WEBTOON Entertainment Inc

Note 1. Description of Business and Summary of Significant Accounting Policies

Organization and Description of Business

WEBTOON Entertainment Inc. (the “Parent”), together with its subsidiaries, (the “Company”, “we”, “us” or “our”), is a majority-owned subsidiary of NAVER Corporation (“NAVER”), and a leading online and web-comic platform service company. We provide hosting services for web-comics through both web and mobile applications and offer thousands of titles with episodes that are updated on a daily basis. 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’stwo 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.

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. For the period after June 1, 2023, Wattpad is presented as part of the Company consolidated financial information. These financial statements and footnotes are therefore referred to as “Consolidated Financial Statements” throughout. NAVER’s equity interest in Wattpad during the period preceding the Wattpad Transfer is reflected within “Group Equity” within the Consolidated Statements of Stockholders’ Equity and Group Equity. Upon completion of the Wattpad Transfer, the Company acquired NAVER’s equity interest in Wattpad and the Group Equity is no longer applicable.

On June 26, 2024, the Company filed an Amended and Restated Certificate of Incorporation (the “Amended Charter”) 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 Consolidated Financial Statements have been retroactively adjusted to reflect the stock split and change in par value for all periods presented. In lieu of issuing fractional shares, the Company opted to pay the holder thereof an amount in cash equal to the fair market value of such fractional share. The Amended Charter authorized 2,100,000,000 shares of capital stock, consisting of 2,000,000,000 shares of common stock, par value $0.0001 per share, and 100,000,000 shares of undesignated preferred stock, par value $0.0001 per share. No preferred stock was issued and outstanding as of December 31, 2024 and December 31, 2023.

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 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. On July 26, 2024, the underwriters exercised the over-allotment option to purchase 1,371,549 shares of common stock for proceeds of $26.8 million, net of underwriting discounts and commissions.

Substantially concurrently with the closing of the IPO, the Company issued 2,380,952 shares of common stock to NAVER U.Hub Inc., a wholly-owned subsidiary of NAVER, at the public offering price of $21.00 per share for aggregate proceeds of $50.0 million. The sale of such shares to U.Hub is not registered under the Securities Act and these shares were subject to a 180-day lock-up agreement with the underwriters in connection with the offering. The underwriters did not receive any fees in connection with the sale of such shares.

Prior to the IPO, deferred offering costs, which consist of direct incremental legal, accounting, and other fees relating to the IPO, were capitalized in Other non-current assets on the Consolidated Balance Sheets. 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. The bonus was paid out, less applicable payroll related taxes and expenses, in July 2024.

The following Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Our fiscal year ends on December 31. Dollar amounts presented in tables are shown in thousands of United States Dollars(in thousands of USD).

Changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions (investments by owners and distributions to owners acting in their capacity as owners) with no gain or loss recognized in net loss or comprehensive loss. The carrying amount of any non-controlling interest is adjusted to reflect the change in a parent’s ownership interest in the subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the non-controlling interest is adjusted is recognized in equity attributable to the parent. 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. 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. The Company believes the charges are reasonably calculated in accordance with SAB Topic 1 Q2. 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.

Use of Estimates

The preparation of Consolidated Financial Statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. 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 assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates.

Segment Information

The Company operates asone operating segment which is also its reportable segment. Our Chief Executive Officer (“CEO”) is our Chief Operating Decision Maker (“CODM”), who assesses performance and makes resource allocations based on financial data presented on a consolidated basis. See Note 14. Segment and Geographic Informationfor more information related to the Company’s segment.

Foreign Currency

The functional currency of the Parent and reporting currency for the Company is U.S. dollars. The Korean won and the Japanese yen are the functional currencies of our major operating subsidiaries. The other subsidiaries predominantly utilize their local currencies as their functional currencies. Assets and liabilities of each subsidiary are translated into U.S. dollars at the exchange rate in effect at the end of each period. Revenue and expenses for these subsidiaries are translated into U.S. dollars using average rates that approximate those in effect during the period. 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.

Revenue Recognition

The Company primarily generates revenue through its platform by providing users with access to Paid Content, and by providing advertising services on the platform. We recognize revenue when services are transferred to customers at the transaction price which considers estimated returns on promotional discounts and earned loyalty rewards. Revenue excludes amounts collected on behalf of third parties, such as value added taxes. Historical data is used to estimate returns, promotional discounts, and earned loyalty rewards using the expected value method. We include these amounts in the transaction price to the extent it is probable that a significant reversal of revenue will not occur and update our estimate of transaction price as additional information becomes available. For revenue contracts with multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price which is primarily determined based on the price charged to customers for sales on a stand-alone basis.

Paid Content Revenue

Paid Content revenue is recognized when the Company provides services that provide content to users through the platform. Content provided by the platform includes, but is not limited to, web-comics, movies, web-novels, and e-books. We have an obligation to upload and maintain content on the platform by contracting with creators and publishers to make the content available to our customers. On most of our offering, customers purchase access to content by first purchasing a virtual currency (such as Coins or Cookies) then redeeming such virtual currency for access to particular content. There are other offerings where content can be purchased directly with cash. For the majority of transactions, we have determined that we are the principal for services provided to users and recognize revenue gross of commissions payable to the creator or publisher. In cases where we have determined that we are an agent in the transaction, we recognize revenue net of amounts remitted to the creator or publisher. The determination of whether the Company is a principal or as an agent in Paid Content revenue transactions requires significant judgment and is based on an assessment of relevant accounting guidance and the arrangements the Company has in place with creators or publishers and end users. Key considerations in this determination include the Company’s ability to control access to, monetization of, and promotion of the content, as well as its responsibility for resolution of end user inquiries and complaints and its ability to establish the price of the content on the platform. The period of time the user can view the content varies depending on the platform and the terms of the arrangement with the user. We recognize Paid Content revenue over the estimated service period, which we determine based on the weighted average number of days between the first day the user can access the content and last day the user views the content, which varies by platform and is typically within one week. We believe this provides a reasonable depiction of the transfer of services.

Paid Content revenue also includes the sale of physical books from other publishers. 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 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.

Advertising Revenue

We post advertisements on our websites and mobile applications and recognize revenue for advertising services. Advertising revenue is recognized at the point in time the advertisement is displayed or based on clicks, impressions, or end-user activity, which represents the point in time that control is transferred to the customer thereby completing our performance obligation. When the customer is an advertising agency, advertising revenue is comprised of the commission the Company earns for lending advertisement space to the advertising agency.

