LeapFrog 2002 Annual Report Download - page 85

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LEAPFROG ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except share, per share and percent data)
by Affinity Squared, Inc. Accounts payable to Affinity Squared, Inc. was $26 and $0 at December 31, 2002 and
2001, respectively.
In August 2000, the Company entered into a cross-marketing agreement with Knowledge Kids Network, in
which the Company has an indirect minority ownership interest. Knowledge Kids Network is an affiliate of
Knowledge Universe. Under this agreement, the Company agreed to insert promotional materials of and
references for Knowledge Kids Network in its product packages, promotional advertisements and website in
exchange for various placements on and referrals from Knowledge Kids Network’s KidsEdge.com website. No
value was recognized from the advertising barter transaction, as the fair value of the advertising surrendered in
the transaction was not determinable. Historically, the Company has not entered into such transactions for cash or
other consideration.
In March 2001, the Company entered into an agreement with Knowledge Kids Network, in which
Knowledge Kids Network agreed to develop content and provide technical services in connection with LeapPad
interactive books. The Company incurred $658 and $1,371 in 2002 and 2001, respectively, in expenses for
services from Knowledge Kids Network. The Company had $5 and $218 recorded in accounts payable to
Knowledge Kids Network at December 31, 2002 and 2001, respectively.
In March 2001, the Company sold 2,000,000 shares of its Series A preferred stock for an aggregate
consideration of $25 million to CSC LF Holdings, LLC, Publishing and Broadcasting International Ltd. and
Windsor Digital Studio LLC. In connection with this sale, the Company entered into an Amended and Restated
Stockholders Agreement with these purchasers, Knowledge Kids, L.L.C., an affiliate of Knowledge Universe,
FrogPond, Michael C. Wood, the Company’s President and Chief Executive Officer, and Explore Technologies.
This agreement was amended and restated in July 2002.
At the Company’s request, the underwriters of its initial public offering allowed the Company to sell at our
initial public offering approximately 500,000 shares of Class A common stock at the initial public offering price
to persons who were directors, officers or employees, or who were otherwise associated with the Company,
through a directed share program. Two of the Company’s directors purchased a total of 89,830 shares of Class A
common stock through the directed share program.
Also, see Note 13 (Income Taxes) for a discussion of a tax sharing agreement between the Company and
Knowledge Universe, Inc.
F-16