What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-03-05 compared with 2025-03-11 · 421 added, 498 removed, 1484 unchanged (38% of the section changed)

9 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

WEBTOON Entertainment Inc.

Opinion on the Financial Statements

To the Board of Directors and Stockholders of WEBTOON Entertainment Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of WEBTOON Entertainment Inc.

and its subsidiaries (the “Company”) as of December 31, 2024 and December 31, 2023, and the related consolidated statements of operations and comprehensive loss, of changes in stockholders’ equity and group equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity and group equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

2 unchanged sentences

Goodwill Impairment Assessments for Certain Reporting Units

As described in Notes 1 and 7 to the consolidated financial statements, the Company’s goodwill balance was $665.3 million as of December 31, 2024, of which the reporting units Wattpad, Munpia and LDF comprise the significant portion.

As described in Notes 1 and 7 to the consolidated financial statements, the Company’s goodwill balance (net) was $336.8 million as of December 31, 2025, of which the reporting units Wattpad, Munpia and LDF comprise the significant portion.

Management conducts an impairment test as of October 1 of each year, or more frequently if events or circumstances result in it being more likely than not that the fair value of a reporting unit is less than its carrying amount.

5 unchanged sentences

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, discount rates, and terminal growth rates;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge as disclosed by management, and a material weakness existed that impacted this matter.

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

As previously disclosed by management, a material weakness existed during the year that impacted this matter.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, (i) testing management’s process for developing the fair value of the reporting units;

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Wattpad, Munpia, and LDF reporting units.

These procedures also included, among others, (i) testing management’s process for developing the fair value of the reporting units;

(ii) evaluating the appropriateness of the discounted cash flow method used by management;

4 unchanged sentences

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow model and (ii) the reasonableness of the discount rate assumption.

/s/ Samil PricewaterhouseCoopers

9 unchanged sentences

176,779 169,187

Asset held for sale — 6,827

Prepaid expenses and other current assets, net 2

17 unchanged sentences

66,690 62,209

Short-term borrowings and current portion of long-term debt 6

Current portion of operating lease liabilities 6

15 unchanged sentences

Redeemable non-controlling interest in subsidiary 24,540 36,580

Stockholders’ equity:

WEBTOON Entertainment Inc.

2 unchanged sentences

As of December 31,

Stockholders’ equity:

Preferred stock, $ 0.0001 par value 100,000,000 authorized and no shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively

18 unchanged sentences

Related Parties and Variable Interest Entity )

Includes amounts due from related parties of $ 17,173 and $ 6,713 as of December 31, 2024 and December 31, 2023, respectively.

(See Note 16.

Related Parties and Variable Interest Entity )

Includes amounts due to related parties of $ 18,765 and $ 17,173 as of December 31, 2025, and December 31, 2024, respectively.

6 unchanged sentences

(See Note 16.

Related Parties and Variable Interest Entity )

Includes amounts due to related parties of $ — and $ 16,160 as of December 31, 2024 and December 31, 2023, respectively.

(See Note 16.

Related Parties and Variable Interest Entity )

Related Parties and Variable Interest Entit y)

Includes amounts due to related parties of $ 5,371 and $ 9,519 as of December 31, 2025, and December 31, 2024, respectively.

16 unchanged sentences

Interest expense ( 56 ) ( 45 ) ( 79 )

Impairment losses on goodwill ( 69,743 ) ( 63,412 ) —

Loss on equity method investments, net ( 1,123 ) ( 12,339 ) ( 4,694 )

Impairment losses on goodwill and other intangible assets, net ( 336,486 ) ( 69,743 ) ( 63,412 )

Gain (loss) on equity method investments, net 1,282 ( 1,123 ) ( 12,339 )

Other income (loss), net 5

1 unchanged sentence

Loss before income tax ( 389,409 ) ( 149,308 ) ( 132,753 )

Income tax expense ( 3,604 ) ( 12,006 ) ( 14,369 )

Income tax benefit (expense) 16,022 ( 3,604 ) ( 12,006 )

Net loss ( 373,387 ) ( 152,912 ) ( 144,759 )

4 unchanged sentences

Foreign currency translation adjustments, net of tax 9,792 ( 71,935 ) ( 17,251 )

Loss on valuation of financial assets measured at fair value, net of tax — — ( 405 )

Share of other comprehensive income (loss) of equity method investments, net of tax 896 ( 94 ) ( 906 )

39 unchanged sentences

Shares Amount

Balance as of January 1, 2022 85,755,540 $ 9 $ 575,168 $ ( 7,467 ) $ ( 108,186 ) $ 459,543 $ — $ 616,789 $ 1,076,332

Net loss — — — — ( 103,847 ) ( 103,847 ) ( 2,743 ) ( 26,024 ) ( 132,614 )

Foreign currency translation adjustments, net of tax — — — ( 28,985 ) — ( 28,985 ) — — ( 28,985 )

Loss on valuation of financial assets measured at fair value, net of tax — — — ( 405 ) — ( 405 ) — — ( 405 )

Issuance of common stock 8,606,430 1 390,803 — — 390,806 — — 390,806

Equity in income of equity method investees — — — 190 — 190 — — 190

Equity-based compensation 2

Balance as of December 31, 2022

97,091,692 $ 10 $ 1,038,262 $ ( 36,667 ) $ ( 212,033 ) $ 789,594 $ 85,395 $ 593,513 $ 1,468,502

Business Combination (Refer to Note 17.

Disposition and Business Combinations) — — — — — — 59,079 — 59,079

Issuance of common shares to acquire a subsidiary 2,729,722 — 70,857 — — 70,858 — — 70,858

Reclassification of redeemable non-controlling interest to non-controlling interest — — — — — — 25,020 — 25,020

Changes in ownership interest in subsidiary — — ( 802 ) — — ( 802 ) ( 640 ) — ( 1,442 )

Change in ownership interest in subsidiary due to purchase of treasury shares — — 173 — — 173 ( 14,032 ) — ( 13,859 )

Change in ownership interest in subsidiary due to issuance of common stock — — 4,651 — — 4,651 15,608 — 20,259

Common control transaction — — ( 2,748 ) — — ( 2,748 ) — 2,748 —

Redemption of redeemable non-controlling interest — — 160 — — 160 798 — 958

Balance as of January 1, 2023 97,091,692 10 1,038,262 ( 36,667 ) ( 212,033 ) 789,594 85,395 593,513 1,468,502

Net loss — — — — ( 102,818 ) ( 102,818 ) ( 22,769 ) ( 13,637 ) ( 139,225 )

2 unchanged sentences

Equity in income of equity method investees — — — ( 906 ) — ( 906 ) — — ( 906 )

Equity-based compensation 2

Equity-based compensation and others 2

— — 646 — — 646 2,155 — 2,801

Changes in scope of consolidation — — — — — — ( 7,875 ) — ( 7,875 )

Common control transactions 12,413,458 1 628,338 — ( 48,441 ) 579,876 — ( 579,876 ) —

Common control transaction 12,413,458 1 628,338 — ( 48,441 ) 579,876 — ( 579,876 ) —

Balance as of December 31, 2023 109,505,150 11 1,667,246 ( 54,824 ) ( 363,292 ) 1,249,141 56,906 — 1,306,047

6 unchanged sentences

Equity in income of equity method investees — — — ( 94 ) — ( 94 ) — — ( 94 )

Equity-based compensation 2

Equity-based compensation and others 2

330,293 — 78,374 — — 78,374 1,098 — 79,472

Changes in scope of consolidation — — — — — — ( 3,861 ) — ( 3,861 )

Vesting of restricted stock units 262,804 — 7,222 — — 7,222 — — 7,222

WEBTOON Entertainment Inc.

Consolidated Statements of Stockholders’ Equity and Group Equity

(in thousands of USD, except share and per share data)

Exercise of stock options 67,489 — 1,142 1,142 1,142

Balance as of December 31, 2024

128,587,944 13 2,103,931 ( 124,620 ) ( 507,197 ) 1,472,127 47,754 — 1,519,881

Net loss — — — — ( 345,927 ) ( 345,927 ) ( 15,227 ) — ( 361,154 )

Foreign currency translation adjustments, net of tax 1

— — — 9,361 — 9,361 238 — 9,599

Equity in income of equity method investees — — — 896 — 896 — — 896

Equity-based compensation and others 2

2,188,217 — 33,995 — — 33,995 515 — 34,510

Balance as of December 31, 2025 130,776,161 13 2,137,926 ( 114,363 ) ( 853,124 ) 1,170,452 33,280 $ — 1,203,732

As of December 31, 2025, December 31, 2024, and December 31, 2023, the ending balance in accumulated other comprehensive loss related to foreign currency translation adjustments was $ 111.5 million, $ 120.9 million, and $ 51.2 million, respectively.

12 unchanged sentences

Depreciation and amortization 35,431 40,074 38,359

Impairment losses on goodwill 69,743 63,412 —

Impairment losses on goodwill and other intangible assets 336,486 69,743 63,412

Operating lease expense 9,690 10,446 11,965

2 unchanged sentences

Loss (Gain) on debt and equity securities, net 8,605 ( 2,263 ) 22,585

Loss on equity method investment 1,123 12,339 4,694

Loss (Gain) on equity method investment ( 1,282 ) 1,123 12,339

Contingent consideration liability — ( 3,712 ) ( 789 )

2 unchanged sentences

Change in severance benefit, net 5,584 3,725 ( 737 )

Loss (Gain) on investments in subsidiaries, net 2,713 884 —

Loss on investments in subsidiaries, net — 2,713 884

Other non-cash items 14 ( 707 ) ( 3,411 )

4 unchanged sentences

Changes in accrued expenses 6,216 1,869 3,083

Changes in consumption taxes payables

( 5,725 ) 3,287 3,213

Changes in contract liabilities 2,400 21,584 1,088

Changes in withholdings

( 6,122 ) ( 8 ) 1,262

Changes in income tax payable - corporate tax

( 8,857 ) 634 1,081

Changes in other liabilities ( 6,540 ) ( 812 ) 4,907

2 unchanged sentences

Transfer of severance benefits ( 2,817 ) ( 956 ) ( 2,637 )

Net cash provided by (used in) operating activities $ 17,883 $ 14,804 $ ( 140,608 )

Net cash provided by operating activities $ 11,216 $ 17,883 $ 14,804

Investing activities:

10 unchanged sentences

Purchases of equity method investments — ( 9,068 ) ( 682 )

Disposal of businesses, net of cash disposed ( 315 ) 1,988 ( 520 )

Acquisition of businesses, net of cash ( 148 ) — —

Disposal of businesses, net of cash

— ( 315 ) 1,988

Other investing activities 119 470 187

11 unchanged sentences

Payment of contingent consideration related to business acquisition — ( 1,849 ) ( 3,796 )

Acquisition of additional equity interests in non-wholly owned subsidiaries — — ( 14,335 )

Payments for the redemption of non-controlling interests — — ( 11,075 )

Repayment of convertible debt — — ( 2,257 )

Net cash provided by (used in) financing activities $ 1,466 $ 353,867 $ ( 6,499 )

12 unchanged sentences

Purchase of property and equipment included in accounts payable — 2 11

Non-cash consideration transferred in business combinations — — 181,930

______________

10 unchanged sentences

We offer extensive and diverse genres of content, including fantasy, romance, and science fiction, on our platform.

Platform refers to the various offerings through which we engage with users across diverse geographical markets including Korea, United States, Japan, Southeast Asia, and Europe.

Wattpad Corporation (“Wattpad”), together with its subsidiaries, is a global multi-platform entertainment company for original stories, content and advertising which became a wholly-owned subsidiary of NAVER and a sister entity of the Parent when it was acquired by NAVER on May 10, 2021.

On December 1, 2022, Wattpad WEBTOON Studios Inc.

(“WWS”), a newly-created and wholly-owned subsidiary of the Parent, entered into a purchase agreement with Wattpad pursuant to which WWS acquired Wattpad’s business related to the development of intellectual property (“IP”) into books, podcasts, movies and television productions (the “Studio Business”) for $ 15.4 million.

The Studio Business consisted of 100 % voting equity interest in Wattpad Studios Inc., a wholly-owned subsidiary of Wattpad, and certain assets and liabilities held by other subsidiaries of Wattpad.

On June 1, 2023, the Parent entered into a stock contribution agreement with NAVER pursuant to which the Parent acquired 100 % of the common shares of Wattpad in exchange for 413,482 shares of the common stock of the Parent (the “Wattpad Transfer”).

The Studio Business acquisition and Wattpad Transfer were accounted for as common control transactions in a manner similar to the pooling-of-interest method.

Thus, the financial statements of the commonly controlled entities were combined, retrospectively, as if the transactions had occurred as of January 1, 2022.

On March 27, 2024, the Company’s board of directors approved a merger between Line Digital Frontier Corporation (“LDF”) and eBOOK Initiative Japan Co., Ltd.

(“eBIJ”), to integrate the Company’s two wholly owned subsidiaries’ business and operations, with LDF as the surviving company (the “LDF-eBIJ Merger”).