IP Adaptations

We internally develop IP Adaptations for films, streaming series, or other rich media format adaptations, the majority of which are commissioned for production by third party studios or streaming platforms. IP Adaptations revenue is recognized based on the terms of the contract with the customer and the determination of the Company’s performance obligation is dependent on which party has authority to make key creative decisions on the produced content. 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. 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. Fixed payments for the content are recognized as revenue on a gross basis upon delivery and acceptance of the content or as sales-based royalties when sell-through sales of the content occur. IP Adaptations revenue also includes license fees generated from sub-licensing content to third parties for secondary media such as video game production. Content sub-licensing revenue is recognized when the Company brokers licensing arrangements between creators or publishers and other third-party platforms on a net commission basis as the Company is acting as an agent in these transactions.

IP Adaptations also include the sale of licensed merchandise under two types of arrangements. In one type of arrangement the Company acts as a principal in the sale of licensed merchandise, while in the other, the Company serves as an agent.

In Korea, the Company directly sells licensed merchandise to customers through digital storefronts, including the related-party NAVER platform and other e-commerce websites. The merchandise is manufactured by third parties in small batches to meet estimated demand or fulfill preorders. As the seller of record, the Company takes control of the relevant inventory prior to distribution, sets the merchandise price, and manages any after-sale issues including refund claims. Thus, the Company is considered a principal in this type of arrangement and recognizes revenues on a gross basis.

In other countries, the Company generates merchandise revenues by licensing IP to third parties who operate all aspects of the revenue stream, from manufacturing the products to maintaining the online merchandise store which operates under the WEBTOON brand. Licensing fees are determined by the contractual commission rate or fixed fee applied to the underlying sales of merchandise. In this type of arrangement, the Company is considered an agent as it is not the seller of record, nor does it take control of the related inventory. Accordingly, although the Company processes and collects the full payments on these transactions, the Company recognizes revenues net of the amounts remitted to the third-party merchant when control transfers to the customer, generally at the time of product shipment from its facilities.

Cost of revenue primarily consists of the commission fees payable to content rights holders as well as other costs directly associated with the acquisition, licensing and production of content, such as payroll and related personnel expenses, amortization and production related costs. 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.

Marketing expenses primarily consist of online and offline advertising and marketing program costs. Marketing expenses also include market research and public relations related expenses that support marketing activities. Advertising costs are expensed as incurred and total advertising expenses were $36.6 million, $28.3 million and $70.9 million for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively.

General and administrative expenses include all our operating costs, excluding cost of revenue and marketing, as described above. More specifically, these expenses include costs related to operating and maintenance of our platform, general corporate function costs, and depreciation and amortization of non-operating assets.

Stock-Based Compensation

The Company accounts for stock-based employee compensation arrangements in accordance with U.S. GAAP which requires compensation expense for the grant-date fair value of equity-based awards to be recognized over the requisite service period. The Company determines the fair value of equity-based awards granted on the grant date using appropriate valuation techniques. Forfeitures are estimated using historical experience at the time of grant and revised in subsequent periods if actual forfeitures differ from initial estimate. See Note 11. Stock-Based Compensationfor more information on the Company’s stock compensation plans.

Stock-Based Awards Issued to Employees of NAVER

The Company issues stock-based awards to employees of NAVER that do not render services to the Company. 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.

Defined severance benefits

We accrue severance benefits for employees of our Korean subsidiaries. Pursuant to the Employee Retirement Benefit Security Act of Korea, eligible employees with one or more years of service are entitled to severance payments upon the termination of their employment based on their length of service and pay rate. We recognize the defined severance benefits in the Consolidated Balance Sheets with a corresponding adjustment to Consolidated Statements of Operations and Comprehensive Loss. The obligations are measured annually, or more frequently if there is a remeasurement event, based on our measurement date utilizing various actuarial assumptions and methodologies. We use certain assumptions including, but not limited to, the discount rates, salary growth rates, and certain employee-related factors, such as turnover, retirement age and mortality. We review our actuarial assumptions and make modifications to the assumptions based on current rates and trends when appropriate. We have adopted a policy of immediate recognition of actuarial gains and losses where any differences arising from the annual remeasurement is immediately charged in the period of the remeasurement within the Consolidated Statements of Operations and Comprehensive Loss as Other income (loss), net.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based upon the difference between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Our deferred tax assets are recorded net of valuation allowances when, based on the weight of available evidence, it is more likely than not that all or some portion of the recorded deferred tax assets will not be realized in future periods. 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. 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. In the first step, recognition, we determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step addresses measurement of a tax position that meets the more-likely-than-not criteria. The tax position is measured at the largest amount of benefit that has a likelihood of greater than 50 percent of being realized upon ultimate settlement.

The Company does not record a deferred tax liability for the excess of the book basis over the tax basis of its investments in foreign subsidiaries to the extent that the basis difference meets the indefinite reversal criteria. These criteria are met if the Company has invested or will invest the undistributed earnings on the foreign subsidiaries indefinitely. The management’s intention is to invest the undistributed earnings on the foreign subsidiaries indefinitely. The decision as to the amount of undistributed earnings that the Company intends to maintain in non-U.S. subsidiaries takes into account various items, including, but not limited to, forecasts and budgets of financial needs of cash for working capital, liquidity plans, capital improvement programs, merger and acquisition plans, and planned loans to other non-U.S. subsidiaries.

Cash and Cash Equivalents

Cash and cash equivalents are short-term, highly liquid investments with original maturities of three months or less from the date of purchase and are mainly comprised of bank deposits.

Receivables, net of allowance for credit losses

Receivables, net of allowance for credit losses, are stated at their carrying value, net of allowance for credit losses based on lifetime expected losses. Receivable balances are primarily receivables due from payment gateway providers relating to sales processed for the Company’s online platform service business, as well as receivables from advertising activities, net of estimated allowances for credit losses. The Company estimates the allowance for credit losses based upon historical experience, the age and delinquency rates of receivables and the credit quality of the customers, as well as economic and regulatory conditions combined with reasonable and supportable management forecasts of collectibility and other economic factors over the lifetime of the receivables. The Company writes off accounts against the allowance for credit losses when they are deemed to be uncollectible. The total allowances for credit losses as of December 31, 2024, and December 31, 2023, were $3.4 million and $1.1 million, respectively. 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

Property and equipment, net is stated at historical cost, less accumulated depreciation. Property and equipment primarily include buildings, land, leasehold improvements, and information technology equipment. Depreciation expense is classified within General and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss. We compute depreciation using the straight-line method over the estimated useful lives of the assets. Maintenance and repairs are expensed as incurred.

