GRAVITY Co., Ltd.

GRAVITY REPORTS SECOND QUARTER 2005 RESULTS


Seoul, South Korea – August 22, 2005 – GRAVITY Co., Ltd. (NASDAQ: GRVY), an
online game developer and distributor, today reported its consolidated
financial results (prepared on a U.S. GAAP basis) for the second quarter ended
June 30, 2005.

Revenue for the second quarter of 2005 was US$13.3 million compared to US$15.6
million in the first quarter and US$15.3 million for the second quarter of
2004. This represents a decline of 15.0% and 13.3%, respectively.

Royalties and license fees from overseas markets, comprising 71.4% of our total
revenues, were US$9.5 million in the second quarter of 2005 showing a 14.0%
decline compared to the first quarter of 2005 and a 13.2% decline compared to
the second quarter of 2004. The reason for the decline in royalties in overseas
market for the second quarter of 2005 was due primarily to increased
competition in major markets. Subscription revenue, comprising 20% of our total
revenues, was US$2.7 million in the second quarter of 2005 which decreased
30.1% compared to the first quarter of 2005 and 30.9 % as compared to the
second quarter of 2004, which we believe was due to increased competition in
Korea and a weak market reception for the Ragnarok Online update in Korea that
was conducted at the end of March 2005. Mobile revenue, comprising 2.5% of our
total revenues, was US$0.3 million in the second quarter of 2005, representing
a 97.1% increase compared to the first quarter of 2005 and a 176.6% increase
compared to the second quarter of 2004.  Other revenues, comprising 6.1% of our
total revenues, were US$0.8 million in the second quarter of 2005, representing
a 26.7% increase compared to the first quarter of 2005, or 80.4% increase
compared to the second quarter of 2004. We attribute this increase to an
increase in animation revenues.

Cost of revenues and operating expenses increased 30.7% to US$10.2 million in
the second quarter of 2005 from US$7.9 million in the first quarter of 2005 due
primarily to research and development expenses of US$1.5 million, which
represent the payment of a license fee for publishing a casual online game
portal, STYLIA. Total license fees of STYLIA were US$3.0 million and the
remaining US$1.5 million will be paid after open bata testing and
commercialization and it will be capitalized. This also represents a 85.5%
increase from our cost of revenues and operating expenses of $5.5 million in
the second quarter of 2004.

Pre-tax profit for the second quarter of 2005 was US$2.8 million, compared to
US$7.2 million for the first quarter of 2005 and US$8.6 million for the second
quarter of 2004.


Net income for the second quarter of 2005 was US$1.9 million or $0.07 per ADS
on a diluted basis, compared to US$5.4 million or US$0.22 per ADS on a diluted
basis for the first quarter of 2005 and US$7.3 million or US$0.33 per ADS on a
diluted basis for the second quarter of 2004. Net income described above was
calculated using the tax rate of 24.75% assuming that we may fail to be
designated as a venture company under Korean law for the fiscal year 2005 and
thus would not be entitled to the benefit of a 50% tax reduction.  Gravity
plans to renew its designation as a venture company, the result of which is
expected to be known in September 2005. If Gravity is successful in renewing
its designation as a venture company, it expects to continue to enjoy the 50%
reduction in corporate income tax rate through 2006 and its net income would be
US$6.4 million for the first quarter of 2005 and US$2.2 million for the second
quarter of 2005.

The balance of cash and cash equivalents and short-term financial instruments
at June 30, 2005 was US$101.3 million.

David Woong-Jin Yoon, Chief Executive Officer of Gravity, commented, “This was
a challenging quarter for Gravity as we faced increased competition in key
markets for Ragnarok Online, lower than expected Ragnarok Online update results
in Korea, and delayed commercialization and unfavorable market conditions for
R.O.S.E. Online. We plan to focus more on the casual game market by publishing
quality casual games produced by other game companies. In addition, we are
planning to expand our publishing business. However, because casual games have
shorter lifecycles than MMORPGs, a lower success-rate and an unpredictable
popularity-cycle, we will continue to update our principal game title, Ragnarok
Online. Although results from updates at the end of 2004 and in the first half
of 2005 did not meet our expectations, we believe updates continue to help us
to retain existing users, attract new users, and maximize the lifecycle of
Ragnarok Online. Ragnarok Online is currently commercialized in 20 countries
worldwide. We continue to increase the number of commercialized markets for
Ragnarok Online and plan to launch into new countries in Latin America and
Europe.  We believe that our expansion into new markets will extend the
lifecycle of Ragnarok Online and contribute to the geographical diversification
of our revenue source. Concurrently, we are doing our best to introduce
commercialization of Requiem and Ragnarok Online 2 as scheduled.”


