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 August, 2011

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.

Form 20-F þ       Form 40-F 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)(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

 

 

GRAVITY REPORTS SECOND QUARTER OF 2011 RESULTS AND BUSINESS UPDATES

Seoul, South Korea — August 12, 2011 — GRAVITY Co., Ltd. (NasdaqGM: GRVY) (“Gravity” or “Company”), an online game developer and publisher based in South Korea, today announced its unaudited financial results for the second quarter ended June 30, 2011, prepared in accordance with generally accepted accounting principles in the United States, and business updates.

FINANCIAL RESULTS FOR THE SECOND QUARTER OF 2011

Revenues for the second quarter ended June 30, 2011 was KRW 14,584 million (US$13,837 thousand), representing a 5.6% increase from KRW 13,810 million for the first quarter ended March 31, 2011 (“QoQ”) and a 28.8% increase from KRW 11,326 million for the second quarter ended June 30, 2010 (“YoY”).

Review of Financial Results

Revenues

Royalty and licensing fee revenues for the second quarter of 2011 were KRW 9,033 million (US$8,570 thousand), representing a 3.6% increase QoQ from KRW 8,719 million and a 37.4% increase YoY from KRW 6,572 million. The increases QoQ and YoY were primarily due to the increased revenues from Ragnarok Online and H.A.V.E. Online, which was commercially launched in March 2011, in the Japanese market. The increase YoY was also attributable to the increased revenues from Ragnarok Online in Taiwan, Hong Kong and Macau and the revenues from Dragonica resulting from our acquisition of Gravity Games Corp., the developer of Dragonica in October 2010.

Subscription revenues for the second quarter of 2011 were KRW 2,922 million (US$2,772 thousand), representing a 11.7% decrease QoQ from KRW 3,310 million but a 8.6% increase YoY from KRW 2,691 million. The decrease QoQ mainly resulted from the decreased revenues from Ragnarok Online in Korea. The increase YoY was primarily driven by the increased revenues from Ragnarok Online in Europe.

Mobile game revenues were KRW 2,469 million (US$2,343 thousand) for the second quarter of 2011, representing a 45.2% increase QoQ from KRW 1,700 million and a 34.2% increase YoY from KRW 1,840 million.

Character merchandising and other revenues were KRW 160 million (US$152 thousand) for the second quarter of 2011, representing a 97.5% increase QoQ from KRW 81 million and a 28.3% decrease YoY from KRW 223 million.

Cost of Revenue and Operating Expenses

Cost of revenue was KRW 6,234 million (US$5,915 thousand) for the second quarter of 2011, representing a 15.8% increase QoQ from KRW 5,383 million and a 26.1% increase YoY from KRW 4,942 million. The increase QoQ was mostly from increased salaries for the headquarters, commission paid and outsourcing fee related to game development. The increase YoY was mainly attributable to increase in salaries due to the acquisition of Gravity Games Corp. in October 2010, and increased salaries for NeoCyon, Inc., the Company’s subsidiary in Korea for mobile game business, and outsourcing fee related to game development.

Operating expenses were KRW 6,398 million (US$6,070 thousand) for the second quarter of 2011, representing a 10.7% increase QoQ from KRW 5,779 million and a 4.7% increase YoY from KRW 6,112 million. The increase QoQ was mainly due to increased commission paid and advertising expenses. The increase YoY mostly resulted from increase in commission paid and salaries for the headquarters.

Income before income tax expenses and others was KRW 2,384 million (US$2,262 thousand) for the second quarter of 2011, which represents a 20.6% decrease QoQ from KRW 3,002 million and a 72.3% increase YoY from KRW 1,384 million.

As a result of the foregoing factors, Gravity recorded a net income attributable to parent company of KRW 1,721 million (US$1,633 thousand) for the second quarter of 2011 compared to KRW 2,408 million for the first quarter of 2011 and KRW 465 million for the second quarter of 2010.

The balance of cash and cash equivalents and short-term financial instruments was KRW 57,954 million (US$54,985 thousand) as of June 30, 2011.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,054.0 to US$1.00, the noon buying rate in effect on July 29, 2011 as quoted by the Federal Reserve Bank of New York.

BUSINESS UPDATES

•

Ragnarok Online II delayed to the first quarter of 2012

The launch schedule of Ragnarok Online II, a sequel to Ragnarok Online, has been delayed to the first quarter of 2012.

After the second closed beta testing in July 2011, the Company has decided to postpone the release of Ragnarok Online II to work on final tweaks and polish.