Leases

We determine whether an arrangement is or contains a lease at contract inception. Leases with contractual terms greater than twelve months are classified as either operating or finance leases. Operating leases are recorded as operating lease right-of-use assets and operating lease liabilities on the Consolidated Balance Sheets. We elected to account for lease and non-lease components as a single lease component for all classes of assets and elected to not record leases with an initial term of twelve months or less on the Consolidated Balance Sheets. If the rate implicit in the Company’s leases is not readily determinable, we use our incremental borrowing rate based on the information available at the lease commencement date to determine the present value of lease payments over the lease term. 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 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. Certain agreements have free rent periods or escalating rent payment provisions. Rent expense is recognized on a straight-line basis over the lease term. The Company subleases its properties, which are all classified as operating leases. Any sub-leasing revenue is classified as Other income (loss), net. The Company does not have any finance leases. See Note 8. Leases for further information.

Impairment of Long-lived Assets

Long-lived assets include property and equipment, trademarks, copyrights, patents, software, brand and other intangible assets with finite lives. Long-lived assets are not required to be tested for impairment annually, but rather whenever circumstances indicate that the carrying amount of the asset may not be recoverable. Conditions that may necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may indicate potential impairment. 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.

See Note 6. 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

The Company conducts an annual review, at a minimum, of the estimated useful lives of its finite-lived intangible assets. This review indicates that the actual lives of certain intangible assets were shorter than the estimated useful lives over which such assets are amortized due to the abandonment of certain intangible assets that cease to be used. As a result, the Company recognized accelerated amortization expense for these intangible assets of $3.9 million, $2.5 million and $1.9 million for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively.

Fair Value Measurements

Certain financial instruments are required to be recorded at fair value. Other financial instruments, including cash and cash equivalents, are recorded at cost, which approximates fair value. Additionally, receivables, term deposits, accounts payable, and accrued expenses approximate fair value because of the short-term nature of these financial instruments. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

We measure the fair value of certain equity securities based on quoted prices in active markets for identical assets or liabilities. 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.

Fair Value Option

The Company elects to account for debt securities under the fair value option in accordance with ASC 825, Financial Instruments, (“ASC 825”). Under the fair value option, these debt securities are recognized at fair value at inception and change in fair value at each subsequent reporting date is recognized as a component of Other income (loss), net in the Consolidated Statements of Operations and Comprehensive Loss.

Equity Securities without Readily Determinable Fair Value

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. 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.

Loans

Typically, loans that do not meet the definition of a debt security, are stated at amortized cost, net of allowance for credit losses. We write off loans against the allowance for credit losses when they are deemed to be uncollectible. Refer to Receivables, net of allowance for credit losses in Note 1. Description of Business and Summary of Significant Accounting Policies for additional information on estimated credit losses for loan receivables.

Accrued interest receivable on loans is recorded in the Consolidated Balance Sheets in Other current assets, net. As of December 31, 2024 and December 31, 2023, accrued interest receivable was $0.7 million and $1.4 million, respectively.

Equity Method Investments

We apply the equity method to account for investments in which we have the ability to exercise significant influence, but not control, over the investee. There is a rebuttable presumption that an investor has significant influence when it owns more than 20% of the common stock of a corporation and more than 3% partnership interest in a partnership. This presumption may be overcome based on specific facts and circumstances that demonstrate the ability to exercise significant influence is restricted. We apply the equity method to investments in common stock. We record the investment at cost and subsequently increase or decrease the carrying amount of the investment by our proportionate share of the net earnings or losses and other comprehensive income of the investee. Basis differences between the cost of an equity method investment and the underlying equity in the intangible assets are amortized over the estimated economic useful life of the underlying intangible asset. We record dividends or other equity distributions as reductions in the carrying value of the investment. If net losses reduce our carrying amount to zero, additional net losses may reduce other investments in the same investee, if they exist. Such additional equity method losses, if any, are based upon the change in our claim on the investee’s book value.

Equity method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company may estimate the fair value of its equity method investments by considering recent investee equity transactions, discounted cash flow analysis, recent operating results, comparable public company operating cash flow multiples and, in certain situations, balance sheet liquidation values. If the fair value of the investment has dropped below its carrying amount, management considers several factors when determining whether an other-than-temporary decline has occurred, such as the length of the time and the extent to which the estimated fair value or market value has been below the carrying value, the financial condition and the near-term prospects of the investee, the intent and ability of the Company to retain its investment in the investee for a period of time sufficient to allow for any anticipated recovery in market value, and general market conditions. The estimation of fair value and whether an other-than-temporary impairment has occurred requires the application of significant judgment and future results may vary from current assumptions. 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.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash, cash equivalents, term deposits, receivables and loan receivables. We maintain cash deposits, cash equivalent balances with several financial institutions. Cash and cash equivalents may be withdrawn or redeemed on demand. We believe that these financial institutions that hold our cash, cash equivalents and term deposits are financially sound and, accordingly, minimal credit risk exists with respect to these balances. We extend credit to our customers, payment gateway companies and borrowers based on an evaluation of their ability to pay amounts due under contractual arrangement and generally do not obtain or require collateral.

Cash and cash equivalents, receivables and loan receivables are potentially subject to concentration of credit risk. Cash and cash equivalents are placed with several financial institutions that management believes are of high credit quality.

The Company’s receivables include amounts concentrated with three payment gateway companies representing 54.9% and 49.6% of the total receivables balance as of December 31, 2024 and December 31, 2023, respectively. Three borrowers represent 89.0% and 96.6% of the total loan receivables balance as of December 31, 2024 and December 31, 2023, respectively.

There are no individual customers who account for more than 10% of total revenue for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, or 10% or more of its receivables balance as of December 31, 2024 or December 31, 2023.

Business Combinations

We include the results of operations of the businesses that we acquire from the date of acquisition. We determine the fair value of the assets acquired and liabilities assumed based on their estimated fair values as of the respective date of acquisition. The excess purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. Our estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. As a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill. At the conclusion of the measurement period, any subsequent adjustments are reflected in the Consolidated Statements of Operations and Comprehensive Loss. When we issue payments or grants of equity to selling stockholders in connection with an acquisition, we evaluate whether the payments or awards are compensatory. This evaluation includes whether cash payments or stock award vesting is contingent on the continued employment of the selling stockholder beyond the acquisition date. If continued employment is required for the cash to be paid or stock awards to vest, the award is treated as compensation for post-acquisition services and is recognized as compensation expense. Transaction costs associated with business combinations are expensed as incurred and are included in General and administrative expenses in our Consolidated Statements of Operations and Comprehensive Loss.

