EX-99.3 4 grvy-ex993_9.htm EX-99.3 grvy-ex993_9.htm

Exhibit 99.3

2018 Annual Business Report

Table of Contents

 

1.

Business Overview

 

(1)

Business Results and Financial Statements for the Past Three Fiscal Years (2016 – 2018)

 

2.

Company Overview

 

(1)

Registered Purpose of the Company

 

(2)

Description of Primary Business

 

(3)

Problems Confronting the Company  

 

(4)

Business Offices and Game Development Facilities

 

(5)

Stock

 

(6)

Debenture

 

(7)

Major Share holders

 

(8)

Investment in Other Companies

 

(9)

Directors Holding Concurrent Positions

 

(10)

Material Transactions with Related Parties

 

(11)

Significant Creditors

 

(12)

Employees

 

(13)

Directors and Auditors

 

(14)

Material Events after the End of Fiscal Year 2017

 

3.

Separate Financial Statements as of and for the fiscal years ended December 31, 2018 and December 31, 2017

 

(1)

Financial Positions

 

(2)

Comprehensive Income

 

(3)

Statements of Appropriation of Retained earnings

 

(4)

Statements of Changes in Equity

 

(5)

Statements of Cash Flows

 

 

4.

Consolidated Financial Statements as of and for the fiscal years ended December 31, 2018 and December 31, 2017

 

(1)

Consolidated Financial Positions

 

(2)

Consolidated Comprehensive Income

 

(3)

Consolidated Statements of Changes in Equity

 

(4)

Consolidated Statements of Cash Flows

 

 


1. Business Overview

 

(1)

Business Results and Financial Statements for the Past Three Fiscal Years (2016 – 2018)

 

 

 

 

 

 

 

(In thousands of Korean Won)

 

Category

 

2018

 

 

2017

 

 

2016

 

Current assets

 

 

83,385,874

 

 

 

101,697,494

 

 

 

48,052,889

 

• Quick assets

 

 

83,385,874

 

 

 

101,697,494

 

 

 

48,052,889

 

Non-current assets

 

 

22,618,902

 

 

 

9,720,122

 

 

 

4,597,662

 

• Investment asset

 

 

9,464,638

 

 

 

1,783,228

 

 

 

1,783,228

 

• Tangible asset

 

 

882,089

 

 

 

476,027

 

 

 

320,560

 

• Intangible asset

 

 

1,572,714

 

 

 

988,855

 

 

 

160,873

 

• Other non-current asset

 

 

10,699,461

 

 

 

6,472,012

 

 

 

2,333,001

 

Total assets

 

 

106,004,776

 

 

 

111,417,616

 

 

 

52,650,551

 

Current liabilities

 

 

24,548,267

 

 

 

59,753,549

 

 

 

16,499,905

 

Non-current liabilities

 

 

3,668,390

 

 

 

6,630,636

 

 

 

3,726,148

 

Total liabilities

 

 

28,216,657

 

 

 

66,384,185

 

 

 

20,226,053

 

Share capital

 

 

3,474,450

 

 

 

3,474,450

 

 

 

3,474,450

 

Capital surplus

 

 

27,482,683

 

 

 

27,482,683

 

 

 

28,219,282

 

Retained earnings (Accumulated deficit)

 

 

47,101,922

 

 

 

14,424,777

 

 

 

705,690

 

Other components of equity

 

 

(270,936

)

 

 

(348,479

)

 

 

25,076

 

Total equity

 

 

77,788,119

 

 

 

45,033,431

 

 

 

32,424,498

 

Revenues

 

 

198,697,511

 

 

 

119,422,554

 

 

 

34,960,528

 

Operating profit (loss)

 

 

40,450,700

 

 

 

13,675,573

 

 

 

5,436,475

 

Profit (loss) before income tax

 

 

35,139,350

 

 

 

13,922,239

 

 

 

2,994,179

 

Net profit (loss)

 

 

32,677,145

 

 

 

12,982,487

 

 

 

(225,724

)

 

* The Company has adopted IFRS adopted by the Republic of Korea for the annual period beginning on January 1, 2017. In accordance with First-time adoption of IFRS, the Company’s transition date to IFRS is January 1, 2016.

