Telenav
Annual Report 2017

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended June 30, 2017or ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the transition period from to Commission file number: 001-34720 TELENAV, INC.(Exact name of registrant as specified in its charter) Delaware 77-0521800(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification Number)4655 Great America Parkway, Suite 300Santa Clara, California 95054(Address of principal executive offices) (Zip Code)(408) 245-3800(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $.001 Par Value per ShareThe NASDAQ Global MarketSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933, as amended. Yes ☐ No ýIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, asamended. Yes ☐ No ýIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes ý No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes ý No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth" companyin Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ýNon-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☐Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with anynew or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of December 30, 2016, the last businessday of the registrant’s most recently completed second fiscal quarter, was approximately $208 million (based on a closing sale price of $7.05 per share asreported for the NASDAQ Global Market). For purposes of this calculation, shares of common stock held by officers and directors and shares of common stockheld by persons who hold more than 10% of the outstanding common stock of the registrant have been excluded from this calculation because such personsmay be deemed to be affiliates. This determination of executive officer or affiliate status is not necessarily a conclusive determination for other purposes.The number of shares of the registrant’s Common Stock, $.001 par value per share, outstanding as of June 30, 2017 was 43,946,228.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive Proxy Statement relating to its 2017 Annual Meeting of Stockholders are incorporated by reference into Part III ofthis Form 10-K where indicated. Such Proxy Statement will be filed with the United States Securities and Exchange Commission within 120 days after theend of the fiscal year to which this Report relates.Table of ContentsTELENAV, INC.FORM 10-KTABLE OF CONTENTS PagePART I ITEM 1.BUSINESS1ITEM 1A.RISK FACTORS12ITEM 1B.UNRESOLVED STAFF COMMENTS33ITEM 2.PROPERTIES33ITEM 3.LEGAL PROCEEDINGS33ITEM 4.MINE SAFETY DISCLOSURES34 PART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES34ITEM 6.SELECTED FINANCIAL DATA35ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS37ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK63ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA63ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE63ITEM 9A.CONTROLS AND PROCEDURES63ITEM 9B.OTHER INFORMATION66 PART III ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE66ITEM 11.EXECUTIVE COMPENSATION66ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS66ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE66ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES66 PART IV ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES67 Table of ContentsSpecial Note Regarding Forward-looking Statements and Industry DataThis Annual Report on Form 10-K, or this Form 10-K, contains forward-looking statements that are based on our management's beliefs and assumptions and on informationcurrently available to our management. The forward-looking statements are contained principally in the sections entitled “Risk factors,” “Management's discussion and analysis offinancial condition and results of operations,” and “Business.” Forward-looking statements include information concerning our possible or assumed future results of operations,business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of competition. Forward-looking statements includestatements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,”“potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms.Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to bematerially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in “Riskfactors” and elsewhere in this Form 10-K. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statementsrepresent our management's beliefs and assumptions only as of the date of this Form 10-K.Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from thoseanticipated in these forward-looking statements, even if new information becomes available in the future. You should read this Form 10-K completely and with the understandingthat our actual future results may be materially different from what we expect.Corporate informationOur predecessor company, TeleNav, Inc., incorporated in the State of Delaware in 1999 and we incorporated in the State of Delaware in 2009 as TNAV Holdings, Inc.Pursuant to stockholder approvals received in December 2009, our predecessor company merged with and into us on April 15, 2010. As the entity surviving the merger, uponcompletion of the merger, we changed our name to TeleNav, Inc. In November 2012, we changed our name to Telenav, Inc. Our executive offices are located at 4655 GreatAmerica Parkway, Suite 300, Santa Clara, California 95054, and our telephone number is (408) 245-3800. Our website address is www.telenav.com. The information on, or thatcan be accessed through, our website is not part of this Form 10-K.We file or furnish periodic reports, including our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K, our proxystatements and other information with the Securities and Exchange Commission, or the SEC. Such reports, proxy statements and other information may be obtained by visiting thePublic Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549, by calling the SEC at 1-800-SEC-0330 or by sending an electronic message to the SEC atpublicinfo@sec.gov. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers thatfile electronically. Our reports, proxy statements and other information are also made available, free of charge, on our investor relations website athttp://investor.telenav.com/financials.cfm as soon as reasonably practicable after we electronically file such information with the SEC. The information posted on our website is notincorporated into this Form 10-K.In this Form 10-K, "Telenav," “we,” “us” and “our” refer to Telenav, Inc. and its subsidiaries.The names Chatbaka™, Geobehavioral™, Geocookie®, HopOver™, LivingMap™, Location Index ™, Location Score ™, ONMYWAY®, RealReach™, RoadSense™,Scout®, Scout GPS Link™, Sipity®, skobbler®, Situational Targeting™, Telenav®, Telenav GPS Navigator™, Telenav Navigator™, Telenav Scout™, Thinknear®, ThinknearGeoVideo™, ThinkPolitical™TrueDelta™, and TurnStream™, as well as the Telenav, Scout, skobbler and Thinknear logos are our trademarks. All other trademarks and tradenames appearing in this Form 10-K are the property of their respective owners.iiTable of ContentsPART I.ITEM 1.BUSINESSOverviewTelenav is a leading provider of connected car and location-based platform products and services. We utilize our automotive navigation platform andour advertising platform to deliver these products and services. Our automotive navigation platform allows us to deliver enhanced location-based services toautomobile manufacturers, as well as original equipment manufacturers and tier one suppliers, to which we refer collectively as OEMs. Our advertisingplatform, which we provide through our Thinknear subsidiary, delivers highly targeted advertising services leveraging our location expertise for advertisersand advertising agencies. We report operating results in three business segments: automotive, advertising and mobile navigation. Our fiscal year endsJune 30. In this Form 10-K, we refer to the fiscal years ended June 30, 2015, 2016 and 2017 and ending June 30, 2018 as fiscal 2015, fiscal 2016, fiscal 2017and fiscal 2018, respectively. Our total revenue was $160.2 million in fiscal 2015, $183.3 million in fiscal 2016 and $169.6 million in fiscal 2017. Our netloss was $23.1 million in fiscal 2015, $35.3 million in fiscal 2016 and $47.3 million in fiscal 2017.Our legacy mobile navigation business has declined steadily since fiscal 2013, and we expect it to continue to decline and represent less than 10% ofour consolidated revenue commencing in the first quarter of fiscal 2018. Telenav began offering its mobile navigation services in 2003. Our mobilenavigation business generates revenue from our partnerships with wireless carriers who sell our navigation services to their subscribers either as a standaloneservice or in a bundle with other data or services. The mobile navigation business has declined both in absolute dollars and as a percentage of revenue from$116.4 million, or 61% of our revenue, in fiscal 2013 to $19.0 million, or 11% of our revenue, in fiscal 2017, as subscriptions for paid navigation servicesdeclined in favor of free or freemium navigation services offered by our competitors with greater resources and name recognition, such as Google and Apple.We have experienced and anticipate that we will continue to experience the non-renewal of our agreements for these services by our wireless carriercustomers as demand from their subscribers declines. In the event our mobile navigation business ceases to be profitable or we determine that it divertsresources from strategic growth areas of our business, we may ultimately elect to terminate our legacy wireless carrier mobile navigation business.We derive revenue primarily from automobile manufacturers and OEMs, advertisers and advertising agencies. We receive revenue from automobilemanufacturers whose vehicles contain our proprietary software and are able to access our personalized navigation services and OEMs who provide largersystems in which our automotive navigation services are integrated. These manufacturers and OEMs generally do not provide us with any volume or revenueguarantees. In addition, we have a growing business in mobile advertising where our customers are primarily advertising agencies, which represent nationaland regional brands, and channel partners, which work closely with local and small business advertisers.For our automotive segment customers, we offer our automotive and mobile navigation platform products and services to vehicle manufacturers andOEMs for distribution with vehicles. We believe our history as a supplier of cloud-based navigation services combined with our proven track record ofworking closely with these automobile manufacturers and OEMs provides a unique advantage in the automotive navigation marketplace over ourcompetitors. We offer traditional navigation products that are built into the vehicle, which we refer to as on-board, connected navigation services that use ourmobile phone-based wireless connectivity, which we refer to as brought-in, and hybrid solutions that contain both on-board and connected functionality. Weprovide our automotive navigation products and services to automobile manufacturers such as Ford Motor Company and affiliated entities, or Ford, whichrepresented 69% of our revenue in fiscal 2017, General Motors Holdings and its affiliates, or GM, and Toyota Motor Corporation, or Toyota.We believe our advertising delivery platform offers significant audience reach, sophisticated targeting capabilities and the ability to deliver interactiveand engaging ad experiences to consumers on their mobile devices. We are experts in location-based advertising and believe we offer differentiated value tobrick-and-mortar and brand advertisers through our location targeting capabilities. Our technology focuses on managing the complexity and scale associatedwith mobile location data to deliver better mobile campaigns for our advertising partners. We deliver mobile advertisements by leveraging our proprietary in-house ad serving technology. Our inventory, or accessible market, is comprised of thousands of mobile applications and mobile websites that are accessedthrough advertising exchanges using programmatic real-time bidding, or RTB, tools.1Table of ContentsAutomotive NavigationIndustry backgroundWe believe the automobile industry is undergoing a significant change in the way that it develops and acquires technology for vehicles. This shift isimpacting automobile manufacturers and OEMs. Historically a car included a collection of relatively distinct functional capabilities, for example the radio,the air conditioning system and the braking system. Each system operated independently and thus could be provided by a different OEM or third partysupplier. More recently, this piece-by-piece approach to assembling cars has been replaced with a much more comprehensive and systematic approach, whichintegrates a number of technology solutions within a vehicle. This transition is evident in the changes to in-car infotainment solutions, from whichconsumers are demanding better integrated and more feature rich experiences. This transition has impacted the delivery of navigation services in passengervehicles. For instance, automobile manufacturers are introducing lower priced navigation units as a central component of on-board entertainment andinformation systems rather than as standalone units and are making navigation standard on more vehicles. Furthermore, enhanced integrated premiumnavigation solutions extend beyond traditional navigation units by combining audio and voice capabilities with wireless network connectivity to deliverreal time location services, such as traffic, weather information and other connected data.Automotive navigation systems are typically on-board or brought-in. On-board navigation systems represent the traditional products with all keynavigation elements of the system residing in the car as a self-contained application along with the related software and content, and the system does notrequire access to the Internet or wireless networks to function. Brought-in systems utilize mobile phone-based wireless connectivity, but use the car's internalelectronic systems including the video screen and audio capabilities. In some cases, the on-board service is enhanced by the delivery of certain “live” dataand connected functionality, such as real-time traffic conditions, cloud search, and/or cloud routing delivered wirelessly to the on-board system for display,which results in a type of hybrid service capability.Industry challengesThe automobile industry is experiencing significant consumer demand for in-car connected services resulting from the availability of mobile phone-based Internet services which have reset consumer expectations. For example, on-board navigation systems are limited to the vehicle in which they areinstalled. The mapping and POI data is loaded when the vehicle is manufactured and requires time, cost and effort to update through a visit to a dealer or viaan SD card and more recently, through updates provided using Wi-Fi capabilities. These on-board systems have typically been sold as an optional feature fora one-time charge with limited adoption by consumers. Automobile manufacturers that can enhance the in-car experience with mobile connectivity andimproved infotainment capabilities are finding greater acceptance from consumers, but the delivery of these capabilities is technically challenging and not atraditional part of the automobile manufacturer's capabilities. This challenge is driving automobile manufacturers to seek new partners to create differentiatedin-car experiences. Automobile manufacturers and OEMs want to provide connected navigation services in a way that can be used safely by the driver“keeping hands on the wheel and eyes on the road” and effectively integrate with large in-vehicle display or vehicle speakers, voice recognition and locationsensors. In addition, the automobile industry has seen the recent introduction of brought-in platforms and products such as Apple's CarPlay and Google's autoinitiatives, including Open Automotive Alliance, which take control of the product and platform away from the automobile manufacturer or OEM and coulddiminish brand loyalty to the automobile manufacturer.Our competitive strengthsAutomobile manufacturers procure the various elements of each car that they manufacture from a number of suppliers directly and through OEMs. Wework directly with automobile manufacturers such as Ford, GM and Toyota, as well as through OEMs. Our strong track record as a connected andpersonalized navigation services provider to mobile phones and our history of working with large wireless carriers has provided us with skills and technologythat are well suited to meet the demands faced by today's automobile manufacturers and OEMs. The sales cycle for automotive navigation systems is long,consultative and requires direct and continuous engagement with the automobile manufacturer and OEMs to succeed in securing business. Often theautomobile manufacturer uses the sales process to help it to define the ultimate product that it chooses to deliver to its end users in a way that not onlyenhances customer experience but also allows the automobile manufacturer to differentiate itself from the competition. We believe that our success withbrought-in and on-board navigation at Ford, GM and Toyota, and the continuing shift in emphasis to connected services has demonstrated the strength of ourofferings to other automobile manufacturers and OEMs. Our ability to bring innovative in-car user experiences that are optimized for the driving experiencesets us apart from other providers of phone based offerings, such as Apple's CarPlay and Google's Android Auto.2Table of ContentsOur automotive services and productsWe entered the automotive navigation services business in fiscal 2008, initially with Ford, and our first brought-in navigation product was launched inFord's model year 2010 vehicles. Since that time, we have been working with Ford and other automobile manufacturers and OEMs to provide our mobilenavigation services and products worldwide through on-board and brought-in systems. Our technology powers automotive navigation services and productsthat provide accurate, easy to use and connected navigation services to drivers at a low cost.Our primary automotive customer to date, Ford, currently distributes our on-board product as a standard or optional feature with its models. Ourautomotive products are now included in Ford models manufactured and sold in North America, Europe and China, as well as distributed in models sold inSouth America, Australia and New Zealand. Ford Europe and Ford Australia and New Zealand also offer a map update program under which Ford owners inEurope with SYNC® 3 and in Australia and New Zealand with SYNC® 2 or SYNC 3 are eligible to receive annual map updates at no additional cost throughthe contractual period. See "Management's Discussion and Analysis of Results of Operations - Recent Developments - Ford Map Updates." Most recently, weannounced that Ford has chosen Telenav to provide connected services globally for Ford’s SYNC 3 platform starting with select model year 2018 vehicles.We have agreements with GM that include our brought-in services for GM's vehicles as well as integration of our on-board and connected navigationsolutions in its vehicles. Our brought-in services for GM vehicles include GM's OnStar RemoteLink® and associated branded mobile applications poweredby our location-based services platform, which includes mapping and one-box search. GM recently added new branding to the provisioning of this servicewhich included MyBuick, MyCadillac, MyChevrolet and MyGMC, or the MyBrand applications. GM also offers a localized version of its OnStarRemoteLink in Europe for GM's Opel and Vauxhall brands. GM recently sold its Opel and Vauxhall brands to PSA Group on August 1, 2017.In November 2016, we were selected to provide entry level on-board navigation through LG Electronics, Inc., or LG, a Tier 1 supplier for GM's selectline of vehicles, for the European market. This solution launched in in Opel's Adam and Corsa model vehicles in 2017. These products are expected to bemade available in select vehicles for model years 2018 to 2022.In February 2017, GM launched its first model featuring integration of our on-board and connected navigation solution, the 2017 Cadillac CTS andCTS-V. Due to specified future obligations in connection with the model year 2017 launch, we did not recognize any revenue from GM on-board andconnected navigation solutions in fiscal 2017, although we did experience an increase in deferred revenue. Our on-board and connected navigation solutionis scheduled to become available in additional regions and GM models for model year 2018 and 2019. In May 2017, GM extended its partnership withTelenav to provide GM's next generation on-board and connected navigation solution on select cars for model years 2020 to 2025.We have a partnership with Toyota for brought-in navigation services where our Scout GPS Link mobile application is available in Entune® AudioPlus equipped Toyota vehicles in the United States and in certain of its Lexus models equipped with Lexus Display Audio multimedia. Toyota and Lexusvehicles enabled to connect with our Scout GPS Link began shipping in August 2015 and September 2016, respectively. In January 2017, Telenav and XevoInc. announced that Scout GPS Link and Xevo™ Engine Link were chosen to provide brought-in navigation services, including a fully interactive movingmap, for select model year 2018 Toyota vehicles equipped with Entune 3.0, as well as certain Lexus vehicles. Our fully interactive solution is expected tobecome available for model years 2018 to 2023. We anticipate that Toyota and Lexus will offer both our current solution and the new fully interactivesolution in model year 2018 vehicles, with the availability of each solution dependent upon the Toyota and Lexus model and trim level. Toyota hasannounced that the 2018 Camry will be the first model to be offered with the fully interactive solution.In August 2017, Daimler selected Telenav’s enhanced OSM platform and navigation SDK to power its Mercedes-Benz COMAND TOUCH® Rear SeatEntertainment system throughout the world. Our solution will power the mapping, search and passenger-driver interactive functions.Our products and services provide our automobile manufacturers and OEMs with the flexibility to use the full range of technologies to deliver on-boardproducts, brought-in services or hybrid products and services, as well as to enhance our navigation solutions with real-time data such as traffic, fuel prices,fresh maps and POIs for enhanced user experiences by drivers. In addition, as the market transitions to cars that are “always connected,” we expect ourproduct and service offerings to become more personalized.3Table of ContentsPlatform and architectureOur offerings for automotive navigation services are tailored to meet the requirements of the automobile manufacturers and OEMs while leveraging ourexpertise with respect to client design and functionality. Our automotive navigation products also offer the capability to connect to our auto and mobilenavigation platform for updated data and services. We have created an automotive reference product, or ARP, which allows us to show auto manufacturersand OEMs our entire product portfolio capabilities. Auto manufacturers or OEMs may then elect to have us configure the ARP to meet their needs as an on-board system or an on-board system with connectivity to live data services. In addition, we have designed custom versions of our navigation products to beexclusively cloud-based solutions for those manufacturers or OEMs seeking connected solution only services.We have developed proprietary technologies that enable us to provide location-based mapping and navigation services. These technologies includeboth client-based and cloud-based services. Our client technologies include a navigation and guidance engine and tools that allow us to efficiently developand deploy new applications for vehicles and mobile phones. Our back-end cloud services technologies allow us to deliver real-time location-based data andservices capabilities to support our clients. We have developed a flexible platform that allows us to use multiple data providers for navigation, maps, pointsof interest, or POIs, traffic and other location-based content services. More recently, we have been expanding our offering of automotive solutions that utilizenavigation to also enhance automotive OEM offerings of Advanced Driver Assistance Systems, or ADAS, and semi-autonomous capabilities. Such ADASfeatures use map attributes to tell the vehicle about upcoming road characteristics such as curvature and elevation. This information is used by the vehicle toimprove fuel economy and safety.In January 2014, we acquired skobbler GmbH, or skobbler, a leading provider of technologies that enhance OpenStreetMap, or OSM, mapping data. Bycombining skobbler's technologies with other proprietary Telenav technologies, we have developed a range of OSM capabilities that allow us to use thesecrowd sourced maps for more advanced services such as navigation. We deployed OSM as part of our Toyota solution, whereby Toyota’s Entune Audio Plusequipped vehicles and Lexus Display Audio multimedia equipped vehicles are enabled to connect with our Scout GPS Link mobile application. We believethat focusing our efforts on OSM will better position us relative to our competitors and expand the nature and extent of our product offerings.Our software and client application development processes, which include design, porting and publication processes, allow us to extend our services todifferent automobiles across various automotive platforms and in-car electronic systems to meet the requirements of automobile manufacturers and OEMs forour on-board and brought-in automotive navigation products.Our back-end cloud technologies include our Geographic Information System, or GIS, engines for local search, voice recognition, geo alert andadvanced geo data aggregation, traffic and a mobile advertising platform. We have developed customized voice recognition technology built upon a thirdparty voice recognition engine to serve the specific needs of navigation services customers. We leverage our existing back-end cloud technologies fordeployment to automobile manufacturer and OEM solution applications. We utilize existing technology to expand the connectivity and service offerings forin-car experiences, including seamless interaction between end users' mobile devices and on-board automobile systems such as displays, sensors and audiofor our automotive brought-in navigation solutions.We developed a search technology that focuses on information with localized relevance and accuracy to address the needs of automotive and mobilephone users. Our proprietary GIS provides fast route and map generation while optimizing the route based on real-time traffic conditions. Because ourproprietary GIS efficiently uses computing resources, we are able to scale our servers economically for our automotive brought-in solutions.Advertising PlatformIndustry backgroundMobile advertising provides advertisers with many benefits over traditional advertising media and PC-based online advertising, such as anytime,anywhere access, personalization, location targeting and relevance. The development of the mobile advertising ecosystem has mirrored the development foronline PC-based advertising. A key differentiator in the quality and effectiveness of mobile advertising is the ability to identify the location of the user.Location is a powerful indicator of an individual's interests and likely actions because it provides context about the user that is not available in traditionaladvertising. Advertising delivered to mobile devices has the potential to increase the impact and relevance of an ad to the user. For example, an ad can betargeted to a consumer who is in close proximity to a retail store, or to a consumer who may live in an area that advertisers wish to target based ondemographics or other characteristics. Given the benefits of mobile advertising as compared4Table of Contentsto traditional offline advertising and PC-based online advertising, we expect and market studies indicate that marketers will continue to shift theiradvertising budgets to mobile as this market continues to grow.Industry challengesThe mobile advertising marketplace is a dynamic, fast growing industry with many new participants. Advertisers are transitioning significant portionsof their marketing budgets to the mobile marketplace where many of the traditional approaches to engaging customers are different and the means to reachtheir customers presents new challenges. These advertisers need to be able to conduct ad campaigns that achieve favorable return on investment, or ROI. ROItypically includes elements related to message reach, audience targeting capabilities and campaign effectiveness measurements. Advertisers are particularlyfocused on measures of effectiveness for mobile which are much less mature and defined than other advertising options. The mobile advertising marketplaceis comprised of application developers, advertising networks, mobile agencies, advertising exchanges and demand-side platforms, among others. The variousmarket participants tend to focus on specific elements of the marketplace and each try to deliver unique technology offerings to assist advertisers. Some focuson targeting, others on audience data and still others on the location information that makes the mobile marketplace distinct from all other advertisingopportunities. Thinknear focuses on use of location data to build consumer insights, develop targeting tools, and create unique audiences that enable brandsto connect with mobile consumers. Tracking the performance of ads in applications and user interactions with those ads is difficult and requires significanttechnological capabilities and know-how.Our competitive strengthsOur mobile advertising solution combines the large and growing pool of mobile impressions marked with location information, a unique ability tofocus on particular audiences, and dynamic user content customizable based on location.We have developed a number of techniques that allow us to differentiate between ad impressions that include highly-accurate location data and thosethat do not. Our proprietary Location Score™ technology measures the accuracy of location information within advertising impressions in order to buildaudience segments that can be targeted for our customers. Our ability to effectively filter out inaccurate data is a key competitive advantage in the rapidlyshifting mobile advertising space.Because of our ability to identify real-time and historical location data, as well as our ability to ingest contextual targeting data, we can target our adson specified demographics and advertiser defined customer segments. For example, an ad delivered in a geographic area where it happens to be raining canprovide a rain-related message. An ad for sunblock can be limited to areas with a high level of sunlight and ultraviolet radiation. In addition, it is our abilityto do this at significant scale that allows advertisers to reach their target audience.Our servicesOur advertising services are built around the ability to provide sophisticated location-based advertising in a manner that allows advertisers to connectwith consumers on mobile devices. For example:Creative - We run a wide range of creative ad units, including static, dynamic, mobile video and rich media content. Our creative allows nationaladvertisers to easily “localize” their content without having to create thousands of individual campaigns. Our creative focuses on leveraging location data toincorporate local context such as distance to a store location, information on where to purchase a product or nearby events that could impact the potentialconsumer.Targeting - We offer a variety of targeting tools to our advertising clients to improve the performance of the campaigns. Our targeting includes bothaudience-focused tools centered on reaching specific customer segments and proximity based tools focused on driving foot traffic to retail locations andother direct-response related metrics.Reports and metrics - We offer clients a broad range of reporting that allows them to monitor all their advertising campaigns and explains clearly whatis happening at any particular point in time with respect to any of the campaigns being run. Our platform provides advertisers with a rich set of analytics andinsights.Platform and architectureOur mobile advertising platform is hosted in the cloud, primarily by Amazon Web Services, or AWS. We leverage the flexibility and scalability of cloudservice providers to meet our scale requirements.5Table of ContentsWe have developed proprietary technologies that enable us to deliver location-based advertising across all types of mobile devices at scale. Ourplatform integrates location-enabled mobile advertising inventory with a number of contextual and location-based triggers to allow us to target mobile users.Our platform permits us to bid and deliver ad impressions through advertising exchanges in less than 30 milliseconds and to do so on billions of potentialimpressions every day. In addition, we are able to target our mobile campaigns based on a variety of criteria beyond location. Our platform was built toprovide scalability through the use of machine-based decision processes, which allows us to execute thousands of campaigns, each with complex targetingcriteria across multiple inventory sources. Infrastructure and operationsAutomotive NavigationOur end users rely on our services primarily while on the road. As a result, we strive to ensure the continuous availability of our services through ourhigh quality hosting platform and operational excellence.Data center facilities. We developed our infrastructure with the goal of maximizing the availability of our applications, which are hosted on a highlyscalable and available network located in AWS facilities in California, Oregon, Virginia, Germany, Ireland and South Korea.We entered into hosted service agreements with AWS for primary resource capacity in addition to disaster recovery capacity. Pursuant to the serviceagreements, AWS provides leased facility space, power, cooling and Internet connectivity for a term of one year, and such agreements are subject to renewal.Advertising platformWe developed our advertising platform infrastructure with the goal of maximizing the performance of our platform. Our platform is hosted on a highlyscalable and available network provided by AWS. Our advertising platform has been designed to place significant focus on the location of any particular unitof display advertising made available for purchase on real time bidding ad exchanges. This focus on location provides us with the speed and capability tomore rapidly bid on the inventory that we believe is best suited for our customers' advertising needs. Our use of AWS provides significant flexibility withrespect to service capability to meet any peaks in demand from our advertisers.Research and developmentOur research and development organization is responsible for the design, development and testing of our services and products. Our engineering teamhas deep expertise and experience in GPS and wireless and connected services and we have a number of personnel with longstanding experience withlocation services applications and scaling hosted service models. In addition, through our acquisition of Thinknear and our own internal efforts, we havedeveloped expertise in real time bidding and advertising targeting capabilities.Our current research and development efforts are focused on:•timely execution and delivery of contracted customer solutions while maintaining strict adherence to requirements such as privacy and security;•developing a unified platform that enables efficient deployment of our solutions across multiple customers and programs;•improving and expanding features, functionality and performance of our existing services;•creating new applications, services and products for automobiles, mobile phones and mobile phone operating systems;•developing key technology and content to reduce third party costs;•developing innovative and engaging advertising products that allow for highly effective targeting of end users and provide for accuratemeasurement of behavior; and•building features and functionality that allow OSM to be used as a substitute for maps licensed from third party providers.6Table of ContentsOur development strategy is to identify features, services and products that are, or are expected to be, needed or desired by end users.As of June 30, 2017, our research and development team consisted of 604 people, 191 of whom are located in Santa Clara and Culver City, Californiaand 413 of whom are located in Cluj, Romania; Shanghai and Xi'an, China; Berlin, Germany; and Incheon, South Korea. We have been successful in creatingcross-border capabilities for high value engineering at lower cost. Our U.S., China and Romanian research and development operations function together toprovide service and product development for our automotive customers. Our Romanian development efforts also focus on our OSM products. Our researchand development expenses were $68.1 million, $68.9 million and $73.1 million for fiscal 2015, 2016 and 2017, respectively.Marketing and salesAutomotive NavigationIn connection with sales efforts directed at auto manufacturers and OEMs, we employ a sales team that focuses on targeted customers and responds torequests for proposal and related sales opportunities.The design and sales cycle for automotive navigation products and services is substantially longer than those associated with our advertising networkservices. The automotive sales cycle is consultative and requires direct and continuous management of the customer and OEMs to succeed in securingopportunities to design our services and products into new vehicles. Often the automobile manufacturer uses the sales process to help them to define theultimate product that they choose to deliver to their end users. For example, design wins for vehicles may be awarded 12 to 36 months prior to the anticipatedmodel year launch of the vehicle. However, once we launch services with an automobile manufacturer, our application and services are typically bundledwith the vehicles for multiple years because of the longer automotive product cycles.Advertising PlatformMarketing. We market our advertising services based upon our location and data expertise. We are building brand recognition and customerrelationships based upon a consultative relationship with key advertising buyers, primarily advertising agencies. Given the mobile advertising marketplace isstill in its infancy, we believe that we have an opportunity to influence the way buyers understand the advertising opportunity.Sales. We are engaged in direct sales efforts to expand the reach of our mobile advertising solutions. We strive to improve the efficiency andproductivity of our sales force, which will result in an increase in our advertising sales headcount during fiscal 2018; however, individual salesrepresentatives typically take six to nine months to become fully productive.CustomersWe derive revenue primarily from automobile manufacturers and OEMs, and advertisers and advertising agencies. We derive our revenue primarily fromautomobile manufacturers and OEMs whose vehicles contain our proprietary software and are able to access our navigation services. In addition, we have agrowing business in mobile advertising where our customers are primarily advertising agencies that represent national and regional brands, and channelpartners that work closely with local and small business advertisers. To a lesser extent, we have legacy relationships with wireless carrier customers to providemobile navigation services to their subscribers through mobile phones.We generate revenue from automobile manufacturers and OEMs for delivery of customized software and royalties from the distribution of thiscustomized software for on-board, brought-in and hybrid automotive navigation solutions. In addition, we earn royalties from brought-in services for vehicleapplications powered by our location-based services platform. We typically enter into long term supply arrangements with our auto customers to provide oursolutions across multiple car models in multiple regions around the world.We also generate revenue from advertisers and advertising agencies for the delivery of advertising impressions based on the specific terms of theadvertising contract.Our revenue from customers located in the United States comprised 96%, 97% and 88% of our total revenue for fiscal 2015, 2016 and 2017,respectively.FordWe are substantially dependent on Ford for our revenue. In fiscal 2015, 2016 and 2017, Ford represented 61%, 71% and 69% of our revenue,respectively. We expect Ford to represent a significant portion of our revenue for the foreseeable future.7Table of ContentsWe provide on-board navigation solutions to Ford pursuant to an agreement dated October 12, 2009. Our automotive products are now included in Fordmodels manufactured and sold in North America, Europe and China, as well as distributed in models sold in South America, Australia and New Zealand. Weamended our SYNC 2 agreement with Ford to provide GPS on-board navigation integrated with Ford's SYNC 3 platform in April 2014.We are the preferred provider for on-board navigation integrated with Ford's SYNC 2 and SYNC 3 platforms during the term of the agreement.We have also entered into amendments with Ford such that Ford Europe and Ford Australia and New Zealand also offer a map update program underwhich Ford owners with SYNC 2, with respect to Australia and New Zealand only, or SYNC 3 in Europe, Australia and New Zealand are eligible to receiveannual map updates at no additional cost through the contractual period.In fiscal 2017, we also entered into amendments of our agreement with Ford pursuant to which Ford’s joint venture in China, Changan Ford AutomobileCo., Ltd, became the primary contracting party for our relationship with Ford in that region.Our agreement with Ford relating to navigation solutions integrated with Ford's SYNC 2 and SYNC 3 platforms expires in December 2017. Theagreement may be renewed for successive 12-month periods if either party provides notice of renewal at least 45 days prior to the expiration of the applicableterm, and the other party agrees to such renewal. Our agreement with Ford also allows either party to terminate the agreement if the other party is insolvent ormaterially breaches its obligations and fails to cure such breach.GM and LGWe have an agreement with GM to provide our brought-in services for GM's vehicles, which expires on December 31, 2019. Our on-board andconnected navigation solutions are now available on select model year 2017 North American GM vehicles and under our agreements with GM we areobligated to provide for additional makes in additional regions through model year 2025. Additionally, we have an agreement with LG to provide our on-board navigation solution to LG for select GM vehicles for the European market. Such agreement expires June 30, 2022. Our agreements with GM, as well asour agreement with LG, allow either party to terminate the agreement if the other party is insolvent or breaches its obligations and fails to cure such breach,and permit GM, or LG as applicable, to terminate at its convenience.Indemnification under automotive customer agreementsUnder our agreements with Ford, GM and Toyota, we have obligations to indemnify each of them against, among other things, losses arising out of or inconnection with any claim that our technology or services infringe third party proprietary or intellectual property rights. Our agreements with each of Ford,GM and Toyota may be terminated in the event an infringement claim is made against us and it is reasonably determined that there is a possibility ourtechnology or service infringed upon a third party's rights.Safeguards against unauthorized data usageWe employ administrative, physical and technical safeguards to prevent unauthorized collection, access, use and disclosure of our end users' privatedata and to comply with applicable federal, state and local laws, rules and regulations. We do not use any end user data for direct marketing or promotionswithout the consent of the user and do not store any user location information that personally identifies the end user except to deliver and support ourservices. We are also required to comply with our customers' privacy and data securities policies.Intellectual propertyWe rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality procedures and contractual restrictions, toestablish and protect our proprietary rights. These laws, procedures and restrictions provide only limited protection and the legal standards relating to thevalidity, enforceability and scope of protection of intellectual property rights are uncertain and still evolving. Furthermore, effective patent, trademark,copyright and trade secret protection may not be available in every country in which our services and products are available.We seek to patent key concepts, components, protocols, processes and other inventions. As of June 30, 2017, we held 130 U.S. patents and 124 foreignpatents expiring between April 11, 2020 and September 21, 2035, and have 67 U.S. and 42 foreign patent applications pending. Of the pending 67 U.S.patent applications, 66 are nonprovisional utility patent applications. These patents and patent applications may relate to features and functions of ourservices and the technology platforms we use to provide them. We have filed, and will continue to file, patent applications in the United States and othercountries where there8Table of Contentsexists a strategic technological or business reason to do so. Any future patents issued to us may be challenged, invalidated or circumvented. Any patents thatmay issue in the future with respect to pending or future patent applications may not provide sufficiently broad protection or may not prove to be enforceablein actions against alleged infringers.As of June 30, 2017, we owned the U.S. Patent and Trademark Office registered trademarks for Geocookie®, ONMYWAY®, Scout®, Sipity®,skobbler®, Telenav®, and Thinknear®, as well as the logos for Telenav, Scout and skobbler. We also own the Telenav registered trademark in Canada,China, the European Union, Mexico and the United Kingdom. We have several unregistered trademarks, including the marks Chatbaka™, Geobehavioral™,HopOver™, LivingMap™, Location Index ™, Location Score ™, MapStream™, RealReach™, RoadSense™, Scout GPS Link™, Situational Targeting™,Telenav GPS Navigator™, Telenav Navigator™, Telenav Scout™, Thinknear GeoVideo™, ThinkPolitical™, TrueDelta™, and TurnStream ™, as well as theThinknear logo.We endeavor to enter into agreements with our employees and contractors and with parties with which we do business in order to limit access to anddisclosure of our proprietary information. We cannot be certain that the steps we have taken will prevent unauthorized use or reverse engineering of ourtechnology. Moreover, others may independently develop technologies that are competitive with ours or that infringe our intellectual property. Theenforcement of our intellectual property rights also depends on the success of our legal actions against these infringers, but these actions may not besuccessful, even when our rights have been infringed.We also enter into various types of licensing agreements to obtain access to technology or data that we utilize in connection with our navigationservices. Our contracts with certain licensors include minimum guaranteed royalty payments, which are payable regardless of the ultimate volume of revenuederived from the number of paying end users. Our most important agreements are with the providers of maps pursuant to which we generally pay a monthlyfee per end user or copy or a per transaction fee. We obtain map data from HERE North America, LLC, or HERE, pursuant to a master data license agreementdated December 1, 2002. HERE is principally owned by a consortium consisting of Audi AG, or Audi, BMW AG, or BMW, and Mercedes AG, or Mercedes.Our agreement with HERE was automatically renewed under its existing terms through January 31, 2018, and automatically renews for successive one yearperiods unless either party provides notice of non-renewal at least 180 days prior to the expiration of the applicable term. In addition, we have entered intoseparate territory license agreements with HERE under which we are licensed to use certain map data for particular programs with certain of our currentautomotive customers to fulfill their requirements. The term of these territory licenses with HERE vary based on the customer and program, and can beextended for additional periods. Our agreement with HERE also allows a party to terminate the agreement if the other party materially breaches itsobligations and fails to cure such breach.In addition, we obtain other data such as map, weather updates, gas prices, POI and traffic information from additional providers.CompetitionThe markets for development, distribution and sale of location services and advertising services are highly competitive. Many of our competitors havegreater name recognition, larger customer bases and significantly greater financial, technical, marketing, public relations, sales, distribution and otherresources than we do.We compete in the automotive navigation market with established automobile manufacturers and OEMs and providers of on-board navigation servicessuch as AISIN AW CO., Ltd, or AISIN, Robert Bosch GmbH, or Bosch, Elektrobit Corporation, or Elektrobit, Garmin, HERE, TomTom and NNG LLC, orNNG, as well as other competitors such as Apple and Google.We compete in the advertising network services business with mobile platform providers, including Google, Apple, Facebook, Inc., or Facebook, andGroundTruth, Inc., or GroundTruth, Verve Wireless, Inc., or Verve Wireless, PlaceIQ, Inc., or PlaceIQ, and NinthDecimal, Inc., or NinthDecimal, among others.Competition in our markets is based primarily on product placement and performance including features, functions, reliability, flexibility, scalabilityand interoperability; automobile manufacturer and OEM and advertising agency relationships; technological expertise, capabilities and innovation; price ofservices and products and total cost of ownership; brand recognition; and size and financial stability of operations. We believe we compete favorably withrespect to these factors based upon the performance, reliability and breadth of our services and products and our technical experience.Some of our competitors and potential competitors enjoy advantages over us, either globally or in particular geographic markets, including withrespect to the following:•significantly greater revenue and financial resources;9Table of Contents•ownership of mapping and other content allowing them to offer a more vertically integrated solution;•stronger brand and consumer recognition in a particular market segment, geographic region or worldwide;•the capacity to leverage their marketing expenditures across a broader portfolio of products;•access to core technology and intellectual property, including more extensive patent portfolios;•access to custom or proprietary content;•quicker pace of innovation;•stronger automotive, OEM, advertising agency and advertiser relationships;•more financial flexibility and experience to make acquisitions;•lower labor and development costs; and•broader global distribution and presence.Our competitors’ and potential competitors’ advantages over us could make it more difficult for us to sell our navigation services and advertisingnetwork services, and could result in increased pricing pressures, reduced profit margins, increased sales and marketing expenses and failure to increase, orthe loss of, market share or expected market share, any of which would likely cause harm to our business, operating results and financial condition.EmployeesAs of June 30, 2017, we employed 746 people, including 604 in research and development, 61 in sales and marketing, 24 in customer support, datacenter operations, and advertising operations, and 57 in a general and administrative capacity. As of that date, we had 284 employees in the United States,226 in China, 216 in Romania, 15 in Germany, three in Korea and two in Japan. We also engage a number of temporary employees and consultants. None ofour employees is represented by a labor union or is a party to a collective bargaining agreement.Executive Officers of the RegistrantThe following table sets forth the names, ages (as of June 30, 2017) and positions of our executive officers:Name Age PositionDr. HP Jin 53 President, Chief Executive Officer and Chairman of the Board of DirectorsMichael Strambi 55 Chief Financial Officer and TreasurerEvan Berg 46 Vice President, Corporate Development and StrategySalman Dhanani 44 Co-President, Automotive Business UnitPhilipp Kandal 34 Senior Vice President, EngineeringLily Toy 37 General Counsel and SecretaryHassan Wahla 45 Co-President, Automotive Business UnitDr. HP Jin is a cofounder of our company and has served as our president and a member of our board of directors since October 1999. Dr. Jin has alsoserved as our chief executive officer and chairman of our board of directors from October 1999 to May 2001 and since December 2001. Prior to Telenav,Dr. Jin served as a senior strategy consultant at the McKenna Group, a strategy consulting firm. Prior to that time, Dr. Jin was a business strategy andmanagement consultant at McKinsey & Company, a management consulting firm. Dr. Jin was also previously a technical director at Loral IntegratedNavigation Communication Satellite Systems, or LINCSS, a division of Loral Space & Communications, Inc., a GPS service and engineering company.Dr. Jin holds a B.S. and M.S. in Mechanical Engineering from Harbin Institute of Technology in China and a Ph.D. in Guidance, Navigation and Control,with a Ph.D. minor in Electrical Engineering, from Stanford University.Michael Strambi has served as our chief financial officer and treasurer since June 2012. From November 2009 to June 2012, Mr. Strambi served as ourvice president of finance. From December 2008 to August 2009, Mr. Strambi served as vice president and chief accounting officer of Silver Spring Networks,Inc., a provider of smart grid services. From February 2008 to December 2008, Mr. Strambi served as chief financial officer of Metacafe, Inc., a provider ofonline video services. From10Table of ContentsFebruary 2006 to February 2008, Mr. Strambi served as vice president of finance of MobiTV, Inc., a provider of mobile media solutions. From 2002 to 2006,Mr. Strambi served in various positions, the most recent of which was vice president, controller and treasurer, with Macromedia, Inc., a provider of webpublishing products and solutions that was acquired by Adobe Systems Incorporated. Mr. Strambi holds a B.S. in Business Administration with aconcentration in Accounting from California State University, Sacramento and an M.B.A. in Finance from the University of Southern California.Evan Berg has served as our vice president, corporate development and strategy since July 2013. Mr. Berg served as our senior director, businessdevelopment from October 2012 to July 2013 and as our director, business development from September 2010 to October 2012. From February 2009 toFebruary 2010, Mr. Berg served as senior director, corporate development of Avid Technology, Inc., a provider of an audio and video creation, protection anddistribution