The effective date of the LDF-eBIJ Merger was September 1, 2024 and eBIJ was dissolved through an absorption-type merger under the applicable corporate laws in Japan.

Platform refers to the various offerings through which we engage with users across diverse geographical markets including Korea, the United States, Japan, Southeast Asia, and Europe.

Basis of Presentation

For the period prior to December 1, 2022, the accompanying financial statements and footnotes present the combined Parent consolidated and Wattpad consolidated financial information.

For the period after December 1, 2022, the Studio Business financial information is presented as part of the Parent consolidated financial information and is combined with the remaining Wattpad consolidated financial information.

The Wattpad Transfer was accounted for as a common control transaction in a manner similar to the pooling-of-interest method.

Thus, the financial statements of Wattpad were combined, retrospectively, as if the transaction had occurred as of January 1, 2022.

For the period after June 1, 2023, Wattpad is presented as part of the Company consolidated financial information.

8 unchanged sentences

On June 28, 2024, the Company completed its initial public offering (the “IPO”) in which it issued and sold 15,000,000 shares of its common stock at a public offering price of $ 21.00 per share.

The Company received proceeds of approximately $ 281.7 million from the IPO, net of underwriting discounts and commissions of $ 22.1 million and offering

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

costs of $ 11.2 million.

The Company received proceeds of approximately $ 281.7 million from the IPO, net of underwriting discounts and commissions of $ 22.1 million and offering costs of $ 11.2 million.

Additionally, the underwriters have the option, for a period of 30 days, to purchase up to an additional 2,250,000 common shares at the public offering price, less the underwriting discount and commissions to cover over-allotment.

5 unchanged sentences

Upon completion of the IPO, all deferred offering costs were reclassified into stockholders’ equity as an offset against proceeds from the IPO.

In addition, as of June 30, 2024, the Company had accrued a $ 30.0 million cash bonus that became due to the chief executive officer upon completion of the IPO.

In addition, as of June 30, 2024, the Company had accrued a $ 30.0 million cash bonus that became due to the chief executive

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

officer upon completion of the IPO.

The bonus was paid out, less applicable payroll related taxes and expenses, in July 2024.

6 unchanged sentences

All intercompany and intra-entity transactions and balances have been eliminated.

The Consolidated Financial Statements for all periods presented included all the cost of doing business, including the expenses that represent services provided by NAVER to the Company and its subsidiaries.

The Consolidated Financial Statements for all periods presented include all the costs of doing business, including the expenses that represent services provided by NAVER to the Company and its subsidiaries.

Such services under certain agreements are charged to the Company and its subsidiaries based on estimated cost allocation plus mark-up methodology, which management believes is approximating arm’s length costs.

1 unchanged sentence

The amounts are billed to and paid for by the Company or its subsidiaries on a regular basis.

Change in Filer Status

Upon completion of the IPO, the Company ceased to be an “emerging growth company” (“EGC”), as defined in the Jumpstart our Business Startups Act of 2012 (“JOBS Act”), due to exceeding the annual gross revenue threshold.

Accordingly, we may no longer take advantage of EGC-related reduced reporting requirements that delay the adoption of new or revised accounting standards that are otherwise applicable to public companies.

As the Company has been a public company for less than twelve months and has not yet filed a Form 10-K, the Company complies with non-accelerated public company filer effective dates of adoption.

The loss of EGC status did not have a significant impact on our Consolidated Financial Statements.

Reclassifications

Certain amounts reported for prior years have been reclassified to conform to the current year's presentation.

None of these reclassifications impacted reported operating or net loss for any presented period.

Use of Estimates

2 unchanged sentences

Significant estimates relate primarily to determining the fair value of assets and liabilities acquired in business combinations, acquired intangible assets and goodwill, unit price of virtual currency in revenue recognition, deferred revenue, allowance for credit losses, evaluation of contingencies, deferred tax assets net of a valuation allowance, uncertain tax positions, the fair value of stock-based awards, the fair value of debt and equity securities and the fair value of reporting units for goodwill impairment testing.

We based our estimates on historical experience and on various other

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

assumptions that we believe to be reasonable under the circumstances.

We based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

Actual results could differ materially from these estimates.

12 unchanged sentences

Translation adjustments are included in Accumulated other comprehensive loss as a separate component of the Consolidated Statements of Stockholders’ Equity and Group Equity and in the effect of exchange rate changes on cash and cash equivalents in the Consolidated Statements of Cash Flows.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Revenue Recognition

20 unchanged sentences

The Company earns commissions on the sales of books to end users from merchants that sell their products through the Company’s offerings.

For the majority of these transactions, the Company is not the seller of record, nor does it take control of the related

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

inventory, which has led the Company to determine that it is an agent in these transactions.

For the majority of these transactions, the Company is not the seller of record, nor does it take control of the related inventory, which has led the Company to determine that it is an agent in these transactions.

Accordingly, although the Company processes and collects the full payment on these transactions, it records revenue net of amounts remitted to the third party merchant when control transfers to the customer, generally at the time of product shipment from its facilities.

7 unchanged sentences

For IP Adaptations where the content is made to an individual customer specification such that the customer controls the output during the production process, the Company’s performance obligation is production services.

Revenue and the associated costs of such contracts are recognized over time on a percentage of completion basis.

Revenue and the associated

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

costs of such contracts are recognized over time on a percentage of completion basis.

For IP Adaptations where the Company controls the key creative decisions and output of the production process, its performance obligation is the sale of content to third-party studios and video-streaming platforms.

15 unchanged sentences

Cost of revenue also includes fees charged by payment gateway companies for processing payments on the offerings as well as platform fees payable to companies that provide consumers with the ability to download the mobile app through app stores (such as Google and Apple) or to third parties providing a platform hosting service.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Marketing expenses primarily consist of online and offline advertising and marketing program costs.

10 unchanged sentences

Stock-Based Compensation for more information on the Company’s stock compensation plans.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Stock-Based Awards Issued to Employees of NAVER

1 unchanged sentence

The Company measures the award based on the grant-date fair value and accounts for the awards as a dividend distribution to NAVER following the attribution principles of ASC 718.

Forward Stock Split, Change in Par Value

On June 26, 2024, the Company filed an Amended and Restated Certificate of Incorporation which effectuated a 30 -for-1 forward stock split of its common stock and adjusted the par value of its common stock from $ 0.01 to $ 0.0001 on such date.

Accordingly, all share and per share amounts presented in the audited Consolidated Financial Statements have been retroactively adjusted to reflect the stock split and change in par value for all periods presented.

Phantom Units

During the twelve months ended December 31, 2025, the Company granted awards in the form of “Phantom Units”, which provide recipients with the right to receive cash payments, less applicable withholding, equivalent to the fair market value of one share of the Company’s common stock on the applicable vesting date, multiplied by the number of Phantom Units that vest.

While these Phantom Units do not confer ownership rights, they are also entitled to dividends, if declared, equivalent in an amount in cash and form equal to the dividend that would have been paid on the shares underlying the Phantom Unit had such shares been outstanding on such record date.

Any such dividend equivalents shall be subject to the same vesting conditions applicable to the underlying Phantom Unit with respect to which they accrue.

Phantom Units are recorded as an expense based on the fair value of the units on the balance sheet date.

The fair value of these awards is updated at each balance sheet date and changes in the fair value of the vested portions of the awards are recorded as increases or decreases to compensation expense in the Consolidated Statements of Operations and Comprehensive Loss.

All of the outstanding Phantom Units at December 31, 2025 met the criteria to be treated under liability classification in accordance with ASC 718, given that these awards will settle in cash on the vesting date.

See Note 11 .

Stock-Based Compensation for more information on the Company’s Phantom Units.

Defined severance benefits

11 unchanged sentences

The consolidated financial statements reflect the jurisdictional netting of deferred tax assets and liabilities within each tax jurisdiction.

However, the tax footnote disclosures are presented on a gross basis, without netting across jurisdictions, to provide a detailed breakdown of deferred tax balances as required by the applicable accounting standards.

Realization of our deferred tax assets is dependent on the generation of future taxable income.

In considering the need for a valuation allowance, we consider our historical, as well as future projected taxable income, along with other positive and negative evidence in assessing the realizability of our deferred tax assets.

However, the tax footnote disclosures are presented on a gross basis, without netting across jurisdictions, to provide a detailed breakdown of deferred tax balances as required by the applicable

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

valuation allowances are recorded as reductions to our income tax expense and increases to valuation allowances result in additional expense for income taxes.

accounting standards.

Realization of our deferred tax assets is dependent on the generation of future taxable income.

Decreases to valuation allowances are recorded as reductions to our income tax expense and increases to valuation allowances result in additional expense for income taxes.

We recognize and measure uncertain tax positions taken or expected to be taken in a tax return utilizing a two-step process.

17 unchanged sentences

Credit loss expense is included in General and administrative expenses.

Reclassifications

Certain amounts reported for prior years have been reclassified to conform to the current year’s presentation.

Property and Equipment, net

10 unchanged sentences

When the Company has the option to extend the term or terminate the lease before the contractual expiration date, and it is reasonably certain that it will exercise the option, the Company considers these options in determining the lease term.

The Company’s operating

The Company’s operating leases are comprised of leases of real estate and equipment that are typically entered into for a fixed term that may contain

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

leases are comprised of leases of real estate and equipment that are typically entered into for a fixed term that may contain extension and termination options.

extension and termination options.

Certain agreements have free rent periods or escalating rent payment provisions.

9 unchanged sentences

When the undiscounted future cash flows indicate the long-lived asset or asset group is not recoverable, any potential impairment loss is measured and recognized at the amount by which the carrying value exceeds its fair value.

Property and Equipment, net and Note 7.

Goodwill, net and Intangible Assets, net for impairments recognized in the year ended December 31, 2024, December 31, 2023 and December 31, 2022.

Deferred Offering Costs

Deferred offering costs, consisting of legal, accounting advisory, and other fees and costs relating to the Company’s planned initial public offering are capitalized within Other current assets, net on the Consolidated Balance Sheets for the year ended December 31, 2023.

Upon the closing of the initial public offering, the deferred offering costs in the amount of $ 11.2 million were offset against the proceeds received by the Company.

Change in Estimated Useful Lives of Intangible Assets

14 unchanged sentences

Other debt and equity securities are valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Fair Value Option

3 unchanged sentences

For equity securities without readily determinable fair value, securities are recorded at cost less impairment, and adjusted for subsequent observable price changes as of the date that an observable transaction takes place.

The Company performs a qualitative assessment on a quarterly basis to determine if any observable price changes have occurred.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

performs a qualitative assessment on a quarterly basis to determine if any observable price changes have occurred.

If the qualitative assessment indicates that an observable price change has occurred for the same or similar security of the issuer, a gain or loss is recorded equal to the difference between the fair value and carrying value in the current period as a component of Other income (loss), net.

20 unchanged sentences

If declines in the value of the equity method investments are determined to be other-than-temporary, a loss is recorded in earnings in the current period as a component of Loss on equity method investment, net on the Consolidated Statements of Operations and Comprehensive Loss.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Concentrations of Credit Risk

6 unchanged sentences

Cash and cash equivalents are placed with several financial institutions that management believes are of high credit quality.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The Company’s receivables include amounts concentrated with three payment gateway companies representing 55.3 % and 54.9 % of the total receivables balance as of December 31, 2025 and December 31, 2024, respectively.

21 unchanged sentences

Periodically, we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether we are the primary beneficiary.

Non-Controlling Interest and Redeemable Non-Controlling Interest in Subsidiary

A non-controlling interest in a consolidated subsidiary represents the portion of the equity in a subsidiary not attributable, directly or indirectly, to the Company.

Non-controlling interests are presented as a separate component of equity in the consolidated balance sheets and the presentation of net income is modified to present earnings attributed to controlling and non-controlling interests.

Redeemable non-controlling interests are presented as a component of temporary equity in the mezzanine section of the consolidated balance sheet and the presentation of net income is modified to present earnings attributed to the controlling and redeemable non-controlling interest.

The redeemable non-controlling interest is initially recorded at the acquisition date fair value.

Subsequently, if it is probable that redeemable non-controlling interest will become redeemable, they are recorded at the higher of (1) the cumulative amount that would result from applying the measurement guidance in ASC 810-10 (i.e., initial carrying amount, increased or decreased for the non-controlling interest’s share of net income or loss, OCI or other comprehensive loss, and dividends) or (2) the redemption price.

If it is not probable that redeemable

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

non-controlling interest will become redeemable, they are recorded at the amount based on step (1) and when the redemption becomes probable, the Group recognizes changes in the redemption price immediately.

The Company does not consider the redemption of the redeemable non-controlling interest probable of being redeemable.

Accordingly, the redeemable non-controlling interest will not be remeasured until the redeemable non-controlling interest is probable of becoming redeemable.

Redeemable Non-Controlling Interest in Subsidiary Note 21.

