Edgar Filing: GameStop Corp.

e10vq

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

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		FOR THE QUARTERLY PERIOD ENDED NOVEMBER 3, 2007
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NO. 1-32637

GameStop Corp.

(Exact name of registrant as specified in its Charter)


Delaware		20-2733559
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

625 Westport Parkway, Grapevine, Texas (Address of principal executive offices)		76051 (Zip Code)

Registrant’s telephone number, including area code:

(817) 424-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


	Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Number of shares of $.001 par value Class A Common Stock outstanding as of November 27, 2007: 160,965,105

TABLE OF CONTENTS


			Page No.

PART I — FINANCIAL INFORMATION
	Item 1.	Financial Statements		2
		Condensed Consolidated Balance Sheets — November 3, 2007 (unaudited), October 28, 2006 (unaudited) and February 3, 2007		2
		Condensed Consolidated Statements of Operations (unaudited) — For the 13 weeks and 39 weeks ended November 3, 2007 and October 28, 2006		3
		Condensed Consolidated Statement of Stockholders’ Equity (unaudited) — November 3, 2007		4
		Condensed Consolidated Statements of Cash Flows (unaudited) — For the 39 weeks ended November 3, 2007 and October 28, 2006		5
		Notes to Condensed Consolidated Financial Statements		6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		34
	Item 4.	Controls and Procedures		35

PART II — OTHER INFORMATION
	Item 1.	Legal Proceedings		35
	Item 1A.	Risk Factors		36
	Item 6.	Exhibits		36
SIGNATURE				39
EXHIBIT INDEX				40
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I — FINANCIAL INFORMATION


ITEM 1.	*Financial Statements*

GAMESTOP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS


	November 3,		October 28,		February 3,
	2007		2006		2007
	(Unaudited)		(Unaudited)
	(In thousands, except per share data)

ASSETS:
Current assets:
Cash and cash equivalents	$	277,808	$	180,948	$	652,403
Receivables, net		47,443		32,841		34,268
Merchandise inventories, net		1,164,229		844,979		675,385
Prepaid expenses and other current assets		59,615		33,346		37,882
Prepaid taxes		73,257		68,307		5,545
Deferred taxes		38,458		48,391		34,858

Total current assets		1,660,810		1,208,812		1,440,341

Property and equipment:
Land		12,026		10,106		10,712
Buildings and leasehold improvements		358,445		291,692		305,806
Fixtures and equipment		516,767		394,712		425,841

		887,238		696,510		742,359
Less accumulated depreciation and amortization		386,658		257,981		285,896

Net property and equipment		500,580		438,529		456,463

Goodwill, net		1,402,845		1,395,824		1,403,907
Deferred financing fees		9,435		15,597		14,375
Deferred taxes		9,496		—		5,804
Other noncurrent assets		31,674		28,008		28,694

Total other assets		1,453,450		1,439,429		1,452,780

Total assets	$	3,614,840	$	3,086,770	$	3,349,584


LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	977,830	$	605,773	$	717,868
Accrued liabilities		313,844		308,192		357,016
Note payable, current portion		—		12,173		12,173

Total current liabilities		1,291,674		926,138		1,087,057

Deferred taxes		—		11,300		—
Senior notes payable, long-term portion, net		574,229		606,592		593,311
Senior floating rate notes payable, long-term portion		—		270,000		250,000
Deferred rent and other long-term liabilities		78,692		39,168		43,338

Total long-term liabilities		652,921		927,060		886,649

Total liabilities		1,944,595		1,853,198		1,973,706

Stockholders’ equity:
Preferred stock — authorized 5,000 shares; no shares issued or outstanding		—		—		—
Class A common stock — $.001 par value; authorized 300,000 shares; 160,959, 151,620 and 152,305 shares issued and outstanding, respectively		161		152		152
Additional paid-in-capital		1,200,586		1,006,794		1,021,903
Accumulated other comprehensive income		37,091		5,833		3,227
Retained earnings		432,407		220,793		350,596

Total stockholders’ equity		1,670,245		1,233,572		1,375,878

Total liabilities and stockholders’ equity	$	3,614,840	$	3,086,770	$	3,349,584

See accompanying notes to condensed consolidated financial statements.

GAMESTOP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	13 Weeks Ended						39 Weeks Ended
	November 3,			October 28,			November 3,			October 28,
	2007			2006			2007			2006
	(In thousands, except per share data)
	(Unaudited)

Sales	$	1,611,201		$	1,011,560		$	4,228,377		$	3,014,934
Cost of sales		1,191,637			695,904			3,098,745			2,097,980

Gross profit		419,564			315,656			1,129,632			916,954
Selling, general and administrative expenses		288,954			240,545			824,504			721,816
Depreciation and amortization		33,705			27,281			96,858			79,541
Merger-related expenses		—			2,890			—			6,788

Operating earnings		96,905			44,940			208,270			108,809
Interest income		(2,627	)		(1,673	)		(9,191	)		(5,402	)
Interest expense		14,549			21,321			48,575			64,588
Debt extinguishment expense		3,840			3,371			12,591			3,562

Earnings before income tax expense		81,143			21,921			156,295			46,061
Income tax expense		29,186			8,352			57,805			17,614

Net earnings	$	51,957		$	13,569		$	98,490		$	28,447

Net earnings per common share-basic	$	0.32		$	0.09		$	0.63		$	0.19

Weighted average shares of common stock-basic		160,048			150,785			157,308			149,239

Net earnings per common share-diluted	$	0.31		$	0.09		$	0.60		$	0.18

Weighted average shares of common stock-diluted		166,357			158,583			164,128			157,728

See accompanying notes to condensed consolidated financial statements.

GAMESTOP CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY


	Class A						Accumulated
	Common Stock				Additional		Other
			Common		Paid-in		Comprehensive		Retained
	Shares		Stock		Capital		Income		Earnings			Total
	(In thousands)
	(Unaudited)

Balance at February 3, 2007		152,305	$	152	$	1,021,903	$	3,227	$	350,596		$	1,375,878
Cumulative effect of change in accounting principle		—		—		—		—		(16,679	)		(16,679	)

Balance at February 4, 2007, adjusted		152,305		152		1,021,903		3,227		333,917			1,359,199
Comprehensive income:
Net earnings for the 39 weeks ended November 3, 2007		—		—		—		—		98,490
Foreign currency translation		—		—		—		33,864		—
Total comprehensive income													132,354
Stock-based compensation		—		—		20,311		—		—			20,311
Exercise of stock options and issuance of shares upon vesting of restricted stock grants (including tax benefit of $94,071)		8,654		9		158,372		—		—			158,381

Balance at November 3, 2007		160,959	$	161	$	1,200,586	$	37,091	$	432,407		$	1,670,245

See accompanying notes to condensed consolidated financial statements.

GAMESTOP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	39 Weeks Ended
	November 3,			October 28,
	2007			2006
	(In thousands)
	(Unaudited)

Cash flows from operating activities:
Net earnings	$	98,490		$	28,447
Adjustments to reconcile net earnings to net cash flows used in operating activities:
Depreciation and amortization (including amounts in cost of sales)		97,576			79,743
Amortization and retirement of deferred financing fees		5,198			2,386
Amortization and retirement of original issue discount on senior notes		918			1,136
Stock-based compensation expense		20,311			15,706
Deferred taxes		(6,586	)		(6,492	)
Excess tax benefits realized from exercise of stock-based awards		(92,628	)		(38,589	)
Loss on disposal of property and equipment		4,979			1,964
Increase in deferred rent and other long-term liabilities		7,175			5,045
Increase in liability to landlords for tenant allowances, net		3,958			1,066
Change in the value of foreign exchange contracts		3,358			(193	)
Changes in operating assets and liabilities, net
Receivables, net		(13,175	)		4,293
Merchandise inventories		(488,844	)		(241,801	)
Prepaid expenses and other current assets		(15,941	)		(17,007	)
Prepaid taxes		34,225			(8,803	)
Accounts payable and accrued liabilities		209,739			37,174

Net cash flows used in operating activities		(131,247	)		(135,925	)

Cash flows from investing activities:
Purchase of property and equipment		(124,757	)		(84,423	)
Acquisitions, net of cash acquired		1,062			—
Sale of assets held for sale		—			19,297

Net cash flows used in investing activities		(123,695	)		(65,126	)

Cash flows from financing activities:
Repurchase of notes payable		(270,000	)		(66,332	)
Repayment of other debt		(12,173	)		(21,675	)
Issuance of shares relating to stock options		64,308			29,390
Excess tax benefits realized from exercise of stock-based awards		92,628			38,589
Net change in other noncurrent assets and deferred financing fees		(5,486	)		277

Net cash flows used in financing activities		(130,723	)		(19,751	)

Exchange rate effect on cash and cash equivalents		11,070			157

Net decrease in cash and cash equivalents		(374,595	)		(220,645	)
Cash and cash equivalents at beginning of period		652,403			401,593

Cash and cash equivalents at end of period	$	277,808		$	180,948

See accompanying notes to condensed consolidated financial statements.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data)
(Unaudited)


1.	Basis of Presentation

GameStop Corp. (the “Company”) is a Delaware corporation formed for the purpose of consummating the business combination (the “merger”) of GameStop Holdings Corp., formerly known as GameStop Corp. (“Historical GameStop”), and Electronics Boutique Holdings Corp. (“EB”), which was completed on October 8, 2005. The merger of Historical GameStop and EB was treated as a purchase business combination for accounting purposes, with Historical GameStop designated as the acquirer. The Company is the world’s largest retailer of video games and entertainment software.

The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. All dollar and share amounts in the consolidated financial statements and notes to the consolidated financial statements are stated in thousands of U.S. dollars unless otherwise indicated.

The unaudited consolidated financial statements included herein reflect all adjustments (consisting only of normal, recurring adjustments) which are, in the opinion of the Company’s management, necessary for a fair presentation of the information for the periods presented. These consolidated financial statements are condensed and, therefore, do not include all of the information and footnotes required by generally accepted accounting principles. These consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the 53 weeks ended February 3, 2007 (“fiscal 2006”). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. Changes in the estimates and assumptions used by management could have significant impact on the Company’s financial results. Actual results could differ from those estimates.

Due to the seasonal nature of the business, the results of operations for the 39 weeks ended November 3, 2007 are not indicative of the results to be expected for the 52 weeks ending February 2, 2008 (“fiscal 2007”).

Certain reclassifications have been made to conform the prior period data to the current interim period presentation.


2.	Business Combinations and Goodwill

On January 13, 2007, the Company purchased Game Brands Inc., a 72-store video game retailer operating under the name Rhino Video Games, for $10,282. The acquisition was accounted for using the purchase method of accounting, with the excess of the purchase price over the net assets acquired, in the amount of $7,021, recorded as goodwill. The pro forma effect assuming the acquisition of Game Brands Inc. at the beginning of fiscal 2006 is not material to the Company’s consolidated financial statements.


3.	Accounting for Stock-Based Compensation

Beginning January 29, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment (“SFAS 123(R)”), using the modified prospective application method. Under this method, the Company records stock-based compensation expense based on the grant-date fair value estimated in accordance with the original provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation for all options granted prior to, but not vested as of, the adoption date. In addition, the Company records compensation expense in accordance with SFAS 123(R) for the share-based awards issued after the adoption date.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This valuation model requires the use of subjective assumptions, including expected option life, expected volatility and the expected employee forfeiture rate. The Company uses historical data to estimate the option life and the employee forfeiture rate, and uses historical volatility when estimating the stock price volatility. There were no options granted during the 13 weeks ended November 3, 2007 and October 28, 2006. The options granted during the 39 weeks ended November 3, 2007 and October 28, 2006 were 939 and 3,260, respectively, with a weighted-average fair value estimated at $10.16 and $8.42 per share, respectively, using the following assumptions:


	39 Weeks Ended
	November 3,			October 28,
	2007			2006

Volatility		40.5	%		54.5	%
Risk-free interest rate		4.8	%		4.6	%
Expected life (years)		4.0			3.0
Expected dividend yield		0	%		0	%

The options to purchase common stock are issued at fair market value on the date of the grant. Generally, the options vest and become exercisable ratably over a three-year period, commencing one year after the grant date, and expire ten years from issuance. The fair value of each option is recognized as compensation expense on a straight-line basis between the grant date and the date the options become fully vested. In the 13 weeks ended November 3, 2007 and October 28, 2006, the Company included compensation expense relating to stock option grants of $3,866 and $4,045, respectively, in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. In the 39 weeks ended November 3, 2007 and October 28, 2006, the Company included compensation expense relating to stock option grants of $11,937 and $12,498, respectively, in selling, general and administrative expenses. As of November 3, 2007, the unrecognized compensation expense related to the unvested portion of our stock options was $17,600 which is expected to be recognized over a weighted average period of 0.9 years. The total intrinsic values of options exercised during the 13 weeks ended November 3, 2007 and October 28, 2006 were $84,100 and $20,142, respectively. The total intrinsic values of options exercised during the 39 weeks ended November 3, 2007 and October 28, 2006 were $262,002 and $109,258, respectively.

