EX-99.3 4 exhibit993.htm EX-99.3 Document

Exhibit 99.3

2021 Annual Business Report


Table of Contents

1.Business Overview
(1)Business Results and Financial Statements for the Past Three Fiscal Years (2019 – 2021)

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 Shareholders
(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 2021

3. Consolidated Financial Statements as of and for the fiscal years ended December 31, 2021 and 2020
(1)Consolidated Financial Positions
(2)Consolidated Comprehensive Income
(3)Consolidated Statements of Changes in Equity
(4)Consolidated Statements of Cash Flows

4. Separate Financial Statements as of and for the fiscal years ended December 31, 2021 and 2020
(1)Financial Positions
(2)Comprehensive Income
(3)Statements of Appropriation of Retained earnings
(4)Statements of Changes in Equity
(5)Statements of Cash Flows







1. Business Overview
(1)Business Results and Financial Statements for the Past Three Fiscal Years (2019 – 2021)

(In thousands of Korean Won)
Category202120202019
Current assets219,505,575 164,602,523100,881,643
• Quick assets219,505,575164,602,523100,881,643
Non-current assets39,159,99828,537,79626,687,368
• Investment asset21,679,84514,958,64112,393,218
• Property and Equipment, net5,608,3203,176,8582,855,143
• Intangible asset3,228,6352,663,8572,025,543
• Other non-current asset8,643,1987,738,4409,413,464
Total assets258,665,573193,140,319127,569,011
Current liabilities48,803,83248,824,37623,916,264
Non-current liabilities4,184,6483,370,7542,151,426
Total liabilities52,988,48052,195,13026,067,690
Share capital3,474,4503,474,4503,474,450
Capital surplus27,482,68327,482,68327,482,683
Other components of equity-929(26,017)
Retained earnings174,719,960109,987,12770,570,205
Total equity205,677,093140,945,189101,501,321
Revenues288,258,376228,996,069133,151,813
Operating income78,174,46756,675,04834,546,553
Income before income tax92,546,06455,050,47635,304,130
Net income64,732,83339,416,92223,468,283

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 91 markets worldwide, including Korea, Japan, Taiwan, Thailand, Southeast Asia, the United States and Europe as of December 31, 2021.



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, the Company has subsidiaries, such as Gravity NeoCyon, Inc. in Korea, Gravity Interactive, Inc. in the United States, Gravity Communications Co., Ltd in Taiwan. Gravity Game Tech Co., Ltd. in Bangkok, Thailand, PT Gravity Game Link in Jakarta, Indonesia and Gravity Game Arise Co., Ltd. in Tokyo, Japan. In order to strengthen its presence in the overseas markets, the company was established subsidiaries in Singapore on January 4, 2021 and in Hong Kong on January 5, 2022.

(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
ClassificationLocation
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, 2021)
Total number of shares authorizedTotal number of shares issuedTotal number of shares unissued
40,000,000 shares6,948,900 shares33,051,100 shares

2) Type of Stock issued (Par value per share: KRW 500)
(As of December 31, 2021)
TypeNumber of sharesTotal par value%
Registered common stock6,948,900 sharesKRW 3,474,450,000100 %

(6)Debenture: None.

(7)Major Shareholders
(As of December 31, 2021)
ShareholderShares Owned%Transaction with the Company
GungHo Online Entertainment, Inc.4,121,73759.31
-
Others2,827,16340.69-
Total6,948,900100.00-




(8)Investment in Other Companies

(As of December 31, 2021)
CompaniesRelationship with the Company
NameLocationCommon StockMain businessShares owned%Relationship
Gravity Interactive, Inc.California, USAUSD 14,500,000Online and Mobile Game Service290,000
100.00%
Subsidiary
Gravity NeoCyon, Inc.Seoul, KoreaKRW 3,972,200,000Mobile game development794,440
99.53%
Subsidiary
Gravity Communications Co., Ltd.Taipei, TaiwanNTD 155,100,000Online and Mobile Game Service15,510,000
100.00%
Subsidiary
PT Gravity Game Link
Jakarta, Indonesia
IDR 30,254,700,000Online and Mobile Game Service3,025,470
70.00%
Subsidiary
Gravity Game Tech Co., Ltd.Bangkok, ThailandTHB 88,049,940 Online and Mobile Game Service8,804,994
100.00%
Subsidiary
Gravity Game Arise Co., Ltd.Tokyo, JapanJPY 150,000,000 Online and Mobile Game Service15,000
100.00%
Subsidiary
Gravity Game Hub PTE., Ltd.(*1)SingaporeSGD 3,359,991Online and Mobile Game Service336,000
100.00%
Subsidiary
(*1) Gravity Game Hub PTE., Ltd. was founded during 2021 and has been included as a subsidiary.