“As part of our effort to successfully compete into the casual game market, we
launched STYLIA, an online game portal in conjunction with our partner
Sonnori.  STYLIA is a game portal where users can enjoy all of the games and
additional services provided by STYLIA with a single character.  A user can use
memory cards to record levels and experience levels of each game, and the game
character selected by the user can be linked to different games and all
additional services.  Currently, we are conducting an in-house closed beta
testing, and plan to implement open beta testing service in October 2005.  In
addition, we plan to launch a new line of casual games line based on the
popular animation character, ‘Pucca’, which has been introduced in 72
countries.”

“During the second quarter we also took an important step towards reinforcing
our overseas distribution network by entering into a licensing agreement for
Ragnarok Online and our next in-house developed game with Shanda, an
interactive entertainment media company in China.  We are excited about
partnering with Shanda and believe that through our partnership we can
strengthen our presence in China, which is believed to be one of the fastest
growing online game markets. System transfer to Shanda was successfully
completed as of August 13, 2005 and Shanda is currently servicing Ragnarok
Online in China.”

Mr. Yoon concluded, “To build on our current titles, we are preparing for open
beta service of our second in-house developed MMORPG title, Requiem by the
first half of 2006.  Requiem is a hardcore MMORPG targeting mature users with a
more realistic storyline and shocking graphics compared to existing hardcore
games.  We are also on track to conduct open beta service of Ragnarok Online 2
by the second half of 2006, a dynamic 3D sequel to Ragnarok Online, also based
on Norse mythology and featuring cute characters similar to those in its
prequel.  However, the sequel will boast a brand new style of gaming experience
which distinguishes it from Ragnarok Online so as not to overlap with our
existing user base for Ragnarok Online.  We also expect to diversify our
revenue base by expanding and focusing on our game publishing business through
planned investments.”


Investor Conference Call / Webcast Details
Gravity will discuss its 2005 second quarter results on Monday, August 22, 2005
at 9:00 AM EST (10:00 PM, August 22 in Seoul).  The conference call-in number
is +1-201-689-8471. A live webcast of the conference call will be available on
Gravity’s website at www.gravity.co.kr.  A replay of the call will be
available immediately after the conclusion of the conference call and will be
accessible by dialing +1-201-612-7415 with account number 3055 and conference
ID number 164654, or through Gravity’s website at www.gravity.co.kr.

About GRAVITY Co. Ltd.
Based in Korea, Gravity is a developer and distributor of online games in
Japan, Taiwan, Thailand and Korea, among others. The Company's principal
product, Ragnarok Online, is currently commercially offered in 20 markets. For
more information visit www.gravity.co.kr.


Forward-Looking Statements:
Certain statements in this press release include forward-looking statements
within the meaning of the U.S. Private Securities Litigation Reform Act of
1995.  Forward-looking statements generally can 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.  All forward-looking statements
involve risks and uncertainties, including, but not limited to, the ability to
diversify revenue, ability to collect license fees and royalty payments from
overseas licensees and in a timely manner; ability to acquire, develop,
license, launch, market or operate commercially successful online games;
competition from companies that have greater financial resources; introduction
of new products into the marketplace by competitors; the ability to recruit and
retain quality employees as Gravity grows; and economic and political
conditions globally. Actual results may differ materially from those discussed
in, or implied by, forward-looking statements. The forward-looking statements
speak only as of the date of this release and Gravity assumes no duty to update
them to reflect new, changing or unanticipated events or circumstances.

CONTACTS For GRAVITY:

In Korea:
John C. Chung
GRAVITY Co. Ltd.
Tel: 82-2-3485-1002
chchung@gravity.co.kr

In the U.S.:
David Pasquale, EVP
The Ruth Group
Tel: +646-536-7006
dpasquale@theruthgroup.com

– Financial Tables and RO Statistics Attached –

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.

