As filed with the Securities and Exchange Commission on January 31, 2005

Registration No. 333-122159

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WASHINGTON, D.C. 20549

FORM F-1

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

(Exact Name of Registrant as Specified in Its Charter)

SEOUL 135-894, KOREA

822-516-5438

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

850 Liberty Avenue

Suite 204

Newark, Delaware 19711

302-738-7210

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Copies to:

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Daewoo Securities Co., Ltd.

CIBC World Markets

CLSA Asia-Pacific Markets

 

PROSPECTUS SUMMARY

      This summary highlights information contained elsewhere in this prospectus and does not contain all the information you should consider before making an investment in our ADSs. You should read the entire prospectus carefully, including “Risk Factors,” beginning on page 8, and the financial statements and notes thereto, beginning on page F-1, before making an investment decision.

Overview

      We are a leading developer and distributor of online games in Japan, Taiwan and Thailand based on the number of peak concurrent users. We are based in Korea and our principal product, Ragnarok Online, is currently commercially offered in 19 markets, including Korea. Ragnarok Online recorded over 770,000 aggregate peak concurrent users (defined as the sum of the highest number of users simultaneously logged on to our games’ servers in each country) and over 400,000 average concurrent users (defined as the sum of the average number of users simultaneously logged on to our games’ servers in our key markets, which are Japan, Taiwan/Hong Kong, Thailand, China and Korea) during the third quarter of 2004. We also offer a number of mobile games, which are played using mobile phones and other mobile devices, participate in the production of a televised animation series, and license the merchandizing of character-related products based on our online games. We intend to diversify our online game offering by developing online games internally and publishing additional online games developed by third parties.

      We were incorporated as a company with limited liability under Korean law on April 4, 2000. In August 2002, we commercially launched our first massively multiplayer online role playing game, Ragnarok Online, which features two-dimensional characters in a three-dimensional background. We commercially launched R.O.S.E. Online, a three-dimensional massively multiplayer online role playing game, in Korea in January 2005, and plan to commence open beta testing of Requiem, a three-dimensional massively multiplayer online role playing game by late 2005 in one or more key markets. We are also internally developing Ragnarok Online 2, a three-dimensional sequel to Ragnarok Online, and expect to commence its open beta testing by early 2006.

      Our revenues and earnings, as well as the number of Ragnarok Online users, have grown significantly since the commercial launch of Ragnarok Online. Our revenues increased by 332.3% to W42,431 million (US$36,832 thousand) in 2003 from W9,816 million in 2002. In addition, our net income increased significantly to W14,669 million (US$12,734 thousand) in 2003 from a net loss of W496 million in 2002. Our revenues increased by 72.1% to W47,978 million (US$41,647 thousand) in the first nine months of 2004 from W27,877 million in the first nine months of 2003. In addition, our net income increased by 134.1% to W21,229 million (US$18,428 thousand) in the first nine months of 2004 from W9,069 million in the first nine months of 2003.

The online game industry

      According to Datamonitor, the global online game industry (which includes massively multiplayer online role playing games, casual online games and web games as discussed in “Our Industry”) generated US$1,995 million of subscription revenues in 2003 with Asia contributing approximately US$1,400 million or 70% of the total subscription revenues.

      According to IDC, in Asia, Korea is the largest online game market in terms of online game subscription revenues with an established online game culture and mature market characteristics. Taiwan is the second largest online game market in Asia with a high level of Internet users playing online games and well developed game content. While the growth rates have slowed in Korea and Taiwan in recent periods, China, the third largest online game market in the region, has a significant expected growth profile with online games becoming an important part of the mainstream entertainment medium. Japan is the fourth largest online game market in Asia with strong growth potential.