There were 10 shares of restricted stock granted during the 13 weeks ended November 3, 2007 and no shares granted during the 13 weeks ended October 28, 2006. The shares granted during the quarter had a fair market value of $56.76 per share and vest in equal installments over three years. During the 39 weeks ended November 3, 2007 and October 28, 2006, the Company granted 974 shares and 515 shares, respectively, of restricted stock. The shares had a weighted-average fair market value of $27.09 and $20.69 per share, respectively, and vest in equal installments over three years. During the 13 weeks ended November 3, 2007 and October 28, 2006, the Company included compensation expense relating to the restricted share grants in the amount of $2,800 and $1,111, respectively, in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. During the 39 weeks ended November 3, 2007 and October 28, 2006, the Company included compensation expense relating to the restricted share grants in the amount of $8,374 and $3,208, respectively, in selling, general and administrative expenses. As of November 3, 2007, there was $21,534 of unrecognized compensation expense related to nonvested restricted stock awards that is expected to be recognized over a weighted average period of 2.2 years.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


4.	Computation of Net Earnings per Common Share

As of February 3, 2007, the Company had two classes of common stock. On February 7, 2007, following approval by a majority of the Class B common stockholders, all outstanding shares of Class B common stock were converted into shares of Class A common stock on a one-for-one basis (the “Conversion”). In addition, on February 9, 2007, the board of directors of the Company authorized a two-for-one stock split, effected by a one-for-one stock dividend to stockholders of record at the close of business on February 20, 2007, paid on March 16, 2007 (the “Stock Split”). The effect of the Conversion and the Stock Split has been retroactively applied to all periods presented in the condensed consolidated financial statements and notes thereto. The Company now has only Class A common stock outstanding and computes earnings per share in accordance with Statement of Financial Accounting Standard No. 128, Earnings per Share. A reconciliation of shares used in calculating basic and diluted net earnings per common share follows:


	13 Weeks Ended				39 Weeks Ended
	November 3,		October 28,		November 3,		October 28,
	2007		2006		2007		2006
	(In thousands, except per share data)

Net earnings	$	51,957	$	13,569	$	98,490	$	28,447

Weighted average common shares outstanding		160,048		150,785		157,308		149,239
Dilutive effect of options and warrants on common stock		6,309		7,798		6,820		8,489

Common shares and dilutive potential common shares		166,357		158,583		164,128		157,728

Net earnings per common share:
Basic	$	0.32	$	0.09	$	0.63	$	0.19

Diluted	$	0.31	$	0.09	$	0.60	$	0.18

The following table contains information on restricted shares and options to purchase shares of Class A common stock which were excluded from the computation of diluted earnings per share because they were anti-dilutive:

Anti-

Range of

Dilutive

Exercise

Expiration

Shares

Prices

Dates

(In thousands, except per share data)

13 Weeks Ended November 3, 2007

—

2010

13 Weeks Ended October 28, 2006

3,050

20.69

2016


5.	Debt

In October 2005, in connection with the merger, the Company entered into a five-year, $400,000 Credit Agreement (the “Revolver”), including a $50,000 letter of credit sub-limit, secured by the assets of the Company and its U.S. subsidiaries. The Revolver places certain restrictions on the Company and its U.S. subsidiaries, including limitations on asset sales, additional liens and the incurrence of additional indebtedness.

In April 2007, the Company amended the Revolver to extend the maturity date from October 11, 2010 to April 25, 2012, reduce the LIBO interest rate margin, reduce and fix the rate of the unused commitment fee and modify or delete certain other covenants.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

case plus 85% of eligible credit card receivables, net of certain reserves. Letters of credit reduce the amount available to borrow by their face value. The Company’s ability to pay cash dividends, redeem options and repurchase shares is generally prohibited, except that if availability under the Revolver is, or will be after any such payment, equal to or greater than 25% of the borrowing base, the Company may repurchase its capital stock and pay cash dividends. In addition, in the event that credit extensions under the Revolver at any time exceed 80% of the lesser of the total commitment or the borrowing base, the Company will be subject to a fixed charge coverage ratio covenant of 1.5:1.0.

The interest rate on the Revolver is variable and, at the Company’s option, is calculated by applying a margin of (1) 0.0% to 0.25% above the higher of the prime rate of the administrative agent or the federal funds effective rate plus 0.50% or (2) 1.00% to 1.50% above the LIBO rate. The applicable margin is determined quarterly as a function of the Company’s consolidated leverage ratio. As of November 3, 2007, the applicable margin was 0.0% for prime rate loans and 1.25% for LIBO rate loans. In addition, the Company is required to pay a commitment fee of 0.25% for any unused portion of the total commitment under the Revolver.

As of November 3, 2007, there were no borrowings outstanding under the Revolver and letters of credit outstanding totaled $5,714.

In September 2007, the Company’s Luxembourg subsidiary entered into a discretionary, $20,000 Uncommitted Line of Credit (the “Line of Credit”) with Bank of America. There is no term associated with the Line of Credit and Bank of America may withdraw the facility at any time without notice. The Line of Credit will be made available to the Company’s foreign subsidiaries for use primarily as a bank overdraft facility for short-term liquidity needs and for the issuance of bank guarantees and letters of credit to support operations.

As of November 3, 2007, there were no borrowings outstanding under the Line of Credit and bank guarantees outstanding were minimal.

On September 28, 2005, the Company, along with GameStop, Inc. as co-issuer (together with the Company, the “Issuers”), completed the offering of U.S. $300,000 aggregate principal amount of Senior Floating Rate Notes due 2011 (the “Senior Floating Rate Notes”) and U.S. $650,000 aggregate principal amount of Senior Notes due 2012 (the “Senior Notes” and, together with the Senior Floating Rate Notes, the “Notes”). The Notes were issued under an Indenture (the “Indenture”), dated September 28, 2005, by and among the Issuers, the subsidiary guarantors party thereto, and Citibank, N.A., as trustee (the “Trustee”). Concurrently with the consummation of the merger on October 8, 2005, EB and its direct and indirect U.S. wholly-owned subsidiaries (together, the “EB Guarantors”) became subsidiaries of the Company and entered into a First Supplemental Indenture, dated October 8, 2005, by and among the Issuers, the EB Guarantors and the Trustee, pursuant to which the EB Guarantors assumed all the obligations of a subsidiary guarantor under the Notes and the Indenture. The net proceeds of the offering were used to pay the cash portion of the merger consideration paid to the stockholders of EB in connection with the merger.

The offering of the Notes was conducted in a private transaction under Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and in transactions outside the United States in reliance upon Regulation S under the Securities Act. In April 2006, the Company filed a registration statement on Form S-4 in order to register new notes (the “New Notes”) with the same terms and conditions as the Notes in order to facilitate an exchange of the New Notes for the Notes. This registration statement on Form S-4 was declared effective by the Securities and Exchange Commission in May 2006 and the Company commenced an exchange offer to exchange the New Notes for the Notes. This exchange offer was completed in June 2006 with 100% participation.

In November 2006, Citibank, N.A. resigned as Trustee for the Notes and Wilmington Trust Company was appointed as the new Trustee for the Notes.

The Senior Notes bear interest at 8.0% per annum, mature on October 1, 2012 and were priced at 98.688%, resulting in a discount at the time of issue of $8,528. The discount is being amortized using the effective interest

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

method. As of November 3, 2007, the unamortized original issue discount was $5,771. The rate of interest on the Senior Floating Rate Notes prior to their redemption on October 1, 2007 was 9.2350% per annum.

The Issuers pay interest on the Senior Notes semi-annually, in arrears, every April 1 and October 1, to holders of record on the immediately preceding March 15 and September 15, and at maturity.

The Indenture contains affirmative and negative covenants customary for such financings, including, among other things, limitations on (1) the incurrence of additional debt, (2) restricted payments, (3) liens, (4) sale and leaseback transactions and (5) asset sales. Events of default provided for in the Indenture include, among other things, failure to pay interest or principal on the Notes, other breaches of covenants in the Indenture, and certain events of bankruptcy and insolvency.

As of November 3, 2007, the Company was in compliance with all covenants associated with the Revolver and the Indenture.

Under certain conditions, the Issuers may on any one or more occasions prior to maturity redeem up to 100% of the aggregate principal amount of Senior Notes issued under the Indenture at redemption prices at or in excess of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date. The circumstances which would limit the percentage of the Notes which may be redeemed or which would require the Company to pay a premium in excess of 100% of the principal amount are defined in the Indenture. Upon a Change of Control (as defined in the Indenture), the Issuers are required to offer to purchase all of the Notes then outstanding at 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase.

The Issuers may acquire Senior Notes by means other than redemption, whether by tender offer, open market purchases, negotiated transactions or otherwise, in accordance with applicable securities laws, so long as such acquisitions do not otherwise violate the terms of the Indenture.

In May 2006, the Company announced that its board of directors authorized the buyback of up to an aggregate of $100,000 of its Senior Floating Rate Notes and Senior Notes. As of October 28, 2006, the Company had repurchased $36,332 of its Senior Notes and $30,000 of its Senior Floating Rate Notes. As of February 3, 2007, the end of its most recent fiscal year, the Company had repurchased the maximum authorized amount, having acquired $50,000 of its Senior Notes and $50,000 of its Senior Floating Rate Notes, and delivered the Notes to the Trustee for cancellation. The associated loss on retirement of this debt was $3,371 and $3,562 for the 13 and 39 week periods ended October 28, 2006, respectively, which consisted of the premium paid to retire the Notes and the recognition of the deferred financing fees and the original issue discount on the Notes.

On February 9, 2007, the Company announced that its board of directors authorized the buyback of up to an aggregate of an additional $150,000 of its Senior Notes and Senior Floating Rate Notes. The timing and amount of the repurchases were determined by the Company’s management based on their evaluation of market conditions and other factors. As of August 4, 2007, the Company had repurchased the additional $150,000 of the Notes, having acquired $20,000 of its Senior Notes and $130,000 of its Senior Floating Rate Notes, and delivered the Notes to the Trustee for cancellation. The associated loss on retirement of this debt was $8,751 for the 39 week period ended November 3, 2007 which consists of the premium paid to retire the Notes and the recognition of the deferred financing fees and the original issue discount on the Notes.

On June 28, 2007, the Company announced that its board of directors authorized the redemption of the remaining $120,000 of Senior Floating Rate Notes outstanding. On July 12, 2007, the Issuers notified the Trustee of their intent to redeem the Notes on October 1, 2007. The Company redeemed the Senior Floating Rate Notes on October 1, 2007 at the redemption price specified by the Senior Floating Rate Notes of 102.0%, plus all accrued and unpaid interest through the redemption date. The Company incurred a one-time pre-tax charge of $3,840 associated with the redemption, which represents a $2,400 redemption premium and $1,440 to recognize unamortized deferred financing costs.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In October 2004, Historical GameStop issued a promissory note in favor of Barnes & Noble, Inc. (“Barnes & Noble”) in the principal amount of $74,020 in connection with the repurchase of Historical GameStop’s common stock held by Barnes & Noble. The note was unsecured and bore interest at 5.5% per annum, payable with each principal installment. Scheduled principal payments of $37,500, $12,173 and $12,173 were made in January 2005, October 2005 and October 2006, respectively, as required by the promissory note. The final payment of $12,173, satisfying the promissory note in full, was made in October 2007.


6.	Comprehensive income

Comprehensive income is net earnings, plus certain other items that are recorded directly to stockholders’ equity and consists of the following:


	13 Weeks Ended				39 Weeks Ended
	November 3,		October 28,		November 3,		October 28,
	2007		2006		2007		2006
	(In thousands)

Net earnings	$	51,957	$	13,569	$	98,490	$	28,447
Other comprehensive income:
Foreign currency translation adjustments		17,732		1,060		33,864		4,947

Total comprehensive income	$	69,689	$	14,629	$	132,354	$	33,394


7.	Income Taxes

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Internal Revenue Service (“IRS”) commenced an examination of the Company’s U.S. income tax returns for the fiscal years ended on January 29, 2005 and January 28, 2006 in the first quarter of fiscal 2007 that is anticipated to be completed by May 2008. The Company does not anticipate any adjustments that would result in a material impact on its consolidated financial statements. The Company is no longer subject to U.S. federal income tax examination by tax authorities for years before and including the fiscal year ended January 31, 2004. EB is no longer subject to U.S. federal income tax examination by tax authorities for years prior to and including the fiscal year ended February 1, 2003.

With respect to state and local jurisdictions and countries outside of the United States, the Company and its subsidiaries are typically subject to examination for three to six years after the income tax returns have been filed. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for in the accompanying financial statements for any adjustments that might be incurred due to state, local or foreign audits.

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), on February 4, 2007. As a result of the implementation of FIN 48, the Company recognized a $16,679 increase in the liability for unrecognized tax benefits, interest and penalties, which was accounted for as a reduction of the February 3, 2007 balance of retained earnings. As of February 4, 2007, the gross amount of unrecognized tax benefits, interest and penalties was $25,250. The total amount of unrecognized tax benefit that, if recognized, would affect the effective tax rate was $22,149 as of February 4, 2007. Additionally, adoption of FIN 48 resulted in the reclassification of certain accruals for uncertain tax positions in the amount of $7,864 from prepaid taxes to other long-term liabilities in our condensed consolidated balance sheets.

For the 13 weeks and 39 weeks ended November 3, 2007, the Company recognized an increase of $268 and a decrease of $1,418 in the liability for unrecognized tax benefits, respectively, and an increase of $571 and $1,688 for interest and penalties, respectively. As of November 3, 2007, the gross amount of unrecognized tax benefits, interest and penalties was $25,521. The total amount of unrecognized tax benefit that, if recognized, would affect the effective tax rate was $20,731.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company has historically recognized interest relating to income tax matters as a component of interest expense and recognized penalties relating to income tax matters as a component of selling, general and administrative expense. Such interest and penalties have historically been immaterial. Subsequent to adoption of FIN 48, the Company recognizes accrued interest and penalties related to income tax matters in income tax expense. The Company had $3,101 in interest and penalties related to unrecognized tax benefits accrued at the date of adoption and $4,789 as of November 3, 2007.

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions could significantly increase or decrease within the next 12 months as a result of settling ongoing audits. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.

The tax provisions for the 13 weeks and 39 weeks ended November 3, 2007 and October 28, 2006 are based upon management’s estimate of the Company’s annualized effective tax rate.


8.	Certain Relationships and Related Transactions

The Company operates departments within nine bookstores operated by Barnes & Noble, a stockholder of Historical GameStop until November 2004 and an affiliate through a common stockholder who is the chairman of the board of directors of Barnes & Noble and a member of the Company’s board of directors. The Company pays a license fee to Barnes & Noble on the gross sales of such departments. Management deems the license fee to be reasonable and based upon terms equivalent to those that would prevail in an arm’s length transaction. These charges amounted to $289 and $193 for the 13 weeks ended November 3, 2007 and October 28, 2006, respectively, and $776 and $591 for the 39 weeks ended November 3, 2007 and October 28, 2006, respectively.

