

Note 22.	Subsequent Event

On January 18, 2019, RealNetworks acquired an additional 42% interest in Napster from its former joint venture partner resulting in our now having a majority voting interest, owning 84% of Napster's outstanding equity. We also now have the right to nominate directors constituting a majority of the Napster board of directors. Napster will continue to operate as an independent business, however, with its own board of directors, strategy and leadership team. Although we have no legal obligation to fund Napster losses and it is our intention to have Napster continue to operate as an independent company, RealNetworks has a majority voting interest in Napster’s business and will consolidate Napster's financial results into our financial statements for fiscal periods following the closing of the acquisition.

The terms of the transaction include initial cash consideration of $1.0 million, $0.2 million of which was paid at closing and the remainder of which will be paid no later than April 25, 2019, which will be funded with our existing cash balances. During the five years following the acquisition, RealNetworks will pay the lesser of (a) an additional $14.0 million to seller, (paid ratably over such five-year period), or (b) if RealNetworks sells the interest to a third party for less than $15.0 million, the actual amount received by RealNetworks, minus the $1.0 million initial payment. Moreover, in the event that RealNetworks sells such equity interest for consideration in excess of $15.0 million, then RealNetworks will pay seller additional consideration, which shall in no event exceed an additional $25.0 million. In order for seller to receive the full $40.0 million, the proceeds from the sale of Napster received by RealNetworks for the 42% equity interest acquired would have to exceed $60.0 million. Due to the limited time since the closing of the transaction, the initial accounting for this acquisition is still in process. The remaining disclosures required under ASC 805 will be provided upon finalization of our preliminary purchase accounting in the first quarter of 2019.

We will fully consolidate Napster's financial results with ours from the date we obtained control and record and present the 16% of Napster that we do not own as a noncontrolling interest. We will record 100% of the fair value of the assets acquired and liabilities assumed as of January 18, 2019, and, as part of this consolidation, the carrying value of our existing 42% equity method investment will be stepped-up to fair value. The step-up to fair value of the existing historical 42% ownership interest is expected to result in our recording of a material gain in the first quarter of 2019. Our consolidated balance sheet will reflect Napster's working capital deficit, which we expect will result in a consolidated working capital deficit. RealNetworks does not have any contractual or implied obligation to provide funding or other financial support to Napster or to guarantee or provide other such support related to Napster's third party borrowing or Napster's other obligations, except as noted in Note 5. Napster Joint Venture.

Through the date of this filing, we have incurred approximately $0.7 million in acquisition-related costs, including regulatory, legal, and other advisory fees, which we have recorded within general and administrative expenses during the respective fiscal periods in which they were incurred.