GRAVITY Co., Ltd. [GRVY] Filings

20-F 1 grvy-20231231.htm 20-F grvy-20231231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________________________________

Form 20-F

(Mark One)


☐			REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934


☑			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-51138

GRAVITY CO., LTD.

(Exact name of registrant as specified in its charter)


N/A			Republic of Korea
(Translation of registrant’s name into English)			(Jurisdiction of incorporation or organization)

_________________________________________________________________________

15F, 396 World Cup buk‑ro, Mapo‑gu,

Seoul 03925, Republic of Korea

(Address of principal executive offices)

_________________________________________________________________________

Heung Gon Kim

Chief Financial Officer

15F, 396 World Cup buk‑ro, Mapo‑gu,

Seoul 03925, Republic of Korea

Telephone: 82‑2‑2132‑7000

Fax: 82‑2‑2132‑7070

(Name, Telephone, E‑mail and/or Facsimile number and Address of Company Contact Person)

_________________________________________________________________________

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common stock, par value Won 500 per share*

GRVY

The NASDAQ Global Market

American depositary shares, each representing one share of common stock

________________________________

*Not for trading, but only in connection with the listing of American depositary shares on the NASDAQ Global Market pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: Shares, par value Won 500: 6,948,900 as of December 31, 2023.

Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☑

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Emerging growth company	☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board ☑ Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No ☑

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TABLE OF CONTENTS


CERTAIN DEFINED TERMS		4
FORWARD-LOOKING STATEMENTS		5
PART I		6
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	6
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	6
ITEM 3.	KEY INFORMATION	6
ITEM 3.A.	Reserved	6
ITEM 3.B.	Capitalization and Indebtedness	6
ITEM 3.C.	Reasons for the Offer and Use of Proceeds	6
ITEM 3.D.	Risk Factors	6
ITEM 4.	INFORMATION ON THE COMPANY	30
ITEM 4.A.	History and Development of the Company	30
ITEM 4.B.	Business Overview	30
ITEM 4.C.	Organizational Structure	65
ITEM 4.D.	Property, Plants and Equipment	65
ITEM 4A.	Unresolved Staff Comments	66
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	66
ITEM 5.A.	Operating Results	66
ITEM 5.B.	Liquidity and Capital Resources	79
ITEM 5.C.	Research and Development, Patents and Licenses, Etc.	81
ITEM 5.D.	Trend Information	82
ITEM 5.E.	Critical Accounting Estimates	82
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	82
ITEM 6.A.	Directors and Senior Management	82
ITEM 6.B.	Compensation	85
ITEM 6.C.	Board Practices	85
ITEM 6.D.	Employees	88
ITEM 6.E.	Share Ownership	89
ITEM 6.F .	Disclosure of a registrant’s action to recover erroneously awarded compensation	90
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	90
ITEM 7.A.	Major Shareholders	90
ITEM 7.B.	Related Party Transactions	91
ITEM 7.C.	Interests of Experts and Counsel	91
ITEM 8.	FINANCIAL INFORMATION	91
ITEM 8.A.	Consolidated Statements and Other Financial Information	92
ITEM 8.B.	Significant Changes	92
ITEM 9.	THE OFFER AND LISTING	92
ITEM 9.A.	Offer and Listing Details	92
ITEM 9.B.	Plan of Distribution	93
ITEM 9.C.	Markets	93
ITEM 9.D.	Selling Shareholders	93
ITEM 9.E.	Dilution	93
ITEM 9.F.	Expenses of the Issue	93
ITEM 10.	ADDITIONAL INFORMATION	93
ITEM 10.A.	Share Capital	93

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ITEM 10.B.	Memorandum and Articles of Incorporation	93
ITEM 10.C.	Material Contracts	99
ITEM 10.D.	Exchange Controls	99
ITEM 10.E.	Taxation	101
ITEM 10.F.	Dividends and Paying Agents	111
ITEM 10.G.	Statement by Experts	111
ITEM 10.H.	Documents on Display	111
ITEM 10.I.	Subsidiary Information	111
ITEM 10.J.	Annual Report to Security Holders	111
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	111
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	112
ITEM 12.A.	Debt Securities	112
ITEM 12.B.	Warrants and Rights	113
ITEM 12.C.	Other Securities	113
ITEM 12.D.	American Depositary Shares	113
PART II		114
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	114
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	114
ITEM 15.	CONTROLS AND PROCEDURES	114
ITEM 16.	RESERVED	115
ITEM 16.A.	Audit Committee Financial Expert	115
ITEM 16.B.	Code of Ethics	115
ITEM 16.C.	Principal Accountant Fees and Services	115
ITEM 16.D.	Exemptions from the Listing Standards for Audit Committees	116
ITEM 16.E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	116
ITEM 16.F.	Changes in Registrant’s Certifying Accountant	116
ITEM 16.G.	Corporate Governance	116
ITEM 16.H.	Mine Safety Disclosure	116
ITEM 16.I.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	116
ITEM 16.J.	I nsider Trading Policies	116
ITEM 16.K.	Cybersecurity	116
PART III		118
ITEM 17.	FINANCIAL STATEMENTS	118
ITEM 18.	FINANCIAL STATEMENTS	118
ITEM 19.	EXHIBITS	118

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CERTAIN DEFINED TERMS

Unless the context otherwise requires, references in this annual report on Form 20‑F (this “Annual Report”) to:

•“ADRs” are to the American depositary receipts that evidence our ADSs;

•“ADSs” are to our American depositary shares, each of which represents one share of our common stock;

•“China” or the “PRC” are to the People’s Republic of China (excluding, for the purposes of this Annual Report, Taiwan, Hong Kong, and Macau, unless specifically indicated otherwise);

•“Chinese Yuan” are to the currency of China;

•“EUR” or “Euro” are to the currency of the Eurozone consisting of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain;

•“Gravity,” “the Company,” “we,” “us,” “our,” or “our company” are to Gravity Co., Ltd. and our subsidiaries, except as otherwise indicated or required by context;

•“Hong Kong” are to the Hong Kong Special Administrative Region of the PRC;

•“Indonesian Rupiah” are to the currency of the Republic of Indonesia;

•“Japanese Yen” or “JPY” are to the currency of Japan;

•“Korea” are to the Republic of Korea;

•“Macau” are to the Macau Special Administrative Region of the PRC;

•“NT dollar” or “NT$” are to the currency of Taiwan;

•“Philippine Peso” are to the currency of the Republic of the Philippines;

•“SGD” or “S$” are to the currency of Singapore;

•“Taiwan” are to Taiwan, the Republic of China;

•“Thai Baht” or “THB฿” are to the currency of the Kingdom of Thailand;

•“US$,” “U.S. dollar,” or “Dollar” are to the currency of the United States of America; and

•“Won,” “Korean Won,” or “W” are to the currency of Korea.

For your convenience, and unless otherwise stated, this Annual Report contains translations of certain Won amounts into U.S. dollars at the noon buying rate in New York City for cable transfers in Korean Won as certified by the Federal Reserve Bank of New York for customs purposes in effect on December 29, 2023, which was Won 1,290.97 to US$ 1.00. No assurance is given that any Won or Dollar amounts could have been or may now be converted into Dollars or Won, as the case may be, at such rate, or any other rate, or at all.

Discrepancies in tables between totals and sums of the amounts listed are due to rounding.

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FORWARD‑LOOKING STATEMENTS

This Annual Report for the year ended December 31, 2023 contains “forward‑looking statements,” as defined in Section 27A of the U.S. Securities Act of 1933, as amended, or the “Securities Act,” and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the “Exchange Act.” The forward‑looking statements are based on our current expectations, assumptions, estimates, and projections about us and our industry, and are subject to various risks and uncertainties. Generally, these forward‑looking statements can be identified by the use of forward‑looking terminology such as “anticipate,” “believe,” “considering,” “depends,” “estimate,” “expect,” “intend,” “plan,” “planning,” “planned,” “predict,” “project,” “continue,” and variations of these words, similar expressions, or that certain events, actions or results “will,” “may,” “might,” “should,” “would,” or “could” occur, be taken or be achieved.

Forward‑looking statements include, but are not limited to, the following:

•future prices of and demand for our products;

•future earnings and cash flow;

•estimated development and commercial launch schedule of our games in development;

•our ability to attract new customers and retain existing customers;

•the expected growth of the Korean and worldwide online and mobile gaming industries;

•the effect that economic, political, or social conditions in Korea have on the revenue generated from our online or mobile game products and our results of operations;

•the effect that any global financial crisis or global economic recession will or may have on our business prospects, financial condition, and results of operations; and

•our future business development and prospects, results of operations, and financial condition.

We caution you not to place undue reliance on any forward‑looking statement, each of which involves risks and uncertainties. Although we believe that the assumptions on which our forward‑looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward‑looking statements based on those assumptions could be incorrect. All forward‑looking statements are based on our management’s current expectations, assumptions, estimates, and projections of future events and are subject to a number of factors that could cause actual results to differ materially from those described in the forward‑looking statements. Risks and uncertainties associated with our business include, but are not limited to, risks related to changes in the regulatory environment; technology changes; potential litigation and governmental actions; changes in the competitive environment; changes in customer preference and popular culture, and trends, including mobile or online gaming culture; political changes; global economic events including, but not limited to, the global social, political, and economic impact of the spread of coronavirus, a significant downturn in the global economic and financial markets, and a tightening of the global credit markets; changes in business and economic conditions; fluctuations in foreign exchange rates; fluctuations in the prices of our products; decreasing consumer confidence and slowing of economic growth generally; and other risks and uncertainties that are more fully described under the heading “Risk Factors” in this Annual Report, and elsewhere in this Annual Report. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans and objectives or projected financial results referred to in any of the forward‑looking statements. Except as required by law, we undertake no obligation to update or revise any forward‑looking statements, whether as a result of new information, future events or otherwise. All subsequent forward‑looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

ITEM 3.A. RESERVED

ITEM 3.B. CAPITALIZATION AND INDEBTEDNESS

Not applicable.

ITEM 3.C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

ITEM 3.D. RISK FACTORS

You should carefully consider the risks described in this section, together with all of the other information included in this Form 20-F, in evaluating us and our shares. The following risk factors could adversely affect our business, financial condition, results of operations, and the price of our shares.

Risk Factor Summary

The following is a summary of the principal risks discussed in greater detail in the following pages, that could materially and adversely affect our business, results of operations, cash flows, and financial condition.

Risks Relating to our Business

•We currently depend on our main game, Ragnarok Online, and games developed from Ragnarok Online, for a significant portion of our revenues.

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

•We may not be successful in making our mobile games profitable, and our profit margins from mobile games may be relatively lower than the profits we have enjoyed historically for online games.

•We depend on our overseas licensees for a portion of our revenues and rely on them to distribute, market, and operate our games and comply with applicable laws and government regulations.

•We operate in a highly competitive industry and compete against many large companies.

•To continue to be successful, we must leverage the global connectivity and distribution of mobile platforms, and our relationships with mobile platform providers, which in many cases have the unilateral ability to amend their policies and terms and conditions for applications and developers.

•We publish games developed by third parties, which exposes us to a number of potential operational, legal, and reputational risks.

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•Unexpected network interruptions, security breaches, or computer virus attacks could harm our business and reputation.

•Unauthorized use of our intellectual property rights by third parties and the expenses incurred in protecting our intellectual property rights may adversely affect our business.

•We may be subject to claims with respect to the infringement of intellectual property rights of others, which could result in substantial costs and diversion of our financial and management resources.

•Our products and services, including those relating to P2E and NFT, may subject us to additional regulatory requirements in the future, which may be costly and difficult to comply with or adversely affect our business, and other potential risks to our business.

Risks Relating to our Company Structure

•GungHo, the licensee of our games in Japan, is our majority shareholder, which gives them control of our board of directors.

•We are a “controlled company” within the meaning of the NASDAQ Stock Market Rules and may rely on exemptions from certain corporate governance requirements.

Risks relating to our Regulatory Environment

•Our online and mobile operations and businesses are subject to laws, rules, and regulations in the countries in which our games are distributed, such as Korea, Taiwan, Thailand, the Philippines, Japan, and the United States, changes to which are difficult to predict, and uncertainties in interpretation and enforcement of the laws, rules, and regulations in such countries may limit the protections available to us.

•Our online and mobile games may be subject to governmental restrictions or ratings systems, which could delay or prohibit the release of new games or reduce the existing and potential scope of our user base.

•Restrictions and controls on currency exchange in Korea and in certain countries in which our games are distributed may limit our ability to effectively utilize revenues generated in Won to fund our business activities outside Korea or expenditures denominated in foreign currencies, and may limit our ability to receive and remit revenues effectively.

•Adverse changes in the withholding tax rates in the countries from which we receive license fees and royalties and adverse changes in our ability to realize deferred tax assets could adversely affect our net profit.

•Changes in tax laws, regulations, or interpretations thereof, including changes to tax rates, may adversely affect our financial statements and tax position.

Risks relating to our Market Environment

•Our businesses and partnerships may be affected by geopolitical tensions between China and the United States.

•Our businesses may be adversely affected by developments affecting the economies of the countries in which our games are distributed.

•Fluctuations in exchange rates could result in foreign currency exchange losses.

Risks relating to our American Depositary Shares

•If we fail to achieve and maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our financial results or do so on a timely basis and our ability to prevent or detect fraud may be reduced and investor confidence and the market price of our ADSs may be adversely affected.

•The public shareholders of our ADSs may have more difficulty protecting their interests than they would as shareholders of a U.S. corporation.

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RISKS RELATING TO OUR BUSINESS

We currently depend on our main game, Ragnarok Online, and games developed from Ragnarok Online, for a significant portion of our revenues.

A significant portion of our revenues has been and is currently derived from Ragnarok Online and other games developed based on the contents of Ragnarok Online, including our mobile game, Ragnarok Origin, Ragnarok X: Next Generation and Ragnarok M: Eternal Love. In 2023 and 2022, we derived Won 77,660 million (US$ 60,156 thousand) and Won 86,743 million in revenues from Ragnarok Online, respectively, representing approximately 10.7% and 18.7% of our total revenues for such periods. We derived Won 632,213 million (US$ 489,719 thousand) and Won 358,599 million in revenues from the games developed based on the contents of Ragnarok Online in 2023 and 2022, respectively, representing approximately 87.1% and 77.3% of our total revenues for such periods. In 2023 and 2022, our mobile game, Ragnarok Origin, represented 62.3% of our total revenues, or Won 451,887 million (US$ 350,037 thousand), and 35.5% of our total revenues, or Won 164,787 million, Ragnarok X: Next Generation, our mobile game, represented 13.7% of our total revenues, or Won 99,321 million (US$ 76,935 thousand), and 16.7% of our total revenues, or Won 77,278 million, respectively. Ragnarok M: Eternal Love, our mobile game, represented 9.6% of our total revenues, or Won 69,773 million (US$ 54,047 thousand), and 20.1% of our total revenues, or Won 93,203 million in 2023 and 2022, respectively.

Ragnarok Online has been on the market for 22 years and has reached maturity in most of our principal markets. The Company has continually maintained, improved, and updated Ragnarok Online and developed new games based on Ragnarok Online. If we fail to maintain, improve, update, or enhance Ragnarok Online in a timely manner or fail to successfully develop new games based on Ragnarok Online, this is likely to lead to a decline in the user base of games developed from the contents of Ragnarok Online, which in turn is likely to lead to a material decline in our subscription revenues, royalties and mobile revenue. This would likely 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 and mobile games, our business, financial condition and results of operations may be materially and adversely affected.

In order to grow our revenues and net income, we must retain our existing users and attract new users by developing, acquiring, licensing, launching, marketing, or operating other commercially successful online and mobile games. In addition to Ragnarok Online, we currently offer five other online games: Ragnarok Online II, Requiem Online, R.O.S.E. Online, Dragonica (which is also known as Dragon Saga in the United States, Canada and South America except for Brazil), and Ragnarok Landverse. None of our other online games to date has proven to be as commercially successful as Ragnarok Online.

In 2023, mobile games represented 86.8% of our total revenues, with one mobile game, Ragnarok Origin, representing 62.3% of our total revenues. Mobile games are played on mobile devices and smartphones, including Google Android compatible phones, the Apple iPhone, other feature phones, and tablet computers. Following a 2015 development agreement with Shanghai The Dream Network Technology Co., Ltd. (“Dream Square”) to develop and distribute two mobile games based on the contents of Ragnarok Online, we launched six mobile games developed by Dream Square (by itself and through certain third-party subcontractors), all of which are based on the contents of Ragnarok Online. For additional information, see ITEM 4.B. “BUSINESS OVERVIEW—OUR PRODUCTS—Mobile games.” Although we have achieved significant commercial success after publishing these mobile games in 2017, there is no guarantee that we will continue to be successful in the mobile game publishing business, and our revenues from mobile game publishing could decline over time.

Our revenues from mobile games increased by 75.5% to Won 629,604 million (US$ 487,698 thousand) in 2023 from Won 358,772 million in 2022. This was mainly due to a 174.2% increase in revenues from Ragnarok Origin to Won 451,887 million (US$ 350,037 thousand) in 2023 from Won 164,787 million in 2022, driven by new launching in Southeast Asia in April 2023. However, mobile revenue from customers in the United States decreased from Won 30,774 million in 2022 to Won 18,172 million in 2023. Mobile revenue from customers in Japan decreased from Won 18,436 million in 2022 to Won 10,879 million in 2023. Although the decreases in mobile revenue in the United States and Japan were more than offset by mobile revenue increases in other markets, such as Thailand and the Philippines, we may also experience declines in mobile game revenue from these or other markets in the future. A game’s commercial success largely depends on appealing to the tastes and preferences of a critical mass of users as well as the willingness of such users to purchase the game and/or in‑game items, and to continue as paying subscribers, all of which are difficult to predict prior

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to a game’s development and introduction. Developing games requires substantial development costs, including the costs of employing skilled developers and acquiring or developing game engines, which enable the creation of games with the latest technological features. For us to continue to succeed, we must acquire, license, or develop promising games at acceptable costs and ensure technical support for the successful operation of such games. The online and mobile gaming industries are highly competitive, and we may not be able to acquire, license, or develop promising games at acceptable costs. In order to successfully distribute and operate a game, we also need a sizable game management and support staff, continued investment in technology, and a substantial marketing budget.

In 2023 and 2024, we launched numerous mobile games in new markets including: Ragnarok X: Next Generation in Korea; Ragnarok Origin in Southeast Asia, North America, Central America, South America, and China; Ragnarok: The Lost Memories in Taiwan, Hong Kong, and Macau; WITH: Whale In The High in Global; White Chord in Japan; Ragnarok 20 Heroes in Korea ; Ragnarok Begins in Korea; Ragnarok Idle Adventure in Thailand; Generation Zombie in Global. We cannot assure you that the games we develop or publish will be attractive to users or otherwise be commercially successful, launched as scheduled or able to successfully compete with games operated by our competitors. If we are not able to consistently develop, acquire, license, launch, market or operate commercially successful games, we may not be able to generate enough revenues to offset our initial development, acquisition, licensing and/or marketing costs and our business, financial condition, and results of operations may be materially and adversely affected.

We may not be successful in making our mobile games profitable, and our profit margins from mobile games may be relatively lower than the profits we have enjoyed historically for online games.

Our profit margins from our mobile games, even if the games are successful, are generally lower than our profits generated from online games. This is because, in order to gain access to our games on mobile app stores, the primary distribution channel for our mobile games, we must enter into revenue-sharing arrangements that result in lower profit margins compared with those of our online games.

We have devoted and expect to continue to devote a significant amount of resources to the development of our mobile games, but the relatively lower profit margins and other uncertainties make it difficult to know whether we will succeed in making our mobile game operations more profitable. If we do not succeed in doing so, our business and results of operations will be adversely affected.

