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 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.

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, 2025, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 5, 2026. 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. None of these reclassifications impacted reported operating or net loss for any presented period.

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 49.6% and 55.3% of the total receivables balance as of September 30, 2026, and December 31, 2025, respectively. Three borrowers represent 96.9% and 88.9% of the total loan receivables balance as of September 30, 2026, and December 31, 2025, respectively.

Performance Stock Units

During the nine months ended September 30, 2026, the Company granted awards in the form of "Performance Stock Units" ("PSUs"), which provide recipients with the right to receive shares of the Company's common stock upon vesting, subject to the achievement of a market condition based on the Company's total shareholder return ("TSR") relative to a custom peer group over the performance period, and the recipient's continued service with the Company.

Compensation expense for PSU awards is recognized ratably over the requisite service period based on the grant-date fair value, regardless of whether the market condition is ultimately achieved. The grant-date fair value of PSU awards is estimated using a Monte Carlo simulation model and is not subsequently remeasured. All of the outstanding PSU awards at September 30, 2026, are classified as equity awards in accordance with ASC 718, given that these awards will be settled in shares of the Company's common stock upon vesting. See Note 9. Stock-Based Compensation for more information on the Company's PSU awards.

Goodwill and Impairment of Goodwill

Goodwill represents the excess of the purchase consideration over the fair values of the identifiable assets acquired and liabilities assumed in a business combination. In accordance with ASC 350, “Intangibles—Goodwill and Other,” goodwill is not amortized but is tested for impairment at the reporting unit level annually, as of October 1. Goodwill is also tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount (a “triggering event”). When a triggering event is identified, the Company performs a quantitative impairment test by comparing the fair value of the reporting unit to its carrying amount. The Company estimates the fair value of its reporting units using a discounted cash flow methodology, a Level 3 fair value measurement under ASC 820 that involves significant management assumptions and judgments, including projected revenue growth, gross margins, and the selection of an appropriate discount rate. An impairment charge is recognized for the amount by which a reporting unit’s carrying amount exceeds its fair value, limited to the amount of goodwill allocated to that reporting unit. See Note 5 for the results of the Company’s evaluations for the periods presented.

Software Development Costs

The Company accounts for internal-use software costs in accordance with ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software, as amended by ASU 2025-06. The Company capitalizes eligible costs, including external vendor fees for coding, configuration, customization, and testing, once management has authorized and committed to funding the project, it is probable the project will be completed and the software used as intended, and no significant development uncertainty exists. Mobilization and onboarding, training, data migration, post-implementation maintenance and other costs not directly attributable to developing the software are expensed as incurred.

Capitalized costs are recorded within intangible assets, net, amortized on a straight-line basis over an estimated useful life offive years beginning when the software is ready for its intended use, and reviewed for impairment under the Company’s long-lived asset policy. As of September 30, 2026, the Company had capitalized $0.3 million for the Wattpad re-platforming project. The software has not been placed in service, andno amortization has been recorded.

Recent Accounting Pronouncements

On January 1, 2026, the Company adopted ASU 2025-05 and elected the practical expedient for measuring expected credit losses on a prospective basis. The adoption did not have a material impact on the Company's unaudited Condensed Consolidated Financial Statements.

During the third quarter of 2026, the Company early adopted ASU 2025-06 on a prospective basis, effective as of January 1, 2026. The adoption had no impact on previously reported interim periods, as the Company incurred no internal-use software development costs before the third quarter of 2026. See Software Development Costs above.

Except for the adoption of ASU 2025-05 and ASU 2025-06, there have been no significant changes to the Company’s accounting policies as described in its Annual Report on Form 10-K for the year ended December 31, 2025.

Note 2. Revenue

Disaggregation of Revenue

The following table shows revenues disaggregated by revenue stream for the three and nine months ended September 30, 2026, and September 30, 2025, 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 $2.6 million and $2.8 million of physical book sales through the platform for the three months ended September 30, 2026, and 2025, respectively, and $7.6 million and $8.3 million of physical book sales through the platform for the nine months ended September 30, 2026, and 2025, respectively.

