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Fellow stockholders, We produced our first learning product in 1995, and in Since it was unwrapped 2002, sales of our learning products made us the third on Christmas day … Arianna largest company in the United States toy industry.* “ has spent countless hours with LeapFrog is one of the fastest-growing education companies, her LeapPad on her lap.Within a and one of the largest publishers of children’s books in the month she could read the stories United States — and we are just getting started. in the original book quite well. 2002 was a banner year for LeapFrog. Annual net sales At first we thought that it was exceeded $531 million, which represented more than 69% more memorization than growth over our 2001 revenues. Net income for 2002 knowledge.We were wrong … increased 349% to $43.4 million compared with $9.7 million in 2001. In July 2002, our she constantly scans the house initial public offering raised a net $115 million for the company. Our capital resources for new words to read. She also and strong financial performance have us well positioned to fund our growth going forward. spends quite a bit of time read- ing her storybooks to her dolls Having met and exceeded all of our financial goals for 2002, we are looking forward to and stuffed animals....Thank building our product offering and developing new market opportunities in 2003. you for creating a wonderfully LeapFrog products are recognized for innovation, engagement and learning efficacy in fun way for my granddaughter every category in which we compete: to learn. Now she can’t wait until • Our core strength in preschool electronic learning aids (ELA) continues to grow. after her fifth birthday so she According to The NPD Group, our market share in 2002 reached 79%, and eight of can get her own library card. the 10 top-selling products in this category were from LeapFrog. We believe we can continue to drive the growth of this category by introducing two new platform products, —Juliann A. 22 new software titles and four standalone products in this market in 2003. Grandparent • We have made a definitive statement about our ability to compete in and address the non-preschool ELA, or “’tween and teen” market. Our market share in this category We integrated in the LeapFrog grew to 71% in 2002, and 16 of the 20 top-selling products were from LeapFrog. curriculum to bring us up to We believe we can lead the expansion of this category by launching four new products standards for literacy.We’re and seven new software titles for this market in 2003. having a lot of success with it. • We are a growth force in the infant and toddler category, our newest market segment. Some of the test results we’re Three of the 10 top-selling products in this category in 2002 were from LeapFrog. We getting with this system plan to introduce a platform product along with six standalone products for the infant are just amazing. and toddler market this year. — Margaret T. Distribution in more than 12 countries contributed to 228% net sales growth in our Teacher international segment in 2002, bringing net sales to $53.6 million. In 2003 we plan to Oakland, California reach out to international children with more than 40 new products. Net sales for our SchoolHouse division grew 129% to $20.1 million in 2002. We believe our SchoolHouse division products are now in use in more than 13,000 classrooms in the U.S. We believe our new LeapTrack™ Assessment and Instruction System is a powerful, effective tool for ” teachers that will help us reach still more educators and classrooms this year. LeapFrog’s focus going forward is clear. We are engaged in an ongoing mission to make learning more engaging and effective for children, parents and teachers. We look forward to launching additional innovative products in 2003, and hope you will continue to monitor our progress and results. Mike Wood President and CEO *Based on retail sales, according to The NPD Group / NPD Funworld /TRSTS. The NPD Toy Retail Sales Tracking Service market study is based on retail sell- through data that encompasses approximately 40% of the toy retailing industry. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 or ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission file number 001-31396 LEAPFROG ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Delaware 95-4652013 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6401 Hollis Street, Suite 150 Emeryville, CA 94608 (Address of principal executive offices) (510) 420-5000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Class A common stock, par value $0.0001 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. È Yes ‘ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ‘ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). ‘ Yes È No There was no established public trading market for the registrant’s common equity as of the last day of the registrant’s most recently completed second fiscal quarter. The number of shares of Class A common stock and Class B common stock, outstanding as of March 11, 2003, was 21,874,099 and 33,989,800, respectively. DOCUMENTS INCORPORATED BY REFERENCE The registrant has incorporated by reference in Part III of this report on Form 10-K portions of its definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 21, 2003, to be filed by April 30, 2003. SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS This report on Form 10-K, including the sections entitled “Item 1. Business,” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Result of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include those listed under “Risk Factors That May Affect Our Results and Stock Price” in Item 7 of this Form 10-K and those found elsewhere in this Form 10-K. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate” “predict,” “potential,” “continue” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this report. INDUSTRY DATA Market share and industry data disclosed in this report on Form 10-K have been obtained from the following sources and publications: NPDFunworldsm, a division of The NPD Group, Inc., Simba Information Inc., the U.S. Department of Education and the National School Supply and Equipment Association. In this Form 10-K, we use data from NPD Funworld’s Consumer Panel, and NPD Funworld’s Toy Retail Sales Tracking Service, or TRSTS. We refer to NPD Funworld’s Consumer Panel data when discussing the sizes of markets and our share of those markets and to TRSTS data when discussing sales of individual products. According to NPD Funworld, the Consumer Panel data is compiled from diary information collected from a panel of over 700,000 U.S. consumers, and this information is used to extrapolate data for the traditional U.S. toy market. NPD Funworld’s Consumer Panel data includes information about the overall size of the market and its various segments. According to NPD Funworld, the TRSTS data contains point- of-sale information from more than 21 large national and regional U.S. retailers and represents approximately 40% of the traditional U.S. toy market. The TRSTS data does not include any information from Wal-Mart, which is one of the largest toy retailers in the United States and was our largest customer in 2002 based on net sales. Despite the absence of information from Wal-Mart, we believe the TRSTS data is the best available source for toy industry product sales information.

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