WEBTOON Entertainment Inc.

Notes to Condensed Consolidated Financial Statements

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”), who is a leading online and web-comic platform service company. We provide hosting services for compact 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, the United States, Japan, Southeast Asia, and Europe.

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

The unaudited Condensed Consolidated Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair statement of the results of the interim period. Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2024, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 11, 2025. Interim results are not necessarily indicative of the results for a full year.

Reclassifications

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

Concentrations of Credit Risk

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 57.7% and 54.9% of the total receivables balance as of September 30, 2025 and December 31, 2024, respectively. Three borrowers represent 89.1% and 89.0% of the total loan receivables balance as of September 30, 2025, and December 31, 2024, respectively.

Forward Stock Split, Change in Par Value

On June 26, 2024, the Company filed an Amended and Restated Certificate of Incorporation which effectuated a 30-for-1 forward stock split of its common stock and adjusted the par value of its common stock from $0.01 to $0.0001 on such date. Accordingly, all share and per share amounts presented in the unaudited Condensed Consolidated Financial Statements have been retroactively adjusted to reflect the stock split and change in par value for all periods presented.

Phantom Units

During the nine months ended September 30, 2025, the Company granted awards in the form of "Phantom Units," which provide recipients with the right to receive cash payments, less applicable withholding, equivalent to the fair market value of one share of the Company's common stock on the applicable vesting date, multiplied by the number of Phantom Units that vest. While these Phantom Units do not confer ownership rights, they are also entitled to dividends, if declared, equivalent in an amount in cash and form equal to the dividend that would have been paid on the shares underlying the Phantom Unit had such shares been outstanding on such record date. Any such dividend equivalents shall be subject to the same vesting conditions applicable to the underlying Phantom Unit with respect to which they accrue.

Phantom Units are recorded as an expense based on the fair value of the units on the balance sheet date. The fair value of these awards is updated at each balance sheet date and changes in the fair value of the vested portions of the awards are recorded as increases or decreases to compensation expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss. All of the outstanding Phantom Units at September 30, 2025, met the criteria to be treated under liability classification in accordance with ASC 718, given that these awards will settle in cash on the vesting date. See Note 8. Stock-Based Compensationfor more information on the Company's Phantom Units.

Recent Accounting Pronouncements Yet to Be Adopted

In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets,” which provides an expedient for measuring expected credit losses on current trade receivables and contract assets by assuming that current conditions remain unchanged over the life of the asset, and for non-public business entities, an accounting policy election to consider subsequent cash collections. The amendments are effective for annual and interim periods beginning after December 15, 2025, with early adoption permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

In September 2025, the FASB issued Accounting Standards Update No. 2025-06, “Intangibles—Goodwill and Other Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software,” which modernizes the accounting for software costs by removing all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout Subtopic 350-40. The amendments are effective for annual and interim periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

Note 2. Revenue

Disaggregation of Revenue

The following table shows revenues disaggregated by revenue stream for the three and nine months ended September 30, 2025, and September 30, 2024, respectively:

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 $2.8 million and $2.8 million of physical book sales through the platform for three months ended September 30, 2025 and 2024, respectively, and $8.3 million and $8.0 million of physical book sales through the platform for nine months ended September 30, 2025 and 2024, 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 from sub-licensing content to third parties were $3.8 million and $3.2 million for the three months ended September 30, 2025, and 2024, respectively, and $9.9 million and $10.0 million for the nine months ended September 30, 2025, and 2024, respectively. We also had $1.8 million and $1.8 million of merchandise sales generated through external platforms, IP royalties, and pop-up stores for the three months ended September 30, 2025, and 2024, respectively and $3.8 million and $10.6 million for the nine months ended September 30, 2025, and 2024, respectively.

The following table shows disaggregation of revenue by geography for the three and nine months ended September 30, 2025 and 2024:

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 $77.0 million and $72.2 million during the three months ended September 30, 2025, and 2024, respectively, and $80.1 million and $70.1 million during the nine months ended September 30, 2025, and 2024, respectively, that were included within Contract liabilities on the Condensed Consolidated Balance Sheets as of the beginning of the respective period.

