TiVo 2005 Annual Report Download - page 77

Table of Contents
The total value of the warrants issued to convertible noteholders in the private placement was $9.6 million and was recorded as a discount on the
convertible notes payable. This discount was amortized to interest expense and other and accreted to the carrying value of the convertible notes payable over
the five-year life of the notes payable or upon conversion, if earlier.
The convertible notes carried a coupon interest rate of 7%. The effective interest rate of the convertible notes, including coupon interest and
amortization of discount, amortization of the beneficial conversion amount and amortization of prepaid debt issuance costs was approximately 58%. The
discount, the beneficial conversion amount and prepaid issuance costs were amortized using the straight-line method over the term of the notes or upon
conversion, if earlier, which approximates the effective interest rate method.
During the fiscal year ended January 31, 2004, the Company issued 2,506,265 shares of common stock as a result of one convertible noteholder, a
related party, converting $10.0 million in face value of convertible notes payable-related parties at the conversion price of $3.99 per share, in accordance with
the terms of the Convertible Notes Payable Indenture.
On November 26, 2004, the Company notified by mail the registered holders of its convertible notes payable that it elected to exercise its option to
redeem all remaining unconverted outstanding notes payable by the redemption date of January 25, 2005.
On January 24, 2005, the Company issued 1,127,819 shares of common stock to a noteholder upon conversion of $4,500,000 aggregate principal
amount of its convertible notes at the then current conversion price of $3.99 per share. Prior to January 24, 2005, on December 21, 2004 and January 19,
2005, the Company had issued 125,313 and 300,751 shares of common stock to two noteholders upon conversion of, respectively, $500,000 and $1,200,000
aggregate principal amounts of their convertible notes at the then current conversion price of $3.99 per share. The issuance of these shares of common stock
was exempt from registration pursuant to Section 3(a)(9) of the Securities Act. On January 25, 2005, the Company redeemed for cash the remaining
$4,250,000 outstanding 7% convertible senior note at a redemption price equal to the aggregate principal amount plus accrued interest up to, but not
including, the redemption date of January 25, 2005. There were no notes outstanding following the redemption date.
During the fiscal year ended January 31, 2006, certain institutional investors exercised three-year warrants to purchase 1,323,120 shares in a cashless
exercise that resulting in the net issuance of 338,190 shares of the Company's common stock.
Interest expense and other for the year ended January 31, 2005 includes coupon interest expense of $572,000; amortization of the discount pertaining to
the value of the warrants issued on convertible notes payable of $1.1 million; and amortization of the discount pertaining to the value of beneficial conversion
of $3.4 million. Interest expense and other for the year ended January 31, 2004 includes coupon interest expense of $732,000; amortization of the discount
pertaining to the value of the warrants issued on convertible notes payable of $388,000; and amortization of the discount pertaining to the value of beneficial
conversion of $1.4 million.
Interest expense and other-related parties for the year ended January 31, 2005 was zero. Interest expense and other-related parties for the year ended
January 31, 2004 includes coupon interest of $669,000; amortization of the discount pertaining to the value of the warrants issued on convertible notes
payable-related parties of $1.2 million; which includes accelerated amortization of $878,000 due to conversions of notes payable – related parties during the
year; and amortization of the discount pertaining to the value of the beneficial conversion of $4.8 million, which includes accelerated amortization of $3.6
million due to conversions of notes payable – related parties during the year.
Amortization of the discount resulting from the issuance of warrants to noteholders on convertible notes payable and convertible notes payable-related
parties was $1.1 million and $1.6 million for the years ended January 31, 2005 and 2004, respectively.
Amortization of the discount pertaining to the value of the beneficial conversion of the convertible notes payable and convertible notes payable-related
parties was $3.4 million and $6.2 million for the years ended January 31, 2005 and 2004, respectively.
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