TeleNav 2010 Annual Report Download - page 91

TELENAV, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
6. Preferred stock warrants
In January 2006, we issued warrants to purchase 272,684 shares of Series E convertible preferred stock at an
exercise price of $3.300492 per share. The warrants, which expired in December 2009, were issued in connection
with the December 2004 issuance of $6,000,000 in convertible notes payable. The fair value of the warrants was
calculated using the Black-Scholes valuation model and was amortized to interest expense from the date of the
issuance of the convertible notes payable in December 2004 through January 2006, the date the notes were
converted to Series E convertible preferred stock. Warrants to purchase 11,361 shares were exercised in 2008,
and warrants to purchase 261,323 shares remained outstanding at June 30, 2008 and 2009. All remaining
outstanding warrants were exercised for cash consideration totaling $862,000 as of December 31, 2009.
The preferred stock warrants were classified as liabilities in our consolidated balance sheets and were
subject to remeasurement at each balance sheet date, with the change in fair value recognized as a component of
other income (expense), net. The following table summarizes the related charge to other income (expense), net
and the assumptions used to determine the fair value of the warrants at each balance sheet date (dollars in
thousands, except per share amounts):
Black-Scholes pricing model
Total
expense
Fair value
per share
Remaining
contractual
term
Expected
volatility
Risk-free
interest rate
Assumed
dividends
Fiscal 2010 ............................ $346 $ — — — % — % —
Fiscal 2009 ............................ $843 $9.61 0.5 75% 0.35% —
Fiscal 2008 ............................ $652 $6.38 1.5 60% 2.50% —
During fiscal 2010, we recognized total other expense of $346,000 to reflect the change in fair value of
preferred stock warrants. As of December 31, 2009, all remaining outstanding warrants had been exercised and a
total of $2.9 million was reclassified from warrant liability to preferred stock.
7. Convertible preferred stock and stockholders’ equity
Reverse Stock Split
In December 2009, our stockholders approved an amendment to our certificate of incorporation to effect a
one for 12 reverse stock split of our common and preferred stock. The record date for the reverse stock split was
April 15, 2010, the date the amendment to our certificate of incorporation was filed with the Delaware Secretary
of State. The par value and the authorized shares of the common and convertible preferred stock were not
adjusted as a result of the reverse stock split. The conversion ratios of each series of convertible preferred stock
were adjusted accordingly. The reverse stock split is reflected in the accompanying consolidated financial
statements and related notes on a retroactive basis for all periods presented.
Convertible preferred stock
In connection with our initial public offering in May 2010, our previously authorized and outstanding
convertible preferred stock was converted into common stock. All of our convertible preferred stock outstanding
converted into 23,345,247 shares of common stock based on the shares of convertible preferred stock outstanding
and we issued 636,139 shares of our common stock in the form of a stock dividend to the holders of our Series E
convertible preferred stock upon the completion of the initial public offering. Holders of Series E convertible
preferred stock were each entitled to receive cumulative dividends, payable in cash or stock at our option, at the
rate of $0.13272 per share per annum. The cumulative dividend became a fixed amount without further
cumulation as of April 15, 2010.
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