UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November, 2010
Commission File Number 000-51138

GRAVITY Co., Ltd.

(Translation of registrant’s name into English)

Nuritkum Square Business Tower 15F, 1605 Sangam-Dong, Mapo-Gu, Seoul, Korea 121-795

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
þ Form 20-F o Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: o Yes þ No

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): n/a

 

 

GRAVITY REPORTS THIRD QUARTER OF 2010 RESULTS AND BUSINESS UPDATES

Seoul, South Korea — November 17, 2010 — GRAVITY Co., Ltd. (NasdaqGM: GRVY) (“Gravity” or the “Company”), an online game developer and publisher based in South Korea, today announced its unaudited financial results for the third quarter ended September 30, 2010, prepared in accordance with generally accepted accounting principles in the United States, and business updates.

FINANCIAL RESULTS FOR THE THIRD QUARTER OF 2010

Revenues for the third quarter ended September 30, 2010 were KRW 13,668 million (US$ 12,148 thousand), representing a 20.7% increase from KRW 11,326 million for the second quarter ended June 30, 2010 (“QoQ”) and a 0.9% decrease from KRW 13,798 million for the third quarter ended September 30, 2009 (“YoY”).

Review of financial results

Revenues

Royalty and licensing fee revenues for the third quarter of 2010 were KRW 9,359 million (US$ 8,318 thousand), representing a 42.4% increase QoQ from KRW 6,572 million and a 23.9% increase YoY from KRW 7,553 million. The increases QoQ and YoY were primarily driven by the increased revenues from Ragnarok Online in the Japanese market and the weakening of the Korean Won against the Japanese Yen.

Subscription revenues for the third quarter of 2010 were KRW 2,004 million (US$ 1,781 thousand), representing a 25.5% decrease QoQ from KRW 2,691 million and a 35.8% decrease YoY from KRW 3,122 million. The decreases QoQ and YoY were primarily due to decreased revenues from Korea, the U.S. and Canada.

Mobile game revenues were KRW 2,163 million (US$ 1,922 thousand) for the third quarter of 2010, representing a 17.6% increase QoQ from KRW 1,840 million and a 6.9% decrease YoY from KRW 2,324 million.

Character merchandising, animation and other revenue were KRW 142 million (US$ 127 thousand) for the third quarter of 2010, representing a 36.3% decrease QoQ from KRW 223 million and a 82.2% decrease YoY from KRW 799 million. The decreases QoQ and YoY primarily resulted from decreased revenues in sales of goods and Ragnarok Online character merchandising. The decrease YoY was largely due to revenues from sales of Ragnarok DS in the third quarter of 2009, which did not recur in the third quarter of 2010.

Cost of Revenues and Operating Expenses

Cost of revenues was KRW 4,502 million (US$ 4,002 thousand) for the third quarter of 2010, representing a 8.9% decrease QoQ from KRW 4,942 million and a 16.6% decrease YoY from KRW 5,396 million. The decreases QoQ and YoY were primarily attributable to decrease in amortization expense resulting from development costs for Emil Chronicle Online being fully amortized in July 2010 and decrease in cost of goods sold.

Operating expenses were KRW 5,692 million (US$ 5,058 thousand) for the third quarter of 2010, representing a 6.9% decrease QoQ from KRW 6,112 million and a 20.9% decrease YoY from KRW 7,193 million. The decrease QoQ was primarily due to decrease in advertising expenses in the third quarter of 2010 as well as employee separation costs which were incurred in the second quarter of 2010 but not in the third quarter of 2010. The decrease YoY was mainly due to accrual for the litigation settlement with Softstar Entertainment Inc. in the third quarter of 2009, which did not recur in the third quarter of 2010. The decrease YoY was partially offset by increased research and development expenses.

Income before income tax expenses and others was KRW 4,071 million (US$ 3,618 thousand) for the third quarter of 2010, which represents a 194.1% increase QoQ from KRW 1,384 million and a 207.7% increase YoY from KRW 1,323 million.

As a result of the foregoing factors, Gravity recorded a net income attributable to parent company of KRW 2,646 million (US$ 2,352 thousand) for the third quarter of 2010 compared to KRW 465 million for the second quarter of 2010 and KRW 16 million for the third quarter of 2009.