platform. From April 2008 to November 2008, Mr. Berg served as vice president, corporate and business development of Visible Measures Corp,acquired by AcuityAds, a platform provider to analyze and understand video engagement and insights. From January 2006 to March 2008, Mr. Berg servedas senior director, business and corporate development of Brightcove Inc., a provider of cloud solutions for delivering and monetizing video across alldevices. From April 2000 to December 2005, Mr. Berg served in multiple roles, including senior director, business development, at Macromedia, Inc., aprovider of web publishing products and solutions that was acquired by Adobe Systems Incorporated. From September 1996 to April 2000, Mr. Berg was acorporate attorney at Palmer and Dodge LLP, a law firm that merged with Lock Lord LLP. Mr. Berg holds an M.B.A. and J.D. from Boston University and aBachelor of Arts in Political Science from the University of Rochester.Salman Dhanani is a cofounder of our company and has served as co-president of our automotive business unit since January 2014. Mr. Dhanani servedas our vice president, growth strategy and partnerships from July 2012 to January 2014, as our vice president, products from August 2010 to July 2012 and asour vice president, products and marketing from August 2009 to August 2010. Mr. Dhanani served as our executive director of marketing from March 2009 toJuly 2009 and as our senior director of marketing from November 1999 to February 2009. From January 1999 to November 1999, Mr. Dhanani served as aconsultant at the McKenna Group, a strategy consulting firm. From July 1996 to December 1998, Mr. Dhanani served as an application engineer atSchlumberger Ltd., a technology consulting services company. Mr. Dhanani holds a B.S. in Electrical Engineering from the University of Washington.Philipp Kandal has served as our senior vice president, engineering since January 2017. From October 2016 to January 2017, Mr. Kandal served as ourvice president, engineering for automotive and OSM. From January 2014 to October 2016, Mr. Kandal served as our general manager, EU and head of OSM.From September 2008 to January 2014, Mr. Kandal served as co-founder and CTO of skobbler, prior to our acquisition of skobbler. Mr. Kandal holds anM.B.A. from the University of Cologne.Lily Toy has served as General Counsel and Secretary since August 2017. Prior to that time, Ms. Toy served as our Acting General Counsel andSecretary from January 2017 to July 2017, Assistant General Counsel from September 2016 to January 2017 and Senior Counsel from December 2010 toSeptember 2016. Ms. Toy was previously an associate at K&L Gates LLP, Fenwick & West LLP and Shearman & Sterling LLP. Ms. Toy holds a J.D. fromCornell Law School and a B.A. in Economics and Legal Studies from the University of California at Berkeley.Hassan Wahla has served as co-president of our automotive business unit since January 2014. Mr. Wahla served as our vice president, businessdevelopment and carrier sales from August 2009 to January 2014 and served as our executive director of business development from May 2005 to August2009. From April 2003 to May 2005, Mr. Wahla served as a senior product manager at Nextel Communications, a wireless communications company thatmerged with Sprint Corporation, or Sprint. From February 2002 to April 2003, Mr. Wahla served as vice president of business development of WirelessMultimedia Solutions, a privately held wireless software platform company. From September 1999 to February 2002, Mr. Wahla served as director of businessdevelopment at MicroStrategy, Inc., a business intelligence software company. Prior to that time, Mr. Wahla served as a senior consultant at Maritime Power,a maritime equipment company. Mr. Wahla holds a B.S. in Industrial Engineering from Virginia Tech, an M.S. in Management from Stevens Institute ofTechnology and a Masters of International Affairs from Columbia University.11Table of ContentsITEM 1A.RISK FACTORSWe operate in a rapidly changing environment that involves numerous uncertainties and risks. The following risks and uncertainties may have amaterial and adverse effect on our business, financial condition or results of operations. You should consider these risks and uncertainties carefully,together with all of the other information included or incorporated by reference in this Form 10-K. If any of the risks or uncertainties we face were to occur,the trading price of our securities could decline, and you may lose all or part of your investment.Risk related to our businessWe incurred losses in fiscal 2015, 2016 and 2017. We expect that we will continue to incur losses in fiscal 2018 and we do not know when, or if, we willreturn to profitability, as we make further expenditures to enhance and expand our operations in order to support growth and diversification of ourbusiness.As a percentage of revenue, our net loss was 28%, 19% and 14% in fiscal 2017, 2016 and 2015, respectively. Our revenue from paid wireless carriermobile navigation has substantially declined and we expect it to continue to do so and we may be unable to generate sufficient revenue from our automobilenavigation and advertising businesses to return Telenav to profitability in the short-term, if at all.We anticipate that we will continue to incur net operating losses in fiscal 2018, as we anticipate increased expenditures to operate our business. Theseexpected losses are also due to the expected continued decline in our higher margin mobile navigation revenue and the costs we expect to incur prior togenerating revenue in connection with new automobile navigation products and services that will not be integrated into production vehicles for severalyears, if at all. The time required to develop, test and deploy products between the time we secure the award of a new contract with any automobilemanufacturer or OEM, and the timing of revenue thereunder, as well as a substantial required upfront investment in research and development resources priorto entering into contracts with auto manufacturers and OEMs contribute to these expected losses. We also expect to continue to experience pressure onpricing in our negotiations with automobile manufacturers and OEMs as we enter into negotiations for contract renewals or new products where we arecompeting with larger suppliers that are competing on price, rather than features, or for vehicles where customers are price sensitive regarding navigationsolutions.Although we are working to replace the continued decline in wireless carrier revenue, our efforts to develop new services and products and attract newcustomers require investments in anticipation of longer term revenue. For example, the design cycle for automotive navigation products and services istypically 18 to 24 months and in order to win designs and achieve revenue from this growth area, we typically have to make investments two to four yearsbefore we anticipate receiving revenue, if any. This is the case for our relationship with GM. In addition, the revenue commencement at initial launch maynot be significant depending on the auto manufacturer's or OEM's launch timing schedule across vehicle models and regions. For example, although our on-board and connected product with GM launched in February 2017, it was only launched in a single vehicle model and we do not have any control over whenand whether it launches in other GM models.Once we are able to recognize revenue from new automotive products, we may be required to recognize that revenue over time if there are contractualservice periods or other obligations to fulfill. Certain contractual service periods or other obligations currently extend up to ten years. We intend to makeadditional investments in systems and continue to expand our operations to support diversification of our business, but it is likely that these efforts atdiversification will not replace our declining wireless carrier revenue in the short-term, if at all. As a result of these factors, we believe we will incur a netoperating loss and we will incur net losses at least through fiscal 2018, and we cannot predict when, or if, we will return to profitability. Our investments andexpenditures may not result in the growth that we anticipate.Our quarterly revenue and operating results have fluctuated in the past and may fluctuate in the future due to a number of factors. As a result, we may failto meet or exceed the expectations of securities analysts or investors, which could cause our stock price to decline.Our quarterly revenue and operating results may vary significantly in the future. Therefore, you should not rely on the results achieved in any onequarter as an indication of future performance. Period to period comparisons of our revenue and operating results may not be meaningful. Our quarterlyresults of operations may fluctuate as a result of a variety of factors, including, but not limited to, those listed below, many of which are outside of ourcontrol:•the ability of automobile manufacturers to sell automobiles equipped with our products;•the introduction of competitive in-car platforms and products, such as Apple's CarPlay and Google's auto initiatives;12Table of Contents•competitive pressures on automotive navigation pricing from low cost suppliers and for vehicles where consumers are extremely price sensitive;•the recent demonstration by Google of in-car integration of Android Auto with Google Maps which did not require a mobile handset;•investments made by HERE and TomTom in high definition maps that may be leveraged to displace our products and services in new vehiclemodels;•changes made to existing contractual obligations with a customer that may affect the nature and timing of revenue recognition, such as thetransition by Ford to its SYNC 3 platform, for which we have different revenue recognition criteria, or the adoption of our map update solution forFord's European customers and its impact on the timing of our revenue recognition;•the seasonality of new vehicle model introductions and consumer buying patterns, as well as the effects of economic uncertainty on vehiclepurchases, particularly outside of the United States;•the seasonality of new vehicle production, including tooling and assembly changes and plant shutdowns;•the effectiveness of our entry into new business areas, such as advertising;•the loss of our relationship, a change in our revenue model, or a change in pricing with any particular customer;•poor reviews of automotive service offerings into which our navigation solutions are integrated resulting in limited uptake of navigation optionsby car buyers;•warranty claims based on the performance of our products and the potential impact on our reputation with navigation users and automotiveOEMs;•the sale of vehicle brands by automotive OEMs, such as the sale of Opel and Vauxhall by GM in August 2017 to an automotive OEM with whichwe do not have an existing relationship;•the timing and quality of information we receive from our customers and the impact of customer audits of their reporting to us;•the inability of our auto manufacturer customers to attract new vehicle buyers and new subscribers for connected services;•the amount and timing of operating costs and capital expenditures related to the expansion of our operations and infrastructure throughacquisitions or organic growth;•the timing of expenses related to the development or acquisition of technologies, products or businesses;•the cost and potential outcomes of existing and future litigation;•the timing and success of new product or service introductions by us or our competitors;•the timing and success of marketing expenditures for our products and services;•the extent of any interruption in our services;•potential foreign currency exchange gains and losses associated with expenses and sales denominated in currencies other than the U.S. dollar;•general economic, industry and market conditions that impact expenditures for new vehicles, smartphones and mobile location services in theUnited States and other countries where we sell our services and products;•changes in interest rates and our mix of investments, which would impact our return on our investments in cash and marketable securities;•changes in customer arrangements where the customer's domicile may impose withholding tax on our revenue that we previously were not subjectto;•changes in our effective tax rates; and13Table of Contents•the impact of new accounting pronouncements such as ASC 606, Revenue from Contracts with Customers.Fluctuations in our quarterly operating results might lead analysts and investors to change their models for valuing our common stock. As a result, ourstock price could decline rapidly and we could face costly securities class action lawsuits or other unanticipated issues.We are dependent on Ford for a substantial and increasing portion of our revenue and our business, financial condition and results of operations will beharmed if our revenue from Ford does not continue to grow or declines.Ford represented approximately 69%, 71% and 61% of our revenue in fiscal 2017, 2016 and 2015, respectively. We expect that Ford, other automobilemanufacturers and OEMs will account for an increasing portion of our revenue, as our revenue from paid wireless carrier provided navigation continues todecline. However, our revenue could potentially decline if Ford increases the cost to consumers of our navigation product, reduces the number of vehicles orthe geographies in which vehicles with our product as an option are sold, or its sales of vehicles fall below forecast due to competition or global macro-economic conditions. Ford recently announced that it would open its SYNC 3 product to Apple’s CarPlay and Google’s Android Auto, which may reduce thenumber of vehicle purchasers who purchase built-in navigation services. We may not successfully increase our revenue from Ford if our products are replacedwithin vehicles by Ford with our competitors’ products or from price competition from third parties.Our agreement with Ford expires in December 2017 and may be terminated by either party prior to expiration if the other party is insolvent or materiallybreaches its obligations and fails to cure such breach. The agreement may be renewed for successive 12-month periods if either party provides notice ofrenewal at least 45 days prior to the expiration of the applicable term, and the other party agrees to such renewal. In the event that Ford does not elect torenew our contract after December 2017, or chooses to renegotiate our contract on less favorable terms, our revenue may decline and our business operatingresults and financial condition could be harmed.We have limited experience managing, supporting and retaining automobile manufacturers and OEMs as customers and if we are not able to maintainFord as a customer our revenue will decline.Our automotive revenue could fluctuate due to the complexities of revenue recognition.Due to the complexities of revenue recognition in accordance with U.S. generally accepted accounting principles, or GAAP, when and if we generaterevenue we may be required to recognize certain revenue over extended periods. For example, GAAP requires us to defer revenue and recognize that revenueover the term of the connected services or contractual obligation for our contractual arrangements with GM for its OnStar RemoteLink and associatedMyBrand applications, Ford Australia and New Zealand and Ford Europe for their respective map update programs, and Toyota for its Entune Audio Plus andLexus Display Audio multimedia equipped vehicles.Because we and Ford entered into an agreement to provide our map update solution in conjunction with our on-board navigation product for theEurope region in the second half of fiscal 2017, certain revenue related to the on-board navigation product in this region, which we had been recognizingupon delivery, is now recognized over time along with the new map updates. Offering map updates in Europe resulted in a substantial decline in our revenueand a substantial increase in our deferred revenue and deferred cost balances in the second half of fiscal 2017. We anticipate that these changes will bemitigated when we adopt ASC 606, which is required for us on July 1, 2018. However, our assessment of the impact of this standard is not complete. Weintend to adopt ASC 606 when required on July 1, 2018. Accordingly, our revenue and profitability will continue to be affected by the revenue recognitionrequirements which do not reflect the economic substance of our transactions with Ford Europe. Investors and securities analysts may not understand thesubtleties of these revenue recognition requirements and the trading prices of our common stock may be negatively affected.Revenue recognition could also be impacted by future amendments to OEM agreements, such as providing our map update solution in other regions,changes in procurement patterns, shipping terms and title transfer. For on-board automotive navigation, we recognize revenue as the related customizedsoftware is delivered to and accepted by our customers. As our solutions encompass greater value-added services, there is potential for changes in the timingof revenue recognition.In addition, our revenue recognition is becoming increasingly more complex with the evolution of our value-added products and services, such as ouron-board and connected solutions. The agreements for these solutions can extend over several years and require multiple deliverables. Given the length ofour contractual obligations, which often extend beyond the manufacture and sale of the vehicle when the royalty is determined and paid, we may havesignificant post-production obligations to provide on-board services or map updates over an extended period of time. These extended obligations can resultin a delay in recognition of revenue, or the need to defer and recognize revenue over the period that we are required to provide these post-productionobligations or other services.14Table of ContentsWe may also incur significant expense to develop products for automobile manufacturers, such as under our worldwide connected navigation servicesagreement with GM, prior to receiving any revenue related to the sale of vehicles with our navigation services. As our offerings in automotive navigationexpand to brought-in, as well as on-board, we may not correctly anticipate the financial accounting treatment for the various products. We could be requiredto amortize revenue from products over time although we previously recognized revenue for similar products when the applicable vehicle was sold.We may not be successful at adapting our business model for the Chinese automotive navigation market, which may reduce our revenue per vehicle.Expanding our initial automotive entry in the Chinese market is a key component of our global growth strategy. The automotive software market inChina is highly competitive. This competition comes from large international automotive software providers as well as domestic providers. The Chinesenavigation software market is seeing transition towards new business models by third party navigation product vendors, such as substantially lower per unitlicense fees that are intended to be offset by opportunities to monetize navigation usage in additional ways that may include, but not be limited to,advertising, usage based insurance and utilizing data to create high definition maps. We may need to change or modify our license fee model in China inorder to compete effectively. Our inability to do so may have a material impact on our ability to expand into the Chinese market. Even if we adopt newlicense fee models for China-based automobile manufacturers, we may not recognize revenue from those new models sufficient to compensate us for the costsof supporting those automobile manufacturers in the short-term, if at all. In addition, many of the same business model, pricing and licensing changes couldalso impact us in additional markets including, but not limited to, North America and Europe.We may not be successful in generating material revenue from automobile manufacturers and OEMs other than Ford. As a result, our business, financialcondition and results of operations will be harmed if we are unable to diversify our automotive revenue.Although we have attempted to mitigate our dependence on Ford by establishing relationships with other automobile manufacturers and OEMs, theserelationships may not produce significant revenue if the products are launched in limited models or face competition from third parties. Even if we are able todiversify our automotive navigation business through new arrangements, such as our more recently established relationships with GM and Toyota, customersmay not elect to purchase automobile manufacturer and OEM navigation offerings that include our software and/or services for reasons unrelated toperformance of our software or services. If customer purchase rates are less than anticipated, we may be unable to effectively diversify our automotivenavigation revenue and our business, financial condition and results of operations may be harmed.We may be unable to enter into agreements to provide automotive navigation products if we do not offer navigation products that serve geographiesthroughout the world or automobile manufacturers and OEMs are uncomfortable with our ability to support markets outside of the United States. Ourautomobile manufacturer and OEM customers may choose to partner with providers of location services with extensive international operations. We may beat a disadvantage in attracting such customers due to our business being concentrated in the United States, and we may not be successful in other geographiesif customers are uncomfortable with the look and feel of our solutions. If we are unable to attract or retain such automobile manufacturer and OEM customers,our revenue and operating results will be negatively affected.We may incur substantial costs when engaging with a new automotive navigation customer and may not realize substantial revenue from that newcustomer in the short-term, if at all.The design and sales cycle for on-board or brought-in automotive navigation services and products is substantially longer than those associated withour mobile navigation services to customers of wireless carriers or our advertising platform services. As a result, we may not be able to achieve significantrevenue growth with new customers from the automotive navigation business in a short period of time, or at all. In addition, these lengthy cycles make itdifficult to predict if and when we will generate revenue from new customers. For example, design wins for vehicles may be awarded 12 to 36 months prior tothe anticipated commercial launch of the vehicle. We also entered into a contract with GM in 2014 to provide worldwide on-board and connected navigationservices beginning in model year 2017 and continuing through model year 2025. Although our on-board and connected product launched in its first GMmodels, the Cadillac CTS and CTS-V, in February 2017 we did not recognize any revenue from the launch of the product in fiscal 2017 due to specifiedfuture obligations. We cannot assure you that our products will be in a wide variety of geographic markets in which GM sells vehicles in or across a variety ofmodels and brands. GM has not provided us with any volume or revenue guarantees and we cannot assure you that we will ever receive material revenue fromthese products and services.We have a partnership with Toyota for Toyota and Lexus vehicles and a separate partnership with Xevo for another navigation solution for Toyota andLexus vehicles. We cannot assure you that we will receive significant revenue from the solutions for Toyota in the long-term.15Table of ContentsAs we have limited experience in the automotive navigation market, we also may not price our solutions in such a way that is profitable for us andenables us to recoup the development expenses we incurred to provide such solutions in the time we expect or at all. Development schedules for automotivenavigation products are difficult to predict, and there can be no assurance that we will achieve timely delivery of these products to our customers. To theextent that we charge service fees beyond an initial fee at the time the vehicle is purchased, we may not be successful in gaining traction with customers toprovide services and charge ongoing monthly or annual fees outside of the traditional on-board navigation service model.Our map, POI and other content costs for our automotive navigation solutions are higher than those we have historically paid for our mobile phone-based navigation services and to date we have not been able to use OSM offerings for automotive navigation, other than our Scout GPS Link mobileapplication for Toyota. Our ability to build demand for our automotive navigation products and services is also dependent upon our ability to provide theproducts and services in a cost effective manner, which may require us to renegotiate map and POI content relationships to address the specific demands ofour automotive navigation products and services. If we are unable to improve our margins, we may not be able to operate our automotive navigation businessprofitably. If we fail to achieve revenue growth in any of our automotive navigation solutions (whether on-board, brought-in or other), we may be unable toachieve the benefits of revenue diversification. In addition, our map and content suppliers, HERE and TomTom, are also becoming competitors through theoffering of their own automotive navigation services.The success of our automotive navigation products may be affected by the number of vehicle models offered with our navigation solutions, as well asoverall demand for new vehicles.Our ability to succeed long term in the automotive industry depends on our ability to expand the number of models offered with our navigationsolutions by our current automobile manufacturer customers. We are also dependent upon our ability to attract new automobile manufacturers and OEMs. Forautomobile manufacturers with whom we have established relationships, such as Ford, our success depends on continued production and sale of new vehicleswith, and adoption by, end users of our products offered by such automobile manufacturers, when our product is not a standard feature. Our on-boardsolutions may not satisfy automobile manufacturers and/or vehicle buyers' expectations for those solutions. If automobile manufacturers and OEMs do notbelieve that our services meet their customers’ needs, our products and services may not be designed into future model year vehicles. As we move forward,our existing automobile manufacturers and OEMs may not include our solutions in future year vehicles or territories, which would negatively affect ourrevenue from these products. Production and sale of new vehicles are subject to delay from forces outside of our control, such as natural disasters, partsshortages and work stoppages, as well as general economic conditions.The advertising business is subject to seasonality, and we may not successfully grow our advertising revenue if we are unable to attract and retainadvertisers.We believe the advertising business is subject to varying buying patterns and seasonality which can impact our ability to grow our revenue. Forexample, in the three months ended December 31, 2016 and 2015, we experienced higher advertising revenue as the second quarter is traditionally strongerdue to seasonality; however, advertising revenue subsequently declined sequentially in the three months ended March 31, 2017 and 2016.In order to grow our advertising business, we need to identify and attract a significant number of advertisers through our Thinknear platform. Themobile advertising market is highly competitive, and advertisers have many options through which to purchase mobile advertising. Our business will requireus to attract and retain a large number of advertisers and will also require us to maintain the ability to purchase a large volume of inventory at competitivelyattractive rates. Increased competition from other mobile advertising companies and technology developers could impair our ability to secure advertiserrevenue. Increased competition could also limit our ability to purchase inventory for advertising placements at an economically attractive rate. We do nothave substantial experience in selling advertising and supporting advertisers and may not be able to develop these capabilities successfully. We may not besuccessful recruiting the number of sales personnel we need to scale or effectively train them to sell mobile advertising. Sales personnel may also be slow toramp up their sales pipelines, negatively impacting our ability to grow. We may not succeed in attracting and retaining a critical mass of advertisers and adplacements and may not be successful in demonstrating the value of mobile advertising. If we are unable to improve the margins of our advertising business,it may not become profitable and may impair our ability to invest in new opportunities or become profitable as a whole.16Table of ContentsMobile connected device users may choose not to allow tracking of their location information and therefore local advertising may not be feasible on theirdevices.The growth of our advertising revenue will depend on our ability to deliver location targeted, highly relevant ads to consumers on their mobileconnected devices. Our targeted advertising is highly dependent on the consumers allowing applications to have access to their location data. Users mayelect not to allow location data sharing for a number of reasons, including personal privacy concerns. Mobile operating systems vendors and applicationdevelopers are also promoting features that allow device users to disable device functionality that consumers may elect to invoke. In addition, companiesmay develop products that enable users to prevent ads from appearing on their mobile device screens. If any of these developments were to become widelyused by consumers, our ability to deliver effective advertising campaigns on behalf of our advertiser clients would suffer, which could hurt our ability togenerate advertising revenue.Our legacy wireless carrier mobile navigation business is declining and may be eliminated altogether in the future. As it continues to decline, our revenueand net income or loss will continue to be adversely affected.Although we historically received a majority of our revenue from wireless carriers whose subscribers received our services through bundles or bypurchasing our navigation services, consistent with industry trends, our wireless carrier revenue has declined significantly. In the last three fiscal years,wireless carrier subscribers have materially decreased their subscriptions for, and usage of, our paid navigation services and our revenue from our relationshipwith wireless carriers has declined accordingly. We anticipate that wireless carrier subscribers will continue to decrease their subscriptions for paid navigationservices in favor of free or freemium offerings and that revenue from our relationship with wireless carriers will continue to decline and may be eliminatedaltogether in the future. In the event that our mobile navigation business ceases to be profitable or we determine that it diverts resources from growing areasof our business, we may ultimately elect to terminate our legacy wireless carrier mobile navigation business. In addition, our wireless carrier customers maydetermine that the cost of offering our service to their subscribers outweighs the benefits and may decide to terminate our business relationship. Our othersources of revenue from our location-based platforms, including automotive navigation and location-based advertising, have substantially lower marginsthan wireless carrier mobile navigation revenue and, as a result, we would have to generate substantially more revenue from those services to replace thedeclining wireless carrier revenue. As a result, in part due to the lower margins on automotive navigation and advertising revenue, we anticipate that we willcontinue to incur net losses at least through fiscal 2018.Our customer requirements and content management obligations are complex. If we inadvertently include content for which we have liability to the vendorbut may not be entitled to payment from our customer, our financial condition and results of operation could be harmed.The nature and extent of content that is delivered as part of our navigation solutions is complex to manage. Matching the requirements of our customerswith the content offered by our vendors may result in our inclusion of content which we believe is necessary to meet our customers’ requirements for whichthe customer may not have agreed to make payment to us. In addition, our customers speak directly to our vendors and often those conversations influencethe expected content for our end products; however, customers may not be fully informed as to the license costs associated with the various components.Therefore, there is some risk that we may include content for which we have liability to the vendor but may not be entitled to payment from our customer. Ifthese situations were to occur, our business, financial condition and results of operations could be adversely affected.Our business practices with respect to data could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements orindustry standards relating to consumer privacy and data protection.Our advertising services depend on our ability to collect, store and use information related to mobile devices and the ads we place, including a device'sgeographic location for the purpose of targeting ads to the user of the device. Our automotive navigation services also depend on our ability to collect, storeand use such information as we deliver personalized navigation. Federal, state and international laws and regulations govern the collection, use, retention,sharing and security of data that we collect across our mobile advertising platform. We strive to comply with all applicable laws, regulations, policies andlegal obligations relating to privacy and data protection. However, it is possible that these requirements may be interpreted and applied in a manner that isinconsistent with our practices. Any failure, or perceived failure, by us to comply with such laws could result in proceedings or actions against us bygovernmental entities, consumers or others. Such proceedings or actions could hurt our reputation, force us to spend significant amounts to defend ourselves,distract our management, increase our costs of doing business, require us to change our advertising services or disclosures, adversely affect the demand forour services and ultimately result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless our users fromthe costs or consequences of inadvertent or unauthorized disclosure of data that we store or handle as part of providing our services.17Table of ContentsThe regulatory framework for privacy issues worldwide is evolving, and various government and consumer agencies and public advocacy groups havecalled for new regulation and changes in industry practices, including some directed at the mobile and advertising industries in particular. It is possible thatnew laws, regulations, standards, recommendations, best practices or requirements will be adopted that would affect our business, particularly with regard tolocation-based services, collection or use of data to target ads and communication with consumers via mobile devices. To the extent that we or our clients aresubject to new laws or recommendations or choose to adopt new standards, recommendations, or other requirements, we may have greater complianceburdens. If we are perceived as not operating in accordance with industry best practices or any such guidelines or codes with regard to privacy, our reputationmay suffer and we could lose relationships with advertiser or developer partners.We face intense competition in our market, especially from competitors that offer their mobile location services for free, which could make it difficult forus to acquire and retain customers and end users.The market for development, distribution and sale of location services is highly competitive. Many of our competitors have greater name recognition,larger customer bases and significantly greater financial, technical, marketing, public relations, sales, distribution and other resources than we do.Competitors may offer mobile location services that have at least equivalent functionality to ours for free. For example, Google offers free voice-guided turnby turn navigation as part of its Google Maps and Waze products for mobile devices, including those based on the Android and iOS operating systemplatforms, and Apple offers proprietary maps and voice-guided turn by turn directions. Microsoft also provides a free voice-guided turn by turn navigationsolution on its Windows Mobile and Windows Phone operating systems. Competition from these free offerings may reduce our revenue, result in ourincurring additional costs to compete and harm our business. If our wireless carrier customers can offer these mobile location services to their subscribers forfree, they may elect to cease their relationships with us, similar to Sprint, alter or reduce the manner or extent to which they market or offer our services orrequire us to substantially reduce our fees or pursue other business strategies that may not prove successful. In addition, new car buyers may not valuenavigation solutions built in to their vehicles if they believe that free (brought-in) offerings, such as Apple CarPlay or Google's auto initiatives, are adequateand may not purchase our solutions with their new cars. Ford recently announced that it would open its SYNC 3 product to Apple’s CarPlay and Google’sAndroid Auto, which may reduce the number of vehicle purchasers who purchase built-in navigation services. We may not successfully increase our revenuefrom Ford if our products are replaced within vehicles by Ford with our competitors’ products or due to price competition from third parties.We compete in the automotive navigation market with established automobile manufacturers and OEMs and providers of on-board navigation servicessuch as AISIN AW CO., Ltd, Robert Bosch GmbH, Elektrobit Corporation, Garmin, Ltd., HERE, TomTom and NNG LLC, as well as other competitors such asApple and Google. We compete in the advertising network services business with mobile platform providers, including Google, Apple, Facebook, AOL,GroundTruth, Verve Wireless, PlaceIQ and NinthDecimal, among others. Some of our competitors’ and our potential competitors’ advantages over us, eitherglobally or in particular geographic markets, include the following:•significantly greater revenue and financial resources;•ownership of mapping and other content allowing them to offer a more vertically integrated solution;•stronger brand and consumer recognition in a particular market segment, geographic region or worldwide;•the capacity to leverage their marketing expenditures across a broader portfolio of products;•access to core technology and intellectual property, including more extensive patent portfolios;•access to custom or proprietary content;•quicker pace of innovation;•stronger automobile manufacturer, OEM, advertising agency and advertiser relationships;•more financial flexibility and experience to make acquisitions;•ability or demonstrated ability to partner with others to create stronger or new competitors;•stronger international presence, which could make our larger competitors more attractive partners to automobile manufacturers and OEMs•lower labor and development costs; and18Table of Contents•broader global distribution and presence.Our competitors’ and potential competitors’ advantages over us could make it more difficult for us to sell our navigation services, and could result inincreased pricing pressures, reduced profit margins, increased sales and marketing expenses and failure to increase, or the loss of, market share or expectedmarket share, any of which would likely cause harm to our business, operating results and financial condition.If we are unable to integrate future acquisitions successfully, our operating results and prospects could be harmed.In the future, we may make acquisitions to improve our navigation services offerings or expand into new markets. Our future acquisition strategy willdepend on our ability to identify, negotiate, complete and integrate acquisitions and, if necessary, to obtain satisfactory debt or equity financing to fundthose acquisitions. Mergers and acquisitions are inherently risky, and any mergers and acquisitions we complete may not be successful. Future mergers andacquisitions we may pursue would involve, numerous risks, including the following:•difficulties in integrating and managing the operations, technologies and products of the companies we acquire, that are geographically remotefrom our existing operations;•diversion of our management’s attention from normal daily operation of our business;•our inability to maintain the key business relationships and the reputations of the businesses we acquire;•our inability to retain key personnel of the companies we acquire;•uncertainty of entry into markets in which we have limited or no prior experience and in which competitors have stronger market positions;•our dependence on unfamiliar affiliates and customers of the companies we acquire;•insufficient revenue to offset our increased expenses associated with acquisitions;•our responsibility for the liabilities of the businesses we acquire, including those which we may not anticipate; and•our inability to maintain internal standards, controls, procedures and policies.We may be unable to secure the equity or debt funding necessary to finance future acquisitions on terms that are acceptable to us. If we financeacquisitions by issuing equity or convertible debt securities, our existing stockholders will likely experience dilution, and if we finance future acquisitionswith debt funding, we will incur interest expense and may have to comply with financial covenants and secure that debt obligation with our assets.We may be required to recognize a significant charge to earnings if our goodwill or other intangible assets become impaired.We have recorded goodwill related to our prior acquisitions, and may do so in connection with any potential future acquisitions. Goodwill and otherintangible assets with indefinite lives are not amortized, but are reviewed for impairment annually or on an interim basis whenever events or changes incircumstances indicate that the carrying value of these assets may not be recoverable. Factors that may indicate that the carrying value of our goodwill orother intangible assets may not be recoverable include a persistent decline in our stock price and market capitalization, reduced future cash flow estimatesand slower growth rates in our industry. We may be required to record a significant charge in our financial statements during the period in which anyimpairment of our goodwill or other intangible assets is determined, which would adversely impact our results of operations. We report results in threebusiness segments, which requires the allocation of goodwill and intangibles to each of these segments. As a result, we conduct our impairment review eachyear or on an interim basis by segment, which can result in a different outcome than if assessed on an overall consolidated basis. Based on the results of ourannual goodwill impairment test as of April 1, 2017, the estimated fair value of our mobile navigation business exceeded its carrying value by $1.7 million.We have not recognized any impairment of goodwill in the three year period ended June 30, 2017.19Table of ContentsWarranty claims, product liability claims and product recalls could subject us to significant costs and adversely affect our financial results.We warrant our automotive navigation products to be free from defects in materials, workmanship and design for periods ranging from three months toseven years. If our navigation services or products contain defects, there are errors in the maps supplied by third party map providers or if our end users do notheed our warnings about the proper use of these products, collisions or accidents could occur resulting in property damage, personal injury or death. If any ofthese events occurs, we could be subject to significant liability for personal injury and property damage and under certain circumstances could be subject to ajudgment for punitive damages. In addition, if any of our designed products are defective or are alleged to be defective, we may be required to participate in arecall campaign. These recall and warranty costs could be exacerbated to the extent they relate to global platforms. Furthermore, recall actions couldadversely affect our reputation or market acceptance of our products, particularly if those recall actions cause consumers to question the safety or reliabilityof our products. Warranty claims, a successful product liability claim or a requirement that we participate in a product recall campaign may adversely affectour results of operations and financial condition.We accrue costs related to warranty claims when they are probable of being incurred and reasonably estimable. Our warranty costs have historically notbeen material. From time to time, we experience incidents where it may be necessary for us to expend resources to investigate and remedy a potentialwarranty claim.We maintain limited insurance against accident related risks involving our products. However, we cannot assure you that this insurance would besufficient to cover the cost of damages to others or will continue to be available at commercially reasonable rates. In addition, we may be named as adefendant in litigation by consumers individually or on behalf of a class if their handsets or automobiles suffer problems from software downloads from ourcustomers. If we are unable to obtain indemnification from our customer for any damages or legal fees we may incur in connection with such complaints, ourfinancial position may be adversely impacted. In addition, insurance coverage generally will not cover awards of punitive damages and may not cover thecost of associated legal fees and defense costs. If we are unable to maintain sufficient insurance to cover product liability costs or if our insurance coveragedoes not cover an award, our business, financial condition and results of operations could be adversely affected.Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, damages caused bydefective software and other losses.Our agreements with our customers include indemnification provisions. We agree to indemnify them for losses suffered or incurred in connection withour navigation services or products, including as a result of intellectual property infringement, damages caused by defects and damages caused by viruses,worms and other malicious software. The term of these indemnity provisions is generally perpetual after execution of the corresponding agreement, and themaximum potential amount of future payments we could be required to make under these indemnification provisions is generally substantial and may beunlimited. In addition, some of these agreements permit our indemnitees to terminate their agreements with us if they determine that the use of our navigationservices or products infringes third party intellectual property rights.We have received, and expect to receive in the future, demands for indemnification under these agreements. These demands can be very expensive tosettle or defend, and we have in the past incurred substantial legal fees and settlement costs in connection with certain of these indemnity demands.Furthermore, we have been notified by several customers that they have been named as defendants in certain patent infringement cases for which they mayseek indemnification from us. Large future indemnity payments and associated legal fees and expenses, including potential indemnity payments and legalfees and expenses relating to the current or future notifications, could materially harm our business, operating results and financial condition.We may in the future agree to defend and indemnify our customers in connection with the pending notifications or future demands, irrespective ofwhether we believe that we have an obligation to indemnify them or whether we believe that our services and products infringe the asserted intellectualproperty rights. Alternatively, we may reject certain of our customers’ indemnity demands, which may lead to disputes with our customers and maynegatively impact our relationships with them or result in litigation against us. Our customers may also claim that any rejection of their indemnity demandsconstitutes a material breach of our agreements with them, allowing them to terminate such agreements. Our agreements with certain customers may beterminated in the event an infringement claim is made against us and it is reasonably determined that there is a possibility our technology or servicesinfringed upon a third party’s rights. If, as a result of indemnity demands, we make substantial payments, our relationships with our customers are negativelyimpacted or if any of our customer agreements is terminated, our business, operating results and financial condition could be materially adversely affected.20Table of ContentsOur investment portfolio may become impaired by deterioration of the financial markets.Our cash equivalent and short-term investment portfolio as of June 30, 2017 consisted of corporate bonds, asset-backed securities, municipal securities,U.S. agency securities, commercial paper and money market mutual funds. We follow an established investment policy and set of guidelines to monitor andhelp mitigate our exposure to interest rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well asour maximum exposure to various asset classes.Should financial market conditions worsen in the future, investments in some financial instruments may pose risks arising from market liquidity andcredit concerns. In addition, any deterioration of the capital markets could cause our other income and expense to vary from expectations. As of June 30,2017, we had no material impairment charges associated with our short-term investment portfolio. Although we believe our current investment portfolio haslittle risk of material impairment, we cannot predict future market conditions or market liquidity, or credit availability, and can provide no assurance that ourinvestment portfolio will remain materially unimpaired.Our effective tax rate may fluctuate, which could reduce our anticipated income tax benefit in the future.Our effective tax rate could be adversely affected by several factors, many of which are outside of our control. Our effective tax rate may be affected bythe proportion of our revenues and income (loss) before taxes in the various domestic and international jurisdictions in which we operate. Our revenue andoperating results are difficult to predict and may fluctuate substantially from quarter to quarter. We are also subject to changing tax laws, regulations andinterpretations in multiple jurisdictions in which we operate, as well as the requirements of certain tax and other accounting body rulings. Since we mustestimate our annual effective tax rate each quarter based on a combination of actual results and forecasted results of subsequent quarters, any significantchange in our actual quarterly or forecasted annual results may adversely impact the effective tax rate for the period. Our estimated annual effective tax ratemay fluctuate for a variety of reasons, including:•impact from our inability to benefit from the carryback of net losses expected in the current fiscal year and thereafter due to the limitations of thetwo-year loss carryback for federal tax purposes.•changes in forecasted annual operating income or loss by jurisdiction and forecasted withholding taxes;•changes in relative proportions of revenue and income or loss before taxes in the various jurisdictions in which we operate;•changes to the valuation allowance on net deferred tax assets;•changes to actual or forecasted permanent differences between book and tax reporting, including the tax effects of purchase accounting foracquisitions and non-recurring charges which may cause fluctuations between reporting periods;•impact from any future tax settlements with state, federal or foreign tax authorities;•impact from increases or decreases in tax reserves due to new assessments of risk, the expiration of the statute of limitations or the completion ofgovernment audits;•impact from changes in tax laws, regulations and interpretations in the jurisdictions in which we operate, as well as the expiration and retroactivereinstatement of tax holidays;•impact from withholding tax requirements in various non-U.S. jurisdictions and our ability to recoup those withholdings, which may depend onhow much revenue we have in a particular jurisdiction to offset the related expenses;•changes in customer arrangements where the customer's domicile may impose withholding tax on our revenue that we previously were not subjectto;•impact from acquisitions and related integration activities; or•impact from new FASB requirements.Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and maymaterially affect our financial results in future periods. In fiscal 2014, we recorded a valuation allowance on the majority of our deferred tax assets, net ofliabilities since the assets are not more likely than not to be realized based upon our assessment of all positive and negative evidence. Realization of deferredtax assets is dependent upon future21Table of Contentstaxable earnings, the timing of which is uncertain. Due to losses in fiscal 2015, 2016 and 2017 and expected losses in fiscal 2018 and potentially future yearsin the United States, we maintained a full valuation allowance on deferred tax assets in the United States. Due to operating losses in previous years andexpected losses in future years, we continued to maintain a full valuation allowance for our foreign deferred tax assets in the United Kingdom. In the eventdeferred tax assets in Germany cannot be realized based upon the ability to generate future income in Germany, our effective tax rate would be negativelyimpacted.Changes in accounting principles, or interpretations thereof, could have a significant impact on our financial position and results of operations.We prepare our consolidated financial statements in accordance with GAAP. These principles are subject to interpretation by the SEC and variousbodies formed to interpret and create appropriate accounting principles. A change in these principles can have a significant effect on our reported results andmay even retroactively affect previously reported transactions. Additionally, the adoption of new or revised accounting principles may require that we makesignificant changes to our systems, processes and controls.For example, the Financial Accounting Standards Board, or FASB, is currently working together with the International Accounting Standards Board, orIASB, on several projects to further align accounting principles and facilitate more comparable financial reporting between companies who are required tofollow GAAP under SEC regulations and those who are required to follow International Financial Reporting Standards outside of the United States. Theseefforts by the FASB and IASB may result in different accounting principles under GAAP that may result in materially different financial results for us in areasincluding, but not limited to, principles for recognizing revenue and lease accounting. Additionally, significant changes to GAAP resulting from the FASB’sand IASB’s efforts may require that we change how we process, analyze and report financial information and that we change financial reporting controls.It is not clear if or when other potential changes in accounting principles may become effective, whether we have the proper systems and controls inplace to accommodate such changes and the impact that any such changes may have on our financial position and results of operations.We rely on our customers for timely and accurate vehicle and subscriber sales information. A failure or disruption in the provisioning of this data to uswould materially and adversely affect our ability to manage our business effectively.We rely on our automobile manufacturers and OEM customers to provide us with reports on the number of vehicles they sell with our on-board andbrought-in navigation services included, depending on the nature of our contractual relationship, and to remit royalties for those sales to us. We also rely onour wireless carrier customers to bill subscribers and collect monthly fees for our mobile navigation services, either directly or through third party serviceproviders. The risk of inaccurate reports may increase as our customers expand internationally and increase the number of manufacturing locations. Forexample, in the three months ended March 31, 2017, Ford determined that it had misreported the production of vehicles to us in certain factories. If ourcustomers or their third party service providers provide us with inaccurate data or experience errors or outages in their own billing and provisioning systemswhen performing these services, our revenue may be less than anticipated or may be subject to adjustment with the customer. In the past, we have experiencederrors in reporting from auto manufacturers and wireless carriers. If we are unable to identify and resolve discrepancies in a timely manner, our revenue mayvary more than anticipated from period to period, which could harm our business, operating results and financial condition.We rely on a proprietary provisioning and reporting system for our navigation products and services to track end user activation, deactivation and usagedata and any material failures in this system could harm our revenue, affect our costs and impair our ability to manage our business effectively.Our provisioning and reporting system that authenticates end users and tracks the number of end users and their use of our services is a proprietary andcustomized system that we developed internally. Although we believe that the flexibility of this service to integrate tightly with auto manufacturers'reporting and provisioning systems gives us a competitive advantage, we might lose revenue and the ability to manage our business effectively if the systemwere to experience material failures or be unable to scale as our business grows. In addition, we may not be able to report our financial results on a timelybasis if our customers question the accuracy of our records or we experience significant discrepancies between the data generated by our provisioning andreporting systems and data generated by their systems, or if our systems fail or we are unable to report timely and accurate information to our third party dataproviders. The inability to timely report our financial results would impair the quality of our financial reporting and could result in the delisting of ourcommon stock.22Table of ContentsWe rely on third party data and content to provide our services and if we were unable to obtain content at reasonable prices, or at all, our gross marginsand our ability to provide our services would be harmed.We rely on third party data and content to provide our services, including map data, POI, traffic information, gas prices and weather information. If oursuppliers of this data or content were to enter into exclusive relationships with other providers of location services or were to discontinue providing suchinformation and we were unable to replace them cost effectively, or at all, our ability to provide our services would be harmed. Our gross margins may also beaffected if the cost of third party data and content increases substantially. Although we have integrated OSM data into our products, we may experiencedifficulty with customer acceptance if the quality of the consumer generated data within OSM is lower than that of paid maps. We introduced mobile phone-based navigation with OSM and launched our first brought-in automotive navigation service with OSM in 2015. As a result, we may not have sufficient datafor automobile manufacturers and OEMs to feel comfortable electing to use OSM in the products and services we provide them.We obtain map data from TomTom and HERE, which are companies owned by our current and potential competitors. Accordingly, these third partydata and content providers may act in a manner that is not in our best interest. For example, they may cease to offer their map and POI data to us. Ouragreement with TomTom to license TomTom map data for voice-guided turn by turn GPS navigation service for our existing mobile navigation products wasautomatically renewed under its existing terms through December 31, 2017. The term of our TomTom agreement will automatically renew for one additionalone-year period until December 31, 2018 unless either party notifies the other party in writing of its intent not to renew at least ninety (90) days prior to theend of the current term, by which time the term of our TomTom agreement shall not be further renewed. Our master data license agreement with HERE wasautomatically renewed under its existing terms through January 31, 2018, and automatically renews for successive one year periods unless either partyprovides notice of non-renewal at least 180 days prior to the expiration of the applicable term. However, individual territory licenses with distinct term,termination and renewal provisions further govern the license of map data to support individual programs and products for our automobile manufacturers andOEMs.We may identify other requisite content and content-related technologies, including certain geocoding data necessary for our OSM products, that wemay be unable to license or develop internally. If we are unsuccessful in these endeavors, we may be unable to successfully launch our OSM-based productsglobally and across all desired product offerings.We may not be able to upgrade our navigation services platform to support certain advanced features and functionality without obtaining technologylicenses from third parties. Obtaining these licenses may be costly and may delay the introduction of such features and functionality, and these licenses maynot be available on commercially favorable terms, or at all. The inability to offer advanced features or functionality, or a delay in our ability to upgrade ournavigation services platform, may adversely affect consumer demand for our navigation services and, consequently, harm our business.We may be subject to our automobile manufacturer or OEM’s selection of map and other content providers, and our ability to negotiate and enter into alicense with such provider(s) may be dependent on the timing of such automobile manufacturer or OEM’s official nomination for such content providers.Accordingly, we may have contractual obligations to provide certain products and services for certain model years or periods to our automobile manufactureror OEM partners, prior to our ability to enter into agreements with our map and other content providers to support such products and services. We may beunable to obtain data licenses with the necessary content providers to support these products and services, or we may not be able to secure such data licenseswithout additional, unplanned costs or delays.We also use our proprietary provisioning and reporting system to record and report royalties we owe to third party providers of content used by endusers in connection with our services. Certain of the third party content providers have the right to audit our use of their services and, if we are found to haveunder or incorrectly reported usage, we may be required to pay the third party content providers for the actual usage, as well as interest and the cost of theaudit. Any significant error in our recording and payment of royalties to our third party content providers could have a material and adverse effect on ourfinancial results. We may also incur losses as a result of any significant error.23Table of ContentsNetwork failures, disruptions or capacity constraints in our third party hosted data center facilities could affect the performance of our navigation servicesand harm our reputation and our revenue.We use hosted services provided by AWS and wireless carrier networks to deliver our navigation and advertising platform services. Our operations relyto a significant degree on the efficient and uninterrupted operation of the third party data centers we use. In the event that AWS or wireless carrier networksexperience a disruption in services or a natural disaster, our ability to continue providing our services would be compromised. Depending on the growth ratein the number of our end users and their usage of our services, if we do not timely complete the negotiation for and scale of additional hosting services, wemay experience capacity issues, which could lead to service failures and disruptions. In addition, if we are unable to secure third party hosting services withappropriate power, cooling and bandwidth capacity, we may be unable to efficiently and effectively scale our business to manage the addition of newwireless carrier customers, increases in the number of our end users or increases in data traffic.AWS hosting services are potentially vulnerable to damage or interruption from a variety of sources, including fire, flood, earthquake, power loss,telecommunications or computer systems failure, human error, terrorist acts or other events. We have not yet completed a comprehensive business continuityplan and there can be no assurance that the measures implemented by us to date, or measures implemented by us in the future, to manage risks related tonetwork failures or disruptions in our data centers will be adequate, or that the redundancies built into our servers will work as planned in the event ofnetwork failures or other disruptions. In particular, if we were to experience damage or interruptions to AWS hosting services our ability to provide efficientand uninterrupted operation of our services would be significantly impaired.We could also experience failures of our data centers or interruptions of our services, or other problems in connection with our operations, as a result of:•damage to or failure of our computer software or hardware or our connections and outsourced service arrangements with third parties;•errors in the processing of data;•computer viruses or software defects;•physical or electronic break-ins, sabotage, intentional acts of vandalism and similar events; or•errors by our employees or third party service providers.Poor performance in or disruptions of our services could harm our reputation, delay market acceptance of our services and subject us to liabilities. Ourautomobile manufacturer and OEM agreements for brought-in and connected navigation solutions require us to meet at least 99.9% operational uptimerequirements, excluding scheduled maintenance periods, or be subjected to penalties. Any outage in a network or system, or other unanticipated problem thatleads to an interruption or disruption of our navigation services, could have a material adverse effect on our operating results and financial condition.We may not be able to enhance our location services to keep pace with technological and market developments, or develop new location services in atimely manner or at competitive prices.The market for location services is characterized by rapid technological change, evolving industry standards, frequent new product introductions andshort product life cycles. To keep pace with technological developments, satisfy increasing customer requirements and achieve product acceptance, ourfuture success depends upon our ability to enhance our current navigation services platform and advertising services platform and to continue to develop andintroduce new navigation services, advertising services and other location-based product offerings and enhanced performance features and functionality on atimely basis at competitive prices. Our inability, for technological or other reasons, to enhance, develop, introduce or deliver compelling services andproducts in a timely manner, or at all, in response to changing market conditions, technologies or consumer expectations could have a material adverse effecton our operating results or could result in our services becoming obsolete. Our ability to compete successfully will depend in large measure on our ability tomaintain a technically skilled development and engineering team and to adapt to technological changes and advances in the industry, including providingfor the continued compatibility of our services platform with evolving industry standards and protocols and competitive network operating environments.24Table of ContentsA large percentage of our research and development operations are conducted in China and Romania, and our ability to introduce new services andsupport 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 ofour research and development personnel are in China and Romania. Although we have sought to retain certain key personnel, we may be unable to retainthem over the long-term. In addition, we have been experiencing significant increases in compensation costs in China and Romania due to competitivemarket conditions for qualified staff, as well as higher risk of employee turnover in those markets.We also expect that we may continue to consolidate certain of our operations or reduce our workforce if we are unable to continue to replace wirelesscarrier revenue with other sources of high gross margin revenue. These reorganizations or reductions in force could result in unexpected costs or delays inproduct 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 besusceptible to risks associated with international operations.As of June 30, 2017, we had international operations in China, Romania, Germany, Japan and South Korea. 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 88%and 97% of our total revenue in fiscal year 2017 and 2016, respectively. However, our product is distributed globally in many different regions outside theUnited States, including South America, Europe, Asia, Australia, China and New Zealand. Our limited experience in operating our business outside theUnited States increases the risk that our current and future international expansion efforts may not be successful. In particular, our business model may not besuccessful in certain countries or regions outside the United States for reasons that we currently do not anticipate. In addition, conducting internationaloperations subjects us to risks that we have not generally faced in the United States. These include:•fluctuations in currency exchange rates;•unexpected changes in foreign regulatory requirements;•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 therepatriation of earnings and changes in tax rates;•difficulties in collecting accounts receivable balances in a timely manner;•dependence on foreign wireless carriers with different pricing models;•roaming charges to end users;•availability of reliable mobile networks in those countries;•requirements that we comply with local telecommunication regulations and automobile hands free laws in those countries;•requirements that we comply with local privacy regulations;•the burdens of complying with a wide variety of foreign laws and different legal standards;•increased financial accounting and reporting burdens and complexities;•political, social and economic instability in some jurisdictions;•terrorist attacks and security concerns in general; and•reduced or varied protection for intellectual property rights in some countries.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 financial25Table of Contentsresources. We cannot be certain that the investment and additional resources required to establish, acquire or integrate operations in other countries willproduce desired levels of revenue or profitability and we may incur larger losses as a result.We rely on our management team and need specialized personnel to grow our business, and the loss of one or more key employees or our inability toattract and retain qualified personnel could harm our business.Our success and future growth depend on the skills, working relationships and continued services of our management team. Our future performance willdepend on our ability to continue to retain our senior management, particularly in the growth areas of our business, such as automotive and advertising.Our future success also depends on our ability to attract, retain and motivate highly skilled personnel in the United States and internationally. All of ourU.S. employees work for us on an at will basis. Competition for highly skilled personnel is intense, particularly in the software industry and for persons withexperience with GPS and location services. The high degree of competition for personnel we experience has resulted in and may also continue to result in theincurrence of significantly higher compensation costs to attract, hire and retain employees. We have from time to time experienced, and we expect tocontinue to experience, difficulty in attracting, hiring and retaining highly skilled employees with appropriate qualifications. Many of the companies withwhich we compete for experienced personnel have greater resources than we have. If we hire employees from competitors, their former employers may attemptto assert that these employees or we have breached the former employees' legal obligations to the former employer, resulting in a diversion of our time andresources. In addition, existing employees often consider the value of the stock awards they receive in connection with their employment. If our stock priceperforms poorly, it may adversely affect our ability to retain highly skilled employees. Our inability to attract and retain the necessary personnel couldadversely affect our business and future growth prospects.We rely on network infrastructures provided by our wireless carriers, mobile phones and in-car wireless connections for the delivery of our navigationservices to end users.We generally provide our navigation services from third party hosted servers, which require close integration with the wireless carriers’ networks. Wemay be unable to provide high quality services if the wireless carriers’ networks perform poorly or experience delayed response times. Our future success willdepend on the availability and quality of our wireless carrier customers’ networks in the United States and abroad to run our mobile navigation services. Thisincludes deployment and maintenance of reliable networks with the speed, data capacity and security necessary to provide reliable wireless communicationsservices. We do not establish or maintain these wireless networks and have no control over interruptions or failures in the deployment and maintenance bywireless carrier customers of their network infrastructure. In addition, these wireless network infrastructures may be unable to support the demands placed onthem if the number of subscribers increases, or if existing or future subscribers increase their use of limited bandwidth. Market acceptance of our mobilenavigation services will depend in part on the quality of these wireless networks and the ability of our customers to effectively manage their subscribers’expectations.In addition, certain automotive navigation applications rely on wireless connections between the vehicle and our network. We have no influence orcontrol over the vehicle’s wireless equipment and if it does not operate in a satisfactory manner, our ability to provide those services would be impaired andour reputation would be harmed.Wireless communications have experienced a variety of outages and other delays as a result of infrastructure and equipment failures and could faceoutages and delays in the future. These outages and delays could affect our ability to provide our navigation services successfully. In addition, changes by awireless carrier to its network infrastructure may interfere with the integration of our servers with their network and delivery of our navigation services andmay cause end users to lose functionality for services they have already purchased. Any of the foregoing could harm our business, operating results andfinancial condition.We cannot control the quality standards of our wireless carriers, their mobile phone providers, automobile manufacturers and other technologyinfrastructure providers. We cannot guarantee that the mobile phones or in-car wireless equipment are free from errors or defects. If errors or defects occur inmobile phones or services offered by our wireless carrier customers, it could result in consumers terminating our services, damage to our reputation, increasedcustomer service and support costs, warranty claims, lost revenue and diverted development resources, any of which could adversely affect our business,results of operations and financial condition.Mergers, consolidations or other strategic transactions in the mapping data industry could weaken our competitive position, reduce the number of ourmap providers and adversely affect our business.The mapping data industry continues to experience consolidation. Should one of our map providers consolidate or enter into an alliance with anothernavigation provider, this could have a material adverse impact on our business. Currently, two of26Table of Contentsour map suppliers are owned by competitors in the navigation space. Such a consolidation may cause us to lose a map supplier or require us to increase theroyalties we pay to map vendors as a result of enhanced supplier leverage, which would have a negative effect on our business. In the event that we lose amap supplier, we may be unable to replace our map suppliers and the remaining map suppliers may increase license fees. In addition, as we continue to usemore OSM-based maps and no longer purchase maps from those suppliers, we may be unable to purchase other data that is integral to our navigation productsfrom our existing map suppliers.Changes in business direction and market conditions could lead to charges related to structural reorganization and discontinuation of certain products orservices, which may adversely affect our financial results.In response to changing market conditions and the desire to focus on new and more potentially attractive opportunities, we may be required tostrategically realign our resources and consider restructuring, eliminating, or otherwise exiting certain business activities. Any decision to reduce investmentin, dispose of, or otherwise exit business activities may result in the recording of special charges, such as workforce reduction and excessive facility spacecosts.Risks related to our intellectual property and regulationWe operate in an industry with extensive intellectual property litigation. Claims of infringement against us, our customers, or other business partners maycause our business, operating results and financial condition to suffer.Our commercial success depends in part upon us, our partners and our customers not infringing intellectual property rights owned by others and beingable to resolve claims of intellectual property infringement without major financial expenditures and/or need to alter our technologies or cease certainactivities. We operate in an industry with extensive intellectual property litigation and it is not uncommon for our automobile manufacturers and OEMs andcompetitors to be involved in infringement lawsuits by or against third parties. Many industry participants that own, or claim to own, intellectual propertyaggressively assert their rights, and our customers and other business partners, who we agree in certain circumstances to indemnify for intellectual propertyinfringement claims related to our services, are often targets of such assertions. We cannot determine with certainty whether any existing or future third partyintellectual property rights would require us to alter our technologies, obtain licenses or cease certain activities.We have received, and may in the future receive, claims from third parties alleging infringement and other related claims. As of the date of this AnnualReport on Form 10-K, we were named as a defendant in several cases alleging that our services infringe other parties' patents, as well as other matters. See PartI, Item 3, “Legal Proceedings,” for a description of these matters. These cases and future litigation may make it necessary to defend ourselves and ourcustomers and other business partners by determining the scope, enforceability and validity of third party proprietary rights or to establish our proprietaryrights. Some of our competitors may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual propertylitigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties andsettlements by enforcing patent rights may target us, our wireless carrier customers or our other business partners. These companies typically have little or noproduct revenue and therefore our patents may provide little or no deterrence against such companies filing patent infringement lawsuits against us.Regardless of whether claims that we are infringing patents or other intellectual property rights have any merit, these claims are time consuming and costly toevaluate and defend and could:•adversely affect our relationships with our current or future customers and other business partners;•cause delays or stoppages in the shipment of Telenav enabled or preloaded mobile phones and vehicles, or cause us to modify or suspend theprovision of our navigation services;•cause us to incur significant expenses in defending claims brought against our customers, other business partners or us;•divert management's attention and resources;•subject us to significant damages or settlements;•require us to enter into settlements, royalty or licensing agreements on unfavorable terms; or•require us or our business partners to cease certain activities and/or modify our products or services.In addition to liability for monetary damages against us or, in certain circumstances, our customers, we may be prohibited from developing,commercializing or continuing to provide certain of our navigation services unless we obtain licenses from the holders of the patents or other intellectualproperty rights. We cannot assure you that we will be able to obtain any such27Table of Contentslicenses on commercially reasonable terms, or at all. If we do not obtain such licenses, our business, operating results and financial condition could bematerially adversely affected and we could, for example, be required to cease offering our navigation services or be required to materially alter our navigationservices, which could involve substantial costs and time to develop.Unauthorized control or manipulation of our systems in vehicles may cause them to operate improperly or not at all, or compromise their safety and datasecurity, which could result in loss of confidence in us and our products, cancellation of contracts with certain of our auto OEM customers and harm ourbusiness.There have been reports of vehicles of certain automobile manufacturers being “hacked” to grant access and operation of the vehicles to unauthorizedpersons and would-be thieves. Modern vehicles are technologically advanced machines requiring the interoperation of numerous complex and evolvinghardware and software systems, including the navigation system, and with respect to vehicles with autonomous driving features, control of the vehicle. Wehave agreed with some of our auto OEM customers to adopt certain security procedures and we may be subject to claims or our contracts with those OEMsmay be terminated if we do not comply with our covenants or if our products are the source of access to the systems in their vehicles by intruders.Although we have designed, implemented and tested security measures to prevent unauthorized access to our products when installed in vehicles, ourinformation technology networks and communications with vehicles in which our products are installed may be vulnerable to interception, manipulation,damage, disruptions or shutdowns due to attacks by hackers or breaches due to errors by personnel who have access to our networks and systems. Any suchattacks or breaches could result in unexpected control of or changes to the vehicles’ functionality and our products’ user interface and performancecharacteristics. Hackers may also use similar means to gain access to data stored in or generated by the vehicle, such as its current geographical position,previous and stored destination address history and web browser “favorites.” Any such unauthorized control of vehicles or access to or loss of informationcould result in legal claims or proceedings and negative publicity, which would negatively affect our brand and harm our business, prospects, financialcondition and operating results.Our business is subject to online security risks, including security and privacy breaches.Our business involves the collection, storage, processing and transmission of users’ personal data including information about routes mapped andtaken. An increasing number of organizations, including large online and offline merchants and businesses, other large Internet companies, financialinstitutions, and government institutions, have disclosed breaches of their security, some of which have involved sophisticated and highly targeted attacks,including on portions of their websites or infrastructure. While we work to evaluate and improve our security, we have been subject to such attacks in thepast, although they have not, to our knowledge, resulted in the disclosure of user information. A breach of security or privacy could have negativeconsequences to our reputation, which could result in users discontinuing or reducing their use of our products and our automotive and advertising customersterminating their agreements with us, and could have significant out-of-pocket financial impact, which could harm our business. Similarly, a breach ofsecurity or privacy in vehicles in which our navigation products are installed could result in a reduction in adoption of our navigation products.The techniques used to obtain unauthorized, improper or illegal access, disable or degrade service, or sabotage systems change frequently, may bedifficult to detect quickly, and often are not recognized until launched against a target. Certain efforts may be state-sponsored and supported by significantfinancial and technological resources and may therefore be even more difficult to detect. As a result, we may be unable to anticipate these techniques or toimplement adequate preventative measures. Unauthorized parties also may attempt to gain access to our systems or facilities through various means,including hacking into our systems or facilities, fraud, trickery or other means of deceiving our employees, contractors and temporary staff. A party that isable to circumvent our security measures could misappropriate our, our customers’ or our employees’ personal or proprietary information, cause interruptionin our operations and damage our computers and systems or those of our customers. In addition, our customers have been and likely will continue to betargeted by parties using fraudulent “spoof” and “phishing” emails to misappropriate user names, passwords, payment card numbers, GPS data or otherpersonal information or to introduce viruses or other malware, including through “trojan horse” programs, to our users' phones and vehicles. Also, ourinformation technology and infrastructure may be vulnerable to cyberattacks or security incidents, and third parties may be able to access our customers’personal or proprietary information and payment card data that are stored on or accessible through our systems. Any security or privacy breach at a companyproviding services to us or our OEM customers, or integrated with our products and services, could have similar effects. We may also need to expendsignificant additional resources to protect against security or privacy breaches or to redress problems caused by breaches. These issues are likely to becomemore difficult and costly as we expand the number of markets where we operate. Additionally, our insurance policies carry low coverage limits, which maynot be adequate to reimburse us for losses caused by security breaches, and we may not be able to collect fully, if at all, under these insurance policies.28Table of ContentsChanges in government regulation of the wireless communications, the automobile and mobile advertising industries may adversely affect our business.It is possible that a number of laws and regulations may be adopted in the United States and elsewhere that could restrict the wireless communicationsindustry, further regulate the automobile industry or impair the mobile advertising industry, including laws and regulations regarding lawful interception ofpersonal data, hands free use of mobile phones or navigation services within autos, autonomous driving or the control of such use, privacy, taxation, contentsuitability, copyright and antitrust. Furthermore, the growth and development of electronic storage of personal information may prompt calls for morestringent consumer protection laws that may impose additional burdens on companies such as ours that store personal information. We anticipate thatregulation of the industries in which our products and services are used will increase and that we will be required to devote legal and other resources toaddress this regulation. In addition, governments have recently begun to consider and adopt laws regarding vehicles using ADAS and semi-autonomousdriving capabilities and those laws may curtail or preclude using the services our products provide. Changes in current laws or regulations or the impositionof new laws and regulations in the United States or elsewhere regarding the wireless communications or automobile industries may make operation morecostly, and may materially reduce our ability to increase or maintain sales of our products and services.Government regulation designed to protect end user privacy may make it difficult for us to provide our services or adopt advertising based revenue models.We transmit and store a large volume of personal information in the course of providing our products and services. This information is increasinglysubject to legislation and regulations in numerous jurisdictions around the world. This government action is typically intended to protect the privacy andsecurity of personal information that is collected, stored and transmitted in or from the governing jurisdiction.Legislation may also be adopted in various jurisdictions that prohibits use of personal information and search histories to target end users with tailoredadvertising, or provide advertising at all. Although our advertising revenue to date is not significant, we anticipate we will continue to grow advertisingrevenue in the future to improve average revenue per user in certain markets.We could be adversely affected if domestic or international legislation or regulations are expanded to require changes in our business practices or ifgoverning jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business. For example, the USA PATRIOTAct provides certain rights to U.S. law enforcement authorities to obtain personal information in the control of U.S. persons and entities without notifying theaffected individuals. If we are required to allocate significant resources to modify the delivery of our services to enable enhanced legal interception of thepersonal information that we transmit and store, our results of operations and financial condition may be adversely affected.In addition, because various foreign jurisdictions have different laws and regulations concerning the storage and transmission of personal information,we may face unknown requirements that pose compliance challenges in new international markets that we seek to enter. Such variation could subject us tocosts, delayed service launches, liabilities or negative publicity that could impair our ability to expand our operations into some countries and therefore limitour future growth.As privacy and data protection have become more sensitive issues, we may also become exposed to potential liabilities as a result of differing views onthe privacy of personal information. These and other privacy concerns could adversely impact our business, results of operations and financial condition.If we are unable to obtain the required government licenses or approvals to comply with government regulation relating to map data and location basedservices, we may not be able to provide our products and services and our business could be adversely impacted.A number of countries and local jurisdictions require certain licenses and/or government approvals in order to comply with regulations governing thecreation or distribution map data and/or the provision of location based services, including the collection of location information. If we are unable to obtainthe necessary licenses or approvals or fail to comply with the regulations in each jurisdiction where we or our partners offer location based products andservices, we may be unable to offer to our partners or customers the full scope of planned products and services. In addition, should any map or location basedservices related regulations change, we may incur additional expense in modifying our existing products and product roadmaps to comply with therequirements of individual jurisdictions. Such laws or regulations or the imposition of new laws and regulations regarding the provision of map data orlocations based services may make operation more costly, and may materially reduce our ability to increase or maintain sales of our products and services.29Table of ContentsIf we are unable to protect our intellectual property and proprietary rights, our competitive position and our business could be harmed.We rely primarily on a combination of patent laws, trademark laws, copyright laws, trade secrets, confidentiality procedures and contractual provisionsto protect our proprietary technology. However, our issued patents and any future patents that may be issued may not survive a legal challenge to their scope,validity or enforceability, or provide significant protection for us. The failure of our patents to adequately protect our technology might make it easier for ourcompetitors to offer similar products or technologies. In addition, patents may not be issued from any of our current or future applications.Monitoring unauthorized use of our intellectual property is difficult and costly. The steps we have taken to protect our proprietary rights may not beadequate to prevent misappropriation of our intellectual property. We may not be able to detect unauthorized use of, or take appropriate steps to enforce, ourintellectual property rights. Our competitors may also independently develop similar technology. In addition, the laws of many countries do not protect ourproprietary rights to as great an extent as do the laws of the United States. Any failure by us to meaningfully protect our intellectual property could result incompetitors offering products that incorporate our most technologically advanced features, which could seriously reduce demand for our navigation services.In addition, we may in the future need to initiate infringement claims or litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive,time consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business, whether or not such litigationresults in a determination favorable to us.Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information.We have devoted substantial resources to the development of our proprietary technology, including the proprietary software components of ournavigation services and related processes. In order to protect our proprietary technology and processes, we rely in part on confidentiality agreements with ouremployees, licensees, independent contractors and other advisors. These agreements may not effectively prevent disclosure of our confidential informationand may not provide an adequate remedy in the event of unauthorized disclosure of our confidential information. In addition, others may independentlydiscover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such parties. Costly and timeconsuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protectioncould adversely affect our competitive business position.Our use of open source software could negatively affect our ability to sell our service and subject us to possible litigation.We use open source software in our navigation services platform and client applications and may use more open source software in the future. Use ofopen source software may subject our navigation services platform and client applications to general release or require us to re-engineer our navigationservices platform and client applications, which may cause harm to our business. From time to time, there have been claims challenging the ownership ofopen source software against companies that incorporate open source software into their products. As a result, we could be subject to suits by parties claimingownership of what we believe to be open source software. Some open source licenses contain requirements that we make available source code formodifications or derivative works we create based upon the open source software and that we license such modifications or derivative works under the termsof a particular open source license or other license granting third parties certain rights of further use. If we combine our proprietary software products withopen source software in a certain manner, we could, under certain of the open source licenses, be required to release our proprietary source code. In additionto risks related to license requirements, usage of open source software can lead to greater risks than use of third party commercial software, as open sourcelicensors generally do not provide warranties or controls on origin of the software. Open source license terms may be ambiguous and many of the risksassociated with usage of open source cannot be eliminated, and could, if not properly addressed, negatively affect our business. If we were found to haveinappropriately used open source software, we may be required to release our proprietary source code, re-engineer our navigation services platform and clientapplications, discontinue the sale of our service in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that maydivert resources away from our development efforts, any of which could adversely affect our business, operating results and financial condition.30Table of ContentsRisks related to being a publicly traded company and holding our common stockAs a public company, we are obligated to develop and maintain effective internal control over financial reporting. We may not always complete ourassessment of the effectiveness of our internal control over financial reporting in a timely manner, or such internal control may not be determined to beeffective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.The Sarbanes-Oxley Act requires that we test our internal control over financial reporting and disclosure controls and procedures annually. For example,as of June 30, 2017, we performed system and process evaluation and testing of our internal control over financial reporting to allow management and ourindependent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of theSarbanes-Oxley Act. Our compliance with Section 404 requires that we incur substantial expense and expend significant management time on compliance-related issues. Moreover, if we are not able to comply with the requirements of Section 404 in the future, or if we or our independent registered publicaccounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stockmay decline and we could be subject to sanctions or investigations by the NASDAQ Global Market, the SEC or other regulatory authorities, which wouldrequire significant additional financial and management resources.We will continue to incur high 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 incur significant legal, accounting, investor relations and other expenses, including costs associated with public companyreporting requirements. We also have incurred and will continue to incur costs associated with current corporate governance requirements, includingrequirements under Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the stock exchange on whichour common stock is traded. We are generally not eligible to report under reduced disclosure requirements or benefit from longer phase in periods for“emerging growth companies” as such term is defined in the Jumpstart Our Business Act of 2012. The expenses incurred by public companies for reportingand corporate governance purposes have increased dramatically over the past several years. We expect these rules and regulations to continue to impact ourlegal and financial compliance costs substantially and to make some activities more time consuming and costly. We are unable currently to estimate thesecosts with any degree of certainty. We also expect that, over time, it may be more expensive for us to obtain director and officer liability insurance. As aresult, 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 if we cannotprovide a level of insurance coverage that they believe is adequate.Regulations relating to investments in offshore companies by Chinese residents may subject our Chinese-resident beneficial owners or our Chinesesubsidiaries to liability or penalties, limit our ability to inject capital into our Chinese subsidiaries, limit our Chinese subsidiaries’ ability to increase theirregistered capital or limit their ability to distribute profits to us.On July 4, 2014, the State Administration of Foreign Exchange of the People’s Republic of China, or SAFE, promulgated the Circular on RelevantIssues Concerning Foreign Exchange Control on Domestic Residents' Offshore Investment and Financing and Roundtrip Investment through SpecialPurpose Vehicles, or Circular 37, which replaced the former Circular on Issues Relating to the Administration of Foreign Exchange in Fund-Raising andRound Trip Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Vehicles (commonly known as "SAFE Circular 75")promulgated by SAFE on October 21, 2005. Circular 37 requires Chinese residents to register with local branches of SAFE in connection with their directestablishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such Chinese residents' legally ownedassets or equity interests in domestic enterprises or offshore assets or interests, referred to in Circular 37 as a "special purpose vehicle." Circular 37 furtherrequires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease ofcapital contributed by Chinese individuals, share transfer or exchange, merger, division or other material event. In the event that a Chinese shareholderholding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the Chinese subsidiaries of that special purpose vehicle may beprohibited from making profit distributions to the offshore parent and from carrying out all subsequent cross-border foreign exchange activities in worstscenario, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its Chinese subsidiary. Furthermore, failure tocomply with the various SAFE registration requirements described above could result in liability under Chinese law for evasion of foreign exchange controls.On February 13, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, orCircular 13, which became effective on June 1, 2015. Pursuant to Circular 13, entities and individuals are required to apply for foreign exchange registrationof overseas direct investment, including those required under Circular 37, with qualified banks, instead of SAFE. The qualified banks, under the supervisionof SAFE, will directly review the applications and conduct the registration.31Table of ContentsWe attempt to comply, and attempt to ensure that our stockholders who are subject to Circular 37 and other related rules, comply with the relevantrequirements under Circular 37. However, we cannot provide any assurances that all of our stockholders who are Chinese residents have complied or willcomply with our request to make or obtain any applicable registrations or comply with other requirements required by Circular 37 or other related rules. Anyfailure or inability of any of our stockholders who is a Chinese resident to comply with relevant requirements under Circular 7 could subject suchstockholders or our Chinese subsidiaries to fines and legal sanctions imposed by the Chinese government and may also limit our ability to contributeadditional capital into our Chinese subsidiaries or receive dividends or other distributions from our Chinese subsidiaries. As a result, these risks may have amaterial adverse effect on our business, financial condition and results of operations.If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock coulddecline.We expect that the trading price for our common stock will be affected by any research or reports that industry or financial analysts publish about us orour business. As of June 30, 2017, only four research analysts published reports regarding our company. If one or more of these analysts cease coverage of ourcompany, our stock may lose visibility in the market, which in turn could cause its price to decline. In addition, if any analysts who may elect to cover usdowngrade their evaluations of our stock, the price of our stock could decline. For example, in late July 2011, following our earnings release for the threemonths and fiscal year ended June 30, 2011, several financial analysts published research reports lowering their price targets of our stock. After ourannouncement and the publication of these reports, our stock price fell more than 40%. If one or more of these analysts cease coverage of our company, ourstock may lose visibility in the market, which in turn could cause its price to decline. If our stock was to trade at prices below $5.00 per share in the future foran extended period of time, financial analysts may terminate coverage of our company due to internal policies within their investment banks, which couldresult in further stock price declines.Our stock price has fluctuated significantly and may continue to fluctuate in the future.Our common stock was sold in our IPO at $8.00 per share. Although our common stock has traded at prices as high as $22.07 per share, it has alsotraded at prices as low as $4.47 and has tended to have significant downward and upward price movements in a relatively short time period. Futurefluctuations or declines in the trading price of our common stock may result from a number of events or factors, including those discussed in the precedingrisk factors relating to our operations, as well as:•actual or anticipated fluctuations in our operating results;•changes in the financial projections we may provide to the public or our failure to meet these projections;•announcements by us or our competitors of significant technical innovations, relationship changes with key customers, acquisitions, strategicpartnerships, joint ventures, capital raising activities or capital commitments;•the public’s response to our press releases or other public announcements, including our filings with the SEC;•lawsuits threatened or filed against us; and•large distributions of our common stock by significant stockholders to limited partners or others who immediately resell the shares.General market conditions and domestic or international macroeconomic factors unrelated to our performance, such as the continuing unprecedentedvolatility in the financial markets, may also affect our stock price. For these reasons, investors should not rely on recent trends to predict future stock prices orfinancial results. Investors in our common stock may not be able to dispose of the shares they purchased at prices above the IPO price, or, depending onmarket conditions, at all.In addition, if the market price of our common stock falls below $5.00 per share for an extended period of time, under stock exchange rules, ourstockholders will not be able to use such shares as collateral for borrowing in margin accounts. Further, certain institutional investors are restricted frominvesting in shares priced below $5.00 per share. This inability to use shares of our common stock as collateral and the inability of certain institutionalinvestors to invest in our shares may depress demand and lead to sales of such shares creating downward pressure on and increased volatility in the marketprice of our common stock.In the past, the market price for our common stock has traded only slightly above the cash value of our common stock. If investors do not value ourcompany as an ongoing business and only value it for the cash on our balance sheet, our stock price may decline if we continue to incur net losses and useour cash to fund operations. We may also attract investors who are32Table of Contentslooking for short-term gains in our shares rather than being interested in our long-term outlook. As a result, the price of our common stock may be volatile.The concentration of ownership of our capital stock limits your ability to influence corporate matters.Our executive officers, directors, current 5% or greater stockholders and entities affiliated with them beneficially owned (as determined in accordancewith the rules of the SEC) approximately 34.3% of our common stock outstanding as of June 30, 2017. This significant concentration of share ownership mayadversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with controllingstockholders. Also, these stockholders, acting together, may be able to control our management and affairs and matters requiring stockholder approval,including the election of directors and the approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of ourassets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change of control, including a merger, consolidation orother business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even ifthat change of control would benefit our other stockholders.ITEM 1B.UNRESOLVED STAFF COMMENTSNone.ITEM 2.PROPERTIESFacilitiesOur corporate headquarters are located at 4655 Great America Parkway, Suite 300, Santa Clara, California in an office consisting of approximately55,000 square feet, which headquarters facility houses the majority of our U.S. research and development, support, marketing and general and administrativepersonnel. As a result of the Avaya Inc. bankruptcy, in August 2017, we entered into an agreement to terminate our existing sublease with Avaya and enteredinto a new lease with the property owner. These agreements will not go into effect until approval of the termination agreement and an amendment to theexisting master lease, respectively, is received from the United States Bankruptcy Court for the Southern District of New York. When effective, the new leasefor 4655 Great America Parkway, Suite 300, will have a six year term. We lease approximately 32,000 square feet of space in Shanghai, China for our researchand development, sales and support operations pursuant to a lease expiring in January 2018, approximately 14,000 square feet in Xi’an, China, for researchand development operations pursuant to a lease expiring in September 2020, and approximately 32,000 square feet in Cluj, Romania, for research anddevelopment operations pursuant to leases that expire in July 2022. We lease approximately 12,000 square feet in Culver City, California for research anddevelopment and sales and marketing operations pursuant to a lease expiring in February 2019. We also lease office space of less than 5,000 square feet eachin Reston, Virginia; Southfield, Michigan; Chicago, Illinois; New York, New York; Berlin, Germany, Tokyo, Japan and Incheon, South Korea for our sales,marketing and business development personnel located in those areas. We believe our current facilities will be adequate or that additional space will beavailable on commercially reasonable terms for the foreseeable future.ITEM 3.LEGAL PROCEEDINGSFrom time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We have received, and may in the futurecontinue to receive, claims from third parties asserting infringement of their intellectual property rights. Future litigation may be necessary to defendourselves and our customers by determining the scope, enforceability and validity of third party proprietary rights or to establish our proprietary rights. Fromtime to time we also may be subject to claims from our third party content providers that we owe them additional royalties and interest, which claims mayresult in litigation if we and the third party content provider are unable to resolve the matter. There can be no assurance with respect to the outcome of anycurrent or future litigation brought against us or pursuant to which we have indemnification obligations and the outcome could have a material adverseimpact on our business, operating results and financial condition.On July 28, 2016, Nathan Gergetz filed a putative class action complaint in the U.S. District Court for the Northern District of California, alleging thatTelenav violated the Telephone Consumer Protection Act, or TCPA. The complaint purports to be filed on behalf of a class, and it alleges that Telenavcaused unsolicited text messages to be sent to the plaintiff from July 6, 2016 to July 26, 2016. Plaintiffs seek statutory and actual damages under the TCPAlaw, attorneys’ fees and costs of the action, and an injunction to prevent any future violations. Telenav moved to dismiss the complaint on November 21,2016. Trial is currently scheduled for January 2020. On August 24, 2017, the court entered a 90 day stay in the case at the parties' request, and the case iscurrently stayed until October 24, 2017. Due to the preliminary nature of this matter and uncertainties33Table of Contentsrelating to litigation, we are unable at this time to estimate the effects of this lawsuit on our financial condition, results of operations, or cash flows.In addition, we have received, and expect to continue to receive, demands for indemnification from our customers, which demands can be veryexpensive to settle or defend, and we have in the past offered to contribute to settlement amounts and incurred legal fees in connection with certain of theseindemnity demands. In response to these demands we may be required to assume control of and bear all costs associated with the defense of our customers incompliance with our contractual commitments. At this time, we are not a party to the following cases; however, our customers have requested that weindemnify them in connection with such cases.In August 2017, AT&T Mobility LLC (AT&T) and Sprint Spectrum L.P. (Sprint) sent Telenav indemnification requests relating to patent infringementlawsuits brought by Location Based Services LLC, alleging patent infringement by the AT&T Navigator system and App for iOS and Android, and the SprintScout System and the Sprint Scout App for iOS and Android. Location Based Services LLC filed separate lawsuits against AT&T and Sprint in the U.S.District Court for the Eastern District of Texas, asserting five US Patents. Due to the preliminary nature of these matters and uncertainties relating to litigation,we are unable at this time to estimate the effects of these lawsuits and any indemnification obligations on our financial condition, results of operations, orcash flows.While we presently believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financialposition, cash flows or overall trends in results of operations, legal proceedings are subject to inherent uncertainties and unfavorable rulings could occur.Nevertheless, were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact on our business, financial position, cashflows or overall trends in results of operations.Large future indemnity payments and associated legal fees and expenses, including potential indemnity payments and legal fees and expenses relatingto our wireless carrier and other customers’ indemnity demands with respect to pending litigation, could materially harm our business, operating results andfinancial condition. When we believe a loss or a cost of indemnification is probable and can be reasonably estimated, we accrue the estimated loss or cost ofindemnification in our consolidated financial statements. Where the outcome of these matters is not determinable, we do not make a provision in ourfinancial statements until the loss or cost of indemnification, if any, is probable and can be reasonably estimated or the outcome becomes known. Althoughto date we have not agreed to defend or indemnify our customers for outstanding and unresolved indemnity demands where we do not believe we have anobligation to do so or that our solution infringes on asserted intellectual property rights, we may in the future agree to defend and indemnify our customers inconnection with demands for indemnification, irrespective of whether we believe that we have an obligation to indemnify them or whether we believe oursolution infringes the asserted intellectual property rights. Alternatively, we may reject certain of our customers’ indemnity demands, including theoutstanding demands, which may lead to disputes with our customers, negatively impact our relationships with them or result in litigation against us. Ourwireless carrier or other customers may also claim that any rejection of their indemnity demands constitutes a material breach of our agreements with them,allowing them to terminate such agreements. If we make substantial payments as a result of indemnity demands, our relationships with our customers arenegatively impacted, or any of our customer agreements is terminated, our business, operating results and financial condition could be materially harmed.