License Agreements

12 Months Ended

Dec. 31, 2013

NOTE E – LICENSE AGREEMENTS

The Company began operating the online game, The Great Merchant, in open beta testing in January 2010. During the years ended December 31, 2013 and 2012, the Company generated revenues of $79,623 and $62,965,respectively, from this beta testing.

The Company hasacquired license agreements for online games for use in South Korea comprised as follows:

	December 31,						Estimated
	2013			2012			Useful Life
License agreements	$	122,500		$	152,500		2-3 years
Accumulated amortization		(42,500	)		(25,108	)
	$	80,000		$	127,392

Amortization expense was $37,396 and $22,920 for the years ended December 31, 2013 and 2012, respectively.

Each license also has a royalty fee which varies for each license. The licenses have terms of 2 to 3 years, beginning when they are launched commercially.Under the license agreements, the Company is required to pay the licensor 24%- 25% of gross sales.

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.

On December 31, 2012, the Company determined that license agreements with carrying values of $48,000 and related deposits of $5,000 were impaired since the Company could not project when such games would generate revenues. As such, an impairment loss of $53,000 is reflected in the Statements of Operations for the year ended December 31, 2012.

On December 31, 2013, the Company determined that license agreements with carrying values of $9,996 and related deposits of $10,000 were impaired since the Company could not project when such games would generate revenues. As such, an impairment loss of $19,996 is reflected in the Statements of Operations for the year ended December 31, 2013.

The Company engaged a Korea-based service provider to support and maintain the online game, and collect payments from customers. Under this agreement the service provider is required to pay the Company 29% of gross sales. For the years ended December 31, 2013 and 2012, the Company billed such 29%, or $41,055 and $97,842, respectively.

At December 31, 2012, the Company established an allowance for doubtful accounts of the $97,842 in game billings as they had not been collected and the Company concluded that collectability was not reasonably assured. At December 31, 2013, a note holder whom the Company originally owed $690,000 (See Note G) agreed to assume the amounts due from the Korea-based service provider, up to $150,000. As such, the Company reduced the note by $138,897, to reduce the game billing receivable for 2012 and 2013. The $97,842 in 2012 billings was recognized as bad debt recovery in the Statements of Operations for the year ended December 31, 2013.