LeapFrog 2009 Annual Report Download - page 61

LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
Consolidated Statement of Cash Flows: Adjustments to reconcile net loss to net cash used in operating activities
for stock-based compensation expense was increased by $1,611 from $9,511 to $10,672, which was offset by
corresponding increases in net loss as indicated above under Consolidated Statement of Operation.
As of and for the year ended December 31, 2006
Consolidated Balance Sheet—Accumulated deficit was increased by $882 from $(12,292) to (13,174), and
additional paid-in capital increased by $882 from $343,310 to $344,192.
Consolidated Statement of Operation: The following financial statement captions were revised by $882: Selling,
general and administrative from $131,928 to $132,810, total operating expenses from $271,697 to $272,579, loss
from operations from $(124,663) to $(125,545), loss before income taxes from $(118,481) to $(119,363) and, net
loss from $(145,092) to $(145,974). Net loss per share was revised from $(2.31) to $(2.32).
Consolidated Statement of Cash Flows: Adjustments to reconcile net loss to net cash used in operating activities
for stock-based compensation expense was increased by $882 from $7,303 to $8,185, which was offset by
corresponding increases in net loss as indicated above under Consolidated Statement of Operation.
The Company has determined that the impact of these errors is not significant to previously issued annual and
interim financial statements as defined by Accounting Standards Codification (ASC) Topic 250, “Accounting
Changes and Error Corrections.” The audited financial statements, related notes and analyses for the years ended
December 31, 2008, 2007 and 2006 have been revised in the Form 10-K filing. All future filings, including
interim financial statements, will be revised appropriately.
Revenue Recognition
The Company derives the majority of its revenue from sales of its technology-based learning products and related
proprietary content. Revenue is recognized when products are shipped and title passes to the customer, provided
that there is evidence of a commercial arrangement, delivery has occurred, there is a fixed or determinable fee
and collection is reasonably assured. For online content downloads, delivery is considered to occur when the
download occurs. For professional training services, delivery is considered to occur when the training has been
performed. Amounts billed to customers for shipping and handling costs are recognized as revenue. Costs
incurred to ship merchandise from warehouse facilities are recorded in cost of sales.
Net sales consist of gross sales less negotiated price allowances based primarily on volume purchasing levels,
estimated returns, allowances for defective products, markdowns and other sales allowances for customer
promotions and other cooperative advertising arrangements. Correspondingly, these allowances are recorded as
reductions of gross accounts receivable.
Allowances for Doubtful Accounts, Sales Returns, Defective Products and Promotions
The Company reduces gross accounts receivable by an allowance for amounts it believes may become
uncollectible. This allowance is an estimate based primarily on management’s evaluation of the customer’s
financial condition in the context of current economic conditions, past collection history and aging of the
accounts receivable balances. The provision for uncollectible accounts is included in selling, general and
administrative expense in the statements of operations.
The Company also provides estimated allowances against revenues and accounts receivable for sales returns,
defective products, charge-backs and co-operative promotional agreements in the same period that the related
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