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Jamdat Mobile Inc – IPO: ‘S-1’ on 7/2/04

On:  Friday, 7/2/04, at 4:13pm ET   ·   Accession #:  1047469-4-22471   ·   File #:  333-117127

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 7/02/04  Jamdat Mobile Inc                 S-1                   27:3.2M                                   Merrill Corp/New/FA

Document/Exhibit                   Description                      Pages   Size 

 1: S-1         Registration Statement (General Form)               HTML   1.34M 
 2: EX-3.1      Articles of Incorporation/Organization or By-Laws   HTML    101K 
 3: EX-3.3      Articles of Incorporation/Organization or By-Laws   HTML     60K 
 4: EX-4.1      Instrument Defining the Rights of Security Holders  HTML    173K 
 5: EX-4.2      Instrument Defining the Rights of Security Holders  HTML     73K 
 6: EX-10.1     Material Contract                                   HTML    117K 
14: EX-10.10    Material Contract                                   HTML    233K 
15: EX-10.11    Material Contract                                   HTML    106K 
16: EX-10.12    Material Contract                                   HTML     39K 
17: EX-10.13    Material Contract                                   HTML     73K 
18: EX-10.15    Material Contract                                   HTML    107K 
19: EX-10.16    Material Contract                                   HTML     51K 
20: EX-10.17    Material Contract                                   HTML     40K 
21: EX-10.18    Material Contract                                   HTML     32K 
22: EX-10.19    Material Contract                                   HTML     91K 
23: EX-10.21    Material Contract                                   HTML     34K 
24: EX-10.23    Material Contract                                   HTML    188K 
 7: EX-10.3     Material Contract                                   HTML    169K 
 8: EX-10.4     Material Contract                                   HTML    140K 
 9: EX-10.5     Material Contract                                   HTML     73K 
10: EX-10.6     Material Contract                                   HTML     23K 
11: EX-10.7     Material Contract                                   HTML     16K 
12: EX-10.8     Material Contract                                   HTML     48K 
13: EX-10.9     Material Contract                                   HTML     59K 
25: EX-21.1     Subsidiaries of the Registrant                      HTML     10K 
26: EX-23.1     Consent of Experts or Counsel                       HTML     11K 
27: EX-23.2     Consent of Experts or Counsel                       HTML     11K 

As Filed with the Securities and Exchange Commission on July 2, 2004

Registration No.: 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

JAMDAT MOBILE INC.

(Exact name of registrant as specified in its charter)

3415 S. Sepulveda Blvd., Suite 700
Los Angeles, CA 90034
(310) 636-3100
(Address, Including Zip Code, and Telephone Number, Including Area Code, of registrant's Principal Executive Offices)

Mitch Lasky
Chief Executive Officer
JAMDAT Mobile Inc.
3415 S. Sepulveda Blvd., Suite 700
Los Angeles, CA 90034
(310) 636-3100
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

        Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. o

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. o

CALCULATION OF REGISTRATION FEE

(1)

Includes shares issuable upon exercise of the underwriters' option to purchase additional shares of common stock.

(2)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.

        The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that the registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated                            , 2004

PROSPECTUS

              Shares

Common Stock

This is our initial public offering of common stock. We are offering                      shares and the selling stockholders are offering                      shares. We will not receive any of the proceeds from the sale of common stock by the selling stockholders.

We expect the initial public offering price to be between $                      and $                      per share. Currently, no public market exists for our common stock. We have applied to have our common stock included for quotation on the Nasdaq National Market under the symbol "JMDT."

Investing in our common stock involves risks.
See "Risk Factors" beginning on page 6 of this prospectus.

The underwriters may also purchase up to an additional                          shares of common stock from us, and up to an additional             shares from the selling stockholders, at the public offering price, less the underwriting discount, at any time until 30 days after the date of this prospectus to cover over-allotments, if any.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Delivery of the shares is expected to be on or about                          , 2004.

Joint Lead Manager

UBS Investment Bank

              , 2004

TABLE OF CONTENTS

        You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

        The "JAMDAT" family of related marks, images and symbols are our properties and trademarks. All other trademarks, tradenames and service marks appearing in this prospectus are the property of their respective holders. References to "JAMDAT," "we," "us," "our," or similar terms refer to JAMDAT Mobile Inc. together with its consolidated subsidiaries.

        All references to market data, industry statistics and other information in this prospectus attributed to International Data Corporation, or IDC, and the ARC Group, or ARC, are references to the independent industry publications IDC Market Analysis, Worldwide Mobile Phone 2004-2008 Forecast and Analysis dated April 2004 with respect to information attributed to IDC and Mobile Entertainment Applications & Markets, Worldwide Market Analysis & Strategic Outlook 2003-2008 dated September 2003 or Mobile Application Platforms and Operating Systems, Worldwide Market Analysis & Strategic Outlook 2003-2008 dated March 2004 with respect to information attributed to ARC. We do not guarantee, and we have not independently verified, this information.

        Until                        , 2004 (the 25th day after the date of this prospectus), all dealers effecting transactions in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to its unsold allotment or subscription.

PROSPECTUS SUMMARY

        This summary highlights selected information contained elsewhere in this prospectus. You should carefully read the entire prospectus, including the section titled "Risk Factors," and the consolidated financial statements and related notes included elsewhere in this prospectus, before making an investment decision.

Our Company

        We are a leading global publisher of wireless entertainment applications, including games, ring tones, images and other entertainment content. We design our applications to take advantage of the multimedia capabilities of the latest generation of mobile phones, including high-resolution color displays and increased processing power. We have developed a diversified portfolio of more than 70 applications designed to appeal to a broad range of wireless subscribers based on intellectual properties that we create and own, like JAMDAT Bowling, and well-established brands that we license from third parties, like The Lord of the Rings®.

        Our customers download our applications to their mobile phones through a carrier's branded e-commerce service, including Verizon Wireless' Get It Now®, Sprint PCS Vision™ and Vodafone live!™. Our customers are charged a fee for the applications which appears on their mobile phone bills. The wireless carriers retain a percentage of the fee and remit the balance to us. Our wireless distribution channel eliminates traditional publishing complexities, including physical production, packaging, shipping, inventory management and return processing. We have agreements to distribute our applications in 38 countries through 72 wireless carriers serving approximately 850 million subscribers. These wireless carriers include AT&T Wireless, China Mobile, Cingular, mmO2, Nextel, NTT DoCoMo, Orange, Sprint PCS, Tata Teleservices, Telefónica Móviles, T-Mobile, Verizon Wireless, Vivo and Vodafone.

        Since commencing operations in March 2000, our revenues have grown to $13.5 million for the year ended December 31, 2003 and $7.0 million for the three months ended March 31, 2004. We had a net loss of $7.1 million for the year ended December 31, 2003 and generated net income of $0.7 million for the three months ended March 31, 2004.

The Wireless Entertainment Market

        The wireless entertainment market has emerged as a result of the rapid growth and technological evolution in the wireless communications industry.

•

Growth in Wireless Subscribers. The number of global wireless subscribers is expected to grow from approximately 1.3 billion in 2003 to 2.0 billion in 2008, according to IDC.