We depend on our overseas licensees for a portion of our revenues and rely on them to distribute, market, and operate our games and comply with applicable laws and government regulations.

In certain markets, we license our games to overseas operators or distributors for license fees and royalty payments based on a percentage of revenues generated from our games in such markets. Overseas license fees and royalty payments generated from our mobile games represented 8.3% of our total revenues in 2023 and 20.8% of our total revenues in 2022, with 79.4% of our 2023 revenues from mobile game license fees and royalty payments attributable to license arrangements with Nuverse (Hong Kong) Limited (“Nuverse”). Under the applicable licensing contract, Nuverse is to provide the service for a term of two years commencing on the date of Ragnarok X: Next Generation’s commercialization in Taiwan, Hong Kong, Macau, and Southeast Asia, with automatic one-year extensions thereafter. Overseas license fees and royalty payments generated from our online games represented 1.4% of our total revenues in 2023 and 1.9% of our total revenues in 2022, with 76.8% of our 2023 revenues from online game license fees and royalty payments attributable to license arrangements with GungHo Online Entertainment Inc. (“GungHo”), which has been our largest shareholder and beneficially owns, as of the date hereof, 59.3% of our common shares.

Deterioration of our relationships with material licensees or material adverse changes in the terms of our licenses with such licensees could have a material adverse effect on our business, prospects, financial condition, and results of operations. In addition, deterioration or any adverse developments in the operations, including changes in senior management, of our overseas licensees may materially and adversely affect our business, financial condition, and results of operations.

Our overseas licensees generally have the exclusive right to distribute our games in their respective markets for a term of two or three years and may also operate or publish other online and mobile games developed or offered by our competitors, and we may not be able to easily terminate the license agreements as the agreements do not specify particular financial or performance criteria that need to be met by our licensees. For example, GungHo, which is our 59.3% shareholder, also has its own mobile games business. If our overseas licensees devote greater time and resources to marketing their proprietary games or those of our competitors, we may not be able to terminate our license agreements or

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enter into new license agreements with different licensees, and our revenues and net profit may be adversely impacted. Also, a failure to satisfy our obligation to provide technical and other consulting services to the licensees under the license agreements may negatively affect user satisfaction and loyalty and hinder our licensees’ efforts to increase market share, which may lead the licensees to focus their attention on our competitors’ games or request modifications to or terminate our licensing agreements and/or not renew expired license agreements.

Our overseas licensees remit royalty payments to us based on a percentage of sales from our games after deducting certain expenses. Some licensees may be allowed to deduct certain expenses before calculating royalty payments depending on the terms of the applicable contracts. Failure by our licensees to maintain a stable and efficient billing, recording, distribution, and payment collection network in their respective markets may result in inaccurate recording of sales or insufficient collection of payments (or an illicit diversion of payments) from such markets and may materially and adversely affect our financial condition and results of operations. Although we have audit rights pursuant to our license agreements to ensure that proper payment amounts are being recorded and remitted, such activities can be disruptive and time consuming and as a result, we do not exercise such rights on a regular basis.

Furthermore, our overseas licensees are responsible for complying with local laws, including obtaining and maintaining the requisite government licenses and permits. Failure by our overseas licensees to do so may result in, among others, a suspension of service of our games in such market, which may result in user complaints and a decrease in the use of our games, which would likely have a material adverse effect on our business, financial condition, and results of operations.

Disruptions in the political environments in which our licensees operate may also have a negative impact on their business and in turn materially and adversely affect our business, financial condition, and results of operations.

We operate in a highly competitive industry and compete against many large companies.

Increased competition in the online and mobile gaming industry from existing and potential competitors could make it difficult for us to retain existing users and attract new users, and could reduce the number of hours users spend playing our current or future games or cause us and our licensees to reduce the fees charged to play our current or future games. In some of our principal markets, such as Korea, Taiwan, and Thailand, growth of the market for online games has continued to slow while competition remains strong. We expect more companies to enter the online and mobile game industries and a wider range of online and mobile games to be introduced in our current and future markets. If we are unable to compete effectively in our principal markets, our business, financial condition, and results of operations could be materially and adversely affected.

Our competitors in the online and mobile game industries vary in size from small companies to very large companies with dominant market shares. Many of our competitors have significantly greater financial, marketing, and game development resources than we have. As a result, we may not be able to devote adequate resources to develop, acquire or license new games, undertake extensive marketing campaigns, adopt aggressive pricing policies, or adequately compensate our game developers or third‑party game developers to the same degree as many of our competitors do.

As the online and mobile game industries are characterized by rapid technological changes, especially in the technical capabilities of devices for mobile games, and changing interests and preferences of users, continuous investment is required to develop and publish new games. Also, as the online and mobile game industries in many of our markets are rapidly evolving, our current or future competitors may adapt to the changing competitive landscape and market conditions and compete more successfully than us. In particular, online and mobile game products are becoming increasingly similar to each other, thus becoming more commoditized and less differentiated. In such an environment, larger companies with relative economies of scale have a clear advantage over smaller companies like us, as they are able to develop games in a more cost efficient manner, diversify their risks with broader categories of games and genres, and increase their chances of offering widely popular games. In addition, any of our competitors may offer products and services that have significant performance, price, creativity, or other advantages over those offered by us. These products and services may weaken the market strength of our brand name and achieve greater market acceptance than ours. In addition, any of our current or future competitors may be acquired by, receive investments from, or enter into strategic relationships with larger and more well established financed companies and therefore may be able to obtain significantly greater financial marketing, game licensing, and development resources than we can.

Furthermore, compared with the online or console game genres, the mobile game market has relatively low barriers to entry because development of a mobile game requires relatively less time and personnel, due to the limitations

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of the devices on which mobile games are played such as screen size and processing power. Moreover, development tools for mobile games are easier to obtain and use, and open marketplaces, such as the Google Play Store and Apple’s App Store, enable developers to easily distribute mobile games to a large global audience. Global game engine companies are also offering game developers support programs to lower the barrier to entry. Therefore, we expect the number of mobile game developers to continually increase in the future and competition to become more intense. See ITEM 4.B. “BUSINESS OVERVIEW—COMPETITION.”

To continue to be successful, we must leverage the global connectivity and distribution of mobile platforms and our relationships with mobile platform providers, which in many cases have the unilateral ability to amend their policies and terms and conditions for applications and developers.

Our mobile games increasingly leverage the global connectivity and distribution of mobile platforms including Apple’s App Store for iOS devices and the Google Play Store for Android devices. Our games are distributed on these platforms and the virtual items we sell in our games are purchased using the payment processing systems of these platform providers. In 2023, 78.4% of our revenues were generated through third-party mobile platforms. We are subject to the standard policies and terms of service of these third-party platforms, which govern the promotion, distribution, and operation of games on the platform, and can be changed by the platform providers, in their sole discretion, at any time. Such changes may decrease the visibility or availability of our games, limit our distribution capabilities, prevent access to our existing games, and reduce revenue we may recognize from in-game purchases, increase our costs to operate on these platforms or result in the exclusion or limitation of our games on such third-party platforms. Any such changes could significantly harm our business in both the short-term and long-term. If we violate, or a platform provider believes we have violated, the terms of service for a platform, our access to the platform could be limited or discontinued, which may materially and adversely affect our business.

We also rely on the continued functionality of the Apple App Store and the Google Play Store. If our players or potential players are not able to access our games through these platforms or encounter difficulties in doing so, we may lose players, resulting in decreased revenue. The level of service provided by these storefronts may also impact users’ purchase and usage of and satisfaction with virtual goods or game money, and adversely affect our business and profitability. Further, in the past these digital storefronts have experienced interruptions in service or issues with their in-app purchasing functionality. If these types of interruptions were to occur regularly or on a prolonged basis, or other similar issues arise that impact our ability to generate revenues from these storefronts, our business, financial condition, and results of operations may be materially and adversely affected.

Our investments in joint ventures or partnerships, or acquisitions of other companies, related to the development or service of online and mobile games may not be successful.

Since 2004, we have made investments in joint ventures and entered into partnership arrangements with third parties to invest in developing and/or servicing online and mobile games. In many cases, the success of such joint ventures and partnership arrangements is heavily dependent on third parties and their investment decisions because we do not have significant voting or other control over such entities.

Joint venture and partnership arrangements may involve risks not otherwise present in investments made solely by us, including:

•we may not control the joint ventures or our partners;

•where we do not have substantial decision-making authority, we may experience impasses or disputes with our joint venture partners on certain decisions, which could require us to expend additional resources to resolve such impasses or disputes, including litigation or arbitration;

•our joint venture partners may become insolvent or bankrupt, fail to fund their share of required capital contributions, or fail to fulfil their obligations as a joint venture partner;

•the arrangements governing our joint ventures may contain certain conditions or milestone events that may never be satisfied or achieved;

•our joint venture partners may have business or economic interests that are inconsistent with ours and may take actions contrary to our interests;

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•we may suffer losses as a result of actions taken by our joint venture partners with respect to our joint venture investments;

•it may be difficult for us to exit a joint venture if an impasse arises or if we desire to sell our interest for any reason; and

•we may make capital investments in our joint ventures or partnership arrangements, which may limit our ability to apply our resources to other endeavors that we find attractive, or decide not to participate in capital investments with our joint venture partners, which may result in the dilution of our ownership and corresponding impact to our decision-making authority and share of future profits or losses.

Our failure to address these risks or resolve any deadlock situations arising out of disagreements with our partners or other problems encountered in connection with our existing or future joint ventures or partnerships could cause us to fail to realize the anticipated benefits of such joint ventures or partnerships and could adversely affect our business, financial condition, results of operations and prospects. In addition, we may, in certain circumstances, be liable for the actions of our joint venture partners or other partners.

If our partners or the joint ventures and partnerships in which we and our partners have invested or companies acquired by us are unable to manage their investments, develop promising online and/or mobile games, or market or operate commercially successful online and/or mobile games, such joint ventures and partnerships or companies will be unable to attain their investment, development or other business objectives, which may materially and adversely affect the value of our investments and commitments and which may have a material adverse effect on our business, financial condition, and results of operations.

We publish games developed by third parties, which exposes us to a number of potential operational, legal, and reputational risks.

In 2023, we derived 86.7% of our revenues from online games and mobile games that were developed by third-party developers, 85.6% of which comprises revenues from mobile games developed by our former key third-party developer Dream Square (by itself and through subcontracting to certain third parties, including X.D. Network Inc. (“Xindong”) and Shanghai Rexue Network Technology Co., Ltd., with each of whom we now have a direct contractual relationship). Under our license agreements for these games, we rely on such third-party developers to provide game updates, enhancements, and new versions; provide materials and other assistance in promoting the games; and resolve game programming errors and issues with intrusions. In particular, our key mobile game, Ragnarok M: Eternal Love, which represented 9.6% of our total revenues in 2023, was developed by Dream Square (by itself and through subcontracting to certain third parties), as is the case of Ragnarok Origin and Ragnarok X: Next Generation, which represented 62.3% and 13.7%, respectively, of our total revenues in 2023.

Any failure of third-party developers to provide game updates, enhancements, and new versions that are appealing to game players in a timely manner, and provide assistance that enables us to effectively promote the games, could adversely affect the game-playing experience of our game players, damage our reputation, or shorten the life-spans of those games, any of which could result in the loss of game players, acceleration of our amortization of the license fees we have paid for those games, or a decrease in our revenues from those games. Since July 2017, technical assistance with respect to certain of our games has been provided by Dream Square (by itself and through subcontracting to certain third parties) pursuant to a publishing and technical support agreement (the “PTSA”), which expired in March 2021, and service to games developed by it expired in March 2024. See ITEM 4.A. “INFORMATION ON THE COMPANY – HISTORY AND DEVELOPMENT OF THE COMPANY.” We are in discussions with other prospective service partners regarding arrangements for our games following their current service terms, including those games provided by Dream Square. Any agreement with new publishing or technical service partners for our games could be on terms that are less favorable than those under the PTSA, and we cannot provide any assurance that any change in publishing or technical service partners will not impact our ability to effectively promote the games or the game-playing experience of our game players.

Publishing games developed by third parties also exposes us to a number of potential operational, legal, and reputational risks. For example, we may be required to provide third-party developers with upfront license fees or non-recoupable minimum guaranteed royalties in order to obtain the rights to publish their games, and we may incur significant marketing costs for these games before or after they have been commercially launched. We must often make such commitments and investments without knowing whether the games we are licensing or jointly developing will be

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successful and generate sufficient revenues to enable us to recoup our costs or for the games to be profitable. In addition, if any of the games created by third-party developers with which we work infringe intellectual property owned by others, or otherwise violate any third party’s rights or any applicable laws and regulations, such as laws with respect to data collection and privacy, we would be exposed to potential legal risks by publishing these games, which could adversely affect our reputation and business. Further, should one of the companies with whom we do business become the subject of any negative attention, reports, publicity or media, our business and reputation may be harmed.

Our revenues fluctuate significantly and may adversely impact the trading price of our ADSs, or any other securities which become publicly traded. We also may not be able to sustain our recent rapid growth in revenue.

Our revenues and results of operations have varied significantly in the past and may continue to fluctuate in the future. Many of the factors that cause such fluctuation, such as competition, regulatory changes, and general economic conditions, are outside our control. In addition, usage of our online and mobile games typically increases slightly around holidays, including the Lunar New Year holidays and during winter and summer holidays for schools. Further, our recent significant growth in revenue may not be sustainable, as our mobile games business may not continue to grow at its current pace. Accordingly, you should not rely on year-to-year, or quarter-to-quarter, comparisons of our results of operations as an indication of our future performance. It is possible that future fluctuations may cause our results of operations to be below the expectations of market analysts and investors, and cause the trading price of our ADSs to decline.

If we fail to hire and retain skilled and experienced game developers or other key personnel to design and develop new online and mobile games and additional game features, we may be unable to achieve our business objectives.

In order to meet our business objectives and maintain our competitiveness, we need to attract and retain qualified employees, including skilled and experienced online and mobile game developers. We compete to attract and retain skilled and experienced personnel with other companies in the online and mobile game industries as well as in the broader entertainment, media, and Internet industries, many of which offer superior compensation arrangements and career opportunities. In addition, our ability to train and integrate new employees into our operations may not meet the changing demands of our business. We cannot assure you that we will be able to attract and retain qualified game developers or other key personnel and successfully train and integrate them to achieve our business objectives, which could materially harm our business prospects.

Undetected programming errors or flaws in our games could harm our reputation or decrease market acceptance of our games, which would materially and adversely affect our business prospects, reputation, financial condition, and results of operations.

Our current and future games may contain programming errors or flaws, which may become apparent only after their release. In addition, our online and mobile games are developed using programs and engines developed by and licensed from third-party vendors, which may include programming errors or flaws over which we have little or no control. If our users have negative experiences with our games related to or caused by undetected programming errors or flaws, they may be less inclined to use our games or recommend our games to other potential users.

While we have not experienced any material disruptions to our business from such errors or flaws in our games or in the programs and engines that we use to develop our games, these risks are inherent to our industry and, if realized, could severely harm our reputation, cause our users to cease playing our games, divert our resources, or delay market acceptance of our games, any of which could materially and adversely affect our business, financial condition, and results of operations.

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Unexpected network interruptions, security breaches, or computer virus attacks could harm our business and reputation.

Failure to maintain satisfactory performance, reliability, security, and availability of our network infrastructure, whether maintained by us or by our licensees, may cause significant harm to our reputation and negatively impact our ability to attract and maintain users. Major risks relating to our network infrastructure include:

•any breakdowns or system failures, including from fire, flood, earthquake, hurricane or other natural disasters, power loss or telecommunications failure, resulting in a sustained shutdown of all or a material portion of our servers;

•any disruptions, failures, or unscheduled service interruptions with data center hosting facilities managed by third-party service providers, which may be due to unforeseen events that are beyond our control or the control of our third-party service providers;

•any disruption or failure in the national or international backbone telecommunications network, which would prevent users in certain countries in which our games are distributed from logging onto or playing our games for which the game servers are located in such countries; and

•any security breach caused by hacking, loss, or corruption of data or malfunctions of software, hardware, or other computer equipment, and the inadvertent transmission of computer viruses.

“Hacking” involves efforts to gain unauthorized access to information or systems or to cause intentional malfunctions or loss or corruption of data, software, hardware, or other computer equipment. Hackers, if successful, could misappropriate proprietary information or cause disruptions in our service. For example, in March and July 2021 and May and August 2022, we experienced a series of incidents where unauthorized users accessed or attempted to access our database or server, by exploiting remote code security vulnerabilities in order to, among others, cause illicit updates to be made to such users’ player data on our database. In response, we took immediate remedial actions such as changing the password for the database, removing the malicious codes identified, and adopting a tool that enables the detection of abnormal queries. No personal information was compromised as a result of these incidents. We have taken steps to ensure these security vulnerabilities have been patched in our systems, but we cannot guarantee that all vulnerabilities have been patched in every system upon which we are dependent or that additional critical vulnerabilities will not be discovered by hackers in the future. While these past incidents have not materially disrupted or damaged our systems or platforms or the performance of our business, there is no assurance that we can anticipate all evolving future attacks, viruses, or intrusions, implement adequate preventative measures, or remediate any security vulnerabilities. Any mitigation or remediation efforts we may have to undertake in the future in response to any such attacks may also require the attention of management and expenditures of significant capital and human resources, which can result in a significant financial impact on our operations and financial results. In addition, we cannot ensure that any measures we take against hacking will be effective. A computer security breach could significantly damage our reputation and materially and adversely affect our business and we could be exposed to a risk of loss, litigation and regulatory proceedings.

We host our servers at third-party data centers located in the U.S., Indonesia, Korea, Taiwan, and Thailand. Given that we lease these data center spaces from third-party data center providers, we do not control the operations of these third-party facilities. Consequently, we have been, and may continue to be, subject to service disruptions, failures, unscheduled service interruptions or failures to provide adequate support for reasons which are beyond our control or the control of our third-party service providers. All of our data center facilities and network infrastructure are vulnerable to damage or interruption from a variety of sources including earthquakes, floods, fires, power loss, system failure, computer vulnerabilities, physical or electronic break-ins, human errors, malfeasance, or interference, including by employees, former employees, or contractors, terrorism, and other catastrophic events. For example, on December 2, 2021, a fire broke out at our third-party data center hosting facility in Indonesia, IDC Indonesia, which services PT Gravity Game Link (“Gravity Game Link”), our 70%‑owned subsidiary in Indonesia. Although basic network infrastructure such as web servers, mails, and virtual private networks (VPN) was restored within 48 hours, and all other services including download servers were restored on the third day after the fire, we experienced a temporary disruption in our services during this period due to continued outages. While all our data and servers were fully restored after the incident, and this incident did not result in a material adverse impact on our operating results, there can be no assurance that any such incidents, which could cause an interruption in our services, will not occur again. In addition, global climate change is expected to result in certain natural disasters occurring more frequently or with greater intensity, such as tsunamis, cyclones, typhoons, drought, wildfires, sea-level rise, heavy rains and flooding. Any such disaster or series of disasters in areas where we have data

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centers, such as the U.S., Indonesia, Korea, Taiwan, and Thailand, could significantly disrupt our operations and have a material adverse effect on our business, results of operations and financial condition. For example, a significant portion of our data centers and operations are located in Korea. A natural disaster, fire, earthquake, volcanic activity, tsunami, power interruption, work stoppage, outbreaks of pandemics or contagious diseases (such as the COVID-19 pandemic) or other calamity in Korea would significantly disrupt our ability to deliver our services and operate our business. The disaster recovery arrangements and data redundancy plans of our Company and our third-party service providers may not be adequate to account for disasters or similar events that may occur in the future and may not effectively permit us to continue operating in the event of any problems with respect to our systems or those of our third-party data centers or any other third-party facilities. If any such event were to occur to our business, our operations could be impaired and our business, financial condition, and results of operations may be materially and adversely affected.

