Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Annual Report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Annual Report, our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting described below. However, after giving full consideration to such material weaknesses, and the additional analyses and other procedures that we performed to ensure that our consolidated financial statements included in this Annual Report were prepared in accordance with U.S. GAAP, our management has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP.
A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that the Company had the following material weaknesses in its internal control over financial reporting:
• The Company did not design and maintain an effective control environment commensurate with its financial reporting requirements. Specifically, the Company lacked a sufficient complement of resources with an appropriate level of accounting knowledge, experience and training to appropriately analyze, record and disclose accounting matters timely and accurately.
• The Company did not design and maintain effective controls related to the period-end financial reporting process, including, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures.
Remediation Progress
In addition to the material weaknesses described above, we previously reported material weaknesses related to information technology (IT) general controls and segregation of duties. In response to the IT general controls deficiency, which was specific to certain subsidiary locations, we implemented program change management controls, user access controls and program development testing and approval controls, and as a result of such efforts, we believe the material weakness is remediated as of December 31, 2024. In response to the segregation of duties deficiency, which was also specific to certain subsidiary locations, the deficiencies have been addressed by transitioning the subsidiaries to Webtoon’s ERP system (Neon) during the period, a system that is configured to segregate the preparer and reviewer for key financial reporting related activities, such as the preparation and approval of journal entries. As a result of such efforts, we believe the material weakness is remediated as of December 31, 2024.
We are continuing to remain focused on remediation of the remaining material weaknesses outlined above, and our ongoing remediation efforts include:
• The continued onboarding of U.S. GAAP and SEC reporting specialists to enhance the financial reporting function and establish a robust financial and system control framework; and
• The continued strengthening of controls around our financial accounting closing, reporting and disclosure processes. During the period we successfully implemented various financial closing controls including controls relating to our balance sheet reconciliation process and our accounting policies.
157
Table of Contents
We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the internal control deficiencies that led to our material weaknesses, that the material weaknesses will be remediated on a timely basis, or that additional material weaknesses will not be identified in the future.
Management’s Report on Internal Control Over Financial Reporting
The Annual Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.
Changes in Internal Control Over Financial Reporting
We are taking actions to remediate the material weaknesses relating to our internal control over financial reporting. Except as otherwise described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
During the three months ended December 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.
Restricted Stock Unit Grants
On March 7, 2025, the Board approved a grant of 22,802 restricted stock units (“RSUs”) to Chankyu Park pursuant to the Company’s 2024 Omnibus Incentive Plan. The RSUs granted to Mr. Park vest 30% upon each of March 15, 2025 and March 15, 2026 with the remaining 40% vesting on March 15, 2027, subject to Mr. Park’s continued employment through each applicable vesting date. Upon the termination of Mr. Park’s employment with the Company, any portion of such RSUs that is not vested as of the date of termination shall automatically expire. The foregoing description of the terms of the RSUs does not purport to be complete and is qualified in its entirety by reference to the Form of Restricted Stock Unit Agreement under the 2024 Omnibus Incentive Plan filed as Exhibit 10.26 hereto and incorporated by reference herein.
Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections.
Not applicable.
158
Table of Contents
Part III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated by reference to the 2025 Proxy Statement, which will be filed with the SEC no later than 120 days after December 31, 2024.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the 2025 Proxy Statement, which will be filed with the SEC no later than 120 days after December 31, 2024.
Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2024.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to the 2025 Proxy Statement, which will be filed with the SEC no later than 120 days after December 31, 2024.
Item 14. Principal Accounting Fees and Services
The information required by this item is incorporated by reference to the 2025 Proxy Statement, which will be filed with the SEC no later than 120 days after December 31, 2024.
159
Table of Contents
Part IV
Item 15. Exhibits, Financial Statement Schedules
(a) Financial Statements
See “INDEX TO CONSOLIDATED FINANCIAL STATEMENTS” in Part II. Item 8 of this Annual Report on Form 10-K.
(b) Exhibits
The exhibit index attached hereto is incorporated herein by reference.
(c) Financial Statement Schedules
All financial statement schedules have been omitted, since the required information is not applicable, or because the information required is included in the consolidated financial statements and accompanying notes.