Variable Interest Entity

We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests is considered a variable interest entity (“VIE”). We consolidate a VIE when we are the primary beneficiary (see Note 16. Related Parties and Variable Interest Entity). We are the primary beneficiary of a VIE when we have the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable GAAP.

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.

Common Control Transactions

Assets and liabilities transferred in common control transactions are recognized at the historical cost of the ultimate parent of the entities under common control. In determining the receiving entity in common control transactions, the entity that first came under control of the ultimate parent is presented as the accounting receiving entity regardless of the legal form of the transaction. Any difference in the amount paid by the receiving entity versus the assets and liabilities transferred at the historical cost of the ultimate parent to the receiving entity is recorded as an adjustment to equity. Business combinations between entities under common control that result in a change in reporting entity are accounted for retrospectively for all periods presented as if the combination had been in effect since the inception of common control. Assets acquisitions between entities under common control are accounted for prospectively. When performing goodwill impairment testing during the period when common control transactions are retrospectively presented, we use the historical reporting unit structures of each of the respective common control entities. The reporting units are reassessed for goodwill impairment testing purposes at the time of the common control transaction to the extent any changes are made to the reporting units as a result of such common control transaction.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. The Company evaluates goodwill and indefinite-lived intangible assets such as membership and intellectual property rights for impairment annually as of October 1, or earlier if an event or other circumstance indicates that it may not recover the carrying value of the asset. If the Company believes that, as a result of its qualitative assessment, it is more likely than not that the fair value of a reporting unit or other indefinite-lived intangible asset is greater than its carrying amount, a quantitative impairment test is not required.

Reporting units are businesses for which individual financial information is available. If a qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit goodwill or other indefinite-lived intangible asset exceeds its fair value, a quantitative impairment test is performed. The Company may elect to bypass this qualitative assessment for annual impairment evaluations as of October 1 for some or all of its reporting units and perform a quantitative test. If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, an impairment charge is recorded for the amount by which the carrying amount exceeds the fair value, not to exceed the amount of goodwill recorded for that reporting unit. Application of the goodwill impairment test requires judgment based on market and operational conditions at the time of the evaluation, including management’s best estimates of the reporting unit’s future business activity and the related estimates and assumptions of future cash flows from the assets that include the associated goodwill.

In determining the fair value of the reporting units, management considers both the income approach and the market approach. Fair value is estimated using a discounted cash flow model (income valuation approach) based on projections of future years’ operating results and associated cash flows combined with comparable trading and transaction multiples based on guideline public companies. The calculated estimated fair value of the reporting unit reflects a number of significant management assumptions and estimates including the forecast of revenue growth, terminal growth rates, and discount rates. Changes in these assumptions could materially impact the estimated fair value.

The Company’s projections incorporate management’s best estimates of the expected future results, which include expectations related to new and retained business and future operating margins. 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.

Basic and Diluted Losses per Share

The share numbers are retroactively stated for purposes of calculating weighted average number of shares outstanding for loss per share to reflect the outstanding shares of Wattpad as if the equity structure of the Parent (the accounting acquirer) was stated to reflect the number of shares of Wattpad (the accounting acquiree) issued in the common control transactions. Basic loss per share available to common stockholders is computed by dividing the net loss available to common stockholders by the weighted average number of common stock outstanding for the period. Diluted loss per share is computed using the weighted-average number of shares of common stock and potentially dilutive potential common shares outstanding during the period. The dilutive loss per share impact of the subsidiaries is included in our numerator when calculating loss per share.

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. Changes to redemption value will be reflected as a corresponding adjustment to the numerator for earnings (loss) per share. As of December 31, 2024, December 31, 2023, and December 31, 2022, no adjustments were made to redemption value or loss per share as the redeemable non-controlling interest was not probable of being redeemed.

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. 2024-03, Income Statement (Topic 220): Disaggregation of Income Statement Expenses, which requires additional disclosures of certain amounts included in the expense captions presented on the Statement of Operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, and early adoption is permitted. The Company is currently evaluating the impacts of adopting this guidance on its financial statement disclosures.

Note 2. Revenue

Disaggregation of Revenue

The following table shows revenues disaggregated by revenue stream for the years ended December 31, 2024, December 31, 2023, and December 31, 2022:

The revenue stream disaggregation above takes into consideration how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Paid Content revenue is generated from the provision of platform services that enable users to access content. Paid Content revenue also includes $10.9 million, $7.5 million and $8.6 million of physical book sales through the platform for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively. Advertising revenue represents amounts earned for the display of advertisements on our offerings or product placement within content. IP Adaptations include the internal development of film, streaming series, or other rich media format adaptations commissioned by third party studios or streaming platforms; the license fees generated by sublicensing content to third parties are $12.9 million, $11.5 million and $8.8 million in 2024, 2023 and 2022, respectively; as well as $15.1 million, $14.0 million and $7.3 million of merchandise sales generated through external platforms, IP royalties, and pop-up stores for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively.

The following table shows disaggregation of revenue by geography for the years ended December 31, 2024, December 31, 2023, and December 31, 2022:

Paid Content revenue in the revenue disaggregation by geography above is based on the location of the Company’s customers at the time of sign-up as determined by the Company’s internal systems utilizing standard geolocation technology.

Contract Liabilities

Contract liabilities primarily include payments received for virtual currency prior to the Company satisfying its performance obligation to deliver content to the customer.

We recognized revenues of $70.4 million, $66.3 million and $48.1 million in 2024, 2023, and 2022, respectively, that were included within Contract liabilities on the Consolidated Balance Sheets as of the beginning of the respective year.

As of December 31, 2024, December 31, 2023, and December 31, 2022, our remaining performance obligations were $85.9 million, $76.7 million, and $77.1 million, respectively, and we expect to recognize the entire amounts withinone year of the respective year-end.

Note 3. Loss per share

For the years ended December 31, 2024, December 31, 2023, and December 31, 2022, for the purpose of calculating loss per share and as a result of the common control transaction as described in Note 1. Description of Business and Summary of Significant Accounting Policies the weighted-average number of shares used in the calculation reflects the outstanding shares of Wattpad as if the equity structure of the Parent (the accounting acquirer) was retroactively stated to reflect the number of shares issued in the Wattpad Transfer.

Basic loss per share is computed using the weighted-average number of outstanding shares of common stock during the period. 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.

