Business Context and Reporting Period
This Form 6-K filing by GRAVITY Co., Ltd. (a Korean online game developer) dated April 5, 2006, reports on the Annual General Meeting of Shareholders held on March 31, 2006. The filing details the approval of restated financial results for the years ended December 31, 2002 through 2005, and the appointment of new directors and committee members.
Key Financial Metrics
The filing text does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. Instead, it references the approval of restated balance sheets and income statements for the periods 2002-2005. The restatements address:
- Diversion of royalty payments by the former Chairman (embezzlement).
- Corrections to revenue recognition regarding initial licensing fees, mobile revenue, and animation revenue.
- A change in depreciation policy from the declining balance method to the straight-line method (effective 2005).
Material Changes Versus Prior Period
Significant material changes involve the restatement of previously issued financial statements for 2002, 2003, 2004, and 2005. These restatements correct for the former Chairman's embezzlement and revenue recognition errors. Additionally, the company changed its depreciation accounting policy starting in 2005. The filing notes that the 2002/2003 results do not retroactively apply the new depreciation policy, whereas the 2004/2005 results do.
Guidance, Outlook, and Corporate Governance
Corporate Governance Changes:
- Four new directors were appointed, three of whom are independent, replacing Messrs. Kotani, Won, Lee, and Deyama.
- New committee members were appointed for the Audit, Director Nomination, and Compensation Committees.
- Shareholders approved the maximum compensation payable to directors for 2006.
- The company expects to file audited 2004/2005 financial statements with the Korean Financial Supervisory Service by April 14, 2006.
- An amendment to the Form 20-F for the year ended December 31, 2004, reflecting restatements for 2002-2004 under U.S. GAAP, is planned for the end of April 2006.
- Ability to diversify revenue and collect license fees/royalties from overseas licensees.
- Success in acquiring, developing, and operating commercially successful online games.
- Competitive industry pressures and technological developments.
- Global economic and political conditions.
Investor Verification Checklist
- Verify the specific financial impact of the restatements (embezzlement and revenue recognition errors) in the upcoming Form 20-F amendment and Exhibit 99.1.
- Confirm the details of the new independent directors and their qualifications.
- Review the full audited 2004/2005 financial statements once filed with the SEC to assess current liquidity and profitability.
- Monitor the company's ability to collect outstanding royalty payments from overseas licensees as highlighted in the risk factors.