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

November 19, 2009

GRAVITY Co., Ltd.

(Translation of registrant’s name into English)

Nuritkum Square Business Tower 15F, 1605 Sangam-Dong, Mapo-Gu, Seoul, Korea 121-270

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 2009 RESULTS AND BUSINESS UPDATES

Seoul, South Korea — November 19, 2009 — 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, 2009, prepared in accordance with generally accepted accounting principles in the United States and business updates.

FINANCIAL RESULTS FOR THE THIRD QUARTER 2009

Revenues for the third quarter ended September 30, 2009 were KRW 13,798 million (US$11,818 thousand), representing a 1.6% decrease from KRW 14,018 million for the second quarter ended June 30, 2009 (“QoQ”) and a 7.9% increase from KRW 12,782 million for the third quarter ended September 30, 2008 (“YoY”).

Review of financial results

Revenues

Royalty and licensing fee revenues for the third quarter ended September 30, 2009 were KRW 7,553 million (US$6,469 thousand), representing a 9.5% decrease QoQ from KRW 8,350 million and a 4.5% increase YoY from KRW 7,226 million. The decrease QoQ was primarily due to the declining revenues from Ragnarok Online in Japanese market. The increase in YoY was mainly from the higher revenues in Japanese market due to the weakening of the Korean Won against the Japanese Yen.

Subscription revenue for the third quarter 2009 was KRW 3,122 million (US$2,674 thousand), representing a 4.8% increase QoQ and a 11.8% decrease YoY compared to KRW 2,980 million and KRW 3,539 million, respectively. The increase QoQ result was primarily from increased revenues in Korean market, partially offset by decreased revenues in the U.S. and Canada. The decrease YoY was attributable to the decreased revenues in Korean market, partially offset by the increased revenues from the U.S., Canada, Europe, Russia and CIS countries.

Mobile game revenues were KRW 2,324 million (US$1,990 thousand) for the third quarter 2009, representing a 32.6% increase QoQ from KRW 1,752 million and a 44.0% increase YoY from KRW 1,614 million. The increase for both QoQ and YoY was mainly due to the increased sales of Ragnarok mobile games and the revenues from development of a mobile game outsourced by LG Electronics.

Character merchandising, animation and other revenue were KRW 799 million (US$685 thousand) for the third quarter 2009, representing a 14.6% decrease QoQ from KRW 936 million and a 98.3% increase YoY from KRW 403 million.

Cost of Revenues and Operating Expenses

Cost of revenues were KRW 5,396 million (US$4,622 thousand) for the third quarter 2009, representing a modest decrease QoQ from KRW 5,441 million and a 19.8% decrease YoY from KRW 6,726 million. Such decrease YoY was primarily attributable to i) decrease in salaries for the headquarters and decrease in salaries for the subsidiaries in the U.S. mainly resulting from the salaries of L5 Games Inc. which existed for the third quarter 2008 but did not occur for the third quarter 2009 due to the liquidation process taken place in August 2008; and ii) fully completed amortization of intangible assets in December 2008, related to acquisition of NeoCyon in November and December 2005.

Operating expenses were KRW 7,193 million (US$6,160 thousand) for the third quarter 2009, representing a 33.5% increase QoQ from KRW 5,389 million and a 23.7% increase YoY from KRW 5,815 million. The increase for both QoQ and YoY was primarily due to accrual for certain litigation settlement of KRW 1,676 million which is expected to be incurred with reasonable certainty. The increase QoQ was also due in part to the increased advertising expenses related to an update for Ragnarok Online. The increase YoY was partially offset by the decrease in rent expenses mainly resulting from the rent expenses for the Company’s subsidiary in Dubai which existed as of the third quarter 2008 but did not occur for the third quarter 2009 due to the liquidation process taken place in September 2008.

Income before income tax expenses and others were KRW 1,323 million (US$1,134 thousand) for the third quarter 2009, which represents a 60.2% decrease QoQ from KRW 3,327 million and a 29.6% decrease YoY from KRW 1,879 million.

Based on the foregoing factors, Gravity recorded a net income of KRW 16 million (US$14 thousand) for the third quarter ended September 30, 2009 compared to the net income of KRW 1,938 million for the second quarter ended June 30, 2009 and a net income of KRW 869 million for the third quarter ended September 30, 2008.

The balance of cash and cash equivalents and short-term financial instruments were KRW 72,878 million (US$62,418 thousand) as of September 30, 2009.

Note: For convenience purposes only, the KRW amounts have been expressed in the U.S. dollars at the exchange rate of KRW 1,167.60 to US$1.00, the noon buying rate in effect on November 6, 2009, as quoted by the Federal Reserve Bank of New York.

BUSINESS UPDATES

• Updates for development of Ice Age Online

The Company previously stated in its annual report on the Form 20-F for 2008 that Ice Age Online, a massively multiplayer online game based on Ice Age motion pictures franchise under the licensing agreement with 20^th Century FOX Licensing & Merchandising (“FOX”), was expected to be launched in December 2009. However, there is disagreement over assessing the current status of the game development between FOX and the Company.

