-dilutive shares including restricted stock awards, warrants and stock options totaling 2.3 million and 1.9 million were excluded from the calculation of diluted weighted-average shares outstanding for the 13-week and 26-week periods ended June 30, 2015, respectively. Anti-dilutive shares including restricted stock awards, warrants and stock options totaling 1.5 million were excluded from the calculation of diluted weighted-average shares outstanding for each of the 13-week and 26-week periods ended July 1, 2014.

Fair value measurement

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1: Quoted prices are available in active markets for identical assets or liabilities.

Level 2: Inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable.

Level 3: Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions that market participants would use in pricing.

Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued amended guidance on Revenue from Contracts with Customers which amended the existing accounting standards for revenue recognition. ASU 2014-09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. The Company is evaluating the impact of adopting this new accounting standard on its consolidated financial statements.

In January 2015, the FASB issued amended guidance which eliminates the concept of extraordinary items from generally accepted accounting principles. This amendment is effective beginning January 1, 2016, and may be applied retrospectively or prospectively. Early adoption is permitted. Prior to this amendment, an entity was required to separately classify and present an event or transaction that was determined to be both unusual in nature and infrequent in occurrence as an extraordinary item, net of tax, after income from continuing operations in the income statement. Upon adopting this amended guidance, a material event or transaction that an entity considers to be unusual or infrequent, or both, may still be presented separately but will now be presented on a pre-tax basis within income from continuing operations or disclosed in the notes to the financial statements. The Company does not expect this guidance to have a significant impact on its Consolidated Financial Statements.

In February 2015, the FASB issued amended guidance to the consolidation standard which updates the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The amendment modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest entities and affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, among other provisions. This amended guidance will be effective for the Company beginning fiscal year 2016. Early adoption is permitted. The Company is currently assessing the impact the adoption of the amended guidance will have on its Consolidated Financial Statements.

In April 2015, the FASB issued amended guidance which requires debt issuance costs to be presented as a direct deduction from the carrying value of the associated debt liability rather than as separate assets on the balance sheet. The recognition and measurement guidance for debt issuance costs are not affected by this amendment. This amended guidance will be effective for the Company beginning fiscal year 2016. Early adoption is permitted, and the new guidance will be applied on a retrospective basis. The Company does not expect the adoption of this amended guidance to have a significant impact on its Consolidated Financial Statements.

3. Share-based Compensation

Stock options

A summary of stock option activity under the Company’s equity incentive plans as of June 30, 2015, and changes during the 26-week period then ended is presented below (shares and dollars in thousands):

						Weighted-Average
	Number of			Weighted-Average		Contractual Term		Aggregate
	Options			Exercise Price		Remaining (years)		Intrinsic Value

Balance at December 30, 2014		889		$	10.89		4.74	$	6,110
Granted		955		$	13.94
Exercised		(172	)	$	7.07
Canceled		(11	)	$	29.08

Balance at June 30, 2015		1,661		$	12.92		7.14	$	6,801

Vested and expected to vest—June 30, 2015		1,375		$	12.72		6.67	$	17,494

Exercisable—June 30, 2015		655		$	11.70		3.69	$	7,660

No options were granted during the 13-week period ended June 30, 2015. During the 26-week period ended June 30, 2015, 1.0 million stock options were granted under the 2013 Equity Incentive Plan at a weighted-average grant date fair value of $6.04 per share. The fair value of stock options was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	26-Week Period Ended
	June 30, 2015

Risk-free interest rate		1.7	%
Expected term (in years)		5.85
Expected volatility		43.7	%
Expected dividend yield		0.0	%

No stock options were granted during the 13-week or 26-week periods ended July 1, 2014.

Restricted Stock Units

Information regarding activities during the 26-week period ended June 30, 2015 for restricted stock units (RSUs) granted under the 2013 Equity Incentive Plan is as follows (shares in thousands):

				Weighted-Average
	Number of			Grant Date
	RSUs			Fair Value

RSUs Outstanding at December 30, 2014		341		$	11.95
Granted		35			15.86
Vested		(35	)		15.54
Forfeited/canceled		(14	)		13.83

RSUs Outstanding at June 30, 2015		327		$	11.90

During the 26-week period ended June 30, 2015, RSUs of 35,000 were granted under the 2013 Equity Incentive Plan at a weighted-average grant date fair value of $15.86. During the 26-week period ended July 1, 2014, RSUs of 80,000 were granted under the 2013 Equity Incentive Plan at a weighted-average grant date fair value of $11.56.

Performance share units

No performance share units (“PSUs”) were granted or vested during the 13-week or 26-week periods ended June 30, 2015 or July 1, 2014. During the 26-week period ended June 30, 2015 22,833 PSUs were canceled.

Share-based compensation expense included in general and administrative expense was $1.5 million and $2.6 million for the 13-week and 26-week periods ended June 30, 2015, and $0.7 million and $1.4 million for the 13-week and 26-week periods ended July 1, 2014, respectively. At June 30, 2015 unvested share-based compensation for stock options and restricted stock awards, net of forfeitures, totaled $3.8 million. This expense will be recognized over the remaining weighted-average vesting periods of approximately 3.5 years. There was no income tax benefit related to share-based compensation expense during the 13-week periods and 26-week periods ended June 30, 2015, and July 1, 2014.

4. Assets Held For Sale

In November 2014, the Company announced plans to transition to an asset light model through the refranchising of Company Stores. In connection with that planned transition, 100 stores, comprised of 99 Company Stores and one unopened store, met the criteria as assets held for sale as of December 30, 2014. During the 26-week period ended June 30, 2015, an additional 124 stores met the criteria to be classified as assets held for sale. A loss of $1.1 million was recorded in the 26-week period ended June 30, 2015 as a result of the reclassification of 14 of the stores to reflect the adjustment to the lower of the net book value or fair value less costs to sell. As of June 30, 2015 and December 30, 2014 assets of $20.5 million and $26.6 million, respectively, include goodwill and other intangibles of $1.3 million and $1.4 million, respectively, are reflected as held for sale in the accompanying condensed consolidated balance sheets.

The Company sold 49 stores and 53 stores for a total price of $11.3 million and $13.7 million in the 13-week and 26-week periods ended June 30, 2015, respectively. The Company expects to sell substantially all of the remaining 173 stores classified as assets held for sale at June 30, 2015 by the first fiscal quarter of 2016.

Gain or loss on the disposal of assets held for sale is recorded within gain on disposal of assets in the condensed consolidated statement of operations. The Company recorded a gain of $4.5 million and $5.4 million from the disposal of assets held for sale relating to refranchising during the 13-week and 26-week periods ended June 30, 2015, respectively.

5. Fair Value Measurement

Financial assets and liabilities

The fair value of financial liability accounted for on a recurring basis as of June 30, 2015 and December 30, 2014, relating to contingent consideration associated with a previous business acquisition, was recorded at $0 and $0.2 million, respectively. The fair value as of December 30, 2014 was included in deferred rent and other long-term liabilities in the condensed consolidated balance sheet. The Company recorded a gain of $0.2 million during the 13-week and 26-week periods ended June 30, 2015 due to the elimination of the fair value of contingent consideration as it was no longer deemed probable of payment.

Level 3 Inputs

The fair value of the contingent consideration is classified as level 3 because it is based on unobservable inputs. Significant inputs and assumptions include management’s estimate of operating profits from the related business, the timing of the payout and the discount rate used to calculate the present value of the liability. Significant changes in any level 3 input or assumption would result in increases or decreases to the related fair value measurements.

Non-financial assets and liabilities

The Company’s non-financial assets and liabilities primarily consist of long-lived assets, trademarks and other intangibles, which are reported at carrying value. These non-financial assets and liabilities are not required to be measured at fair value on a recurring basis. The Company evaluates long-lived assets for impairment when facts and circumstances indicate that their carrying values may not be recoverable. Trademarks and other intangibles are evaluated for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.

6. Credit Facility

The Company has a revolving line of credit of $15.0 million with Wells Fargo, N.A that expires in July 2016. The credit facility is collateralized by substantially all of the Company’s assets. The outstanding balance under the credit facility bears interest at a LIBOR Market Index Rate based upon the rate for one month U.S. dollar deposits, plus 2.50% per annum. The credit facility requires the Company to maintain maximum consolidated leverage ratios, minimum levels of tangible net worth and a minimum fixed charge coverage ratio. There were no borrowings outstanding under the credit facility and the Company was in compliance with the covenants as of June 30, 2015 and December 30, 2014. The line of credit collateralizes the Company’s outstanding letters of credit of $1.5 million. The unused borrowing capacity under the Credit Agreement at June 30, 2015 was $13.5 million.

7. Stock Repurchases

In October 2014, the Company’s Board of Directors authorized the repurchase of up to $25 million of shares of common stock over a period of 18 months (the “2014 Stock Repurchase Program”). In May 2015, the Board authorized to increase the Company’s share repurchase program by $15 million, over a period of 18 months, to $40 million (“the 2015 Stock Repurchase Program”). During the 13-week and 26-week periods ended June 30, 2015, the Company repurchased 195,171 and 640,585 shares, respectively, under the 2014 Stock Repurchase Program. The average price per share during the 13-week period was $16.09 for an aggregate cost of $3.1 million and the average price per share during the 26-week period was $15.33, resulting in an aggregate cost of $9.8 million, leaving $3.2 million available for share repurchase in the $25 million repurchase that expires April 2016 and $15 million available for share repurchase that expires in November 2016. Shares repurchased under the 2014 Stock Repurchase Program are considered treasury stock until retired.

8. Other Operating, Net

The components of other operating, net were as follows (in thousands):

	13-Week Period Ended						26-Week Period Ended
	June 30, 2015			July 1, 2014			June 30, 2015			July 1, 2014

Jambacard breakage income	$	(974	)	$	(803	)	$	(1,996	)	$	(1,327	)
Jambacard expense		128			219			238			366
Franchise expense		693			441			1,415			772
Store pre-opening		166			267			188			420
Impairment of long-lived assets		295			145			295			175
Store lease termination and closure		40			40			62			58
CPG and JambaGO® direct expense		633			774			1,243			1,342
Franchise bad debt and trade credit write-off		785			22			798			13
Loss on equity investments		-			-			204			-
Other		68			(20	)		137			(64	)

Total other operating, net	$	1,834		$	1,085		$	2,584		$	1,755

9. Commitments and Contingencies

The Company is a defendant in litigation arising in the normal course of business. Although there can be no assurance as to the ultimate disposition of these matters, it is the opinion of the Company’s management, based upon the information available at this time, that the expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on the results of operations, liquidity or financial condition of the Company.

10. Subsequent Events

Since June 30, 2015, the Company closed two refranchising transactions in which a total of 98 stores, comprised of 97 Company Stores and one unopened store, were sold for proceeds of approximately $31.6 million, consisting of approximately $29.6 million in cash and a $2 million note receivable.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”). Except for historical information, the discussion in this Form 10-Q contains certain forward-looking statements that involve risks and uncertainties. We have based these forward-looking statements on our current expectations and assumptions about future events. In some cases, you can identify forward-looking statements by terminology, such as “may,” “should,” “could,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” “forecast” and similar expressions (or the negative of such expressions). Forward-looking statements include, but are not limited to, statements concerning the effect of our refranchising initiative, projected new store openings, store refranchising, revenue growth rates, and capital expenditures. Forward-looking statements are based on our beliefs as well as assumptions based on information currently available to us, including financial and operational information, the volatility of our stock price and current competitive conditions. As a result, these statements are subject to various risks and uncertainties. For a discussion of material risks and uncertainties that the Company faces, see the discussion titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 30, 2014.

Overview

Jamba, Inc. and its wholly-owned subsidiary, Jamba Juice Company, is a healthy, active lifestyle brand with a robust expanding global business driven by a portfolio of franchised and company-owned Jamba Juice® stores and licensed JambaGO® and Jamba Smoothie Station^TM formats. The Jamba® brand includes innovative product platforms and both licensed and company driven consumer packaged goods. We are a leading restaurant retailer of “better-for-you” specialty food and beverage offerings which include great tasting, whole fruit smoothies, fresh squeezed juices and juice blends, Energy Bowls^TM, hot teas, and a variety of food items including, hot oatmeal, breakfast wraps, sandwiches, Artisan Flatbreads^TM , baked goods and snacks. We continue to expand the Jamba brand by direct selling of consumer packaged goods (“CPG”), and by licensing our trademarks for CPG products sold through retail channels such as grocery stores, warehouse clubs, and convenience stores.

EXECUTIVE OVERVIEW

Key Overall Strategies

Our BLEND Plan, launched in 2009, continues to guide the Company’s strategy toward transforming Jamba into a globally recognized healthy, active lifestyle brand. The BLEND Plan is our strategic roadmap to transform Jamba into a global lifestyle brand and a best-in-class franchisor, as well as guiding our commitment to creating greater shareholder value through a number of strategic initiatives. Our BLEND Plan priorities include driving the expansion of our franchise base on a global basis, increasing store level profitability through cost optimization plans, continuing to develop our brand equity and becoming the clear leader in product platforms like smoothies, juices and bowls.

In addition, during fiscal 2015 we continue to focus on accelerating our move to an asset-light model through our refranchising initiatives, with a goal to bring us to a greater than 90% franchise system by the end of the current fiscal year.

2015 Second Quarter Financial Summary

Company Stores comparable sales decreased 5.9% for the quarter compared to the prior year. System-wide comparable sales decreased 3.9% and Franchise Store comparable sales decreased 2.6% for the quarter compared to the prior year. System-wide and Franchise Store comparable store sales are non-GAAP financial measures and represent the change in year-over-year sales for all Company and Franchise Stores (system-wide) and for all Franchise Stores, respectively, opened for at least one full fiscal year.

Net income attributable to Jamba, Inc. was $6.3 million for each of the 13-week periods ended June 30, 2015 and July 1, 2014.

Total revenue for the quarter decreased 15.7% to $54.1 million from $64.2 million for the prior year, primarily due to the reduction in the number of Company Stores as part of our refranchising initiative and the 5.9% decrease in Company Store comparable sales.

Income from operations was $6.5 million and operating margin was 11.9% for the quarter.

General and administrative expenses for the 13-week period ended June 30, 2015 decreased 12.1% to $8.4 million compared with $9.6 million for the prior year period.

Shares repurchased during 13-week period ended June 30, 2015 were 195,171, utilizing $3.1 million under the $25 million 2014 Stock Repurchase Program. Cumulatively, from inception through the end of the second quarter, 1,551,398 shares were repurchased for $21.8 million under this program.

Plans were accelerated to move to a greater than 90% franchise system by the end of fiscal 2015. We closed six refranchising transactions during the 13-week period ended June 30, 2015 for proceeds of approximately $11.4 million, including $10.1 million of cash. We closed two refranchising transactions subsequent to June 30, 2015, to sell 98 stores, comprised of 97 Company Stores and one unopened store, for approximately $31.6 million resulting in a gain of $14.0 million and expect to close another two to three transactions by the end of fiscal 2015.

Franchisees opened 16 new Jamba Juice stores globally. At June 30, 2015, there were 875 stores globally; 206 Company Stores, 601 Franchise Stores and 68 International Stores.

Fiscal 2015 Second Quarter Business Highlights

Brand activation and leadership

We continue to build our total brand value through multi-channel brand marketing and product innovation, including the adoption of consumer loyalty programs, the development of engaging national and local marketing programs and entering into national scale partnerships. We are addressing our customers’ health and wellness needs by our offerings centered on “Whole Food Nutrition,” which encompasses blending juices and combining whole fruits and vegetables into nutritious and convenient beverages and product offerings across all day-parts.

We continue to enhance our multi-channel marketing efforts in 2015 through several activities centered on Jamba’s great-tasting, nutritional products. During the second quarter, we offered consumers a tasty and nutritious way to stay cool and hydrated this summer with Jamba Colada Fruit Refreshers with Coconut Water. Jamba Colada Fruit Refreshers, made with real whole fruit and naturally-hydrating coconut water, are a good source of Vitamin C and come in three fun island flavors. Awareness was generated via in-store point of purchase, online and social media and through a robust public relations campaign in major media markets.

By leveraging technology and online services and partners, including Yelp^®, ApplePay^®, Google, Cardyltics and others, we connect with today’s tech-savvy consumers, helping them locate stores, order ahead, speed up transactions and improve the online and in-store experience. In the second quarter our social media launched an improved Jamba website and surpassed the 2 million member mark in our Jamba Insider Rewards (JIR) loyalty program. Through JIR, we distribute monthly emails to our members, informing them of new products and promotions.

We also continue to enhance our presence on social media, increasing our following on Facebook (almost 1.8 million followers as of June 2015), Twitter and Instagram with postings that receive increasing favor with Jamba fans. Jamba was awarded the “Who Won the Week” recognition 6 consecutive weeks for our social media postings. Our YouTube channel continues to attract fans and increase awareness with the addition of fun and informative videos leveraging registered dieticians who sit on the Jamba Healthy Living Council and NFL star Vernon Davis. Our high-profile influencers and celebrity athletes post in support of our products and promotions on an ongoing basis.

