Realnetworks (RNWK) 8-K/A Index to Unaudited Condensed Consolidated Financial Statements

EXHIBIT 99.3

REALNETWORKS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     The following unaudited pro forma condensed combined financial statements are based on the historical financial statements of RealNetworks, Inc. and Subsidiaries (RealNetworks) and WiderThan Co., Ltd. (WiderThan) after giving effect to our acquisition (Acquisition) of WiderThan and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. We acquired a majority ownership, 94.6% of WiderThan effective October 31, 2006, and owned 99.7% of WiderThan as of November 28, 2006.

     The unaudited pro forma condensed combined balance sheet of RealNetworks and WiderThan as of September 30, 2006 is presented as if the Acquisition had occurred on September 30, 2006. The unaudited pro forma condensed combined statement of operations of RealNetworks and WiderThan for the nine months ended September 30, 2006 is presented as if the Acquisition had taken place on January 1, 2005. The unaudited pro forma condensed combined statement of operations of RealNetworks and WiderThan for the year ended December 31, 2005 is presented as if the Acquisition had taken place on January 1, 2005.

     The unaudited pro forma condensed combined financial statements have been prepared as if we own 100% of WiderThan as of September 30, 2006 for the unaudited pro forma condensed combined balance sheet and as of January 1, 2005 for the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2006 and the year ended December 31, 2005, as the minority interest liability and expense became immaterial upon our acquisition of 99.7% of WiderThan effective November 28, 2006.

     The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial statements is based upon a preliminary valuation. The estimated fair values of certain assets and liabilities have been determined with the assistance of an independent third-party valuation firm and such firm’s preliminary work. Our estimates and assumptions are subject to change upon the finalization of the valuation. The primary areas of the purchase price allocation which are not yet finalized relate to the fair value of accounts receivable, deferred costs, equipment, software, and leasehold improvements, identifiable intangible assets, certain accrued expenses, deferred revenue, deferred tax assets and liabilities, and goodwill.

     The unaudited pro forma condensed combined financial statements are not intended to represent or be indicative of our consolidated results of operations or financial position that would have been reported had the Acquisition been completed as of the dates presented, and should not be taken as representative of our future consolidated results of operations or financial position. The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes of RealNetworks in our annual reports on Form 10-K and quarterly reports on Form 10-Q. The unaudited pro forma condensed combined financial statements should also be read in conjunction with the historical consolidated financial statements and accompanying notes of WiderThan in its annual report on Form 20-F for the year ended December 31, 2005.

1

REALNETWORKS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2006

(In thousands)

					Pro Forma
	Historical				Adjustments				Pro Forma
	RealNetworks		WiderThan		(Note 3)				Combined
ASSETS
Current assets:
Cash and cash equivalents	$	693,057	$	66,854	$	(336,887	)	A	$	423,024
Short-term investments		151,745		29,598		—				181,343
Trade accounts receivable, net		24,481		31,437		4,287		B		60,205
Deferred tax assets, current portion		7,046		709		(1,559	)	G		6,196
Deferred costs		—		4,798		(4,798	)	B		—
Prepaid expenses and other current assets		11,488		7,307		—				18,795
Total current assets		887,817		140,703		(338,957	)			689,563
Equipment, software, and leasehold improvements, net		34,455		11,864		313		C		46,632
Restricted cash equivalents		17,300		—		—				17,300
Equity investments		26,269		—		—				26,269
Other assets		4,177		9,946		(5,692	)	B		8,431
Deferred tax assets, non-current portion		15,967		—		549		G		16,5176
Other intangible assets, net		7,386		2,128		96,072		D		105,586
Goodwill		132,789		19,936		154,371		E		307,096
Total assets	$	1,126,160	$	184,577	$	(93,344	)		$	1,217,393
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,905	$	23,283	$	—			$	38,188
Accrued and other liabilities		72,105		16,109		22,634		F		110,848
Deferred revenue, current portion		25,469		3,011		(2,943	)	B		25,537
Deferred tax liabilities, current portion		—		—		4,784		G		4,784
Accrued loss on excess office facilities, current portion		4,053		—		—				4,053
Total current liabilities		116,532		42,403		24,475				183,410
Deferred revenue, non-current portion		340		1,962		(1,962	)	B		340
Accrued loss on excess office facilities, non-current portion		11,323		—		—				11,323
Deferred rent		4,472		—		—				4,472
Deferred tax liabilities, non-current portion		—		997		21,790		G		22,787
Convertible debt		100,000		—		—				100,000
Other long-term liabilities		1,679		1,568		—				3,247
Total liabilities		234,346		46,930		44,303				325,579
Shareholders’ equity:
Common stock		161		8,871		(8,871	)	H		161
Additional paid-in-capital		760,347		89,899		(89,899	)	H		760,347
Accumulated other comprehensive income		15,597		14,712		(14,712	)	H		15,597
Retained earnings		115,709		24,165		(24,165	)	H		115,709
Total shareholders’ equity		891,814		137,647		(137,647	)			891,814
Total liabilities and shareholders’ equity	$	1,126,160	$	184,577	$	(93,344	)		$	1,217,393