 

2. Company Overview

 

(1)

Registered Purpose of the Company

 

1)

Software consulting, development and supply

 

2)

Development and sales of software and CD

 

3)

Information-technology-related software development

 

4)

Production, development, distribution, sales and consulting of digital contents, including game software, as well as corresponding licensing

 

5)

Online network game services

 

6)

Applied package-related software development

 

7)

Production and sales of computer programs

 

8)

Import and export of software

 

9)

E-commerce

 

10)

Character development business

 

11)

Animation business

 

12)

Real estate leasing

 

13)

Service-area restaurant business

 

14)

Media-related business

 

15)

Printing and publication

 

16)

Record & video production and distribution

 

17)

Any other businesses incidental to the above businesses


 

(2)

Description of Primary Business

Gravity Co., Ltd. (the “Company”) is the developer of Ragnarok Online, an MMORPG, which was launched in August 2002 and is commercially offered in 81 markets worldwide, including Korea, Japan, Taiwan, Thailand, Southeast Asia, the United States and Europe as of December 31, 2018.

Having strong global network and success from Ragnarok Online, the Company is expanding its business areas from online game development and publishing to cultural contents business based on various platforms, such as development of games for smartphones, console and IPTV, and animation and game character merchandising.

In addition, in order to strengthen its presence in the overseas markets, the Company has subsidiaries in the United States and Japan. The Company also has subsidiaries in Korea, such as NeoCyon, Inc. In November 2016, the company established a branch office in Taiwan and in April 2018, the company established a subsidiary in Taiwan.

 

(3)

Problems Confronting the Company

Since the Company operates in a highly competitive industry, the Company is making every effort to enhance its development capacity and to maintain and increase its market share in overseas markets to preserve its competitive advantage.

The Company is in need of diversified revenue structure, continuous global market expansion and new business initiatives for sustainable revenue growth. The Company is doing its best diversely to expand new markets, to publish mobile games, to develop mobile games and to do IP licensing business.

 

 

(4)

Business Offices and Game Development Facilities

 

Classification

 

Location

Head Office

 

(Nuritkum Square R&D Tower) 15F, 396 World Cup buk-ro,

Mapo-gu, Seoul 121-795, Korea

Game Development Facilities

 

(Nuritkum Square R&D Tower) 15F, 396 World Cup buk-ro,

Mapo-gu, Seoul 121-795, Korea

 

 

(5)

Stock

 

1)

Total number of shares

 

 

 

 

 

(As of December 31, 2018)

Total number of shares authorized

 

Total number of shares issued

 

Total number of shares unissued

40,000,000 shares

 

6,948,900 shares

 

33,051,100 shares

 

 

2)

Type of Stock issued (Par value per share: KRW 500)

 

(As of December 31, 2018)

Type

 

Number of shares

 

Total par value

 

%

 

Registered common stock

 

6,948,900 shares

 

KRW 3,474,450,000

 

100%

 

 

 

(6)

Debenture: None.

 

 

(7)

Major Shareholders

 

 

 

 

 

 

 

(As of December 31, 2018)

 

Shareholder

 

Shares

owned

 

 

%

 

 

Transaction with

the Company

 

GungHo Online Entertainment, Inc.

 

 

4,121,737

 

 

 

59.31

 

 

*

 

Others

 

 

2,827,163

 

 

 

40.69

 

 

 

 

Total

 

 

6,948,900

 

 

 

100.00

 

 

 

 

 

* Refer to “(10) Material Transactions with Related Parties.”

 


 

(8)

Investment in Other Companies

 

 

 

 

 

 

 

 

 

(As of December 31, 2018)

Companies

 

Relationship with the Company

Name

 

Location

 

Common Stock

 

Main business

 

Shares owned

 

 

%

 

 

Relationship

Gravity Interactive, Inc.

