MBLV MobiVentures Inc (CE)

Overview

MobiVentures Inc. (“we”, “us”, “our” or the “Company”) is engaged in the business of providing multi-media mobile content, applications and services. We were originally engaged in the business of commercializing our MobileMail software. In 2007, we identified an opportunity to grow through the strategic consolidation of fast growing companies operating within the mobile content and service industry. In line with this strategy, we acquired Oy Tracebit AB (“Tracebit”), a Finnish mobile games and content company, and held discussions with a number of other companies as acquisition targets in the U.S., Europe and South East Asia. We are continuing discussions with certain of these companies at the present time, although no definitive acquisition agreements have been executed to date. Our plan is to develop our existing business through acquisitions and internal growth in order to become an established provider of leading edge multi-media mobile content, applications and services with clients across the United Kingdom, Europe, Asia and North America. Tracebit has developed more than 30 original games and applications for mobile phones and simultaneously created a global network of customers consisting of over 150 agreements including sales channels with global mobile carriers, service providers and content distributors, ensuring delivery to a global audience. Tracebit licenses well-known brands to attach to the products it makes in order to differentiate from other products in the marketplace.

We believe we have assembled a strong management team both through the acquisition of Tracebit and by engaging with seasoned executives from the mobile industry who have a proven track record in creating sustainable and profitable ventures within the mobile sector, both in Europe and the U.S.

We are also the owner of a suite of software applications that we refer to as the MobileMail software which provide a platform for enabling users to send Short Message Service (“SMS”) messaging traffic to wireless devices using the Internet and to, in turn, receive SMS messages from wireless devices through the Internet. The SMS short message service refers to an industry adopted standard for sending and receiving text messages to and from mobile telephones. Our MobileMail messaging solutions allow network operators and enterprises to offer their customers SMS messaging on their Internet home pages and the ability to send SMS messages from their personal computers.

The MobileMail SMS messaging technology is no longer the core product in relation to our current and future operational plans. As such, we do not envisage proceeding with any further developments of the messaging technology. Support will continue to current customers but no resources will be allocated to extend the sales and marketing of the current SMS messaging platform.

Acquisition of OY Tracebit AB

On February 6, 2007, we completed the acquisition (the “Acquisition”) of all of the issued and outstanding shares in the capital of Tracebit pursuant to an Equity Share Purchase Agreement dated January 31, 2007 among the Company and Capella Capital OU, Pollux OU and Tracebit Holding OY (collectively, the “Vendors”) and Tracebit in consideration for the issuance of an aggregate of 8,224,650 shares of our common stock to the Vendors.

We appointed three new directors to our board of directors upon the completion of the Acquisition, each of whom was a principal shareholder of Tracebit. The business of Tracebit has been our primary business subsequent to the completion of the Acquisition.

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Our Corporate Organization

We were incorporated on April 1, 2005 under the laws of the State of Nevada. We carry out our business operations through our wholly owned subsidiaries, Tracebit and Mobilemail Limited (“Mobilemail UK”). MobileMail UK is incorporated and headquartered in the United Kingdom. Tracebit is incorporated and headquartered in Finland. Our principal office is located at Suite 3.19, MLS Business Centre, 130 Shaftesbury Avenue, London, England, W1D 5EU. Our telephone number is +44 (0)20 7031 1193 and our fax number is +44 (0)20 7031 1199.

Effective July 30, 2007, we increased our authorized capital from 100,000,000 shares to 300,000,000 shares with a par value of $0.001 per share. Effective August 2, 2007, we completed a change of our corporate name from “Mobilemail (US) Inc.” to “MobiVentures Inc.”.

Tracebit was incorporated under the laws of Finland in October 1996. Initially, the core business of Tracebit was IT consulting. However, in 2001, Tracebit divested its IT consulting business and entered the mobile sector, first by selling ring tone and logo editor products created by it and later the same year focusing on emerging J2ME mobile games market.

Tracebit Mobil Solutions India (PVT) was incorporated as a wholly-owned subsidiary of Tracebit in India in 2004. The subsidiary was subsequently dissolved during 2006.

Business of Tracebit

Since 2001, Tracebit has been a developer and publisher of leading edge games and entertainment applications for mobile handsets. Tracebit has developed more than 30 original games and applications for mobile phones and simultaneously created a global network of customers consisting of over 150 agreements including approximately 70 sales channels with global mobile carriers, service providers and content distributors, ensuring delivery to a global audience. Tracebit licenses well-known brands to attach to the products it makes in order to differentiate from other products in the marketplace.

Currently, Tracebit has 10 brands for which it develops mobile games and applications, including: David Coulthard; Kung Fu Hustle; WilliamsF1 Team; Nicky Hayden - MotoGP 2006 World Champion; Scott Dixon (winner of Indy Cars series); Moomin characters; Reality of Speed/BooKoo; Subaru WRX and Giancarlo Fisichella Motor Sport.

Tracebit’s customers are ultimately mobile phone users all over the world that download content (the games Tracebit creates) from:

• mobile portals such as Jamba! and Zingy; or

• carrier sales such as Vodafone, T-Mobile, Orange and Elisa Finland among others.

The mobile portal and carrier sales channels receive content from Tracebit in two ways:

• under a direct agreement with Tracebit that delivers the content to them; or

• through agreements with one or more content aggregators who may represent Tracebit’s content and are in a contractual relationship with Tracebit.

The agreements Tracebit makes are either:

• on a revenue share basis where Tracebit receives a fixed percentage of the net revenues the contract partner receives from its customers; or

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• on a fixed fee basis where Tracebit receives a fixed fee per download of its content.

Currently Tracebit’s main sales channels include carriers and mobile portals such as: Elisa Finland; T-Mobile Hungary; Peoples Telephone HK (Part of China Mobile); Times India Ltd.; Opera Telecom (UK); and Playfon (Russia). The main distribution network includes content aggregators such as: Cellmania (US); WapOneLine (US); MIG (China); Airgames (Canada); Amaio (Czech Republic); LocZ (Brazil); End2End (Denmark); and Selatra (UK).

Our Products

We design our portfolio of games to appeal to a broad wireless subscriber base. Our portfolio of games includes original games based on our own intellectual property and games based on brands and other intellectual property licensed by us from branded content owners. These latter games are inspired by non-mobile brands and intellectual property, including movies, board games, Internet-based casual games and console games.

End users typically purchase our games from their wireless carrier and are billed on their monthly phone bill. In Europe, our subscription prices range from 3 to 5 euros, while one-time fees for unlimited use range both higher and lower, depending on the country. Carriers normally share with us 35% to 50% of their subscribers’ payments for our games, which we record as revenues. In the case of games based on licensed brands, we, in turn, share with the content licensor a portion of our revenues. The average royalty rate that we paid on games based on licensed intellectual property was 40% in 2006 and 2007. In the case of games licensed from third party developers, we, in turn, share with the game developers a portion of our revenues. The average rate that we paid on games based on licenses from third party developers was 50% in 2007. We did not have any third party games for sale during 2006.

Our games typically generate revenues for 18 to 24 months after release. As a result, we generate a significant portion of our revenues from our collection of games that have been in release for more than 12 months.

Wireless carriers generally control the price charged to end users for our mobile games either by approving or establishing the price of the games charged to their subscribers. Some of our carrier agreements also restrict our ability to change established prices.