Advertising revenue represents amounts earned for the display of advertisements on our offerings or product placement within content.

IP Adaptations revenue originates from the internal development of film, streaming series, or other rich media format adaptations commissioned by third party studios or streaming platforms. The composition of this revenue stream was primarily as follows for the three months ended September 30, 2026, and 2025, and the nine months ended September 30, 2026, and 2025:

•Licensing fees (from sublicensing content to third parties): $4.2 million and $3.8 million, respectively, and $15.2 million and $9.9 million, respectively.

•Merchandise sales (from external platforms, IP royalties, and pop-up stores): $1.4 million and $1.8 million, respectively, and $4.7 million and $3.8 million, respectively.

The following table shows disaggregation of revenue by geography for the three months ended September 30, 2026, and 2025, and nine months ended September 30, 2026 and 2025:

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 $97.8 million and $77.0 million during the three months ended September 30, 2026, and 2025, respectively, and $84.8 million and $80.1 million during the nine months ended September 30, 2026, and 2025, 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 $101.4 million and $90.0 million as of September 30, 2026, and December 31, 2025, respectively, and we expect to recognize the entire amounts withinone year of the respective dates.

Note 3. 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 and PSUs. Diluted earnings (loss) per share also reflects the effect of dilutive securities issued by the Company’s subsidiaries and equity method investees, which are settled in shares of the respective entity and, if dilutive, are included as an adjustment to the numerator rather than the share count.

The following table sets forth the computation of basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2026, and 2025, 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.

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:

Stock options and convertible preferred stock issued by the Company’s subsidiaries and equity method investees, which are settled in shares of the respective entity, were also excluded because their effect would have been anti-dilutive for the periods presented.

In addition, shares of the Company's common stock that may be issued under the RI Games Shareholders Agreement (see Note 8. Commitments and Contingencies) were excluded from the computation of diluted loss per share for the three and nine months ended September 30, 2026, because the conditions to their issuance, including the completion of the second closing, had not been satisfied as of September 30, 2026.

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 recorded amortization expense of $27.9 million and $36.1 million during the three months ended September 30, 2026, and 2025, respectively, and $47.6 million and $61.1 million during the nine months ended September 30, 2026, and 2025, respectively. The Company's balance of advance payments, net due to film production contracts was $37.6 million and $29.0 million as of September 30, 2026, and December 31, 2025, respectively.

The advance payments for minimum guarantees 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.

As of September 30, 2026, and December 31, 2025, $8.8 million and $8.7 million, respectively, 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.

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, net due to film production contracts was $3.8 million and $7.3 million as of September 30, 2026, and December 31, 2025, respectively.

Note 5. Goodwill, net

The changes in the carrying amount of goodwill for the nine months ended September 30, 2026, are as follows:

The changes in the carrying amount of goodwill during the three and nine months ended September 30, 2026 were attributable solely to foreign currency translation adjustments.

During the fiscal year ended December 31, 2025, the Company recorded a goodwill impairment charge principally related to its Wattpad and Munpia reporting units, as described in Note 7, “Goodwill, net and Intangible Assets, net,” to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

During the three and nine months ended September 30, 2026, the Company evaluated its reporting units for triggering events in accordance with ASC 350-20-35-30. This evaluation considered macroeconomic conditions; industry and market considerations; cost factors; the overall financial performance of the reporting units relative to the projections used in the 2025 annual quantitative impairment test; other entity-specific events; events affecting the reporting units; and trends in the Company’s share price. Based on this evaluation, the Company concluded that no triggering events occurred during either period and, accordingly, did not perform an interim goodwill impairment test for the three or nine months ended September 30, 2026. No goodwill impairment was recognized during either period. There can be no assurance that the estimates and assumptions underlying the Company’s goodwill evaluations will prove accurate, and material impairment charges may be required in future periods.

Note 6. Property and Equipment, net

Property and equipment, net consists of the following:

Note 7. Leases

Supplemental disclosure of cash flow information related to operating leases is as follows for the nine months ended September 30, 2026, and 2025, 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 thetwo 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 its operating lease right-of-use assets for buildings. Sublease income was $0.1 million and $0.1 million for the three months ended September 30, 2026, and 2025, respectively, and $0.2 million and $0.2 million for the nine months ended September 30, 2026, and 2025, respectively, and is included within Other income (loss), net on the Condensed Consolidated Statements of Operations and Comprehensive Loss.

