TeleNav 2010 Annual Report Download - page 56

As of June 30, 2010, there was $8.5 million of unrecognized stock-based compensation expense related to
unvested stock option awards, net of estimated forfeitures, that we expect to be recognized over a weighted
average period of 3.0 years, respectively.
We utilize the Black-Scholes option-pricing model to determine the fair value of our stock option awards,
which requires a number of estimates and assumptions. In valuing share-based awards under the fair value
accounting method, significant judgment is required in determining the expected volatility of our common stock
and the expected term individuals will hold their share-based awards prior to exercising. The expected volatility
of our stock is based on the historical volatility of various comparable companies, as we do not have sufficient
historical data with regards to the volatility of our own stock. The expected term of options granted represents the
period of time that options granted are expected to be outstanding. The expected term was based on an analysis
of our historical exercise and cancellation activity. In the future, as we gain historical data for volatility in our
own stock and the actual term for which employees hold our options, the expected volatility and expected term
may change which could substantially change the grant date fair value of future awards of stock options and
ultimately the expense we record. In addition, the estimation of stock awards that will ultimately vest requires
judgment, and to the extent actual results differ from our estimates, such amounts will be recorded as an
adjustment in the period estimates are revised.
For fiscal 2008, 2009 and 2010, we calculated the fair value of options granted to employees using the
Black-Scholes pricing model with 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%
Preferred stock warrants. In January 2006, we issued warrants to purchase 272,684 shares of our Series E
convertible preferred stock. Warrants to purchase 261,323 shares of our Series E convertible preferred stock were
outstanding at June 30, 2008 and 2009 and were classified as a liability on the consolidated balance sheets. The
warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a
component of other income (expense), net. As of December 31, 2009, all remaining outstanding Series E
preferred stock warrants had been exercised and the warrant liability was reclassified to preferred stock.
We recorded charges of $652,000, $843,000 and $346,000 to other income (expense), net for fiscal 2008,
2009 and 2010, respectively, to reflect an increase in the fair value of these warrants. We estimated the fair value
using the Black-Scholes model, which requires the input of highly subjective assumptions.
Provision for income taxes. We use the asset and liability method of accounting for income taxes, whereby
deferred tax asset or liability account balances are calculated at the balance sheet date using current tax laws and
rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances
are provided when necessary to reduce deferred tax assets to the amount that will more likely than not be
realized.
We must make certain estimates and judgments in determining income tax expense for financial statement
purposes. These estimates and judgments occur in the calculation of tax credits, benefits and deductions and in
the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of
revenue and expense for tax and financial statement purposes. Significant changes to these estimates may result
in an increase or decrease to our tax provision in a subsequent period.
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