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Table of Contents
(3) As discussed in Note 11, on January 4, 2011 the Company's Board of Directors approved the Rosetta Stone Inc. Long Term Incentive Program
("LTIP") and then subsequently cancelled the LTIP on November 30, 2011, resulting in $4.9 million additional operating expense.
(4) In April 2009 shares of common stock were awarded to key employees as part of the IPO resulting in $18.8 million of additional operating expense.







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Cash and cash equivalents
$98,825
$ 148,190
$106,516
$115,756
$95,188
Total assets
290,776
279,446
280,059
278,804
227,228
Deferred revenue
78,857
63,416
51,895
47,158
26,106
Notes payable and capital lease obligation
242
5
12
—
—
Total stockholders' equity
$131,243
$ 148,194
$172,951
$179,724
$157,531
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

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
Rosetta Stone Inc. (“Rosetta Stone,” “the Company,” “we” or “us”) is dedicated to changing the way the world learns. Our innovative, technology-driven
language-learning solutions have been purchased by millions of individuals and used by thousands of schools, businesses, and government organizations
around the world. Founded in 1992, Rosetta Stone pioneered the use of interactive software to accelerate language learning. Today we offer courses in 30
languages across a broad range of formats, including online subscriptions, digital downloads, mobile apps, and perpetual CD-Rom packages. Rosetta Stone
has invested more in language learning and expanded beyond language learning and deeper into education-technology with its acquisitions of Livemocha Inc.
("Livemocha") and Lexia Learning Systems Inc, ("Lexia") in 2013 and Vivity Labs, Inc. ("Vivity""), and Tell Me More S.A. ("Tell Me More") in January
2014.
We derive our revenues from sales to both individual consumers and organizations. Our global consumer distribution model comprises a mix of our call
centers, websites, third party e-commerce websites such as Digital River and Apple iTunes, select retail resellers, such as Amazon.com, Barnes & Noble,
Target, Best Buy, Books-a-Million, Staples, Costco, daily deal partners such as Groupon, home shopping networks such as GS Home Shopping in Korea
and consignment distributors such as Speed Commerce and third-party resellers of Lexia solutions. Our Global Enterprise & Education distribution model is
focused on targeted sales activity primarily through a direct sales force in five markets: K-12 schools; colleges and universities; federal government agencies;
corporations; and not-for-profit organizations.
Rosetta Stone’s management team has communicated a strategic business plan designed to guide the Company through 2015. The key areas of focus
are:
1. leveraging the brand;
2. innovating the platform; and
3. expanding distribution.
In pursuing these priorities, we plan to grow the business by continuing to invest in research and development of new products while focusing on
maintaining costs and margins at appropriate levels.
During 2012, we instituted a change in our chief operating decision maker ("CODM"), which led to a fourth quarter change to what our CODM uses to
measure profitability and allocate resources. Accordingly, beginning with the fourth quarter of 2012, we have three operating segments, North America
Consumer, Rest of World ("ROW") Consumer and Global Enterprise & Education. From the first quarter of 2011 through the third quarter of 2012, we had
two operating segments, Consumer and Global Enterprise & Education. Prior to 2011 we operated as a single segment.
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