In April 2026, the Company commenced an operating lease for approximately 24,787 square feet of office space located at 222 N. Pacific Coast Highway, El Segundo, California, which serves as the Company's new headquarters. The lease has a term of seven years and eight months, expiring in November 2033.

The lease also obligates the Company to pay its proportionate share (approximately 4.1%) of building operating expenses in excess of a 2026 base year amount. These costs represent variable lease payments and are recognized as incurred.

The Company hasone option to extend the lease for a period offive years at the then-prevailing fair market rent. The Company has determined that exercise of this option is not reasonably certain, and accordingly the option period has been excluded from the measurement of the lease liability and right-of-use asset.

Upon commencement, the Company recognized an operating lease right-of-use asset of $4.8 million and a corresponding operating lease liability of $4.8 million, measured at the present value of remaining lease payments using an incremental borrowing rate of 5.4%. The right-of-use asset and lease liability reflects a reduction for the $3.5 million tenant improvement allowance treated as a lease incentive.

Note 8. 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.

IP Adaptations Fund

In July 2026, the Company committed $40.0 million as a 40% limited partner in NW Webcomic Adaptation Fund, L.P. (the “Fund”). At the initial closing on August 6, 2026, $10 million was funded. As of the date of this filing, the Company’s remaining unfunded commitment was $30 million. Under the Fund’s Agreement of Limited Partnership, limited partners are required to contribute 25% of their commitments at the initial closing and 25% of their commitments on each of the first three anniversaries of the initial closing. In addition, each partner’s obligation to fund capital for the purpose of repaying Fund indebtedness is unconditional and not subject to any excuse right or defense. See Note 16. Equity Method Investments, for further information regarding this commitment.

RI Games Holdings Inc.

On August 6, 2026, the Company entered into a Share Purchase Agreement (the “RI Games Purchase Agreement”) with Redice & Company, Inc. (the “Seller”) and a Shareholders Agreement with the Seller, RI Games Holdings Inc. (“RI Games Holdings”) and Tail Han (the “RI Games Shareholders Agreement” and, together with the RI Games Purchase

Agreement, the “RI Games Holdings Agreements”) providing for the acquisition, intwo closings of up to 9,000 shares of common stock of RI Games Holdings. The RI Games Holdings Agreements include obligations of the Company to fund future subscriptions for shares of RI Games Holdings. See Note 16. Equity Method Investments, for further information related to this transaction.

On August 14, 2026, the Company completed the first of two closings and acquired 2,999 shares for aggregate consideration of KRW 49,983,334,333 (approximately $35.3 million, based on the exchange rate on the payment date), representing 19.99% of the outstanding common stock of RI Games Holdings. As of the date of this filing, the second closing has not occurred, and certain conditions to the second closing remain unsatisfied. The Company is subject to the below listed commitments and contingent rights and obligations under the RI Games Holdings Agreements. None of these arrangements were recognized in the Condensed Consolidated Balance Sheet as of September 30, 2026. U.S. dollar amounts below are based on the exchange rate as of September 30, 2026.

Subject to the satisfaction or waiver of additional conditions, including the achievement of a specified commercial launch milestone with respect to a game under development by a subsidiary of RI Games Holdings, the Company will acquire the remaining 6,001 shares of the 9,000 shares under the RI Games Purchase Agreement for aggregate consideration of KRW 100,016,668,667 (approximately $73.6 million). The RI Games Purchase Agreement may be terminated if the second closing has not occurred by a specified outside date. Upon completion of the second closing, the Company will hold approximately 60% of the outstanding common stock of RI Games Holdings, and the Company expects to consolidate the financial results of RI Games Holdings and its subsidiaries.

If the second closing has not occurred by a specified outside date, for reasons not attributable to the Seller, the RI Games Shareholders Agreement will terminate automatically and substantially all of the rights and obligations described below will lapse, except for rights and liabilities that have accrued prior to the termination and certain provisions that survive in accordance with their terms.