See notes to unaudited pro forma condensed combined financial statements.

2

REALNETWORKS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006

(In thousands, except per share data)

							Pro Forma
	Historical						Adjustments				Pro Forma
	RealNetworks			WiderThan			(Note 3)				Combined
Net revenue:
License fees	$	68,014		$	—		$	—			$	68,014
Service revenue		201,673			93,754			(2,298	)	B		293,129
Total net revenue		269,687			93,754			(2,298	)			361,143
Cost of revenue:
License fees		28,865			—			—				28,865
Service revenue		52,923			42,846			2,737		K		98,506
Total cost of revenue		81,788			42,846			2,737				127,371
Gross profit		187,899			50,908			(5,035	)			233,772
Operating expenses:
Research and development		55,127			11,926			1		K		67,054
Sales and marketing		111,604			9,711			7,889		K		129,204
General and administration		41,586			19,025			(5,202	)	K		55,409
Loss on excess office facilities		738			—			—				738
Subtotal operating expenses		209,055			40,662			2,688				252,405
Antitrust litigation benefit, net		(159,554	)		—			—				(159,554	)
Total operating expenses, net		49,501			40,662			2,688				92,851
Operating income		138,398			10,246			(7,723	)			140,921
Other income, net		30,696			2,852			(11,651	)	M		21,897
Income before income taxes		169,094			13,098			(19,374	)			162,818
Income tax provision		(63,180	)		(6,405	)		5,386		N		(64,199	)
Net income	$	105,914		$	6,693		$	(13,988	)		$	98,619
Basic net income per share	$	0.66		$	0.34						$	0.61
Diluted net income per share	$	0.59		$	0.33						$	0.55
Shares used to compute basic net income per share		160,466			19,807							160,466
Shares used to compute diluted net income per share		178,551			20,231							178,551

See notes to unaudited pro forma condensed combined financial statements.

3

REALNETWORKS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands, except per share data)