Until June 2005, Historical GameStop participated in Barnes & Noble’s workers’ compensation, property and general liability insurance programs. The costs incurred by Barnes & Noble under these programs were allocated to Historical GameStop based upon total payroll expense, property and equipment, and insurance claim history of Historical GameStop. Management deemed the allocation methodology to be reasonable. Although the Company secured its own insurance coverage, costs will likely continue to be incurred by Barnes & Noble on insurance claims which were incurred under its programs prior to June 2005 and any such costs applicable to insurance claims against Historical GameStop will be allocated to the Company. During the 13 weeks ended November 3, 2007 and October 28, 2006, these charges amounted to $124 and $307, respectively. During the 39 weeks ended November 3, 2007 and October 28, 2006, these charges amounted to $259 and $697, respectively.

In October 2004, the board of directors authorized a repurchase of the Historical GameStop common stock held by Barnes & Noble. Historical GameStop repurchased 12,214 shares of its common stock at a price equal to $9.13 per share for aggregate consideration before expenses of $111,520. Historical GameStop paid $37,500 in cash and issued a promissory note in the principal amount of $74,020, which was payable in installments and bore interest at 5.5% per annum, payable when principal installments were due. The Company’s final scheduled principal payment of $12,173 was paid in October 2007. Interest expense on the promissory note for the 13 weeks ended November 3, 2007 and October 28, 2006 totaled $106 and $286, respectively. Interest expense on the promissory note for the 39 weeks ended November 3, 2007 and October 28, 2006 totaled $444 and $963, respectively.

In May 2005, the Company entered into an arrangement with Barnes & Noble under which www.gamestop.com is the exclusive specialty video game retailer listed on www.bn.com, Barnes & Noble’s e-commerce site. Under the terms of this agreement, the Company pays a fee to Barnes & Noble for sales of video game or PC entertainment products sold through www.bn.com. The fee paid to Barnes & Noble in connection with this arrangement was $54 and $34 for the 13 weeks ended November 3, 2007 and October 28, 2006, respectively, and $153 and $129 for the 39 weeks ended November 3, 2007 and October 28, 2006, respectively.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


9.	Commitments and Contingencies

Contingencies

On February 14, 2005, and as amended, Steve Strickland, as personal representative of the Estate of Arnold Strickland, deceased, Henry Mealer, as personal representative of the Estate of Ace Mealer, deceased, and Willie Crump, as personal representative of the Estate of James Crump, deceased, filed a wrongful death lawsuit against GameStop, Sony, Take-Two Interactive, Rock Star Games and Wal-Mart (collectively, the “Defendants”) and Devin Moore in the Circuit Court of Fayette County, Alabama, alleging that Defendants’ actions in designing, manufacturing, marketing and supplying Defendant Moore with violent video games were negligent and contributed to Defendant Moore killing Arnold Strickland, Ace Mealer and James Crump. Plaintiffs are seeking damages of $600,000 under the Alabama wrongful death statute and punitive damages. GameStop and the other defendants intend to vigorously defend this action. The Defendants filed a motion to dismiss the case on various grounds, which was heard in November 2005 and was denied. The Defendants appealed the denial of the motion to dismiss and on March 24, 2006, the Alabama Supreme Court denied the Defendants’ application. Discovery is currently stayed as plaintiffs’ counsel has received leave of court to withdraw. Plaintiffs are essentially without counsel and have been given 90 days from October 14, 2007 to find new counsel. Mr. Moore was found guilty of capital murder in a criminal trial in Alabama and was sentenced to death in August 2005. We do not believe there is sufficient information to estimate the amount of the possible loss, if any, resulting from the lawsuit.

In the ordinary course of our business, the Company is, from time to time, subject to various other legal proceedings. Management does not believe that any such other legal proceedings, individually or in the aggregate, will have a material adverse effect on the Company’s financial condition or results of operations.


10.	Significant Product Information

The Company is principally engaged in the sale of new and used video game systems and software, PC entertainment software and related accessories. The following table sets forth sales (in millions) by significant product category for the periods indicated:


	13 Weeks Ended										39 Weeks Ended
	November 3,					October 28,					November 3,					October 28,
	2007					2006					2007					2006
			Percent					Percent					Percent					Percent
	Sales		of Total			Sales		of Total			Sales		of Total			Sales		of Total
	(Unaudited)

Sales:
New video game hardware	$	373.9		23.2	%	$	150.5		14.9	%	$	949.1		22.4	%	$	468.7		15.5	%
New video game software		636.9		39.5	%		401.8		39.7	%		1,591.7		37.7	%		1,138.8		37.8	%
Used video game products		356.3		22.1	%		295.4		29.2	%		1,040.0		24.6	%		879.5		29.2	%
Other		244.1		15.2	%		163.9		16.2	%		647.6		15.3	%		527.9		17.5	%

Total	$	1,611.2		100.0	%	$	1,011.6		100.0	%	$	4,228.4		100.0	%	$	3,014.9		100.0	%

Other products include PC entertainment and other software and accessories, magazines and character-related merchandise.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth gross profit (in millions) and gross profit percentages by significant product category for the periods indicated:


	13 Weeks Ended								39 Weeks Ended
	November 3,				October 28,				November 3,				October 28,
	2007				2006				2007				2006
			Gross				Gross				Gross				Gross
	Gross		Profit		Gross		Profit		Gross		Profit		Gross		Profit
	Profit		Percent		Profit		Percent		Profit		Percent		Profit		Percent
	(Unaudited)

Gross Profit:
New video game hardware	$	27.5		7.4%	$	16.5		11.0%	$	70.6		7.4%	$	43.5		9.3%
New video game software		132.1		20.7%		94.0		23.4%		324.1		20.4%		248.7		21.8%
Used video game products		172.6		48.5%		143.9		48.7%		510.0		49.0%		438.9		49.9%
Other		87.4		35.8%		61.3		37.4%		224.9		34.7%		185.9		35.2%

Total	$	419.6		26.0%	$	315.7		31.2%	$	1,129.6		26.7%	$	917.0		30.4%


11.	Segment Information

The Company operates its business in the following segments: United States, Canada, Australia and Europe. Segment results for the United States include retail operations in 50 states, the District of Columbia, Puerto Rico and Guam, electronic commerce websites under the names www.gamestop.com and www.ebgames.com and Game Informer magazine. Segment results for Canada include retail operations in Canada and segment results for Australia include retail operations in Australia and New Zealand. Segment results for Europe include retail operations in 12 European countries. In the first quarter of fiscal 2007, the European segment expanded to include Portugal.

The Company measures segment profit using operating earnings which is defined as income from continuing operations before net interest expense and income taxes and excludes unallocated corporate overhead. The basis of segmentation and the measurement of segment profit or loss have not changed since the end of fiscal 2006 and there have been no material changes in total assets by segment since February 3, 2007. Transactions between reportable segments consist primarily of intersegment loans and related interest. Information on segments appears in the following tables:


	13 Weeks Ended				39 Weeks Ended
	November 3,		October 28,		November 3,		October 28,
	2007		2006		2007		2006
	(In thousands)
	(Unaudited)

Sales by operating segment were as follows:
United States	$	1,241,205	$	805,585	$	3,271,940	$	2,425,315
Canada		115,867		65,957		280,557		181,733
Australia		89,418		51,692		255,517		169,832
Europe		164,711		88,326		420,363		238,054

Total	$	1,611,201	$	1,011,560	$	4,228,377	$	3,014,934

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	13 Weeks Ended					39 Weeks Ended
	November 3,		October 28,			November 3,		October 28,
	2007		2006			2007		2006
	(In thousands)
	(Unaudited)

Segment operating earnings (loss) were as follows:
United States	$	73,856	$	40,755		$	165,540	$	103,421
Canada		10,010		3,961			19,185		8,483
Australia		7,360		3,768			19,837		12,291
Europe		5,679		(3,544	)		3,708		(15,386	)

Total	$	96,905	$	44,940		$	208,270	$	108,809


12.	Supplemental Cash Flow Information


	39 Weeks Ended
	November 3,		October 28,
	2007		2006
	(In thousands)
	(Unaudited)

Cash paid during the period for:
Interest	$	57,518	$	74,758

Income taxes	$	30,613	$	29,234


13.	Consolidating Financial Statements

On September 28, 2005, the Company, along with GameStop, Inc. as co-issuer, completed the offering of the Senior Floating Rate Notes and Senior Notes described in Note 5. The direct and indirect U.S. wholly-owned subsidiaries of the Company, excluding GameStop, Inc., as co-issuer, have guaranteed the Notes on a senior unsecured basis with unconditional guarantees. The following condensed consolidating financial statements illustrate the composition of the Issuers and guarantors on a combined basis (each Issuer and guarantor together with its majority-owned subsidiaries) and all other non-guarantor subsidiaries on a combined basis as of November 3, 2007, October 28, 2006 and February 3, 2007 for the balance sheet, the statements of operations for the 13 and 39 weeks ended November 3, 2007 and October 28, 2006 and cash flows for the 39 weeks ended November 3, 2007 and October 28, 2006.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GameStop Corp.
Condensed Consolidating Balance Sheet


	Issuers and
	Guarantor			Non-Guarantor
	Subsidiaries			Subsidiaries						Consolidated
	November 3,			November 3,						November 3,
	2007			2007			Eliminations			2007
	(Amounts in thousands, except per share amounts)
	(Unaudited)

ASSETS:
Current assets:
Cash and cash equivalents	$	196,705		$	81,103		$	—		$	277,808
Receivables, net		181,422			13,888			(147,867	)		47,443
Merchandise inventories, net		770,742			393,487			—			1,164,229
Prepaid expenses and other current assets		38,010			21,605			—			59,615
Prepaid taxes		76,155			(2,898	)		—			73,257
Deferred taxes		36,294			2,164			—			38,458

Total current assets		1,299,328			509,349			(147,867	)		1,660,810

Property and equipment:
Land		2,670			9,356			—			12,026
Buildings and leasehold improvements		236,468			121,977			—			358,445
Fixtures and equipment		411,352			105,415			—			516,767

		650,490			236,748			—			887,238
Less accumulated depreciation and amortization		307,116			79,542			—			386,658

Net property and equipment		343,374			157,206			—			500,580

Investment		519,760			—			(519,760	)		—
Goodwill, net		1,097,027			305,818			—			1,402,845
Deferred financing fees		9,416			19			—			9,435
Deferred taxes		(5,787	)		15,283			—			9,496
Other noncurrent assets		16,504			15,170			—			31,674

Total other assets		1,636,920			336,290			(519,760	)		1,453,450

Total assets	$	3,279,622		$	1,002,845		$	(667,627	)	$	3,614,840


LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	716,778		$	261,052		$	—		$	977,830
Accrued liabilities		249,248			212,463			(147,867	)		313,844

Total current liabilities		966,026			473,515			(147,867	)		1,291,674

Senior notes payable, long-term portion, net		574,229			—			—			574,229
Deferred rent and other long-term liabilities		69,122			9,570			—			78,692

Total long-term liabilities		643,351			9,570			—			652,921

Total liabilities		1,609,377			483,085			(147,867	)		1,944,595

Stockholders’ equity:
Preferred stock — authorized 5,000 shares; no shares issued or outstanding		—			—			—			—
Class A common stock — $.001 par value; authorized 300,000 shares; 160,959 shares issued and outstanding		161			—			—			161
Additional paid-in-capital		1,200,586			397,858			(397,858	)		1,200,586
Accumulated other comprehensive income		37,091			16,774			(16,774	)		37,091
Retained earnings		432,407			105,128			(105,128	)		432,407

Total stockholders’ equity		1,670,245			519,760			(519,760	)		1,670,245

Total liabilities and stockholders’ equity	$	3,279,622		$	1,002,845		$	(667,627	)	$	3,614,840

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GameStop Corp.
Condensed Consolidating Balance Sheet


	Issuers and
	Guarantor		Non-Guarantor
	Subsidiaries		Subsidiaries						Consolidated
	October 28,		October 28,						October 28,
	2006		2006			Eliminations			2006
	(Amounts in thousands, except per share amounts)
	(Unaudited)

ASSETS:
Current assets:
Cash and cash equivalents	$	133,768	$	47,180		$	—		$	180,948
Receivables, net		98,029		10,649			(75,837	)		32,841
Merchandise inventories, net		638,758		206,221			—			844,979
Prepaid expenses and other current assets		27,023		6,323			—			33,346
Prepaid taxes		57,380		10,927			—			68,307
Deferred taxes		46,961		1,430			—			48,391

Total current assets		1,001,919		282,730			(75,837	)		1,208,812

Property and equipment:
Land		2,000		8,106			—			10,106
Buildings and leasehold improvements		205,478		86,214			—			291,692
Fixtures and equipment		320,521		74,191			—			394,712

		527,999		168,511			—			696,510
Less accumulated depreciation and amortization		215,953		42,028			—			257,981

Net property and equipment		312,046		126,483			—			438,529

Investment		455,937		—			(455,937	)		—
Goodwill, net		1,091,172		304,652			—			1,395,824
Deferred financing fees		15,576		21			—			15,597
Other noncurrent assets		21,147		6,861			—			28,008

Total other assets		1,583,832		311,534			(455,937	)		1,439,429

Total assets	$	2,897,797	$	720,747		$	(531,774	)	$	3,086,770


LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	455,861	$	149,912		$	—		$	605,773
Accrued liabilities		259,929		124,100			(75,837	)		308,192
Note payable, current portion		12,173		—			—			12,173

Total current liabilities		727,963		274,012			(75,837	)		926,138

Deferred taxes		23,043		(11,743	)		—			11,300
Senior notes payable, long-term portion, net		606,592		—			—			606,592
Senior floating rate notes payable, long-term portion		270,000		—			—			270,000
Deferred rent and other long-term liabilities		36,627		2,541			—			39,168

Total long-term liabilities		936,262		(9,202	)		—			927,060

Total liabilities		1,664,225		264,810			(75,837	)		1,853,198

Stockholders’ equity:
Preferred stock — authorized 5,000 shares; no shares issued or outstanding		—		—			—			—
Class A common stock — $.001 par value; authorized 300,000 shares; 151,620 shares issued and outstanding		152		—			—			152
Additional paid-in-capital		1,006,794		388,158			(388,158	)		1,006,794
Accumulated other comprehensive income (loss)		5,833		449			(449	)		5,833
Retained earnings		220,793		67,330			(67,330	)		220,793

Total stockholders’ equity		1,233,572		455,937			(455,937	)		1,233,572

Total liabilities and stockholders’ equity	$	2,897,797	$	720,747		$	(531,774	)	$	3,086,770

