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 2016

Commission File Number 000-51138

GRAVITY CO., LTD.

(Translation of registrant’s name into English)

15F, 396 World Cup buk-ro, Mapo-gu, Seoul 121-795, Korea

(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  x 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):  ¨

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):  ¨

 

 

 

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GRAVITY REPORTS SECOND QUARTER OF 2016 RESULTS

Seoul, South Korea – August 24, 2016 – GRAVITY Co., Ltd. (NasdaqCM: GRVY) (“Gravity” or “Company”), a developer and publisher of online and mobile games based in South Korea, today announced its unaudited financial results for the second quarter ended June 30, 2016, prepared in accordance with generally accepted accounting principles in the United States.

FINAICIAL RESULTS FOR THE SECOND QUARTER OF 2016

Revenues for the second quarter ended June 30, 2016 was KRW 9,057 million (US$ 7,848 thousand), representing a 0.4% decrease from KRW 9,094 million for the first quarter ended March 31, 2016 (“QoQ”) and a 1.7% decrease from KRW 9,217 million for the second quarter ended June 30, 2015 (“YoY”).

Review of Financial Results

Revenues

Royalty and license fee revenues for the second quarter of 2016 were KRW 2,738 million (US$ 2,372 thousand), representing a 18.7% decrease QoQ from KRW 3,368 million and a 1.4% decrease YoY from KRW 2,777 million. The decrease QoQ was primarily due to i) decreased revenue from Ragnarok Online in Taiwan resulting from a service suspension on May 31, 2016, as the Company terminated a distribution agreement with a local licensee for its direct service of Ragnarok Online in such market and ii) decreased revenue from Ragnarok Online in Japan. The decrease YoY was resulted mainly from decreased revenue from Ragnarok Online II in Thailand, which was partially offset by increased revenues from Ragnarok Online in Japan and the strengthening of the Japanese Yen against the Korean Won.

Mobile game and application revenues were KRW 2,495 million (US$ 2,162 thousand) for the second quarter of 2016, representing a 4.6% decrease QoQ from KRW 2,616 million and a 32.6% decrease YoY from KRW 3,703 million. The decrease QoQ and YoY was resulted primarily from decreased revenues from mobile applications for a 3^rd party and Ragnarok: Path of Heroes.

Subscription revenues for the second quarter of 2016 were KRW 2,323 million (US$ 2,013 thousand), representing a 8.7% increase QoQ from KRW 2,137 million and a 20.9% increase YoY from KRW 1,922 million. The increase QoQ and YoY was mainly attributable to revenues from Ragnarok Online in Taiwan. The Company has commenced its direct service for Ragnarok Online in such market since June 15, 2016.

Character merchandising and other revenues were KRW 1,501 million (US$ 1,301 thousand) for the second quarter of 2016, representing a 54.3% increase QoQ from KRW 973 million and a 84.2% increase YoY from KRW 815 million. The increase QoQ and YoY was mainly due to recognition of deferred revenues occurred from a game development and publishing agreement with a third party, which was executed on March 25, 2016.

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Cost of Revenue and Operating Expenses

Cost of revenue was KRW 6,846 million (US$ 5,932 thousand) for the second quarter of 2016, representing a 3.4% increase QoQ from KRW 6,619 million but a 7.5% decrease YoY from KRW 7,401 million. The increase QoQ was mostly from an increase in commission paid. The decrease YoY was mostly from decreased amortization of capitalized research and development cost of Ragnarok Online II, which had been amortized and fully impaired in December 2015.

Operating expenses were KRW 3,717 million (US$ 3,221 thousand) for the second quarter of 2016, representing a 22.4% increase QoQ from KRW 3,036 million but a 17.0% decrease YoY from KRW 4,481 million. The increase QoQ was mainly due to an increase in advertising expenses in Taiwan and commission paid. The decrease YoY was mostly resulted from a decrease in research and development expenses.

Loss before income tax expenses and others was KRW 1,212 million (US$ 1,050 thousand) for the second quarter of 2016 compared with loss before income tax expenses and others of KRW 1,287 million for the first quarter of 2016 and loss before income tax expenses and others of KRW 2,434 million for the second quarter of 2015.

As a result of the foregoing factors, Gravity recorded a net loss attributable to parent company of KRW 1,605 million (US$ 1,390 thousand) for the second quarter of 2016 compared with a net loss attributable to parent company of KRW 1,701 million for the first quarter of 2016 and a net loss attributable to parent company of KRW 2,763 million for the second quarter of 2015.

The balance of cash and cash equivalents and short-term financial instruments was KRW 37,445 million (US$ 32,443 thousand) as of June 30, 2016.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,154.15 to US$ 1.00, the noon buying rate in effect on June 30, 2016 as quoted by the Federal Reserve Bank of New York.

About GRAVITY Co., Ltd.

Based in Korea, Gravity is a developer and publisher of online and mobile games. Gravity’s principal product, Ragnarok Online, is a popular online game in many markets, including Japan and Taiwan, and is currently commercially offered in 80 markets and countries. 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 annual report for the fiscal year ended December 31, 2015 on Form 20-F, together with such other documents that 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.