We have been, may continue to be, subject to denial of service attacks that have caused, and could cause, portions of our network to be inaccessible for limited periods of time. For example, in March 2022, we experienced a distributed denial of service (“DDOS”) attack on the Amazon Web Services cloud platform, which we use for the Ragnarok Online service in Malaysia, Singapore, and the Philippines. While this attack caused our service to be unstable intermittently for a period of two weeks, we were able to mitigate the attack by subscribing to AWS Shield, a DDOS protection service, and taking preventive measures. In September 2022, another DDOS attack occurred on the network of IDC Korea, our third-party data center hosting facility in Korea, resulting in the server becoming inaccessible. We restored access to the server within 24 hours and took remedial actions including changing the Canonical NAME (CNAME) record in the Domain Name System (DNS) and adopting Cloudflare’s solution. Although the attacks we have experienced did not cause material losses or damages, we cannot ensure that any protective measures we have implemented, including those by our third-party service providers, will be adequate or effective against future hacking efforts and that any such attacks in the future will not have a material adverse effect on our business, results of operations, financial condition, reputation or prospects.

In addition, computer viruses may cause delays or other service interruptions on our systems and expose us to a material risk of loss or litigation and possible liability. We may be required to expend significant capital and other resources to protect our Web sites against the threat of such computer viruses and to address and resolve any problems resulting from such viruses. Moreover, if a computer virus affecting our system is highly publicized, our reputation could be materially damaged and our visitor traffic may decrease.

Any of the foregoing factors could reduce our users’ satisfaction, harm our business and reputation and have a material adverse effect on our business, financial condition, and results of operations.

Failure to protect personal information could adversely affect our business, reputation, and results of operations.

We collect, process, store, and transmit personal information of game users worldwide for our global game service. Our business may be subject to a number of federal, state, local and foreign laws, and regulations governing data privacy and security, including with respect to the collection, processing, storage, use, transmission, and protection of personal information and other consumer data on the Internet and mobile platforms, the scope of which are continually changing and subject to differing interpretations, and which may be inconsistent among countries or otherwise in conflict with other laws or regulations. These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other laws or regulations or our practices. Also, the failure to prevent or mitigate the loss of personal information data or other game user data, including as a result of breaches of our vendors’ technologies and systems, could expose us or our game users to a risk of loss or misuse of such information. Any such failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to players or other third parties, or our privacy-related legal obligations, including without limitation any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other player data, may result in governmental enforcement actions, litigation or public statements against us by consumer advocacy groups or others and could cause our players to lose trust in us, which may have an adverse effect on our business, reputation, and results of operations. See ITEM 4.B. “BUSINESS OVERVIEW—LAWS AND REGULATIONS” for a detailed discussion regarding laws of Korea, Taiwan, Thailand, the Philippines, Japan, and the United States that may materially impact our operations.

Further, we may not be able to adequately adapt our internal policies and/or procedures to evolving regulations, which may require us to change our practices in a manner adverse to our business or limit access to our products and services in certain countries. As a result, our reputation and brand may be harmed, we could incur substantial costs, and we could lose both customers and revenues. For example, the European General Data Protection Regulation (“GDPR”), which

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became effective as of May 2018, contains significant penalties for non-compliance and apply to us as we receive or process the personal data of residents of the European Union. If we fail to comply with such GDPR regulations, or other data protection laws and regulations globally, we may be subject to significant penalties and sanctions which may have a material adverse effect on our business, financial condition, and results of operations.

Electronic embezzlement could negatively impact the popularity of our online and mobile games and adversely affect our reputation and results of operations.

Some of our employees or licensees’ employees with high‑level security access to our network, or other employees or persons who hack into or otherwise gain unauthorized access to certain sectors of our network, may succeed in breaching internal security systems and engage in electronic embezzlement by creating or diverting game money used in our online and mobile games and publicly or privately selling the game money for their financial benefit. We and our overseas licensees may not be successful in preventing electronic embezzlement. Incidents of electronic embezzlement may negatively impact the reputation of our games, which may materially and adversely affect our business, financial condition, and results of operations.

Cheating by users of online and mobile games could negatively impact the popularity of our online and mobile games and adversely affect our reputation and results of operations.

We have experienced numerous incidents where users were able to modify the published rules of our online and mobile games. Users were able to modify the rules of our online and mobile games during game play in a manner that allowed them to cheat and disadvantage other online game users. For example, users have utilized auto‑run programs that enabled games to be continuously and automatically played without user participation to quickly accumulate in‑game points, causing many other players to stop using the game and shortening the game’s life cycle. For mobile games, some users have purchased game money or in‑game items through cloned mobile phones and sold such illegally obtained property to other users, which resulted in a shortfall between total sales and our actual revenues. Such unauthorized manipulation of our games may negatively impact users’ perception of our games and damage our reputation as well as our results of operations. We or our licensees may not be successful in taking the corrective measures necessary to prevent users from modifying the terms of our games in a timely manner.

Unauthorized use of our intellectual property rights by third parties and the expenses incurred in protecting our intellectual property rights may adversely affect our business.

Our intellectual property rights such as copyrights, service marks, trademarks, and trade secrets are critical to our business. Unauthorized use of the intellectual property rights used in our business, whether owned by us or licensed to us, may materially and adversely affect our business and reputation. We rely on trademark and copyright law, trade secret protection, and confidentiality agreements with our employees, customers, business partners, and others to protect our intellectual property rights. It may be possible for third parties to obtain and use our intellectual property without authorization.

Since the commercialization of Ragnarok Online in August 2002, we have discovered that the server‑end software of Ragnarok Online has been unlawfully released on a consistent basis in most of the countries and markets in which Ragnarok Online has been offered. This enables unauthorized parties to set up local server networks to operate Ragnarok Online, which may result in the diversion of a significant number of paying users. We designate certain employees to be responsible for detecting such illegal servers. In Korea, we report offenders to the relevant enforcement authority for possible prosecution relating to crimes on the Internet. In markets outside of Korea, we cooperate with and rely on our licensees to seek enforcement actions against operators of illegal servers. For example, in December 2007 and June 2008, Gravity Interactive, Inc. (“Gravity Interactive”), our wholly-owned subsidiary in the United States, which manages Ragnarok Online game operations in the United States, petitioned the Federal Bureau of Investigation for remission or mitigation of forfeiture of the property of two illegal server operators of Ragnarok Online, which property was deemed proceeds of copyright infringement violations by the illegal server operators, and US$ 154,674.73 was returned to Gravity Interactive, Inc. in April 2011. In April 2022, Gravity filed a claim against an operator of an illegal server of Ragnarok Online in the United States District Court for the Central District of California. The court held in favor of Gravity finding that the illegal server operator infringed Gravity’s copyrights and, as a result, the server in question closed its operations in July 2023. We may incur considerable costs in the future in order to remedy software piracy of our server software and enforce our rights against the operators of unauthorized server networks.

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The validity, enforceability, enforcement mechanisms, and scope of protection of intellectual property in Internet‑related industries are uncertain and evolving. In particular, the laws and enforcement regimes of Korea, Japan, Taiwan, the Philippines, China, Thailand, and certain other countries in which our games are distributed are uncertain or may not protect intellectual property rights to the same extent as do the laws and enforcement procedures of the United States. Moreover, litigation may be necessary in the future to enforce our intellectual property rights. Such litigation could result in substantial costs and diversion of our resources, disruption of our business, and have a material adverse effect on our business, prospects, financial condition, and results of operations.

We may be subject to claims with respect to the infringement of intellectual property rights of others, which could result in substantial costs and diversion of our financial and management resources.

We cannot be certain that our online and mobile games do not or will not infringe upon patents, copyrights, or other intellectual property rights held by third parties. We have in the past been and may in the future become subject to legal proceedings and claims from time to time relating to the intellectual property of other parties. For example, in November 2010, Gravity Interactive, which manages Dragonica game operations under the name Dragon Saga in the United States and Canada, THQ*ICE LLC, the former game distributor of Dragonica in the United States and Canada, and THQ Inc., the former joint venture partner of THQ*ICE LLC, were accused of trademark infringement. The owner of the registered trademark of Dragonica in the United States filed a lawsuit with the United States District Court for the Southern District of Florida seeking damages and any profits and gains to the defendants through the alleged trademark infringement. The lawsuit was settled in March 2012. If we are found to have violated the intellectual property rights of other parties, we may be enjoined from using such intellectual property rights, be required to pay penalties and fines and pay for the unauthorized use of such intellectual property, and may need to incur additional license fees or be forced to develop alternative technology or obtain other licenses. We may incur substantial expenses in defending against these third-party infringement claims, regardless of their merit. In addition, certain of our employees were recruited from other online and mobile game developers, including current and potential competitors. To the extent these employees have been and are involved in the development of our games that are similar to the games they helped develop at their former employers, we may become subject to claims that we or such employees have improperly used or disclosed trade secrets or other proprietary information. Although we are not aware of any pending or threatened claims of this type, if any such claims were to arise in the future, litigation or other dispute resolution procedures might be necessary to retain our ability to offer our current and future games, which could result in substantial costs and diversion of our financial and management resources.

Successful infringement or licensing claims against us may result in substantial monetary damages, which may materially disrupt our business operations and have a material adverse effect on our reputation, business, financial condition, and results of operations.

Our products and services, including those involving play-to-earn (“P2E”) features and non-fungible tokens (“NFT”), may subject us to additional regulatory requirements in the future, which may be costly and difficult to comply with or adversely affect our business, and other potential risks to our business.

We currently offer the market NFT items created using our game contents, and will continue to develop and launch games integrated with P2E and NFT elements. For example, users of the Sand Box can purchase certain virtual items as NFTs, using Ragnarok Online IP, on the Sandbox Platform, which they can in turn use in their virtual land. Furthermore, the P2E game we are developing allows users to earn rewards through game play, which can be exchanged for certain types of cryptocurrency trading on cryptocurrency exchanges. We may become subject to regulatory requirements in the future in Korea and other countries for providing such products and services.

Governments of different countries have responded differently to cryptoassets (including cryptocurrency and NFTs). Governments of various countries may adopt laws, regulations, or policies that could adversely affect P2E or NFT by restricting rights to acquire, own, hold, sell, use or trade cryptoassets or to exchange them for fiat currency. In addition, there is significant uncertainty regarding the tax treatment of cryptoassets. We cannot rule out the possibility that such restrictions and uncertainties could have a material adverse effect on our ability to pursue P2E, NFT and/or adjacent business, financial condition, and the results of operations.

Furthermore, our P2E and NFT-related businesses may be subject to cybersecurity risks. We cannot rule out the possibility that such risks become materialized affecting our business, financial condition, and the results of operations.

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We may not be able to successfully implement our growth and profit improvement strategies.

We are pursuing a number of growth and profit improvement strategies, including the following:

•distributing games developed in‑house;

•publishing games acquired from or developed by third parties through licensing arrangements;

•intellectual property licensing to or from third parties for game development;

•offering our games in countries where such games have not yet been launched;

•optimizing our marketing and research and development expenditures;

•cross‑selling our popular online games through other lines of businesses, such as mobile games, console games, animation, and character merchandising;

•pursuing strategic relationships with game development and service companies;

•strengthening localized services through the establishment of local subsidiaries in our major markets; and

•developing new business areas other than the game business, such as a screen golf business based on a franchise model.

We cannot assure you that we will be successful in implementing any of these strategies. Certain of our strategies relate to new services or products for which there are no established markets, or in which we lack experience and expertise. If we are unable to successfully implement our growth and profit improvement strategies, our revenues, profitability, and competitiveness may be materially and adversely affected.

We have limited business insurance coverage, and business interruption could have a material adverse effect on our business.

While we carry insurance coverage against certain risks to our property and assets, such as fire, flood and earthquake, as well as directors’ and officers’ liability insurance, we do not separately maintain casualty and liability insurance against litigation, risks or disruptions related to our business. The occurrence of any natural disaster, fire, power loss, telecommunications failure, break‑ins, sabotage, computer viruses, intentional acts of Internet vandalism, human error, or other similar events may damage our facilities or network servers and disrupt the operation of our business. As we do not carry sufficient natural disaster or business interruption insurance to compensate us for all types or amounts of loss that could arise, any damage or disruption from such events might result in our incurring substantial costs and the diversion of our resources, and have a material adverse effect on our business, financial condition, and results of operations. See ITEM 4.B. “BUSINESS OVERVIEW—INSURANCE.”

As we introduce new games, we face the risk that a significant number of users of our existing games may migrate to our new games.

As we introduce new games, a certain number of our existing users may migrate from our existing games to the new games, which may lead to a decrease in the player base of our existing games and in turn make those existing games less playable to other game players, resulting in decreased revenues from our existing games. Players of our existing games may also spend less money to purchase in‑game items in our new games than they would have spent if they had continued playing our existing games. In addition, our game players may migrate from our existing games with a higher profit margin to new games with a lower profit margin. If any of the forgoing occurs, our revenues and profitability are likely to be materially and adversely affected.

New or changed game features in our online games may not be well-received by our game players.

In the course of launching and operating online games, including the release of updates and expansion packs to existing games, certain game features may periodically be introduced, changed or removed. We cannot assure you that the introduction, change or removal of any game feature will be well-received by our game players, who may decide to reduce

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or eliminate their playing time in response to any such introduction, change, or removal. As a result, any introduction, change, or removal of game features may adversely impact our business, financial condition, and results of operations.

We believe that we were a PFIC for taxable years 2008 through 2016, 2022 and 2023, and we may be a PFIC in future years. As a result of being a PFIC in 2023 and prior years, and because of the possibility that we may have been a PFIC for taxable years 2017 through 2021, and may be a PFIC in future taxable years, U.S. investors could be subject to adverse U.S. federal income tax consequences.

The rules governing PFICs can have adverse consequences for U.S. investors for U.S. federal income tax purposes. The tests for determining PFIC status for a taxable year depend upon the relative values of certain categories of assets and the relative amounts of certain kinds of income. As discussed in ITEM 10.E. “TAXATION—MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS,” we believe that we were a PFIC for the taxable years 2023 and 2022 and for taxable years 2008 through 2016 (though we believe we may not have been a PFIC for taxable years 2017 through 2021), and we may be a PFIC in future years. The determination of whether we are a PFIC must be made annually after the end of each taxable year, and our PFIC status for each taxable year will depend on particular facts and circumstances (such as the composition of our income and assets, and the valuation of our assets, including goodwill and other intangible assets, which may be determined by reference to the market price of our ADSs, which has fluctuated and may continue to fluctuate significantly over time) and may be affected by differing interpretations of the PFIC rules. In light of the foregoing, no assurance can be provided that we were not a PFIC for the taxable years 2017 through 2021 or that we will not become a PFIC in the current year or any future taxable year. In addition, our U.S. counsel expresses no opinion with respect to our PFIC status for our past, current, or future taxable years. Furthermore, if we are treated as a PFIC, and one or more of our subsidiaries are also treated as PFICs, U.S. Holders will be subject to the PFIC rules with respect to their indirect interests in those subsidiaries and will be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of the PFIC rules. Accordingly, U.S. Holders should invest in our ADSs only if they are willing to bear the U.S. federal income tax consequences associated with investments in PFICs.

If we are characterized as a PFIC for any taxable year, and a U.S. Holder (as defined in ITEM 10.E. “TAXATION—MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS.”) held our ADSs or common shares during such taxable year, we generally will continue to be treated as a PFIC with respect to that U.S. Holder for all succeeding taxable years during which the U.S. Holder holds ADSs or common shares, even if we cease to meet the requirements for PFIC status. In such case, U.S. Holders of our common shares and ADSs would be subject to adverse U.S. federal income tax consequences, such as ineligibility for any preferential tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. Whether U.S. Holders of our common shares or ADSs make (or are eligible to make) a timely qualified electing fund, or QEF, election or a mark-to-market election may affect the U.S. federal income tax consequences to U.S. Holders with respect to the acquisition, ownership, and disposition of our common shares and ADSs and any distributions such U.S. Holders may receive. We do not, however, expect to provide the information regarding our income that would be necessary in order for a U.S. Holder to make a QEF election if we are classified as a PFIC. Investors should consult their own tax advisors regarding all aspects of the application of the PFIC rules to our common shares and ADSs.

Rapid technological developments and changes in market environment may limit our ability to recover game development costs and adversely affect our financial condition and results of operations due to impairment loss.

The online and mobile game industries are subject to rapid technological developments and changes in market environment, which could render our online and mobile games under development and commercialized games obsolete or unattractive to users. Any resulting failure to recover capitalized development costs and the recognition of impairment loss for such costs may materially and adversely affect our financial condition, and results of operations.

We could suffer losses due to asset impairment charges.

We held a total of Won 6,370 million (US$ 4,934 thousand) in intangible assets (comprising software, industrial property rights and other intangible assets) as of December 31, 2023. See Note 9 to our consolidated financial statements included in this Annual Report. We test indefinite‑lived intangible assets at least annually for impairment, and more frequently if an event occurs or circumstances change so that the carrying amount may not be recoverable. Such an event would include unfavorable variances from established business plans, significant changes in forecasted results or volatility inherent to external markets and industries, which are periodically reviewed by our management. If such an adverse event occurs and has the effect of changing one of the critical assumptions or estimates related to the fair value of our intangible

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assets, an impairment charge could result. For example, in 2023, 2022 and 2021, we recognized impairment loss on intangible assets of Won 1,531 million in relation to the games WITH: Whale In The High and Lost Saga, Won 293 million in relation to the games Tera Classic and CPBL Baseball and Won 281 million in relation to the games The Lord and Lost Saga, respectively, and we have recognized other similar impairment losses during the past several years.

There can be no assurance that future reviews of intangible assets will not result in significant impairment charges. Although it does not affect cash flow, an impairment charge does have the effect of decreasing our earnings, assets, and shareholders’ equity.

The value of our deferred tax assets could become impaired, which could materially and adversely affect our results of operations.

As of December 31, 2023, we had approximately Won 5,952 million (US$ 4,610 thousand) in net deferred tax assets. See Note 19 to our consolidated financial statements included in this Annual Report. These deferred tax assets include net operating loss carryforwards, tax credit carryforwards and temporary differences that can be used to offset taxable income in future periods and reduce income taxes payable in those future periods. Each year, we determine the probability of the realization of deferred tax assets, using significant judgments and estimates with respect to, among other things, historical operating results and expectations of future earnings. If we determine in the future that there is not sufficient positive evidence to support the valuation of these assets, due to the risk factors described herein or other factors, we may be required to further adjust the probability of realization to reduce our deferred tax assets. Such a reduction could result in material non-cash expenses in the period in which the probability of realization is adjusted and could have a material adverse effect on our results of operations.

RISKS RELATING TO OUR COMPANY STRUCTURE

GungHo, the licensee of our games in Japan, is our majority shareholder, which gives them control of our board of directors.

