LeapFrog 2002 Annual Report Download - page 22

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challenges, we announced strategic relationships with Benesse Corporation and Sega Toys. In March 2002, Sega
Toys began distributing the CoCoPad system, a co-branded, modified version of our LeapPad platform, and Sega
Toys has developed original Japanese-language content for interactive books used with the CoCoPad system,
including books by Berlitz International that help teach English. Benesse Corporation is assisting us in
developing the Japanese supplemental educational materials market by distributing the CoCoPad system to its
pre-school through third grade level subscribers and, in 2002 distributed a co-branded version of our Quantum
Pad platform under the QPad name to its 7th grade subscribers. Additionally, Benesse Corporation has developed
original educational content in Japanese and English for interactive books to be used with the CoCoPad system.
Our international sales team, including our U.K. office, comprised 33 employees as of December 31, 2002.
Research and Development
Hardware and Software Development
To develop our products and content, we have assembled a team of technologists with backgrounds in a
wide variety of fields including education, child development, hardware engineering, software development,
video games and toys. We have developed internally each of our current platforms and stand-alone products,
although we may use licensed technology for future platforms if it is advantageous to do so.
We have successfully developed proprietary technologies that we use across a number of products in the
markets we serve. We have made innovations in the areas of touch detection technology, speech compression,
music synthesis and content generation. By combining technology developments with the ability to target mixed
signal ASIC integration, we have been able to add features at comparatively low cost.
We have built internal expertise in hardware design, hardware synthesis, mixed signal custom ASIC design,
real-time embedded systems, software design, tools for packaging and compiling product content and mechanical
engineering. The research and development team participates in all phases of the product development process
from concept through manufacturing launch.
In 2002, 2001 and 2000, we had product development and engineering expenses of $25.3 million, $23.4
million and $12.5 million, respectively.
Our hardware and software engineering, research and development team, located in our Los Gatos,
California facility, comprised 61 employees as of December 31, 2002.
Content Development
Our dedicated content production department has designed a large majority of the art, audio and other
content for our interactive books, activity sheets, coloring pages and stand-alone products, applying our own
pedagogical approach that is based on established educational standards. Our content development group is
responsible for creating a substantial portion of our new content available for download from our Internet website
using our Mind Station connectors. Most of the members of our content production team have prior experience in
the education, entertainment and educational software or video game industries.
We have developed a portion of our content using licensed characters such as Thomas the Tank Engine,Bob
the Builder,Winnie-the-Pooh and Arthur, and we plan to continue the use of licensed characters in our LeapPad
interactive books and other content. In addition, we offer licensed BrainQuest content for our Turbo Twist
handheld and test preparation materials from Kaplan, Inc. for use with our iQuest handheld.
We launched our Developer’s Studio in July 2001, a team dedicated to creating software tools that help turn
the content designed by our content developers into interactive books and activity sheets that work with our
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