LeapFrog 2005 Annual Report Download - page 93

LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
8. Intangible Assets
December 31,
2005 2004
Trademarks, patents and other intangibles ...................... $14,378 $14,378
Less accumulated amortization ............................... (6,353) (4,431)
8,025 9,947
Goodwill ................................................ 19,549 19,549
Intangible assets, net ................................... $27,574 $29,496
In January 2004, the Company entered into a ten-year technology license agreement with a third party to
jointly develop and customize their respective technologies to be combined in a platform and related licensed
products. The agreement calls for contractual payments of $6,000 in license fees, payable in 2004, of which
$5,000 has been paid as of December 31, 2004. The $6,000 license fee is included in intangible assets on the
balance sheet and is being amortized on a straight-line basis over the life of the contract.
Amortization expense related to trademarks, patents and other intangible assets was $1,923, $1,872, and
$1,144 for the years ended December 31, 2005, 2004, and 2003, respectively. The estimated future amortization
expense related to these intangible assets is as follows:
Year Ended December 31,
2006 .............................................................. $1,641
2007 .............................................................. 1,421
2008 .............................................................. 917
2009 .............................................................. 817
2010 .............................................................. 817
Thereafter .......................................................... 2,412
$8,025
9. Related Party Transactions
The Company is reporting the following related party transactions that involve Knowledge Universe, LLC
and Lawrence J. Ellison, as it was a subsidiary of Knowledge Universe in 2002 and through April 2003. From
April 2003 through April 2004, Lawrence J. Ellison and entities controlled by him, Michael R. Milken, Lowell J.
Milken, and Knowledge Universe (which is controlled by Messrs. M. Milken, L. Milken and Ellison) and its
affiliates owned a majority of the Company’s voting shares. From April 2004, the Company has been a
subsidiary of Mollusk Holdings, LLC, an entity controlled by Lawrence J. Ellison, which owns a majority of the
Company’s voting shares. In April 2004, Knowledge Universe, LLC changed its name to “KU LLC” and in
October 2004, KU LLC changed its name to “Krest LLC.”
In August 2005, the Company entered into a software capital lease agreement for a new enterprise resource
planning (ERP) system, Oracle 11i. The total commitment of the lease, which expires on December 31, 2007 is
$1,566. At December 31, 2005, the Company had remaining liability of $1,140 related to this lease, of which
$570 is included in the “Long term liabilities” section of the balance sheet and the remaining balance is included
in “Accrued liabilities.” The estimated annual payments for this lease are $570 for each of 2006 and 2007,
respectively, and the interest rate is 3.0%. In 2004 and 2003, the Company purchased software products and
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