Under the RI Games Shareholders Agreement, from and after the second closing until June 30, 2030, the Seller may require RI Games Holdings to conduct up tofour capital increases pursuant to which the Company would be obligated to subscribe for newly issued shares of RI Games Holdings for an aggregate subscription amount of up to KRW 50 billion (approximately $36.8 million) through third-party allotments. The parties may agree to permit a portion of that amount to be drawn and funded between the first closing and the second closing. In addition, if aggregate revenue of RI Games Holdings and its subsidiaries for fiscal years 2027 through 2030 equals or exceeds a specified target, the Seller may require RI Games Holdings to conduct a further capital increase in which the Company would be obligated to subscribe for newly issued shares for an amount determined in accordance with the RI Games Shareholders Agreement, subject to a specified maximum.

The RI Games Shareholders Agreement further provides that if aggregate revenue of RI Games Holdings and its subsidiaries derived from their business equals or exceeds KRW 250 billion during the period commencing on the earlier of January 1, 2027, and the date a game under development by a subsidiary of RI Games Holdings becomes available to the general public, and ending June 30, 2030 (the “Measurement Period”), the Seller may require the Company to purchase all, but not less than all, of the Seller's remaining 6,000 shares of RI Games Holdings common stock for aggregate consideration of not less than KRW 100,000,002,000 (approximately $73.6 million), payable in a combination of cash and shares of the Company's common stock, of which not less than the greater of KRW 50 billion (approximately $36.8 million) and the taxes reasonably expected to be incurred by the Seller on the sale of such remaining shares is payable in cash, subject to the terms and limitations of the RI Games Shareholders Agreement. If that revenue threshold is not achieved by the end of the applicable Measurement Period, the Company may, during a specified put exercise period, require the Seller to purchase the 6,001 shares acquired by the Company at the second closing, at a price based on the second closing purchase price and subject to adjustments.

The aggregate number of shares of the Company's common stock issuable under the RI Games Shareholders Agreement may not exceed 19.9% of the shares of the Company's common stock issued and outstanding immediately prior to the date of the RI Games Shareholders Agreement unless a greater issuance is approved by the Company's stockholders.

The Company evaluated the arrangements described above under ASC 815, Derivatives and Hedging, and ASC 480, Distinguishing Liabilities from Equity, and concluded that none of these arrangements is a derivative. No consideration was paid or received for these arrangements, and they are not separately accounted for until they are performed. The arrangements to purchase or subscribe for shares of RI Games Holdings require physical settlement in shares that are not readily convertible to cash.

Legal Proceedings

The Company is involved in a number of claims pending with various courts, or otherwise unresolved as of September 30, 2026. 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 September 30, 2026. 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 unaudited Condensed Consolidated Financial Statements for that reporting period.

Securities & Derivative 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 January 9, 2026, the WEBTOON defendants and underwriter defendants filed answers to the operative complaint. On July 8, 2026, the parties notified the court that they had reached an agreement-in-principle that resolves all of the putative class’s claims, and requested a stay of all case deadlines. On August 7, 2026, the parties filed a stipulation of settlement with the Court. On August 14, 2026, the Court preliminarily approved the settlement. A hearing on final approval of the settlement is set for December 1, 2026. During the three months ended September 30, 2026, the settlement amount of $10.05 million was deposited into escrow, of which $9.8 million was funded by the Company’s insurers and $0.25 million by the Company. As of September 30, 2026, the Company recorded a liability within Provisions and defined pension benefits and an insurance receivable of $9.8 million within Receivables. The settlement did not have a material impact on the Condensed Consolidated Statements of Operations.

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 21D 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. On April 24, 2026, by stipulation of the parties, the court ordered the shareholder derivative lawsuit stayed until the end of the fact discovery period in the securities class action.

On May 5, 2026, a purported shareholder 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 similar 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 breach of fiduciary duties, aiding and abetting breach of fiduciary duties, unjust enrichment, waste of corporate assets, and contribution under Section 11(f) of the Securities Act of 1933, and Section 21D of the Exchange Act of 1934.