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.PART II.ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESOur common stock began trading on the NASDAQ Global Market under the symbol “TNAV” on May 13, 2010. The following table sets forth the rangeof high and low closing sales prices of our common stock for the periods indicated: 34Table of ContentsYear ended June 30, 2017 High LowFirst Quarter $6.10 $4.64Second Quarter $7.45 $4.80Third Quarter $10.15 $6.80Fourth Quarter $9.25 $7.50Year ended June 30, 2016 High LowFirst Quarter $8.18 $6.65Second Quarter $7.71 $5.69Third Quarter $6.68 $5.17Fourth Quarter $6.06 $4.48We had approximately 38 stockholders of record as of June 30, 2017. A substantially greater number of holders of our common stock are “street name”or beneficial holders, whose shares are held by banks, brokers and other financial institutions. We have never declared or paid dividends on our commonstock and do not expect to pay dividends on our common stock for the foreseeable future. Instead, we anticipate that all of our earnings in the foreseeablefuture will be used for the operation and growth of our business.Unregistered Sales of Equity Securities and Use of Proceeds.Not applicable. STOCK PERFORMANCE GRAPHThis performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission for purposes ofSection 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall notbe deemed to be incorporated by reference into any filing of Telenav, Inc. under the Securities Act or the Exchange Act.The following graph shows a comparison from July 1, 2012 through June 30, 2017 of cumulative total return for our common stock, the NASDAQComposite Index and the Russell 3000 Index. Such returns are based on historical results and are not intended to suggest future performance. Data for theNASDAQ Composite Index and the Russell 3000 Index assume reinvestment of dividends.ITEM 6.SELECTED FINANCIAL DATAThe following selected financial data should be read in conjunction with the consolidated financial statements and related notes thereto appearingelsewhere in this Form 10-K. We have derived the statement of operations data for fiscal years ended June 30, 2017, 2016 and 2015 and the balance sheetdata as of June 30, 2017 and 2016 from the audited consolidated financial35Table of Contentsstatements included elsewhere in this Form 10-K. The statement of operations data for the fiscal years ended June 30, 2014 and 2013 and the balance sheetdata as of June 30, 2015, 2014 and 2013 were derived from the audited consolidated financial statements that are not included in this Form 10-K. Theconsolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The results of operationsof our enterprise business, which were previously presented as a component of our consolidated operating results, have been classified as discontinuedoperations in our statement of operations for all periods presented. We have not declared or distributed any cash dividends on our common stock. Historicalresults are not necessarily indicative of results to be expected for future periods. Consolidated Statements of Operations Data:(in thousands, except per share data) Fiscal Year Ended June 30,2017 2016 2015 2014 2013Revenue $169,584 $183,346 $160,239 $150,313 $191,800Cost of revenue 92,335 100,797 78,784 60,841 69,113Gross profit 77,249 82,549 81,455 89,472 122,687Operating expenses: Research and development 73,102 68,911 68,060 60,573 60,349Sales and marketing 21,995 25,587 26,975 33,138 30,435General and administrative 23,041 23,059 23,606 26,176 24,765Legal settlement and contingencies 6,424 935 — — —Restructuring — (1,362) 1,150 4,412 1,671Total operating expenses 124,562 117,130 119,791 124,299 117,220Operating income (loss) (47,313) (34,581) (38,336) (34,827) 5,467Other income (expense), net 892 (229) 2,267 1,288 1,207Income (loss) from continuing operations beforeprovision (benefit) for income taxes (46,421) (34,810) (36,069) (33,539) 6,674Provision (benefit) for income taxes 841 511 (13,006) (4,015) 1,093Income (loss) from continuing operations, net of tax (47,262) (35,321) (23,063) (29,524) 5,581Income from discontinued operations, net of tax — — — — 7,486Net income (loss) $(47,262) $(35,321) $(23,063) $(29,524) $13,067 Basic income (loss) per share: Income (loss) from continuing operations $(1.09) $(0.85) $(0.58) $(0.76) $0.14Income from discontinued operations, net of tax $— $— $— $— $0.18Net income (loss) $(1.09) $(0.85) $(0.58) $(0.76) $0.32Diluted income (loss) per share: Income (loss) from continuing operations $(1.09) $(0.85) $(0.58) $(0.76) $0.13Income from discontinued operations, net of tax $— $— $— $— $0.18Net income (loss) $(1.09) $(0.85) $(0.58) $(0.76) $0.31Weighted average shares used in computing netincome (loss) per share: Basic 43,343 41,567 39,991 38,796 40,310Diluted 43,343 41,567 39,991 38,796 41,919 36Table of ContentsConsolidated Balance Sheets Data:(in thousands) June 30,2017 2016 2015 2014 2013Cash, cash equivalents and short-term investments $98,355 $109,626 $119,916 $136,849 $191,685Working capital 97,094 118,182 138,415 153,238 190,385Total assets 259,560 218,247 223,922 239,841 273,669Common stock and additional paid-in capital 159,710 149,818 140,447 129,318 118,233Total stockholders’ equity 112,148 149,685 176,183 192,405 214,464ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis should be read together with our consolidated financial statements and the notes to those statements includedelsewhere in this Form 10-K. This discussion contains forward-looking statements based on our current expectations, assumptions, estimates andprojections about Telenav and our industry. These forward-looking statements involve risks and uncertainties. Our actual results could differ materiallyfrom those indicated in these forward-looking statements as a result of certain factors, as more fully described in “Risk factors” in Item 1A of this Form 10-K, Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Form 10-K. We undertake no obligationto update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.OverviewTelenav is a leading provider of connected car and location-based platform products and services. We utilize our automotive navigation platform andour advertising platform to deliver these products and services. Our automotive navigation platform allows us to deliver enhanced location-based services toautomobile manufacturers, as well as original equipment manufacturers and tier one suppliers, to which we refer collectively as OEMs. Our advertisingplatform, which we provide through our Thinknear subsidiary, delivers highly targeted advertising services leveraging our location expertise for advertisersand advertising agencies. We report operating results in three business segments: automotive, advertising and mobile navigation. Our fiscal year endsJune 30. In this Form 10-K, we refer to the fiscal years ended June 30, 2015, 2016 and 2017 and ending June 30, 2018 as fiscal 2015, fiscal 2016, fiscal 2017and fiscal 2018, respectively. Our total revenue was $160.2 million in fiscal 2015, $183.3 million in fiscal 2016 and $169.6 million in fiscal 2017. Our netloss was $23.1 million in fiscal 2015, $35.3 million in fiscal 2016 and $47.3 million in fiscal 2017.Our legacy mobile navigation business has declined steadily since fiscal 2013, and we expect it to continue to decline and represent less than 10% ofour consolidated revenue commencing in the first quarter of fiscal 2018. Telenav began offering its mobile navigation services in 2003. Our mobilenavigation business generates revenue from our partnerships with wireless carriers who sell our navigation services to their subscribers either as a standaloneservice or in a bundle with other data or services. The mobile navigation business has declined both in absolute dollars and as a percentage of revenue from$116.4 million, or 61% of our revenue, in fiscal 2013 to $19.0 million, or 11% of our revenue, in fiscal 2017, as subscriptions for paid navigation servicesdeclined in favor of free or freemium navigation services offered by our competitors with greater resources and name recognition, such as Google and Apple.We anticipate that our wireless carrier customers may not renew our agreements with them for these services as demand from their subscribers declines. In theevent our mobile navigation business ceases to be profitable or we determine that it diverts resources from strategic growth areas of our business, we mayultimately elect to terminate our legacy wireless carrier mobile navigation business. In addition, we expect the continued deterioration of this revenue base toresult in an impairment of some or all of the goodwill assigned to this reporting unit during fiscal 2018. Total goodwill for our mobile navigation segment asof June 30, 2017 was $2.7 million.We derive revenue primarily from automobile manufacturers and OEMs, advertisers and advertising agencies. We receive revenue from automobilemanufacturers whose vehicles contain our proprietary software and are able to access our personalized navigation services and OEMs who provide largersystems in which our automotive navigation services are integrated. These manufacturers and OEMs generally do not provide us with any volume or revenueguarantees. In addition, we have a growing business in mobile advertising where our customers are primarily advertising agencies, which represent nationaland regional brands, and channel partners, which work closely with local and small business advertisers.37Table of ContentsFor our automotive segment customers, we offer our automotive and mobile navigation platform products and services to vehicle manufacturers andOEMs for distribution with vehicles. We believe our history as a supplier of cloud-based navigation services combined with our proven track record ofworking closely with these automobile manufacturers and OEMs provides a unique advantage in the automotive navigation marketplace over ourcompetitors. We offer traditional navigation products that are built into the vehicle, which we refer to as on-board, connected navigation services that use ourmobile phone-based wireless connectivity, which we refer to as brought-in, and hybrid solutions that contain both on-board and connected functionality. Weprovide our automotive navigation products and services to automobile manufacturers such as Ford, which represented 69% of our revenue in fiscal 2017,GM and Toyota.We believe our advertising delivery platform offers significant audience reach, sophisticated targeting capabilities and the ability to deliver interactiveand engaging ad experiences to consumers on their mobile devices. We are experts in location-based advertising and believe we offer differentiated value tobrick-and-mortar and brand advertisers through our location targeting capabilities. Our technology focuses on managing the complexity and scale associatedwith mobile location data to deliver better mobile campaigns for our advertising partners. We deliver mobile advertisements by leveraging our proprietary in-house ad serving technology. Our inventory, or accessible market, is comprised of thousands of mobile applications and mobile websites that are accessedthrough advertising exchanges using programmatic real-time bidding, or RTB, tools.We generate product revenue from the delivery of customized software and royalties from the distribution of this customized software in certainautomotive navigation applications. For example, Ford utilizes our on-board automotive navigation product in its Ford SYNC platform. Ford pays us aroyalty fee on SYNC 2 on-board solutions as the software is imaged onto an SD card and shipped for installation in vehicles and pays us a royalty fee onSYNC 3 on-board solutions as our software is installed in the vehicle. We also derive product revenue from map update fees.We generate automotive services revenue primarily from our brought-in automotive navigation solutions. We earn a royalty for each new vehicle ownerwho downloads the GM OnStar RemoteLink or associated application, whereby we provide enhanced search capabilities for contracted service periods. Wealso earn a royalty for each new Toyota and Lexus vehicle sold and enabled to connect with our Scout GPS Link mobile application, similarly provided overa contracted service period.For our on-board and connected navigation solutions, GM pays us a product royalty fee as the software is imaged onto an SD card and shipped forinstallation in vehicles; this royalty includes a fee for the initial connected service to be provided once the vehicle is sold. GM will pay us an additionalservice fee for connected solution subscriptions for each end user that elects to renew their OnStar Connected Navigation or Connected Navigationsubscription with GM. Due to specified future obligations in connection with the model year 2017 launch, we did not recognize any revenue from GM on-board and connected solutions in fiscal 2017, although we did experience an increase in deferred revenue.We generate revenue from advertising network services through the delivery of advertising impressions based on the specific terms of the advertisingcontract.We also generate a declining portion of our services revenue from subscriptions to access our mobile navigation services, which are generally providedthrough our wireless carrier customers that offer our services to their subscribers. Our wireless carrier customers typically pay us based on a revenue sharingarrangement or a monthly subscription fee per end user.Recent DevelopmentsFord Map UpdatesWe and Ford entered into an agreement to provide our map update solution in conjunction with our on-board navigation product for the Europe region,similar to Ford's offering in Australia and New Zealand, commencing in the three months ended March 31, 2017. Under this agreement, we agreed to providemap updates to Ford for distribution to its SYNC 3 navigation customers in Europe, which will increase our royalty amount per unit going forward. However,because map updates are provided over a contractual period, certain revenue related to the on-board navigation product, which we had been recognizingupon delivery, is now recognized over time along with the new map updates.Offering map updates in Europe resulted in a substantial decline in our revenue under current GAAP, and a substantial increase in our deferred revenueand deferred cost balances during the second half of fiscal 2017. With the adoption of ASC 606, Revenue from Contracts with Customers, which is requiredfor us on July 1, 2018, we believe that our revenue recognition for certain value-added and combined offerings, such as on-board navigation with mapupdates and on-board and connected navigation, may change and we may no longer recognize revenue associated with certain software-related elements overthe life of our contractual obligations. However, our assessment of the impact of this standard is not complete. Adoption of ASC 606 requires the applicationof ASC 340 related to the deferral of contract acquisition costs, which we believe could result in the38Table of Contentscapitalization of a significant amount of upfront research and development costs and amortization of these costs over the life of our contractual obligations.These costs are expensed under existing accounting standards. The implementation of ASC 340 requires a significant amount of judgment, as well as acompilation of historical development costs. Our assessment of the impact of this standard is not complete. We intend to adopt ASC 606, including theassociated application of ASC 340, when required on July 1, 2018. While we are in the process of selecting a transition method, we anticipate this standardwill have a material impact on our consolidated financial statements.As a result of offering map updates in Europe in conjunction with our on-board navigation product, during the three-month periods ended March 31,2017 and June 30, 2017 we began to experience the effects noted below as compared to the three-month periods ended March 31, 2016 and June 30, 2016,respectively. For the three months ending September 30, 2017 we anticipate the following continued effects as compared to the three months endedSeptember 30, 2016:•Revenue is expected to decline substantially as certain revenue that we previously recognized upon product delivery during the three months endedSeptember 30, 2016 will now be recognized over the contractual period during which we provide map updates;•Gross profit is also expected to decline in conjunction with the decline in revenue;•Gross margin is expected to increase, as the royalties earned on on-board navigation solutions for the Europe region that were recognized upondelivery in certain previous periods and carry a higher relative map cost and lower gross margin will now be deferred and recognized over thecontractual period. This increase in gross margin will be partially offset by declining mobile navigation revenue that carries a higher relative grossmargin;•Net loss is expected to increase due to the decreases in revenue recognized and gross profit;•Deferred revenue and deferred costs are expected to increase as we invoice and defer revenue and costs related to the map updates offering inEurope; and•Adjusted EBITDA, a non-GAAP metric, is expected to decrease as our loss increases.Key operating and financial performance metricsWe monitor the key operating and financial performance metrics set forth in the tables below to help us evaluate growth trends, establish budgets,measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies. Certain of these measures such as billings, changes indeferred revenue and deferred costs, adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA and free cash flow are notmeasures calculated in accordance with GAAP, and should not be considered as an alternative to any measure of financial performance calculated andpresented in accordance with GAAP. In addition, these non-GAAP measures may not be comparable to similarly titled measures of other companies becauseother companies may not calculate them in the same manner that we do.Our key operating and financial performance metrics are as follows (in thousands, except percentages and per share amounts): Fiscal Year Ended June 30, 2017 2016 2015 (in thousands, except percentages and per share amounts)Revenue $169,584 $183,346 $160,239Revenue from Ford as a percentage of total revenue 69% 71% 61%Billings (non-GAAP) $233,616 $199,887 $164,631Billings to Ford as a percentage of total billings (non-GAAP) 68% 68% 60% Increase in deferred revenue $64,032 $16,541 $4,392Increase in deferred costs $42,016 $8,935 $2,641 Gross profit $77,249 $82,549 $81,455Gross margin 46% 45% 51% Net loss $(47,262) $(35,321) $(23,063)Diluted net loss per share $(1.09) $(0.85) $(0.58) Adjusted EBITDA (non-GAAP) $(28,080) $(21,522) $(20,519)Free cash flow (non-GAAP) $(10,677) $(7,102) $(8,904)Gross margin is our gross profit, or total revenue less cost of revenue, expressed as a percentage of our total revenue. Our gross margin has been and willcontinue to be impacted by the increasing percentage of our revenue base derived from automotive navigation solutions and advertising network services,which generally have higher associated third party content costs and third party display ad inventory costs, respectively, than our mobile navigationofferings provided through wireless carriers.Billings measure revenue recognized plus the change in deferred revenue from the beginning to the end of the period. We have also provided abreakdown of the calculation of the change in deferred revenue by segment, which is added to revenue in calculating our non-GAAP metric of billings. Inconnection with our presentation of the change in deferred revenue, we have provided a similar presentation of the change in the related deferred costs. Suchdeferred costs primarily include costs associated with third party content and certain development costs associated with our customized software solutions.As deferred revenue and deferred costs become larger components of our operating results, we believe these metrics are useful in evaluating cash flow.39Table of ContentsWe consider billings to be a useful metric for management and investors because billings drive deferred revenue, which is an important indicator of theviability of our business. There are a number of limitations related to the use of billings versus revenue calculated in accordance with GAAP. First, billingsinclude amounts that have not yet been recognized as revenue and may require additional services to be provided over contracted service periods. Forexample, billings related to certain connected solutions cannot be fully recognized as revenue in a given period due to requirements for ongoingprovisioning of services such as hosting, monitoring, customer support and map updates. Second, we may calculate billings in a manner that is different frompeer companies that report similar financial measures, making comparisons between companies more difficult. When we use these measures, we attempt tocompensate for these limitations by providing specific information regarding billings and how they relate to revenue calculated in accordance with GAAP.Adjusted EBITDA measures our GAAP net loss excluding the impact of stock-based compensation expense, depreciation and amortization, otherincome (expense), provision (benefit) for income taxes, and other applicable items such as legal settlements and contingencies, restructuring accruals andreversals, and deferred rent reversals due to lease termination, net of tax. Stock-based compensation expense relates to equity incentive awards granted to ouremployees, directors, and consultants. Legal settlements and contingencies represent settlements and offers made to settle patent litigation cases in which weare defendants and royalty disputes. Deferred rent reversals represent the reversal of our deferred rent liability that is no longer required due to our Sunnyvalefacility lease termination in fiscal 2016. Adjusted EBITDA, while generally a measure of profitability, can also represent a loss.Adjusted EBITDA is a key measure used by our management and board of directors to understand and evaluate our core operating performance andtrends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that the exclusion of theexpenses eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. In addition,adjusted EBITDA is a key financial measure used by the compensation committee of our board of directors in connection with the development of incentive-based compensation for our executive officers. Accordingly, we believe that adjusted EBITDA generally provides useful information to investors and othersin understanding and evaluating our operating results in the same manner as our management and board of directors.Free cash flow is a non-GAAP financial measure we define as net cash provided by (used in) operating activities less purchases of property andequipment. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash(used) generated by our business after the purchases of property and equipment.We determined that it would be meaningful to investors to develop a breakout of the operating results of our advertising business beyond the currentGAAP segment reporting of revenue, cost of revenue and gross margin, and we are including such presentation in our non-GAAP reporting results. Thispresentation reflects operating expenses that are directly attributable to the advertising business. We are unable to provide a similar breakout of operatingresults for the automotive and mobile navigation businesses beyond the current GAAP segment reporting of revenue, cost of revenue and gross marginbecause these segments share many of the same technologies and resources and as such, comprise operating expenses which are not fully attributable to onesegment versus the other. In addition, the reported non-GAAP operating results for the advertising business only include an allocation of certain sharedcorporate general and administrative costs that directly benefit the business, such as accounting and human resource services.These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as substitutes for our financial results asreported under GAAP. Some of these limitations are:•assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditurerequirements for such replacements or for new capital expenditures;•adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation;•adjusted EBITDA does not reflect the use of cash for net share settlements of RSUs;•adjusted EBITDA does not reflect tax payments that historically have represented a reduction in cash available to us or tax benefits that may arise asa result of generating net losses; and•adjusted EBITDA, free cash flow or similarly titled measures may be calculated by other companies differently, which reduces their usefulness ascomparative measures.Because of these and other limitations, you should consider billings, adjusted EBITDA and free cash flow alongside other GAAP-based financialperformance measures.40Table of ContentsWe reconcile the most directly comparable GAAP financial measure to each non-GAAP financial metric used. The following tables presentreconciliations of revenue to billings, deferred revenue to the change in deferred revenue, deferred costs to the change in deferred costs, net loss to adjustedEBITDA and net loss to free cash flow for each of the periods indicated (dollars in thousands): Automotive Advertising Mobile Navigation Total Fiscal Year EndedJune 30, Fiscal Year EndedJune 30, Fiscal Year EndedJune 30, Fiscal Year EndedJune 30, 2017 2016 2015 2017 2016 2015 2017 2016 2015 2017 2016 2015Revenue $123,784 $135,372 $103,100 $26,841 $21,744 $17,941 $18,959 $26,230 $39,198 $169,584 $183,346 $160,239Adjustments: Change in deferred revenue 64,364 16,961 5,062 — — — (332) (420) (670) 64,032 16,541 4,392Billings $188,148 $152,333 $108,162 $26,841 $21,744 $17,941 $18,627 $25,810 $38,528 $233,616 $199,887 $164,631 Automotive Advertising Mobile Navigation Total Fiscal Year EndedJune 30, Fiscal Year EndedJune 30, Fiscal Year EndedJune 30, Fiscal Year EndedJune 30, 2017 2016 2015 2017 2016 2015 2017 2016 2015 2017 2016 2015Deferred revenue, ending balance $86,517 $22,153 $5,192 $— $— $— $884 $1,216 $1,636 $87,401 $23,369 $6,828Deferred revenue, beginning balance 22,153 5,192 130 — — — 1,216 1,636 2,306 23,369 6,828 2,436Increase (decrease) in deferred revenue $64,364 $16,961 $5,062 $— $— $— $(332) $(420) $(670) $64,032 $16,541 $4,392 Deferred costs, ending balance $54,092 $12,076 $3,141 $— $— $— $— $— $— $54,092 $12,076 $3,141Deferred costs, beginning balance 12,076 3,141 500 — — — — — — 12,076 3,141 500Increase in deferred costs $42,016 $8,935 $2,641 $— $— $— $— $— $— $42,016 $8,935 $2,641 Fiscal Year Ended June 30, 2017 2016 2015Revenue from Ford $117,088 $129,480 $98,545Adjustments: Change in deferred revenue attributed to Ford 42,216 5,929 (131)Billings to Ford $159,304 $135,409 $98,414Billings to Ford as a percentage of total billings 68% 68% 60% Fiscal Year Ended June 30, 2017 2016 2015Net loss $(47,262) $(35,321) $(23,063)Adjustments: Legal settlement and contingencies 6,424 935 —Restructuring accrual (reversal) — (1,362) 1,150Deferred rent reversal due to lease termination — (1,242) —Stock-based compensation expense 10,162 11,366 11,428Depreciation and amortization 2,647 3,362 5,239Interest and other income, net (892) 229 (2,267)Provision (benefit) for income taxes 841 511 (13,006)Adjusted EBITDA $(28,080) $(21,522) $(20,519) 41Table of Contents Fiscal Year Ended June 30, 2017 2016 2015Net loss $(47,262) $(35,321) $(23,063) Adjustments to reconcile net loss to net cash provided by (used in) operatingactivities: Change in deferred revenue (1) 64,032 16,541 4,392Change in deferred costs (2) (42,016) (8,935) (2,641)Changes in other operating assets and liabilities 2,407 7,774 (4,999)Other adjustments (3) 13,387 16,843 18,615Net cash used in operating activities (9,452) (3,098) (7,696)Less: Purchases of property and equipment (1,225) (4,004) (1,208)Free cash flow $(10,677) $(7,102) $(8,904) (1) Consists of royalties, customized software development fees and subscription fees. (2) Consists primarily of third party content costs and customized software development expenses. (3) Consists primarily of depreciation and amortization, stock-based compensation expense and other non-cash items.42Table of ContentsNon-GAAP metrics for the Advertising segment and the combined Automotive and Mobile Navigation segments Fiscal Year Ended June 30, 2017 GAAPConsolidated Non-GAAPConsolidated Non-GAAPAdvertising Automotive (1) Mobile Navigation(1) TotalNon-GAAPAutomotive andMobile Navigation(1) Revenue $169,584 $26,841 $123,784 $18,959 $142,743Cost of revenue 92,335 12,724 73,923 5,688 79,611Gross profit 77,249 14,117 $49,861 $13,271 63,132Operating expenses: Research and development 73,102 5,066(2) 68,036Sales and marketing 21,995 10,525(2) 11,470General and administrative 23,041 1,187(3) 21,854Legal settlements and contingencies 6,424 —(4) 6,424Total operating expenses 124,562 16,778 107,784Loss from operations (47,313) (2,661) (44,652)Other income (expense), net 892 —(5) 892Loss before provision for income taxes (46,421) (2,661) (43,760)Provision for income taxes 841 —(6) 841Net loss $(47,262) $(47,262) $(2,661) $(44,601) Adjustments: Legal settlements and contingencies 6,424 —(4) 6,424Stock-based compensation expense 10,162 874(2) 9,288Depreciation and amortizationexpense 2,647 200(2) 2,447Other income (expense), net (892) —(5) (892)Provision for income taxes 841 —(6) 841Adjusted EBITDA $(28,080) $(1,587) $(26,493) (1) Automotive and mobile navigation segments share many of the same technologies and resources. Accordingly, we are unable to allocate the operating expenses, interest andother income (expense), net and provision for income taxes to one segment versus the other. For purposes of calculating the non-GAAP net loss attributable to the advertising segment:(2) These expenses represent costs directly attributable to the advertising segment.(3) These expenses represent actual general and administrative costs directly attributable to the advertising segment as well as an allocation of certain shared corporate costs thatdirectly benefit the advertising segment such as accounting and human resource services.(4) Legal settlement and contingencies are not related to the advertising segment.(5) Expenses or income cannot be directly allocated to the advertising segment.(6) Income taxes are primarily from foreign operations which support the automotive and mobile navigation segments.43Table of ContentsNon-GAAP metrics for the Advertising segment and the combined Automotive and Mobile Navigation segments Fiscal Year Ended June 30, 2016 GAAPConsolidated Non-GAAPConsolidated Non-GAAPAdvertising Automotive (1) Mobile Navigation(1) TotalNon-GAAPAutomotive andMobile Navigation(1) Revenue $183,346 $21,744 $135,372 $26,230 $161,602Cost of revenue 100,797 12,296 81,293 7,208 88,501Gross profit 82,549 9,448 $54,079 $19,022 73,101Operating expenses: Research and development 68,911 4,722(2) 64,189Sales and marketing 25,587 13,822(2) 11,765General and administrative 23,994 1,996(3) 21,998Restructuring (1,362) (230)(2) (1,132)Total operating expenses 117,130 20,310 96,820Loss from operations (34,581) (10,862) (23,719)Other income (expense), net (229) —(5) (229)Loss before provision for income taxes (34,810) (10,862) (23,948)Provision for income taxes 511 —(6) 511Net loss $(35,321) $(35,321) $(10,862) $(24,459) Adjustments: Legal contingencies 935 —(4) 935Stock-based compensation expense 11,366 1,150(2) 10,216Restructuring accrual (reversal) (1,362) (230)(2) (1,132)Deferred rent reversal due to leasetermination (1,242) (300)(2) (942)Depreciation and amortizationexpense 3,362 810(2) 2,552Other income (expense), net 229 —(5) 229Provision for income taxes 511 —(6) 511Adjusted EBITDA $(21,522) $(9,432) $(12,090) (1) Automotive and mobile navigation segments share many of the same technologies and resources. Accordingly, we are unable to allocate the operating expenses, interest andother income (expense), net and provision for income taxes to one segment versus the other. For purposes of calculating the non-GAAP net loss attributable to the advertising segment:(2) These expenses represent costs directly attributable to the advertising segment.(3) These expenses represent actual general and administrative costs directly attributable to the advertising segment as well as an allocation of certain shared corporate costs thatdirectly benefit the advertising segment such as accounting and human resource services.(4) Legal contingencies are not related to the advertising segment.(5) Expenses or income cannot be directly allocated to the advertising segment.(6) Income taxes are primarily from foreign operations which support the automotive and mobile navigation segments.44Table of ContentsNon-GAAP metrics for the Advertising segment and the combined Automotive and Mobile Navigation segments Fiscal Year Ended June 30, 2015 GAAPConsolidated Non-GAAPConsolidated Non-GAAPAdvertising Automotive (1) Mobile Navigation(1) TotalNon-GAAPAutomotive andMobile Navigation(1) Revenue $160,239 $17,941 $103,100 $39,198 $142,298Cost of revenue 78,784 11,710 56,319 10,755 67,074Gross profit 81,455 6,231 $46,781 $28,443 75,224Operating expenses: Research and development 68,060 6,146(2) 61,914Sales and marketing 26,975 14,173(2) 12,802General and administrative 23,606 2,111(3) 21,495Restructuring 1,150 398(2) 752Total operating expenses 119,791 22,828 96,963Loss from operations (38,336) (16,597) (21,739)Other income (expense), net 2,267 —(4) 2,267Loss before benefit from income taxes (36,069) (16,597) (19,472)Benefit from income taxes (13,006) (4,324)(5) (8,682)Net loss $(23,063) $(23,063) $(12,273) $(10,790) Adjustments: Stock-based compensation expense 11,428 1,753(2) 9,675Restructuring accrual 1,150 398(2) 752Depreciation and amortizationexpense 5,239 2,058(2) 3,181Other income (expense), net (2,267) —(4) (2,267)Benefit from income taxes (13,006) (4,324)(5) (8,682)Adjusted EBITDA $(20,519) $(12,388) $(8,131) (1) Automotive and mobile navigation segments share many of the same technologies and resources. Accordingly, we are unable to allocate the operating expenses, interest andother income (expense), net and provision for income taxes to one segment versus the other. For purposes of calculating the non-GAAP net loss attributable to the advertising segment:(2) These expenses represent costs directly attributable to the advertising segment.(3) These expenses represent actual general and administrative costs directly attributable to the advertising segment as well as an allocation of certain shared corporate costs thatdirectly benefit the advertising segment such as accounting and human resource services.(4) Expenses or income cannot be directly allocated to the advertising segment.(5) Benefit from income taxes for the advertising segment was allocated based upon its pro rata share of U.S. losses.45Table of ContentsKey components of our results of operationsSources of revenueWe classify our revenue as either product or services revenue. Product revenue consists primarily of revenue we receive from the delivery of customizedsoftware and royalties from the distribution of this customized software in certain automotive navigation applications, and map updates to the software.Services revenue consists primarily of revenue we derive from our brought-in automotive navigation services, advertising services and mobile navigationservices.We report revenue, cost of revenue and gross profit results in three business segments: automotive, advertising and mobile navigation. Our chiefexecutive officer, or CEO, the chief operating decision maker, reviews revenue and gross margin information for each of our reportable segments. See " -Results of operations" and Note 11 to the consolidated financial statements in this Form 10-K for more information about our business segments.Revenue from our automotive segment represented 73%, 74% and 64% of our revenue in fiscal 2017, 2016 and 2015, respectively. Ford represented69%, 71% and 61% of our revenue in fiscal 2017, 2016 and 2015, respectively. Our contract with Ford expires in December 2017. The agreement may berenewed for successive 12-month periods if either party provides notice of renewal at least 45 days prior to the expiration of the applicable term, and the otherparty agrees to such renewal.Our automotive product revenue is generated primarily from on-board automotive navigation solutions provided to Ford. Our on-board solutionsconsist of software, map and point of interest, or POI, data loaded in the vehicle that provides voice-guided turn by turn navigation displayed on the vehiclescreen.Our product revenue is primarily derived from Ford's SYNC 2 and SYNC 3 on-board solutions. We recognize as revenue royalties earned from our FordSYNC 2 on-board solutions as the software is reproduced onto an SD card and shipped for installation in vehicles; however, we recognize revenue from FordSYNC 3 primarily as our software is installed in the vehicle by Ford. Accordingly, the timing of our revenue recognition changed materially in fiscal 2017during Ford's global transition from SYNC 2 to SYNC 3. We experienced a lower level of orders and revenue in the three months ended September 30, 2016as Ford used its existing inventory of SYNC 2 product in conjunction with its transition to SYNC 3. Ford fully transitioned to SYNC 3 in all major regions asof December 31, 2016.Ford Europe and Ford Australia and New Zealand also offer a map update program as part of its SYNC 2 and SYNC 3 product distribution. Under thisprogram, Ford owners in Europe with SYNC 3 and in Australia and New Zealand with SYNC 2 or SYNC 3 are eligible to receive annual map updates at noadditional cost during the contractual period. We earn an annual fee and a per unit fee for these updates. As our solutions encompass greater value-addedservices, such as Ford’s map update program, there is potential for changes in the timing of revenue recognition. We anticipate that we will continue todepend on Ford for a material portion of our revenue for the foreseeable future.We also have agreements with GM. In February 2017, GM launched its first model featuring integration of our on-board and connected navigationsolution, the 2017 Cadillac CTS and CTS-V. Due to specified future obligations in connection with the model year 2017 launch, we did not recognize anyrevenue from GM on-board and connected navigation solutions in fiscal 2017, although we did experience an increase in deferred revenue. Our on-board andconnected navigation solution is scheduled to become available in additional regions and GM models for model years 2018 to 2025. In November 2016, wewere selected to provide entry level on-board navigation through LG, a Tier 1 supplier for GM's select line of vehicles, for the European market. This solutionlaunched in in Opel's Adam and Corsa model vehicles in 2017. These products are expected to be made available in select vehicles for model years 2018 to2022.We derive automotive services revenue primarily from our brought-in automotive navigation solutions. Billings for these services are recorded asdeferred revenue and amortized to revenue over the estimated service periods. GM offers its OnStar RemoteLink mobile application powered by our location-based services platform, and we earn a one-time royalty for each new vehicle owner who downloads the OnStar RemoteLink or associated brandedapplication.We have a partnership with Toyota for brought-in navigation services where our Scout GPS Link mobile application is available in Entune Audio Plusequipped Toyota vehicles in the United States and in certain of its Lexus models equipped with Lexus Display Audio multimedia. Toyota and Lexusvehicles enabled to connect with our Scout GPS Link began shipping in August 2015 and September 2016, respectively. We earn a one-time royalty for eachnew Toyota or Lexus sold and enabled to connect to our Scout GPS Link mobile application.In January 2017, Telenav and Xevo Inc. announced that Scout GPS Link and Xevo Engine Link were chosen to provide brought-in navigation services,including a fully interactive moving map, for select model year 2018 Toyota vehicles equipped with Entune 3.0, as well as certain Lexus vehicles. Our fullyinteractive solution is expected to become available for model46Table of Contentsyears 2018 to 2023. We anticipate that Toyota and Lexus will offer both our current solution and the new fully interactive solution in model year 2018vehicles, with the availability of each solution dependent upon the Toyota and Lexus model and trim level.Revenue from our advertising segment, which includes the delivery of display, location-based advertising impressions represented 16%, 12% and 11%of our revenue in fiscal 2017, 2016 and 2015, respectively. Our advertising revenue is derived from ad insertion orders contracted with advertising agencies,direct customers, and channel partners.Revenue from our mobile navigation segment represented 11%, 14% and 25% of our revenue in fiscal 2017, 2016 and 2015, respectively. We offervoice-guided, real-time, turn by turn, mobile navigation services under several brand names including Scout GPS Navigation as well as under wireless carrierbrands (or “white label” brands). Subscription fee revenue from our mobile navigation service has declined steadily from fiscal 2013 through fiscal 2017,primarily due to a substantial decrease in the number of paying subscribers for navigation services provided through AT&T and other wireless carriers,including Sprint. We expect that mobile navigation revenue will continue to decline.AT&T represented less than 10% of our revenue in fiscal 2017 and 2016, and represented 15% of our revenue in fiscal 2015. In March 2017, ouragreement with AT&T automatically renewed through March 2018 and we continue to be the exclusive provider of white label GPS navigation services toAT&T. AT&T is not required to offer our navigation services. The number of paying subscribers for our services through AT&T has declined substantiallyover the past few years and we expect the number of subscribers and related revenue to continue to decline substantially. In addition, as AT&T shifts themanner in which our applications are preloaded on AT&T devices to one where users are directed to an application store to load our applications on theirown, the rate of decline in our revenue from AT&T may increase as those subscribers may then search for other alternatives.We derive mobile navigation services revenue primarily from our wireless carrier customers for their end users' subscriptions to our mobile navigationservices. Our wireless carrier customers pay us based on a revenue sharing arrangement or a monthly subscription fee per end user, and they are responsible forbilling and collecting the fees they charge their subscribers for the right to use our navigation services. When we are paid on a revenue sharing basis with ourwireless carrier customers, the amount we receive varies depending on several factors, including the revenue share rate negotiated with the wireless carriercustomer, the price charged to the subscriber by the wireless carrier customer, the specific sales channel of the wireless carrier customer in which the service isoffered and the features and capability of the service. As a result of these factors, the amount we receive for a subscriber may vary considerably and is subjectto change over time.In fiscal 2018, we expect automotive and advertising revenue to represent the strategic growth segments of our business, but our expectations may notbe realized. We expect that services revenue from wireless carrier customers, which has a higher gross margin than automotive and advertising revenue, willcontinue to decline substantially in fiscal 2018 due to the continued decline in the number of monthly recurring subscribers. See "Recent Developments -Ford Map Updates" for discussion about anticipated trends in automotive revenue, gross profit and gross margin.We generated 88%, 97% and 96% of our revenue in the United States in fiscal 2017, 2016 and 2015, respectively. With respect to revenue we receivefrom automobile manufacturers and OEMs for sales of vehicles in other countries, we classify the majority of that revenue as being generated in the UnitedStates, because we provide deliverables to and receive compensation from the manufacturer's or OEM's United States' entity. It is possible that thisclassification may change in the future, as existing and new customers may elect to contract through subsidiaries. For example, in the three months endedSeptember 30, 2016, Ford assigned certain contract rights for its production of vehicles with our SYNC 3 products to its joint ventures in China.Cost of revenueWe classify our cost of revenue as either cost of product revenue or cost of services revenue. Cost of product revenue consists primarily of the cost ofthird party content we incur in providing our on-board automotive navigation solutions and recognition of deferred development costs. Cost of servicesrevenue consists primarily of the costs associated with third party content we incur in providing our brought-in automotive navigation solutions, third partyexchange ad inventory, data center operations and outsourced hosting services, customer support, stock-based compensation and amortization of developedtechnology that we incur in providing our navigation and advertising network services.We also capitalize and defer recognition of certain licensed map and POI content costs from third parties in a manner similar to deferred revenue for ourbrought-in automotive solutions and certain of our on-board solutions, and we recognize these deferred costs over the requisite service period. As the deferredrevenue and related deferred costs are recognized as the underlying services are provided, we will also incur ongoing costs of revenue for network operations,hosting and data center,47Table of Contentscustomer service support, and other related costs over time. See "Recent Developments - Ford Map Updates" for discussion about anticipated trends inautomotive revenue, gross profit and gross margin.We primarily provide navigation service customer support through a third party provider to whom we provide training and assistance with problemresolution. In addition, we use outsourced, hosting services and industry standard hardware to provide our navigation services. We generally maintain at least99.9% uptime every month, excluding designated periods of maintenance. Our internal targets for service uptime are even higher. We have in the past, andmay in the future, not achieve our targets for service availability, which could result in penalties for failure to meet contractual service availabilityrequirements or termination of our customer agreement.The largest component of cost of revenue as it relates to our advertising business is the cost of location-based, third party advertising inventory whichwe acquire from advertising exchanges. Other notable costs of our advertising business are the cost of technologies that we license to deliver customizedsolutions, costs of ad delivery via contracted hosted relationships and the cost of our advertising operations.While we expect that our services revenue from wireless carrier customers will continue to decline substantially in fiscal 2018 and beyond, we do notexpect to be able to reduce our cost of services revenue at the same rate, if at all, as the decline in services revenue. Although we successfully transitioned toutilizing OSM content for the majority of our mobile user base resulting in notable cost savings, we expect to continue to incur significant costs, especiallyrelated to third party content as well as for outsourced hosting services. Cost of services revenue related to our advertising business will be impacted by ourability to grow advertising revenue, as well as the cost and availability of display ad inventory sourced from third party exchanges.Operating expensesWe classify our operating expenses into three categories: research and development, sales and marketing and general and administrative. Our operatingexpenses consist primarily of personnel costs, which include salaries, bonuses, advertising sales commissions, payroll taxes, employee benefit costs andstock-based compensation expense. Other expenses include marketing program costs, third party contractor and temporary staffing services, facilities-relatedcosts including rent expense, legal, audit and tax consulting and other professional service fees. We allocate stock-based compensation expense resultingfrom the amortization of the fair value of stock-based awards granted, based on the department in which the award holder works. We allocate overhead, suchas rent and depreciation, to each expense category based on headcount. We anticipate continued investment of resources, including the hiring of significantadditional headcount, or reallocation of employee personnel to automotive and