•

Deployment of Advanced Wireless Networks. Wireless carriers are deploying high-speed, next-generation digital networks which have enabled the over-the-air delivery and billing of data applications, including games, to their mobile phones.



•

Availability of Mobile Phones with Multimedia Capabilities. Annual sales of mobile phones are expected to grow from 465.0 million units in 2003 to 689.1 million units in 2008, according to ARC. Manufacturers are increasingly offering mobile phones with multimedia capabilities enabled by technologies such as Binary Run-Time Environment for Wireless, or BREW®, and Java®. Penetration of mobile phones with BREW and Java is expected to grow from approximately 23% of all mobile phones sold in 2003 to approximately 97% of all mobile phones sold in 2008, according to ARC.



•

Demand for Wireless Entertainment. Total wireless gaming revenues in North America were approximately $119 million in 2003 and are expected to grow to $1.2 billion in 2008, according to ARC, a 59% compound annual growth rate. In addition, according to ARC, global wireless

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gaming revenues in 2003 were approximately $1.1 billion and are expected to grow to $8.4 billion in 2008, a 49% compound annual growth rate.

Our Competitive Strengths

        We believe that our success is a result of the following competitive strengths:

•

Innovative, Award-Winning Development Studios. We develop high-quality, innovative applications that build brand loyalty among our customers and appeal to wireless carriers and mobile phone manufacturers looking to promote new mobile phone features and services. Our applications have received high rankings from industry critics and have won several major industry awards.



•

Balanced Portfolio of Original and Licensed Properties. We publish a diverse portfolio of wireless entertainment applications. The majority of our 2003 revenues were from JAMDAT-branded applications. We also have license agreements with, among others, Activision, Atari, Microsoft, New Line Productions and Nickelodeon, as well as the NFL, MLB, the NBA and the NHL.



•

Proven Revenue-Generating Catalog. Many of our applications have lasting appeal and continue to generate revenue long after their initial release. Four of our five best-selling applications by revenues in the first quarter of 2004 had been on sale for over 22 months.



•

Strong, Diversified Carrier Relationships. Our strong carrier relationships are a result of our early commitment to the wireless entertainment market and focus on carrier and customer service.



•

Proprietary Technology and Commitment to Research and Development. We have created proprietary technologies that enhance our publishing business and enable us to develop and deploy innovative applications to more than 200 mobile phone models.



•

Experienced Management Team. Our executive team has significant experience in the video game publishing, wireless communications and media industries, and most of them have been with us since at least 2001. We believe our management team's expertise and continuity is a significant competitive advantage in the increasingly complex wireless entertainment publishing market.

Our Strategy

        Our goal is to become the leading global publisher of wireless games and other entertainment applications. To achieve this goal, we plan to:

•

Publish High-Quality Entertainment Applications.    We will continue to publish high-quality, innovative applications based on original and licensed brands.



•

Enhance Our Distribution Channels.    We plan to enhance our distribution channels by increasing our application deployment capability and strengthening our wireless carrier relationships. We will also expand our use of alternative channels, including Internet portal sites and retail stores.



•

Build the JAMDAT Brand.    We will continue to build the JAMDAT brand through application quality, customer and carrier support, advertising and other marketing efforts.

Our Offices

        Our executive offices are located at 3415 South Sepulveda Boulevard, Suite 700, Los Angeles, California 90034. Our website is located at www.jamdat.com. The information contained in our website does not constitute a part of this prospectus.

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The Offering

        The total number of shares of our common stock set forth above that will be outstanding after this offering is based on            shares outstanding as of                        , 2004 and, unless specifically stated otherwise, the information in this prospectus:

•

assumes the underwriters do not exercise their over-allotment option;



•

excludes 2,580,804 shares of common stock as of March 31, 2004 reserved for issuance on the exercise of 1,504,804 outstanding options with a weighted average exercise price of $0.11 per share and 1,076,000 outstanding warrants with a weighted average exercise price of $0.89 per share;



•

reflects the conversion of all of our outstanding convertible preferred stock into an aggregate of 33,941,655 shares of our common stock immediately upon completion of this offering; and



•

reflects the changes in our common stock resulting from the amendment and restatement of our certificate of incorporation and bylaws and the conversion of our preferred stock, which will increase the authorized number of shares of common stock to                        shares.

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SUMMARY CONSOLIDATED FINANCIAL DATA

        You should read the following financial information in conjunction with "Capitalization," "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus.

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(1)

Stock-based compensation charges are excluded from the following operating expense categories (in thousands):

(2)

See Notes 2 and 13 to our consolidated financial statements for the determination of shares used in computing basic and diluted net income (loss) per share.

(3)

Reflects the conversion of all issued and outstanding shares of our convertible redeemable preferred stock into common stock upon closing of this offering.

(4)

The unaudited pro forma combined statement of operations data for the year ended December 31, 2003 reflect our acquisition of Jeux Hexacto Inc., or Hexacto, as if the acquisition occurred on January 1, 2003 and are derived from the unaudited condensed consolidated financial information appearing elsewhere in this prospectus. The unaudited pro forma combined statement of operations data are not necessarily indicative of what our results would have been if the acquisition had occurred on such date and should be read in conjunction with our consolidated financial statements and the related notes, the separate financial statements and the related notes of Hexacto, and the unaudited pro forma condensed consolidated financial information included elsewhere in this prospectus.

(5)

Reflects the sale of                        shares of common stock by us and the selling stockholders in this offering at the assumed initial public offering price of $            per share, after deducting estimated underwriting discounts, commissions and offering expenses.

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RISK FACTORS

        You should consider carefully the risks described below, together with all of the other information in this prospectus, before making a decision to invest in our common stock. If any of the following risks actually occurs, our business, operating results and financial condition could suffer. The trading price of our common stock could decline due to any of these risks and you may lose all or part of your investment in our common stock.

Risks Related to Our Business

        We have a history of losses, have only recently become profitable and may not sustain or increase profitability in the future.

        For the year ended December 31, 2003, we had a net loss of approximately $7.1 million and an accumulated deficit of approximately $20.1 million. We have only recently attained profitability and we cannot be certain this profitability will be sustainable. If we do not sustain profitability, the market price of our common stock will likely decline.

        We have a limited operating history, which may make it difficult for you to evaluate our business.

        We were incorporated in March 2000 and began offering entertainment applications through wireless carriers to their subscribers in October 2000. Accordingly, we have a limited history of generating revenues, and the future revenues and income potential of our business is uncertain. As a result of our short operating history, we have limited financial data that you can use 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 often encountered by companies in our stage of development. Some of these risks and uncertainties relate to our ability to do the following:

•

maintain our current, and develop new, wireless carrier relationships upon which our business currently depends;



•

respond effectively to competitive pressures;



•

increase brand awareness and consumer recognition; and



•

attract and retain qualified management and employees.

        If we are unable to address these risks, our operating results may not meet the expectations of investors, which would likely cause the price of our common stock to decline.

        Our business currently relies on wireless carriers to distribute our entertainment applications, and the loss of, or a material change in, any of these relationships could materially and adversely affect our business, operating results and financial condition.

