Rosetta Stone 2015 Annual Report Download - page 16

Table of Contents
Acquisitions, joint ventures and strategic alliances may have an adverse effect on our business.
We have made and may continue to make acquisitions or enter into joint ventures and strategic alliances as part of our long-term business strategy.
Such transactions may result in use of our cash resources, dilutive issuances of our equity securities, or incurrence of debt. Such transactions also 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 technology, employees, and business systems, that we divert 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 more customers,
or those benefits may ultimately be smaller than anticipated, or may not be realized. These events and circumstances could harm our operating results or
financial condition.
We may incur significant costs related to data security breaches that could compromise our information technology network security, trade secrets and
customer data.
Threats to our information technology network security can take a variety of forms. Individual hackers and groups of hackers, and sophisticated
organizations or individuals may threaten our information technology network security. Cyber attackers may develop and deploy malicious software to
attack our services and gain access to our networks, data centers, or act in a coordinated manner to launch distributed denial of service or other coordinated
attacks. Cyber threats and attacks are constantly evolving, thereby increasing the difficulty of detecting and successfully defending against them. We may be
unable to anticipate these techniques or to implement adequate preventative measures in time. Cyber threats and attacks can have cascading impacts that
unfold with increasing speed across internal networks and systems. Breaches of our network, credit card processing information, or data security could disrupt
the security of our internal systems and business applications, impair our ability to provide services to our customers and protect the privacy of their data,
resulting in product development delays, could compromise confidential or technical business information harming our competitive position, result in theft
or misuse of our intellectual property or other assets, require us to allocate more resources to improved technologies, or otherwise adversely affect our
business.
Our possession and use of personal information presents risks and expenses that could harm our business. If we are unable to protect our information
technology network against service interruption or failure, misappropriation or unauthorized disclosure or manipulation of data, whether through breach
of our network security or otherwise, we could be subject to costly government enforcement actions and litigation and our reputation may be damaged.
Our business involves the collection, storage and transmission of personal, financial or other information that is entrusted to us by our customers and
employees. Our information systems also contain the Company's proprietary and other confidential information related to our business. Our efforts to protect
such information may be unsuccessful due to the actions of third parties, computer viruses, physical or electronic break-ins, catastrophic events, employee
error or malfeasance or other attempts to harm our systems. 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. Some of our commercial partners may receive or store information provided by us or our users through our
websites. If these third parties fail to adopt or adhere to adequate information security practices, or fail to comply with our online policies, or in the event of a
breach of their networks, our customers' data may be improperly accessed, used or disclosed. As our business and the regulatory environment evolve in the
U.S. and 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 our systems are harmed or fail to function properly or if third parties improperly obtain and use the personal information of our customers or
employees, we may be required to expend significant resources to repair or replace systems or to otherwise protect against security breaches or to address
problems caused by breaches. 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. Any such events could have a material and adverse effect on our business, reputation or financial results. Our
insurance policies carry coverage limits, which may not be adequate to reimburse us for losses caused by security breaches.
Changes in regulations or customer concerns regarding privacy and protection of customer data, or any failure to comply with such laws, could adversely
affect our business.
Federal, state, and international laws and regulations govern the collection, use, retention, disclosure, sharing and security of data that we receive from
and about our customers. The use of consumer data by online service providers and advertising
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