Non-Controlling Interest in Subsidiaries for more information on the Company’s redeemable and nonredeemable non-controlling interests.

Common Control Transactions

21 unchanged sentences

Projected future cash flows are then discounted to present value using a discount rate management believes is commensurate with the risks inherent in the cash flows.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Basic and Diluted Losses per Share

3 unchanged sentences

The dilutive loss per share impact of the subsidiaries is included in our numerator when calculating loss per share.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Each reporting period, a measurement period adjustment is recorded to adjust the redeemable non-controlling interest to its maximum redemption amount with changes recorded in retained earnings (or Additional paid-in capital if the Company has an accumulated deficit) if such non-controlling interest is probable of being redeemed.

2 unchanged sentences

Recent Accounting Pronouncements Adopted

In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842), Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with common control leases.

This update is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

ASU 2023-01 became effective for us on January 1, 2024.

The adoption of ASU 2023-01 did not have a material effect on our Consolidated Financial Statements.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which amends Topic 280 primarily through enhanced disclosures about significant segment expenses.

This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

ASU 2023-07 become effective for us on January 1, 2024, for fiscal years and January 1, 2025, for interim periods on a retrospective basis for all periods presented in the financial statements.

We do not believe the impact of the new guidance and related codification improvements had a material impact to our financial position, results of operations and cash flows.

Recent Accounting Pronouncements Yet to Be Adopted

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.

ASU 2023-06 includes a number of amendments to clarify or improve disclosure and presentation requirements of a variety of topics in order to allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements and to align the requirements in the FASB accounting standard codification with the SEC’s regulations.

The effective date for each amendment will be 2 years after the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

We are currently evaluating the impact of the adoption of this accounting pronouncement on our Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures, which requires enhancements and further transparency to certain income tax disclosures, most notably the tax rate reconciliation and income taxes paid.

This ASU is effective for fiscal years beginning after December 15, 2024, on a prospective basis and retrospective application is permitted.

We are currently evaluating the impact of the adoption of this accounting pronouncement on our Consolidated Financial Statements.

In March 2024, the SEC adopted new rules that will require disclosures about climate-related risks that are reasonably likely to have a material impact on registrants’ business strategy, results of operations, or financial condition.

The required information about climate-related risks will also include disclosure of a registrant’s greenhouse gas emissions.

In addition, the rules will require registrants to present certain climate-related financial metrics in their audited financial statements.

On April 4, 2024, the SEC determined to voluntarily stay the final rules pending certain legal challenges.

We are currently evaluating the potential impact of these rules on our Consolidated Financial Statements and related disclosures.

In November 2024, the FASB issued Accounting Standards Update No.

This update is effective for fiscal years beginning after December 15, 2024, on a prospective basis and retrospective application is permitted.

The Company adopted ASU 2023-09 prospectively during the year ended December 31, 2025.

Income Taxes ” for more information about the impact of the adoption of ASU 2023-09.

Recent Accounting Pronouncements Yet to Be Adopted

In November 2024, the FASB issued ASU No.

2024-03, Income Statement (Topic 220):

2 unchanged sentences

The Company is currently evaluating the impacts of adopting this guidance on its financial statement disclosures.

In July 2025, the FASB issued ASU No.

2025-05, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides an expedient for measuring expected credit losses on current trade receivables and contract assets by assuming that current conditions remain unchanged over the life of the asset, and for non-public business entities, an accounting policy election to consider subsequent cash collections.

The amendments are effective for annual and interim periods beginning after December 15, 2025, with early adoption permitted.

We do not expect the adoption of this standard to have a material impact on our Consolidated Financial Statements.

In September 2025, the FASB issued ASU No.

2025-06, Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the accounting for software costs by removing all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout Subtopic 350-40.

The amendments are effective for annual and interim periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impacts of adopting this guidance on its financial statement disclosures.

WEBTOON Entertainment Inc.

36 unchanged sentences

Diluted loss per share is computed using the weighted average number of outstanding shares of common stock and, potentially dilutive common shares outstanding during the period.

Potentially dilutive common shares consist of incremental shares issuable upon the assumed exercise of stock options and vesting of the RSUs.

For the years ended December 31, 2024, December 31, 2023, and December 31, 2022, the Company’s Korean subsidiaries each had outstanding stock options that will be settled in each respective subsidiary’s common shares.

The numerator of the Company’s loss per share includes the Parent’s proportionate share of the diluted earnings (loss) per share impact of outstanding subsidiaries’ stock options.

Potentially dilutive common shares consist of incremental shares issuable upon the assumed exercise of stock options and vesting of RSUs.

For the years ended December 31, 2025, December 31, 2024, and December 31, 2023, the Company’s Korean subsidiaries and equity method investees each had outstanding stock options that will be settled in each respective subsidiary or equity method investee’s common shares.

The numerator of the Company’s loss per share includes the Parent’s proportionate share of the diluted loss per share impact of outstanding subsidiaries and equity method investees’ stock options.

The following table sets forth the computation of basic and diluted loss per share for the years ended December 31, 2025, December 31, 2024, and December 31, 2023:

5 unchanged sentences

allocation to subsidiary/equity method investee participating security 1

( 207 ) 123 210

Net loss available to WEBTOON Entertainment Inc.

11 unchanged sentences

Weighted-average common shares outstanding 130,177,475 119,231,997 109,505,150

Diluted weighted-average common shares outstanding 130,177,475 119,231,997 109,505,150

Diluted loss per share $ ( 2.66 ) $ ( 1.21 ) $ ( 1.06 )

4 unchanged sentences

Disposition and Business Combinations for additional information for Jakga disposition).

The following potentially dilutive outstanding securities were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented, or issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period:

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

2025 2024 2023

10 unchanged sentences

Loss on foreign currency, net ( 625 ) ( 2,103 ) ( 7,590 )

Retirement benefit, net 2,807 8,763 9,598

Retirement benefit (loss), net ( 601 ) 2,807 8,763

Dividend income — 2,640 —

3 unchanged sentences

Total other income (loss), net $ ( 9,808 ) $ 6,482 $ ( 23,574 )

Balance Sheet Components and Assets Held for Sale

Assets Held for Sale

Major classes of assets held for sale as of December 31, 2023, are as follows:

As of December 31,

2024 As of December 31,

(in thousands of USD)

Land $ — $ 6,670

Building — 157

Total assets held for sale $ — $ 6,827

On October 1, 2023, the Company approved a plan to sell a building and land held by Jakga Company Inc.

(“Jakga”), a Korean subsidiary.

Jakga initially acquired the land and building for office use, but Jakga later decided against utilizing the property for this purpose, leading to their sale.

The building and land were considered a single disposal group as they were intended to be sold in a single transaction.

Upon approval of the plan, the building and land were classified as held for sale and measured at the lower of their aggregate carrying value or estimated aggregate fair value, less costs to sell.

The Company recognized no write-down loss during the year ended December 31, 2023.

No depreciation expense was recorded for the assets held for sale starting October 1, 2023 through December 31, 2023.

The Company deconsolidated Jakga on March 28, 2024, and therefore was excluded from the scope of consolidation.

Jakga completed the sale during the third quarter ended September 30, 2024.

Dispositions and Business Combinations for further details on this disposition.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

There were no Assets Held for Sale as of the year ended December 31, 2024.

Balance Sheet Components

Prepaid Expenses and Other Current Assets, net

8 unchanged sentences

The advance payments for production of film contents are directly related to the contract that will be used to satisfy a future performance obligation and are expected to be recovered.

The Company’s balance of advance payments due to film production contracts are $ 35.1 million and $ 24.7 million, as of December 31, 2024, and December 31, 2023, respectively.

The Company’s balance of advance payments due to film

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

production contracts are $ 29.0 million and $ 35.1 million, as of December 31, 2025, and December 31, 2024, respectively.

These costs are amortized on a systematic basis consistent with the transfer of services to the customer to which the asset relates.

15 unchanged sentences

Long-term advance payments represent the portion of advance payments expected to remain on the balance sheet beyond one year.

When the Company determines the estimated future commission expenses payable are less than the

When the Company determines the estimated future commission expenses payable are less than the carrying amount of the long-term advance payments, the remaining portion of that long-term advance payment is charged to expense in the period in which such determination is made.

The Company’s balance of advance payments due to film production contracts are $ 7.3 million and $ 8.5 million as of December 31, 2025 and December 31, 2024, respectively, and charged long-term advance payments to expense due to such determination in the amounts of $ 11.9 million, $ 6.9 million and $ 4.4 million, for the years ended December 31, 2025, December 31, 2024, and December 31, 2023, respectively.

The Company recorded amortization expense of $ 65.3 million, $ 36.3 million, and $ 64.2 million, and impairment loss of $ 0.7 million, $ 0.4 million and $ 0.5 million during the years ended December 31, 2025, and December 31, 2024, and December 31, 2023, respectively, for contracts related to film products.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

carrying amount of the long-term advance payments, the remaining portion of that long-term advance payment is charged to expense in the period in which such determination is made.

The Company’s balance of advance payments due to film production contracts are $ 8.5 million and $ 8.7 million, and charged long-term advance payments to expense due to such determination in the amounts of $ 6.9 million, $ 4.4 million and $ 14.5 million, for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively.

The Company recorded amortization expense of $ 36.3 million, $ 64.2 million, and $ 8.4 million, and impairment loss of $ 0.4 million, $ 0.5 million and $ 0.5 million during the years ended December 31, 2024, and December 31, 2023, and December 31, 2022, respectively, for contracts related to film products.

Accrued Expenses

31 unchanged sentences

amount Accumulated

Amortization Carrying

Amortization Impairment Carrying

(in thousands of USD)

5 unchanged sentences

Trademarks, copyrights, and patents 4.32 - 15

98 ( 57 ) — 41

Intangible assets with indefinite lives:

13 unchanged sentences

Trademarks, copyrights, and patents 4.32 - 15

415 ( 33 ) 382

Intangible assets with indefinite lives:

10 unchanged sentences

Notes to Consolidated Financial Statements

Intangible assets, other than goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

During the fourth quarter of 2025, based on management’s updated cash flow forecasts, management determined that the carrying amount of the Bootcamp video production assets was no longer recoverable as no further revenues or cost recoveries are anticipated from the project.

As a result, the Company recognized an impairment charge of $ 1.0 million for the year ended December 31, 2025, in Impairment losses on goodwill and other intangible assets in the Consolidated Statements of Operations and Comprehensive Loss, representing a full write-off of the remaining carrying balance.

There were no impairments of intangible assets, other than goodwill, during the years ended December 31, 2024, or December 31, 2023.

Intangible asset amortization expenses for the following five years are expected to be as follows:

9 unchanged sentences

Goodwill Activity:

Acquisition 1,398 —

Foreign currency translation adjustments 5,660 ( 30,564 )

8 unchanged sentences

(*) Accumulated impairment losses include $ 437.0 million and $ 101.4 million of impairment charges for the years ended December 31, 2025, and December 31, 2024, respectively.

Additionally, cumulative translation adjustments (“CTA”) resulted in a net reversal of $ 5.0 million for the year ended December 31, 2024, whereas a net charge of $ 0.7 million was recorded for the year ended December 31, 2023.

Additionally, cumulative translation adjustments (“CTA”) resulted in a net reversal of $ 5.6 million and $ 5.0 million for the year ended December 31, 2025, and December 31, 2024, respectively.

During 2025, the Company acquired a controlling interest in Purple Duck through a business combination achieved in stages, and recognized goodwill of $ 1.4 million.

During 2024, the Company deconsolidated its reporting unit Jakga, which resulted in the Company derecognizing goodwill, net in the amount of $ 13.6 million, which consisted of goodwill of $ 44.3 million and accumulated impairment of $ 30.7 million.

During 2023, the Company deconsolidated LOCUS which resulted in the Company derecognizing goodwill related to the reporting unit of $ 30.3 million (see Note 17.

Disposition and Business Combinations ).

The Company is required to assess goodwill and any indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate an impairment may have occurred.

(see Note 17.

Disposition and Business Combinations, for more information on these transactions).

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

For the years ended December 31, 2025, and December 31, 2024, the Company elected to bypass a qualitative assessment and performed a quantitative assessment to fulfill its annual goodwill impairment testing requirements under U.S.

1 unchanged sentence

The carrying values were based on each respective reporting unit’s net asset balance as of October 1, 2025, and October 1, 2024, respectively, and included directly attributable assets and liabilities, including goodwill.

The company recognized impairment loss on goodwill for Wattpad, Munpia, and WWS of $ 46.7 million, $ 20.3 million, and $ 2.7 million respectively, for the year ended December 31, 2024, as the carrying value of each reporting unit exceeded

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

the fair value of the respective reporting unit.

For Wattpad, strategic shifts toward an ad-based revenue model has not yet yielded significant revenue improvement, resulting in delayed profitability enhancement which contributed to the impairment of the reporting unit.

The Company recognized impairment loss on goodwill for Wattpad, Munpia, Wattpad WEBTOON Studios Corp.