Since April 1, 2008, GungHo has been our largest shareholder and beneficially owns, as of the date hereof, 59.3% of our common shares. As a result, GungHo is able to exert significant control over all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions, including acquisitions, divestitures, strategic relationships, and other matters, and may also exert significant control over decisions related to the status of our ADSs being eligible for quotation and trading on the NASDAQ Global Market. In addition, as GungHo is also an online and mobile game developer, there may be conflicts of interest. For instance, GungHo may lead our management with strategies and efforts which benefit itself, its affiliates, and their respective shareholders to the detriment of our other shareholders. GungHo may also compete directly or indirectly against us for users and customers or increased market share for its games. GungHo is also currently the licensee of Ragnarok Online, Ragnarok M: Eternal Love, Ragnarok Origin, and Ragnarok X: Next Generation in Japan. Furthermore, five of our Executive Directors, Mr. Hyun Chul Park, Mr. Yoshinori Kitamura, Mr. Kazuki Morishita, Mr. Kazuya Sakai, and Mr. Koji Yoshida currently serve as General Manager, Director and Executive General Manager, President and Chief Executive Officer, Chief Financial Officer and Director, and Executive General Manager, Chief Customer Officer, Chief Crisis Management Officer and Director, respectively, of GungHo, and there may be conflicts of interest in the decisions made by the Board of Directors of Gravity (the “Board of Directors”) and senior management. See ITEM 7.B. “RELATED PARTY TRANSACTIONS—Relationship with GungHo Online Entertainment, Inc.”

We are a “controlled company” within the meaning of the NASDAQ Stock Market Rules and may rely on exemptions from certain corporate governance requirements.

As GungHo controls 59.3% of our outstanding voting power as of the date hereof, we are a “controlled company” within the meaning of the NASDAQ Stock Market Rules and may rely on exemptions from certain corporate governance requirements. As a “controlled company,” we are not required to have a majority of our Board of Directors be independent, nor are we required to have a compensation committee or independent director oversight of director nominations which meet the requirements set forth in the NASDAQ Stock Market Rules. We are relying on these exemptions as a controlled company. Accordingly, our shareholders do not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NASDAQ Stock Market Rules. For our corporate governance policies, see ITEM 6.C. “BOARD PRACTICES—CORPORATE GOVERNANCE PRACTICES.”

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RISKS RELATING TO OUR REGULATORY ENVIRONMENT

Our online and mobile operations and businesses are subject to laws, rules, and regulations in the countries in which our games are distributed, such as Thailand, Taiwan, Korea, Japan, the United States, and the Philippines, changes to which are difficult to predict, and uncertainties in interpretation and enforcement of the laws, rules, and regulations in such countries may limit the protections available to us.

The regulatory and legal regimes in many of the countries in which our games are distributed have yet to establish a sophisticated set of laws, rules or regulations designed to regulate the online and mobile game industries. However, in many of our principal markets, such as Thailand, Taiwan, Korea, Japan, the United States, and the Philippines, legislators and regulators have implemented or indicated their intention to implement laws, rules and regulations with respect to issues such as user privacy, defamation, pricing, advertising, taxation, foreign ownership limitations, promotions, financial market regulation, consumer protection, content regulation, quality of products and services, and intellectual property ownership and infringement that may directly or indirectly impact our activities. The impact of such laws, rules, and regulations on our business and results of operations is difficult to predict as many such laws, rules, and regulations are constantly changing. However, as we might unintentionally violate such laws, rules, and regulations, or such laws, rules or regulations may be modified, and new laws, rules and regulations may be enacted in the future, any such developments, or developments stemming from enactment or modification of other laws, rules or regulations, could increase the costs of regulatory compliance, force changes in business practices or otherwise have a material adverse effect on our business, financial condition, and results of operations. Further, if the cost of regulatory compliance increases for our licensees as a result of regulatory changes, our licensees may seek to reduce royalties and license fees payable to us, which may materially and adversely affect our business, financial condition, and results of operations. See ITEM 4.B. “BUSINESS OVERVIEW—LAWS AND REGULATIONS” for a discussion regarding the laws of Thailand, Taiwan, Korea, Japan, the United States, and the Philippines that may materially impact our operations.

Our online and mobile games may be subject to governmental restrictions or ratings systems, which could delay or prohibit the release of new games or reduce the existing and potential scope of our user base.

Legislation is periodically introduced in many of the countries in which our games are distributed to establish a system for protecting consumers from the influence of graphic violence and sexually explicit materials contained in various types of games. For example, Korean law requires online game companies to obtain ratings classifications and implement procedures to restrict access of online games to certain age groups. Similar mandatory ratings systems and other regulations affecting the content and distribution of our games have been adopted or are under review in Taiwan, China, the United States, and other markets for our games. In the future, we may be required to modify our game content or features or alter our marketing strategies to comply with new governmental regulations or ratings assigned to our current or future games, which could delay or prohibit the release of new games or upgrades and reduce the existing and potential scope of our user base. Moreover, uncertainties regarding governmental restrictions or ratings systems applicable to our business could give rise to market confusion, thereby materially and adversely affecting our business, financial condition, and results of operations.

Restrictions and controls on currency exchange in Korea and in certain countries in which our games are distributed may limit our ability to effectively utilize revenues generated in Won to fund our business activities outside Korea or expenditures denominated in foreign currencies, and may limit our ability to receive and remit revenues effectively.

Existing and future restrictions on currency exchange in Korea, including Korean foreign exchange control regulations, may restrict our ability to convert Won into foreign currencies under certain emergency circumstances, such as natural calamities, wars, conflicts of arms or grave and sudden changes in domestic or foreign economic circumstances, difficulties in Korea’s international balance of payments and international finance and obstacles in carrying out currency policies, exchange rate policies, and other Korean macroeconomic policies. Such restrictions may limit our ability to effectively utilize revenues generated in Won to fund our business activities outside Korea or expenditures denominated in foreign currencies.

In addition, the governments in certain markets in which our games are distributed, including without limitation in Taiwan, China, and Thailand, impose controls on the convertibility of local currency into foreign currencies and, in some cases, the remittance of currency outside their countries. Under current foreign exchange control regulations of certain markets, shortages in the availability of foreign currency may restrict the ability of our overseas licensees to pay license fees and royalties, most of which are paid in U.S. dollars, to us. Restrictions on our ability to receive license fees, royalties, and other payments from our licensees would adversely affect our results of operations, financial condition, and liquidity.

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Adverse changes in the withholding tax rates in the countries from which we receive license fees and royalties and adverse changes in our ability to realize deferred tax assets could adversely affect our net profit.

We may be subject to income tax withholding in countries where we derive revenues. Such withholding is made by our overseas licensees at the current withholding rates in such countries. To the extent Korea has a tax treaty with any such country, the withholding rate prescribed by such tax treaty will apply. Under the Corporation Tax Law of Korea, we are entitled to and recognize a capped foreign tax credit computed based on the amount of income taxes withheld overseas when filing our corporate income tax return in Korea. Accordingly, the amount of taxes withheld overseas may be offset against taxes payable in Korea.

Recently, there have been a series of amendments to tax treaties that Korea has entered into with various countries. Under the amended tax treaty between Korea and India, the tax rate applicable to license fees and royalties was reduced from 15% to 10% in respect of income derived in any fiscal year beginning on or after April 1, 2017. The tax treaty between Korea and Hong Kong, which became effective as of September 27, 2016, includes a provision promulgating that license fees and royalties shall be subject to tax at the reduced rate of 10% in respect of income derived in any fiscal year beginning on or after April 1, 2017. Under the amended tax treaty between Korea and Singapore, the tax rate applicable to license fees and royalties was reduced from 15% to 5% in respect of amounts paid, deemed to be paid or liable to be paid (whichever is the earliest) on or after January 1, 2020. Under the amended protocol of tax treaty between Korea and Vietnam, the tax rate applicable to royalties was reduced from 5% or 15% to 5% or 10% in respect of amounts paid on or after January 1, 2022. The tax treaty between Korea and Taiwan, effective as of December 26, 2023, includes a provision stating that royalties shall be subject to a reduced tax rate of 10% for amounts payable on or after January 1, 2024. These series of promulgations are all intended to eventually further limit the source country’s taxation right with respect to license fees and royalties. Any adverse changes in tax treaties between Korea and the countries from which we receive license fees and royalties, such as in the rate of withholding tax in the countries in which our games are distributed or in Korean tax law enabling us to recognize foreign tax credits for taxes withheld overseas, could adversely affect our net income.

Changes in tax laws, regulations, or interpretations thereof, including changes to tax rates, may adversely affect our financial statements and tax position.

New income or other tax laws or regulations could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws and regulations could be interpreted, modified, or applied adversely to us. Significant judgment is required in determining our worldwide provision for income and other taxes. Although we believe that we have adequately assessed and accounted for our potential tax liabilities, and that our tax estimates are reasonable, there can be no certainty that additional taxes will not be due upon audit of our tax returns or as a result of changes to the tax laws and interpretations thereof.

In 2021, the Organization for Economic Co-operation and Development (the “OECD”) released Pillar Two model rules defining the global minimum tax rules, which contemplate a jurisdictional 15% minimum tax rate. The OECD continues to release additional guidance on these rules and the framework calls for law enactment by local countries to take effect in 2024 or 2025. These changes, when enacted by various countries in which we do business, may increase our taxes in these countries. South Korea has enacted legislation to implement the OECD framework including the Income Inclusion Rule (the “IIR”) which may impose additional reporting and compliance obligations to our group effective from January 1, 2024 and the Under-taxed Profit Rules (the “UTPR”), which may impose additional reporting and compliance obligations to our group effective from January 1,2025. We are continuing to monitor legislative developments and are in the process of evaluating the potential impact of Korea and other legislation on our taxes.

Changes to tax law or administration such as these, whether at the state level or the international level, could increase our tax administrative costs and tax risk, and negatively affect our overall business, results of operations, financial condition and cash flows. We are currently unable to predict whether such changes will occur and, if so, the ultimate impact on our business.

RISKS RELATING TO OUR MARKET ENVIRONMENT

Our businesses and partnerships may be affected by geopolitical tensions between China and the United States.

In recent years, there has been a deterioration in the relationship between China and the United States, which has resulted in intense potential conflicts between the two countries in trade, technology, finance, and other areas, and this

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has led to greater uncertainties in the geopolitical situations in other parts of the world affecting China, Chinese companies, and companies that have business relationships with Chinese companies. For example, economic and trade sanctions have been threatened and/or imposed by the U.S. government on a number of Chinese technology companies. The United States has also threatened to impose further sanctions, trade embargoes, and other heightened regulatory requirements. Most recently, President Biden issued Executive Order 14034 on June 9, 2021 (the “EO 14034”) authorizing the Secretary of Commerce to evaluate transactions involving apps designed, developed, manufactured, or supplied by “foreign adversaries” that may present national security concerns, particularly with regard to access by persons owned, controlled, or subject to the jurisdiction of “foreign adversaries,” including China.

Revenue originating from the United States represented approximately 3.1% of our 2023 revenue. In addition, we maintain agreements with Chinese entities for distribution of our products in China and elsewhere in Asia. Accordingly, any further deterioration of US-China relations or further sanctions involving Chinese companies with whom we may do business may be detrimental and have an adverse impact on our business.

Our businesses may be adversely affected by developments affecting the economies of the countries in which our games are distributed.

Our future performance will depend in large part on the economic growth of our principal markets. Our top geographic markets in terms of 2023 revenues were Taiwan, Thailand, the Philippines, and Korea representing 24.3%, 18.9%, 14.1% and 11.9%, respectively, of our total revenues in 2023. Accordingly, our business, prospects, financial condition, and results of operations are subject to the economic, political, legal and regulatory conditions, and developments in these countries and markets. Adverse economic developments in such markets may have an adverse effect on the number of our users and our revenues and have a material adverse effect on our results of operations.

The overall prospects for our principal markets as well as the global economy remain uncertain. For example, in Korea, economic indicators in recent years have shown mixed signs, and the future growth of the Korean economy is subject to many factors beyond our control, including developments in the global economy. Unfavorable or uncertain economic and market conditions can be caused by difficulties in the financial sector, corporate, political, or other scandals that may reduce confidence in the markets, declines in business confidence, increases in inflation, natural disasters or pandemics, outbreaks of hostilities, or other geopolitical instability. Deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from territorial or trade disputes or disagreements in foreign policy, or a combination of these or other factors, have in the past adversely affected, and may in the future adversely affect, the Korean economy and, in turn, our business and performance.

Further, we derive a significant percentage of our revenue from customers in Taiwan. An increase in tensions between Taiwan and China and the possibility of instability and uncertainty could adversely affect the prices of our ADSs and our shares. Relations between Taiwan and China and other factors affecting Taiwan’s political and economic environment could affect our business.

We also derive a significant percentage of our revenues from customers in Thailand and the Philippines. Both of these countries have been subject to political, social and economic volatility that, directly or indirectly, could have a material adverse impact on our ability to sustain our business and growth in these markets. We cannot assure you that the political environment in Thailand or the Philippines will be stable or that the current or any future government will adopt economic policies that are conducive to sustained economic growth or which do not materially and adversely impact the current regulatory environment for digital gaming companies.

In addition to the above factors, adverse economic developments may be a result of a multitude of factors, including, but not limited to, turmoil in the credit and financial markets, concerns regarding the stability and viability of major financial institutions, declines in gross domestic product, increases in unemployment, volatility in commodity prices and worldwide stock markets, higher interest rates, potential governmental shutdowns, natural catastrophes, the COVID-19 pandemic, warfare, the wars between Russia and Ukraine or Israel and Hamas, and the overall volatility and violence in the Middle East and North Africa, inflation, excessive government debt and disruptions to global trade or tariffs. The severity and length of time that a downturn in economic and financial market conditions may persist, as well as the timing, strength and sustainability of any recovery, are unknown and are beyond our control.

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Fluctuations in exchange rates could result in foreign currency exchange losses.

In most of the countries in which our games are distributed, the revenues generated by our overseas licensees or subsidiaries are denominated in local currencies, which include, among others, the NT dollar, the Japanese Yen, the U.S. dollar, the Euro, the Thai Baht, and the Chinese Yuan. In 2023, approximately 88.1% of our revenues were denominated in currencies other than Won, primarily in the NT dollar, the Thai Baht, the Philippine Peso, the Indonesia Ruphia and the Malaysia Ringgit. As the revenues denominated in currencies other than the U.S. dollar, the Japanese Yen, and the Euro are converted into the U.S. dollar for remittance of monthly royalty payments to us, any depreciation of the local currencies against the U.S. dollar will result in reduced license fees and monthly royalty payments in U.S. dollar terms and may materially and adversely affect our financial condition and results of operations.

While we receive monthly royalty revenues from our overseas licensees in foreign currencies, substantially all of our costs are denominated in Won. Our financial statements are also prepared and presented in Won. We receive monthly royalty payments from our overseas licensees based on a percentage of revenues confirmed and recorded at the end of each month applying the foreign exchange rate applicable on such date. Appreciation of the Won against the NT Dollar, the Thai Baht, the U.S. dollar, the Japanese Yen, or other foreign currencies will result in foreign currency losses that may materially and adversely affect our results of operations and financial condition. Although we take steps to hedge our foreign currency exposures related to our costs denominated in Won, such measures may not adequately protect us from material adverse effects due to the impact of global inflation or from fluctuations in the relative values of foreign currencies in which we transact business, and may result in a financial loss. See ITEM 5.A. “OPERATING RESULTS—OVERVIEW—Foreign currency effects.”

As of December 31, 2023, we have not entered into any outstanding foreign currency forward exchange contract. We may enter into hedging transactions in the future to mitigate our exposure to foreign currency exchange risks, but we may not be able to do so in a timely or cost‑effective manner, or at all.

Increased tensions with North Korea could adversely affect us and the price of our ADSs.

Relations between Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In particular, there have been heightened security concerns stemming from North Korea’s nuclear weapons and ballistic missile programs and its hostile military actions against Korea.

North Korea’s economy also faces severe challenges, which may further aggravate social and political pressures within North Korea. In recent years, three inter-Korean summits were held in April, May, and September of 2018, respectively, and summits between the United States and North Korea were also held in June 2018 and in February and June 2019 (held at the Korean Demilitarized Zone). The United States-North Korea meeting in February 2019 ended abruptly and without an agreement after the United States refused to lift sanctions until North Korea relinquished all of its nuclear weapons. In June 2019, the United States and North Korea had another one-day summit at the Korean Demilitarized Zone, following which both sides announced a resumption of denuclearization talks. However, despite attempted new outreach to North Korea by the United States under the presidency of Joe Biden in early 2021, North Korea has since resumed its missile testing, heightening tensions, and the outlook of such discussions remains uncertain. As such, there can be no assurance that the level of tension on the Korean peninsula will not escalate further in the future. Any such further increase in tensions, which may occur, for example, if North Korea experiences a leadership or economic crisis, high-level contacts between Korea and North Korea break down or further military hostilities occur, could have a material adverse effect on the Korean economy and on our business, prospects, financial condition, and results of operations and could lead to a decline in the market value of our ADSs.

If the Korean government deems that emergency circumstances are likely to occur, it may restrict holders of our ADSs and the depositary from converting and remitting dividends and other amounts in U.S. dollars.

Under the Korean Foreign Exchange Transaction Law, if the Korean government deems that certain emergency circumstances, including sudden fluctuations in interest rates or exchange rates, extreme difficulty in stabilizing the balance of payments or substantial disturbance in the Korean financial and capital markets, are likely to occur, it may impose any necessary restrictions such as requiring Korean or foreign investors to obtain prior approval from the Minister of Strategy and Finance for the acquisition of Korean securities or the repatriation of interest, dividends or sales proceeds arising from disposition of such securities or other transactions involving foreign exchange. See ITEM 10.D. “EXCHANGE CONTROLS.”

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RISKS RELATING TO OUR AMERICAN DEPOSITARY SHARES

If we fail to achieve and maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our financial results or do so on a timely basis and our ability to prevent or detect fraud may be reduced and investor confidence and the market price of our ADSs may be adversely affected.

We are subject to Section 404 of the Sarbanes‑Oxley Act of 2002, which requires us to, among other things, maintain an effective system of internal controls over financial reporting, and requires our management to provide a certification on the effectiveness of our internal controls on an annual basis.

Although we have determined that our internal control over financial reporting was effective as of December 31, 2023, we may in the future determine that we have a material weakness in our internal controls over financial reporting. If we fail to maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our financial results in a timely manner or prevent errors or fraud. Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to loss of investor confidence in the reliability of our consolidated financial statements and could result in investigations or sanctions by the SEC, NASDAQ, or other regulatory authorities or in stockholder litigation. Any of these factors could ultimately harm our business and could adversely impact the market price of our ADSs. See ITEM 15. “CONTROLS AND PROCEDURES.”

The liquidity and price of our ADSs, and our ability to raise capital, may be negatively impacted if our ADSs are delisted from NASDAQ.

Our ADSs are currently listed for trading on the NASDAQ Global Market. There are a number of continuing requirements that must be met in order for our ADSs to remain listed on the NASDAQ Global Market, and the failure to meet these listing standards could result in the delisting of our ADSs by NASDAQ.

If our ADSs cease to be listed for trading on NASDAQ for any reason, the liquidity of our ADSs may be materially reduced and result in a corresponding material reduction in the price of our ADSs. Furthermore, any such delisting could harm our ability to raise capital on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, business partners, licensees, customers, and employees. Such consequences may materially and adversely affect our business, financial condition, and results of operations.

The public shareholders of our ADSs may have more difficulty protecting their interests than they would as shareholders of a U.S. corporation.