We continue to reaffirm our heritage as a good partner in the community. In April 2015, we supported National Gardening Month, partnering with the National Gardening Association and their Kid’s Gardening program. We continued to drive awareness of the need to encourage better dietary and fitness habits in kids through our team Up For a Healthy America program and partnerships with the National Gardening Association and the GenYouth Foundation. We supported kids and schools through our work with local sports teams, the awarding of 19 garden grants to schools across the country, and we launched a new fundraising card to help support schools in our markets.

Our marketing campaigns included promotional offers centered around Memorial Day. We worked with local franchisees on dozens of local promotions designed to increase trial and awareness. Our continued efforts to support our juice platform focused on our new Cold Pressed Juice in key markets in California and New York.

Leverage an innovative in-store experience to drive profitability

As we move towards a 90% franchise model, our primary focus will be on franchisee profitability. Areas that we will highlight are driving profitable traffic and continuing to find ways to reduce cost of goods used in our product platforms. We will continue to improve Company Store margins, although as we move to the franchise model, the profitability of the enterprise will be governed by franchisee unit growth, cost containment and franchisee profitability.

Early in the second quarter, we launched operational initiatives to help improve speed of service and throughput across all stores. These initiatives were tested in pilot stores during the first quarter of 2015 and deployed during the second quarter. We saw our average speed of service decreased to 3.1 minutes, a greater than 10% improvement since September 2014. We expect to see improvement in the labor line for the full year of 2015. On the cost of goods sold side, the new fresh produce contracts that we entered into, the recipe formulations and additional SKU’S rolled out in the second quarter have improved cost of goods sold for the second quarter. We believe that these initiatives will improve our costs of goods sold for the full fiscal year of 2015.

As our innovative juice and bowls platforms continue to show strong performance, we believe that with these course-corrections, these product introductions will be key drivers toward the transformation of the brand and continued positive growth.

Expand retail footprint on a global basis

As part of the new business model, unit growth will be the primary driver of our enterprise growth. Domestically, we plan on opening 500 new units over the next four to five years, in both traditional and small format venues. We have a variety of formats to expand our global footprint, including traditional and non-traditional stores, smaller footprint Smoothie Stations™ and the JambaGO® formats. As of June 30, 2015, we had 807 Jamba® stores system-wide in the United States, of which 601 are Franchise Stores, including 40 non-traditional smoothie stations, and 206 Company Stores, and 68 International Stores. The system is comprised of approximately 76% Franchise and International Store locations and 24% Company Store locations at the end of the second quarter. We opened 10 Franchise Stores and six International Stores during the second quarter of 2015. We expect to open approximately 100 global store locations by the end of fiscal 2015 through franchisees.

The Company entered into two separate master development agreements in June 2015. One master development agreement was with one of Indonesia’s leading lifestyle retailers to develop 70 Jamba Juice ® stores in Indonesia over the next ten years. The second master development agreement was with a seasoned operator of other food and beverage concepts in Thailand to develop 30 Jamba Juice ® stores in Thailand over the next ten years. The first Jamba Juice ® stores in Indonesia and Thailand are expected to open in 2016.

Our JambaGO ® business consists of over 2,000 units deployed across the United States. Typical venues that utilize our JambaGo ® technology include Target Cafes, K-12 schools, colleges, universities and other captive venues where speed of services and through-put are critical.

New products - leadership in smoothies, juices and bowls

During fiscal 2014, we launched our made-to-order, fresh fruit and vegetable juice platform in over 500 locations, and currently have this platform in 550 locations with additional units to be added throughout fiscal 2015. This platform is primarily comprised of made-to-order juices and smoothies blended with fresh, whole fruits and vegetables like kale, apples, cucumbers, ginger and chia seeds. We believe that we are in the forefront of the consumer trend towards healthier beverage options.

In addition, we now have 348 locations in California showcasing our new line of ready-to-drink, cold-pressed juices and plan to continue to expand distribution into many additional markets across the Jamba System throughout the year. These juices are made from wholesome fruits and vegetables and are available exclusively at Jamba Juice® Stores in 12 oz. bottles for easy, on-the-go convenience and multiple-unit purchases to support routine consumption at home or the office. Our cold-pressed juices undergo high pressure processing (HPP) to extend their shelf life while protecting the nutrients and flavor of the fresh ingredients. New SKU’s were announced early third quarter including organic, Non-GMO ready-to-drink Cold Pressed Juice Blends. The new product is part of the Company’s ongoing commitment to provide consumers with better-for-you beverage choices. The product comes bottled for on-the-go convenience.

We also introduced a new line of made-to-order bowls in stores nationwide during late fiscal 2014. Jamba Energy Bowls, served in convenient, portable servings, are a nutritious blend of real, whole fruit and soymilk or fresh Greek yogurt, topped with an assortment of dry toppings and fresh fruits. Jamba Energy Bowls™ are a convenient way to get fruit, antioxidants like Vitamin C, and protein and will satisfy consumers looking for a meal replacement they can eat with a spoon.

Drive the asset-light business model to enhance shareholder value

We are committed to moving aggressively to an asset-light business model that will focus on becoming a greater than 90% franchise system by the end of fiscal year 2015. Subsequent to the end of the second quarter, two refranchising transactions closed involving a total of 98 stores, comprised of 97 Company Stores and one unopened store, and we expect to close two to three additional transactions during the remainder of this fiscal year. We anticipate having approximately 885-900 Franchise Stores and 50-60 Company Stores by the end of fiscal 2015. We project total proceeds of $60-70 million from the refranchising transactions in 2015 with the majority of the proceeds to be received in the third quarter.

To further accelerate our move to an asset-light business model, and to enhance shareholder value, we continue to seek ways to further reduce costs as our Company Store base shrinks due to our refranchising initiative.

Results of Operations

13-Week Period Ended June 30, 2015 as Compared to 13-Week Period Ended July 1, 2014 (Unaudited)

(in thousands)

		13-Week Period Ended June 30, 2015		%⁽¹⁾			13-Week Period Ended July 1, 2014		%⁽¹⁾
Revenue:
Company stores	$	48,360		89.3	%	$	58,632		91.3	%
Franchise and other revenue		5,766		10.7	%		5,566		8.7	%

Total revenue		54,126		100.0	%		64,198		100.0	%

Costs and operating expenses:
Cost of sales		11,474		23.7	%		13,587		23.2	%
Labor		14,876		30.8	%		16,243		27.7	%
Occupancy		6,131		12.7	%		6,899		11.8	%
Store operating		8,059		16.7	%		8,495		14.5	%
Depreciation and amortization		1,344		2.5	%		2,680		4.2	%
General and administrative		8,427		15.6	%		9,582		14.9	%
Gain on disposal of assets		(4,480	)	(8.3	)%		(979	)	(1.5	)%
Other operating, net		1,834		3.4	%		1,085		1.7	%

Total costs and operating expenses		47,665		88.1	%		57,592		89.7	%

Income from operations		6,461		11.9	%		6,606		10.3	%

Other income (expense), net:
Interest income		14		0.0	%		18		0.0	%
Interest expense		(68	)	(0.1	)%		(48	)	(0.1	)%

Total other expense, net		(54	)	(0.1	)%		(30	)	(0.0	)%

Income before income taxes		6,407		11.8	%		6,576		10.2	%
Income tax expense		(57	)	-0.1	%		(223	)	(0.3	)%

Net income		6,350		11.7	%		6,353		9.9	%
Less: Net income attributable to noncontrolling interest		21		0.0	%		17		0.0	%

Net income attributable to Jamba, Inc.	$	6,329		11.7	%	$	6,336		9.9	%

⁽¹⁾	Cost of sales, labor, occupancy and store operating percentages are calculated using Company stores revenue. All other line items are calculated using total revenue.

Revenue

(in thousands)

	13-Week Period Ended June 30, 2015		% of Total Revenue			13-Week Period Ended July 1, 2014		% of Total Revenue
Revenue:
Company stores	$	48,360		89.3	%	$	58,632		91.3	%
Franchise and other revenue		5,766		10.7	%		5,566		8.7	%

Total revenue	$	54,126		100.0	%	$	64,198		100.0	%

Total revenue is comprised of revenue from Company Stores, royalties and fees from Franchise Stores in the U.S. and from International Stores, income from JambaGO® locations, license income from sales of Jamba-branded CPG products and direct sales of CPG products. Total revenue for the 13-week period ended June 30, 2015 was $54.1 million, a decrease of $10.1 million, or 15.7%, compared to $64.2 million for the 13-week period ended July 1, 2014. The decrease in total revenue was primarily due to 52 less Company Stores as a result of 58 refranchises and 12 store closures along with a decrease in Company Store comparable sales, partially offset by 18 re-acquired franchise stores since July 1, 2014.

Company Store revenue

Company Store revenue for the 13-week period ended June 30, 2015 was $48.4 million, a decrease of $10.3 million or 17.5%, compared to Company Store revenue of $58.6 million for the 13-week period ended July 1, 2014. The decrease in Company Store revenue was primarily due to 52 less Company Stores, net, along with a decrease in Company Store comparable sales as illustrated by the following table:

	Company Store Decrease in Revenue
	(in thousands)
Second Quarter 2015 vs. Second Quarter 2014:
Company Stores comparable sales decrease	$	(3,039	)
Reduction in number of Company Stores, net		(7,233	)

Total change in Company Store revenue	$	(10,272	)

Company Store comparable sales decreased by $3.0 million for the 13-week period ended June 30, 2015, or 5.9%, attributable to a decrease in transaction count of 11.5% partially offset by an increase of 5.6% in average check as compared to the same period in the prior year. Company Store comparable sales represents the change in year-over-year sales for all Company Stores opened for at least a full fiscal year. As of June 30, 2015, 100% of our Company Stores had been open for at least one full year.

Franchise and other revenue

Franchise and other revenue was $5.8 million, an increase of $0.2 million or 3.6% for the 13-week period ended June 30, 2015 compared to $5.6 million for the 13-week period ended July 1, 2014. The increase was primarily due to the increase in royalties associated with increase in Franchised Stores, partially offset by a Franchise Store comparable store sales decrease of 2.6%.

The aggregate number of Franchise and International Stores as of June 30, 2015 and July 1, 2014 was 669 and 599, respectively.

Cost of Sales

Cost of sales is primarily comprised of produce, dairy, and other products used to make smoothies and juices, paper products, and delivery fees. As a percentage of Company Store revenue, cost of sales increased to 23.7% for the 13-week period ended June 30, 2015, compared to 23.2% for the 13-week period ended July 1, 2014. The increase in cost of sales as a percentage of Company Store revenue was primarily due to lower vendor rebates as a result of lower purchase volumes of specific commodities (approximately 1.5%), partially offset by lower sales discounts (approximately -0.5%), product mix and price changes (approximately -0.4%), and a decrease in commodity costs (approximately -0.2%). Cost of sales for the 13-week period ended June 30, 2015 was $11.5 million, a decrease of $2.1 million, or 15.6%, compared to $13.6 million for the 13-week period ended July 1, 2014. The decrease in dollars is driven by a decrease in net sales of $10.3 million, or 17.5%, primarily as a result of refranchising.

Labor

Labor costs are comprised of store management salaries and bonuses, hourly team member payroll, training costs and other associated fringe benefits. As a percentage of Company Store revenue, labor costs were 30.8% for the 13-week period ended June 30, 2015 compared to 27.7% for the 13-week period ended July 1, 2014. The 3.1% increase was primarily attributable to the minimum wage increase in California on July 1, 2014 (approximately 1.6%), higher wages in the Chicago stores acquired in second half of 2014 (approximately 0.9%), the deleverage impact as a result of the decrease in Company Store comparable sales, and the increase in product mix of our juice and bowl platforms, partially offset by reduced hours (approximately 0.8%). The increase in the ratio of made-to-order items was partially offset by the launch of new standard operating procedures in June that reduced the production times. Additionally, labor increased due to increased health insurance costs due to compliance with the Affordable Care Act (approximately 0.4%), which was offset by reduction of store incentive payouts due to lower sales (approximately 0.5%). Labor costs for the 13-week period ended June 30, 2015 were $14.9 million, a decrease of $1.4 million, or 8.4%, compared to $16.2 million for the 13-week period ended July 1, 2014, which is primarily due to fewer Company Stores resulting from refranchising.

Occupancy

Occupancy costs include both fixed and variable portions of rent, common area maintenance charges, property taxes, licenses and property insurance for all Company Store locations. As a percentage of Company Store revenue, occupancy costs increased to 12.7% for the 13-week period ended June 30, 2015, compared to 11.8% for the 13-week period ended July 1, 2014. The increase in occupancy costs as a percentage of Company Store revenue was primarily due to the refranchising of Company Stores that carried a lower rent base (approximately 1.3%). Occupancy costs for the 13-week period ended June 30, 2015 were $6.1 million compared to $6.9 million for the 13-week period ended July 1, 2014, which is primarily due to fewer Company Stores resulting from refranchising.

Store Operating

Store operating expenses consist primarily of various store-level costs such as utilities, marketing, repairs and maintenance, credit card fees and other store operating expenses. As a percentage of Company Store revenue, total store operating expenses increased to 16.7% for the 13-week period ended June 30, 2015, compared to 14.5% for the 13-week period ended July 1, 2014. The increase in total store operating expenses as a percentage of Company Store revenue was primarily due to an increase in advertising costs (approximately 1.0%), credit card usage (approximately 0.2%) and repairs and preparation for refranchising transactions (approximately 0.6%). Total store operating expenses for the 13-week period ended June 30, 2015 were $8.1 million, a decrease of $0.4 million, or 5.1%, compared to $8.5 million for the 13-week period ended July 1, 2014 primarily due to fewer Company Stores resulting from refranchising.

Depreciation and Amortization

Depreciation and amortization expenses include the depreciation of fixed assets and the amortization of intangible assets. As a percentage of total revenue, depreciation and amortization decreased to 2.5% for the 13-week period ended June 30, 2015, compared to 4.2% for the 13-week period ended July 1, 2014. The decrease in depreciation and amortization as a percentage of total revenue was primarily due to reclassification from property, fixtures and equipment to assets held for sale for stores prior to their refranchising and the resulting discontinuation of depreciation on those assets. Depreciation and amortization for the 13-week period ended June 30, 2015 was $1.3 million, resulting in a decrease of $1.3 million, or 49.9%, compared to $2.7 million for the 13-week period ended July 1, 2014.

General and Administrative

General and administrative (G&A) expenses include costs associated with our corporate headquarters in Emeryville, CA, field supervision, performance related incentives, outside and contract services, accounting and legal fees, travel and travel-related expenses, share-based compensation and other. As a percentage of total revenue, G&A expenses increased to 15.6% for the 13-week period ended June 30, 2015, compared to 14.9% for the 13-week period ended July 1, 2014. Total G&A expenses for the 13-week period ended June 30, 2015 were $8.4 million, a decrease of $1.2 million, or 12.1%, compared to $9.6 million for the 13-week period ended July 1, 2014. The decrease of total G&A expenses was primarily due to reduced payroll as a result of reduced general and administrative headcount (approximately $1.1 million) and reduced semi-annual performance related incentives (approximately $1.7 million), partially offset by increased professional fees (approximately $0.1 million), increased stock compensation expense related to both the timing of grants (2014 and 2015 employee grants in August 2014 and March 2015, respectively) and modified options relating to the acceleration to an asset-light model, (approximately $0.8 million) and outsourcing costs (approximately $0.5 million).

Gain on Disposal of Assets

Gain on disposal of assets includes gains from sales of Company Stores, fixed asset retirements and sales of furniture, fixtures and equipment. For the 13-week period ended June 30, 2015, gain on disposal of assets was $4.5 million compared to $1.0 million for the 13-week period ended July 1, 2014, an increase of 357.6%. The increase was primarily due to the increased gains on refranchise sales of Company Stores (approximately $3.0 million).

Other Operating, Net

Other operating, net consists primarily of income from jambacard breakage, store lease termination, impairment charge and closure costs, jambacard related fees, pre-opening expense, expenses related to our franchise, CPG and JambaGO® activities, and franchise bad debt and trade credit write-off. For the 13-week period ended June 30, 2015, other operating, net was an expense of $1.8 million compared to an expense of $1.1 million for the 13-week period ended July 1, 2014, an increase of 69.0%. Changes in the components of other operating, net include increased costs related to franchise operations due to the increase in Franchise Stores (approximately $0.3 million) and an increase in bad debt related to the write-off of barter credits for marketing services due to vendor insolvency (approximately $0.8 million), partially offset by increased jambacard breakage (approximately $0.2 million).

