iRobot 2005 Annual Report Download - page 54

available under our working capital line of credit. Borrowings are secured by substantially all of our assets
other than our intellectual property. The credit facility restricts our ability to:
‚ incur or guaranty additional indebtedness;
‚ create liens;
‚ enter into transactions with affiliates;
‚ make loans or investments;
‚ sell assets;
‚ pay dividends or make distributions on, or repurchase, our stock; or
‚ consolidate or merge with other entities.
In addition, we are required to maintain quarterly tangible net worth thresholds based on our
stockholders' equity under the credit facility that vary by quarter based on anticipated seasonality in our
business. These operating and financial covenants may restrict our ability to finance our operations, engage in
business activities or expand or pursue our business strategies. At December 31, 2005, we were in compliance
with all covenants under the credit facility. To the extent we are unable to satisfy those covenants in the future,
we will need to obtain waivers to avoid being in default of the terms of this credit facility. In addition to a
covenant default, other events of default under our credit facility include the filing or entry of a tax lien,
attachment of funds or material judgment against us, or other uninsured loss of our material assets. If a default
occurs, the bank may require that we repay all amounts then outstanding.
Working Capital and Capital Expenditure Needs
We currently have no material cash commitments, except for normal recurring trade payables, expense
accruals and operating leases, all of which we anticipate funding through our existing working capital line of
credit, working capital and funds provided by operating activities. In addition, we do not currently anticipate
significant investment in property, plant and equipment, and we believe that our outsourced approach to
manufacturing provides us with flexibility in both managing inventory levels and financing our inventory. We
believe our existing cash, cash equivalents, cash provided by operating activities, and funds available through
our working capital line of credit will be sufficient to meet our working capital and capital expenditure needs
over at least the next twelve months. In the event that our revenue plan does not meet our expectations, we
may eliminate or curtail expenditures to mitigate the impact on our working capital. Our future capital
requirements will depend on many factors, including our rate of revenue growth, the expansion of our
marketing and sales activities, the timing and extent of spending to support product development efforts, the
timing of introductions of new products and enhancements to existing products, the acquisition of new
capabilities or technologies, and the continuing market acceptance of our products and services. Moreover, to
the extent that existing cash, cash equivalents, cash from operations, and cash from short-term borrowing are
insufficient to fund our future activities, we may need to raise additional funds through public or private equity
or debt financing. Although we are currently not a party to any agreement or letter of intent with respect to
potential investments in, or acquisitions of, businesses, services or technologies, we may enter into these types
of arrangements in the future, which could also require us to seek additional equity or debt financing.
Additional funds may not be available on terms favorable to us or at all.
Contractual Obligations
We generally do not enter into binding purchase commitments. Our principal commitments consist of
obligations under our working capital line of credit, leases for office space and minimum contractual
50