 

California, US

 

USD 14,540,000

 

Gaming Service

 

 

290,000

 

 

 

100.00

%

 

Subsidiary

Gravity Entertainment Corp.

 

Tokyo, Japan

 

JPY 167,850,000

 

Animation

making/service

 

 

1,000

 

 

 

100.00

%

 

Subsidiary

NeoCyon, Inc.

 

Seoul, Korea

 

KRW 2,964,000,000

 

Mobile game

development

 

 

585,300

 

 

 

98.73

%

 

Subsidiary

Gravity Communications Co.,Ltd

 

Taipei. Taiwan

 

NTD 155,100,000

 

Online and Mobile Game Service

 

 

15,510,000

 

 

 

100.00

%

 

Subsidiary

 

 

(9)

Directors Holding Concurrent Positions

 

 

 

Company

 

Name

 

Name

 

Position

 

Responsibility

 

Hyun Chul Park

 

Gravity Co., Ltd.

 

CEO

 

Overall management

 

 

 

NeoCyon, Inc.

 

Executive Director

 

Chief Operating Officer

 

 

 

Gravity Communications Co.,Ltd

 

Executive Director

 

 

 

 

 

Gravity Interactive, Inc.

 

Executive Director

 

 

 

Yoshinori Kitamura

 

Gravity Co., Ltd.

 

Executive Director

 

Chief Operating Officer

 

 

 

Gravity Interactive, Inc.

 

CEO

 

Overall management

 

 

 

Gravity Entertainment Corp.

 

CEO

 

Overall management

 

 

 

NeoCyon, Inc.

 

CEO

 

Overall management

 

 

 

Gravity Communications Co.,Ltd

 

CEO

 

Overall management

 

 

 

(10)

Material Transactions with Related Parties

 

1)

Sales and purchases

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands of Korean Won)

 

 

 

 

 

2018

 

 

2017

 

Nature

 

Related companies

 

Sales

 

 

Purchases

 

 

Sales

 

 

Purchase

 

Parent company

 

GungHo Online Entertainment, Inc.

 

 

9,538,157

 

 

-

 

 

 

9,488,821

 

 

 

35,912

 

Subsidiaries

 

Gravity Interactive, Inc.

 

 

15,068,304

 

 

 

2,937

 

 

 

918,141

 

 

-

 

 

 

Gravity Entertainment Corp.

 

-

 

 

 

158,025

 

 

-

 

 

-

 

 

 

NeoCyon, Inc.

 

 

74,931

 

 

 

5,392,633

 

 

 

462,360

 

 

 

4,901,306

 

 

 

Gravity Games Corp.

 

 

255

 

 

 

2,635

 

 

 

985

 

 

 

218,600

 

 

 

Gravity Communications Co.,Ltd

 

 

741,076

 

 

 

13,845

 

 

-

 

 

-

 

 

 

Total

 

 

25,422,723

 

 

 

5,570,075

 

 

 

10,870,307

 

 

 

5,155,818

 

 

 

2)

Receivables and Payables

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands of Korean Won)

 

 

 

 

 

2018

 

 

2017

 

Nature

 

Related companies

 

Receivables

 

 

Payables

 

 

Receivables

 

 

Payables

 

Parent company

 

GungHo Online Entertainment, Inc.

 

 

831,478

 

 

 

2,981

 

 

 

629,728

 

 

 

2,792

 

 

 

Gravity Interactive, Inc.

 

 

14,911,497

 

 

 

215,381

 

 

 

7,975,591

 

 

 

5

 

Subsidiaries

 

Gravity Entertainment Corp.

 

-

 

 

 

139,984

 

 

-

 

 

-

 

 

 

NeoCyon. Inc.

 

 

851,615

 

 

 

660,630

 

 

 

1,691,503

 

 

 

220,279

 

 

 

Gravity Games Corp.