Our remaining performance obligations were $88.2 million and $85.9 million as of September 30, 2025 and December 31, 2024, respectively, and we expect to recognize the entire amounts withinone year of the respective dates.

Note 3. Earnings (loss) per share

Basic earnings (loss) per share is computed using the weighted-average number of outstanding shares of common stock during the period, including vested restricted stock units ("RSUs"). Diluted earnings (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 unvested RSUs. For the three and nine months ended September 30, 2025, and 2024, the Company's Korean subsidiaries and equity method investees each had outstanding stock options that will be settled in each respective subsidiary or equity method investee's common shares. The numerator of the Company's earnings (loss) per share include the Parent's proportionate share of the diluted earnings or loss per share impact of outstanding subsidiaries and equity method investees' stock options.

The following table sets forth the computation of basic and diluted earnings (loss) per share, as adjusted on a retrospective basis to reflect the Stock Split as discussed in Note 1. Description of Business and Summary of Significant Accounting Policies, for the three and nine months ended September 30, 2025 and 2024, respectively (in thousands of USD, except share and per share amounts):

1. Represents net income (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 14. Disposition for additional information for Jakga disposition).

The following potentially dilutive outstanding securities were excluded from the computation of diluted net earnings (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. Prepaid Expenses and Other Assets, net

Other Current Assets, net

Advance payments are primarily comprised of the advance payments for production of film contents and 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. These costs are amortized on a systematic basis consistent with the transfer of services to the customer to which the asset relates. The Company's balance of advance payments due to film production contracts were $30.1 million and $35.1 million as of September 30, 2025 and December 31, 2024, respectively.

The advance payments for minimum guarantee are amortized as 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 $0.5 million and $0.2 million as of September 30, 2025 and December 31, 2024, respectively.

As of September 30, 2025 and December 31, 2024, $8.9 million and $8.0 million of the term deposit balance 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, respectively.

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 were $10.2 million and $8.5 million, and charged long-term advance payments to expense due to such determination in the amounts of $7.3 million and $6.9 million as of September 30, 2025 and December 31, 2024, respectively.

Note 5. Property and Equipment, net

Note 6. Leases

Supplemental disclosure of cash flow information related to operating leases is as follows for the nine months ended September 30, 2025 and 2024, respectively:

In March 2025, Line Digital Frontier entered intotwo lease agreements for office space. The leases commenced in March 2025, and expire in February 2030, with monthly payments of $0.1 million each, at a discount rate of 2.9%. Upon commencement, each of the two leases was recognized as a right-of-use asset in the amounts of $6.0 million and $6.0 million, respectively.

The Company subleases a portion of the operating lease right-of-use assets for buildings. Total other income generated from subleases was $0.1 million and $0.1 million for the three months ended September 30, 2025 and 2024, respectively and $0.2 million and $0.3 million for the nine months ended September 30, 2025 and 2024, respectively, and is included within Other income (loss), net of the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Note 7. 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 judgment related to both the likelihood of a loss and the estimate of the amount or range of loss.

Legal Proceedings

The Company is involved in a number of claims pending with various courts, or otherwise unresolved as of September 30, 2025. 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. The outcome of pending lawsuits and claims cannot be anticipated with certainty and the timing and outcome of ongoing legal proceedings are uncertain by nature. Therefore, 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 unaudited Condensed 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 Company’s initial public offering completed on June 28, 2024 (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 our 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. On March 11, 2025, the lead plaintiff filed an opposition to this motion to dismiss, and on March 18, 2025, the Company, its directors, and the underwriters filed a reply in support of the motion to dismiss. The Company intends to defend this case vigorously. At this early stage of the proceedings, the Company cannot 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 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 stage of the proceedings, the Company can neither predict the ultimate outcome of the litigation nor estimate any range of possible losses.

Note 8. Stock-Based Compensation

Restricted Stock Units

The table below summarizes the Company’s RSU activity for the nine months ended September 30, 2025:

As of September 30, 2025, the total unrecognized compensation expense related to unvested RSUs was $31.9 million and is expected to be recognized over the remaining weighted-average service period of 1.5 years using the straight-line method and graded-vesting methods, as appropriate, net of estimated forfeitures.

