Rosetta Stone 2011 Annual Report Download - page 5

Table of Contents
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws. These forward-looking
statements include, but are not limited to, statements regarding: our business strategies; information regarding our future financial performance; our
projected plans and objectives; our development of new products including an English remediation solution; international expansion and our development of
a business model to drive growth; the sufficiency of our cash flows from operations and available sources of funds; the impact of inflation on our financial
position and results of operations; the effect of state tax law examination on our results of operations and financial position; our technology and product
development initiatives; and our intellectual property strategy. These forward-looking statements are subject to risks and uncertainties that could cause
actual results and events to differ. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ
materially from such forward-looking statements is included throughout this filing and particularly in Item 1A: "Risk Factors" section set forth in this Annual
Report on Form 10-K. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume
no obligation to revise or publicly release any revision to any such forward-looking statement, except as may otherwise be required by law.
PART I
Item 1. Business
Overview
We are a leading provider of technology-based language-learning solutions. We develop, market, and sell language-learning solutions consisting of
software, online services, mobile applications and audio practice tools primarily under our Rosetta Stone brand. Our teaching method, which we call Dynamic
Immersion, is designed to leverage the innate, natural language-learning ability that children use to learn their native language. Our courses are based on our
proprietary interactive technologies and pedagogical content and utilize a sophisticated sequencing of images, text and sounds to teach a new language
without translation or grammar explanation. We believe our award-winning solutions provide an effective, convenient and fun way to learn languages. We
currently offer our self-study language-learning solutions in over 30 languages. Our customers include individuals, educational institutions, armed forces,
government agencies and corporations.
The strength and breadth of our solutions have allowed us to develop a business model that we believe distinguishes us from other language-learning
companies. Our scalable technology platform and our proprietary content can be deployed across many languages, which have enabled us to cost-effectively
develop a broad product portfolio. We have a multi-channel marketing and distribution strategy that directly targets customers, utilizing print, online,
television and radio advertising, public relations initiatives and our branded kiosks. Approximately 86% of our revenue for the year ended December 31, 2011
was generated through our direct sales channels, which include our call centers, websites, institutional sales force and kiosks. We also distribute our solutions
through select retailers such as Amazon.com, Barnes & Noble, Best Buy, Books-a-Million, Staples and Costco.
We were incorporated in Delaware in 2005.
Our Industry
The language-learning market is highly fragmented and consists of the following primary models: classroom instruction utilizing the traditional approach
of memorization, grammar and translation; immersion-based classroom instruction; self-study books, audio tapes and software that rely primarily on grammar
and translation; and free online offerings that provide basic content and opportunities to practice writing and speaking.
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