        We currently generate, and we expect to continue to generate, a significant portion of our revenues from the distribution of our applications through wireless carriers. For the three months ended March 31, 2004, we received approximately 42% of our revenues from subscribers of Verizon Wireless and 18% of our revenues from subscribers of Sprint PCS; in 2003, we received approximately 50% of our revenues from subscribers of Verizon Wireless and approximately 18% of our revenues from subscribers of Sprint PCS; and in 2002, we received approximately 49% of our revenues from subscribers of Verizon Wireless and approximately 26% of our revenues from Sprint PCS and its subscribers. We expect that we will continue to generate a significant portion of our revenues through a limited number of carriers for the foreseeable future, although these carriers may vary from period to period.

        Our carrier agreements are not exclusive and generally have a limited term of one or two years with evergreen, or automatic renewal, provisions upon expiration of the initial term. These agreements

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set out the terms of our distribution relationships with the carriers but generally do not obligate the carriers to market or distribute any of our applications. In addition, the carriers can terminate these agreements early, and in some instances, without cause.

        Many other factors outside our control could impair our carrier relationships, including the following:

•

a carrier's preference for the applications of our competitors over our applications;



•

a carrier's decision to offer its own competing entertainment applications;



•

a carrier's decision to offer entertainment applications to its subscribers for free;



•

a carrier's network encountering technical problems that disrupt the delivery of or billing for our applications; or



•

a carrier's decision to increase the fees it charges to market and distribute our applications, thereby increasing its own revenues and decreasing our share of revenues.

        If one or more of these wireless carriers decides not to market or distribute our applications or decides to terminate or not renew its agreement with us, we may be unable to replace the agreement with an acceptable alternative, causing us to lose access to the subscribers covered by that wireless carrier, which could materially harm our business, operating results and financial condition.

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

        The development, distribution and sale of wireless entertainment applications is a highly competitive business. We compete primarily on the basis of quality of applications, brand, carrier and customer service and distribution breadth. We also compete for experienced and talented employees.

        Currently, we consider our primary competitors to be Disney, Gameloft, Mforma, Namco, Sony Pictures and THQ Wireless. In the future, likely competitors may include other major media companies, traditional video game publishers, content aggregators, wireless software providers and other pure-play wireless entertainment publishers. Wireless carriers may also decide to develop and distribute their own wireless entertainment applications. If carriers enter the wireless entertainment applications market, they might refuse to distribute some or all of our applications or may deny us access to all or part of their networks.

        Some of our competitors' advantages over us include the following:

•

substantially greater revenues and financial resources;



•

stronger brand names and consumer recognition;



•

the capacity to leverage their marketing expenditures across a broader portfolio of wireless and non-wireless products;



•

pre-existing relationships with brand holders;



•

more resources to make acquisitions;



•

lower labor and development costs; and



•

broader geographic presence.

        We face different market dynamics and competition outside the United States. In some international markets, our competitors have greater brand recognition and broader distribution than we have. We may not be as successful as our competitors in generating revenues in international markets due to our inability to provide applications that are attractive to the local market, the lack of

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recognition of our brand or other factors. Developing user interfaces that are compatible with other languages or cultures could be expensive. As a result, our international expansion efforts may be more costly and less profitable than we expect.

        If we are not as successful as our competitors in our target markets, our sales could decline, our margins could be negatively impacted and we could lose market share, any of which could materially harm our business.

        Our success depends on our ability to develop new applications that our customers will continue to buy.

        Our success depends on providing applications that offer our customers a high-quality entertainment experience. We must continue to invest significant resources in research and development to enhance our offering of wireless applications and introduce new applications that our customers will continue to buy. Our operating results would suffer if our applications are not responsive to the preferences of our customers or are not effectively brought to market.

        The planned timing or introduction of new applications is subject to risks and uncertainties. Unexpected technical, operational, deployment, distribution or other problems could delay or prevent the introduction of new applications, which could result in a loss of, or delay in, revenues or damage to our reputation and brand. If any of our applications is introduced with defects, errors or failures, we could experience decreased sales, loss of customers and damage to our reputation and brand. In addition, new applications may not achieve sufficient market acceptance to offset the costs of development. Our success depends, in part, on unpredictable and volatile factors beyond our control, including customer preferences, competing applications and the availability of other entertainment activities. A shift in mobile phone usage or the entertainment preferences of our customers could cause a decline in our applications' popularity that could materially reduce our revenues and harm our business.

        We continuously develop and introduce new applications for use on next-generation mobile phones. We must make product development decisions and commit significant resources well in advance of the anticipated introduction of a new mobile phone model. New mobile phone models for which we are developing applications may be delayed, may not be commercially successful, may have a shorter life cycle than anticipated or may not be adequately promoted by wireless carriers or the mobile phone manufacturer. If the mobile phone models for which we are developing applications are not released when expected or do not achieve broad market penetration, our potential revenues will be limited and our business will suffer.

        We depend on a limited number of applications for a significant portion of our revenues.

        We derive a significant portion of our revenues from a limited number of applications. In fiscal 2003 and the first quarter of fiscal 2004, we generated approximately 25% and 24%, respectively, of our revenues from our JAMDAT Bowling applications. We expect to continue to derive a substantial portion of our revenues from JAMDAT Bowling and a limited number of other applications in the foreseeable future. Due to this dependence on a limited number of applications, the failure to achieve anticipated results with any one of these key applications may harm our business. Additionally, if we cannot develop new applications that are as successful as JAMDAT Bowling, our future revenues could be limited and our business will suffer.

        Failure to renew our existing licenses or to obtain additional licenses could harm our business.

        Many of our applications are based on or incorporate intellectual properties that we license from third parties. We have both exclusive and non-exclusive licenses to use these properties for terms that typically range from one to five years. We may be unable to renew these licenses on terms favorable to us, or at all, and we may be unable to secure alternatives in a timely manner. We expect to obtain

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additional licenses that may impose various development, commercialization, funding, royalty and other obligations on us. If we breach our obligations, our licensors may have the right to terminate our license or change an exclusive license to a non-exclusive license.

        We have non-exclusive licenses to develop applications based on the four major North American professional sports leagues. We face significant competition from third parties that may develop applications based on these professional sports leagues that compete with our applications.

        Competition for licenses may also increase the advances, guarantees and royalties that we must pay to the licensor, which could significantly increase our costs. Failure to maintain our existing licenses or obtain additional licenses with significant commercial value could impair our ability to introduce new applications or continue our current applications, which could materially harm our business.

        We rely on independent third parties for the development of many of our applications.

        We rely on independent third-party developers to develop many of our entertainment applications, which subjects us to the following risks:

•

key developers who worked for us in the past may choose to work for our competitors;



•

developers currently under contract may try to renegotiate our agreements with them on terms less favorable to us; and



•

our developers may be unable or unwilling to allocate sufficient resources to complete our applications on a timely or satisfactory basis or at all.

        If our developers terminate their relationships with us or negotiate agreements with terms less favorable to us, we would have to increase our internal development staff, which would be a time consuming and potentially costly process. If we are unable to increase our internal development staff in a cost-effective manner or if our current internal development staff fails to create successful applications, our earnings could be materially diminished.

We face challenges in managing the rapid growth of our business.