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GameStop Corp.
Condensed Consolidating Balance Sheet


	Issuers and
	Guarantor			Non-Guarantor
	Subsidiaries			Subsidiaries						Consolidated
	February 3,			February 3,						February 3,
	2007			2007			Eliminations			2007
	(Amounts in thousands, except per share amounts)

ASSETS:
Current assets:
Cash and cash equivalents	$	582,514		$	69,889		$	—		$	652,403
Receivables, net		51,978			9,010			(26,720	)		34,268
Merchandise inventories, net		495,137			180,248			—			675,385
Prepaid expenses and other current assets		30,528			7,354			—			37,882
Prepaid taxes		11,012			(5,467	)		—			5,545
Deferred taxes		33,152			1,706			—			34,858

Total current assets		1,204,321			262,740			(26,720	)		1,440,341

Property and equipment:
Land		2,670			8,042			—			10,712
Buildings and leasehold improvements		212,286			93,520			—			305,806
Fixtures and equipment		348,576			77,265			—			425,841

		563,532			178,827			—			742,359
Less accumulated depreciation and amortization		237,838			48,058			—			285,896

Net property and equipment		325,694			130,769			—			456,463

Investment		517,332			—			(517,332	)		—
Goodwill, net		1,098,089			305,818			—			1,403,907
Deferred financing fees		14,356			19			—			14,375
Deferred taxes		(6,329	)		12,133			—			5,804
Other noncurrent assets		9,547			19,147			—			28,694

Total other assets		1,632,995			337,117			(517,332	)		1,452,780

Total assets	$	3,163,010		$	730,626		$	(544,052	)	$	3,349,584


LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	569,435		$	148,433		$	—		$	717,868
Accrued liabilities		321,944			61,792			(26,720	)		357,016
Note payable, current portion		12,173			—			—			12,173

Total current liabilities		903,552			210,225			(26,720	)		1,087,057

Senior notes payable, long-term portion, net		593,311			—			—			593,311
Senior floating rate notes payable, long-term portion		250,000			—			—			250,000
Deferred rent and other long-term liabilities		40,269			3,069			—			43,338

Total long-term liabilities		883,580			3,069			—			886,649

Total liabilities		1,787,132			213,294			(26,720	)		1,973,706

Stockholders’ equity:
Preferred stock — authorized 5,000 shares; no shares issued or outstanding		—			—			—			—
Class A common stock — $.001 par value; authorized 300,000 shares; 152,305 shares issued and outstanding		152			—			—			152
Additional paid-in-capital		1,021,903			427,012			(427,012	)		1,021,903
Accumulated other comprehensive income (loss)		3,227			(2,738	)		2,738			3,227
Retained earnings		350,596			93,058			(93,058	)		350,596

Total stockholders’ equity		1,375,878			517,332			(517,332	)		1,375,878

Total liabilities and stockholders’ equity	$	3,163,010		$	730,626		$	(544,052	)	$	3,349,584

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GameStop Corp.
Condensed Consolidating Statement of Operations


	Issuers and
	Guarantor			Non-Guarantor
	Subsidiaries			Subsidiaries						Consolidated
	November 3,			November 3,						November 3,
For the 13 Weeks Ended November 3, 2007	2007			2007			Eliminations			2007
	(Amounts in thousands)
	(Unaudited)

Sales	$	1,241,205		$	369,996		$	—		$	1,611,201
Cost of sales		912,910			278,727			—			1,191,637

Gross profit		328,295			91,269			—			419,564
Selling, general and administrative expenses		228,577			60,377			—			288,954
Depreciation and amortization		25,862			7,843			—			33,705

Operating earnings		73,856			23,049			—			96,905
Interest income		(4,988	)		(4,912	)		7,273			(2,627	)
Interest expense		14,489			7,333			(7,273	)		14,549
Debt extinguishment expense		3,840			—			—			3,840

Earnings before income tax expense		60,515			20,628			—			81,143
Income tax expense		22,515			6,671			—			29,186

Net earnings	$	38,000		$	13,957		$	—		$	51,957

GameStop Corp.
Condensed Consolidating Statement of Operations


	Issuers and
	Guarantor			Non-Guarantor
	Subsidiaries			Subsidiaries						Consolidated
	October 28,			October 28,						October 28,
For the 13 Weeks Ended October 28, 2006	2006			2006			Eliminations			2006
	(Amounts in thousands)
	(Unaudited)

Sales	$	805,585		$	205,975		$	—		$	1,011,560
Cost of sales		545,252			150,652			—			695,904

Gross profit		260,333			55,323			—			315,656
Selling, general and administrative expenses		195,942			44,603			—			240,545
Depreciation and amortization		20,746			6,535			—			27,281
Merger-related expenses		2,890			—			—			2,890

Operating earnings		40,755			4,185			—			44,940
Interest income		(3,081	)		(2,820	)		4,228			(1,673	)
Interest expense		21,105			4,444			(4,228	)		21,321
Debt extinguishment expense		3,371			—			—			3,371

Earnings before income tax expense		19,360			2,561			—			21,921
Income tax expense		6,908			1,444			—			8,352

Net earnings	$	12,452		$	1,117		$	—		$	13,569

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GameStop Corp.
Condensed Consolidating Statement of Operations


	Issuers and
	Guarantor			Non-Guarantor
	Subsidiaries			Subsidiaries						Consolidated
	November 3,			November 3,						November 3,
For the 39 Weeks Ended November 3, 2007	2007			2007			Eliminations			2007
	(Amounts in thousands)
	(Unaudited)

Sales	$	3,271,940		$	956,437		$	—		$	4,228,377
Cost of sales		2,380,285			718,460			—			3,098,745

Gross profit		891,655			237,977			—			1,129,632
Selling, general and administrative expenses		651,294			173,210			—			824,504
Depreciation and amortization		74,821			22,037			—			96,858

Operating earnings		165,540			42,730			—			208,270
Interest income		(15,101	)		(12,931	)		18,841			(9,191	)
Interest expense		48,320			19,096			(18,841	)		48,575
Debt extinguishment expense		12,591			—			—			12,591

Earnings before income tax expense		119,730			36,565			—			156,295
Income tax expense		45,439			12,366			—			57,805

Net earnings	$	74,291		$	24,199		$	—		$	98,490

GameStop Corp.
Condensed Consolidating Statement of Operations


	Issuers and
	Guarantor			Non-Guarantor
	Subsidiaries			Subsidiaries						Consolidated
	October 28,			October 28,						October 28,
For the 39 Weeks Ended October 28, 2006	2006			2006			Eliminations			2006
	(Amounts in thousands)
	(Unaudited)

Sales	$	2,425,315		$	589,619		$	—		$	3,014,934
Cost of sales		1,665,208			432,772			—			2,097,980

Gross profit		760,107			156,847			—			916,954
Selling, general and administrative expenses		588,319			133,497			—			721,816
Depreciation and amortization		61,579			17,962			—			79,541
Merger-related expenses		6,788			—			—			6,788

Operating earnings		103,421			5,388			—			108,809
Interest income		(9,516	)		(7,039	)		11,153			(5,402	)
Interest expense		64,349			11,392			(11,153	)		64,588
Debt extinguishment expense		3,562			—			—			3,562

Earnings before income tax expense		45,026			1,035			—			46,061
Income tax expense		15,942			1,672			—			17,614

Net earnings (loss)	$	29,084		$	(637	)	$	—		$	28,447

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GameStop Corp.
Condensed Consolidating Statement of Cash Flows


	Issuers and
	Guarantor			Non-Guarantor
	Subsidiaries			Subsidiaries					Consolidated
	November 3,			November 3,					November 3,
For the 39 Weeks Ended November 3, 2007	2007			2007			Eliminations		2007
	(Amounts in thousands)
	(Unaudited)

Cash flows from operating activities:
Net earnings	$	74,291		$	24,199		$	—	$	98,490
Adjustments to reconcile net earnings to net cash flows provided by (used in) operating activities:
Depreciation and amortization (including amounts in cost of sales)		75,532			22,044			—		97,576
Amortization and retirement of deferred financing fees		5,198			—			—		5,198
Amortization and retirement of original issue discount on senior notes		918			—			—		918
Stock-based compensation expense		20,311			—			—		20,311
Deferred taxes		(2,978	)		(3,608	)		—		(6,586	)
Excess tax benefits realized from exercise of stock-based awards		(92,628	)		—			—		(92,628	)
Loss on disposal of property and equipment		1,013			3,966			—		4,979
Increase in deferred rent and other long-term liabilities		4,795			2,380			—		7,175
Increase in liability to landlords for tenant allowances, net		3,531			427			—		3,958
Change in the value of foreign exchange contracts		7,213			(3,855	)		—		3,358
Changes in operating assets and liabilities, net
Receivables, net		(8,297	)		(4,878	)		—		(13,175	)
Merchandise inventories		(275,605	)		(213,239	)		—		(488,844	)
Prepaid expenses and other current assets		(7,173	)		(8,768	)		—		(15,941	)
Prepaid taxes		36,794			(2,569	)		—		34,225
Accounts payable and accrued liabilities		(10,432	)		220,171			—		209,739

Net cash flows provided by (used in) operating activities		(167,517	)		36,270			—		(131,247	)

Cash flows from investing activities:
Purchase of property and equipment		(94,244	)		(30,513	)		—		(124,757	)
Acquisitions, net of cash acquired		1,062			—			—		1,062

Net cash flows used in investing activities		(93,182	)		(30,513	)		—		(123,695	)

Cash flows from financing activities:
Repurchase of notes payable		(270,000	)		—			—		(270,000	)
Repayment of other debt		(12,173	)		—			—		(12,173	)
Issuance of shares relating to stock options		64,308			—			—		64,308
Excess tax benefits realized from exercise of stock-based awards		92,628			—			—		92,628
Net change in other noncurrent assets and deferred financing fees		127			(5,613	)		—		(5,486	)

Net cash flows used in financing activities		(125,110	)		(5,613	)		—		(130,723	)

Exchange rate effect on cash and cash equivalents		—			11,070			—		11,070

Net increase (decrease) in cash and cash equivalents		(385,809	)		11,214			—		(374,595	)
Cash and cash equivalents at beginning of period		582,514			69,889			—		652,403

Cash and cash equivalents at end of period	$	196,705		$	81,103		$	—	$	277,808

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GameStop Corp.
Condensed Consolidating Statement of Cash Flows


	Issuers and
	Guarantor			Non-Guarantor
	Subsidiaries			Subsidiaries					Consolidated
	October 28,			October 28,					October 28,
For the 39 Weeks Ended October 28, 2006	2006			2006			Eliminations		2006
	(Amounts in thousands)
	(Unaudited)

Cash flows from operating activities:
Net earnings (loss)	$	29,084		$	(637	)	$	—	$	28,447
Adjustments to reconcile net earnings (loss) to net cash flows used in operating activities:
Depreciation and amortization (including amounts in cost of sales)		61,779			17,964			—		79,743
Amortization and retirement of deferred financing fees		2,386			—			—		2,386
Amortization and retirement of original issue discount on senior notes		1,136			—			—		1,136
Stock-based compensation expense		15,706			—			—		15,706
Deferred taxes		(6,951	)		459			—		(6,492	)
Excess tax benefits realized from exercise of stock-based awards		(38,589	)		—			—		(38,589	)
Loss on disposal of property and equipment		1,831			133			—		1,964
Increase in deferred rent and other long-term liabilities		4,279			766			—		5,045
Increase in liability to landlords for tenant allowances, net		664			402			—		1,066
Change in the value of foreign exchange contracts		(196	)		3			—		(193	)
Changes in operating assets and liabilities, net
Receivables, net		4,318			(25	)		—		4,293
Merchandise inventories		(168,745	)		(73,056	)		—		(241,801	)
Prepaid expenses and other current assets		(16,007	)		(1,000	)		—		(17,007	)
Prepaid taxes		2,590			(11,393	)		—		(8,803	)
Accounts payable and accrued liabilities		(18,486	)		55,660			—		37,174

Net cash flows used in operating activities		(125,201	)		(10,724	)		—		(135,925	)

Cash flows from investing activities:
Purchase of property and equipment		(64,603	)		(19,820	)		—		(84,423	)
Sale of assets held for sale		19,297			—			—		19,297

Net cash flows used in investing activities		(45,306	)		(19,820	)		—		(65,126	)

Cash flows from financing activities:
Repurchase of notes payable		(66,332	)		—			—		(66,332	)
Repayment of other debt		(21,675	)		—			—		(21,675	)
Issuance of shares relating to stock options		29,390			—			—		29,390
Excess tax benefits realized from exercise of stock-based awards		38,589			—			—		38,589
Net change in other noncurrent assets and deferred financing fees		(4,620	)		4,897			—		277

Net cash flows provided by (used in) financing activities		(24,648	)		4,897			—		(19,751	)

Exchange rate effect on cash and cash equivalents		—			157			—		157

Net decrease in cash and cash equivalents		(195,155	)		(25,490	)		—		(220,645	)
Cash and cash equivalents at beginning of period		328,923			72,670			—		401,593

Cash and cash equivalents at end of period	$	133,768		$	47,180		$	—	$	180,948


ITEM 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

The following discussion should be read in conjunction with the information contained in our consolidated financial statements, including the notes thereto. Statements regarding future economic performance, management’s plans and objectives, and any statements concerning assumptions related to the foregoing contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations constitute forward-looking statements. Certain factors, which may cause actual results to vary materially from these forward-looking statements, accompany such statements or appear in GameStop’s Annual Report on Form 10-K for the fiscal year ended February 3, 2007 filed with the Securities and Exchange Commission (the “SEC”) on April 4, 2007 (the “Form 10-K”), including the factors disclosed under “Item 1A. Risk Factors.”

General

GameStop Corp. (“GameStop” or the “Company”) is the world’s largest retailer of video game products and PC entertainment software. We sell new and used video game hardware, video game software and accessories, as well as PC entertainment software and related accessories and other merchandise. As of November 3, 2007, we operated 5,123 stores in the United States, Australia, Canada and Europe, primarily under the names GameStop and EB Games. We also operate electronic commerce websites under the names www.gamestop.com and www.ebgames.com and publish Game Informer, the largest multi-platform video game magazine in the United States based on circulation.

