iRobot 2005 Annual Report Download - page 33

Acquisitions also frequently result in the recording of goodwill and other intangible assets which are
subject to potential impairments in the future that could harm our financial results. In addition, if we finance
acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted, which
could lower the market price of our common stock. As a result, if we fail to properly evaluate acquisitions or
investments, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in
excess of what we anticipate. The failure to successfully evaluate and execute acquisitions or investments or
otherwise adequately address these risks could materially harm our business and financial results.
We will incur significant increased costs as a result of operating as a public company, and our
management will be required to devote substantial time to new compliance initiatives.
Prior to November 9, 2005, we were a private company. As a public company, we will incur significant
legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-
Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange
Commission and the NASDAQ National Market, have imposed various new requirements on public
companies, including requiring changes in corporate governance practices. Our management and other
personnel will need to devote a substantial amount of time to these new compliance initiatives. Moreover,
these rules and regulations will increase our legal and financial compliance costs and will make some activities
more time-consuming and costly. For example, we expect these new rules and regulations to make it more
difficult and more expensive for us to obtain and/or renew our director and officer liability insurance, and we
may be required to incur substantial costs to maintain the same or similar coverage.
In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal
control over financial reporting and disclosure controls and procedures. In particular, commencing in 2006, we
must perform system and process evaluation and testing of our internal control over financial reporting to allow
management and our independent registered public accounting firm to report on the effectiveness of our
internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or
the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our
internal controls over financial reporting that are deemed to be material weaknesses. Our compliance with
Section 404 will require that we incur substantial accounting expense and expend significant management
time on compliance-related issues. We currently do not have an internal audit group, and we will evaluate the
need to hire additional accounting and financial staff with appropriate public company experience and
technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404
in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our
internal controls over financial reporting that are deemed to be material weaknesses, the market price of our
stock could decline and we could be subject to sanctions or investigations by the NASDAQ National Market,
the Securities and Exchange Commission or other regulatory authorities, which would require additional
financial and management resources.
We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to
our stockholders.
We anticipate that our current cash, cash equivalents, cash provided by operating activities and funds
available through our working capital line of credit, will be sufficient to meet our current and anticipated needs
for general corporate purposes. We operate in an emerging market, however, which makes our prospects
difficult to evaluate. It is possible that we may not generate sufficient cash flow from operations or otherwise
have the capital resources to meet our future capital needs. If this occurs, we may need additional financing to
execute on our current or future business strategies, including to:
‚ hire additional roboticists and other personnel;
‚ develop new or enhance existing robots and robot accessories;
‚ enhance our operating infrastructure;
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