(9)Directors Holding Concurrent Positions
NameCompany
NamePositionResponsibility
Hyun Chul ParkGravity Co., Ltd.CEOOverall management
Gravity NeoCyon, Inc.Executive DirectorChief Operating Officer
Gravity Communications Co., Ltd.Executive Director-
Gravity Interactive, Inc.Executive Director-
Yoshinori KitamuraGravity Co., Ltd.Executive DirectorChief Operating Officer
Gravity Interactive, Inc.CEOOverall management
Gravity NeoCyon, Inc.CEOOverall management
Gravity Communications Co., Ltd.CEOOverall management
PT Gravity Game LinkCEOOverall management
Gravity Game Tech Co., Ltd.CEOOverall management
Gravity Game Arise Co., Ltd.CEOOverall management
Gravity Game Hub PTE., Ltd.CEOOverall management
Heung Gon KimGravity Co., Ltd.Executive DirectorChief Financial Officer
Gravity NeoCyon, Inc.Executive DirectorChief Financial Officer
Gravity Interactive, Inc.Vice President-
Gravity Communications Co., Ltd.Executive DirectorChief Financial Officer
PT Gravity Game LinkExecutive Director-
Gravity Game Tech Co., Ltd.Executive Director-
Gravity Game Arise Co., Ltd.Executive Director-
Gravity Game Hub PTE., Ltd.Executive DirectorChief Financial Officer




(10)Material Transactions with Related Parties
① Sales and purchases
(In thousands of Korean Won)
NatureRelated Companies20212020
SalesPurchasesSalesPurchase
Parent companyGungHo Online Entertainment, Inc.35,489,01057,14420,970,472211,348
SubsidiariesGravity Interactive, Inc. (*1)14,838,616643,32422,952,182859
Gravity NeoCyon, Inc.327,3296,734,567301,6727,504,107
Gravity Communications Co., Ltd.(*2)18,682,5915,676,8907,779,9179,855,435
PT Gravity Game Link298,864157,6001,535,46628,007
Gravity Game Tech Co., Ltd.6,769,77429,5349,662,91954
Gravity Game Arise Co., Ltd.-3,246,517-2,478,752
Total76,406,18416,545,57663,202,62820,078,562
(*1) Revenue include dividend income of W2,382,800 thousand from Gravity Interactive, Inc. in 2020.
(*2) Revenue include dividend income of W11,326,984 thousand from Gravity Communications Co., Ltd. in 2021.

② Receivables and Payables
(In thousands of Korean Won)
NatureRelated Companies20212020
ReceivablesPayablesReceivablesPayables
Parent companyGungHo Online Entertainment, Inc.5,051,0137,4482,449,5064,924
SubsidiariesGravity Interactive, Inc.3,538,932405,3593,845,373-
Gravity NeoCyon, Inc.822,0091,550,411349,634862,702
Gravity Communications Co., Ltd.1,179,228
1,283,908
1,021,4371,296,845
PT Gravity Game Link35,8249,411442,92714,899
Gravity Game Tech Co., Ltd.1,439,384181,043966,402-
Gravity Game Arise Co., Ltd.310,4121,106,765922,3601,461,626
Gravity Game Hub PTE., Ltd.96,628---
Total12,473,4304,544,3459,997,6393,640,996

(11)Significant Creditors: The Company had no significant creditors as of December 31, 2021.