The balance of cash and cash equivalents and short-term financial instruments was KRW 67,767 million (US$ 60,229 thousand) as of September 30, 2010.

Note: For convenience purposes only, the KRW amounts have been expressed in the U.S. dollars at the exchange rate of KRW 1,125.16 to US$ 1.00, the noon buying rate in effect on October 29, 2010, as quoted by the Federal Reserve Bank of New York.

BUSINESS UPDATES

• Ragnarok Online II delayed to the second quarter of 2011

The launch schedule of Ragnarok Online II, a sequel to Ragnarok Online and a massively multiplayer online role playing game (“MMORPG”), has been delayed to the second quarter of 2011.

After the management’s careful consideration, the Company has decided to postpone the schedule as it has become clear that more time is needed in order to reflect users’ feedbacks and to refine the game.

Mr. Toshiro Ohno, the President and CEO of Gravity said, “While we are certainly aware that another delay may come as a disappointment to many fans, our inevitable decision has been made as we put the importance on the degree of completion. We are very hopeful that the additional time will result in the best and most immersive game.”

• License Agreement for War of Gods, a web browser-based game

Gravity has entered into a license agreement with Link China Entertainment, a Chinese game developer, to publish War of Gods in Korea.

War of Gods is a web browser-based strategy simulation game, which is currently serviced in China, Taiwan, Vietnam and Europe by other publishers. Gravity currently expects to commercially release the game in Korea in the fourth quarter of 2010.

• License Agreement for Weapons of the Gods, an MMORPG

Gravity has entered into a license agreement with Shanghai Nineyou Interactive Community and Media Co., Ltd. and its two affiliates, Shanghai Nineshine Information Technology Co., Ltd. and HitNorth International Limited, Chinese game developers and publishers, to publish Weapons of the Gods in Korea.

Weapons of the Gods is a three dimensional MMORPG, based on the storyline and characters from a famous Chinese martial arts comic book series. Weapons of the Gods is expected to be launched in Korea in the third quarter of 2011.

About GRAVITY Co., Ltd. ---------------------------------------------------

Based in Korea, Gravity is a developer and publisher of online games. Gravity’s principal product, Ragnarok Online™, is a popular online game in many markets, including Japan, Taiwan and Thailand, and is currently commercially offered in 80 markets. For more information about Gravity, please visit http://www.gravity.co.kr.

Forward-Looking Statements:

Certain statements in this press release may include, in addition to historical information, “forward-looking statements” within the meaning of the “safe-harbor” provisions of the U.S. Private Securities Litigation Reform Act 1995. Forward-looking statements can generally be identified by the use of forward-looking terminology, such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” “project,” or “continue” or the negative thereof or other similar words, although not all forward-looking statements contain these words. Investors should consider the information contained in our submissions and filings with the United States Securities and Exchange Commission (the “SEC”), including our registration statement on Form F-1, as amended, and our annual reports on Form 20-F, together with such other documents and we may submit to or file with the SEC from time to time, on Form 6-K. The forward-looking statements speak only as of this press release and we assume no duty to update them to reflect new, changing or unanticipated events or circumstances.

Contact:

Mr. Heung Gon Kim
Chief Financial Officer
Gravity Co., Ltd.
Email: kheung@gravity.co.kr

Ms. Yoon Joo Lee
IR Manager
Gravity Co., Ltd.
Email: yoonjoo.lee@gravity.co.kr
Telephone: +82-2-2132-7800
#     #     #

GRAVITY Co., Ltd.
Consolidated Balance Sheet

(In millions of KRW and in thousands of US$)