(“WWS”), and Purple Duck of $ 257.2 million, $ 74.0 million, $ 2.9 million and $ 1.4 million respectively, for the year ended December 31, 2025, as the carrying value of each reporting unit exceeded the fair value of the respective reporting unit.

For Wattpad, the impairment charge was primarily driven by a downward revision in projected operating results, which led to a lowered outlook for 2026 and beyond.

This adjustment resulted from challenges in the advertising business, where delays in key strategic initiatives, such as the migration to the advertising platform, caused by organizational restructuring in the North American advertising division, along with the loss of sales personnel, led to a shortfall in advertising revenue.

Additionally, user metrics declined due to a sustained decrease in Monthly Active Users (MAU) and traffic from prolonged service bans in Russia and Turkey, combined with technical issues affecting search engine functionality, which collectively resulted in lower ad impressions and slower growth in paid content revenue.

For Munpia, while recent standalone operating performance remains stable, the Company recalibrated its long term forecast to reflect a lower than expected realization of synergies from IP expansion.

Recent financial analysis indicated that the conversion of webnovels into secondary content and the subsequent increase in distribution revenue were slower than initially anticipated.

This structural realignment resulted in a reduction in projected business scale, which in turn increased the discount rate applied in the valuation due to a higher size premium.

For WWS, business strategy shifted from drama and movie production to providing scripts or rights utilizing Webtoon IP to clients, such as drama and movie production companies, leading to a significant reduction in projected future cash flows.

In the case of Purple Duck, lower than expected operating profits and cash flows contributed to the impairment of the reporting unit.

The Company recognized impairment loss on goodwill for Wattpad, Munpia, and WWS of $ 46.7 million, $ 20.3 million, and $ 2.7 million respectively, for the year ended December 31, 2024, as the carrying value of each reporting unit exceeded the fair value of the respective reporting unit.

For Wattpad, strategic shifts toward an ad-based revenue model had not yet yielded significant revenue improvement, resulting in delayed profitability enhancement which contributed to the impairment of the reporting unit.

For Munpia, structural changes in operations, workforce reduction, and project delays resulted in the underperformance in revenue growth which contributed to the impairment of the reporting unit.

7 unchanged sentences

Changes in these estimates and assumptions could materially affect the fair value of the reporting units, potentially resulting in a non-cash impairment charge.

For the year ended December 31, 2022, the Company recognized no goodwill impairment.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The Company engages in leasing arrangements that primarily involve office buildings, some of which are further subleased to third parties or related parties.

The Company has not entered into any arrangements that include residual value guarantees for its leases.

The Company has extension options for two lease offices, with extension periods of five years and one year , respectively;

The Company has extension options for four lease offices, with extension periods ranging from one year to five years ;

however, since the likelihood of extension is not reasonably certain, it is not reflected in the right-of-use assets and liabilities.

9 unchanged sentences

Lease expense is included within General and administrative expenses of the Consolidated Statements of Operations and Comprehensive Loss.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Supplemental disclosure of cash flow information related to operating leases is as follows:

7 unchanged sentences

Weighted-average discount rate 3.86 % 4.49 %

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The aggregate future lease payments for operating lease liabilities as of December 31, 2025, are as follows:

Year (in thousands of USD)

2026 $ 10,188

Thereafter 691

4 unchanged sentences

Total other income generated from subleases is $ 0.3 million, $ 0.3 million, and $ 0.6 million for the years ended December 31, 2025, December 31, 2024, and December 31, 2023, respectively, and is included within Other income (loss), net of the Consolidated Statements of Operations and Comprehensive Loss.

Short-Term Borrowings

The carrying amounts of short-term borrowings as of December 31, 2024 and December 31, 2023 are as follows:

Date Interest

rate(%) As of December 31,

Lender Interest type 2024 2023

(in thousands of USD)

Industrial Bank of Korea Loan 1

Jun-24 6.04 3

Floating rate — 387

NW Media Loan 2

Apr-24 1.35 Fixed rate — 3,800

Total short-term borrowings $ — $ 4,187

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

______________

As of December 31, 2023, debt includes $ 0.4 million related to Jakga, which was derecognized from the Company’s Consolidated Financial Statements when the Company deconsolidated Jakga on March 28, 2024.

In April 2022, the Company received a loan of $ 3.9 million from NAVER that NAVER subsequently transferred to its subsidiary NW Media Contents, Inc.

(“NWMC”) in June 2022.

In March 2023, the maturity date of NW Media Loan was extended, and subsequently repaid in April 2024.

Calculated as the 3 month KORIBOR, which ranged from 3.43 % - 4.03 % plus 2.17 % for the year ended December 31, 2023.

The weighted average interest rates on short term borrowings outstanding as of December 31, 2024 and December 31, 2023 are — % and 1.78 %, respectively.

Long-Term Debt

Date Interest

rate(%) As of December 31,

Lender Interest type 2024 2023

(in thousands of USD)

Feb-25 2.00 Fixed rate — 30

Aug-25 2.85 2

Floating rate — 65

Total principal long-term debt $ — $ 95

current portion of long-term debt — ( 65 )

Total long-term debt $ — $ 30

______________

Korea Small and Medium-sized Enterprises and Startups Agency (“KOSME”).

Calculated as the KOSME policy rate, which was 2.90 % and 2.90 % - 3.20 % for the years ended December 31, 2024 and December 31, 2023, respectively.

Revolving Credit Facility

In February and April 2022, the Company entered into one-year revolving credit facility arrangements with Shinhan Bank, KEB Hana Bank, and Kookmin Bank, where were further extended for an additional one-year period during the year ended December 31, 2023.

During the year ended December 31, 2024, the revolving credit facility arrangements with Shinhan Bank and KEB Hana Bank were further extended for an additional one-year term.

The revolving credit facilities provide collective available credits of $ 54.4 million and $ 62.0 million during the years December 31, 2024 and December 31, 2023, respectively.

As of December 31, 2024 and December 31, 2023, the Company has not drawn any amounts from these facilities.

Revolving Credit Facilities

In October 2025, the Company entered into a new one-year revolving credit facility arrangement with Shinhan Bank Japan.

During the year ended December 31, 2025, the Company extended its previous one-year revolving credit facility arrangements with Shinhan Bank, KEB Hana Bank, and Kookmin Bank.

Collectively, the revolving credit facilities provide available credits of $ 64.0 million and $ 54.4 million as of December 31, 2025, and December 31, 2024, respectively.

As of December 31, 2025, and December 31, 2024, the Company had not drawn any amounts from these facilities.

Commitments and Contingencies

2 unchanged sentences

The Company also discloses material contingencies when it believes a loss is not probable but reasonably possible.

Accounting for contingencies requires us to use judgement related to both the likelihood of a loss and the estimate of the amount or range of loss.

Accounting for contingencies requires us to use judgment related to both the likelihood of a loss and the estimate of the amount or range of loss.

Legal Proceedings

The Company is involved in a number of claims pending with various courts, or otherwise unresolved as of December 31, 2025 and December 31, 2024.

Adverse results in these claims may include awards of damages and may also result in, or even compel a change in the Company’s business practices, which could materially impact the Company’s

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

future financial results.

Adverse results in these claims may include awards of damages and may also result in, or even compel a change in the Company’s business practices, which could materially impact the Company’s future financial results.

The Company cannot determine the potential loss or a range of possible losses for cases in their initial stages or where there is an unclear and inconsistent interpretation of laws related to the industry-specific grievances across various jurisdictions.

1 unchanged sentence

The timing and outcome of ongoing legal proceedings are uncertain by nature.

Therefore, while management deems the chance of a significant loss for all pending claims, whether asserted or unasserted, to be remote, the resolution of one or more of these legal matters against the Company during the same reporting period in excess of management’s projections could negatively impact the Company’s Consolidated Financial Statements for that reporting period.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

management’s projections could negatively impact the Company’s Consolidated Financial Statements for that reporting period.

Securities Litigation

1 unchanged sentence

333-279863) relating to the IPO (the “Registration Statement”).

The complaint alleges that the Registration Statement was materially false and misleading in violation of Sections 11 and 15 of the Securities Act of 1933.

The complaint alleges that the Registration Statement was materially false and misleading in violation of Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”).

On October 10, 2024, the court ordered that the defendants are not required to answer or otherwise respond to the complaint, deferring any response until after the court rules on any motion by a purported class member to serve as lead plaintiff.

1 unchanged sentence

On February 3, 2025, the lead plaintiff filed an amended complaint, and on March 4, 2025, the Company, its directors, and the underwriters of the IPO moved to dismiss the amended complaint.

On November 14, 2025, the court denied the motion to dismiss.

On November 14, 2025, the court issued an order granting in part and deny in part the motion to dismiss.

On December 2, 2025, the court issued an amended order granting in part and denying in part the motion to dismiss.

On January 9, 2026, the WEBTOON defendants and underwriter defendants filed answers to the operative complaint.

The Company intends to defend this case vigorously.

2 unchanged sentences

The complaint focuses on the same allegations as the putative securities class action described above, including that the Company’s Registration Statement was materially false or misleading.

The complaint includes claims for violations of Section 14 (a) of the Exchange Act, breach of fiduciary duties, and unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and contribution under Section 11(f) of the Securities Act of 1933, and the Section 31D of the Exchange Act of 1934.

On January 13, 2025, by stipulation of the parties, the court ordered the shareholder derivative lawsuit stayed pending resolution of the Company’s motion to dismiss in the putative securities class action.

At this early state of the proceedings, the Company can neither predict the ultimate outcome of the litigation nor estimate any range of possible losses.

On December 9, 2025, by stipulation of the parties, the court ordered the shareholder derivative lawsuit stayed until the court in the putative securities class action holds a scheduling conference and issues a scheduling order.

At this early stage of the proceedings, the Company can neither predict the ultimate outcome of the litigation nor estimate any range of possible losses.

Stock-Based Compensation

4 unchanged sentences

In addition, the Company granted RSUs that vest upon the satisfaction of both service-based and performance-based conditions, RSUs that vest upon the satisfaction of either a service-based condition or a performance-based condition and RSUs that vest upon the satisfaction of a service-based condition.

For the stock options and RSUs with the performance conditions satisfied upon the completion of the Company’s IPO, the Company recorded $ 48.6 million in stock-based compensation expense, consisting primarily of a cumulative catch-up adjustment related to such awards based on the full or partial fulfillment of requisite service periods.

For the stock options and RSUs with the performance conditions satisfied upon the completion of the Company’s IPO, the Company recorded $ 48.6 million in stock-based compensation expense in 2024, consisting primarily of a cumulative catch-up adjustment related to such awards based on the full or partial fulfillment of requisite service periods.

Unrecognized stock-based compensation expense related to these awards will be recorded over the remaining requisite service period.

11 unchanged sentences

The 2024 Plan provides for the granting of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, other share-based awards, other cash-based awards, substitute awards, and performance awards to employees, consultants, executives, and directors.

As of December 31, 2024, the Company had 10,818,583 shares of common stock available for future issuance, under the 2024 Plan.

As of December 31, 2025, and December 31, 2024, the Company had 7,570,494 and 10,818,583 shares, respectively, of common stock available for future issuance under the 2024 Plan.

Stock options

4 unchanged sentences

Stock options issued under the 2020 Plan expire eight years from the grant date.

As of December 31, 2024, the total unrecognized compensation expense related to unvested stock options was $ 12.39 million and is expected to be recognized over the remaining weighted-average service period of 1.62 years using the straight-line method, net of estimated forfeitures.

As of December 31, 2025, and December 31, 2024, the total unrecognized compensation expense related to unvested stock options was $ 4.6 million and

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

$ 12.4 million, respectively, and is expected to be recognized over the remaining weighted-average service period of 0.96 years using the straight-line method, net of estimated forfeitures.

The table below summarizes the Company’s stock option activity:

12 unchanged sentences

Options exercisable as of December 31, 2024 8,381,081 11.45 4.1 19,163

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Balance as of January 1, 2025 10,932,251 $ 14.36 4.9 $ 19,163

Forfeited ( 241,501 ) 17.48 56

Exercised ( 112,902 ) 11.75 648

Balance as of December 31, 2025 10,577,848 $ 14.31 3.7 $ 14,372

Options vested and expected to vest as of December 31, 2025 10,558,530 $ 14.30 3.7 14,372

Options exercisable as of December 31, 2025 8,896,348 $ 12.96 3.2 14,372

The fair value of the Company’s stock options was estimated using a Black-Scholes option pricing model on the grant date based on the following assumptions:

2024 2023 2022

Weighted-average expected term 5.5 years 4.9 years 5.5 years

Weighted-average expected term 5.5 years 4.9 years

Weighted-average expected volatility 34.60 % 34.15 %

9 unchanged sentences

The Company utilized a dividend yield of zero , as it had no history or plan of declaring dividends on its common stock.

No options were granted during the year ended December 31, 2025.

Restricted Stock Units

The Company granted (i)under the 2020 Plan RSUs with both a service- and performance-based condition, RSUs that vest upon satisfaction of a service-based condition or a performance-based condition, and RSUs that vest upon a service-based condition and (ii) under the 2024 Plan, RSUs that vest upon a service-based condition.