							Pro Forma
	Historical						Adjustments				Pro Forma
	RealNetworks			WiderThan			(Note 3)				Combined
Net revenue:
License fees	$	80,785		$	—		$	—			$	80,785
Service revenue		244,274			101,417			(3,064	)	B		342,627
Total net revenue		325,059			101,417			(3,064	)			423,412
Cost of revenue:
License fees		33,770			—			—				33,770
Service revenue		64,479			49,295			4,195		L		117,969
Total cost of revenue		98,249			49,295			4,195				151,739
Gross profit		226,810			52,122			(7,259	)			271,673
Operating expenses:
Research and development		70,731			13,721			153		L		84,605
Sales and marketing		130,515			11,173			10,621		L		152,309
General and administration		50,697			15,875			204		L		66,776
Subtotal operating expenses		251,943			40,769			10,978				303,690
Antitrust litigation benefit, net		(422,500	)		—			—				(422,500	)
Total operating expenses (benefit), net		(170,557	)		40,769			10,978				(118,810	)
Operating income		397,367			11,353			(18,237	)			390,483
Other income, net		32,176			1,015			(8,567	)	M		24,624
Income before income taxes		429,543			12,368			(26,804	)			415,107
Income tax provision		(117,198	)		(3,791	)		7,452		N		(113,537	)
Net income	$	312,345		$	8,577		$	(19,352	)		$	301,570
Accretion of preferred shares		—			(1,354	)		1,354		O		—
Amounts allocated to participating preferred shareholders		—			(1,807	)		1,807		O		—
Net income attributable to common shareholders	$	312,345		$	5,416		$	(16,191	)		$	301,570
Basic net income per share	$	1.84		$	0.49						$	1.77
Diluted net income per share	$	1.70		$	0.49						$	1.64
Shares used to compute basic net income per share		169,986			10,959							169,986
Shares used to compute diluted net income per share		184,161			11,081							184,161

See notes to unaudited pro forma condensed combined financial statements.

4

REALNETWORKS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1. Basis of Pro Forma Presentation

     The unaudited pro forma condensed combined balance sheet as of September 30, 2006 and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2006 and for the year ended December 31, 2005 are based on the historical financial statements of RealNetworks, Inc. and Subsidiaries (RealNetworks) and WiderThan Co., Ltd. (WiderThan) after giving effect to our acquisition (Acquisition) of WiderThan and the assumptions and adjustments described in the notes herein. Certain historical WiderThan balances have been reclassified to conform to RealNetworks’ balance sheet presentation. Additionally, certain cost and expenses of WiderThan for the nine months ended September 30, 2006 and the year ended December 31, 2005 have been reclassified to conform to RealNetworks’ classification and presentation of such costs and expenses with no impact on operating income or net income. There were no transactions between RealNetworks and WiderThan during the periods presented.

     The unaudited pro forma condensed combined balance sheet of RealNetworks and WiderThan as of September 30, 2006 is presented as if the Acquisition occurred on September 30, 2006 and combines the historical balance sheet for RealNetworks and WiderThan at September 30, 2006.

     The unaudited pro forma condensed combined statement of operations of RealNetworks and WiderThan for the nine months ended September 30, 2006 is presented as if the Acquisition had taken place on January 1, 2005 and combines the historical results of RealNetworks and WiderThan for the nine months ended September 30, 2006.

     The unaudited pro forma condensed combined statement of operations of RealNetworks and WiderThan for the year ended December 31, 2005 is presented as if the Acquisition had taken place on January 1, 2005 and combines the historical results of RealNetworks and WiderThan for the year ended December 31, 2005.

     The unaudited pro forma condensed combined financial statements have been prepared as if we own 100% of WiderThan as of September 30, 2006 for the unaudited pro forma condensed combined balance sheet and as of January 1, 2005 for the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2006 and the year ended December 31, 2005, as the minority interest liability and expense became immaterial upon our acquisition of 99.7% of WiderThan effective November 28, 2006.

     The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial statements is based upon a preliminary valuation. The estimated fair values of certain assets and liabilities have been determined with the assistance of an independent third-party valuation firm and such firm’s preliminary work. Our estimates and assumptions are subject to change upon the finalization of the valuation. The primary areas of the purchase price allocation which are not yet finalized relate to the fair value of accounts receivable, deferred costs, equipment, software, and leasehold improvements, identifiable intangible assets, certain accrued expenses, deferred revenue, deferred tax assets and liabilities, and goodwill.

     The unaudited pro forma condensed combined financial statements are not intended to represent or be indicative of our consolidated results of operations or financial position that would have been reported had the Acquisition been completed as of the dates presented, and should not be taken as representative of our future consolidated results of operations or financial position. The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes of RealNetworks in our annual reports on Form 10-K for the year ended December 31, 2005 and quarterly reports on Form 10-Q. The unaudited pro forma condensed combined financial statements should also be read in conjunction with the historical consolidated financial statements and accompanying notes of WiderThan in its annual report on Form 20-F for the year ended December 31, 2005.