Mr. Hyun Chul Park, CEO of Gravity said, “We want to assure everyone that our development team is working to launch Ragnarok Online II in the earliest time. We really appreciate our users showing continued patience and bearing with us. It will be worth the wait.”

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-10								30-Jun-11
		KRW				US$				KRW				US$
Assets		(audited)				(unaudited)				(unaudited)				(unaudited)
Current assets:
Cash and cash equivalents			44,122				41,861				38,954				36,958
Short-term financial instruments			12,500				11,860				19,000				18,027
Short-term available-for-sale investments			5,000				4,744				5,060				4,801
Accounts receivable, net			8,242				7,820				5,468				5,188
Other current assets			6,479				6,147				7,369				6,991
Total current assets			76,343				72,432				75,851				71,965
Property and equipment, net			2,672				2,535				2,839				2,694
Leasehold and other deposits			1,711				1,623				1,684				1,598
Intangible assets			41,831				39,688				43,411				41,187
Equity method investments			1,336				1,268				1,294				1,228
Other non-current assets			1,597				1,515				1,279				1,212
Total assets			125,490				119,061				126,358				119,884
Liabilities and Equity
Current liabilities:
Accounts payable			6,641				6,301				5,793				5,496
Deferred revenue			5,611				5,324				5,206				4,939
Other current liabilities			1,813				1,720				1,313				1,246
Total current liabilities			14,065				13,345				12,312				11,681
Long-term deferred revenue			8,993				8,532				8,386				7,956
Accrued severance benefits			1,031				978				1,146				1,087
Other non-current liabilities			2,989				2,836				2,579				2,447
Total liabilities			27,078				25,691				24,423				23,171
Common shares			3,474				3,296				3,474				3,296
Additional paid-in capital			75,395				71,532				75,395				71,532
Retained earnings			4,995				4,739				9,124				8,657
Accumulated other comprehensive income			3,552				3,370				3,382				3,209
Total parent company shareholders’ equity			87,416				82,937				91,375				86,694
Non-controlling interest			10,996				10,433				10,560				10,019
Total equity			98,412				93,370				101,935				96,713
Total liabilities and equity			125,490				119,061				126,358				119,884

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																Six months ended
		31-Mar-11				30-Jun-10				30-Jun-11								30-Jun-10				30-Jun-11
		(KRW)				(KRW)				(KRW)				(US$)				(KRW)				(KRW)				(US$)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenues:
Online games-subscription revenue			3,310				2,691				2,922				2,772				5,125				6,232				5,913
Online games-royalties and license fees			8,719				6,572				9,033				8,570				13,056				17,752				16,843
Mobile games			1,700				1,840				2,469				2,343				3,679				4,169				3,955
Character merchandising and other revenue			81				223				160				152				585				241				228
Total net revenue			13,810				11,326				14,584				13,837				22,445				28,394				26,939
Cost of revenue			5,383				4,942				6,234				5,915				9,803				11,617				11,022
Gross profit			8,427				6,384				8,350				7,922				12,642				16,777				15,917
Operating expenses:
Selling, general and administrative			4,749				5,291				5,671				5,380				9,626				10,420				9,886
Research and development			1,030				821				727				690				1,482				1,757				1,667
Operating income			2,648				272				1,952				1,852				1,534				4,600				4,364
Other income (expenses):
Interest income			416				508				464				440				1,028				880				835
Interest expense			(17	)			(3	)			(15	)			(14	)			(8	)			(32	)			(30	)
Foreign currency gain (loss), net			(58	)			596				(7	)			(7	)			281				(65	)			(62	)
Others, net			13				11				(10	)			(9	)			61				3				3
Income before income tax expenses and equity income (loss) on investments			3,002				1,384				2,384				2,262				2,896				5,386				5,110
Income tax expenses			802				796				869				824				1,743				1,671				1,586
Income before equity income(loss) on investments			2,200				588				1,515				1,438				1,153				3,715				3,524
Equity income (loss) on investments			(12	)			120				(9	)			(9	)			279				(21	)			(20	)
Net income			2,188				468				1,506				1,429				874				3,694				3,504
LESS: Net income attributable to the non-controlling interest			(220	)			3				(215	)			(204	)			28				(435	)			(413	)
Net income attributable to parent company			2,408				465				1,721				1,633				846				4,129				3,917
Earnings per share
- Basic and diluted			347				67				247				0.23				122				594				0.56
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			87				17				62				0.06				31				149				0.14

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.