        We have experienced, and continue to experience, rapid growth in our business. This growth has placed, and may continue to place, significant demands on our management and our operational and financial infrastructure. To manage our growth effectively, we must continue to improve and enhance our operational, financial and management controls in order to maintain efficiency and innovation in our growing organization. We must also enhance our reporting systems and procedures to ensure timely and accurate periodic public disclosure of our operations and we will need to hire additional personnel. These systems enhancements and improvements will require significant expenditures and allocation of valuable management resources. If we fail to maintain the efficiency of our organization as it grows, our profit margins will decline and our earnings could be materially diminished.

        If we fail to deliver our applications to correspond with the commercial introduction of new mobile phone models, our sales may suffer.

        Our business is tied, in part, to the commercial introduction of new mobile phone models with enhanced features, including color screens and greater processing power. Many new mobile phone models are released in the final quarter of the year to coincide with the holiday shopping season. We cannot control the timing of these mobile phone launches. Some of our customers download our applications soon after they purchase their new mobile phones in order to experience the new features of those phones. If we miss the opportunity to sell applications when our customers upgrade to a new mobile phone due to application launch delays, our sales may suffer. In addition, if we miss the key holiday selling period, either because the introduction of a new mobile phone model is delayed or we do not successfully deploy our applications in time for the holiday selling season, our sales may suffer.

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        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, many of whom may be difficult to replace. The loss of the services of any of our executive officers or other key employees could harm our business. All of our executive officers and key employees are at-will employees. We only maintain a key person life insurance policy on our chief executive officer. Our future success also depends on our ability to identify, attract and retain highly skilled technical, managerial, finance, marketing and creative personnel. Qualified individuals are in high demand, and we may incur significant costs to attract them. If we are unable to attract or retain the personnel we need to succeed, our business may suffer.

        Many of our senior management personnel and other key employees have become, or will soon become, substantially vested in their initial restricted stock, or stock option, grants. Employees may be more likely to leave us if their owned shares or the shares underlying their options have significantly appreciated in value relative to the original purchase price of the shares or the option exercise price.

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

        Any disruption to the carriers' or our services, billing systems, information systems or communications networks could result in the inability of our customers to download our applications. If any of these systems fails, there is an interruption in the supply of power, an earthquake, fire, flood or other natural disaster, or an act of war or terrorism, our customers may be unable to access our applications. Any disruption to the carriers' or our systems could cause us to lose customers or revenues or incur substantial repair costs and distract management from operating our business.

        The acquisition of other companies, businesses or technologies could result in operating difficulties, dilution and other harmful consequences.

        We may selectively pursue strategic acquisitions, any of which could be material to our business, operating results and financial condition. Future acquisitions could divert management's time and focus from operating our business. In addition, integrating an acquired company, business or technology is risky and may result in unforeseen operating difficulties and expenditures associated with integrating employees from the acquired company into our organization and integrating each company's accounting, management information, human resources and other administrative systems to permit effective management. Foreign acquisitions, such as our acquisition in July 2003 of Hexacto, involve unique risks related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.

        The anticipated benefits of our past and future acquisitions may not materialize. Future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, including our common stock, the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill, any of which could harm our financial condition. Future acquisitions may also require us to obtain additional financing, which may not be available on favorable terms or at all.

        Expansion into international markets is important to our long-term strategy, and our limited experience in the operation of our international businesses may be a risk to our success.

        An important element of our business strategy is international expansion. We opened our first office outside the United States in the second quarter of 2003 and have only limited experience with international operations. Nevertheless, international sales have been, and are expected to continue to be, an important component of our revenues. International sales represented approximately 18% of our revenues in the first quarter of 2004 and approximately 14% of our revenues in 2003. Risks affecting our international operations include:

•

challenges caused by distance, language and cultural differences;

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•

multiple, conflicting and changing laws and regulations, including difficulties in enforcing intellectual property rights;



•

foreign exchange controls that might prevent us from repatriating income earned in countries outside the United States;



•

political and economic instability;



•

higher costs associated with doing business internationally;



•

restrictions on the export or import of technology;



•

difficulties in staffing and managing international operations;



•

variations in tariffs, quotas, taxes and other market barriers; and



•

greater fluctuations in sales to customers in developing countries, including longer payment cycles and greater difficulty collecting accounts receivable.

        These risks could harm our international expansion efforts, which could in turn materially and adversely affect our business, operating results and financial condition.

        If we do not adequately protect our intellectual property rights, our competitive position may be adversely affected.

        We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology and applications. Monitoring unauthorized use of our applications 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 applications, particularly in foreign countries, where the laws may not protect our intellectual property rights as fully as in the United States. From time to time, 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.

        In addition, we have two patent applications pending with the U.S. Patent and Trademark Office, but we cannot assure you that the prosecution of these applications will result in issued U.S. patents.

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

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        We face risks associated with currency exchange rate fluctuations.

        Although we currently transact business primarily in U.S. dollars, a larger portion of our revenues may be denominated in foreign currencies as we expand our international operations. Conducting business in currencies other than U.S. dollars subjects us to fluctuations in currency exchange rates that could have a negative impact on our reported operating results. Fluctuations in the value of the U.S. dollar relative to other currencies impact our revenues, cost of revenues and operating margins and result in foreign currency translation gains and losses. Historically, we have not engaged in exchange rate hedging activities. Although we may implement hedging strategies to mitigate this risk, these strategies may not eliminate our exposure to foreign exchange rate fluctuations and involve costs and risks of their own.

        Changes to financial accounting or other standards may affect our operating results and cause us to change our business practices.

        We prepare our financial statements to conform with generally accepted accounting principles, or GAAP, in the United States. These accounting principles are subject to interpretation by the American Institute of Certified Public Accountants, the SEC and various other bodies. A change in those policies could have a significant effect on our reported results and may affect our reporting of transactions completed before a change is announced.

        For example, we have used stock options and other long-term equity incentives as a fundamental component of our employee compensation packages. We believe that stock options and other long-term equity incentives directly motivate our employees to maximize long-term stockholder value and, through the use of vesting, encourage employees to remain with our company. Several regulatory agencies and entities are considering regulatory changes that could make it more difficult or expensive for us to grant stock options to employees. For example, the Financial Accounting Standards Board has announced that it will propose changes to GAAP that, if implemented, would require us to record a charge to earnings for employee stock option grants. In addition, regulations implemented by the Nasdaq National Market generally require stockholder approval for all stock option plans, which could make it more difficult or expensive for us to grant stock options to employees. We may, as a result of these changes, incur increased compensation costs, change our equity compensation strategy or find it difficult to attract, retain and motivate employees, each of which could materially and adversely affect our business, operating results and financial condition.

Risks Relating to Our Industry

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

        Wireless network and mobile phone technologies are undergoing rapid innovation. New mobile phones with more advanced processors and supporting advanced programming languages continue to be introduced in the market. We have no control over the demand for, or success of, these products. However, if we fail to anticipate and adapt to these and other technological changes, our market share and our operating results may suffer. Our future success will depend on our ability to adapt to rapidly changing technologies, develop applications to accommodate evolving industry standards and improve the performance and reliability of our applications. In addition, the widespread adoption of networking or telecommunications technologies or other technological changes could require substantial expenditures to modify or adapt our entertainment applications.

