Item 1.01. Entry into a Material Definitive Agreement.
On April 24, 2020, RealNetworks, Inc. (the "Company") executed a promissory note
confirming a term loan from Bank of America, NA ("Lender") in the principal
amount of $2,870,568 (the "PPP Loan") pursuant to the Paycheck Protection
Program established by the recently enacted Coronavirus Aid, Relief, and
Economic Security Act of 2020 (the "CARES Act"). The PPP Loan has an interest
rate of 1.00% per annum, a two-year maturity, no pre-payment penalty, and a
deferment period of six months.
The Paycheck Protection Program authorized up to $349 billion in forgivable
loans to small businesses to pay their employees during the COVID-19 crisis.
Accordingly, principal and interest accrued under the PPP Loan is eligible for
forgiveness so long as the Company uses all proceeds of the PPP Loan to cover
payroll costs, and rent and utilities, and otherwise complies with the
requirements of the program. Any amounts not forgiven will be payable by the
Company to Lender in monthly installments following the six-month deferment
period. The Company intends to use the proceeds of the PPP Loan for eligible
purposes and to pursue forgiveness, although the Company could take action that
might cause some or all of the PPP Loan to become ineligible for forgiveness.
The PPP Loan contains customary events of default relating to, among other
things, payment defaults and breaches of representations, warranties or
covenants. The occurrence of an event of default may result in the immediate
repayment of all amounts outstanding, collection of all amounts owing from the
Company, or filing suit and obtaining judgment against the Company.
The foregoing description of the PPP Loan does not purport to be complete and is
qualified in its entirety by reference to the full text of the PPP Loan filed as
Exhibit 10.1 and incorporated herein by reference.
Item 2.02. Results of Operations and Financial Condition.
On April 29, 2020, RealNetworks issued a press release that, among other
announcements, reported that the Company reaffirms that its financial results
for the first quarter of 2020 met or exceeded the guidance the Company provided
on February 5, 2020. The Company's press release dated April 29, 2020 is
included as Exhibit 99.1 to this report.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information contained in Item 1.01 is hereby incorporated by reference into
this Item 2.03.
Item 3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or
Standard; Transfer of Listing.
On April 23, 2020, RealNetworks, Inc. received a letter from the Listing
Qualifications Staff of The Nasdaq Stock Market LLC indicating that, based upon
the closing bid price of the Company's common stock for the last 30 consecutive
business days, the Company no longer meets Nasdaq Listing Rule 5550(a)(2), which
requires listed companies to maintain a minimum bid price of at least $1 per
share.
In response to the unprecedented turmoil in U.S. and world financial markets in
recent weeks, on April 16, 2020 Nasdaq filed an immediately effective rule
change with the U.S. Securities and Exchange Commission that tolled the
compliance periods for the bid price and market value of publicly held shares
requirements (the "Price-Based Requirements") through June 30, 2020 (the
"Tolling Period"). In its public statement, Nasdaq stated its belief that this
relief was appropriate as it saw an increase in the number of companies whose
securities were becoming non-compliant with the Price-Based Requirements amidst
the market uncertainty. Nasdaq further stated its belief that this temporary
tolling of the compliance periods for the Price-Based Requirements would permit
companies to focus on running their businesses and the immediate health crisis
caused by the COVID-19 pandemic, including its impact on employees, customers,
and communities.
Nasdaq Listing Rule 5810(c)(3)(A) provides a compliance period of 180 calendar
days in which to regain compliance with the minimum bid price requirement.
Applying the Tolling Period, the Company's 180-day compliance period will run
from July 1, 2020 to December 28, 2020. If the Company evidences a closing bid
price of at least $1 per share for a minimum of 10 consecutive business days
during the Tolling Period or 180-day compliance period, the Company will
automatically regain compliance. In the event the Company does not regain
compliance with the $1 bid price requirement by December 28, 2020, the Company
may be eligible for consideration of a second 180-day compliance period.
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The Company is diligently working to evidence compliance with the minimum bid
price requirement for continued listing on Nasdaq. There can be no assurance,
however, that the Company will be able to regain compliance or that Nasdaq will
grant the Company a further extension of time to regain compliance, if
necessary. If the Company fails to regain compliance with the Nasdaq continued
listing standards, its common stock would be subject to delisting from Nasdaq.
Item 7.01. Regulation FD.
The Company's press release dated April 29, 2020 is included as Exhibit 99.1 to
this report.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
10.1 Promissory note dated April 24, 2020
99.1 Press release dated April 29, 2020
This Current Report on Form 8-K contains "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements related to the Company's
first quarter 2020 financial results, use of proceeds from and potential
forgiveness of the PPP Loan, and its ability to regain compliance with Nasdaq's
continued listing standards and eligibility for an additional compliance period
beyond December 28, 2020, as well as statements relating to the current
pandemic, product innovations and markets. While the Company believes its plans,
intentions and expectations reflected in any forward-looking statements are
reasonable, these plans, intentions or expectations may not be achieved. The
Company's actual results, performance or achievements could differ materially
from those contemplated, expressed or implied by the forward-looking statements.
For information about the factors that could cause such differences, please
refer to the Company's Annual Report on Form 10-K for the year ended December
31, 2019, including the information discussed under the captions "Item 1
Business," "Item 1A. Risk Factors" and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations," as well as the
Company's various other filings with the SEC. Given these uncertainties, you
should not place undue reliance on these forward-looking statements. The Company
assumes no obligation to update any forward-looking statement.
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