On August 21, 2026, a purported shareholder 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 similar allegations as the putative securities class action and other derivative lawsuits described above, including that the Company's Registration Statement was materially false or misleading. The complaint includes claims for breach of fiduciary duties, aiding and abetting breach of fiduciary duties, 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 21D of the Exchange Act of 1934.

On September 18, 2026, the purported shareholders of all three derivative actions and the Company notified the Court that they had reached an agreement-in-principle that resolves all of the putative class’s claims, and requested a stay of all case deadlines. On September 21, 2026, the Court ordered that the parties’ stipulation of settlement and plaintiffs’ motion for preliminary approval shall be filed by October 30, 2026. On October 28, 2026, the Court extended the deadline to file the settlement documents to November 13, 2026. The settlement terms are subject to the Court’s review and determination of whether they are fair, reasonable, and adequate, as well as an application for Plaintiffs’ counsel’s attorney’s fees. The Company has insurance policies in place with respect to any future fee award. The Company does not expect any future settlement to have a material impact to the financial statements.

Note 9. Stock-Based Compensation

Restricted Stock Units

The table below summarizes the Company’s RSU activity for the nine months ended September 30, 2026:

As of September 30, 2026, the total unrecognized compensation expense related to unvested RSUs was $26.2 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.

Performance Stock Units

On March 26, 2026, the Company granted Performance Stock Units ("PSUs") to certain employees under the 2024 Omnibus Incentive Plan. The vesting of PSUs is subject to a market condition based on the Company's total shareholder return ("TSR") relative to a custom peer group over the performance period from January 1, 2026, through December 31, 2028, and the recipient's continued service with the Company.

The PSUs are eligible to be earned and vest from 0% to 200% of the target number of shares granted, depending on the Company's relative TSR percentile ranking among the peer group at the end of the performance period. The grant-date fair value of the PSU awards was estimated using a Monte Carlo simulation model, resulting in a weighted-average grant-date fair value of $13.27 per target share. The simulation was performed using an expected volatility of 69.8%, a risk-free interest rate of 3.9%, and an expected dividend yield of 0%.

The table below summarizes the Company’s PSU activity for the nine months ended September 30, 2026:

As of September 30, 2026, total unrecognized compensation expense related to unvested PSU awards was $2.8 million, which is expected to be recognized over a weighted-average remaining service period of approximately 2.4 years using the straight-line method.

The following table summarizes the Company's Phantom Unit activity for the nine months ended September 30, 2026:

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

Note 10. Stockholders' Equity

On January 8, 2026, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a wholly-owned indirect subsidiary of The Walt Disney Company (“Disney”). Pursuant to the Purchase Agreement, the Company issued and sold 2,666,757 shares of its common stock, par value $0.0001 per share (the “Shares”), to Disney for an aggregate purchase price of approximately $32.8 million. The Shares represented an approximate 2% equity interest in the Company at the time of issuance. The issuance and sale of the Shares were consummated as a private placement in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, as a transaction not involving a public offering.

The Company evaluated the transaction under ASC 480, Distinguishing Liabilities from Equity, ASC 815, Derivatives and Hedging, and SEC Regulation S-X Rule 5-02.27 and concluded that the Shares should be classified as permanent equity on the consolidated balance sheets because the Shares are not mandatorily redeemable, do not contain embedded derivative features requiring bifurcation, and are also not redeemable at the option of the holder or upon the occurrence of an event outside the Company’s control. In connection with the issuance of the Shares, the investor was granted customary pro rata tag-along rights in the event of certain common stock transfers by the Company’s major shareholders, as well as customary protective consent rights over certain fundamental corporate actions (such as voluntary bankruptcy proceedings or disproportionately adverse amendments to organizational documents). The Company determined these rights are strictly protective rather than substantive participating rights, do not obligate the Company to transfer assets or issue additional shares, and do not grant the investor significant influence or a controlling financial interest. The issued Shares are included in the Company's weighted-average shares outstanding and proportionately dilute basic and diluted earnings per share.