 

 

-

 

 

-

 

 

 

3,873,051

 

 

 

4,396

 

 

 

Gravity Communications Co.,Ltd.

 

 

590,891

 

 

 

13,396

 

 

-

 

 

-

 

 

 

Total

 

 

17,185,481

 

 

 

1,032,372

 

 

 

14,169,873

 

 

 

227,472

 


 

 

(11)

Significant Creditors: The Company had no significant creditors as of December 31, 2018.

 

 

(12)

Employees

 

 

 

 

 

 

 

 

 

(As of December 31, 2018)

Category

 

Directors & Officers

 

Developers

 

Marketing/Operating

 

Finance/Administration

 

Total

Employees

 

9

 

149

 

58

 

33

 

249

 

 

(13)

Directors and Auditors

(As of December 31, 2018)

Name

 

Position

 

Main work

 

 

Transaction with the

Company

 

Hyun Chul Park

 

CEO

 

Chief Executive Officer

 

 

 

 

Yoshinori Kitamura

 

Executive Director

 

Chief Operating Officer

 

 

 

 

Kazuki Morishita

 

Executive Director

 

 

 

 

 

 

Kazuya Sakai

 

Executive Director

 

 

 

 

 

 

Jong Gyu Hwang

 

Independent Director

 

Member of audit committee

 

 

 

 

Doo Hyun Ryu

 

Independent Director

 

Member of audit committee

 

 

 

 

Jung Yoo

 

Independent Director

 

Member of audit committee

 

 

 

 

 

 

(14)

Material Events after the end of fiscal year 2018:

Gravity established a subsidiary, Gravity Game Tech. Co., Ltd in Thailand on January 29, 2019 and a Joint Venture in Indonesia, named as Gravity Game Link Co., Ltd on February 7, 2019.


3. Separate Financial Statements as of and for the fiscal year ended December 31, 2018 and December 31, 2017

 

(1)

Statements of Financial Position

 

GRAVITY CO., LTD.

(In thousands of Korean Won)

 

 

 

December 31, 2018

 

 

December 31, 2017

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

83,385,874

 

 

 

 

 

 

 

101,697,494

 

Cash and cash equivalents

 

 

46,598,874

 

 

 

 

 

 

 

34,990,206

 

 

 

 

 

Short-term financial instruments

 

 

9,500,000

 

 

 

 

 

 

 

22,500,000

 

 

 

 

 

Accounts receivable, net

 

 

24,659,595

 

 

 

 

 

 

 

38,890,644

 

 

 

 

 

Other receivable, net

 

 

469,710

 

 

 

 

 

 

 

704,664

 

 

 

 

 

Prepaid expenses

 

 

618,219

 

 

 

 

 

 

 

2,753,700

 

 

 

 

 

Other current assets

 

 

1,539,476

 

 

 

 

 

 

 

1,858,280

 

 

 

 

 

Non-current Assets

 

 

 

 

 

 

22,618,902

 

 

 

 

 

 

 

9,720,122

 

Investments in subsidiaries

 

 

9,464,638

 

 

 

 

 

 

 

1,783,228

 

 

 

 

 

Property and equipment, net

 

 

882,089

 

 

 

 

 

 

 

476,027

 

 

 

 

 

Intangible assets, net

 

 

1,572,714

 

 

 

 

 

 

 

988,855

 

 

 

 

 

Deferred tax assets

 

 

7,413,106

 

 

 

 

 

 

 

3,036,165

 

 

 

 

 

Other non-current financial assets

 

 

1,405,988

 

 

 

 

 

 

 

1,357,272

 

 

 

 

 

Other non-current assets

 

 

1,880,367

 

 

 

 

 

 

 

2,078,575

 

 

 

 

 

Total assets

 

 

 

 

 

 

106,004,776

 

 

 

 

 

 

 

111,417,616

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

24,548,267

 

 

 

 

 

 

 

59,753,549

 

Accounts payables

 

 

14,440,762

 

 

 

 

 

 

 

42,150,983

 

 

 