advertising.Research and development. Research and development expenses consist primarily of personnel costs for our development and product managementemployees and related costs of outside consultants and temporary staffing. We have focused our research and development efforts on improving the ease ofuse and functionality of our existing and developing products and services. In addition to our U.S. employee base, a significant number of our research anddevelopment employees are located in our development centers in China and Romania; as a result, a portion of our research and development expense issubject to changes in foreign exchange rates, notably the Chinese Renminbi, or RMB, and the Romanian Leu, or RON.Sales and marketing. Sales and marketing expenses consist primarily of personnel costs for our sales and marketing staff, commissions earned by oursales personnel and the cost of marketing programs, advertising and promotional activities. Historically, a majority of our revenue has been derived fromwireless carriers, which bore much of the expense of marketing and promoting our services to their subscribers, as well as consumers acquired through openmarket application stores. More recently, automotive revenue has comprised the largest portion of our revenue and automotive and advertising revenue haverepresented the growing components of our revenue. Our sales and marketing activities supporting our automotive navigation solutions include the costs ofour business development efforts. Our automobile manufacturer partners and OEMs also provide primary marketing for our on-board and brought-innavigation services.General and administrative. General and administrative expenses consist primarily of personnel costs for our executive, finance, legal, human resourcesand administrative personnel, legal, audit and tax consulting and other professional services and corporate expenses. With our recent settlement of theVehicle IP case, we anticipate that reduced legal expenses will drive decreased general and administrative expenses during fiscal 2018. We may also berequired to pay judgments, indemnification claims or other amounts, which we are unable to predict or estimate at this time.Other income (expense), net. Other income (expense), net consists primarily of interest we earn on our cash and cash equivalents and short-terminvestments, gain or loss on investments and foreign currency transaction gains or losses.48Table of ContentsProvision (benefit) for income taxes. Our provision (benefit) for income taxes primarily consists of corporate income taxes related to profits earned inforeign jurisdictions, foreign withholding taxes, and changes to our tax reserves. Our effective tax rate could fluctuate significantly from period to period,particularly in those periods in which we incur losses, due to our ability to benefit from the carryback of net operating losses within the carryback period andthe available amount therein, if any. Furthermore, on a quarterly basis our tax rates can fluctuate due to changes in our tax reserves resulting from thesettlement of tax audits or the expiration of the statute of limitations. Our effective tax rate could also fluctuate due to a change in our earnings or lossprojections, changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles, as well as theexpiration and retroactive reinstatement of tax holidays.Critical accounting policies and estimatesWe prepare our consolidated financial statements in accordance with GAAP. In many cases, the accounting treatment of a particular transaction isspecifically dictated by GAAP and does not require our judgment in its application. In other cases, our judgment is required in selecting among availablealternative accounting policies that allow different accounting treatment for similar transactions. The preparation of consolidated financial statements alsorequires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. Webase our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances. In many instances, wecould reasonably use different accounting estimates, and in some instances changes in the accounting estimates are reasonably likely to occur from period toperiod. Accordingly, actual results could differ significantly from the estimates made by our management. To the extent that there are differences between ourestimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believethat the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the moresignificant areas involving our judgments and estimates.Revenue recognition. We generate revenue primarily from software licenses, service subscriptions and customized software development fees. We alsogenerate revenue from the delivery of advertising impressions. We recognize revenue when persuasive evidence of an arrangement exists, delivery of theproduct or service has occurred, the fee is fixed or determinable and collectability is reasonably assured. We evaluate whether it is appropriate to recognizerevenue based on the gross amount billed to our customers or the net amount earned as revenue. When we are primarily obligated in a transaction, havelatitude in establishing prices, are responsible for fulfillment of the transaction, have credit risk, or have several but not all of these indicators, we recordrevenue on a gross basis. While none of the factors individually are considered presumptive or determinative, in reaching conclusions on gross versus netrevenue recognition, we place the most weight on the analysis of whether or not we are the primary obligor in the arrangement. We report our automotive andadvertising revenue on a gross basis.We derive product revenue from the delivery of customized software and royalties earned from the distribution of this customized software in certainautomotive navigation applications, and map updates to the software. We generally recognize customized software revenue using the completed contractmethod of contract accounting under which revenue is recognized upon delivery to, and acceptance by, the automobile manufacturer of our on-boardnavigation solutions. We generally recognize royalty revenue for our automotive on-board navigation solutions as the software is reproduced for installationin vehicles or as the software is installed in vehicles, assuming all other conditions for revenue recognition have been met. For on-board navigation solutionsprovided with ongoing contractual obligations such as map updates, we generally recognize royalty revenue ratably over the contractual period.We derive services revenue from our brought-in automotive navigation solutions. Billings for these services are recorded as deferred revenue andamortized to revenue over the estimated service periods.We derive services revenue from the delivery of advertising impressions. We recognize revenue when the related advertising services are deliveredbased on the specific terms of the advertising contract, which are commonly based on the number of ad impressions delivered, or clicks, drives or actions byusers on mobile advertisements.We also derive services revenue from subscriptions to access our mobile navigation services, which are generally provided through our wireless carriercustomers that offer our services to their subscribers. Our wireless carrier customers pay us based on a revenue sharing arrangement or a monthly subscriptionfee per end user.We recognize monthly fees related to our mobile navigation services in the month we provide the services. We defer amounts received or billed inadvance of the service being provided and recognize the deferred amounts when the monthly service has been provided. Our agreements do not containgeneral rights of refund once the service has been provided. We also establish allowances for estimated credits subsequently issued to end users by ourwireless carrier customers.We recognize as services revenue the amount our wireless carrier customers report to us as we provide our services, which are net of any revenue sharingor other fees earned and deducted by our wireless carrier customers. We are not the principal provider when selling access to our mobile navigation servicesthrough our wireless carrier customers as the49Table of Contentssubscribers directly contract with our wireless carrier customers. Our wireless carrier customers have the sole ability to set the price charged to theirsubscribers for our service and have direct responsibility for billing and collecting those fees from their subscribers.In certain instances, due to the nature and timing of monthly revenue and reporting from our customers, we may be required to make estimates of theamount of revenue to recognize from a customer for the current period. For example, we may not receive accurate subscriber billing information from ourwireless carrier customers or production information from our automobile manufacturer and OEM customers and may have to use provisioning, usage,activation and deactivation data, or shipment and production information to allow us to compute revenue due to us from our customers, and in such cases wemake estimates of revenue and third party costs. In addition, if we fail to receive an accurate revenue report from a customer for the month, we will need toestimate the amount of revenue that should be recorded for that month. These estimates may require judgment, and we consider certain factors andinformation in making these estimates such as:•purchaser data supplied by our wireless carrier customers or production and sales data provided by our auto manufacturer and OEM customers;•customer specific historical subscription or unit sales trends and revenue reporting trends;•end user subscription data from our internal systems; and•data from comparable distribution channels of our other customers.If we are unable to reasonably estimate recognizable revenue from a customer for a given period, we defer recognition of revenue to the period in whichwe receive and validate the customer’s revenue report and all of our revenue recognition criteria have been met. If we have recorded an estimated revenueamount, we record any difference between the estimated revenue and actual revenue in the period when we receive the final revenue reports from ourcustomer, which typically occurs within the following month. To date, actual amounts have not differed materially from our estimates.Software development costs.Software developed for internal use. We account for the costs of computer software we develop for internal use by capitalizing qualifying costs,which are incurred during the application development stage, and amortizing those costs over the application’s estimated useful life, which generally rangesfrom 18 months to 24 months depending on the type of application. Costs incurred and capitalized during the application development stage generallyinclude the costs of software configuration, coding, installation and testing. Such costs primarily include payroll and payroll related expenses for employeesdirectly involved in the application development, as well as third party developer fees. We expense preliminary evaluation costs as they are incurred beforethe application development stage, as well as post development implementation and operation costs, such as training, maintenance and minor upgrades. Webegin amortizing capitalized costs when a project is ready for its intended use, and we periodically reassess the estimated useful life of a project consideringthe effects of obsolescence, technology, competition and other economic factors which may result in a shorter remaining life.We did not capitalize or write off any software development costs during fiscal 2017, 2016 or 2015. Amortization expense related to capitalizedsoftware costs, which was recorded in cost of revenue, totaled zero, zero and $0.1 million for fiscal 2017, 2016 and 2015, respectively.Software developed for external customers. We account for the costs of computer software we develop for customers requiring significantmodification or customization by deferring qualifying costs under the completed contract method. We begin deferring development costs upon receipt of asigned contract or purchase order. All such development costs incurred are deferred until the related revenue is recognized. We deferred $3.2 million, $0.6million and $0.8 million of software development costs during fiscal 2017, 2016 and 2015, respectively. Development costs expensed to cost of revenuetotaled $0.1 million, $0.7 million and $1.2 million for fiscal 2017, 2016 and 2015, respectively.Impairment of long-lived assets. We evaluate long-lived assets held and used for impairment whenever events or changes in circumstances indicate thattheir net book value may not be recoverable. We continually evaluate whether events and circumstances have occurred that indicate the balance of ourproperty and equipment and intangible assets with definite lives may not be recoverable. Our evaluation is significantly impacted by our estimates andassumptions of future revenue, costs, and expenses and other factors. If an event occurs that would cause us to revise our estimates and assumptions used inanalyzing the value of our property and equipment, that revision could result in a non-cash impairment charge that could have a material impact on ourfinancial results. When these factors and circumstances exist, we compare the projected undiscounted future cash flows associated with the related asset orgroup of assets over their estimated useful lives against their respective carrying amounts. We base the impairment, if any, on the excess of the carryingamount over the fair value, based on market value when available, or discounted expected cash flows of those assets, and record it in the period in which wemake the determination.Goodwill. Goodwill represents the excess of the aggregate purchase price paid over the fair value of the net assets acquired. Goodwill is not amortizedand is tested for impairment at least annually or whenever events or changes in50Table of Contentscircumstances indicate that the carrying value may not be recoverable. These tests are based on our operating segment and reporting unit structure. We firstassess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. We are not required to calculatethe fair value of our reporting units unless we determine, based on a qualitative assessment, that it is more likely than not that the fair value is less than ourcarrying amount. If we determine it is more likely than not that the fair value of the reporting unit is less than its carrying value, we perform a two-stepquantitative goodwill impairment test. The first step of the impairment test involves comparing the fair value of the reporting unit to its net book value,including goodwill. If the net book value exceeds its fair value, then we would perform the second step of the goodwill impairment test to determine theamount of the impairment loss, if any. In assessing the fair value of our reporting units, we make assumptions regarding our estimated future cash flows, long-term growth rates, timing over which the cash flows will occur and, amongst other factors, the weighted average cost of capital. Application of the goodwillimpairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units and determination ofthe fair value of each reporting unit. Based on the results of our annual goodwill impairment test as of April 1, 2017, the estimated fair value of our mobilenavigation business exceeded its carrying value by $1.7 million.We tested goodwill for impairment on April 1, 2017 at the reporting unit level using a discounted cash flow analysis based upon projected financialinformation. We applied our best judgment when assessing the reasonableness of the financial projections used to determine the fair value of each reportingunit. Based on the results of our annual goodwill impairment test as of April 1, 2017, the estimated fair value of each of our reporting units exceeded itscarrying value.Revenue from our mobile navigation business has been declining substantially over the last few years and continued deterioration of this revenue baseis expected to result in an impairment of some or all of the goodwill assigned to this reporting unit during fiscal 2018. Total goodwill for our mobilenavigation segment as of June 30, 2017 was $2.7 million.The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results, market conditions and otherfactors. If our estimates or related assumptions change in the future, or if our net book value were to exceed our market capitalization, we may be required torecord an impairment loss related to our goodwill. We have not recognized any impairment of goodwill in the three year period ended June 30, 2017. As ofJune 30, 2017, we had goodwill of $31.3 million.Stock-based compensation expense. We account for stock-based employee compensation arrangements under the fair value recognition method, whichrequires us to measure the stock-based compensation costs of share-based compensation arrangements based on the grant date fair value, and recognize thecosts in the financial statements over the employees’ requisite service period. We recognize compensation expense for the fair value of these awards with timebased vesting on a straight-line basis over an employee’s requisite service period of each of these awards, net of estimated forfeitures.Our stock-based compensation expense was as follows: Fiscal Year Ended June 30, 2017 2016 2015 (in thousands)Cost of revenue $130 $143 $98Research and development 5,543 6,062 5,275Selling and marketing 2,090 2,844 2,943General and administrative 2,399 2,317 3,112Total stock-based compensation expense $10,162 $11,366 $11,428As of June 30, 2017, there was $4.6 million of unrecognized stock-based compensation expense related to unvested stock option awards, net ofestimated forfeitures, that we expect to be recognized over a weighted average period of 2.69 years. At June 30, 2017, the total unrecognized stock-basedcompensation cost related to restricted stock units was $12.2 million, net of estimated forfeitures, and will be amortized over a weighted average period of2.34 years.We generally utilize the Black-Scholes option-pricing model to determine the fair value of our stock option awards, which requires a number ofestimates and assumptions. In valuing share-based awards under the fair value accounting method, significant judgment is required in determining theexpected volatility of our common stock and the expected term individuals will hold their share-based awards prior to exercising. The expected volatility isbased on the historical volatility of our common stock. The expected term of options granted represents the period of time that options granted are expectedto be outstanding. The expected term was based on an analysis of our historical exercise and cancellation activity. The estimation of stock awards that willultimately vest requires judgment, and to the extent actual results differ from our estimates, such amounts will be recorded as an adjustment in the periodestimates are revised.For fiscal 2017, 2016 and 2015, we calculated the fair value of options granted to employees with the following weighted average assumptions:51Table of Contents Fiscal Year Ended June 30, 2017 2016 2015Expected volatility 39% 47% 54%Expected term (in years) 4.25 4.53 4.38Risk-free interest rate 1.32% 1.35% 1.60%Dividend yield — — —We recognize the estimated stock-based compensation expense of restricted stock units, net of estimated forfeitures, over the vesting term. Theestimated stock-based compensation expense is based on the fair value of our common stock on the date of grant.Provision (benefit) for income taxes. We use the asset and liability method of accounting for income taxes. Under this method, income tax expense(benefit) is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for theexpected future tax effect of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and taxcredit carryforwards. We must make assumptions, judgments and estimates to determine our current provision for income taxes and also our deferred taxassets and liabilities and any valuation allowance to be recorded against a deferred tax asset.Our assumptions, judgments and estimates relative to the current provision (benefit) for income taxes take into account current tax laws, ourinterpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. We have establishedreserves for income taxes to address potential exposures involving tax positions that could be challenged by tax authorities. In addition, we are subject to theperiodic examination of our income tax returns by the Internal Revenue Service, or IRS, and other domestic and foreign tax authorities. Although we believeour assumptions, judgments and estimates are reasonable, changes in tax laws or our interpretation of tax laws and the resolution of the current and any futuretax audits could significantly impact the amounts provided for income taxes in our consolidated financial statements.Our assumptions, judgments and estimates relative to the value of a deferred tax asset take into account predictions of the amount and category offuture taxable income, such as income from operations or capital gains income and predictions of the amount and category of future taxable loss that may becarried back for a tax refund. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of thedeferred tax assets, on a jurisdiction by jurisdiction basis, will be realized. Actual operating results and the underlying amount and category of income infuture years as well as expectations regarding the generation of operating losses could render our current assumptions, judgments and estimates ofrecoverable net deferred taxes inaccurate. Any of the assumptions, judgments and estimates mentioned above could cause our actual income tax obligationsor refunds to differ from our estimates, thus materially impacting our financial position and results of operations.52Table of ContentsResults of operationsThe following tables set forth our results of operations for fiscal 2017, 2016 and 2015, as well as a percentage that each line item represents of ourrevenue for those periods. The period to period comparison of financial results is not necessarily indicative of financial results to be achieved in futureperiods. Fiscal Year Ended June 30,Consolidated Statements of Operations Data 2017 2016 2015Revenue: (in thousands) Product $119,785 $132,454 $100,768Services 49,799 50,892 59,471Total revenue 169,584 183,346 160,239Cost of revenue: Product 70,260 79,165 55,270Services 22,075 21,632 23,514Total cost of revenue 92,335 100,797 78,784Gross profit 77,249 82,549 81,455Operating expenses: Research and development 73,102 68,911 68,060Sales and marketing 21,995 25,587 26,975General and administrative 23,041 23,059 23,606Legal settlement and contingencies 6,424 935 —Restructuring — (1,362) 1,150Total operating expenses 124,562 117,130 119,791Loss from operations (47,313) (34,581) (38,336)Other income (expense), net 892 (229) 2,267Loss before provision (benefit) for income taxes (46,421) (34,810) (36,069)Provision (benefit) for income taxes 841 511 (13,006)Net loss $(47,262) $(35,321) $(23,063) Fiscal Year Ended June 30, 2017 2016 2015Revenue: (as a percentage of revenue)Product 71 % 72 % 63 %Services 29 % 28 % 37 %Total revenue 100 % 100 % 100 %Cost of revenue: Product 41 % 43 % 34 %Services 13 % 12 % 15 %Total cost of revenue 54 % 55 % 49 %Gross profit 46 % 45 % 51 %Operating expenses: Research and development 43 % 38 % 42 %Sales and marketing 13 % 14 % 17 %General and administrative 14 % 13 % 15 %Legal settlement and contingencies 4 % — % — %Restructuring — % (1)% 1 %Total operating expenses 74 % 64 % 75 %Loss from operations (28)% (19)% (24)%Other income (expense), net 1 % — % 1 %Loss before provision (benefit) for income taxes (27)% (19)% (23)%Provision (benefit) for income taxes 1 % — % (9)%Net loss (28)% (19)% (14)%53Table of ContentsSegments information. The information below is organized in accordance with our three reportable business segments (dollars in thousands): Fiscal Year Ended June 30, 2017 2016 2015Revenue Automotive $123,784 $135,372 $103,100Advertising 26,841 21,744 17,941Mobile Navigation 18,959 26,230 39,198Total revenue 169,584 183,346 160,239Cost of revenue Automotive 73,923 81,293 56,319Advertising 12,724 12,296 11,710Mobile Navigation 5,688 7,208 10,755Total cost of revenue 92,335 100,797 78,784Gross profit Automotive 49,861 54,079 46,781Advertising 14,117 9,448 6,231Mobile Navigation 13,271 19,022 28,443Total gross profit $77,249 $82,549 $81,455Gross margin Automotive 40% 40% 45%Advertising 53% 43% 35%Mobile Navigation 70% 73% 73%Total gross margin 46% 45% 51%Comparison of the fiscal years ended June 30, 2017 and 2016Revenue, cost of revenue and gross profit.Consolidated overview. Product revenue decreased 10% to $119.8 million in fiscal 2017 from $132.5 million in fiscal 2016. The decrease in productrevenue was due primarily to a decrease in royalty revenue recognized from the commencement of Ford's map update program in Europe in the second half offiscal 2017, whereby revenue from certain on-board navigation products offered with map updates that we previously recognized upon delivery is now beingdeferred and recognized as revenue over the contractual period during which we provide map updates. Services revenue decreased 2% to $49.8 million infiscal 2017 from $50.9 million in fiscal 2016. The decrease in services revenue was due primarily to a decrease in mobile navigation revenue, partially offsetby an increase in advertising revenue.Our cost of product revenue decreased 11% to $70.3 million in fiscal 2017 from $79.2 million in fiscal 2016. The decrease was due primarily to adecrease in third party content costs associated with automotive navigation solutions as a result of offering map updates in Europe in conjunction with ouron-board navigation product, which requires that we defer the associated costs that we previously recognized upon delivery of the product and nowrecognize those costs with the related revenue over the contractual period during which we provide map updates. Our cost of services revenue increased 2%to $22.1 million in fiscal 2017 from $21.6 million in fiscal 2016. The increase was due primarily to an increase in cost of advertising revenue resulting fromincreases in third party ad exchange inventory costs and hosting services associated with the increased impressions delivered, partially offset by a decrease incost of mobile navigation revenue associated with the decline in such revenue.Our gross profit decreased to $77.2 million in fiscal 2017 from $82.5 million in fiscal 2016. Our gross margin increased to 46% in fiscal 2017 from 45%in fiscal 2016. The increase in gross margin was primarily due to an increase in automotive gross margin resulting from the commencement of Ford's mapupdate program in Europe in the second half of fiscal 2017, as the royalties earned from on-board navigation solutions for the Europe region that wererecognized upon delivery in previous periods and carry a higher relative map cost and lower gross margin are now deferred and recognized over thecontractual54Table of Contentsperiod, and to a lesser extent, an increase in gross margin from our advertising services revenue due to lower inventory acquisition costs.Revenue concentrations. In fiscal 2017 and 2016, revenue from Ford represented 69% and 71% of our total revenue, respectively.We primarily sell our services in the United States. In fiscal 2017 and 2016, revenue derived from U.S. sources represented 88% and 97% of our totalrevenue, respectively.Segments information.Automotive. Automotive revenue decreased 9% to $123.8 million in fiscal 2017 from $135.4 million in fiscal 2016. The decrease was due primarily to adecrease in production royalty revenue of $15.0 million in the second half of fiscal 2017 resulting from the commencement of Ford's map update program inEurope, whereby revenue from certain on-board navigation products offered with map updates that we previously recognized upon delivery is now beingdeferred and recognized as revenue over the contractual period during which we provide map updates. This decrease was partially offset by an increase inroyalty revenue of $5.9 million from automotive navigation solutions in the first half of fiscal 2017. Automotive revenue included customized softwaredevelopment and map update revenue of $0.7 million and $3.2 million in fiscal 2017 and 2016, respectively. In addition, during fiscal 2017 and 2016, ourdeferred automotive revenue increased $64.4 million and $17.0 million, respectively, primarily related to royalties from Ford Europe and Ford Australia andNew Zealand SYNC 3 map update programs, GM's on-board and connected solution and OnStar RemoteLink and Toyota's Scout GPS Link mobileapplications. Automotive revenue represented 73% and 74% of total revenue in fiscal 2017 and 2016, respectively.Cost of automotive revenue decreased 9% to $73.9 million in fiscal 2017 from $81.3 million in fiscal 2016. The decrease was due primarily to adecrease in third party content costs of $7.6 million as a result of offering map updates in Europe in conjunction with our on-board navigation product, whichrequires that we defer the associated costs that we previously recognized upon delivery of the product and now recognize those costs with the related revenueover the contractual period during which we provide map updates.Automotive gross profit decreased 8% to $49.9 million in fiscal 2017 from $54.1 million in fiscal 2016. Automotive gross margin was comparable at40% in fiscal 2017 and fiscal 2016. Gross margin was favorably impacted by the commencement of Ford's map update program in Europe beginning in thesecond half of fiscal 2017, as the royalties earned from on-board navigation solutions for the Europe region that were recognized upon delivery in previousperiods and carry a higher relative map cost and lower gross margin are now deferred and recognized over the contractual period. This increase was offset bythe gross margin realized on royalty revenue from SYNC 2 replacement SD cards for updating maps, which has a lower gross margin than our on-board andbrought-in automotive solutions.Advertising. Advertising revenue increased 23% to $26.8 million fiscal 2017 from $21.7 million in fiscal 2016. The increase was due primarily to anincrease in the value of contracted insertion orders along with the number of impressions delivered. Advertising revenue represented 16% and 12% of totalrevenue in fiscal 2017 and 2016, respectively.Cost of advertising revenue increased 3% to $12.7 million in fiscal 2017 from $12.3 million in fiscal 2016. The increase was due primarily to increasedthird party ad exchange inventory costs of $1.1 million, partially offset by a decrease in amortization of intangible assets of $0.5 million, as our advertising-related acquired intangibles were fully amortized during fiscal 2016. Our costs of advertising revenue increased at a lower rate than our advertising revenuedue primarily to improvements in our ability to acquire high performing inventory that meets our customers' requirements at a lower effective cost perthousand impressions, or eCPM.Advertising gross profit increased 49% to $14.1 million in fiscal 2017 from $9.4 million in fiscal 2016. Advertising gross margin increased to 53% infiscal 2017 from 43% in fiscal 2016. The increase in gross margin was due primarily to the increased value of contracted insertion orders, combined with alower eCPM of our inventory.Mobile Navigation. Mobile navigation revenue decreased 28% to $19.0 million in fiscal 2017 from $26.2 million in fiscal 2016. The decrease wasprimarily due to lower subscription revenue resulting from decreases in the number of paying subscribers for mobile navigation services provided throughAT&T, Sprint and T-Mobile and a decrease in mobile navigation revenue outside of the United States. Mobile navigation revenue represented 11% and 14%of total revenue in fiscal 2017 and 2016, respectively.Cost of mobile navigation revenue decreased 21% to $5.7 million in fiscal 2017 from $7.2 million in fiscal 2016. The decrease was due primarily todecreases in data center and hosted services costs of $0.6 million, third party content costs of $0.6 million and compensation and benefits expense of $0.3million.55Table of ContentsMobile navigation gross profit decreased 30% to $13.3 million in fiscal 2017 from $19.0 million in fiscal 2016. Mobile navigation gross margindecreased to 70% in fiscal 2017 from 73% in fiscal 2016. The decrease in gross margin resulted from revenue declining at a greater rate than cost of revenuedue to certain fixed costs, primarily related to third party content.Operating expensesResearch and development. Our research and development expenses increased 6% to $73.1 million in fiscal 2017 from $68.9 million in fiscal 2016.The increase was due primarily to increases of $4.8 million in payroll and related compensation and benefits expense resulting from higher averageheadcount and $2.1 million in outside services, partially offset by a decrease in stock-based compensation of $0.5 million due primarily to the cancellationof performance-based stock awards for which the performance conditions were not met, and an increase in deferred customized software development costs of$2.5 million. As a percentage of revenue, research and development expenses increased to 43% in fiscal 2017 from 38% in fiscal 2016. The total number ofresearch and development personnel increased 34% to 604 at June 30, 2017 from 451 at June 30, 2016, with a significant portion of the increase attributableto employees in lower cost regions such as Romania and China. We believe that as we deliver our contracted customer requirements for our automotivecustomers, establish relationships with new automotive OEMs, enhance our service offerings around our OSM capabilities, and develop new products andservices for advertisers, revenue from those investments and development efforts will lag the related research and development expenses.Sales and marketing. Our sales and marketing expenses decreased 14% to $22.0 million in fiscal 2017 from $25.6 million in fiscal 2016. The decreasewas primarily due to decreases in payroll and related compensation and benefits expense, including commissions, of $1.7 million resulting from loweraverage headcount, stock-based compensation expense of $0.8 million, advertising and promotion of $0.7 million and travel and entertainment of $0.3million. As a percentage of revenue, sales and marketing expenses decreased to 13% in fiscal 2017 from 14% in fiscal 2016. The total number of sales andmarketing personnel increased 20% to 61 at June 30, 2017 from 51 at June 30, 2016, although average headcount in fiscal 2017 was lower than in fiscal2016.General and administrative. Our general and administrative expenses decreased slightly to $23.0 million in fiscal 2017 from $23.1 million in fiscal2016. The decrease was primarily due to a decrease in legal expense of $1.4 million, partially offset by an increase in outside services of $1.3 million. Thetotal number of general and administrative personnel was comparable at 57 as of June 30, 2017 and 2016. As a percentage of revenue, general andadministrative expenses increased to 14% in fiscal 2017 from 13% in fiscal 2016.Legal settlement and contingencies. Legal settlement and contingencies expense in fiscal 2017 included the portion of our $8.0 million settlement withVehicle IP in January 2017 that was not previously accrued. Of the $8.0 million total settlement expense, $0.9 million was previously accrued in fiscal 2016.Legal settlement and contingencies expense in fiscal 2017 also reflected the reversal of an accrued liability of $0.7 million previously expensed related toother ongoing indemnification matters, which were also resolved in January 2017.Restructuring. Restructuring expense (reversal) for fiscal 2016 was $(1.4) million, primarily reflecting the reversal of a $1.5 million restructuringaccrual related to our Sunnyvale facility at 920 De Guigne Drive, as this amount represented the fair value of our lease obligation from April 2016 throughNovember 2019 that was no longer payable in connection with our office lease termination agreement.Other income (expense), net. Our other income (expense), net was $0.9 million in fiscal 2017 and $(0.2) million in fiscal 2016. Other income (expense),net in fiscal 2017 included $1.2 million of interest income partially offset by a $(0.3) million loss on foreign exchange. Other income (expense), net in fiscal2016 included $1.1 million of interest income offset by a $1.0 million loss from the write-off of investments in privately-held companies.Provision (benefit) for income taxes. Our provision for income taxes increased to $0.8 million in fiscal 2017 compared to $0.5 million in fiscal 2016.Our effective tax rate was 2% in fiscal 2017 compared to an effective tax rate of 1% in fiscal 2016. Our effective tax rate in fiscal 2017 was attributableprimarily to foreign withholding taxes and income taxes in certain foreign jurisdictions where we have profit, partially offset by the reversal of tax reservesrelated to the settlement of our New York state and IRS tax audits. Our effective tax rate in fiscal 2016 was attributable primarily to income taxes in certainforeign jurisdictions where we have profit.We anticipate that our foreign tax withholding obligation will continue into the future and that we will not be able to benefit from an offsettingdeduction in the United States for an extended period of time given our existing net operating loss carryforwards and, accordingly, we have negotiated aprice adjustment with a major customer.Due to the limitations of the two year loss carryback for federal tax purposes, we do not anticipate any refunds for losses incurred in fiscal 2017 orthereafter.56Table of ContentsThe usage of our remaining U.S. federal and California state loss carryforwards at June 30, 2017 of approximately $112.5 million and $9.3 million,respectively, is limited by Section 382 of the Internal Revenue Code.As of June 30, 2017, our cumulative unrecognized tax benefit was $3.0 million, of which $2.9 million was netted against deferred tax assets. Includedin the other long-term liabilities are unrecognized tax benefits at June 30, 2017 of $0.1 million that, if recognized, would affect the annual effective tax rate.We believe it is reasonably possible that the gross unrecognized tax benefits as of June 30, 2017 could decrease (whether by payment, release, or acombination of both) by approximately $0.1 million in the next 12 months. We recognize interest and penalties related to unrecognized tax benefits as partof our provision for income taxes. We had $0.1 million and $0.6 million accrued for the payment of interest and penalties at June 30, 2017 and 2016,respectively.All available evidence, both positive and negative, was considered to determine whether, based upon the weight of the evidence, a valuation allowancefor deferred tax assets is needed.Due to operating losses in previous years and continued earnings volatility, we maintain a valuation allowance on the majority of our deferred taxassets, net of liabilities, since the assets are not more likely than not to be realized based upon our assessment of all positive and negative evidence.Realization of deferred tax assets is dependent upon future taxable earnings, the timing of which is uncertain. Due to losses in previous years, and expectedlosses in fiscal 2018 and potentially future years in the U.S., we maintained a valuation allowance on deferred tax assets in the U.S. Due to operating losses inprevious years and expected losses in future years, we continued to maintain a full valuation allowance for our foreign deferred tax assets in the UnitedKingdom. Our valuation allowance increased from the prior fiscal year by approximately $20.3 million, $12.1 million and $4.7 million in fiscal 2017, 2016and 2015, respectively.We file income tax returns in the U.S. with the IRS, California, various states and foreign tax jurisdictions in which we have subsidiaries. The statute oflimitations remains open for fiscal 2016 for federal tax purposes, for fiscal 2013 through fiscal 2016 in state jurisdictions, and for fiscal 2012 through fiscal2016 in foreign jurisdictions. Fiscal years outside the normal statute of limitations remain open to audit by tax authorities due to tax attributes generated inthose early years which have been carried forward and may be audited in subsequent years when utilized. As of June 30, 2017, we were under audit by thestate of New York for fiscal 2013 through fiscal 2015 and the statute of limitations has been extended for fiscal 2013 to allow New York additional time tocomplete its audit.In July 2016, the state of New York completed its audit of our taxes for fiscal 2010 through fiscal 2012. We paid $0.4 million to settle the audit andrecorded a tax benefit of $1.0 million in July 2016 to reverse the remaining related tax reserves.In May 2017, the IRS completed its audit of our income taxes for fiscal 2012 through fiscal 2015. The audit resulted in a $0.9 million reduction of ourresearch and development tax credit carryforwards and we recorded a tax benefit of $0.4 million to reverse the related tax reserves.Comparison of the fiscal years ended June 30, 2016 and 2015Revenue, cost of revenue and gross profit.Consolidated overview. Product revenue increased 31% to $132.5 million in fiscal 2016 from $100.8 million in fiscal 2015. The increase in productrevenue was due primarily to an increase in royalty revenue from automotive navigation solutions we provide for our automotive customers. Services revenuedecreased 14% to $50.9 million in fiscal 2016 from $59.5 million in fiscal 2015. The decrease in services revenue was due primarily to lower subscriptionfees resulting from decreases in the number of paying subscribers for mobile navigation services, partially offset by an increase in advertising revenue.Our cost of product revenue increased 43% to $79.2 million in fiscal 2016 from $55.3 million in fiscal 2015. The increase was due primarily to anincrease in third party content costs associated with automotive navigation solutions, as our business continued to shift from deriving a majority of revenuefrom mobile navigation services to deriving a majority of revenue from automotive navigation products and services. Furthermore, cost of product revenueincreased at a higher rate than product revenue due primarily to an increase in third party content costs associated with increased royalty revenue and ahigher percentage of revenue from Ford on vehicles sold in Europe and China, which generally have higher associated content costs. Our cost of servicesrevenue decreased 8% to $21.6 million in fiscal 2016 from $23.5 million in fiscal 2015. The decrease was due primarily to a decrease in cost of mobilenavigation revenue associated with the decline in such revenue, partially offset by an increase in cost of advertising revenue resulting from increases in thirdparty ad exchange inventory costs and hosting services associated with the increased impressions delivered.57Table of ContentsOur gross profit increased to $82.5 million in fiscal 2016 from $81.5 million in fiscal 2015. Our gross margin decreased to 45% in fiscal 2016 from 51%in fiscal 2015. The decrease in gross margin was primarily due to the continuing increased proportion of product revenue contributed from our on-boardautomotive navigation solutions provided to our automotive customers and advertising services revenue, which generally have higher associated costs andresulting lower gross margins than our mobile navigation services provided through our wireless carrier customers. We expect our gross margin to continue todecline as the percentage of our revenue from automotive and advertising offerings increases, and as a result of increased competition on our offering ofmobile navigation services, especially from other freemium offerings. In addition, we expect that our gross margin will continue to be negatively impacted inthe future by the amortization of developed technology acquired as part of our January 2014 acquisition of skobbler.Revenue concentrations. In fiscal 2016 and 2015, revenue from Ford represented 71% and 61% of our total revenue, respectively, and revenue fromAT&T represented 9% and 15% of our total revenue, respectively.We primarily sell our services in the United States. In fiscal 2016 and 2015, revenue derived from U.S. sources represented 97% and 96% of our totalrevenue, respectively.Segments information.Automotive. Automotive revenue increased 31% to $135.4 million in fiscal 2016 from $103.1 million in fiscal 2015. The increase was due primarily toan increase in royalty revenue of $33.3 million. Automotive revenue included customized software and map content revenue of $3.2 million and $4.7 millionin fiscal 2016 and 2015, respectively. Automotive revenue represented 74% and 64% of total revenue in fiscal 2016 and 2015, respectively. In addition,during fiscal 2016 and 2015, our deferred automotive revenue increased $17.0 million and $5.1 million, respectively, primarily related to royalties from GM'sOnStar RemoteLink, the Ford Australia and New Zealand SYNC 2 map update program and Toyota Entune product. We may experience a lag in revenue asFord transitions to SYNC 3 in various geographies. For SYNC 3, we recognize revenue when our software is installed in the vehicle, as compared to SYNC 2for which we recognize revenue as the software is reproduced for installation in vehicles. The SYNC 3 transition has occurred in North America and Chinaand has begun in Europe, and the nominal effect on revenue recognition was reflected in our consolidated financial statements for fiscal 2016. During thethree months ending September 30, 2016, we anticipate that as Ford completes the transition in Europe and transitions to SYNC 3 in other internationalmarkets, we will experience a lower level of orders as Ford uses its existing inventory of SYNC 2 product in preparation for the transition to SYNC 3.Cost of automotive revenue increased 44% to $81.3 million in fiscal 2016 from $56.3 million in fiscal 2015. The increase was due primarily to anincrease in third party content costs of $25.1 million associated with the increased royalty revenue and a higher percentage of revenue from Ford for vehiclessold in Europe and China, which generally have higher associated content costs.Automotive gross profit increased 16% to $54.1 million in fiscal 2016 from $46.8 million in fiscal 2015. Automotive gross margin decreased to 40% infiscal 2016 from 45% in fiscal 2015. The decrease in gross margin was due primarily to the higher proportion of revenue from vehicles sold in Europe andChina, which generally has higher associated content costs.Advertising. Advertising revenue increased 21% to $21.7 million fiscal 2016 from $17.9 million in fiscal 2015. The increase was due primarily to anincrease in the value of contracted insertion orders along with the number of impressions delivered. Advertising revenue represented 12% and 11% of totalrevenue in fiscal 2016 and 2015, respectively.Cost of advertising revenue increased 5% to $12.3 million in fiscal 2016 from $11.7 million in fiscal 2015. The increase was due primarily to increasedthird party ad exchange inventory costs of $2.2 million, partially offset by a decrease in amortization of intangible assets of $1.2 million, as our advertising-related acquired intangibles were fully amortized during fiscal 2016.Advertising gross profit increased 52% to $9.4 million in fiscal 2016 from $6.2 million in fiscal 2015. Advertising gross margin increased to 43% infiscal 2016 from 35% in fiscal 2015. The increase in gross margin was due primarily to the increased value of contracted insertion orders, combined with thecompletion of amortization of advertising-related intangible assets.Mobile Navigation. Mobile navigation revenue decreased 33% to $26.2 million in fiscal 2016 from $39.2 million in fiscal 2015. The decrease wasprimarily due to lower subscription revenue resulting from decreases in the number of paying subscribers for mobile navigation services provided throughAT&T, Sprint, T-Mobile and USCC and a decrease in mobile navigation revenue internationally. Mobile navigation revenue represented 14% and 24% oftotal revenue in fiscal 2016 and 2015, respectively.58Table of ContentsCost of mobile navigation revenue decreased 33% to $7.2 million in fiscal 2016 from $10.8 million in fiscal 2015. The decrease was due primarily todecreases in data center and hosted services costs of $1.6 million, third party content costs of $0.9 million, amortization of intangibles of $0.2 million andcompensation and benefits expense of $0.2 million.Mobile navigation gross profit decreased 33% to $19.0 million in fiscal 2016 from $28.4 million in fiscal 2015. Mobile navigation gross margin was73% in each of fiscal 2016 and 2015. The relatively consistent margins reflect the net impact of lower revenue levels, offset by the lower cost from oursuccessful transition to OSM maps for the majority of our mobile user base.Operating expensesResearch and development. Our research and development expenses increased 1% to $68.9 million in fiscal 2016 from $68.1 million in fiscal 2015.The increase was due primarily to increases in outside services of $1.0 million, stock-based compensation of $0.8 million and travel and entertainmentexpenses of $0.7 million, partially offset by a decrease of $0.9 million due to the reversal of deferred rent associated with our Sunnyvale, California facilitylease termination and a decrease in severance pay of $0.9 million. As a percentage of revenue, research and development expenses decreased to 38% in fiscal2016 from 42% in fiscal 2015. The total number of research and development personnel increased 9% to 451 at June 30, 2016 from 413 at June 30, 2015,with a significant portion of the increase attributable to employees in lower cost regions such as Romania and China. We believe that as we deliver ourcontracted customer requirements for our automotive customers, establish relationships with new automobile manufacturers and OEMs, enhance our serviceofferings around our OSM capabilities, and develop new services and products for advertisers, revenue from those investments and development efforts willlag the related research and development expenses.Sales and marketing. Our sales and marketing expenses decreased 5% to $25.6 million in fiscal 2016 from $27.0 million in fiscal 2015. The decreasewas primarily due to decreases in advertising and promotion of $1.0 million, recruiting of $0.3 million, compensation and benefits expense of $0.3 millionand software license expense of $0.1 million, partially offset by an increase in commission expense of $0.7 million. As a percentage of revenue, sales andmarketing expenses decreased to 14% in fiscal 2016 from 17% in fiscal 2015. The total number of sales and marketing personnel decreased 35% to 51 atJune 30, 2016 from 78 at June 30, 2015.General and administrative. Our general and administrative expenses increased 2% to $24.0 million in fiscal 2016 from $23.6 million in fiscal 2015.The increase was primarily due to an increase in legal expenses of $4.3 million related to current litigation and legal contingencies, that was partially offsetby decreases in compensation and benefits expense of $1.5 million, stock-based compensation expense of $0.8 million, severance pay of $0.5 million, traveland entertainment expense of $0.4 million and a decrease of $0.5 million due to the reversal of deferred rent associated with our facility lease termination.During fiscal 2016, we incurred a total of $6.9 million in legal expenses, including legal contingencies. The total number of general and administrativepersonnel decreased 8% to 57 at June 30, 2016 from 62 at June 30, 2015. As a percentage of revenue, general and administrative expenses decreased to 13%in fiscal 2016 from 15% in fiscal 2015. We anticipate that our general and administrative expenses may vary substantially from period to period as our legalcosts associated with ongoing intellectual property litigation and requests for indemnification related to intellectual property litigation proceedings.Restructuring. Restructuring expense (reversal) for fiscal 2016 was $(1.4) million, primarily reflecting the reversal of a $1.5 million restructuringaccrual related to our Sunnyvale facility at 920 De Guigne Drive, as this amount represents the fair value of our lease obligation from April 2016 throughNovember 2019 that is no longer payable in connection with our office lease termination agreement. We incurred restructuring expense of $1.2 million infiscal 2015 associated with facility lease impairment in connection with the consolidation of our Sunnyvale headquarters facilities in fiscal 2014.Other income (expense), net. Our other income (expense), net was $(0.2) million in fiscal 2016 and $2.3 million in fiscal 2015. Other income (expense),net in fiscal 2016 included $1.1 million of interest income offset by a $1.0 million loss from the write-off of investments in privately-held companies. Otherincome, net in 2015 included foreign currency transaction gains of $1.6 million and interest income of $1.0 million, which were partially offset by a $1.3million loss from the impairment of long-term equity investments. The impairment of long-term equity investments of $1.3 million included $0.8 millionfrom an investment in connection with the spin off of a product line developed by our Shanghai, China team.Provision (benefit) for income taxes. Our provision for income taxes increased to $0.5 million in fiscal 2016 from a benefit of $(13.0) million in fiscal2015. Our effective tax rate, which resulted in the recognition of a tax expense, was 1% in fiscal 2016 compared to an effective tax rate, which resulted in therecognition of a tax benefit, of 36% in fiscal 2015. Our effective tax rate in fiscal 2016 was attributable primarily to income taxes in certain foreignjurisdictions where we have profit. Our effective tax rate in fiscal 2015 was attributable primarily to tax benefits recorded from the federal income tax refundof $5.4 million, the recognition of a state income tax refund of $3.0 million and a refund of $1.1 million from a change in tax59Table of Contentsaccounting method, both related to prior years and received in fiscal 2015; and the reversal of tax reserves of $4.2 million due to loss carryback, expiration ofthe statute of limitations, and settlement of our California audit.Liquidity and capital resourcesThe following table sets forth the major sources and uses of cash and cash equivalents for each of the periods set forth below: Fiscal Year Ended June 30, 2017 2016 2015 (in thousands)Net cash used in operating activities $(9,452) $(3,098) $(7,696)Net cash provided by investing activities 8,942 8,553 16,052Net cash used in financing activities (270) (2,316) (2,471)Effect of exchange rate changes on cash and cash equivalents 188 (511) (1,698)Net increase (decrease) in cash and cash equivalents $(592) $2,628 $4,187At June 30, 2017, we had cash and cash equivalents and short-term investments of $98.4 million, which primarily consisted of corporate bonds, asset-backed securities, municipal securities and commercial paper held by well-capitalized financial institutions.Our accounts receivable are heavily concentrated in a small number of customers. As of June 30, 2017, our accounts receivable, net balance was $57.8million, of which Ford represented 74%.Our future capital requirements will depend on many factors, including our ability to continue to increase our billings and control our expenses infiscal 2018 and beyond, whether we return to profitability, the timing and extent of expenditures to support development efforts, the expansion of researchand development and sales and marketing activities and headcount, the introduction of our new and enhanced service and product offerings and the timingand scale of the introduction of vehicles including our navigation products relative to when we are required to develop the product. We believe our cash,cash equivalents and short-term investments will be sufficient to satisfy our financial obligations through at least the next 12 months. However, we expect tocontinue to use cash in operating activities in fiscal 2018 and we may experience greater than expected cash usage in operating activities if revenue is lowerthan we anticipate or we incur greater than expected cost of revenue or operating expenses. Our revenue and operating results could be lower than weanticipate if, among other reasons, our customers, one of which we are substantially dependent upon for a large portion of our revenue, were to limit orterminate our relationships with them; we were to fail to successfully compete in our highly competitive market, our revenue did not grow as expected or wewere unable to reduce our costs by using OSM. In the future, we may acquire businesses or technologies or license technologies from third parties, and wemay decide to raise additional capital through debt or equity financing to the extent we believe this is necessary to successfully complete these acquisitionsor license these technologies. However, additional financing may not be available to us on favorable terms, if at all, at the time we make such determinations,which could have a material adverse effect on our business, operating results, financial condition and liquidity and cash position.Net cash used in operating activities. Net cash used in operating activities was $9.5 million, $3.1 million and $7.7 million in fiscal 2017, 2016 and2015, respectively. Cash provided by (used in) operating activities has historically been affected by changes in our end user base and our operating costs. Infiscal 2017, cash used in operating activities was due primarily to a net loss of $47.3 million, partially offset by non-cash charges for depreciation andamortization of $2.6 million, stock-based compensation of $10.2 million, and a $24.4 million change in our operating assets and liabilities. In fiscal 2016,cash used in operating activities was due primarily to a net loss of $35.3 million, partially offset by non-cash charges for depreciation and amortization of$3.4 million, stock-based compensation of $11.4 million, write-off of long-term investments of $1.0 million, and a $15.4 million change in our operatingassets and liabilities. In fiscal 2015, cash used in operating activities was driven principally by a net loss of $23.1 million and a $3.2 million change in ouroperating assets and liabilities, partially offset by non-cash charges for depreciation and amortization of $5.2 million, stock-based compensation of $11.4million, and write-off of long-term investments of $1.3 million.Net cash provided by investing activities. Net cash provided by investing activities was $8.9 million, $8.6 million and $16.1 million during fiscal2017, 2016 and 2015, respectively. In fiscal 2017, cash was provided primarily by proceeds from sales and maturities of short-term investments, net ofpurchases, of $9.9 million, partially offset by purchases of property and equipment of $1.2 million. In fiscal 2016, cash was provided primarily by proceedsfrom sales and maturities of short-term investments, net of purchases, of $12.6 million, partially offset by purchases of property and equipment of $4.0million. In fiscal 2015, cash was provided primarily by proceeds from sales and maturities of short-term investments, net of purchases, of $19.4 million,partially offset by purchases of property and equipment of $1.2 million and purchases of long-term investments of $2.5 million. We expect our capitalexpenditures in future periods to remain in line with fiscal 2017 as we60Table of Contentscontinue to invest in the infrastructure needed for our strategic growth areas of automotive and advertising, while also leveraging the benefits of hostedenvironments for which we no longer have to make large upfront capital expenditure investments.Net cash used in financing activities. During fiscal 2017, 2016 and 2015, we used cash in our financing activities of $0.3 million, $2.3 million and$2.5 million, respectively. In fiscal 2017, 2016 and 2015, these activities reflect the repurchases of our outstanding stock under our stock repurchaseprograms and tax withholdings paid related to net share settlements of restricted stock units upon vesting, and were partially offset by proceeds from theexercise of options for our common stock.Contractual obligations, commitments and contingenciesWe generally do not enter into long term minimum purchase commitments. However, we have agreed to pay minimum annual license fees to certain ofour third party content providers. Our principal commitments, in addition to those related to our third party content providers, consist of obligations underfacility leases for office space in Santa Clara and Culver City, California; Reston, Virginia; Southfield, Michigan; Chicago, Illinois; New York, New York;Shanghai, China; Xi’an, China; Cluj, Romania; Berlin, Germany; Tokyo, Japan; and Incheon, South Korea.The following table summarizes our outstanding noncancelable contractual obligations as of June 30, 2017: Payments due by period Total Less than1 Year 1-3 Years 3-5 Years More than5 Years (in thousands)Operating lease obligations(1) $10,452 $3,415 $4,553 $2,435 $49Purchase obligations(2) 6,321 2,347 1,898 830 1,246Total contractual obligations $16,773 $5,762 $6,451 $3,265 $1,295 (1)Consists of contractual obligations for office space under noncancelable operating leases.