Note 2. WiderThan Co., Ltd. Acquisition

     Pursuant to our Combination Agreement with WiderThan Co., Ltd. a company with limited liability organized under the laws of the Republic of Korea, dated September 12, 2006, we acquired approximately 94.6% and 99.7% of the outstanding common shares and American Depository Shares (ADSs) of WiderThan for $17.05 per common share and per ADSs in cash effective October 31, 2006 and November 28, 2006, respectively. We will include 100% of the financial results of WiderThan in our consolidated financial statements beginning October 31, 2006 and account for the minority interest as a reduction of our income which is expected to be immaterial.

5

REALNETWORKS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)

     Our acquisition of WiderThan has been accounted for as a business combination. Assets acquired and liabilities assumed will be recorded at their fair values as of October 31, 2006. The total preliminary purchase price of $342.7 million, including direct acquisition costs, is comprised of the following (in thousands):

Acquisition of the outstanding common shares of WiderThan (19.7 million shares at $17.05 per share)	$	336,652
Preliminary direct acquisition costs		6,036
Total preliminary purchase price	$	342,688

     Preliminary direct acquisition costs include legal and accounting fees and other costs directly related to the Acquisition.

     The total preliminary purchase price has been allocated to WiderThan’s net tangible and identifiable intangible assets based on their estimated fair values as of September 30, 2006. The excess of the purchase price over the net tangible and identifiable intangible assets has been recorded as goodwill. Based on the preliminary valuation, the total preliminary purchase price was allocated as follows (in thousands):

Goodwill	$	174,307
Identifiable intangible assets		98,200
Net assets acquired		97,765
Net deferred tax liabilities		(27,584	)
Total preliminary purchase price	$	342,688

     The preliminary allocation of the purchase price was based upon a preliminary valuation by a third-party, as described below. Our estimates and assumptions are subject to change upon the finalization of the valuation.

     Net tangible assets were valued at their respective carrying amounts, except accounts receivable, deferred costs, equipment, software, and leasehold improvements, deferred revenue, and deferred tax assets and liabilities, as we believe that these amounts approximate their current fair values.

     The preliminary fair value of accounts receivable was determined to be higher than WiderThan’s carrying value as WiderThan has receivables from certain customers where the services have already been delivered and no receivable had been recorded due to extended payment terms or application of revenue recognition criteria. The decrease in revenue, due to increase in fair value, is reflected in the unaudited pro forma condensed combined statements of operations.

     Deferred costs were written off as the preliminary fair value of these costs was determined to be zero due to the lack, on the part of RealNetworks, of any remaining obligation to earn associated revenues. The expensing of the deferred costs, due to the write-down, is reflected in the unaudited pro forma condensed combined statements of operations.

     Equipment, software, and leasehold improvements were recorded at current estimated fair values based on a third-party valuation. The increase in depreciation related to the increase in fair value is reflected in the unaudited pro forma condensed combined statements of operations.

     Identifiable intangible assets acquired consist of: customer contracts and related relationships; developed technology; trademarks and tradenames. The increase in amortization expense related to the acquired identifiable intangible assets is reflected in the unaudited pro forma condensed combined statements of operations.

     Developed technology is comprised of products that have reached technological feasibility and includes products in most of WiderThan’s service offerings. Customer contracts and related relationships represent the underlying relationships and agreements with customers of WiderThan.

     Goodwill represents the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired.

     Deferred revenue was reduced in the pro forma condensed combined balance sheet to adjust deferred revenue to an amount equivalent to the estimated cost to complete plus an appropriate profit margin to perform the services related to WiderThan’s service contracts. The decrease in revenue, due to decrease in fair value, is reflected in the unaudited pro forma condensed combined statements of operations.