        The markets for our applications are also characterized by frequent new mobile phone model introductions and shortening mobile phone model life cycles. The development of new, technologically advanced applications to match the advancements in mobile phone technology is a complex process requiring significant research and development expense, as well as the accurate anticipation of

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technological and market trends. As the life cycle of mobile phone models and other wireless devices shortens, we will be required to develop and adapt our existing applications and create new applications more quickly. These efforts may not be successful. Any failure or delay in anticipating technological advances or developing and marketing new applications that respond to any significant change in technology or customer demand could limit the available channels for our applications and limit or reduce our sales.

        Our success depends on the continuing adoption of entertainment applications by wireless subscribers.

        We operate in a developing industry. Currently, only a limited number of wireless subscribers download entertainment applications to their mobile phones. Our success depends on growth in the number of wireless subscribers who use their mobile phones to access data services and, in particular, entertainment applications. If this market does not continue to grow or we are unable to acquire new customers, our business growth, operating results and financial condition could be materially and adversely affected.

        Next-generation mobile phones may significantly reduce or eliminate the wireless carriers' control over delivery of our applications.

        Some next-generation mobile phone models currently available use an open platform operating system that allows for Internet browsing. By using these browsers, wireless subscribers could avoid their carrier's branded e-commerce service and access data applications directly from third parties. If this practice increases, our primary distribution channel could be significantly harmed and, accordingly, our business may suffer.

        Actual or perceived security vulnerabilities in mobile phones could adversely affect our revenues.

        Maintaining the security of mobile phones and wireless networks is critical for our business. There are individuals and groups who develop and deploy viruses, worms and other malicious software programs that may attack wireless networks and mobile phones. Recently, security experts identified what appears to be the first computer "worm" program targeted specifically at mobile phones. The worm, entitled "Cabir," targets mobile phones running the Symbian® operating system. While the "Cabir" worm has not been widely released and presents little immediate risk to our business, we believe future threats could lead some customers to seek to return our applications, reduce or delay future purchases or reduce or delay the use of their mobile phones. Wireless carriers and mobile phone manufacturers may also increase their expenditures on protecting their wireless networks and mobile phone products from attack, which could delay adoption of new mobile phone models. Any of these activities could adversely affect our revenues.

        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 which could restrict the media and wireless communications industries, including 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. Changes in current laws or regulations or the imposition of new laws and regulations in the United States or elsewhere regarding the media and wireless communications industries may lessen the growth of wireless communications services and may materially reduce our ability to increase or maintain sales of our applications.

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        A decline in, or limitation on, the use of mobile phones would negatively impact our business.

        A number of public and private entities have begun to restrict the use of mobile phones on their premises. For example, many places of worship, restaurants, hospitals, medical offices, libraries, museums, concert halls and other private and public businesses restrict the use of mobile phones due to privacy concerns, the inconvenience caused by mobile phone users to other patrons and the disruption mobile phones may cause to other electronic equipment at these locations.

        Legislation has also been proposed in the U.S. Congress and by many states and municipalities to restrict or prohibit the use of mobile phones while driving motor vehicles. Some states and municipalities in the United States have already passed laws restricting the use of mobile phones while driving, and similar laws have been enacted in other countries. These laws and other potential laws prohibiting or restricting the use of mobile phones could reduce demand for mobile phones generally and, accordingly, the demand for our applications, which could reduce our ability to increase or maintain sales of our applications.

        A number of studies have examined the health effects of mobile phone use and the results of some of the studies have been interpreted as evidence that mobile phone use causes adverse health effects. The establishment of a link between the use of mobile phone services and health problems, and any media reports suggesting such a link, could reduce demand for mobile phones and, accordingly, the demand for our applications.

        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 in the United States and around the world. This includes deployment and maintenance of reliable next-generation digital networks with the necessary speed, data capacity and security for providing reliable wireless communications services. Wireless communications infrastructure may be unable to support the demands placed on it if the number of customers continues to increase, or if existing or future customers increase their bandwidth requirements. In addition, viruses, worms and similar break-ins and disruptions from illicit code or unauthorized tampering may harm the performance of wireless communications. If a well-publicized breach of security were to occur, general mobile phone usage could decline, which could reduce the demand for and use of our applications. Wireless communications experience 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 applications successfully.

Risks Related to this Offering

        We have not determined a specific use for the net proceeds received by us from this offering and we may use these proceeds in ways with which you may not agree.

        We have not determined a specific use for the net proceeds received by us from this offering. You will not have the opportunity, as part of your investment decision, to assess whether the net proceeds are being used appropriately. Our management will have considerable discretion in the application of the net proceeds from this offering and you must therefore rely on their judgment. We intend to use the net proceeds from this offering for general corporate purposes, including working capital and capital expenditures. We may also use a portion of the net proceeds to acquire or invest in companies, applications and technologies that we believe will complement our business. The net proceeds received by us from this offering may be placed in investments that do not produce income or which lose value, or could be applied in other ways that do not improve our operating results or increase the value of your investment.

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        Sales of a substantial number of shares of common stock in the public market following this offering may adversely affect the market price for our common stock.

        Upon completion of this offering, we will have    shares of common stock outstanding, of which the            shares sold in this offering, or            shares if the underwriters' over allotment option is exercised in full, will be freely tradable without restriction or further registration under the Securities Act, unless purchased by our "affiliates," as such term is defined under the Securities Act, in which case such shares will be subject to the resale limitations but not the holding period requirements of Rule 144 under the Securities Act. We and our executive officers and directors, the selling stockholders and substantially all of our other stockholders, who beneficially own in the aggregate            shares of common stock, including             shares issuable upon exercise of outstanding options and warrants, have entered into 180-day lock-up agreements with the underwriters. The lock-up agreements prohibit each of us from selling or otherwise disposing of our shares of common stock except in limited circumstances. The lock-up agreements are contractual agreements, and Lehman Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, at their discretion, can waive the restrictions of any lock-up agreement at an earlier time without prior notice or announcement and allow the sale of shares of our common stock. If the restrictions in the lock-up agreements are waived, shares of our common stock will be available for sale into the public market, subject to applicable securities laws, which could reduce the market price for shares of our common stock. See "Underwriting—Lock-Up Agreements." We believe that, following the expiration of the 180-day period,                  of these shares will be eligible for immediate sale in the public market, subject to the Rule 144 resale limitations.

        Under our Second Amended and Restated Investors' Rights Agreement, some of our stockholders have customary demand and piggyback registration rights. See "Description of Capital Stock—Registration Rights." In addition, we intend to file a registration statement under the Securities Act to register an aggregate of 12,127,550 shares of our common stock reserved for issuance under our Amended and Restated 2000 Stock Incentive Plan, or 2000 Stock Plan, and                 shares of our common stock reserved for issuance under our 2004 Equity Incentive Plan, or 2004 Stock Plan, which will, when issued in accordance with such plans, be eligible for immediate sale in the public market, subject to the 180-day lock-up restriction described above and Rule 144 resale volume limitations. We may also issue our common stock in connection with acquisitions or investments. The perception of investors that a large number of shares may enter the market when prices rise could depress the market price for our common stock.

