true12/31/20202020FY0001635282--12-3133.3310000016352822020-10-012020-12-3100016352822020-01-012020-12-310001635282us-gaap:CommonStockMember2020-01-012020-12-310001635282rmni:PublicUnitsMember2020-01-012020-12-310001635282us-gaap:WarrantMember2020-01-012020-12-31iso4217:USD00016352822020-06-30xbrli:shares00016352822021-05-0700016352822020-12-3100016352822019-12-3100016352822019-01-012019-12-31iso4217:USDxbrli:shares00016352822018-01-012018-12-310001635282us-gaap:CommonStockMember2017-12-310001635282us-gaap:AdditionalPaidInCapitalMember2017-12-310001635282us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-12-310001635282us-gaap:RetainedEarningsMember2017-12-3100016352822017-12-310001635282us-gaap:AdditionalPaidInCapitalMember2018-01-012018-12-310001635282us-gaap:CommonStockMember2018-01-012018-12-310001635282us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2018-01-012018-12-310001635282us-gaap:AdditionalPaidInCapitalMemberus-gaap:PrivatePlacementMember2018-01-012018-12-310001635282us-gaap:PrivatePlacementMember2018-01-012018-12-310001635282us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-01-012018-12-310001635282us-gaap:RetainedEarningsMember2018-01-012018-12-310001635282us-gaap:CommonStockMember2018-12-310001635282us-gaap:AdditionalPaidInCapitalMember2018-12-310001635282us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001635282us-gaap:RetainedEarningsMember2018-12-3100016352822018-12-310001635282us-gaap:AdditionalPaidInCapitalMember2019-01-012019-12-310001635282us-gaap:CommonStockMember2019-01-012019-12-310001635282us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2019-01-012019-12-310001635282us-gaap:AdditionalPaidInCapitalMemberus-gaap:PrivatePlacementMember2019-01-012019-12-310001635282us-gaap:PrivatePlacementMember2019-01-012019-12-310001635282us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-12-310001635282us-gaap:RetainedEarningsMember2019-01-012019-12-310001635282us-gaap:CommonStockMember2019-12-310001635282us-gaap:AdditionalPaidInCapitalMember2019-12-310001635282us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001635282us-gaap:RetainedEarningsMember2019-12-310001635282us-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310001635282us-gaap:CommonStockMemberrmni:August2020OfferingMember2020-01-012020-12-310001635282rmni:August2020OfferingMemberus-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310001635282rmni:August2020OfferingMember2020-01-012020-12-310001635282us-gaap:AdditionalPaidInCapitalMemberus-gaap:SeriesAPreferredStockMember2020-01-012020-12-310001635282us-gaap:SeriesAPreferredStockMember2020-01-012020-12-310001635282us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-12-310001635282us-gaap:RetainedEarningsMember2020-01-012020-12-310001635282us-gaap:CommonStockMember2020-12-310001635282us-gaap:AdditionalPaidInCapitalMember2020-12-310001635282us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001635282us-gaap:RetainedEarningsMember2020-12-310001635282us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2020-01-012020-12-31xbrli:pure0001635282rmni:August2020OfferingMember2020-08-182020-08-180001635282rmni:August2020OfferingMember2020-08-180001635282us-gaap:SeriesAPreferredStockMember2020-10-300001635282us-gaap:PrivatePlacementMember2019-06-202019-06-200001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2019-06-202019-06-200001635282us-gaap:SeriesAPreferredStockMember2020-12-310001635282us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2019-06-202019-06-200001635282us-gaap:PrivatePlacementMember2019-03-072019-03-070001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2019-03-072019-03-070001635282us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2019-03-072019-03-070001635282rmni:FundedDebtMember2018-07-192018-07-1900016352822018-07-192018-07-190001635282us-gaap:SeriesAPreferredStockMember2018-07-192018-07-190001635282us-gaap:CommonStockMember2018-07-192018-07-190001635282rmni:CashDividendMember2018-07-190001635282srt:MinimumMember2018-07-190001635282srt:MaximumMember2018-07-190001635282us-gaap:SeriesAPreferredStockMember2018-07-1900016352822019-06-3000016352822018-07-190001635282us-gaap:ComputerEquipmentMembersrt:MinimumMember2020-01-012020-12-310001635282us-gaap:ComputerEquipmentMembersrt:MaximumMember2020-01-012020-12-310001635282us-gaap:FurnitureAndFixturesMembersrt:MinimumMember2020-01-012020-12-310001635282us-gaap:FurnitureAndFixturesMembersrt:MaximumMember2020-01-012020-12-310001635282us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2020-01-012020-12-310001635282srt:MaximumMemberus-gaap:LeaseholdImprovementsMember2020-01-012020-12-3100016352822021-01-012020-12-310001635282srt:MinimumMember2020-12-310001635282srt:MaximumMember2020-12-31rmni:day00016352822020-01-010001635282us-gaap:AllowanceForCreditLossMember2019-12-310001635282us-gaap:AllowanceForCreditLossMember2018-12-310001635282us-gaap:AllowanceForCreditLossMember2017-12-310001635282us-gaap:AllowanceForCreditLossMember2020-01-012020-12-310001635282us-gaap:AllowanceForCreditLossMember2019-01-012019-12-310001635282us-gaap:AllowanceForCreditLossMember2018-01-012018-12-310001635282us-gaap:AllowanceForCreditLossMember2020-12-310001635282us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2020-12-310001635282us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2019-12-310001635282us-gaap:ComputerEquipmentMember2020-12-310001635282us-gaap:ComputerEquipmentMember2019-12-310001635282us-gaap:FurnitureAndFixturesMember2020-12-310001635282us-gaap:FurnitureAndFixturesMember2019-12-310001635282us-gaap:SoftwareDevelopmentMember2020-12-310001635282us-gaap:SoftwareDevelopmentMember2019-12-310001635282us-gaap:LeaseholdImprovementsMember2020-12-310001635282us-gaap:LeaseholdImprovementsMember2019-12-310001635282us-gaap:ConstructionInProgressMember2020-12-310001635282us-gaap:ConstructionInProgressMember2019-12-310001635282rmni:GPSponsorMember2017-05-3100016352822017-05-012017-05-310001635282rmni:GpInvestmentsAcquisitionCorpMember2017-05-012017-05-3100016352822018-12-212018-12-210001635282rmni:AccretionExpenseforGPSponsorNotePayableMember2018-12-212018-12-210001635282us-gaap:CommonClassAMember2018-12-012018-12-310001635282rmni:AccretionExpenseforGPSponsorNotePayableMember2018-12-012018-12-310001635282us-gaap:CommonClassAMember2020-01-012020-12-3100016352822019-06-280001635282us-gaap:RevolvingCreditFacilityMember2016-06-300001635282us-gaap:RevolvingCreditFacilityMemberrmni:InitialTermLoanMember2016-06-300001635282rmni:DelayedDrawTermLoanMemberus-gaap:RevolvingCreditFacilityMember2016-06-300001635282us-gaap:RevolvingCreditFacilityMemberrmni:DelayedDrawBTermLoanMember2016-06-300001635282us-gaap:RevolvingCreditFacilityMember2016-06-012016-06-300001635282us-gaap:RevolvingCreditFacilityMember2020-12-310001635282us-gaap:RevolvingCreditFacilityMemberrmni:InterestPayableInCashMember2020-12-310001635282us-gaap:RevolvingCreditFacilityMemberrmni:InterestPayablethroughtheIssuanceofAdditionalBorrowingsMember2020-12-310001635282rmni:DelayedDrawTermLoanMemberus-gaap:RevolvingCreditFacilityMember2018-01-012018-12-310001635282us-gaap:RevolvingCreditFacilityMemberrmni:DelayedDrawBTermLoanMember2018-12-310001635282us-gaap:PrivatePlacementMember2018-07-192018-07-190001635282rmni:FundedDebtMemberrmni:PrincipalBalanceMember2018-07-190001635282rmni:FundedDebtMemberrmni:MandatoryTriggerEventExitFeesMember2018-07-190001635282rmni:MandatoryConsultingFeesMemberrmni:FundedDebtMember2018-07-190001635282rmni:FundedDebtMember2018-07-190001635282rmni:FundedDebtMemberrmni:PrincipalBalanceMember2017-12-310001635282us-gaap:PaymentInKindPIKNoteMemberrmni:FundedDebtMemberrmni:PrincipalBalanceMember2018-01-012018-12-310001635282rmni:LiabilityAdjustmentMemberrmni:FundedDebtMemberrmni:PrincipalBalanceMember2018-01-012018-12-310001635282rmni:PrincipalBorrowingsMemberrmni:FundedDebtMemberrmni:PrincipalBalanceMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalPrepaymentsMemberrmni:PrincipalBalanceMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalPaymentsMemberrmni:PrincipalBalanceMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalBalanceMemberrmni:AccretionExpenseMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalBalanceMember2018-12-310001635282rmni:FundedDebtMemberrmni:MandatoryTriggerEventExitFeesMember2017-12-310001635282us-gaap:PaymentInKindPIKNoteMemberrmni:FundedDebtMemberrmni:MandatoryTriggerEventExitFeesMember2018-01-012018-12-310001635282rmni:LiabilityAdjustmentMemberrmni:FundedDebtMemberrmni:MandatoryTriggerEventExitFeesMember2018-01-012018-12-310001635282rmni:PrincipalBorrowingsMemberrmni:FundedDebtMemberrmni:MandatoryTriggerEventExitFeesMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalPrepaymentsMemberrmni:MandatoryTriggerEventExitFeesMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalPaymentsMemberrmni:MandatoryTriggerEventExitFeesMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:MandatoryTriggerEventExitFeesMemberrmni:AccretionExpenseMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:MandatoryTriggerEventExitFeesMember2018-12-310001635282rmni:MandatoryConsultingFeesMemberrmni:FundedDebtMember2017-12-310001635282us-gaap:PaymentInKindPIKNoteMemberrmni:MandatoryConsultingFeesMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:LiabilityAdjustmentMemberrmni:MandatoryConsultingFeesMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:PrincipalBorrowingsMemberrmni:MandatoryConsultingFeesMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:MandatoryConsultingFeesMemberrmni:FundedDebtMemberrmni:PrincipalPrepaymentsMember2018-01-012018-12-310001635282rmni:MandatoryConsultingFeesMemberrmni:FundedDebtMemberrmni:PrincipalPaymentsMember2018-01-012018-12-310001635282rmni:MandatoryConsultingFeesMemberrmni:FundedDebtMemberrmni:AccretionExpenseMember2018-01-012018-12-310001635282rmni:MandatoryConsultingFeesMemberrmni:FundedDebtMember2018-12-310001635282rmni:FundedDebtMember2017-12-310001635282us-gaap:PaymentInKindPIKNoteMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:LiabilityAdjustmentMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:PrincipalBorrowingsMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalPrepaymentsMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalPaymentsMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:AccretionExpenseMember2018-01-012018-12-310001635282rmni:FundedDebtMember2018-12-310001635282rmni:OriginalIssueDiscountMemberrmni:FundedDebtMember2017-12-310001635282rmni:OriginalIssueDiscountMemberus-gaap:PaymentInKindPIKNoteMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