Rosetta Stone 2014 Annual Report Download - page 18

Possession and use of personal information in conducting our business subjects us to legislative and regulatory obligations that could require
notification of data breaches, restrict our use of personal information and hinder our ability to acquire new customers or market to existing customers. As our
business evolves and as we expand internationally, we may become subject to additional and even more stringent legal obligations concerning our treatment
of customer information. We have incurred, and will continue to incur, expenses to comply with privacy and security standards and protocols imposed by
law, regulation, industry standards or contractual obligations.
If third parties improperly obtain and use the personal information of our customers or employees, we may be required to expend significant resources
to resolve these problems. A major breach of our network security and systems could have serious negative consequences for our businesses, including
possible fines, penalties and damages, reduced customer demand for our products and services, harm to our reputation and brand and loss of our ability to
accept and process customer credit card orders.
We are exposed to risks associated with credit card and payment fraud, and with our obligations under rules on credit card processing and alternative
payment methods, which could cause us to lose revenue or incur costs.
As an e-commerce provider that accepts debit and credit cards for payment, we are subject to the Payment Card Industry Data Security Standard ("PCI
DSS"), issued by the PCI Council. PCI DSS contains compliance guidelines and standards with regard to our network security surrounding the physical and
electronic storage, processing and transmission of individual cardholder data. Despite our compliance with these standards and other information security
measures, we cannot guarantee that all our information technology systems are able to prevent, contain or detect any cyber attacks, cyber terrorism, or
security breaches from currently known viruses or malware, or viruses or malware that may be developed in the future. To the extent any disruption results in
the loss, damage or misappropriation of information, we may be adversely affected by claims from customers, financial institutions, regulatory authorities,
payment card associations and others. In addition, the cost of complying with stricter privacy and information security laws and standards could be
significant.
We are subject to rules, regulations and practices governing our accepted payment methods which could change or be reinterpreted to make it difficult
or impossible for us to comply. A failure to comply with these rules or requirements could make us subject to fines and higher transaction fees and we could
lose our ability to accept these payment methods. Our business and results of operations could be adversely affected if these changes were to occur.
Any significant interruptions in the operations of our website, call center or third-party call centers, especially during the holiday shopping season, could
cause us to lose sales and disrupt our ability to process orders and deliver our solutions in a timely manner.
We rely on our website, an in-house call center and third-party call centers to sell our solutions, respond to customer service and technical support
requests and process orders. These activities are especially important during the holiday season
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