Competitive strengths

      We believe that our primary competitive strengths are:

	•	Leading online game in multiple markets. Ragnarok Online’s success and appeal are demonstrated by our presence and leading market positions based on peak concurrent users in countries such as Japan, Taiwan and Thailand.
	•	Early entrant in key online game markets. Due in part to our early entry in a number of key online game markets, Ragnarok Online has captured a large number of loyal users since its commercialization. Our established relationships with online game operators in several countries provide us with (i) ability to more effectively market and sell new online games and (ii) access to in-depth knowledge of local markets and user preference.
	•	Capability to develop and source new online games, effectively market products and distribute products. We have an experienced game development team, including the majority of the original development team of Ragnarok Online, that is currently developing new in-house games to broaden our product offering. Our large game user base has allowed us to establish an online game community that gives us a natural and accessible audience to which we can market our new online games as well as cross-market our online game related-products. In addition, our robust game distribution capability with established relationships with local operators in 16 overseas markets is attractive to third party game developers who seek to increase their product exposure to key online game markets.
	•	High quality customer service. We place a significant emphasis on technology, personnel and training to facilitate excellent customer service with customer service centers operating 24 hours a day, seven days a week to provide real-time assistance to our users via in-game bulletin boards, emails, telephone and facsimile.

Business strategy

      Our key strategic objective is to strengthen our competitive position and to be a leading developer and publisher of online games with a broad product offering and presence in multiple markets. Our business strategy principally consists of the following elements:

	•	Maintain and strengthen competitive position in online games. We aim to maintain and strengthen the competitive position of our online games by continuing to upgrade game content and quality to satisfy user expectations. We, along with our overseas licensees, will continue to conduct marketing campaigns and online in-game events to increase the loyalty and playing time of our existing users and attract new users.
	•	Continue to focus on international expansion. We plan to continue the expansion and penetration of our products in new overseas markets. Consistent with this strategy, we plan to commercialize Ragnarok Online in four to seven additional countries by the end of 2005. We believe that further geographic diversification will contribute to the growth and stabilization of our revenue streams.
	•	Enhance development of proprietary games and publication of licensed games. We intend to offer a broader and more sophisticated game offering by developing and procuring additional games. We will continue to devote significant resources to the in-house development of our own games. Separately, we will also continue to focus on publishing online games licensed from third party developers to take advantage of our strong game distribution capability. For example, in December 2004, we signed a memorandum of understanding with Expotato Corporation, a third party game developer in Korea, to publish, market and offer “Come On Baby! Road Star”, an online casual racing action game. There can be no assurance, however, that this transaction will be completed.
	•	Taking advantage of our current products for revenue diversification and growth. In order to continually diversify our revenue base, we intend to take advantage of our current products to expand into other related businesses, including mobile games, animation and game character-based merchandise businesses.

Challenges and risks

      We face numerous challenges and risks in our business, including the following:

	•	As we currently depend on one product, Ragnarok Online, for substantially all of our revenues, our failure to develop or license additional games may materially and adversely affect our business, financial condition and results of operations.
	•	In many of our markets, we license Ragnarok Online to overseas operators or distributors. Our reliance on third parties that we do not control exposes us to certain risks that we would not encounter if we were to operate or distribute directly in such markets. If our overseas licensees fail to perform their contractual obligations or suffer from management or other problems in their businesses, our business operations in overseas markets and our ability to collect royalty payments from such markets may be materially adversely affected.
	•	If we are unable to consistently develop, acquire, license, launch, market or operate commercially successful online games, our business, financial condition and results of operations may be materially and adversely affected.
	•	We operate in a highly competitive industry and compete against many large companies. If we fail to retain and hire skilled and experienced game developers or other key personnel in order to design and develop new online games and additional game features, we may be unable to achieve our business objectives.
	•	Undetected programming errors or flaws in our games could harm our reputation or decrease market acceptance of our games, which would materially and adversely affect our results of operations.

      Prospective investors should carefully consider the risks described in “Risk Factors” before deciding to invest in us.

Contact information

      Our principal executive offices are located at Shingu Building, 620-2 Shinsa-dong, Gangnam-gu, Seoul 135-894, Korea. Our telephone number is (822) 516-5438. We maintain a website at http://www.gravity.co.kr. Information contained in our website does not constitute part of this prospectus.