The following table sets forth information regarding a selection of our games:

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Our Market Opportunity

Products such as ring tones outsell any other types of content at an approximately 2 to 1 ratio and wallpapers are surprisingly popular considering that people can make their own with their camera phones.

We therefore plan to further expand Tracebit’s current product offering including:

We have already started the process to expand our content portfolio to include video clips, streamed video, wallpaper and graphics and third party developer games. We plan to continue this expansion during 2008.

Furthermore, we may consider acquiring an already existing portal with an existing user base and a proven business model, where Tracebit would aim to create a one stop shop for purchasing content and an

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online mobile community where users interact with each other, anywhere, anytime, and expand their social network on a daily basis using services like mobile messaging, blogging, user profiles, friends, groups, picture, video & music sharing, downloadable free mobile content, downloadable premium mobile content and multi-player games that the portal would offer. We plan to leverage this community as a media channel for advertisers and act as a merchant for mobile content providers.

We plan to introduce additional revenue streams for Tracebit to the completed online portal to further increase the interaction between the community’s members, thus helping to attract new individual and business users. We plan to source value adding partnerships with leading VOIP and mobile T.V. service providers. These services would be added into the current messaging portfolio of MobileMail SMS based communication solutions to initiate the development of an interactive multi media messaging interface, providing additional revenue through direct users and branding/advertising opportunities.

Competition

Our primary competitors include Glu Mobile, Digital Chocolate, Electronic Arts (EA Mobile), Gameloft, Hands-On Mobile, I-play, Namco and THQ, among others. In the future, likely competitors include major media companies, traditional video game publishers, content aggregators, mobile software providers and independent mobile game publishers. Wireless carriers may also decide to develop, internally or through a managed third-party developer, and distribute their own mobile games. If carriers enter the mobile game market as publishers, they might refuse to distribute some or all of our games or might deny us access to all or part of their networks.

The development, distribution and sale of mobile games is a highly competitive business. For end users, we compete primarily on the basis of brand, game quality and price. For carriers, we compete for deck placement based on these factors, as well as historical performance and perception of sales potential and relationships with licensors of brands and other intellectual property. For content and brand licensors, we compete based on royalty and other economic terms, perceptions of development quality, porting abilities, speed of execution, distribution breadth and relationships with carriers.

Some of our competitors’ and our potential competitors’ advantages over us, either globally or in particular geographic markets include having significantly greater revenues and financial resources, stronger brand and consumer recognition, pre-existing relationships with brand owners or carriers; lower labor and development costs, and broader distribution.

We plan to create a portal and host a mobile social network that would enable Tracebit to increase revenues by collecting demographics of users and utilizing this together with media agencies to reach their client’s target groups with greater accuracy using content and portal for advertising. So far we have not been able to identify a direct competitor offering content distribution and a mobile community portal with a merchant, community and advertising business model. However, within the individual categories we plan to combine, each has its own competitors as outlined below.

The competitive landscape in which Tracebit plans to operate can be split into three broad categories:

• mobile portal: includes competitors such as Jamba! and Zed.

• content distribution: includes competitors such as MobileMedia and MediaPlazza.

• mobile advertising: includes competitors such as Greystripe and AvantGo.

Mobile Portal

Mobile portals sell a wide variety of mobile content to end users on a per download or subscription basis where the user pays a periodical fixed fee and can choose a limited amount of content from a range. The

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fee is generally less than if the user would have purchased the same items individually. Mobile portals target users specifically looking to personalize their mobile phone by downloading mobile content.

The mobile community business model has a high customer loyalty compared to a pure merchant business model. We plan to differentiate Tracebit from its competition by acquiring a mobile community, and growing the number of registered users interacting with each other, as shown by internet companies such as mySpace and YouTube to create an attractive environment for advertisers, by offering free services like blogging, personal profiles, video, picture and music sharing, friends, groups, search and e-mail. We plan to sell premium downloadable mobile content on the community portal where one of the key differentiating factors is that Tracebit will offer its registered customer base select advertisement enabled content for free, lowering the barrier to enter the world of premium content while at the same time deriving revenues from advertisers. We also plan to offer a possibility for registered users to store their content giving them a possibility to secure their purchase, this typically is something the other competitors do not offer and a customer has to buy the content again if he or she buys a new phone.

Content Distribution

A content distributor sources a wide array of content from content developers and sells it to mobile carriers and portals whose users download the content for a fee that is split between all parties in the value chain on a revenue share basis. Some content distributors also offer turn-key solutions for persons willing to become merchants of mobile content.

We plan to compete in this space by offering content that Tracebit either sources from other content developers and/or produces. There are two major differentiating factors in its product offerings: i) unique content – Tracebit makes the content and controls who offers it to a specific carrier or portal or may agree to source some content on an exclusive basis; and ii) branded content – the carrier or portal already has similar content, however, as there is a brand attached to it, it differentiates enough from others, having better chances of inclusion in the carrier or portal content offering. We plan to pursue licensing additional brands on a continuous basis. We plan to also increase Tracebit’s local presence in US and Asian markets, providing better opportunities to interact with customers. We also plan to explore opportunities in creating co-marketing efforts with the carriers or portals to provide more visibility for the content offered. We also plan to leverage the Tracebit brand and the fact that it has been a pioneer in the mobile content market while adding new channels and exploiting existing ones.

Mobile Advertising

Competitors in this space offers content for free or for a reduced price to the customers who in return are exposed to dynamic advertisements (banners, full-screen advertisements or strategically placed product promotions inside game content) while they consume the content. One competitor offers a possibility for select partners to distribute the full ad-enabled catalog. Most competitors offer on-line tools for advertisers to follow up their mobile campaign.

Tracebit’s main asset and competitive advantage is expected to be the profiles of the members of its mobile community, providing very specific demographic information that can be used to target a specific audience. Using proprietary technology we expect to have the ability to attach dynamically targeted advertising to virtually every piece of content on Tracebit’s portal as well as within the free services therein.

Marketing Plan

The key to enhanced uptake of our products are:

• Capture greater market share with carriers and mobile portals;

• Increased visibility of mobile portal; and

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• Establish the mobile community as a recognized media channel among the media agencies and brand owners.

To succeed in our marketing efforts we believe we will need to recruit an experienced marketing expert who will be responsible for setting up and implementing a detailed marketing strategy that helps us reach the objectives above.

Carriers and Mobile Portals

To capture greater market share with carriers and mobile portals, we plan to target carriers, mobile portals, value added resellers and aggregators worldwide with a focus on growth markets like USA, China, India and Brazil.

With the addition of new sales people we expect to have the ability to meet up with the carriers and mobile portals key decision makers on a regular basis to discuss our product offerings. We plan to offer them a fee in exchange for better product placement, advertisements of our products on their own portal and advertisements of their service in the local media where our products are represented. We plan to offer them brand related prizes to be used in contests they arrange on their portal where our products would get visibility. We plan to create an on-line marketing catalog of our product portfolio for the carriers and mobile portals where they can easily view, listen or try out our products.

We plan to add our corporate messaging applications to Tracebit’s portfolio of mobile content as a value-added service. Tracebit’s current distribution channels with mobile operators and value-added resellers provides an opportunity to add to the reseller channels already in place across Hong Kong, China, Africa, Europe, the United Kingdom and the Unites States.

We also plan to attend industry fairs, including among others 3GSM, GDC and CES, where we would set up a booth to present our products and gain access to new sales channels. We further would use banner advertising on Internet sites in conjunction with new product launches to stimulate general consumer awareness and demand for our branded products.