        Our stock price may be volatile, and you may not be able to resell shares of our common stock at or above the price you paid or at all.

        Our common stock has not been sold in a public market prior to this offering. We cannot predict the extent to which a trading market will develop or how liquid that market might become. The initial public offering price for our shares of common stock will be determined by negotiations among the representatives of the underwriters, the selling stockholders and us and may not be indicative of prices that will prevail in the trading market. The trading price of our common stock could be subject to wide fluctuations due to the factors discussed in this "Risk Factors" section and elsewhere in this prospectus. In addition, the stock market in general, and the Nasdaq National Market and technology companies in particular, have experienced extreme price and volume fluctuations. Current trading prices and valuations may not be sustainable. Investor sentiment towards the market and our industry may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a company's securities, securities class action litigation has often been instituted against such companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.

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        If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock, our stock price and trading volume could decline.

        The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrade our common stock, our common stock price would likely decline. If analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our common stock price or trading volume to decline.

        We do not intend to pay any cash dividends in the foreseeable future.

        We have never declared or paid any cash dividend on our capital stock, and we do not anticipate declaring or paying any cash dividends in the foreseeable future. We intend to reinvest any earnings in the growth of our business. Payments of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our business, operating results and financial condition, current and anticipated cash needs and plans for expansion.

        Our new investors will experience dilution in the book value per share.

        The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock immediately after this offering. Purchasers of the common stock in this offering will experience an immediate and substantial dilution of $            in the consolidated net tangible book value per share from the assumed initial public offering price of $            per share, the midpoint of the range set forth on the front cover of this prospectus. Any exercise of options and warrants that are currently outstanding will result in further dilution.

        We will incur increased costs as a public company.

        As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the SEC and the Nasdaq National Market, have required changes in corporate governance practices of public companies. We expect these new rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. For example, as a result of being a public company, we will be required to create additional board committees and adopt policies regarding internal controls and disclosure controls and procedures. In addition, we will incur additional costs associated with our public company reporting requirements. We also expect these new rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these new rules, but we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

        Concentration of ownership among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions and may result in a lower trading price for our common stock than if ownership of our common stock was less concentrated.

        Upon completion of this offering, our executive officers, directors and principal stockholders will beneficially own, in the aggregate, approximately    % of our outstanding common stock. As a result, these stockholders, acting together, could have the ability to exert substantial influence over all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate

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transactions. This concentration of control could be disadvantageous to other stockholders with interests different from those of our executive officers, directors and principal stockholders. For example, our executive officers, directors and principal stockholders could delay or prevent an acquisition or merger even if the transaction would benefit other stockholders. In addition, this significant concentration of common stock ownership may adversely affect the market price for our common stock because investors often perceive disadvantages in owning stock in companies with a concentration of ownership in a few stockholders. See "Principal and Selling Stockholders."

        Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

        Provisions in our certificate of incorporation and bylaws, as amended and restated prior to the closing of this offering, may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

•

Vacancies created by the expansion of the board of directors, or the resignation, death or removal of a director may be filled by a majority of the remaining directors, even though less than a quorum, or by a sole remaining director, and not by the stockholders.



•

Our stockholders may not act by written consent. As a result, a holder or holders controlling a majority of our capital stock would not be able to take certain actions without holding a stockholders' meeting.



•

Our certificate of incorporation does not provide for cumulative voting in the election of directors. This limits the ability of minority stockholders to elect director candidates. Members of the board of directors may only be removed for cause and upon the affirmative vote of the holders of a majority of our capital stock entitled to vote.



•

Our certificate of incorporation provides for the board of directors to be divided into three classes, each with staggered three-year terms. As a result, only one class of directors will be elected at each annual meeting of stockholders, and each of the two other classes of directors will continue to serve for the remainder of their respective three-year term, limiting the ability of stockholders to reconstitute the board of directors.



•

Our bylaws provide that the holders of a majority of our capital stock entitled to vote constitute a quorum for the conduct of business at a meeting of stockholders. However, the holders of at least two-thirds of our capital stock entitled to vote at a meeting of stockholders must approve any amendments to the protective provisions of our certificate of incorporation and bylaws.



•

Our bylaws provide that special meetings of the stockholders can be called only by the board of directors or the chairman of the board, and not by any stockholders. Additionally, our bylaws specify a notice period prior to any special meeting of the stockholders and prohibit the conduct of any business other than as specified in the notice of special meeting. These provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.



•

Our board of directors may issue, without stockholder approval, shares of preferred stock with rights, preferences and privileges determined by the board of directors. The ability to authorize and issue preferred stock with voting or other rights or preferences makes it possible for our board of directors to issue preferred stock that could impede the success of any attempt to acquire us.



•

As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15 percent or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction in which such person became such an interested stockholder. Our board of directors could rely on Delaware law to prevent or delay an acquisition of our company.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. In making such forward-looking statements, we must rely on estimates and assumptions drawn in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. These estimates and assumptions are inherently subject to significant business, economic and competitive uncertainties, many of which are beyond our control. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by us, or on our behalf.

        In particular, the words "expect," "anticipate," "estimate," "may," "will," "should," "intend," "believe," and similar expressions are intended to identify forward-looking statements. In light of the risks and uncertainties inherent in all forward-looking statements, you should not consider the inclusion of forward-looking statements in this prospectus to be a representation by us or any other person that our objectives or plans will be achieved.

        We undertake no obligation to update our forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

USE OF PROCEEDS

        We estimate that the net proceeds to us from the sale of            shares of common stock in this offering will be approximately $            million, assuming an initial public offering price of $            per share, the mid-point of the range set forth on the front cover of this prospectus, and after deducting the underwriting discount and estimated offering expenses we are responsible for paying. We will not receive any of the proceeds from the sale of shares of common stock by the selling stockholders.

        We intend to use the net proceeds from this offering primarily for working capital and general corporate purposes. The amounts that we actually expend for working capital and other general corporate purposes will vary significantly depending on a number of factors, including future revenue growth, if any, and the amount of cash that we generate from operations. As a result, we will retain broad discretion over the allocation of the net proceeds of this offering. We also may use a portion of the net proceeds for the acquisition of businesses, applications and technologies. We have no current agreements or commitments for the acquisition of any businesses, products or technologies. Pending these uses, we will invest the net proceeds of this offering in short-term money market and money market equivalent securities.

DIVIDEND POLICY

        We have never declared or paid cash dividends on our capital stock. We currently anticipate that we will retain future earnings, if any, to finance the growth and development of our business. Accordingly, we do not expect to declare or pay any cash dividends on our common stock in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors, which will depend on our financial condition, results of operations, capital requirements and such other factors as the board of directors deems relevant.

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CAPITALIZATION

        The following table sets forth our cash, cash equivalents and capitalization at March 31, 2004, as follows:

•

on an actual basis;



•

on a pro forma basis to give effect to the conversion of all of our outstanding convertible redeemable preferred stock into an aggregate of 33,941,655 shares of our common stock; and



•

on a pro forma as adjusted basis to reflect the sale of            shares of common stock by us in this offering at an assumed initial public offering price of $            per share, the mid-point of the range set forth on the front cover of this prospectus, after deducting estimated underwriting discounts, commissions and offering expenses.

