Leapfrog Enterprises, Inc. ("LeapFrog" or the Company) is a developer of educational entertainment for children. The Company’s product portfolio consists of multimedia learning platforms and related content, and learning toys. The Company has developed a number of learning platforms, including the LeapPad family of learning tablets, the Leapster family of handheld learning game systems, and the LeapReader reading and writing systems.

The original Complaint alleges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b- 5 promulgated thereunder, by issuing a series of material misrepresentations with respect to the Company's sales projections for fiscal year 2003 to the market from August 20, 2003 through October 21, 2003.

Specifically, the Complaint alleges that the Defendants' statements about its sales projections were materially false and misleading because they failed to disclose and/or misrepresented the following adverse facts: (1) that LeapFrog was aware that its retail customers' orders were less than LeapFrog had forecast; (2) that LeapFrog was aware that Mattel's PowerTouch was outperforming LeapFrog's LeapPad line where LeapFrog's retail customers had decreased or not placed additional orders for LeapFrog products; (3) that LeapFrog was aware that its third quarter 2003 projections would not be met because retail customers' orders were less than expected and some retail customers had delayed shipment until the fourth quarter 2003; and (4) that as a result of the foregoing, Defendants lacked a reasonable basis for their sale projections for the Company, which were therefore materially false and misleading.

The Complaint further alleges that on October 21, 2003, LeapFrog announced that it missed its third quarter 2003 sales projection of $225 to $235 million with net sales for the third quarter of $203.9 million. The Company indicated that sales projections were not met because retail customers' orders were less than expected, and some retail customers had delayed shipment until the fourth quarter 2003. The market reacted swiftly to this news, with the Company's stock falling 25%, or $11.65 per share, to close at $34.89 per share on October 22, 2003.

On April 28, 2005, a Complaint was filed charging LeapFrog and certain of its officers and directors (collectively the "Defendants") with violations of the Securities Exchange Act of 1934 resulting from Defendants' false and misleading statements and omissions, which artificially inflated the price of LeapFrog's stock during the Class Period, February 11, 2004, through October 18, 2004, inclusive, causing harm to LeapFrog's investors. Specifically, the Complaint alleges that throughout the Class Period, Defendants continually assured investors that LeapFrog had taken the necessary steps to correct the problems in its IT systems and supply chain infrastructure (and that these efforts had been successful) and misrepresented and/or failed to disclose that: (i) the Company had not in fact materially improved either its IT systems or its supply chain infrastructure; and (ii) these issues were continuing to have a materially negative effect on its business and on its ability to accurately forecast results and meet analysts' sales and earnings expectations. The Complaint further claims that on October 18, 2004, LeapFrog announced that its 2004 earnings would miss its estimates by more than 60% due, in large part, to its failure to correct the IT and supply chain problems it said it had taken steps to correct. The announcement prompted a large sell-off of LeapFrog shares, which fell 34% in a single day, to a then all-time low of $11.99. Since then, LeapFrog has also missed fourth quarter estimates by a wide margin and replaced three members of its senior management, including its Chief Financial Officer and Chief Operating Officer.

According to a press release dated August 2, 2005, the court-appointed lead Plaintiff in In re LeapFrog Enterprises Sec. Litig., No. C-03-05421 RMW Lerach Coughlin Stoia Geller Rudman & Robbins LLP announced that they filed a consolidated class action Complaint on June 17, 2005 in the United States District Court for the Northern District of California on behalf of purchasers of LeapFrog class A common stock and options during the period between July 24, 2003 and October 18, 2004.

According to a press release dated August 4, 2005, the law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C. announced that a consolidated class action Complaint on behalf of purchasers of the securities of LeapFrog from July 24, 2003, through October 18, 2004, inclusive, was filed on June 17, 2005, in the United States District Court for the Northern District of California.

Notice of this filing was first announced on August 3, 2005, pursuant to a July 5, 2005 Court Order, a copy of which can be found at www.cmht.com. The July 5 Order was prompted by the fact that the consolidated class action Complaint filed on June 17, 2005 encompassed a substantially different class period and different allegations than the July 24, 2003 to February 10, 2004 class period for which the Court had previously appointed Alice Cupples and William Sullivan as lead Plaintiffs in an April 6, 2005 order. The new class period and allegations encompassed by the Consolidated Complaint include new allegations about LeapFrog's supply chain and IT system. Similar allegations about LeapFrog's supply chain and IT system had already been made in a different class action Complaint filed on April 25, 2005 by the law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C. on behalf of the Parnassus Fund and the Parnassus Equity Fund and other purchasers of LeapFrog securities between February 11, 2004 and October 18, 2004. In the July 5 Order, the Court found that "the new claims and new scope of the (Consolidated Complaint) necessitates new notice and lead plaintiff selection." The Court further noted that "(t)he fact that Parnassus claims to be an institutional investor with losses of over $10 million, while the Cupples Movants are individuals with alleged losses of only approximately $36,000 reinforces the conclusion that Parnassus may be better-suited to represent the class under the amended LeapFrog complaint."

On August 1, 2006, the Court issued the Order signed by Judge Ronald M. Whyte granting the Defendants’ motion to dismiss Plaintiffs’ Amended Consolidated Class Action Complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). The Plaintiffs were given 20 days to amend their Complaint.

On September 29, 2006, the Plaintiffs filed a Second Amended Consolidated Class Action Complaint. On November 26, 2006 Leap Frog and the individual Defendants filed separate motions to dismiss the Second Amended Consolidated Complaint.

According to the Order issued by U.S. District Judge Ronald M. Whyte, the court granted the Defendants' motions to dismiss the Second Amended Consolidated Class Action Complaint. Plaintiffs were given twenty (20) days from the date of this order to amend their Complaint.

On November 21, 2007, the Plaintiffs filed a Third Amended Consolidated Class Action Complaint.

Plaintiff's filed a motion for preliminary approval of settlement on April 18, 2008, which the judge ordered approved on May 1, 2008.

According to a news article dated July 14, 2008, a settlement was reached and LeapFrog will pay $2.3 million to settle allegations that it disguised problems caused by competition with Mattel Inc.'s Fisher-Price subsidiary. The joint motion for approval of the settlement was filed in the U.S. District Court for the Northern District of California on Friday.

The judge entered the Order and Final Judgment of Dismissal on September 29, 2008. Lead Counsel was awarded 19.28% of the settlement fund and reimbursement of expenses of $82,000.