Income Tax Expense

We have recorded income tax expense for both the 13-week period ended June 30, 2015 and July 1, 2014, respectively. Our effective income tax rates were 1.0% and 3.4% for the 13-week period ended June 30, 2015 and July 1, 2014, respectively. For the 13-week period ended June 30, 2015 and July 1, 2014, the effective tax rates were primarily affected by forecasted pretax income or loss, a change in the valuation allowance related to deductible temporary differences, the U.S. alternative minimum and foreign withholding taxes of the respective periods.

26-Week Period Ended June 30, 2015 as Compared to 26-Week Period Ended July 1, 2014 (Unaudited)

(in thousands)

		26-Week Period Ended June 30, 2015		%⁽¹⁾			26-Week Period Ended July 1, 2014		%⁽¹⁾
Revenue:
Company stores	$	96,088		90.1	%	$	105,904		91.4	%
Franchise and other revenue		10,542		9.9	%		9,927		8.6	%

Total revenue		106,630		100.0	%		115,831		100.0	%

Costs and operating expenses:
Cost of sales		23,881		24.9	%		25,169		23.8	%
Labor		30,964		32.2	%		30,573		28.9	%
Occupancy		12,966		13.5	%		13,866		13.1	%
Store operating		16,093		16.7	%		15,897		15.0	%
Depreciation and amortization		3,217		3.0	%		5,298		4.6	%
General and administrative		17,390		16.3	%		17,932		15.5	%
Gain on disposal of assets		(5,258	)	(4.9	)%		(1,046	)	(0.9	)%
Other operating, net		2,584		2.4	%		1,755		1.5	%

Total costs and operating expenses		101,837		95.5	%		109,444		94.5	%

Income from operations		4,793		4.5	%		6,387		5.5	%

Other income (expense), net:
Interest income		29		0.0	%		34		0.0	%
Interest expense		(109	)	(0.1	)%		(94	)	(0.1	)%

Total other expense, net		(80	)	(0.1	)%		(60	)	(0.1	)%

Income before income taxes		4,713		4.4	%		6,327		5.5	%
Income tax expense		(83	)	(0.1	)%		(218	)	(0.2	)%

Net income		4,630		4.3	%		6,109		5.3	%
Less: Net income attributable to noncontrolling interest		52		0.0	%		17		0.0	%

Net income attributable to Jamba, Inc.	$	4,578		4.3	%	$	6,092		5.3	%

⁽¹⁾	Cost of sales, labor, occupancy and store operating percentages are calculated using Company Stores revenue. All other line items are calculated using total revenue.

Revenue

(in thousands)

	26-Week Period Ended June 30, 2015		% of Total Revenue			26-Week Period Ended July 1, 2014		% of Total Revenue
Revenue:
Company stores	$	96,088		90.1	%	$	105,904		91.4	%
Franchise and other revenue		10,542		9.9	%		9,927		8.6	%

Total revenue	$	106,630		100.0	%	$	115,831		100.0	%

Total revenue is comprised of revenue from Company Stores, royalties and fees from Franchise Stores in the U.S. and from International Stores, income from JambaGO® locations, license income from sales of Jamba-branded CPG products and direct sales of CPG products. Total revenue for the 26-week period ended June 30, 2015 was $106.6 million, a decrease of $9.2 million, or 8.0%, compared to $115.8 million for the 26-week period ended July 1, 2014. The decrease in total revenue was primarily due to 52 less Company Stores as a result of 58 refranchises and 12 store closures, partially offset by 18 re-acquired franchise stores since July 1, 2014.

Company Store revenue

Company Store revenue for the 26-week period ended June 30, 2015 was $96.1 million, a decrease of $9.8 million or 9.3%, compared to Company Store revenue of $105.9 million for the 26-week period ended July 1, 2014.

The decrease in total revenue was primarily due to 52 less Company Stores as a result of 58 refranchises and 12 store closures, partially offset by 18 re-acquired franchise stores since July 1, 2014 along with a decrease in Company Store comparable sales as illustrated by the following table:

	Company Store Decrease in Revenue
	(in thousands)
Year-To-Date Q2 2015 vs. Year-To-Date Q2 2014:
Company Stores comparable sales decrease	$	(347	)
Reduction in number of Company Stores, net		(9,469	)

Total change in Company Store revenue	$	(9,816	)

Company Store comparable sales decreased by $0.3 million for the 26-week period ended June 30, 2015, or 0.4%, attributable to a decrease in transaction count of 5.7%, partially offset by an increase of 5.3% in average check as compared to the same period in the prior year. Company Store comparable sales represents the change in year-over-year sales for all Company Stores opened for at least a full fiscal year. As of June 30, 2015, 100% of our Company Stores had been open for at least one full year.

Franchise and other revenue

Franchise and other revenue was $10.5 million, an increase of $0.6 million or 6.2% for the 26-week period ended June 30, 2015 compared to $9.9 million for the 26-week period ended July 1, 2014. The increase was primarily due to the increase in royalties associated with increase in Franchised Stores and an increase in Franchise Store comparable store sales of 0.3%.

Cost of Sales

Cost of sales is primarily comprised of fruit, dairy, and other products used to make smoothies and juices, paper products, and delivery fees. As a percentage of Company Store revenue, cost of sales increased to 24.9% for the 26-week period ended June 30, 2015, compared to 23.8% for the 26-week period ended July 1, 2014. The increase in cost of sales as a percentage of Company Store revenue was primarily due to lower vendor rebates as a result of lower purchase volumes of specific commodities (approximately 1.2%), product mix and price changes (approximately 0.4%), partially offset by lower discounts (approximately -0.5%), and a decrease in commodity costs (approximately -0.4%). Cost of sales for the 26-week period ended June 30, 2015 was $23.9 million, a decrease of $1.3 million, or 5.1%, compared to $25.2 million for the 26-week period ended July 1, 2014. The decrease in dollars is driven by a decrease in net sales of $9 million, or 8%, primarily as a result of refranchising and decrease in Company Store sales.

Labor

Labor costs are comprised of store management salaries and bonuses, hourly team member payroll, training costs and other associated fringe benefits. As a percentage of Company Store revenue, labor costs were 32.2% for the 26-week period ended June 30, 2015 compared to 28.9% for the 26-week period ended July 1, 2014. The 3.3% increase was primarily attributable to the minimum wage increase in California on July 1, 2014 (approximately 0.6%), higher wages in the Chicago stores acquired in second half of 2014 (approximately 0.9%), the deleverage impact as a result of the decrease in Company Store comparable sales, and the increase in product mix of our juice and bowl platforms, partially offset by reduced hours (approximately 1.3%). Additionally, labor increased due to increased health insurance costs due to compliance with the Affordable Care Act (approximately 0.8%), partially offset by reduction of store incentive payouts due to lower sales (approximately 0.2%). Labor costs for the 26-week period ended June 30, 2015 were $30.9 million, a decrease of $0.3 million, or 3.9%, compared to $30.6 million for the 26-week period ended July 1, 2014, which is primarily due to fewer stores resulting from refranchising.

Occupancy

Occupancy costs include both fixed and variable portions of rent, common area maintenance charges, property taxes, licenses and property insurance for all Company Store locations. As a percentage of Company Store revenue, occupancy costs increased to 13.5% for the 26-week period ended June 30, 2015, compared to 13.1% for the 26-week period ended July 1, 2014. The increase in occupancy costs as a percentage of Company Store revenue was primarily due to the refranchising of Company Stores with lower rents than the average store rent (approximately 0.4%). Occupancy costs for the 26-week period ended June 30, 2015 were $13.0 million, a decrease of $0.9 million, or 6.5%, compared to $13.9 million for the 26-week period ended July 1, 2014, which is primarily due to fewer stores resulting from refranchising.

Store Operating

Store operating expenses consist primarily of various store-level costs such as utilities, marketing, repairs and maintenance, credit card fees and other store operating expenses. As a percentage of Company Store revenue, total store operating expenses increased to 16.7% for the 26-week period ended June 30, 2015, compared to 15.0% for the 26-week period ended July 1, 2014. The increase in total store operating expenses as a percentage of Company Store revenue was primarily due to repairs and maintenance costs incurred to prepare stores for refranchising (approximately 0.3%), increased advertising (approximately 0.5%), and increased uniform costs related to the new-look roll-out (approximately 0.3%). Total store operating expenses for the 26-week period ended June 30, 2015 were $16.1 million, an increase of $0.2 million, or 1.2%, compared to $15.9 million for the 26-week period ended July 1, 2014, primarily due to the matters referenced above partially offset by the impact of fewer Company Stores resulting from our refranchising initiative.

Depreciation and Amortization

Depreciation and amortization expenses include the depreciation of fixed assets and the amortization of intangible assets. As a percentage of total revenue, depreciation and amortization decreased to 3.0% for the 26-week period ended June 30, 2015, compared to 4.6% for the 26-week period ended July 1, 2014. The decrease in depreciation and amortization as a percentage of total revenue was primarily due to reclassification from property, fixtures and equipment to assets held for sale of stores prior to their refranchising and the resulting discontinuation of depreciation on those assets. Depreciation and amortization for the 26-week period ended June 30, 2015 was $3.2 million, a decrease of $2.1 million, or 39.3%, compared to $5.3 million for the 26-week period ended July 1, 2014.

General and Administrative

General and administrative (G&A) expenses include costs associated with our corporate headquarters in Emeryville, CA, field supervision, performance related incentives, outside and contract services, accounting and legal fees, travel and travel-related expenses, share-based compensation and other. As a percentage of total revenue, G&A expenses increased to 16.3% for the 26-week period ended June 30, 2015, compared to 15.5% for the 26-week period ended July 1, 2014. Total G&A expenses for the 26-week period ended June 30, 2015 were $17.4 million, a decrease of $0.5 million, or 3.0%, compared to $17.9 million for the 26-week period ended July 1, 2014. The decrease of total G&A expenses was primarily due to a decrease in payroll as a result of reduced general and administrative headcount (approximately $2.1 million) and reduced semi-annual performance related incentives (approximately $1.7 million), partially offset by an increase in professional fees (approximately $1.0 million), increased stock compensation expense related to both the timing of grants (2014 and 2015 employee grants in August 2014 and March 2015, respectively) and modified options relating to the acceleration to an asset-light model, (approximately $1.2 million) and outsourcing costs (approximately $0.9 million).

Gain on Disposal of Assets

Gain on disposal of assets includes gains from sales of Company Stores, fixed asset retirements and sales of furniture, fixtures and equipment. For the 26-week period ended June 30, 2015, gain on disposal of assets was $5.3 million compared to $1.0 million for the 26-week period ended July 1, 2014, an increase of 402.7%. The increase was primarily due to the increased gains on refranchise sales of Company Stores (approximately $3.5 million).

Other Operating, Net

Other operating, net consists primarily of income from jambacard breakage, store lease termination, impairment charge and closure costs, jambacard-related fees, pre-opening expense, expenses related to our franchise, CPG and JambaGO® activities, franchise bad debt and trade credit write-off, and loss on equity investments. For the 26-week period ended June 30, 2015, other operating, net was an expense of $2.6 million compared to an expense of $1.8 million for the 26-week period ended July 1, 2014, an increase of 47.2%. Changes in the components of other operating, net include increased costs related to franchise operations due to the increase in Franchise Stores (approximately $0.6 million) and an increase in bad debt related to the write-off of barter credits for marketing services due to vendor insolvency (approximately $0.8 million), partially offset by increased jambacard breakage (approximately $0.7 million).

Income Tax Expense

We have recorded income tax expense for both the 26-week period ended June 30, 2015 and July 1, 2014, respectively. Our effective income tax rates were 1.7% and 3.4% for the 26-week period ended June 30, 2015 and July 1, 2014, respectively. For the 26-week period ended June 30, 2015 and July 1, 2014, the effective tax rates were primarily affected by forecasted pretax income, a change in the valuation allowance related to deductible temporary differences originating during those periods, the alternative minimum taxes and foreign withholding taxes. The effective tax rates were also impacted by a reduction of the federal income tax liability related to the net operating loss deduction for alternative minimum tax purposes.

Key Financial Metrics and Non-GAAP Measures

We review and discuss our operations based on both financial and non-financial metrics. Among the key financial metrics upon which we focus is reviewing our performance based on our consolidated GAAP results, including Company Store comparable sales. We also use certain supplemental, non-GAAP financial metrics in evaluating financial results, including Franchise Store comparable sales and system-wide comparable sales.

Company Store comparable sales represents the change in year-over-year sales for all Company Stores opened for at least one full year. Franchise Store comparable sales, a non-GAAP financial measure, represents the change in year-over-year sales for all Franchise Stores opened for at least one full year, as reported by franchisees and excludes International Stores. System-wide comparable store sales, a non-GAAP financial measure, represents the change in year-over-year sales for all Company and Franchise Stores opened for at least one full year and is based on sales by both company-owned and domestic franchise-operated stores, as reported by franchisees, which are in the store base. System-wide comparable store sales do not include International Stores, JambaGO® units and smoothie stations.

Company Stores sold in refranchising transactions are included in the store base for each accounting period of the fiscal quarter in which the store was sold to the extent the sale is consummated at least three days prior to the end of such accounting period, but only for the days such stores have been company-owned. Thereafter, such stores are excluded from the store base until such stores have been franchise-operated for at least one full fiscal period at which point such stores are included in the store base and compared to sales in the comparable period of the prior year. Comparable store sales exclude closed locations.

We review the increase or decrease in Company Store comparable sales, Franchise Store comparable sales and system-wide comparable sales compared with the same period in the prior year to assess business trends and make certain business decisions. We believe that Franchise Store comparable sales and system-wide comparable sales data, non-GAAP financial measures, are useful in assessing the overall performance of the Jamba brand and, ultimately, the performance of the Company.

The following table sets forth operating data that do not otherwise appear in our condensed consolidated financial statements as of, and for, the 13-week and 26-week periods ended June 30, 2015 and July 1, 2014:

	13-Week Period Ended						26-Week Period Ended
	June 30, 2015			July 1, 2014			June 30, 2015			July 1, 2014

Percentage change in Company Store comparable sales⁽¹⁾		(5.9	)%		2.5	%		(0.4	)%		1.6	%
Percentage change in Franchise Store comparable sales⁽²⁾		(2.6	)%		2.0	%		0.3	%		1.2	%
Percentage change in system-wide comparable sales⁽²⁾		(3.9	)%		2.2	%		0.1	%		1.4	%
Total Company Stores		206			258			206			258
Total Franchise Stores		601			551			601			551
Total International Stores		68			48			68			48

⁽¹⁾

Percentage change in Company Store comparable sales compares the sales of Company Stores during the 13-week and 26-week periods in 2015 to the sales from the same Company Stores for the equivalent period in the prior year. A Company Store is included in this calculation after one full year of operations. Sales from Franchise Stores are not included in Company Store comparable sales.

⁽²⁾

Percentage change in system-wide comparable sales compares the combined sales of Company and Franchise Stores during the 13-week and 26-week periods in 2015 to the combined sales from the same Company Stores and Franchise Stores for the equivalent period in the prior year. A Company Store or Franchise Store is included in this calculation after one full year of operations.

The following table sets forth certain data relating to Company Stores, Franchise and International Stores for the periods indicated:

	26-Week Period Ended June 30, 2015						26-Week Period Ended July 1, 2014
	Domestic			International			Domestic			International

Company Stores:
Beginning of period		263			-			268			-
Company Stores opened		-			-			-			-
Company Stores closed		(4	)		-			(2	)		-
Company Stores sold to franchisees		(53	)		-			(8	)		-

Total Company Stores		206			-			258			-

Franchise and International Stores:
Beginning of period		543			62			535			48
Franchise Stores opened		14			8			22			8
Franchise Stores closed		(9	)		(2	)		(14	)		(8	)
Franchise Stores purchased from the Company		53			-			8			-

Total Franchise and International Stores		601			68			551			48

Refranchising Initiative

In November 2014 we announced an accelerated refranchising initiative that includes the sale of up to 114 Company Stores in the California market as part of our transition to an asset-light business model. Our accelerated refranchising initiative is a key driver to reduce general and administrative costs, accelerate growth, and to achieve certain operational efficiencies. As a part of our accelerated refranchising strategy, we completed the refranchising of 53 Company Stores during the 26-week period ended June 30, 2015.

We anticipate completing the refranchising of over 200 stores by the end of fiscal year 2015. At the end the second quarter of 2015, we included the fair value of 173 stores as assets held for sale on the face of the consolidated balance sheets. Prior year balances were also reclassified to match the current year presentation. These stores met the six criteria as described in Note 1 to the condensed consolidated financial statements and are classified as assets held for sale.

In the majority of refranchising transactions, we enter into development agreements committing buyers to build additional Franchise Stores in regions their purchased stores occupy. In addition, as part of these refranchising transactions, buyers of mature Company Stores are obligated to refresh and refurbish these stores.