Our corporate affairs are governed by our articles of incorporation and by the laws and regulations governing Korean corporations. The rights and responsibilities of our shareholders and members of our Board of Directors under Korean law may be different from those that apply to shareholders and directors of a U.S. corporation. For example, minority shareholder rights afforded under Korean law often require the minority shareholder to meet minimum shareholding requirements in order to exercise certain rights. Under applicable Korean law, of the total issued and outstanding shares, a shareholder must own at least (i) 1% to bring a shareholders’ derivative lawsuit (or to demand that a director cease certain activity or conduct if there are concerns that a director may cause irrevocable damage to the company by acting in violation of applicable laws and regulations or the articles of incorporation), (ii) 3% to demand convocation of an extraordinary meeting of shareholders, demand removal of directors or inspect the books and related documents of a company, or to propose the agenda for a general meeting of shareholders, (iii) 10% to apply to the court for dissolution if there is gross improper management or a deadlock in corporate affairs likely to result in a significant and irreparable harm to the company or to apply to the court for a reorganization in the case of an insolvency and (iv) 20% to block a small‑scale share exchange or a small merger that may be approved only by a board resolution. In addition, while the facts and circumstances of each case will differ, the duty of care required of a director under Korean law may not be the same as the fiduciary duty of a director of a U.S. corporation. Although the “business judgment rule” concept exists in Korea, there is insufficient case law or precedent to provide guidance to the management and shareholders as to how it should be applied

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or interpreted. Holders of our ADSs may have more difficulty protecting their interests against actions of our management, members of our Board of Directors or controlling shareholders than they would as shareholders of a U.S. corporation.

Any dividends paid on our common shares will be in Won and fluctuations in the exchange rate between the Won and the U.S. dollar may affect the amount received by you.

If and when we declare cash dividends, the dividends will be paid to the depositary for the ADSs in the Won and then converted by the depositary into the U.S. dollar pursuant to the deposit agreement that governs the rights and obligations of the holders of ADSs. Fluctuations in the exchange rate between the Won and the U.S. dollar will affect, among other things, the U.S. dollar amounts you will receive from the depositary as dividends. Holders of ADSs may not receive dividends if the depositary does not believe it is reasonable or practicable to do so. In addition, the depositary may collect certain fees and expenses, at the sole discretion of the depositary, by billing the holders of ADSs for such charges or by deducting such charges from one or more cash dividends or other cash distributions from us to be distributed to the holders of ADSs.

Your ability to deposit or withdraw common shares underlying the ADSs into and from the depositary facility may be limited, which may adversely affect the value of your investment.

Under the terms of our deposit agreement, holders of our common shares may deposit such shares with the depositary’s custodian in Korea and obtain ADSs, and holders of our ADSs may surrender the ADSs to the depositary and receive our common shares. However, to the extent that a deposit of common shares exceeds the difference between:

•the aggregate number of common shares we have consented to be deposited for the issuance of ADSs (including deposits in connection with offerings of ADSs and stock dividends or other distributions relating to ADSs); and

•the number of common shares on deposit with the custodian for the benefit of the depositary at the time of such proposed deposit, such common shares will not be accepted for deposit unless (i) our consent with respect to such deposit has been obtained or (ii) such consent is no longer required under Korean laws and regulations or under the terms of the deposit agreement.

Under the terms of the deposit agreement, no consent is required if the common shares are obtained through a dividend, free distribution, rights offering or reclassification of such shares. We might not consent to the deposit of any additional common shares. As a result, if a holder surrenders ADSs and withdraws common shares, the holder may not be able to subsequently deposit the common shares to obtain ADSs.

You may not be able to exercise preemptive rights or participate in rights offerings and as a result, you may experience dilution in your ownership percentage in us.

The Korean Commercial Code and our articles of incorporation require us, with some exceptions, to offer shareholders the right to subscribe for new common shares in proportion to their existing ownership percentages whenever new common shares are issued, except under certain circumstances as provided in our articles of incorporation. See ITEM 10.B. “MEMORANDUM AND ARTICLES OF INCORPORATION—Preemptive rights and issuance of additional shares.”

Such exceptions include an offering of new shares, pursuant to a resolution of the Board of Directors:

•through a general public offering, of no more than 50% of the total number of issued and outstanding shares;

•to the members of the employee stock ownership association;

•upon exercise of a stock option in accordance with our articles of incorporation;

•in the form of depositary receipts of no more than 50% of the total number of issued and outstanding shares;

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•to induce foreign direct investment necessary for business in accordance with the Foreign Investment Promotion Act of Korea, of no more than 50% of the total number of issued and outstanding shares;

•to the extent not exceeding 50% of the total number of issued and outstanding shares, to domestic or overseas financial institutions, corporations, or individuals for the purpose of raising funds on an emergency basis;

•to certain companies under joint venture arrangements; or

•in a public offering or the new shares are underwritten by underwriters for the purpose of listing such shares on any stock exchange, to the extent not exceeding 50% of the total number of issued and outstanding shares.

Accordingly, if we issue new shares to non‑shareholders based on such exceptions, existing holders of ADSs will be diluted. If none of the above exemptions is available under Korean law, we may be required to grant subscription rights when issuing additional common shares. However, under U.S. law, we would not be able to make those rights available in the United States unless we register the securities to which the rights relate or an exemption from the registration requirements of the Securities Act is available. Under the deposit agreement governing the ADSs, if we offer rights to subscribe for additional common shares, the depositary under the deposit agreement, after consultation with us, may make such rights available to you or dispose of such rights on behalf of you and make the net proceeds available to you or, if the depositary is unable to take such actions, it may allow the rights to lapse with no consideration to be received by you. The depositary is generally not required to make available any rights under any circumstances. We are under no obligation to file a registration statement under the Securities Act to enable you to exercise preemptive rights in respect of the common shares underlying the ADSs, and we cannot assure you that any registration statement would be filed or that an exemption from the registration requirement under the Securities Act would be available. Accordingly, you may not be entitled to exercise preemptive rights and may thereby suffer dilution of your interests in the Company.

You will not be treated as our shareholder and you will not have shareholder rights such as the voting rights applicable to a holder of common shares.

As an ADS holder, we are not obligated to and we will not treat you as one of our shareholders and therefore, you will not have the rights of a shareholder. Korean law and our articles of incorporation govern the rights applicable to our shareholders. The depositary will be treated as the shareholder of the common shares underlying your ADSs. As a holder of ADSs, you will have ADS holder rights, which is governed by the deposit agreement among us, the depositary and you, as an ADS holder. Upon receipt of the necessary voting materials, you may instruct the depositary to vote the number of shares your ADSs represent. The depositary will notify you of shareholders’ meetings and arrange to deliver our voting materials to you only when we deliver them to the depositary with sufficient time under the terms of the deposit agreement. If there is a delay or loss of the voting materials, we cannot ensure that you will receive voting materials or otherwise learn of an upcoming shareholders’ meeting to ensure that you may instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions.

You would not be able to exercise dissent and appraisal rights unless you have withdrawn the underlying common shares from the depositary facility and become a holder of our common stock.

In some limited circumstances, including the transfer of the whole or any significant part of our business, our acquisition of all or a part of the business of any other company having a material effect on our business, or our merger or consolidation with another company, except a small‑scale merger (as prescribed under Korean law) that leaves us as the surviving company, dissenting shareholders have the right to require us to purchase their shares under Korean law. However, if you hold our ADSs, you will not be able to exercise such dissent and appraisal rights unless you have withdrawn the underlying common shares from the depositary facility and become our direct shareholder prior to the record date for the shareholders’ meeting at which the relevant transaction is to be approved.

We may amend the deposit agreement and the ADRs without your consent for any reason and, if you disagree, your option will be limited to selling the ADSs or withdrawing the underlying securities.

We may agree with the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of

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the depositary, for registration fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADRs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended. If you do not agree with an amendment to the deposit agreement or the ADRs, your option is limited to selling the ADSs or withdrawing the underlying securities. No assurance can be given that the sale of ADSs would be made at a price satisfactory to you in such circumstances. In addition, the common shares underlying the ADSs are not listed on any stock exchange in Korea. Your ability to sell the underlying common shares following withdrawal and the liquidity of the common shares may be limited.

Dividend payments and the amount you realize upon a sale of our ADSs that you hold will be affected by fluctuations in the exchange rate between the U.S. dollar and the Korean Won.

Cash dividends, if any, in respect of the shares represented by our ADSs will be paid to the depositary in the Korean Won and then converted by the depositary into the U.S. dollar, subject to certain conditions. Accordingly, fluctuations in the exchange rate between the Korean Won and the U.S. dollar will affect, among other things, the amounts a holder will receive from the depositary in respect of dividends, the U.S. dollar value of the proceeds that a holder would receive upon sale in Korea of the shares of our common stock obtained upon surrender of ADSs and the secondary market price of ADSs. Such fluctuations will also affect the U.S. dollar value of dividends and sales proceeds received by holders of our common stock.

You may be subject to Korean withholding tax.

Under Korean tax law, if you are a U.S. investor, you may be subject to Korean withholding taxes on capital gains and dividends in respect of the ADSs unless an exemption or a reduction under the income tax treaty between the United States and Korea is available. Under the Korea‑United States tax treaty, capital gains realized by holders that are residents of the United States eligible for treaty benefits will not be subject to Korean taxation upon the disposition of the ADSs. However, under the Korea‑United States tax treaty, the following holders are not eligible for such tax treaty benefits: (i) in case the holder is a United States corporation, if by reason of any special measures, the tax imposed on such holder by the United States with respect to such capital gains is substantially less than the tax generally imposed by the United States on corporate profits, and 25% or more of the holder’s capital is held of record or is otherwise determined, after consultation between competent authorities of the United States and Korea, to be owned directly or indirectly by one or more persons who are not individual residents of the United States; and (ii) in case the holder is an individual, if such holder maintains a fixed base in Korea for a period or periods aggregating 183 days or more during the taxable year and the holder’s ADSs or common shares giving rise to capital gains are effectively connected with such fixed base or such holder is present in Korea for a period or periods of 183 days or more during the taxable year.

You may have difficulty bringing an original action or enforcing any judgment obtained outside Korea against us and our directors and officers who are not United States persons.

We are organized under the laws of Korea, and all of our directors and officers reside outside the United States. While we have a wholly‑owned subsidiary in the United States, most of our assets and the assets of such persons are located outside the United States. As a result, it may not be possible for you to effect service of process within the United States upon these persons or to enforce against them or us court judgments obtained in the United States that are predicated upon the civil liability provisions of the federal securities laws of the United States or of the securities laws of any state of the United States. There is doubt as to the enforceability in Korea, either in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated on the federal securities laws of the United States or the securities laws of any state of the United States.

The transfer, sale, or availability for sale of substantial amounts of our ADSs could adversely affect their market price.

We cannot predict the effect, if any, that market sales of shares of our common stock or other securities that may be converted into shares of our common stock or the availability of such shares or securities for sale will have on the market price of our common stock prevailing from time to time. Our largest shareholder, GungHo, beneficially owns 59.3% of our common shares. If GungHo decides to sell or transfer substantial amounts of our common shares into the form of ADSs in the public market or if there is a perception of its intent to sell, the market price of our ADSs could be materially and adversely affected and could materially impair our future ability to raise capital through offerings of our ADSs. Any future sales by GungHo or any future issuance by us of a significant number of shares of our common stock or other securities that may be converted into shares of our common stock in the public market, or the perception that any of

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these events may occur, could cause the market price of our common stock to decrease or to be lower than it might be in the absence of these events or perceptions.

We may need additional capital and may sell additional ADSs or other equity securities or incur indebtedness, which could result in additional dilution to our shareholders or increase our debt service obligations.

We may require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our cash resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities or equity-linked debt securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, or at all.

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ITEM 4. INFORMATION ON THE COMPANY

ITEM 4.A. HISTORY AND DEVELOPMENT OF THE COMPANY

We were incorporated as a company with limited liability under the Korean Commercial Code on April 4, 2000 under the legal name of Gravity Co., Ltd. On February 8, 2005, our ADSs, each representing one‑fourth of one share of our common stock, were listed on the NASDAQ Stock Market’s NASDAQ Global Market. Our ADSs each currently represent one share of our common stock, effective since August 27, 2018. Other than from November 26, 2014 through August 27, 2018 (during which period our ADSs were traded on the NASDAQ Capital Market), our ADSs have been traded on the NASDAQ Global Market under the symbol “GRVY.”

In January 2015, we entered into a development agreement with Dream Square to develop and distribute in China two mobile games based on the contents of Ragnarok Online. This agreement was amended on March 25, 2016, to grant Dream Square an exclusive right to develop mobile games and web games based on the contents of Ragnarok Online and distribute such games in China for five years from the date of the amendment. Gravity retained the distribution rights in certain territories other than China. Under the terms of this agreement, the Company has a right to collect royalties that exceed the minimum guaranteed advance payment. Following the agreement, Dream Square developed and we launched six mobile games – RO: Idle Poring, Ragnarok R, Ragnarok M: Eternal Love, Ragnarok H5, Ragnarok Origin, and Ragnarok X: Next Generation – based on the contents of Ragnarok Online in September 2017, February 2017, October 2017, September 2019, July 2020 and October 2020, respectively. We also launched these games in various markets including Taiwan, Korea, Japan, Europe, the United States and Canada, Southeast Asia, North, Central and South America, Oceania, and China.

In July 2017, we further entered into a PTSA with Dream Square, whereby the former would provide technical assistance and profits would be shared. This agreement was amended in September 2018, October 2018, October 2019 and October 2020, whereby certain technical assistance expenses and profit sharing proportions were further clarified. The PTSA, as amended, specified that Gravity retains the distribution rights of the games developed in conjunction with Dream Square (with or without any co-developer) in Korea, Taiwan, Hong Kong, and Macau, as well as globally (other than in China, where the distribution rights are licensed to Xindong). The final amendment of the PTSA expired on March 24, 2021. We are in discussions with other prospective service partners regarding arrangements for these games following their current service terms.

Each of Ragnarok Origin, Ragnarok X: Next Generation and Ragnarok Online received International Standard Book Number (the “ISBN”) codes from the Chinese government in August 2023, December 2023 and February 2024, respectively.

Recent developments relating to our organizational structure include the Company’s acquisition of shares of Gravity NeoCyon held by its minority shareholder, as a result of which Gravity NeoCyon became a wholly-owned subsidiary of the Company as of April 1, 2024.

Our registered office is located at 15F, 396 World Cup buk‑ro, Mapo‑gu, Seoul 03925, Korea. Our telephone number is (822) 2132‑7000. Our main Web site is at http://www.gravity.co.kr. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. That address is http://www.sec.gov.

ITEM 4.B. BUSINESS OVERVIEW

OVERVIEW

Gravity is an online and mobile games developer and publisher based in Korea. We generate revenue from online games, mobile games and other sources (including character based merchandise and animation). Our historical principal product, Ragnarok Online, is an online game available in 91 markets. Revenues from Ragnarok Online decreased in 2023, representing 10.7% of our total revenues for the year ended December 31, 2023, compared to 18.7% of our total revenues in 2022. This decrease was primarily due to decreased revenue from Ragnarok Online in Taiwan and the Philippines in 2023, as discussed below.

Our focus on mobile games has increased in recent years, and mobile games represented 86.8% of our total revenues for the year ended December 31, 2023. Our principal mobile games, Ragnarok Origin, Ragnarok X: Next

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Generation and Ragnarok M: Eternal Love accounted for 62.3%, 13.7% and 9.6%, respectively, of our total revenues for the year ended December 31, 2023. In 2022, Ragnarok Origin accounted for 35.5% of our total revenues. We intend to continue to diversify our product offering by developing online and mobile games in-house or through outsourcing as well as publishing additional games developed by third parties.

Our main geographic markets in terms of revenues for the year ended December 31, 2023, were Taiwan, Thailand, the Philippines, Korea, and Indonesia.

Online games

Online games are a genre of computer games in which a large number of players interact with one another within a virtual game world.

The following table summarizes the online games that we currently offer.

Title

Genre

Game Source

Date of Commercial

Launch(1)

Ragnarok Online

Action adventure MMORPG(2)

Developed in‑house

August 2002

Dragonica (Dragon Saga)(3)

Action adventure MMORPG

Originally licensed from third-party developer; currently owned by us(4)

February 2009(5)

Ragnarok Online II

Action adventure MMORPG

Developed in‑house

March 2012

Requiem Online

Action adventure MMORPG

Developed in-house

August 2022(6)

R.O.S.E. Online(7)

Action adventure MMORPG

Developed by third party based on our intellectual property

December 2022

Ragnarok Landverse(8)

Action adventure MMORPG / P2E

Developed by third party based on our intellectual property

September 2023

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Notes:

(1)The actual date of commercial launch of games in each jurisdiction is dependent on a variety of factors, including technical viability and durability, availability of in‑house development capability, market conditions, beta testing results, and availability of licensing partners, among others.

(2)MMORPG is an abbreviation for Massively Multiplayer Online Role-Playing Game.

(3)Dragonica is commercially offered in the United States, Canada, and South America except for Brazil under the name Dragon Saga.

(4)We acquired an aggregate of 50.83% equity interest in Gravity Games Corporation (“Gravity Games”), formerly known as Barunson Interactive, which developed Dragonica, on October 21, 2010, and subsequently increased our ownership in Gravity Games to 85.5% in August 2013. Due to the liquidation of Gravity Games, Gravity took over Dragonica IP.

(5)Dragonica was initially launched in China in February 2009 followed by certain other countries and markets under license agreements between Gravity Games and local publishers before our acquisition of Gravity Games.

(6)Requiem Online was relaunched globally on August 25, 2022.

(7)R.O.S.E. Online was relaunched on December 13, 2022.

(8)Ragnarok Landverse was initially launched in Southeast Asia (excluding Thailand and Indonesia), South America, Middle East, India, Africa, and Oceania in September 2023.

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Ragnarok Online

Ragnarok Online is an action adventure based MMORPG that combines cartoon-like characters, community oriented themes and combat features in a virtual world within which thousands of players can interact with another. By combining highly interactive and community oriented themes and features, such as marriages and organization of guilds, we believe we are able to create user loyalty from our users who favor games that provide social interaction in a virtual setting.

Ragnarok Online was first commercially launched in August 2002 and, as of March 31, 2024, was commercially offered in 91 markets. See ITEM 4.B. “BUSINESS OVERVIEW—OUR MARKETS—Online Games.” Ragnarok Online represented 10.7% of our total revenues or Won 77,660 million (US$ 60,156 thousand) in 2023, compared with 18.7% of our total revenues or Won 86,743 million in 2022. Gravity, either directly or through a subsidiary, operates Ragnarok Online in each geographic market other than Japan, Vietnam, Europe, Russia/CIS, and China, where a third-party licensee operates the game. In markets where we or our subsidiary operate Ragnarok Online, our revenues are generated through micro-transaction revenue, and in markets where a third-party licensee operates the game, our revenues are generated through royalties or licensing fees.

We believe that the PC configurations required to run Ragnarok Online are lower than or similar to many other competing online games, which we believe has facilitated our successful entry into and expansion of Ragnarok Online in many of the developed and developing countries in which Ragnarok Online is distributed. The recommended minimum PC configuration for Ragnarok Online is Intel Celeron 2.4 GHz or AMD Athlon 3000+, 512 MB RAM and 32 MB graphics card.

The table below provides, for the periods indicated, the peak concurrent users and average concurrent users of Ragnarok Online since the first quarter of 2021, in each of our principal markets for Ragnarok Online.