:OriginalIssueDiscountMemberrmni:LiabilityAdjustmentMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:OriginalIssueDiscountMemberrmni:PrincipalBorrowingsMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:OriginalIssueDiscountMemberrmni:FundedDebtMemberrmni:PrincipalPrepaymentsMember2018-01-012018-12-310001635282rmni:OriginalIssueDiscountMemberrmni:FundedDebtMemberrmni:PrincipalPaymentsMember2018-01-012018-12-310001635282rmni:OriginalIssueDiscountMemberrmni:FundedDebtMemberrmni:AccretionExpenseMember2018-01-012018-12-310001635282rmni:OriginalIssueDiscountMemberrmni:FundedDebtMemberrmni:WriteOffDDICPrepaymentMember2018-01-012018-12-310001635282rmni:OriginalIssueDiscountMemberrmni:WriteOffDDICPayoffMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:OriginalIssueDiscountMemberrmni:FundedDebtMember2018-12-310001635282rmni:FundedDebtMemberrmni:OriginationFeeMember2017-12-310001635282us-gaap:PaymentInKindPIKNoteMemberrmni:FundedDebtMemberrmni:OriginationFeeMember2018-01-012018-12-310001635282rmni:LiabilityAdjustmentMemberrmni:FundedDebtMemberrmni:OriginationFeeMember2018-01-012018-12-310001635282rmni:PrincipalBorrowingsMemberrmni:FundedDebtMemberrmni:OriginationFeeMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalPrepaymentsMemberrmni:OriginationFeeMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalPaymentsMemberrmni:OriginationFeeMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:AccretionExpenseMemberrmni:OriginationFeeMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:WriteOffDDICPrepaymentMemberrmni:OriginationFeeMember2018-01-012018-12-310001635282rmni:WriteOffDDICPayoffMemberrmni:FundedDebtMemberrmni:OriginationFeeMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:OriginationFeeMember2018-12-310001635282rmni:AmendmentFeeMemberrmni:FundedDebtMember2017-12-310001635282rmni:AmendmentFeeMemberus-gaap:PaymentInKindPIKNoteMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:AmendmentFeeMemberrmni:LiabilityAdjustmentMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:AmendmentFeeMemberrmni:PrincipalBorrowingsMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:AmendmentFeeMemberrmni:FundedDebtMemberrmni:PrincipalPrepaymentsMember2018-01-012018-12-310001635282rmni:AmendmentFeeMemberrmni:FundedDebtMemberrmni:PrincipalPaymentsMember2018-01-012018-12-310001635282rmni:AmendmentFeeMemberrmni:FundedDebtMemberrmni:AccretionExpenseMember2018-01-012018-12-310001635282rmni:AmendmentFeeMemberrmni:FundedDebtMemberrmni:WriteOffDDICPrepaymentMember2018-01-012018-12-310001635282rmni:AmendmentFeeMemberrmni:WriteOffDDICPayoffMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:AmendmentFeeMemberrmni:FundedDebtMember2018-12-310001635282rmni:FairValueOfWarrantsMemberrmni:FundedDebtMember2017-12-310001635282us-gaap:PaymentInKindPIKNoteMemberrmni:FairValueOfWarrantsMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:FairValueOfWarrantsMemberrmni:LiabilityAdjustmentMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:PrincipalBorrowingsMemberrmni:FairValueOfWarrantsMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:FairValueOfWarrantsMemberrmni:FundedDebtMemberrmni:PrincipalPrepaymentsMember2018-01-012018-12-310001635282rmni:FairValueOfWarrantsMemberrmni:FundedDebtMemberrmni:PrincipalPaymentsMember2018-01-012018-12-310001635282rmni:FairValueOfWarrantsMemberrmni:FundedDebtMemberrmni:AccretionExpenseMember2018-01-012018-12-310001635282rmni:FairValueOfWarrantsMemberrmni:FundedDebtMemberrmni:WriteOffDDICPrepaymentMember2018-01-012018-12-310001635282rmni:FairValueOfWarrantsMemberrmni:WriteOffDDICPayoffMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:FairValueOfWarrantsMemberrmni:FundedDebtMember2018-12-310001635282rmni:FundedDebtMemberrmni:ConsultingFeesToLendersMember2017-12-310001635282us-gaap:PaymentInKindPIKNoteMemberrmni:FundedDebtMemberrmni:ConsultingFeesToLendersMember2018-01-012018-12-310001635282rmni:LiabilityAdjustmentMemberrmni:FundedDebtMemberrmni:ConsultingFeesToLendersMember2018-01-012018-12-310001635282rmni:PrincipalBorrowingsMemberrmni:FundedDebtMemberrmni:ConsultingFeesToLendersMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalPrepaymentsMemberrmni:ConsultingFeesToLendersMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalPaymentsMemberrmni:ConsultingFeesToLendersMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:ConsultingFeesToLendersMemberrmni:AccretionExpenseMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:ConsultingFeesToLendersMemberrmni:WriteOffDDICPrepaymentMember2018-01-012018-12-310001635282rmni:WriteOffDDICPayoffMemberrmni:FundedDebtMemberrmni:ConsultingFeesToLendersMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:ConsultingFeesToLendersMember2018-12-310001635282rmni:FundedDebtMemberrmni:MandatoryTriggerEventExitFeesMemberrmni:WriteOffDDICPrepaymentMember2018-01-012018-12-310001635282rmni:WriteOffDDICPayoffMemberrmni:FundedDebtMemberrmni:MandatoryTriggerEventExitFeesMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:OtherIssuanceCostsMember2017-12-310001635282us-gaap:PaymentInKindPIKNoteMemberrmni:OtherIssuanceCostsMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:LiabilityAdjustmentMemberrmni:OtherIssuanceCostsMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:PrincipalBorrowingsMemberrmni:OtherIssuanceCostsMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:OtherIssuanceCostsMemberrmni:FundedDebtMemberrmni:PrincipalPrepaymentsMember2018-01-012018-12-310001635282rmni:OtherIssuanceCostsMemberrmni:FundedDebtMemberrmni:PrincipalPaymentsMember2018-01-012018-12-310001635282rmni:OtherIssuanceCostsMemberrmni:FundedDebtMemberrmni:AccretionExpenseMember2018-01-012018-12-310001635282rmni:OtherIssuanceCostsMemberrmni:FundedDebtMemberrmni:WriteOffDDICPrepaymentMember2018-01-012018-12-310001635282rmni:WriteOffDDICPayoffMemberrmni:OtherIssuanceCostsMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:OtherIssuanceCostsMember2018-12-310001635282rmni:FundedDebtMemberrmni:WriteOffDDICPrepaymentMember2018-01-012018-12-310001635282rmni:WriteOffDDICPayoffMemberrmni:FundedDebtMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:CumulativeAccretionMember2017-12-310001635282us-gaap:PaymentInKindPIKNoteMemberrmni:FundedDebtMemberrmni:CumulativeAccretionMember2018-01-012018-12-310001635282rmni:LiabilityAdjustmentMemberrmni:FundedDebtMemberrmni:CumulativeAccretionMember2018-01-012018-12-310001635282rmni:PrincipalBorrowingsMemberrmni:FundedDebtMemberrmni:CumulativeAccretionMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalPrepaymentsMemberrmni:CumulativeAccretionMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:PrincipalPaymentsMemberrmni:CumulativeAccretionMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:CumulativeAccretionMemberrmni:AccretionExpenseMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:CumulativeAccretionMemberrmni:WriteOffDDICPrepaymentMember2018-01-012018-12-310001635282rmni:WriteOffDDICPayoffMemberrmni:FundedDebtMemberrmni:CumulativeAccretionMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:CumulativeAccretionMember2018-12-310001635282us-gaap:PaymentInKindPIKNoteMemberrmni:FundedDebtMember2018-12-310001635282rmni:LiabilityAdjustmentMemberrmni:FundedDebtMember2018-12-310001635282rmni:FundedDebtMemberrmni:AccretionExpenseMember2018-12-310001635282rmni:FundedDebtMemberrmni:WriteOffDDICPrepaymentMember2018-12-310001635282rmni:WriteOffDDICPayoffMemberrmni:FundedDebtMember2018-12-310001635282rmni:TwelvePointZeroPercentageCreditFacilityMember2020-01-012020-12-310001635282rmni:TwelvePointZeroPercentageCreditFacilityMember2019-01-012019-12-310001635282rmni:TwelvePointZeroPercentageCreditFacilityMember2018-01-012018-12-310001635282us-gaap:PaymentInKindPIKNoteMember2020-12-310001635282rmni:ThreePointZeroPercentagePaidInKindInterestCreditFacilityMember2020-01-012020-12-310001635282rmni:ThreePointZeroPercentagePaidInKindInterestCreditFacilityMember2019-01-012019-12-310001635282rmni:ThreePointZeroPercentagePaidInKindInterestCreditFacilityMember2018-01-012018-12-310001635282rmni:AccretionExpenseFundedDebtMember2020-01-012020-12-310001635282rmni:AccretionExpenseFundedDebtMember2019-01-012019-12-310001635282rmni:AccretionExpenseFundedDebtMember2018-01-012018-12-310001635282rmni:PrincipalPrepaymentsMemberrmni:ApplicablePremiumForPrincipalPrepaymentMember2020-01-012020-12-310001635282rmni:PrincipalPrepaymentsMemberrmni:ApplicablePremiumForPrincipalPrepaymentMember2019-01-012019-12-310001635282rmni:PrincipalPrepaymentsMemberrmni:ApplicablePremiumForPrincipalPrepaymentMember2018-01-012018-12-310001635282rmni:PrincipalPaymentsMemberrmni:ApplicablePremiumForPrincipalPrepaymentMember2020-01-012020-12-310001635282rmni:PrincipalPaymentsMemberrmni:ApplicablePremiumForPrincipalPrepaymentMember2019-01-012019-12-310001635282rmni:PrincipalPaymentsMemberrmni:ApplicablePremiumForPrincipalPrepaymentMember2018-01-012018-12-310001635282rmni:AccretionExpenseforGPSponsorNotePayableMember2020-01-012020-12-310001635282rmni:AccretionExpenseforGPSponsorNotePayableMember2019-01-012019-12-310001635282rmni:AccretionExpenseforGPSponsorNotePayableMember2018-01-012018-12-310001635282rmni:OtherBorrowingsMember2020-01-012020-12-310001635282rmni:OtherBorrowingsMember2019-01-012019-12-310001635282rmni:OtherBorrowingsMember2018-01-012018-12-310001635282rmni:FundedDebtMemberrmni:WriteOffDDICPrepaymentMember2020-01-012020-12-310001635282rmni:FundedDebtMemberrmni:WriteOffDDICPrepaymentMember2019-01-012019-12-310001635282rmni:WriteOffDDICPayoffMemberrmni:FundedDebtMember2020-01-012020-12-310001635282rmni:WriteOffDDICPayoffMemberrmni:FundedDebtMember2019-01-012019-12-310001635282rmni:UnfundedPortionMemberrmni:WriteOffDDICMember2020-01-012020-12-310001635282rmni:UnfundedPortionMemberrmni:WriteOffDDICMember2019-01-012019-12-310001635282rmni:UnfundedPortionMemberrmni:WriteOffDDICMember2018-01-012018-12-310001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2018-07-192018-07-190001635282us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2018-07-192018-07-190001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2018-07-190001635282us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2018-07-190001635282us-gaap:PrivatePlacementMember2018-07-190001635282us-gaap:CommonStockMember2018-07-190001635282rmni:FinancialAdvisorAndProfessionalFeesMemberus-gaap:PrivatePlacementMember2018-07-192018-07-190001635282rmni:DueDiligenceAndProfessionalFeesMemberus-gaap:PrivatePlacementMember2018-07-192018-07-190001635282us-gaap:PrivatePlacementMember2019-03-070001635282rmni:DueDiligenceAndProfessionalFeesMemberus-gaap:PrivatePlacementMember2019-03-072019-03-070001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2019-03-070001635282us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2019-03-0700016352822019-03-070001635282us-gaap:CommonStockMember2019-03-072019-03-070001635282us-gaap:CommonStockMember2019-03-060001635282us-gaap:PrivatePlacementMember2019-06-200001635282rmni:DueDiligenceAndProfessionalFeesMemberus-gaap:PrivatePlacementMember2019-06-202019-06-200001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2019-06-200001635282us-gaap:CommonStockMemberus-gaap:PrivatePlacementMember2019-06-2000016352822019-06-200001635282us-gaap:CommonStockMember2019-06-202019-06-200001635282us-gaap:CommonStockMember2019-06-200001635282us-gaap:SubsequentEventMemberus-gaap:SeriesAPreferredStockMember2021-01-050001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2018-10-012018-10-010001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2018-07-202018-12-310001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2018-12-310001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2019-01-022019-01-020001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2019-04-012019-04-010001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2019-07-012019-07-010001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2019-10-012019-10-010001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2019-01-012019-12-310001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2019-12-310001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2020-01-022020-01-020001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2020-04-012020-04-010001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2020-07-012020-07-010001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2020-10-012020-10-010001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2020-10-302020-10-300001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2020-01-012020-12-310001635282us-gaap:PrivatePlacementMemberus-gaap:SeriesAPreferredStockMember2020-12-310001635282rmni:PaidInKindDividendMember2018-07-190001635282rmni:CashDividendMember2018-12-310001635282us-gaap:SeriesAPreferredStockMember2018-01-012018-12-310001635282rmni:CashDividendMemberus-gaap:SeriesAPreferredStockMember2018-01-012018-12-310001635282rmni:CashDividendMemberus-gaap:SeriesAPreferredStockMember2018-12-310001635282rmni:PaidInKindDividendMember2018-12-310001635282rmni:PaidInKindDividendMemberus-gaap:SeriesAPreferredStockMember2018-01-012018-12-310001635282rmni:PaidInKindDividendMemberus-gaap:SeriesAPreferredStockMember2018-12-310001635282rmni:FractionalSharesMemberus-gaap:SeriesAPreferredStockMember2018-01-012018-12-310001635282rmni:FractionalSharesMemberus-gaap:SeriesAPreferredStockMember2018-12-310001635282us-gaap:SeriesAPreferredStockMember2018-12-310001635282rmni:CashDividendMember2019-12-310001635282us-gaap:SeriesAPreferredStockMember2019-01-012019-12-310001635282rmni:CashDividendMemberus-gaap:SeriesAPreferredStockMember2019-01-012019-12-310001635282rmni:CashDividendMemberus-gaap:SeriesAPreferredStockMember2019-12-310001635282rmni:PaidInKindDividendMember2019-12-310001635282rmni:PaidInKindDividendMemberus-gaap:SeriesAPreferredStockMember2019-01-012019-12-310001635282rmni:PaidInKindDividendMemberus-gaap:SeriesAPreferredStockMember2019-12-310001635282rmni:FractionalSharesMemberus-gaap:SeriesAPreferredStockMember2019-01-012019-12-310001635282rmni:FractionalSharesMemberus-gaap:SeriesAPreferredStockMember2019-12-310001635282us-gaap:SeriesAPreferredStockMember2019-12-310001635282rmni:CashDividendMember2020-12-310001635282rmni:CashDividendMemberus-gaap:SeriesAPreferredStockMember2020-01-012020-12-310001635282rmni:CashDividendMemberus-gaap:SeriesAPreferredStockMember2020-12-310001635282rmni:PaidInKindDividendMember2020-12-310001635282rmni:PaidInKindDividendMemberus-gaap:SeriesAPreferredStockMember2020-01-012020-12-310001635282rmni:PaidInKindDividendMemberus-gaap:SeriesAPreferredStockMember2020-12-310001635282rmni:FractionalSharesMemberus-gaap:SeriesAPreferredStockMember2020-01-012020-12-310001635282rmni:FractionalSharesMemberus-gaap:SeriesAPreferredStockMember2020-12-31rmni:vote0001635282us-gaap:CommonClassBMemberrmni:TwoThousandsAndSevenPlanMember2007-12-310001635282rmni:TwoThousandsAndSevenPlanMember2020-12-310001635282rmni:TwoThousandsAndThirteenPlanMember2020-12-310001635282rmni:StockPlansMember2020-12-310001635282rmni:StockPlansMember2020-01-012020-12-310001635282us-gaap:EmployeeStockOptionMemberrmni:StockPlansMembersrt:DirectorMember2020-01-012020-12-310001635282us-gaap:SubsequentEventMember2021-02-232021-02-230001635282rmni:StockOptionsPlansMember2019-12-310001635282rmni:StockOptionsPlansMember2018-12-310001635282rmni:StockOptionsPlansMember2017-12-310001635282rmni:StockOptionsPlansMember2020-01-012020-12-310001635282rmni:StockOptionsPlansMember2019-01-012019-12-310001635282rmni:StockOptionsPlansMember2018-01-012018-12-310001635282rmni:StockOptionsPlansMember2020-12-310001635282rmni:StockPlansMember2019-12-310001635282rmni:StockPlansMember2018-12-310001635282us-gaap:EmployeeStockOptionMember2020-12-310001635282us-gaap:EmployeeStockOptionMember2019-12-310001635282us-gaap:EmployeeStockOptionMember2018-12-310001635282us-gaap:EmployeeStockOptionMember2020-01-012020-12-310001635282us-gaap:EmployeeStockOptionMember2019-01-012019-12-310001635282us-gaap:EmployeeStockOptionMember2018-01-012018-12-310001635282us-gaap:RestrictedStockUnitsRSUMemberrmni:TwoThousandsAndThirteenPlanMember2020-01-012020-12-310001635282us-gaap:RestrictedStockUnitsRSUMembersrt:MinimumMemberrmni:TwoThousandsAndThirteenPlanMember2020-01-012020-12-310001635282us-gaap:RestrictedStockUnitsRSUMembersrt:MaximumMemberrmni:TwoThousandsAndThirteenPlanMember2020-01-012020-12-310001635282us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-12-310001635282us-gaap:RestrictedStockUnitsRSUMember2020-12-310001635282us-gaap:CostOfSalesMember2020-01-012020-12-310001635282us-gaap:CostOfSalesMember2019-01-012019-12-310001635282us-gaap:CostOfSalesMember2018-01-012018-12-310001635282us-gaap:SellingAndMarketingExpenseMember2020-01-012020-12-310001635282us-gaap:SellingAndMarketingExpenseMember2019-01-012019-12-310001635282us-gaap:SellingAndMarketingExpenseMember2018-01-012018-12-310001635282us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-12-310001635282us-gaap:GeneralAndAdministrativeExpenseMember2019-01-012019-12-310001635282us-gaap:GeneralAndAdministrativeExpenseMember2018-01-012018-12-310001635282us-gaap:EmployeeStockMember2018-06-072018-06-07rmni:offering_period0001635282us-gaap:EmployeeStockMember2020-01-012020-12-310001635282rmni:OriginalWarrantsMemberrmni:RedeemableOriginationAgentWarrantsMember2020-12-310001635282rmni:GpiaPublicWarrantsMember2020-12-310001635282rmni:GpSponsorPrivatePlacementWarrantsMember2020-12-310001635282rmni:PublicWarrantsMember2015-05-260001635282rmni:PublicWarrantsMember2015-05-262015-05-260001635282rmni:PrivatePlacementWarrantsMember2015-05-260001635282rmni:StockPlansMembersrt:DirectorMember2020-01-012020-12-310001635282us-gaap:DomesticCountryMember2020-12-310001635282us-gaap:StateAndLocalJurisdictionMember2020-12-310001635282rmni:ForeignTaxCreditCarryforwardMemberus-gaap:DomesticCountryMember2020-12-310001635282rmni:OracleLitigationMember2016-01-012016-12-310001635282rmni:OracleLitigationMember2020-01-012020-12-310001635282rmni:OracleLitigationMember2019-03-012019-03-310001635282rmni:OracleLitigationMember2019-04-012019-04-300001635282rmni:OracleLitigationMember2019-01-012019-12-310001635282rmni:OracleLitigationMember2020-12-310001635282rmni:OracleLitigationCounterclaimMember2020-01-012020-12-31rmni:copyright0001635282rmni:OracleLitigationCounterclaimMember2020-12-310001635282rmni:AdamsStreetPartnersMemberus-gaap:CommonStockMember2020-01-012020-12-310001635282rmni:AdamsStreetPartnersMember2016-10-310001635282us-gaap:SeriesAPreferredStockMember2018-07-012018-07-310001635282us-gaap:CommonClassAMember2018-07-012018-07-310001635282srt:AffiliatedEntityMemberrmni:PrivatePlacementsMember2018-07-012018-07-310001635282rmni:AdamsStreetPartnersMemberus-gaap:CommonStockMemberrmni:VotingControlOwnershipMember2020-12-310001635282rmni:AdamsStreetPartnersMemberus-gaap:SeriesAPreferredStockMember2020-12-310001635282rmni:AdamsStreetPartnersMember2018-07-180001635282us-gaap:WarrantMember2020-01-012020-12-310001635282us-gaap:WarrantMember2019-01-012019-12-310001635282us-gaap:WarrantMember2018-01-012018-12-310001635282us-gaap:EmployeeStockOptionMember2020-01-012020-12-310001635282us-gaap:EmployeeStockOptionMember2019-01-012019-12-310001635282us-gaap:EmployeeStockOptionMember2018-01-012018-12-310001635282us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-12-310001635282us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-12-310001635282us-gaap:RestrictedStockUnitsRSUMember2018-01-012018-12-310001635282srt:MinimumMemberus-gaap:MeasurementInputExpectedTermMemberus-gaap:SeriesAPreferredStockMember2020-12-310001635282srt:MaximumMemberus-gaap:MeasurementInputExpectedTermMemberus-gaap:SeriesAPreferredStockMember2020-12-310001635282rmni:MeasurementInputImpliedYieldMembersrt:MinimumMemberus-gaap:SeriesAPreferredStockMember2020-12-310001635282rmni:MeasurementInputImpliedYieldMembersrt:MaximumMemberus-gaap:SeriesAPreferredStockMember2020-12-310001635282us-gaap:MeasurementInputRiskFreeInterestRateMemberus-gaap:SeriesAPreferredStockMember2019-06-200001635282us-gaap:MeasurementInputRiskFreeInterestRateMemberus-gaap:SeriesAPreferredStockMember2019-03-070001635282us-gaap:MeasurementInputRiskFreeInterestRateMemberus-gaap:SeriesAPreferredStockMember2018-07-190001635282us-gaap:MeasurementInputPriceVolatilityMemberus-gaap:SeriesAPreferredStockMember2020-12-310001635282country:US2020-01-012020-12-310001635282country:US2019-01-012019-12-310001635282country:US2018-01-012018-12-310001635282us-gaap:NonUsMember2020-01-012020-12-310001635282us-gaap:NonUsMember2019-01-012019-12-310001635282us-gaap:NonUsMember2018-01-012018-12-310001635282us-gaap:NonUsMember2020-12-310001635282us-gaap:NonUsMember2019-12-310001635282country:US2020-12-310001635282country:IN2020-12-310001635282rmni:NonUSAndNonIndiaMember2020-12-310001635282rmni:SingleFinancialInstitutionMember2020-12-310001635282rmni:SingleFinancialInstitutionMember2019-12-310001635282rmni:OtherFinancialInstitutionMember2020-12-3100016352822020-01-012020-03-3100016352822020-04-012020-06-3000016352822020-07-012020-09-3000016352822019-01-012019-03-3100016352822019-04-012019-06-3000016352822019-07-012019-09-3000016352822019-10-012019-12-31


