Business Context and Reporting Period
This Form 6-K filing by GRAVITY Co., Ltd. (Nasdaq: GRVY) is dated January 10, 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 revenue, profit, cash flow, margin, debt, or liquidity figures for a completed reporting period. Instead, it discloses projected future revenue from new contracts:
- Expected Aggregate Revenue: A minimum of US$ 31.5 million in license fees and minimum guaranteed payments.
- Revenue Source: New license and distribution agreements for the game "Ragnarok Online 2" (RO2).
Material Changes and New Agreements
The primary material event is the execution of two major distribution agreements for RO2:
- China Agreement: Entered into with a subsidiary of The9 Limited. The term is four years from the commercial service date.
- Taiwan, Macau, and Hong Kong Agreement: Entered into on November 13, 2006, with Gamania Digital Entertainment Co, Ltd. The term is three years from the commercial service date.
- Operational Status: The company recently completed the first closed beta test of RO2.
Guidance, Outlook, and Risks
Management Commentary: Chairman and CEO Il Young Ryu stated that RO2 is expected to contribute to both top-line and bottom-line growth in 2007. Management views the expansion into the Chinese market as a critical growth driver.
Outlook: Beyond the guaranteed US$ 31.5 million, the company anticipates potential for additional fees based on market acceptance and the success of RO2 in the covered territories.
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers. Key risks identified include:
- Ability to collect license fees and royalty payments from overseas licensees in a timely manner.
- Ability to launch and operate commercially successful online games.
- Intense industry competition and technological developments.
- Global economic and political conditions.
Investor Verification Checklist
- Verify the commercial service launch dates for RO2 in China and the Taiwan/Macau/Hong Kong region to determine when revenue recognition begins.
- Confirm the specific identity of the The9 Limited subsidiary involved in the China agreement.
- Monitor the performance of the closed beta test results and subsequent player adoption rates.
- Review the company's historical ability to collect royalties from overseas partners to assess the collectability of the guaranteed payments.