		1Q 24	4Q 23	3Q 23	2Q 23	1Q 23	4Q 22	3Q 22	2Q 22	1Q 22	4Q 21	3Q 21	2Q 21	1Q 21
Japan	PCU(1)	7,346	7,367	6,931	9,229	7,352	9,424	9,209	8,772	6,920	7,152	9,641	9,034	8,973
	ACU(2)	3,618	3,255	3,041	2,917	3,371	3,651	2,769	3,015	3,010	2,792	4,226	3,760	4,284
Korea	PCU	6,421	8,185	8,212	5,305	6,926	6,843	8,346	6,968	5,697	5,524	4,269	6,138	5,210
	ACU	5,072	4,841	4,473	3,302	3,998	3,694	4,856	3,267	3,293	3,033	2,589	3,479	2,882
Thailand(3)	PCU	8,937	9,229	11,285	11,158	13,010	12,642	11,963	14,722	13,261	13,931	23,326	34,214	24,076
	ACU	5,588	4,291	4,024	5,113	5,787	4,879	5,400	5,619	5,627	5,841	10,288	15,340	11,841
USA/ Canada	PCU	2,087	2,082	2,078	2,016	1,860	1,824	1,539	1,669	1,839	2,500	3,244	3,140	3,463
	ACU	2,048	1,772	1,668	1,384	1,340	1,309	1,112	1,124	1,183	1,311	2,230	1,970	2,807
Taiwan/ Hong Kong/ Macau	PCU	21,858	22,329	19,256	19,317	16,702	25,609	21,648	24,316	22,490	18,960	24,729	25,845	21,072
	ACU	9,852	13,075	11,698	10,587	10,243	13,815	13,033	15,082	12,418	10,780	13,555	12,640	12,491

__________________

Notes:

(1)“PCU,” or peak concurrent users, represents the highest number of users of Ragnarok Online each quarter during the specified time period as recorded on the servers for the various countries.

(2)“ACU,” or average concurrent users, represents the average number of concurrent users of Ragnarok Online each quarter during the specified time period as recorded on the servers for the various countries.

(3)Ragnarok Online was relaunched in Thailand on May 28, 2020.

We believe that the number of users as measured by PCU or ACU (i) is a measure of our active user base and (ii) is correlated with revenues, as revenues from an online game depend on the number of users as well as time spent playing the game. PCU and ACU associated with, and revenues generated from, Ragnarok Online have decreased largely because user preferences are shifting to mobile games, where we have an increased focus. PCU and ACU are non‑financial variables and the data presented has not been audited or reviewed. Other companies may determine PCU or ACU differently than we do.

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The following table provides a breakdown of the revenues generated by Ragnarok Online in certain key markets for the periods indicated:


Revenue Type	Country	2023		2023(1)		2022		2021
		(In millions of Won and thousands of US$)
Online games—micro-transaction revenue	Thailand(2)	₩	29,168	US$	22,594	₩	29,657	₩	26,866
	Taiwan/Hong Kong/Macau	25,799		19,984		35,319		25,930
	Korea	6,822		5,284		5,810		4,429
	The United States/Canada(3)	3,528		2,733		2,035		2,089
	Brazil	2,204		1,707		1,681		1,854
	Philippines(4)	828		641		2,512		—
	Other	663		513		1,015		517
	Subtotal	69,012		53,456		78,029		61,685

Online games—royalties and license fees	Japan	7,833		6,068		7,611		9,009
	The Philippines	—		—		—		324
	Europe	219		170		212		266
	Other	596		462		891		893
	Subtotal	8,648		6,700		8,714		10,492
	Total	₩	77,660	US$	60,156	₩	86,743	₩	72,177

__________________

Notes:

(1)For convenience only, the Won amounts are expressed in the U.S. dollar at the rate of Won 1,290.97 to US$ 1.00, the noon buying rate in effect on December 29, 2023, as certified by the Federal Reserve Bank of New York for customs purposes.

(2)Ragnarok Online game service in Thailand by our former licensee Electronics Extreme Ltd ceased on May 27, 2020. The revenues generated from Thailand on or before May 27, 2020, are shown as “Online games—royalties and license fees—Thailand” and those revenues generated by Gravity Game Tech Co., Ltd (“Gravity Game Tech”) since May 28, 2020 are shown as “Online games—micro transaction revenue—Thailand.”

(3)Includes subscription and other types of game revenues managed by Gravity Interactive, Inc. and generated in countries other than the United States and Canada. Such revenues from other countries constitute an immaterial portion of the revenues recorded as micro-transaction revenues from the United States and Canada.

(4)Ragnarok Online game service in the Philippines by our former licensee Electronics Extreme Ltd. ceased on December 28, 2021. The revenues generated from the Philippines on or before December 28, 2021, are shown as “Online games—royalties and license fees—The Philippines” and those revenues generated by Gravity Game Hub PTE., Ltd. (“Gravity Game Hub”) since December 28, 2021 are shown as “Online games—micro transaction revenue—The Philippines.”

We obtained an exclusive license from Mr. Myoung‑Jin Lee to use the storyline and characters from his cartoon titled “Ragnarok” for the development of games including for animation and character merchandising. We paid Mr. Lee an initial license fee of Won 40 million and are required to pay royalties based on a percentage of adjusted revenues (net of value‑added taxes and certain other expenses) or net income generated from the use of the Ragnarok brand through January 2033.

On December 27, 2017, we launched Ragnarok Zero, a new version of Ragnarok Online, in Korea. New game features were introduced for Ragnarok Zero, such as updated quests, improved user interface, premium character service and new item upgrade systems. Ragnarok Online Classic, a new server of Ragnarok Online, was launched in Thailand on October 28, 2021. The game is based on the original Ragnarok Online, which was first released in 2003, and features new user interface, premium character service and upgraded content.

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On December 15, 2021, we launched Ragnarok Retro, a new server of Ragnarok Online, in Indonesia. Ragnarok Retro features classic and upgraded characters, stories and game items from the original Ragnarok Online launched in 2003.

Mobile games

As compared to online games, mobile games, which are played on mobile phones, including smartphones such as Google Android compatible phones and the Apple iPhone as well as feature phones and other mobile devices, such as tablet computers, have shorter game playtimes and less complex user‑game interactions. We believe that mobile games, due to such characteristics, provide less‑experienced users with a means to become familiar with both game playing and the game culture without making a substantial commitment in time and resources. As a result, we believe that mobile games allow us to target a broader audience of users.

We develop mobile games either in-house or through outsourcing to third-party developers, and we also publish mobile games licensed from third parties. In contrast to online games, the life cycle of a mobile game is relatively short and generally lasts from six to 24 months while reaching its peak popularity within the first three months of its introduction, though it varies by genre. As a result, we generate a significant portion of our mobile games revenue from the games that have been released within the recent 12 months.

The following table sets forth each of the mobile games that we have released since January 2023.

Title

Genre

Service Area

Date of Commercial
Launch

Ragnarok X: Next Generation

MMORPG

Korea

January 2023

Ragnrok Origin

MMORPG

Southeast Asia

Central and South America, etc.

China

April 2023
February 2024
March 2024

Ragnarok Lost Memories

Cinematic Newtro Story RPG

Taiwan, Hong Kong, Macau

May 2023

WITH: Whale In The High

Healing Idle

Global

June 2023

White Chord

Character Collecting RPG

Japan

August 2023

Ragnarok 20 Heroes

Action RPG

Korea

October 2023

Ragnarok Begins

Action Side-scrolling MMORPG

Korea

December 2023

Ragnarok Idle Adventure

Idle RPG

Thailand

January 2024

Generation Zombie

Turn-based Card Game of Survival

Global

March 2024

__________________

Notes:

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The following are revenues generated from our mobile games business for the periods indicated:


Revenue Type	Country	2023		2023(1)		2022		2021
		(In millions of Won and thousands of US$)
Mobile games— micro transaction revenue	Taiwan	₩	142,438	US$	110,334	₩	125,516	₩	23,906
	Thailand	103,008		79,791		29,235		14,235
	The Philippines	89,818		69,574		11,612		13,337
	Korea	65,626		50,835		24,341		49,798
	Indonesia	56,736		43,948		2,578		3,629
	Malaysia	45,759		35,445		5,413		19,359
	Hong Kong	17,071		13,223		15,987		155
	The United States	16,337		12,655		30,069		17,241
	Other(2)	31,872		24,689		16,871		22,986
	Subtotal	568,665		440,494		261,622		164,646

Mobile games— royalties and license fees	Malaysia	12,650		9,799		18,734		10,882
	The Philippines	11,949		9,256		11,879		6,693
	Japan	10,148		7,861		17,225		26,559
	Taiwan	7,724		5,983		14,573		26,928
	Hong Kong	5,584		4,325		8,410		7,493
	Thailand	4,646		3,599		16,565		53,357
	Indonesia	1,051		814		1,515		5,198
	Other(3)	7,187		5,567		8,249		18,408
	Subtotal	60,939		47,204		97,150		155,518
	Total	₩	629,604	US$	487,698	₩	358,772	₩	320,164

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Notes:

(2)Other primarily comprises Singapore, Brunei, Europe, Brazil, and Central and South America.

(3)Other primarily comprises China, the United States, and Singapore.

Ragnarok M: Eternal Love

Ragnarok M: Eternal Love is a MMORPG, which we offer in 122 markets across Taiwan, Hong Kong and Macau, Korea, Southeast Asia, North and South America, Oceania, Japan, Europe, and Russia. The game was developed by Gravity and Dream Square, together with co-developer Xindong. We commenced our service for Ragnarok M: Eternal Love in Taiwan in October 2017, Korea in March 2018, Southeast Asia in October 2018, North and South America, and Oceania in January 2019, Japan in June 2019 and Europe and Russia in October 2019.

For the year ended December 31, 2023, Ragnarok M: Eternal Love represented 9.6% of our total revenues or Won 69,773 million (US$ 54,047 thousand), compared with 20.1% of our total revenues or Won 93,203 million in 2022.

Ragnarok X: Next Generation

Ragnarok X: Next Generation is a MMORPG we offer in Taiwan, Hong Kong, Macau, Southeast Asia, and Korea.

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The game was developed by Gravity and Dream Square and we licensed Nuverse to commence the service in Taiwan, Hong Kong and Macau in October 2020, Southeast Asia (except Vietnam) in June 2021 and Vietnam in September 2021. We also directly provide the game in Korea since January 2023. See Item 3.D. “RISK FACTORS—RISKS RELATING TO OUR MARKET ENVIRONMENT—Our businesses and partnerships may be affected by geopolitical tensions between China and the United States.”

For the year ended December 31, 2023, Ragnarok X: Next Generation 13.7% of our total revenues or Won 99,321 million (US$ 76,935 thousand), compared with 16.7% of our total revenues or Won 77,278 million in 2022.

Ragnarok Origin

Ragnarok Origin is a MMORPG, which we offer in Korea, Japan, the United States, Canada, Taiwan, Hong Kong, Macau, Southeast Asia, Central and South America and China. The game was developed by Gravity and Dream Square, together with co-developer Shanghai Rexue Network Technology Co., Ltd. We commenced our service for Ragnarok Origin in Korea in July 2020, Japan in June 2021, the United States and Canada in November 2021, Taiwan, Hong Kong and Macau in September 2022, in Southeast Asia in April 2023 and Central and South America in February 2024 and China in March 2024.

For the year ended December 31, 2023, Ragnarok Origin represented 62.3% of our total revenues or Won 451,887 million (US$ 350,037 thousand), compared with 35.5% of our total revenues or Won 164,787 million in 2022.

Other games and game‑related products and services

Other games

In addition to developing and publishing online games and mobile games, which is our primary business, we also provide games for gaming consoles (including handheld gaming consoles), such as the Steam, Nintendo, Xbox, and the PlayStation series. Console games are distributed in the form of a disc or cartridge (game card), or downloaded directly to a console through the Internet.

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The following table sets forth the console games we have released.

Title

Genre

Platform

Release Date

Ragnarok DS

Role playing

Nintendo DS

December 2008

Ragnarok: The Princess of Light and Darkness

Tactical role playing

PlayStation Portable

October 2011

Ragnarok Odyssey

Role playing

PlayStation Vita

February 2012

Double Dragon II

Action

Xbox 360

April 2013

Ragnarok Odyssey Ace

Role playing

PlayStation Vita

August 2013

Ragnarok Odyssey Ace

Role playing

PlayStation 3

April 2014

GRANDIA HD Collection

Role playing, Adventure

Nintendo Switch

October 2021

Pigromance

Puzzle Platformer

Steam, Stove, Nintendo Switch, Xbox One, Xbox Series X|S

December 2022

ALTF4 II

Adventure

Steam, Stove

March 2023

Wetory

Roguelike

Steam, Stove, Nintedo Switch

October 2023

We also provide games for IPTV. In September 2008, we entered into a licensing agreement with ICONIX, Co, LTD., or “ICONIX,” to develop and publish Pororo Game, an IPTV game based on ICONIX’s 3D TV animation series “Pororo: The Little Penguin.” We commercially launched Pororo Game in September 2009. Our licensing agreement with ICONIX has been renewed annually since its inception including, most recently, in March 2024. In January 2018, we entered into a licensing agreement with CJ ENM Corporation or “CJ ENM” to develop and publish an IPTV Game based on CJ ENM’s animation series, “The Haunted House.” We commercially launched the game in May 2019.

In April 2022, we entered into a licensing agreement with YoungToys for “Kongsuni” and “Tobot V.” “Kongsuni” game was launched in July 2023, while “Tobot V” game is still under development.

The amount of revenues from console and IPTV games represented less than 1% of our total revenues in each of 2023 and 2022.

Game character merchandising

In order to optimize the commercial opportunities presented by our games and their characters, we and our licensees have been marketing dolls, stationery, food and other character based merchandise, as well as game manuals, monthly magazines and other publications, based on our games. We currently have arrangements with CM Holdings Company to license Ragnarok Online game characters in Korea; with GungHo in Japan; with EMC Empire Multimedia Corporation in the Philippines and China; with Dream Express Co., Ltd. in Thailand; with Max Licensing & Consulting Co., Ltd. in Taiwan, Hong Kong, and Macau; with Aswas Co.,Ltd. in Korea, Malaysia, and the United States; with Sessom Asia Pte., Ltd. in Singapore, Indonesia, and Malaysia; and with Hellomisterlee Co., Ltd. in Korea, and the United States.

The amount of revenues from game character merchandising represented less than 1% of our total revenues in 2023 and in 2022.

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Other services

In addition to its core mobile game business, Gravity NeoCyon, Inc. (“Gravity NeoCyon”) provides system development and maintenance services as well as system integration services to third parties. The amount of revenues from such other services represented 1.7% of our total revenues or Won 12,368 million (US$ 9,580 thousand) for the year ended December 31, 2023, compared with 3.1% of our total revenues or Won 14,329 million in 2022.

OUR MARKETS

Our biggest geographic markets in terms of revenue for the year ended December 31, 2023, were Taiwan, Thailand, the Philippines and Korea. The following table sets forth a summary of our consolidated statement of operations showing revenues by geographic area for the periods indicated and the percentage represented by such revenues for the year ended December 31, 2023.


	Year Ended December 31,
Country	2023				2023(1)		2022		2021
	(In millions of Won and thousands of US$, except percentages)
Taiwan	₩	176,071	24.3	%	US$	136,387	₩	175,664	₩	77,462
Thailand	136,874		18.9	%	106,024		75,498		94,475
The Philippines	102,595		14.1	%	79,471		26,003		20,173
Korea	86,058		11.9	%	66,662		46,719		73,751
Indonesia	58,763		8.1	%	45,518		5,472		10,723
Malaysia	58,553		8.1	%	45,356		24,830		30,422
The United States (2)	22,702		3.1	%	17,585		33,697		20,894
Hong Kong	22,656		3.1	%	17,550		24,397		7,648
Japan	18,999		2.6	%	14,717		26,133		40,259
Others	42,245		5.8	%	32,723		25,205		38,131
Total	₩	725,516	100.0	%	US$	561,993	₩	463,618	₩	413,938

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Notes:

(1)For convenience only, the Won amounts are expressed in the U.S. dollar at the rate of Won 1,290.97 to US$ 1.00, the noon buying rate in effect on December 29, 2023 as certified by the Federal Reserve Bank of New York for customs purposes.

(2)Revenues in the United States, as shown on this table, also include micro-transaction and other types of game revenues generated in other countries managed by Gravity Interactive. Such revenues from other countries constitute an immaterial portion of the revenues recorded as micro-transaction revenues from the United States.

Online games

We manage and distribute (directly or through our subsidiaries) online game operations in Korea, Thailand, Taiwan, Hong Kong and Macau, the United States, Canada, Brazil, Indonesia, the Middle East, the Philippines, Singapore, and Malaysia, and we work with licensees to manage and distribute our games in other markets. Our licensees pay us an initial license fee and/or ongoing royalty payments based on a percentage of revenues generated from subscription fees and/or micro transactions of the game they service in the respective overseas markets. The license agreements may be terminated in the event of bankruptcy or a material breach by either party, including, in our case, in the event the licensee fails to pay royalty fees in a timely manner.

Ragnarok Online is commercially offered in the 91 markets, including Japan, Taiwan, Hong Kong and Macau, the United States, Canada, Thailand, the Philippines, Singapore, Malaysia, and others. We or our subsidiaries manage the distribution of Ragnarok Online in each market other than in Japan, China, Russia/CIS, and 37 European countries and markets. In each of these markets, local licensees publish Ragnarok Online. The following table lists the overseas countries

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and markets in which Ragnarok Online is commercially offered through our licensees, the names of the licensees, the dates of the license agreements, and the commercial launch dates, and expiry dates of the license agreements.

Country

Licensee

Date of License
Agreement

Date of
Commercial Launch

Date of Expiry

Japan

GungHo Online Entertainment, Inc.

July 2002

December 2002

September 2025

Europe(1)

Innova Intellectual Properties SARL

August 2019

April 2004

September 2025

China(2)

Shanghai BING KUAI Network Technology Co., Ltd.

January 2022

February 2013

December 2024

Russia and CIS(3)

Innova Solutions FZ-LLC

February 2018

March 2007

August 2024

Vietnam(4)

VTC Technology and Digital Content Company

June 2019

July 2021

December 2025

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Notes:

(1)Represents game operations in France, Belgium, the United Kingdom, Finland, Sweden, Norway, Ireland, Scotland, Denmark, Spain, Austria, Bulgaria, Cyprus, Czech Republic, Germany, Greece, Hungary, Italy, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Switzerland, Andorra, Estonia, Iceland, Kosovo, Latvia, Liechtenstein, Lithuania, Monaco, San Marino, and Vatican. Ragnarok Online was initially launched in Germany, Austria, Switzerland, Italy, and Turkey with a different licensee in April 2004.

(2)Ragnarok Online was initially launched in China with a different licensee in February 2013. A license agreement entered into on October 1, 2016, with our previous licensee in China, Shanghai TA REN Network Technology Co., Ltd. (“Shanghai TA REN”) expired on December 31, 2021. On January 1, 2022, we entered into a new licensing agreement with Shanghai BING KUAI Network Technology Co., Ltd. (“BING KUAI”), a subsidiary of Shanghai TA REN, under which BING KUAI will continue to provide the service of Ragnarok Online. The term of this new licensing agreement was extended on January 1, 2023 and again on January 1, 2024 pursuant to the automatic one year extension thereunder.

(3)Ragnarok Online was initially launched in Russia and CIS with a different licensee in March 2007.

(4)Ragnarok Online was initially launched in Vietnam with VTC Technology and Digital Content Company as co-publishers.

Mobile games

With respect to mobile games, as of April 26, 2024, we directly manage the distribution of each of Ragnarok M: Eternal Love (other than in Japan and China, where we work with a third-party licensee), Ragnarok Origin in Korea, the United States, Canada, Taiwan, Hong Kong, Macau, Southeast Asia and Central and South America, and Ragnarok X: Next Generation in Korea.

PRICING STRUCTURE AND PAYMENT SYSTEM

Online games

Our online games, including Ragnarok Online, are priced using a combination of payment models. Historically, we used only a subscription-based fee model, whereby users paid an ongoing subscription fee to access our online games. In December 2006, we introduced micro-transactions (also known as sale of virtual in-game items), whereby players are able to purchase a wide array of items to customize, personalize and enhance their characters and game playing experiences. Micro-transaction purchases are available in all markets where Ragnarok Online is available. Since January 2007, we have allowed free-to-play servers applying the micro-transaction model in all markets where Ragnarok Online is

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available (other than in Japan, which operate under a subscription fee plus micro-transaction model), whereby players may play Ragnarok Online free of any subscription fees and are encouraged to purchase in-game items.