Growth in the video game industry is driven by the introduction of new technology. In 2005 in the North American markets, Sony introduced the PlayStation Portable (the “PSP”) in March and Microsoft introduced the Xbox 360 in November. In November 2006, Nintendo introduced the Wii hardware platform worldwide and Sony introduced the PlayStation 3 hardware platform in the North American markets. Sony introduced the PlayStation 3 platform in the Australian and European markets in March 2007. Typically, in the first full year following the introduction of new video game platforms, sales of new video game hardware increase as a percentage of sales. As video game platforms mature, the sales mix attributable to complementary video game software and accessories, which generate higher gross margins, generally increases in the second and third years. The net effect is generally a decline in gross margins in the first full year following new platform releases and an increase in gross margins in the second and third years. Unit sales of maturing video game platforms are typically also driven by manufacturer-funded retail price decreases, further driving sales of related software and accessories. We expect that the installed base of the hardware platforms listed above and sales of related software and accessories will increase in the future. The Company’s gross margin in the 13 and 39 weeks ended November 3, 2007 was impacted by the recent launches of these new products and subsequent manufacturer-funded retail price decreases for some of these products.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles. Preparation of these statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. For a summary of significant accounting policies and the means by which we develop estimates thereon, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Form 10-K.

Accounting for Uncertainty in Income Taxes. In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), which clarifies the accounting for uncertainty in income taxes recognized under FASB Statement No. 109, Accounting for Income Taxes. FIN 48 addresses the recognition and measurement of tax positions taken or expected to be taken, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. The Company adopted and applied FIN 48 under the transition provisions to all of its income tax positions at the required effective date of February 4, 2007, resulting in a $16.7 million cumulative effect decrease to retained earnings and a $7.9 million increase in prepaid taxes. For additional information related to the Company’s adoption of FIN 48, see Note 7 of “Notes to Condensed Consolidated Financial Statements.”

Consolidated Results of Operations

The following table sets forth certain statement of operations items as a percentage of sales for the periods indicated:


	13 Weeks Ended						39 Weeks Ended
	November 3,			October 28,			November 3,			October 28,
	2007			2006			2007			2006

Statement of Operations Data:
Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		74.0			68.8			73.3			69.6

Gross profit		26.0			31.2			26.7			30.4
Selling, general and administrative expenses		17.9			23.8			19.5			23.9
Depreciation and amortization		2.1			2.7			2.3			2.7
Merger-related expenses		—			0.3			—			0.2

Operating earnings		6.0			4.4			4.9			3.6
Interest expense, net		0.8			1.9			0.9			2.0
Debt extinguishment expense		0.2			0.3			0.3			0.1

Earnings before income tax expense		5.0			2.2			3.7			1.5
Income tax expense		1.8			0.9			1.4			0.6

Net earnings		3.2	%		1.3	%		2.3	%		0.9	%

The Company includes purchasing, receiving and distribution costs in selling, general and administrative expenses, rather than cost of goods sold, in the statement of operations. For the 13 weeks ended November 3, 2007 and October 28, 2006, these purchasing, receiving and distribution costs amounted to $10.4 million and $8.3 million, respectively. For the 39 weeks ended November 3, 2007 and October 28, 2006, these purchasing, receiving and distribution costs amounted to $29.6 million and $24.9 million, respectively. The Company includes processing fees associated with purchases made by check and credit cards in cost of sales, rather than selling, general and administrative expenses, in the statement of operations. For the 13 weeks ended November 3, 2007 and October 28, 2006, these processing fees amounted to $12.1 million and $7.3 million, respectively. For the 39 weeks ended November 3, 2007 and October 28, 2006, these processing fees amounted to $31.3 million and $20.8 million, respectively. The net effect of the Company’s classifications is that its cost of sales as a percentage of sales and its selling, general and administrative expenses as a percentage of sales differ from what they would have been had the Company’s treatment conformed with those retailers that include purchasing, receiving and distribution costs in cost of sales and include processing fees associated with purchases made by check and credit cards in selling, general and administrative expenses. The net effect of these differences is 0.1% of sales or less for all periods presented herein.

The following table sets forth sales (in millions) by significant product category for the periods indicated:


	13 Weeks Ended										39 Weeks Ended
	November 3,					October 28,					November 3,					October 28,
	2007					2006					2007					2006
			Percent					Percent					Percent					Percent
	Sales		of Total			Sales		of Total			Sales		of Total			Sales		of Total
	(Unaudited)

Sales:
New video game hardware	$	373.9		23.2	%	$	150.5		14.9	%	$	949.1		22.4	%	$	468.7		15.5	%
New video game software		636.9		39.5	%		401.8		39.7	%		1,591.7		37.7	%		1,138.8		37.8	%
Used video game products		356.3		22.1	%		295.4		29.2	%		1,040.0		24.6	%		879.5		29.2	%
Other		244.1		15.2	%		163.9		16.2	%		647.6		15.3	%		527.9		17.5	%

Total	$	1,611.2		100.0	%	$	1,011.6		100.0	%	$	4,228.4		100.0	%	$	3,014.9		100.0	%

Other products include PC entertainment and other software and accessories, magazines and character-related merchandise.

The following table sets forth gross profit (in millions) and gross profit percentages by significant product category for the periods indicated:


	13 Weeks Ended										39 Weeks Ended
	November 3,					October 28,					November 3,					October 28,
	2007					2006					2007					2006
			Gross					Gross					Gross					Gross
	Gross		Profit			Gross		Profit			Gross		Profit			Gross		Profit
	Profit		Percent			Profit		Percent			Profit		Percent			Profit		Percent
	(Unaudited)

Gross Profit:
New video game hardware	$	27.5		7.4	%	$	16.5		11.0	%	$	70.6		7.4	%	$	43.5		9.3	%
New video game software		132.1		20.7	%		94.0		23.4	%		324.1		20.4	%		248.7		21.8	%
Used video game products		172.6		48.5	%		143.9		48.7	%		510.0		49.0	%		438.9		49.9	%
Other		87.4		35.8	%		61.3		37.4	%		224.9		34.7	%		185.9		35.2	%

Total	$	419.6		26.0	%	$	315.7		31.2	%	$	1,129.6		26.7	%	$	917.0		30.4	%

13 weeks ended November 3, 2007 compared with the 13 weeks ended October 28, 2006

Sales increased by $599.6 million, or 59.3%, from $1,011.6 million in the 13 weeks ended October 28, 2006 to $1,611.2 million in the 13 weeks ended November 3, 2007. The increase in sales was attributable to the comparable store sales increase of 46.3% for the third quarter of fiscal 2007, the addition of non-comparable store sales from the 682 stores opened since July 29, 2006 of approximately $113.6 million and increases related to changes in foreign exchange rates of $22.6 million. Stores are included in our comparable store sales base beginning in the thirteenth month of operation and exclude the effect of changes in foreign exchange rates. The comparable store sales increase was driven by strong sales of the Nintendo Wii, Microsoft’s Xbox 360 and the Sony PlayStation 3 and their related software and accessories, including several strong video game titles, such as Halo 3 and Guitar Hero III.

New video game hardware sales increased $223.4 million, or 148.4%, from $150.5 million in the 13 weeks ended October 28, 2006 to $373.9 million in the 13 weeks ended November 3, 2007, primarily due to the sales of hardware units mentioned above, as well as the increase in store count since October 2006. New video game software sales increased $235.1 million, or 58.5%, from $401.8 million in the 13 weeks ended October 28, 2006 to $636.9 million in the 13 weeks ended November 3, 2007, primarily due to new stores added, sales related to the new hardware platforms and a strong lineup of new video game titles released during the 13 weeks ended November 3, 2007. Used video game product sales also grew due to an increase in store count and an increase in overall demand for video game products following the launch of the new hardware platforms, with an increase in sales of $60.9 million, or 20.6%, from $295.4 million in the 13 weeks ended October 28, 2006 to $356.3 million in the 13 weeks ended November 3, 2007. Sales of other product categories grew 48.9%, or $80.2 million, from the 13 weeks ended October 28, 2006 to the 13 weeks ended November 3, 2007, due to the increase in store count and the increase in new hardware platform accessories sales.

As a percentage of sales, used video game products and the other product category decreased in the 13 weeks ended November 3, 2007 compared to the 13 weeks ended October 28, 2006. This was due to the strong sales of new video game hardware and software driven by the recent launches of the new video game consoles mentioned earlier.

Cost of sales increased by $495.7 million, or 71.2%, from $695.9 million in the 13 weeks ended October 28, 2006 to $1,191.6 million in the 13 weeks ended November 3, 2007 as a result of the increase in sales and the changes in gross profit discussed below.

Gross profit increased by $103.9 million, or 32.9%, from $315.7 million in the 13 weeks ended October 28, 2006 to $419.6 million in the 13 weeks ended November 3, 2007. Gross profit as a percentage of sales decreased from 31.2% in the 13 weeks ended October 28, 2006 to 26.0% in the 13 weeks ended November 3, 2007. The gross profit percentage decrease was caused primarily by the increase in sales of new video game hardware as a

percentage of total sales in the third quarter of 2007. New video game hardware typically carries a much lower margin than software and accessories sales. Gross profit as a percentage of sales was also impacted by a decrease in the excess of vendor allowances received over marketing and advertising expenses. Vendor allowances received during the 13 weeks ended October 28, 2006 were abnormally high due to the launches of the Nintendo Wii and the Sony PlayStation 3 and returned to normal levels in the 13 weeks ended November 3, 2007. In addition, net vendor allowances decreased due to higher expenditures on marketing and advertising from the third quarter of fiscal 2006 to the same period in fiscal 2007 in support of the Company’s branding campaign. These factors led to a decrease in gross profit as a percentage of sales on new video game hardware, new video game software and other products from 11.0%, 23.4% and 37.4% of sales, respectively, in the prior year quarter to 7.4%, 20.7% and 35.8% of sales, respectively, in the third quarter of 2007. Gross profit as a percentage of sales on used video game products remained comparable at 48.5% in the 13 weeks ended November 3, 2007 compared to 48.7% in the 13 weeks ended October 28, 2006.

Selling, general and administrative expenses increased by $48.5 million, or 20.2%, from $240.5 million in the 13 weeks ended October 28, 2006 to $289.0 million in the 13 weeks ended November 3, 2007. This increase was primarily attributable to the increase in the number of stores in operation and related increases in store, distribution and corporate office operating expenses. Selling, general and administrative expenses as a percentage of sales decreased from 23.8% in the 13 weeks ended October 28, 2006 to 17.9% in the 13 weeks ended November 3, 2007. The decrease in selling, general and administrative expenses as a percentage of sales was primarily due to leveraging as a result of the higher sales associated with the introduction of the new video game systems and related software and accessories. Selling, general and administrative expenses include $6.7 million and $5.2 million in stock-based compensation expense for the 13 weeks ended November 3, 2007 and October 28, 2006, respectively, in accordance with SFAS 123(R).

Depreciation and amortization expense increased $6.4 million from $27.3 million for the 13 weeks ended October 28, 2006 to $33.7 million in the 13 weeks ended November 3, 2007. This increase was primarily due to capital expenditures associated with new stores opened since October 28, 2006 and investments in management information systems.

The Company’s results of operations for the 13 weeks ended October 28, 2006 include $2.9 million in expenses associated with the merger of GameStop Holdings Corp., formerly known as GameStop Corp. (“Historical GameStop”), and Electronics Boutique Holdings Corp. (“EB”).

Interest income increased from $1.7 million in the 13 weeks ended October 28, 2006 to $2.6 million in the 13 weeks ended November 3, 2007 due primarily to interest income earned on higher invested cash balances. Interest expense decreased from $21.3 million in the 13 weeks ended October 28, 2006 to $14.5 million in the 13 weeks ended November 3, 2007 primarily due to the retirement of $33.7 million of the Company’s senior notes and $270.0 million of the Company’s senior floating rate notes since October 28, 2006. Debt extinguishment expense of $3.8 million was recognized in the 13 weeks ended November 3, 2007 as a result of premiums paid related to debt retirement and the recognition of deferred financing fees and unamortized original issue discount. Debt extinguishment expense of $3.4 million was incurred in the 13 weeks ended October 28, 2006 for the loss associated with the repurchase of $29.4 million of senior notes and $30.0 million of senior floating rate notes.

Income tax expense for the 13 weeks ended October 28, 2006 and the 13 weeks ended November 3, 2007 was based upon management’s estimate of the Company’s annualized effective tax rate. Income tax expense was $8.4 million for the 13 weeks ended October 28, 2006 compared to $29.2 million for the 13 weeks ended November 3, 2007. For the 13 weeks ended November 3, 2007, income tax expense included $0.8 million for unrecognized tax benefit, interest and penalties associated with our uncertain tax positions, as prescribed by FIN 48.

The factors described above led to an increase in operating earnings of $52.0 million, or 115.8%, from $44.9 million in the 13 weeks ended October 28, 2006 to $96.9 million in the 13 weeks ended November 3, 2007, and an increase in net earnings of $38.4 million, or 282.4%, from $13.6 million in the 13 weeks ended October 28, 2006 to $52.0 million in the 13 weeks ended November 3, 2007.

39 weeks ended November 3, 2007 compared with the 39 weeks ended October 28, 2006

Sales increased by $1,213.5 million, or 40.3%, from $3,014.9 million in the 39 weeks ended October 28, 2006 to $4,228.4 million in the 39 weeks ended November 3, 2007. The increase in sales was attributable to the comparable store sales increase of 30.2% for the 39 weeks ended November 3, 2007 versus the 39 weeks ended October 28, 2006, the addition of non-comparable store sales from the 838 stores opened since January 29, 2006 of approximately $265.7 million and increases related to changes in foreign exchange rates of $52.2 million. The comparable store sales increase was driven by continued strong sales of the Nintendo Wii, Microsoft’s Xbox 360 and the Sony PlayStation 3, which completed its worldwide launch during this fiscal year, and their related software and accessories, including several strong video game titles, such as Halo 3 and Guitar Hero III.