		As of
		31-Dec-09								30-Sep-10
		KRW				US$				KRW				US$
		(audited)				(unaudited)				(unaudited)				(unaudited)
Assets
Current assets:
Cash and cash equivalents			51,333				45,623				43,267				38,454
Short-term financial instruments			16,000				14,220				24,500				21,775
Short-term available-for-sale investments			4,973				4,420				5,242				4,659
Accounts receivable, net			5,907				5,250				5,848				5,197
Other current assets			4,686				4,165				6,929				6,158
Total current assets			82,899				73,678				85,786				76,243
Property and equipment, net			2,837				2,521				2,278				2,025
Leasehold and other deposits			1,496				1,330				1,531				1,361
Intangible assets			12,455				11,070				13,907				12,360
Equity method investments			1,100				978				1,180				1,049
Other non-current assets			1,651				1,466				1,588				1,411
Total assets			102,438				91,043				106,270				94,449
Liabilities and Equity
Current liabilities:
Accounts payable			3,205				2,848				3,224				2,865
Deferred revenue			3,750				3,333				4,098				3,642
Other current liabilities			1,293				1,149				1,177				1,046
Total current liabilities			8,248				7,330				8,499				7,553
Long-term deferred income			9,658				8,584				9,238				8,210
Accrued severance benefits			478				425				565				502
Other non-current liabilities			444				395				597				531
Total liabilities			18,828				16,734				18,899				16,796
Common shares			3,474				3,088				3,474				3,088
Additional paid-in capital			75,395				67,008				75,395				67,008
Retained earnings			1,265				1,124				4,757				4,228
Accumulated other comprehensive income			3,262				2,899				3,481				3,094
Total parent company shareholders’ equity			83,396				74,119				87,107				77,418
Non-controlling interest			214				190				264				235
Total equity			83,610				74,309				87,371				77,653
Total liabilities and equity			102,438				91,043				106,270				94,449

GRAVITY Co., Ltd.
Consolidated Statements of Operations

(In millions of KRW and in thousands of US$, except for share and ADS data)

		Three months ended																Nine months ended
		30-Jun-10				30-Sep-09				30-Sep-10								30-Sep-09				30-Sep-10
		(KRW)				(KRW)				(KRW)				(US$)				(KRW)				(KRW)				(US$)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenues:
Online games-subscription revenue			2,691				3,122				2,004				1,781				9,577				7,129				6,336
Online games-royalties and license fees			6,572				7,553				9,359				8,318				26,718				22,415				19,922
Mobile games			1,840				2,324				2,163				1,922				5,928				5,842				5,192
Character merchandising, animation and other revenue			223				799				142				127				2,200				727				646
Total net revenue			11,326				13,798				13,668				12,148				44,423				36,113				32,096
Cost of revenue			4,942				5,396				4,502				4,002				16,265				14,305				12,714
Gross profit			6,384				8,402				9,166				8,146				28,158				21,808				19,382
Operating expenses:
Selling, general and administrative			5,291				6,719				4,737				4,210				16,989				14,363				12,765
Research and development			821				474				955				848				1,258				2,437				2,166
Operating income			272				1,209				3,474				3,088				9,911				5,008				4,451
Other income (expenses)
Interest income			508				526				494				439				1,800				1,522				1,353
Interest expense			(3	)			(10	)			(9	)			(8	)			(36	)			(17	)			(15	)
Foreign currency gains (losses), net			596				(389	)			(63	)			(56	)			(55	)			218				194
Others, net			11				(13	)			175				155				27				236				209
Income before income tax expense, and equity loss of joint venture and partnership			1,384				1,323				4,071				3,618				11,647				6,967				6,192
Income tax expenses			796				1,074				1,207				1,073				3,582				2,950				2,622
Income before equity loss of related joint venture and partnership			588				249				2,864				2,545				8,065				4,017				3,570
Equity loss of joint venture and partnership			120				210				195				173				797				474				421
Net Income			468				39				2,669				2,372				7,268				3,543				3,149
LESS: Net income attributable to the non-controlling interest			3				23				23				20				61				51				45
Net income attributable to parent company			465				16				2,646				2,352				7,207				3,492				3,104
Earnings per share
- Basic and diluted			67				2				381				0.34				1,037				503				0.45
Weighted average number of shares outstanding
- Basic and diluted			6,948,900				6,948,900				6,948,900				6,948,900				6,948,900				6,948,900				6,948,900
Earnings per ADS (1)
- Basic and diluted			17				0				95				0.08				259				126				0.11

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.