Mobile Portal

To increase visibility of our mobile portal, we plan to target t he global mobile phone subscriber base, particularly teenagers and young people who generally have an interest in sports and music.

We plan to approach celebrities with the intent of getting them to join the community and getting permission to making it public through a press release. We plan to use Internet banners, TV-spot and newspaper advertising with an emphasis on free services, free (ad-enabled) downloadable mobile content, and branded content. We also plan to advertise on search engines like Google, using Ad Words and to offer a quality service to get good response from word-of-mouth viral marketing. We plan to attract new users by offering free contests for our registered users where you can win prizes.

Mobile Community

To establish the mobile community as a recognized media channel among the media agencies and brand owners, we plan to target media agencies and brand owners.

We plan to engage a media agency account manager who would visit the media agencies and also to use sales promotion efforts by offering the media agencies a free trial of our service as a media channel and send out promotional leaflets to media agencies.

Our Mobile Solutions

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Our MobileMail software solution enables us to offer to our potential customers a computer based solution for sending and receiving SMS messages from personal computers to wireless devices using the Internet. This solution is achieved by employing our MobileMail software on a user’s personal computer, which provides the computer interface with the user, and on a network server, which provides the SMS messaging functionality and administration services. Our MobileMail solution enables users to send and receive SMS messages from their personal computers to mobile devices without the requirement for involvement by the user or customer in the distribution of the wireless services. We offer two distinct user interfaces that provide users with this functionality, namely our MailSMS and EasySMS software. Our MailSMS software integrates with Microsoft Outlook® as an embedded program and enables users to send SMS messages using the Microsoft Outlook® program installed on their personal computer. Our EasySMS software is a software that acts as an interface to a network server on which all of a user’s messages and information is stored. Potential users and customers will be able to download the required MobileMail software client directly to their personal computer and install the software themselves. Once the user or customer has done this, he or she can send SMS to mobile devices (cell phones or personal digital assistants) from their personal computer.

The MobileMail SMS messaging technology is no longer the core product in relation to our current and future operational plans. As such, we do not envisage proceeding with any further developments of the messaging technology. Support will continue to current customers but no resources will be allocated to extend the sales and marketing of the current SMS messaging platform.

Recent Corporate Developments

Staley, Okada & Partners, Chartered Accountants (“Staley, Okada”) resigned as principal independent registered public accounting firm of the Company effective January 16, 2007. As a result of this resignation, we engaged Dale Matheson Carr-Hilton LaBonte, Chartered Accountants, as our principal independent registered public accounting firm effective January 22, 2007. The decision to change our principal independent registered public accounting firm was approved by our board of directors.

On January 31, 2007, we entered into an Employment Agreement with Mr. Miro Wikgren, an officer of Tracebit, whereby Mr. Wikgren was appointed as the Chief Technical Officer concurrent with his appointment as a director of the Company. A copy of the Employment Agreement was filed as an exhibit to our Current Report on Form 8-K filed with the SEC on February 12, 2007.

On January 31, 2007, we entered into an Employment Agreement with Mr. Simon Ådahl, an officer of Tracebit, whereby Mr. Ådahl was appointed as the Chief Marketing Officer concurrent with his appointment as a director of the Company. A copy of the Employment Agreement was filed as an exhibit to our Current Report on Form 8-K filed with the SEC on February 12, 2007. Mr. Ådahl resigned as a director on June 30, 2007 and as our chief marketing officer effective July 31, 2007.

On February 6, 2007, pursuant to the acquisition of Tracebit, Mr. Peter Åhman was appointed as a director and President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of the Company in replacement of Mr. Gary Flint, who has remained as a director of the Company.

On March 9, 2007, we entered into a Consultant Agreement with Mr. Nigel Nicholas whereby Mr. Nicholas was retained to provide consulting services to the Company pursuant to the terms and subject to the conditions of the Consultant Agreement. A copy of the Consultant Agreement was filed as an exhibit to our Current Report on Form 8-K filed with the SEC on March 15, 2007. In accordance with the terms of the Consultant Agreement, Mr. Nicholas was appointed as a director of the Company.

On March 14, 2007, we entered into a Consultant Agreement with Mr. Ian Downie whereby Mr. Downie was retained to provide consulting services to the Company pursuant to the terms and subject to the conditions of the Consultant Agreement. A copy of the Consultant Agreement was filed an exhibit to our

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Current Report on Form 8-K filed with the SEC on March 20, 2007. In accordance with the terms of the Consultant Agreement, Mr. Downie was appointed as a director of the Company.

Effective June 28, 2007, we entered into a consulting agreement with Mr. Adrian Clarke whereby Mr. Clarke was retained to provide consulting services to the Company pursuant to the terms and subject to the conditions of the consultant agreement. A copy of the consultant agreement was filed an exhibit to our Current Report on Form 8-K filed with the SEC on July 5, 2007. In accordance with the terms of the Consultant Agreement, Mr. Downie was appointed as a director of the Company effective June 28, 2007.

Simon Ådahl resigned as a director of the Company effective June 30, 2007.

Accordingly, the current directors of the Company are: Gary Flint, Peter Åhman, Miro Wikgren, Nigel Nicholas, Ian Downie and Adrian Clarke.

On September 3, 2007, we entered into an Amendment to Consulting Agreement with each of Peter Åhman, Gary Flint and Nigel Nicholas, amending the terms of the consulting services agreements previously entered into with each of them. A copy of each of these agreements was filed as an exhibit to our Current Report on Form 8-K filed with the SEC on September 7, 2007.

On November 1, 2007, we entered into a Consulting Agreement with Gary Flint, which supercedes the previous Consulting Agreement entered into with him on February 1, 2007 and subsequently amended on September 3, 2007, whereby Mr. Flint was retained to provide consulting services to the Company pursuant to the terms and subject to the conditions of the Consulting Agreement. A copy of the Consulting Agreement was filed as an exhibit to our Current Report on Form 8-K filed with the SEC on November 6, 2007.

Proposed Acquisition of TxTNation Ltd.

On April 24, 2007, we entered into a letter of intent with TxtNation Ltd. and Jonathan Rowsell and Michael Whelan. TxtNation is a UK based provider of mobile messaging and billing solutions. Jonathan Rowsell and Michael Whelan are principal shareholders of TxtNation (the “Principal Shareholders”).

We determined in August 2007 that we would not proceed with the acquisition of TxtNation contemplated in the letter of intent based on the results of our due diligence investigations. No definitive agreement was executed between us and TxtNation and the Principal Shareholders.

Froggie S.L. and Norris Marketing S.L.

Partnership Agreement

We entered into a partnership agreement with Froggie S.L. (“Froggie”) and Move2Mobile Limited (“M2M”) on October 31, 2007. The partnership agreement contemplates the creation of a business to be operated in partnership between us and Froggie pursuant to which the net income derived from the business will be split equally between us and Froggie on a 50/50 basis. In addition, Froggie has agreed to provide “bridge financing” to us to an agreed maximum of 120,000 Euros.

Letter of Intent

The execution of the partnership agreement follows the execution of a letter of intent with Froggie, Norris Marketing S.L. (“Norris”) and Tom Horsey dated July 17, 2007 and a further letter of intent between us and M2M, Nigel Nicholas and Danny Wootton dated August 13, 2007.

