Filing Overview
Registrant: GP Investments Acquisition Corp., not Rimini Street, Inc. The supplied filing is an unaudited Form 10-Q for the quarter and nine months ended September 30, 2016, filed November 15, 2016.
Business Context and Reporting Period
The registrant was a Cayman Islands blank check company formed to pursue a merger, acquisition, or similar business combination. It had not commenced operating activities and had generated no operating revenue as of September 30, 2016. Activities consisted primarily of its 2015 initial public offering, target identification, due diligence, and expenses related to a proposed acquisition of WKI Holding Company, Inc., parent of World Kitchen, LLC.
Financial Metrics
| Metric | Three Months Ended September 30, 2016 | Nine Months Ended September 30, 2016 |
|---|---|---|
| Operating revenue | None | None |
| Operating costs | $402,948 | $2,291,424 |
| Net loss | $347,057 | $1,897,194 |
| Net loss per share | $0.06 | $0.35 |
| Interest income | $55,234 | $393,573 |
| Net cash used in operating activities | Not separately provided | $2,157,615 |
- Cash and cash equivalents outside the trust account were $2,470 at September 30, 2016, compared with $967,449 at December 31, 2015.
- Cash and marketable securities held in the trust account were $172,972,482, compared with $172,578,252 at December 31, 2015.
- Total liabilities were $7,609,879, including $6,037,500 of deferred underwriting fees and $1,192,636 owed under a related-party promissory note.
- Ordinary shares subject to possible redemption totaled $160,598,989, representing 16,016,030 shares.
- Shareholders’ equity was $5,000,001. The filing does not report conventional operating margins because the company had no operating revenue.
- The company had no long-term debt, capital lease obligations, or operating lease obligations. Related-party loans were non-interest-bearing and unsecured.
Material Changes Versus Prior Comparable Period
- Third-quarter net loss increased to $347,057 from $51,827 in the 2015 comparable period.
- Nine-month net loss increased to $1,897,194 from $59,198 in the comparable 2015 period, primarily due to substantially higher target identification, transaction, and operating costs.
- Nine-month operating costs increased to $2,291,424 from $123,764.
- Nine-month interest income increased to $393,573 from $64,566 because the trust account was invested for a longer period.
- Cash outside the trust account declined substantially, while the trust account balance increased modestly through interest income and investment gains.
- A related-party promissory note of $1,192,636 was outstanding at September 30, 2016; no comparable balance was reported at December 31, 2015.
Outlook, Risks, Contingencies, and Unusual Items
- On April 19, 2016, the company agreed to acquire WKI Holding Company, Inc. The merger agreement was terminated on November 11, 2016, after the reporting date.
- The company had approximately $3,943,000 of contingent transaction fees payable only if the potential business combination was completed. Additional significant costs would have been incurred upon closing.
- The company was required to complete a business combination by May 26, 2017, or cease operations and redeem public shares from the trust account, subject to applicable requirements.
- Management stated that available resources, including sponsor financing, were expected to fund operations through the earlier of a business combination or the liquidation date. The filing also warns that actual transaction and diligence costs could exceed estimates.
- In November 2016, the sponsor increased its commitment to provide loans from $500,000 to an aggregate of $1,900,000. The filing reports that $1,192,636 was outstanding as of September 30, 2016.
- The trust account was invested in short-term U.S. Treasury bills, and management reported no material interest-rate risk or hedging activity.
- If no business combination occurred, public warrants could expire worthless and public shares would be redeemed from the trust account. Deferred underwriting fees of $6,037,500 were payable only upon a completed business combination.
- Management reported effective disclosure controls and procedures and no material changes to internal control over financial reporting.
- No legal proceedings were reported, and management identified no material changes to previously disclosed risk factors.
Investor Verification Checklist
- Verify the issuer identity: the filing is for GP Investments Acquisition Corp., not Rimini Street, Inc.
- Confirm the November 11, 2016 termination of the WKI merger agreement and its impact on the company’s liquidation timeline and trust-account distributions.
- Reconcile the $172.97 million trust account, the $160.60 million redeemable-share liability, and the $6.04 million deferred underwriting fee.
- Assess whether the $2,470 of unrestricted cash and sponsor financing were sufficient to fund operations and transaction costs.
- Review the approximately $3.94 million of contingent transaction fees and any additional costs associated with the terminated transaction.
- Confirm the terms, repayment priority, and post-period increase of the sponsor loan commitment.