Note 11. Income Taxes

The Company’s income tax provision for the nine months ended September 30, 2026, is determined using an estimate of the Company’s annual effective tax rate, adjusted for any discrete items reflected in the relevant period. Income tax (benefit) expense was $9.1 million and $2.3 million, with effective tax rates of (41.7)% and (6.8)%, during the nine months ended September 30, 2026 and 2025, respectively. This includes a discrete tax benefit of $2.6 million and a discrete tax expense of $1.1 million for the nine months ended September 30, 2026 and 2025, respectively, due to the return-to-provision true-up adjustments in Korea and Japan tax return filings.

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 U.S. statutory federal tax rate of 21% primarily due to state income taxes, foreign income taxes, and the non-recognition of deferred tax assets due to a full valuation allowance against deferred tax assets in the U.S. and taxable loss generating subsidiaries in Korea, Canada, and Japan.

In evaluating the realizability of these deferred tax assets, we consider on a jurisdictional basis, the period of sustained taxable losses, the existence of taxable temporary differences, and available sources of future taxable income. As of September 30, 2026, we cannot objectively assert that these deferred tax assets are more likely than not to be realized and therefore we have maintained a valuation allowance. We intend to continue maintaining a valuation allowance on these deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances. It is reasonably possible that within the next 12 months, we may have enough positive evidence to release part or all of the remaining valuation allowance in Japan. This release would reduce our income tax expense for the period, significantly impacting our net earnings. The timing and amount of the release depend on the Company’s actual profitability.

Note 12. 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 $0.5 million for the three months ended September 30, 2026, and 2025, respectively, and $1.9 million and $1.5 million for the nine months ended September 30, 2026, and 2025, respectively.

Note 13. 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:

1 The measure of stock-based compensation excludes expenses related to Phantom Units.

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, 2026, and December 31, 2025, were located as follows:

1 Rest of the World includes long-lived tangible assets and operating lease right-of-use assets located in the United States of $13.4 million and $1.1 million as of September 30, 2026 and December 31, 2025, respectively.

Note 14. 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, 2026, and December 31, 2025. 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, 2026, and December 31, 2025. 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 debt securities relate to the Company's investments in privately held companies through the purchase of redeemable convertible preferred stock that meet the definition of a debt security.

The Level 3 equity securities 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. These equity securities include non-marketable equity investments without readily determinable fair values. The company has elected to account for these investments using the measurement alternative, under which the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. For the nine months ended September 30, 2026, there were no upward or downward adjustments resulting from observable price changes, and no impairment losses were identified or recognized for these investments.

The following table presents a summary of the changes in the carrying value of our equity securities measured using the measurement alternative for the nine months ended September 30, 2026:

For the nine months ended September 30, 2026, and 2025, the Company didnot recognize any realized gain or loss on its Level 3 equity or debt securities.

Note 15. 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, 2026, and 2025, the Company provided advertising services to NAVER group companies and LY giving rise to related party receivables as of September 30, 2026, and December 31, 2025. Additionally, during the three and nine months ended September 30, 2026, and 2025, 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, 2026, and December 31, 2025.

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 $1.4 million and $1.3 million during the three months ended September 30, 2026, and 2025, respectively, and $3.9 million and $2.9 million during the nine months ended September 30, 2026, and 2025, respectively, with related lease obligations of $7.3 million and $10.6 million as of September 30, 2026, and December 31, 2025, respectively (Refer to Note 7. 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, 2026, and 2025, respectively, and $0.2 million and $0.1 million for the nine months ended September 30, 2026, and 2025, 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, 2026, and December 31, 2025:

In July 2026, the Company entered into an Agreement of Limited Partnership with N Investment Co., Ltd. (“N Investment”), a wholly-owned subsidiary of NAVER Corporation, the Company’s majority stockholder, to co-invest in NW Webcomic Adaptation Fund, L.P. (the “Fund”). The Company has committed $40.0 million and N Investment has committed $60.0 million to the Fund. The Company accounts for its 40% limited partner interest as an equity method investment under ASC Topic 323. As of September 30, 2026, the Company has funded $10 million of its $40.0 million commitment. See Note 16. Equity Method Investments

Note 16. 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.