Since September 2007, we have been offering premium services as an additional revenue model. Players may pay additional fees during a specified period of time in order to receive certain additional features, such as the faster accumulation of experience points or higher rates of item drops. Premium services are offered in all the countries and markets where Ragnarok Online is serviced.

Pricing structures are determined primarily based on the cost of publishing and operating the game, the playing and payment patterns of the users, the pricing of competing games in a given market and the purchasing power parity of consumers in that market. Since the launch of Ragnarok Online in August 2002, we have tracked and accumulated user data generated from our user base, which provide us with an extensive database to analyze user patterns and establish pricing for other markets. The pricing for Ragnarok Online has remained generally stable in each of our markets since the respective dates of Ragnarok Online’s commercial launch in those markets.

In markets where we work with third-party licensees, such licensees develop, after consultation with us, a retail pricing structure for the users of the game they service in their respective markets. The pricing structure for Ragnarok Online in Thailand, Korea, Japan, the United States and Canada, Taiwan, Hong Kong and Macau, Singapore, Malaysia, and the Philippines are set forth below.

Thailand

Gravity Game Tech, our wholly-owned subsidiary in Thailand, determines the pricing plan for Ragnarok Online in Thailand. Users can pay through debit card, electronic wallet, and internet banking, which they are able to convert to RO Cash Points, the currency used in Ragnarok Online. RO Cash Points are eligible for use in the purchase of game items. We pay a commission for payment processing ranging from 2% to 14% per transaction to third parties, who bear the delinquency risk associated with payments from users.

Micro‑transaction model

We have been directly providing Ragnarok Online in Thailand since May 28, 2020. We have applied a micro-transaction model for users in Thailand, which allows users to buy game items in the price range between THB 1 and THB 5,000. The following table sets forth our basic pricing for points of Ragnarok Online in Thailand as of December 31, 2023.


Points	Retail Price
10 point	฿	1.00

Korea

Individual PC account users in Korea can choose from a number of alternative payment options, including charges made through mobile or fixed telephone service provider payment systems, prepaid cards, gift certificates, online credit card payments, and bank transfers, to buy G Cash, which can be used for any games we offer and convert G Cash to RO Points, the currency of the money used in Ragnarok Online, which enable them to buy game items. Internet café subscribers make payments through credit card or bank transfers. We pay a commission for payment processing ranging from 1.4% to 2.8% or Won 200 per transaction to third parties who bear the delinquency risk associated with payments from users.

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Subscription‑based fee model

The subscription‑based fee model is currently applied only to Internet cafés, not to individual PC users in Korea, and the subscription‑based revenue is not material. The following table sets forth our published pricing plans for Internet cafés in Korea for Ragnarok Online access as of December 31, 2023.


Hours(1)	Flat Fee per PC
300 hours	₩	69,300
600 hours	138,600
1,000 hours	231,000
2,000 hours	462,000

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Note:

(1)Actual hours may vary depending on additional bonus hours we offer in proportion to hours purchased by the subscriber.

Micro‑transaction model

We have applied a micro‑transaction model in Korea since April 2007. The price range of each of the game items is between Won 400 and Won 29,800. There are certain game items, which users can buy only at Internet cafés.

Japan

GungHo, our licensee in Japan, determines the pricing plan for Ragnarok Online in Japan. A majority of users in Japan typically pay to gain access to or purchase game items of Ragnarok Online with prepaid cards, such as WebMoney, among others, which can be purchased at convenience stores or retail game outlets, or online. In addition, credit cards are also a popular payment method. Mobile payment, which can be used for the payment of subscription-based fees and for payments of micro transactions, is popular in Japan as well.

Subscription‑based fee model

Our licensee in Japan offers only one rate for Ragnarok Online and charges JPY 1,500 per 30 days of unlimited use.

Micro‑transaction model

We have applied a micro‑transaction model in Japan since December 2006. Game users buy GungHo Shop Points, which enable them to buy game items or directly buy game items from the mobile item shop. The price range of the game items is between JPY 50 and JPY 2,000. The following table sets forth our licensee’s published basic pricing for GungHo Shop Points in Japan as of December 31, 2023.


Points	Retail Price(1)
10,000 points	¥	1,000
21,000 points	2,000
32,500 points	3,000
55,000 points	5,000
112,000 points	10,000

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Note:

(1)For convenience only, on December 29, 2023, the noon buying rate of the Japanese Yen to the U.S. dollar as certified by the Federal Reserve Bank of New York for customs purposes was JPY 140.92 to US$ 1.00.

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The United States and Canada

Gravity Interactive, our wholly‑owned subsidiary in the United States, determines the pricing plan for Ragnarok Online in the United States and Canada. Users pay through credit cards, wire and/or bank transfers, or mobile payment, or online payment systems such as PayPal. Gravity Interactive ceased to apply the subscription‑based fee model in April 2011.

Micro‑transaction model

We have applied a micro‑transaction model in the United States and Canada since June 2007. Game users buy points, which enable them to buy game items in the price range between US$ 0.05 and US$ 30. The following table sets forth Gravity Interactive’s published basic pricing for points of Ragnarok Online in the United States and Canada as of December 31, 2023.

VIP Items are only sold through the cash shop for 250 points/$2.50.


Points	Retail Price
1,100 points	US$	10.00
1,650 points	15.00
2,875 points	25.00
4,600 points	40.00
6,000 points	50.00
9,000 points	75.00
12,000 points	100.00

Taiwan, Hong Kong and Macau

Gravity Communications Co., Ltd. (“Gravity Communications”), our wholly-owned subsidiary in Taiwan, determines the pricing plan for Ragnarok Online in Taiwan, Hong Kong, and Macau. Users can pay through credit cards, wire and/or bank transfers, or mobile payment or online payment systems such as MyCard, which they are able to convert to RO Points, the currency used in Ragnarok Online. RO Points are eligible for use in the purchase of in-game items. We pay a commission for payment processing ranging from 5% to 21% per transaction to third parties.

Micro‑transaction model

We have been directly providing Ragnarok Online in Taiwan, Hong Kong, and Macau since June 15, 2016. We have applied a micro-transaction model for users in Taiwan, Hong Kong, and Macau, which enables them to buy game items in the price range between NT$ 1 and NT$ 449. For purchases in currencies other than the NT dollar, the price will be converted to local currency at the applicable exchange rate when users make the payment. The following table sets forth our basic pricing for points of Ragnarok Online in Taiwan, Hong Kong, and Macau as of December 31, 2023.


Points	Retail Price
1 point	NT$	1.00

Singapore, Malaysia, and the Philippines

Gravity Game Hub PTE. Ltd., our wholly-owned subsidiary in Singapore, determines the pricing plan for Ragnarok Online in Singapore, Malaysia, and the Philippines. Users can pay through direct carrier billing, digital payments, electronic wallet and internet banking, which they are able to convert to Kafra Points, the currency used in Ragnarok Online. Kafra Points are eligible for use in the purchase of in-game items. We pay a commission for payment

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processing per transaction to third-party payment processors, who bear the delinquency risk associated with payments from users.

Micro‑transaction model

We have been directly providing Ragnarok Online in Singapore, Malaysia, and the Philippines since February 23, 2022. We have applied a micro-transaction model for users in Singapore, Malaysia, and the Philippines, which allows users to purchase in-game items in the price range between SGD 0.2 and SGD 25. The following table sets forth our basic pricing for Kafra Points in Ragnarok Online in Singapore, Malaysia, and the Philippines.


Points	Retail Price
1,000 point	S$	10.00

Mobile games

For our mobile games, we have applied a micro-transaction model by providing virtual item shops in the games where players can purchase a wide array of items to customize, personalize and enhance their characters and game playing experiences. In addition, a Gatcha system (or a random box model to buy virtual in-game items) has been introduced in all the regions and markets where all Ragnarok IP-based games are serviced.

Taiwan, Hong Kong and Macau

For Ragnarok M: Eternal Love in Taiwan, Hong Kong, and Macau, we have applied a micro-transaction model, including a Gatcha system, for users in these markets, which enables them to buy game items in the price range between NT$ 30 and NT$ 10,000 as of December 31, 2023.

For Ragnarok X: Next Generation in Taiwan, Hong Kong, and Macau, we have applied a micro-transaction model, including a Gatcha system, for users in these markets, which enables them to buy game items in the price range between NT$ 30 and NT$ 11,000 as of December 31, 2023.

For Ragnarok Origin in Taiwan, Hong Kong, and Macau, we have applied a micro‑transaction model, including a Gatcha system, for users in these markets, which enables them to buy game items in the price range between NT$ 30 and NT$ 3,290 as of December 31, 2023.

For purchases in currencies other than the NT dollar, the price will be converted to local currency at the applicable exchange rate when users make the payment. Users pay through credit cards, wire and/or bank transfers, or mobile payment or online payment systems such as MyCard.

Korea

For Ragnarok M: Eternal Love in Korea, we have applied a micro‑transaction model, including a Gatcha system, in Korea since March 2018. Game users buy virtual game items in the price range between Won 1,200 and Won 119,000 as of December 31, 2023. Users pay through credit cards, wire and/or bank transfers, or mobile payment or online payment systems.

For Ragnarok Origin in Korea, we have applied a micro‑transaction model, including a Gatcha system, in Korea since July 2020. Game users buy virtual game items in the price range between Won 1,200 and Won 119,000 as of December 31, 2023. Users pay through credit cards, wire and/or bank transfers, or mobile payment or online payment systems.

For Ragnarok X: Next Generation in Korea, we have applied a micro-transaction model, including a Gatcha system, in Korea since January 2023, which enables them to buy game items in the price range between Won 1,500 and Won 149,000 as of April 26, 2024. Users pay through credit cards, wire and/or bank transfers, or mobile payment or online payment systems.

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Southeast Asia, North and South America, Oceania and Europe

We have applied a micro-transaction model including a Gatcha system for Ragnarok M: Eternal Love in Southeast Asia since October 2018, in North and South America, and Oceania since January 2019 and Europe since October 2019. Game users in Southeast Asia, North and South America, Oceania, and Europe buy virtual game items in the price range between US$ 0.99 and US$ 99.99 as of December 31, 2023.

For Ragnarok X: Next Generation in Southeast Asia, we have applied a micro-transaction model, including a Gatcha system, for users in these markets, which enables them to buy game items in the price range between US$ 0.99 and US$ 189.99 as of December 31, 2023.

For Ragnarok Origin in the United States and Canada, we have applied a micro‑transaction model, including a Gatcha system in the United States and Canada since November 2021. Game users buy virtual game items in the price range between US$ 0.99 and US$ 99.99 as of December 31, 2023.

For Ragnarok Origin, we have applied a micro-transaction model, including a Gatcha system in Southeast Asia since April 2023. Game users buy virtual game items in the price range between US$ 0.21 and US$ 104.16 as of December 31, 2023.

For purchases in currencies other than the U.S. dollar, the price will be converted to local currency at the applicable exchange rate when users make the payment. Users pay through credit cards, wire and/or bank transfers, mobile payment, or online payment systems such as PayPal and Huawei.

Japan

For Ragnarok M: Eternal Love in Japan, we have applied a micro‑transaction model including a Gatcha system in Japan since June 2019. Game users buy virtual game items in the price range between JPY 120 and JPY 10,000 as of December 31, 2023. Users pay through credit cards, wire and/or bank transfers, mobile payment, or online payment systems.

For Ragnarok Origin in Japan, we have applied a micro‑transaction model, including a Gatcha system, in Japan since June 2021. Game users buy virtual game items in the price range between JPY 160 and JPY 10,000 as of December 31, 2023. Users pay through credit cards, wire and/or bank transfers, mobile payment, or online payment systems.

GAME DEVELOPMENT AND PUBLISHING

We expect the online and mobile game industries to be characterized by increasing demand for sophisticated or original games with the most up‑to‑date technologies and/or innovative game designs. In response, we intend to expand our game offerings by continuing to develop in‑house additional high quality games with the latest technologies and/or innovative game designs and by publishing such new games developed by us or licensed or acquired from leading third-party developers.

To prepare for the commercial launch of a new online and mobile game, we conduct closed beta testing for the game to fix technical problems, in which we allow registered users to play the game free of charge. During these testing periods, users provide us with feedback and our technical team seeks to address any technical problems and programming flaws that may compromise a stable and consistent game playing environment. We conduct several rounds of closed beta testing, which usually takes a few weeks for each round but may take significantly more time if material problems are detected. Open beta testing of online games usually takes one to three months before commercial launch. We generally commence our other marketing activities for online games during the open beta testing stage. For overseas markets, we also localize the language and content of our games to tailor the game to local cultural preferences.

Game development

Our game development department is divided into two categories of development teams: one is dedicated to online games and the other is dedicated to mobile games. As of December 31, 2023, we employed a total of 228 game developers. We have developed online games, such as Ragnarok Online, Ragnarok Online II, Requiem Online and some social network games and mobile games, such as Ragnarok V: Returns, Ragnarok: The Lost Memories and Ragnrok

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Begins in-house. Furthermore, we have developed cross-platform games, such as Ragnarok V: Returns, Ragnarok Begins, and Ragnarok: The Lost Memories, which will be made available on both online and mobile platforms. In order to remain competitive, we are focusing our in‑house game development efforts on enhancing the game experience and on developing new games incorporating the latest technologies (including software improving the communication and interaction between players).

We also outsource development activities for our new games to third parties. For example, in November 2022, we entered into a game development agreement with Ntriple Co., Ltd, a developer in Korea, to outsource the development of Ragmon Marble using the contents of Ragnarok Online. In January 2023, we entered into a partnership agreement with Zero X And Pte. Ltd., a developer in Singapore, to permit the development of the P2E game Ragnarok Monster World using the contents of Ragnarok Online. In April 2023, we entered into a game development agreement with IOI Co., Ltd., a developer in Korea, to outsource the development of Poring Merge NFT to IOI Co., Ltd. using the contents of Ragnarok Online. We own all intellectual property rights relating to Poring Merge NFT, Ragmon Marble, and Ragnarok Monster World.

Furthermore, we outsource development for console platform games in Steam, Nintendo Switch, PlayStation, and Xbox.

We develop new mobile games and related updates. We will continue to devote substantial resources to develop popular games with high revenue potential. Our in-house teams specialize in game planning, graphic design, research and development, and game operation.

Our game development process generally includes the following key steps:

•concept generation;

•development of new game proposal and commencement of technical review;

•formulation of development projects;

•commencement of development;

•closed beta testing; and

•open beta testing.

Publishing

We also seek opportunities to publish games developed by third parties if we determine such games have potential to become a commercial success. Our publishing and licensing processes include the following:

•Preliminary screening. Our preliminary screening process for a game usually includes preliminary review and testing of the game and discussions with the game developer on technological and operational aspects;

•In‑depth examination, analysis, and commercial negotiation. Once a game passes preliminary screening, we thoroughly review and test the game, conduct a cost analysis, develop operational and financial projections and formulate a preliminary game operating plan. We then begin commercial negotiations with the developer;

•Game rating and regulatory registration and approval. Once a license agreement to publish and distribute a game is signed, we submit an application to the Game Rating and Administration Committee to obtain a game rating, except for mobile games, which are not required to be rated by the Game Rating and Administration Committee and may be rated by us as distributor. This process generally takes approximately 15 days. We also typically register our intellectual property rights in Korea under our license agreements, such as copyright and trademark, with the relevant Korean government agency. Our overseas subsidiaries or licensees follow similar procedures in their respective markets where the games we license are commercially offered; and

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•Testing and marketing. Once the required registration and approvals are obtained, we conduct closed beta testing and open beta testing of the new game and assist the licensor with the development of the game, in the case of online games.

Our game business team takes the lead in conducting preliminary screenings to select games for potential distribution and the commercial negotiations process. The games initially screened by our game business team are additionally evaluated or tested by other teams, such as the marketing team and quality management team, for a second opinion. Once a license agreement is finalized, we generally create a specific team for the selected game within the business department to work with and guide the licensor through the beta testing and/or marketing process for a successful launch of the game.

Intellectual property licensing

Intellectual property licensing is one of our means to diversify our game titles when we determine that certain intellectual property may be valuable in the development and publishing of new games.

We license out certain intellectual property and other rights to third-party developers or to our subsidiaries for the development of new game titles.

We licensed Ragnarok Online to Dream Square, a game developer in China, in May 2013, which led to the development of Ragnarok Prequel and Ragnarok Prequel II, a Web browser-based game. We also signed a license and development agreement with the same developer in January 2015 to grant the developer the right to use the contents of Ragnarok Online to develop two mobile games, which was revised in March 2016 to grant the developer the exclusive right to develop mobile games and web games based on the contents of Ragnarok Online and distribute such games in China for five years from March 25, 2016. Such license and development agreement led to the development of Ragnarok R, RO: Idle Poring, Ragnarok M: Eternal Love, Ragnarok H5, Ragnarok Origin, and Ragnarok X: Next Generation. See ITEM 4.B. “BUSINESS OVERVIEW—OUR PRODUCTS—Mobile games.”

We also entered into a license and development agreement with the same developer in December 2015, which granted the developer the right to develop two mobile games and one web game based on the contents of Dragonica and distribute such games in global market. The term will expire after two years from the commercial launch of such games in such markets. We entered into a license and development agreement with Xian’ Sky Online network technology limited liability Company in July 2018, which granted the developer the right to develop online game based on the contents of Dragonica and distribute such game in China. The agreement will expire after five years from the commercial launch of such game in such market.

We entered into an agreement with Electronics Extreme Ltd., a game developer and publisher in Thailand, in February 2017 and allowed Electronics Extreme Ltd. to use the contents of Ragnarok Online to develop one mobile game and publish the game in Thailand, the Philippines, Singapore and six other Asian countries.

In September 2019, we granted Pin You Technology, a game developer in Taiwan, the right to use the contents of Ragnarok Online to develop one mobile game, which led to the development of Ragnarok Monster’s Arena. Ragnarok Monster’s Arena was commercially launched in Taiwan, Hong Kong, and Macau in May 2022, in Thailand and Korea in September 2022, and in Southeast Asia, South Asia, the Middle East, and Oceania in December 2022.

We entered into an agreement with each of Shanghai Taren Network Technology Co.,Ltd. (“Taren”), and Guangdong Xinghui Teamtop Interactive Entertainment Co.,Ltd. (“Teamtop Interactive”), both game developers and publishers in China, in July 2021 and January 2023, respectively. We allowed Taren and Teamtop Interactive to use the contents of Ragnarok Online to develop three mobile games and one mobile game, respectively, and distribute such games in China.

We entered into an agreement with Shanghai GameAle Network Technology Co., Ltd (“GameAle”), a game developer and publisher in China, under which GameAle is permitted to use the contents of Ragnarok Online to develop and distribute in China two mobile games in January 2022 and in October 2023.

Moreover, we license in existing intellectual property from third parties for developing new games. In September 2008, we entered into a license agreement with ICONIX to develop Pororo Games, an IPTV game, based on a popular Korean television animation series “Pororo: The Little Penguin.” Pororo Games has been commercially offered

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since September 2009. In November 2015, we entered into another licensing agreement with ICONIX, which allowed Gravity to develop and publish games for various platforms based on Pororo: The Little Penguin. In January 2018, we entered into a licensing agreement with CJ ENM Corporation (“CJ ENM”) to develop and publish an IPTV Game based on CJ ENM’s animation series “The Haunted House.” In January 2018, we entered into a game development agreement with Doyeon Games to outsource the development of “The Haunted House” IPTV game. The game was launched in May 2019 in Korea. In May 2020, we entered into an agreement with National Basketball Association (“NBA”) and National Basketball Players Association (“NBPA”) to obtain the right to develop and publish a NBA licensed game. NBA Rise To Stardom, a Sports mobile game, was launched in Japan in November, 2021. In April 2022, we entered into a licensing agreement with YoungToys, to develop and publish Kongsuni Game and Tobot V Game, Internet protocol television (IPTV), cable television and mobile games, based on YoungToys’ TV animation series “Kongsuni” and “Tobot V.”

