TeleNav 2013 Annual Report Download - page 37

Table of Contents
the sale of our service in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources
away from our development efforts, any of which could adversely affect our business, operating results and financial condition.
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 control over financial reporting. We may not always complete
our assessment of the effectiveness of our internal control over financial reporting in a timely manner, or such internal control 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.
The Sarbanes-Oxley Act requires that we test our internal control over financial reporting and disclosure controls and procedures annually. For
example, as of June 30, 2013, we performed system and process evaluation and testing of our internal control over financial reporting to allow
management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as
required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 requires that we incur substantial expense and expend
significant management time on compliance-related issues. Moreover, if we are not able to comply with the requirements of Section 404 in the
future, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are
deemed to be material weaknesses, the market price of our stock may decline and we could be subject to sanctions or investigations by the NASDAQ
Global Market, the SEC or other regulatory authorities, which would require significant additional financial and management resources.
We will incur continued high costs and demands upon management as a result of complying with the laws and regulations affecting public
companies, which could harm our operating results.
As a public company, we incur significant legal, accounting, investor relations and other expenses, including costs associated with public
company reporting requirements. We also have incurred and will incur costs associated with current corporate governance requirements, including
requirements under Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the stock exchange on
which our common stock is traded. We are generally not eligible to report under reduced disclosure requirements or benefit from longer phase in
periods for “emerging growth companies” as such term is defined in the Jumpstart Our Business Act of 2012. The expenses incurred by public
companies for reporting and corporate governance purposes have increased dramatically over the past several years. We expect these rules and
regulations to continue to impact our legal and financial compliance costs substantially and to make some activities more time consuming and costly.
We are unable currently to estimate these costs with any degree of certainty. We also expect that, over time, it may be more expensive for us to
obtain director and officer liability insurance. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our
board of directors or as our executive officers if we cannot provide a level of insurance coverage that they believe is adequate.
Regulations relating to offshore investment activities by residents of China may limit our ability to acquire Chinese companies and could
adversely affect our business.
In October 2005, SAFE, a Chinese government agency, promulgated “Relevant Issues Concerning Foreign Exchange Control on Domestic
Residents’ Corporate Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles,” or Circular 75, that states that if Chinese
residents use assets or equity interests in their Chinese entities as capital contributions to establish offshore companies or inject assets or equity
interests of their Chinese entities into offshore companies to raise capital overseas, they must register with local SAFE branches with respect to their
overseas investments in offshore companies. They must also file amendments to their registrations if their offshore companies experience material
events involving capital variation, such as changes in share capital, share transfers, mergers and acquisitions, spinoff transactions, long term equity or
debt investments or uses of assets in China to guarantee offshore obligations. Under this regulation, their failure to comply with the registration
procedures set forth in such regulation may result in restrictions being imposed on the foreign exchange activities of the relevant Chinese entity,
including restrictions on the payment of dividends and other distributions to its offshore parent, as well as restrictions on the capital inflow from the
offshore entity to the Chinese entity.
We attempt to comply, and attempt to ensure that our stockholders who are subject to Circular 75 and other related rules comply, with the
relevant requirements. However, we cannot provide any assurances that all of our stockholders who are Chinese residents have complied or will
comply with our request to make or obtain any applicable registrations or comply with other requirements required by Circular 75 or other related
rules. Any future failure by any of our stockholders who is a Chinese resident, or controlled by a Chinese resident, to comply with relevant
requirements under this regulation could subject us to fines or sanctions imposed by the Chinese government, including restrictions on our Chinese
subsidiary’s ability to pay dividends or make distributions to us.
If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our
stock could decline.
31