TeleNav 2011 Annual Report Download - page 41

Table of Contents
We have in the past been subject to securities class action litigation and may be subject to similar litigation in the future. If the outcome of
this litigation is unfavorable, it could have a material adverse effect on our financial condition, results of operations and cash flows.
On September 2, 2010, a purported stockholder class action was filed by David Smith in the United States District Court for the Northern
District of California (Case No. 3:10-CV-03942-SC) against us, certain of our officers and directors, and certain of our underwriters for our
May 13, 2010 initial public offering or IPO, alleging violations of Sections 11 and 15 of the Securities Act. A hearing to approve settlement of
the case will be held in November 2011. The settlement will include a payment of $3.8 million to resolve all claims as to all defendants to the
litigation. The entire settlement amount will be paid by our insurance carrier. We do not anticipate any liability as a result of this matter.
In the future, especially following periods of volatility in the market price of our shares, other purported class action or derivative
complaints may be filed against us. The outcome of potential future litigation is difficult to predict and quantify and the defense of such claims
or actions can be costly. In addition to diverting financial and management resources and general business disruption, we may suffer from
adverse publicity that could harm our brand or reputation, regardless of whether the allegations are valid or whether we are ultimately held
liable. A judgment or settlement that is not covered by or is significantly in excess of our insurance coverage for any claims, or our obligations to
indemnify the underwriters and the individual defendants, could materially and adversely affect our financial condition, results of operations and
cash flows.
We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public
companies, which could harm our operating results.
As a public company, we will incur significant legal, accounting, investor relations and other expenses that we did not incur as a private
company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with
current corporate governance requirements, including requirements under Section 404 and other provisions of the Sarbanes-
Oxley Act, as well as
rules implemented by the SEC and the stock exchange on which our common stock is traded. The expenses incurred by public companies for
reporting and corporate governance purposes have increased dramatically over the past several years. We expect these rules and regulations to
increase our legal and financial compliance costs substantially and to make some activities more time consuming and costly. We are unable
currently to estimate these costs with any degree of certainty. We also expect that, as a public company, it will be more expensive for us to
obtain director and officer liability insurance. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our
board of directors or as our executive officers.
Regulations relating to offshore investment activities by residents of China may limit our ability to acquire Chinese companies and could
adversely affect our business.
In October 2005, SAFE, a Chinese government agency, promulgated “
Relevant Issues Concerning Foreign Exchange Control on Domestic
Residents’ Corporate Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles,” or Circular 75, that states that if
Chinese residents use assets or equity interests in their Chinese entities as capital contributions to establish offshore companies or inject assets or
equity interests of their Chinese entities into offshore companies to raise capital overseas, they must register with local SAFE branches with
respect to their overseas investments in offshore companies. They must also file amendments to their registrations if their offshore companies
experience material events involving capital variation, such as changes in share capital, share transfers, mergers and acquisitions, spinoff
transactions, long term equity or debt investments or uses of assets in China to guarantee offshore obligations. Under this regulation, their failure
to comply with the registration procedures set forth in such regulation may result in restrictions being imposed on the foreign exchange activities
of the relevant Chinese entity, including restrictions on the payment of dividends and other distributions to its offshore parent, as well as
restrictions on the capital inflow from the offshore entity to the Chinese entity.
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