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No.1)
(Mark One)
Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the Fiscal Year Ended December 31, 2020
  
Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
  
For the Transition Period from to
 
Commission File Number 001-37397 
 Rimini Street, Inc. 
 (Exact name of registrant as specified in its charter) 
Delaware 36-4880301
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
3993 Howard Hughes Parkway, Suite 500,
Las Vegas, NV
 
89169
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 
702 839-9671
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:Trading Symbol(s)Name of each exchange on which registered:
Common Stock, par value $0.0001 per shareRMNIThe Nasdaq Global Market
Public Units, each consisting of one share of Common  
Stock, $0.0001 par value, and one-half of one WarrantRMNIUOTC Pink Current Information Marketplace
Warrants, exercisable for one share of Common Stock, $0.0001 par valueRMNIWOTC Pink Current Information Marketplace
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, and an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
Accelerated filer
Non-accelerated filer
Smaller reporting company
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of June 30, 2020, the last business day of the second fiscal quarter, the aggregate market value of the Registrant’s voting stock held by non-affiliates, was approximately $115,575,000 based on the last reported sales price of $5.15 as quoted on the Nasdaq Capital Market on such date.
The registrant had approximately 85,266,000 shares of its $0.0001 par value Common Stock outstanding as of May 7, 2021.
Documents incorporated by reference
Portions of the Registrant’s definitive Proxy Statement for use in connection with its 2021 Annual Meeting of Stockholders (the “2021 Proxy Statement”) to be held on June 2, 2021 are incorporated by reference in Part III of this Form 10-K to the extent stated herein. Except with respect to information specifically incorporated by reference in this Form 10-K, the 2021 Proxy Statement is not deemed to be filed as a part hereof.






Explanatory Note

Rimini Street, Inc. (the “Company”) is filing this amended Form 10-K/A (“Form 10-K/A”) to amend our Annual Report on Form 10-K for the year ended December 31, 2020, originally filed with the Securities and Exchange Commission (the “SEC”) on March 3, 2021 (the “Original Report”), to amend Part II, Item 9A (Controls and Procedures) to address management’s re-evaluation of disclosure controls and procedures to reflect the identification of a material weakness in internal control over financial reporting. Part II, Item 8 (Financial Statements and Supplementary Data) is also being amended to reflect the identification of the material weakness in internal control over financial reporting.

On April 12, 2021, the staff of the SEC issued a public statement (the “SEC Staff Statement”) entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies” discussing the accounting implications of certain terms that are common in warrants issued by a publicly-held special purpose acquisition company (“SPAC”).

The Company became public in October 2017 through a merger with GP Investments Acquisition Corp. (“GPIA”), a SPAC, and certain warrants were issued in connection with the transaction. Currently, there are outstanding warrants to purchase approximately 6.1 million shares of the Company’s common stock, par value $0.0001 per share, at $11.50 per share (the “GP Sponsor Private Placement Warrants”), which were sold in a private placement transaction in May 2015 to GPIC, Ltd. by GPIA, contemporaneously with GPIA’s initial public offering.

After review of the SEC Staff Statement and the terms of all of our warrant agreements, we determined that the GP Sponsor Private Placement Warrants should have been classified as a liability and that changes in the fair value of that liability should have been recognized by way of charges and credits to the consolidated statement of operations. We further determined that the previous accounting treatment of the GP Sponsor Private Placement Warrants resulted in immaterial misstatements in the Company’s consolidated financial statements included in the Original Report.

With respect to internal control over financial reporting, our management re-evaluated the internal controls surrounding the Company’s accounting for the GP Sponsor Private Placement Warrants and determined that a control deficiency existed such that the possibility of a material misstatement in the Company’s consolidated financial statements would not have been prevented or detected on a timely basis.