     Net deferred tax liabilities include tax effects of fair value adjustments related to accounts receivable, equipment, software, and leasehold improvements, identifiable intangible assets, accrued expenses, difference in tax basis of a subsidiary of WiderThan, and reversal of valuation allowance on tax assets. Currently, we are in the process of determining the final structure of WiderThan Americas as a direct subsidiary of WiderThan Co., Ltd. or a direct subsidiary of RealNetworks, Inc.

6

REALNETWORKS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)

We are also evaluating a formal policy to permanently reinvest with regards to WiderThan and its subsidiaries. A change in the structure and intent can affect net deferred tax liabilities and goodwill.

     We expect to convert WiderThan’s unvested stock options into cash rights that will have a value equal to the difference between the WiderThan option exercise price and $17.05. The cash rights relating to the unvested stock options will be earned by employees over the remaining vesting period of the original option term. As a result, we expect to record compensation expense of $3.2 million during the period November 2006 to March 2010. Expected expense related to cash rights during the nine months ended September 30, 2006 and year ended December 31, 2005 is reflected in the unaudited pro forma condensed combined statements of operations.

Note 3. Pro Forma Adjustments

     The following pro forma adjustments are included in the unaudited pro forma condensed combined balance sheet as of September 30, 2006 and statements of operations for the nine months ended September 30, 2006 and year ended December 31, 2005:

A. To record the following adjustments to cash and cash equivalents (in thousands):

To record cash paid for WiderThan common stock	$	336,652
Direct acquisition costs paid as of September 30, 2006		235
Total adjustment to cash and cash equivalents	$	336.887

B. To record the difference between the preliminary fair value and the historical amount of WiderThan’s accounts receivable, deferred revenue, deferred costs, and the resulting decrease in revenue and cost of revenue, based on the estimated average contractual life of the underlying contracts (in thousands):

								Decrease in Revenue			Decrease in
	Historical							for the Nine Months			Revenue for the
	Amount,		Preliminary		Increase			Ended			Year Ended
	Net		Fair Value		(Decrease)			September 30, 2006			December 31, 2005
Accounts receivable	$	31,347	$	35,634	$	4,287		$	(1,072	)	$	(1,429	)
Deferred revenue	$	4,973	$	68	$	(4,905	)		(1,226	)		(1,635	)
Total decrease in revenue								$	(2,298	)	$	(3,064	)

									Decrease in Cost of
									Service Revenue for			Decrease in Cost of
	Historical				��				the Nine Months			Service Revenue
	Amount,		Preliminary						Ended			for the Year Ended
	Net		Fair Value			Decrease			September 30, 2006			December 31, 2005
Deferred costs, short-term	$	4,798	$	—		$	(4,798	)
Deferred costs, long-term(1)		5,692		—			(5,692	)
Total deferred costs	$	10,490	$	—		$	(10,490	)	$	(2,623	)	$	(3,497	)

⁽¹⁾ Deferred costs, long-term are included in other assets in the unaudited pro forma condensed combined balance sheet.

7

REALNETWORKS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)

C. To record the difference between the preliminary fair value and the historical amount of WiderThan’s equipment, software, and leasehold improvements and the difference in depreciation of the preliminary fair value and the historical amount (dollars in thousands):

											Remaining
	Historical										Estimated
	Amount,		Preliminary				Nine Month		Annual		Average
	Net		Fair Value		Increase		Depreciation		Depreciation		Useful Life
Equipment and software	$	11,587	$	11,726	$	139	$	3,681	$	3,738	26 months
Leasehold improvements		277		451		174		221		280	26 months
Total equipment, software, and leasehold improvements	$	11,864	$	12,177	$	313		3,902		4,018
WiderThan’s historical depreciation								3,794		3,874
Increase in depreciation							$	108	$	144

D. To record the difference between the preliminary fair value and the historical amount of identifiable intangible assets and the difference in amortization of the preliminary fair value and the historical amount (dollars in thousands):

