Ragnarok Online has been in the market for nearly six years and    has reached maturity in most of our principal markets. Our    failure to maintain, improve, update or enhance Ragnarok Online    in a timely manner or successfully introduce it in attractive    new markets such as the Middle East, CIS countries (the    Commonwealth of Independent States, the association of former    Soviet republics) and South America could lead to a continual    decline in Ragnorak Online’s user base and the subscription    revenues and royalties from this user base. This could lead to a    continual decline in our overall revenues, which would    materially and adversely affect our business, financial    condition and results of operations.

    If we    are unable to consistently and timely develop, acquire, license,    launch, market or operate commercially successful online games    in addition to Ragnarok Online, our business, financial    condition and results of operations may be materially and    adversely affected.

    In all the countries in which our games are offered, our    overseas licensees are responsible for the marketing, operation,    billing and customer service in their respective markets in    close cooperation with us, except in Korea, the United States    and Canada, Russia and CIS countries, and France and Belgium.    Our license agreements have an initial term of two years and are    subject to renewal every year once the initial term expires. We    rely on the initial license fees and the ongoing royalties from    our overseas licensees for a significant portion of our    revenues. The ongoing royalties are based on a percentage of    revenues generated by our overseas licensees from the    subscriptions to our games in their respective markets. We    directly manage game operations in Korea, while in the United    States and Canada, our wholly-owned subsidiary, GRAVITY    Interactive, Inc., is responsible for all aspects of the game    operations. GRAVITY CIS, Inc. and GRAVITY EU SASU, our    subsidiaries, are responsible for game operations in Russia and    CIS countries and in France and Belgium, respectively.