Liquidity and Capital Resources

Cash Flows Summary

The following table summarizes our cash flows for the 26-week period ended June 30, 2015 and July 1, 2014 (in thousands):

	26-Week Period Ended
	June 30, 2015			July 1, 2014

Net cash (used in) provided by operating activities	$	(5,244	)	$	6,782
Net cash provided by (used in) investing activities		10,089			(7,875	)
Net cash (used in) provided by financing activities		(8,677	)		1,083

Net decrease in cash and cash equivalents	$	(3,832	)	$	(10	)

Liquidity

As of June 30, 2015, we had cash and cash equivalents of $13.9 million compared to $17.8 million as of December 30, 2014. As of June 30, 2015 and December 30, 2014, we had no outstanding borrowings against our revolving credit facility. Our primary sources of liquidity are cash provided by operating activities. In addition, we have a revolving line of credit with Wells Fargo, N.A. of $15.0 million that expires in July 2016. In the future, we may enter equipment leasing arrangements and incur additional indebtedness as necessary and as permitted under our credit facility. We cannot assure, however, that such financing will be available on favorable terms or at all.

We expect that our cash on hand and future cash provided by operating activities and our refranchising initiative will be sufficient to fund our working capital and general corporate needs and the non-discretionary capital expenditures for the foreseeable future. Our primary liquidity and capital requirements are for working capital and general corporate needs and the planned fiscal 2015 capital expenditures. The use of cash to fund discretionary capital expenditures will be based on the need to conserve our capital.

The adequacy of our available funds will depend on many factors, including the macroeconomic environment, the operating performance of our Company Stores, the successful expansion of our franchise and licensing programs and the successful rollout and consumer acceptance of our new beverage and food initiatives. Given these factors, our foremost priorities for the near term continue to be preserving and generating cash sufficient to fund our liquidity needs.

Operating Activities

Net cash used in operating activities was $5.2 million for the 26-week period ended June 30, 2015, compared to net cash provided by operating activities of $6.8 million in the 26-week period ended July 1, 2014, reflecting a net increase in cash flows used in operating activities of $12.0 million. This increase in cash used in operating activities was primarily due to a net increase in cash used in operating assets and liabilities (approximately $5.9 million) and an increase in net loss after adjustments for noncash items (approximately $6.1 million). Cash flows relating to vendor balances and employee compensation declined compared to the prior year primarily due to the reduction in the number of Company Stores.

The amount of cash provided by our operating activities during any particular fiscal year is highly subject to variations in the seasons. The first and fourth quarters of the fiscal year encompass the winter and holiday seasons when we traditionally generate our lowest revenue, and our second and third quarters of the fiscal year encompass the warmer seasons where a significant portion of our revenue and cash flows are realized. For more information on seasonality, refer to the section below entitled “Seasonality and Quarterly Results.” We also expect to have increased expenditures during the first part of the fiscal year as we invest in product development and domestic expansion with the goal to have new products released and new stores open by mid-year to take advantage of the busier summer months.

Investing Activities

Net cash provided by investing activities was $10.1 million for the 26-week period ended June 30, 2015, compared to net cash used in investing activities of $7.9 million for the 26-week period ended July 1, 2014. The $18.0 million increase in net cash provided by investing activities during the 26-week period ended June 30, 2015 was primarily due to an increase in proceeds from disposal of fixed assets (approximately $11.0 million) resulting from our refranchising strategy and a decrease in capital expenditure payments (approximately $6.9 million).

In fiscal 2015, we expect capital expenditures to be approximately $8 to $9 million depending on our liquidity needs, including store refreshes and redesigns to facilitate fresh-squeezed juice and whole food nutrition offerings, investing in improvements to our technology infrastructure as well as maintenance capital. We have embarked on a significant refresh of all Jamba Juice® stores to provide a contemporary and fresh experience for our customers and that supports our whole food nutrition and fresh-squeezed platform.

Financing Activities

Net cash used in financing activities was $8.7 million for the 26-week period ended June 30, 2015, compared to net cash provided by financing activities of $1.1 million for the 26-week period ended July 1, 2014. The $9.8 million increase in net cash used in financing activities was primarily due to the repurchase of the shares of the Company's common stock (approximately $9.8 million) under the stock repurchase plan approved by our Board of Directors in 2014 and proceeds from sale of noncontrolling interest in the second quarter of 2014 that did not recur in 2015 (approximately $0.8 million) partially offset by an increase in receipts from our stock issuance plans, including from the exercise of stock options (approximately $0.9 million).

Contractual Obligations

There have been no significant changes to our contractual obligations as disclosed in our Annual Report on Form 10-K for the year ended December 30, 2014.

COMMODITY PRICES, AVAILABILITY AND GENERAL RISK CONDITIONS

We contract for significant amounts of individually quick frozen fruit, fruit concentrate and dairy products to support the needs of both our Company Stores and Franchise Stores. The price and availability of these commodities directly impacts our results of operations and can be expected to impact our future results of operations.

SEASONALITY AND QUARTERLY RESULTS

Our business is subject to seasonal fluctuations. We expect to realize significant portions of our revenue during the second and third quarters of the fiscal year, which align with the warmer summer season. In addition, quarterly results are affected by the timing of the opening of new stores and weather conditions. However, geographic diversification of our store locations may conceal or diminish the financial statement impact of such seasonal influences. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year or any subsequent quarter.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to adopt accounting policies and make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In many cases, there are alternative policies or estimation techniques that could be used. We maintain a process to review the application of our accounting policies and to evaluate the appropriateness of the many estimates that we are required to make in order to prepare the financial statements. However, even under optimal circumstances, estimates routinely require adjustment based on changing circumstances and the receipt of new or better information. There have been no significant changes to the policies and estimates as discussed in our Annual Report on Form 10-K for the year ended December 30, 2014.

Recent Accounting Pronouncements

See Recent Accounting Pronouncements section of Note 1 to our Notes to Condensed Consolidated Financial Statements for information about new accounting standards.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion of market risks contains forward-looking statements. Actual results may differ materially from the following discussion based on general conditions in the financial and commodity markets.

We purchase fruit based on short-term seasonal pricing agreements. These short-term agreements generally set the price of procured frozen fruit and 100% fruit juice concentrates for less than one year based on estimated annual requirements. In order to mitigate the effects of price changes in any one commodity on its cost structure, we contract with multiple suppliers both domestically and internationally. These agreements typically set the price for some or all of our estimated annual fruit requirements, protecting us from short-term volatility. Nevertheless, these agreements typically contain a force majeure clause, which, if utilized (such as when hurricanes in 2004 destroyed the Florida orange crop and more recently with the freeze that affected California citrus), may subject us to significant price increases.

Our pricing philosophy is not to attempt to change consumer prices with every move up or down of the commodity market, but to take a longer-term view of managing margins and the value perception of our products in the eyes of our customers. Management’s objective is to maximize our revenue through increased customer frequency. However, management has the ability to increase certain menu prices in response to food commodity prices.

We do not purchase derivative instruments on the open market.

We are subject to changes in the risk free interest rate in connection with the cash we hold in interest bearing accounts.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Jamba Juice’s management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on this review, management, including the Chief Executive Officer and the Chief Financial Officer, has concluded that our disclosure controls and procedures were not effective as of June 30, 2015, due to the existence of the following material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We did not maintain sufficient finance and accounting resources within the organization, in part attributable to employee turnover related to recently implemented cost reductions and infrastructure changes, to ensure the proper application of U.S. GAAP with respect to the Company’s non-routine transactions. Specifically, our controls over non-routine transactions were not designed to capture all non-routine activities and our controls were not designed to ensure that non-routine transactions are adequately analyzed and accounted for in accordance with GAAP.

Despite the existence of this material weakness, management believes that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

Changes in Internal Control over Financial Reporting

The following change in our internal control over financial reporting was completed during the quarter ended June 30, 2015 and has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting:

We have hired additional professional accounting resources to assist with the preparation and review of accounting policies and procedures and financial reporting with knowledge, experience and training in the application of GAAP.

We have also initiated the following corrective actions, which management believes are reasonably likely to materially affect our controls and procedures as they are designed to remediate the material weaknesses as described above:

We are in the process of further enhancing, our internal finance and accounting organizational structure, which includes hiring additional resources.

We are in the process of further enhancing, the supervisory procedures that will include additional levels of analysis and quality control reviews within the accounting and financial reporting functions.

We do not expect to have fully remediated these material weaknesses until management has tested those internal controls and found them to have been remediated. We expect to complete this process during our annual testing for fiscal 2015.

The Company is taking actions to remediate the material weakness related to its internal control over non-routine transactions, as described above. Other than the material weakness referenced above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is party to various legal proceedings arising in the ordinary course of its business. Based on the information currently available, the Company is not currently a party to any legal proceeding that management believes would have a material adverse effect on the consolidated financial position or results of operations of the Company.

Item 1A. Risk Factors

The Company’s risk factors are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2014 and have not materially changed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On October 29, 2014, the Company’s Board of Directors authorized the repurchase of up to $25 million of shares of common stock (the "2014 Stock Repurchase Program") over a period of 18 months. During the second quarter the Company repurchased in the open market 195,171 shares under this program at an aggregate cost of $3.1 million. On May 11, 2015, the Company’s Board of Directors authorized the repurchase of an additional $15 million of shares of common stock (the “2014 Stock Repurchase Program”) over a period of 18 months. There have been no shares of common stock repurchased under the additional $15 million of shares of common stock authorization. Shares purchased under the 2014 Stock Repurchase Program are considered treasury stock until retired. The following table presents information related to repurchases of shares of the Company's common stock during the second quarter of 2015 (in thousands except share and per share amounts):

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Amount That May Yet Be Purchased Under the Plans or Programs(1)

April 1, 2015 — April 28, 2015		158,849	$	16.09		158,849		3,770
April 29, 2015 — May 26, 2015		36,322	$	16.08		36,322		3,186
May 27, 2015 — June 30, 2015		-	$	-		-		3,186

Total		195,171	$	16.09		195,171		3,186

(1) The amounts exclude commission costs.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit
Number

Description

Form

File No.

Exhibit

Filing Date

Filed

Herewith

3.1

Certificate of Elimination of Series A Preferred Stock of Jamba, Inc..

8-K

001-32552

3.1

April 3, 2015

4.1

Amendment No.2 to Rights Agreement by and between Jamba, Inc. and Continental Stock Transfer & Trust Company, dated as of April 2, 2015.

8-K

001-32552

4.1

April 3, 2015

10.1

Asset Purchase Agreement dated April 1, 2015 by and between Jamba Juice Company and Vitaligent, LLC.

10.2

First Amendment to Asset Purchase Agreement dated July 28, 2015 by and between Jamba Juice Company and Vitaligent, LLC.

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

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, thereunto duly authorized, on the 10^th day of August, 2015.

	JAMBA, INC.

	By:	/s/ James D. White
		James D. White
		Chairman of the Board, Chief Executive
		Officer
		and President (Duly Authorized Officer)

	By:	/s/ Karen L. Luey
		Karen L. Luey
		Chief Financial Officer, Chief Administrative Officer, Executive Vice President and Secretary
		(Principal Financial Officer and Chief
		Accounting Officer)

Exhibit 10.1

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of April 1, 2015, by and among JAMBA JUICE COMPANY, a California corporation (“Seller”), and Vitaligent, LLC, a Delaware limited liability company, or its permitted assigns (“Buyer”).

RECITALS

WHEREAS, Seller is the lessee under certain leases (a “Prime Lease” and collectively, the “Prime Leases”) of certain parcels of real property (a “Leased Property” and collectively, the “Leased Properties”) currently operated as JAMBA JUICE® stores (each a “Store” and collectively, the “Stores”). Section 4.8 of the Disclosure Schedule contains a complete and accurate list of the Prime Leases, Leased Properties and Stores.

WHEREAS, Seller desires to sell and transfer to Buyer, and Buyer desires to purchase from Seller certain assets concerning the Stores; Seller desires to sublease to Buyer and Buyer desires to sublease from Seller the Leased Properties; Seller and Buyer desire to enter into Jamba Juice’s franchise agreements for the operation of the Stores by Buyer as a JAMBA JUICE® Store (a “Franchise Agreement” and collectively, the “Franchise Agreements”), all upon the terms and subject to the conditions set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained in this Agreement, the parties hereby agree as follows:

ARTICLE I
DEFINITIONS

1.1 Defined Terms. Unless otherwise defined in this Agreement, all capitalized terms shall have the meanings set forth in Annex 1.1, attached hereto.

ARTICLE II
Purchase and Sale

2.1 Transfer of Assets. At the Closing, Seller hereby agrees to sell, transfer, convey, assign and deliver to Buyer, and Buyer agrees to purchase, acquire and assume from Seller, all of Seller’s right, title and interest in and to the assets listed below (collectively, the “Purchased Assets”). The Purchased Assets shall include:

(i) all machinery, equipment, computer hardware (including the point of sale equipment), furniture, fixtures, tools, signs, vehicles owned by Seller, and other items of tangible personal property (including Marketable Inventory) located at the Stores (the “Fixed Assets”); and

(ii) all goodwill associated with the Stores, subject to the limitations contained in Section 2.2(c).

2.2 Excluded Assets. The Purchased Assets shall include only the assets expressly listed in Section 2.1 and shall not include, and Seller shall not sell, convey, transfer, assign and deliver to Buyer, any other assets of any kind, including but not limited to the following assets, properties, rights, contracts or claims, wherever located, whether, real, personal, tangible, or intangible, accrued, contingent or otherwise (the “Excluded Assets”):

(a) all cash on hand or in banks, checks, drafts or other negotiable instruments except the Change Fund;

(b) all accounts receivable, refunds, rebates and credits due from the Stores as of the Effective Time;

(c) all of Seller’s rights provided with respect to the Stores under the Franchise Agreements, including without limitation, the Marks and the System and any goodwill associated with the Marks and the System;

(d) except as provided in the Subleases, Seller’s interest as tenant in the Leased Properties and all tenant improvement allowances still due and outstanding for work completed prior to the Effective Time under the Prime Leases for the Leased Properties;

(e) all computer software, including without limitation, Kronos, eRS, email access, and all locally installed applications (such as HRB);

(f) all employee benefit plans;

(g) all insurance policies and any benefits paid thereunder; and

(h) all claims and rights to receive tax refunds, credits and benefits relating to the operation or ownership of the Stores or the Purchased Assets prior to the Effective Time.

2.3 Sublease of Leased Properties.

(a) At Closing, Seller shall sublease to Buyer all of the Leased Properties. The rental for the Leased Properties shall be an amount equal to the rent, additional rent, and any and all other amounts due under the Prime Leases. The subleases of the Leased Properties shall be in the form to be agreed upon by Buyer and Seller prior to Closing and to be attached hereto as Exhibit 2.3(a) prior to Closing (each a “Sublease” and collectively, the “Subleases”). Prime Leasor will send all notices and communications directly to Buyer, and Seller shall provide any communications it receives from the landlords to Buyer promptly but no later than 72 hours after receiving the communications.

(i) Simultaneously with the execution of the Sublease, Buyer and Seller shall enter into a side agreement in the form to be agreed upon by Buyer and Seller prior to Closing and to be attached hereto as Exhibit 2.3(b) prior to Closing that governs the use and assignment language of the sublease (each a “Side Agreement” and collectively, the Side Agreements”).

(b) Buyer has reviewed the Prime Lease of each Leased Property and, except as may be otherwise provided below, acknowledges that the remaining term under each Prime Lease (specifically excluding any option renewals in the Prime Lease) is acceptable to Buyer.

2.4 Excluded Liabilities. Buyer will not and does not assume, and will not and does not become responsible for, any Liabilities of any kind of Seller or its affiliates, parent or subsidiary companies, shareholders, directors, employees, successors or assigns (collectively, for purposes of this Section 2.4, “Seller”), to any person or entity, including, without limitation, any of Seller’s Liabilities relating to or involving its employees, landlords, vendors, lenders, creditors or suppliers with respect to Seller’s acts, omissions, or conduct of the Seller’s business occurring prior to the Closing Date. Seller will remain solely responsible and liable for all such Liabilities including all such Liabilities arising after the Closing Date based upon acts, omissions or such conduct prior to the Closing Date. “Liabilities” means any debt, claim, liability, obligation or cause of action of whatever kind or nature, whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due, including but not limited to any liability for taxes, employee benefits, fees, fines, penalties, those items set forth in the last sentence of Section 3.5(a), Sections 3.5(c) and 3.5(d), and for the waivers set forth in Section 13.12.