The following table sets forth the computation of basic and diluted loss per share for the years ended December 31, 2024, December 31, 2023, and December 31, 2022:

1. Represents net loss allocable to Jakga Company Inc. (“Jakga”) redeemable convertible preferred stock which is a participating security per ASC 260. Jakga became an equity method investee from a subsidiary when it was deconsolidated on March 28, 2024 (Refer to Note 17. 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:

Note 4. Other Income (Loss), net

The following table summarizes Other income (loss), net for the years ended December 31, 2024, December 31, 2023, and December 31, 2022:

Note 5. 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:

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 recognizedno 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. See Note 17. Dispositions and Business Combinations for further details on this disposition.

There wereno Assets Held for Sale as of the year ended December 31, 2024.

Prepaid Expenses and Other Current Assets, net

Advance payments are primarily comprised of the payment of minimum guarantees to creators or publishers for their provision of content, such as web-comics, on the Company’s platform.

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. These costs are amortized on a systematic basis consistent with the transfer of services to the customer to which the asset relates. The Company recorded amortization of $11.5 million, $8.0 million ,and $27.0 million during the years ended December 31, 2024, December 31, 2023, and December 31, 2022 respectively.

The advance payments for minimum guarantee are amortized as the associated commission expenses payable to creators or publishers are incurred. When the Company determines the estimated future commission expenses payable are less than the carrying amount of such advance payments, the remaining portion of that advance payment is charged to expense in the period in which such determination is made. The Company charged advance payments to expense due to such determination in the amounts of $0.2 million, $1.2 million, and $0.4 million for the years ended December 31, 2024, December 31, 2023, and December 31, 2022 respectively.

Other current assets, net, consist primarily of inventories, the current portion of leasehold deposits and contract asset. The allowances on short-term loans were immaterial to the Company’s consolidated balance sheets as of December 31, 2024, and December 31, 2023, respectively.

Term deposits are bank deposits held by Korean and Japanese subsidiaries of the Company with maturities of less than one year but more than three months. As of December 31, 2024, and December 31, 2023, the term deposit balance of $8.0 million and $7.1 million was pledged to Sumitomo Mitsui Banking Corporation as a compensating balance deposit on contract liabilities of the Company’s subsidiary in accordance with the Payment Services Act in Japan.

Other Non-Current Assets, net

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 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

Accrued expenses as of December 31, 2024, and December 31, 2023, consisted of :

Accrued royalties are liabilities recorded on an accrual basis for amounts to be paid to the content providers by the Company, and Accrued other expenses are liabilities recorded on an accrual basis for marketing and advertising expenses. Accrued allowances and Accrued bonuses are liabilities recorded on an accrual basis for labor expenses.

Note 6. Property and Equipment, net

Property and equipment, net consists of the following:

Depreciation expenses on property and equipment were $3.4 million, $3.8 million and $3.3 million for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively and were recorded within General and administrative expenses.

Note 7. Goodwill, net and Intangible Assets, net

Intangible assets, net as of December 31, 2024 and December 31, 2023 consist of the following:

Intangible assets, other than goodwill, are initially recognized at cost and stated net of accumulated amortization. The amortization expense is recorded in General and administrative expenses or Cost of revenue in our Consolidated Statements of Operations and Comprehensive Loss, depending upon the nature of activities. Brands, software, trademarks, copyrights and patents are amortized on a straight-line basis over their estimated useful lives. Intellectual property rights consist of exclusive rights under contracts, customer relationships, and publishing rights. Intellectual property rights with definite lives are amortized over their economic useful lives or the period over which we have exclusive and unrestricted rights to the content under the contract on a straight-line basis, while intellectual property rights with perpetual exclusive rights are treated as indefinite-lived assets.

Amortization expense for intangible assets for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, was $36.7 million, $34.5 million, and $31.5 million, respectively, which included the accelerated amortization expense for abandoned intellectual property rights of $3.9 million, $2.5 million, and $1.9 million, respectively.

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

The changes in the carrying amount of goodwill for the years ended December 31, 2024 and December 31, 2023 are as follows:

(*)Accumulated impairment losses include $101.4 million and $63.4 million of impairment charges for the years ended December 31, 2024 and December 31, 2023, 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.

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.

For the years ended December 31, 2024, and December 31, 2023, the Company elected to bypass a qualitative assessment and performed a quantitative assessment to fulfill its annual goodwill impairment testing requirements under U.S. GAAP. The fair value of each reporting unit as of October 1, 2024, and October 1, 2023, respectively, was estimated using a discounted cash flow method with significant Level 3 inputs such as projected future cash flows, discount rate and terminal growth rate. The carrying values were based on each respective reporting unit’s net asset balance as of October 1, 2024, and October 1, 2023, 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 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. 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. In the case of WWS, lower than expected operating profits and cash flows contributed to the impairment of the reporting unit.

The Company recognized impairment loss on goodwill for WWS, Munpia, and Jakga of $6.1 million, $25.6 million, and $31.7 million, respectively, for the year ended December 31, 2023, as the carrying value of each reporting unit exceeded the fair value of the respective reporting unit. For WWS, the delay in web-novel video production resulted in lower operating profits and cash flows than expected, leading to the impairment of the reporting unit. As for Munpia, operating profits and cash flows were lower than anticipated due to a delay in realizing synergies and returns from investments in content creation and IP Adaptations which were initiated as a vertical expansion from Munpia’s platform business, leading to the impairment of the reporting unit. In the case of Jakga, the postponement of releases for major works led to operating profits and cash flows that were lower than anticipated, leading to the impairment of the reporting unit.

Making estimates requires significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the Consolidated Financial Statements could change in the near term due to one or more future events. 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 recognizedno goodwill impairment.

Note 8. Leases

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 fortwo lease offices, with extension periods offive years andone year, respectively; however, since the likelihood of extension is not reasonably certain, it is not reflected in the right-of-use assets and liabilities.

The components of lease expense for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, are as follows:

1. Includes operating lease expense of $5.5 million, $7.2 million, and $5.0 million related to NAVER for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively. See Note. 16“Related Parties and Variable Interest Entity” for further details.

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

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

The following table presents the weighted average remaining lease terms and discount rates as of December 31, 2024 and December 31, 2023:

The aggregate future lease payments for operating lease liabilities as of December 31, 2024 are as follows:

The Company subleases a portion of its operating lease right-of-use assets for buildings. Total other income generated from subleases is $0.3 million, $0.6 million, and $0.7 million for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively, and is included within Other income (loss), net of the Consolidated Statements of Operations and Comprehensive Loss.

Note 9. Debt

Short-Term Borrowings

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

1. 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.

2. 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.

3. 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

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

2. 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 intoone-year revolving credit facility arrangements with Shinhan Bank, KEB Hana Bank, and Kookmin Bank, where were further extended for an additionalone-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 additionalone-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 hasnot drawn any amounts from these facilities.