 

 

Deferred income

 

 

6,751,978

 

 

 

 

 

 

 

14,141,070

 

 

 

 

 

Withholdings

 

 

1,240,957

 

 

 

 

 

 

 

1,348,968

 

 

 

 

 

Accrued expenses

 

 

564,621

 

 

 

 

 

 

 

343,690

 

 

 

 

 

Income tax payable

 

 

1,390,798

 

 

 

 

 

 

 

1,628,368

 

 

 

 

 

Other current liabilities

 

 

159,151

 

 

 

 

 

 

 

140,470

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

3,668,390

 

 

 

 

 

 

 

6,630,636

 

Long-term deferred income

 

 

3,362,537

 

 

 

 

 

 

 

6,335,827

 

 

 

 

 

Other non-current liabilities

 

 

305,853

 

 

 

 

 

 

 

294,809

 

 

 

 

 

Total liabilities

 

 

 

 

 

 

28,216,657

 

 

 

 

 

 

 

66,384,185

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share capital

 

 

 

 

 

 

3,474,450

 

 

 

 

 

 

 

3,474,450

 

Common shares

 

 

3,474,450

 

 

 

 

 

 

 

3,474,450

 

 

 

 

 

Capital surplus

 

 

 

 

 

 

27,482,683

 

 

 

 

 

 

 

27,482,683

 

Other components of equity

 

 

 

 

 

 

(270,936

)

 

 

 

 

 

 

(348,479

)

Retained earnings

 

 

 

 

 

 

47,101,922

 

 

 

 

 

 

 

14,424,777

 

Total equity

 

 

 

 

 

 

77,788,119

 

 

 

 

 

 

 

45,033,431

 

Total liabilities and equity

 

 

 

 

 

 

106,004,776

 

 

 

 

 

 

 

111,417,616

 

 

 


 

(2)

Statements of Comprehensive Income

 

GRAVITY CO., LTD.

(In thousands of Korean Won)

 

  

 

2018

 

 

2017

 

Revenues

 

 

 

 

 

 

198,697,511

 

 

 

 

 

 

 

119,422,554

 

Online games-subscription revenue

 

 

18,891,718

 

 

 

 

 

 

 

31,533,084

 

 

 

 

 

Online games-royalties and license fees

 

 

15,378,752

 

 

 

 

 

 

 

17,069,208

 

 

 

 

 

Mobile games

 

 

164,303,242

 

 

 

 

 

 

 

70,634,135

 

 

 

 

 

Other revenue

 

 

123,799

 

 

 

 

 

 

 

186,127

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

123,500,203

 

 

 

 

 

 

 

75,972,759

 

Gross profit

 

 

 

 

 

 

75,197,308

 

 

 

 

 

 

 

43,449,795

 

Selling, general and administrative expenses

 

 

 

 

 

 

34,746,608

 

 

 

 

 

 

 

29,774,222

 

Operating Profit

 

 

 

 

 

 

40,450,700

 

 

 

 

 

 

 

13,675,573

 

Non-operating income and expenses

 

 

 

 

 

 

(5,311,350

)

 

 

 

 

 

 

246,666

 

Finance income

 

 

1,075,820

 

 

 

 

 

 

 

556,997

 

 

 

 

 

Finance costs

 

 

(79,822

)

 

 

 

 

 

 

(186,723

)

 

 

 

 

Other non-operating income

 

 

5,803,645

 

 

 

 

 

 

 

1,601,880

 

 

 

 

 

Other non-operating expenses

 

 

(12,110,993

)

 

 

 

 

 

 

(1,725,488

)

 

 

 

 

Profit before income tax expense

 

 

 

 

 

 

35,139,350

 

 

 

 

 

 

 

13,922,239

 

Income tax expense

 

 

 

 

 

 

2,462,205

 

 

 

 

 

 

 

939,752

 

Profit for the year

 

 

 

 

 

 

32,677,145

 

 

 

 

 

 

 

12,982,487

 

