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 –