We continue to seek more opportunities to license out existing intellectual properties or license in existing intellectual properties of third parties for game development and publishing.

MARKETING

We employ a variety of traditional and online marketing programs and promotional activities, including in‑game events, in‑game marketing, and offline events. Due to the close‑knit nature of the game community, we believe that word‑of‑mouth is an important medium for the promotion of our games.

In Korea, two independent promotional agents currently promote our online games to Internet cafés pursuant to agency agreements. Under these agreements, each promotional agent is granted non‑exclusive promotion rights within a specified geographical area. The agent is generally paid a monthly base commission between 10% and 30% of revenues received from Internet cafés in the allocated area. The commission percentage varies according to the amount of revenues.

We conduct a variety of marketing programs and online and offline events to target potential subscribers. Our main marketing efforts include advertising on Web site portals and game magazines, conducting online promotional events, participating in trade shows, and entering into promotional alliances with Internet service providers. We spent Won 13,661 million (US$ 10,582 thousand) on advertising and promotions in 2023, compared with Won 29,898 million in 2022.

We frequently organize in‑game events, such as card exchange events for our users. We also host “fortress raid” events, which we believe encourage the development of virtual communities among our users and increase user interest in our games. We also host from time to time in‑game tournaments in which users can compete against each other either as a team or individually. In addition, we use in‑game events to introduce users to new features of our games. We organized 673 and 515 in‑game events for Ragnarok Online users in 2023 and 2022, respectively.

After the lifting of the COVID-19 quarantine restrictions, we organized large-scale offline events, including e-sports tournaments featuring Ragnarok IP games in Asia and participated in various global game exhibitions, such as Gamescom 2023 in Cologne, Germany, PAX WEST 2023 in Seattle, U.S., Tokyo Game Show 2023 in Tokyo, Japan and G-Star 2023 in Busan, Korea. Particularly, Rangarok Online 2023 (“ROS 2023”) resumed in a decade after Ragnarok World Championship 2013. The countries that participated in ROS 2023 included Korea, Taiwan, Thailand, Indonesia, Philippines, and Malaysia, and on the day of grand finals, approximately 20,000 spectators visited the venue in Jakarta, Indonesia with high excitement. Same as the previous year, we participated in Global Game Exhibition G-Star 2023 (“G-Star 2023”) at BEXCO in Busan, Korea, which was attended by approximately 197,000 offline visitors and 970,000 online viewers. At G-Star 2023, we set up our own booth where we offered hands-on demonstration of Gravity’s newly introduced games and various events for visitors.

In most of our overseas markets, marketing activities are principally conducted by our licensees and typically consist of advertising on Web site game portals and online game magazines and through television commercials, as well as hosting online and offline promotional events. The licensees are responsible for the costs associated with such advertising and promotional activities. For example:

•In January 2024, Gravity Communications Co., Ltd., our subsidiary in Taiwan, participated in the Taipei Game Show, which was attended by 360,000 visitors, At our booth, we introduced Ragnarok Origin and Ragnarok Golf Monsters along with 17 new console titles that will be published.

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•In May 2023, Gravity Game Tech Co. Ltd., our subsidiary in Thailand, held an offline event celebrating the third anniversary of Ragnarok Online with 248 users at Ari Station in Bangkok.

•In June 2023, Nuverse (Hong Kong) Limited, who is responsible for marketing Ragnarok X: Next Generation in Taiwan, Hong Kong, Macau, and Southeast Asia, held a promotional offline event to celebrate the second year anniversary of Ragnarok X: Next Generation in Southeast Asia. The event was a camper van parade themed with Ragnarok X: Next Generation and visited seven cities in Thailand, Indonesia, and Philippines for three days. The number of participants of the event is approximately 18,000.

•In September 2023, Gravity Game Arise, Co. Ltd., our subsidiary in Japan participated in Tokyo Game Show 2023 in Japan. Approximately 243,000 participants attended the show. At our booth, we introduced ten console titles including Snow Brothers 2.

Our licensees are selected in part on the basis of their marketing capabilities, including the size and scope of their distribution networks. Also, in more strategic markets where we anticipate considerable growth such as Taiwan, Thailand, Vietnam, or the United States, we believe that it is important to enhance our own direct publishing network for game services.

GAME SUPPORT AND CUSTOMER SERVICE

We are committed to providing superior customer service to our users directly and through our licensees. As of December 31, 2023, 54 employees were game masters or persons who are in charge of testing, updating and providing server maintenance for our games, as well as dealing with customer complaints, 30 employees were members of our domestic customer service team and 24 employees were members of our overseas customer support team.

In Korea, we provide customer service for our online and mobile games through bulletin boards of the Web sites of our online and mobile games, call centers, email, facsimile, and at our walk‑in customer service center. Our bulletin boards of the Web sites of our online and mobile games allow our customers to post questions to, and receive responses from, other users and our support staff. In our overseas markets, our licensees administer customer service through varying combinations of bulletin boards of the Web sites of our online and mobile games, call centers, email, and facsimile, with assistance from time to time from our overseas customer support staff.

In addition to providing customer service to our users, our customer service staff also collects user comments with respect to our games and generate daily and weekly reports for our management and operations that summarize important issues raised by users as well as how such issues have been addressed.

NETWORK AND TECHNOLOGY INFRASTRUCTURE

We have designed and assembled our game server network and information management system in Korea to allow centralized game management on a global basis. Our system network is designed to speedily accommodate a growing user base and demand for faster game performance. Our game server architecture runs multiple servers on a parallel basis to readily accommodate increased user traffic through deployment of connection to servers, which permits us to route users in the same country to servers with less user traffic. Each of these servers is linked to our information systems network to ensure rapid implementation of game upgrades and to facilitate game monitoring and supervision.

We maintain our server hardware in a single climate‑controlled facility at KT Mokdong Internet Computing Center at 233‑5 Mokdong‑ro, Yangcheon‑gu, Seoul, Korea and our other system hardware in our offices in Seoul. As of December 31, 2023, our server network for our online game operations in Korea consisted of a total of 157 servers, including 70 physical servers and 87 physical servers through the server virtualization technology we have adopted since July 2011, which allows one physical server to be divided into multiple virtual servers, each of which functions individually as a complete and independent server.

In overseas markets, overseas subsidiaries or licensees own or lease the servers necessary to establish the server network for our games, and we assist them with the initial assembly and installation of operating game servers and optimization of their systems network for game operations in their respective markets. While the overseas system architectures are modeled on our system architecture in Korea, they are also tailored to meet the specific needs of each market. When we install and initialize a game in an overseas market, we generally dispatch network engineers and database technicians from Korea to assist with the assembly and operation of the system network and game servers. Following

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installation, we typically send two to five of our technicians and customer support staff to that market, for a few weeks in some cases and much longer periods in other cases, to assist with on‑site game operation and technical support. Our overseas subsidiaries and licensees are responsible for providing database and other game information backup.

Our game management software can program the game content to include localized features such as virtual map zones specific to each market. These features can be updated at the host country level in order to encourage development of a communal spirit among the users from the same country.

COMPETITION

We compete primarily with other online and mobile game developers and distributors in each of our markets. In addition, we compete against providers of games on various platforms, such as console games, handheld games, and arcade games. We compete primarily on the basis of the quality of the game experience offered by us to our users, which depends on a number of factors, including our ability to do the following:

•hire and retain creative personnel to develop games that appeal to our users;

•offer online and mobile game service that is stable and is not prone to server shutdowns, connection problems, or other technical difficulties;

•provide timely and responsive customer service; and

•establish payment systems that are secure and efficient.

Competition in the online game industry

Currently, the leading providers of online games globally, based on the number of peak concurrent users, include Korea-based companies such as NCSoft Corporation, Krafton, Inc., Nexon Co., Ltd. and Smilegate RPG. Co. Ltd. as well as foreign publishers, such as Mojang Studios, Epic Games, Inc., Electronic Arts Inc., Valve, L.L.C. and Riot Games according to data available from various public sources.

PlayerUnknown’s Battlegrounds of PUBG Corporation, Minecraft of Mojang Studios, Fortnite Battle Royale of Epic Games, Inc., CS: Global Offensive of Valve, L.L.C. and League of Legends of Riot Games are some of the most popular online games both in Korea and globally.

Our existing and any potential new competitors in the online games industry compete with us for talent, game player spending, time spent on game playing, marketing activities, quality of games, and distribution network. As many of our competitors have significantly greater financial, marketing, and game development resources than we have, we face intense competition in the online game industry. We expect competition will continue to be strong as new competitors enter the market and existing competitors allocate more resources to develop and market competing games, while the online game industry begins to consolidate into a small number of leading companies or groups of affiliated companies due to the high cost of game development, marketing, and distribution networks, which is likely to drive unsuccessful online game providers to go out of business or be acquired by other successful game providers.

Competition in the mobile game industry

Compared with the online or console game genres, the mobile game market has a relatively low barrier to entry because development of a mobile game requires relatively less time and personnel due to the limitations of the devices on which mobile games are played such as screen size and processing power. Moreover, development tools for mobile games are easier to obtain and use and open marketplaces, such as the Google Play Store and Apple’s App Store, enable developers to easily distribute mobile games to a large global audience. Therefore, we expect the number of mobile game developers to continually increase in the future and competition to become more intense.

We compete with companies that specialize in developing and/or distributing mobile games including leading Korea-based publishers such as NCSoft Corporation, Nexon Co., Ltd., Kakao Games Corp., and Netmarble Corp. as well as foreign publishers such as Tencent Holdings Ltd., NetEase Inc., King.com Ltd., and Playrix Holding Ltd.

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Honor of Kings, PlayerUnknown’s Battlegrounds, Genshin Impact, Candy Crush Saga, and Roblox are some of the most popular mobile games both in Korea and globally.

Our current or potential future competitors for mobile games also include package game companies that have successfully expanded their business into mobile game development such as Electronic Arts Inc. In addition, we believe more companies that previously were or currently are dedicated to developing online or console games will allocate more resources toward developing mobile games because the number of mobile game users is rapidly increasing as the penetration of mobile devices, such as smartphones and tablet computers, continues to deepen.

Competition from other game platforms

We also compete against PC and console‑based game developers that produce popular package games, such as Activision Blizzard, Inc., Bandai Namco Entertainment Inc., and Electronic Arts Inc. and game console manufacturers such as Nintendo Co., Ltd., Sony Interactive Entertainment Inc., and Microsoft Corporation, all of which also have their own console game development studios.

All the current game consoles enable users to play games with other users online by connecting their console to a network over the Internet. Likewise, a number of PC‑based game developers have also introduced online features to their PC‑packaged games, such as team games or user‑to‑user combat.

Competition in the gaming industry is expected to remain intense as established game companies with significant financial resources have various financial and strategic advantages over smaller game companies such as us. See ITEM 3.D. “RISK FACTORS—RISKS RELATING TO OUR BUSINESS—we operate in a highly competitive industry and compete against many large companies.”

INSURANCE

We maintain medical and accident insurance for our employees to the extent required under Korean law, and we also maintain fire and general commercial insurance with respect to our facilities. We do not have any business liability or disruption insurance coverage for our operations in Korea. We maintain a directors’ and officers’ liability insurance policy covering certain potential liabilities of our directors and officers. See ITEM 3.D. “RISK FACTORS—RISKS RELATING TO OUR BUSINESS—We have limited business insurance coverage and business interruption could have a material adverse effect on our business.”

INTELLECTUAL PROPERTY

Our intellectual property is an essential element of our business. We rely on intellectual property such as copyrights, trademarks, and trade secrets, as well as non‑competition, confidentiality, and license agreements with our employees, suppliers, licensees, business partners, and others to protect our intellectual property rights. Our employees are generally required to sign agreements acknowledging that all inventions, trade secrets, works of authorship, developments, and other processes generated by them on our behalf are our property and assigning to us any ownership rights that they may claim in those works. With respect to copyrights and computer program rights created by our employees within their employment scope and which are made public bearing our name, we are not required to pay any additional compensation to our employees.

In developing Ragnarok Online, we obtained an exclusive license from Mr. Myoung‑Jin Lee to use the storyline and characters from his cartoon titled Ragnarok for the production of games, animation and character merchandising. See ITEM 4.B. “BUSINESS OVERVIEW—OUR PRODUCTS—Online games—Ragnarok Online.”

We are the registered owner of 26 registered software copyrights to 17 games: Ragnarok Online, Ragnarok Online II, R.O.S.E. Online, Requiem Online, Ragnarok Violet, Ragnarok Angel Poring, Ragnarok Online—Uprising: Valkyrie, Arcturus, Pucca Racing, W Baseball, Dragonica, Dragon Saga, Ragnarok Online Zero, Ragnarok Spear of Odin and Triple Chain, Ragnarok Origin, Ragnarok M: Eternal Love, each of which has been registered with the Korea Copyright Commission. As of December 31, 2023, we owned 200 registered domain names, including our official Web site and domain names registered in connection with each of the games we offer. We had 1,140 registered discrete trademarks at patent and trademark offices in 68 countries as of December 31, 2023. We registered with the Korea Intellectual Property Office, registered copyrights covering 13 game characters and six online game business model patents, in each case as of December 31, 2023.

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SEASONALITY

Usage of our online and mobile games has typically increased slightly around the Lunar New Year holiday season and other holidays, in particular during winter and summer school holidays.

LAWS AND REGULATIONS

We are subject to many laws and regulations in the different countries in which we operate. See ITEM 3.D. “RISK FACTORS—RISKS RELATING TO OUR REGULATORY ENVIRONMENT.” A general overview of the material laws and regulations that apply to our business is provided below for the countries from which we derive a significant portion of our revenues.

Korea

The Korean game industry and online and mobile game companies operating in Korea are subject to the following laws and regulations:

The Personal Information Protection Act

The Personal Information Protection Act (“PIPA”) was enacted on March 29, 2011, and went into effect on September 30, 2011. PIPA’s scope covers anyone dealing with personal information in the private and public sectors. An amended version of PIPA, enacted on February 4, 2020 (which came into effect on August 5, 2020) now also includes Special Provisions for Personal Information Processing by Information and Communication Network Providers (the “Special Provisions”), which used to be previously covered in the Act on Promotion of Information and Telecommunications Network Utilization and Information Protection, etc. (the “Information Protection Act”).

If a person’s personal information is collected or used, or provided to a third person, such person’s consent should be obtained. However, under the amended PIPA of February 4, 2020 (which came into effect on August 5, 2020), the consent of such persons does not have to be obtained if (i) it is deemed reasonable for the purpose of collecting information, (ii) no adverse consequences are incurred to such persons and if (iii) measures such as encryptions are taken as necessary to secure safety.

If personal information is no longer necessary upon achievement of the purpose of the collection and use of personal information, such information should be immediately destroyed.

Any transaction requiring identifiers granted by law for identification purposes, such as the resident registration number, is generally prohibited, and exceptions are recognized on a restrictive basis only if consent is obtained or required by law. In addition, any person dealing with personal information as determined pursuant to the Presidential Decree, for instance, such as signing up for a website, should provide alternative methods to using the resident registration number.

In the event of a personal information leak, the processor of personal information should promptly notify the affected person after discovering such incident. If the volume of the leak of personal information exceeds a certain number, the processor of personal information should report the incident to the authorities and take necessary measures to minimize damages.

In addition, the same legislation grants to each individual the right to request perusal, the right to request correction or deletion, and the right to request suspension of process with respect to one’s personal information, and also provides the methods to exercise such rights.

We are required to indemnify users for damages occurring as a result of our violation of the foregoing restrictions, unless we can prove the absence of willful misconduct or negligence on our part.

Penalty surcharges are imposed on any personal information processors violating the regulation on the protection of personal information, and some conducts, such as collection of personal information of users without their consent, are the subject of criminal punishment. Any personal information processors violating its obligation to protect personal information by collecting, using, disclosing such information without consent, and not complying with protective measures, may be imposed with surcharges not exceeding 3% of the sales relevant to the conduct of violation in consideration of the details, degree, period, the number of times, and the scale of gained profits.

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Following the continued occurrence of personal information leakage incidents, PIPA was amended on July 24, 2015 (which came into effect on July 25, 2016) to strengthen personal information protection measures and supplement remedial methods for users by strengthening punishment on personal information processors and introducing a statutory damage compensation system. According to the amended PIPA, a user may claim for statutory damage compensation up to Won 3 million in case of loss, theft, or leakage of his/her personal information under management by personal information processors.

To promote prompt and fair settlement of disputes concerning personal information, the same legislation also provides that a Personal Information Dispute Mediation Committee, or “PIDMC,” should be established and the PIDMC’s decision, if accepted by the disputing parties, should have the same legal effect as settlement by trial. In consideration of the fact that most identity theft cases are large in scale and small in the amount of monetary damages, the legislation adopts a collective dispute settlement system. A class action system for personal information has been adopted, but in order to prevent frivolous class action suits, litigants are required to go through the collective dispute settlement system prior to bringing a class action and cases are limited to those seeking suspension or injunctive relief.

The PIPA was amended on March 14, 2023, and became effective as of September 15, 2023, except for (i) below, for which the effective date has not yet been determined. The amended PIPA brings about several changes, including:

(i) Strengthening the rights of data subjects by introducing the right of data subjects to request transmission of their own personal information to themselves or to a third party, thereby enhancing their control over their personal information;

(ii) Unifying the current bifurcated rules for “personal information processors” and “information and communications service providers” by deleting the Special Provisions that overlap with the general provisions applicable to personal information processors, while moving the Special Provisions that apply only to information and communications service providers to the general provision section. In addition, the Special Provisions, which impose an obligation on the information and communications service providers to take necessary measures (e.g., the destruction of personal information) to protect the personal information of users who have not used the information and communication network services for a year, will be abolished due to significant negative feedback from the industry about inconveniences caused to the users and the information and communications service providers;

(iii) Substituting criminal sanctions for certain violations of the PIPA (e.g., failure to obtain consent for collection and use of personal information, failure to destroy personal information, data breaches due to failure to take data protection measures) with economic sanctions in the form of administrative penalties and fines, but with an upward adjustment in the base amount from the amount of the personal information processors’ “revenue specifically related to the violation” to the “total revenue” of the personal information processors;

(iv) Increasing the maximum punitive damages amount from three times to five times the actual damages incurred by the data subject due to cases of loss, theft, leakage, forgery, alteration, or damage of personal information due to willful misconduct or gross negligence of the personal information processors; and

(v) Requiring not only public institutions but also personal information processors to submit to dispute mediation and granting the PIDMC the right to conduct fact-finding investigations, thereby prohibiting personal information processors from refusing the PIDMC access to its premises or materials.

The Act on Promotion of Information and Communications Network Utilization and Information Protection, Etc., or Information Protection Act

Previously, the Information Protection Act was silent on mobile application developers’ access to personal information of application users, and such application users typically consented to such access as they would otherwise not be permitted to use the mobile application services. However, the Information Protection Act was amended on March 22, 2016 (which came into effect on September 23, 2016) to require mobile application developers to distinguish between information that is critical to provision of material components of the application services and information that is not critical, and clearly explain to each user why access to such critical information is necessary when the developers’ request such user to provide consent for such developer’s access to the data stored on such user’s smart phone. Moreover, a mobile application developer may not refuse to provide services based on a user’s refusal to provide access to his or her information, which is not critical to provision of the application services.