Rosetta Stone 2014 Annual Report Download - page 19

Table of Contents
and in particular Black Friday through Cyber Monday. Any significant interruption in the operation of these facilities, including an interruption caused by
our failure to successfully expand or upgrade our systems or to manage these expansions or upgrades, could reduce our ability to receive and process orders
and provide products and services, which could result in lost and cancelled sales and damage to our brand and reputation. These risks are more important
during the Black Friday through Cyber Monday holiday season, when many sales of our products and services take place.
We structure our marketing and advertising to drive potential customers to our website and call centers to purchase our solutions. If we experience
technical difficulties with our websites or if our call center operators do not convert inquiries into sales at expected rates, our ability to generate revenue
could be impaired. Training and retaining qualified call center operators is challenging due to the expansion of our product and service offerings and the
seasonality of our business. If we do not adequately train our call center operators, they will not convert inquiries into sales at an acceptable rate.
If any of our products or services contain defects or errors or if new product releases or services are delayed, our reputation could be harmed, resulting in
significant costs to us and impairing our ability to sell our solutions.
If our products or services contain defects, errors or security vulnerabilities, our reputation could be harmed, which could result in significant costs to us
and impair our ability to sell our products in the future. In the past, we have encountered product development delays due to errors or defects. We would
expect that, despite our testing, errors could be found in new products and product enhancements in the future. Significant errors in our products or services
could lead to, among other things:
• delays in or loss of marketplace acceptance of our products and services;
• diversion of our resources;
• a lower rate of license renewals or upgrades for consumer and enterprise and education customers;
• injury to our reputation;
• increased service expenses or payment of damages; or
• costly litigation.
If we fail to effectively upgrade our information technology systems, we may not be able to accurately report our financial results or prevent fraud.
As part of our efforts to continue improving our internal control over financial reporting, we plan to continue to upgrade our existing financial
information technology systems in order to automate several controls that are currently performed manually. We may experience difficulties in transitioning
to these upgraded systems, including loss of data and decreases in productivity, as personnel become familiar with these new systems. In addition, our
management information systems will require modification and refinement as our business needs change, which could prolong difficulties we experience
with systems transitions, and we may not always employ the most effective systems for our purposes. If we experience difficulties in implementing new or
upgraded information systems or experience significant system failures, or if we are unable to successfully modify our management information systems or
respond to changes in our business needs, we may not be able to effectively manage our business and we may fail to meet our reporting obligations. In
addition, as a result of the automation of these manual processes, the data produced may cause us to question the accuracy of previously reported financial
results.
Failure to maintain the availability of the systems, networks, databases and software required to operate and deliver our internet-based products and
services could damage our reputation and cause us to lose revenue.
We rely on internal and external systems, networks and databases maintained by us and third-party providers to process customer orders, handle
customer service requests, and host and deliver our internet-based learning solutions. Any damage, interruption or failure of our systems, networks and
databases could prevent us from processing customer orders and result in degradation or interruptions in delivery of our products and services.
Notwithstanding our efforts to protect against interruptions in the availability of our e-commerce websites and internet-based products and services, we do
occasionally experience unplanned outages or technical difficulties. In addition, we do not have complete redundancy for all of our systems.
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