Accordingly, as a result of this control deficiency discovered after the filing date for the Original Report, our management determined that the Company had a material weakness in internal control over financial reporting as of December 31, 2020.

Notwithstanding this material weakness, Company management concluded that the consolidated financial statements as filed in the Original Report, and as included in this Form 10-K/A, present fairly, in all material respects, our financial position as of December 31, 2020 and 2019, and the results of our results of operations and cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

In addition to Items 8 and 9A of Part II of the Original Report, Part IV, Item 15 (Exhibits and Financial Statement Schedules) of the Original Report is being amended to include currently dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer as required by sections 302 and 906 of the Sarbanes Oxley Act of 2002, as well as a currently dated Consent of Independent Registered Public Accounting Firm (the “Auditors’ Consent”) provided by KPMG LLP. The certifications are attached to this Form 10-K/A as Exhibits 31.1, 31.2, 32.1 and 32.2, and the Auditors’ Consent is attached to this Form 10-K/A as Exhibit 23.1.

This Form 10-K/A does not modify, amend or update in any manner the consolidated financial statements set forth in the Original Report, and there have been no changes to the XBRL data filed in Exhibit 101 of the Original Report.

This Form 10-K/A has not been updated for other events or information subsequent to the date of the filing of the Original Report, except as noted above, and should be read in conjunction with the Original Report and with our filings with the SEC subsequent to the Original Report.


-i-

Table of Contents


TABLE OF CONTENTS
  Page
  
 
  
 

-ii-


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Annual Report on Form 10-K (this “Report”) includes forward-looking statements. All statements other than statements of historical facts contained in this Report, including statements regarding our future results of operations and financial position, business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements include, but are not limited to, information concerning:

the duration of and economic, operational and financial impacts on our business of the COVID-19 pandemic, as well as the actions taken by us, governmental authorities, clients or others in response to the COVID-19 pandemic;
the evolution of the enterprise software management and support landscape facing our clients and prospects;
our ability to educate the market regarding the advantages of our enterprise software management and support services and products;
estimates of our total addressable market;
projections of client savings;
the occurrence of catastrophic events that may disrupt our business or that of our current and prospective clients;
our ability to maintain an adequate rate of revenue growth;
our expectations about future financial, operating and cash flow results;
the sufficiency of future cash and cash equivalents to meet our liquidity requirements;
our business plan and our ability to effectively manage our growth and associated investments;
beliefs and objectives for future operations;
our ability to expand our leadership position in independent enterprise software support and sell our new application managed services;
our ability to attract and retain clients;
our ability to further penetrate our existing client base;
our ability to maintain our competitive technological advantages against new entrants in our industry;
our ability to timely and effectively scale and adapt our existing technology;
our ability to innovate new products and bring them to market in a timely manner, including our recently announced application management services offerings;
our ability to maintain, protect, and enhance our brand and intellectual property;
our ability to capitalize on changing market conditions including a market shift to hybrid and cloud/SaaS offerings for information technology environments and retirement of certain software releases by software vendors;
our ability to develop strategic partnerships;
benefits associated with the use of our services;
our ability to expand internationally;
our ability to raise equity or debt financing in the future;
the effects of increased competition in our market and our ability to compete effectively;
our intentions with respect to our pricing model;
cost of revenues, including changes in costs associated with production, manufacturing, and client support;
operating expenses, including changes in sales and marketing, and general administrative expenses;
anticipated income tax rates;
our ability to maintain our good standing with the United States and international governments and secure new contracts;
costs associated with defending intellectual property infringement and other claims, such as those claims discussed under the section titled “Business—Legal Proceedings”;
our expectations with respect to such litigation;
our expectations concerning relationships with third parties, including channel partners and logistics providers;
economic and industry trends or trend analysis;
the attraction and retention of qualified employees and key personnel;
future acquisitions of or investments in complementary companies, products, subscriptions or technologies;
uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmarks;
the effects of seasonal trends on our results of operations, including the contract renewal cycles for vendor-supplied software support services; and
other risks and uncertainties, including those discussed under "Risk Factors" in Part I, Item 1A of this Report.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-
-iii-


term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing market. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
 
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements in this Report are made as of the date of the filing, and except as required by law, we disclaim and do not undertake any obligation to update or revise publicly any forward-looking statements in this Report. You should read this Report and the documents that we reference in this Report and have filed with the SEC as exhibits to the registration statement of which this Report is a part with the understanding that our actual future results, levels of activity and performance, as well as other events and circumstances, may be materially different from what we expect.
-iv-


PART II
Item 8.   Financial Statements and Supplementary Data

TABLE OF CONTENTS
 
  Page
 
  
 
 
 
 
Notes to Consolidated Financial Statements
 

-1-


Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Rimini Street, Inc.:

Opinion on the Consolidated Financial Statements
 
We have audited the accompanying consolidated balance sheets of Rimini Street, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), stockholders’ deficit, and cash flows for each of the years in the three-year period ended December 31, 2020 and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 3, 2020, except for the restatement as to the effectiveness of internal control over financial reporting for the material weakness related to accounting for its GP Sponsor Private Placement Warrants, as to which the date is May 10, 2021, expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2020 due to the adoption of Accounting Standards Codification (ASC) Topic 842, Leases.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of revenue contracts with non-standard provisions

As discussed in Note 2 and Note 4 to the consolidated financial statements, the Company recognized $327 million in revenue which was primarily derived from the subscription-based software support revenue for the year ended December 31, 2020. A significant portion of the Company’s contracts contain non-standard provisions which require
-2-


judgment to determine the appropriate accounting through the five-step framework prescribed by ASC Topic 606 Revenue from Contracts with Customers.

We identified the evaluation of revenue contracts with non-standard provisions related to subscription-based software support revenue as a critical audit matter. This matter required a higher degree of auditor judgment to assess whether non-standard provisions in contracts and amendments were appropriately evaluated by management.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of an internal control over the Company’s subscription-based software support revenue processes that included identifying and evaluating non-standard contract provisions. We applied auditor judgment to determine the nature and extent of procedures to be performed over subscriptions-based software support revenue. For a selection of revenue transactions, we developed independent expectations of the revenue recognized based on the provisions in contracts and amendments and compared them to the amounts recorded by the Company. We also evaluated the overall sufficiency of the audit evidence over revenue by assessing the results of our procedures.

Contingencies for Rimini II litigation

As discussed in Note 10 to the consolidated financial statements, on September 15, 2020, the U.S. District Court of Nevada issued an order resolving seven total motions for summary judgment with respect to the Rimini II litigation. The Court found infringement of certain Oracle PeopleSoft copyrights for work Rimini performed for a set of specific customers. As of this date, no damages have been awarded and, if any, such will be determined ultimately by the Rimini II jury. The Company believes that an award for damages payable to Oracle is not probable. Further, the Company has determined that the amount of loss or range of loss cannot be reasonably estimated. Accordingly, no accrual has been recorded and no disclosure of the amount of estimated loss or range of loss has been made as of December 31, 2020.

We identified the evaluation of the Company’s assessment of contingencies related to the Rimini II litigation as a critical audit matter. There was a high degree of subjective auditor judgment required in evaluating the probability of legal outcomes and disclosures related to the litigation contingencies.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to management’s evaluation of contingencies, including the determination of whether a loss is probable of being incurred and whether the amount of loss or range of loss can be reasonably estimated. We evaluated the reasonableness of management’s assessment of an unfavorable outcome being not probable by (1) performing inquiries of management and of internal and external legal counsel; (2) reading minutes of meetings of the board of directors and committees thereof; and (3) inspecting historical court documents and other relevant support. We obtained letters of audit inquiry from internal and external legal counsel to confirm the status of the litigation in court proceedings and obtain legal interpretation to evaluate management’s assessment that the award of damages at this time is not probable. We evaluated the sufficiency of the Company’s litigation contingency disclosures in accordance with Financial Accounting Standards Board (the “FASB”) Accounting Standards Codifications Topic 450, Contingencies, by assessing the results of procedures performed.

 
/s/ KPMG LLP 
 
We have served as the Company’s auditor since 2016.
 
Santa Clara, California
March 3, 2021, except for the restatement as to the effectiveness of internal control over financial reporting for the material weakness related to accounting for its GP Sponsor Private Placement Warrants, as to which the date is May 10, 2021








-3-


Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Rimini Street, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Rimini Street, Inc. and subsidiaries (the Company) internal control over financial reporting as of December 31, 2020, based criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), stockholders’ deficit, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated March 3, 2021, except for the restatement as to the effectiveness of internal control over financial reporting for the material weakness related to accounting for its GP Sponsor Private Placement Warrants, as to which the date is May 10, 2021, expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness related to ineffective controls over sufficiently assessing changes related to the de-SPAC transaction that could impact the system of internal control relating to improperly applying the accounting guidance for the Company’s GP Sponsor Private Placement Warrants, has been identified and included in management’s report. The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

-4-


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP 
 
Santa Clara, California
March 3, 2021, except for the restatement as to the effectiveness of internal control over financial reporting for the material weakness related to accounting for its GP Sponsor Private Placement Warrants, as to which the date is May 10, 2021
-5-


RIMINI STREET, INC.
 