(12)Employees
(As of December 31, 2021)
CategoryDirectors & OfficersDevelopersMarketing/OperatingFinance/AdministrationTotal
Employees112087046335

(13)Directors and Auditors
(As of December 31, 2021)
NamePositionMain workTransaction with the Company
Hyun Chul ParkCEOChief Executive Officer-
Yoshinori KitamuraExecutive Director
Chief Operating Officer
-
Heung Gon KimExecutive DirectorChief Financial Officer-
Kazuki MorishitaExecutive Director--
Kazuya SakaiExecutive Director--
Jung YooIndependent DirectorMember of audit committee-
Yong Seon KwonIndependent DirectorMember of audit committee-
Kee Woong ParkIndependent DirectorMember of audit committee-

(14)Material Events after the end of fiscal year 2021: Gravity Game Vision Limited, a subsidiary in Hong Kong, was established on January 5, 2022.



3. Consolidated Financial Statements as of and for the fiscal year ended December 31, 2021 and December 31, 2020
(1)Consolidated Statements of Financial Position
GRAVITY CO., LTD. (In thousands of Korean Won)
December 31, 2021December 31, 2020
Assets
Current Assets
 306,134,920246,585,717
Cash and cash equivalents
99,104,943110,632,482
Short-term financial instruments
148,000,00071,000,000
Accounts receivable, net
52,614,59559,761,256
Other receivable, net
1,080,5168,333
Prepaid expenses
3,164,0752,237,708
Other current financial assets
598,099817,825
Other current assets
1,572,6922,128,113
Non-current Assets
 21,391,40318,786,651
Property and equipment, net
11,337,9997,695,046
Intangible assets, net
3,342,0283,362,879
Other non-current financial assets
3,018,823 1,323,865
Other non-current assets
1,973,064 2,814,792
Deferred tax assets
1,719,489 3,590,069
Total assets 327,526,323265,372,368
Liabilities
Current liabilities
 73,997,47582,720,222
Account payables
41,199,40152,687,616
Deferred revenue
13,480,51813,692,283
Withholdings
3,596,4032,851,636
Accrued expenses
1,484,0191,364,753
Income tax payable
10,628,9819,469,833
Other current liabilities
3,608,1532,654,101
Non-current liabilities
 6,687,9905,304,130
Long-term account payables
729,173 1,402,466
Long-term deferred revenue
98,226 101,015
Other non-current liabilities
5,860,591 3,800,649
Total liabilities 80,685,46588,024,352
Equity attributable to owners of the Parent Company 246,070,907 176,910,875
Share capital
3,474,450 3,474,450
Common shares
3,474,450 3,474,450 
Capital surplus
27,098,26427,109,803
Other components of equity
2,180,388(1,044,533)
Retained earnings
213,317,805147,371,155
Non-controlling interest769,951437,141
Total equity246,840,858177,348,016
Total liabilities and equity327,526,323265,372,368



(2)Consolidated Statements of Comprehensive Income
GRAVITY CO., LTD. (In thousands of Korean Won)
20212020
Revenues 413,937,974405,953,021
Online games
75,370,395 89,545,060
Mobile games
320,163,555 298,323,908
Other revenue
18,404,024 18,084,053
Cost of revenues 224,172,902239,044,923
Gross profit 189,765,072166,908,098
Selling, general and administrative expenses
 92,201,17777,433,905
Operating Profit 97,563,89589,474,193
Non-operating income and expenses 1,736,637(1,463,083)
Financial income
5,268,535 3,475,764
Financial costs
(2,686,170) (3,832,610)
Other non-operating income
606,731 657,898
Other non-operating expenses
(1,452,459) (1,764,135)
Profit before income tax expense 99,300,53288,011,110
Income tax expense 33,420,74125,455,435
Profit for the year 65,879,79162,555,675
Owners of the Parent Company
65,946,650 62,703,088
Non-controlling interests
(66,859) (147,413)
Other comprehensive income 3,271,136(1,319,071)
Items that may be subsequently reclassified to profit or loss
3,273,897 (1,319,071)
Foreign currency translation adjustments
3,226,854 (1,319,071)
Non-controlling interest of foreign currency translation adjustments47,043 -
Items that will never be reclassified to profit or loss
(2,761) -
Remeasurement of defined benefit liabilities
(1,933) -
Non-controlling interest of remeasurement of defined benefit liabilities
(828) -
Total comprehensive income for the year 69,150,92761,236,604
Owners of the Parent Company
69,171,571 61,384,017
Non-controlling interests
(20,644) (147,413)
Earnings per share attributable to the equity holders of the Parent Company  
Basic earnings per share
 9,4909,023
Diluted earnings per share
 9,4909,023




