LeapFrog 2007 Annual Report Download - page 98

LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share and percent data)
Conversion
Each holder of Class B common stock has 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 are entitled to dividends when and as declared by the Board out of funds legally
available. When dividends are declared, such dividends will 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.
16. Stock-Based Compensation
Effective January 1, 2006, LeapFrog adopted the provisions of SFAS No. 123(R), as discussed in “Note 2:
Summary of Significant Accounting Policies.” On May 1, 2007, the stockholders approved an amendment to the
Company’s stock-based compensation plans to increase the number of shares of Class A common stock reserved
for issuance under the plan to 24,000 from 21,000.
The following table summarizes the effects of stock-based compensation resulting from the application of
SFAS No. 123(R):
In thousands, except per share amounts 2007 2006
Selling, general and administrative .......................................... $8,129 $4,688
Research and development ................................................ 1,195 2,615
Advertising ............................................................ 187 —
Stock-based compensation effects in income before taxes ........................ 9,511 7,303
Income taxes ........................................................... — —
Net stock-based compensation effects on net loss .............................. $9,511 $7,303
Stock-based compensation effects on loss per common share ..................... $ 0.09 $ 0.07
Stock-based compensation effects on net cash provided by operating activities ....... $9,511 $7,303
Stock-based compensation effects on net cash provided by financing activities ....... $1,648 $3,594
Stock options expense .................................................... 7,114 3,952
Restricted stock units and awards expense .................................... 2,397 3,351
Total stock-based compensation expense ..................................... $9,511 $7,303
LeapFrog periodically adjusts stock-based compensation for changes to the estimate of expected equity
award forfeitures based on a review of recent forfeiture activity and expected future employee turnover.
Stock-based compensation of $9,511 is recorded in common stock and additional paid in capital components
of equity. During 2007, the tax shortfall of $107 incurred for the tax deductions for equity awards was offset by a
valuation allowance and there was no net effect on additional paid-in capital.
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