TiVo 2004 Annual Report Download - page 80

Table of Contents
Index to Financial Statements
The following table contains information concerning outstanding stock options for all of the Company's plans as of January 31, 2005:
Number of
Options Outstanding
Range of
Exercise Prices
Weighted Average
Exercise Prices of
Options
Outstanding
Weighted Average
Remaining
Contractual Life
Number of
Options
Outstanding and
Exercisable
Weighted Average
Exercise Prices of
Options
Outstanding and
Exercisable
155,052 $ 0.13 - $ 1.00 $ 0.60 3.81 years 155,052 $ 0.60
2,206,283 $ 2.50 - $ 3.98 $ 3.60 6.48 years 1,677,171 $ 3.52
6,223,563 $ 4.00 - $ 6.94 $ 5.73 7.09 years 3,700,837 $ 5.95
3,518,850 $ 7.13 - $ 9.90 $ 7.74 8.01 years 1,120,461 $ 8.23
1,314,989 $10.14 - $15.88 $10.91 7.50 years 641,683 $11.16
1,434,536 $16.00 - $20.00 $19.19 4.92 years 1,340,114 $19.11
467,750 $20.25 - $27.63 $21.62 5.02 years 467,750 $21.62
246,250 $30.00 - $37.63 $34.44 5.00 years 246,250 $34.44
15,567,273 $ 0.13 - $37.63 $ 8.44 6.92 years 9,349,318 $ 9.48
12. INVESTMENT IN TGC, INC.
On August 9, 2004, the Company acquired a minority interest in TGC, Inc. ("TGC"), a newly formed independent entity. In exchange for the
Company's interest in TGC, it granted TGC a license to certain aspects of its technology for use in The People's Republic of China, Singapore, Hong Kong,
Macau, and Taiwan. The Company accounts for its investment in TGC under the equity method of accounting as it owns less than 50% of TGC's equity. No
gain was recognized by the Company for its interest in TGC. There is significant uncertainty as to the realization of a gain due to the start-up nature of TGC.
Accordingly since the intellectual property licensed had no carrying value on the Company's financial statements, no value has been assigned to the
Company's interest in TGC. This transaction did not have a material effect on the Company's results of operations in fiscal year 2005 as TGC's activity and
financial position were not material.
Through TGC, the Company's management expects to gain access to high quality, low-cost engineering resources for the design and development of
reduced-cost digital video recorder platforms. Management believes that this investment will enable the Company's internal research and development team to
focus on future service-related enhancements and initiatives. Management expects TGC to engage in design, development, and licensing activities related to
reduced-cost digital video recorder platforms and technology. The Company and TGC have agreed to share certain costs and expenses relating to research and
development. Management also expects TGC will pursue opportunities to market TiVo technology in The People's Republic of China, Singapore, Hong
Kong, Macau, and Taiwan. TGC's technology license from TiVo is exclusive for the first five years and non-exclusive to TGC for a perpetual period
afterwards. Subject to certain terms and conditions, this license grants TGC limited access to portions of TiVo's source code and provides for both parties to
exchange improvements to that code during the first five years. The Company will be entitled to royalty payments from TGC in limited circumstances. In
addition, TGC has agreed not to market, without the prior consent of TiVo, any DVR products or DVR services that do not support the TiVo service outside
of the People's Republic of China, Singapore, Hong Kong, Macau, and Taiwan. In the United States, TGC may offer DVR products that support the TiVo
service only to TiVo, authorized TiVo licensees or TiVo approved retail distributors.
At closing, TiVo's preferred share investment accounted for approximately 49.4% of TGC's equity (approximately 44.3% on a fully-diluted basis
assuming the issuance of options to executives of TGC). The remainder of TGC's shareholders include financial investors (including New Enterprise
Associates, a stockholder of TiVo Inc. that has a representative on TiVo's board of directors and holds less then 10% of TGC's equity) and certain members of
TGC's management team who have contributed cash or services in exchange for equity. Initially, the Company will have two seats on TGC's five-member
board of directors. Subject to restrictions and under specific circumstances, the Company also has a limited call right to acquire all of TGC after five years or
upon a change of control of TiVo at a premium to TGC's fair market value. The Company also has the right to acquire at least a majority of TGC in the event
of a TGC initial public offering at the net initial public offering price. TGC is incorporated in the Cayman Islands.
With the approval of the Company's board of directors, Ta-Wei Chien, TiVo's former Senior Vice President, General Manager of TiVo Technologies,
serves as TGC's Chief Executive Officer and Chairman of TGC's board of directors. Mr. Chien resigned from his position at TiVo on August 3, 2004.
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