We have licensed our games to leading game operators in a number of countries and regions in Asia, Latin America, and the Russian Federation and other Russian speaking territories and we plan to further expand the geographical reach of our games. Under our license agreements, we allow our overseas licensees to exclusively operate, promote, service and distribute our games in specified territories. In return, we are generally entitled to an initial fee and ongoing royalties, the latter of which is generally determined based on the amount of money charged to players’ accounts or the service fees payable by the players to the licensee in a specific country or region. The licensees are responsible for the sales and marketing of our games in the specified territories, including setting the price of our games and virtual items, and usually there are minimum requirements on promotion expenditures. The licensees are also generally in charge of maintenance of the network infrastructure and customer service. We are responsible for the technical support for the operation of our games, including providing technical tools for the localization of our games. We generally agree to provide our licensees with updates or upgrades to the licensed games, usually every three to six months or on a when-and-if-available basis. We also usually assist the licensees in preventing, detecting and resolving hacking and cheating activities.

All of the games we license to overseas operators use an item-based revenue model. Our games offer localized in-game items in different territories, e.g., Baek Ream Sword in Korea. The licensees determine the pricing of in-game items based on the local market conditions as well as our input.