LeapFrog 2005 Annual Report Download - page 99

LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the
Company would be subject to U.S. income tax in the approximate amount of $18,119, net of resulting tax credits.
The components of the Company’s deferred taxes are as follows:
December 31
2005 2004
Deferred tax assets: ........................................
NOL and Credits Carryover ............................. $12,404 $14,440
Inventory and other reserves ............................. 11,578 14,911
Depreciation and Amortization ........................... 3,092 622
Other ............................................... 229 1,669
Total ........................................... $27,303 $31,642
As of December 31, 2005, the Company has federal operating net loss carryforwards of $9,587 which will
expire in 2025. State net operating loss carryforwards totaling $32,590 as of December 31, 2005 will expire in
years 2007 through 2025. As of December 31, 2005, the Company also has federal and California research and
development credit carryforwards of $2,825 and $7,102, respectively. The federal research credit carryforwards
will expire beginning in 2024 while the California research credits can be carried forward indefinitely.
Management has determined that the Company will realize its entire deferred tax asset. Therefore, no
valuation allowance has been established for 2005 or 2004.
15. Defined Contribution Plan
The Company sponsors a defined contribution plan under Section 401 (k) of the Internal Revenue
Code. Effective September 1, 2005, the 401(k) plan provides that the Company match 50% of employee
contributions up to the greater of $2 or 6% of the participant’s compensation per plan year. Matching
contributions vest to employees over three years. Prior to September 1, 2005, the 401(k) program provided for
the Company to match 25% of employee contributions up to 4% of the participant’s compensation, with the
vesting occurring at the end of three years. Prior to October 2004, the defined contribution plan was sponsored by
Knowledge Universe, Inc. For the years ended December 31, 2005, 2004 and 2003, the Company recorded total
expense of $479, $307 and $238 respectively related to the defined contribution plan.
16. Stockholders’ Equity
Common Stock
The Company is authorized to issue 180,000 shares of common stock at a $0.0001 par value per share, of
which 139,500 shares are designated as Class A common stock and 40,500 shares are designated as Class B
common stock.
Conversion
Each holder of Class B common stock shall have the right to convert each share of Class B common stock
into one share of Class A common stock.
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