        You should read this table in conjunction with "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus.

        The table above excludes the following shares:

•

1,076,000 shares of common stock issuable upon the exercise of warrants outstanding, as of March 31, 2004, at a weighted average exercise price of $0.89 per share;



•

1,504,804 shares of common stock issuable upon exercise of stock options outstanding, as of March 31, 2004, at a weighted average exercise price of $0.11 per share; and



•

501,227 shares of common stock available for future issuance under our 2000 Stock Plan, as of March 31, 2004.

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DILUTION

        If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Pro forma net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding at March 31, 2004 after giving effect to the conversion of all of our outstanding convertible preferred stock into an aggregate of 33,941,655 shares of our common stock, which will occur immediately upon the completion of this offering.

        Investors participating in this offering will incur immediate, substantial dilution. Our pro forma net tangible book value was approximately $14.3 million, or $0.30 per share of common stock at March 31, 2004. Assuming the sale of                        shares of common stock by us in this offering at the assumed initial public offering price of $            per share, the mid-point of the range set forth on the front cover of this prospectus, after deducting estimated underwriting discounts, commissions and offering expenses we are responsible for paying, our pro forma as adjusted net tangible book value at March 31, 2004, would have been $            million, or $            per share of common stock. This represents an immediate increase in pro forma net tangible book value of $            per share of common stock to our existing stockholders and an immediate dilution of $            per share to the new investors purchasing shares in this offering. The following table illustrates this per share dilution:

        The following table summarizes, as of March 31, 2004, on a pro forma as adjusted basis, the total number of shares and consideration paid to us and the average price per share paid by existing stockholders and by new investors purchasing shares of common stock in this offering from us at an assumed initial public offering price of $            per share, the mid-point of the range set forth on the front cover of this prospectus, and before deducting the estimated underwriting discounts and commissions and estimated offering expenses we are responsible for paying:

        The discussion and tables above are based on the number of shares of common stock and convertible preferred stock outstanding as of March 31, 2004.

        The discussion and tables above exclude the following shares:

•

1,076,000 shares of common stock issuable upon the exercise of warrants outstanding, as of March 31, 2004, at a weighted average exercise price of $0.89 per share;



•

1,504,804 shares of common stock issuable upon exercise of stock options outstanding, as of March 31, 2004, at a weighted average exercise price of $0.11 per share; and



•

501,227 shares of common stock available for future issuance under our 2000 Stock Plan, as of March 31, 2004.

        To the extent outstanding options and warrants are exercised, new investors will experience further dilution.

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SELECTED CONSOLIDATED FINANCIAL DATA

        You should read the following selected consolidated financial data in conjunction with "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus. The consolidated statements of operations data for the period beginning March 13, 2000, our inception, through December 31, 2000 and the consolidated balance sheet data as of December 31, 2000 and 2001 are derived from our audited consolidated financial statements for those periods, which are not included in this prospectus. The consolidated statements of operations data for the years ended December 31, 2001, 2002 and 2003 and the consolidated balance sheet data as of December 31, 2002 and 2003 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The consolidated statements of operations data for the three months ended March 31, 2003 and 2004 and the balance sheet data for the three months ended March 31, 2004 are derived from unaudited interim financial statements included elsewhere in this prospectus that, in the opinion of management, have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of operations and financial condition for those periods. This section presents our historical consolidated financial data and does not purport to project our results of operations or financial position for any future period or date. Operating results for the three months ended March 31, 2004 are not necessarily indicative of the results that may be expected for any other period or the entire year ending December 31, 2004. The unaudited pro forma combined statement of operations data for the year ended December 31, 2003 reflect our acquisition of Hexacto as if the acquisition had occurred on January 1, 2003 and are derived from our unaudited pro forma condensed consolidated financial information appearing elsewhere in this prospectus. The pro forma statement of operations data are not necessarily indicative of what our results would have been if the acquisition had occurred on such date and should be read in conjunction with our consolidated financial statements and related notes, the separate financial statements and related notes of Hexacto, and the unaudited pro forma condensed consolidated financial information included elsewhere in this prospectus.

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(1)

Stock-based compensation charges are excluded from the following operating expense categories (in thousands):

(2)

See Notes 2 and 13 to our consolidated financial statements for the determination of shares used in computing basic and diluted net loss per share.

(3)

Pro forma to give effect to the conversion of all issued and outstanding shares of our redeemable convertible preferred stock into common stock.

(4)

Reflects the sale of                        shares of common stock by us and the selling stockholders in this offering at the assumed initial public offering price of $            per share, after deducting estimated underwriting discounts, commissions and offering expenses.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion and analysis together with our consolidated financial statements and the related notes appearing at the end of this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly under the heading "Risk Factors."

Overview

        We are a leading global publisher of wireless entertainment applications, including games, ring tones, images and other entertainment content. We develop our applications both internally and through third-party developers. We have agreements to distribute our applications in 38 countries through 72 wireless carriers whose networks serve approximately 850 million subscribers. Our customers typically purchase our applications through a wireless carrier's branded e-commerce service accessed directly from their mobile phones. These carrier services include, among others, Verizon Wireless' Get It Now, Sprint PCS Vision and Vodafone live!. Our customers download our applications to their mobile phones and they are charged a one-time or monthly subcription fee for the application which appears on their mobile phone bill. The wireless carrier collects the fee, retains a percentage and remits the balance to us. We also distribute our applications through Internet portal sites, retail stores and mobile phone manufacturers that embed our games directly in mobile phones. In addition, we offer a limited number of personal computer, or PC, and personal digital assistant, or PDA, products that may be purchased through Internet portal sites and at retail locations.

        Our games and other entertainment applications are based on intellectual properties that we create and own, and well-established brands that we license from third parties. Our original properties include, among others, JAMDAT Bowling, Lemonade Tycoon™ and Gladiator®. Our licensed brands include, among others, Bejeweled, The Lord of the Rings, Tony Hawk's® Underground, Scrabble®, Blue's Clues® and Lemony Snicket's A Series of Unfortunate Events®. We also have license agreements with the NFL, MLB, the NBA and the NHL.

        In 2000 and 2001, we were primarily engaged in developing applications for existing and emerging technologies in the wireless entertainment market and building wireless carrier relationships in the United States. We generated minimal revenues during this period. In 2002, Verizon Wireless launched Get It Now and we began selling our applications to Verizon Wireless subscribers with BREW-enabled mobile phones. Get It Now provides a billing mechanism through which Verizon Wireless bills its subscribers on behalf of application providers like us. During the second half of 2002, we began selling our applications through other U.S. carriers, including Sprint PCS and AT&T Wireless, when they launched similar e-commerce application download services.

        Although we began operations in the United States, we have expanded internationally. In early 2002, we entered the Korean and Japanese markets through agreements with local distribution partners. In the second quarter of 2003, we opened an office in the United Kingdom to target the European market. In the third quarter of 2003, we entered the Chinese market through agreements with local distribution partners. Additionally, in the third quarter of 2003, we entered the Canadian market through our acquisition on July 3, 2003 of all the assets of Hexacto. The acquisition was accounted for as a purchase and Hexacto's operating results are included in our operating results for periods subsequent to the acquisition date. In early 2004, we opened a Tokyo office to begin direct distribution into the Japanese market.

