LeapFrog 2005 Annual Report Download - page 32

On April 25, 2005, another class action complaint entitled The Parnassus Fund et al. v. LeapFrog
Enterprises, Inc., et al., No. 05-01695 JSW, was filed in federal district court for the Northern District of
California against us, our current CEO and our former CFO alleging violations of the 1934 Act. On June 3,
2005, a nearly identical class action complaint entitled Fredde Gentry et al. v. LeapFrog Enterprises, Inc. et al.,
No. 05-02279 MJJ, was filed in federal district court for the Northern District of California. Both the Parnassus
and Gentry complaints purport to be class actions brought on behalf of persons who acquired LeapFrog securities
during the period of February 11, 2004 through October 18, 2004. The complaints alleged that the defendants
caused us to make false and misleading statements about our business, operations, management and value of our
common stock, which allowed insiders to sell our common stock at artificially inflated prices and which caused
plaintiffs to purchase our common stock at artificially inflated prices. Neither of these complaints specified the
amount of damages sought.
On June 17, 2005, lead plaintiffs in the class actions that were consolidated under the March 31, 2005
order filed a consolidated complaint. The consolidated complaint alleged that the defendants caused us to make
false and misleading statements about our business and forecasts about our financial performance, that certain of
our individual officers and directors sold portions of their stock holdings while in the possession of adverse,
non-public information, and that certain of our financial statements were false and misleading. The consolidated
complaint also alleged an expanded class period of July 24, 2003 through October 18, 2004 (thereby including
the purported class period of the Parnassus and Gentry complaints), and sought unspecified damages. On
May 10, 2005 and June 28, 2005, lead plaintiffs for the Miller, etc. actions also filed notices to relate and
consolidate the Parnassus and Gentry actions, respectively, with the original class actions that had been
consolidated by the March 31, 2005 order. In July 2005, the Court entered an order relating the Parnassus and
Gentry actions with the cases consolidated under the March 31, 2005 consolidation order. On November 23,
2005, the Court entered an order appointing the plaintiffs in the Parnassus action as lead plaintiffs. On
January 27, 2006, the lead plaintiffs filed an amended and consolidated complaint. The class period and
defendants are identical to that alleged in the complaint filed on June 17, 2005 by the previous lead plaintiffs, and
the substantive allegations are largely the same. By stipulation and order, we are due to respond to the amended
and consolidated complaint on March 27, 2006. Discovery has not commenced and no trial date has been set.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to our stockholders during the fourth quarter of our 2005 fiscal year.
25