iRobot 2012 Annual Report Download - page 70

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The effects of new regulations relating to conflict minerals may adversely affect our business.
On August 22, 2012, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC adopted
new requirements for companies that use certain minerals and metals, known as conflict minerals, in their products, whether or
not these products are manufactured by third parties. These requirements will require companies to diligence, disclose and
report whether or not such minerals originate from the Democratic Republic of Congo and adjoining countries. We will have to
diligence whether such minerals are used in the manufacture of our products. However, the implementation of these new
requirements could adversely affect the sourcing, availability and pricing of such minerals if they are found to be used in the
manufacture of our products. In addition, we will incur additional costs to comply with the disclosure requirements, including
costs related to determining the source of any of the relevant minerals and metals used in our products. Since our supply chain
is complex, we may not be able to sufficiently verify the origins for these minerals and metals used in our products through the
due diligence procedures that we implement, which may harm our reputation. In such event, we may also face difficulties in
satisfying customers who require that all of the components of our products are certified as conflict mineral free. The first
report is due on May 31, 2014 for the 2013 calendar year. Recently, the U.S. Chamber of Commerce, the National Association
of Manufacturers and the Business Roundtable filed a petition challenging the adoption of the rules by the SEC. It is presently
unclear if this challenge will delay the effectiveness of the rule.
Our income tax provision and other tax liabilities may be insufficient if taxing authorities are successful in asserting
tax positions that are contrary to our position. Additionally, there is no guarantee that we will realize our deferred tax assets.
From time to time, we are audited by various federal, state and local authorities regarding income tax matters. Significant
judgment is required to determine our provision for income taxes and our liabilities for federal, state, local and other taxes.
Although we believe our approach to determining the appropriate tax treatment is supportable and in accordance with relevant
authoritative guidance it is possible that the final tax authority will take a tax position that is materially different than that
which is reflected in our income tax provision. Such differences could have a material adverse effect on our income tax
provision or benefit, in the reporting period in which such determination is made and, consequently, on our results of
operations, financial position and/or cash flows for such period.
The realization of our deferred tax assets ultimately depends on the existence of sufficient taxable income in either the
carryback or carryforward periods under the tax law. Due to significant estimates utilized in establishing a valuation allowance
and the potential for changes in facts and circumstances, it is possible that we will be required to record a valuation allowance
in future reporting periods. Our results of operations would be impacted negatively if we determine that a deferred tax asset
valuation allowance is required in a future reporting period.
Provisions in our certificate of incorporation and by-laws, our shareholder rights agreement or Delaware law might
discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the
trading price of our common stock.
Provisions of our certificate of incorporation and by-laws and Delaware law may discourage, delay or prevent a merger,
acquisition or other change in control that stockholders may consider favorable, including transactions in which you might
otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by
our stockholders to replace or remove our management. These provisions include:
• limitations on the removal of directors;
• a classified board of directors so that not all members of our board are elected at one time;
• advance notice requirements for stockholder proposals and nominations;
• the inability of stockholders to act by written consent or to call special meetings;
• the ability of our board of directors to make, alter or repeal our by-laws; and
• the ability of our board of directors to designate the terms of and issue new series of preferred stock without
stockholder approval.
The affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote is necessary to amend or
repeal the above provisions of our certificate of incorporation. In addition, absent approval of our board of directors, our by-
laws may only be amended or repealed by the affirmative vote of the holders of at least 75% of our shares of capital stock
entitled to vote.
We have also adopted a shareholder rights agreement that entitles our stockholders to acquire shares of our common
stock at a price equal to 50% of the then-current market value in limited circumstances when a third party acquires or
announces its intention to acquire 15% or more of our outstanding common stock.
In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation from
engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns,
or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.