1159167--2/25/2008--IROBOT

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Our future profitability may fluctuate, and we have a limited operating history on which you can base your evaluation of our business. A majority of our business currently depends on our consumer robots, and our sales growth and operating results would be negatively impacted if we are unable to enhance our current consumer robots or develop new consumer robots at competitive prices or in a timely manner. We depend on the U.S. federal government for a significant portion of our revenue, and any reduction in the amount of business that we do with the U.S. federal government would negatively impact our operating results and financial condition. Our contracts with the U.S. federal government contain certain provisions that may be unfavorable to us and subject us to government audits, which could materially harm our business and results of operations. Some of our contracts with the U.S. federal government allow it to use inventions developed under the contracts and to disclose technical data to third parties, which could harm our ability to compete. Government contracts are subject to a competitive bidding process that can consume significant resources without generating any revenue. We depend on single source manufacturers, and our reputation and results of operations would be harmed if these manufacturers fail to meet our requirements. Any efforts to expand our product offerings beyond our current markets may not succeed, which could negatively impact our operating results. If we are unable to implement appropriate controls and procedures to manage our growth, we may not be able to successfully implement our business plan. If the consumer robot market does not experience significant growth or if our products do not achieve broad acceptance, we will not be able to achieve our anticipated level of growth. Our business and results of operations could be adversely affected by significant changes in the policies and spending priorities of governments and government agencies. We face intense competition from other providers of robots, including diversified technology providers, as well as competition from providers offering alternative products, which could negatively impact our results of operations and cause our market share to decline. Our business is significantly seasonal and, because many of our expenses are based on anticipated levels of annual revenue, our business and operating results will suffer if we do not achieve revenue consistent with our expectations. If critical components of our products that we currently purchase from a small number of suppliers become unavailable, we may incur delays in shipment, which could damage our business. Our products are complex and could have unknown defects or errors, which may give rise to claims against us, diminish our brand or divert our resources from other purposes. The robot industry is and will likely continue to be characterized by rapid technological change,which will require us to develop new products and product enhancements, and could render our existing products obsolete. If we are unable to attract and retain additional skilled personnel, we may be unable to grow our business. We may be sued by third parties for alleged infringement of their proprietary rights, which could be costly, time-consuming and limit our ability to use certain technologies in the future. If we fail to maintain or increase our consumer robot sales through our primary distribution channels, which include third-party retailers, our product sales and results of operations would be negatively impacted. If we fail to enhance our brand, our ability to expand our customer base will be impaired and our operating results may suffer. If our existing collaborations are unsuccessful or we fail to establish new collaborations, our ability to develop and commercialize additional products could be significantly harmed. We depend on the experience and expertise of our senior management team and key technical employees, and the loss of any key employee may impair our ability to operate effectively. 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. If we fail to protect, or incur significant costs in defending, our intellectual property and other proprietary rights, our business and results of operations could be materially harmed. Potential future acquisitions could be difficult to integrate, divert the attention of key personnel, disrupt our business, dilute stockholder value and impair our financial results. We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our stockholders. Environmental laws and regulations and unforeseen costs could negatively impact our future earnings. Business disruptions resulting from international uncertainties could negatively impact our profitability. If we are unable to continue to obtain U.S. federal government authorization regarding the export of our products, or if current or future export laws limit or otherwise restrict our business, we could be prohibited from shipping our products to certain countries, which would harm our ability to generate revenue. We invest in auction rate securities that are subject to market risk and the recent problems in the financial markets could adversely affect the value and liquidity of our assets. State and local taxing authorities may determine that we are required to collect and remit sales tax in additional jurisdictions. 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.

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1159167--2/25/2008--IROBOT_CORP