Froggie is a provider of mobile telephony marketing systems with operations in Argentina and Spain. Norris is a company incorporated in the BVI which provides premium SMS and bulk SMS solutions into

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Spain. Tom Horsey is the principal shareholder of Froggie and Norris. The letter of intent contemplates the Company’s acquisition of up to 100% of the shares of Froggie and Norris from Tom Horsey. To date, no definitive agreement has been executed for the acquisition contemplated in the letter of intent. The parties have entered into the partnership agreement pending the continuation of negotiations on a definitive acquisition agreement. There is no assurance that any definitive agreement for the acquisition by us of an interest in Froggie or Norris will be executed.

M2M is a UK-based consulting business that specializes in assisting businesses and entrepreneurs to develop wireless applications for their existing or proposed business applications. Nigel Nicholas and Danny Wootton are the principal shareholders of M2M. The letter of intent contemplates our potential acquisition of up to 100% of the shares of M2M from Nigel Nicholas, Danny Wootton and the other shareholders of M2M. To date, no definitive agreement has been executed for the acquisition contemplated in the letter of intent. The parties have entered into the partnership agreement pending the continuation of negotiations on a definitive acquisition agreement. There is no assurance that any definitive agreement for the acquisition by us of an interest in M2M will be executed.

Planned Business

Under the partnership agreement, we, Froggie and M2M have agreed to actively work together to grow our current mobile phone applications business that provides content, applications and services to customers via their mobile phones.

The objective of the parties is to generate revenues using content and services through the live channels that each party has generated. We, Froggie and M2M have agreed on a management team that will be devoted to the launching of the business.

Bridge Financing

Froggie has agreed to provide to us the following maximum bridging finance until January 31, 2008:

• 30,000 Euros at November 1, 2007;

• 30,000 Euros at December 1, 2007 provided deals have been signed by the partnership between November 1, 2007 and December 1, 2007 with a cumulative margin value equal or greater than 120,000 Euros on an annualized basis. For every 10,000 Euros below this figure the bridging finance will be reduced by 2,500 Euros;

• 30,000 Euros at January 1, 2008 provided deals have been signed by the partnership between November 1, 2007 and January 1, 2008 with a cumulative margin value equal or greater than 240,000 Euros on an annualized basis. For every 10,000 Euros below this figure the bridging finance will be reduced by 2,500 Euros; and

• 30,000 Euros at February 1, 2008 provided deals have been signed by the partnership between November 1, 2007 and February 1, 2008 with a cumulative margin value equal or greater than 360,000 Euros on an annualized basis. For every 10,000 Euros below this figure the bridging finance will be reduced by 2,500 Euros.

In consideration for providing this financing, Froggie will be issued shares of our common stock calculated based on a per share price equal to the average of the 5 days preceding the date of the investment in each case. In the event that we complete the acquisition of Froggie, as contemplated in the letter of intent, the shares acquired by Froggie will be transferred to the shareholder of Froggie and will be reflected in the share exchange agreement as an additional “payment” in shares.

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Move2Mobile

We entered into a letter of intent with Move2Mobile Limited, Nigel Nicholas and Danny Wootton dated August 13, 2007. M2M is a UK-based consulting business that specializes in assisting businesses and entrepreneurs to develop wireless applications for their existing or proposed business applications. Nigel Nicholas and Danny Wootton are the principal shareholders of M2M. Nigel Nicholas is presently a director of the Company.

The letter of intent contemplates the Company’s acquisition of up to 100% of the shares of M2M from Nigel Nicholas, Danny Wootton and the other shareholders of M2M, for consideration comprised of cash and shares of the Company’s common stock over a period of two years. In addition, further payments would be payable over an earn-out period of two years from the date of closing based on the profit generated by M2M and the value of the shareholdings of M2M at the end of the earn-out period. The earn-out agreement will be predicated on the Company providing agreed upon working capital to M2M after completion of the acquisition. The letter of intent contemplates that closing of the acquisition of M2M would follow within five business days of the satisfaction of all conditions precedent to closing and, in any event, by no later than October 31, 2007. It will be a condition of closing that M2M will have delivered to the Company financial statements of M2M in the form required to be filed by the Company with the United States Securities and Exchange Commission in accordance with its reporting obligations under the Securities Exchange Act of 1934. A partnership agreement among the Company, M2M and Froggie was subsequently executed on October 31, 2007, as described above.

Regulation S Debt Conversion Agreements - Shares

We entered into a Regulation S debt conversion agreement (the “Conversion Agreement”) with each of Nigel Nicholas, the Chief Executive Officer, the Director of Operations and a director of the Company, Ian Downie, a director of the Company, Pollux OU and Tracebit Holding Oy (together, the “Creditors”) whereby the Company issued to the Creditors a total of 8,051,714 shares of common stock of the Company (the “Shares”) as repayment and settlement of an aggregate of $169,086 of indebtedness owed by the Company to the Creditors (the “Indebtedness”) on the basis of one Share for each $0.021 of the Indebtedness. Each Creditor entered into a Conversion Agreement with the Company that included representations, warranties and covenants regarding the restricted status of the securities. The Company has granted piggyback registration rights to the Creditors. The issuance of the Shares was approved by written consent board resolutions of the Company’s board of directors on November 9, 2007.

Pollux OU, is a shareholder of the Company whose director, Miro Wikgren, is also a director and Chief Technical Officer of the Company. Pollux OU will be issued a total of 2,450,000 Shares in consideration for the repayment of a total US$51,450 in settlement of the Indebtedness owed by the Company to Pollux OU.

Tracebit Holding Oy is a shareholder of the Company whose Chairman, Peter Åhman, is also a director, President, Chief Financial Officer, Secretary and Treasurer of the Company. Tracebit Holding Oy will be issued 3,000,000 Shares in consideration for the repayment of a total US$63,000 in settlement of the Indebtedness owed by the Company to Tracebit Holding Oy.

A form of the Conversion Agreement has been filed as an exhibit to our Current Report on Form 8-K filed with the SEC on November 23, 2007.

Regulation S Debt Conversion Agreement - Warrants

We also entered into a Regulation S debt conversion agreements with Gary Flint, a director of the Company, whereby the Company issued to Mr. Flint a total of 1,915,000 warrants (the “Warrants”) to purchase a total of 1,915,000 shares of common stock of the Company (the “Warrant Shares”). The Warrants were issued by the Company in repayment and settlement of an aggregate of $40,215 of

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indebtedness owed by the Company to Mr. Flint on the basis of one Warrant Share for each $0.021 of the indebtedness. Mr. Flint entered into a Conversion Agreement with the Company that included representations, warranties and covenants regarding the restricted status of the securities. The Company has granted piggyback registration rights to Mr. Flint. The issuance of the Warrants to Mr. Flint was approved by written consent board resolutions of the Company’s board of directors on November 9, 2007.

A form of the Conversion Agreement has been filed as an exhibit to our Current Report on Form 8-K filed with the SEC on November 23, 2007.

Plan of Operations

Our strategy is focused on:

(a) the pursuit of complimentary technologies and additional mobile content to sell through our sales channels; and

(b) the creation of an aggregated content provision service managed through an interactive community based web-portal through the pursuit of a number of acquisitions of established mobile service providers to add to our portfolio of mobile applications.