Consolidated Balance Sheets
(In thousands, except per share amounts)
December 31,
 20202019
ASSETS  
Current assets:  
Cash and cash equivalents$87,575 $37,952 
Restricted cash334 436 
Accounts receivable, net of allowance of $723 and $1,608, respectively
117,937 111,574 
Deferred contract costs, current13,918 11,754 
Prepaid expenses and other13,456 15,205 
Total current assets233,220 176,921 
Long-term assets:
Property and equipment, net4,820 3,667 
Operating lease right-of-use assets17,521  
Deferred contract costs, noncurrent21,027 16,295 
Deposits and other1,476 3,089 
Deferred income taxes, net1,871 1,248 
Total assets$279,935 $201,220 
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:  
Accounts payable$3,241 $2,303 
Accrued compensation, benefits and commissions38,026 27,918 
Other accrued liabilities21,154 23,347 
Operating lease liabilities, current3,940  
Deferred revenue228,967 205,771 
Total current liabilities295,328 259,339 
Long-term liabilities:
Deferred revenue, noncurrent27,966 29,727 
Operating lease liabilities, noncurrent15,993  
Accrued PIK dividends payable1,193 1,156 
Other long-term liabilities2,539 2,275 
Total liabilities343,019 292,497 
Commitments and contingencies (Note 10)
Redeemable Series A Preferred Stock. Authorized 180 shares, issued and outstanding 155 shares and 155 shares as of December 31, 2020 and 2019, respectively. Liquidation preference of $154,911, net of discount of $17,057 and $155,231, net of discount of $23,915 as of December 31, 2020 and 2019, respectively.
137,854 131,316 
Stockholders’ deficit:  
Preferred stock, $0.0001 par value per share. Authorized 99,820 shares (excluding 180 shares of Series A Preferred Stock); no other series has been designated
  
Common stock, $0.0001 par value. Authorized 1,000,000 shares; issued and outstanding 76,406 and 67,503 shares as of December 31, 2020 and 2019, respectively
8 7 
Additional paid-in capital101,047 93,484 
Accumulated other comprehensive loss(318)(1,429)
Accumulated deficit(301,675)(314,655)
Total stockholders' deficit(200,938)(222,593)
Total liabilities, redeemable preferred stock and stockholders' deficit$279,935 $201,220 

The accompanying notes are an integral part of these consolidated financial statements.
-6-


RIMINI STREET, INC.
 
Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except per share amounts)
Years Ended December 31,
 202020192018
Revenue$326,780 $281,052 $253,460 
Cost of revenue126,211 105,106 95,981 
Gross profit200,569 175,946 157,479 
Operating expenses:   
Sales and marketing114,741 107,280 89,493 
General and administrative52,222 47,364 37,204 
Impairment charges related to operating lease right-of-use assets1,167   
Litigation costs and related recoveries:
  Professional fees and other costs of litigation13,493 8,002 30,126 
  Litigation appeal refunds (12,775)(21,285)
  Insurance costs and recoveries, net1,062 3,939 (7,583)
  Litigation costs and related recoveries, net14,555 (834)1,258 
Total operating expenses182,685 153,810 127,955 
Operating income 17,884 22,136 29,524 
Non-operating expenses:
Interest expense(77)(398)(32,530)
Other debt financing expenses  (58,331)
Gain from change in fair value of embedded derivatives  1,600 
Other expenses, net(258)(1,495)(2,222)
Income (loss) before income taxes17,549 20,243 (61,959)
Income tax expense(4,569)(2,714)(1,992)
Net income (loss)12,980 17,529 (63,951)
Other comprehensive income (loss):
  Foreign currency gain (loss)1,111 138 (700)
Comprehensive income (loss)$14,091 $17,667 $(64,651)
Net loss attributable to common stockholders$(13,829)$(7,914)$(74,592)
Net loss per share attributable to common stockholders (basic and diluted) $(0.19)$(0.12)$(1.22)
Weighted average number of shares of Common Stock outstanding (basic and diluted)71,231 66,050 61,384 


The accompanying notes are an integral part of these consolidated financial statements.
-7-


RIMINI STREET, INC.
Consolidated Statements of Stockholders’ Deficit
(In thousands)
Common Stock Additional Paid-in Capital Accumulated Other Comprehensive LossAccumulated Deficit Total
 SharesAmount
Balances, December 31, 201759,314 $6 $94,967 $(867)$(268,233)$(174,127)
Stock-based compensation— — 4,394 — — 4,394 
Exercise of stock options for cash1,982 — 2,034 — — 2,034 
Issuance of Common Stock in Private Placement, net2,897 — 17,593 — — 17,593 
Accretion of discount on Series A Preferred Stock— — (2,373)— — (2,373)
Accrued dividends on Series A Preferred Stock
  Paid and payable in cash— — (6,366)— — (6,366)
  Paid and payable in kind— — (1,902)— — (1,902)
Foreign currency translation gain— — — (700)— (700)
Net loss— — — — (63,951)(63,951)
Balances, December 31, 201864,193 6 108,347 (1,567)(332,184)(225,398)
Stock-based compensation expense— — 5,532 — — 5,532 
Exercise of stock options for cash2,780 1 3,334 — — 3,335 
Restricted stock units vested178 — — — —  
Issuance of Common Stock in Private Placement, net207 — 935 — — 935 
Issuance of Common Stock145 — 779 — — 779 
Accretion of discount on Series A Preferred Stock— — (5,848)— — (5,848)
Accrued dividends on Series A Preferred Stock
Paid and payable in cash— — (15,073)— — (15,073)
Paid and payable in kind— — (4,522)— — (4,522)
Foreign currency translation loss— — — 138 — 138 
Net income— — — — 17,529 17,529 
Balances, December 31, 201967,503 7 93,484 (1,429)(314,655)(222,593)
Stock-based compensation expense— — 7,461 — — 7,461 
Exercise of stock options for cash1,689  1,808 — — 1,808 
Restricted stock units vested1,114 — — — — — 
Issuance of Common Stock in August 2020 Offering, net6,100 1 25,103 — — 25,104 
Return related to repurchase of Series A Preferred Stock— — (83)— — (83)
Accretion of discount on Series A Preferred Stock— — (6,275)— — (6,275)
Accrued dividends on Series A Preferred Stock
Paid and payable in cash— — (15,713)— — (15,713)
Paid and payable in kind— — (4,738)— — (4,738)
Foreign currency translation loss— — — 1,111 — 1,111 
Net income— — — — 12,980 12,980 
Balances, December 31, 202076,406 $8 $101,047 $(318)$(301,675)$(200,938)


The accompanying notes are an integral part of these consolidated financial statements.
-8-


RIMINI STREET, INC.
 
Consolidated Statements of Cash Flows
(In thousands)
Years Ended December 31,
 202020192018
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income (loss)
$12,980 $17,529 $(63,951)
Adjustments to reconcile net loss to net cash provided by operating activities:
Accretion and amortization of debt discount and issuance costs
 185 13,331 
Write-off of debt discount and issuance costs
  54,536 
Non-cash impairment charge
1,167   
Amortization and accretion related to ROU assets
6,192   
Gain from change in fair value of embedded derivatives
  (1,600)
Paid-in-kind interest expense
  1,886 
Stock-based compensation expense
7,461 5,532 4,394 
Depreciation and amortization
1,813 1,913 1,838 
Write-off of deferred debt financing costs
  704 
Deferred income taxes
(514)(337)(235)
Other
47 138  
Make-whole applicable premium included in interest expense
  10,410 
Changes in operating assets and liabilities:
Accounts receivable(8,547)(31,221)(18,036)
Prepaid expenses, deposits and other3,189 (9,244)555 
Deferred contract costs(6,895)(968)(3,722)
Accounts payable931 (10,513)2,875 
Accrued compensation, benefits, commissions and other liabilities1,565 8,262 (1,541)
Deferred insurance settlement  (8,033)
Deferred revenue22,714 39,110 28,971 
Net cash provided by operating activities42,103 20,386 22,382 
CASH FLOWS USED IN INVESTING ACTIVITIES:   
Capital expenditures(1,483)(1,872)(1,053)
CASH FLOWS FROM FINANCING ACTIVITIES:   
     Net proceeds related to the issuance of Common Stock from August 2020 Offering25,657   
     Payments of professional fees related to issuance of Common Stock from August 2020 Offering(553)  
     Net proceeds from issuance of Series A Preferred Stock and Common Stock 9,110 133,000 
     Payments to repurchase shares of Series A Preferred Stock(4,500)  
Principal payments on borrowings
 (2,555)(145,807)
Make-whole applicable premium related to prepayment of borrowings
  (10,410)
Payments for deferred offering and finance costs
 (452)(10,159)
Proceeds from exercise of employee stock options
1,808 3,335 2,034 
Payment of cash dividends on Series A Preferred Stock
(15,781)(14,742)(2,845)
Principal payments on financing leases
(256)(433)(587)
Net cash provided by (used in) financing activities6,375 (5,737)(34,774)
Effect of foreign currency changes on cash2,526 405 (1,376)
Net change in cash, cash equivalents and restricted cash49,521 13,182 (14,821)
Cash, cash equivalents and restricted cash at beginning of year38,388 25,206 40,027 
Cash, cash equivalents and restricted cash at end of year$87,909 $38,388 $25,206 

The accompanying notes are an integral part of these consolidated financial statements.
-9-


RIMINI STREET, INC.
 
Consolidated Statements of Cash Flows, Continued
(In thousands)
Years Ended December 31,
 202020192018
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:   
Cash paid for interest
$63 $230 $19,321 
Cash paid for income taxes
3,065 2,184 1,765 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Discount on shares of Common Stock issued in August 2020 Public Offering:
$1,650 $ $ 
 Underwriter discounts and commissions143   
 Underwriter expenses300   
 Accrued professional fees related to the issuance of Common Stock
Discount on shares issued in Private Placement:
Fair value of 292 and 2,897 shares of Common Stock issued for no consideration in 2019 and 2018, respectively
$ $1,098 $20,131 
Original issuance discount on Series A Preferred Stock 500 7,000 
Transaction costs 390  
Issuance of 120 shares of Common Stock regarding consent for Private Placements
 638  
Redeemable Series A Preferred Stock Dividends and Accretion:
Accrued cash dividends$3,842 $3,889 $3,521 
Accrued PIK dividends1,193 1,156 1,056 
Accretion of discount on Series A Preferred Stock6,275 5,848 2,373 
Issuance of Series A Preferred Stock for PIK Dividends
4,680 4,385 846 
Liability for mandatory fees and related debt discount under Credit Facility:
Adjustment for updated calculation of mandatory trigger event exit fees$ $ $3,952 
Increase in principal for debt discount on GP Sponsor loan
  167 
Purchase of equipment under capital lease obligations
1,640 206 353 

The accompanying notes are an integral part of these consolidated financial statements.