      Our service of process agent is Puglisi & Associates, located at 850 Liberty Avenue, Suite 204, Newark, Delaware 19711. Its telephone number is (302) 738-7210.

THE OFFERING

The offering		6,510,000 ADSs offered by us and 2,790,000 ADSs offered by the selling shareholders.
The selling shareholders		Mr. Jung Ryool Kim, one of our joint representative directors, and other selling shareholders. See “Principal and Selling Shareholders”.
The ADSs		Each ADS will represent one fourth of one common share, par value W500 per share. The ADSs will be evidenced by American depositary receipts, or ADRs. The depositary is The Bank of New York.
ADSs to be outstanding after this offering		28,705,600 ADSs. Unless otherwise noted, the information in this prospectus assumes no exercise of the underwriters’ over-allotment option and no exercise of outstanding stock options.
Common shares to be outstanding immediately after this offering		7,176,400 common shares. The number of common shares that will be outstanding immediately after this offering excludes 271,000 common shares issuable upon exercise of outstanding stock options under our stock option plan.
Offering price		US$          per ADS.
Use of proceeds		We expect the net proceeds from this offering to be approximately US$88 million assuming an initial public offering price of $14.50 per ADS and further assuming no exercise of the underwriters’ over-allotment option. The principal reason for this offering is to establish a public market for our common shares, facilitate our future access to public capital markets and obtain additional working capital to continue to grow our business. We anticipate using approximately W30 billion (US$26 million) for on-going and future game development, approximately W30 billion (US$26 million) for acquiring, licensing and publishing games developed by third party game developers; approximately W25 billion (US$22 million) for investing in enhancing our technological, marketing, distribution and service capabilities; and the balance of the net proceeds for general corporate purposes and working capital.
		We will not receive any of the proceeds from the sale of ADSs by the selling shareholders. See “Use of Proceeds”.
Listing		We have applied to have the ADSs quoted on Nasdaq under the symbol “GRVY”.
Over-allotment		We have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase from us up to 1,395,000 ADSs solely to cover over-allotments. Unless we state otherwise, the information in this prospectus does not take into account the possible sale of these additional ADSs.
Trading market for common shares		Our common shares are not listed on any stock exchange or organized trading market, including in Korea. There is no public market for our common shares or ADSs, although a small number of our common shares are traded in off-market transactions involving private sales primarily in Korea.

Deposit or withdrawal of common shares		You may deposit common shares with the custodian for the depositary and obtain ADSs, and may surrender ADSs to the depositary and receive common shares, subject in each case to certain conditions. However, under current Korean law and regulations, the depositary is required to obtain our prior consent for a deposit to the extent that, after giving effect to the deposit, the total number of common shares on deposit would exceed the maximum amount previously approved by us. As of the date of this prospectus, such maximum amount approved by us is 2,673,750 shares, which is the total number of common shares representing the ADSs issued in this offering (assuming the full exercise of the underwriters’ over-allotment option). After 180 days from the date of this prospectus, we expect to approve an increase in the maximum amount to 3,854,060 shares.
		Common shares underlying the ADSs offered hereby may be withdrawn from the depositary facility established under the deposit agreement upon:
		• the surrender of the ADSs, and
		• the receipt by the depositary of proper instructions.
Voting rights		Subject to the provisions of the deposit agreement, you will be entitled to instruct the depositary how to vote the common shares underlying the ADSs. However, you will receive our voting materials and a solicitation of voting instructions only if we request the depositary to send those materials to you. It is our current intention to request the depositary to do so.
Dividends		We have not paid a dividend on our share capital since inception and any decision to pay dividends in the future will be subject to a number of factors, including cash requirements for future capital expenditures and investments, as well as other factors our board of directors deem relevant. We have no intention to pay dividends in the near future.
Lock-up		We, all of our directors and officers, and the selling shareholders holding in the aggregate 91.11% of our common shares outstanding, have agreed with the underwriters that, without the prior consent of Credit Suisse First Boston LLC, subject to certain exceptions, neither we nor they will, for a period of 180 days following the date of this prospectus, offer, sell or contract to sell any of our ADSs or common shares or any economic interests therein. See “Underwriting”.
Risk factors		For a discussion of certain factors that should be considered in evaluating an investment in our ADSs, see “Risk Factors” beginning on page 8 of this prospectus.