We plan to pursue the achievement of the following milestones in 2008:

Phase 1-until Q2 2007/2008

• attempt to negotiate and conclude definitive agreements for the acquisition of Froggie, Norris and M2M and, if such definitive agreements are concluded, to complete these acquisitions;

• Raise the required funding to complete the above transactions and any further acquisitions;

• Expand Tracebit’s current product offering to include (i) mobile music services such as ring tones, ring back tones, video ring tones, streamed music, and full track music (ii) infotainment (mobile sport, leisure and information data services) such as video clips, streamed video, wallpapers and graphics, and picture messaging, and (iii) games;

• Enter into negotiations and continue to negotiate further acquisitions;

• Expand our management team, particularly through the involvement of management of companies that we may acquire;

• Grow sales of Tracebit through the completion of further partnership deals with leading mobile content providers, adding gaming titles and the latest video and audio content to sell additional content through current sales channels to enhance possibilities when selling content to new customers.

Phase II – until Q4 2007/2008

• Establish an operational centre in the United States and expand the South American offices acquired through the Froggie acquisition, if completed;

• Expand into North America by signing up partnership deals with US and Canadian based mobile service providers to capture opportunities in the growing mobile content market in US and Canada;

• Identify and complete further acquisition targets within the mobile community;

• Initiate online and mobile marketing campaigns through affiliate marketing agencies and pay per click campaigns; online search engines to increase traffic to and the user base of the portal;

• Establish an operational centre in Asia and expand the existing European sales offices;

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• Fund raise to support further growth;

• Update and distribute marketing material to reflect additional product offerings to support sales efforts.

Phase III – 2008/2009

• achieve full operation of and revenue generation from North American and Asian sales offices;

• complete full launch of branded multimedia content and messaging portal in Europe;

• Sign contracts with a number of large media agencies to source advertising inventory;

• Complete a new multi-interaction mobile application, to attract new users as this application enhances the product offering of the portal.

There can be no assurance that any of these milestones will be achieved, within the time frames indicated or at all. The achievement of these milestones will be conditional upon our achieving significant financing. There is no assurance that we will achieve this necessary financing. Further, there is no assurance that any financing achieved will be sufficient to complete our planned acquisitions or other business plans .

MobileMail SMS Messaging

The MobileMail SMS messaging technology is no longer the core product in relation to our current and future operational plans. As such, we do not envisage proceeding with any further developments of the messaging technology. Support will continue to current customers but no resources will be allocated to extend the sales and marketing of the current SMS messaging platform.

Financial Condition

We had cash of $27,123 and a working capital deficit of $1,085,799 at September 30, 2007. Our planned expenditures over the next twelve months in the amount of $500,000 will exceed our cash reserves and working capital. We presently does not have sufficient cash to fund our operations for more than the next month. We anticipate that we will require additional financing in the amount of approximately $1,000,000 in order to enable us to sustain our operations for the next twelve months in view of our plan of operations and our account deficit. We will also require additional financing to fund our contemplated acquisitions if we are able to execute definitive agreement for these acquisitions. We are currently seeking additional financing, however, there can be no assurance that we will obtain such financing in the amount required or on terms favorable to us. If we are unable to obtain additional financing, we may have to abandon our business activities and plan of operations and we may not be able to proceed with our planned acquisitions.

Beyond the next twelve months, we will be required to obtain additional financing in order to continue our plan of operations as we anticipate that we will not earn any substantial revenues in the foreseeable future. We believe that debt financing will not be an alternative for funding our plan of operations as we do not have tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock. However, we do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our plan of operations. Even if we are successful in obtaining equity financing to fund our plan of operations, there is no assurance that we will obtain the funding necessary to pursue the plan of operations.

Employees

We currently have three full-time employees and four part-time employees.

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Research and Development

We spent approximately $71,669 and $Nil on research and development activities in fiscal 2007 and fiscal 2006, respectively.

Intellectual Property

We own intellectual property rights relating to Tracebit’s games and entertainment applications for mobile handsets and our MobileMail suite of software applications that includes trade secrets and copyright except for some brand names that we have licensed. We seek to protect our intellectual property by generally limiting access to it, treating portions of it as trade secrets and obtaining confidentiality or non-disclosure agreements from persons who are given access to it, including developers.

There can be no assurance that we will be able to achieve any trademark protection for any of the names that Tracebit uses in connection with its games and entertainment applications or for our MobileMail suite of software applications. As a result, third parties might be able to sell competing products with names incorporating these terms, and our ability to build goodwill and brand recognition for our products may be compromised. Further, there is a risk that a competitor or other business or person may claim our MobileMail suite of software applications or the use of the names in connection with Tracebit’s games and entertainment application violates the trademark or other intellectual property rights of the competitor or other business or person. We have not received any such claims to date.

Government Regulation

We must abide by regulations imposed by government regulatory authorities in deploying our games and entertainment applications and MobileMail software solutions. The majority of regulations within the telecommunications industry that apply to mobile games and entertainment applications and mobile messaging are created by industry bodies producing codes of conduct that outline the rules that network operators, content providers, carriers, technology providers and advertisers must adhere to when providing telecommunication services to the public. These codes of conduct generally focus on protecting consumers against unwanted e-mails being delivered to their mobile devices.

We intend to thoroughly investigate the regulations imposed in each jurisdiction in which we plan to expand our business prior to commencing any marketing efforts in such jurisdiction. In some cases, the cost of compliance with a jurisdiction’s regulations may preclude us from providing services to customers in such jurisdiction.

Subsidiaries

We have two subsidiaries: Mobilemail UK and Tracebit. Tracebit had a subsidiary in India, Tracebit Mobile Solutions India (Pvt) which was dissolved during 2006.

Risk Factors

The following sets forth some of the risks relating to the business of Tracebit, which is our primary business subsequent to the Acquisition of Tracebit in February 2007. If any of the following risks occurs, our business, financial condition or results of operations could be seriously harmed.

In this section, references to “we”, “us”, “our” or the “Company” mean Tracebit.

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Risks Related to Our Business

We have a limited operating history in an emerging market, which may make it difficult to evaluate our business.

Tracebit was incorporated in 1996 but began selling mobile games in 2002. Accordingly, we have only a limited history of generating revenues in the mobile entertainment industry, and the future revenue potential of our business in this emerging market is uncertain. As a result of our short operating history, we have limited financial data that can be used to evaluate our business. Any evaluation of our business and our prospects must be considered in light of our limited operating history and the risks and uncertainties encountered by companies in our stage of development. As an early stage company in the emerging mobile entertainment industry, we face increased risks, uncertainties, expenses and difficulties, any of which could materially harm our business, operating results and financial condition.

We have incurred losses in certain periods and may incur substantial net losses in the future and may not achieve profitability.

We have incurred losses in certain periods since inception. We expect to continue to increase expenses as we implement initiatives designed to continue to grow our business, including, among other things, the development and marketing of new games, further international expansion, expansion of our infrastructure, acquisition of content, and general and administrative expenses associated with being a public company. If our revenues do not increase to offset these expected increases in operating expenses, we will continue to incur losses and will not become profitable. In future periods, our revenues could decline. Accordingly, we may not be able to achieve profitability in the future.

Our financial results could vary significantly from quarter to quarter and are difficult to predict.