New video game hardware sales increased $480.4 million, or 102.5%, from $468.7 million in the 39 weeks ended October 28, 2006 to $949.1 million in the 39 weeks ended November 3, 2007, primarily due to the sales of hardware units mentioned above, as well as the increase in store count since January 2006. New video game software sales increased $452.9 million, or 39.8%, from $1,138.8 million in the 39 weeks ended October 28, 2006 to $1,591.7 million in the 39 weeks ended November 3, 2007, primarily due to new stores added, sales related to the new hardware platforms and a strong lineup of new video game titles released during the 39 weeks ended November 3, 2007. Used video game product sales also grew due to an increase in store count and an increase in overall demand for video game products following the launch of the new hardware platforms, with an increase in sales of $160.5 million, or 18.2%, from $879.5 million in the 39 weeks ended October 28, 2006 to $1,040.0 million in the 39 weeks ended November 3, 2007. Sales of other product categories grew 22.7%, or $119.7 million, from the 39 weeks ended October 28, 2006 to the 39 weeks ended November 3, 2007, due to the increase in store count and the increase in new hardware platform accessories sales.

As a percentage of sales, new video game software, used video game products and the other products category decreased in the 39 weeks ended November 3, 2007 compared to the 39 weeks ended October 28, 2006. This was due to the strong sales of new video game hardware driven by the recent launches of the new video game consoles mentioned earlier.

Cost of sales increased by $1,000.7 million, or 47.7%, from $2,098.0 million in the 39 weeks ended October 28, 2006 to $3,098.7 million in the 39 weeks ended November 3, 2007 as a result of the increase in sales and the changes in gross profit discussed below.

Gross profit increased by $212.6 million, or 23.2%, from $917.0 million in the 39 weeks ended October 28, 2006 to $1,129.6 million in the 39 weeks ended November 3, 2007. Gross profit as a percentage of sales decreased from 30.4% in the 39 weeks ended October 28, 2006 to 26.7% in the 39 weeks ended November 3, 2007 for the reasons described in the comparison of the 13-week periods. These reasons combined led to a decrease in gross profit as a percentage of sales on new video game hardware, new video game software and other products from 9.3%, 21.8% and 35.2% of sales, respectively, in the 39 weeks ended October 28, 2006 to 7.4%, 20.4% and 34.7% of sales, respectively, for the 39 weeks ended November 3, 2007. Gross profit as a percentage of sales on used video game products decreased from 49.9% in the 39 weeks ended October 28, 2006 to 49.0% in the 39 weeks ended November 3, 2007 due to increased promotional expenses and higher refurbishment costs associated with an increase in production of refurbished hardware platforms during fiscal 2007.

Selling, general and administrative expenses increased by $102.7 million, or 14.2%, from $721.8 million in the 39 weeks ended October 28, 2006 to $824.5 million in the 39 weeks ended November 3, 2007. This increase was primarily attributable to the increase in the number of stores in operation and related increases in store, distribution and corporate office operating expenses. Selling, general and administrative expenses as a percentage of sales decreased from 23.9% in the 39 weeks ended October 28, 2006 to 19.5% in the 39 weeks ended November 3, 2007. The decrease in selling, general and administrative expenses as a percentage of sales was primarily due to leveraging as a result of the higher sales associated with the introduction of the new video game systems and synergies associated with the acquisition of EB, including the shut-down of EB’s corporate headquarters and distribution center in the 39 weeks ended October 28, 2006. Selling, general and administrative expenses include $20.3 million and $15.7 million in stock-based compensation expense for the 39 weeks ended November 3, 2007 and October 28, 2006, respectively, in accordance with SFAS 123(R).

Depreciation and amortization expense increased $17.4 million from $79.5 million for the 39 weeks ended October 28, 2006 to $96.9 million in the 39 weeks ended November 3, 2007. This increase was primarily due to capital expenditures associated with new stores opened since October 28, 2006 and investments in management information systems.

The Company’s results of operations for the 39 weeks ended October 28, 2006 include $6.8 million of expenses associated with the merger of Historical GameStop and EB.

Interest income increased from $5.4 million in the 39 weeks ended October 28, 2006 to $9.2 million in the 39 weeks ended November 3, 2007 due primarily to interest income earned on higher invested cash balances. Interest expense decreased from $64.6 million in the 39 weeks ended October 28, 2006 to $48.6 million in the 39 weeks ended November 3, 2007 primarily due to the retirement of $33.7 million of the Company’s senior notes and $270.0 million of the Company’s senior floating rate notes since October 28, 2006. Debt extinguishment expense of $12.6 million was recognized in the 39 weeks ended November 3, 2007 as a result of premiums paid related to debt retirement and the recognition of deferred financing fees and unamortized original issue discount. Debt extinguishment expense of $3.6 million was incurred in the 39 weeks ended October 28, 2006 for the loss associated with the repurchase of $36.3 million of senior notes and $30.0 million of senior floating rate notes.

Income tax expense for the 39 weeks ended October 28, 2006 and the 39 weeks ended November 3, 2007 was based upon management’s estimate of the Company’s annualized effective tax rate. Income tax expense was $17.6 million for the 39 weeks ended October 28, 2006 compared to $57.8 million for the 39 weeks ended November 3, 2007. For the 39 weeks ended November 3, 2007, income tax expense included $0.3 million for unrecognized tax benefit, interest and penalties associated with our uncertain tax positions, as prescribed by FIN 48.

The factors described above led to an increase in operating earnings of $99.5 million, or 91.5%, from $108.8 million in the 39 weeks ended October 28, 2006 to $208.3 million in the 39 weeks ended November 3, 2007, and an increase in net earnings of $70.1 million, or 246.8%, from $28.4 million in the 39 weeks ended October 28, 2006 to $98.5 million in the 39 weeks ended November 3, 2007.

Segment Performance

The Company operates its business in the following segments: United States, Australia, Canada and Europe. The following tables provide a summary of our sales and operating earnings (loss) by reportable segment:


	13 Weeks Ended					39 Weeks Ended
	November 3,		October 28,			November 3,		October 28,
	2007		2006			2007		2006
	(In millions)
	(Unaudited)

Sales by operating segment are as follows:
United States	$	1,241.2	$	805.6		$	3,271.9	$	2,425.3
Canada		115.9		66.0			280.6		181.7
Australia		89.4		51.7			255.5		169.8
Europe		164.7		88.3			420.4		238.1

Total	$	1,611.2	$	1,011.6		$	4,228.4	$	3,014.9

Operating earnings (loss) by operating segment are as follows:
United States	$	73.9	$	40.7		$	165.6	$	103.4
Canada		10.0		4.0			19.2		8.5
Australia		7.3		3.8			19.8		12.3
Europe		5.7		(3.6	)		3.7		(15.4	)

Total	$	96.9	$	44.9		$	208.3	$	108.8

United States

Segment results for the United States include retail operations in 50 states, the District of Columbia, Puerto Rico and Guam, the electronic commerce websites www.gamestop.com and www.ebgames.com and Game Informer magazine. As of November 3, 2007, the United States segment included 4,008 GameStop stores, compared to 3,705 stores on October 28, 2006. Sales for the 13 and 39 weeks ended November 3, 2007 increased 54.1% and 34.9%, respectively, compared to the 13 and 39 weeks ended October 28, 2006 as a result of increased sales at existing stores and the opening of 420 new stores since July 29, 2006 and 525 stores since January 28, 2006, including 101 and 249 stores in the 13 and 39 weeks ended November 3, 2007, respectively. Sales at existing stores increased due to strong sales of the new hardware platform units, including the Nintendo Wii and the Sony PlayStation 3 and their related software and accessories, as well as Microsoft’s Xbox 360 hardware, software and accessories, particularly new sales of Halo 3 released by Microsoft in September 2007. Segment operating income for the 13 and 39 weeks ended November 3, 2007 increased by 81.6% and 60.2%, respectively, compared to the 13 and 39 weeks ended October 28, 2006 driven by strong sales of the new hardware platforms and their related software and accessories, leveraging of selling, general and administrative expenses, and the recognition of synergies related to the acquisition of EB, including the shut-down of EB’s corporate headquarters and distribution center.

Canada

Sales in the Canadian segment in the 13 and 39 weeks ended November 3, 2007 increased 75.6% and 54.4%, respectively, compared to the 13 and 39 weeks ended October 28, 2006. The increase in sales was primarily attributable to increased sales at existing stores and the additional sales at the 16 and 18 stores opened since July 29, 2006 and January 28, 2006, respectively. As of November 3, 2007, the Canadian segment had 277 stores compared to 265 stores as of October 28, 2006. The increase in sales at existing stores was driven by strong sales of the new hardware platform units, including the Nintendo Wii and the Sony PlayStation 3 and their related software and accessories, as well as Microsoft’s Xbox 360 software and accessories, particularly new software sales of Halo 3 released by Microsoft in September 2007. Segment operating income for the 13 and 39 weeks ended November 3, 2007 increased by 150.0% and 125.9%, respectively, compared to the 13 and 39 weeks ended October 28, 2006, driven by the increased sales discussed above, the leveraging of the selling, general and administrative expenses and the favorable impact of changes in exchange rates since the prior year. For the 13 and 39 week periods ended November 3, 2007, changes in exchange rates when compared to the prior year had the effect of increasing operating earnings by $0.9 million and $1.2 million, respectively.

Australia

Segment results for Australia include retail operations in Australia and New Zealand. As of November 3, 2007, the Australian segment included 262 stores, compared to 208 at October 28, 2006. Sales for the 13 and 39 weeks ended November 3, 2007 increased 72.9% and 50.5%, respectively, compared to the 13 and 39 weeks ended October 28, 2006. The increase in sales was due to higher sales at existing stores and the additional sales at the 66 and 86 stores opened since July 29, 2006 and January 28, 2006, respectively. The increase in sales at existing stores was due to strong sales of the Sony PlayStation 3, which launched in Australia and New Zealand during the first quarter of fiscal 2007, as well as strong sales of other video game hardware, including the Nintendo Wii, and increased sales of handheld video game systems during the third quarter and full fiscal year of 2007 compared to the same periods in 2006. The increased hardware sales led to increases in sales in new video game software, used video game products and accessories and other products. Segment operating income in the 13 and 39 weeks ended November 3, 2007 increased by 92.1% and 61.0%, respectively, when compared to the 13 and 39 weeks ended October 28, 2006. The increase was driven by the increased sales and related margin dollars discussed above, the leveraging of selling, general and administrative expenses and the favorable impact of changes in exchange rates since the prior year. For the 13 and 39 week periods ended November 3, 2007, changes in exchange rates when compared to the prior year had the effect of increasing operating earnings by $0.9 million and $2.2 million, respectively.

Europe

Segment results for Europe include retail operations in 12 European countries including Portugal, which commenced operations in the first quarter of fiscal 2007. As of November 3, 2007, the European segment operated 576 stores, compared to 455 stores at October 28, 2006. For the 13 and 39 weeks ended November 3, 2007, European sales increased 86.5% and 76.6%, respectively, compared to the 13 and 39 weeks ended October 28, 2006. The increase in sales was primarily due to the increase in sales at existing stores and the additional sales at the 180 and 209 stores opened since July 29, 2006 and January 28, 2006, respectively. These increases in store count were offset by store closings in the first quarter of fiscal 2007, primarily in Spain, as part of the implementation of the integration strategy of the acquisition of EB. The increase in sales at existing stores was driven by strong sales of the Sony PlayStation 3, which launched in Europe during the first quarter of fiscal 2007, as well as strong sales of other video game hardware, including the Nintendo Wii, and increased sales of Microsoft’s Xbox 360 and handheld video game systems during the third quarter and first three quarters of fiscal 2007 compared to the same periods in fiscal 2006. The increased hardware sales led to increases in sales in new video game software, used video game products and accessories and other products.

The segment operating earnings in Europe for the 13 and 39 weeks ended November 3, 2007 increased to $5.7 million and $3.7 million, respectively, compared to the operating losses in the 13 and 39 weeks ended October 28, 2006 of $3.6 million and $15.4 million, respectively. The increase in the operating earnings was driven by the increase in sales and related margin dollars discussed above, the leveraging of selling, general and administrative expenses and the favorable impact of changes in exchange rates since the prior year. For the 13 and 39 week periods ended November 3, 2007, changes in exchange rates when compared to the prior year had the effect of increasing operating earnings by $0.7 million and $0.6 million, respectively.

Seasonality

The Company’s business, like that of many retailers, is seasonal, with the major portion of the sales and operating profit realized during the quarter which includes the holiday selling season.

Liquidity and Capital Resources

During the 39 weeks ended November 3, 2007, cash used in operations was $131.2 million, compared to cash used in operations of $135.9 million during the 39 weeks ended October 28, 2006. In the 39 weeks ended November 3, 2007, cash used in operations was primarily due to an increase in merchandise inventories of $488.8 million, and the excess tax benefits realized from the exercise of stock-based awards of $92.6 million. These cash outflows were partially offset by an increase in accounts payable and accrued liabilities of $209.7 million, net income of $98.5 million, depreciation and amortization of $97.6 million, a decrease in prepaid taxes of $34.2 million and stock-based compensation expense of $20.3 million. The increase in merchandise inventories and in accounts payable and accrued liabilities during the 39 weeks ended November 3, 2007 was primarily due to the increase in the number of stores in operation and purchases made in anticipation of fourth quarter seasonal activity.

In the 39 weeks ended October 28, 2006, cash used in operations was primarily due to an increase in merchandise inventories of $241.8 million; $38.6 million due to the tax benefit realized from the exercise of stock-based awards and an increase in prepaid expenses and other current assets of $17.0 million due to the timing of rent payments at the end of the quarter versus the end of the previous fiscal year. These cash outflows were partially offset by an increase in accounts payable and accrued liabilities of $37.2 million, net income of $28.4 million, depreciation and amortization of $79.7 million and stock-based compensation expense of $15.7 million. The increase in merchandise inventories and accounts payable and accrued liabilities during the 39 weeks ended October 28, 2006 was primarily due to the increase in the number of stores in operation and purchases made in anticipation of fourth quarter seasonal activity.