The following table presents the effects of all stock-based compensation in the Condensed Consolidated Statements of Operations and Comprehensive Loss:

The following table summarizes the Company's Phantom Unit activity for the nine months ended September 30, 2025:

As of September 30, 2025, the Company recognized stock-based compensation expense related to the Phantom Units of $4.3 million. Compensation expense for the Phantom Units is based on the fair value of the units as of the balance sheet date, as further discussed in Note 1. Description of Business and Summary of Significant Accounting Policies, and such costs are recognized ratably over the service period of the awards. As the fair value of liability awards is required to be re-measured each period end, stock compensation expense amounts recognized in future periods for these awards will vary. The estimated future cash payments of these awards are presented within accrued expenses on the Company's Condensed Consolidated Balance Sheets. The total unrecognized compensation expense related to unvested Phantom Units is $4.3 million and is expected to be recognized over the remaining weighted-average service period of 1.2 years using the straight-line method, net of estimated forfeitures.

Note 9. 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.

The Company recorded an income tax expense/(benefit) of $0.6 million and $(9.9) million in the three months ended September 30, 2025, and 2024, respectively, and $2.3 million and $(1.3) million in the nine months ended September 30, 2025, and 2024, respectively. The effective tax rate was (6.0)% and (6.8)% for the three and nine months ended September 30, 2025, respectively.

During the nine months ended September 30, 2025, the Company recognized a net discrete tax expense of $1.1 million, primarily due to return-to-provision true up adjustments in Korea and Japan tax return filings. During the nine months ended September 30, 2024, the Company recognized a net discrete tax (benefit) of $(12.1) million primarily due to the change in valuation allowance upon completion of the LDF-eBIJ merger.

The Company’s income tax provision for the nine months ended September 30, 2025, is determined using an estimate of the Company’s annual effective tax rate, adjusted for any discrete items reflected in the relevant period. The effective tax rate for the nine months ended September 30, 2025, and 2024 was (6.8)% and 2.6%, respectively. The change in effective tax rate is primarily driven by the change in jurisdictional profits and losses. The provision for income taxes differs from the amount of income tax computed by applying the U.S. statutory federal tax rate of 21% to the loss before income taxes primarily attributable to state income taxes, foreign income taxes including foreign withholding taxes, and non-recognition deferred tax assets as the Company established a full valuation allowance against U.S. deferred tax assets and deferred tax assets for the majority of its subsidiaries that generated taxable losses.

On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act (“OBBBA”), which contains several changes to key U.S. federal income tax laws, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatments for certain business provisions. The legislation has multiple effective dates, with some provisions effective in 2025 and others implemented through 2027. The Company has reviewed the provisions of the OBBBA to determine the potential impact on the Company’s financial statements. Based on this review, the Company does not expect the OBBBA to have a material impact on its income taxes, including current and deferred tax balances and the effective tax rate. As of September 30, 2025, the Company is still in the process of evaluating the full impact of the OBBBA, and any material changes to the Company’s assessment will be disclosed in future filings as required.

Note 10. Retirement Benefits

Defined severance benefits

The following table provides the components of net periodic benefit costs (income):

Defined severance contribution

Defined severance expense was $0.5 million and $0.3 million for the three months ended September 30, 2025 and 2024, respectively, and $1.5 million and $2.2 million for the nine months ended September 30, 2025 and 2024, respectively.

Note 11. 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 Condensed 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 Condensed Consolidated Statements of Operations and Comprehensive Loss as total sales and the Condensed 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 as of September 30, 2025 and December 31, 2024, were located as follows:

Note 12. 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.

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 September 30, 2025 and December 31, 2024. 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, either the binomial optional pricing model or market approach were used in the determination of fair value of Level 3 assets as of September 30, 2025 and December 31, 2024. 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 significant unobservable inputs used in the market approach are based on market comparable transactions and market multiples of publicly traded comparable companies. Increases or decreases in market comparable transactions or market multiples would result in an increase or decrease in the fair value.

The below tables present a summary of changes in fair value of Level 1 and Level 3 assets, included within Debt and equity securities in the Condensed Consolidated Balance Sheets, by investment type (in thousands of USD):

The Level 1 equity securities relate 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, 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.