Other comprehensive income

 

 

 

 

 

 

77,543

 

 

 

 

 

 

 

(373,554

)

Items that may be subsequently reclassified to income or loss

 

 

 

 

 

 

77,753

 

 

 

 

 

 

 

(373,554

)

Foreign currency translation adjustments

 

 

77,543

 

 

 

 

 

 

 

(373,554

)

 

 

 

 

Total comprehensive income for the year

 

 

 

 

 

 

32,754,688

 

 

 

 

 

 

 

12,608,933

 

 

 

 

 


 

(3)

Statements of Appropriation of Retained earnings

 

GRAVITY CO., LTD.

(In thousands of Korean Won)

 

 

 

2018

 

 

2017

 

 

 

Confirmed disposition date:

March 29, 2019

 

 

Confirmed appropriation date:

March 30, 2018

 

Retained earnings before appropriation

 

 

 

 

 

 

47,101,922

 

 

 

 

 

 

 

14,424,777

 

Unappropriated retained earnings carried over

   from prior year(*1)

 

 

14,424,777

 

 

 

 

 

 

 

1,442,290

 

 

 

 

 

Profit for the year

 

 

32,677,145

 

 

 

 

 

 

 

12,982,487

 

 

 

 

 

Appropriation of retained earnings

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

Disposition of accumulated deficit with share

   premium

 

 

-

 

 

 

 

 

 

 

-

 

 

 

 

 

Unappropriated retained earnings carried forwards to subsequent year

 

 

 

 

 

 

47,101,922

 

 

 

 

 

 

 

14,424,777

 

 

(*1) The above comparative statement of appropriation of retained earnings for the prior year reflects the conversion effect of adopting Korean IFRS. Accordingly, the statement of appropriation of retained earnings under the previous Korean Accounting Standards for Non-Public Entities in Korea disposed at March 30, 2017 have differences with the above comparative statement.


 

(4)

Statements of Changes in Equity

 

GRAVITY CO., LTD.

(In thousands of Korean Won)

 

 

 

Share capital

 

 

Capital Surplus

 

 

Other

components

of equity

 

 

Retained

Earnings

 

 

Total

 

Balance at January 1, 2017

 

 

3,474,450

 

 

 

28,219,282

 

 

 

25,075

 

 

 

705,691

 

 

 

32,424,498

 

Profit for the year

 

 

 

 

 

 

 

 

 

 

 

12,982,487

 

 

 

12,982,487

 

Disposition of deficit with

   capital surplus

 

 

 

 

 

(736,599

)

 

 

 

 

 

736,599

 

 

 

 

Foreign currency translation

   adjustments

 

 

 

 

 

 

 

 

(373,554

)

 

 

 

 

 

 

(373,554

)

Balance at December 31, 2017

 

 

3,474,450

 

 

 

27,482,683

 

 

 

(348,479

)

 

 

14,424,777

 

 

 

45,033,431

 

Balance at January 1, 2018

 

 

3,474,450

 

 

 

27,482,683

 

 

 

(348,479

)

 

 

14,424,777

 

 

 

45,033,431

 

Profit for the year

 

 

 

 

 

 

 

 

 

 

 

 

32,677,145

 

 

 

32,677,145

 

Foreign currency translation

   adjustments

 

 

 

 

 

 

 

 

77,543

 

 

 

 

 

 

77,543

 

Balance at December 31, 2018

 

 

3,474,450

 

 

 

27,482,683

 

 

 

(270,936

)

 

 

47,101,922

 

 

 

77,788,119

 

 


 

(5)

Statements of Cash Flows

 

GRAVITY CO., LTD.

(In thousands of Korean Won)

 

 

 

2018

 

 

2017

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

 

32,677,145

 

 

 

 

 

 

 

12,982,487

 

 

 

 

 

Adjustments

 

 

6,558,769

 

 

 

 

 

 

 

2,392,360

 

 

 

 

 

Changes in operating assets and liabilities

 

 

(19,018,839

)