Our revenues and operating results could vary significantly from quarter to quarter because of a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. In addition, we may not be able to predict our future revenues or results of operations. We base our current and future expense levels on our internal operating plans and sales forecasts, and our operating costs are to a large extent fixed. As a result, we may not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in revenues, and even a small shortfall in revenues could disproportionately and adversely affect financial results for that quarter. Individual games and carrier relationships represent meaningful portions of our revenues and net loss in any quarter. We may incur significant or unanticipated expenses when licenses are renewed. In addition, any payments due to us from carriers for revenues that are recognized on a cash basis may be delayed because of changes or issues with those carriers’ processes.

The markets in which we operate are highly competitive, and many of our competitors have significantly greater resources than we do.

The development, distribution and sale of mobile games is a highly competitive business. For end users, we compete primarily on the basis of brand, game quality and price. For wireless carriers, we compete for deck placement based on these factors, as well as historical performance and perception of sales potential and relationships with licensors of brands and other intellectual property. For content and brand licensors, we compete based on royalty and other economic terms, perceptions of development quality, porting abilities, speed of execution, distribution breadth and relationships with carriers. We also compete for experienced and talented employees.

Our primary competitors include Digital Chocolate, Electronic Arts (EA Mobile), Gameloft, Hands-On Mobile, I-play, Namco and THQ, among others. In the future, likely competitors include major media companies, traditional video game publishers, content aggregators, mobile software providers and independent mobile game publishers. Carriers may also decide to develop, internally or through a

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managed third-party developer, and distribute their own mobile games. If carriers enter the mobile game market as publishers, they might refuse to distribute some or all of our games or might deny us access to all or part of their networks.

Some of our competitors’ and our potential competitors’ advantages over us, either globally or in particular geographic markets, include having significantly greater revenues and financial resources, stronger brand and consumer recognition, the capacity to leverage their marketing expenditures across a broader portfolio of mobile and non-mobile products, pre-existing relationships with brand owners or carriers, greater resources to make acquisitions, lower labor and development costs, and broader distribution.

If we are unable to compete effectively or we are not as successful as our competitors in our target markets, our sales could decline, our margins could decline and we could lose market share, any of which would materially harm our business, operating results and financial condition.

Failure to renew our existing brand and content licenses on favorable terms or at all and to obtain additional licenses would impair our ability to introduce new mobile games or to continue to offer our current games based on third-party content.

Even if mobile games based on licensed content or brands remain popular, any of our licensors could decide not to renew our existing license or not to license additional intellectual property and instead license to our competitors or develop and publish its own mobile games or other applications, competing with us in the marketplace. Many of these licensors already develop games for other platforms, and may have significant experience and development resources available to them should they decide to compete with us rather than license to us.

We currently rely on wireless carriers, content aggregators and value added resellers to market and distribute our games and thus to generate our revenues. The loss of or a change in any of these significant carrier, content aggregator or value added reseller relationships could cause us to lose access to their subscribers and thus materially reduce our revenues.

Our future success is highly dependent upon maintaining successful relationships with the wireless carriers, content aggregators and value added resellers with which we currently work and establishing new relationships in geographies where we have not yet established a significant presence. Our failure to maintain our relationships with these carriers, content aggregators and value added resellers would materially reduce our revenues and thus harm our business, operating results and financial condition.

If any of our carriers, content aggregators and value added resellers decides not to market or distribute our games or decides to terminate, not renew or modify the terms of its agreement with us or if there is consolidation among carriers, content aggregators and value added resellers generally, we may be unable to replace the affected agreement with acceptable alternatives, causing us to lose access to that carrier’s, content aggregator’s and value added reseller’s subscribers/customers and the revenues they afford us, which could materially harm our business, operating results and financial condition.

End user tastes are continually changing and are often unpredictable; if we fail to develop and publish new mobile games that achieve market acceptance, our sales would suffer.

Our business depends on developing and publishing mobile games that wireless carriers, content aggregators and value added resellers will place on their decks and end users will buy. We must invest significant resources in licensing efforts, research and development, marketing and regional expansion to enhance our offering of games and introduce new games, and we must make decisions about these matters well in advance of product release in order to implement them in a timely manner. Our success depends, in part, on unpredictable and volatile factors beyond our control, including end-user preferences, competing games and the availability of other entertainment activities. If our games and related

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applications are not responsive to the requirements of our carriers, content aggregators and value added resellers or the entertainment preferences of end users, or they are not brought to market in a timely and effective manner, our business, operating results and financial condition would be harmed. Even if our games are successfully introduced and initially adopted, a subsequent shift in our carriers, content aggregators and value added resellers or the entertainment preferences of end users could cause a decline in our games’ popularity that could materially reduce our revenues and harm our business, operating results and financial condition.

Inferior deck placement would likely adversely impact our revenues and thus our operating results and financial condition.

Wireless carriers provide a limited selection of games that are accessible to their subscribers through a deck on their mobile handsets. The inherent limitation on the number of games available on the deck is a function of the limited screen size of handsets and carriers’ perceptions of the depth of menus and numbers of choices end users will generally utilize. Carriers typically provide one or more top level menus highlighting games that are recent top sellers, that the carrier believes will become top sellers or that the carrier otherwise chooses to feature, in addition to a link to a menu of additional games sorted by genre. We believe that deck placement on the top level or featured menu or toward the top of genre-specific or other menus, rather than lower down or in sub-menus, is likely to result in games achieving a greater degree of commercial success. If carriers choose to give our games less favorable deck placement, our games may be less successful than we anticipate, our revenues may decline and our business, operating results and financial condition may be materially harmed.

We have depended on no more than 20 mobile games for a majority of our revenues in recent fiscal periods.

In our industry, new games are frequently introduced, but a relatively small number of games account for a significant portion of industry sales. Similarly, a significant portion of our revenues comes from a limited number of mobile games, although the games in that group have shifted over time. We expect to release a relatively small number of new games each year for the foreseeable future. If these games are not successful, our revenues could be limited and our business and operating results would suffer in both the year of release and thereafter.

If we are unsuccessful in establishing and increasing awareness of our brand and recognition of our mobile games or if we incur excessive expenses promoting and maintaining our brand or our games, our potential revenues could be limited, our costs could increase and our operating results and financial condition could be harmed.

We believe that establishing and maintaining our brand is critical to retaining and expanding our existing relationships with wireless carriers, content aggregators, value added resellers and content licensors, as well as developing new relationships. Promotion of the Tracebit brand will depend on our success in providing high-quality mobile games. Similarly, recognition of our games by end users will depend on our ability to develop engaging games of high quality with attractive titles. However, our success will also depend, in part, on the services and efforts of third parties, over which we have little or no control. For instance, if our carriers fail to provide high levels of service, our end users’ ability to access our games may be interrupted, which may adversely affect our brand. If end users, branded content owners and carriers do not perceive our existing games as high-quality or if we introduce new games that are not favorably received by our end users and carriers, then we may be unsuccessful in building brand recognition and brand loyalty in the marketplace. In addition, globalizing and extending our brand and recognition of our games will be costly and will involve extensive management time to execute successfully. Further, the markets in which we operate are highly competitive and some of our competitors, such as Glu Mobile, already have substantially more brand name recognition and greater marketing resources than we do. If we fail to increase brand awareness and consumer recognition of our

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games, our potential revenues could be limited, our costs could increase and our business, operating results and financial condition could suffer.

Our business and growth may suffer if we are unable to hire and retain key personnel, who are in high demand.

We depend on the continued contributions of our senior management and other key personnel. The loss of the services of any of our executive officers or other key employees could harm our business. We do not maintain a key-person life insurance policy on any of our officers or other employees.

