TeleNav 2014 Annual Report Download - page 32

Table of Contents
Our lengthy sales cycle makes it difficult for us to predict when we will generate revenue from automobile manufacturer and OEM
customers.
Being selected to participate and being designed into new vehicle models is a lengthy and time consuming process and our navigation
services platform may not be included for factors beyond our control if we are participating in the vehicle design with an OEM. Because of these
lengthy cycles, we may experience delays from the time we begin the sales process and incur increased costs and expenses to obtain a partner as
a customer and integrate our navigation services platform until the time we generate revenue from such wireless carrier, OEM or automobile
manufacturer. These delays may make it difficult to predict when we will generate revenue from new customers. For example, we announced in
January 2014 that we entered into an agreement with a top five global automobile manufacturer but we do not anticipate generating revenue
related to the sale of vehicles under this agreement until model year 2017 vehicles come to market.
A large percentage of our research and development operations are conducted in China and Romania, and our ability to introduce new
services and support our existing services cost effectively depends on our ability to manage those remote development sites successfully.
Our success depends on our ability to enhance our current services and develop new services and products rapidly and cost effectively. A
majority of our research and development personnel are in China and Romania. Although we have sought to retain certain key personnel, we
may be unable to retain them over the long-term. In addition, we have been experiencing significant increases in compensation costs in China
due to competitive market conditions for qualified staff, as well as higher risk of employee turnover in certain China markets.
We also expect that we may continue to consolidate certain of our operations or reduce our workforce if we are unable to sustain our
current revenue due to the decline in wireless carrier revenue. These reorganizations or reductions in force could result in unexpected costs or
delays in product development that could impair our ability to meet market windows or cause us to forego certain new product opportunities.
Because our long term success depends on our ability to increase the number of end users located outside of the United States, our business
will be susceptible to risks associated with international operations.
As of June 30, 2014 , we had international operations in China, Mexico, Brazil, Germany and Romania. Our experience with wireless
carriers, automobile manufacturers and OEMs and advertisers outside the United States is limited. Our revenue from customers in the United
States comprised 94% and 92% of our total revenue for fiscal 2014 and 2013, respectively. Our limited experience in operating our business
outside the United States increases the risk that our current and future international expansion efforts may not be successful. In particular, our
business model may not be successful in particular countries or regions outside the United States for reasons that we currently do not anticipate.
In addition, conducting international operations subjects us to risks that we have not generally faced in the United States. These include:
The occurrence of any one of these risks could negatively affect our international business and, consequently, our operating results.
Additionally, operating in international markets requires significant management attention and financial resources. We cannot be certain that the
investment and additional resources required to establish, acquire or integrate operations in other countries will produce desired levels of revenue
or profitability and we may incur larger losses as a result.
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fluctuations in currency exchange rates;
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unexpected changes in foreign regulatory requirements;
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difficulties in managing the staffing of remote operations;
• potentially adverse tax consequences, including the complexities of foreign value added tax systems, foreign tax withholding,
restrictions on the repatriation of earnings and changes in tax rates;
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dependence on foreign wireless carriers with different pricing models;
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roaming charges to end users;
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availability of reliable mobile networks in those countries;
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requirements that we comply with local telecommunication regulations and automobile hands free laws in those countries;
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the burdens of complying with a wide variety of foreign laws and different legal standards;
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increased financial accounting and reporting burdens and complexities;
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political, social and economic instability in some jurisdictions;
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terrorist attacks and security concerns in general; and
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reduced or varied protection for intellectual property rights in some countries.