RSUs generally time-vest over one to four years from the vesting start date, subject to the recipient remaining an employee of the Company at each vesting date.

RSUs generally time-

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

vest over one to four years from the vesting start date, subject to the recipient remaining an employee of the Company at each vesting date.

For RSUs subject to a performance-based condition, the performance condition was satisfied upon the completion of the Company's IPO.

3 unchanged sentences

As of December 31, 2025, no dividends were declared.

As of December 31, 2024, the total unrecognized compensation expense related to unvested RSUs was $ 28.8 million and is expected to be recognized over the remaining weighted-average service period of 2.45 years using the straight-line method and graded-vesting methods, as appropriate, net of estimated forfeitures.

The total fair value of RSUs vested during the year ended December 31, 2024 was $ 6.6 million.

No RSUs vested during the years ended December 31, 2023 and 2022.

As of December 31, 2025 and December 31, 2024, the total unrecognized compensation expense related to unvested RSUs was $ 27.0 million and $ 28.8 million respectively, and is expected to be recognized over the remaining weighted-average service period of 1.43 years using the straight-line method and graded-vesting methods, as appropriate, net of estimated forfeitures.

The total fair value of RSUs vested during the years ended December 31, 2025, and December 31, 2024, was $ 40.4 million and $ 6.6 million respectively.

No RSUs vested during the year ended December 31, 2023.

The table below summarizes the Company’s RSU activity:

6 unchanged sentences

Balance as of December 31, 2024

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

2,635,775 $ 22.00

Balance as of January 1, 2025 2,635,775 $ 22.00

Granted 3,248,089 9.08

Forfeited ( 177,535 ) 10.73

Released ( 2,407,816 ) 16.77

Balance as of December 31, 2025 3,298,513 $ 13.69

A summary of compensation expenses for all stock-based payment arrangements recognized in Cost of revenue, Marketing and General and administrative expense on our Consolidated Statements of Operations and Comprehensive Loss is as follows:

6 unchanged sentences

Total $ 41,907 $ 87,379 $ 8,345

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The following table summarizes the Company's Phantom Unit activity for the year ended December 31, 2025:

Number of Phantom Units Weighted Average Grant-Date Fair Value

Balance as of January 1, 2025 — $ —

Granted 557,180 9.04

Forfeited ( 21,399 ) 9.04

Vested ( 207,033 ) 9.04

Balance as of December 31, 2025 328,748 $ 9.04

As of December 31, 2025, the Company recognized stock-based compensation expense related to the Phantom Units of $ 4.1 million.

Compensation expense for the Phantom Units is based on the fair value of the units as of the balance sheet date, as further discussed in Note 1.

Description of Business and Summary of Significant Accounting Policies , and such costs are recognized ratably over the service period of the awards.

As the fair value of liability awards is required to be re-measured each period end, stock compensation expense amounts recognized in future periods for these awards will vary.

The estimated future cash payments of these awards are presented within accrued expenses on the Company's Consolidated Balance Sheets.

As of December 31, 2025, the total unrecognized compensation expense related to unvested Phantom Units is $ 2.1 million and is expected to be recognized over the remaining weighted-average service period of 1.06 years using the straight-line method, net of estimated forfeitures.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The Company is subject to U.S.

13 unchanged sentences

Current income tax expense:

Federal $ 2,810 $ 2,419 $ —

( 575 ) 1,025 150

7 unchanged sentences

Total deferred income tax expense ( 28,965 ) ( 24,535 ) ( 15,573 )

Total income tax expense $ 3,604 $ 12,006 $ 14,369

Total income tax expense (benefit) $ ( 16,022 ) $ 3,604 $ 12,006

Effective tax rate 4.11 % ( 2.41 )% ( 9.04 )%

On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act (the “Act”), with certain provisions of the Act effective in 2025 and other provisions becoming effective in 2026 and beyond.

The provisions of the Act effective in 2025 were not material and have been reflected in our results, as applicable.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The Company’s effective tax rate is ( 2.41 %) for the year ended December 31, 2024.

The Company’s current tax expenses are primarily attributable to the taxable income generated by the Parent and its Korean and Japanese subsidiaries, WTEK, Studio N, Munpia, Studio Lico, and LDF.

The current income tax expense incurred by the Parent is primarily due to the limitation of foreign tax credit utilization for the year ended December 31, 2024.

Other current income tax expenses incurred by Korean and Japanese subsidiaries are primarily due to taxable profits incurred as well as $ 8.0 million of foreign withholding taxes paid by WTEK in Japan.

The Company continues to maintain a full valuation allowance against its deferred tax assets for the majority of its subsidiaries, which contributed to the negative effective tax rate.

A full valuation allowance is maintained against deferred tax assets for the Parent where the majority of deferred tax benefits from its foreign tax credits are not recognized.

The effective date of the LDF-eBIJ merger was September 1, 2024.

eBIJ, a profit-making entity, had net deferred tax liabilities at the date of merger, which resulted in LDF partially releasing its valuation allowance.

A $ 17.0 million deferred tax benefit is primarily attributable to the release of valuation allowance related to the LDF-eBIJ merger.

The Company’s effective tax rate for the year ended December 31, 2024 differs from the federal statutory rate of 21.00% due to the tax benefits not recognized as a result of a full valuation allowance established by the Company and most of its foreign subsidiaries.

The Company’s effective tax rate for the year ended December 31, 2023 is ( 9.04 %) which differs from the federal statutory rate of 21.00% due to the tax benefits not recognized as a result of a full valuation allowance established by the Company and most of its foreign subsidiaries.

The Company’s effective tax rate for the year ended December 31, 2022 is ( 12.16 %) which differs from the federal statutory rate of 21.00% due to the tax benefits not recognized as a result of a full valuation allowance established by the Company and most of its foreign subsidiaries.

The reconciliation from the statutory federal income tax rate to our effective income tax rate, applying ASU 2023-09 prospectively, for the year ended December 31, 2025 is as follows:

(in thousands of USD)

Provision computed at federal statutory rate $ ( 81,776 ) 21.0 %

State income taxes, net of federal effect * 188 — %

Foreign tax effects

Difference in foreign tax rates ( 816 ) 0.2 %

Non-deductible stock compensation 5,374 ( 1.4 ) %

Foreign tax ( 1,701 ) 0.4 %

Impairment of goodwill 5

15,809 ( 4.1 ) %

Others 1,201 ( 0.3 ) %

Difference in foreign tax rates 1,853 ( 0.5 ) %

Non-deductible stock compensation 1,548 ( 0.4 ) %

Change in valuation allowance ( 8,425 ) 2.2 %

Withholding tax 7

8,533 ( 2.2 ) %

Others 717 ( 0.2 ) %

Difference in foreign tax rates ( 1,145 ) 0.3 %

Change in valuation allowance ( 17,059 ) 4.4 %

Impairment of goodwill 5

54,622 ( 14.0 ) %

Others 1,189 ( 0.3 ) %

Effect of changes in tax laws or rates enacted in the current period — — %

Effect of cross-border tax laws

Disavowed Deduction Addback 3

13,755 ( 3.5 ) %

Global Intangible Low Taxed Income 4

2,195 ( 0.6 ) %

Branch (loss)/income 1

( 14,736 ) 3.8 %

Investments in affiliates 8,169 ( 2.1 ) %

Foreign tax credits 1

( 6,031 ) 1.5 %

Changes in valuation allowances

Change in valuation allowance ( 363 ) 0.1 %

Nontaxable or nondeductible items

Disallowed Deduction of Covered Employees Compensation 2

1,461 ( 0.4 ) %

Other ( 324 ) 0.1 %

Changes in unrecognized tax benefits

Uncertain tax positions liability ( 258 ) 0.1 %

Income tax expense (benefit) $ ( 16,022 ) 4.1 %

*The state that contributes to the majority (greater than 50%) of the tax effect in this category is California for 2025.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The reconciliation of taxes at the federal statutory rate of 21.00% to our income tax expense for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 is as follows:

2024 2023 2022

The reconciliation from the statutory federal income tax rate to our effective income tax rate, applying ASC 740 prior to the adoption of ASU 2023-09 for the years ended December 31, 2024 and December 31, 2023 is as follows:

(in thousands of USD)

3 unchanged sentences

Permanent differences:

Capital gain on sale of business 1

— — ( 1,413 )

Foreign tax ( 1,681 ) ( 1,145 )

13 unchanged sentences

Withholding tax 7

7,969 5,479 4,768

Foreign currency translation adjustments on deferred tax 7,734 699

Taxation on foreign currency translation gains or losses 8

( 13,256 ) — —

Change in valuation allowance ( 7,198 ) 26,465

4 unchanged sentences

______________

Wattpad reported a capital gain in its Canadian tax return for the year ended December 31, 2022, from the sale of its studio business to WWS.

The capital gain is only 50% taxable for Canadian tax purposes.

As such, 50% of capital gain was deductible as a permanent difference.

For the years ended December 31, 2025, December 31, 2024 and December 31, 2023, a permanent difference of $( 14.7 ) million, $( 16.8 ) million and $( 14.0 ) million, respectively, were included as branch (loss)/income.

The branch loss of $ 16.8 million for the year ended December 31, 2024, represents the tax effect on $ 20.7 million of accounting income and $ 21.2 million of foreign tax credits generated by WTEK.

The branch loss of $ 14.0 million for the year ended December 31, 2023, represents the tax effect on $ 4.6 million of accounting loss and $ 13.0 million of foreign tax credits generated by WTEK.

The branch income of $ 1.5 million for the year ended December 31, 2022, represents the tax effect on $ 73.3 million of accounting income and $ 13.9 million of foreign tax credits generated by WTEK.

The foreign tax credits include income taxes paid in Korea and withholding taxes paid in various countries by WTEK, which are adjusted for the effect of changes in foreign tax credits in connection with the future reversal of the deferred taxes recorded under the Korean tax laws.

The branch loss of $ 14.7 million for the year ended December 31, 2025, represents the tax effect on $ 70.2 million of accounting loss and $ 6.0 million of foreign tax credits generated by NAVER WEBTOON.

The branch loss of $ 16.8 million for the year ended December 31, 2024, represents the tax effect on $ 20.7 million of accounting income and $ 21.2 million of foreign tax credits generated by NAVER WEBTOON.

The branch loss of $ 14.0 million for the year ended December 31, 2023, represents the tax effect on $ 4.6 million of accounting loss and $ 13.0 million of foreign tax credits generated by NAVER WEBTOON.

The foreign tax credits include income taxes paid in Korea and withholding taxes paid in various countries by NAVER WEBTOON, which are adjusted for the effect of changes in foreign tax credits in connection with the future reversal of the deferred taxes recorded under the Korean tax laws.

Internal Revenue Code (“IRC”) Section 162(m) limits the deductible compensation paid to covered employees of publicly traded companies, which includes the CEO and CFO, to $1 million per covered employee per year.

The Company has disallowed total cash and equity compensation of $ 7.0 million for the year ended December 31, 2025.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The Company has disallowed total cash and equity compensation of $ 74.7 million for the year ended December 31, 2024.

IRC Section 59A levies a tax on certain qualifying large corporations that have deductions with respect to amounts paid or accrued to foreign related parties that are 3% or more of their total deductions (“base erosion percentage”).

1 unchanged sentence

For the year ended December 31, 2025, the Company has waived approximately $ 65.5 million of deductions.

For the year ended December 31, 2024, the Company has waived approximately $ 49.0 million of deductions.

IRC Section 951A requires a U.S.

3 unchanged sentences

The Company has GILTI inclusion of $ 10.5 million net of deductions for the year ended December 31, 2025.

The Company has GILTI inclusion of $ 18.6 million net of deductions for the year ended December 31, 2024.

The Company recognized impairment loss on goodwill of $ 257.2 million, $ 74.0 million, $ 2.9 million, and $ 1.4 million for Wattpad, Munpia, WWS and Purple Duck, respectively, for the year ended December 31, 2025.

In 2025, the impairment loss was recognized as the carrying value of each reporting unit exceeded the fair value of the respective reporting unit.

None of the goodwill generated from business combinations structured as a

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

sale/purchase of stock was tax deductible and thus, the impairment of goodwill for book purpose for Wattpad, Munpia, WWS, and Purple Duck have been added back as permanent difference.

The Company recognized impairment loss on goodwill for Wattpad, Munpia, and WWS of $ 46.7 million, $ 20.3 million, and $ 2.7 million respectively, for the year ended December 31, 2024.

6 unchanged sentences

Since LOCUS had recorded a full valuation allowance, there was a change in the valuation allowance of $( 5.4 ) million upon deconsolidation and no tax expense or benefit was recognized upon deconsolidation.

WTEK has received royalty income from various foreign entities and has paid withholding taxes on such income.

NAVER WEBTOON has received royalty income from various foreign entities and has paid withholding taxes on such income.

