iRobot 2014 Annual Report Download - page 90

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We are subject to extensive U.S. federal government regulation, and our failure to comply with applicable regulations
could subject us to penalties that may restrict our ability to conduct our business.
As a contractor and subcontractor to the U.S. federal government, we are subject to and must comply with various
government regulations that impact our operating costs, profit margins and the internal organization and operation of our
business. Among the most significant regulations affecting our business are:
• the Federal Acquisition Regulations and supplemental agency regulations, which comprehensively regulate the
formation and administration of, and performance under government contracts;
• the Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in connection
with contract negotiations;
• the Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement
under cost-based government contracts;
• the Foreign Corrupt Practices Act, which prohibits U.S. companies from providing anything of value to a foreign
official to help obtain, retain or direct business, or obtain any unfair advantage;
• the False Claims Act and the False Statements Act, which, respectively, impose penalties for payments made on the
basis of false facts provided to the government, and impose penalties on the basis of false statements, even if they
do not result in a payment;
• laws, regulations and executive orders restricting the use and dissemination of information classified for national
security purposes and the exportation of certain products and technical data;
• Certain contracts from the U.S. federal government may require us to maintain certain certifications including but
not limited to AS9100 and CMMI;
• Contractor Purchasing Systems review (CPSR) requirements, which evaluate the efficiency and effectiveness with
which we spend U.S. Government funds; and
• The sale of our products in countries outside the United States is regulated by the governments of those countries.
While compliance with such regulation will generally be undertaken by our international distributors, we may assist
with such compliance and in certain cases may be liable if a distributor fails to comply.
We must comply with U.S. laws regulating the export of our products. In addition, we are required to obtain a license
from the U.S. federal government to export our PackBot, Kobra and SUGV lines of defense and security robots. We cannot be
sure of our ability to obtain any licenses required to export our products or to receive authorization from the U.S. federal
government for international sales or domestic sales to foreign persons. Moreover, the export regimes and the governing
policies applicable to our business are subject to change. We cannot assure you of the extent that such export authorizations will
be available to us, if at all, in the future. In some cases where we act as a subcontractor, we rely upon the compliance activities
of our prime contractors, and we cannot assure you that they have taken or will take all measures necessary to comply with
applicable export laws. If we or our prime contractor partners cannot obtain required government approvals under applicable
regulations in a timely manner or at all, we would be delayed or prevented from selling our products in international
jurisdictions, which could materially harm our business, operating results and ability to generate revenue.
Also, we need special clearances to continue working on and advancing certain of our projects with the U.S. federal
government. Obtaining and maintaining security clearances for employees involves a lengthy process, and it is difficult to
identify, recruit and retain employees who already hold security clearances. If our employees are unable to obtain security
clearances in a timely manner, or at all, or if our employees who hold security clearances are unable to maintain the clearances
or terminate employment with us, then a customer requiring classified work could terminate the contract or decide not to renew
it upon its expiration. In addition, we expect that many of the contracts on which we will bid will require us to demonstrate our
ability to obtain facility security clearances and employ personnel with specified types of security clearances. To the extent we
are not able to obtain facility security clearances or engage employees with the required security clearances for a particular
contract, we may not be able to bid on or win new contracts, or effectively rebid on expiring contracts. Classified programs
generally will require that we comply with various Executive Orders, federal laws and regulations and customer security
requirements that may include restrictions on how we develop, store, protect and share information, and may require our
employees to obtain government clearances.
Our failure to comply with applicable regulations, rules and approvals could result in the imposition of penalties, the loss
of our government contracts or our suspension or debarment from contracting with the federal government generally, any of
which would harm our business, financial condition and results of operations.