Cash used in investing activities was $123.7 million and $65.1 million during the 39 weeks ended November 3, 2007 and October 28, 2006, respectively. During the 39 weeks ended November 3, 2007, $124.8 million of cash was used primarily to open 417 new stores and to invest in information systems, offset by $1.1 million of cash received related to the finalization of the purchase price of Game Brands Inc. which was acquired during the fourth quarter of fiscal 2006. During the 39 weeks ended October 28, 2006, $84.4 million of capital expenditures was primarily used

to invest in information and distribution systems in support of the integration of the operations of EB and Historical GameStop and to open 237 new stores. These investing activities were offset by $19.3 million of cash provided by the sale of the Pennsylvania corporate office and distribution center which were acquired in the merger.

Cash used in financing activities was $130.7 million during the 39 weeks ended November 3, 2007 compared to cash used in financing activities during the 39 weeks ended October 28, 2006 of $19.8 million. The cash used in financing activities for the 39 weeks ended November 3, 2007 was primarily due to the repurchase of $20.0 million and $250.0 million of principal value of the Company’s senior notes and senior floating rate notes, respectively and the $12.2 million principal payment made in October 2007 on the Barnes & Noble, Inc. (“Barnes & Noble”) promissory note. These cash outflows were offset by $64.3 million received for the issuance of shares relating to stock option exercises and $92.6 million for the realization of tax benefits relating to the stock option exercises and vested restricted stock. The cash used in financing activities for the 39 weeks ended October 28, 2006 was primarily due to the repurchase of $36.3 million and $30.0 million of principal value of the Company’s senior notes and senior floating rate notes, respectively, and the repayment of long-term debt, including the payoff of the $9.2 million mortgage associated with the Pennsylvania distribution center sold in June 2006 and the $12.2 million principal payment made in October 2006 on the Barnes & Noble promissory note. These decreases in cash flows during the 39 weeks ended October 28, 2006 were offset by $29.4 million received for the issuance of shares relating to stock option exercises and $38.6 million for the realization of tax benefits relating to the stock option exercises and vested restricted stock.

The favorable impact of the fluctuations of the foreign exchange rate effect on cash for the 39 weeks ended November 3, 2007, versus the comparable period in fiscal 2006 was driven primarily by a stronger Canadian dollar, Australian dollar and Euro which had percentage increases year-to-date of 21%, 16% and 11%, respectively, as compared to the U.S. dollar.

Future capital requirements will depend on the number of new stores opened and the timing of those openings within a given fiscal year. The Company opened 417 stores in the 39 weeks ended November 3, 2007 and expects to open approximately 135 additional stores in the remainder of fiscal 2007. Within the next 6 months, the Company intends to rebrand all of the EB stores that do not have real estate restrictions to the GameStop brand. Capital expenditures for fiscal 2007 are projected to be approximately $140.0 million to $150.0 million, to be used primarily to fund new store openings, rebrand EB stores and invest in distribution and information systems in support of operations.

In October 2005, in connection with the merger, the Company entered into a five-year, $400 million Credit Agreement (the “Revolver”), including a $50 million letter of credit sub-limit, secured by the assets of the Company and its U.S. subsidiaries. The Revolver places certain restrictions on the Company and its U.S. subsidiaries, including limitations on asset sales, additional liens and the incurrence of additional indebtedness.

The availability under the Revolver is limited to a borrowing base which allows the Company to borrow up to the lesser of (x) approximately 70% of eligible inventory and (y) 90% of the appraisal value of the inventory, in each case plus 85% of eligible credit card receivables, net of certain reserves. Letters of credit reduce the amount available to borrow by their face value. The Company’s ability to pay cash dividends, redeem options, and repurchase shares is generally prohibited, except that if availability under the Revolver is, or will be after any such payment, equal to or greater than 25% of the borrowing base, the Company may repurchase its capital stock and pay cash dividends. In addition, in the event that credit extensions under the Revolver at any time exceed 80% of the lesser of the total commitment or the borrowing base, the Company will be subject to a fixed charge coverage ratio covenant of 1.5:1.0.

rate loans and 1.25% for LIBO rate loans. In addition, the Company is required to pay a commitment fee of 0.25% for any unused portion of the total commitment under the Revolver.

As of November 3, 2007, there were no borrowings outstanding under the Revolver and letters of credit outstanding totaled $5.7 million.

In September 2007, the Company’s Luxembourg subsidiary entered into a discretionary, $20 million Uncommitted Line of Credit (the “Line of Credit”) with Bank of America. There is no term associated with the Line of Credit and Bank of America may withdraw the facility at any time without notice. The Line of Credit will be made available to the Company’s foreign subsidiaries for use primarily as a bank overdraft facility for short-term liquidity needs and for the issuance of bank guarantees and letters of credit to support operations.

As of November 3, 2007, there were no borrowings outstanding under the Line of Credit and bank guarantees outstanding were minimal.

On September 28, 2005, the Company, along with GameStop, Inc. as co-issuer (together with the Company, the “Issuers”), completed the offering of U.S. $300 million aggregate principal amount of Senior Floating Rate Notes due 2011 (the “Senior Floating Rate Notes”) and U.S. $650 million aggregate principal amount of Senior Notes due 2012 (the “Senior Notes” and, together with the Senior Floating Rate Notes, the “Notes”). The Notes were issued under an Indenture (the “Indenture”), dated September 28, 2005, by and among the Issuers, the subsidiary guarantors party thereto, and Citibank, N.A., as trustee (the “Trustee”). Concurrently with the consummation of the merger on October 8, 2005, EB and its direct and indirect U.S. wholly-owned subsidiaries (together, the “EB Guarantors”) became subsidiaries of the Company and entered into a First Supplemental Indenture, dated October 8, 2005, by and among the Issuers, the EB Guarantors and the Trustee, pursuant to which the EB Guarantors assumed all the obligations of a subsidiary guarantor under the Notes and the Indenture. The net proceeds of the offering were used to pay the cash portion of the merger consideration paid to the stockholders of EB in connection with the merger.

The offering of the Notes was conducted in a private transaction under Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and in transactions outside the United States in reliance upon Regulation S under the Securities Act. In April 2006, the Company filed a registration statement on Form S-4 in order to register new notes (the “New Notes”) with the same terms and conditions as the Notes in order to facilitate an exchange of the New Notes for the Notes. This registration statement on Form S-4 was declared effective by the SEC in May 2006 and the Company commenced an exchange offer to exchange the New Notes for the Notes. This exchange offer was completed in June 2006 with 100% participation.

In November 2006, Citibank, N.A. resigned as Trustee for the Notes and Wilmington Trust Company was appointed as the new Trustee for the Notes.

The Senior Notes bear interest at 8.0% per annum, mature on October 1, 2012 and were priced at 98.688%, resulting in a discount at the time of issue of $8.5 million. The discount is being amortized using the effective interest method. As of November 3, 2007, the unamortized original issue discount was $5.8 million. The rate of interest on the Senior Floating Rate Notes prior to their redemption on October 1, 2007 was 9.2350% per annum.

The Issuers pay interest on the Senior Notes semi-annually, in arrears, every April 1 and October 1, to holders of record on the immediately preceding March 15 and September 15, and at maturity.

As of November 3, 2007, the Company was in compliance with all covenants associated with the Revolver and the Indenture.

100% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date. The circumstances which would limit the percentage of the Notes which may be redeemed or which would require the Company to pay a premium in excess of 100% of the principal amount are defined in the Indenture. Upon a Change of Control (as defined in the Indenture), the Issuers are required to offer to purchase all of the Notes then outstanding at 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase.

In May 2006, the Company announced that its board of directors authorized the buyback of up to an aggregate of $100 million of its Senior Floating Rate Notes and Senior Notes. As of October 28, 2006, the Company had repurchased $36.3 million of its Senior Notes and $30.0 million of its Senior Floating Rate Notes. As of February 3, 2007, the end of its most recent fiscal year, the Company had repurchased the maximum authorized amount, having acquired $50 million of its Senior Notes and $50 million of its Senior Floating Rate Notes, and delivered the Notes to the Trustee for cancellation. The associated loss on retirement of this debt was $3.4 million and $3.6 million for the 13 and 39 week periods ended October 28, 2006, respectively, which consisted of the premium paid to retire the Notes and the recognition of the deferred financing fees and the original issue discount on the Notes.

On February 9, 2007, the Company announced that its board of directors authorized the buyback of up to an aggregate of an additional $150 million of its Senior Notes and Senior Floating Rate Notes. The timing and amount of the repurchases were determined by the Company’s management based on their evaluation of market conditions and other factors. As of August 4, 2007, the Company had repurchased the additional $150 million of the Notes, having acquired $20 million of its Senior Notes and $130 million of its Senior Floating Rate Notes, and delivered the Notes to the Trustee for cancellation. The associated loss on the retirement of this debt was $8.8 million for the 39 week period ended November 3, 2007 which consists of the premium paid to retire the Notes and the recognition of the deferred financing fees and the original issue discount on the Notes.

On June 28, 2007, the Company announced that its board of directors authorized the redemption of the remaining $120 million of Senior Floating Rate Notes outstanding. On July 12, 2007, the Issuers notified the Trustee of their intent to redeem the Notes on October 1, 2007. The Company redeemed the Senior Floating Rate Notes on October 1, 2007 at the redemption price specified by the Senior Floating Rate Notes of 102.0%, plus all accrued and unpaid interest through the redemption date. The Company incurred a one-time pre-tax charge of $3.8 million associated with the redemption, which represents a $2.4 million redemption premium and $1.4 million to recognize unamortized deferred financing costs.

In October 2004, Historical GameStop issued a promissory note in favor of Barnes & Noble in the principal amount of $74.0 million in connection with the repurchase of Historical GameStop’s common stock held by Barnes & Noble. The note was unsecured and bore interest at 5.5% per annum, payable with each principal installment. Scheduled principal payments of $37.5 million, $12.2 million and $12.2 million were made in January 2005, October 2005 and October 2006, respectively, as required by the promissory note. The final payment of $12.2 million, satisfying the promissory note in full, was made in October 2007.

Based on our current operating plans, we believe that available cash balances, cash generated from our operating activities and funds available under the Revolver will be sufficient to fund our operations, required payments on the Senior Notes, store expansion and remodeling activities and corporate capital expenditure programs for at least the next 12 months.

Recent Accounting Policies

In September 2006, the FASB issued Statement of Financial Accounting Standard No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements. The Company will adopt SFAS 157 on February 3, 2008 as required. The adoption of SFAS 157 is not expected to have a material impact on the Company’s financial condition and results of operations.

In February 2007, the FASB issued Statement of Financial Accounting Standard No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). This statement permits entities the option to measure many financial instruments and certain other items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 will be effective beginning February 3, 2008. The Company is currently assessing the potential impact, if any, of the adoption of SFAS 159 on its consolidated financial statements.

Disclosure Regarding Forward-looking Statements

This report on Form 10-Q and other oral and written statements made by the Company to the public contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). The forward-looking statements involve a number of risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, but are not limited to:


	•	our reliance on suppliers and vendors for sufficient quantities of their products and for new product releases;

	•	economic conditions affecting the video game industry;

	•	the competitive environment in the video game industry;

	•	our ability to open and operate new stores;

	•	our ability to attract and retain qualified personnel;

	•	the impact and costs of litigation and regulatory compliance;

	•	unanticipated litigation results;

	•	the risks involved with our international operations;

	•	alternate sources of distribution of video game software; and

	•	other factors described in the Form 10-K, including those set forth under the caption “Item 1A. Risk Factors.”

In some cases, forward-looking statements can be identified by the use of terms such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “pro forma,” “should,” “seeks,” “will” or similar expressions. These statements are only predictions based on current expectations and assumptions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. You should not place undue reliance on these forward-looking statements.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Form 10-Q. In light of these risks and uncertainties, the forward-looking events and circumstances contained in this Form 10-Q may not occur, causing actual results to differ materially from those anticipated or implied by our forward-looking statements.


ITEM 3.	*Quantitative and Qualitative Disclosures About Market Risk*

Interest Rate Exposure

We do not use derivative financial instruments to hedge interest rate exposure. We limit our interest rate risks by investing our excess cash balances in short-term, highly-liquid instruments with a maturity of one year or less. In addition, the Senior Notes outstanding issued in connection with the merger carry a fixed interest rate. We do not expect any material losses from our invested cash balances, and we believe that our interest rate exposure is modest.

Foreign Currency Risk

The Company follows the provisions of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), as amended. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if it is, depending on the type of hedge transaction.

The Company uses forward exchange contracts, foreign currency options and cross-currency swaps, (together, the “Foreign Currency Contracts”) to manage currency risk primarily related to intercompany loans denominated in non-functional currencies and certain foreign currency assets and liabilities. These Foreign Currency Contracts are not designated as hedges and, therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the current earnings effect of the re-measurement of related intercompany loans and foreign currency assets and liabilities. The aggregate fair value of the Foreign Currency Contracts as of November 3, 2007 was a liability of $5.2 million. A hypothetical strengthening or weakening of 10% in the foreign exchange rates underlying the Foreign Currency Contracts from the market rate as of November 3, 2007 would result in a (loss) or gain in value of the forwards, options and swaps of ($9.8 million) or $8.0 million, respectively.


ITEM 4.	*Controls and Procedures*

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.


	(b)	Changes in Internal Controls

There was no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION


ITEM 1.	*Legal Proceedings*

On February 14, 2005, and as amended, Steve Strickland, as personal representative of the Estate of Arnold Strickland, deceased, Henry Mealer, as personal representative of the Estate of Ace Mealer, deceased, and Willie Crump, as personal representative of the Estate of James Crump, deceased, filed a wrongful death lawsuit against GameStop, Sony, Take-Two Interactive, Rock Star Games and Wal-Mart (collectively, the “Defendants”) and Devin Moore in the Circuit Court of Fayette County, Alabama, alleging that Defendants’ actions in designing, manufacturing, marketing and supplying Defendant Moore with violent video games were negligent and contributed to Defendant Moore killing Arnold Strickland, Ace Mealer and James Crump. Plaintiffs are seeking damages of $600 million under the Alabama wrongful death statute and punitive damages. GameStop and the other defendants intend to vigorously defend this action. The Defendants filed a motion to dismiss the case on various grounds, which was heard in November 2005 and was denied. The Defendants appealed the denial of the motion to dismiss and on March 24, 2006, the Alabama Supreme Court denied the Defendants’ application. Discovery is currently stayed as plaintiffs’ counsel has received leave of court to withdraw. Plaintiffs are essentially without counsel and have been given 90 days from October 14, 2007 to find new counsel. Mr. Moore was found guilty of capital murder in a

criminal trial in Alabama and was sentenced to death in August 2005. We do not believe there is sufficient information to estimate the amount of the possible loss, if any, resulting from the lawsuit.