On December 11, 2024, the US Treasury and IRS released final regulations under IRC Section 987 and related rules, which are effective on December 10, 2024, and generally apply to taxable years beginning after December 31, 2024.

For the year-ended December 31, 2024, WTEK is the only Section 987 qualified business unit (“QBU”) of the Company whose functional currency is non-USD.

For the year-ended December 31, 2024, NAVER WEBTOON is the only Section 987 qualified business unit (“QBU”) of the Company whose functional currency is non-USD.

The Company has calculated pre-transition loss of $ 63.1 million based on the rules prescribed in the final regulations.

In December 2022, the Korean National Tax Service (“KNTS”) initiated a regular tax audit for WTEK covering tax years 2020 and 2021.

In December 2022, the Korean National Tax Service (“KNTS”) initiated a regular tax audit for NAVER WEBTOON covering tax years 2020 and 2021.

The tax assessment primarily relates to the disallowance of losses on a disposition of the Parent’s shares in 2020.

The assessment also includes a deemed distribution from a disproportionate capital increase of its investment in an affiliate and the disallowance of research and development credits.

WTEK did not appeal the assessment result and settled the tax payment in May 2023.

NAVER WEBTOON did not appeal the assessment result and settled the tax payment in May 2023.

WEBTOON Entertainment Inc.

8 unchanged sentences

Intangible assets 4,388 7,565

Foreign currency translation 1,705 —

Valuation of investment 11,641 9,307

16 unchanged sentences

Total deferred tax liabilities ( 46,926 ) ( 53,574 )

Net deferred tax liabilities $ ( 12,679 ) $ ( 37,089 )

Net deferred tax assets (liabilities) $ 16,545 $ ( 12,679 )

Cash paid for income taxes, net of refunds received, by jurisdiction for the year ended December 31, 2025, is as follows (in thousands):

As of December 31,

(in thousands of USD)

Cash Paid for income taxes, net of refunds received

The amount of cash income taxes paid by the Company during the years ended December 31, 2024, and December 31, 2023, was $ 25,675 and $ 26,644 , respectively.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Changes in the valuation allowance for deferred tax assets for the years ended December 31, 2025, December 31, 2024 and December 31, 2023 are as follows:

8 unchanged sentences

Valuation allowance, balance at the ending $ 100,833 $ 125,648 $ 131,524

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

As of December 31, 2025, December 31, 2024, and December 31, 2023, the Company recorded a valuation allowance of $ 100.8 million, $ 125.6 million and $ 131.5 million, respectively, on its deferred tax assets related to temporary differences, taxation on foreign currency translation gains or losses, NOL carry-forwards and foreign tax credits.

The changes to existing valuation allowances for the year ended December 31, 2025 were primarily attributable to the utilization of foreign tax credits and net operating losses.

The changes to existing valuation allowances for the year ended December 31, 2024 were primarily attributable to the release of valuation allowance due to the LDF-eBIJ merger.

The changes to existing valuation allowances for the year ended December 31, 2023 were primarily attributable the increase in outside basis differences of investments at the Company level and NOLs incurred by the Canadian and Japanese subsidiaries for which the Company has recorded a full valuation allowance and a valuation allowance release of $ 5.4 million from the deconsolidation of LOCUS.

The changes to existing valuation allowances for the year ended December 31, 2022 were primarily attributable to the increased foreign tax credit at the Company level and NOLs incurred by the Canadian and Japanese subsidiaries for which the Company has recorded a full valuation allowance and a valuation allowance release of $ 1.1 million from the Company’s subsidiary in Korea, Studio N, since it was determined that it was more likely than not that the deferred tax assets at these subsidiaries will be realizable based on the current prospects of their future taxable income.

The changes to existing valuation allowances for the year ended December 31, 2023 were primarily attributable to the increase in outside basis differences of investments at the Company level and NOLs incurred by the Canadian and Japanese subsidiaries for which the Company has recorded a full valuation allowance and a valuation allowance release of $ 5.4 million from the deconsolidation of LOCUS.

The Company makes an ongoing assessment of our deferred tax assets for recoverability considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences, expiration of foreign tax credit and NOL carry-forwards and tax planning strategies.

3 unchanged sentences

Net operating loss carry-forwards $ 182,722 $ 208,021

As of December 31, 2024, the Company had $ 208.0 million of NOL carry-forwards available to offset future taxable income, of which $ 18.8 million, $ 103.4 million and $ 85.4 million are associated with the Company’s Korean, Japanese and Canadian subsidiaries, respectively.

As of December 31, 2025, the Company had $ 182.7 million of NOL carry-forwards, which $ 17.9 million, $ 76.5 million and $ 88.3 million are associated with the Company’s Korean, Japanese and Canadian subsidiaries, respectively.

NOLs from our Japanese subsidiary begin to expire from 2032 through 2034 and NOLs from Canadian subsidiaries begin to expire from 2039 through 2045.

The remaining NOLs mainly related to the Company and its Korean subsidiaries which expire at various years through 2038.

The Company also has U.S.

The remaining NOLs related its Korean subsidiaries which expire at various years from 2036 through 2041.

The Company has U.S.

foreign tax credit carry-forwards of approximately $ 27.8 million as of December 31, 2025, which begin to expire from 2032 through 2034.

As of December 31, 2023, the Company had $ 225.4 million of NOL carry-forwards available to offset future taxable income, of which $ 135.8 million and $ 70.4 million are associated with the Company’s Japanese and Canadian subsidiaries, respectively.

Uncertainty in Income Taxes

The changes to our gross unrecognized tax benefits are as follows:

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

2024 2023 2022

(in thousands of USD)

Unrecognized tax benefits, balance at the beginning $ 268 $ 1,074 $ —

Disposition in LOCUS — ( 87 ) —

Additions based on tax positions related to the current year — 93 1,069

Settlement for tax positions of prior years — ( 413 ) —

Lapse of statute of limitations ( 169 ) ( 361 ) —

Translation adjustments ( 21 ) ( 38 ) 5

Unrecognized tax benefits, balance at the ending $ 78 $ 268 $ 1,074

We are subject to income taxes in the U.S.

and foreign jurisdictions.

Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.

The total amount of gross unrecognized tax benefits was $ 78 thousand, $ 268 thousand, and $ 1.1 million as of December 31, 2024, 2023, and 2022, respectively, of which $ 78 thousand, $ 268 thousand, and $ 1.1 million, if recognized, would affect our effective tax rate, respectively.

As of December 31, 2024 and 2023, we accrued $ 10 thousand and $ 43 thousand in interest and penalties in provision for income taxes, respectively.

The Company and its subsidiaries file income tax returns in the U.S., Korea, Japan, and Canada.

The material filing jurisdictions are the U.S.

The Company and its subsidiaries are subject to examinations by tax authorities of these jurisdictions for all open tax years.

The open tax years for the company’s major tax jurisdictions are 2021 through 2024 for the U.S., 2020 through 2024 for Canada, 2018 through 2024 for Japan, and 2019 through 2024 for Korea.

The open tax years for the company’s major tax jurisdictions are 2022 through 2025 for the U.S.

and 2020 through 2025 for Korea.

The Company is currently under examination by local taxing authorities in the United States and in Canada.

1 unchanged sentence

We continue to monitor the progress of ongoing discussions with tax authorities.

The Company is currently unaware of any uncertain tax positions that could result in significant additional payments, accruals, or other material deviations from this estimate over the next 12 months.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Retirement Benefits

8 unchanged sentences

Transfer in/(out) ( 863 ) 70

Disposition 1

Cumulative effects of foreign currency translation 467 ( 4,054 )

2 unchanged sentences

Non-current $ 25,069 $ 22,030

______________

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

This relates to the disposition of Korean subsidiaries during 2023 (LOCUS, and SIDUS).

Changes in plan assets are as follows:

(in thousands of USD)

Beginning balance, January 1 $ — $ 428

Payments to plans — 18

Disposition 1

Cumulative effects of foreign currency translation — ( 7 )

Ending balance, December 31 $ — $ —

______________

This relates to the removal of plan assets due to the disposition of a Korean subsidiary during 2023 (SIDUS).

There were no changes to plan assets during the years ended December 31, 2025, and December 31, 2024.

Our provision for retirement benefits is as follows:

4 unchanged sentences

Provision for Defined severance benefits $ 26,264 $ 23,031

Net periodic cost consists of the following:

Net periodic cost (income) consists of the following:

As of December 31,

3 unchanged sentences

Interest expense 1,081 1,279 1,509

Actuarial loss (gain) ( 4,086 ) ( 10,272 ) ( 10,827 )

Net periodic benefit income $ 3,725 $ ( 737 ) $ ( 292 )

Actuarial gain ( 480 ) ( 4,086 ) ( 10,272 )

Net periodic benefit cost (income) $ 5,584 $ 3,725 $ ( 737 )

The principal actuarial assumptions used to determine defined severance benefits were as follows:

2 unchanged sentences

Salary growth rates 3.67 % — 8.12 % 4.00 % — 9.63 %

The principal actuarial assumptions used to determine the net periodic income were as follows:

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The principal actuarial assumptions used to determine the net periodic benefit cost (income) were as follows:

As of December 31,

1 unchanged sentence

Salary growth rates 4.00 % — 9.63 % 5.00 % — 10.31 %

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The expected maturity analysis of undiscounted defined severance benefits as of December 31, 2025 is as follows:

8 unchanged sentences

During the years ended December 31, 2025, December 31, 2024, and December 31, 2023, we recognized expense of $ 2.3 million, $ 2.7 million and $ 2.3 million, respectively.

Of the expense recognized in the years ended December 31, 2024, December 31, 2023, and December 31, 2022, $ — million, $ — million, and $ 0.2 million, respectively, was attributable to business combinations.

Segment and Geographic Information

24 unchanged sentences

Interest expense 56 45 79

Loss on equity method investment, net 1,123 12,339 4,694

Goodwill - impairment losses 69,743 63,412 —

Loss (gain) on equity method investment, net

( 1,282 ) 1,123 12,339

Impairment losses on goodwill and other intangible assets

336,486 69,743 63,412

Other loss (income), net 9,808 ( 6,482 ) 23,574

Income tax expense 3,604 12,006 14,369

Income tax expense (benefit)

( 16,022 ) 3,604 12,006

$ ( 373,387 ) $ ( 152,912 ) $ ( 144,759 )

The following non-cash expense items are also included in the measure of segment profit or loss reviewed by the CODM:

Stock-based compensation

37,798 $ 87,379 $ 8,345

Depreciation and amortization

35,431 $ 40,074 $ 38,359

Geographic Information

58 unchanged sentences

Volatility 44.96 %- 50.60 %

Convertible Preferred Stock 2,264 Measurement alternative

Simple Agreement For Future Equity (SAFE) 1,000 Measurement alternative

Total $ 22,034

4 unchanged sentences

Included in the consideration and selection of discount rates or market yields is risk of default, rating of the investment, call provisions and comparable company investments.

The following tables present a summary of the Company’s assets categorized within the fair value hierarchy as of December 31, 2024 and December 31, 2023:

The following tables present a summary of the Company’s assets categorized within the fair value hierarchy, or accounted for under the measurement alternative, as of December 31, 2025, and December 31, 2024:

As of December 31, 2025

3 unchanged sentences

Debt Securities — — 46,024 46,024

Total recorded at fair value $ 2 $ — $ 70,176 $ 70,178

Total $ — $ — $ 69,669 $ 69,669

As of December 31, 2024

3 unchanged sentences

Debt Securities — — 48,142 48,142

Total recorded at fair value $ 16,109 $ — $ 75,124 $ 91,233

Total $ 2 $ — $ 70,176 $ 70,178

The Level 1 equity securities relate to a contribution to investments in public equity securities that have readily determinable fair values.

The Level 3 equity securities relate to the Company’s investments in privately held companies through the purchase of convertible preferred stock, private equity securities, Simple Agreement For Future Equity (SAFE), contribution to

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

investment fund and redeemable convertible preferred stock.

For these equity securities, the Company does not have the ability to exercise significant influence on the investee, and therefore accounts for them as equity securities under ASC Topic 321, Investments in Equity Securities.

The Level 3 debt securities relate to the Company’s investments in privately held companies through the purchase of redeemable convertible preferred stock that meet the definition of a debt security.

The Level 3 equity securities include non-marketable equity investments without readily determinable fair values.

The company has elected to account for these investments using the measurement alternative, under which the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

For the year ended December 31, 2025, there were no upward or downward adjustments resulting from observable price changes, and no impairment losses were identified or recognized for these investments.

The following table presents a summary of the changes in the carrying value of our equity securities measured using the measurement alternative for the year ended December 31, 2025, and December 31, 2024.

