avity announced that it has approved a termination of the license and distribution agreement for Ragnarok Online II with Gungho Online Entertainment according to a report from StreetInsider.com. Gravity and Gungho entered into the license and distribution agreement in 2006, which granted Gungho the exclusive right to service Ragnarok Online II in Japan. However, Ragnarok Online II has not yet been launched in Japan and has had limited success in certain jurisdictions where the game has been launched. Therefore, in relation to Ragnarok Online II in Japan, after discussions with Gungho and due consideration, the Company’s board of directors unanimously approved the termination of the license agreement with Gungho.
As part of the termination, US$5 million in initial payments received from Gungho will be refunded in a manner mutually agreed by the parties. The Company also anticipates recognizing an impairment loss on intangible assets of approximately Won 4,605 million, which represents the total remaining capitalized development cost of Ragnarok Online II.
Gravity signed a memorandum of understanding (“MOU”) with Shanghai The Dream Network Technology (“Dream Square”), dated January 15, 2016.
The MOU sets forth the parties’ intention for Gravity to grant Dream Square the right to exclusively develop and distribute in China mobile games and web games based on the intellectual property of Ragnarok Online for 5 years. Pursuant to the MOU, and subject to the signing of a definitive agreement, Gravity may receive up to more than US$10 million in minimum guaranteed royalties and royalties on gross sales. The terms and conditions of such definitive agreement are currently being negotiated between the parties.
Pursuant to an existing agreement, two Ragnarok Online IP-based mobile games developed by Dream Square are expected to be launched in China during 2016.
Gravity plans to expand its business in Taiwan in 2016, through direct game service and new launchings. In November 2015, Gravity set up a representative office in Taipei City, Taiwan. Initiating direct game service in Taiwan, Gravity plans to launch Ragnarok Prequel, a web game developed by Dream Square, under the name of Xianjing RO Chuanshuo WEB, in the first quarter of 2016. Also, the Company expects to launch a mobile game, developed by a third party, in the second quarter of 2016. In addition, Gravity plans to launch Ragnarok Prequel in more markets, including North America, Hong Kong and Thailand, during 2016.