Subsequent Event

3 Months Ended

Mar. 31, 2020


Note 14			Subsequent Events

The Coronavirus Aid, Relief and Economic Security (CARES) Act, signed into law in March 2020, established the Paycheck Protection Program (PPP). Through the PPP, loan amounts are forgiven to the extent proceeds are used to cover documented payroll, rent, and utility costs over an 8-week measurement period following loan funding. In April 2020, RealNetworks issued a promissory note in the principal amount of $2.9 million and in May 2020, Napster issued a promissory note in the principal amount of $1.7 million, both pursuant to the PPP. The notes have a maturity of 2 years, an interest rate of 1.0%, no pre-payment penalty, a six-month deferment period, and are eligible for forgiveness pursuant to program guidelines. We cannot provide assurance, however, that all or any portion of the principal and interest on these loans will be forgiven.

On April 6, 2020, RealNetworks Asia Pacific Co., Ltd. received notice of a civil lawsuit filed by Korean Music Copyright Association (KOMCA) seeking damages of $2.6 million. Also named as a defendant in the lawsuit is Kakao M Corp (formerly known as LOEN Entertainment Corp.), one of the largest media publishing companies in Korea, which operates the Melon music platform. The claim is for a late payment penalty under a music licensing contract, pursuant to which, from 2004 to 2017, RealNetworks licensed music for its services to LOEN for its Melon platform. The current lawsuit relates solely to the late payment of music licensing fees under the contract; the underlying music licensing fees were paid by Kakao M to KOMCA in a separate settlement prior to KOMCA’s filing of this lawsuit. While we believe we have meritorious defenses to this lawsuit and intend to vigorously defend RealNetworks, litigation is inherently uncertain and we cannot predict the outcome of this matter. We have not recorded an accrual related to this settlement as of March 31, 2020 as it is early in the litigation and any potential liability cannot be reasonably estimated.

On April 23, 2020, the Company received a letter from the Listing Qualifications Department of the Nasdaq Global Market (Nasdaq) indicating that, based upon the closing bid price of RealNetworks’ common stock for the 30 consecutive business day period between March 11, 2020 through April 23, 2020, we did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq. In April 2020, in response to the unprecedented turmoil in U.S. and world financial markets, Nasdaq tolled the compliance periods for its bid price and market value of publicly held shares requirements through June 30, 2020. As a result of Nasdaq's general grant of this grace period, we have a compliance period of 180 calendar days starting July 1, 2020 and ending December 28, 2020 in which to regain compliance. In order to regain compliance with Nasdaq’s minimum bid price requirement, the Company’s common stock must maintain a minimum closing bid price of $1.00 for at least ten consecutive business days during the compliance period. In the event RealNetworks does not regain compliance by the end of the compliance period, we may be eligible for a second compliance period pursuant to Nasdaq's existing rules.

The letter has no immediate impact on the listing of the RealNetworks’ common stock, which will continue to be listed and traded on Nasdaq during the general grace period and the 180-day compliance period. RealNetworks’ Board will consider the implementation of various measures intended to support compliance, including a reverse split of our common stock in an effort to increase the trading price of the RealNetworks’ shares.