(3)Consolidated Statements of Changes in Equity
GRAVITY CO., LTD. (In thousands of Korean Won)



Share capital
Capital surplus
Other components of equityRetained EarningsTotal
Non-controlling
interest
Total
Equity
Balance at January 1, 20203,474,45027,127,684274,53884,668,067115,544,739221,351115,766,090
Profit for the year
---62,703,08862,703,088(147,413)62,555,675
Equity transaction
-(17,881)--(17,881)1,227(16,654)
Non-controlling interests
-----361,976361,976
Foreign currency translation adjustments
--(1,319,071)-(1,319,071)-(1,319,071)
Balance at December 31, 20203,474,45027,109,803(1,044,533)147,371,155176,910,875437,141177,348,016
Balance at January 1, 20213,474,45027,109,803(1,044,533)147,371,155176,910,875437,141177,348,016
Profit for the year
---65,946,65065,946,650(66,859)65,879,791
Equity transaction
-(11,539)--(11,539)353,454341,915
Remeasurements of defined benefit liabilities
--(1,933)-(1,933)(828)(2,761)
Foreign currency translation adjustments
--3,226,854-3,226,85447,0433,273,897
Balance at December 31, 20213,474,45027,098,2642,180,388213,317,805246,070,907769,951246,840,858




(4) Consolidated Statements of Cash Flows
GRAVITY CO., LTD. (In thousands of Korean Won)
20212020
Cash flows from operating activities 
74,182,958
69,856,903
Profit for the year
65,879,79162,555,675
Adjustments
40,575,77932,132,238
Changes in operating assets and liabilities
(2,883,876)(12,952,425)
Interest received
995,1491,122,471
Interest paid
(111,416)(185,742)
Income tax paid
(30,272,469)(12,815,314)
Cash Flows from investing activities
(82,471,756)(36,049,464)
Proceeds from disposal of property and equipment
13,8503,039
Proceeds from disposal of other intangible assets
14,861-
Decrease in other non-current financial assets
594,77422,479
Increase in short-term financial instruments
(77,000,000)(31,500,000)
Purchase of property and equipment
(1,747,427)(1,071,379)
Purchase of intangible assets
(2,463,914)(2,624,540)
Increase in other non-current financial assets
(1,883,900) (879,063)
Cash Flows from Financing Activities (3,306,019)(2,547,245)
Proceeds from capital contribution from non-controlling interests
353,454 361,976
Repayment of lease liabilities
(3,647,934) (2,892,567)
Payment of share issuance
(11,539) (16,654)
Effects of exchange rate changes on cash and cash equivalents67,278(55,691)
Net increase (decrease) in cash and cash equivalents(11,527,539)31,204,503
Cash and cash equivalents at beginning of the year110,632,48279,427,979
Cash and cash equivalents at end of the year99,104,943110,632,482




4. Separate Financial Statements as of and for the fiscal year ended December 31, 2021 and December 31, 2020.

(1)Statements of Financial Position
GRAVITY CO., LTD. (In thousands of Korean Won)
December 31, 2021December 31, 2020
Assets
Current Assets219,505,575164,602,523
Cash and cash equivalents
26,602,12245,956,245
Short-term financial instruments
148,000,00071,000,000
Accounts receivable, net
40,569,84144,353,327
Other receivable, net
1,677,451478,428
Prepaid expenses
1,823,6231,293,345
Other current financial assets
790,051841,092
Other current assets
42,487680,086
Non-current Assets39,159,99828,537,796
Investments in subsidiaries
21,679,84514,958,641
Property and equipment, net
5,608,3203,176,858
Intangible assets, net
3,228,6352,663,857
Other non-current financial assets
2,895,5651,128,475
Other non-current assets
1,701,6691,891,247
Deferred tax assets
4,045,9644,718,718
Total assets258,665,573193,140,319
Liabilities
Current liabilities
48,803,83248,824,376
Accounts payables
29,467,72134,810,387
Deferred income
4,139,0254,680,655
Withholdings
2,754,3472,096,706
Accrued expenses
785,358610,004
Income tax payable
9,403,1754,998,566
Other current liabilities
2,254,2061,628,058
Non-current liabilities
4,184,6483,370,754
Long-term account payables
729,1731,402,466
Long-term deferred revenue
199,062133,936
Other non-current liabilities
3,256,4131,834,352
Total liabilities52,988,48052,195,130
Equity
Share Capital3,474,4503,474,450
Common shares
3,474,4503,474,450
Capital surplus27,482,68327,482,683
Other components of equity-929
Retained earnings174,719,960109,987,127
Total equity205,677,093140,945,189
Total liabilities and equity258,665,573193,140,319