During the three months ended September 30, 2026, the Company recognized an impairment loss of $1.1 million on an equity method investment due to an other-than-temporary decline in fair value below carrying value. There wereno equity method disposals during the nine months ended September 30, 2026.

Investment in RI Games Holdings Inc.

On August 6, 2026, the Company entered into the RI Games Purchase Agreement with the Seller, and the RI Games Shareholders Agreement with the Seller, RI Games Holdings and Tail Han, providing for the acquisition, in two closings, of up to 9,000 shares, or approximately 60%, of the outstanding common stock of RI Games Holdings, a South Korea-based game developer focused on developing games based on web-comic intellectual property. On August 14, 2026, the Company completed the first closing and acquired 2,999 shares, representing 19.99% of the outstanding common stock of RI Games Holdings, for cash consideration of KRW 49,983 million ($35.3 million), based on the exchange rate on the payment date. See Note 8. Commitments and Contingencies for the commitments and contingent rights and obligations under the RI Games Holdings Agreements.

The Company holds 19.99% of the outstanding common stock of RI Games Holdings. Although this is less than 20%, the Company accounts for its interest under the equity method because it has the ability to exercise significant influence over RI Games Holdings’ operating and financial policies. Under the RI Games Shareholders Agreement, the Company has the right to attend regular meetings with development leadership, to be consulted on capital-raising matters of RI Games Holdings’ subsidiaries, and to receive business plan and budget information. The Company exercises these rights through a post-closing integration framework. The Company’s consent is also required for specified significant actions of RI Games Holdings.

The Company records its share of RI Games Holdings’ results on a three-month lag; accordingly, no equity in earnings or losses was recorded for the three and nine months ended September 30, 2026.

The cost of the investment exceeded the Company's proportionate share of RI Games Holdings’ underlying net assets. The Company accounts for this basis difference as if RI Games Holdings were a consolidated subsidiary. The allocation is preliminary and is expected to be completed in the fourth quarter of 2026.

Investment in NW Webcomic Adaptation Fund, L.P.

In July 2026, the Company entered into an Agreement of Limited Partnership of the NW Webcomic Adaptation Fund, L.P. (the “Agreement of Limited Partnership”) as a 40% limited partner in NW Webcomic Adaptation Fund, L.P. (the “Fund”), an investment fund formed to invest in live-action, animation, game and other intellectual property adaptation project. The Fund has total committed capital of $100.0 million, of which the Company has committed $40.0 million. N Investment Co., Ltd. (“N Investment”), a wholly-owned subsidiary of NAVER Corporation and a related party, has committed the remaining $60.0 million as the 60% limited partner.

NW Webcomic Adaptation Management, LLC, a wholly-owned subsidiary of the Company, serves as the general partner of the Fund. Under the Agreement of Limited Partnership, the limited partners hold substantive participating rights over the Fund’s investment decisions, including the right to approve or withhold approval of proposed Fund investments. Because these participating rights prevent the general partner from having a controlling financial interest, the Company does not consolidate the Fund. The Company accounts for its 40% limited partner interest as an equity method investment under ASC Topic 323. As of September 30, 2026, the Company has funded $10.0 million of its $40.0 million commitment (see Note 8).

Note 17. 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 18. Non-Controlling Interest in Subsidiaries

The Company has non-controlling interests in several of its subsidiaries. The balances of non-controlling interests as of September 30, 2026, and December 31, 2025, are as follows (in thousands of USD):

1. The Munpia non-controlling interest balance excludes redeemable non-controlling interest (See Note 17. 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.

Note 19. Subsequent Events

Merger of Tap Future Information Corporation.

On October 8, 2026, Tap Future Information Corporation (“Tap Future”), an equity investment of the Company, was merged with and into Drama Times Inc. (“DramaBox”). In connection with the merger, the Company exchanged its equity interest in Tap Future for Series A1 preferred shares of DramaBox and subscribed for additional Series A1 preferred shares. Prior to completing the merger, the Company received cash distributions of $5.8 million from Tap Future. The Company is evaluating the accounting for the transaction, and an estimate of its financial effect cannot be made at this time.