Rosetta Stone 2011 Annual Report Download - page 35

Table of Contents
timely manner if our revenue falls short of our expectations. Accordingly, any significant shortfall of revenue in relation to our estimates could have an
immediate negative effect on our profitability. In addition, as our business evolves, we anticipate increasing our operating expenses to expand our product
development, technical support, sales and marketing and administrative organizations. Any such expansion could cause material losses to the extent we do not
generate additional revenue sufficient to cover the additional expenses.
We may need to raise additional funds to pursue our growth strategy or continue our operations, and we may be unable to raise capital when needed.
From time to time, we may seek additional equity or debt financing to provide for the capital expenditures required to finance working capital
requirements, continue our expansion, develop new products and services or make acquisitions or other investments. In addition, if our business plans change,
general economic, financial or political conditions in our markets change, or other circumstances arise that have a material effect on our cash flow, the
anticipated cash needs of our business as well as our conclusions as to the adequacy of our available sources of capital could change significantly. Any of
these events or circumstances could result in significant additional funding needs, requiring us to raise additional capital. We cannot predict the timing or
amount of any such capital requirements at this time. If financing is not available on satisfactory terms, or at all, we may be unable to expand our business or
to develop new business at the rate desired and our results of operations may suffer.
Acquisitions, joint ventures and strategic alliances may have an adverse effect on our business.
We may make acquisitions or enter into joint ventures and strategic alliances as part of our long-term business strategy. Such transactions involve
significant challenges and risks including that the transaction does not advance our business strategy, that we do not realize a satisfactory return on our
investment, that we experience difficulty integrating new employees, business systems, and technology, diversion of management's attention from our other
businesses or that we acquire undiscovered liabilities such as patent infringement claims or violations of the U.S. Foreign Corrupt Practices Act and similar
worldwide anti-bribery laws. It may take longer than expected to realize the full benefits, such as increased revenue, enhanced efficiencies, or market share, or
those benefits may ultimately be smaller than anticipated, or may not be realized. These events could harm our operating results or financial condition.
Risks Related to Intellectual Property Rights
Protection of our intellectual property is limited, and any misuse of our intellectual property by others, including software piracy, could harm our
business, reputation and competitive position.
Our intellectual property is important to our success. We believe our trademarks, copyrights, trade secrets, pending patents, trade dress and designs are
valuable and integral to our success and competitive position. To protect our proprietary rights, we rely on a combination of patents, copyrights, trademarks,
trade secret laws, confidentiality procedures, contractual provisions and technical measures.
We have four issued patents in the United States. We have several patent applications on file in the United States and other countries. However, we do
not know whether any of our pending patent applications will result in the issuance of patents or whether the examination process will require us to narrow
our claims. Even if patents are issued from our patent applications, which is not certain, they may be contested, circumvented or invalidated in the future.
Moreover, the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages, and, as with any technology,
competitors may be able to develop similar or superior technologies now or in the future. In addition, we have not emphasized patents as a source of
significant competitive advantage
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