EXHIBIT INDEX
Exhibit
Number Description
3.1 Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant ’ s Current Report on Form 8-K filed with the SEC on July 1, 2024)
3.2 Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 1, 2024)
10.1 Registration Rights Agreement by and among the Registrant and certain stockholders identified therein (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 1, 2024)
10.2 Stockholder Agreement by and between the Registrant and NAVER Corporation (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 1, 2024)
10.3 Stockholder Agreement by and between the Registrant and LY Corporation (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 1, 2024)
10.4 Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.5† 2024 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Registration Statement on Form S-8 filed with the SEC on June 2 7 , 2024)
10.6† 2020 Stock Option Plan (incorporated by reference to Exhibit 10. 5 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.7† Amended and Restated 2020 Stock Option Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.8† Second Amended and Restated 2020 Stock Option Plan (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.9† Third Amended and Restated 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.10† Form of Stock Option Agreement (U.S.) under 2020 Stock Option Plan (incorporated by reference to Exhibit 10.9 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.11† Form of Stock Option Agreement (Korea) under 2020 Stock Option Plan (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
160
Table of Contents
Exhibit
Number Description
10.12† Form of Stock Option Agreement (Korea) under Amended and Restated 2020 Stock Option Plan (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.13† Form of Stock Option Agreement (Korea) under Third Amended and Restated 2020 Stock Option Plan (incorporated by reference to Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.14† Form A of Restricted Stock Unit Agreement under Third Amended and Restated 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.15† Form B of Restricted Stock Unit Agreement under Third Amended and Restated 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.14 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.16† Form C of Restricted Stock Unit Agreement under Third Amended and Restated 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.17† Restricted Stock Unit Agreement under Third Amended and Restated 2020 Equity Incentive Plan between the Registrant and Junkoo Kim (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.18† Stock Option Agreement under Third Amended and Restated 2020 Equity Incentive Plan between the Registrant and David Lee (incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.19† 2023 Restricted Stock Unit Agreement under Third Amended and Restated 2020 Equity Incentive Plan between the Registrant and David Lee (incorporated by reference to Exhibit 10.18 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.20† 2024 Restricted Stock Unit Agreement under Third Amended and Restated 2020 Equity Incentive Plan between the Registrant and David Lee (incorporated by reference to Exhibit 10.19 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.21† Stock Option Agreement under Third Amended and Restated 2020 Equity Incentive Plan between the Registrant and Chankyu Park (incorporated by reference to Exhibit 10.20 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.22† English Translation of Form of Business Delegation Agreement (incorporated by reference to Exhibit 10.21 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.23† English Translation of Form of Annex Agreement to Business Delegation Agreement (incorporated by reference to Exhibit 10.22 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.24† Executive Employment Agreement, dated October 14, 2023, between the Registrant and David Lee (incorporated by reference to Exhibit 10.23 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on May 31, 2024)
10.25† Employment Agreement, dated November 5, 2024, by and between the Registrant and Junkoo Kim (incorporated by reference to Exhibit 10.25 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 12, 2024)
10.26*†
Form of Restricted Stock Unit A g reement under the 2024 O m nibus Incentive Plan
19.1* Insider Trading Policy of the Registrant
21.1* List of Significant Subsidiaries of the Registrant
23.1* Consent of Samil PricewaterhouseCoopers, independent registered public accounting firm
31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
161
Table of Contents
Exhibit
Number Description
31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1** Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1* Clawback Policy of the Registrant
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104 Cover Page Interactive Data Files (Embedded within the Inline XBRL document and included in Exhibit 101)
______________
* Filed herewith
** Furnished herewith
† Management compensatory plan or contract
Item 16. Form 10-K Summary
None.
162
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 11, 2025.
WEBTOON Entertainment Inc.
By: /s/ Junkoo Kim
Name: Junkoo Kim
Title: Chief Executive Officer and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and the dates indicated.
Signature Title Date
/s/ Junkoo Kim Chief Executive Officer and Chairman of the Board March 11, 2025
Junkoo Kim (Principal Executive Officer)
/s/ David J. Lee Chief Financial Officer, Chief Operating Officer and Director March 11, 2025
David J. Lee (Principal Financial and Accounting Officer)
* Director March 11, 2025
Haejin Lee
* Director March 11, 2025
Namsun Kim
* Director March 11, 2025
Jun Masuda
* Director March 11, 2025
Isabelle Winkles
* Director March 11, 2025
Nancy Dubuc