TeleNav 2010 Annual Report Download - page 66

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carriers for the indemnity demands. For those notices where we have not agreed to provide indemnity or defense
to date, or future demands for indemnity, we may in the future agree to defend and indemnify our wireless
carriers or other partners, irrespective of whether we believe that we have an obligation to indemnify them or
whether we believe our LBS infringe the asserted intellectual property rights. Alternatively, we may reject
certain of our wireless carrier or other partners’ indemnity demands, including the outstanding demands, which
may lead to disputes with our wireless carrier or other partners, negatively impact our relationships with them or
result in litigation against us. Our wireless carrier or other partners may also claim that any rejection of their
indemnity demands constitutes a material breach of our agreements with them, allowing them to terminate such
agreements. If we make substantial payments as a result of indemnity demands, our relationships with our
wireless carrier or other partners are negatively impacted or any of our wireless carrier or partner agreements is
terminated, our business, operating results and financial condition could be materially harmed. To date, we have
not incurred material costs and do not have material liabilities related to such obligations recorded in our
consolidated financial statements.
We have agreed to indemnify our directors, officers and certain other employees for certain events or
occurrences, subject to certain limits, while such persons are or were serving at our request in such capacity. We
may terminate the indemnification agreements with these persons upon the termination of their services with us,
but termination will not affect claims for indemnification related to events occurring prior to the effective date of
termination. The maximum amount of potential future indemnification is unlimited. We have a director and
officer insurance policy that limits our potential exposure. We believe the fair value of these indemnification
agreements is minimal. We have not recorded any liabilities for these agreements as of June 30, 2009 and 2010.
Based upon our historical experience and information known as of June 30, 2010, we do not believe it is
likely that we will have significant liability for the above indemnities at June 30, 2010.
Off-balance sheet arrangements
During fiscal 2008, 2009 and 2010, we did not have any relationships with unconsolidated organizations or
financial partnerships, such as structured finance or special purpose entities, which would have been established
for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Recent accounting pronouncements
In October 2009, the FASB issued its revised standard which supersedes certain guidance with respect to
accounting for revenue arrangements with multiple deliverables. The revised standard changes the determination
of when individual deliverables in a multiple element arrangement may be treated as separate units of accounting
and modifies the manner in which the transaction consideration is allocated across separately identifiable
deliveries. The revised standard is effective for our fiscal year beginning July 1, 2010. We are in the process of
assessing the potential impact, if any, of the revised standard on our financial position, cash flows and results of
operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate sensitivity. The primary objectives of our investment activities are to preserve principal,
provide liquidity and maximize income without significantly increasing risk. Some of the securities we invest in
are subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of
the investment to fluctuate. To minimize this risk, we have historically maintained our portfolio of cash and cash
equivalents in money market funds and certificates of deposit. The risk associated with fluctuating interest rates
is limited to our investment portfolio. A 10% decrease in interest rates in fiscal 2009 and 2010 would have
resulted in a decrease in our interest income of $27,000 and $11,000, respectively. As of June 30, 2010, our cash
and cash equivalents were in interest bearing money market funds and non-interest bearing bank checking
accounts.
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