You should read the following discussion and analysis in conjunction with our financial statements and related notes included elsewhere in this report. Except for historical information, the discussion in this report 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 projected new store openings, 2009 revenue growth rates, global sourcing, distribution strategies 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 year ended December 30, 2008 and in this Quarterly Report on Form 10-Q.

JAMBA, INC. OVERVIEW

Jamba, Inc. ("we", "us", "our" or the "Company"), a Delaware corporation, and its wholly owned subsidiary, Jamba Juice Company, is a leading restaurant retailer of better-for-you food and beverage offerings, including great tasting fruit smoothies, juices, teas, hot oatmeal made with steel cut oats and baked goods. As of July 14, 2009, there were 735 locations consisting of 490 company owned and operated stores ("Company Stores") and 245 franchise stores ("Franchise Stores"). Jamba Juice Company began operations in 1990.

EXECUTIVE OVERVIEW

2009 Second Fiscal Quarter - In Review

In the second quarter of fiscal 2009, we continued to execute on our strategic initiatives. These efforts focused on five key initiatives: building a customer first "operationally focused" service culture; building retail food capability across all four day parts (breakfast, lunch, afternoon, and dinner); accelerating the development of franchise and non-traditional stores; building a licensing growth platform; and continuing to implement a disciplined expense reduction plan.

Some of the most significant events that occurred during the second quarter of fiscal 2009 in furtherance of our business and in each of these areas include:

• In June 2009, we raised $35 million in a convertible preferred stock offering, which allowed us to repay our senior term note and provides us with greater financial flexibility to implement our strategic initiatives (see "Liquidity and Capital Resources" section).

• Building on the success of our steel cut hot oatmeal with fruit, we launched a portfolio of ready-made wraps, sandwiches, salads and California Flatbreads™, as well as cold Fruit Tea Infusions™ in 222 California locations as the first phase of a system-wide roll-out. This food offering seeks to satisfy consumer demand of great tasting, high quality, better-for-you, grab-and-go food for a healthy lifestyle. Like all of the Jamba products, these products contain no artificial flavors, no trans fat, no artificial preservatives and no high fructose corn syrup.

• We launched a refranchising initiative expected to involve up to 150 Jamba Juice store locations primarily outside of California. We expect many of the refranchising transactions to also include a development agreement. As part of this initiative, we sold nine Company Stores in Oregon to an existing franchisee. This refranchising effort helps transition the Company to a more heavily weighted Franchise Store model, grow the Jamba brand outside of California and achieve a more efficient deployment of operational and financial resources.

• Following negotiations during the quarter, we signed a license agreement with The Inventure Group for frozen smoothie kits. This license supplements the previously reported license agreements we have with Nestlé for ready-to-drink beverages, Oregon Ice Cream for frozen novelty products and Think Wow Toys for a Jamba-branded blender for youngsters. We continue to make progress in identifying additional licensing opportunities to extend the Jamba brand into complementary consumer products categories.

• We opened six new Franchise Stores.

• We responded to the economic challenges facing our customers by implementing a number of promotions such as Buy One Get One Free, bundled offerings and discounts. These promotions seek to provide real value to our customers and increase traffic to our stores. We also expanded our efforts to elevate the level of customer service, especially with regard to team member products and sales training. Besides improving the customer experience, this training seeks to increase average check through cross-selling.

Despite the many accomplishments during the second quarter in furtherance of our strategic initiatives, we believe the current recession has negatively impacted our revenue, which is highly dependent on consumer confidence and spending. We have responded to these economic challenges by diligently managing our costs while at the same time taking actions to improve comparable store sales. While we do not expect an immediate recovery in the economic environment, these efforts, together with the continued execution of our strategic initiatives, are designed to improve the Company's performance and position the Company for long-term success.

RESULTS OF OPERATIONS - 12 WEEK PERIOD ENDED JULY 14, 2009 AS COMPARED TO 12
WEEK

PERIOD ENDED JULY 15, 2008 (UNAUDITED)



                                                                 12 Week Period Ended
                                                    July 14,                   July 15,
(In thousands)                                        2009         % (1)         2008         % (1)
Revenue:
Company stores                                      $  81,662       98.2 %     $  96,311       98.3 %
Franchise and other revenue                             1,516        1.8 %         1,654        1.7 %

Total revenue                                          83,178      100.0 %        97,965      100.0 %

Costs and operating expenses:
Cost of sales                                          19,309       23.6 %        25,334       26.3 %
Labor                                                  25,395       31.1 %        31,420       32.6 %
Occupancy                                              10,145       12.4 %        10,556       11.0 %
Store operating                                         9,811       12.0 %        10,760       11.2 %
Depreciation and amortization                           4,344        5.2 %         5,682        5.8 %
General and administrative                              8,185        9.8 %         9,850       10.1 %
Impairment of long-lived assets                         7,548        9.1 %         3,260        3.3 %
Trademark impairment                                       -         0.0 %        82,600       84.3 %
Other operating                                           158        0.2 %         3,370        3.4 %

