TiVo 2004 Annual Report Download - page 76

Table of Contents
Index to Financial Statements
On October 8, 2002, the Company entered into an agreement to issue 6,963,788 shares of common stock, 3 year warrants to purchase 1,323,120 shares
of common stock and 4 year warrants to purchase 1,323,120 shares of common stock to institutional investors for $25.0 million in cash. The common stock
and warrant offering price of $3.59 was based on a 3.0% premium to the trailing 10-day average closing price of the Company's common stock ending two
days prior to the closing date. The number of three and four year warrants issued were each based on 19% of the total number of common shares issued to the
institutional investors. The investors were New Enterprise Associates and Crosslink Capital.
This transaction triggered an adjustment to the conversion price of the convertible notes (see Note 9. "Convertible Notes Payable"). Because this
transaction was an issuance of common stock and warrants, the indenture governing the convertible notes required the Company to determine the value
attributed to the common stock, which it calculated by determining the value to be attributed to the warrants by using the Black-Scholes option pricing model
and subtracting the value of the warrants from the total value. The warrants were valued using the Black-Scholes model with a fair market value of the
Company's common stock at the date of issuance of $3.50, a strike price of $5.00, a risk free rate of return of 2.25%, a dividend yield of zero percent, and a
volatility of 50%. Accordingly, the 3 year warrants to purchase 1,323,120 shares of the Company's common stock, which will expire October 7, 2005, were
valued at $1.1 million; and the 4 year warrants to purchase 1,323,120 shares of the Company's common stock, which will expire October 7, 2006, were valued
at $1.4 million, for a total warrant value of $2.5 million or 10% of the total cash proceeds.
The Company, as an incentive to induce conversions of these notes, temporarily reduced the conversion price of the notes pursuant to the terms of the
indenture governing the notes from $3.99 per share to $3.70 per share for the 20 business day period from December 30, 2002 through January 28, 2003. As a
result of the temporarily reduced conversion price, note holders converted $22.7 million in face value of convertible notes payable at the incentive conversion
price of $3.70 per share and the Company issued 6,135,400 shares of common stock as a result of these conversions.
During the fiscal year ended January 31, 2005 the Company issued an aggregate of 1,553,883 shares of common stock as a result of convertible note
holders converting $6.2 million in face value of convertible notes payable at the conversion price of $3.99 per share, in accordance with the terms of the
Convertible Notes Payable Indenture. During the fiscal year ended January 31, 2004 the Company issued 2,506,265 shares of common stock as a result of a
related party convertible noteholder converting $10.0 million in face value of convertible notes payable at the conversion price of $3.99 per share, in
accordance with the terms of the Convertible Notes Payable Indenture. During the fiscal year ended January 31, 2003 the Company issued an aggregate of
275,438 shares of common stock as a result of two convertible note holders converting $1.1 million in face value of convertible notes payable at the
conversion price of $3.99 per share, in accordance with the terms of the Convertible Notes Payable Indenture.
During the fiscal year ended January 31, 2004, the Company also issued 216,760 shares of common stock in exchange for all of the outstanding shares
of Strangeberry (See Note 15.) In addition, the Company issued 108,382 shares of restricted stock to four former employees of Strangeberry, which vest over
2 years based on their continued employment with TiVo Inc.
During the fiscal year ended January 31, 2003, the Company issued 1,012,915 shares of common stock as payment for $4.0 million in accrued
liabilities.
During the fiscal years ended January 31, 2005, 2004, and 2003, the Company issued 434,083 shares, 408,096 shares, and 387,493 shares of common
stock as a result of employee stock purchase plan purchases and 448,086 shares, 1,520,287 shares, and 620,436 shares of common stock as a result of the
exercise of stock options, respectively.
Warrants
In February 2004, Global Alliance Partners exercised two of their three-year warrants to purchase 15,000 shares in a cashless exercise that resulted in
the net issuance of 10,886 shares of the Company's common stock. Additionally, NBC, a related party, exercised their five-year warrant to purchase 490,196
shares in a cashless exercise that resulted in the net issuance of 167,373 shares of the Company's common stock. NBC was issued this warrant in conjunction
with the issuance of the convertible notes payable in August 2001.
DIRECTV was issued 155,941 two-year warrants in April 2002 in conjunction with the Warrant and Registration Rights Agreement. These warrants
were transferred by DIRECTV to their parent company, Hughes Electronics Corporation. In March 2004, Hughes Electronics Corporation exercised warrants
to purchase 149,291 shares in a cashless exercise that resulted in the net issuance of 63,233 shares of the Company's common stock. The remaining 6,650
warrants expired, unexercised on April 16, 2004.
During the fiscal year ended January 31, 2004 there were no new warrants issued. Additionally, no existing warrants were exercised. On December 31,
2003, the AOL Initial Common Stock Warrant B issued on September 13, 2000, to purchase 295,428 shares of the Company's common stock at an exercise
price of $7.29 expired unexercised.
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