Summary of business and significant accounting policies

Description of business

Telenav, Inc., also referred to in this report as “we,” “our” or “us,” was incorporated in September 1999 in the State of Delaware. We are a leader in personalized mobile navigation. We help on the go people by creating products that (1) provide easily-accessed, relevant, and personalized information for discovery, traffic, local search, and navigation and (2) are available across multiple platforms and devices, including mobile phones, tablets, computers and cars. We operate in a single segment. Our fiscal year ends on June 30 and in this report we refer to the fiscal year ended June 30, 2013 as “fiscal 2013” and the fiscal year ending June 30, 2014 as “fiscal 2014.”

Basis of presentation

The unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The condensed consolidated financial statements include the accounts of Telenav, Inc. and our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The financial statements include all adjustments (consisting only of normal recurring adjustments) that our management believes are necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.

Our condensed consolidated financial statements also include the financial results of Shanghai Jitu Software Development Ltd., or Jitu, located in China. Based on our contractual arrangements with the shareholders of Jitu, we have determined that Jitu is a variable interest entity, or VIE, for which we are the primary beneficiary and are required to consolidate in accordance with Accounting Standards Codification, or ASC, subtopic 810-10, or ASC 810-10, Consolidation: Overall. Despite our lack of legal ownership, there exists a parent-subsidiary relationship between Telenav, Inc. and Jitu, whereby through contractual arrangement, the equity holders of Jitu have effectively assigned all of their voting rights underlying their equity interest in Jitu to us. In addition, through these agreements, we have the ability and intention to absorb all of the expected losses and profits of Jitu. The results of Jitu did not have a material impact on our overall operating results for the three months ended September 30, 2013 and 2012.

The condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for fiscal 2013, included in our Annual Report on Form 10-K for fiscal 2013 filed with the U.S. Securities and Exchange Commission (the “SEC”).

There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Form 10-K.

Use of estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions made by us include the determination of revenue recognition and deferred revenue, the recoverability of accounts receivable, the determination of acquired intangibles and goodwill, the fair value of stock awards issued, the determination of income taxes and the recoverability of deferred tax assets. Actual results could differ from those estimates.

Concentrations of risk and significant customers

Revenue related to services provided through Ford Motor Company, or Ford, comprised 40% and 22% of revenue for the three months ended September 30, 2013 and 2012, respectively. As of September 30, 2013 and June 30, 2013, receivables due from Ford were 46% and 45% of total accounts receivable, respectively. Revenue related to services provided through AT&T Mobility LLC, or AT&T, comprised 23% and 38% of revenue for the three months ended September 30, 2013 and 2012, respectively. Receivables due from AT&T were 17% and 23% of total accounts receivable at September 30, 2013 and June 30, 2013, respectively. Revenue related to services provided through Sprint Nextel Corporation, or Sprint, comprised 15% and 19% of revenue for the three months ended September 30, 2013 and 2012, respectively. No other customer represented 10% of our revenue or 10% of our accounts receivable for any period presented.

Our map and points of interest, or POI, data have been provided principally by TomTom North America, Inc., or TomTom, and HERE North America, LLC, a Nokia company, or HERE, in the three months ended September 30, 2013 and 2012. To date, we are not aware of circumstances that may impair either party’s intent or ability to continue providing such services to us.

Restricted cash

As of September 30, 2013 and June 30, 2013, we had restricted cash of $8.6 million and $2.7 million, respectively, on our consolidated balance sheets. As of September 30, 2013, restricted cash is comprised of a $5.9 million overpayment from a customer that will be refunded, and $2.7 million of cash withheld and deposited in escrow related to our acquisition of Local Merchant Services, Inc., or Thinknear.

Accumulated other comprehensive income, net of tax

The components of accumulated other comprehensive income, net of related taxes, during the three months ended September 30, 2013, were as follows (in thousands):



	Foreign Currency Translation Adjustments		Unrealized Gains (Losses) on Available-for-Sale Securities			Total
Balance, net of tax as of June 30, 2013	$	270	$	103		$	373
Other comprehensive income before reclassifications, net of tax	51		139			190
Amount reclassified from accumulated other comprehensive income, net of tax	—		(19		)	(19		)
Other comprehensive income, net of tax	51		120			171
Balance, net of tax as of September 30, 2013	$	321	$	223		$	544

The amount reclassification from accumulated other comprehensive income, net of tax, was determined using the specific identification method and the amount was included in other income, net, for the three months ended September 30, 2013, and 2012, respectively.

The amount of income tax benefit allocated to each component of accumulated other comprehensive was not material for the three months ended September 30, 2013.

Long-term investments

As of September 30, 2013, our investments in privately-held companies were $1.5 million. These investments are accounted for as cost-basis investments, as we own less than 20% of the voting securities and do not have the ability to exercise significant influence over operating and financial policies of the entities. Our investments are in entities that are not publicly traded and, therefore, no established market for the securities exists. Our cost-method investments are carried at historical cost in our condensed consolidated balance sheets and measured at fair value on a nonrecurring basis. If we believe that the 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 value to estimated fair value, when the impairment is deemed other-than-temporary. We regularly evaluate the carrying value of these cost-method investments for impairment. As of September 30, 2013, no event had occurred that would adversely affect the carrying value of these investments, therefore, the fair value of the cost-method investments was not estimated. We did not record any impairment charges for these cost-method investments during the three months ended September 30, 2013 and 2012.

Recent accounting pronouncements

In February 2013, the Financial Accounting Standards Board, or, FASB, issued amended guidance on how to report the effect of significant reclassifications out of accumulated other comprehensive income. We adopted this guidance effective July 1, 2013 and the adoption of this guidance did not have a material effect on our consolidated financial statements.

In June 2013, the FASB ratified Emerging Issues Task Force (EITF) Issue 13-C, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” which concludes an unrecognized tax benefit should be presented as a reduction of a deferred tax asset when settlement in this manner is available under the tax law. We will adopt this amendment as of July 2014. The result of adoption may be to reclassify certain long term liabilities to long term deferred tax assets and the adoption will not result in a change to the tax provision. We do not believe that the impact on our consolidated financial statements will be significant.