(2)Statements of Comprehensive Income
GRAVITY CO., LTD. (In thousands of Korean Won)
20212020
Revenues288,258,376228,996,069
Online games
30,176,02537,917,065
Mobile games
256,918,510190,926,376
Other revenue
1,163,841152,628
Cost of revenues141,815,263119,227,125
Gross profit146,443,113109,768,944
Selling, general and administrative expenses
68,268,64653,093,896
Operating Profit78,174,46756,675,048
Non-operating income and expenses14,371,597(1,624,572)
Financial income
4,921,8172,735,951
Financial costs
(1,989,233)(2,909,451)
Other non-operating income
11,997,7433,020,932
Other non-operating expenses
(558,730)(4,472,004)
Profit before income tax
92,546,06455,050,476
Income tax expense27,813,23115,633,554
Profit for the year64,732,83339,416,922
Other comprehensive income-26,946
Items that may be subsequently reclassified to income or loss
-26,946
Foreign currency translation adjustments
-26,946
Total comprehensive income for the year64,732,83339,443,868



(3)Statements of Appropriation of Retained earnings
GRAVITY CO., LTD. (In thousands of Korean Won)
20212020
Confirmed disposition date:
March 31, 2022
Confirmed disposition date:
March 31, 2021
Retained earnings before appropriation
 174,719,960109,987,127
Unappropriated retained earnings carried over from prior year
109,987,127 70,570,205
Profit for the year
64,732,833 39,416,922
Appropriation of retained earnings -
Unappropriated retained earnings to be carried forward
174,719,960109,987,127



(4) Statements of Changes in Equity
GRAVITY CO., LTD. (In thousands of Korean Won)



Share capitalCapital SurplusOther components of equityRetained EarningsTotal
Balance at January 1, 20203,474,45027,482,683(26,017)70,570,205101,501,321
Profit for the year
---39,416,92239,416,922
Foreign currency translation adjustments
--26,946-26,946
Balance at December 31, 20203,474,45027,482,683929109,987,127140,945,189
Balance at January 1, 20213,474,45027,482,683929109,987,127140,945,189
Profit for the year
---64,732,83364,732,833
Foreign currency translation adjustments
--(929)-(929)
Balance at December 31, 20213,474,45027,482,683-174,719,960205,677,093



(5)Statements of Cash Flows
GRAVITY CO., LTD. (In thousands of Korean Won)
20212020
Cash flows from operating activities70,320,58643,998,181
Profit for the year64,732,833 39,416,922
Adjustments
18,716,916 19,381,149
Changes in operating assets and liabilities
(2,637,125) (8,008,589)
Interest received
966,070  998,281
Dividend received
11,326,9842,382,800
Interest paid
(68,886) (120,865)
Income tax paid
(22,716,206) (10,051,517)
Cash flows from investing activities(88,153,976)(36,633,521)
Decrease in other non-current financial assets
500,0006,391
Decrease in other non-current financial liabilities
89,860-
Disposal of property and equipment
2351,238
Acquisition of investments in subsidiaries
(6,721,204)(3,853,178)
Increase in short-term financial instruments
(77,000,000)(31,500,000)
Increase in other non-current financial assets
(1,660,952)(100)
Purchase of property and equipment
(1,210,372)(158,284)
Purchase of intangible assets
(2,151,543)(1,129,588)
Cash flows from financing activities(1,787,171)(1,515,930)
Repayment of lease liabilities
(1,787,171)(1,515,930)
Effects of exchange rate changes on cash and cash equivalents266,43819,265
Net increase (decrease) in cash and cash equivalents(19,354,123)5,867,995
Cash and cash equivalents at the beginning of the year45,956,24540,088,250
Cash and cash equivalents at the end of the year26,602,12245,956,245