The Company will make every effort to reach an amicable settlement with FOX and disclose the outcome of the discussion in the near future.

• Publishing Agreement for Estar

The Company has entered into a publishing agreement with Naru Entertainment Co., Ltd., an online game developer based in South Korea, to publish Estar (tentative title) game worldwide.

Estar is an MMORPG (Massively Multiplayer Online Role Playing Game) targeting male game users from their teens through their thirties.

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 38 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-08								30-Sep-09
		KRW				US$				KRW				US$
		(audited)				(unaudited)				(unaudited)				(unaudited)
Assets
Current assets
Cash and cash equivalents			53,168				45,536				64,361				55,123
Short-term financial instruments			7,278				6,233				8,517				7,295
Accounts receivable, net			6,540				5,601				7,253				6,212
Other current assets			5,564				4,766				4,644				3,976
Total current assets			72,550				62,136				84,775				72,606
Property and equipment, net			5,226				4,476				3,385				2,900
Leasehold and other deposits			1,501				1,286				1,500				1,284
Intangible assets			11,154				9,553				11,165				9,563
Goodwill			1,451				1,243				1,451				1,243
Investments			2,440				2,090				1,788				1,531
Other non-current assets			1,613				1,380				1,869				1,600
Total assets			95,935				82,164				105,933				90,727
Liabilities and shareholders’ equity
Current liabilities
Accounts payable			3,093				2,649				5,128				4,392
Deferred income			3,286				2,814				3,983				3,411
Income tax payable			815				698				478				409
Other current liabilities			1,203				1,031				980				840
Total current liabilities			8,397				7,192				10,569				9,052
Long-term deferred income			9,839				8,427				10,044				8,602
Accrued severance benefits			926				793				1,254				1,074
Other non-current liabilities			165				141				184				158
Total liabilities			19,327				16,553				22,051				18,886
Minority interest			137				117				198				170
Common stock			3,474				2,976				3,474				2,976
Additional paid-in capital			75,247				64,446				75,302				64,493
Retained earnings (Accumulated deficit)			(5,652	)			(4,841	)			1,555				1,332
Accumulated other comprehensive income			3,402				2,913				3,353				2,870
Total shareholders’ equity			76,471				65,494				83,684				71,671
Total liabilities and shareholders’ equity			95,935				82,164				105,933				90,727

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-09				30-Sep-08				30-Sep-09								30-Sep-08				30-Sep-09
		(KRW)				(KRW)				(KRW)				(US$)				(KRW)				(KRW)				(US$)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenues
Online games-subscription revenue			2,980				3,539				3,122				2,674				9,481				9,577				8,203
Online games-royalties and license fees			8,350				7,226				7,553				6,469				20,865				26,718				22,883
Mobile games			1,752				1,614				2,324				1,990				5,111				5,928				5,077
Character merchandising, animation and other revenue			936				403				799				685				2,515				2,200				1,884
Total net revenues			14,018				12,782				13,798				11,818				37,972				44,423				38,047
Cost of revenues			5,441				6,726				5,396				4,622				21,735				16,265				13,931
Gross profit			8,577				6,056				8,402				7,196				16,237				28,158				24,116
Operating expenses
Selling, general and administrative			4,953				5,401				6,719				5,754				16,601				16,989				14,550
Research and development			436				414				474				406				1,806				1,258				1,078
Operating income (loss)			3,188				241				1,209				1,036				(2,170	)			9,911				8,488
Other income (expenses)
Interest income			537				661				526				451				2,065				1,800				1,542
Interest expense			(11	)			(7	)			(10	)			(9	)			(18	)			(36	)			(31	)
Foreign currency gains (losses), net			(430	)			1,000				(389	)			(333	)			1,962				(55	)			(47	)
Others, net			43				(16	)			(13	)			(11	)			(19	)			27				23
Income before income tax expense, minority interest and equity in loss of related joint venture			3,327				1,879				1,323				1,134				1,820				11,647				9,975
Income tax expenses			1,103				865				1,074				920				2,521				3,582				3,068
Income (loss) before minority interest and equity in loss of related joint venture			2,224				1,014				249				214				(701	)			8,065				6,907
Minority interest			19				22				23				20				62				61				52
Equity in loss of related joint venture			267				123				210				180				3,664				797				683
Net Income (loss)			1,938				869				16				14				(4,427	)			7,207				6,172
Earnings (loss) per share
- Basic and diluted			279				125				2				0				(637	)			1,037				0.89
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 (loss) per ADS (1)
- Basic and diluted			70				31				0				0				(159	)			259				0.22
Weighted average number of ADSs outstanding
- Basic and diluted			27,795,600				27,795,600				27,795,600				27,795,600				27,795,600				27,795,600				27,795,600

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.