TeleNav 2010 Annual Report Download - page 39

Risks related to being a publicly traded company and holding our common stock
As a public company, we are obligated to develop and maintain effective internal controls over financial
reporting. We may not complete our analysis of our internal controls over financial reporting in a timely
manner, or these internal controls may not be determined to be effective, which may adversely affect investor
confidence in our company and, as a result, the value of our common stock.
We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management
on, among other things, the effectiveness of our internal control over financial reporting for the fiscal year ending
June 30, 2011. This assessment will need to include disclosure of any material weaknesses identified by our
management in our internal control over financial reporting. Our auditors will also have to issue an opinion on
the effectiveness of our internal control over financial reporting.
We are in the very early stages of the costly and challenging process of compiling the system and processing
documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to
complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and
testing process, if we identify one or more material weaknesses in our internal control over financial reporting,
we will be unable to assert that our internal controls are effective. If we are unable to conclude that our internal
control over financial reporting is effective, or if our auditors were to express an adverse opinion on the
effectiveness of our internal controls because we had one or more material weaknesses, we could lose investor
confidence in the accuracy and completeness of our financial reports, which could cause the price of our common
stock to decline.
We are currently subject to securities class action litigation and may be subject to similar litigation in the
future. If the outcome of this litigation is unfavorable, it could have a material adverse effect on our financial
condition, results of operations and cash flows.
On September 2, 2010, a purported stockholder class action was filed by David Smith in the United States
District Court for the Northern District of California (Case No. 3:10-CV-03942-SC) against us, certain of our
officers and directors, and certain of our underwriters for our May 13, 2010 IPO. The complaint purports to be
brought on behalf of all persons who acquired shares of our common stock pursuant to our May 13, 2010 IPO,
traceable to our Form S-1/A Registration Statement and Prospectus filed with the Securities and Exchange
Commission, or SEC, on May 13, 2010. The complaint alleges that we, certain of our officers and directors, and
certain of our underwriters for the IPO violated the Securities Act of 1933, as amended, or the Securities Act, by
issuing the Registration Statement and Prospectus, which the plaintiff alleges contained material misstatements and
omissions in violation of Sections 11 and 15 of the Securities Act. Specifically, the complaint alleges that we failed
to disclose in our May 13, 2010 Registration Statement and Prospectus that we would soon be renegotiating our
current contract with Sprint, our largest customer, which would result in our revenue being reduced. The complaint
seeks class certification, compensatory damages, attorneys’ fees and costs, rescission or a rescissory measure of
damages, equitable and/or injunctive relief, and such other relief as the court may deem proper. We expect that
other purported plaintiffs will file claims in this case. We deny these allegations and believe that our defenses to this
action have merit. We intend to vigorously defend against this action and file a motion to dismiss the complaint.
Due to the preliminary status of the lawsuit and uncertainties related to litigation, we are unable to evaluate the
likelihood of either a favorable or unfavorable outcome. We cannot currently estimate a range of any possible losses
we may experience in connection with this case. Accordingly, we are unable at this time to estimate the effects of
this complaint on our financial condition, results of operations or cash flows.
In the future, especially following periods of volatility in the market price of our shares, other purported
class action or derivative complaints may be filed against us. The outcome of the pending and potential future
litigation is difficult to predict and quantify and the defense of such claims or actions can be costly. In addition to
diverting financial and management resources and general business disruption, we may suffer from adverse
publicity that could harm our brand or reputation, regardless of whether the allegations are valid or whether we
are ultimately held liable. A judgment or settlement that is not covered by or is significantly in excess of our
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