Total costs and operating expenses                     84,895      102.1 %       182,832      186.6 %

Loss from operations                                   (1,717 )     (2.1 )%      (84,867 )    (86.6 )%

Other income (expense):
Gain from derivative liabilities                        1,432        1.7 %         2,488        2.5 %
Interest income                                            30        0.0 %            59        0.1 %
Interest expense                                       (4,851 )     (5.7 )%         (106 )     (0.1 )%

Total other (expense) income                           (3,389 )     (4.0 )%        2,441        2.5 %

Loss before income taxes                               (5,106 )     (6.1 )%      (82,426 )    (84.1 )%
Income tax expense                                        (17 )      0.0 %        (6,769 )     (6.9 )%

Net loss                                               (5,123 )     (6.1 )%      (89,195 )    (91.0 )%

Preferred stock dividends                                (226 )     (0.3 )%           -         0.0 %

Net loss attributable to common stockholders        $  (5,349 )     (6.4 )%    $ (89,195 )    (91.0 )%

(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 000's)



                                   12 Week        % of            12 Week        % of
                                Period Ended      Total        Period Ended      Total
                                July 14, 2009    Revenue       July 15, 2008    Revenue
 Revenue:
 Company stores                $        81,662      98.2 %    $        96,311      98.3 %
 Franchise and other revenue             1,516       1.8 %              1,654       1.7 %

 Total revenue                 $        83,178     100.0 %    $        97,965     100.0 %

Total revenue decreased 15.1% to $83.2 million for the 12 week period ended July 14, 2009 compared to $98.0 million for the 12 week period ended July 15, 2008. The $14.8 million decrease in total revenue was attributable to a $14.6 million decrease in Company Store revenue and a $0.2 million decrease in franchise and other revenue.

Company Store revenue decreased $14.6 million or 15.2% to $81.7 million compared to $96.3 million for the prior year period. The net decrease in revenue was primarily attributable to a decrease in Company Store comparable sales of 13.7% for the 12 week period ended July 14, 2009 and was also affected by a net decrease of 28 Company Stores since the prior year period, which includes 19 stores that we have refranchised in connection with our refranchising initiative. The number of Company Stores decreased from 518 stores as of July 15, 2008 to 490 stores as of July 14, 2009. Company Store comparable sales represents the change in year-over-year sales for all Company Stores opened for at least 13 full fiscal periods.

Franchise and other revenue decreased $0.2 million to $1.5 million compared to $1.7 million for the prior year period. The number of franchise stores as of July 14, 2009 was 245 as compared to 218 stores as of July 15, 2008. The decrease in franchise and other revenue is primarily due to lower comparable franchise store sales, partially offset by a net increase of 27 franchise stores since the prior year period.

Cost of sales

(in 000's)

                                           % of                           % of
                            12 Week       Company          12 Week       Company
                         Period Ended      Store        Period Ended      Store
                         July 14, 2009    Revenue       July 15, 2008    Revenue
        Cost of sales   $        19,309      23.6 %    $        25,334      26.3 %

Cost of sales is mostly comprised of fruit, dairy and other products used to make smoothies, as well as paper products. Cost of sales decreased $6.0 million or 23.8% to $19.3 million for the 12 week period ended July 14, 2009 compared to $25.3 million for the prior year period. The decrease in cost of sales and decrease as a percentage of Company Store revenue to 23.6% in the second quarter of fiscal 2009 compared to 26.3% in the prior year period was primarily attributable to cost savings initiatives implemented during late fiscal 2008, a shift in product mix and reductions in waste through our food cost system.

Labor

(in 000's)



                                       % of                           % of
                        12 Week       Company          12 Week       Company
                     Period Ended      Store        Period Ended      Store
                     July 14, 2009    Revenue       July 15, 2008    Revenue
            Labor   $        25,395      31.1 %    $        31,420      32.6 %

Labor costs, which include store management salaries and bonuses, hourly team member payroll, training costs and other associated fringe benefits decreased $6.0 million or 19.2% to $25.4 million for the 12 week period ended July 14, 2009 compared to $31.4 million for the prior year period. The $6.0 million decrease was primarily due to optimization of labor scheduling leading to more efficient labor management, a net decrease of 28 Company Stores since the prior year period, a $1.2 million decrease in workers' compensation cost due to improved claims management and lower staffing in stores due to lower average unit sales volumes. Labor cost as a percentage of Company Store revenue decreased to 31.1% in the second quarter of fiscal 2009 compared to 32.6% in the prior year period due primarily to optimization of labor scheduling leading to more efficient labor management partially offset by lower average unit sales volumes in the second quarter of fiscal 2009 as compared to the prior year period.

