Business Context and Reporting Period
Rimini Street, Inc. filed this Form 10-Q for the quarter and nine months ended September 30, 2017. At the reporting date, the registrant was GP Investments Acquisition Corp. (“GPIA”), a Cayman Islands blank-check company seeking a business combination; it had not yet consolidated Rimini Street’s operating results. The October 10, 2017 merger with Rimini Street, domestication as a Delaware corporation, and name change occurred after the reporting period. Rimini Street’s financial statements for the periods presented were to be filed separately as an amendment to the related Form 8-K.
Key Financial Metrics
| Metric | Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | Comparable 2016 Period |
|---|---|---|---|
| Operating revenue | $0 | $0 | $0 |
| Operating costs | $348,224 | $831,833 | $402,948 and $2,291,424, respectively |
| Net loss | $37,618 | $67,032 | $347,057 and $1,897,194, respectively |
| Basic and diluted loss per share | $0.01 | $0.01 | $0.06 and $0.35, respectively |
| Cash flow from operating activities | Not separately provided | $(502,090) | $(2,157,615) |
- Interest income was $313,290 in the quarter and $764,801 for the nine months, compared with $55,234 and $393,573 in the comparable 2016 periods.
- Cash and marketable securities in the restricted Trust Account were $158.2 million at September 30, 2017, compared with $173.1 million at December 31, 2016.
- Cash outside the Trust Account was only $1,551. Total liabilities were $9.3 million, including a $2.98 million related-party promissory note and $6.04 million of deferred underwriting fees.
- Shares subject to possible redemption were recorded as temporary equity at $144.0 million, representing 14,283,525 shares.
- The filing does not provide operating margins for Rimini Street because no Rimini Street operating revenue or expense information is included in these financial statements.
Material Changes Versus the Prior Comparable Period
- Nine-month net loss declined to $67,032 from $1.90 million, primarily because operating and transaction costs declined to $831,833 from $2.29 million and interest income increased.
- Quarterly net loss declined to $37,618 from $347,057.
- Operating cash use improved to $502,090 from $2.16 million.
- In May 2017, shareholders approved an extension of the business-combination deadline to November 27, 2017. The company redeemed 1,552,724 shares for $15.6 million during the nine months.
- After quarter-end, 14,286,064 additional shares were redeemed for approximately $143.9 million, and the Sponsor purchased 3.6 million shares for $36.0 million to support closing liquidity requirements.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management provided no operating or financial guidance for the post-merger Rimini Street business in this filing.
- Following the October 10 merger, the transaction is expected to be accounted for as a reverse recapitalization, with Rimini Street treated as the accounting acquirer and predecessor. Future filings are therefore expected to reflect Rimini Street’s historical results.
- The merger consideration included 48,868,647 newly issued Company shares, approximately 13.26 million converted options, and 3,440,424 converted warrants. Former Rimini Street stockholders owned approximately 84% of the Company’s shares immediately after closing, excluding options and warrants.
- The $6.04 million deferred underwriting fee was settled after closing with $4.43 million in cash and the balance in newly issued shares.
- Approximately $3.1 million of Sponsor transaction costs became obligations of the Company and were paid at closing. Conversely, approximately $3.99 million of contingent fees related to the terminated WKI transaction were forgiven.
- The Sponsor-related loan of $2.98 million was replaced after quarter-end with a non-interest-bearing loan due when outstanding Rimini Credit Facility term loans are reduced to $95 million or less.
- Management reported no legal proceedings, no material changes to previously disclosed risk factors, no off-balance-sheet arrangements, and effective disclosure controls as of September 30, 2017.
- Principal risks include execution and integration of the merger, substantial share redemptions, liquidity and debt obligations, dilution from options and warrants, and the forward-looking risks incorporated from the company’s September 8, 2017 prospectus and October 4, 2017 supplement.
Investor Verification Items
- Verify the amended filing containing Rimini Street’s actual September 30, 2017 balance sheet and operating results, since this Form 10-Q primarily reports GPIA’s shell-company activity.
- Reconcile the post-closing share count of 58,580,796 with the 48,868,647 shares issued to Rimini Street holders, Sponsor purchases, redemptions, and underwriting-fee shares.
- Assess the final cash available after approximately $143.9 million of redemptions, the $36.0 million Sponsor investment, closing costs, and settlement of deferred underwriting fees.
- Review the terms, covenants, and repayment trigger of the $2.98 million Sponsor loan and the broader Rimini Credit Facility.
- Evaluate dilution from approximately 13.26 million options, public and private warrants, and converted Rimini warrants.