2.5 Area Development Rights. During the term of the Franchise Agreement, prior to granting any new or recaptured area development rights within the markets being sold to Buyer in California, Seller shall first offer such area development rights to Buyer. Upon notice thereof (“Seller’s Notice”), Buyer may notify Seller (“Buyer’s Notice”) of Buyer’s interest therein and, upon providing such notice, Seller shall enter into good faith negotiations with Buyer with respect thereto. Buyer’s rights with respect to any such area development rights shall expire 15 days after Buyer receives Seller’s Notice. If Buyer provides the Buyer’s Notice, Buyer and Seller will cooperate and negotiate in good faith to enter into an appropriate area development rights agreement within 30 days after Seller receives Buyer’s Notice.

2.6 Store Software. Commencing upon the execution of this Agreement, Seller shall use its reasonable good faith commercial efforts, working with Buyer, to effectuate the transfer or assist Buyer with obtaining new licenses, of any necessary software and software agreements reasonably necessary for the efficient operation of the Stores following the Closing Date without interruption in service.

ARTICLE III
Purchase Consideration

3.1 Cash Consideration from Buyer at Closing.

(a) The purchase price (the “Purchase Price”) for the Purchased Assets shall be Thirty-Six Million Dollars ($36,000,000) plus the amounts due pursuant to Section 3.1(b). The Purchase Price includes the Initial Fee for each of the Stores otherwise due under any Franchise Agreement.

(b) The amount Buyer shall pay Seller for the (i) Change Fund shall be $1,200.00 per Store, and (ii) Marketable Inventory shall be the value of Marketable Inventory actually located at a Store at the Effective Time as determined pursuant to this Section. Ten (10) business days prior to Closing, Seller shall provide Buyer with an estimate of Marketable Inventory using the 2 weeks prior inventory count, which value shall be used to estimate the Marketable Inventory portion of the Purchase Price. During the evening on the Closing Date, representatives of Buyer and Seller shall conduct a physical inventory of all items of Marketable Inventory at the Stores. The final value of the Marketable Inventory shall be determined within 10 business days following the Closing Date by mutual agreement of Seller and Buyer at cost using the most current price list of each vendor for the Marketable Inventory in effect on the Closing Date. For the Change Funds, Seller shall ensure that there is exactly $1,200.00 in each Store register at the Effective Time.

(i) An amount equal to the lesser of (y) $10,000 for each Store that Buyer, using commercially reasonable efforts, does not complete a Fixed Assets due diligence review prior to the Closing Date or (z) $200,000, shall be paid to the Escrow Agent to cover defects in and replacements to the Fixed Assets at these Stores as further described in Section 12.3 (“Fixed Assets Escrow”).

(ii) The balance of the Purchase Price, after the payment in (i) above is made shall be paid to Seller by wire transfer of immediately available funds to an account designated by Seller at Closing.

3.2 Franchise Agreements and Fees.

On the Closing Date, Buyer as franchisee and Seller as franchisor, shall enter into, for each Store, a mutually acceptable Franchise Agreement together with any applicable state addendum; provided however, that the Franchise Agreement for each Store shall be modified by a mutually acceptable addendum to change certain standard terms and conditions (the “Addendum to Franchise Agreement”) as the parties mutually agree, the form of which will be attached hereto as Exhibit 3.2 prior to Closing. The Addendum to Franchise Agreement shall provide, among other things, that the continuing royalty rate shall not exceed 5.5% during the initial term of the Franchise Agreement, the initial term of the Franchise Agreement will be 15 years with 2 successive 10 year renewal periods, the royalty rate and marketing contribution rates for any renewal term will not exceed the rates being charged to 80% or more of all Jamba franchisee stores, that there will be no renewal fee upon the first renewal of any franchise agreement and that the renewal fee on the second renewal of any franchise agreement will be the lesser of $5,000 per Store or the then-current renewal fee offered in the then-current Franchise Agreement upon exercise of a renewal term. Furthermore, the Buyer agrees to complete the refresh of those Stores identified in Section 3.2 of the Disclosure Schedule on or before the earlier of (y) December 31, 2016 or (z) the date set forth in the Prime Lease requiring the complete refresh for any Store identified in Section 3.2 of the Disclosure Schedule. The form of the Franchise Agreement will be Seller’s current form as of the Closing Date subject to such modifications provided in the Addendum to Franchise Agreement as the parties mutually agree.

(a) JambaGo’s. Seller will use commercially reasonable efforts to provide at least thirty (30) days prior written notice to Buyer with regard to any new JambaGo locations to open within Buyer’s markets.

3.3 Pro-Rations; Etc.

(a) The following pro-rations relating to the Purchased Assets will be made as of the Effective Time, with Seller liable to the extent such items relate to any time period up to and including the Effective Time and Buyer liable to the extent such items relate to periods after the Effective Time. Except as otherwise specifically provided herein, the net amount of all such pro-rations, to the extent not already paid by Buyer, will be settled and paid on the Closing Date:

(i) Personal property taxes and other assessments, if any, on or with respect to the Purchased Assets; including special assessments for work actually commenced or levied prior to the Effective Time;

(ii) Rents, additional rents, taxes and other items payable or paid by Seller under any lease, license, permit, contract or other agreement or arrangement to be assigned to or assumed by Buyer;

(iii) The amount of rents, real property taxes and charges for sewer, water, fuel, telephone, electricity and other utilities; provided that if practicable, meter readings shall be taken at the Effective Time and the respective obligations of the parties determined in accordance with such readings;

(iv) The amount payable to Seller by Buyer, or payable by Seller to Buyer, based upon loads and redemptions of “jambacards” prior to the Effective Time;

(v) Gross sales receipts;

(vi) Sales tax accruing prior to the Effective Time; and

(vii) Such other items customarily pro-rated in connection with similar transactions.

If the actual receipts or expenses of any of the above items for the billing period within which the Effective Time falls is not known on the Closing Date, the pro-ration shall be settled and paid as soon as is reasonably practicable after the Closing Date. Seller agrees to furnish Buyer with such documents and other records as shall be reasonably requested in order to confirm all pro-ration calculations.

(b) Notwithstanding the foregoing, the parties agree that the following items will be handled as set forth below:

(i) Seller shall not transfer to Buyer any security deposits paid by Seller under the Real Property Leases and the Purchase Price shall not be adjusted by any security deposits paid by Seller pursuant to the Real Property Leases; provided, however, in the event Buyer secures a lease in Buyer’s name as lessee or tenant for any of the Leased Properties, any security deposit on file with the landlord of such Leased Property shall be retained and transferred to Buyer by the landlord without any further obligation between Buyer and Seller;

(ii) The Purchase Price shall not be increased by any prepaid expenses paid by Seller with respect to the Stores and for which the benefit is not transferred to Buyer hereunder; provided however, that to the extent the benefit is transferred to Buyer, such prepaid expenses shall be pro-rated pursuant to Section 3.3(a) above;

(iii) Seller shall be responsible for any sales, use or similar taxes arising in connection with the transfer and sale of any personal property comprising the Purchased Assets to Buyer and Seller shall remit payment of all such taxes to the appropriate taxing authority; and

(iv) Seller will extend its ISP services for the Stores for up to sixty (60) days after the Closing in order to allow Buyer to obtain its own ISP services and Buyer shall pay for or reimburse Seller, at Seller’s actual cost, for such ISP services but not exceeding $50,000 for providing such DSL services.

(c) In lieu of the Closing adjustments provided for in this Section, either party may, subsequent to the Closing Date, invoice the other party for any item for which such party would be entitled to a credit under this Section 3.3, and the other party shall pay the undisputed amount within thirty (30) days of receipt of the invoice.

3.4 Allocation of Purchase Price. On or prior to the Closing Date, the parties shall agree on an estimated allocation of the Purchase Price and, within ninety (90) days following Closing, the parties shall agree on a final allocation of the Purchase Price. Seller and Buyer agree that said final allocation of the Purchase Price shall be used by Seller and Buyer in reporting the transactions covered by this Agreement for income tax purposes. The final allocation shall include all state and local sales and use taxes caused by the sale of the Purchased Assets, which shall be paid by Seller to the appropriate taxing authority.

3.5 Employees.

(a) Section 3.5 of the Disclosure Schedule contains a true, accurate and complete list of all employees required to operate the Stores and the respective position, job location and salary rate of each employee listed thereon. Subject to the provisions of this Section 3.5, as of the Effective Time, Seller will terminate and Buyer will make an offer of employment, on an at-will basis, to such employees, on the terms and subject to the conditions specified by Buyer, but commensurate in terms of salary and benefits to those currently being received by each employee (the employees who are actually employed by Buyer are referred to collectively as the “Transferred Employees”); provided, however, that, Buyer shall not be required to offer employment to all employees or offer the same employee benefits to the Transferred Employees that may be offered or provided to such employees as of the Effective Time. Buyer and Seller acknowledge and agree that it is their intent that any WARN and state equivalent duty and obligation to such employees, arising out of or following the consummation of this Agreement, is that of Seller.

(b) The transfer to Buyer of such Transferred Employees shall be conditioned upon the closing of the transactions contemplated by this Agreement, and upon such reasonable conditions as Buyer may include in its employment letter to such employee. Only upon the satisfaction of all such conditions shall an employee become a Transferred Employee, and until such time (i) the employee shall not be eligible for compensation from, or to participate in any benefit plans of, Buyer, and (ii) Buyer shall have no liability with respect to any employee of Seller.

(c) Seller shall be responsible for payment of all final wages and all paid time off benefits, including vacation pay accrued by Transferred Employees up to the Effective Time. Seller will pay out all wages, and accrued but unused vacation pay, to Transferred Employees after the Effective Time in accordance with Applicable Law.

(d) Seller shall be responsible for payment of all accrued and payable bonuses for all Transferred Employees to whom Seller has agreed to pay such bonuses.

(e) Seller shall be responsible for providing COBRA and other notices and documentation to the employees of Seller as required by Seller’s employee benefit plans and Applicable Law; provided that Buyer will reimburse the Transferred Employees for the COBRA cost until covered by any employee benefits provided by Buyer to the Transferred Employees.

3.6 Leased Vehicles and Catering Trucks.

At Closing, Seller shall cooperate with Buyer and facilitate the assignment of any vehicle and catering truck leases that Buyer chooses to assume after Buyer has completed its due diligence review of the vehicles, catering trucks and leases.

ARTICLE IV
Representations and Warranties of Seller

Seller represents and warrants, including those matters reflected in a disclosure schedule attached to this Agreement (the “Disclosure Schedule”), which disclosures shall qualify the representations and warranties of Seller, that as of the date of this Agreement and as of the Effective Time:

4.1 Organization. Seller is a California corporation, duly organized, validly existing, and in good standing under the laws of California. Seller is qualified and in good standing as a foreign corporation under the laws of each jurisdiction in which the failure to be so qualified and in good standing would have a Material Adverse Change on the assets, financial condition, operations or business of Seller.

4.2 Power and Authority; Authorization. Seller has all requisite power and authority to enter into, and perform its obligations under, this Agreement and related agreements. The execution, delivery and performance of this Agreement by Seller have been or will be duly authorized prior to the Closing Date.

4.3 Enforceability. This Agreement constitutes a valid and legally binding obligation of Seller enforceable in accordance with the terms hereof, except as may be limited by principles of bankruptcy and creditors’ rights in general.

4.4 No Consents or Approvals. Except as set forth on Section 4.4 of the Disclosure Schedule, no consent, approval, or authorization of, or declaration, filing, or registration with, any federal, state or other governmental or regulatory authority, or any other persons is required to be made or obtained by Seller in connection with the execution, delivery, and performance of this Agreement and related agreements and the consummation of the transactions contemplated by this Agreement, other than applicable state franchise filings (all of which have been made). Except as set forth on Section 4.4 of the Disclosure Schedule, Seller has obtained all consents required to be obtained from landlords in connection with the Subleases as provided in the applicable Prime Leases.

4.5 Agreement Will Not Cause Breach or Violation. Neither the execution, delivery nor performance of this Agreement or related agreements or the consummation of the transactions contemplated by this Agreement will result in or constitute (a) a conflict or breach under Seller’s organizational documents, (b) a default or an event that, with notice or lapse of time or both, would be a default, breach or violation of the Assumed Contracts or any other material lease, license, promissory note, conditional sales contract, commitment, indenture, mortgage, deed of trust or other agreement, instrument or arrangement to which Seller is a party or by which the Stores or Purchased Assets are bound or affected, or (c) the creation or imposition of any Lien on the Purchased Assets or the Stores.

4.6 Financial Statements.

(a) Seller has previously furnished Buyer with, and attached as Section 4.6 of the Disclosure Schedule are, true and complete copies of unaudited profit and loss statements for each of the Stores for Seller’s Fiscal Years 2011, 2012, 2013 and 2014 and will furnish monthly, updated statements through the Closing Date (the “Actual Financials”), adjusted pursuant to the Confidential Information Memorandums dated December, 2014 (the “Confidential Information Memorandums”) for all of the Stores. The Actual Financials are true, complete, and correct in all material respects, and present fairly and accurately the results of operations of each of the Stores for the periods indicated. The books and records of Seller relating to the Stores fully and fairly reflect all transactions, properties, assets and liabilities of the Stores.

(b) Since March 31, 2015: (i) the Stores have been operated in a manner consistent with Seller’s ordinary course of business, (ii) there has been no Material Adverse Change in the assets, financial condition, operations or business of the Stores from that which is reflected in the profit and loss statements, (iii) the Stores have not incurred any material obligation or liability except in the normal course of business, and (iv) the Stores have not experienced any Material Adverse Change in its relationships with customers and/or suppliers.

4.7 Title; Condition of Purchased Assets and Marketable Inventory.

(a) Section 4.7 of the Disclosure Schedule completely and accurately lists all of the Fixed Assets owned by, in the possession of, or used by Seller in connection with the Stores. At Closing, Seller is or shall: (i) be the sole owner, beneficially and of record, of all of the Purchased Assets, the Change Fund, and the Marketable Inventory; and (ii) has or shall have, and will convey good and marketable title to all of the Purchased Assets, the Change Fund, and Marketable Inventory, whether real, personal, mixed, tangible or intangible. The Purchased Assets, the Change Fund, along with the Marketable Inventory that shall be in the Stores on the Closing Date, constitute all the assets and interests in assets that are used in the operation of each of the Stores and are sufficient to operate each of the Stores in a manner consistent with Seller’s operation of the Stores in the ordinary course of business for such Store and in compliance with the FDD. At Closing, all of the Purchased Assets, the Change Fund, and Marketable Inventory are or will be free and clear of restrictions on, or conditions to, transfer or assignment, and are or will be free and clear of mortgages, liens, pledges, charges, encumbrances, equities, claims, easements, rights of way, covenants, conditions or restrictions (“Liens”), and at the Closing, Seller shall transfer and assign to Buyer the Purchased Assets, the Change Fund, and Marketable Inventory free and clear of any and all Liens.

(b) Subject to Sections 12.2 and 12.3, Buyer agrees to accept the Purchased Assets and the Stores in “AS-IS” condition, with all faults, known or unknown, patent or latent.

4.8 Stores; Leased Real Property. Section 4.8 of the Disclosure Schedule contains a true, accurate and complete list of all of the Prime Leases, the Stores, and the Leased Properties. The Stores have been continuously open and operated consistent with the normal course of business from the date of this Agreement until the Effective Time. The Stores comply with all requirements set forth in the Franchise Agreement. The Prime Leases (a) are valid and in full force and effect, and (b) to Seller’s knowledge, are not the subject of any default by Seller or landlord or event which with notice or lapse of time, or both, would constitute a default. Seller has provided to Buyer a true, correct and complete copy of the Prime Leases. Seller does not occupy or use the premises where any Store is located in violation of any law, regulation, decree or other restriction.

4.9 Tax Matters. Within the times and in the manner prescribed by law, Seller has filed all federal, state and local tax returns required by law and has paid all taxes (including, without limitation, sales taxes), assessments and penalties due and payable. There are no present disputes, nor is there any reason to believe a dispute may result, as to taxes of any nature payable by Seller with respect to any Store or the Purchased Assets.

4.10 Compliance with Laws. Seller has to his knowledge, complied, and is in full compliance, in all material respects, with all applicable federal and state franchise laws and all applicable federal, state and local statutes, laws and regulations (including, without limitation, any applicable building, zoning, health, employment, environmental protection or other law, ordinance or regulation) affecting the Stores or the Purchased Assets, and the operation of the Stores has not been cited for any violation of any such law or regulation. Seller has in full force and effect all licenses, permits and other authorizations required for the conduct and operation of the Stores presently constituted; and Seller has not received notice of any default or violation in respect of or under any of the foregoing. Seller has not received any non-compliance orders, warning letters, notices of violation, claims, suits, actions, proceedings, judgments, penalties, fines or judicial or administrative investigations of any nature pending or threatened against or involving the Stores, the business, operations, or property of the Stores, or the Purchased Assets.