Occupancy

(in 000's)



                                                               % of                               % of
                                              12 Week         Company            12 Week         Company
                                           Period Ended        Store          Period Ended        Store
                                           July 14, 2009      Revenue         July 15, 2008      Revenue
Rent                                      $         7,954                    $         8,359
Common area maintenance, real estate
taxes, licenses and insurance                       2,191                              2,197

Total occupancy                           $        10,145        12.4 %      $        10,556        11.0 %

Occupancy costs include both fixed and variable portions of rent, real estate taxes, property insurance and common area maintenance charges for all Company Store locations. Occupancy costs decreased $0.5 million or 3.9% to $10.1 million for the 12 week period ended July 14, 2009 compared to $10.6 million for the prior year period. Rent decreased $0.4 million due primarily to a net decrease of 28 Company Stores since the prior year period and benefits from rent reductions we received from certain landlords. The slight decrease in common area maintenance fees, real estate taxes and insurance was primarily attributable to a net decrease of 28 Company Stores, partially offset by increased common area maintenance charges. As a percentage of Company Store revenue, occupancy costs increased to 12.4% in the second quarter of fiscal 2009 compared to 11.0% in the prior year period. This increase as a percentage of Company Store revenue was primarily due to deleverage resulting from lower average unit sales volumes.

Store operating

(in 000's)

                                                % of                           % of
                                 12 Week       Company          12 Week       Company
                              Period Ended      Store        Period Ended      Store
                              July 14, 2009    Revenue       July 15, 2008    Revenue
   Utilities                 $         2,753                $         2,810
   Marketing                           1,851                          2,359
   Repairs and maintenance             1,205                          1,269
   Credit card fees                      926                          1,164
   Other                               3,076                          3,158

   Total store operating     $         9,811      12.0 %    $        10,760      11.2 %

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 decreased $1.0 million or 8.8% to $9.8 million for the 12 week period ended July 14, 2009 compared to $10.8 million for the prior year period. This $1.0 million decrease was primarily attributable to a $0.5 million decrease in marketing expenses as a result of our decision to decrease marketing spend, $0.2 million decrease in credit card processing fees resulting from lower fees, partially offset by higher usage, $0.1 million decrease in repairs and maintenance and $0.1 million net decrease from other store operating expenses such as decreased office supplies expense, decreased printing expenses and decreased contract services as a result of our cost savings initiatives, partially offset by increased donations. As a percentage of Company Store revenue, store operating expenses increased to 12.0% for the second quarter of fiscal 2009 compared to 11.2% in the prior year period. The increase as a percentage of Company Store revenue was primarily attributable to deleverage resulting from lower average unit sales volumes partially offset by reduced expenditures.

Depreciation and amortization

(in 000's)

                                    12 Week        % of            12 Week        % of
                                 Period Ended      Total        Period Ended      Total
                                 July 14, 2009    Revenue       July 15, 2008    Revenue
Depreciation and amortization   $         4,344       5.2 %    $         5,682       5.8 %

Depreciation and amortization expenses include the depreciation and amortization of fixed assets and the amortization of intangible assets. Depreciation and amortization decreased $1.4 million or 23.5% to $4.3 million for the 12 week period ended July 14, 2009 compared to $5.7 million for the prior year period. The $1.4 million decrease is primarily attributable to a net decrease of 28 Company Stores since the prior year period and impairment charges for certain stores taken to date through fiscal 2009 and fiscal 2008. As a percentage of total revenue, depreciation and amortization decreased to 5.2% for the second quarter of fiscal 2009 compared to 5.8% in the prior year period. The decrease in depreciation and amortization as a percentage of revenue is primarily attributable to the net decrease in 28 Company Stores since the prior year period and impairment charges for certain stores taken to date through fiscal 2009 and fiscal 2008, partially offset by deleverage resulting from lower average unit sales volumes.

General and administrative

(in 000's)

                                                12 Week          % of              12 Week          % of
                                             Period Ended        Total          Period Ended        Total
                                             July 14, 2009      Revenue         July 15, 2008      Revenue
Wages and payroll related                   $         5,007                    $         6,390
Outside and contract services                           996                                680
Travel and travel-related                               484                                730
Accounting and legal fees                               386                                983
Share-based compensation                                384                                613
Other                                                   928                                454

Total general and administrative            $         8,185         9.8 %      $         9,850        10.1 %

