LeapFrog 2003 Annual Report Download - page 7

Download and view the complete annual report

Please find page 7 of the 2003 LeapFrog annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 170

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170

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 infants and toddlers through high school students learn age- and skill-appropriate
subject matter, including phonics, reading, writing, math, spelling, science, geography, history and music. 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) learning platforms, which are portable, affordable
hardware devices, (2) educational software-based content, such as interactive books and cartridges, specifically
designed for use with our learning 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.
As of December 31, 2003, we have sold more than 23 million platform products since 1999. These
platforms provide us with a large and growing installed base on which to build continued software content sales.
In 2003 we introduced three new platforms, the LittleTouch LeapPad learning system designed for ages 6 months
to 3 years, the LeapPad Plus Writing learning system designed for ages 4 to 8 years and the Leapster multimedia
learning system designed for ages 4 to 8 years.
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 LittleTouch LeapPad, My First LeapPad, LeapPad, LeapPad Plus
Writing and Quantum Pad platforms, which together constitutes our LeapPad family of platforms, each set of
content related to those platforms consists of an audio cartridge as well as a corresponding interactive books and
activity cards. For our Turbo Twist, iQuest and Leapster handhelds, our content comes in memory cartridges that
slot easily into the platforms. We currently offer over 100 interactive books for our LeapPad family of platforms
at U.S. retail stores. We also currently offer eight Leapster cartridges with math, phonics and writing, nine Turbo
Twist cartridges with math, spelling and social studies questions, as well as seven cartridges for our iQuest
platform covering material from over 250 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.
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 family of platforms. Depending on the book,
they can hear information regarding various academic subjects, read engaging stories or play interactive,
educational games. Our LeapPad family of platforms 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 family-related interactive books feature our internally developed, branded LeapFrog characters, such as
Leap, Lily, Tad and Professor Quigley, while others feature popular licensed characters such as Thomas the Tank
Engine, Dora the Explorer, Bob the Builder, Winnie-the-Pooh, Disney Princesses, Scooby-Doo, Dr. Seuss’ The
Cat in the Hat and characters from the movies like Monsters, Inc.,The Lion King,Toy Story 2 and Finding Nemo.
Our product line also includes over 35 stand-alone educational products. These stand-alone products
combine our proprietary technologies with a fixed set of content and include our interactive plush toys, our
LeapStart learning table and our Fridge Phonics magnetic set products for infants and toddlers and our Explorer
interactive globes for older children.
Since the inception of our business in 1995, we have focused primarily on the U.S. consumer market. This
market represented the substantial majority of our sales and operating profit in 2003 and will continue to be our
primary focus in the near future. However, we are increasing our focus on international markets and have
1
PART I