Dispositions (Notes)

3 Months Ended

Sep. 30, 2021

Disposal Groups, Including Discontinued Operations, Disclosure


Note 5.			Dispositions

RealNetworks, Inc. entered into a Support Agreement dated August 25, 2020 by and among its 84%-owned subsidiary, Rhapsody International, Inc. (doing business as Napster), and MelodyVR Group PLC, an English public limited company. The Support Agreement was executed in connection with an Agreement and Plan of Merger by and among Napster, MelodyVR, and a wholly owned subsidiary of MelodyVR. The transaction was completed on December 30, 2020. Pursuant to the Merger Agreement, on the closing date, MelodyVR's subsidiary merged with and into Napster, with Napster surviving and becoming a wholly owned subsidiary of MelodyVR. Other than as Securityholder Representative, RealNetworks is not a party to the Merger Agreement.

MelodyVR paid consideration of approximately $26 million to certain holders of debt and equity of Napster, comprised of $12 million in cash, shares of MelodyVR, and a $3 million 18-month indemnity escrow. Of the cash consideration, approximately $5.3 million was used to fully repay the advance to Napster on the revolving line of credit, pay Napster's transaction expenses, and pay amounts to certain of Napster's common stockholders. Additionally, $2.5 million of the cash proceeds and 47.8 million MelodyVR shares were used by RealNetworks to settle a contingent consideration obligation associated with our January 2019 acquisition from a third party of both a 42% stake in Napster and a $5 million loan to Napster. Net of these items, RealNetworks retained approximately $4.2 million in cash and 173.3 million shares of MelodyVR, as well as the right to any funds released from the $3 million escrow account. The shares of MelodyVR that RealNetworks received may not be sold or transferred, except in limited circumstances, for a period of approximately one year from the close of the transaction.

In March 2021, MelodyVR changed its name to Napster Group PLC (the "Napster Group") and the stock symbol was changed from MVR to NAPS.

Effective on the execution of the Agreement and Plan of Merger on August 25, 2020, Napster was treated as discontinued operations and held-for-sale for accounting and disclosure purposes and subsequently sold in December 2020. As such, Napster’s operating results were recast to conform to this presentation.

The following table summarizes the loss from discontinued operations (in thousands):


	Quarter Ended September 30, 2020		Nine Months Ended September 30, 2020
Revenue	$	23,563	$	73,225
Cost of revenue	17,438		56,280
Gross profit	6,125		16,945
Operating expenses	5,828		19,013
Operating income (loss)	297		(2,068)
Other expense	(261)		(299)
Income (loss) from discontinued operations before income taxes	36		(2,367)
Income tax expense	37		99
Net loss from discontinued operations	(1)		(2,466)
Noncontrolling interests in net income (loss) from discontinued operations	6		(364)
Net loss from discontinued operations attributable to RealNetworks	$	(7)	$	(2,102)

The 18-month indemnity escrow, which is included in Other current assets on the condensed consolidated balance sheet, was $2.8 million at September 30, 2021. We are not aware of any additional claims against the escrow at September 30, 2021.