Note 10. Commitments and Contingencies

Contingencies

The Company records a loss contingency, consistent with ASC 450, when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. 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.

The Company is involved in a number of claims pending with various courts, or otherwise unresolved as of December 31, 2024 and December 31, 2023. 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. Though the outcome of pending lawsuits and claims cannot be anticipated with certainty, the Company does not expect adverse results from its pending lawsuits and claims, as of December 31, 2024, and December 31, 2023. 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.

Securities Litigation

On September 5, 2024, a purported stockholder filed a putative class action lawsuit against the Company, its directors, and the underwriters of the IPO in the federal court for the Central District of California, purportedly on behalf of all purchasers of shares of the Company’s common stock pursuant or traceable to the IPO Prospectus and the Company’s Registration Statement on Form S-1 (File No. 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. 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. On December 12, 2024, the court appointed a lead plaintiff and lead counsel. 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. The Company intends to defend this case vigorously. 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 November 15, 2024, a purported stockholder filed a shareholder derivative lawsuit against the Company’s directors, naming the Company as a nominal defendant, in the federal court for the Central District of California. 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.

Note 11. Stock-Based Compensation

2020 Equity Incentive Plan

In November 2020, the Company’s board of directors approved and adopted the 2020 Equity Incentive Plan (the “2020 Plan”) that was amended and restated in December 2021 (“First Amendment”), February 2023 (“Second Amendment”) and in November 2023 (“Third Amendment”). The 2020 Plan governs the terms for the granting of incentive stock options, non-statutory stock options and RSUs, to employees, consultants, and directors of the Company. The Company granted stock options that vest upon the satisfaction of both service-based and performance-based conditions and stock options that vest upon satisfaction of a service-based condition. 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. Unrecognized stock-based compensation expense related to these awards will be recorded over the remaining requisite service period. Under the 2020 Plan,7,639,440 shares of the Company’s common stock reflecting 2024 stock split effect were initially reserved for grant. Options and RSUs under the 2020 Plan that expire or are forfeited, canceled, exchanged or repurchased are returned to the pool of shares of common stock available for issuance under the 2020 Plan. The maximum number of shares of the Company’s common stock issuable under the 2020 Plan is 19,288,192 shares. As of December 31, 2024, and December 31, 2023, the Company had 5,277,764 shares and 5,033,250 shares of common stock available for future issuance, respectively.

2024 Omnibus Incentive Plan

In June 2024, the Company's board of directors adopted, and the stockholders approved, the 2024 Omnibus Incentive Plan ("2024 Plan"), which became effective on June 14, 2024. The Company initially reserved 10,950,515 shares of common stock for issuance under the 2024 Plan. Under the 2024 Plan, the number of common shares reserved will be increased by 5% or any such smaller number of shares as determined by the board of directors beginning on January 1, 2025 through January 1, 2034. Shares of the Company’s common stock subject to an award under the 2024 Plan shall again be made available for issuance or delivery under the 2024 Plan if such shares are (i) shares delivered, withheld or surrendered in payment of the exercise or purchase price of an award, (ii) shares delivered, withheld, or surrendered to satisfy any tax withholding obligation or (iii) shares subject to a stock-settled award that expires or is canceled, forfeited or terminated without issuance of the full number of shares to which the award related. 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.

Stock options

The Company’s stock options are granted with exercise prices equal to the estimated fair value of common stock at the date of grant. For stock options that vest only upon the satisfaction of both service and performance-based vesting conditions with cliff vesting at the end of the requisite service period (all of which were granted prior to the completion of the Company’s IPO), the Company recognizes stock-based compensation expense over the requisite service period when the performance condition is deemed probable or met. Such pre-IPO options vest on the third anniversary of the grant date, subject to the recipient remaining an employee of the Company and the performance-based condition was satisfied upon the completion of the Company's IPO. Options with only a service-based condition generally vest quarterly over three years from the vesting start date, subject to the recipient remaining an employee of the Company at each vesting date. 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.

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

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:

All stock options were granted prior to the completion of the Company’s IPO. As the Company was privately held prior to its IPO and did not have trading history for the Company’s common stock, the expected price volatility for the Company’s common stock was estimated by taking the average historical price volatility for industry peers that also served as benchmark references in the Company’s common stock valuations. The expected term is the midpoint between the end of the requisite service period and the contractual term of the award. The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group. The Company utilized a dividend yield ofzero, as it had no history or plan of declaring dividends on its common stock.

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 overone tofour 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. The RSUs carry dividend-equivalent rights during the vesting period which is accrued over the vesting period if the Company declares any dividends. Dividend equivalents are subject to the same vesting conditions applicable to the underlying RSUs and the dividend-equivalent rights are forfeited in the event the recipient is no longer an employee on the vesting date. The accrued dividend is paid upon vesting of the RSUs. As of December 31, 2024, 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.

The table below summarizes the Company’s RSU activity:

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:

Note 12. Income Taxes

The Company is subject to U.S. federal and various state corporate income taxes as well as taxes in foreign jurisdictions where foreign subsidiaries have been established.

Loss before income tax expense for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 is as follows:

The components of income tax expense for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 consist of the following:

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 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:

1. 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.

2. For the years ended December 31, 2024, December 31, 2023 and December 31, 2022, a permanent difference of $(16.8) million, $(14.0) million and $1.5 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.

3. 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 $74.7 million for the year ended December 31, 2024.

4. 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”). A taxpayer may elect to waive such deductions to reduce their base erosion percentage below the 3% threshold. For the year ended December 31, 2024, the Company has waived approximately $49.0 million of deductions.

5. IRC Section 951A requires a U.S. taxpayer to include income from its Controlled Foreign Corporations (“CFCs”) as Global Intangible Low Tax Income (“GILTI”) in computing U.S. taxable income. The section allows for a special deduction up to 50% of the income inclusion. The Company has GILTI inclusion of $18.6 million net of deductions for the year ended December 31, 2024.

6. 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. The Company recognized impairment loss on goodwill for WWS, Munpia, and Jakga of $6.1 million, $25.6 million, and $31.7 million, respectively, for the year ended December 31, 2023. 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 sale/purchase of stock was tax deductible and thus, the impairment of goodwill for book purpose for Wattpad, WWS, Munpia, and Jakga has been added back as permanent difference.

7. On June 27, 2023, the Company sold part of its voting interest in LOCUS, decreasing its ownership to 39.2%. This resulted in the deconsolidation of LOCUS and its subsidiaries. $5.4 million of net DTA of LOCUS was removed upon deconsolidation. Since LOCUS had recorded a full valuation allowance, there was a change in the valuation allowance of $(5.4) million upon deconsolidation andno tax expense or benefit was recognized upon deconsolidation.