		GRAVITY Co., Ltd.

Date: 08/22/2005	By:	/s/John C. Chung
	Name:	John C. Chung
	Title:	Investor Relations Officer

EXHIBIT INDEX

Exhibit No.		Description

99.1		GRAVITY 2Q05 Financial Statements and RO Statistics

EX-99.1 2 exhibit1.htm EX-99.1 Exhibit EX-99.1

2Q05 Financial Statements


GRAVITY Co. Ltd.
Condensed Consolidated Statements of Operations(unaudited)
For the Three Months Ended Jun 30, 2004 and 2005, June 30, 2005
(In million of Korean Won and in thousands of US dollars, except share and per share data)
													For the three months ended (unaudited)
	Jun 30,			Jun 30,			Mar 31,			Mar 31,			Jun 30,			Jun 30,
	2004			2004			2005			2005			2005			2005
	KRW			US$			KRW			US$			KRW			US$
Total Net revenues		15,527			15,314			15,833			15,616			13,457			13,273
Subscription revenues		3,892			3,839			3,848			3,795			2,691			2,654
Royalties & License fees		11,056			10,904			11,163			11,010			9,602			9,471
Mobile revenues		124			122			174			172			343			338
Other revenues		455			449			648			639			821			810
Cost of revenues		2,333			2,301			3,525			3,477			3,688			3,637
Gross profit		13,194			13,013			12,308			12,139			9,769			9,636
Operating expenses :		3,231			3,188			4,375			4,315			6,634			6,544
General and administrative		2,223			2,193			2,865			2,826			3,388			3,342
Research and development		464			458			949			936			2,638			2,602
Advertising expenses		544			537			561			553			608			600
Operating income		9,963			9,825			7,933			7,824			3,135			3,092
Other income(expenses) :		(1,245	)		(1,228	)		(677	)		(667	)		(254	)		(252	)
Interest income		67			66			451			445			786			775
Gain on foreign currency transaction		78			77			671			662			732			722
Interest expense		(1,193	)		(1,177	)		(883	)		(871	)		(651	)		(642	)
Loss on foreign currency transaction		(197	)		(194	)		(916	)		(903	)		(1,121	)		(1,106	)
Income before income tax expenses		8,718			8,597			7,256			7,157			2,881			2,841
Income tax expenses		1,285			1,267			1,777			1,753			822			811
Income before minority interest & losses from equity method investee		7,433			7,330			5,479			5,404			2,059			2,030
Minority interest		15			15			—			0			—			—
Equity in loss of related joint venture		—			—			37			36			(117	)		(115	)
Net Income		7,448			7,345			5,516			5,440			1,942			1,915
Earnings per share
Basic and diluted (Based on ADS)		336		US$	0.33			219		US$	0.22			70		US$	0.07

• Our net income set forth above is net of our income tax expenses, which was calculated using a corporate income tax rate of 24.75% tax rate under the assumption that we may fail to be designated as a venture company under applicable Korean law and regulations. However, if we are successful in renewing our designation as a venture company again this year, we will be entitled to the 50% reduction in corporate income tax rate. If so, our tax rate will be 13.75% and our net income would be US$6.4 million for the first quarter of 2005 and US$2.2 million for the second quarter of 2005.

• The exchange rate applied is the Market Average Exchange Rate in Korea effective as of August 08, 2005, which was KRW 1,013.9 to US$1.00.


GRAVITY Co., Ltd.
Condensed Consolidated Balance Sheet(unaudited)
As of June 30, 2005
(In million of Korean Won and in thousands of US dollars, except share and per share data)
	March 31,				Jun 30,
	2005		2005		2005		2005
	KRW		US$		KRW		US$
ASSETS
Current assets :
Cash and cash equivalents		11,812		11,650		9,443		9,314
Short-term financial instruments		90,816		89,571		93,234		91,956
Accounts receivable		9,000		8,877		8,347		8,233
Current deferred income tax assets		2,443		2,410		2,652		2,616
Other current assets		5,299		5,226		4,139		4,082
Total current assets		119,370		117,734		117,815		116,201

