Business Context and Reporting Period
This Form 6-K filing by GRAVITY Co., Ltd. (Nasdaq: GRVY) is dated January 17, 2007. The company is a South Korea-based developer and publisher of online games, with its principal product being Ragnarok Online, which is commercially offered in 21 markets.
Key Financial Metrics
The filing does not provide specific historical financial statements, revenue figures, profit margins, cash flow, debt levels, or liquidity ratios for a specific reporting period. The only financial metric disclosed is a forward-looking revenue projection related to a new agreement.
- Projected Revenue: Total expected revenue from the Emil Chronicle Online (ECO) agreement in Southeast Asia and Oceania is projected to exceed US$ 6.8 million over the term of the agreement.
- Revenue Components: This projection includes license fees and minimum guaranteed payments.
Material Changes and Agreements
The primary material event reported is the expansion of the distribution network for the game Emil Chronicle Online (ECO):
- Mainland China Agreement: Gravity entered into a License and Distribution Agreement with a wholly-owned subsidiary of The9 Limited in January 2007. The agreement is effective for 3 years from the commercial service date.
- Southeast Asia and Oceania Agreement: In November 2006, Gravity signed an agreement with Infocomm Asia Holdings Pte Ltd. for ECO distribution in Singapore, Malaysia, Brunei, Thailand, Philippines, Indonesia, Vietnam, Australia, and New Zealand.
- Strategic Milestone: Management noted that the total expected revenue from these recent agreements already exceeds the amount paid for the global publishing rights for ECO.
Guidance, Outlook, and Risks
Management Commentary: Chairman and CEO Il Young Ryu stated that ECO is expected to appeal to users familiar with manga and animation culture. The company cited a successful first closed beta test in Korea as a catalyst for these business accomplishments. The strategy involves excavating high-quality games globally and publishing them through Gravity's distribution network.
Risks and Contingencies: The filing includes a standard forward-looking statements disclaimer. Key risks identified include:
- Ability to diversify revenue.
- Timely collection of license fees and royalty payments from overseas licensees.
- Success in acquiring, developing, licensing, launching, marketing, or operating commercially successful online games.
- Intense industry competition and technological developments.
- Recruitment and retention of quality employees.
- Global economic and political conditions.
Investor Verification Checklist
- Verify the commercial service start date for ECO in Mainland China to determine the commencement of the 3-year revenue term.
- Confirm the actual collection of license fees and minimum guaranteed payments from The9 Limited and Infocomm Asia Holdings.
- Monitor the performance of the ECO closed beta test in Korea and subsequent commercial launch metrics.
- Review the company's ability to manage the operational risks associated with expanding into the Chinese market.
- Check subsequent filings for updates on the US$ 6.8 million revenue projection versus actual performance.