	Historical										Estimated
	Amount,		Preliminary				Nine Month		Annual		Useful
	Net		Fair Value		Increase		Amortization		Amortization		Life
Customer relationships	$	1,896	$	67,000	$	65,104	$	7,178	$	9,572	7 years
Developed technology		199		24,000		23,801		4,500		6,000	4 years
Trademarks and tradenames		33		3,800		3,767		950		1,267	3 years
Service contracts		—		3,400		3,400		850		1,133	3 years
Total identifiable intangible assets	$	2,128	$	98,200	$	96,072		13,478		17,972
WiderThan’s historical amortization								288		404
Increase in amortization							$	13,190	$	17,568

E. To eliminate WiderThan’s historical goodwill and to record the preliminary fair value of goodwill (in thousands):

	Historical		Preliminary
	Amount, Net		Fair Value		Increase
Goodwill	$	19,936	$	174,307	$	154,371

F. To record the following liabilities (in thousands):

Accrue WiderThan’s transaction related costs	$	16,165
RealNetworks’ unpaid direct acquisition costs		5,801
Cash payable for vested unexercised WiderThan options and other expenses		668
Total adjustment to accrued and other liabilities	$	22,634

8

REALNETWORKS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)

G. To record preliminary adjustments to deferred tax assets and deferred tax liabilities, based on our statutory tax rate, related to identifiable intangible assets, difference in tax basis of a subsidiary of WiderThan, accounts receivable, equipment, software, and leasehold improvements, reversal of valuation allowance, and accrued expenses (dollars in thousands).

	Preliminary					Deferred Tax
	Fair Value		Statutory			Assets
	Adjustment		Tax Rate			(Liabilities)
Increase in identifiable intangible assets	$	96,072		27.8	%	$	(26,707	)
Difference in tax basis of a subsidiary of WiderThan		6,354		27.8	%		(1,766	)
Increase in accounts receivable		4,287		27.8	%		(1,192	)
Increase in equipment, software, and leasehold improvements		313		27.8	%		(87	)
Total deferred tax liabilities							(29,752	)
Reversal of valuation allowance		7,128		27.8	%		1,982
Increase in accrued expenses		668		27.8	%		186
Total deferred tax assets							2,168
Net deferred tax liabilities						$	(27,584	)

     Currently, we are in the process of determining the final structure of WiderThan Americas as a direct subsidiary of WiderThan Co., Ltd. or a direct subsidiary of RealNetworks, Inc. We are also evaluating a formal policy to permanently reinvest with regards to WiderThan and its subsidiaries. A change in the structure and intent can affect deferred tax liabilities and goodwill.

H. To record the following adjustments to stockholders’ equity (in thousands):

To eliminate WiderThan’s historical common stock	$	8,871
To eliminate WiderThan’s historical additional paid-in-capital		89,899
To eliminate WiderThan’s historical accumulated other comprehensive income		14,712
To eliminate WiderThan’s historical retained earnings		24,165
Total adjustment to stockholders’ equity	$	137,647

I. Subsequent to the acquisition of WiderThan, we granted stock options to the employees of WiderThan. The pro forma statements of operations for the nine months ended September 30, 2006 and the year ended December 31, 2005 have been prepared as if these stock options had been granted on January 1, 2005. The following summarizes the impact on the unaudited condensed combined statement of operations for the nine months ended September 30, 2006 and the year ended December 31, 2005 (in thousands):

	Nine Months Ended		Year Ended
	September 30, 2006		December 31, 2005
Cost of revenue	$	1,098	$	1,622
Research and development		305		451
Sales and marketing		249		368
General and administrative		356		524
Total stock-based compensation expense	$	2,008	$	2,965

9

REALNETWORKS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)

J. We expect to convert WiderThan’s unvested stock options into cash rights that will have a value equal to the difference between the WiderThan option exercise price and $17.05. The cash rights relating to the unvested stock options will be earned by employees over the remaining vesting period of the original option term. The pro forma statements of operations for the nine months ended September 30, 2006 and the year ended December 31, 2005 have been prepared as if these cash rights had been converted on January 1, 2005. The following summarizes the impact on the unaudited condensed combined statement of operations for the nine months ended September 30, 2006 and the year ended December 31, 2005 (in thousands):