Our future success also depends on our ability to identify, attract and retain highly skilled technical, managerial, finance, marketing and creative personnel. We face intense competition for qualified individuals from numerous technology, marketing and mobile entertainment companies. Qualified individuals are in high demand, and we may incur significant costs to attract them. We may be unable to attract and retain suitably qualified individuals who are capable of meeting our growing creative, operational and managerial requirements, or may be required to pay increased compensation in order to do so. If we are unable to attract and retain the qualified personnel we need to succeed, our business would suffer.

If we fail to deliver our games at the same time as new mobile handset models are commercially introduced, our sales may suffer.

Our business is dependent, in part, on the commercial introduction of new handset models with enhanced features, including larger, higher resolution color screens, improved audio quality, and greater processing power, memory, battery life and storage. We do not control the timing of these handset launches. Some new handsets are sold by carriers with one or more games or other applications pre-loaded, and many end users who download our games do so after they purchase their new handsets to experience the new features of those handsets. Some handset manufacturers might give us access to their handsets prior to commercial release. If one or more major handset manufacturers were to cease to provide us the opportunity to access new handset models prior to commercial release, we might be unable to introduce compatible versions of our games for those handsets in coordination with their commercial release, and we might not be able to make compatible versions for a substantial period following their commercial release. If, because of game launch delays, we miss the opportunity to sell games when new handsets are shipped or our end users upgrade to a new handset, or if we miss the key holiday selling period, either because the introduction of a new handset is delayed or we do not deploy our games in time for the holiday selling season, our revenues would likely decline and our business, operating results and financial condition would likely suffer.

Wireless carriers, content aggregators and value added resellers generally control the price charged for our mobile games and the billing and collection for sales of our mobile games and could make decisions detrimental to us.

Wireless carriers, content aggregators and value added resellers generally control the price charged for our mobile games either by approving or establishing the price of the games charged to their subscribers/customers. Some of our carrier, content aggregator and value added reseller agreements also restrict our ability to change prices. In cases where carrier, content aggregator or value added reseller approval is required, approvals may not be granted in a timely manner or at all. A failure or delay in obtaining these approvals, the prices established by the carriers, content aggregators and value added resellers for our games, or changes in these prices could adversely affect market acceptance of those games. A failure or delay by these carriers in adjusting the retail price for our games, could adversely affect sales volume and our revenues for those games.

Carriers and other distributors also control billings and collections for our games, either directly or through third-party service providers. If our carriers, content aggregators and value added resellers or

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their third-party service providers cause material inaccuracies when providing billing and collection services to us, our revenues may be less than anticipated or may be subject to refund at the discretion of the carrier. This could harm our business, operating results and financial condition.

We may be unable to develop and introduce in a timely way new mobile games, and our games may have defects, which could harm our brand.

The planned timing and introduction of new original mobile games and games based on licensed intellectual property are subject to risks and uncertainties. Unexpected technical, operational, deployment, distribution or other problems could delay or prevent the introduction of new games, which could result in a loss of, or delay in, revenues or damage to our reputation and brand. If any of our games is introduced with defects, errors or failures, we could experience decreased sales, loss of end users, damage to our carrier relationships and damage to our reputation and brand. Our attractiveness to branded content licensors might also be reduced. In addition, new games may not achieve sufficient market acceptance to offset the costs of development, particularly when the introduction of a game is substantially later than a planned “day-and-date” launch, which could materially harm our business, operating results and financial condition.

If we fail to maintain and enhance our capabilities for porting games to a broad array of mobile handsets, our attractiveness to wireless carriers and branded content owners will be impaired, and our sales could suffer.

Once developed, a mobile game may be required to be ported to, or converted into separate versions for, more than 100 different handset models, many with different technological requirements. These include handsets with various combinations of underlying technologies, user interfaces, keypad layouts, screen resolutions, sound capabilities and other carrier-specific customizations. If we fail to maintain or enhance our porting capabilities, our sales could suffer, branded content owners might choose not to grant us licenses and carriers might choose to give our games less desirable deck placement or not to give our games placement on their decks at all.

Changes to our game design and development processes to address new features or functions of handsets or networks might cause inefficiencies in our porting process or might result in more labor intensive porting processes. In addition, we anticipate that in the future we will be required to port existing and new games to a broader array of handsets. If we utilize more labor intensive porting processes, our margins could be significantly reduced and it might take us longer to port games to an equivalent number of handsets. This, in turn, could harm our business, operating results and financial condition.

If our independent, third-party developers cease development of new games for us and we are unable to find comparable replacements, we may have to reduce the number of games that we intend to introduce, delay the introduction of some games or increase our internal development staff, which would be a time-consuming and potentially costly process, and, as a result, our competitive position may be adversely impacted.

We rely on independent third-party developers to develop our games. If our developers terminate their relationships with us or negotiate agreements with terms less favorable to us, we may have to reduce the number of games that we intend to introduce, delay the introduction of some games or increase our internal development staff, which would be a time-consuming and potentially costly process, and, as a result, our business, operating results and financial condition could be harmed.

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If we do not adequately protect our intellectual property rights, it may be possible for third parties to obtain and improperly use our intellectual property and our competitive position may be adversely affected.

Our intellectual property is an essential element of our business. We rely on a combination of copyright, trademark, trade secret and other intellectual property laws and restrictions on disclosure to protect our intellectual property rights. To date, we have not sought patent protection. Consequently, we will not be able to protect our technologies from independent invention by third parties. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to copy or otherwise to obtain and use our technology and games. Monitoring unauthorized use of our games is difficult and costly, and we cannot be certain that the steps we have taken will prevent piracy and other unauthorized distribution and use of our technology and games, particularly internationally where the laws may not protect our intellectual property rights as fully as in the United States. In the future, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our management and resources.

Third parties may sue us for intellectual property infringement, which, if successful, may disrupt our business and could require us to pay significant damage awards.

Third parties may sue us for intellectual property infringement or initiate proceedings to invalidate our intellectual property, either of which, if successful, could disrupt the conduct of our business, cause us to pay significant damage awards or require us to pay licensing fees. In the event of a successful claim against us, we might be enjoined from using our or our licensed intellectual property, we might incur significant licensing fees and we might be forced to develop alternative technologies. Our failure or inability to develop non-infringing technology or games or to license the infringed or similar technology or games on a timely basis could force us to withdraw games from the market or prevent us from introducing new games. In addition, even if we are able to license the infringed or similar technology or games, license fees could be substantial and the terms of these licenses could be burdensome, which might adversely affect our operating results. We might also incur substantial expenses in defending against third-party infringement claims, regardless of their merit. Successful infringement or licensing claims against us might result in substantial monetary liabilities and might materially disrupt the conduct of our business.

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, damages caused by malicious software and other losses.

In the ordinary course of our business, most of our agreements with carriers and other distributors include indemnification provisions. In these provisions, we agree to indemnify them for losses suffered or incurred in connection with our games, including as a result of intellectual property infringement and damages caused by viruses, worms and other malicious software. The term of these indemnity provisions is generally perpetual after execution of the corresponding license agreement, and the maximum potential amount of future payments we could be required to make under these indemnification provisions is generally unlimited. Large future indemnity payments could harm our business, operating results and financial condition.

We may need to raise additional capital to grow our business, and we may not be able to raise capital on terms acceptable to us or at all.

