LICENSE AGREEMENTS

9 Months Ended

Sep. 30, 2012

License Agreements [Abstract]

LICENSE AGREEMENTS

NOTE C – LICENSE AGREEMENTS

During 2010, the Company acquired license agreements for 16 online games for use in South Korea. These agreements called for a total of $120,500 in license fees, $30,000 in nonrefundable royalty prepayments on two of the licenses and a $5,000 non refundable deposit on one of the licenses. The Company paid $73,750 of these fees during the nine months ended September 30, 2010 and will pay the remaining fees of $81,750 when the games are launched commercially. Each license also has a royalty fee which varies for each license. Future royalties will be offset against the $30,000 prepayment. The licenses have terms of 2 to 3 years, beginning when they are launched commercially.

In 2011, the licensor terminated two of these agreements due to the licensor’s inability to install and localize the game for the South Korean territory. These licenses were for $20,000, of which $10,000 was paid by the Company. The Company has determined that the possibility of realizing these license agreements or recovering those funds advanced is minimal due to the locality of the licensor in China. As such, the Company has concluded that these licenses are impaired and has written them off.

Also in 2011, the Company decided to terminate two of the agreements due to problems in scheduling the launch dates. The Company did not pay any deposits to acquire licenses for these two games.

During 2012, the Company acquired an additional license agreement for $40,000, of which $20,000 was paid during the nine months ended September 30, 2012. This game was launched commercially and the Company paid the remaining $20,000 in July of 2012. Under the license agreement, the Company is required to pay the licensor 24% of gross sales, or $50,959 for the nine months ended September 30, 2012. The Company engaged with Browsergames Co., Ltd. (“Browsergames”), a Korean Company, to support and maintain the online game, and collect payments from customers. Under this agreement, Browsergames is required to pay the Company 29% of gross sales. For the nine months ended September 30, 2012, the Company billed such 29%, or $61,181, during the nine months ended September 30, 2012.

On March 9, 2012, the Company entered into a termination agreement relating to one of its license agreements. The license agreement had a carrying value of $10,000 and related prepaid revenue of $20,000. As part of the termination, the licensor paid the Company $35,000, plus VAT. The Company recognized a gain of $5,000 on this termination.

Amortization expense was $8,230 and $14,690 for the three and nine months ended September 30, 2012, respectively. There was no amortization expense in the three and nine months ended September 30, 2011.