-10-


RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BASIS OF PRESENTATION

Nature of Business

Rimini Street, Inc. is a global provider of enterprise software support services. The Company's subscription-based software support products and services offer enterprise software licensees a choice of solutions that replace or supplement the support products offered by enterprise software vendors.
 
Rimini Street, Inc. (“RSI”) was incorporated in the state of Nevada in September 2005. RSI provides enterprise software support services. In May 2017, RSI entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GP Investments Acquisition Corp. (“GPIA”), a publicly-held special purpose acquisition company (“SPAC”) incorporated in the Cayman Islands and formed for the purpose of effecting a business combination with one or more businesses. The Merger Agreement was approved by the respective shareholders of RSI and GPIA in October 2017, and closing occurred on October 10, 2017, resulting in (i) the merger of a wholly-owned subsidiary of GPIA with and into RSI, with RSI as the surviving corporation, after which (ii) RSI merged with and into GPIA, with GPIA as the surviving corporation and renamed “Rimini Street, Inc.” (referred to herein as “RMNI”, as distinguished from RSI, which is defined as the predecessor entity with the same legal name) immediately after consummation of the second merger. As such, the consolidated financial results of the Company for the years ended December 31, 2020, 2019 and 2018 presented in the consolidated financial statements reflect the operating results of RSI and its consolidated subsidiaries.

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES
 
Consolidation
 
The consolidated financial statements, which include the accounts of the Company and its wholly-owned subsidiaries, are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All significant intercompany balances and transactions have been eliminated.

Liquidity
 
As of December 31, 2020, the Company's current liabilities exceeded its current assets by $62.1 million, and the Company earned net income of $13.0 million for the year ended December 31, 2020. As of December 31, 2020, the Company had available cash, cash equivalents and restricted cash of $87.9 million. As of December 31, 2020, the Company’s current liabilities included $229.0 million of deferred revenue whereby the historical costs of fulfilling the Company’s commitments to provide services to its customers was approximately 39% of the related deferred revenue for the year ended December 31, 2020.

As discussed in Note 7, the Company completed a firm commitment underwritten public offering on August 18, 2020 (the “August 2020 Offering”) of 6.1 million shares of its Common Stock at a price of $4.50 per share for total gross proceeds of $27.5 million. Underwriter discounts and commissions were $1.7 million and the underwriter expenses were $0.1 million. The Company also incurred additional professional fees of $0.6 million as part of the transaction, resulting in net proceeds from the August 2020 Offering of approximately $25.1 million. The Company intends to use the net proceeds from the August 2020 Offering for working capital and other general corporate purposes.

As discussed in Note 6, the Company entered into an agreement on October 30, 2020 with certain of the holders of its Series A Preferred Stock (the "Stock Repurchase Agreement") to repurchase 5,000 shares of Series A Preferred Stock and the associated obligations pursuant to the Company's Convertible Secured Promissory Notes outstanding in respect thereof (the "Note Obligations") for an aggregate purchase price of approximately $4.5 million.

On June 20, 2019, the Company completed a third private placement, which provided additional net proceeds of $3.0 million from the sale of 3,500 shares of 13.00% Series A Redeemable Convertible Preferred Stock, par value $0.0001 per share (the "Series A Preferred Stock") and 72,414 of Common Stock. On March 7, 2019, the Company had completed a second placement, which provided additional net cash proceeds of $5.0 million from the sale of 6,500 shares of the Series A Preferred Stock and 134,483 shares of Common Stock.

-11-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 2018, the Company refinanced and repaid its Credit Facility on July 19, 2018 through aggregate cash payments of $132.8 million that resulted in the termination of the Credit Facility. These payments were funded from the Private Placement that resulted in cash proceeds of $133.0 million from the sale of 140,000 shares of Series A Preferred Stock and approximately 2.9 million shares of Common Stock. In addition, the Company used approximately $2.7 million of its cash, primarily for interest and fees under the Credit Facility and transaction costs that were due on July 19, 2018. This refinancing is expected to improve the Company’s liquidity and capital resources whereby cash dividends are payable at 10.0% per annum that will result in quarterly cash dividends ranging from $3.9 million to $4.3 million over the initial 5-year period beginning on the issuance date assuming all shares of Series A Preferred Stock remain outstanding, and thereafter, if not previously redeemed or converted, cash dividends will be payable at 13.0% per annum. Additionally, the Company repaid the $2.4 million loan payable to GP Sponsor during the first half of 2019, and to make operating and financing lease payments that are due within the next 12 months in the aggregate amount of $6.4 million. The Company believes that current cash, cash equivalents, restricted cash, and future cash flow from operating activities will be sufficient to meet the Company’s anticipated cash needs, including cash dividend requirements, working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of these financial statements.
 
Reclassifications
 
Certain amounts in the consolidated financial statements of the Company for prior years have been reclassified to conform to the Company’s presentation for the current year. These reclassifications had no effect on the previously reported net loss, stockholders’ deficit and cash flows.
 
Use of Estimates
 
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires the Company to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. The full extent to which the COVID-19 pandemic will impact the Company's business and operating results will depend on circumstances which are highly uncertain and cannot be accurately predicted. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes are reasonable under the circumstances, to determine the carrying values of assets and liabilities that are not readily apparent from other sources. The Company’s significant accounting estimates include, but are not necessarily limited to, the allowance for doubtful accounts receivable, valuation assumptions for stock options, operating lease right-of-use assets and liabilities, deferred income taxes and the related valuation allowances, accretion of discounts on debt and Series A Preferred Stock, and the evaluation and measurement of contingencies. To the extent there are material differences between the Company’s estimates and the actual results, the Company’s future consolidated results of operation may be affected.
 
Risks and Uncertainties
 
Inherent in the Company’s business are various risks and uncertainties, including its limited operating history in a rapidly changing industry. These risks include the Company’s ability to manage its rapid growth and its ability to attract new customers and expand sales to existing customers, risks related to litigation, as well as other risks and uncertainties. In the event that the Company does not successfully execute its business plan, certain assets may not be recoverable, certain liabilities may not be paid and investments in its capital stock may not be recoverable. The Company’s success depends upon the acceptance of its expertise in providing services, development of sales and distribution channels, and its ability to generate significant revenues and cash flows from the use of this expertise.
 
Segments
 
The Company’s chief operating decision maker (the “CODM”), who is the Company’s Chief Executive Officer, allocates resources and assesses performance based on financial information of the Company. The CODM reviews financial information presented on an entity-level basis for purposes of making operating decisions and assessing financial performance. The entity-level financial information is identical to the information presented in the accompanying consolidated statements of operations and comprehensive loss. Accordingly, the Company has determined that it operates in a single operating and reportable segment.
 
-12-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash, Cash Equivalents and Restricted Cash
 
All highly liquid investments purchased with an original maturity of three months or less that are freely available for the Company’s immediate and general business use are classified as cash and cash equivalents. Cash and cash equivalents consist primarily of demand deposits with financial institutions. The restricted cash consists of demand deposits that are pledged as collateral for corporate credit card debts.
 
Allowance for Doubtful Accounts
 
The Company records a provision for doubtful accounts based on historical experience and a detailed assessment of the collectability of its accounts receivable. In estimating the allowance for doubtful accounts, the Company considers, among other factors, the aging of the accounts receivable, its historical write-offs, the credit worthiness of customers, and general economic conditions. Account balances are charged off against the allowance when the Company believes that it is probable that the receivable will not be recovered. Actual write-offs may either be in excess or less than the estimated allowance.

Property and Equipment
 
Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method over the estimated useful life of the following assets:
  Years
Computer equipment 
1 - 3
Furniture and fixtures 
3 - 7
Capitalized software costs 
3
Leasehold improvements 
Up to 8 years, not to exceed lease term
 
Maintenance and repairs are expensed as incurred. Application development costs related to internal use software projects are capitalized and included in property and equipment. Preliminary planning activities and post implementation activities for internal use software projects are expensed as incurred. Construction-in-progress primarily consists of computer equipment and leasehold improvements that have not yet been placed into service for their intended use. Depreciation and amortization commence when assets are initially placed into service for their intended use.
 
Deferred Contract Costs
 
Costs incurred to obtain new client contracts and to extend existing client contracts are primarily comprised of sales commissions. Initial sales commissions are generally deferred and amortized over their estimated useful life, which is generally 4 years. We determined the period of benefit by taking into consideration the estimated life cycles for our customers, our technology and other factors. We recognized amortization expense related to deferred contract costs of $14.0 million, $12.4 million and $11.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.
 
Impairment of Long-lived Assets
 
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists for property and equipment and other long-lived assets if the carrying amounts of such assets exceed the estimates of future net undiscounted cash flows expected to be generated by such assets. Impairment for intangible software assets is based upon an assessment of net realizable value. An impairment charge is recognized for the amount by which the carrying amount of the asset, or asset group, exceeds its fair value. The Company recognized an impairment charge of $1.2 million for the year ended December 31, 2020, related to one of our office leases as it ceased use of a portion of the office space due to increased use of remote work which has occurred during the COVID-19 pandemic.
 
