LeapFrog 2002 Annual Report Download - page 6

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PART I
Item 1. Business
Overview
LeapFrog is a leading designer, developer and marketer of innovative, technology-based educational
products and related proprietary content, dedicated to making learning effective and engaging. We currently
design our products to help preschool through 8th grade children learn age- and skill-appropriate subject matter,
including phonics, reading, math, spelling, science, geography, history and music. We have also extended our
product line downward in age to reach infants and toddlers and upward in age to reach high school students. We
base our products on sound educational pedagogy under the guidance of our in-house educational experts and our
Education Advisory Board. We then use our proprietary technologies and content to make these products
interactive and engaging. Our product line includes: (1) platforms, which are portable, affordable hardware
devices, (2) content, such as interactive books and cartridges, specifically designed for use with our platforms
and (3) stand-alone educational products. Our products are sold throughout the United States primarily by
national and regional mass-market and specialty retailers, and to a lesser extent into international markets and to
U.S. schools.
By the end of 2002, we had introduced six core platforms that offer age-appropriate user interfaces and
work interactively with a variety of books, cartridges or other content units. Under our LeapFrog brand, our
platforms include the Imagination Desk learning system designed for ages 3 to 5, the My First LeapPad learning
system for ages 3 to 5 and the LeapPad learning system for ages 4 to 8. Under our Quantum Leap brand, our
platforms include the Turbo Twist handhelds designed for 1st through 6th grades, the Quantum Pad learning
system, for 3rd through 5th grades, and the iQuest interactive handhelds for middle school through high school
students. As of December 31, 2002, we have sold more than 14 million platforms. These platforms provide us
with a large and growing installed base on which to build continued content sales.
Our product line also includes a significant library of proprietary content, most of which has been developed
internally, for use with our platforms. For our Imagination Desk, My First LeapPad, LeapPad and Quantum Pad
platforms, each set of additional content consists of an audio cartridge as well as a corresponding interactive
book, activity sheet or coloring page. For our Turbo Twist and iQuest handhelds, our content comes in memory
cartridges that slot easily into the platforms. We currently offer over 75 interactive books for our Imagination
Desk, My First LeapPad, LeapPad and Quantum Pad platforms at U.S. retail stores. We also currently offer nine
Turbo Twist cartridges with math, spelling and social studies questions, as well as 7 cartridges for our iQuest
platform covering chapter outlines and other material from over 200 major textbooks used in 5th through 8th
grade classrooms in U.S. schools and for PSAT, SAT and ACT preparation materials for high school students.
Our currently available iQuest content as well as additional content for some of our other platforms can be
downloaded from our Internet website to a re-writable flash memory cartridge using a home computer and our
Mind Station connector, a peripheral sold at retail stores. Our activity sheets and coloring pages for our
Imagination Desk and activity sheets for our LeapPad platform can also be downloaded from our Internet website
in a printable format.
In 2002, our LeapPad platform and related LeapPad books were the two best-selling products in the U.S. toy
industry, based on total dollar sales, according to NPD. By using a specially designed stylus that incorporates our
proprietary NearTouch technology, children touch words and images on our interactive books placed in our
LeapPad platform. Depending on the book, they can hear information regarding various academic subjects, read
engaging stories or play interactive, educational games. Our LeapPad platform evolves with a child as his or her
interests and abilities change, since switching the content is as easy as changing the book and related audio
cartridge. Many of our LeapPad interactive books feature our internally developed, branded LeapFrog characters,
such as Leap, Lily and Tad, while others feature popular licensed characters such as Thomas the Tank Engine,
Bob the Builder, Winnie-the-Pooh, Disney Princesses, Scooby-Doo, Arthur and characters from the movie
Monsters, Inc.
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