RNWK Price Correlated With Financials For RealNetworks

Note 1. Description of Business and Summary of Significant Accounting Policies

Description of Business. RealNetworks provides digital media software and services to consumers, mobile carriers, device manufacturers, system integrators, and other businesses. Consumers use our digital media products and services to store, organize, play, manage and enjoy their digital media content, either directly from us or through our distribution partners. We have recently developed a new generation of artificial intelligence (AI)-based products and solutions. The main two products and key investment initiatives in our AI portfolio are SAFR, our AI-based computer vision platform, and KONTXT, our natural language processing-based message classification and analysis platform.

Rhapsody International, Inc. (doing business as Napster) offers a comprehensive set of digital music products and services designed to provide consumers with broad access to digital music. Napster was held-for-sale and treated as discontinued operations for accounting and disclosure purposes as of the third quarter of 2020. The sale of Napster was completed during the fourth quarter of 2020. The results of operations and cash flows for these discontinued operations were segregated from the results of continuing operations and segment results, and Napster’s operating results and financial condition were recast to conform to this presentation. The notes to the consolidated financial statements, unless otherwise indicated, are on a continuing operations basis. See Note 4. Dispositions for additional details regarding the sale of Napster.

Inherent in our business are various risks and uncertainties, including a limited history of certain of our product and service offerings. RealNetworks' success will depend on the acceptance of our technology, products and services and the ability to generate related revenue and cash flow.

In this Annual Report on Form 10-K for the year ended December 31, 2021 (10-K), RealNetworks, Inc. and subsidiaries is referred to as “RealNetworks”, the “Company”, “we”, “us”, or “our”.

Basis of Presentation. The consolidated financial statements include the accounts of the Company and its subsidiaries in which it has a more than 50% voting interest. Noncontrolling interests primarily represent third-party ownership in the equity of Scener Inc. ("Scener"), which was deconsolidated on June 30, 2021, and are reflected separately in the Company's financial statements. See Note 19. Related Party Transactions for additional details. Intercompany balances and transactions have been eliminated in consolidation.

Liquidity and Capital Resources. The Company continues to incur operating losses from continuing operations, including net operating losses of $20.9 million, and $5.0 million for the years ended December 31, 2021 and 2020, respectively. The Company had an accumulated deficit of $570.8 million and $548.9 million as of December 31, 2021 and 2020, respectively. The Company believes that its cash and cash equivalents of $27.1 million as of December 31, 2021 is adequate to fund the Company's operations for at least one year from the date these financial statements were issued.

Risks and Uncertainties. In March 2020, the World Health Organization declared the outbreak of the coronavirus that causes COVID-19 to be a global pandemic. As the virus spread throughout the U.S. and the world, authorities implemented numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, business limitations, and shutdowns. In addition to the pandemic's widespread impact on public health and global society, reactions to the pandemic as well as measures taken to contain the virus have caused significant turmoil to the global economy and financial markets. Moreover, similar to other companies, we have taken steps to support the health and well-being of our employees, customers, partners and communities, which include w