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        In managing and evaluating our business, we consider, among other factors, the following:

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Penetration of next-generation mobile phones.    The primary growth drivers of our business are the number of mobile phones in the market capable of downloading our applications and our ability to deploy our applications to those mobile phones—primarily through our carrier relationships. We believe that over time the majority of all mobile phones worldwide will be capable of downloading data applications through application environments like BREW and Java. According to ARC, worldwide mobile phone sales are expected to grow from 465.0 million units in 2003 to 689.1 million units in 2008. In addition, ARC estimates that sales of mobile phones with BREW are expected to grow from 11.6 million units in 2003 to 75.6 million units in 2008, and sales of mobile phones with Java are expected to grow from 95.5 million units in 2003 to 594.9 million units in 2008, collectively representing approximately 97% of all mobile phones expected to be sold in 2008. According to ARC, sales of BREW handsets in North America are expected to grow from 5.5 million units in 2003 to 31.0 million units in 2008, and sales of Java handsets in North America are expected to grow from 7.3 million units in 2003 to 71.6 million units in 2008, a 52% compound annual growth rate.



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Estimated annual wireless gaming revenues.    We analyze the wireless entertainment market on an aggregate basis estimating the average annual amount spent on wireless gaming per subscriber and more specifically the amount spent per next-generation mobile phone. According to ARC, total wireless gaming revenues in North America in 2003 were approximately $119 million and are expected to grow to approximately $1.2 billion in 2008, a 59% compound annual growth rate. In addition, according to ARC, global wireless gaming revenues in 2003 were approximately $1.1 billion and are expected to grow to approximately $8.4 billion by 2008, a 49% compound annual growth rate.



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Complexity of mobile phone features and technologies.    We support numerous mobile phone models and technologies in an effort to reach the maximum number of wireless subscribers. We have developed processes and proprietary technologies that enable us to efficiently deploy our applications to over 200 mobile phone models. However, keeping pace with the rapid innovation of mobile phone technologies together with the continuous introduction of new mobile phone models by wireless carriers requires significant investment in deployment capabilities, including personnel, technologies and equipment. To date, we have broadly supported mobile phones utilizing BREW and Java as the primary application environment. Although we develop applications for other platforms including Symbian, PalmSource® and Windows Mobile™, we derived approximately 91% of our revenues during the year ended December 31, 2003 and 97% of our revenues during the three months ended March 31, 2004, from a combination of BREW and Java applications.



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Composition of our application portfolio.    As of June 30, 2004, we had more than 70 application titles commercially available. Our strategy is to publish a diversified and balanced portfolio of high-quality applications based on both JAMDAT brands and brands that we license from third parties. Our license agreements for third-party brands typically require that we pay an advance or guaranteed payment. We generally recoup all of the advances we have paid from royalties earned from sales of the application before the licensor receives any further royalty payments from us. We also distribute a limited number of applications for other publishers, developers and licensors. The majority of our 2003 revenues were from JAMDAT-branded applications.



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Pricing of our applications.    Our prices and purchasing methods vary by application, mobile phone model and wireless carrier. We conduct extensive data analysis to determine appropriate pricing. We offer some of our applications only on a monthly subscription basis and others only through a one-time purchase option. We also bundle multiple applications for a monthly subscription fee. The carriers typically charge $1.49 to $2.99 for a monthly subscription and $3.99

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to $7.49 for a one-time purchase of our applications. During the year ended December 31, 2003 and the three months ended March 31, 2004, we derived approximately 32% and 30% of our revenues, respectively, from subscriptions.

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Carrier revenue diversity.    We distribute our applications primarily through wireless carriers. We generally seek to create direct contractual relationships with these carriers when they launch their bill on behalf of services. Of the 72 carriers with whom we have distribution arrangements, 64 are direct and 8 are indirect or through a local distribution partner. Our ability to generate revenues and the terms under which we deliver our applications depend on a number of factors, including our ability to maintain strong relationships with the carriers and to differentiate our applications from those of our competitors. Verizon Wireless and Sprint PCS, our largest and second largest carrier relationships by revenue, accounted for approximately 49% and 26%, respectively, of our revenues during the year ended December 31, 2002, approximately 50% and 18%, respectively, of our revenues during the year ended December 31, 2003, and approximately 42% and 18%, respectively, of our revenues for the three months ended March 31, 2004, respectively.



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Geographic revenue diversity.    While we have initially focused on building our presence in the United States, we believe that the wireless entertainment market is expanding globally and we intend to pursue strategic expansion opportunities outside the United States. Our Montreal, Canada office distributes our applications to Canadian wireless carriers and, starting in late 2003, our Guildford, England office began distributing our applications throughout Europe. In April 2004, we opened an office in Tokyo, Japan to distribute our applications in the Japanese market. We distribute our applications in China and Korea through local distribution partners. All of our other international distribution efforts are currently managed directly from the United States. During the year ended December 31, 2003 and the three months ended March 31, 2004, we derived approximately 14% and 18% of our revenues, respectively, from international markets.

Application of Critical Accounting Policies and Estimates

        We have identified the policies below as critical to our business operations and understanding of our financial results. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

        We recognize revenues in accordance with the guidelines of SEC Staff Accounting Bulletin, or SAB, No. 104 "Revenue Recognition." We generally recognize revenues from the sale or subscription of our applications to wireless subscribers under distribution agreements with wireless carriers and other distributors in the period in which the applications are purchased or over the period in which the applications are subscribed, assuming that: fees are fixed and determinable; we have no significant obligations remaining; and collection of the related receivable is reasonably assured. In accordance with our distribution agreements, the wireless carriers and other distributors are responsible for billing, collecting and remitting to us our percentage of the fees. The wireless carriers and other distributors generally report the final sales data to us within 10 to 45 days following the end of each month. When final sales data is not available in a timely manner for reporting purposes, we estimate our revenues based on available sales data and historical trends. To date, instances requiring estimates have not been significant.

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        In accordance with Emerging Issues Task Force, or EITF, No. 99-19, "Reporting Revenue Gross as a Principal Versus Net as an Agent," we recognize as revenues the net amount the wireless carrier or distributor pays to us upon the sale of our applications, net of any service or other fees earned and deducted by the wireless carrier or distributor. We have evaluated our wireless carrier and distributor agreements and have determined that we are not the principal when selling our applications through wireless carriers. Key indicators that we evaluated to reach this determination include:

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wireless subscribers directly contract with wireless carriers who have most of the customer service interaction and are generally viewed as the primary obligor by the wireless subscribers;



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wireless carriers generally have significant control over the type of applications and content that are offered to their wireless subscribers;



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wireless carriers are directly responsible for billing and collecting fees from wireless subscribers including resolution of billing disputes;



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wireless carriers generally pay us a fixed percentage of revenues collected;



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wireless carriers generally must approve the price of our applications in advance of their sale to wireless subscribers, and our more significant carrier customers have the ability to set the ultimate price charged to the wireless subscriber; and



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we have limited risks, including no inventory risk and limited credit risk.