For the nine months ended September 30, 2025 and 2024, the Company didnot recognize any realized gain or loss on its Level 3 equity or debt securities.

Note 13. Related Party Transactions

The Company’s Related Parties

NAVER and LY Corporation ("LY," 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 three and nine months ended September 30, 2025, and 2024, the Company provided advertising services to NAVER group companies and LY giving rise to related party receivables as of September 30, 2025, and December 31, 2024. Additionally, during the three and nine months ended September 30, 2025, and 2024, the Company received brand-usage and outsourcing services from NAVER and LY, which resulted in the Company recognizing related party payables as of September 30, 2025, and December 31, 2024.

In addition to the transactions mentioned above, the Company has a history of renting facilities from its parent, NAVER. Related party operating lease expenses were $1.3 million and $1.6 million during the three months ended September 30, 2025, and 2024, respectively, and $2.9 million and $4.6 million during the nine months ended September 30, 2025, and 2024, respectively, with related lease obligations of $12.1 million and $13.0 million as of September 30, 2025, and December 31, 2024, respectively (Refer to Note 6. Leases for additional information).

The Company also subleases part of its office space to other related parties and the total other income generated from subleases was $0.1 million and $0.1 million for the three months ended September 30, 2025, and 2024, respectively, and $0.1 million and $0.2 million for the nine months ended September 30, 2025, and 2024, respectively.

Related Party Transactions and Balances

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

*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 September 30, 2025, and December 31, 2024:

Note 14. Disposition

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 12. 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 Condensed Consolidated Statements of Operations and Comprehensive Loss for the nine months ended September 30, 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):

Note 15. 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.

Due to the Jakga Transactions entered by the Company on March 28, 2024, the Company's voting equity interest in Jakga reduced to 49.2%, and the Company no longer held a controlling financial interest. The Company deconsolidated Jakga and recognized the retained common stock of Jakga as an equity method investment (see additional details in Note 14. Disposition).

In March 2024, the Company began to exercise significant influence over CELSYS, Inc. ("CELSYS") due to its appointment of a director to CELSYS's board of directors. Accordingly, it reclassified its $18.3 million investment in shares of common stock of CELSYS from equity securities to an equity method investment.

In March 2024, the Company acquired 33,593 shares of common stock of Namooactors Entertainment ("Namooactors"), which represents 20.0% voting interest, for $4.6 million in cash. The Company accounted for the investment in Namooactors using the equity method.

In March 2024, the Company invested in STUDIO WHITE Limited Liability Partnership ("STUDIO WHITE"), which represents 40.0% partnership interest, for $0.8 million in cash. The Company accounted for the investment in STUDIO WHITE using the equity method.

In May 2024, the Company sold 15,000 shares of common stock of Studio Dragon Japan CO., LTD. ("SDJ"), which represents the Company's entire voting interest in SDJ, for $5.7 million in cash. As a result of the sale, the Company no longer retained any interest nor had the ability to exercise significant influence over SDJ.

In June 2025, the Company acquired an additional 300 shares of common stock of Purple Duck Co., which represented 23.1% of remaining equity interest, for $0.3 million in cash. This increased the Company’s ownership to 100%. The Company began consolidating the financial statements from the date of acquisition. The Company initially acquired a majority stake during the six months ended June 30, 2024; however, continued to apply the equity method due to contractual limitations on significant influence. The Company’s previously held equity interest was remeasured to its fair value as of the acquisition date, and the resulting gain was recognized in our Condensed Consolidated Statement of Operations and Comprehensive Loss.

Note 16. Redeemable Non-Controlling Interest in Subsidiary

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

Note 17. Non-Controlling Interest in Subsidiaries

The Company has non-controlling interests in several of its subsidiaries. The balances of non-controlling interest as of September 30, 2025, and December 31, 2024, are as follows (in thousands of USD):

1. The Munpia non-controlling interest balance excludes redeemable non-controlling interest (See Note 16. Redeemable Non-Controlling Interest in Subsidiary for detail).

2. The portion of net assets in Bootcamp attributable to the LP represents a non-controlling interest.