Mobile entertainment services enable users to engage in a range of entertainment activities, such as personalizing their mobile phones through ringback tones, ringtones and images as well as listening to music, playing games, watching videos and accessing news, weather, financial, sports and other information. The global mobile entertainment market has grown to become a multibillion dollar market and is expected to continue to grow rapidly as a result of increased wireless subscriber penetration, the introduction of new, more sophisticated services and the aggressive promotion of these services by wireless carriers. According to market analyses conducted in February 2005 by Juniper Research, a leading industry research firm, the combined size of sports, infotainment, music and game segments of the mobile entertainment services market is expected to grow from $9.2 billion in 2004 to $37.7 billion in 2009.

Wireless carriers are aggressively launching and promoting these mobile entertainment services as they are increasingly viewing them as future growth drivers for their businesses. These carriers face intense competition from other wireless carriers, wireline carriers and cable-based voice service providers, which has resulted in pricing pressure, increasing customer churn and declining voice revenues. Particularly in mature markets that are approaching saturated penetration rates, wireless carriers are expected to increase their focus on mobile data, a large subset of which is mobile entertainment that encompasses ringtones, ringback tones, music-on-demand, mobile games logos, images, video clips, news and sports information, to address competition and declining average revenue per user from voice services to generate additional revenues.

As network and mobile handset capabilities have improved, mobile entertainment services have continued to evolve from simple monophonic ringtones to more complex applications like ringback tones, music-on-demand and multi-player networked games. The ease of access and functionality of the applications have also improved, whereby users can access applications on demand by downloading them to their mobile phones and can also enjoy a real-time interactive experience. The two key categories of the mobile entertainment services market today are music and games.

In November 2004, using the music-on-demand carrier application service that the Company provides, SK Telecom launched “MelOn”, which is among the world’s first music-on-demand service that provides users with access to a music source from any place that has Internet connectivity. Depending on the type of subscription, the MelOn service enables subscribers to listen to a wide range of song titles by downloading or streaming to a personal computer, certain MP3-enabled mobile phones and certain portable audio players that are equipped with a digital rights management system that is authorized by SK Telecom and bars unauthorized use of copyrighted material.

Together with VeriSign, Inc., the Company offers an inter-carrier messaging service which routes and delivers SMS messages between wireless carriers within the United States and internationally to multiple wireless devices, under the brand name of Metcalf. This service allows subscribers with any text messaging capable handset to send and receive text messages to and from subscribers on other networks. The Company also provides other types of messaging services, including e-mail messaging, multi-media messaging, voice messaging and multimedia application gateway management.

The Company provides a mobile phone-based broadcasting application service to SK Telecom. Subscribers to this application can automatically receive news updates with full color graphics on the browser pages of their mobile phones (assuming such phones are embedded with client software that enables reception), and can also download information in a variety of categories on an on-demand basis.

The Company’s content services involve the delivery of content, such as ringtones, ringback tones and mobile games, to wireless subscribers through application service providers. The Company’s music content offerings primarily include ringtones, ringback tones and music for music-on-demand services. As a publisher, the Company offers various categories of games including sports, action, role-playing, card and trivia that it licenses from third-party developers.

Total costs and expenses increased by 64.5% to US$62.0 million in the nine months ended September 30, 2005 from US$37.7 million in the nine months ended September 30, 2004.

Cost of system sales decreased by 17.7% to US$4.0 million in the nine months ended September 30, 2005 from US$4.9 million in the nine months ended September 30, 2004.

Operating income increased to US$8.0 million in the nine months ended September 30, 2005 from US$2.5 million in the nine months ended September 30, 2004.

Net income increased to US$5.9 million in the nine months ended September 30, 2005 from US$1.9 million in the nine months ended September 30, 2004.