SUMMARY CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA

      The balance sheet data as of December 31, 2002 and 2003, and September 30, 2003 and 2004, and the statement of operations data for the years ended December 31, 2001, 2002 and 2003 and for the nine months ended September 30, 2003 and 2004, are derived from our audited financial statements and related notes thereto included elsewhere in this prospectus. The balance sheet data as of December 31, 2001 is derived from our audited financial statements and related notes, which are not included in this prospectus.

      These audited financial statements and the related notes thereto have been prepared in accordance with accounting principles generally accepted in the United States. The information set forth below is not necessarily indicative of the results that should be expected for future periods and the results for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes thereto included elsewhere in this prospectus.

																			As of and for the nine months ended
			As of and for the years ended December 31,																September 30,
			2001				2002				2003				2003(1)				2003				2004				2004(1)
															(unaudited)												(unaudited)
			(in millions of Won and thousands of US$, except share and per share data,
			operating data and percentages)
Statement of operations:
Total revenues			W	167			W	9,816			W	42,431			US$	36,832			W	27,877			W	47,978			US$	41,647
Cost of revenues				—				1,735				6,866				5,960				4,800				7,480				6,493
Gross profit				167				8,081				35,565				30,872				23,077				40,498				35,154
Operating expenses:
	Selling, general and administrative			354				4,956				11,115				9,648				7,387				10,157				8,817
	Research and development			718				815				1,597				1,386				686				1,435				1,246
Operating income (loss)				(905	)			2,310				22,853				19,838				15,004				28,906				25,091
Other income (expense)				(3	)			(2,339	)			(5,649	)			(4,903	)			(4,556	)			(3,562	)			(3,091	)
Income (loss) before income tax expenses, minority interest, and losses from equity method investee				(908	)			(29	)			17,204				14,935				10,448				25,344				22,000
Income tax expenses				—				467				2,535				2,201				1,379				3,976				3,451
Income (loss) before minority interest and losses from equity method investee				(908	)			(496	)			14,669				12,734				9,069				21,368				18,549
Minority interest				—				—				—				—				—				17				14
Equity in loss of related joint venture				—				—				—				—				—				(156	)			(135	)
	Net income (loss)		W	(908	)		W	(496	)		W	14,669			US$	12,734			W	9,069			W	21,229			US$	18,428
Earnings per share:
	Basic and diluted per share		W	(492	)		W	(148	)		W	2,859			US$	2.48			W	1,818			W	3,826			US$	3.32
	Basic and diluted per ADS
Weighted average number of shares outstanding (basic and diluted)				1,846,575				3,355,616				5,130,895				5,130,895				4,990,029				5,548,900				5,548,900
Balance sheet data:
Cash and cash equivalents			W	1,820			W	560			W	5,405			US$	4,692			W	1,589			W	12,577			US$	10,918
Total current assets				2,383				7,425				17,304				15,021				12,217				28,043				24,344
Property and equipment, net				522				2,254				5,694				4,943				4,451				15,401				13,369
Total assets				3,055				11,509				28,765				24,970				22,866				51,076				44,338
Total current liabilities				1,123				7,677				9,051				7,857				8,341				8,359				7,257
Total liabilities				2,912				11,772				10,945				9,500				10,680				12,004				10,421
Total shareholders’ equity				143				(263	)			17,820				15,470				12,186				39,072				33,917
Selected operating data and financial ratios:
Aggregate peak concurrent Ragnarok Online users(2)				—				200,150				597,615				597,615				498,888				774,713				774,713
Average concurrent Ragnarok Online users(3)				—				79,364				252,457			<