The operation of our business and our efforts to grow our business further will require significant cash outlays and commitments. We need to seek additional capital, potentially through debt or equity financings, to fund our growth. We may not be able to raise needed cash on terms acceptable to us or at all. Financings, if available, may be on terms that are dilutive or potentially dilutive to our stockholders, and the prices at which new investors would be willing to purchase our securities may be lower than the initial public offering price. The holders of new securities may also receive rights, preferences or

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privileges that are senior to those of existing holders of our common stock. If new sources of financing are required but are insufficient or unavailable, we would be required to modify our growth and operating plans to the extent of available funding, which would harm our ability to grow our business.

Risks Relating to Our Industry

Wireless communications technologies are changing rapidly, and we may not be successful in working with these new technologies.

Wireless network and mobile handset technologies are undergoing rapid innovation. New handsets with more advanced processors and supporting advanced programming languages continue to be introduced. In addition, networks that enable enhanced features, such as multiplayer technology, are being developed and deployed. We have no control over the demand for, or success of, these products or technologies. The development of new, technologically advanced games to match the advancements in handset technology is a complex process requiring significant research and development expense, as well as the accurate anticipation of technological and market trends. If we fail to anticipate and adapt to these and other technological changes, the available channels for our games may be limited and our market share and our operating results may suffer. Our future success will depend on our ability to adapt to rapidly changing technologies, develop mobile games to accommodate evolving industry standards and improve the performance and reliability of our games. In addition, the widespread adoption of networking or telecommunications technologies or other technological changes could require substantial expenditures to modify or adapt our games.

The complexity of and incompatibilities among mobile handsets may require us to use additional resources for the development of our games.

To reach large numbers of wireless subscribers, mobile entertainment publishers like us must support numerous mobile handsets and technologies. However, keeping pace with the rapid innovation of handset technologies together with the continuous introduction of new, and often incompatible, handset models by wireless carriers and handset manufacturers may require us to make significant investments in research and development, including personnel, technologies and equipment. We may be required to make substantial investments in our development if the number of different types of handset models continues to proliferate. In addition, as more advanced handsets are introduced that enable more complex, feature rich games, we anticipate that our per-game development costs will increase, which could increase the risks associated with the failure of any one game and could materially harm our operating results and financial condition.

If wireless subscribers do not continue to use their mobile handsets to access games and other applications, our business growth and future revenues may be adversely affected.

We operate in a developing industry. Our success depends on growth in the number of wireless subscribers who use their handsets to access data services and, in particular, entertainment applications of the type we develop and distribute. New or different mobile entertainment applications, such as streaming video or music applications, developed by our current or future competitors may be preferred by subscribers to our games. In addition, other mobile platforms such as the iPod and dedicated portable gaming platforms such as the PlayStation Portable and the Nintendo DS may become more widespread, and end users may choose to switch to these platforms. If the market for our games does not continue to grow or we are unable to acquire new end users, our business growth and future revenues could be adversely affected. If end users switch their entertainment spending away from the games and related applications that we publish, or switch to portable gaming platforms or distribution where we do not have comparative strengths, our revenues would likely decline and our business, operating results and financial condition would suffer.

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Our industry is subject to risks generally associated with the entertainment industry, any of which could significantly harm our operating results.

Our business is subject to risks that are generally associated with the entertainment industry, many of which are beyond our control. These risks could negatively impact our operating results and include: the popularity, price and timing of release of games and mobile handsets on which they are played; economic conditions that adversely affect discretionary consumer spending; changes in consumer demographics; the availability and popularity of other forms of entertainment; and critical reviews and public tastes and preferences, which may change rapidly and cannot necessarily be predicted.

A shift of technology platform by wireless carriers and mobile handset manufacturers could lengthen the development period for our games, increase our costs and cause our games to be of lower quality or to be published later than anticipated.

End users of games must have a mobile handset with multimedia capabilities enabled by technologies capable of running third-party games and related applications such as ours. Our development resources are concentrated in the Java platform, and we have experience developing games for the BREW platforms. If one or more of these technologies fall out of favor with handset manufacturers and wireless carriers and there is a rapid shift to a technology platform such as Adobe Flash Lite or a new technology where we do not have development experience or resources, the development period for our games may be lengthened, increasing our costs, and the resulting games may be of lower quality, and may be published later than anticipated. In such an event, our reputation, business, operating results and financial condition might suffer.

System or network failures could reduce our sales, increase costs or result in a loss of end users of our games.

Mobile game publishers rely on wireless carriers’ networks to deliver games to end users and on their or other third parties’ billing systems to track and account for the downloading of their games. In certain circumstances, mobile game publishers may also rely on their own servers to deliver games on demand to end users through their carriers’ networks. Any failure of, or technical problem with, carriers’, third parties’ or our billing systems, delivery systems, information systems or communications networks could result in the inability of end users to download our games, prevent the completion of billing for a game, or interfere with access to some aspects of our games or other products. If any of these systems fails or if there is an interruption in the supply of power, an earthquake, fire, flood or other natural disaster, or an act of war or terrorism, end users might be unable to access our games. Any failure of, or technical problem with, the carriers’, other third parties’ or our systems could cause us to lose end users or revenues or incur substantial repair costs and distract management from operating our business. This, in turn, could harm our business, operating results and financial condition.

The market for mobile games is seasonal, and our results may vary significantly from period to period.

Many new mobile handset models are released in the fourth calendar quarter to coincide with the holiday shopping season. Because many end users download our games soon after they purchase new handsets, we may experience seasonal sales increases based on the holiday selling period. However, due to the time between handset purchases and game purchases, most of this holiday impact occurs for us in our first quarter. If we miss these key selling periods for any reason, our sales will suffer disproportionately. Likewise, if a key event to which our game release schedule is tied were to be delayed or cancelled, our sales would also suffer disproportionately. Further, for a variety of reasons, including roaming charges for data downloads that may make purchase of our games prohibitively expensive for many end users while they are traveling, we may experience seasonal sales decreases during the summer, particularly in Europe. If the level of travel increases or expands to other periods, our operating results and financial condition may be harmed.

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Our business depends on the growth and maintenance of wireless communications infrastructure.

Our success will depend on the continued growth and maintenance of wireless communications infrastructure internationally. This includes deployment and maintenance of reliable next-generation digital networks with the speed, data capacity and security necessary to provide reliable wireless communications services. Wireless communications infrastructure may be unable to support the demands placed on it if the number of subscribers continues to increase, or if existing or future subscribers increase their bandwidth requirements. Wireless communications have experienced a variety of outages and other delays as a result of infrastructure and equipment failures, and could face outages and delays in the future. These outages and delays could reduce the level of wireless communications usage as well as our ability to distribute our games successfully. In addition, changes by a wireless carrier to network infrastructure may interfere with downloads of our games and may cause end users to lose functionality in our games that they have already downloaded. This could harm our business, operating results and financial condition.

Changes in government regulation of the media and wireless communications industries may adversely affect our business.

It is possible that a number of laws and regulations may be adopted in the United States and elsewhere that could restrict the media and wireless communications industries, including laws and regulations regarding customer privacy, taxation, content suitability, copyright, distribution and antitrust. Furthermore, the growth and development of the market for electronic commerce may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies such as ours conducting business through wireless carriers. We anticipate that regulation of our industry will increase and that we will be required to devote legal and other resources to address this regulation.