(2)Consists of minimum noncancelable financial commitments primarily related to fees owed to certain third party content providers, regardless of usagelevel.At June 30, 2017, we had a liability for unrecognized tax benefits and an accrual for the payment of related interest and penalties totaling $0.2 million.Due to uncertainties related to these tax matters, we are unable to make a reasonably reliable estimate of when cash settlements with the taxing authority willoccur.Warranties and indemnificationsOur agreements with our customers generally include certain provisions for indemnifying them against liabilities if our navigation services or productsinfringe a third party’s intellectual property rights or for other specified reasons. We have in the past received indemnification requests or notices of theirintent to seek indemnification in the future from our customers with respect to litigation in which our customers have been named as defendants. See Part I,Item 3, “Legal Proceedings.” As it relates to past indemnification requests or notices, in certain situations we have agreed to defend or indemnify ourcustomers for the indemnity demands. For those notices where we have not agreed to provide indemnity or defense to date, or future demands for indemnity,we may in the future agree to defend and indemnify our customers, irrespective of whether we believe that we have an obligation to indemnify them orwhether we believe our navigation services and products infringe the asserted intellectual property rights. Alternatively, we may reject certain of ourcustomers’ indemnity demands, including the outstanding demands, which may lead to disputes with our customers, negatively impact our relationships withthem or result in litigation against us. Our customers may also claim that any rejection of their indemnity demands constitutes a material breach of ouragreements with them, allowing them to terminate such agreements. If, as a result of indemnity demands, we make substantial payments, our relationshipswith our customers are negatively impacted, or any of our customer agreements is terminated, our business, operating results and financial condition could bematerially harmed. As of June 30, 2017, any costs in connection with such indemnity demands which are probable and estimable have been recorded in ourconsolidated financial statements.We have agreed to indemnify our directors, officers and certain other employees for certain events or occurrences, subject to certain limits, while suchpersons are or were serving at our request in such capacity. We may terminate the indemnification agreements with these persons upon the termination oftheir services with us, but termination will not affect claims for indemnification related to events occurring prior to the effective date of termination. Themaximum amount of potential future indemnification is unlimited. We have a director and officer insurance policy that limits our potential exposure. Webelieve the fair value of these indemnification agreements is minimal. We have not recorded any liabilities for these agreements as of June 30, 2017.61Table of ContentsOff-balance sheet arrangementsDuring fiscal 2017, 2016 and 2015, we did not have any relationships with unconsolidated entities or financial partnerships, such as structured financeor special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow orlimited purposes.Recent accounting pronouncementsSee Part IV., Item 15 (a) 1. Financial Statements, Note 1 Summary of business and significant accounting policies, "Recent accountingpronouncements."62Table of ContentsITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKInterest rate sensitivity. The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income withoutsignificantly increasing risk. By policy, we do not enter into investments for trading or speculative purposes. Some of the securities we invest in are subject tomarket risk. This means that a change in prevailing interest rates may cause the fair value of the investment to fluctuate. To minimize this risk, we invest in avariety of securities, which primarily consist of money market funds, commercial paper, municipal securities and other debt securities of domesticcorporations. Due to the nature of these investments and relatively short duration of the underlying securities, we believe that we do not have any materialexposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, will reduce futureinterest income. A 10% appreciation or depreciation in interest rates in fiscal 2017 would not have had a material impact on our interest income or the fairvalue of our marketable securities.Foreign currency risk. A substantial majority of our revenue has been generated to date from our end users in the United States and, as such, ourrevenue has not been substantially exposed to fluctuations in currency exchange rates. However, some of our contracts with our customers outside of theUnited States are denominated in currencies other than the U.S. dollar and therefore expose us to foreign currency risk. Should the revenue generated outsideof the United States grow in absolute amounts and as a percentage of our revenue, we will increasingly be exposed to foreign currency exchange risks. Inaddition, a portion of our operating expenses are incurred outside the United States, are denominated in foreign currencies and are subject to changes inforeign currency exchange rates, particularly the RMB and the Romanian Leu. Additionally, changes in foreign currency exchange rates may cause us torecognize transaction gains and losses in our statement of operations.To date, we have not used any foreign currency forward contracts or similar instruments to attempt to mitigate our exposure to changes in foreigncurrency rates. ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe response to this item is submitted as a separate section of this Form 10-K. See Part IV, Item 15.ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURENone.ITEM 9A.CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresOur management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosurecontrols and procedures as of June 30, 2017. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the ExchangeAct, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports thatit files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by acompany in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including itsprincipal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that anycontrols and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and managementnecessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosurecontrols and procedures as of June 30, 2017, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls andprocedures were effective at the reasonable assurance level.Management’s Report on Internal Control Over Financial ReportingThe SEC, as required by Section 404 of the Sarbanes-Oxley Act, adopted rules requiring every company that files reports with the SEC to include amanagement report on such company’s internal control over financial reporting in its annual report.63Table of ContentsIn addition, our independent registered public accounting firm must attest to the effectiveness of our internal control over financial reporting.Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assuranceregarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles.Management assessed our internal control over financial reporting as of June 30, 2017. Management based its assessment on criteria established in the2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on ourassessment, management has concluded that our internal control over financial reporting was effective as of June 30, 2017.Grant Thornton LLP, an independent registered public accounting firm, has issued a report on our internal control over financial reporting, which isincluded below.Changes in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2017 that have materiallyaffected, or are reasonably likely to materially affect, our internal control over financial reporting.Limitations on the Effectiveness of ControlsControl systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that theobjectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits ofcontrols must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absoluteassurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatementsdue to error or fraud may occur and not be detected.64Table of ContentsReport of Independent Registered Public Accounting FirmBoard of Directors and StockholdersTelenav, Inc.We have audited the internal control over financial reporting of Telenav, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of June 30, 2017,based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment ofthe effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over FinancialReporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testingand evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2017, based on criteriaestablished in the 2013 Internal Control-Integrated Framework issued by COSO.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financialstatements of the Company as of and for the year ended June 30, 2017, and our report dated August 24, 2017 expressed an unqualified opinion on thosefinancial statements./s/ GRANT THORNTON LLP San Jose, CaliforniaAugust 24, 2017 65Table of ContentsITEM 9B.OTHER INFORMATIONNot applicable.PART III.ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEPursuant to General Instruction G(3) of Form 10-K, the information required by this Item 10 relating to our executive officers is included under thecaption “Executive Officers of the Registrant” in Part I of this Form 10-K.The other information required by this Item 10 is incorporated by reference to our Proxy Statement for the 2017 Annual Meeting of Stockholders (to befiled with the Securities and Exchange Commission within 120 days of our June 30, 2017 fiscal year end) under the headings “Election of Directors,”“Corporate Governance,” and “Section 16(a) Beneficial Ownership Reporting Compliance.”ITEM 11.EXECUTIVE COMPENSATIONThe information required by this Item 11 is incorporated by reference to our Proxy Statement for the 2017 Annual Meeting of Stockholders (to be filedwith the Securities and Exchange Commission within 120 days of our June 30, 2017 fiscal year end) under the headings “Corporate Governance,” “ExecutiveCompensation,” and “Compensation Committee Report.”ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSThe information required by this Item 12 is incorporated by reference to our Proxy Statement for the 2017 Annual Meeting of Stockholders (to be filedwith the Securities and Exchange Commission within 120 days of our June 30, 2017 fiscal year end) under the headings “Security Ownership of CertainBeneficial Owners and Management” and “Equity Compensation Plan Information.”ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by this Item 13 is incorporated by reference to our Proxy Statement for the 2017 Annual Meeting of Stockholders (to be filedwith the Securities and Exchange Commission within 120 days of our June 30, 2017 fiscal year end) under the headings “Corporate Governance” and“Certain Relationships and Related Party Transactions.”ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required by this Item 14 is incorporated by reference to our Proxy Statement for the 2017 Annual Meeting of Stockholders (to be filedwith the Securities and Exchange Commission within 120 days of our June 30, 2017 fiscal year end) under the heading “Ratification of Appointment ofIndependent Registered Public Accounting Firm.”66Table of ContentsPART IV. ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES(a) 1. Financial StatementsWe have filed the consolidated financial statements listed in the Index to Consolidated Financial Statements of Telenav, Inc. on page F-1 as a part ofthis Form 10-K.2. Financial Statement ScheduleSchedule II—Valuation and Qualifying Accounts is set forth on page F-33 of this Form 10-K. All other schedules are omitted because they are notapplicable or the required information is shown in the Consolidated Financial Statements and the Notes thereto.3. ExhibitsSee Item 15(b) below.(b) ExhibitsThe following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the U.S. Securities and ExchangeCommission. ExhibitNumber Description Incorporatedby ReferenceFrom Form Incorporatedby ReferenceFrom ExhibitNumber Date Filed3.1 Second Amended and Restated Certificate of Incorporation of TeleNav, Inc. filed onMay 18, 2010. 10-K 3.1 9/24/20103.1.1 Certificate of Amendment of Second Amended and Restated Certificate ofIncorporation of Telenav, Inc. filed on November 27, 2012. 8-K 3.1.1 12/3/20123.2 Amended and Restated Bylaws of TeleNav, Inc. effective as of May 18, 2010. 10-K 3.2 9/24/20094.1 Specimen Common Stock Certificate of TeleNav, Inc. S-1/A 4.1 1/5/20104.2 Fifth Amended and Restated Investors’ Rights Agreement, dated April 14, 2009,between TeleNav, Inc. and certain holders of TeleNav, Inc.’s capital stock namedtherein. S-1 4.2 10/30/200910.1 Form of Indemnification Agreement between Registrant and its directors and officers. S-1 10.1 10/30/200910.2# 1999 Stock Option Plan and forms of agreement thereunder. S-1 10.2 10/30/200910.3# 2002 Executive Stock Option Plan and forms of agreement thereunder. S-1 10.3 10/30/200910.4# 2009 Equity Incentive Plan and forms of agreement thereunder. S-1 10.4 10/30/200910.4.1# 2009 Equity Incentive Plan, amended and restated as of January 27, 2017 8-K 10.4.3 1/31/201710.7# Employment Agreement, dated as of May 4, 2005, between TeleNav, Inc. and HassanWahla. S-1 10.7 10/30/200910.8# Employment Agreement, dated October 28, 2009, between TeleNav, Inc. and H.P. Jin. S-1 10.8 10/30/200910.9# Form of Employment Agreement between TeleNav, Inc. and each of Y.C. Chao, SalmanDhanani, Robert Rennard and Hassan Wahla. S-1 10.9 10/30/200910.15† License Agreement effective as of July 1, 2009, by and between TeleNav, Inc. and TeleAtlas North America, Inc. S-1/A 10.15 12/8/200910.15.1† Amendment No.1 effective as of March 1, 2010 to the License Agreement, dated as ofJuly 1, 2009, by and between TeleNav, Inc. and Tele Atlas North America, Inc. S-1/A 10.15.1 4/26/201067Table of ContentsExhibitNumber Description Incorporatedby ReferenceFrom Form Incorporatedby ReferenceFrom ExhibitNumber Date Filed10.15.2† Amendment No. 2 effective as of August 1, 2010 to the License Agreement, dated as ofJuly 1, 2009, as amended, by and between TeleNav, Inc. and Tele Atlas NorthAmerica, Inc. 10-Q 10.15.2 11/15/201010.15.3† Amendment No. 3 effective as of December 14, 2010 to the License Agreement, datedas of July 1, 2009, as amended, by and between TeleNav, Inc. and Tele Atlas NorthAmerica, Inc. 10-K 10.15.3 9/7/201210.15.4† Amendment No. 4 effective as of November 21, 2011 to the License Agreement, datedas of July 1, 2009, as amended, by and between TeleNav, Inc. and TomTom NorthAmerica, Inc. 10-K 10.15.4 9/7/201210.15.5† Amendment No. 5 effective as of March 24, 2011 to the License Agreement, dated asof July 1, 2009, as amended, by and between TeleNav, Inc. and TomTom NorthAmerica, Inc. 10-K 10.15.5 9/7/201210.15.6† Amendment No. 6 effective as of July 1, 2012 to the License Agreement, dated as ofJuly 1, 2009, as amended, by and between TeleNav, Inc. and TomTom North America,Inc. 10-K 10.15.6 9/7/201210.15.7† Amendment No. 7 effective as of November 1, 2012 to the License Agreement, datedas of July 1, 2009, as amended, by and between Telenav, Inc. and TomTom NorthAmerica, Inc. 10-Q 10.15.7 2/8/201310.15.8† Amendment No. 8 effective as of November 1, 2012 to the License Agreement, datedas of July 1, 2009, as amended, by and between Telenav, Inc. and TomTom NorthAmerica, Inc. 10-Q 10.15.8 2/8/201310.16† Data License Agreement, dated as of December 1, 2002, by and between Televigation,Inc. and Navigation Technologies Corporation. S-1/A 10.16 2/2/201010.16.1† Third Amendment dated December 22, 2004 to the Data License Agreement, dated asof December 1, 2002, by and between Televigation, Inc. and NAVTEQ North America,LLC. S-1/A 10.16.1 4/26/201010.16.2† Fourth Amendment dated May 18, 2007 to the Data License Agreement, dated as ofDecember 1, 2002, by and between TeleNav, Inc. and NAVTEQ North America, LLC. S-1/A 10.16.2 2/2/201010.16.3† Fifth Amendment dated January 15, 2008 to the Data License Agreement, dated as ofDecember 1, 2002, by and between TeleNav, Inc. and NAVTEQ North America, LLC. S-1/A 10.16.3 2/2/201010.16.4† Seventh Amendment dated December 16, 2008 to the Data License Agreement, datedas of December 1, 2002, by and among TeleNav, Inc., NAVTEQ Europe B.V. andNAVTEQ North America, LLC. S-1/A 10.16.4 4/26/201010.16.5 Eighth Amendment dated December 15, 2008 to the Data License Agreement, dated asof December 1, 2002, by and between TeleNav, Inc. and NAVTEQ NorthAmerica, LLC. S-1 10.16.5 10/30/200910.16.6† Territory License No. 1, dated as of December 1, 2002, by and between Televigation,Inc. and Navigation Technologies Corporation. S-1/A 10.16.6 4/26/201010.16.7† Territory License No. 2, dated as of June 30, 2003, by and between Televigation, Inc.and NAVTEQ North America, LLC. S-1/A 10.16.7 4/26/201010.16.8† Territory License No. 3, dated as of February 7, 2006, by and between TeleNav, Inc.and NAVTEQ North America, LLC. S-1/A 10.16.8 4/26/201010.16.9† Territory License No. 5, dated as of March 6, 2006, by and between TeleNav, Inc. andNAVTEQ North America, LLC. S-1/A 10.16.9 4/26/201010.16.10† Territory License No. 6, dated as of May 18, 2007, by and between TeleNav, Inc. andNAVTEQ North America, LLC. S-1/A 10.16.10 4/26/201010.16.11† Territory License No. 7, dated as of May 18, 2007, by and between TeleNav, Inc. andNAVTEQ North America, LLC. S-1/A 10.16.11 4/26/201010.16.12† Ninth Amendment dated February 25, 2010 to the Data License Agreement, dated asof December 1, 2002 by and between TeleNav, Inc. and NAVTEQ NorthAmerica, LLC. S-1/A 10.16.12 4/26/201010.16.13 Tenth Amendment dated June 1, 2010 to the Data License Agreement, dated as ofDecember 1, 2002, by and between TeleNav, Inc., NAVTEQ North America, LLC, andNAVTEQ Europe B.V. 10-Q 10.16.13 5/7/201268Table of ContentsExhibitNumber Description Incorporatedby ReferenceFrom Form Incorporatedby ReferenceFrom ExhibitNumber Date Filed10.16.14† Eleventh Amendment dated September 16, 2010 to the Data License Agreement, datedas of December 1, 2002, by and between TeleNav, Inc., NAVTEQ North America, LLC,and NAVTEQ Europe B.V. 10-Q 10.16.14 5/7/201210.16.15† Twelfth Amendment dated September 28, 2010 to the Data License Agreement, datedas of December 1, 2002, by and between TeleNav, Inc., NAVTEQ North America, LLC,and NAVTEQ Europe B.V. 10-Q 10.16.15 5/7/201210.16.16† Fourteenth Amendment dated September 30, 2011 to the Data License Agreement,dated as of December 1, 2002, by and between TeleNav, Inc., NAVTEQ North America,LLC, and NAVTEQ Europe B.V. 10-Q 10.16.16 5/7/201210.16.17† Territory License No. 8, dated December 1, 2011, by and between TeleNav, Inc.,NAVTEQ North America, LLC, and NAVTEQ Europe B.V. 10-Q 10.16.17 5/7/201210.16.18† First Amendment dated February 7, 2012 to Territory License No. 8, dated as ofDecember 1, 2011, by and between TeleNav, Inc., NAVTEQ North America, LLC andNAVTEQ Europe B.V. 10-Q 10.16.18 5/7/201210.16.19† Second Amendment dated October 18, 2012 to Territory License No. 8, datedDecember 1, 2011 to the Data License Agreement, dated as of December 1, 2002, byand between Telenav, Inc., NAVTEQ North America, LLC and NAVTEQ Europe B.V. 10-Q 10.16.19 2/8/201310.16.20 Fifteenth Amendment dated October 30, 2012 to the Data License Agreement, dated asof December 1, 2002, by and between Telenav, Inc., NAVTEQ North America, LLC andNAVTEQ Europe B.V. 10-Q 10.16.20 2/8/201310.16.21† Third Amendment dated December 10, 2012 to Territory License No. 8, datedDecember 1, 2011 to the Data License Agreement, dated as of December 1, 2002, byand between Telenav, Inc., NAVTEQ North America, LLC and NAVTEQ Europe B.V. 10-Q 10.16.21 2/8/201310.16.22† Seventeenth Amendment dated June 27, 2013 to the Data License Agreement, dated asof December 1, 2002, by and between HERE North America, LLC (f/k/a NAVTEQNorth America, LLC) (formerly Navigation Technologies Corporation) and Telenav,Inc. 10-Q/A 10.16.22 2/27/201410.16.23† Fourth Amendment dated October 2, 2013 to Territory License No. 8, dated December1, 2011 to the Data License Agreement, dated as of December 1, 2002, by and betweenTelenav, Inc., and Navigation Technologies Corporation (“NTC”), which wassubsequently assigned by NTC to HERE North America, LLC (f/k/a NAVTEQ NorthAmerica, LLC). 10-Q 10.16.23 11/8/201310.16.24 Eighteenth Amendment dated January 28, 2014 to the Data License Agreement, datedas of December 1, 2002, by and between HERE North America, LLC (f/k/a NAVTEQNorth America, LLC) (formerly Navigation Technologies Corporation) and Telenav,Inc. 10-Q 10.16.24 2/6/201410.16.25† Territory License No. 9, dated February 1, 2014 by and between HERE North America,LLC, HERE Europe B.V., NAVTEQ Korea Co. Ltd, and Telenav, Inc. 10-Q 10.16.25 5/8/201410.16.26† General License Agreement, dated February 10, 2014 by and between HERE NorthAmerica, LLC, and Telenav, Inc. 10-Q 10.16.26 5/8/201410.16.27† Nineteenth Amendment dated May 20, 2014 to the Data License Agreement, dated asof December 1, 2002, by and between HERE North America, LLC (f/k/a NAVTEQNorth America, LLC) (formerly Navigation Technologies Corporation) and Telenav,Inc. 10-K 10.16.27 8/22/201410.16.28† First Amendment, dated June 12, 2014, to Territory License No. 9, dated as of February1, 2014, by and between Telenav, Inc., and HERE North America, LLC (f/k/a NAVTEQNorth America, LLC).” 10-K 10.16.28 8/22/201410.16.29† Amended and Restated Territory License No. 8, dated August 18, 2014, by andbetween Telenav, Inc., HERE North America, LLC (f/k/a NAVTEQ North America,LLC), and Here Europe B.V. (f/k/a NAVTEQ Europe B.V.) 10-Q 10.16.29 11/6/201469Table of ContentsExhibitNumber Description Incorporatedby ReferenceFrom Form Incorporatedby ReferenceFrom ExhibitNumber Date Filed10.16.30† Patent License Agreement, dated January 1, 2014, by and between Telenav, Inc., andHERE Global B.V. (f/k/a Navteq B.V.) 10-Q 10.16.30 2/5/201510.16.31† Territory License No. 11, dated April 3, 2015 by and between HERE North America,LLC, HERE Europe B.V., and Telenav, Inc. 10-K 10.16.31 8/24/201510.16.32† First Amendment to Amended and Restated Territory License No. 8, dated November 4,2015 by and between Telenav, Inc., and HERE North America, LLC (f/k/a NAVTEQNorth America, LLC). 10-Q 10.16.32 2/9/201610.16.33† First Amendment to General License Agreement, dated November 12, 2015 by andbetween HERE North America, LLC, and Telenav, Inc. 10-Q 10.16.33 2/9/201610.16.34† Territory License No. 10, dated March 15, 2016, by and between HERE North America,LLC, HERE Europe B.V., HERE Solutions Korea Co. Ltd, and Telenav, Inc. 10-Q 10.16.34 5/9/201610.16.35† First Amendment, effective August 24, 2016, to Territory License No. 11, dated April 3,2015, by and between HERE North America, LLC and Telenav, Inc. 10-Q 10.16.35 11/7/201610.16.36† Second Amendment, effective December 5, 2016, to Amended and Restated TerritoryLicense No. 8, dated April 1, 2014, by and between HERE North America, LLC andTelenav, Inc. 10-Q 10.16.36 2/3/201710.16.36.1 Sublease Termination Agreement, dated as of August 10, 2017, among Avaya Inc. andTelenav, Inc.1 10.16.37† Third Amendment, effective December 6, 2016, to Territory License No. 9, datedFebruary 1, 2014, by and between HERE North America, LLC and Telenav, Inc. 10-Q 10.16.37 2/3/201710.16.38† Second Amendment, effective December 6, 2016, to Territory License No. 11, datedApril 3, 2015, by and between HERE North America, LLC and Telenav, Inc. 10-Q 10.16.38 2/3/201710.16.39†+ Territory License No. 12, dated June 30, 2017, by and among HERE North America,LLC, HERE Europe B.V. and Telenav, Inc. Filed Herewith 10.21# Form of First Year Executive Employment Agreement. 10-Q 10.21 11/7/201110.22# Retention Letter dated March 28, 2012 from TeleNav, Inc. to Michael W. Strambi. 10-Q 10.22 5/7/201210.23# Employment Agreement dated March 28, 2012 between TeleNav, Inc. and Michael W.Strambi. 10-Q 10.23 5/7/201210.23.1# Amendment No. 1 dated December 20, 2013 to the Employment Agreement datedMarch 28, 2012 between TeleNav, Inc. and Michael W. Strambi. 10-Q 10.23.1 2/6/201410.25# Director Offer Letter dated July 30, 2012 between TeleNav, Inc. and Ken Xie. 10-K 10.25 9/7/201210.26† SYNC Generation 2 On-Board Navigation Agreement dated October 12, 2009 by andbetween TeleNav, Inc. and Ford Motor Company. 10-K 10.26 9/7/201210.26.1† Amendment No. 1 effective August 10, 2010 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009 by and between TeleNav, Inc. and FordMotor Company. 10-K 10.26.1 9/7/201210.26.2† Amendment No. 2 effective February 3, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.2 9/7/201210.26.3† Amendment No. 3 effective February 3, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.3 9/7/201210.26.4† Amendment No. 4 effective March 31, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.4 9/7/201270Table of ContentsExhibitNumber Description Incorporatedby ReferenceFrom Form Incorporatedby ReferenceFrom ExhibitNumber Date Filed10.26.5† Amendment No. 5 effective March 31, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.5 9/7/201210.26.6† Amendment No. 6 effective March 31, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.6 9/7/201210.26.7† Amendment No. 7 effective November 15, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.7 9/7/201210.26.8† Amendment No. 8 effective January 1, 2012 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.8 9/7/201210.26.9† Amendment No. 9 effective May 11, 2012 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.9 9/7/201210.26.10† Amendment No. 10 effective February 3, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company. 10-Q 10.26.10 5/8/201310.26.11† Amendment No. 11 effective February 3, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company. 10-K 10.26.11 8/30/201310.26.12† Amendment No. 12 effective February 28, 2013 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company. 10-K 10.26.12 8/30/201310.26.13† Amendment No. 13 effective June 17, 2013 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company. 10-K 10.26.13 8/30/201310.26.14† Amendment No. 14 effective October 1, 2013 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company. 10-Q 10.26.14 11/8/201310.26.15† Amendment No. 15 effective November 18, 2013 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company. 10-Q 10.26.15 2/6/201410.26.16† Amendment No. 16 effective April 17, 2014 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company 10-Q 10.26.16 5/8/201410.26.17† Amendment No. 17 effective January 1, 2015 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company 10-Q 10.26.17 5/7/201510.26.18† Amendment No. 18 effective June 17, 2015 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, by and between Telenav, Inc. and FordMotor Company 10-Q 10.26.18 11/9/201510.26.19† Amendment No. 19, effective December 1, 2015, to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, by and between Telenav, Inc. and FordMotor Company 10-Q 10.26.19 11/7/201610.26.20† Amendment No. 20, effective January 1, 2016, to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, by and between Telenav, Inc. and FordMotor Company 10-Q 10.26.20 2/3/201710.29# Amended and Restated Telenav, Inc. 2011 Stock Option and Grant Plan. S-8 4.2 10/29/201271Table of ContentsExhibitNumber Description Incorporatedby ReferenceFrom Form Incorporatedby ReferenceFrom ExhibitNumber Date Filed10.32# Form of Restricted Stock Unit Award Agreement under the 2009 Equity IncentivePlan. 10-Q 10.32 2/5/201510.33# Form of Restricted Stock Unit Award Agreement under the Amended and RestatedTelenav, Inc. 2011 Stock Option and Grant Plan. 10-Q 10.33 2/5/201510.36 Sublease, dated as of November 11, 2015, between Avaya Inc. and Telenav, Inc. 10-Q 10.36 2/9/201610.37 Landlord Consent to Sublease, dated as of December 18, 2015, by and among ThePrudential Insurance Company of America, Avaya Inc., and Telenav, Inc. 10-Q 10.37 2/9/201610.38 Lease Termination Agreement dated October 16, 2015, by and between St. Paul Fireand Marine Insurance Company and Telenav, Inc. 8-K 10.1 10/22/201510.39 Shanghai Real Estate Lease Agreement, dated as of March 4, 2016, by and betweenTeleNav Shanghai Inc. and Shanghai Dongfang Weijing Culture Development Co. 10-K 10.39 8/22/201610.40 Lease dated August 9, 2017 for 4655 Great America Parkway, Suite 300, Snata Clara,CA among PRII Towers at Great America Owner LLC and Telenav, Inc.1 10.41 Settlement Agreement dated August 24, 2017 by and among Telenav, Inc. andNokomis Capital, LLC and its affiliates 8-K 10.41 8/24/201721.1 Subsidiaries of the registrant. Filed herewith 23.1 Consent of Independent Registered Public Accounting Firm Filed herewith 24.1 Power of Attorney (contained in the signature page to this Form 10-K). Filed herewith 31.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer. Filed herewith 31.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer. Filed herewith 32.1~ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer. Filed herewith 32.2~ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer. Filed herewith 101.INS* XBRL Instance Document Filed herewith 101.SCH* XBRL Taxonomy Extension Schema Document Filed herewith 101.CAL* XBRL Taxonomy Calculation Linkbase Document Filed herewith 101.DEF* XBRL Taxonomy Definition Linkbase Document Filed herewith 101.LAB* XBRL Taxonomy Label Linkbase Document Filed herewith 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith 72Table of Contents#Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.†Portions of the exhibit have been omitted pursuant to an order granted by the Securities and Exchange Commission for confidential treatment.+Portions of the exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.~In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Management’s Reports onInternal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished inExhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-K and will not be deemed “filed” for purposes of Section 18 of theExchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the ExchangeAct, except to the extent that the registrant specifically incorporates it by reference.*XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus forpurposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is notsubject to liability under these sections.1 To be filed with the Telenav, Inc. September 30, 2017 Quarterly Report on Form 10-Q.73Table of ContentsSIGNATURESPursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. TELENAV, INC. Dated:August 24, 2017 By: /s/ Dr. HP JIN Dr. HP Jin Chairman of the Board of Directors, President and Chief ExecutiveOfficer POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dr. HP Jin and MichaelStrambi, jointly and severally, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her andin his or her name, place and stead, in any and all capacities, to sign this Form 10-K, and to file the same, with all exhibits thereto, and other documents inconnection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do andperform each and every act and thing requisite or necessary to be done in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant inthe capacities and on the dates indicated.74Table of ContentsName and Signature Title Date /s/ Dr. HP JIN Chairman of the Board of Directors, President and ChiefExecutive Officer August 24, 2017Dr. HP Jin (Principal Executive Officer) /s/ MICHAEL STRAMBI Chief Financial Officer and Treasurer August 24, 2017Michael Strambi (Principal Financial and Accounting Officer) /s/ SAMUEL CHEN Director August 24, 2017Samuel Chen /s/ WES CUMMINS Director August 24, 2017Wes Cummins /s/ KAREN C. FRANCIS Director August 24, 2017Karen C. Francis /s/ DOUGLAS MILLER Director August 24, 2017Douglas Miller /s/ KEN XIE Director August 24, 2017Ken Xie /s/ JOSEPH M. ZAELIT Director August 24, 2017Joseph M. Zaelit 75Table of ContentsFINANCIAL STATEMENTS.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF TELENAV, INC. Page Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Comprehensive Loss F-5 Consolidated Statements of Stockholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8 F-1Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and StockholdersTelenav, Inc.We have audited the accompanying consolidated balance sheets of Telenav, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of June 30,2017 and 2016, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the three years inthe period ended June 30, 2017. Our audits of the basic consolidated financial statements included the financial statement schedule listed in the indexappearing under Item 15(a)2. These financial statements and financial statement schedule are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Telenav, Inc. andsubsidiaries as of June 30, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2017in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule,when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forththerein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal controlover financial reporting as of June 30, 2017, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO), and our report dated August 24, 2017 expressed an unqualified opinion thereon./s/ GRANT THORNTON LLP San Jose, CaliforniaAugust 24, 2017 F-2Table of ContentsTELENAV, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except per share amounts) June 30, 2017 June 30, 2016Assets Current assets: Cash and cash equivalents $20,757 $21,349Short-term investments 77,598 88,277Accounts receivable, net of allowances of $75 and $111 at June 30, 2017 and 2016, respectively 57,834 42,216Restricted cash 3,401 5,109Income taxes receivable 34 687Deferred costs 11,703 1,784Prepaid expenses and other current assets 3,988 4,448Total current assets 175,315 163,870Property and equipment, net 4,658 5,247Deferred income taxes, non-current 900 661Goodwill and intangible assets, net 34,844 35,993Deferred costs, non-current 42,389 10,292Other assets 1,454 2,184Total assets $259,560 $218,247Liabilities and stockholders’ equity Current liabilities: Trade accounts payable $6,151 $4,992Accrued expenses 51,528 36,274Deferred revenue 20,345 4,334Income taxes payable 197 88Total current liabilities 78,221 45,688Deferred rent, non-current 996 1,124Deferred revenue, non-current 67,056 19,035Other long-term liabilities 1,139 2,715Commitments and contingencies Stockholders’ equity: Preferred stock, $0.001 par value: 50,000 shares authorized; no shares issued or outstanding — —Common stock, $0.001 par value: 600,000 shares authorized; 43,946 shares and 42,708 shares issued andoutstanding at June 30, 2017 and 2016, respectively 44 43Additional paid-in capital 159,666 149,775Accumulated other comprehensive loss (1,934) (1,767)Retained earnings (accumulated deficit) (45,628) 1,634Total stockholders’ equity 112,148 149,685Total liabilities and stockholders’ equity $259,560 $218,247See accompanying Notes to Consolidated Financial Statements.F-3Table of ContentsTELENAV, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts) Fiscal Year Ended June 30, 2017 2016 2015Revenue: Product $119,785 $132,454 $100,768Services 49,799 50,892 59,471Total revenue 169,584 183,346 160,239Cost of revenue: Product 70,260 79,165 55,270Services 22,075 21,632 23,514Total cost of revenue 92,335 100,797 78,784Gross profit 77,249 82,549 81,455Operating expenses: Research and development 73,102 68,911 68,060Sales and marketing 21,995 25,587 26,975General and administrative 23,041 23,059 23,606Legal settlement and contingencies 6,424 935 —Restructuring — (1,362) 1,150Total operating expenses 124,562 117,130 119,791Loss from operations (47,313) (34,581) (38,336)Other income (expense), net 892 (229) 2,267Loss before provision (benefit) for income taxes (46,421) (34,810) (36,069)Provision (benefit) for income taxes 841 511 (13,006)Net loss $(47,262) $(35,321) $(23,063) Net loss per share, basic and diluted $(1.09) $(0.85) $(0.58) Weighted average shares used in computing net loss per share, basic and diluted 43,343 41,567 39,991See accompanying Notes to Consolidated Financial Statements.F-4Table of ContentsTELENAV, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(in thousands) Fiscal Year Ended June 30, 2017 2016 2015 Net loss $(47,262) $(35,321) $(23,063)Other comprehensive income (loss), net of tax: Foreign currency translation adjustment, net of tax 188 (512) (1,698)Available for sale securities: Unrealized gain (loss) on available-for-sale securities, net of tax (360) 272 (156)Reclassification adjustments for gain (loss) on available-for-sale securities recognized, net oftax 5 13 (262)Net increase (decrease) from available-for-sale securities, net of tax (355) 285 (418)Other comprehensive loss, net of tax (167) (227) (2,116)Comprehensive loss $(47,429) $(35,548) $(25,179)See accompanying Notes to Consolidated Financial Statements.F-5Table of ContentsTELENAV, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(in thousands) Common Stock AdditionalPaid-inCapital AccumulatedOtherComprehensiveIncome (Loss) RetainedEarnings Total Stockholders'Equity Shares Amount Balance at June 30, 2014 39,462 $40 $129,278 $576 $62,511 $192,405Issuance of common stock upon exercise of stock options 889 1 4,411 — — 4,412Release of restricted stock units 683 — (3,103) — — (3,103)Repurchases of common stock (497) — (1,608) — (2,172) (3,780)Stock-based compensation expense — — 11,428 — — 11,428Foreign currency translation adjustment, net of tax — — — (1,698) — (1,698)Unrealized net loss on available-for-sale securities, net oftax — — — (418) — (418)Net loss — — — — (23,063) (23,063)Balance at June 30, 2015 40,537 $41 $140,406 $(1,540) $37,276 $176,183Issuance of common stock upon exercise of stock options 1,299 1 1,548 — — 1,549Release of restricted stock units 948 1 (3,296) — — (3,295)Repurchases of common stock (76) — (249) — (321) (570)Stock-based compensation expense — — 11,366 — — 11,366Foreign currency translation adjustment, net of tax — — — (512) — (512)Unrealized net gain on available-for-sale securities, net oftax — — — 285 — 285Net loss — — — — (35,321) (35,321)Balance at June 30, 2016 42,708 $43 $149,775 $(1,767) $1,634 $149,685Issuance of common stock upon exercise of stock options 437 — 2,738 — — 2,738Release of restricted stock units 801 1 (3,009) — — (3,008)Stock-based compensation expense — — 10,162 — — 10,162Foreign currency translation adjustment, net of tax — — — 188 — 188Unrealized net loss on available-for-sale securities, net oftax — — — (355) — (355)Net loss — — — — (47,262) (47,262)Balance at June 30, 2017 43,946 $44 $159,666 $(1,934) $(45,628) $112,148See accompanying Notes to Consolidated Financial Statements.F-6Table of ContentsTELENAV, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Fiscal Year Ended June 30, 2017 2016 2015Operating activities Net loss $(47,262) $(35,321) $(23,063)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,647 3,362 5,239Accretion of net premium on short-term investments 403 645 1,318Stock-based compensation expense 10,162 11,366 11,428Valuation allowance on deferred tax assets — — (778)Bad debt expense 189 95 33Write-off of long-term investments — 977 1,302(Gain) loss on disposal of property and equipment (14) 398 73Changes in operating assets and liabilities: Accounts receivable (15,807) (5,817) (10,764)Deferred income taxes (239) 109 1,342Restricted cash 1,709 (231) 1,117Income taxes receivable 654 5,393 852Deferred costs (42,016) (8,935) (2,641)Prepaid expenses and other current assets 459 (592) 5,133Other assets 483 972 550Trade accounts payable 1,195 4,118 328Accrued expenses and other liabilities 13,778 4,730 (2,258)Income taxes payable 109 (636) (80)Deferred rent 66 (272) (1,219)Deferred revenue 64,032 16,541 4,392Net cash used in operating activities (9,452) (3,098) (7,696)Investing activities Purchases of property and equipment (1,225) (4,004) (1,208)Purchases of short-term investments (64,957) (55,021) (113,144)Proceeds from sales and maturities of short-term investments 74,878 67,578 132,528Purchases of long-term investments — — (2,500)Proceeds from sales of long-term investments 246 — 376Net cash provided by investing activities 8,942 8,553 16,052Financing activities Proceeds from exercise of stock options 2,738 1,549 4,412Repurchase of common stock — (570) (3,780)Tax withholdings related to net share settlements of restricted stock units (3,008) (3,295) (3,103)Net cash used in financing activities (270) (2,316) (2,471)Effect of exchange rate changes on cash and cash equivalents 188 (511) (1,698)Net increase (decrease) in cash and cash equivalents (592) 2,628 4,187Cash and cash equivalents, at beginning of period 21,349 18,721 14,534Cash and cash equivalents, at end of period $20,757 $21,349 $18,721Supplemental disclosure of cash flow information Income taxes paid (received), net $1,872 $(4,610) $(10,754)See accompanying Notes to Consolidated Financial Statements.F-7Table of ContentsTELENAV, INC.Notes to Consolidated Financial Statements1.Summary of business and significant accounting policiesDescription of businessTelenav, Inc., also referred to in this report as "Telenav," “we,” “our” or “us,” was incorporated in September 1999 in the State of Delaware. Telenav is aleading provider of connected car and location-based platform products and services. We utilize our automobile navigation platform and our advertisingdelivery platform to deliver these products and services. Our automobile navigation platform allows us to deliver enhanced location-based services toautomobile manufacturers, as well as original equipment manufacturers and tier one suppliers, to which we refer collectively as OEMs. Our advertisingdelivery platform, which we provide through our Thinknear subsidiary, delivers highly targeted advertising services leveraging our location expertise. Weoperate in three business segments: automotive, advertising and mobile navigation. Our fiscal year ends on June 30, and in this report we refer to the fiscalyears ended June 30, 2017, 2016 and 2015 as fiscal 2017, fiscal 2016 and fiscal 2015, respectively.Basis of presentationThe consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles,or GAAP. The consolidated financial statements include the accounts of Telenav, Inc. and our wholly owned subsidiaries. All significant intercompanybalances and transactions have been eliminated in consolidation. Certain prior year balances have been reclassified to conform to the current yearpresentation.Our consolidated financial statements also include the financial results of Shanghai Jitu Software Development Ltd., or Jitu, located in China. Based onour contractual arrangements with the shareholders of Jitu, we have determined that Jitu is a variable interest entity, or VIE, for which we are the primarybeneficiary and are required to consolidate in accordance with Accounting Standards Codification, or ASC, subtopic 810-10, or ASC 810-10, Consolidation:Overall. The results of Jitu did not have a material impact on our overall operating results for fiscal 2017, fiscal 2016 or fiscal 2015.Use of estimatesThe preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in theconsolidated financial statements and accompanying notes. Significant estimates and assumptions made by us include the determination of revenuerecognition and deferred revenue, the recoverability of accounts receivable, the determination of acquired intangibles and assessment of goodwill forimpairment, the fair value of stock awards issued, the determination of income taxes and the recoverability of deferred tax assets. Actual results could differfrom those estimates.Revenue recognitionWe generate revenue primarily from software licenses, service subscriptions and customized engineering fees. We also generate revenue from thedelivery of advertising impressions. We recognize revenue when persuasive evidence of an arrangement exists, delivery of the product or service hasoccurred, the fee is fixed or determinable, and collectability is reasonably assured. We evaluate whether it is appropriate to recognize revenue based on thegross amount billed to our customers or the net amount earned as revenue. When we are primarily obligated in a transaction, have latitude in establishingprices, are responsible for fulfillment of the transaction, have credit risk, or have several but not all of these indicators, we record revenue on a gross basis.While none of the factors individually are considered presumptive or determinative, in reaching conclusions on gross versus net revenue recognition, weplace the most weight on the analysis of whether or not we are the primary obligor in the arrangement. We report our automotive and advertising revenue on agross basis.We derive product revenue from the delivery of customized software and royalties earned from the distribution of this customized software in certainautomotive navigation applications, and map updates to the software. We generally recognize customized software revenue using the completed contractmethod of contract accounting under which revenue is recognized upon delivery to, and acceptance by, the automobile manufacturer of our on-boardnavigation solutions. We generally recognize royalty revenue for our automotive on-board navigation solutions as the software is reproduced for installationin vehicles or as the software is installed in vehicles, assuming all other conditions for revenue recognition have been met. For on-board navigation solutionsprovided with ongoing contractual obligations such as map updates, we generally recognize royalty revenue ratably over the contractual period.F-8Table of ContentsTELENAV, INC.Notes to Consolidated Financial Statements—(Continued)We derive services revenue from our brought-in automotive navigation solutions and other automotive services. Billings for these services are recordedas deferred revenue and amortized to revenue over the estimated service periods.We derive services revenue from the delivery of advertising impressions. We recognize revenue when the related advertising services are deliveredbased on the specific terms of the advertising contract, which are commonly based on the number of ad impressions delivered, or clicks, drives or actions byusers on mobile advertisements.We also derive services revenue from subscriptions to access our mobile navigation services, which are generally provided through our wireless carriercustomers that offer our services to their subscribers. Our wireless carrier customers typically pay us based on a revenue sharing arrangement or a monthlysubscription fee per end user.We recognize monthly fees related to our mobile navigation services in the month we provide the services. We defer amounts received or billed inadvance of the service being provided and recognize the deferred amounts when the monthly service has been provided. Our agreements do not containgeneral rights of refund once the service has been provided. We also establish allowances for estimated credits subsequently issued to end users by ourwireless carrier customers.We recognize as services revenue the amount our wireless carrier customers report to us as we provide our services, which are net of any revenue sharingor other fees earned and deducted by our wireless carrier customers. We are not the principal provider when selling access to our mobile navigation servicesthrough our wireless carrier customers as the subscribers directly contract with our wireless carrier customers. Our wireless carrier customers have the soleability to set the price charged to their subscribers for our service and have direct responsibility for billing and collecting those fees from their subscribers.In certain instances, due to the nature and timing of monthly revenue and reporting from our customers, we may be required to make estimates of theamount of revenue to recognize from a customer for the current period. Estimates for revenue include our consideration of certain factors and information,including subscriber data, historical subscription and revenue reporting trends, end user subscription data from our internal systems, and data fromcomparable distribution channels of our other customers. We record any differences between estimated revenue and actual revenue in the reporting periodwhen we determine the actual amounts. To date, actual amounts have not differed materially from our estimates.Cost of revenueOur cost of revenue consists primarily of the cost of third party royalty based data, such as map, points of interest, or POI, traffic, gas price and weatherdata, and voice recognition technology that we use in providing our personalized navigation services. Our cost of revenue also includes the cost of thirdparty exchange ad inventory as well as expenses associated with third party hosting services, data center operations, customer support, the amortization ofcapitalized software, recognition of deferred development costs on specific projects, stock-based compensation and amortization of acquired developedtechnology.In connection with our usage of licensed third party content, our contracts with certain licensors include minimum guaranteed royalty payments, whichare payable regardless of the ultimate volume of revenue derived from the number of paying end users. These contracts contain obligations for the licensor toprovide ongoing services and, accordingly, we record any minimum guaranteed royalty payments as an asset when paid and amortize the amount to cost ofrevenue over the applicable period. Any additional royalties due based on actual usage are expensed monthly as incurred.Foreign currencyWe translate the financial statements of certain of our foreign subsidiaries whose functional currency is their local currency. Adjustments resulting fromtranslating foreign functional currency financial statements into U.S. dollars are recorded as part of a separate component of comprehensive income instockholders’ equity. Foreign currency transaction gains and losses are included in our net income for each year. All assets and liabilities denominated in aforeign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenue and expenses are translated at the average monthlyexchange rates during the year. Equity transactions are translated using historical exchange rates. Foreign currency transaction gains (losses) were $318,000,$(10,000) and $1.6 million in fiscal 2017, 2016 and 2015, respectively. The foreign currency transaction gains of $1.6 million in fiscal 2015 were primarilydriven by mark-to-market adjustment of intercompany balances.F-9Table of ContentsTELENAV, INC.Notes to Consolidated Financial Statements—(Continued)Accumulated other comprehensive income (loss), net of taxThe components of accumulated other comprehensive income (loss), net of related taxes, were as follows (in thousands): Foreign CurrencyTranslationAdjustments UnrealizedGains (Losses) onAvailable-for-SaleSecurities TotalBalance, net of tax as of June 30, 2015 $(1,377) $(163) $(1,540)Other comprehensive income (loss) before reclassifications, net of tax (512) 272 (240)Amount reclassified from accumulated other comprehensive income (loss), net of tax — 13 13Other comprehensive income (loss), net of tax (512) 285 (227)Balance, net of tax as of June 30, 2016 (1,889) 122 (1,767)Other comprehensive income (loss) before reclassifications, net of tax 188 (360) (172)Amount reclassified from accumulated other comprehensive income (loss), net of tax — 5 5Other comprehensive income (loss), net of tax 188 (355) (167)Balance, net of tax as of June 30, 2017 $(1,701) $(233) $(1,934)The amount reclassified from accumulated other comprehensive income (loss), net of tax, was determined using the specific identification method andthe amount was included in other income, net, for fiscal 2017 and 2016, respectively.The amount of income tax benefit allocated to each component of accumulated other comprehensive income (loss) was not material for fiscal 2017 and2016.Cash equivalents and short-term investmentsCash equivalents consist of highly liquid fixed-income investments with original maturities of three months or less at the time of purchase, includingmoney market funds. Short-term investments consist of readily marketable securities with a remaining maturity of more than three months from time ofpurchase. Short-term investments are classified as current assets, even though maturities may extend beyond one year, because they represent investments ofcash available for operations. We classify all of our cash equivalents and short-term investments as “available-for-sale,” as these investments are free oftrading restrictions. We may or may not hold securities with stated maturities greater than 12 months until maturity. After consideration of our risk versusreward objectives, as well as our liquidity requirements, we may sell these securities prior to their stated maturities. As we view these securities as available tosupport current operations, we classify securities with maturities beyond 12 months as current assets under the caption short-term investments in theaccompanying consolidated balance sheets. These marketable securities are carried at fair value, with the unrealized gains and losses, net of tax, reported asaccumulated other comprehensive income and included as a separate component of stockholders’ equity. Gains and losses are recognized when realized.When we have determined that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss isrecognized in earnings. Gains and losses are determined using the specific identification method. Our net realized gains (losses) were zero, $4,000 and$236,000 in fiscal 2017, 2016 and 2015, respectively. Interest income totaled $1.2 million, $1.1 million and $1.0 million in fiscal 2017, 2016 and 2015,respectively.Concentrations of risk and significant customersFinancial instruments that subject us to significant concentrations of credit risk primarily consist of cash, cash equivalents, short-term investments andaccounts receivable. We maintain our cash, cash equivalents and short-term investments with well-capitalized financial institutions. Cash equivalents consistprimarily of money-market accounts and commercial paper with original maturities of three months or less at the time of purchase. Our primary customers areautomobile manufacturers, original equipment manufacturers and tier one suppliers, and advertisers and advertising agencies, and we do not require collateralfor accounts receivable. To manage the credit risk associated with accounts receivable, we evaluate the creditworthiness of our customers. We evaluate ouraccounts receivable on an ongoing basis to determine those amounts not collectible. To date, we are not aware of circumstances that may impair a specificcustomer’s ability to meet its financial obligations to us, other than those customers for which an allowance for doubtful accounts has been established.F-10Table of ContentsTELENAV, INC.Notes to Consolidated Financial Statements—(Continued)Revenue related to products and services provided through Ford Motor Company, or Ford, comprised 69%, 71% and 61% of revenue for fiscal 2017,2016 and 2015, respectively. Receivables due from Ford were 74% and 64% of total accounts receivable at June 30, 2017 and 2016, respectively. Revenuerelated to services provided through AT&T Mobility LLC., or AT&T, comprised less than 10% of revenue for fiscal 2017 and 2016, and 15% of revenue forfiscal 2015. No other customer represented 10% of our revenue or 10% of our receivables for any period presented.Our licensed map, POI and traffic data have been provided principally through HERE North America, LLC, a company owned by a consortium ofGerman auto manufacturers, or HERE, and TomTom North America, Inc., or TomTom, in fiscal 2017, 2016 and 2015. To date, we are not aware ofcircumstances that may impair either party’s intent or ability to continue providing such services to us.Restricted cashAs of June 30, 2017 and 2016, we had restricted cash of $3.4 million and $5.1 million, respectively, on our consolidated balance sheets. As of June 30,2017 and 2016, restricted cash is comprised primarily of prepayments from a customer.Fair value of financial instrumentsThe estimated fair market value of financial instruments, including cash, accounts receivable and accounts payable, approximates the carrying valuesof those instruments due to their relatively short maturities.We measure certain other financial instruments at fair value on a recurring basis. We have established a hierarchy, which consists of three levels, fordisclosure of the inputs used to determine the fair value of our financial instruments.Level 1 valuations are based on quoted prices in active markets for identical assets or liabilities.Level 2 valuations are based on inputs that are observable, either directly or indirectly, other than quoted prices included within Level 1. Such inputsused in determining fair value for Level 2 valuations include quoted prices in active markets for similar assets or liabilities, quoted prices for identical orsimilar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantiallythe full term of the assets or liabilities.Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement.As of June 30, 2017 and 2016, we did not have any Level 3 financial instruments.Property and equipmentProperty and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line methodover the estimated useful lives of the respective assets. Computers, software and equipment have useful lives of three years and automobiles, furniture andfixtures have useful lives of five years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives ofthe assets or the term of the related lease.Long-term investmentsOur long-term investments consist of privately-held investments, and are included in other assets in our consolidated balance sheets. As of June 30,2017, the carrying value of our total privately-held investments was $708,000. These investments are accounted for as cost-basis investments, as we own lessthan 20% of the voting securities and do not have the ability to exercise significant influence over operating and financial policies of the entities. Ourinvestments are in entities that are not publicly traded and, therefore, no established market for the securities exists. Our cost-method investments are carriedat historical cost in our consolidated balance sheets and measured at fair value on a nonrecurring basis when indicators of impairment exist. If we believe thatthe carrying value of the cost basis investments is in excess of estimated fair value, our policy is to record an impairment charge to adjust the carrying valueto estimated fair value, when the impairment is deemed other-than-temporary. We regularly evaluate the carrying value of these cost-method investments forimpairment. We record realized gains or losses on the sale or impairment of cost method investments in other income, net. We recorded impairment chargesof zero, $750,000 and $482,000 for cost-method investments during fiscal 2017, 2016 and 2015, respectively.In addition to these cost-basis investments, in April 2015, we entered into an agreement to spin off a product line developed by our Shanghai, Chinateam, including certain assets and technology as well as the transfer of seven employees, and we agreed to invest $1.0 million in the form of a convertiblenote. We are the primary investor; however, we do not haveF-11Table of ContentsTELENAV, INC.Notes to Consolidated Financial Statements—(Continued)significant influence over the operations of the business. Accordingly, we record the monthly net change in operating results against the carrying value of theconvertible note recorded in long-term investments on our consolidated balance sheet. Fiscal 2015 includes three months of operating results for the investeeentity. The entity's success is contingent upon its ability to generate revenue and raise additional capital. Based upon the early stage of this company, its lackof success to date in each of these endeavors, and China's unfavorable macroeconomic conditions making the raising of additional capital difficult, werecorded an impairment charge of $820,000 to write down the carrying value of the convertible note to zero as of June 30, 2015.During fiscal 2016, we also recorded an impairment charge of $227,000 to write down to zero the remaining carrying value of our June 2015 investmentin a Xi'an, China spinoff made in the form of a convertible note.Including the impairment in the Shanghai and Xi'an, China spin offs above, we recorded impairment charges of zero, $977,000 and $1.3 million oncertain non-marketable equity investments in fiscal 2017, 2016 and 2015, respectively.Long-lived assetsWe evaluate our long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate the carryingamount of an asset may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscountedcash flows the assets are expected to generate. If long-lived assets are considered to be impaired, the impairment to be recognized equals the amount by whichthe carrying value of the asset exceeds its fair value.GoodwillGoodwill represents the excess of the aggregate purchase price paid over the fair value of the net assets acquired. Goodwill is not amortized and is testedfor impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. These tests arebased on our operating segment and reporting unit structure. We first assess qualitative factors to determine whether it is necessary to perform the two-stepquantitative goodwill impairment test. We are not required to calculate the fair value of our reporting units unless we determine, based on a qualitativeassessment, that it is more-likely-than-not that the fair value is less than our carrying amount. If we determine it is more likely than not that the fair value ofthe reporting unit is less than its carrying value, we perform a two-step quantitative goodwill impairment test. The first step of the impairment test involvescomparing the fair value of the reporting unit to its net book value, including goodwill. If the net book value exceeds its fair value, then we would performthe second step of the goodwill impairment test to determine the amount of the impairment loss, if any. In assessing the fair value of our reporting units, wemake assumptions regarding our estimated future cash flows, long-term growth rates, timing over which the cash flows will occur and, amongst other factors,the weighted average cost of capital. If our estimates or related assumptions change in the future, or if our net book value were to exceed our marketcapitalization, we may be required to record an impairment loss related to our goodwill. Based on the results of our annual goodwill impairment test as ofApril 1, 2017, the estimated fair value of our mobile navigation business exceeded its carrying value by $1.7 million. We have not recognized anyimpairment of goodwill in the three year period ended June 30, 2017. As of June 30, 2017, we had goodwill of $31.3 million.LeasesWe lease our office facilities under operating lease agreements. Office facilities subject to an operating lease and the related lease payments are notrecorded on our consolidated balance sheets. The terms of certain lease agreements provide for rental payments on a graduated basis; however, we recognizerent expense on a straight-line basis over the lease period. Any lease incentives or contracted sublease income are recognized as reductions of rental expenseon a straight-line basis over the term of the lease. The lease term begins on the date we become legally obligated for the rent payments or when we takepossession of the office space, whichever is earlier. As of June 30, 2017, and 2016, we had a total of $1.2 million and $1.3 million, respectively, in deferredrent related to tenant improvement lease incentives and graduated rent payments recorded as liabilities on our balance sheets.Stock-based compensationWe account for stock-based employee compensation arrangements under the fair value recognition method, which requires us to measure the stock-based compensation costs of share-based compensation arrangements based on the grant-date fair value, and recognize the costs in the financial statementsover the employees’ requisite service period. We recognize compensation expense for the fair value of these awards with time-based vesting on a straight-linebasis over the employee’s requisite service period of each of these awards, net of estimated forfeitures.F-12Table of ContentsTELENAV, INC.Notes to Consolidated Financial Statements—(Continued)Equity instruments issued to nonemployees are recorded at their fair value on the measurement date and are subject to periodic adjustment as theunderlying equity instruments vest.Income taxesWe utilize the asset and liability method of accounting for income taxes, whereby deferred tax asset or liability account balances are calculated at thebalance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowancesare provided when necessary to reduce deferred tax assets to the amount that will more likely than not be realized.Research and software development costsWe expense research and development costs as incurred. We account for the costs of computer software we develop for internal use by capitalizingqualifying costs, which are incurred during the application development stage, and amortizing those costs over the application’s estimated useful life, whichgenerally ranges from 18 to 24 months depending on the type of application. We did not capitalize or write off any software development costs during fiscal2017, 2016 and 2015. Amortization expense related to capitalized software costs, which has been recorded in cost of revenue, totaled zero, zero and $97,000for fiscal 2017, 2016 and 2015, respectively. As of June 30, 2017, capitalized software costs were fully amortized.We also account for the costs of computer software we develop for customers requiring significant modification or customization by deferringqualifying costs under the completed contract method. We begin deferring development costs upon receipt of a signed contract or purchase order. All suchdevelopment costs incurred are deferred until the related revenue is recognized. We deferred $3.2 million, $648,000 and $802,000 of software developmentcosts during fiscal 2017, 2016 and 2015, respectively. Development costs expensed to cost of revenue totaled $120,000, $660,000 and $1.2 million in fiscal2017, 2016 and 2015, respectively. As of June 30, 2017 and 2016, deferred capitalized software development costs were $3.1 million and $33,000,respectively.Advertising expenseAdvertising costs are expensed as incurred. Advertising expense was $246,000, $254,000 and $1.1 million in fiscal 2017, 2016 and 2015, respectively.Recent accounting pronouncementsIn November 2016, the Financial Accounting Standards Board, or FASB, issued new guidance to clarify how entities should present restricted cash andrestricted cash equivalents in the statement of cash flows. The new guidance requires that restricted cash and restricted cash equivalents be included with cashand cash equivalents when reconciling the beginning and ending total amounts shown in the statement of cash flows. The new standard is effective for us inour first quarter of fiscal 2019 and requires a retrospective method of adoption. Early adoption is permitted. We are evaluating the effect that this newstandard will have on our consolidated financial statements.In October 2016, the FASB issued new guidance which is intended to eliminate diversity in practice and provide a more accurate depiction of the taxconsequences on intercompany asset transfers (excluding inventory). The new guidance removes the current prohibition against immediate recognition of thecurrent and deferred income tax effects of intra-entity transfers of assets other than inventory. The new standard is effective for us in our first quarter of fiscal2019 and requires a modified retrospective method of adoption. Early adoption is permitted, but only in the first quarter of an entity’s annual fiscal year. Weare evaluating the effect that this new standard will have on our consolidated financial statements.In August 2016, the FASB issued new guidance which clarifies how companies present and classify certain cash receipts and cash payments in thestatement of cash flows. The new standard is effective for us in our first quarter of fiscal 2019 and early adoption is permitted. We are evaluating the effectthat this new standard will have on our consolidated financial statements.In June 2016, the FASB issued new guidance that changes the accounting for recognizing impairments of financial assets. Under the new guidance,credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models foravailable-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. The new standard is effective for us in ourfirst quarter of fiscal 2021. Early adoption is permitted as of the fiscal year beginning after December 15, 2018, including interim periods within those fiscalyears. We are evaluating the effect that this new standard will have on our consolidated financial statements.F-13Table of ContentsTELENAV, INC.Notes to Consolidated Financial Statements—(Continued)In March 2016, the FASB issued new guidance to revise aspects of stock-based compensation guidance which include income tax consequences,classification of awards as equity or liabilities, and classification on the statement of cash flows. The new standard is effective for us in our first quarter offiscal 2018. Early adoption is permitted. We are evaluating the effect that this new standard will have on our consolidated financial statements.In March 2016, the FASB issued new guidance to clarify the implementation guidance on principal versus agent considerations for reporting revenuegross versus net. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred tothe customer. The new standard will be effective for us in the first quarter of fiscal 2019. We are evaluating the effect that this new standard will have on ourconsolidated financial statements.In February 2016, the FASB issued new guidance which amends the existing accounting standards for leases. Under the new guidance, a lessee will berequired to recognize right-of-use assets and lease liabilities on the balance sheet for certain leases classified as operating leases. The new standard is effectivefor us in our first quarter of fiscal 2020. Early adoption is permitted. We are evaluating the effect that this new standard will have on our consolidatedfinancial statements.In January 2016, the FASB issued new guidance that amends the accounting and disclosures of financial instruments, including a provision thatrequires equity investments (except for investments accounted for under the equity method of accounting) to be measured at fair value with changes in fairvalue recognized in current earnings. The new standard is effective for us in our first quarter of fiscal 2019. We are evaluating the effect that this new standardwill have on our consolidated financial statements.In May 2014, the FASB issued guidance related to revenue from contracts with customers, which supersedes the revenue recognition requirements inASC 605, Revenue Recognition. Under this new guidance, ASC 606, Revenue from Contracts with Customers, or ASC 606, revenue is recognized whenpromised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services.The new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customercontracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The updatedstandard will replace most existing revenue recognition guidance under GAAP when it becomes effective and permits the use of either the full retrospectiveor cumulative effect transition method. In August 2015, the FASB deferred the effective date of this guidance by one year; however, early adoption ispermitted. The updated standard will be effective for us in the first quarter of fiscal 2019. We are in the process of selecting a transition method anddetermining the effect that this new standard will have on our consolidated financial statements and related disclosures.We intend to adopt ASC 606 effective July 1, 2018. While we are in the process of selecting a transition method, we anticipate this standard will have amaterial impact on our consolidated financial statements. Even though our assessment of the impact of this standard is not complete, we currently believe themost significant impact will be to the recognition of revenue for certain of our automotive value-added and combined offerings, such as on-board navigationwith map updates and on-board and connected navigation. We anticipate our revenue recognition for certain of these offerings may change and we may nolonger recognize revenue associated with certain software-related elements over the life of our contractual obligations.2.Net income (loss) per shareBasic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for theperiod. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for theperiod, including potential dilutive common shares assuming the dilutive effect of outstanding stock options and restricted stock units using the treasury-stock method.F-14Table of ContentsThe following table presents the calculation of basic and diluted net loss per share (in thousands, except per share amounts): Fiscal Year Ended June 30, 2017 2016 2015Net loss $(47,262) $(35,321) $(23,063) Weighted average common shares used in computing net loss per share, basic and diluted 43,343 41,567 39,991 Net loss per share, basic and diluted $(1.09) $(0.85) $(0.58)The following outstanding shares subject to options and restricted stock units were excluded from the computation of diluted net loss per share for theperiods presented because including them would have had an antidilutive effect (in thousands): Fiscal Year Ended June 30, 2017 2016 2015Stock options 5,708 5,370 4,781Restricted stock units 3,005 3,302 4,290Total 8,713 8,672 9,0713.Cash, cash equivalents and short-term investmentsCash, cash equivalents and short-term investments consisted of the following as of June 30, 2017 (in thousands): AmortizedCost UnrealizedGains UnrealizedLosses EstimatedFair ValueCash $17,316 $— $— $17,316Cash equivalents: Money market mutual funds 444 — — 444Commercial paper 2,997 — — 2,997Total cash equivalents 3,441 — — 3,441Total cash and cash equivalents 20,757 — — 20,757Short-term investments: U.S. treasury securities 1,476 — (3) 1,473U.S. agency securities 2,553 — (16) 2,537Asset-backed securities 9,707 8 (10) 9,705Municipal securities 7,980 3 (1) 7,982Commercial paper 4,240 — (1) 4,239Foreign government securities 750 — — 750Corporate bonds 50,987 24 (99) 50,912Total short-term investments 77,693 35 (130) 77,598Cash, cash equivalents and short-term investments $98,450 $35 $(130) $98,355F-15Table of ContentsCash, cash equivalents and short-term investments consisted of the following as of June 30, 2016 (in thousands): AmortizedCost UnrealizedGains UnrealizedLosses EstimatedFair ValueCash $14,308 $— $— $14,308Cash equivalents: Money market mutual funds 5,641 — — 5,641Agency bonds 1,400 1,400Total cash equivalents 7,041 — — 7,041Total cash and cash equivalents 21,349 — — 21,349Short-term investments: U.S. treasury securities 1,699 3 — 1,702Asset-backed securities 10,160 17 (2) 10,175Municipal securities 6,004 14 — 6,018Commercial paper 3,494 1 — 3,495Agency bonds 5,907 22 — 5,929Corporate bonds 60,754 217 (13) 60,958Total short-term investments 88,018 274 (15) 88,277Cash, cash equivalents and short-term investments $109,367 $274 $(15) $109,626The following table summarizes the cost and estimated fair value of fixed income securities classified as short-term investments based on statedmaturities as of June 30, 2017 (in thousands): AmortizedCost EstimatedFair ValueDue within one year $36,957 $36,952Due between one and two years 26,270 26,227Due between two and three years 14,466 14,419Total $77,693 $77,598Declines in fair value judged to be other-than-temporary on securities available for sale are included as a component of other income, net. In order todetermine whether a decline in value is other-than-temporary, we evaluate, among other factors: the duration and extent to which the fair value has been lessthan the carrying value and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair marketvalue. As of June 30, 2017 and 2016, we did not consider any of our short-term investments to be other-than-temporarily impaired.F-16Table of Contents4.Fair value of financial instrumentsWe measure certain financial instruments at fair value on a recurring basis. We have established a hierarchy, which consists of three levels, fordisclosure of the inputs used to determine the fair value of our financial instruments.All of our cash equivalents and short-term investments are classified within Level 1 or Level 2. The fair values of these financial instruments weredetermined using the following inputs at June 30, 2017 (in thousands): Fair Value Measurements at June 30, 2017 Using Quoted Pricesin ActiveMarkets forIdenticalAssets SignificantOtherObservableInputs SignificantUnobservableInputs Total (Level 1) (Level 2) (Level 3)Description Cash equivalents: Money market mutual funds $444 $444 $— $—Commercial paper 2,997 — 2,997 —Total cash equivalents 3,441 444 2,997 —Short-term investments: U.S. treasury securities 1,473 1,473 — —U.S. agency securities 2,537 — 2,537 —Asset-backed securities 9,705 — 9,705 —Municipal securities 7,982 — 7,982 —Commercial paper 4,239 — 4,239 —Foreign government securities 750 — 750 —Corporate bonds 50,912 — 50,912 —Total short-term investments 77,598 1,473 76,125 —Cash equivalents and short-term investments $81,039 $1,917 $79,122 $—The fair values of our financial instruments were determined using the following inputs at June 30, 2016 (in thousands): Fair Value Measurements at June 30, 2016 Using Quoted Pricesin ActiveMarkets forIdenticalAssets SignificantOtherObservableInputs SignificantUnobservableInputs Total (Level 1) (Level 2) (Level 3)Description Cash equivalents: Money market mutual funds $5,641 $5,641 $— $—Agency bonds 1,400 — 1,400 —Total cash equivalents 7,041 5,641 1,400 —Short-term investments: U.S. treasury securities 1,702 1,702 — —Asset-backed securities 10,175 — 10,175 —Municipal securities 6,018 — 6,018 —Commercial paper 3,495 — 3,495 —Agency bonds 5,929 — 5,929 —Corporate bonds 60,958 — 60,958 —Total short-term investments 88,277 1,702 86,575 —Cash equivalents and short-term investments $95,318 $7,343 $87,975 $—F-17Table of ContentsAccretion of premium, net of discounts, on short-term investments totaled $403,000 and $645,000 in fiscal 2017 and 2016, respectively.Where applicable, we use quoted prices in active markets for identical assets to determine fair value short-term investments. If quoted prices in activemarkets for identical assets are not available to determine fair value, we use quoted prices for similar assets and liabilities or inputs that are observable eitherdirectly or indirectly. If quoted prices for identical or similar assets are not available, we use third-party valuations utilizing underlying assets assumptions.There were no transfers between Level 1 and Level 2 financial instruments in fiscal 2017 and 2016, respectively.We did not have any financial liabilities measured at fair value on a recurring basis as of June 30, 2017 or 2016.5. Balance sheet informationProperty and equipment, netProperty and equipment consist of the following (in thousands): June 30, 2017 2016Computers and equipment $7,357 $6,885Computer software 2,616 2,420Furniture and fixtures 1,337 1,337Automobiles 671 723Leasehold improvements 3,885 3,841 15,866 15,206Less accumulated depreciation and amortization (11,208) (9,959)Property and equipment, net $4,658 $5,247Depreciation and amortization expense related to property and equipment was $1.7 million, $5.7 million and $2.8 million for fiscal 2017, 2016 and2015, respectively.Goodwill and intangible assets, netIntangible assets consist of the following (in thousands): June 30, 2017 2016Acquired developed technology $13,875 $13,875Less accumulated amortization (10,359) (9,210)Intangible assets, net $3,516 $4,665Acquired developed technology is amortized on a straight-line basis over the expected useful life. Amortization expense related to intangibles was $1.1million, $1.5 million and $3.2 million for fiscal 2017, 2016 and 2015, respectively.As of June 30, 2017, amortization expense for intangible assets by fiscal year is as follows: $1.1 million in fiscal 2018, $1.0 million in fiscal 2019,$872,000 in fiscal 2020 and $509,000 in fiscal 2021.Goodwill by reportable segment as of June 30, 2017 and 2016 was as follows (in thousands):Automotive $14,320Advertising 14,343Mobile Navigation 2,665Goodwill $31,328Goodwill impairmentF-18Table of ContentsWe report results in three business segments. We tested goodwill for impairment on April 1, 2017 at the reporting unit level using a discounted cashflow analysis based upon projected financial information. We applied our best judgment when assessing the reasonableness of the financial projections usedto determine the fair value of each reporting unit. Based on the results of our annual goodwill impairment test as of April 1, 2017, the estimated fair value ofeach of our reporting units exceeded its carrying value.Accrued expensesAccrued expenses consist of the following (in thousands): June 30, 2017 2016Accrued compensation and benefits $10,554 $9,308Accrued royalties 28,179 15,331Accrued legal settlement and contingencies — 850Customer overpayments and related reserves 5,940 4,407Other accrued expenses 6,855 6,378 $51,528 $36,274The overpayment from customers and related reserves will either be refunded or be applied to future amounts owed to us.6. Commitments and contingenciesOperating leasesOur primary facilities located in Santa Clara and Culver City, California, Shanghai and Xi’an, China, and Cluj, Romania, as well as certain otherfacilities in various locations in the United States, Germany and Japan, are leased under noncancelable operating lease arrangements.In connection with our Sunnyvale lease termination agreements in October 2015, we recorded the following amounts during fiscal 2016: i) the reversalof a $1.5 million restructuring accrual related to 920 De Guigne Drive, as this amount represents the fair value of our lease obligation from April 2016through November 2019 that is no longer payable; ii) the reversal of a $0.5 million loss accrual related to 930 De Guigne Drive, as this amount represents ourloss from subleasing the building from July 2016 through November 2019 that we will no longer incur, partly offset by an accrual of $0.4 million related tothe early lease termination fee payable to our sublease tenant; and iii) the reversal of $1.2 million of deferred rent related to 950 De Guigne Drive, as thisamount represents our deferred rent liability that is no longer required. We reversed the excess deferred rent as a credit to rent expense. As of June 30, 2017,future minimum operating lease payments by fiscal year were as follows (in thousands):Fiscal Year Ending June 30, 2018$3,41520192,43920202,11420211,8462022589Thereafter49Total minimum lease payments$10,452Rent expense was $4.1 million, $2.7 million and $3.8 million for fiscal 2017, 2016 and 2015, respectively. Facility exit costs included in restructuringin fiscal 2017, 2016 and 2015 were zero, $135,000 and $1.2 million, respectively. See Note 14 Subsequent events.F-19Table of ContentsPurchase obligationsAs of June 30, 2017, in addition to our lease obligations, we had an aggregate of $6.3 million of future minimum noncancelable financial commitmentsprimarily related to license fees due to certain of our third party content providers over the next two fiscal years. The aggregate of $6.3 million of futureminimum commitments is comprised of $2.3 million due in fiscal 2018, $1.1 million due in fiscal 2019, $798,000 due in fiscal 2020, $415,000 due in fiscal2021, $415,000 due in fiscal 2022 and $1.2 million due thereafter. The above commitment amounts exclude amounts already recorded on the consolidatedbalance sheet.ContingenciesFrom time to time, we may become involved in legal proceedings, claims and litigation arising in the ordinary course of business. When we believe aloss or a cost of indemnification is probable and can be reasonably estimated, we accrue the estimated loss or cost of indemnification in our consolidatedfinancial statements. Where the outcome of these matters is not determinable, we do not make a provision in our financial statements until the loss or cost ofindemnification, if any, is probable and can be reasonably estimated or the outcome becomes known. We expense legal fees related to these matters as theyare incurred.On December 31, 2009, Vehicle IP, LLC, or Vehicle IP, filed a patent infringement lawsuit against us in the U.S. District Court for the District ofDelaware, seeking monetary damages, fees and expenses and other relief. Verizon Wireless, or Verizon, was named as a co-defendant in the Vehicle IPlitigation based on the VZ Navigator product and has demanded that we indemnify and defend Verizon against Vehicle IP. We have not agreed to defend orindemnify Verizon. AT&T was also named as a co-defendant in the Vehicle IP litigation based on the AT&T Navigator and Telenav Track products. AT&Ttendered the defense of the litigation to us and we defended the case on behalf of AT&T. During fiscal 2016, we accrued $850,000 related to this litigation.On January 12, 2017, we entered into a settlement and license agreement with Vehicle IP. In connection with the agreement, we made a one-time payment of$8.0 million and recorded $7.2 million of this amount as legal settlement and contingencies expense in our consolidated statement of operations in fiscal2017. On January 31, 2017, Vehicle IP's claims against Telenav and AT&T were dismissed. We are not obligated to make any future payments with respect tothe settlement or license. We also will have no further obligation to indemnify AT&T with respect to the case.On July 28, 2016, Nathan Gergetz filed a putative class action complaint in the U.S. District Court for the Northern District of California, alleging thatTelenav violated the Telephone Consumer Protection Act, or TCPA. The complaint purports to be filed on behalf of a class, and it alleges that Telenavcaused unsolicited text messages to be sent to the plaintiff from July 6, 2016 to July 26, 2016. Plaintiffs seek statutory and actual damages under the TCPAlaw, attorneys’ fees and costs of the action, and an injunction to prevent any future violations. Telenav moved to dismiss the complaint on November 21,2016. Trial is currently scheduled for January 2020. On August 24, 2017, the court entered a 90 day stay in the case at the parties' request, and the case iscurrently stayed until October 24, 2017. Due to the preliminary nature of this matter and uncertainties relating to litigation, we are unable at this time toestimate the effects of this lawsuit on our financial condition, results of operations, or cash flows.In addition, we have received, and expect to continue to receive, demands for indemnification from our customers, which demands can be veryexpensive to settle or defend, and we have in the past offered to contribute to settlement amounts and incurred legal fees in connection with certain of theseindemnity demands. A number of these indemnity demands, including demands relating to pending litigation, remain outstanding and unresolved as of thedate of this Form 10-K. Furthermore, in response to these demands we may be required to assume control of and bear all costs associated with the defense ofour customers in compliance with our contractual commitments. At this time, we are not a party to the following cases; however, our customers haverequested that we indemnify them in connection with such cases.In August 2017, AT&T Mobility LLC (AT&T) and Sprint Spectrum L.P. (Sprint) sent Telenav indemnification requests relating to patent infringementlawsuits brought by Location Based Services LLC, alleging patent infringement by the AT&T Navigator system and App for iOS and Android, and the SprintScout System and the Sprint Scout App for iOS and Android. Location Based Services LLC filed separate lawsuits against AT&T and Sprint in the U.S.District Court for the Eastern District of Texas, asserting five US Patents. Due to the preliminary nature of these matters and uncertainties relating to litigation,we are unable at this time to estimate the effects of these lawsuits and any indemnification obligations on our financial condition, results of operations, orcash flows.In 2008, Alltel Communications LLC, or Alltel, AT&T, Sprint Corporation, or Sprint, and T-Mobile USA, or T-Mobile, each demanded that weindemnify and defend them against patent infringement lawsuits brought by patent holding companies EMSAT Advanced Geo-Location Technology LLCand Location Based Services LLC (collectively, EMSAT) in the U.S.F-20Table of ContentsDistrict Court for the Northern District of Ohio. In March 2011, EMSAT and AT&T settled their claims. The U.S. Patent and Trademark Office, or PTO,reexamined two of the patents in suit, confirming the validity of only two of the asserted claims from those patents. All patent claims that EMSAT alleged tobe infringed by the Telenav GPS Navigator product were cancelled during reexamination. In the suits against T-Mobile, Alltel and Sprint, EMSAT amendedits allegations to remove allegations of infringement of the patent claims that were cancelled during reexamination. EMSAT and T-Mobile stipulated to adismissal and their case was dismissed on January 28, 2015. On March 20, 2015, the Court dismissed and closed the Alltel case and on April 10, 2015 theCourt dismissed and closed the Sprint case. In January 2017 we resolved this indemnification dispute with AT&T. We do not anticipate any additionalliability from this matter.In March 2009, AT&T demanded that we indemnify and defend them against a patent infringement lawsuit brought by Tendler Cellular of Texas LLC,or Tendler, in the U.S. District Court for the Eastern District of Texas. In June 2010, AT&T settled its claims with Tendler and we came to an agreement withAT&T as to the extent of our contribution towards AT&T's settlement; however, Telenav and AT&T disagreed as to whether any additional amounts wereowed to AT&T for legal fees and expenses related to the defense of the matter. In January 2017 we resolved this indemnification dispute with AT&T. We donot anticipate any additional liability from this matter.In connection with our resolution of certain indemnification disputes with AT&T in January 2017, we reversed a total accrued liability of $726,000previously expensed for these and other contingencies.7. Guarantees and indemnificationsOur agreements with our customers generally include certain provisions for indemnifying them against liabilities if our products and services infringe athird party’s intellectual property rights or for other specified matters. We have in the past received indemnification requests or notices of their intent to seekindemnification in the future from our customers with respect to specific litigation claims in which our customers have been named as defendants.We have agreed to indemnify our directors, officers and certain other employees for certain events or occurrences, subject to certain limits, while suchpersons are or were serving at our request in such capacity. We may terminate the indemnification agreements with these persons upon the termination oftheir services with us, but termination will not affect claims for indemnification related to events occurring prior to the effective date of termination. Themaximum amount of potential future indemnification is unlimited. We have a directors and officers insurance policy that limits our potential exposure. Webelieve that any financial exposure related to these indemnification agreements is not material.F-21Table of Contents8. Stockholders’ equityUndesignated preferred stockWe are authorized to issue 50,000,000 shares of undesignated preferred stock, par value $0.001 per share. The undesignated preferred stock may beissued from time to time at the discretion of our board of directors. As of June 30, 2017 and 2016, no shares of undesignated preferred stock were issued oroutstanding.Common stockWe are authorized to issue 600,000,000 shares of $0.001 par value stock. The holders of each share of common stock have the right to one vote.Stock repurchase programOn August 28, 2014, our board of directors authorized repurchase programs for the repurchase of up to $10.0 million of our shares of common stockthrough open market purchases. Under the August 28, 2014 program, which expired in September 2015, we utilized $4.4 million of cash torepurchase 573,257 shares of our common stock at an average purchase price of $7.59 per share.The repurchased shares are retired and designated as authorized but unissued shares. The timing and amount of repurchase transactions under our stockrepurchase programs depends on market conditions and other considerations. We use the par value method of accounting for our stock repurchases. Under thepar value method, common stock is first charged with the par value of the shares involved. The excess of the cost of shares acquired over the par value isallocated to additional paid-in capital, or APIC, based on an estimated average sales price per issued share with the excess amounts charged to retainedearnings. As a result of our stock repurchases during fiscal 2016, we reduced common stock and APIC by an aggregate of $249,000 and charged $321,000 toretained earnings. As a result of our stock repurchases during fiscal 2015, we reduced common stock and APIC by an aggregate of $1.6 million and charged$2.2 million to retained earnings.Stock plansUnder our 1999 Stock Option Plan, or 1999 Plan, 2002 Executive Stock Option Plan, or 2002 Plan, 2009 Equity Incentive Plan, or 2009 Plan, and 2011Stock Option and Grant Plan, or 2011 Plan, eligible employees, directors, and consultants are able to participate in our future performance through awards ofnonqualified stock options, incentive stock options and restricted stock units, or RSUs, through the receipt of such awards as authorized by our board ofdirectors. Incentive stock options may be granted only to employees to purchase our common stock at prices equal to or greater than the fair market value onthe date of grant. Nonqualified stock options to purchase our common stock may be granted at prices not less than 85% of the fair market value on the date ofgrant. Options generally vest over a four-year period beginning from the date of grant and generally expire 10 years from the date of grant. RSUs generallyvest annually over a four-year period beginning from the date of grant. Prior to our IPO, we granted options outside of our stock option plans with termssubstantially similar to the terms of options granted under our plans. Our 2009 Plan expires in October of 2019 and our 2011 Plan expires in June 2021.On the first day of each fiscal year, the number of shares available and reserved for issuance under the 2009 Plan will be annually increased by anamount equal to the lesser of 1,666,666 shares of common stock; 4% of the outstanding shares of our common stock as of the last day of our immediatelypreceding fiscal year; or an amount determined by our board of directors.F-22Table of ContentsA summary of our stock option activity is as follows (in thousands except per share and contractual life amounts): Number ofshares Weightedaverageexercise priceper share Weightedaverageremainingcontractual life (years) Aggregateintrinsic valueOptions outstanding as of June 30, 2016 5,370 $6.80 Granted 1,458 5.57 Exercised (437) 6.26 Canceled or expired (683) 7.23 Options outstanding as of June 30, 2017 5,708 $6.47 6.70 $10,327As of June 30, 2017: Options vested and expected to vest 5,342 $6.51 6.56 $9,533Options exercisable 3,274 $6.78 5.18 $5,275During fiscal 2017, 2016 and 2015, the total cash received from the exercise of stock options was $2.7 million, $1.5 million and $4.4 million,respectively, and the total intrinsic value of stock options exercised was $929,000, $6.1 million and $2.4 million, respectively.A summary of our RSU activity is as follows (in thousands except contractual life amounts): Number ofShares Weightedaverageremainingcontractual life (years) Aggregateintrinsic valueRSUs outstanding as of June 30, 2016 3,302 Granted 1,460 Vested (1,255) Canceled (502) RSUs outstanding as of June 30, 2017 3,005 1.35 $24,339As of June 30, 2017: RSUs expected to vest 2,558 1.23 $20,716Performance-based RSUsOn May 5, 2015, our board of directors approved the 2015 Performance Share Program, or 2015 Program, including the award calculation methodology,under the terms of our 2009 Equity Incentive Plan. Under the 2015 Program, RSUs and/or cash bonuses may be earned based on the achievement of specifiedperformance conditions measured over periods ranging from approximately 15 to 21 months. Participants in the 2015 Program generally have the ability toreceive 0% to 100% of the target number of restricted stock units or cash bonus originally granted. The expense associated with performance-based RSUgrants is recorded when the performance condition is determined to be probable. Fully vested restricted stock units and or cash bonuses will be awarded uponmanagement’s certification of the level of achievement.As of June 30, 2016, we had granted 106,000 RSUs under the 2015 Program, no RSUs had been earned and 36,000 RSUs had been canceled. At June 30,2016, based upon our closing stock price the total unrecognized stock-based compensation expense related to the 70,000 RSUs issued and outstanding inconnection with the 2015 program was $357,000. In December 2016, the remaining 70,000 RSUs were canceled as the performance conditions were not met.The cancellation of these RSUs resulted in a credit to stock-compensation expense of $546,000, which is reflected in our results of operations for fiscal 2017.F-23Table of ContentsA summary of our shares available for grant activity is as follows (in thousands): Number ofSharesShares available for grant as of June 30, 2016 1,719Additional shares authorized pursuant to annual increase provisions of 2009 Equity Incentive Plan 1,667Granted (2,919)RSUs withheld for taxes in net share settlements 453Canceled 979Shares available for grant as of June 30, 2017 1,899Canceled shares above are net of 206,000 shares that were non-Plan grants and were not returned to the pool of shares available for grant.The following table summarizes total stock-based compensation expense included in our consolidated statements of operations (in thousands): Fiscal Year Ended June 30, 2017 2016 2015Cost of revenue $130 $143 $98Research and development 5,543 6,062 5,275Selling and marketing 2,090 2,844 2,943General and administrative 2,399 2,317 3,112Total stock-based compensation expense $10,162 $11,366 $11,428The following table summarizes total stock-based compensation expense recorded for stock options, RSUs and restricted common stock issued toemployees and nonemployees (in thousands): Fiscal Year Ended June 30, 2017 2016 2015Stock option awards $2,384 $1,893 $2,071RSU awards 7,778 9,473 8,851Restricted common stock — — 506Total stock-based compensation expense $10,162 $11,366 $11,428We generally use the Black-Scholes option-pricing model to determine the fair value of stock option awards. The determination of the fair value ofstock option awards on the date of grant is affected by the stock price as well as assumptions regarding a number of complex and subjective variables. Thesevariables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interestrates and expected dividends. The weighted average assumptions used to value stock options granted were as follows: Fiscal Year Ended June 30, 2017 2016 2015Expected volatility 39% 47% 54%Expected term (in years) 4.25 4.53 4.38Risk-free interest rate 1.32% 1.35% 1.60%Dividend yield — — —Weighted average grant date fair value per share $1.87 $2.66 $2.54Expected volatility. The expected volatility used is based on the historical volatility of our common stock.Expected term. The expected term represents the period that our stock-based awards are expected to be outstanding. The expected term was based on ananalysis of our historical exercise and cancellation activity.Risk-free interest rate. The risk-free rate is based on U.S. Treasury zero coupon issues with remaining terms similar to the expected term on the options.F-24Table of ContentsDividend yield. We have never declared or paid any cash dividends on our common stock and do not plan to pay cash dividends in the foreseeablefuture and, therefore, use an expected dividend yield of zero in the valuation model.We recognize the estimated stock-based compensation expense of RSUs and restricted common stock, net of estimated forfeitures, over the vesting term.The estimated stock-based compensation cost is based on the fair value of our common stock on the date of grant.At June 30, 2017, the total unrecognized stock-based compensation expense related to employee options was $4.6 million, net of estimated forfeitures,and will be amortized over a weighted average period of 2.69 years. The total fair value of stock options that vested during fiscal 2017, 2016 and 2015 was$2.2 million, $2.0 million and $1.8 million, respectively. At June 30, 2017, the total unrecognized stock-based compensation expense related to RSUs was$12.2 million, net of estimated forfeitures, and will be amortized over a weighted average period of 2.34 years. The total fair value of RSUs that vested duringfiscal 2017, 2016 and 2015 was $8.2 million, $9.2 million and $8.2 million, respectively.Shares reserved for future issuanceCommon stock reserved for future issuance as of June 30, 2017 was as follows (in thousands): Stock options outstanding 5,708RSUs outstanding 3,005Available for future grants 1,899Total common shares reserved for future issuance 10,612F-25Table of Contents9.Income taxesThe domestic and foreign components of loss before provision (benefit) for income taxes were as follows (in thousands): Fiscal Year Ended June 30, 2017 2016 2015United States $(49,295) $(36,142) $(37,583)Foreign 2,874 1,332 1,514Loss before provision (benefit) for income taxes $(46,421) $(34,810) $(36,069) The provision (benefit) for income taxes consists of the following (in thousands): Fiscal Year Ended June 30, 2017 2016 2015Current income taxes: Federal $(435) $70 $(10,214)State (1,075) 5 (3,674)Foreign 2,131 261 219Total current income taxes 621 336 (13,669)Deferred income taxes: Federal — — 1,334State — — —Foreign 220 175 (671)Total deferred income taxes 220 175 663Total provision (benefit) for income taxes $841 $511 $(13,006)The provision (benefit) for income taxes differs from the amount computed by applying the statutory federal income tax rate as follows (in thousands): Fiscal Year Ended June 30, 2017 2016 2015Tax at federal statutory tax rate $(16,248) $(12,184) $(12,624)State taxes—net of federal benefit (1,075) 8 (893)Non-deductible expenses 108 129 68Research and development credits — — (2,678)Section 199 deduction — — (907)Foreign withholding taxes 1,737 — —Foreign income taxed at different rates (323) (2) (276)Stock-based compensation expense 364 562 1,011Tax exempt income (24) (302) (844)Change in valuation allowance 16,807 12,270 6,138Change in tax accounting method — — (1,121)FIN 48 (479) 52 (827)Other (26) (22) (53)Total provision (benefit) for income taxes $841 $511 $(13,006)Our provision for income taxes was $841,000 in fiscal 2017 compared to $511,000 in fiscal 2016. Our effective tax rate was 2% in fiscal 2017 comparedto an effective tax rate of 1% in fiscal 2016. Our effective tax rate in fiscal 2017 was attributable primarily to foreign withholding taxes and income taxes incertain foreign jurisdictions where we have profit, partially offset by the reversal of tax reserves related to the settlement of our New York state and IRS taxaudits. Our effective tax rate in fiscal 2016 was attributable primarily to income taxes in certain foreign jurisdictions where we have profit. Our benefit forincome taxes was $(13.0) million in fiscal 2015. Our effective tax rate in fiscal 2015 was attributable primarily to tax benefits recorded from the anticipatedfederal income tax refund of $5.4 million; the recognition of a state income tax refund of $3.0 million and a refund of $1.1 million from a change in taxaccounting method, both related to prior years andF-26Table of Contentsreceived in fiscal 2015; and the reversal of tax reserves of $4.2 million due to loss carryback, expiration of the statute of limitations, and settlement of ourCalifornia audit.Our effective tax rate of 2% and 1% in fiscal 2017 and 2016, respectively, was lower than the tax computed at the U.S. federal statutory income tax ratedue primarily to losses for which no benefit will be recognized since they are not more likely than not to be realized due to the lack of current and futureincome and the inability to carry back losses within the two year carryback period.In July 2016, the state of New York completed its audit of our income taxes for fiscal 2010 through fiscal 2012. We paid $442,000 to settle the auditand recorded a tax benefit of approximately $1.0 million in July 2016 to reverse the related tax reserves.In May 2017, the Internal Revenue Service, or IRS, completed its audit of our income taxes for fiscal 2012 through fiscal 2015. The audit resulted in a$947,000 reduction of our research and development tax credit carryforwards and we recorded a tax benefit of $425,000 to reverse the related tax reserves.Due to the limitations of the two year loss carryback for federal tax purposes, we do not anticipate any refunds for losses incurred in fiscal 2017 orthereafter.Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of our net deferred tax assets were as follows (in thousands): June 30, 2017 2016Deferred tax assets: Federal, state and foreign net operating losses $42,702 $16,482Federal and state tax credits 9,897 6,696Stock-based compensation 5,044 4,747Accrued expenses and reserves 11,664 5,465Capitalized expense 174 252Unrealized losses on investments 717 727Acquired intangible assets 822 596Total deferred tax assets: 71,020 34,965Deferred tax liabilities: Property and equipment (329) (468)Capitalized software (19,528) (3,734)Unrealized gains on investments (630) (353)Total deferred tax liabilities: (20,487) (4,555)Deferred tax assets, net of liabilities: 50,533 30,410Valuation allowance - worldwide (50,083)(29,820)Net deferred tax assets: $450 $590All available evidence, both positive and negative, was considered to determine whether, based upon the weight of the evidence, a valuation allowancefor deferred tax assets is needed.Due to operating losses in previous years and continued earnings volatility, we maintain a valuation allowance on the majority of our deferred taxassets, net of liabilities, since the assets are not more likely than not to be realized based upon our assessment of all positive and negative evidence.Realization of deferred tax assets is dependent upon future taxable earnings and losses, the timing of which is uncertain. Due to losses in previous years, andexpected losses in fiscal 2018 and potentially future years in the U.S., we maintained a full valuation allowance on deferred tax assets in the U.S. Due tooperating losses in previous years and expected losses in future years, we continued to maintain a full valuation allowance for our foreign deferred tax assetsin the United Kingdom. Our valuation allowance increased from the prior year by approximately $20.3 million, $12.1 million, and $4.7 million in fiscal2017, 2016 and 2015, respectively.F-27Table of ContentsWe provide for U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries' earnings are permanently reinvested outside the U.S. Tothe extent that the foreign earnings previously treated as permanently reinvested are repatriated, the related U.S. liability may be reduced by any foreignincome taxes paid on these earnings. As of June 30, 2017, the cumulative amount of earnings upon which U.S. income taxes have not been provided wasapproximately $3.6 million. The net unrecognized deferred tax liability for these earnings was zero since we have significant net operating losses which areavailable to offset the repatriation income.As of June 30, 2017, we had federal and California net operating loss carryforwards for income tax purposes of $112.5 million and $9.3 million,respectively. These loss carryforwards will begin to expire in fiscal 2020 for federal purposes and fiscal 2017 for California purposes. In addition, we hadfederal and California research and development tax credit carryforwards of $4.6 million and $8.1 million, respectively, as of June 30, 2017. The federalresearch credits will begin to expire in fiscal 2023 and the California research credits can be carried forward indefinitely. The loss carryforwards and certaincredits are subject to annual limitation under Internal Revenue Code Section 382.As of June 30, 2017, we also had foreign net operating loss carryforwards of $5.0 million, which can be carried forward indefinitely. Due to uncertaintyregarding our ability to utilize the foreign net operating loss carryforwards in certain jurisdictions, we have placed a valuation allowance of $0.5 million onthese deferred tax assets.The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands): Fiscal Year Ended June 30, 2017 2016 2015Unrecognized tax benefit—beginning of period $6,662 $6,114 $6,931Increase in tax positions taken during the current period 678 513 562Increase in tax positions taken during the prior period 242 74 170Decrease in tax positions due to settlements (4,086) — (600)Lapse of statute of limitations (461) (39) (949)Unrecognized tax benefit—end of period $3,035 $6,662 $6,114At June 30, 2017, 2016 and 2015, there were $0.1 million, $1.6 million and $1.7 million of unrecognized tax benefits that if recognized would affectthe annual effective tax rate.We file income tax returns in the U.S. with the IRS, California, various states, and foreign tax jurisdictions in which we have subsidiaries. The statute oflimitations remains open for fiscal 2016 for federal tax purposes, for fiscal 2013 through fiscal 2016 in state jurisdictions, and for fiscal 2012 through 2016 inforeign jurisdictions. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those earlyyears which have been carried forward and may be audited in subsequent years when utilized. As of June 30, 2017, we were under audit by the state of NewYork for fiscal 2013 through fiscal 2015 and the statute of limitations has been extended for fiscal 2013 to allow New York additional time to complete itsaudit.We believe it is reasonably possible that the gross unrecognized tax benefits as of June 30, 2017 could decrease (whether by payment, release, or acombination of both) by approximately $0.1 million in the next 12 months. We recognize interest and penalties related to unrecognized tax positions as partof our provision for federal, state and foreign income taxes. During fiscal 2017, 2016 and 2015, we recognized approximately $17,000, $91,000 and$134,000 in interest and penalties. We had accrued $91,000 and $570,000 for the payment of interest and penalties at June 30, 2017 and 2016, respectively.10. RestructuringIn the fourth quarter of fiscal 2014, in order to further align our resources and consolidate facilities, we initiated a restructuring plan consisting of theelimination of 108 full-time positions in the U.S. and China and we recorded restructuring charges of $2.4 million related to severance and benefits for thepositions eliminated. Earlier in fiscal 2014, we commenced our consolidation of our Sunnyvale, California headquarters facilities from two buildings intoone, and during the fourth quarter we closed our Boston, Massachusetts office. As a result, we recorded restructuring charges of $2.0 million related to theimpairment of the facility leases. Restructuring expenses of $1.2 million incurred in fiscal 2015 were associated with facility lease impairment in connectionwith the consolidation of our Sunnyvale headquarters facilities in fiscal 2014. During fiscal 2016, in connection with our Sunnyvale office lease terminationagreement described further in Note 6 Commitments and contingencies, we reversed $1.5 million previously charged to our restructuring accrual as facilityexit costs. As of June 30, 2016, our remaining restructuring liabilities were primarily associated with facility exit costs.F-28Table of ContentsThe activity related to restructuring liabilities is presented in the following table (in thousands): Severance andBenefits Facility Exit Costsand AssetImpairment TotalBalance at June 30, 2014 $2,126 $2,743 $4,869Restructuring expenses — 1,150 1,150Cash payments (2,123) (1,640) (3,763)Other (3) 391 388Balance at June 30, 2015 — 2,644 2,644Restructuring expenses 146 (11) 135Cash payments (139) (1,145) (1,284)Other — (1,468) (1,468)Balance at June 30, 2016 7 20 27Cash payments (7) (20) (27)Balance at June 30, 2017 $— $— $—F-29Table of Contents11. Industry segment and geographic informationWe report segment information based on the “management” approach. The management approach designates the internal reporting used bymanagement for making decisions and assessing performance as the source of our reportable segments.Our CEO, the chief operating decision maker, reviews revenue and gross margin information for each of our reportable segments. In addition, with theexception of goodwill and intangible assets, we do not identify or allocate our assets by the reportable segments.We report results in three business segments:Automotive - Our automotive segment utilizes our automotive navigation platform to deliver enhanced location-based services to automobilemanufacturers, as well as original equipment manufacturers and tier one suppliers, to which we refer collectively as OEMs. We provide both built-in, oron-board, and mobile phone-based wireless connectivity, or brought-in, navigation solutions, as well as hybrid solutions that contain elements of on-board and connected. Our on-board solutions consist of software, map and point of interest, or POI, data loaded in the vehicle that provides voice-guided turn by turn navigation displayed on the vehicle screen. These solutions are often enhanced with connected services which leverage our cloudto provide real-time traffic, online search and map updates.Advertising - Our advertising segment provides interactive mobile advertisements on behalf of our advertising clients to consumers based specificallyon the location of the user and other sophisticated targeting capabilities. Our customers include advertisers and advertising agencies.Mobile Navigation - Our mobile navigation segment provides our map and navigation platform to end users through mobile devices. We distribute ourservices primarily through our wireless carrier partners.Our segment results were as follows (dollars in thousands): Fiscal Year Ended June 30, 2017 2016 2015Revenue Automotive $123,784 $135,372 $103,100Advertising 26,841 21,744 17,941Mobile Navigation 18,959 26,230 39,198Total revenue 169,584 183,346 160,239Cost of revenue Automotive 73,923 81,293 56,319Advertising 12,724 12,296 11,710Mobile Navigation 5,688 7,208 10,755Total cost of revenue 92,335 100,797 78,784Gross profit Automotive 49,861 54,079 46,781Advertising 14,117 9,448 6,231Mobile Navigation 13,271 19,022 28,443Total gross profit $77,249 $82,549 $81,455Gross margin Automotive 40% 40% 45%Advertising 53% 43% 35%Mobile Navigation 70% 73% 73%Total gross margin 46% 45% 51%F-30Table of ContentsRevenue by geographic region is based on the billing address of our customers. The following table sets forth revenue and property and equipment bygeographic region (in thousands): Fiscal Year Ended June 30, 2017 2016 2015Revenue United States $149,486 $178,323 $153,371International 20,098 5,023 6,868Total revenue $169,584 $183,346 $160,239 June 30,Property and equipment, net 2017 2016United States $3,679 $4,400International 979 847Total property and equipment, net $4,658 $5,24712. Employee savings and retirement planWe sponsor a defined contribution plan under Internal Revenue Code Section 401(k), or the 401(k) Plan. Most of our U.S. employees are eligible toparticipate following the start of their employment. Employees may contribute up to the lesser of 100% of their current compensation to the 401(k) Plan or anamount up to a statutorily prescribed annual limit. We pay the direct expenses of the 401(k) Plan and beginning in July 2006, we began to match employeecontributions up to 4% of an employee’s salary, limited to a maximum annual contribution of $8,000 per employee. Contributions made by us are subject tocertain vesting provisions. We made matching contributions and recorded expense of $1.3 million, $1.4 million and $1.3 million for fiscal 2017, 2016 and2015, respectively.13. Quarterly financial data (unaudited)Summarized quarterly financial information for fiscal 2017 and 2016 is as follows (in thousands, except per share data): Three Months EndedConsolidated statements ofoperations data (in thousands) Sept. 30,2015 Dec. 31,2015 Mar. 31,2016 June 30,2016 Sept. 30,2016 Dec. 31,2016 Mar. 31,2017 June 30,2017 (unaudited)Revenue $44,061 $45,253 $46,278 $47,754 $42,227 $52,001 $35,065 $40,291Gross profit 20,674 20,721 20,172 20,982 18,751 23,274 17,398 17,826Net loss (10,846) (6,639) (9,838) (7,998) (9,335) (11,423) (13,694) (12,810)Net loss per share: Basic and diluted $(0.27) $(0.16) $(0.23) $(0.19) $(0.22) $(0.26) $(0.31) $(0.29)F-31Table of Contents14. Subsequent eventIn August 2017, we terminated our sublease with Avaya Inc. for our Santa Clara, California headquarters facility and signed a new lease agreement withour landlord for this same facility. The new lease expires six years after it becomes effective. The increase (decrease) in future minimum operating leasepayments by fiscal year resulting from the new lease is approximately as follows (in thousands):Fiscal Year Ending June 30, 2018$(557)20195722020632202177520222,037Thereafter2,329Increase in total minimum lease payments for headquarters facility$5,788F-32Table of ContentsSCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS(in thousands) BeginningBalance Chargeback Additions ChargebackReductions EndingBalanceTrade Receivable Allowances: Year Ended June 30, 2015 $206 $1,079 $(1,074) $211Year Ended June 30, 2016 $211 $756 $(856) $111Year Ended June 30, 2017 $111 $469 $(505) $75 BeginningBalance Additions Reductions EndingBalanceValuation Allowance for Deferred Tax Assets: Year Ended June 30, 2015 $12,969 $6,356 $(1,653) $17,672Year Ended June 30, 2016 $17,672 $12,271 $(123) $29,820Year Ended June 30, 2017 $29,820 $20,635 $(372) $50,083F-33Table of ContentsINDEX TO EXHIBITS ExhibitNumber Description Incorporatedby ReferenceFrom Form Incorporatedby ReferenceFrom ExhibitNumber Date Filed3.1 Second Amended and Restated Certificate of Incorporation of TeleNav, Inc. filed onMay 18, 2010. 10-K 3.1 9/24/20103.1.1 Certificate of Amendment of Second Amended and Restated Certificate ofIncorporation of Telenav, Inc. filed on November 27, 2012. 8-K 3.1.1 12/3/20123.2 Amended and Restated Bylaws of TeleNav, Inc. effective as of May 18, 2010. 10-K 3.2 9/24/20094.1 Specimen Common Stock Certificate of TeleNav, Inc. S-1/A 4.1 1/5/20104.2 Fifth Amended and Restated Investors’ Rights Agreement, dated April 14, 2009,between TeleNav, Inc. and certain holders of TeleNav, Inc.’s capital stock namedtherein. S-1 4.2 10/30/200910.1 Form of Indemnification Agreement between Registrant and its directors and officers. S-1 10.1 10/30/200910.2# 1999 Stock Option Plan and forms of agreement thereunder. S-1 10.2 10/30/200910.3# 2002 Executive Stock Option Plan and forms of agreement thereunder. S-1 10.3 10/30/200910.4# 2009 Equity Incentive Plan and forms of agreement thereunder. S-1 10.4 10/30/200910.4.1# 2009 Equity Incentive Plan, amended and restated as of January 27, 2017 8-K 10.4.3 1/31/201710.7# Employment Agreement, dated as of May 4, 2005, between TeleNav, Inc. and HassanWahla. S-1 10.7 10/30/200910.8# Employment Agreement, dated October 28, 2009, between TeleNav, Inc. and H.P. Jin. S-1 10.8 10/30/200910.9# Form of Employment Agreement between TeleNav, Inc. and each of Y.C. Chao, SalmanDhanani, Robert Rennard and Hassan Wahla. S-1 10.9 10/30/200910.15† License Agreement effective as of July 1, 2009, by and between TeleNav, Inc. and TeleAtlas North America, Inc. S-1/A 10.15 12/8/200910.15.1† Amendment No.1 effective as of March 1, 2010 to the License Agreement, dated as ofJuly 1, 2009, by and between TeleNav, Inc. and Tele Atlas North America, Inc. S-1/A 10.15.1 4/26/201010.15.2† Amendment No. 2 effective as of August 1, 2010 to the License Agreement, dated as ofJuly 1, 2009, as amended, by and between TeleNav, Inc. and Tele Atlas North America,Inc. 10-Q 10.15.2 11/15/201010.15.3† Amendment No. 3 effective as of December 14, 2010 to the License Agreement, datedas of July 1, 2009, as amended, by and between TeleNav, Inc. and Tele Atlas NorthAmerica, Inc. 10-K 10.15.3 9/7/201210.15.4† Amendment No. 4 effective as of November 21, 2011 to the License Agreement, datedas of July 1, 2009, as amended, by and between TeleNav, Inc. and TomTom NorthAmerica, Inc. 10-K 10.15.4 9/7/201210.15.5† Amendment No. 5 effective as of March 24, 2011 to the License Agreement, dated as ofJuly 1, 2009, as amended, by and between TeleNav, Inc. and TomTom North America,Inc. 10-K 10.15.5 9/7/201210.15.6† Amendment No. 6 effective as of July 1, 2012 to the License Agreement, dated as ofJuly 1, 2009, as amended, by and between TeleNav, Inc. and TomTom North America,Inc. 10-K 10.15.6 9/7/20121Table of ContentsExhibitNumber Description Incorporatedby ReferenceFrom Form Incorporatedby ReferenceFrom ExhibitNumber Date Filed10.15.7† Amendment No. 7 effective as of November 1, 2012 to the License Agreement, datedas of July 1, 2009, as amended, by and between Telenav, Inc. and TomTom NorthAmerica, Inc. 10-Q 10.15.7 2/8/201310.15.8† Amendment No. 8 effective as of November 1, 2012 to the License Agreement, datedas of July 1, 2009, as amended, by and between Telenav, Inc. and TomTom NorthAmerica, Inc. 10-Q 10.15.8 2/8/201310.16† Data License Agreement, dated as of December 1, 2002, by and between Televigation,Inc. and Navigation Technologies Corporation. S-1/A 10.16 2/2/201010.16.1† Third Amendment dated December 22, 2004 to the Data License Agreement, dated asof December 1, 2002, by and between Televigation, Inc. and NAVTEQ North America,LLC. S-1/A 10.16.1 4/26/201010.16.2† Fourth Amendment dated May 18, 2007 to the Data License Agreement, dated as ofDecember 1, 2002, by and between TeleNav, Inc. and NAVTEQ North America, LLC. S-1/A 10.16.2 2/2/201010.16.3† Fifth Amendment dated January 15, 2008 to the Data License Agreement, dated as ofDecember 1, 2002, by and between TeleNav, Inc. and NAVTEQ North America, LLC. S-1/A 10.16.3 2/2/201010.16.4† Seventh Amendment dated December 16, 2008 to the Data License Agreement, datedas of December 1, 2002, by and among TeleNav, Inc., NAVTEQ Europe B.V. andNAVTEQ North America, LLC. S-1/A 10.16.4 4/26/201010.16.5 Eighth Amendment dated December 15, 2008 to the Data License Agreement, dated asof December 1, 2002, by and between TeleNav, Inc. and NAVTEQ NorthAmerica, LLC. S-1 10.16.5 10/30/200910.16.6† Territory License No. 1, dated as of December 1, 2002, by and between Televigation,Inc. and Navigation Technologies Corporation. S-1/A 10.16.6 4/26/201010.16.7† Territory License No. 2, dated as of June 30, 2003, by and between Televigation, Inc.and NAVTEQ North America, LLC. S-1/A 10.16.7 4/26/201010.16.8† Territory License No. 3, dated as of February 7, 2006, by and between TeleNav, Inc.and NAVTEQ North America, LLC. S-1/A 10.16.8 4/26/201010.16.9† Territory License No. 5, dated as of March 6, 2006, by and between TeleNav, Inc. andNAVTEQ North America, LLC. S-1/A 10.16.9 4/26/201010.16.10† Territory License No. 6, dated as of May 18, 2007, by and between TeleNav, Inc. andNAVTEQ North America, LLC. S-1/A 10.16.10 4/26/201010.16.11† Territory License No. 7, dated as of May 18, 2007, by and between TeleNav, Inc. andNAVTEQ North America, LLC. S-1/A 10.16.11 4/26/201010.16.12† Ninth Amendment dated February 25, 2010 to the Data License Agreement, dated asof December 1, 2002 by and between TeleNav, Inc. and NAVTEQ NorthAmerica, LLC. S-1/A 10.16.12 4/26/201010.16.13 Tenth Amendment dated June 1, 2010 to the Data License Agreement, dated as ofDecember 1, 2002, by and between TeleNav, Inc., NAVTEQ North America, LLC, andNAVTEQ Europe B.V. 10-Q 10.16.13 5/7/201210.16.14† Eleventh Amendment dated September 16, 2010 to the Data License Agreement, datedas of December 1, 2002, by and between TeleNav, Inc., NAVTEQ North America, LLC,and NAVTEQ Europe B.V. 10-Q 10.16.14 5/7/201210.16.15† Twelfth Amendment dated September 28, 2010 to the Data License Agreement, datedas of December 1, 2002, by and between TeleNav, Inc., NAVTEQ North America, LLC,and NAVTEQ Europe B.V. 10-Q 10.16.15 5/7/201210.16.16† Fourteenth Amendment dated September 30, 2011 to the Data License Agreement,dated as of December 1, 2002, by and between TeleNav, Inc., NAVTEQ NorthAmerica, LLC, and NAVTEQ Europe B.V. 10-Q 10.16.16 5/7/201210.16.17† Territory License No. 8, dated December 1, 2011, by and between TeleNav, Inc.,NAVTEQ North America, LLC, and NAVTEQ Europe B.V. 10-Q 10.16.17 5/7/20122Table of ContentsExhibitNumber Description Incorporatedby ReferenceFrom Form Incorporatedby ReferenceFrom ExhibitNumber Date Filed10.16.18† First Amendment dated February 7, 2012 to Territory License No. 8, dated as ofDecember 1, 2011, by and between TeleNav, Inc., NAVTEQ North America, LLC andNAVTEQ Europe B.V. 10-Q 10.16.18 5/7/201210.16.19† Second Amendment dated October 18, 2012 to Territory License No. 8, datedDecember 1, 2011 to the Data License Agreement, dated as of December 1, 2002, byand between Telenav, Inc., NAVTEQ North America, LLC and NAVTEQ Europe B.V. 10-Q 10.16.19 2/8/201310.16.20 Fifteenth Amendment dated October 30, 2012 to the Data License Agreement, dated asof December 1, 2002, by and between Telenav, Inc., NAVTEQ North America, LLC andNAVTEQ Europe B.V. 10-Q 10.16.20 2/8/201310.16.21† Third Amendment dated December 10, 2012 to Territory License No. 8, datedDecember 1, 2011 to the Data License Agreement, dated as of December 1, 2002, byand between Telenav, Inc., NAVTEQ North America, LLC and NAVTEQ Europe B.V. 10-Q 10.16.21 2/8/201310.16.22† Seventeenth Amendment dated June 27, 2013 to the Data License Agreement, dated asof December 1, 2002, by and between HERE North America, LLC (f/k/a NAVTEQNorth America, LLC) (formerly Navigation Technologies Corporation) and Telenav,Inc. 10-Q/A 10.16.22 2/27/201410.16.23† Fourth Amendment dated October 2, 2013 to Territory License No. 8, dated December1, 2011 to the Data License Agreement, dated as of December 1, 2002, by and betweenTelenav, Inc., and Navigation Technologies Corporation (“NTC”), which wassubsequently assigned by NTC to HERE North America, LLC (f/k/a NAVTEQ NorthAmerica, LLC). 10-Q 10.16.23 11/8/201310.16.24 Eighteenth Amendment dated January 28, 2014 to the Data License Agreement, datedas of December 1, 2002, by and between HERE North America, LLC (f/k/a NAVTEQNorth America, LLC) (formerly Navigation Technologies Corporation) and Telenav,Inc. 10-Q 10.16.24 2/6/201410.16.25† Territory License No. 9, dated February 1, 2014 by and between HERE North America,LLC, HERE Europe B.V., NAVTEQ Korea Co. Ltd, and Telenav, Inc. 10-Q 10.16.25 5/8/201410.16.26† General License Agreement, dated February 10, 2014 by and between HERE NorthAmerica, LLC, and Telenav, Inc. 10-Q 10.16.26 5/8/201410.16.27† Nineteenth Amendment dated May 20, 2014 to the Data License Agreement, dated asof December 1, 2002, by and between HERE North America, LLC (f/k/a NAVTEQNorth America, LLC) (formerly Navigation Technologies Corporation) and Telenav,Inc. 10-K 10.16.27 8/22/201410.16.28† First Amendment, dated June 12, 2014, to Territory License No. 9, dated as of February1, 2014, by and between Telenav, Inc., and HERE North America, LLC (f/k/a NAVTEQNorth America, LLC).” 10-K 10.16.28 8/22/201410.16.29† Amended and Restated Territory License No. 8, dated August 18, 2014, by andbetween Telenav, Inc., HERE North America, LLC (f/k/a NAVTEQ North America,LLC), and Here Europe B.V. (f/k/a NAVTEQ Europe B.V.) 10-Q 10.16.29 11/6/201410.16.30† Patent License Agreement, dated January 1, 2014, by and between Telenav, Inc., andHERE Global B.V. (f/k/a Navteq B.V.) 10-Q 10.16.30 2/5/201510.16.31† Territory License No. 11, dated April 3, 2015 by and between HERE North America,LLC, HERE Europe B.V., and Telenav, Inc. 10-K 10.16.31 8/24/201510.16.32† First Amendment to Amended and Restated Territory License No. 8, dated November 4,2015 by and between Telenav, Inc., and HERE North America, LLC (f/k/a NAVTEQNorth America, LLC). 10-Q 10.16.32 2/9/201610.16.33† First Amendment to General License Agreement, dated November 12, 2015 by andbetween HERE North America, LLC, and Telenav, Inc. 10-Q 10.16.33 2/9/20163Table of ContentsExhibitNumber Description Incorporatedby ReferenceFrom Form Incorporatedby ReferenceFrom ExhibitNumber Date Filed10.16.34† Territory License No. 10, dated March 15, 2016, by and between HERE NorthAmerica, LLC, HERE Europe B.V., HERE Solutions Korea Co. Ltd, and Telenav, Inc. 10-Q 10.16.34 5/9/201610.16.35† First Amendment, effective August 24, 2016, to Territory License No. 11, dated April3, 2015, by and between HERE North America, LLC and Telenav, Inc. 10-Q 10.16.35 11/7/201610.16.36† Second Amendment, effective December 5, 2016, to Amended and Restated TerritoryLicense No. 8, dated April 1, 2014, by and between HERE North America, LLC andTelenav, Inc. 10-Q 10.16.36 2/3/201710.16.36.1 Sublease Termination Agreement, dated as of August 10, 2017, among Avaya Inc. andTelenav, Inc.1 10.16.37† Third Amendment, effective December 6, 2016, to Territory License No. 9, datedFebruary 1, 2014, by and between HERE North America, LLC and Telenav, Inc. 10-Q 10.16.37 2/3/201710.16.38† Second Amendment, effective December 6, 2016, to Territory License No. 11, datedApril 3, 2015, by and between HERE North America, LLC and Telenav, Inc. 10-Q 10.16.38 2/3/201710.16.39†+ Territory License No. 12, dated June 30, 2017, by and among HERE North America,LLC, HERE Europe B.V. and Telenav, Inc. Filed Herewith 10.21# Form of First Year Executive Employment Agreement. 10-Q 10.21 11/7/201110.22# Retention Letter dated March 28, 2012 from TeleNav, Inc. to Michael W. Strambi. 10-Q 10.22 5/7/201210.23# Employment Agreement dated March 28, 2012 between TeleNav, Inc. and Michael W.Strambi. 10-Q 10.23 5/7/201210.23.1# Amendment No. 1 dated December 20, 2013 to the Employment Agreement datedMarch 28, 2012 between TeleNav, Inc. and Michael W. Strambi. 10-Q 10.23.1 2/6/201410.25# Director Offer Letter dated July 30, 2012 between TeleNav, Inc. and Ken Xie. 10-K 10.25 9/7/201210.26† SYNC Generation 2 On-Board Navigation Agreement, dated October 12, 2009, by andbetween TeleNav, Inc. and Ford Motor Company. 10-K 10.26 9/7/201210.26.1† Amendment No. 1 effective August 10, 2010 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009 by and between TeleNav, Inc. and FordMotor Company. 10-K 10.26.1 9/7/201210.26.2† Amendment No. 2 effective February 3, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.2 9/7/201210.26.3† Amendment No. 3 effective February 3, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.3 9/7/201210.26.4† Amendment No. 4 effective March 31, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.4 9/7/201210.26.5† Amendment No. 5 effective March 31, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.5 9/7/201210.26.6† Amendment No. 6 effective March 31, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.6 9/7/201210.26.7† Amendment No. 7 effective November 15, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.7 9/7/20124Table of ContentsExhibitNumber Description Incorporatedby ReferenceFrom Form Incorporatedby ReferenceFrom ExhibitNumber Date Filed10.26.8† Amendment No. 8 effective January 1, 2012 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.8 9/7/201210.26.9† Amendment No. 9 effective May 11, 2012 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between TeleNav,Inc. and Ford Motor Company. 10-K 10.26.9 9/7/201210.26.10† Amendment No. 10 effective February 3, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company. 10-Q 10.26.10 5/8/201310.26.11† Amendment No. 11 effective February 3, 2011 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company. 10-K 10.26.11 8/30/201310.26.12† Amendment No. 12 effective February 28, 2013 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company. 10-K 10.26.12 8/30/201310.26.13† Amendment No. 13 effective June 17, 2013 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company. 10-K 10.26.13 8/30/201310.26.14† Amendment No. 14 effective October 1, 2013 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company. 10-Q 10.26.14 11/8/201310.26.15† Amendment No. 15 effective November 18, 2013 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company. 10-Q 10.26.15 2/6/201410.26.16† Amendment No. 16 effective April 17, 2014 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company 10-Q 10.26.16 5/8/201410.26.17† Amendment No. 17 effective January 1, 2015 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, as amended, by and between Telenav,Inc. and Ford Motor Company 10-Q 10.26.17 5/7/201510.26.18† Amendment No. 18 effective June 17, 2015 to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, by and between Telenav, Inc. andFord Motor Company 10-Q 10.26.18 11/9/201510.26.19† Amendment No. 19, effective December 1, 2015, to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, by and between Telenav, Inc. andFord Motor Company 10-Q 10.26.19 11/7/201610.26.20† Amendment No. 20, effective January 1, 2016, to the SYNC Generation 2 On-BoardNavigation Agreement dated October 12, 2009, by and between Telenav, Inc. andFord Motor Company 10-Q 10.26.20 2/3/201710.29# Amended and Restated Telenav, Inc. 2011 Stock Option and Grant Plan. S-8 4.2 10/29/201210.32# Form of Restricted Stock Unit Award Agreement under the 2009 Equity IncentivePlan. 10-Q 10.32 2/5/201510.33# Form of Restricted Stock Unit Award Agreement under the Amended and RestatedTelenav, Inc. 2011 Stock Option and Grant Plan. 10-Q 10.33 2/5/201510.36 Sublease, dated as of November 11, 2015, between Avaya Inc. and Telenav, Inc. 10-Q 10.36 2/9/201610.37 Landlord Consent to Sublease, dated as of December 18, 2015, by and among ThePrudential Insurance Company of America, Avaya Inc., and Telenav, Inc. 10-Q 10.37 2/9/20165Table of ContentsExhibitNumber Description Incorporatedby ReferenceFrom Form Incorporatedby ReferenceFrom ExhibitNumber Date Filed10.38 Lease Termination Agreement dated October 16, 2015, by and between St. Paul Fireand Marine Insurance Company and Telenav, Inc. 8-K 10.1 10/22/201510.39 Shanghai Real Estate Lease Agreement, dated as of March 4, 2016, by and betweenTeleNav Shanghai Inc. and Shanghai Dongfang Weijing Culture Development Co. 10-K 10.39 8/22/201610.40 Lease dated August 9, 2017 for 4655 Great America Parkway, Suite 300, Snata Clara,CA among PRII Towers at Great America Owner LLC and Telenav, Inc.1 10.41 Settlement Agreement dated August 24, 2017 by and among Telenav, Inc. andNokomis Capital, LLC and its affiliates 8-K 10.41 8/24/201721.1 Subsidiaries of the registrant. Filed herewith 23.1 Consent of Independent Registered Public Accounting Firm Filed herewith 24.1 Power of Attorney (contained in the signature page to this Form 10-K). Filed herewith 31.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer. Filed herewith 31.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer. Filed herewith 32.1~ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer. Filed herewith 32.2~ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer. Filed herewith 101.INS* XBRL Instance Document Filed herewith 101.SCH* XBRL Taxonomy Extension Schema Document Filed herewith 101.CAL* XBRL Taxonomy Calculation Linkbase Document Filed herewith 101.DEF* XBRL Taxonomy Definition Linkbase Document Filed herewith 101.LAB* XBRL Taxonomy Label Linkbase Document Filed herewith 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith 6Table of Contents#Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.†Portions of the exhibit have been omitted pursuant to an order granted by the Securities and Exchange Commission for confidentialtreatment.+Portions of the exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and ExchangeCommission.~In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Management’s Reportson Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnishedin Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-K and will not be deemed “filed” for purposes of Section 18 of theExchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or theExchange Act, except to the extent that the registrant specifically incorporates it by reference.*XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus forpurposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is notsubject to liability under these sections.1 To be filed with the Telenav, Inc. September 30, 2017 Quarterly Report on Form 10-Q.7Exhibit 10.16.39+ TERRITORY LICENSE NO. 12Quick Reference Title:[******] ApplicationsPursuant to the Data License Agreement between HERE and Client dated as of the effective date identified therein (“Agreement”), HERE and Client hereby agree to thefollowing additional terms and conditions. For purposes of this TL, “HERE” shall be deemed to also include HERE Europe B.V., which agrees by signing below to be bound bythe terms and conditions contained in the Agreement. This TL shall additionally consist of (attachments setting forth the terms and conditions (including pricing) related to theData for each Territory licensed under this TL. Capitalized terms not otherwise defined in the Agreement or in this TL (including any exhibits, schedules or attachments hereto)shall have the meanings set forth in Exhibit A hereto.Client:TELENAV, INC.Effective Date of Territory License:The first day of the calendar month in which the last party signs below (the “Effective Date”) (e.g., if the lastparty signs this TL on May 24th, the Effective Date is May 1st).Territory License TermThe term of this TL shall commence on the Effective Date of this TL and continue for a period of [******] (“Expiration Date”), unless terminated as provided in the Agreement(“TL Term”).The exchange of a fully executed TL (in counterparts or otherwise) by electronic transmission in .PDF format or by facsimile shall be sufficient to bind the parties to the terms andconditions of this TL.Both parties have executed this TL by their duly authorized officers as of the Effective Date.HERE NORTH AMERICA, LLCTELENAV, INC.By: /s/ Simon B. AnolickBy: /s/ Michael StrambiName: Simon B. AnolickName: Michael StrambiTitle: HERE LegalTitle: Chief Financial Officer, Telenav, Inc.Date: 29 June 2017Date: 6/22/17 HERE NORTH AMERICA, LLCHERE EUROPE B.V.By: /s/ Neil McTeigueBy: /s/ F.M. van HaarenName: Neil McTeigueName: F.M. van HaarenTitle: Senior Legal CounselTitle: Managing DirectorDate: June 29, 2017Date: 30 Jun 2017 HERE EUROPE B.V. By: /s/ T. Gaastra Name: T. Gaastra Title: Director Date: 30 Jun 2017Territory License No. 12 [******](Telenav, Inc.6-7-17 lee) [******] [******] Certain portions denoted with an asterisk have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.HERE CONFIDENTIALExhibit 10.16.39+TERMS AND CONDITIONSI.Territories.[******][******]II.DataThe Data for each Territory consists of (i) Base Map Data and (ii) any Additional Content, and (iii) Add-Ons, each as further described below. HEREshall make available to Client the Data for those countries in the Territory that have been generally released by HERE as of the Effective Date of thisTL as well as updated versions of the Data made available by HERE during the TL Term for use in the type of Applications authorized hereunder.Data for certain regions or areas of the Territory may not be completed and/or may not be produced within the TL Term, and will only be availablehereunder upon general release by HERE following completion. Client may request that HERE deliver Data to Client for additional countries in theTerritory that are generally released by HERE during the TL Term and HERE shall notify Client if additional terms and conditions apply to suchData. By using the Data after receipt of any such notice from HERE, Client shall be deemed to be bound by such terms and conditions, which arehereby incorporated by reference to be part of this TL.A.Base Map Data. “Base Map Data” means, as it relates to any particular country, the standard geographic map data (i.e., not includingAdditional Content) as and when generally released for commercial use by HERE for such country or portion thereof and which is referredto (and further described) in the applicable standard product documentation provided by HERE as the “Base Map” for that country orportion thereof. For purposes of determining which features and attributes are deemed to be “Base Map Data” and covered by the per CopyLicense Fees in Exhibit C, a description of such features and attributes is set forth in the then-current Attribute Overview and Usage Guide(or equivalent document) made available to Client as part of the Customer Technical Reference Guide. HERE may update the list of featuresand attributes included in “Base Map Data” but shall not reclassify any “Base” attributes as “Premium”. In the event that HERE violates theforegoing, Client shall have the right to continue using such attribute as part of the “Base Map Data” licensed hereunder and shall not beobligated to pay any incremental amount associated with such use for the duration of the TL Term.B.Additional Content. “Additional Content” means Data licensed under this TL in addition to Base Map Data (as defined above) as such Datais further described at the URL http://corporate.navteq.com/additional_content_descriptions.html. Additional Content shall be subject tothe terms and conditions in such URL and the applicable fees described in Section V(A) below. HERE reserves the right to discontinueAdditional Content upon reasonable notice to Client and [******]; provided, however, subject to HERE’s rights under its supplieragreements, that the last releases provided by HERE to Client of any discontinued Additional Content may be included in any Copiesdistributed thereafter. For sake of clarity, Client may continue to include discontinued Additional Content in Copies previously distributedprior to receipt of notice from HERE of such discontinuation. Additional Content is not available on a standalone basis and may be licensedand used in conjunction with Data only.C.Add-Ons. “Add-Ons” means additional content generally released by HERE from time to time for which HERE does not charge, in its solediscretion, additional license fees. HERE shall be under no obligation to release such Additional Content.Territory License No. 12 [******](Telenav, Inc.6-7-17 lee) [******] [******] Certain portions denoted with an asterisk have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.HERE CONFIDENTIALExhibit 10.16.39+III.Application.Applications licensed under this TL shall consist solely of the [******] Applications developed by or for [******] for [******] in the Territoriesspecified herein, as further described below:A.A [******] Application” means a [******] that uses Data solely to provide information solely in connection with one or more of the functionsof [******]. For sake of clarity, [******] may not be capable of [******].The Applications shall not include Excluded Applications. In addition, to the extent that Client has another TL under which Client is licensed forapplications (“Other Applications”) that would otherwise fall within the definition of Applications under this TL, such Other Applications shall beexcluded from the license granted under this TL.IV. Licensed Use. Use of the Data is limited to:A.Compiling any portion of the Data (“Compiled Data”) into Client’s own proprietary data format (which shall not include third party orpublic domain formats, unless otherwise mutually agreed upon between the parties) and, using the most current version of Data delivered byHERE to Client (except as otherwise required by [******] and Client’s development schedule), making initial copies of the Compiled Data(“Initial Copies”) for any portion of a single Territory either stored on physical storage media or in the form of electronic files suitable fortransmission to an End-User for storage on physical storage media possessed by the End-User (collectively, “Copies”); andB.Distributing such Copies of Compiled Data to [******] for further distribution to End-Users (in the case of electronic files by transmittingand storing the same directly onto the physical storage media possessed by the End-User), solely for the End-Users’ own personal use withthe Application. Client shall use commercially reasonable efforts to enforce the terms and conditions of its [******] agreement with[******], which shall include the obligation for [******] to comply with the applicable terms and conditions set forth herein as well asterms providing that HERE shall be a third party beneficiary to such agreement with the right to audit such third parties in a mannerconsistent with the provisions of the Agreement. Client shall be fully responsible for compliance by such third parties with [******]agreements.C.For sake of clarity, notwithstanding anything to the contrary under this TL, Client’s rights herein are limited solely to production anddistribution of Compiled Data for Initial Copies to [******] for the [******] Application. Client shall not, and shall not permit any thirdparty to, distribute, provide or otherwise make available any physical [******] to [******] and/or any End-User under this TL.V. Fees to HERE.A.License Fees. License fees hereunder consist of the per Copy fees applicable to use of the Data for the applicable Territory for eachApplication specified herein (“License Fees”), combined with the amounts due for any Additional Content that is made accessible for use insuch Application (“Additional Content Fees”). For the avoidance of doubt, the pricing for each Territory in the tables in Exhibit C reflectsthe total amount due to HERE for each Copy, after combining the License Fees and the applicable Additional Content Fees (collectively,the “License Fees”).B.License Fee Reports & Due Dates. Due to the supplier positions of Client as [******] and HERE as map supplier and solely for License Feereporting purposes under this TL, and notwithstanding anything to the contrary under Section 5.8 of the Agreement, preliminary LicenseFee reports from Client specifying (i) the estimated number of Copies distributed during the calendar month reporting period; and (ii) ; anon-binding forecast of Copies to be distributed during the six (6) months following such reporting period, are due by the [******] dayafter [******] for which the report is provided (e.g., for Copies distributed in January 2017, the preliminary License Fee report is due by[******] ). Client shall provide a final License Fee report specifying the actual number of Copies distributed within [******] days from the[******] for which the report is provided (e.g. for Copies distributed in January 2017, the final License Fee report is due by [******]).Following receipt of such a final License Fee report, HERE shall invoice Client for the amounts due. Client shall pay the License Fees asspecified under Exhibit C by the [******] for which the License Fee report is provided (e.g., for Copies distributed in January 2017,payment is due by [******]). In the event that the [******] notifies Client that the number of Copies reported during a prior reportingperiod to Client and to HERE were incorrect, Client shall include, with Client’s subsequent final License Fee report following suchnotification, a proper adjustment to the number of Copies reported for such prior period, which shall be incorporated as a debit or credit, asappropriate, to the then-current period’s License Fee report.C.Currency. License Fees hereunder shall be paid in U.S. Dollars.VI. End-User Terms; Supplier Terms.Territory License No. 12 [******](Telenav, Inc.6-7-17 lee) [******] [******] Certain portions denoted with an asterisk have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.HERE CONFIDENTIALExhibit 10.16.39+A.In all instances where the Application uses, accesses, reflects or relies upon any portion of the Data to deliver information to End-Users,Client shall comply with the requirements for End User Terms as specified in Exhibit B.B.Client shall comply with the third party supplier requirements and restrictions with respect to use of the Data as made available through theHERE B2B Download Center or at the URL at https://legal.here.com/en-gb/terms/general-content-supplier-terms-and-notices.C.Notwithstanding any termination or expiration of the Agreement or this TL, an End-User’s right to use the last version of the Copy of theCompiled Data received by the End-User in connection with the Application under the Agreement and this TL shall continue so long assuch End-User’s use of the Application is in compliance with all terms and conditions of Client’s then current end user license agreement forthe Application.VII. Additional Provisions.A.Audit. During the TL Term, HERE has the right to audit Client’s records regarding (i) its use of the Data; and (ii) the number of Copiesdistributed for the calculation of license fees in accordance with Section 5.9 of the Agreement. With respect to any License Fees reported byClient [******], Client shall use commercially best efforts to require [******].B.HERE Marks and Legends. Client shall include HERE Marks and the applicable HERE copyright notice (as specified in the HERE brandingguidance as provided by HERE to Client) and third party copyright and similar notices and legends as specified in the Agreement, theHERE branding guidance and/or otherwise provided by HERE in the Application and/or owner’s manual, or such other placement of theHERE Marks & Legends as may be mutually agreed by the parties.Territory License No. 12 [******](Telenav, Inc.6-7-17 lee) [******] [******] Certain portions denoted with an asterisk have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.HERE CONFIDENTIALExhibit 10.16.39+EXHIBIT ADEFINITIONS“[******]” means functionality that enables [******].“Application” means each application as defined under Section III of this TL.“Customer Technical Reference Guide” or “CTRG” means the technical product specifications and documentation that make up the Customer TechnicalReference Guide that is made available to Client through the HERE B2B Download Center.“Electronic Horizon” means a HERE proprietary method and system for calculating the most likely path and other feasible paths, based on algorithmicheuristic maneuvering rules, of a vehicle on the road network for some distance ahead (typically 2 to 5 kilometers) and identification of defined hazards andother road data of interest such as slope, curvature, speed limits, intersections, hazard signs and others."Excluded Applications" means any use of the Data in a manner not expressly authorized under this TL, including but not limited to use of the Data (i)[******]; (ii) [******]; (iii) [******]; (iv) [******]; or (v) [******].“HERE B2B Download Center” means the on-line data delivery service made available to Client by HERE on a 24x7 basis (except for downtime due tosystem maintenance) and through which HERE makes Data and related documentation available for download by Client.“[******]” means [******].“[******]” means [******].Territory License No. 12 [******](Telenav, Inc.6-7-17 lee) [******] [******] Certain portions denoted with an asterisk have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.HERE CONFIDENTIALExhibit 10.16.39+EXHIBIT BEND-USER TERMSIn all instances where the Application uses any portion of the Data to deliver information to End-Users, Client shall provide End-Userswith a copy of End User terms and shall provide conspicuous notice to End-Users and notify each End-User that their use is subject tothe End User terms, prior to such End-User’s use of, or access to any portion of the Data. End-User terms shall, at a minimum, includeprovisions that:i.restrict use of the Data to the End-User's own use for use with the Application;ii.prohibit use of the Data with geographic data from competitors of HERE (unless otherwise expressly permitted in writing byHERE);iii.prohibit reverse-engineering and archiving of the Data;iv.prohibit any export of the Data (or derivative thereof) except in compliance with applicable export laws, rules and regulations;v.require the End-User to cease using the Data if End-User fails to comply with the terms and conditions of the End-User terms;vi.provide notice to the End-User of the applicable regulatory and third-party supplier restrictions and obligations (includingcopyright notices), which may be satisfied by including a link to a URL to be hosted by HERE, which is currently contained athttps://legal.here.com/terms/general-content-supplier/terms-and-notices/ (or as notified to Customer by HERE);vii.provide notice to United States Government End-Users that the Data is a "commercial item", as that term is defined at 48 C.F.R.("FAR") 2.101, and is licensed in accordance with the End-User terms under which the Data is provided;viii.affirmatively disclaim any warranties, express or implied of quality, performance, merchantability, fitness for a particularpurpose and non-infringement;ix.affirmatively disclaim liability for any claim, demand or action, irrespective of the nature of the cause of the claim, demand oraction arising out of the use or possession of the Data; or for any loss of profit, revenue, contracts or savings, or any otherdirect, indirect, incidental, special or consequential damages arising out of the use of, or inability to use the Data, any defect orinaccuracy in the Data, or the breach of these terms or conditions, whether in an action in contract or tort or based on awarranty, even if Client, HERE or their suppliers have been advised of the possibility of such damages; andx.do not make or imply any warranties on behalf of HERE or its data suppliers or provide any right of liability or indemnityagainst HERE or its data suppliers.U.S. Government End-Users. If the Data is being acquired by or on behalf of the United States government or any other entityseeking or applying rights similar to those customarily claimed by the United States government, the Data is a “commercial item” asthat term is defined at 48 C.F.R. (“FAR”) 2.101, is licensed in accordance with these End-User Terms, and each copy of Datadelivered or otherwise furnished shall be marked and embedded as appropriate with the following “Notice of Use,” and shall betreated in accordance with such Notice:NOTICE OF USECONTRACTOR (MANUFACTURER/ SUPPLIER) NAME: HERECONTRACTOR (MANUFACTURER/SUPPLIER) ADDRESS:c/o HERE, 425 West Randolph Street, Chicago, Illinois 60606This Data is a commercial item as defined in FAR 2.101 and is subject to these End-User Terms under which this Data wasprovided.© 1987 - 20XX HERE – All rights reservedTerritory License No. 12 [******](Telenav, Inc.6-7-17 lee) [******] [******] Certain portions denoted with an asterisk have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.HERE CONFIDENTIALExhibit 10.16.39+If the Contracting Officer, federal government agency, or any federal official refuses to use the legend provided herein, theContracting Officer, federal government agency, or any federal official must notify HERE prior to seeking additional or alternativerights in the Data.Territory License No. 12 [******](Telenav, Inc.6-7-17 lee) [******] [******] Certain portions denoted with an asterisk have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.HERE CONFIDENTIALExhibit 10.16.39+EXHIBIT CPRICING1.License Fees Per Copy for [******] Applications. Client shall pay HERE the License Fee per initial Copy as set forth in the table below distributed to anEnd-User with an Application (“Initial Copy”) containing all or any portion of the Data identified in Section 2 below based on (i) the Territory; and (ii)period during which the Application is distributed.License Fees per Initial CopyTerritoryDistribution Period:[******]Distribution Period:[******]Distribution Period:[******]Distribution Period:[******]Distribution Period:[******]Distribution Period:[******][******]*[******][******][******][******][******][******][******][******][******][******][******][******][******]*For the avoidance of doubt, as licensed hereunder, [******] for purposes of Section IV.A of this TL.Territory License No. 12 [******](Telenav, Inc.6-7-17 lee) [******] [******] Certain portions denoted with an asterisk have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.HERE CONFIDENTIALExhibit 10.16.39+2.Data. The Data included in the Copy for each Territory, where made available by HERE, is specified in the table below, subject toterms and conditions set forth herein and the Agreement. For sake of clarity, other than Base Map Data and Add-ons, each of thefollowing attributes licensed hereunder shall be considered Additional Content subject to the provisions of Section II.B of this TL. [******][******][******][******][******][******][******][******][******][******][******][******][******][******][******][******][******][******][******][******][******][******][******][******] * Use of [******] is subject to the following terms and conditions:•[******]Territory License No. 12 [******](Telenav, Inc.6-7-17 lee) [******] [******] Certain portions denoted with an asterisk have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.HERE CONFIDENTIALExhibit 21.1SUBSIDIARIES OF TELENAV, INC. TeleNav Shanghai Inc. (PRC)TeleNav Xi’an Software Limited (PRC)TeleNav Hong Kong, Limited (Hong Kong)TeleNav UK Limited (U.K.)Thinknear, Inc. (Delaware)Telenav GmbHTelenav Software SRLTelenav G.K.Telenav Korea, LimitedExhibit 23.1Consent of Independent Registered Public Accounting FirmWe have issued our reports dated August 24, 2017, with respect to the consolidated financial statements, financial statement schedule, and internalcontrol over financial reporting included in the Annual Report of Telenav, Inc. on Form 10-K for the year ended June 30, 2017. We consent to theincorporation by reference of said reports in the Registration Statements of Telenav, Inc. on Form S-8 (File No. 333-213243, effective August 22, 2016;File No. 333-206546, effective August 24, 2015; File No. 333-198317, effective August 22, 2014; File No. 333-195815, effective May 8, 2014; File No. 333-190901, effective August 30, 2013; File No. 333-184638, effective October 29, 2012; File No. 333-183787, effective September 7, 2012; File No. 333-176773, effective September 9, 2011; and File No. 333-166780, effective May 13, 2010)./s/ GRANT THORNTON LLP San Jose, California August 24, 2017 Exhibit 31.1CERTIFICATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICERPURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Dr. HP Jin, certify that:1.I have reviewed this annual report on Form 10-K of Telenav, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date:August 24, 2017 By: /s/ Dr. HP JIN DR. HP Jin Chairman of the Board of Directors, President and Chief ExecutiveOfficerExhibit 31.2CERTIFICATION OF THE CHIEF FINANCIAL OFFICERPURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Michael Strambi, certify that:1.I have reviewed this annual report on Form 10-K of Telenav, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date:August 24, 2017 By: /s/ MICHAEL STRAMBI Michael Strambi Chief Financial OfficerExhibit 32.1CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICERPURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO SECTION 906OF THE SARBANES-OXLEY ACT OF 2002I, Dr. HP Jin, the president and chief executive officer of Telenav, Inc. (the “Company”), certify for the purposes of 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge,(i)the Annual Report of the Company on Form 10-K for the fiscal year ended June 30, 2017 (the “Report”), fully complies with therequirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date:August 24, 2017 By: /s/ Dr. HP JIN Dr. HP Jin Chairman of the Board of Directors, President and Chief ExecutiveOfficerExhibit 32.2CERTIFICATION OF CHIEF FINANCIAL OFFICERPURSUANT TO 18 U.S.C. § 1350, AS ADOPTED PURSUANT TO SECTION 906OF THE SARBANES-OXLEY ACT OF 2002I, Michael Strambi, the chief financial officer of Telenav, Inc. (the “Company”), certify for the purposes of 18 U.S.C. Section 1350, as adopted pursuantto Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge,(i)the Annual Report of the Company on Form 10-k for the fiscal year ended June 30, 2017 (the “Report”), fully complies with therequirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date:August 24, 2017 By: /s/ MICHAEL STRAMBI Michael Strambi Chief Financial Officer

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