4.11 Litigation, Etc. There is no pending, or, to the knowledge of Seller, any threatened suit, action, arbitration or legal, administrative or other proceeding, or governmental investigation or claims against, or affecting, the Purchased Assets or any of the Stores. To the knowledge of Seller, there is no basis for any claim against Seller relating to, or which could have a Material Adverse Change on the Purchased Assets or any of the Stores.

4.12 Employees. Seller is not a party to or bound by any collective bargaining agreement, employment agreement, consulting agreement or other commitment for the employment or retention of any employees or independent contractors who work at the Stores or are otherwise employed by Seller in connection with the business conducted at the Stores. Seller has not had any material labor difficulty at any of the Stores in the past two (2) years.

4.13 Employee Benefits. Seller does not maintain and is not required to make any contributions to any pension, profit-sharing, retirement, deferred compensation or other such plan or arrangement for the benefit of employees who work at any of the Stores or are otherwise employed by Seller in connection with the business conducted by the Stores, except for 401(k) matching contributions from paychecks through the Closing Date, and except for health plan coverage for certain General Manager employees as described in Section 12.2. Subject to the foregoing, Seller has made all required payments, contributions and filings under or in respect of any such plans or arrangements, and there has not occurred any act, omission, event or condition such as would give rise to any liability of Seller or the Stores thereunder other than the obligations to make normal payments and contributions thereunder.

4.14 Finder’s or Broker’s Fees. Seller has not engaged a broker or financial advisor to assist Seller in connection with this transaction except for Peak Franchise Capital. Seller is solely responsible for all fees to be paid to Peak Franchise Capital.

4.15 Full Disclosure. None of the representations and warranties made by Seller or made in any certificate or memorandum furnished or to be furnished by Seller or on Seller’s behalf, contains or will contain any untrue statement of a material fact, or omits to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading. Certain of the representations and warranties of Seller are made “to Seller’s knowledge” or refer to what is “known” to Seller or of what Seller is “aware.” The parties hereto agree that the meaning of such expressions shall with respect to Seller in all cases be understood as comprising the actual knowledge and belief of the corporate officers of Seller without any type of additional investigation thereof.

4.16 Seller’s Representation and Warranties. Seller’s representations and warranties shall all survive the Closing through the period during which claims for indemnification may be made pursuant to Section 11.1 (at which time each such representation and warranty shall terminate as applicable).

ARTICLE V
Representations and Warranties of BuyeR

Buyer hereby represents and warrants as of the date of this Agreement as of the Effective Time that:

5.1 Organization. Buyer is a limited liability company duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it was organized.

5.2 Power and Authority; Authorization. Buyer is a limited liability company with the power and authority to enter into, and perform its obligations under, this Agreement and related agreements. The execution and delivery of this Agreement by Buyer has been duly authorized by all necessary action on the part of Buyer and neither the execution, delivery nor performance of this Agreement or related agreements or the consummation of the transactions contemplated by this Agreement will result in or constitute a conflict or breach under Buyer’s organizational documents.

5.3 Enforceability. This Agreement constitutes a valid and legally binding obligation of Buyer, enforceable in accordance with the terms hereof, except as may be limited by principles of bankruptcy and creditors rights in general.

5.4 No Consents or Approvals. No consent, approval, or authorization of, or declaration, filing, or registration with, any federal, state or other governmental or regulatory authority, or any other persons is required to be made or obtained by Buyer in connection with the execution, delivery, and performance of this Agreement and related agreements, and the consummation of the transactions contemplated by this Agreement, in each case, which have not been obtained by the Closing Date.

5.5 Non-contravention. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, shall (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Buyer is subject, or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which Buyer is a party or by which it is bound or to which any of its assets are subject. Buyer does not need to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the parties to consummate the transactions contemplated by this Agreement.

5.6 Finder’s or Broker’s Fees. Buyer has not engaged a broker or finder in connection with any transaction contemplated by this Agreement, and no broker or other person is entitled to any commission or finder’s fee from Buyer in connection with any of these transactions as a result of any actions by Buyer.

5.7 Representations of Seller. Buyer acknowledges that neither Seller nor any representative of Seller has made any representations or statements of projected or forecasted sales, profits or earnings of the Stores, and Buyer acknowledges that future sales, profits and earnings at the Stores may be more or less than past sales, profits and earnings. In making its decision to enter into this Agreement and the transaction documents related to this Agreement, except as otherwise provided in this Agreement, Buyer has not relied on any information provided by Seller or any other third party; provided that nothing in this Agreement shall disclaim or require Buyer to waive reliance on any representation that Seller made in the FDD. Buyer has inspected and reviewed, including in the context of what may be required pursuant to applicable law, regulation or code, a majority of the Fixed Assets in the possession of, or used by Seller in connection with the Stores. In addition, effective as of the Closing Date, Buyer acknowledges that it has read, reviewed with appropriate counsel and advisors, Seller’s FDD and the Confidential Information Memorandum.

ARTICLE VI
Seller’s Obligations Before Closing

6.1 Buyer’s Access to Premises and Information. Buyer and its counsel, accountants and other representatives shall have full access during normal business hours to all properties, books, accounts, reports, records, contracts, employees and documents of Seller relating to the Stores, provided Buyer shall permit Seller to be present during such access, upon reasonable request of Seller. Seller shall furnish, or cause to be furnished, to Buyer and its representatives all data, reports and information concerning the business, finances and properties of Seller relating to the Stores that may reasonably be requested.

6.2 Conduct of Business in Normal Course. Seller shall, from and after the date of this Agreement and through the Closing Date, with respect to each of the Stores, (i) carry on its business solely in the usual and ordinary course and as diligently as heretofore conducted, including, without limitation, maintenance of inventory levels consistent with past practices in the ordinary course of business; (ii) use reasonable efforts to preserve and maintain its business organization intact, to retain its employees and to maintain its relationships with suppliers, customers and others so that such relationships will be preserved on and after the Closing Date; (iii) repair and maintain all Fixed Assets of each of the Stores in accordance with its usual and ordinary repair and maintenance standards and maintain the Fixed Assets through the Closing Date in substantially the same condition as they were at the time of the Inspections, normal wear and tear excepted; (iv) consult with Buyer regarding all significant developments, transactions and proposals relating to the business or operations or any of the Purchased Assets or liabilities of Seller; (v) not end, terminate or change in any material respect any lease, contract, undertaking or other commitment and shall not knowingly do any act, or omit to do any act, or permit an act or omission to act, which will cause a material breach of any such lease, contract, undertaking or other commitment; and (vi) not grant any general increase in the rates of pay of any of its hourly-paid employees, grant any increase in the salaries or other compensation of any of the employees described in Section 3.5(a) hereof; or grant any increase in the pension, retirement or other employment benefits of any character of, or grant any new benefits to, such employees.

ARTICLE VII
Buyer’s Obligations Before Closing

7.1 Cooperation in Securing Consents of Third Parties. Buyer shall use reasonable efforts to assist Seller in obtaining the consents listed on Section 4.4 of the Disclosure Schedule of all necessary persons and agencies to the assignment and transfer to Buyer of any and all properties, assets and agreements, to be assigned and transferred under the terms of this Agreement, but Buyer shall not, in order to obtain such consents or otherwise, be required to give consideration, assume or guarantee any obligations of Seller, whether relating to Seller’s operation of the Stores, ownership of the Purchased Assets or otherwise.

7.2 Initial Financing Contingency. Buyer shall use commercially reasonable efforts to deliver to Seller within thirty (30) days of the execution of this Agreement a fully-executed commitment letter or non-binding term sheet from a bank or other financial institution (“Debt Commitment Letter”) to provide debt financing to Buyer (“Initial Financing Contingency Requirement”). Such debt financing, when taken together with committed equity financing and/or other sources of funds, will need to be sufficient for Buyer to consummate the transactions contemplated by this Agreement. If Buyer has been unable to deliver such Debt Commitment Letter or pull together committed equity financing and/or other sources of funds within the time period specified above, despite its commercially reasonable efforts to do so, such time period may be extended by Seller or Buyer for an additional period as is commercially reasonable for Buyer to deliver such Debt Commitment Letter or pull together committed equity financing and/or other sources of funds, not to exceed fifteen (15) business days. If Buyer is unable to deliver the Debt Commitment Letter or pull together committed equity financing and/or other sources of funds within such additional period of time, this Agreement shall terminate and Buyer shall have no further obligations under this Agreement.

7.3 Further Assurances with Respect to Financing. Buyer shall use commercially reasonable efforts to obtain financing in an amount at least equal to the amount set forth in the Debt Commitment Letter, including the execution of definitive agreements for the financing contemplated by the Debt Commitment Letter and equity financing upon terms and conditions acceptable to Buyer in its sole discretion, on or prior to the Closing Date. The definitive agreements for such debt and equity financing (along with any other documents pursuant to which Buyer intends to obtain the financing contemplated hereby) are collectively referred to herein as the “Financing Agreements.” Without limiting the generality of the foregoing, in the event that at any time it may be reasonably likely that funds will not be made available under the Debt Commitment Letter or the Financing Agreements so as to enable Buyer to proceed with the Closing in a timely manner, Buyer shall promptly notify Seller. If Buyer is unable to obtain financing as contemplated in this Section, this Agreement shall terminate and Buyer shall have no further obligations under this Agreement.

7.4 Certain Agreements. The parties anticipate that Seller will at its sole cost and expense discontinue the Security Services previously provided to Seller by Diebold-Alarm alarm company. Buyer agrees that it shall assume sole responsibility for contracting for the security services it deems necessary for the Stores following the Closing Date. Buyer further agrees that effective immediately following the Closing Date for each of the Stores, Buyer shall be solely responsible for all service and termination fees in connection with internet services provided by Earthlink for no less than the duration of Seller's existing contracts therefor (dates having been previously provided to Buyer).

ARTICLE VIII
Conditions Precedent To Buyer’s Performance

8.1 Buyer’s Closing Conditions. The obligations of Buyer to purchase the Purchased Assets under this Agreement are subject to the satisfaction, at or before the Closing, of all the conditions set out below. Buyer may waive any or all of these conditions in whole or in part without prior notice.

(a) All representations and warranties by Seller in this Agreement, or in any written statement that shall be delivered to Buyer in connection with this Agreement, shall be true in all material respects on, and as of, the Closing Date as though made at that time.

(b) Seller shall have performed, satisfied and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by Seller in all material respects, on or before the Closing Date including all deliveries set forth in Section 10.2.

(c) Seller shall have completed and delivered final versions of the Disclosure Schedule and all Exhibits hereto, including all exhibits to agreements attached hereto as Exhibits, all of which shall be satisfactory to Buyer in its sole discretion.

(d) Seller shall have delivered a certificate certifying the satisfaction of the conditions set forth in Sections 8.1(a), (b) and (c) above.

(e) The parties have performed immediately prior to Closing, in the manner set forth in Section 3.1(b), an inventory of the Marketable Inventory and counting and verification of the Change Fund.

(f) The financing conditions precedent set forth in Sections 7.2 and 7.3 shall have been completed as provided in those Sections.

(g) Buyer shall have completed all due diligence regarding the Stores and the results of all due diligence shall be acceptable to Buyer in its sole discretion.

ARTICLE IX
Conditions Precedent To Seller’s Performance

9.1 Seller’s Conditions. The obligations of Seller to sell the Purchased Assets under this Agreement are subject to the satisfaction, at or before the Closing, of all the conditions set out below. Seller may waive any or all of these conditions in whole or in part without prior notice.

(a) All representations and warranties by Buyer in this Agreement, or in any written statement that shall be delivered to Seller under this Agreement, shall be true in all material respects on and as of the Closing Date as though made at that time.

(b) Buyer shall have performed, satisfied and complied with all covenants, agreements and conditions required by this Agreement, including the execution by all required parties of the Franchise Agreement(s) and the Subleases to be performed or complied with by Buyer in all material respects on or before the Closing Date including all deliveries set forth in Section 10.3.

(c) Buyer shall have delivered a certificate certifying the satisfaction of the conditions set forth in Sections 9.1(a) and (b) above.

(d) To the extent possible, Seller shall have removed its proprietary information from the Stores including, without limitation, erasing computer hard drives, removing credit card merchant information, removing human resources manuals, and the like, except to the extent such information is required to operate the Stores, in which case it shall not be removed. Seller shall bear the costs of all such removals.

(e) Buyer shall have delivered to Seller personal financial statements of David Peacock. Such personal financial statement shall be held in confidence and used solely for (i) Seller’s due diligence in conjunction with this transaction, and (ii) upon notice to Buyer, to provide to owners of properties being subleased pursuant to the Sublease Agreement where the property owner’s approval is required and such property owners have specifically requested copies of the personal financial statement.

(f) Buyer has completed all training required under the Franchise Agreements.

(g) Seller shall have received consent from Wells Fargo to dispose of the Purchased Assets.

ARTICLE X
The Closing

10.1 Time and Place. The parties shall undertake reasonable good faith commercial efforts to effect the transfer of the Purchased Assets by Seller to Buyer (the “Closing”) on May 19, 2015 (the “Closing Date”), with the Closing to be deemed effective as of 11:59 p.m., Pacific Daylight Time, on the Closing Date (the “Effective Time”), it being acknowledged and agreed that the a May 19, 2015 Closing Date is ambitious and that Closing may not occur until later and the parties agree to extend the Closing Date as necessary, subject to the last sentence of this Section 10.1. The obligations of the Parties to close or effect the transactions contemplated by this Agreement will be subject to satisfaction, unless duly waived, of the applicable conditions set forth in this Agreement, and, subject to the parties’ termination rights expressly set forth herein, if any said condition is not satisfied or waived, the Closing Date shall be extended until satisfaction of such condition. Notwithstanding the foregoing, if the Closing has not occurred on or before June 30, 2015 (the “Walkaway Date”), then Seller and Buyer shall each have the right at any time after the Walkaway Date, but prior to Closing, to terminate this Agreement pursuant to Section 13.1.

10.2 Seller’s Obligations at Closing. At the Closing, Seller shall deliver or cause to be delivered to Buyer:

(a) Instruments of assignment and transfer of all the Purchased Assets and Marketable Inventory, including titles for any vehicles and related documents required by the Department of Revenue or Department of Motor Vehicles;

(b) The executed Subleases and Side Agreements, Franchise Agreements, Escrow Agreement, Addendums to Franchise Agreements;

(d) An estoppel certificate completed and signed by the landlord under each Prime Lease, in a form to be provided by Buyer and acceptable to Seller. The Parties acknowledge that not all Prime Leases require the landlord to execute the estoppel certificate contemplated herein and Seller’s use of commercially reasonable efforts to obtain such estoppel certificates shall satisfy this obligation.

Simultaneously with the consummation of the transfer, Seller shall put Buyer into full possession and enjoyment of all the Purchased Assets, the Stores, the Change Fund and Marketable Inventory.

10.3 Buyer’s Obligations at Closing. At the Closing, Buyer shall deliver or cause to be delivered to Seller:

(a) The Purchase Price pursuant to Section 3.1(c), by wire transfer of immediately available funds to accounts designated by Seller and the Escrow Agent; and

(b) The executed Subleases and Side Agreements, Franchise Agreements, Escrow Agreement, Addendums to Franchise Agreements, and Letter of Credit.

10.4 Cash for Each Store. Buyer and Seller shall ensure that the Change Fund is on hand on each Store as of the Effective Time.

10.5 Closing Costs and Escrow Agent Fees. All closing cost and the fees charged by the escrow agent, if any, shall be shared equally by Seller and Buyer; provided however that each party shall be liable for their own advisors’ fees (attorneys, accountants, consultants, etc.) and any income taxes. To the extent that the cost of such fees and expenses are known by the Closing Date, the parties agree to adjust payments made at Closing. Any differences between any estimated charges paid and actual charges incurred, or other costs or fees that arise out of the transactions contemplated by this Agreement that should have been deemed included in this Section 10.5 that are incurred post-Closing, will be resolved pursuant to Section 3.3(c).

ARTICLE XI
Indemnification

11.1 Seller’s Indemnities.

(a) Seller shall indemnify, defend and hold harmless Buyer and its officers, agents, attorneys, employees, directors, parent entities, subsidiaries and affiliates, including third parties that have a secured interest in the Stores pursuant to any Financing Agreements (as defined in Section 7.3 above) (collectively, the “Buyer Parties”) against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities, damages, recoveries and deficiencies, including interest, penalties and reasonable attorneys’ fees, that Buyer and the Buyer Parties (collectively, the “Buyer Indemnified Parties”) shall incur or suffer, that arise from, result from or relate to (i) any breach of, or failure by Seller to perform, any of Seller’s covenants or agreements in this Agreement, (ii) any inaccuracy or breach of, or failure by Seller to perform, any of Seller’s representations or warranties in this Agreement or in the Disclosure Schedule or any schedule, certificate, or exhibit furnished or to be furnished by Seller under this Agreement, (iii) any and all litigation pending against Seller at Closing, or (iv) any and all Seller Liabilities.