(in thousands of USD)

Beginning balance, January 1 $ 16,557 $ 16,431

Purchases 844 1,000

Disposition and Other — ( 773 )

Net unrealized gain (loss) — —

Currency translation differences ( 24 ) ( 101 )

Ending balance, December 31 $ 17,377 $ 16,557

The below tables present a summary of changes in fair value of Level 1 and Level 3 assets by investment type (in thousands of USD):

Year Ended December 31, 2025

Level 1 Level 3

Level 1 Level 3 Total

Securities Equity

Securities Debt

Securities Debt & Equity Securities

Beginning balance, January 1 $ 2 $ 22,034 $ 48,142 $ 70,178

Purchases — 846 5,955 6,801

Business disposition — ( 776 ) 6,522

Net unrealized gain (loss) ( 2 ) 649 ( 9,252 ) ( 8,605 )

Sales and settlement — ( 2,713 ) ( 19 )

Reclassification 1

( 18,702 ) — —

Currency translation differences — 117 1,178 1,295

Ending balance, December 31 $ — $ 23,646 $ 46,023 $ 69,669

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Year Ended December 31, 2024

Level 1 Level 3

Level 1 Level 3 Total

Securities Equity

Securities Debt

Securities Debt & Equity Securities

Beginning balance, January 1 $ 16,109 $ 26,847 $ 48,277 $ 91,233

4 unchanged sentences

Reclassification 1

( 18,702 ) — — ( 18,702 )

Currency translation differences ( 756 ) ( 1,375 ) ( 6,557 ) ( 8,688 )

12 unchanged sentences

The Company recognized cost of revenue, other assets and accounts payable as of December 31, 2025, and December 31, 2024.

During the year ended December 31, 2022, the Company received a short-term loan of $ 30.4 million from NAVER that was repaid during the year ended December 31, 2023.

In March 2022, the Company started leasing office space from NAVER.

2 unchanged sentences

The Company also subleases part of its office space to other related parties and the total other income generated from subleases was $ 0.2 million and $ 0.3 million for the years ended December 31, 2025 and December 31, 2024, respectively.

In April 2022, Studio N, the Company’s subsidiary received the NW Media Loan from NAVER, which was transferred to its subsidiary NWMC in June 2022.

The NW Media Loan was extended for additional one-year in March 2023.

The loan was fully repaid in April 2024.

(Refer to Note 9.

Debt for additional information for NW Media Loan).

In February 2023, the Company issued a one-year loan to its related party, NAVER WEBTOON Company Corporation, for $ 11.6 million with a fixed interest rate of 5.26 %.

1 unchanged sentence

In February 2025, the loan was once again extended for an additional year.

In September 2023, LDF and LY entered into an Agreement of Termination and Transfer of Coin Issuance Operation pursuant to which LY transferred the coin issuance operation to LDF.

Prior to the transfer of the coin issuance operation, the Coins redeemable on the platform operated by LDF had been issued by LY to the users.

With the transfer of the coin issuance operation, the Coins redeemable on the platform operated by LDF have been issued by LDF.

Upon the transfer of the coin issuance operation, LDF inherited unused balances of the Coins issued by LY in the amount of $ 12.1 million.

In September 2023, LDF received cash from LY in the amount of $ 12.1 million for the unused balances of the Coins inherited by LDF.

The Company awarded a non-employee director with 2,832,270 stock options in exchange for non-director services in November 2020.

6 unchanged sentences

The reimbursed amounts primarily related to platform service fees, marketing-related expenses, and other outsourcing fees.

However, in the fourth quarter of 2023, Yahoo merged with Line, forming LY, resulting in these transactions being classified as related party transactions for

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

financial reporting purposes.

However, in the fourth quarter of 2023, Yahoo merged with Line, forming LY, resulting in these transactions being classified as related party transactions for financial reporting purposes.

Following the merger of LDF and eBIJ in September 2024, the recipient of these reimbursements transitioned from eBIJ to LDF.

For the years ended December 31, 2025, and December 31, 2024, LDF received total gross reimbursements of $ 20.0 million and $ 24.0 million, respectively, which is deducting $ 2.7 million and $ 11.0 million for cost of revenue, $ 11.8 million and $ 10.3 million for marketing, and $ 5.5 million and $ 2.7 million for general and administrative expenses, respectively.

Variable Interest Entity

In August 2023, WWS, the Company’s wholly-owned subsidiary, entered into a Limited Partnership Agreement with NWMC, a wholly-owned subsidiary of NAVER and a sister company of WEBTOON, to establish Bootcamp Limited Partnership (“Bootcamp”) pursuant to Limited Partnerships Act of the Province of Ontario, Canada.

Bootcamp distributes a film produced by GPM Boot Productions Inc.

which is a film adaptation of a web-novel titled Boot Camp published on our platform.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

WWS is the general partner (“GP”) of Bootcamp and manages as well as makes all operating decisions over Bootcamp and receives a 1.0 % variable interest management fee based on contributed capital.

NWMC is the sole limited partner (“LP”) and has no unilateral participating or kick-out rights over the GP.

Bootcamp is a VIE over which WWS is the primary beneficiary because the LP with the equity at risk is not able to exercise substantive kick-out rights or participating rights and WWS has the obligation to absorb losses and right to receive benefits that could potentially be significant to Bootcamp.

Accordingly, we consolidated Bootcamp into the Consolidated Financial Statements.

Related Party Transactions and Balances

10 unchanged sentences

Other income, net 1,687 3,592 4,761

3,592 4,761 614

NAVER Loan repaid — — ( 30,416 )

NW Media Loan received — — 3,867

NW Media Loan repaid — ( 3,638 ) —

( 3,638 ) — —

Loan receivable provided — — 11,633

2 unchanged sentences

All expenses are net amounts including reimbursement from its related parties.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The Company had the following significant balances due from and due to related parties as of December 31, 2025 and December 31, 2024:

9 unchanged sentences

Long-term operating lease liabilities 5,371 9,519

NW Media Loan — 3,800

Accounts payables 18,765 17,173

Accrued expenses 6,849 5,562

Contract liabilities — 16,160

Variable Interest Entity

Bootcamp distributes a film produced by GPM Boot Productions Inc.

which is a film adaptation of a web-novel titled Boot Camp published on our platform.

NWMC is the sole limited partner (“LP”) and has no unilateral participating or kick-out rights over the GP.

Accordingly, we consolidated Bootcamp into the Consolidated Financial Statements.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Disposition and Business Combinations

7 unchanged sentences

Jakga became a related party of the Company after the deconsolidation.

As of the disposition date, the retained common stock and redeemable convertible preferred stock in Jakga were measured at fair value using a discounted cash flow model applying a discount rate of 15.1 % and a terminal growth rate of 1.0 % incorporating historical financial information, business plans of Jakga,

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

and market outlook information.

The Company recorded a $ 2.5 million loss on disposition of Jakga in Other income (loss), net in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2024.

15 unchanged sentences

The Company has accounted for the transaction as follows (in thousands of USD):

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Cash consideration received $ 4,951

3 unchanged sentences

Loss on sale of LOCUS $ ( 783 )

Fiscal Year 2022 Business Combinations

On February 9, 2022, the Company acquired a controlling financial interest in Munpia and its subsidiaries, located in Korea that operate a web-novel offering on which online users can read, write and share web-novels.

This acquisition allows the Company to strengthen its content pool.

The Company entered into a Share Purchase Agreement in September 2021 pursuant to which the Company acquired 20.2 % of the shares of Munpia in October 2021 for $ 51.2 million in cash

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

and accounted for the investment using the equity method.

On February 9, 2022, the Company acquired additional shares of Munpia from Premier in exchange for a partial settlement of an outstanding loan with Premier (Premier Loan) of $ 91.3 million.

As of the acquisition date, the previously held equity method investment and non-controlling interests including redeemable non-controlling interests were measured at fair values using a discounted cash flow model applying a discount rate of 13.6 % and a terminal growth rate of 1.0 % incorporating historical financial information, the business plans of the target, and market outlook information.

As a result of the remeasurement of the previously held equity method investment, the Company recognized a gain of $ 0.1 million in Other income (loss), net in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2022.

On July 5, 2022, the Company acquired a controlling financial interest in Jakga, a professional agency for web-novel writers, to enhance the Company’s existing product offerings.

The Company initially acquired shares of redeemable preferred stock of Jakga representing 25.9 % of the voting equity interests in November 2020.

The Company acquired additional shares of common stock representing 10.0 % of the voting equity interests in October 2021, redeemable preferred stock representing 5.4 % of the voting equity interests in March 2022 and common stock representing 5.0 % of the voting equity interests in July 2022.

The common stock and preferred stock were accounted for as an equity method investment and a debt security, respectively.

The Company paid $ 1.7 million in cash for the acquisition of additional shares on July 5, 2022 which increased the voting equity interests in Jakga held by the Company to 50.4 %.

The acquisition was considered a step acquisition and accounted for under the acquisition method.

As of the acquisition date, the previously held equity method investment and debt security and non-controlling interests were measured at fair value using a discounted cash flow model applying a discount rate of 14.9 % and a terminal growth rate of 1.0 % incorporating historical financial information, business plans of the target, and market outlook information.

As a result of the remeasurement of the previously held equity method investment and debt security, the Company recognized a gain of $ 2.6 million in Other income (loss), net in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2022.

On March 31, 2022, the Company acquired a controlling financial interest in eBOOK Initiative Japan Co., Ltd., an online service for eBooks in Japan to strengthen its competitiveness in web-comic and web-novel business in Japan.

The Company initially acquired 33.9 % of the shares of eBIJ in November 2021.

The shares were accounted for as an equity method investment.

On March 31, 2022 the Company paid $ 52.5 million in cash and exchanged its own common stock with fair value of $ 70.9 million to acquire additional shares of eBIJ which increased the shares of eBIJ held by the Company to 100.0 %.

Given the acquisition date fair value of eBIJ is more reliably measurable than the Company’s common stock exchanged, the $ 70.9 million fair value of the Company’s common stock exchanged was determined based on the public trading value before the tender offer.

The cash consideration transferred is included in “Acquisitions of businesses, net of cash acquired” in investing activities of the Consolidated Statements of Cash Flows.

The acquisition was considered a step acquisition and accounted for under the acquisition method.

On March 31, 2022, in conjunction with the acquisition of a controlling financial interest in eBIJ by Company, eBIJ entered into an Amendment to Business Partnership Agreement for Electronic Book Business with a former stockholder pursuant to which the terms of a preexisting arrangement with the former stockholder were modified.

The modified arrangement includes the payments to the former stockholder based on a percentage of eBIJ’s future revenues, payable until the Company completes an initial public offering, which represents contingent consideration in the business combination that is considered as an assumed liability.

ASC Topic 805 requires that contingent consideration classified as a liability to be recognized at fair value on the acquisition date and be re-measured each reporting period with subsequent adjustments recognized in the Consolidated Statements of Operations and Comprehensive Loss.

We estimate the fair value of contingent consideration liabilities using an income-based valuation methodology that is calculated by weighting the cash flow from payments to the former stockholder by the annual probability of an initial public offering success, discounted using weighted average cost of capital.

At the acquisition date on March 31, 2022, contingent consideration presented as other non-current liability totaled $ 13.9 million.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The fair value of the previously held equity method investment at acquisition date represents 33.9 % of implied enterprise value of eBIJ amounting to $ 72.6 million that was determined using a discounted cash flow model incorporating historical financial information, business plans of the target, and market outlook information.

As a result of the remeasurement of the previously held equity method investment, the Company recognized a loss of $ 11.9 million in Other income (loss), net in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2022.

On March 31, 2022, the Company acquired 53.6 % of LOCUS and its subsidiaries, a 3D animation and visual special effects production company.

This acquisition allows the Company to build an intellectual property value chain, including visualization of the Company’s web-comics and web-novel intellectual property.

The fair value of the purchase consideration was $ 23.2 million paid in cash at closing which is reflected in “Acquisitions of businesses, net of cash acquired” under investing activities in the Consolidated Statements of Cash Flows.

The acquisition was accounted for under the acquisition method.

On August 22, 2022, Munpia, a partially-owned subsidiary of the Parent, acquired a controlling financial interest in Studio JHS Inc.

(“JHS”), a web-novel and web-comics content creator.

This acquisition allows the Company to expand its business and create synergies in the market.

WTEK, a subsidiary of the Parent and the parent company of Munpia, initially acquired 35.0 % of the shares of JHS in August 2018.

The shares of JHS were initially accounted for as an equity method investment.

In June 2022, Munpia entered into a Stock Exchange Agreement with JHS pursuant to which Munpia acquired 100.0 % of the shares of JHS, including the shares held by WTEK, in exchange for the issuance of 1,263,119 shares of Munpia to the shareholders of JHS, including 442,112 shares to WTEK, on August 22, 2022.

The acquisition was considered a step acquisition and accounted for under the acquisition method.

As of the acquisition date, 821,007 shares of Munpia newly issued to the shareholders of JHS was measured at a contracted exchange ratio was estimated to be fair value based on a valuation performed with the assistance of a third party firm in May 2022 using a range of values under using a discounted cash flow model applying a discount rate of 13.8 % and terminal growth rate of 1.0 % incorporating historical financial information, business plans of Munpia, and market outlook information.