Property and equipment, net		15,669		15,454		17,110		16,875
Leasehold and other deposits		4,246		4,188		4,729		4,664
Other non-current assets		2,948		2,907		4,724		4,659
TOTALASSETS		142,233		140,283		144,378		142,399

LIABILITIES&SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		2,732		2,695		3,258		3,213
Deferred Income		5,370		5,296		5,543		5,467
Current portion of long-term debt		803		792		272		268
Accrued interest		263		259		213		210
Income taxes payable		486		479		440		434
Other current liabilities		918		906		950		937
Total Current Liabilities		10,572		10,427		10,676		10,529

Long term deferred income		3,756		3,705		3,282		3,237
Accrued severance benefits		1,022		1,008		1,221		1,204
Other non-current liabilities		2,009		1,981		2,170		2,141
TOTAL LIABILITIES		17,359		17,121		17,349		17,111
Total Shareholders’ Equity		124,874		123,162		127,029		125,288
TOTAL LIABILITIES&SHAREHOLDERS’ EQUITY		142,233		140,283		144,378		142,399

*Above balance sheet was stated based on the rate of 24.75% not applying 50% tax reduction as we are not certain if we will satisfy the law and regulations for venture company designation. However, if we are successful in renewing our designation as a venture company again this year, we will be entitled to the 50% reduction in corporate income tax rate and our tax rate will be 13.75%.

• The exchange rate applied is the Market Average Exchange Rate in Korea effective as of August 08, 2005, which was KRW 1,013.9 to US$1.00.

RO Statistics
(As of June 30, 2005)


		3Q 02		4Q 02		1Q 03		2Q 03		3Q 03		4Q 03		1Q 04		2Q 04		3Q 04		4Q 04		1Q 05		2Q05
Korea	# of server sets		10		10		10		10		10		10		10		10		11		11		11		11
PCU			24,966		31,294		28,598		29,103		33,491		27,931		30,059		22,051		26,508		20,587		22,403		15,784
ACU			13,880		14,930		15,758		14,687		17,554		14,430		15,439		11,236		13,023		10,179		10,569		7,153
Japan	# of server sets				7		7		7		12		12		13		13		19		19		20		24
PCU					56,033		58,785		75,582		75,026		83,880		89,111		101,983		100,503		104,559		106,195		96,119
Taiwan/Hong Kong	# of server sets				14		20		22		30		42		48		52		59		61		61		61
PCU					112,823		158,695		184,436		206,904		250,030		342,228		339,843		352,592		325,351		344,534		326,848
Thailand	# of server sets						7		8		13		15		17		17		19		21		22		22
PCU							65,100		60,600		66,700		72,200		82,385		86,133		107,798		130,148		116,672		111,959
China	# of server sets						22		23		26		30		31		31		34		37		36		36
PCU									112,844		125,183		118,257		147,059		116,208		100,002		78,320		76,993		64,970
Philippines	# of server sets										2		4		7		7		7		8		9		9
PCU											15,186		30,108		37,441		38,440		36,436		50,816		54,533		45,805
Malaysia/Singapore	# of server sets																7		8		9		11		11
PCU																	28,614		31,648		30,234		29,080		24,956
Indonesia	# of server sets												2		4		4		5		5		5		5
PCU													10,854		16,879		20,726		26,881		26,053		21,390		23,415
USA/Canada	# of server sets										3		3		3		4		4		4		4		4
PCU											9,000		7,484		9,456		11,230		12,965		10,011		9,190		8,997
Europe(5 countries)*	# of server sets																2		3		3		3		3
PCU																	4,125		5,818		5,972		7,321		7,364
Australia/New Zealand	# of server sets																				1		2		2
PCU																					1,083		951		999
Brazil	# of server sets																						3		3
PCU																							8,913		16,033

* Europe (5 countries) represents Germany, Australia, Switzerland, Italy and Turkey.

GRAVITY Co., Ltd. ———————————————————————————————————
(Translation of registrant’s name into English)

Shin-Gu Building, 620-2 Shinsa-Dong, Gangnam-Gu, Seoul, 135-894, 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: [x] Form 20-F [ ] 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): [ ]

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: [ ] Yes [x] No