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Contact:

Mr. Heung Gon Kim

Chief Financial Officer

Gravity Co., Ltd.

Email: kheung@gravity.co.kr

Ms. Ji Hee Kim

IR Manager

Gravity Co., Ltd.

Email: ircommunication@gravity.co.kr

Telephone: +82-2-2132-7800

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GRAVITY CO., LTD.

Consolidated Balance Sheet

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

 

		As of
		31-Dec-15								30-Jun-16
		KRW (audited)				US$ (unaudited)				KRW (unaudited)				US$ (unaudited)
Assets
Current assets:
Cash and cash equivalents			24,909				21,582				13,945				12,082
Short-term financial instruments			11,500				9,964				23,500				20,361
Accounts receivable, net			5,289				4,583				4,631				4,012
Other current assets			1,978				1,714				2,706				2,345
Total current assets			43,676				37,843				44,782				38,800
Property and equipment, net			882				764				673				583
Leasehold and other deposits			954				827				953				826
Intangible assets			132				114				112				97
Other non-current assets			85				74				366				317
Total assets			45,729				39,622				46,886				40,623
Liabilities and Equity
Current liabilities:
Accounts payable			2,971				2,574				7,072				6,127
Deferred revenue			4,997				4,330				7,493				6,492
Other current liabilities			836				724				590				511
Total current liabilities			8,804				7,628				15,155				13,130
Long-term deferred revenue			6,600				5,718				4,654				4,032
Accrued severance benefits			123				107				130				113
Other non-current liabilities			210				182				209				181
Total liabilities			15,737				13,635				20,148				17,456
Common shares			3,474				3,010				3,474				3,010
Additional paid-in capital			75,076				65,049				75,076				65,049
Accumulated deficit			(48,761	)			(42,248	)			(52,067	)			(45,113	)
Accumulated other comprehensive income			694				601				782				678
Total parent company shareholders’ equity			30,483				26,412				27,265				23,624
Non-controlling interest			(491	)			(425	)			(527	)			(457	)
Total equity			29,992				25,987				26,738				23,167
Total liabilities and equity			45,729				39,622				46,886				40,623

 

 

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,154.15 to US$1.00, the noon buying rate in effect on June 30, 2016 as quoted by the Federal Reserve Bank of New York.

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GRAVITY CO., LTD.

Consolidated Statements of Operations

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

 

		Three months ended																Six months ended
		31-Mar-16				30-Jun-15				30-Jun-16								30-Jun-15				30-Jun-16
		(KRW)				(KRW)				(KRW)				(US$)				(KRW)				(KRW)				(US$)
		(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenues:
Online games-subscription revenue			2,137				1,922				2,323				2,013				3,620				4,460				3,864
Online games-royalties and license fees			3,368				2,777				2,738				2,372				5,289				6,106				5,290
Mobile games and applications			2,616				3,703				2,495				2,162				7,906				5,111				4,428
Character merchandising and other revenue			973				815				1,501				1,301				1,471				2,474				2,144
Total net revenue			9,094				9,217				9,057				7,848				18,286				18,151				15,726
Cost of revenue			6,619				7,401				6,846				5,932				15,077				13,465				11,667
Gross profit			2,475				1,816				2,211				1,916				3,209				4,686				4,059
Operating expenses:
Selling, general and administrative			2,688				3,014				3,205				2,777				5,508				5,893				5,106
Research and development			343				1,465				512				444				2,923				855				741
Impairment losses on intangible assets			5				2				—				—				2				5				4
Total operating expenses			3,036				4,481				3,717				3,221				8,433				6,753				5,851
Operating loss			(561	)			(2,665	)			(1,506	)			(1,305	)			(5,224	)			(2,067	)			(1,792	)
Other income (expenses):
Interest income			132				181				131				114				383				263				228
Interest expense			—				(1	)			—				—				(3	)			—				—
Foreign currency income (loss), net			(858	)			51				163				141				55				(695	)			(602	)
Others, net			—				—				—				—				—				—				—
Loss before income tax expenses and equity loss on investments			(1,287	)			(2,434	)			(1,212	)			(1,050	)			(4,789	)			(2,499	)			(2,166	)
Income tax expenses			433				351				410				355				638				843				730
Net loss			(1,720	)			(2,785	)			(1,622	)			(1,405	)			(5,427	)			(3,342	)			(2,896	)
Net income (loss) attributable to:
Non-controlling interest			(19	)			(22	)			(17	)			(15	)			(36	)			(36	)			(31	)
Parent company			(1,701	)			(2,763	)			(1,605	)			(1,390	)			(5,391	)			(3,306	)			(2,865	)
Loss per share
- Basic and diluted			(245	)			(398	)			(231	)			(0.20	)			(776	)			(476	)			(0.41	)
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
Loss per ADS(1)
- Basic and diluted			(490	)			(795	)			(462	)			(0.40	)			(1,552	)			(952	)			(0.82	)

 

 

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,154.15 to US$1.00, the noon buying rate in effect on June 30, 2016 as quoted by the Federal Reserve Bank of New York.

(1) Each ADS represents two common shares.

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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.

 

Date: August 24, 2016