Filing Scope and Business Context
This Form 10-Q covers the quarter ended March 31, 2016, and was filed May 16, 2016. The provided filing is for GP Investments Acquisition Corp., a Cayman Islands blank-check company, not Rimini Street, Inc. The company had not commenced operating activities and was formed to pursue a business combination.
The filing states that the company was a shell company with 21,562,500 ordinary shares issued and outstanding as of May 16, 2016. The financial statements are unaudited and prepared under U.S. GAAP.
Financial Position and Results
| Metric | Three months ended March 31, 2016 | Three months ended March 31, 2015 |
|---|---|---|
| Operating revenue | $0 | $0 |
| Operating costs | $1.067 million | $9,351 |
| Interest income | $161,227 | $0 |
| Unrealized gain on Trust Account securities | $103,291 | $0 |
| Net loss | $802,394 | $9,351 |
| Basic and diluted loss per share | $0.15 | $0.00 |
| Net cash used in operating activities | $95,529 | $1,351 |
At March 31, 2016, cash outside the Trust Account was $871,920, while $172.843 million was held in the Trust Account, principally in U.S. Treasury bills. Total assets were $173.798 million. Accounts payable and accrued expenses were $1.067 million, deferred underwriting fees were $6.038 million, and shares subject to possible redemption were recorded as temporary equity at $161.694 million. Shareholders’ equity was $5.000 million.
The company had no long-term debt, capital leases, operating leases, or off-balance-sheet financing arrangements. It paid an affiliate of the Sponsor $10,000 per month for administrative services.
Material Changes and Liquidity
- Operating costs increased substantially from $9,351 to $1.067 million, primarily because of target identification and transaction-related expenses.
- Net loss increased to $802,394 from $9,351, partly offset by Trust Account interest and unrealized investment gains.
- Cash outside the Trust Account declined by $95,529 during the quarter, from $967,449 to $871,920.
- Accounts payable and accrued expenses increased from $19,968 at December 31, 2015 to $1.067 million at March 31, 2016.
- The Trust Account increased from $172.578 million to $172.843 million, reflecting investment earnings.
Management stated that available cash, together with approximately $239,000 of Trust Account interest that could be released for permitted purposes, was expected to fund operations through the earlier of a business combination or May 26, 2017, the liquidation trigger date if no business combination was completed.
Merger, Outlook, Risks, and Contingencies
On April 19, 2016, after the reporting date, the company entered into a merger agreement to acquire WKI Holding Company, Inc., parent of World Kitchen, LLC. The stated purchase price was $500 million, consisting of 75% cash and 25% newly issued common stock priced at $10 per share. The transaction was subject to shareholder, regulatory, financing, listing, and other customary conditions.
Proposed financing included a $100 million senior secured asset-based revolving facility, a $250 million senior secured first-lien term facility, and up to $58 million of Sponsor equity financing. These financing commitments were subject to definitive documentation and customary closing conditions.
Closing conditions included a limit on net share redemptions of 30% of outstanding common shares and a requirement that at least $122 million remain in the Trust Account after redemptions. The merger could be terminated if not completed by September 20, 2016, subject to a possible extension to November 19, 2016.
As of March 31, 2016, approximately $1.881 million of transaction fees were contingent on completion of a potential business combination, and approximately $16.894 million of additional merger-related fees had been committed but not incurred. Deferred underwriting fees of $6.038 million would become payable only upon completion of a business combination.
If no business combination was completed within 24 months of the initial public offering, the company was required to cease operations, redeem the public shares using the Trust Account, and liquidate. Public warrants could expire worthless in that circumstance. Management also identified risks relating to insufficient working capital, the ability to complete a business combination, redemption levels, financing availability, and potential claims that could reduce Trust Account funds.
Management reported that disclosure controls and procedures were effective as of March 31, 2016. No legal proceedings or material changes to previously disclosed risk factors were reported.
Investor Verification Items
- Verify the issuer identity: the supplied filing is for GP Investments Acquisition Corp., whereas the request identifies Rimini Street, Inc.
- Confirm the subsequent merger agreement, financing commitments, shareholder approvals, redemption activity, and whether the World Kitchen transaction ultimately closed.
- Review the Trust Account balance, deferred underwriting fees, redemption obligations, and the $122 million minimum cash condition.
- Assess the approximately $16.894 million of committed merger-related fees and $1.881 million of contingent transaction fees.
- Confirm the May 26, 2017 liquidation deadline and the rights of public shareholders and warrant holders if no business combination occurred.
- Review the filing’s incorporated risk factors and the definitive merger and financing documents for conditions not fully described in this summary.