TeleNav 2011 Annual Report Download - page 100

Table of Contents
TELENAV, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
We have agreed to indemnify our directors, officers and certain other employees for certain events or occurrences, subject to certain limits,
while such persons are or were serving at our request in such capacity. We may terminate the indemnification agreements with these persons
upon the termination of their services with us, but termination will not affect claims for indemnification related to events occurring prior to the
effective date of termination. The maximum amount of potential future indemnification is unlimited. We have a directors and officers insurance
policy that limits our potential exposure. We believe the fair value of these indemnification agreements is minimal. We had not recorded any
liabilities for these agreements as of June 30, 2011 and 2010.
8. 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 were outstanding at June 30, 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):
During fiscal 2010 and 2009, we recognized total other expense of $346,000 and $843,000, respectively, 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.
9. Convertible preferred stock and stockholders’ equity (deficit)
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.
96
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
%
—