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LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share and percent data)
8. Intangible Assets
December 31,
2006 2005
Trademarks, patents and other intangibles ...................... $14,378 $14,378
Less accumulated amortization ............................... (7,994) (6,353)
6,384 8,025
Goodwill ................................................ 19,549 19,549
Intangible assets, net ................................... $25,933 $27,574
In 2005, 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 $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 $1,641, $1,923, and
$1,872 for the years ended December 31, 2006, 2005, and 2004, respectively. The estimated future amortization
expense related to these intangible assets is as follows:
Year Ended December 31,
2007 .............................................................. $1,422
2008 .............................................................. 917
2009 .............................................................. 817
2010 .............................................................. 817
2011 .............................................................. 817
Thereafter .......................................................... 1,594
$6,384
9. Related Party Transactions
Since 2004, the Company has been a subsidiary of Mollusk Holdings, LLC, an entity controlled by
Lawrence J. Ellison. In 2006, the Company purchased software products and support services from Oracle
Corporation totaling $391. As of December 31, 2006, Lawrence J. Ellison, the Chief Executive Officer of Oracle
Corporation, may be deemed to have or share the power to direct the voting and disposition, and therefore, to
have beneficial ownership of approximately 16,750,000 shares of the Company’s Class B common stock, which
represents approximately 26.3% of the combined voting power of the Company’s Class A common stock and
Class B common stock.
In 2006, the Company paid Pillar Data Systems, Inc. a total of $303 in equipment fees. Mr. Ellison is the
majority stockholder of Pillar Data Systems, Inc.
The Company is currently involved in a dispute with Mounte LLC arising out of a 2002 tax sharing
agreement between LeapFrog and Knowledge Universe, Inc., the predecessor in interest of Mounte LLC. The
Company is claiming a $635 refund of amounts that the Company previously paid under the agreement, while
Mounte LLC is claiming that the Company owes an additional payment of approximately $1,200. Mounte LLC is
F-16