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

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

10. In December 2022, the Korean National Tax Service (“KNTS”) initiated a regular tax audit for WTEK 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.

Deferred tax assets (liabilities) as of December 31, 2024 and December 31, 2023 consist of the following:

Changes in the valuation allowance for deferred tax assets for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 are as follows:

As of December 31, 2024, December 31, 2023, and December 31, 2022, the Company recorded a valuation allowance of $125.6 million, $131.5 million and $105.3 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, 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 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. The Company will continue to evaluate the ability to realize our net deferred tax assets on an ongoing basis to identify whether any significant changes in circumstances or assumptions have occurred that could materially affect the ability to realize deferred tax assets.

Net operating loss carryforwards as of December 31, 2024 and December 31, 2023 follows:

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. NOLs from our Japanese subsidiary begin to expire from 2031 through 2033 and NOLs from Canadian subsidiaries begin to expire from 2041 through 2044. 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. foreign tax credit carry-forwards of approximately $37.0 million as of December 31, 2024, which begin to expire from 2030 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:

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 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 Company is currently under examination by local taxing authorities in the United States and in Canada. The Company has not identified additional uncertain tax positions during the audits. 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.

Note 13. Retirement Benefits

Defined severance benefits

Changes in Defined severance benefits are as follows:

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

Changes in plan assets are as follows:

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

Our provision for retirement benefits is as follows:

Net periodic cost consists of the following:

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

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

The expected maturity analysis of undiscounted defined severance benefits as of December 31, 2024 is as follows:

Defined severance contribution

During the years ended December 31, 2024, December 31, 2023, and December 31, 2022, we recognized expense of $2.7 million, $2.3 million and $1.2 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.

Note 14. Segment and Geographic Information

Segment Information

The Company operates asone reportable segment, which derives its revenue from paid content, advertising, and IP adaptations revenue streams. Our chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM reviews financial information presented on a consolidated basis for the purposes of allocating resources and evaluating financial performance. The CODM manages the Company as a consolidated ecosystem because the revenue streams are interrelated, and resources are shared.

The CODM uses net income (loss) as reported in our Consolidated Statements of Operations and Comprehensive Loss to assess performance and allocate resources such as employees and capital expenditures. Additionally, the net income (loss) is used to monitor trends in year-over-year or quarter-over-quarter performance comparisons and to compare actual results to forecasts.

The CODM receives and reviews expenses included in segment operating performance regularly. However, the CODM reviews general and administrative expenses on a more disaggregated basis to ensure the resources are in line with its business and operating needs.

The measure of segment revenue and assets are reported on the Consolidated Statements of Operations and Comprehensive Loss as total sales and the Consolidated Balance Sheets as total assets, respectively.

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

The following table presents reportable segment profit and loss, including significant expense categories, attributable to the Company’s reportable segment for the periods presented:

Geographic Information

Refer to Note 2. Revenuefor revenues by location. The Company’s long-lived tangible assets as well as the Company’s operating lease right-of-use assets recognized on the Consolidated Balance Sheets, are located as follows:

Note 15. Fair Value Measurements

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Note 1. Description of Business and Summary of Significant Accounting Policies should be read in conjunction with the information outlined below.

The table below presents the valuation techniques and the nature of significant inputs generally used in determining the fair value of Level 3 Instruments.

The tables below present the ranges of significant unobservable inputs used to value the Company’s Level 3 assets as of December 31, 2024 and December 31, 2023. These ranges do not represent a range of values for any single instrument. For example, the lowest discount rate for a particular redeemable convertible preferred stock investment may be appropriate for valuing that specific debt security but may not be appropriate for valuing any other debt securities in this asset class. Accordingly, the ranges of inputs presented below do not represent uncertainty in, or possible ranges of, fair value measurements of the Company’s Level 3 assets.

As noted above, the binomial optional pricing model was used in the determination of fair value of Level 3 assets as of December 31, 2024 and December 31, 2023. The significant unobservable inputs used in the binomial option pricing model are the discount rate or market yield used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. An increase in the discount rate or market yield would result in a decrease in the fair value. 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 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 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 below tables present a summary of changes in fair value of Level 1 and Level 3 assets by investment type (in thousands of USD):

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.

Note 16. Related Parties and Variable Interest Entity

The Company’s Related Parties

NAVER and LY Corporation (“LY”, and formerly named Z Holdings Corporation) are the primary shareholders of the Parent. Related parties include NAVER’s controlled affiliates, Company’s management, Company directors, and stakeholders that hold significant influence over the Company. During the years ended December 31, 2024 and December 31, 2023, the Company provided advertising services to NAVER group companies and LY giving rise to related party receivables as of December 31, 2024 and December 31, 2023. Additionally, during the years ended December 31, 2024 and December 31, 2023, the Company received brand-usage and outsourcing services from NAVER and LY, which resulted in the Company recognizing related party payables as of December 31, 2024 and December 31, 2023.

During the year ended December 31, 2024, and December 31, 2023, the Company received payment gateway services from NAVER group companies and LY group companies, which resulted in the Company recognizing related party receivables as of December 31, 2024, and December 31, 2023. During the year ended December 31, 2024, and December 31, 2023, the Company published content provided by various content providers over which the Company exercised significant influence and are considered as related parties. The Company recognized cost of revenue, other assets and accounts payable as of December 31, 2024, and December 31, 2023.

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. Operating lease expenses from the lease were $5.5 million, $7.2 million and $5.0 million during the years ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively, with related lease obligations of $13.0 million and $21.3 million as of December 31, 2024 and December 31, 2023, respectively. The Company paid a rental security deposit of $2.4 million related to a new office during the year ended December 31, 2024. The Company also subleases part of its office space to other related parties and the total other income generated from subleases was $0.3 million and $0.6 million for the years ended December 31, 2024 and December 31, 2023, 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 additionalone-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 aone-year loan to its related party, NAVER WEBTOON Company Corporation, for $11.6 million with a fixed interest rate of 5.26%. In February 2024 the loan was extended for an additionalone-year with a fixed interest rate of 4.6%. 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. The options contained a performance-based condition which was satisfied upon the completion of the Company's IPO. The Company recorded the transaction as a dividend of $16.6 million and a reduction in additional paid-in capital as the director is employed by NAVER (See Note 1. Description of Business and Summary of Significant Accounting Policies for the treatment of stock-based awards issued to employees of NAVER).