ITEM 1A.	*Risk Factors*

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed under “Risk Factors” in “Item 1A. Risk Factors” in our Form 10-K for the fiscal year ended February 3, 2007 filed with the SEC on April 4, 2007. These risks could materially and adversely affect our business, financial condition and results of operations. The risks described in our Form 10-K have not changed materially, however, they are not the only risks we face. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business.


ITEM 6.	*Exhibits*

Exhibits


Exhibit
Number			Description

	2	.1	Agreement and Plan of Merger, dated as of April 17, 2005, among GameStop Corp. (f/k/a GSC Holdings Corp.), Electronics Boutique Holdings Corp., GameStop, Inc., GameStop Holdings Corp. (f/k/a GameStop Corp.), Cowboy Subsidiary LLC and Eagle Subsidiary LLC.(1)
	3	.1	Second Amended and Restated Certificate of Incorporation.(2)
	3	.2	Amended and Restated Bylaws.(3)
	4	.1	Indenture, dated September 28, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary guarantors party thereto, and Citibank N.A., as trustee.(4)
	4	.2	First Supplemental Indenture, dated October 8, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary guarantors party thereto, and Citibank N.A., as trustee.(5)
	4	.3	Registration Rights Agreement, dated September 28, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary guarantors listed on Schedule I-A thereto, and Citigroup Global Markets Inc., for themselves and as representatives of the several initial purchasers listed on Schedule II thereto.(4)
	4	.4	Rights Agreement, dated as of June 27, 2005, between GameStop Corp. (f/k/a GSC Holdings Corp.) and The Bank of New York, as Rights Agent.(3)
	4	.5	Form of Indenture.(6)
	10	.1	Separation Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(7)
	10	.2	Tax Disaffiliation Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8)
	10	.3	Insurance Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8)
	10	.4	Operating Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8)
	10	.5	Second Amended and Restated 2001 Incentive Plan.(9)
	10	.6	Amended and Restated Supplemental Compensation Plan.(10)
	10	.7	Form of Option Agreement.(11)
	10	.8	Form of Restricted Share Agreement.(12)
	10	.9	Stock Purchase Agreement, dated as of October 1, 2004, by and among GameStop Holdings Corp. (f/k/a GameStop Corp.), B&N GameStop Holding Corp. and Barnes & Noble, Inc.(13)


Exhibit
Number			Description

	10	.10	Promissory Note, dated as of October 1, 2004, made by GameStop Holdings Corp. (f/k/a GameStop Corp.) in favor of B&N GameStop Holding Corp.(13)
	10	.11	Credit Agreement, dated as of October 11, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries of GameStop Corp., Bank of America, N.A. and the other lending institutions listed in the Agreement, Bank of America, N.A. and Citicorp North America, Inc., as Issuing Banks, Bank of America, N.A., as Administrative Agent and Collateral Agent, Citicorp North America, Inc., as Syndication Agent, and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as Documentation Agent.(14)
	10	.12	Guaranty, dated as of October 11, 2005, by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop Corp. in favor of the agents and lenders.(14)
	10	.13	Security Agreement, dated October 11, 2005, by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop Corp. in favor of Bank of America, N.A., as Collateral Agent for the Secured Parties.(14)
	10	.14	Patent and Trademark Security Agreement, dated as of October 11, 2005 by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop Corp. in favor of Bank of America, N.A., as Collateral Agent.(14)
	10	.15	Mortgage, Security Agreement, and Assignment and Deeds of Trust, dated October 11, 2005, between GameStop of Texas, L.P. and Bank of America, N.A., as Collateral Agent.(14)
	10	.16	Mortgage, Security Agreement, and Assignment and Deeds of Trust, dated October 11, 2005, between Electronics Boutique of America, Inc. and Bank of America, N.A., as Collateral Agent.(14)
	10	.17	Form of Securities Collateral Pledge Agreement, dated as of October 11, 2005.(14)
	10	.18	First Amendment, dated April 25, 2007, to Credit Agreement, dated as of October 11, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries of GameStop Corp., Bank of America, N.A. and the other lending institutions listed in the Amendment, Bank of America, N.A. and Citicorp North America, Inc., as Issuing Banks, Bank of America, N.A., as Administrative Agent and Collateral Agent, Citicorp North America, Inc., as Syndication Agent, and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as Documentation Agent.(15)
	10	.19	Registration Rights Agreement, dated October 8, 2005, among EB Nevada Inc., James J. Kim and GameStop Corp. (f/k/a GSC Holdings Corp.).(14)
	10	.20	Executive Employment Agreement, dated as of April 11, 2005, between GameStop Holdings Corp. (f/k/a GameStop Corp.) and R. Richard Fontaine.(16)
	10	.21	Executive Employment Agreement, dated as of April 11, 2005, between GameStop Holdings Corp. (f/k/a GameStop Corp.) and Daniel A. DeMatteo.(16)
	10	.22	Executive Employment Agreement, dated as of December 9, 2005, between GameStop Corp. and Steven R. Morgan.(17)
	10	.23	Executive Employment Agreement, dated as of April 3, 2006, between GameStop Corp. and David W. Carlson.(18)
	31	.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32	.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


(1)		Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on April 18, 2005.

(2)		Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on February 7, 2007.


(3)		Incorporated by reference to the Registrant’s Amendment No. 1 to Form S-4 filed with the Securities and Exchange Commission on July 8, 2005.

(4)		Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on September 30, 2005.

(5)		Incorporated by reference to the Registrant’s Form 10-Q for the fiscal quarter ended October 29, 2005 filed with the Securities and Exchange Commission on December 8, 2005.

(6)		Incorporated by reference to the Registrant’s Form S-3ASR filed with the Securities and Exchange Commission on April 10, 2006.

(7)		Incorporated by reference to GameStop Holdings Corp.’s Amendment No. 4 to Form S-1 filed with the Securities and Exchange Commission on February 5, 2002.

(8)		Incorporated by reference to GameStop Holdings Corp.’s Amendment No. 3 to Form S-1 filed with the Securities and Exchange Commission on January 24, 2002.

(9)		Incorporated by reference to Appendix A to the Registrant’s Proxy Statement for 2007 Annual Meeting of Stockholders filed with the Securities and Exchange Commission on May 29, 2007.

(10)		Incorporated by reference to the Registrant’s Form 10-Q for the fiscal quarter ended July 29, 2006 filed with the Securities and Exchange Commission on September 5, 2006.

(11)		Incorporated by reference to GameStop Holdings Corp.’s Form 10-K for the fiscal year ended January 29, 2005 filed with the Securities and Exchange Commission on April 11, 2005.

(12)		Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on September 12, 2005.

(13)		Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on October 5, 2004.

(14)		Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on October 12, 2005.

(15)		Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on April 26, 2007.

(16)		Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on April 15, 2005.

(17)		Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on December 13, 2005.

(18)		Incorporated by reference to the Registrant’s Form 10-K for the fiscal year ended January 28, 2006 filed with the Securities and Exchange Commission on April 3, 2006.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GAMESTOP CORP.


	By:	/s/ David W. Carlson

David W. Carlson

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: December 7, 2007

GAMESTOP CORP.


	By:	/s/ Robert A. Lloyd

Robert A. Lloyd

Senior Vice President and Chief Accounting Officer

(Principal Accounting Officer)

Date: December 7, 2007

GAMESTOP CORP.

EXHIBIT INDEX


Exhibit
Number			Description

	2	.1	Agreement and Plan of Merger, dated as of April 17, 2005, among GameStop Corp. (f/k/a GSC Holdings Corp.), Electronics Boutique Holdings Corp., GameStop, Inc., GameStop Holdings Corp. (f/k/a GameStop Corp.), Cowboy Subsidiary LLC and Eagle Subsidiary LLC.(1)
	3	.1	Second Amended and Restated Certificate of Incorporation.(2)
	3	.2	Amended and Restated Bylaws.(3)
	4	.1	Indenture, dated September 28, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary guarantors party thereto, and Citibank N.A., as trustee.(4)
	4	.2	First Supplemental Indenture, dated October 8, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary guarantors party thereto, and Citibank N.A., as trustee.(5)
	4	.3	Registration Rights Agreement, dated September 28, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary guarantors listed on Schedule I-A thereto, and Citigroup Global Markets Inc., for themselves and as representatives of the several initial purchasers listed on Schedule II thereto.(4)
	4	.4	Rights Agreement, dated as of June 27, 2005, between GameStop Corp. (f/k/a GSC Holdings Corp.) and The Bank of New York, as Rights Agent.(3)
	4	.5	Form of Indenture.(6)
	10	.1	Separation Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(7)
	10	.2	Tax Disaffiliation Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8)
	10	.3	Insurance Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8)
	10	.4	Operating Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8)
	10	.5	Second Amended and Restated 2001 Incentive Plan.(9)
	10	.6	Amended and Restated Supplemental Compensation Plan.(10)
	10	.7	Form of Option Agreement.(11)
	10	.8	Form of Restricted Share Agreement.(12)
	10	.9	Stock Purchase Agreement, dated as of October 1, 2004, by and among GameStop Holdings Corp. (f/k/a GameStop Corp.), B&N GameStop Holding Corp. and Barnes & Noble, Inc.(13)
	10	.10	Promissory Note, dated as of October 1, 2004, made by GameStop Holdings Corp. (f/k/a GameStop Corp.) in favor of B&N GameStop Holding Corp.(13)
	10	.11	Credit Agreement, dated as of October 11, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries of GameStop Corp., Bank of America, N.A. and the other lending institutions listed in the Agreement, Bank of America, N.A. and Citicorp North America, Inc., as Issuing Banks, Bank of America, N.A., as Administrative Agent and Collateral Agent, Citicorp North America, Inc., as Syndication Agent, and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as Documentation Agent.(14)
	10	.12	Guaranty, dated as of October 11, 2005, by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop Corp. in favor of the agents and lenders.(14)
	10	.13	Security Agreement, dated October 11, 2005, by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop Corp. in favor of Bank of America, N.A., as Collateral Agent for the Secured Parties.(14)
	10	.14	Patent and Trademark Security Agreement, dated as of October 11, 2005 by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop Corp. in favor of Bank of America, N.A., as Collateral Agent.(14)


Exhibit
Number			Description

	10	.15	Mortgage, Security Agreement, and Assignment and Deeds of Trust, dated October 11, 2005, between GameStop of Texas, L.P. and Bank of America, N.A., as Collateral Agent.(14)
	10	.16	Mortgage, Security Agreement, and Assignment and Deeds of Trust, dated October 11, 2005, between Electronics Boutique of America, Inc. and Bank of America, N.A., as Collateral Agent.(14)
	10	.17	Form of Securities Collateral Pledge Agreement, dated as of October 11, 2005.(14)
	10	.18	First Amendment, dated April 25, 2007, to Credit Agreement, dated as of October 11, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries of GameStop Corp., Bank of America, N.A. and the other lending institutions listed in the Amendment, Bank of America, N.A. and Citicorp North America, Inc., as Issuing Banks, Bank of America, N.A., as Administrative Agent and Collateral Agent, Citicorp North America, Inc., as Syndication Agent, and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as Documentation Agent.(15)
	10	.19	Registration Rights Agreement, dated October 8, 2005, among EB Nevada Inc., James J. Kim and GameStop Corp. (f/k/a GSC Holdings Corp.).(14)
	10	.20	Executive Employment Agreement, dated as of April 11, 2005, between GameStop Holdings Corp. (f/k/a GameStop Corp.) and R. Richard Fontaine.(16)
	10	.21	Executive Employment Agreement, dated as of April 11, 2005, between GameStop Holdings Corp. (f/k/a GameStop Corp.) and Daniel A. DeMatteo.(16)
	10	.22	Executive Employment Agreement, dated as of December 9, 2005, between GameStop Corp. and Steven R. Morgan.(17)
	10	.23	Executive Employment Agreement, dated as of April 3, 2006, between GameStop Corp. and David W. Carlson.(18)
	31	.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32	.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


(1)		Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on April 18, 2005.

(2)		Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on February 7, 2007.

(3)		Incorporated by reference to the Registrant’s Amendment No. 1 to Form S-4 filed with the Securities and Exchange Commission on July 8, 2005.

(4)		Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on September 30, 2005.

(5)		Incorporated by reference to the Registrant’s Form 10-Q for the fiscal quarter ended October 29, 2005 filed with the Securities and Exchange Commission on December 8, 2005.

(6)		Incorporated by reference to the Registrant’s Form S-3ASR filed with the Securities and Exchange Commission on April 10, 2006.

(7)		Incorporated by reference to GameStop Holdings Corp.’s Amendment No. 4 to Form S-1 filed with the Securities and Exchange Commission on February 5, 2002.

(8)		Incorporated by reference to GameStop Holdings Corp.’s Amendment No. 3 to Form S-1 filed with the Securities and Exchange Commission on January 24, 2002.

(9)		Incorporated by reference to Appendix A to the Registrant’s Proxy Statement for 2007 Annual Meeting of Stockholders filed with the Securities and Exchange Commission on May 29, 2007.


(10)		Incorporated by reference to the Registrant’s Form 10-Q for the fiscal quarter ended July 29, 2006 filed with the Securities and Exchange Commission on September 5, 2006.

(11)		Incorporated by reference to GameStop Holdings Corp.’s Form 10-K for the fiscal year ended January 29, 2005 filed with the Securities and Exchange Commission on April 11, 2005.

(12)		Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on September 12, 2005.

(13)		Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on October 5, 2004.

(14)		Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on October 12, 2005.

(15)		Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on April 26, 2007.

(16)		Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on April 15, 2005.

(17)		Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on December 13, 2005.

(18)		Incorporated by reference to the Registrant’s Form 10-K for the fiscal year ended January 28, 2006 filed with the Securities and Exchange Commission on April 3, 2006.