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Quarterly Value Added Tax return

The Company is required to meet the requirements of the Korean Value Added Tax ("VAT") Law. The VAT is payable by persons which receive goods or services for value, and is to be collected by those persons providing such goods or services at a flat rate of ten (10) percent of the value of the goods or services. When the Company buys goods or services in Korea or imports foreign goods into Korea, VAT ("input tax") is collected by the person providing the goods or services or sells goods in Korea or by the customs office at the rate of ten percent (10%) of the price.

When the Company provides services or sells goods in Korea, it will be required to collect VAT ("output tax") from the purchaser at the rate of ten percent (10%) of the service/goods price and to remit to the appropriate tax office the difference between the input and output tax, filing returns on a semiannual basis (i.e., for the periods from January to June and from July to December) with preliminary returns filed in the first quarter of each six month taxation period. Taking into account the preliminary returns, VAT returns are actually required on a quarterly basis. VAT returns should be filed no later than the 25th day after the end of each calendar quarter. By paying the difference between input and output tax, the Company does not actually bear the VAT burden, but passes the burden on to the ultimate consumer, except for few cases.

If the Company exports goods or provides services to a foreign corporation which has no permanent establishment in Korea and receives payment in a foreign currency through a foreign exchange bank in Korea, VAT will be imposed on such goods/services at a zero rate (i.e., no output VAT is collected) rather than the standard ten percent VAT rate. Although VAT is imposed at a zero rate, it is still necessary for the Company to file VAT returns on a quarterly basis. If the Company has paid input VAT during the quarter, such input VAT may be offset against zero VAT, thus entitling the Company to a VAT refund.

In this connection, the Company is required to report its quarterly revenue such as sales, commission and service fee income, etc. to the tax office when the Company files its quarterly VAT return. The VAT return shall be submitted to the Korean tax authorities by the 25th day after the end of every quarter.