Also, as of the acquisition date, the previously held equity method investment by the Company (i.e., 35.0 % of the shares of JHS previously held by WTEK) was valued with the assistance of a third party valuation firm using a discounted cash flow model applying a discount rate of 13.8 % and terminal growth rate of 1.0 % incorporating historical financial information, business plans of JHS, and market outlook information.

As a result of the remeasurement of the previously held equity method investment, the Company recognized a gain of $ 9.9 million in Other income (loss), net in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2022.

Equity Method Investments

6 unchanged sentences

Total $ 80,440 $ 78,668

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The Company’s proportionate share of net income (loss) resulting from these investments is reported under the line item captioned Loss on equity method investments, net in our Consolidated Statements of Operations and Comprehensive Loss.

The following tables summarize revenues for the years ended December 31, 2024 and December 31, 2023:

The following tables summarize revenues for the years ended December 31, 2025, December 31, 2024, and December 31, 2023:

2025 2024 2023

3 unchanged sentences

Total $ 1,282 $ ( 1,123 ) $ ( 12,339 )

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The carrying value of our equity method investments is reported under the line item captioned Equity method investments in the Consolidated Balance Sheets.

7 unchanged sentences

Reclassification 1

( 1,134 ) 21,820

Share of other comprehensive income 896 ( 94 )

Dividends ( 725 ) —

Currency translation differences 1,452 ( 9,287 )

Balance at December 31 $ 80,440 $ 78,668

1 Relates to reclassification of Celsys, which was an equity security as of December 31, 2023, and became an equity method investee as the Company acquired the right to appoint directors during 2024, and Jakga, which was a subsidiary at December 31, 2023, and became an equity method investee in 2024 as a result of a partial disposition of the Company’s investment in Jakga.

1 In 2025, the investment in Purple Duck Co.

was reclassified from an equity method investee to a subsidiary as the Company obtained control by acquiring the entire remaining equity interest.

In 2024, the investment in Celsys was reclassified from an equity security to an equity method investee as the Company acquired the right to appoint directors, while the investment in Jakga was reclassified from a subsidiary to an equity method investee following a partial disposition of the Company’s interest.

Investments in affiliates and joint ventures that are accounted for under the equity method are as follows:

1 unchanged sentence

100.0 % 76.9 %

Jakga Company Inc.

26.46 % 51.30 %

Studio Toon Corp.

1 unchanged sentence

Studio White 2

AtoZ 26.67 % 26.67 %

40.0 % 40.0 %

Jakga Company Inc.

26.5 % 26.5 %

Namu Actors 4

1 unchanged sentence

10.4 % 10.1 %

LOCUS 22.04 % 22.41 %

1.8 % - 47.0 %

1 unchanged sentence

______________

In 2024, the Company obtained a majority stake in Purple Duck Co.

but continues to apply the equity method due to contractual limitations on significant influence.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Jakga was a subsidiary as at December 31, 2023, and became an equity method investee in 2024 as a result of a partial disposition of the Company’s investment in Jakga.

In 2025, the Company obtained control of Purple Duck by acquiring the remaining equity interest, and consequently classified the investee as a subsidiary.

Studio Toon Corp.

and Studio White are joint ventures.

Jakga was a subsidiary as at December 31, 2023, and became an equity method investee in 2024 as a result of a partial disposition of the Company’s investment in Jakga.

The Company classified Namu Actors under the equity method by acquiring more than 20% of its ownership interest in 2024.

The equity method is applied to the investment since the Company has the ability to exercise significant influence over the investee even though the Company holds less than 20.0% of the voting stock.

In March 2024, the Company gained significant influence by obtaining the right to appoint one board member, reclassifying the investment from an equity security to the equity method even though the Company holds less than 20.0% of the voting stock.

The equity method is applied to the investment since the Company has the ability to exercise significant influence over the investee even though the Company holds less than 20.0% of the voting stock.

In December 2024, the Company made a new capital contribution and secured the right to appoint one board member, resulting in the classification of the investment under the equity method due to significant influence even though the Company holds less than 20.0% of the voting stock.

1 unchanged sentence

The equity method is applied for investees where the Company holds less than 20.0% of the voting stock, yet the Company has the ability to exercise significant influence over the investees.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Condensed Financial Information of Parent

33 unchanged sentences

Total current liabilities $ 15,431 $ 14,733

Non-current liabilities:

Long-term operating lease liabilities — 1,260

Total liabilities $ 15,431 $ 14,733

2 unchanged sentences

Additional paid-in capital 2,137,926 2,103,931

Accumulated other comprehensive income ( 124,620 ) ( 54,824 )

Accumulated other comprehensive loss ( 114,363 ) ( 124,620 )

Accumulated deficit ( 853,124 ) ( 507,197 )

2 unchanged sentences

______________

Consists of long-term loans to our subsidiaries WTEK, and LDF of $ 22,839 and $ 53,292 , respectively, as of December 31, 2024 and December 31, 2023.

Consists of long-term loans to our subsidiaries NAVER WEBTOON, and LDF of $ 22,839 and $ 53,292 , respectively, as of December 31, 2025 and December 31, 2024.

WEBTOON Entertainment Inc.

10 unchanged sentences

Interest income 18,256 14,326 3,513

Interest expense — — ( 8 )

Loss on equity method investments, net ( 333,972 ) ( 13,933 ) ( 89,524 )

1 unchanged sentence

Loss before income tax $ ( 343,803 ) $ ( 140,460 ) $ ( 116,305 )

Income tax expense ( 3,445 ) ( 150 ) ( 104 )

Income tax benefit (expense) ( 2,124 ) ( 3,445 ) ( 150 )

Net loss $ ( 345,927 ) $ ( 143,905 ) $ ( 116,455 )

Other comprehensive income (loss):

Share of other comprehensive income of equity method investments, net of tax ( 69,796 ) ( 18,157 ) ( 29,200 )

Total other comprehensive loss, net of tax ( 69,796 ) ( 18,157 ) ( 29,200 )

Share of other comprehensive income (loss) of equity method investments, net of tax 10,260 ( 69,796 ) ( 18,157 )

Total other comprehensive income (loss), net of tax 10,260 ( 69,796 ) ( 18,157 )

Total comprehensive loss $ ( 335,667 ) $ ( 213,701 ) $ ( 134,612 )

10 unchanged sentences

Operating lease expense 1,168 1,229 1,595

Loss on foreign currency, net — — 858

Loss on equity method investments, net 333,972 13,933 89,524

Income tax expense 3,445 — —

Income tax expense (benefit) 2,124 3,445 —

Stock-based compensation 7,520 81,893 —

14 unchanged sentences

Payment made for short-term investments — ( 20,000 ) —

Payments made for loan receivable — — ( 22,839 )

Purchases of debt and equity securities — ( 1,000 ) —

8 unchanged sentences

Proceeds from exercise of over-allotment, net of underwriting discounts and commissions — 26,786 —

Proceeds from issuance of common stock $ — $ — $ 408,372

Proceeds from short-term borrowings — — 22,000

Proceeds from stock option exercise 1,377 746 —

Repayments of short-term borrowings — — ( 22,000 )

Additional purchases of investments in subsidiaries — — ( 165,533 )

Net cash provided by financing activities $ 1,377 $ 359,328 $ —

1 unchanged sentence

Net increase (decrease) in cash and cash equivalents ( 26,768 ) 318,961 ( 75,375 )

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Cash and cash equivalents at beginning of the year 364,927 45,966 121,341

2 unchanged sentences

Income taxes paid $ ( 4,787 ) $ ( 1,242 ) $ ( 15 )

Interest paid — — 8

Interest received $ 18,792 $ 13,225 $ 1,189

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Non-cash transactions:

Loans related to the issuance of stock 1

$ — $ — $ 53,292

Share exchange with NAVER upon issuance of new WEBTOON Entertainment Inc.

$ — $ — $ 579,876

Reclassification of deferred offering costs to additional paid-in capital upon IPO $ — $ 11,215 $ —

______________

Loan to LDF issued to acquire eBIJ.

Refer to Organization and Desc ription of Business in Note 1.

1 unchanged sentence

Redeemable Non-Controlling Interest in Subsidiary

In February 2022, the Company acquired a controlling interest in Munpia and recognized non-controlling interest at its fair value.

In connection to the Company’s acquisition of Munpia in February 2022, the Company entered into a shareholders’ agreement under which the third-party former majority owner of Munpia has the right to require the Company to redeem its Munpia shares if certain events that are not solely within the Company’s control occur.

In February 2022, the Company entered into a shareholders’ agreement under which the third-party former majority owner of Munpia has the right to require the Company to redeem its Munpia shares if certain events that are not solely within the Company’s control occur.

The redemption price on the put option shall equal $ 26.20 (the equivalent of KRW 33,251 ) per share plus 15 % per annum.

As a portion of the Munpia shares held by holders other than the Company are redeemable, such shares must be classified outside of stockholders’ equity.

The Company does not consider the redemption of the redeemable non-controlling interest probable of being redeemable.

Accordingly, the redeemable non-controlling interest will not be remeasured until the redeemable non-controlling interest is probable of becoming redeemable.

During the year 2023, the third-party former owner of Munpia sold a portion of their Munpia shares to their employees and other third-parties, and the redemption rights under the shareholders’ agreement did not transfer along with the shares that were sold.

6 unchanged sentences

Accordingly, the remaining Cloudary owned shares were reclassified from redeemable non-controlling interest to non-controlling interest.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The following table summarizes the redeemable non-controlling interest activity for the periods indicated below (in thousands of USD):

The Company has redeemable non-controlling interests in one subsidiary, Munpia.

The following table summarizes the redeemable non-controlling interest activity of Munpia for the periods indicated below (in thousands of USD):

Balance as of December 31, 2022 $ 46,964

Recognition of redeemable non-controlling interest at Munpia acquisition date 84,002

Redemption of redeemable non-controlling interest ( 11,311 )

Reclassification of redeemable non-controlling interest to non-controlling interest 1

Total comprehensive income (loss) attributable to redeemable non-controlling interest ( 5,535 )

4 unchanged sentences

Balance as of December 31, 2025 $ 24,540

Representative of the reclassification of Cloudary’s Munpia shares from redeemable non-controlling interest to non-controlling interest and the reclassification of the Munpia shares sold by Premier from redeemable non-controlling interest to non-controlling interest.

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

Non-Controlling Interest in Subsidiaries

The Company had non-controlling interests in several of its subsidiaries.

The balances of non-controlling interest as of December 31, 2024 and December 31, 2023 are as follows:

The balances of non-controlling interest as of December 31, 2025, and December 31, 2024.

are as follows:

As of December 31,

2024 2023 2022

(in thousands of USD)

$ 33,160 $ 46,593

— 3,832 19,770

1,161 3,257 —

Total $ 33,280 $ 47,754

2 unchanged sentences

Redeemable Non-Controlling Interest in Subsidiary.

The LOCUS non-controlling interest balance is no longer included as part of the Company’s balances of non-controlling interest as LOCUS was deconsolidated in June 2023 (See Note 17.

Disposition and Business Combinations for detail).

The Jakga non-controlling interest balance is no longer included as Jakga was deconsolidated in March 2024 (See Note 17.

Disposition and Business Combinations for detail).

The portion of net assets in Bootcamp attributable to the LP represents a non-controlling interest (See Note 16.

Related Parties and Variable Interest Entity for detail).

WEBTOON Entertainment Inc.

Notes to Consolidated Financial Statements

The following table summarizes the effects of the changes in the Company’s ownership interest in Munpia on the Company’s equity.

As of December 31,

2024 2023 2022

(in thousands of USD)

Net loss attributable to WEBTOON Entertainment Inc.

$ ( 143,905 ) $ ( 116,455 ) $ ( 129,871 )

Transfer to non-controlling interest

Changes in the Company’s equity for the issuance of 1,263,119 Munpia shares

Changes in the Company’s equity for the purchase of 561,647 Munpia shares

Changes in the Company’s equity for the purchase of 425,016 Munpia shares

Net transfer to non-controlling interest — — 4,984

Change from net loss attributable to WEBTOON Entertainment Inc.

and transfer to non-controlling interest $ ( 143,905 ) $ ( 116,455 ) $ ( 124,887 )

Subsequent Events

On January 8, 2026, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a wholly owned indirect subsidiary of The Walt Disney Company (“Disney”), pursuant to which Disney purchased 2,666,757 shares of the Company’s common stock, par value $ 0.0001 per share (the “Shares”), representing an approximately 2 % equity interest in the Company, for an aggregate purchase price of $ 32.8 million.

The Shares were issued in a private placement in reliance on the exemption provided by Section 4(a)(2) of the Securities Act, as a transaction not involving a public offering.

In connection with the Purchase Agreement, the Company has provided Disney with certain rights related to its investment in the Shares, including the ability to approve certain corporate actions that would adversely affect Disney or its affiliates and the ability to sell or otherwise transfer the Shares for the same consideration, on the same terms and subject to the same conditions as a sale or transfer made by NAVER Corporation or LY Corporation.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data