Q&A

Fafafa and Golden HoYeah have zero cash flow issues and they are considered light gambling. On the other hand, games such as our Mangan Dahen involve cash flow. Current Taiwanese law provides that as long as a company does not operate purchases and sales in the cash flow process, it is considered legal according to the laws of Taiwan. It is not considered illegal under Taiwanese laws even if there are players who play with cash flow procedures.

Xin Stars and 08 Online are successful because they had an early start. Games such as Golden HoYeah and Fafafa have no legal issues. Companies like Company A have studied the laws thoroughly and they understand what they cannot do. They would draw a line. Companies with Hondreds of millions in revenue do not cross these lines simply to get a larger piece of the market. They have very strict requirements in terms of legal compliance. As for Star 3 in 1, the game itself is very casual and people can pay to play for one whole month. They consume a lot of our bandwidth and more than 90% of them do not pay. The MAU is approximately 700,000 to 800,000. We only collected a little more than NT$20 million and it is not enough. We will think of ways to encourage non-paying players to pay a little to make the game more fun.

We still need to adapt to the policies of the new government in the Malaysian market, and the transition consolidation period would take 3-4 months. We expect to recover 30%, and we also took opportunities to sell a batch of products in July. We will naturally continue to obtain the information on the latest market developments.

In China, the main factor was that we had sold more slot machines and ticket machines last year, but the inventory for these two types of machines has remained high this year. Therefore, we could not achieve the outstanding new orders as we did in the previous year. Due to the slowdown in the opening of new venues in tier 2 and tier 3 cities, we would indeed need time to observe market conditions. Fishing games are our mainstay in the United States and we have also faced excess inventory issues since the second quarter. Performance has also been poor when compared to the same period last year. We will develop new fishing games in the third quarter and launch them in the fourth quarter. As for skill games, we have yet to achieve a major breakthrough with our products.

The performance of arcade games in the second half of the year was generally better than the first half. We have new products that we plan to launch in the second half of the year, but we may not be able to attain the same level of sales as in the previous year.

The Hero of Robots 2 children's card game is now being developed based on the original plan. We expect to launch the game in Taiwan in the first quarter of next year. We also plan on launching the game in the Chinese and Southeast Asian market. Our primary focus will be the Chinese market.

Fish Gamer: After Tencent started the introduction process at the end of last year, revenue has achieved sufficient growth. Its revenue has made significant contributions to the Company since March 2018. Ocean King: Introduction began in July and we have seen a substantial increase in revenue.

The two mobile games licensed to the Southeast Asian market have been launched. The consumption habits in Southeast Asian countries appear to be quite different from our expectations, and we need to modify the contents of the game and enhance promotion and marketing. We are still exploring the market, and we will report if we have achieved better performance. The two games licensed to China were Knights of Valour 2 and Ocean King. The second generation will be marketed in the fourth quarter as early as possible. Ocean King has been launched in China and it appears that it would only contribute to revenue in the fourth quarter.

Mangan Dahen is a product that targets Taiwan as the main source of revenue. Mangan Dahen was launched in the first quarter of 2016, and the growth in revenue in Online Business Division's mobile games would include both Star 3 in 1 and Mangan Dahen in addition to Mangan Dahen.

With regard to the five mobile games you mentioned, we have developed a separate version for Mangan and licensed it to overseas markets. We do not have overseas licensing plans for the other four games. However, both Golden HoYeah and Golden Tiger have been launched in overseas markets. If we have other partners or opportunities for cooperation, we will not rule out such opportunities. As for the Division under which revenue would be recognized, it will be determined based on the unit responsible for the app.