(b) Seller’s obligations to indemnify the Buyer Indemnified Parties for claims arising under Sections 11.1(a)(i) and 11(a)(ii) shall survive the Closing for a period of eighteen (18) months; provided that Seller’s obligations to indemnify the Buyer Indemnified Parties for claims arising under Section 11.1(a)(iii) or Section 11.1(a)(iv) shall survive the Closing without limitation. Seller’s, aggregate liability to Buyer Indemnified Parties for claims arising under Sections 11.1(a)(i) and 11.1(a)(ii) shall not exceed the Purchase Price.

(c) Seller represents, warrants and agrees that Seller is the operating entity for all Jamba stores; that Seller has and will maintain a sufficient level of assets to provide for Seller’s indemnification obligations set forth in this Section; that Seller does not have any plans to wind-up or liquidate Seller or its assets prior to satisfying its indemnification obligations set forth in this Section; and that Seller does not plan to and will not transfer all or substantially all of its assets to Parent or any affiliate in order to avoid or minimize its indemnification obligations set forth in this Section.

11.2 Buyer’s Indemnities. Buyer shall indemnify, defend and hold harmless Seller and its officers, agents, attorneys, employees, directors, parent entities, subsidiaries and affiliates (collectively, the “Seller Parties”) against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities, damages, recoveries and deficiencies, including interest, penalties and reasonable attorneys’ fees, that Seller and the Seller Parties (collectively, the “Seller Indemnified Parties”) shall incur or suffer, that arise from, result from, or relate to, (i) any breach of, or failure by Buyer to perform, any of Buyer’s covenants or agreements in this Agreement, or (ii) any inaccuracy or breach by, or failure by Buyer to perform, any of Buyer’s representations or warranties in this Agreement or in any certificate executed and delivered to Seller under or pursuant to this Agreement or the transactions contemplated herein.

The indemnity obligations under this Section 11.2 shall survive Closing for a period of eighteen months.

11.3 Procedure for Indemnified Claims.

(a) In the case of any claim for indemnification pursuant to this Article by any indemnitee, other than a claim covered by Section 11.3(b), the indemnitee shall send written notice of such claim to the indemnitor, setting forth in such notice the material facts known to the indemnitee giving rise to such claim. Failure to give such notice shall not relieve the indemnitor of its obligations hereunder except to the extent, and only to the extent, that the indemnitor is actually prejudiced thereby. Promptly after the delivery of such notice (and in any event within thirty (30) days, or such longer period as the parties may mutually agree), the indemnitee shall meet with the indemnitor and attempt in good faith to settle and compromise such claim. If the indemnitor refuses to meet with the indemnitee within such thirty (30) day period, or if the claim cannot be resolved within an additional thirty (30) day period following such meeting (or such longer period as the parties may mutually agree), the indemnitee may commence legal proceedings to resolve such claim.

(b) If any third party shall notify any indemnitee with respect to any matter which may give rise to a claim for indemnification against an indemnitor pursuant to this Article, the indemnitee shall promptly notify the indemnitor in writing; provided, however, that failure of the indemnitee to give the indemnitor notice as provided herein shall not relieve the indemnitor of its obligations hereunder except to the extent, and only to the extent, that the indemnitor is actually prejudiced thereby. In the case any legal proceedings shall be commenced against any indemnitee with respect to a third party claim, the indemnitor shall be entitled to jointly participate with the indemnitee in the defense of such proceeding. Whether or not the indemnitor jointly participates in the defense of any proceeding, the indemnitee shall not admit any liability with respect to, or settle, compromise or discharge, such proceeding without indemnitor’s prior written consent (which consent shall not be unreasonably withheld or delayed) to the extent the indemnitor would be obligated to indemnify the indemnitee under this Article with respect to such proceeding.

11.4 Exclusive Remedy. The remedies provided for in this Article are exclusive and shall be in lieu of all other remedies, including consequential and direct or indirect damages, for any breach of any representation, warranty, covenant, obligation or other provision of this Agreement; provided however, that the foregoing clause of this sentence shall not be deemed a waiver by any party of any right to obtain in court specific performance or injunctive relief or other equitable remedies.

11.5 Additional Indemnification. If the transactions contemplated by this Agreement fail to close for any reason, Buyer shall return to Seller (or, at Seller’s direction, destroy) all documentation, test results, surveys, financial statements and other confidential information furnished to Buyer by or on behalf of Seller. Buyer agrees to reimburse, indemnify and hold Seller harmless from and against any and all damages, injuries, liabilities, claims, demands or liens, including, without limitation, any property damage, personal injury or claim of lien against the Stores, caused by the due diligence activities of Buyer permitted by this Agreement (including, without limitation, reasonable attorneys’ fees and expenses paid or incurred by Seller during litigation, if any), which indemnity shall survive the Closing or earlier termination of this Agreement.

ARTICLE XII
POST CLOSING MATTERS

12.1 Post-Closing Store Access by Seller. To the extent Seller has not completed the removal of proprietary information contemplated by Section 9.1, Buyer will provide access to the Stores during normal business hours during the five (5) days following the Closing Date for Seller to complete such removal.

12.2 Critical Deficiencies.

(a) Notwithstanding that the Purchased Assets are being sold to Buyer “AS IS, WHERE IS,” with all faults, and subject to the representations, warranties and limitations set forth herein, Seller agrees to indemnify the Buyer for the actual costs incurred by Buyer to cure any Critical Deficiency. For purposes of this Agreement, “Critical Deficiency” means a (i) deficiency in the preparation area of any Store (or other areas of a Store that are not accessible to the general public) that Buyer reasonably assumes that, if known, a local health department would probably determine to be of such a magnitude that Buyer would not be permitted to open such Store for business while such deficiency exists, or (ii) a deficiency of the store grease trap or plumbing so that such grease trap or plumbing is not, in Buyer’s reasonable opinion, adequate for the operation of the Store. Seller’s obligation to provide Buyer with an indemnification due to a Critical Deficiency is conditioned upon Buyer notifying Seller within 45 days after the Closing Date of any deficiency described in Section 12.2(a)(i) or Section 12.2(a)(ii), and providing Seller with back-up documentation or copies of all relevant inspections reports citing the Critical Deficiencies.

(b) The maximum amount of the indemnity for which Seller shall be liable under Section 12.2 shall not exceed Three Hundred Thousand Dollars ($300,000) for all Stores combined. Seller shall have no obligation to indemnify Buyer for lost profits or other consequential damages resulting from any business interruption while the Critical Deficiencies are cured. Buyer specifically acknowledges that this provision supersedes entirely all prior oral or written discussions, agreements or understandings regarding Seller’s responsibility for the costs to repair Critical Deficiencies. Any amounts paid by Seller to Buyer pursuant to this Section 12.2 shall not be counted for purposes of the last sentence of Section 11.1(b).

12.3 Fixed Assets Repairs and Replacements. Notwithstanding that the Purchased Assets are being sold to Buyer “AS IS, WHERE IS,” with all faults, and subject to the representations, warranties and limitations set forth herein, at Closing, Buyer and Seller shall enter into the Escrow Agreement in the form attached hereto as Exhibit 11.6. The Escrow Agreement shall provide for the payment and reimbursement to Buyer for defects and replacements of Fixed Assets from the Fixed Assets Escrow, which shall only include those repairs, purchases and replacements needed so that the Stores for which Buyer does not complete a Fixed Asset due diligence review prior to the Closing Date are operational and able to conduct business post- Closing. Buyer shall use commercially reasonable efforts to complete a due diligence review of the Fixed Assets at all Stores prior to the Closing Date, and no later than 45 days following the Closing Date. The total amount to be reimbursed to Buyer for defects and replacements of Fixed Assets shall not exceed Two Hundred Thousand Dollars ($200,000) for all Stores combined.

12.4 Letter of Credit. Buyer will maintain a renewable standby letter of credit (the “Letter of Credit”) in favor of Seller in the amount of $3,000,000 for the first 3 years following the Closing Date and in a reduced amount of $2,000,000 beginning 3 years following the Closing Date and lasting for the remaining initial term of the Franchise Agreements. The Letter of Credit will secure Buyer’s payments of (i) Continuing Royalty and Marketing Contribution payments required by and as defined in the Franchise Agreements, and (ii) rent payments pursuant to the Subleases. Seller will be permitted to make a draw on the Letter of Credit in the event Buyer defaults in any of these payments and fails to cure the default as provided in the Franchise Agreements or Subleases, as applicable.

ARTICLE XIII
MISCELLANEOUS

13.1 Events of Termination. In addition to the other termination rights set forth in this Agreement, this Agreement may be terminated, without liability on the part of the terminating party to the other party, at any time before the Closing Date: (i) by mutual consent of Buyer and Seller; (ii) by Buyer if any of the conditions precedent found in Article VIII of this Agreement shall have become incapable of fulfillment by the Closing Date through no fault of Buyer and provided Buyer has proceeded with reasonable diligence and Buyer has not waived the same; (iii) by Seller if any of the conditions precedent found in Article IX of this Agreement shall have become incapable of fulfillment by the Closing Date through no fault of Seller and have not been waived in writing by Seller; (iv) by Buyer if there is a breach of or failure by Seller to perform in any material respect any of the representations, warranties, commitments, covenants or conditions under this Agreement, which breach or failure is not cured after written notice thereof is given to Seller and prior to the Closing Date; (v) by Seller if there is a breach of or failure by Buyer to perform in any material respect any of the representations, warranties, commitments, covenants or conditions under this Agreement, which breach or failure is not cured after written notice thereof is given to the Buyer and prior to the Closing Date; (vi) by Seller or Buyer at any time after the Walkaway Date if the Closing has not occurred on or before such Walkaway Date; or (vii) by Buyer or Seller upon the occurrence of a Material Adverse Change or by Buyer or Seller as provided in Section 13.15. In the event of termination and abandonment by any party as above provided in clauses (ii), (iii), (iv), (v), (vi) or (vii) of this Section, written notice shall forthwith be given to the other party, which notice shall clearly specify the reason of such party for terminating this Agreement.

13.2 Notices. Except as otherwise expressly provided herein, all written notices and reports permitted or required to be delivered by the parties pursuant hereto shall be deemed so delivered at the time delivered by hand, or one business day after transmission by facsimile, telegraph or other electronic system (with confirmation copy sent by regular U.S. mail), or three (3) business days after placement in the United States Mail by Registered or Certified Mail, Return Receipt Requested, postage prepaid and addressed as follows:

To Seller:	Jamba Juice Company 6475 Christie Ave Suite 150 Emeryville, CA 94688 Attn: SVP - Global Franchise and Development

With a copy to:	Jamba Juice Company 6475 Christie Ave Suite 150 Emeryville, CA 94688 Attn: Director, Legal Affairs

To Buyer:	Vitaligent, LLC 7701 Forsyth Blvd., Suite 1000 St. Louis, Missouri 63105 Attn: Dean VandeKamp

With a copy to:	Polsinelli PC 100 S. Fourth Street Suite 1000 St. Louis, MO 63102-1825 Attn: Andrew Hoyne, Esq.

Any party may change its address for purposes of this Section 13.2 by giving the other parties written notice of the new address in the manner set forth above.

13.3 Effect of Headings. The subject headings of this Agreement are included for convenience only and shall not affect the construction or interpretation of any of its provisions.

13.4 Entire Agreement; Modification; Waiver. This Agreement and the Disclosure Schedule, together with all Exhibits and schedules hereto or thereto and agreements or instruments executed in connection herewith or therewith, constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations and understandings of the parties; provided that nothing in this Agreement shall disclaim or require Buyer to waive reliance on any representation that Seller made in the FDD. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by all the parties. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, and no waiver shall constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver.

13.5 Parties in Interest. Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties to it and its respective successors and assigns. Nothing in this Agreement is intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, and no provision herein shall give any third persons any right of subrogation or action over or against any party to this Agreement.

13.6 Assignment. This Agreement and the rights, interests, and obligations hereunder shall be binding and upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by Seller without the prior written consent of Buyer, but Buyer may at its sole discretion assign its rights and obligations hereunder to any affiliate or any subsidiary; provided however, that any such assignment shall not relieve Buyer of its obligations hereunder and any such affiliate or subsidiary shall agree to be bound by the provisions of this Agreement.

13.7 Signatures. The signatures of the parties to this Agreement, or to any related document, may be delivered by facsimile or email transmission, each of which shall be deemed an original. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

13.8 Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF CALIFORNIA AS APPLIED TO CONTRACTS THAT ARE EXECUTED AND PERFORMED ENTIRELY IN CALIFORNIA. EACH PARTY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA AND THE U.S. FEDERAL COURTS SITTING IN SAN FRANCISCO COUNTY, CALIFORNIA FOR PURPOSES THEREOF. THE PARTIES AGREE THAT VENUE FOR ANY SUCH PROCEEDING SHALL BE THE STATE AND FEDERAL COURTS LOCATED IN SAN FRANCISCO COUNTY, CALIFORNIA. EACH PARTY TO THIS AGREEMENT WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH ACTION OR PROCEEDING, ANY CLAIM THAT (A) IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (B) THE ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR (C) THE VENUE OF THE ACTION OR PROCEEDING IS IMPROPER.

13.9 Attorneys’ Fees. The prevailing party in any dispute or controversy under or in connection with this Agreement shall be entitled to collect its reasonable attorneys’ fees and costs from the other party.

13.10 Severability. If any provision of this Agreement is held invalid or unenforceable by any arbitrator or court of final jurisdiction, it is the intent of the parties that all other provisions of this Agreement be construed to remain fully valid, enforceable and binding on the parties.

13.11 Expenses. Except as otherwise provided herein, each party shall pay all costs and expenses incurred or to be incurred by it in negotiating and preparing this Agreement and in closing and carrying out the transactions contemplated by this Agreement.

13.12 Bulk Sales. Seller and Buyer each waive compliance by the other with any bulk sales or similar laws that may be applicable to the transactions contemplated by this Agreement.

13.13 Disclosure. Seller and its parent organization shall have the right to disclose this Agreement and related agreements in connection with any filings or other disclosures required in connection with compliance with federal and state securities and franchise laws, or the rules and regulations of any applicable securities trading organization. Subject to the other provisions of this Agreement, press releases and other publicity materials relating to the transactions contemplated by this Agreement shall be released by the parties only after review and with the consent of the other parties. Buyer shall not disclose to anyone, including without limitation, any employee of Seller, including but not limited to employees at a Store or any employee of any vendor of Seller, without Seller’s prior consent, the existence or nature of the transactions contemplated by this Agreement. All other terms of the Confidentiality Agreement signed by Buyer prior to the execution of this Agreement shall survive. This Section 13.13 does not alter or amend any confidentiality obligations that Buyer may have or will have under the Franchise Agreement. Buyer acknowledges and agrees that Seller’s remedy at law for any breach of Buyer’s obligations hereunder would be inadequate, and that Seller shall have the right to seek temporary and permanent injunctive relief in any court proceeding to enforce this covenant regarding confidentiality. However, nothing contained herein shall in any way affect Seller’s rights and remedies afforded by law and/or in equity, and Seller shall retain the right to recover such damages as it may have sustained by reason of any breach hereof. Notwithstanding the foregoing, Seller or Buyer may disclose to any of its current or prospective lenders, equity or other financing sources any of the provisions of this Agreement and the documents entered into or to be entered into in connection herewith.

13.14 Further Assurances. Each party, as requested by the other, shall execute, acknowledge and deliver any further deeds, assignments, conveyances and other assurances, documents and instruments of transfer, reasonably requested by the other, and shall take any other action consistent with the terms of this Agreement that may reasonably be requested by the other, for the purpose of assigning, transferring, granting, conveying and confirming to Buyer, or reducing to possession, any or all property to be conveyed and transferred under this Agreement.

13.15 Schedules and Exhibits. The parties acknowledge that this Agreement may be signed without certain Schedules or Exhibits agreed upon and attached hereto. In such event, the mutual agreement of the parties to the terms and conditions of any missing Exhibit or Schedule or any updates proposed by Buyer or Seller to any Exhibit or Schedule attached hereto shall be a condition precedent to the Buyer’s and Seller’s obligation to close the transactions contemplated by this Agreement, failing which either Buyer or Seller may terminate this Agreement as provided in Section 13.1.

SIGNATURE PAGE FOLLOWS

IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the day and year first above written.

“SELLER”			“BUYER”

JAMBA JUICE COMPANY			VITALIGENT, LLC
a California corporation			a Delaware limited liability company

By:			By:

Name:			Name:

Its:			Its:

ANNEX 1.1
DEFINED TERMS

“Actual Financials” has the meaning given to it in Section 4.6(a).

“Addendum to Franchise Agreement” has the meaning given to it in Section 3.2(a).

“Affiliates” means any person or entity that directly or indirectly controls, is controlled by, or is under common control with, the person or entity in question or any partner, member, manager, officer, or director of the person or entity in question. “Control” means directly or indirectly having the power to direct or cause the direction of management, whether through ownership, governance, contract or otherwise.

