1138951--2/22/2010--LEAPFROG_ENTERPRISES

related topics

{customer, product, revenue}

{condition, economic, financial}

{product, market, service}

{property, intellectual, protect}

{system, service, information}

{stock, price, operating}

{interest, director, officer}

{tax, income, asset}

{operation, natural, condition}

{operation, international, foreign}

{personnel, key, retain}

{product, liability, claim}

{regulation, change, law}

{provision, law, control}

{debt, indebtedness, cash}

Our business depends on highly changeable consumer preferences and toy trends. Our business depends on three retailers that together accounted for the vast majority of the United States segment s gross sales for the year, and our dependence upon a small group of retailers may increase. Our growing strategic focus on web-based products and customer relationship management may not yield the returns we expect, and may limit the adoption of our products in some international markets. Economic declines have had a material adverse effect on our sales, and a slow recovery could prevent us from achieving our financial goals in 2010 and beyond. Our business is seasonal, and our annual operating results depend, in large part, on sales relating to the brief holiday season. The unexpected loss of one or more members of our executive management team or other key employees could adversely affect our business. If we do not maintain sufficient inventory levels or if we are unable to deliver our products to our customers in sufficient quantities, or on a timely basis, or if retail inventory levels are too high, our operating results will be adversely affected. We depend on our suppliers for our components and raw materials, and our production or operating margins would be harmed if these suppliers are not able to meet our demand and alternative sources are not available. We rely on a limited number of manufacturers, virtually all of which are located in China, to produce our finished products, and our reputation and operating results could be harmed if they fail to produce quality products in a timely and cost-effective manner and in sufficient quantities. Our intellectual property rights include licenses from third parties and may not prevent other companies from using our technologies or similar technologies to develop competing products, which could weaken our competitive position and harm our operating results. Third parties have claimed, and may claim in the future, that we are infringing their intellectual property rights, which may cause us to incur significant litigation or licensing expenses or to stop selling some of our products or using some of our trademarks. Any errors or defects contained in our products, or our failure to comply with applicable safety standards, could result in recalls, delayed shipments and rejection of our products and damage to our reputation, and could expose us to regulatory or other legal action. Privacy concerns about our web-connected products and related software and applications could harm our reputation and hinder adoption of these products. System failures in our web-based services or store could harm our business. If we are unable to compete effectively with existing or new competitors, our sales and market share could decline. Retailer liquidity problems could harm our liquidity and financial results. Our liquidity may be insufficient to meet the long-term or periodic needs of our business. Our international business may not succeed and subjects us to risks associated with international operations. We are subject to international, federal, state and local laws and regulations that could impose additional costs or changes on the conduct of our business. Our net loss would be increased and our assets would be reduced if we are required to record impairment charges related to the value of our intangible assets. Natural disasters, armed hostilities, terrorism, labor strikes or public health issues could have a material adverse effect on our business. One stockholder controls a majority of our voting power as well as the composition of our board of directors. Our stock price has been extremely volatile over the past several years and could decline in the future, resulting in losses for our investors and harming the employee-retention and recruiting value of our equity compensation.

Full 10-K form ▸

1138951--2/22/2010--LEAPFROG_ENTERPRISES_INC