TeleNav 2010 Annual Report Download - page 94

TELENAV, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In May 2010, we recorded a stock-based compensation charge in the amount of $2.8 million associated with
options granted in 2006 to our founders which vested upon the closing of our initial public offering.
Commencing in December 2006 until our initial public offering, we generally obtained contemporaneous
valuation analyses prepared by an unrelated third party valuation firm in order to assist us in determining the fair
market value of our common stock. The initial contemporaneous valuation report valued our common stock as of
December 2006. Our most recent contemporaneous valuation report was as of December 31, 2009. Prior to the
completion of our initial public offering, our board of directors has considered these reports when determining
the fair market value of our common stock and related exercise prices of option awards on the date such awards
were granted. We have also used these contemporaneous third party valuations for purposes of determining the
Black-Scholes fair value of our stock option awards and related stock-based compensation expense.
We use the Black-Scholes pricing model to determine the fair value of stock options. The determination of
the fair value of stock-based payment awards on the date of grant is affected by the stock price as well as
assumptions regarding a number of complex and subjective variables. These variables include expected stock
price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-
free interest rates and expected dividends. The fair value of our stock options granted to employees was
estimated using the following weighted-average assumptions:
Fiscal year ended June 30,
2010 2009 2008
Dividend yield .................................................... — — —
Expected volatility ................................................. 74% 72% 61%
Expected term (in years) ............................................ 4.85 4.76 4.69
Risk-free interest rate .............................................. 2.36% 2.46% 3.24%
Weighted average fair value per share at grant date ....................... $4.75 $2.04 $1.07
Dividend yield. We have never declared or paid any cash dividends on our common stock and do not plan to
pay cash dividends in the foreseeable future and, therefore, use an expected dividend yield of zero in the
valuation model.
Expected volatility. Because we were a private entity with no historical data regarding the volatility of our
common stock until our initial public offering and we do not yet have sufficient historical public market trading
data, the expected volatility used is based on the historical volatility of various comparable companies. In
evaluating similarity, we considered factors such as industry, stage of life cycle, revenue and size.
Expected term. The expected term represents the period that our stock-based awards are expected to be
outstanding. For options granted prior to fiscal 2008 the expected term was calculated as the average of the
option vesting and contractual terms. For options granted beginning in fiscal 2008, the expected term was based
on an analysis of our historical exercise and cancellation activity.
Risk-free interest rate. The risk-free rate is based on U.S. Treasury zero coupon issues with remaining terms
similar to the expected term on the options.
At June 30, 2010, the total unrecognized stock-based compensation cost related to employee options was
$8.5 million, net of estimated forfeitures and will be amortized over a weighted-average period of 3.0 years. The
total fair value of stock options that vested during fiscal 2010, 2009 and 2008, was $700,000, $457,000 and
$315,000, respectively.
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