	Nine Months Ended		Year Ended
	September 30, 2006		December 31, 2005
Cost of revenue	$	80	$	742
Research and development		22		206
Sales and marketing		18		168
General and administrative		27		240
Total stock-based compensation expense	$	147	$	1,356

K. The following summarizes the impact of the balance sheet preliminary purchase price adjustments on the unaudited condensed combined statement of operations for the nine months ended September 30, 2006 (in thousands):

					Cost of
					Service			Research and			Sales And			General and
	Note	Total			Revenue			Development			Marketing			Administrative
Decrease in fair value of deferred costs	B	$	(2,623	)	$	(2,623	)	$	—		$	—		$	—
Increase in fair value of equipment, software, and leasehold improvements	C		108			74			5			2			27
Increase in fair value of identifiable intangible assets	D		13,190			5,300			—			7,890			—
Reduction of WiderThan’s acquisition related costs(1)			(5,226	)		—			—			—			(5,226	)
Decrease in stock-based compensation for WiderThan stock options(2)			(2,179	)		(1,192	)		(331	)		(270	)		(386	)
Increase in stock-based compensation for new stock option grants	I		2,008			1,098			305			249			356
Conversion of unvested WiderThan stock options to cash rights	J		147			80			22			18			27
Net increase (decrease) in expenses		$	5,425		$	2,737		$	1		$	7,889		$	(5,202	)

(1)	To reduce WiderThan’s general and administrative expenses by direct acquisition costs that were expensed during the nine months ended September 30, 2006.
(2)	Represents amount of stock-based compensation expense recorded by WiderThan during the nine months ended September 30, 2006, as such expense would not have been incurred had the acquisition occurred on January 1, 2005.

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REALNETWORKS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)

L. The following summarizes the impact of the balance sheet preliminary purchase price adjustments on the unaudited condensed combined statement of operations for the year ended December 31, 2005 (in thousands):

					Cost of
					Service			Research and			Sales And			General and
	Note	Total			Revenue			Development			Marketing			Administrative
Decrease in fair value of deferred costs	B	$	(3,497	)	$	(3,497	)	$	—		$	—		$	—
Increase in fair value of equipment, software, and leasehold improvements	C		144			100			7			2			35
Increase in fair value of identifiable intangible assets	D		17,568			7,068			—			10,500			—
Decrease in stock-based compensation for WiderThan stock options(1)			(3,363	)		(1,840	)		(511	)		(417	)		(595	)
Increase in stock-based compensation for new stock option grants	I		2,965			1,622			451			368			524
Conversion of unvested WiderThan stock options to cash rights	J		1,356			742			206			168			240
Net increase (decrease) in expenses		$	15,173		$	4,195		$	153		$	10,621		$	204

⁽¹⁾ Represents amount of stock-based compensation expense recorded by WiderThan during the year ended December 31, 2005, as such expense would not have been incurred had the acquisition occurred on January 1, 2005.

M.	To record reduction of interest income due to reduction in cash and cash equivalents for payment of purchase price, based on our average actual yield earned during the respective periods.
N.	To record income tax impact on pro forma adjustments at our statutory tax rate of 27.8%. The pro forma combined provision for income taxes does not reflect the amounts that would have resulted had RealNetworks and WiderThan filed consolidated income tax returns during the periods presented (dollars in thousands).

	Nine Months Ended			Year Ended
	September 30, 2006			December 31, 2005
Pro forma adjustments before income taxes	$	(19,374	)	$	(26,804	)
Statutory tax rate		27.8	%		27.8	%
Pro forma income tax adjustment	$	5,386		$	7,452

O. To reverse accretion of preferred shares and amounts allocated to participating preferred shareholders as all preferred shares are assumed to be liquidated and converted to common stock prior to the acquisition.

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