“Agreement” has the meaning given to it in the Caption.

“Applicable Law” means and includes applicable common law and all applicable statutes, laws, rules, regulations, ordinances, policies and procedures established by any governmental authority, including, without limitation, those governing the development, construction and/or operation of a Jamba Juice Store, including, without limitation, all labor, disability, food and drug laws and regulations, as in effect on the Closing Date hereof, and as may be enacted, modified or amended from time to time thereafter.

“Assumed Contracts” has the meaning given to it in Section 2.1(ii).

“Bankruptcy” means any voluntary petition by or involuntary petition against Seller or Parent shall be filed under any chapter of the United States Bankruptcy Code or similar code of an foreign country; or any proceeding involving Seller or Parent shall be instituted under any other law relating to the relief of debtors and is not discharged within thirty (30) days of filing or institution; or Seller or Parent shall be called to perform on any indebtedness or guaranty held by any creditor or lender of Seller or Parent, whether by scheduled maturity, required prepayment, acceleration, demand or otherwise, and Seller or Parent fails to perform when called upon to do so; or the insolvency of Seller or Parent under any state insolvency act; or the appointment of a receiver or trustee for Seller or Parent; or any other event of “bankruptcy” with respect to Seller or Parent.

“Buyer” has the meaning given to it in the Caption.

“Buyer Indemnified Parties” has the meaning given to it in Section 11.1(a).

“Buyer Parties” has the meaning given to it in Section 11.1(a).

“Change Fund” has the meaning given to it in Section 3.1(b).

“Closing” has the meaning given to it in Section 10.1.

“Closing Date” has the meaning given to it in Section 10.1.

“Contracts” all contracts, agreements, leases, license agreements, arrangements and/or commitments of any kind to which Seller is a party which relate to the Store other than the Real Property Lease.

“Contract Interests” has the meaning given to it in Section 2.3(b).

“Critical Deficiency” has the meaning given to it in Section 12.3.

“Disclosure Schedule” has the meaning given to it in Article 4.

“Effective Time” has the meaning given to it in Section 10.1.

“Escrow Agent” has the meaning given to it in the Escrow Agreement.

“Escrow Agreement” has the meaning given to it in Section 12.3.

“Excluded Assets” has the meaning given to it in Section 2.2.

“FDD” means Seller’s most recent Franchise Disclosure Document updated through the date of this Agreement.

“Fiscal Year” means the 51, 52 or 53 week period that ends on the Tuesday closest to December 31 of each calendar year and begins on the following Wednesday.

“Fiscal Period” is the basic fiscal weeks or months that comprise a Fiscal Year.

“Fixed Assets” has the meaning given to it in Section 2.1(i).

“Fixed Assets Escrow” has the meaning given to it in Section 3.1.

“Franchise Agreement” and “Franchise Agreements” have the meanings given to them in the Recitals.

“General Manager” has the meaning given to it in Section 7.2.2 of the Franchise Agreement.

“Initial Fee” or “Initial Fees” refers to the Initial Fee defined and described in the Franchise Agreements.

“Inspections” means Buyer’s right to inspect the Store and Purchased Assets to determine if the Fixed Assets are in satisfactory working condition.

“Liabilities” has the meaning given to it in Section 2.6.

“Leased Property” and “Leased Properties” have the meanings given to them in the Recitals.

“Letter of Credit” has the meaning set forth in Section 12.4.

“Liens” has the meaning given to it in Section 4.7(a).

“Marketable Inventory” refers to items of tangible personal property for sale that are of a quality that is usable and salable and meets all applicable requirements of any applicable law.

“Marks” refers to certain proprietary and other property rights and interests in and to the “JAMBA JUICE®” name and service mark, and such other trademarks, service marks, logo types and commercial symbols as Seller may from time to time authorize for use by either its licensees or franchisees.

“Material Adverse Change” means any effect or change that would be materially adverse to the business of any of the Stores. None of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been, a Material Adverse Change: any material adverse change in (1) general business or economic conditions, excluding such conditions related to the business of a Store, (2) financial, banking, or securities markets (including any disruption thereof and any decline in the price of any security or any market index), excluding markets and market conditions related to Seller or Parent, (3) changes in United States generally accepted accounting principles, (4) changes in laws, rules, regulations, orders or other binding directives issued by any governmental entity (unless such changes affect the smoothie industry or the ability of some or all of the Stores to operate), or (5) the taking of any action contemplated by this Agreement and the other agreements contemplated hereby. Material Adverse Change shall include a Bankruptcy.

“Memorandum of Intent” means that certain Non-Binding Indication of Interest to Purchase JAMBA JUICE® Store dated March 2015 delivered by Buyer to Seller.

“Confidential Information Memorandum” has the meaning given to it in Section 4.6(a).

“Parent” means Jamba, Inc., the parent company of Seller.

“Prime Lease” and “Prime Leases” have the meanings given to them in the Recitals.

“Purchase Price” has the meaning given to it in Section 3.1(a).

“Purchased Assets” has the meaning given to it in Section 2.1.

“Seller” has the meaning given to it in the Caption.

“Seller Indemnified Parties” has the meaning given to it in Section 11.2.

“Seller Parties” has the meaning given to it in Section 11.2.

“Store” and “Stores” have the meanings given to them in the Recitals.

“Sublease(s)” have the meanings given to them in Section 2.3(a).

“System” shall mean the Seller’s business operating methods for a Store, as further defined in the Franchise Agreement.

“Transferred Employees” has the meaning given to it in Section 3.5(a).

“Walkaway Date” has the meaning given to it in Section 10.1.

“WARN” has the meaning given to it in Section 3.5(a).

Exhibit 10.2

First Amendment
to
Asset Purchase Agreement

This First Amendment to Asset Purchase Agreement (this “Amendment”) is made and entered into as of July 28, 2015, by and among Jamba Juice Company, a California corporation (“Seller”), and Vitaligent, LLC, a Delaware limited liability company, or its permitted assigns (“Buyer”).

RECITALS

WHEREAS, Buyer and Seller are all of the parties to that certain Asset Purchase Agreement dated as of April 1^st, 2015 (the “Agreement”); and

WHEREAS, the Closing of the transactions contemplated in the Asset Purchase Agreement has not yet occurred; and

WHEREAS, the parties have engaged in further discussions and negotiations concerning the terms and conditions of the transactions contemplated by the Agreement; and

WHEREAS, the parties now wish to enter into this Amendment to modify the terms and conditions concerning the transactions contemplated by the Agreement.

NOW, THEREFORE, in consideration of the premises, the mutual promises made herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged and agreed, the parties hereby agree as follows:

Agreement

1. Defined Terms. Unless otherwise defined in this Amendment, all capitalized terms shall have the meanings ascribed to such terms in the Agreement, as modified hereby.

2. Purchased Assets.

a. Seller represents and warrants that the revised Section 4.8 of the Disclosure Schedule attached hereto as Exhibit A constitutes the true, complete and accurate list of the Stores.

b. The final period in Section 2.1(ii) is hereby deleted and replaced with “; and” and the following new subsection 2.1(iii) is added to the Agreement immediately thereafter:

(iii) The Change Fund, in an amount equal to $1,200.00, on hand at each Store as of the Effective Time. Seller shall ensure that there is at least $1,200.00 in each Store register at the Effective Time.

3. Purchase Price and Payment. Section 3.1 of the Agreement is hereby deleted in its entirety and replaced with the following:

3.1 Consideration.

(a) The purchase price (the “Purchase Price”) for the Purchased Assets shall be Twenty-Five Million Dollars ($25,000,000). The Purchase Price includes the Initial Fee for each of the Stores otherwise due under any Franchise Agreement.

(b) The Purchase Price shall be paid by Buyer as follows:

(i) An amount equal to $50,000, shall be paid to the Escrow Agent to cover defects in and replacements to the Fixed Assets at these Stores as further described in Section 12.3 (“Fixed Assets Escrow”).

(ii) The delivery by Buyer to Seller of a promissory note, in substantially the form attached hereto as Exhibit 3.1(b), in the original principal amount of Two Million Dollars ($2,000,000) (the “Promissory Note”).

(iii) The balance of the Purchase Price, after the payment in (i) above is made, and reduced by $2,000,000 represented by the original principal amount of the Promissory Note delivered pursuant to (ii) above, shall be paid to Seller by wire transfer of immediately available funds to an account designated by Seller at Closing. The balance shall be adjusted to account for any deficiencies in the Change Fund.

4. Store Refreshes. Section 3.2 of the Disclosure Schedule, as attached to the Agreement, is hereby deleted in its entirety and replaced with the form of Section 3.2 of the Disclosure Schedule attached hereto as Exhibit A.

5. Conditions to Closing. Sections 8.1(e) and 8.1(f) of the Agreement are hereby deleted in their entirety and replaced as follows:

(e) [Intentionally Omitted].

(f) The financing conditions precedent set forth in Section 7.3 shall have been completed as provided in that Section.

6. Closing.

a. Section 10.1 of the Agreement is hereby deleted in its entirety and replaced with the following:

10.1 Time and Place. The parties shall undertake reasonable good faith commercial efforts to effect the transfer of the Purchased Assets by Seller to Buyer (the “Closing”) on or before July 28, 2015, or such other date to which the parties mutually agree (the “Closing Date”), with the Closing to be deemed effective as of 11:59 p.m., Pacific Daylight Time, on the Closing Date (the “Effective Time”). The obligations of the Parties to close or effect the transactions contemplated by this Agreement will be subject to satisfaction, unless duly waived, of the applicable conditions set forth in this Agreement, and, subject to the parties’ termination rights expressly set forth herein, if any said condition is not satisfied or waived, the Closing Date shall be extended until satisfaction of such condition. Notwithstanding the foregoing, if the Closing has not occurred on or before August 31, 2015 (the “Walkaway Date”), then Seller and Buyer shall each have the right at any time after the Walkaway Date, but prior to Closing, to terminate this Agreement pursuant to Section 13.1.

First Amendment to Asset Purchase Agreement

Page 2

b. Section 10.3(a) of the Agreement is hereby deleted in its entirety and replaced with the following:

(a) (i) The cash portions of the Purchase Price pursuant to Sections 3.1(b)(i) and 3.1(b)(iii), by wire transfer of immediately available funds to accounts designated by Seller and the Escrow Agent, and (ii) the executed Promissory Note; and

c. The reference to the Letter of Credit in Section 10.3(b) of the Agreement is hereby deleted.

7. Post-Closing Matters. The last sentence of Section 12.3 of the Agreement is hereby deleted in its entirety and replaced, Section 12.4 of the Agreement is hereby deleted in its entirety and replaced, and a new Section 12.5 is hereby added to the Agreement, in the appropriate order, as follows:

12.3 “The total amount to be reimbursed to Buyer for defects and replacements of Fixed Assets shall not exceed One Hundred Forty-Four Thousand Dollars ($144,000) for all Stores combined.”

12.4 [Intentionally Omitted].

12.5 Easybar Replacements. Within two days after the Closing Date, Seller will reimburse Buyer the amount of Two Hundred and Fifty Thousand Dollars ($250,000) for the expected out-of-pocket expenses to be incurred by Buyer in replacing, not later than May 31, 2016 (the “Deadline”), the Easybar beverage dispensing systems in each of the Stores with sales greater than Seven Hundred Thousand Dollars ($700,000), which shall be calculated based on the trailing twelve months of sales prior to Closing (as identified on Section 4.8 of the Disclosure Schedule or otherwise agreed to in writing between Buyer and Seller), with a Crathco system substantially similar to that used in other stores within the System (as defined in the Franchise Agreement). Such replacement and expenses shall include refinishing each Store such that it meets the then-applicable standards for appearance of such Store set forth in the Franchise Agreement and all applicable health and safety standards.

8. Definitions. Annex 1.1 of the Agreement is hereby amended as follows:

a. The definition of “Change Fund” is hereby deleted in its entirety and replaced as follows:

“Change Fund” means the cash on hand at each Store equal to $1,200.00.

b. The definition of “Letter of Credit” is hereby deleted in its entirety.

c. The definition of “Marketable Inventory” is amended by adding the following at the end thereof: “, and of a quantity that is necessary and appropriate to operate each Store on a day to day basis.”

d. A definition of “Promissory Note” is added as follows:

“Promissory Note” has the meaning given to it in Section 3.1(b)(ii).

First Amendment to Asset Purchase Agreement

Page 3

9. Reaffirmation of Representations and Warranties.

a. Seller hereby reaffirms, and represents and warrants, that the representations and warranties of Seller set forth in Article IV of the Agreement as written as of the date of the Agreement, were, subject to the qualifications set forth on the Disclosure Schedule at such time, true and correct as of the date of the Agreement.

b. Seller hereby represents and warrants that the representations and warranties of Seller set forth in Article IV of the Agreement as modified by this Amendment, are, subject to the qualifications set forth on the Disclosure Schedule attached hereto, true and correct as of the date of this Amendment.

c. Buyer hereby reaffirms, and represents and warrants, that the representations and warranties of Buyer set forth in Article V of the Agreement were true and correct as of the date of the Agreement and are true and correct as of the date of this Amendment.

10. Limited Waivers. Seller acknowledges and agrees that the Initial Financing Contingency Requirement set forth in Section 7.2 of the Agreement has been performed and satisfied, and further waives any right to terminate the Agreement based on the conditions set forth in Section 7.2 of the Agreement. Buyer and Seller further acknowledge and agree that the Agreement has not terminated pursuant to Section 7.2 or Section 7.3.

11. Seller Approval of ShowMe Transaction. The parties acknowledge that, in connection with the transactions contemplated by the Agreement, as modified by this Amendment, at the Closing Buyer desires to acquire direct ownership of ShowMe Smoothie, LLC, a Missouri limited liability company (“ShowMe”) which, directly or indirectly, is the franchisee of JAMBA JUICE® stores in the St. Louis, Missouri and Columbia, Missouri areas, and which has certain area development rights for additional JAMBA JUICE® stores. To the extent required by any agreement(s) by and between Seller and ShowMe or any of ShowMe’s wholly-owned subsidiaries, Seller hereby consents to, and waives any and all rights arising out of, the acquisition of ShowMe by the Buyer as of the Closing.

12. Additional Provisions.

a. Except to the limited extent expressly provided by this Amendment, nothing herein shall constitute a waiver of any provision of, or of any right arising under or pursuant to, the Agreement.

b. Except to the limited extent expressly modified by this Amendment, the Agreement shall remain and continue in full force and effect without modification hereby, and the Agreement, as amended by this Amendment, is hereby ratified and affirmed in all respects.

c. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF CALIFORNIA AS APPLIED TO CONTRACTS THAT ARE EXECUTED AND PERFORMED ENTIRELY IN CALIFORNIA. EACH PARTY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA AND THE U.S. FEDERAL COURTS SITTING IN SAN FRANCISCO COUNTY, CALIFORNIA FOR PURPOSES THEREOF. THE PARTIES AGREE THAT VENUE FOR ANY SUCH PROCEEDING SHALL BE THE STATE AND FEDERAL COURTS LOCATED IN SAN FRANCISCO COUNTY, CALIFORNIA. EACH PARTY TO THIS AMENDMENT WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH ACTION OR PROCEEDING, ANY CLAIM THAT (A) IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (B) THE ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR (C) THE VENUE OF THE ACTION OR PROCEEDING IS IMPROPER.

d. This Amendment may be executed and delivered, by digital, electronic or manual means, in multiple counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

First Amendment to Asset Purchase Agreement

Page 4

IN WITNESS WHEREOF, the parties to this Amendment have duly executed it on the day and year first above written.

“SELLER”			“BUYER”

JAMBA JUICE COMPANY			VITALIGENT, LLC
a California corporation			a Delaware limited liability company

By:			By:
Name:			Name:
Its:			Its:

First Amendment to Asset Purchase Agreement

Page A-1

Exhibit 31.1

CERTIFICATIONS

I, James D. White, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Jamba, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ James D. White
	James D. White
	Chairman of the Board, Chief Executive
	Officer and President
	(Principal Executive Officer)

Date: August 10, 2015

Exhibit 31.2

CERTIFICATIONS

I, Karen L. Luey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Jamba, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Karen L. Luey
	Karen L. Luey
	Chief Financial Officer, Chief Administrative Officer, Executive Vice President and Secretary
	(Principal Financial Officer)

Date: August 10, 2015

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Jamba, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James D. White, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that:

(1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ James D. White
	James D. White
	Chairman of the Board, Chief Executive
	Officer and President

Date: August 10, 2015

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Jamba, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Karen L. Luey, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that:

(1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Karen L. Luey

Karen L. Luey

Chief Financial Officer, Chief Administrative Officer,

Executive Vice President and Secretary

Date: August 10, 2015

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