Business Context and Reporting Period
GP Investments Acquisition Corp. filed this unaudited Form 10-Q for the quarter ended June 30, 2017. Although the requested company is Rimini Street, Inc., the filing is by the blank-check company that had not yet completed its proposed acquisition of Rimini Street. The company had no operating business or revenue and was focused on identifying and completing a business combination.
On May 16, 2017, the company agreed to acquire Rimini Street for aggregate consideration of $775 million, subject to contractual adjustments. The transaction would involve a domestication, two-step merger, and renaming of the surviving entity as Rimini Street, Inc. The company filed a preliminary Form S-4 on June 30, 2017.
Financial Position and Performance
| Metric | Three months ended June 30, 2017 | Six months ended June 30, 2017 | Comparable 2016 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating costs | $304,223 | $483,609 | $821,564 and $1,888,476, respectively |
| Net loss | $25,143 | $29,414 | $747,743 and $1,550,137, respectively |
| Interest income | $251,336 | $451,511 | $177,112 and $338,339, respectively |
| Net loss per share | $0.00 | $0.01 | $0.14 and $0.29, respectively |
At June 30, 2017, total assets were $158.1 million, including $157.9 million of cash and marketable securities in the restricted Trust Account and $1,551 of unrestricted cash. Total liabilities were $9.1 million, including $6.0 million of deferred underwriting fees and $3.0 million of related-party promissory notes. Shareholders’ equity was $5.0 million. The filing does not report conventional operating margins because the company had no revenue or operating business.
For the six months ended June 30, 2017, operating activities used $444,950 of cash. Trust Account withdrawals and corresponding redemptions each totaled $15.6 million. The company reported no long-term debt or capital lease obligations, but had $2.98 million outstanding under non-interest-bearing, unsecured sponsor loans and contingent transaction fees of approximately $3.99 million payable only if a business combination occurs.
Material Changes Versus the Prior Comparable Period
- Six-month operating costs decreased to $483,609 from $1.89 million, and the six-month net loss decreased to $29,414 from $1.55 million, primarily because the prior-year period included costs associated with the terminated WKI transaction.
- Interest income increased to $451,511 from $338,339 as Trust Account investments generated additional earnings.
- The company redeemed 1,552,724 public shares in connection with an extension vote, distributing $15.6 million, or approximately $10.05 per share.
- The Trust Account declined from $173.1 million at December 31, 2016 to $157.9 million at June 30, 2017, primarily because of the redemptions.
- The deadline to complete a business combination was extended from May 26, 2017 to November 27, 2017.
- The prior proposed WKI acquisition had been terminated in November 2016; the Rimini Street transaction became the current proposed business combination.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Closing the Rimini Street transaction required at least $50 million of available cash after shareholder redemptions. Funding was expected from the Trust Account, sponsor backstop equity of up to $35 million, and potential third-party equity financing.
- Available cash was intended to fund transaction expenses, repay certain Rimini Street indebtedness, and provide cash to the combined company.
- If a business combination was not completed by November 27, 2017, the company would cease operations, redeem public shares from the Trust Account, and liquidate. Public warrants would expire worthless.
- Management stated that existing unrestricted cash, Trust Account interest available for taxes, and sponsor loan commitments were expected to fund operations through the earlier of closing or the end of the combination period, but acknowledged that additional financing might be required.
- The proposed merger consideration was subject to adjustments for Rimini Street debt, cash, unpaid transaction expenses, and a 5.5 million-share indemnification escrow.
- There were no reported legal proceedings, defaults, or material changes to previously disclosed risk factors. The company identified no off-balance-sheet financing arrangements.
- Management concluded that disclosure controls and procedures were effective as of June 30, 2017, with no material changes to internal control over financial reporting.
Important Facts for Investors to Verify
- Verify whether the proposed Rimini Street business combination closed, was amended, or was terminated after June 30, 2017.
- Verify the final merger consideration, closing-date debt and cash adjustments, share issuance, dilution, and treatment of the 5.5 million escrow shares.
- Verify the amount of shareholder redemptions and any sponsor or third-party financing used to satisfy the $50 million minimum cash condition.
- Assess the restricted nature of the $157.9 million Trust Account and the consequences if the transaction deadline was missed.
- Review the approximately $3.99 million of contingent transaction fees, $6.04 million deferred underwriting fees, and $2.98 million of sponsor loans.
- Do not treat this filing’s results as Rimini Street operating results; it reports a pre-merger shell company with no revenue or operating operations.