On September 1, 2024, the merger between LDF and eBIJ became effective, following approval by the Company’s Board of Directors on March 27, 2024. Under the applicable corporate laws of Japan, eBIJ was merged into LDF through an absorption-type merger, with LDF as the surviving entity. Prior to this, eBIJ had been receiving reimbursements from Yahoo for certain costs and expenses incurred under its platform service agreement. 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 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, 2024, and December 31, 2023, LDF received total gross reimbursements of $24.0 million and $4.5 million, respectively, which is deducting $11.0 million and $1.8 million for cost of revenue, $10.3 million and $2.1 million for marketing, and $2.7 million and $0.6 million for general and administrative expenses, respectively.

Related Party Transactions and Balances

The Company entered into the following significant related party transactions during the periods presented:

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

The Company had the following significant balances due from and due to related parties as of December 31, 2024 and December 31, 2023:

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.

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.

Note 17. Disposition and Business Combinations

Jakga

On March 28, 2024, the Company entered into a stock transfer agreement with a third party (the “Buyer”), pursuant to which the Buyer agreed to acquire 0.3% of Jakga voting interests from the Company. The Company completed the sale for consideration of $0.1 million in cash. On the same day, Jakga entered into a share investment agreement with another third party, pursuant to which Jakga issued new shares of redeemable convertible preferred stock representing 3.5% of the voting equity interest of Jakga. Following the completion of the stock transfer agreement and the share investment agreement, the Company entered into a shareholder’s agreement to forgo its ability to appoint a member on Jakga’s board of directors to divest Jakga. The stock transfer agreement, share investment agreement, and shareholder’s agreement (collectively, the “Jakga Transactions”) resulted in a dilution of the Company’s ownership to 49.2% and losing controlling financial interest in Jakga. The Company deconsolidated Jakga on March 28, 2024 and accounted for the retained common stock as an equity method investment and the retained redeemable convertible preferred stock as a debt security (see additional details related to the redeemable preferred stock in Note 15. Fair Value Measurements). 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, 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. The loss includes the accounting for assets sold, liabilities transferred upon sale and the loss of $2.1 million relating to the remeasurement of the retained interest in Jakga.

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

LOCUS

On June 2, 2023, the Company entered into stock transfer agreements withtwo unrelated parties, (the “Buyers”) pursuant to which the Buyers agreed to collectively acquire 14.4% of LOCUS voting interests from the Company. On June 27, 2023, the Company completed the sale for an aggregate consideration of $5.0 million in cash. As a result of the sale, the voting interest of LOCUS held by the Company decreased from 53.6% to 39.2% and the Company no longer held a controlling financial interest in LOCUS, and deconsolidated LOCUS and its subsidiaries on June 27, 2023 and recognized the retained non-controlling interest in LOCUS as an equity method investment. LOCUS and its subsidiaries became related parties of the Company after the deconsolidation.

As of the disposition date, the retained interest in LOCUS was measured at fair value using a discounted cash flow model applying a discount rate of 16.0% and a terminal growth rate of 1.0% incorporating historical financial information, business plans of LOCUS and its subsidiaries, and market outlook information. The Company recorded a $0.8 million loss on sale of the 14.4% of the voting interests of LOCUS in Other income (loss), net in the Company’s Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2023. The loss includes the accounting for assets sold, liabilities transferred upon sale and the gain of $0.6 million relating to the remeasurement of the retained interest in LOCUS.

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

Fiscal Year 2022 Business Combinations

Munpia

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 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.

Jakga

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.

eBIJ

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.

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.

LOCUS

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.

JHS

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.

Note 18. Equity Method Investments

The Company accounts for investments using the equity method when the Company can exercise significant influence over operating and financial policies, but does not hold a controlling interest in the investee. Equity method investments as of December 31, 2024 and December 31, 2023 are as follows:

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 carrying value of our equity method investments is reported under the line item captioned Equity method investments in the Consolidated Balance Sheets. The following table summarizes the change in the balance of the Company’s equity method investment:

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.

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

1. 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.

2. 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.

3. Studio Toon Corp. and Studio White are joint ventures.

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

5. 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.

6. 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.

7. 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.

8. Individually immaterial investments are grouped as others. 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.

Note 19. Condensed Financial Information of Parent

The Company performed a test on the restricted net assets of combined subsidiary in accordance with U.S. Securities and Exchange Commission Regulation S-X Rule 4-08 (e) (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial statements of the parent company, WEBTOON Entertainment Inc.

These condensed Parent company only financial statements have been derived from its consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto of WEBTOON Entertainment, Inc. and subsidiaries included in Part II, Item 8 of this Form 10-K. The Parent’s significant accounting policies are consistent with those described in Note 1 - “Description of Business and Summary of Significant Accounting Policies” in Part II, Item 8, except that all subsidiaries are accounted for as equity method investments.

Certain foreign subsidiaries are regulated by governmental requirements. As a result, the ability of these subsidiaries to pay dividends or loan money to our Parent company is restricted due to their earnings and applicable law. In addition, the Parent has certain regulatory restrictions that dividends are only payable out of surplus or current net profits.

Condensed Balance Sheet

1. 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.

Condensed Statement of Operations and Comprehensive Loss

Condensed Statement of Cash Flows

1. Loan to LDF issued to acquire eBIJ.

2. Refer to Organization and Desc ription of Business in Note 1. Description of Business and Summary of Significant Accounting Policies.

Note 20. 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. 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. Accordingly, such shares sold are no longer redeemable and the shares that were sold were reclassified from redeemable non-controlling interest to non-controlling interest.

Prior to the acquisition, in September 2021, the Company entered into a side letter agreement with a third party, Cloudary, under which the Cloudary had the option to require the Company to purchase Cloudary’s Munpia shares for $26.20 per share (the equivalent of KRW 33,251). Such put option was set to expire upon the earlier of (i) March 2023 or (ii) when Cloudary holds less than 5% of the outstanding shares of Munpia. When the Company acquired Munpia in February 2022, the shares held by Cloudary were recognized as redeemable non-controlling interest. In December 2023, Cloudary exercised its put option and the Company purchased 425,016 of Cloudary’s Munpia shares. As a result of the exercise, Cloudary owned less than 5% of the outstanding shares of Munpia, and the remaining Munpia shares held by Cloudary were no longer redeemable. Accordingly, the remaining Cloudary owned shares were reclassified from redeemable non-controlling interest to non-controlling interest.

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

1. 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.

Note 21. 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:

1. The Munpia non-controlling interest balance excludes redeemable non-controlling interest discussed in Note 20. Redeemable Non-Controlling Interest in Subsidiary.

2. 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).

3. 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).

4. 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).

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