LeapFrog 2006 Annual Report Download - page 94

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LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share and percent data)
On November 10, 2005, the Financial Accounting Standards Board, or FASB issued FASB Staff Position
No. FAS 123(R)-3, “Transition Election Related to Accounting for Tax Effects of Share-Based Payment
Awards.” The Company has adopted the alternative transition method provided in the FASB Staff Position for
calculating the tax effects (if any) of stock-based compensation expense pursuant to SFAS 123(R). The
alternative transition method includes simplified methods to establish the beginning balance of the additional
paid-in capital pool (APIC pool) related to the tax effects of employee stock-based compensation, and to
determine the subsequent impact to the APIC pool and the consolidated statements of operations and cash flows
of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of
SFAS 123(R).
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 this change, in 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 2005, the defined contribution plan was
sponsored by Knowledge Universe, Inc. For the years ended December 31, 2006, 2005 and 2004, the Company
recorded total expense of $829, $479 and $307, 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.
Dividends
Class A and B stockholders shall be entitled to dividends when and as declared by the Board out of funds
legally available. When dividends are declared, such dividends shall be paid in equal amounts per share on all
shares of Class A and Class B common stock.
Voting
The Class A stockholders are entitled to one vote per share and the Class B stockholders are entitled to ten
votes per share.
Liquidation
Class A and B common stockholders are equally entitled to all assets of the Company available for
distribution.
F-22