General and administrative ("G&A") expenses include costs associated with our corporate support center, field supervision, bonuses, outside and contract services, legal and accounting fees, share-based compensation and other. G&A expenses decreased $1.7 million or 16.9% to $8.2 million for the 12 week period ended July 14, 2009 compared to $9.9 million for the prior year period. The $1.7 million decrease was primarily attributable to a $1.4 million reduction of wage and payroll related expenses, resulting from headcount reductions implemented during fiscal 2008 and the non-recurrence of $0.6 million in severance costs related to workforce reductions recorded in the prior year period. Additional contributing factors include a reduction in accounting and legal fees of $0.6 million, a reduction of travel and travel-related expenses of $0.2 million and a reduction of share-based compensation expense of $0.2 million resulting from decreased fair value of options granted and increased stock option cancellations. These decreases were partially offset by increases of $0.3 million from outside and contract services and net increases in other G&A expenses of $0.5 million. As a percentage of total revenue, G&A expenses decreased to 9.8% for the second quarter of fiscal 2009 compared to 10.1% for the prior year period. This decrease was primarily attributable to deleverage resulting from lower average unit sales volumes and decreases in wages and payroll related expenses, travel and travel-related expenses, accounting and legal fees, and share-based compensation, which were partially offset by increases in outside and contract services.

Impairment of long-lived assets

(in 000's)

                                                12 Week          % of              12 Week          % of
                                             Period Ended        Total          Period Ended        Total
                                             July 14, 2009      Revenue         July 15, 2008      Revenue
Impairment of long-lived assets             $         7,548         9.1 %      $         3,260         3.3 %

Long-lived assets are reviewed for impairment when indicators of impairment are present in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). Expected future cash flows associated with an asset, in addition to other quantitative and qualitative analyses, including certain assumptions about expected future operating performance and changes in economic conditions are the key factors in determining undiscounted future cash flows. If the sum of the undiscounted cash flows is less than the carrying value of the asset, we recognize an impairment loss equal to the amount by which the carrying value exceeds the fair value of the asset.

We recorded long-lived asset impairment expense of $7.5 million for the 12 week period ended July 14, 2009 compared to $3.3 million for the prior year period. As a percentage of total revenue, impairment of long-lived assets increased to 9.1% for the 12 week period ended July 14, 2009, compared to 3.3% for the prior year period. The $4.4 million increase in impairment of long-lived assets and increase as a percentage of total revenue for the 12 week period ended July 14, 2009 as compared to the prior year period is attributable to an increase in the number of stores impaired as a result of lower comparable store sales. For more information on our impairment analysis, please refer to the discussion under "Business and Significant Accounting Policies - Impairment of Long-Lived Assets" included within Note 1 in the Notes to the Financial Statements of Jamba, Inc. in our Annual Report on Form 10-K for the year ended December 30, 2008.

Trademark impairment

(in 000's)

                                12 Week        % of            12 Week        % of
                             Period Ended      Total        Period Ended      Total
                             July 14, 2009    Revenue       July 15, 2008    Revenue
     Trademark impairment   $            -        0.0 %    $        82,600      84.3 %

There was no trademark impairment recorded for the 12 week period ended July 14, 2009 as the value of our trademark has been written down to zero. During the 12 week period ended July 15, 2008, $82.6 million was recorded for trademark impairment. In the prior year, we recorded an intangible asset impairment expense related to the impairment of our trademark. SFAS No. 142, requires us to assess our intangible asset amounts for impairment each year, and more frequently if circumstances suggest an impairment may have occurred. The requirements for assessing whether intangible assets have been impaired involve market-based information and some degree of subjective assessment. The fair value is estimated using a discounted cash flow model combined with market valuation approaches. Based on our stock price, negative comparable store sales and our forecast, we determined that an impairment of $82.6 million impairment of our trademark was necessary in the prior year period.

Other operating

(in 000's)

                             12 Week        % of            12 Week        % of
                          Period Ended      Total        Period Ended      Total
                          July 14, 2009    Revenue       July 15, 2008    Revenue
       Other operating   $           158       0.2 %    $         3,370       3.4 %

Other operating expenses consist primarily of store closure and lease termination costs, pre-opening expense, losses on disposals, amortization of jambacard™ liability and income from jambacard™ breakage. Other operating expenses decreased $3.2 million or 95.3% to $0.2 million for the 12 week period ended July 14, 2009 compared to $3.4 million for the prior year period. As a percentage of total revenue, other operating expenses were 0.2% for the second quarter of fiscal 2009 as compared to 3.4% in the prior year period. This $3.2 million decrease and decrease as a percentage of total revenue is primarily attributable to a $2.3 million decrease in store closure and lease termination expenses which was recorded in the prior year as a part of our announced restructuring efforts, a decrease in pre-opening expenses of $0.4 million resulting from no new Company Store openings in the second quarter as compared to 14 Company Store openings in the prior year period and a $0.3 million decrease from loss on disposals. Pre-opening expense was classified as its own . . .