Debt Issuance Costs and Discounts
 
Debt issuance costs are costs incurred to obtain new debt financing or modify existing debt financing and consist of incremental direct costs incurred for professional fees and due diligence services, including reimbursement of similar costs incurred by the lenders. Debt issuance costs are allocated proportionately between funded and unfunded portions of debt. Amounts paid to the
-13-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
lenders when a financing is consummated are a reduction of the proceeds and are treated as a debt discount. Debt issuance costs and discounts related to funded debt are presented in the accompanying consolidated balance sheet as a reduction in the carrying value of the debt and are accreted to interest expense using the effective interest method. Debt issuance costs related to unfunded debt is presented in the accompanying consolidated balance sheets as a long-term asset and are amortized using the straight-line method over the contractual term of the debt agreement. Unamortized deferred debt issuance costs are not charged to expense when the related debt becomes a demand obligation due to the violation of terms so long as it is probable that the lenders will either waive the violation or will agree to amend or restructure the terms of the indebtedness. If either circumstance is probable, the deferred debt issuance costs continue to be amortized over the remaining term of the initial amortization period. If it is not probable, the costs will be charged to expense. Debt discounts and issuance costs are collectively referred to as DDIC.
 
Embedded Derivatives
 
When the Company enters into a financial instrument such as a debt or equity agreement (the “host contract”), the Company assesses whether the economic characteristics of any embedded features are clearly and closely related to the primary economic characteristics of the remainder of the host contract. When it is determined that (i) an embedded feature possesses economic characteristics that are not clearly and closely related to the primary economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would meet the definition of a financial derivative instrument, then the embedded feature is bifurcated from the host contract and accounted for as a derivative instrument. The estimated fair value of the derivative feature is recorded separately from the carrying value of the host contract, with subsequent changes in the estimated fair value recorded as a non-operating gain or loss in the Company’s consolidated statements of operations.

Accounting for Series A Preferred Stock

Series A Preferred Stock is classified as mezzanine equity in the Company’s consolidated balance sheet since the holders have redemption rights beginning in July 2023 (and earlier under certain circumstances). Discounts and incremental and direct costs incurred to consummate the Private Placement were allocated pro rata between the Series A Preferred Stock and the Common Stock issued based on the relative fair value on the Closing Date. The discount related to Series A Preferred Stock is being accreted using the effective interest method. Accordingly, the carrying value of the Series A Preferred Stock is being increased with a corresponding reduction in additional paid-in capital from the issuance date of July 19, 2018 until the first redemption date of July 19, 2023, when the carrying value will be equal to the aggregate liquidation preference. The Company records a liability for dividends in the period incurred. Accrued dividends are a component of the liquidation preference until paid in cash or settled in additional shares of Series A Preferred Stock. Accretion and accrued dividends are treated as deductions in the calculation of earnings attributable to common stockholders.

Beneficial Conversion Features
 
A beneficial conversion feature is a non-detachable conversion feature that is “in the money” at the commitment date, which requires recognition of a deemed dividend. A conversion option is in the money if the conversion price is lower than the fair value of a share into which it is convertible.
 
Revenue Recognition
 
Revenue is primarily derived from support services, and to a lesser extent, software licensing and related maintenance and professional services.

Effective in fiscal year 2019 with the adoption of Accounting Standards Codification 606 ("ASC 606"), Revenue from Contracts with Customers, revenue is recognized when performance obligations, as stipulated in the contracts, are transferred to a customer for an amount that reflects the consideration the Company expects to receive in exchange for those support services and service contracts. This occurs when the contracts are executed by both parties, the rights and obligations of the parties are identified, payment terms are identified, the contracts have commercial substance and collectability of consideration is probable. The Company's contracts generally do not contain any refund provisions other than in the event of our non-performance or breach.

-14-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company determines revenue recognition through the following steps:
 
Identification of the contract with the customer.
Identification of the performance obligations. 
Determination of the transaction price.   
Allocation of the transaction price to the performance obligations.   
Recognition of revenue when the performance obligations are satisfied.

Most of the Company's contracts contain a single performance obligation for subscription support services. In a limited number of arrangements, the Company also licenses software and related maintenance services under term-based arrangements or provides professional services. The Company’s performance obligations are evaluated for whether they can be distinct or should be accounted for as one performance obligation and primarily consist of (i) subscription support services or (ii) professional services sold on a time and materials basis.

The transaction price is generally the same as the contractual price. Typically, the structure of our arrangements do not give rise to variable consideration. However, in those instances where variable consideration should exist, the Company includes in its estimates, additional revenue for variable consideration when it has an enforceable right, the amount can be estimated reliably and its realization is probable.

Subscription Services

The Company’s subscription support services are part of a comprehensive support program that helps clients keep their software and systems running smoothly and in full legal compliance. Subscription support services include product support (fixes and installation support), security, advanced support (performance tuning and interoperability), strategic roadmap services (upgrade process), global tax, legal and regulatory services, global security, proactive support services, strategic roadmap services, device and user interface support and account management services. Subscription contracts are generally non-cancelable and do not contain general rights of return. The Company’s support subscription is viewed as a stand-ready performance obligation comprised of a series of distinct services that is satisfied ratably over time as the services are provided. A time-elapsed output method is used to measure progress as the Company's efforts are expended evenly throughout the period given the nature of the promise is a stand-ready service.

Other Services

Other services include both software licensing services and professional services. The Company’s software licensing includes both internally developed software licenses as well as third party licenses. The Company’s professional services consist of various consulting services, which include project oversight, minor software customization or enhancement, and testing of client-developed software customization. Services may be provided solely by the Company, by a partner of the Company, or in combination with the Company's partners. The Company’s professional services are generally provided under a separate statement of work from our subscription support services. Revenue is recognized as services are performed.
 
Revenues generally include any taxes withheld by foreign customers and subsequently remitted to governmental authorities in those foreign jurisdictions. Foreign withholding taxes included in revenues amounted to $2.1 million, $0.9 million and $0.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Deferred revenue is a contract liability that consists of billings issued that are non-cancellable but not yet paid and payments received in advance of revenue recognition. The Company typically invoices its customers at the beginning of the contract term, in annual and multi-year installments. Deferred revenue is recognized as the Company satisfies its performance obligations over the term of the contracted service period. The Company expects to recognize revenue on approximately $229.0 million of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

Advertising
 
Advertising costs are charged to sales and marketing expense in the period incurred.
 
-15-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Legal Costs and Deferred Settlement Proceeds
 
Legal fees and costs are charged to general and administrative expense as incurred, other than legal fees and costs that are accounted for as deferred offering costs and debt issuance costs. The proceeds from legal fee insurance coverage prepaid settlements were accounted for as a deferred liability that was reduced as legal expenses related to the litigation were incurred.
 
Loss Contingencies
 
The Company is subject to various loss contingencies arising in the ordinary course of business. An estimated loss contingency is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. If some amount within a range of probable loss appears to be a better estimate than any other amount within the range, the Company accrues that amount. Alternatively, when no amount within a range of probable loss appears to be a better estimate than any other amount, the Company accrues the lowest amount in the range. If the Company determines that a loss is reasonably possible and the range of the loss is estimable, then the Company discloses the range of the possible loss if the upper end of the range is material. If the Company cannot estimate the range of loss, it will disclose the reason why it cannot estimate the range of loss, if there is a reasonable possibility that the amount of loss may be material. The Company regularly evaluates current information available to it to determine whether an accrual is required, an accrual should be adjusted and if a range of possible loss should be disclosed.
 
Stock-Based Compensation
 
The Company measures the cost of employee and director services received in exchange for all equity awards granted, based on the fair market value of the award as of the grant date. The Company computes the fair value of options using the Black-Scholes-Merton (“BSM”) option pricing model. The Company recognizes the cost of the equity awards over the period that services are provided to earn the award, usually the vesting period. For awards granted which contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation cost is recognized as an expense on a straight-line basis over the requisite service period as if the award was, in substance, a single award. Stock-based compensation expense is recognized based on awards ultimately expected to vest whereby estimates of forfeitures are based upon historical experience.

Income Taxes
 
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets is dependent upon future taxable income. A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings.
 
The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change in recognition or measurement is reflected in the period in which such change occurs. Interest and penalties related to income taxes are recognized in the provision for income taxes.
 
Foreign Currency
 
The Company’s reporting currency is the U.S. Dollar, while the functional currencies of its foreign subsidiaries are their respective local currencies. The asset and liability accounts of the foreign subsidiaries are translated from their local currencies at the exchange rates in effect on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the period. Gains and losses resulting from the translation of the subsidiary balance sheets are recorded net of tax as a component of accumulated other comprehensive loss. Gains and losses from foreign currency transactions are recorded in other income and expense in the consolidated statements of operations and comprehensive loss. The tax effect has not been material to date.
 
-16-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Loss Per Common Share
 
Basic net loss per common share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding for each period presented. Diluted net loss per common share is computed using the treasury stock method by giving effect to the exercise of all potential shares of Common Stock, including stock options and warrants, and the conversion of RSI Preferred Stock, to the extent dilutive. RSI Preferred Stock participated in dividends but was not considered participating securities when there was a net loss because the holders did not have a contractual obligation to share in the losses.

The holders of Series A Preferred Stock are entitled to participate in Common Stock dividends, if and when declared, on a one-to-one per-share basis. Accordingly, in periods in which the Company has net income, earnings per share will be computed using the two-class method whereby the pro rata dividends distributable to the holders of Series A Preferred Stock will be deducted from earnings applicable to common stockholders, regardless of whether a dividend is declared for such undistributed earnings.
 
Recent Accounting Pronouncements

The following accounting standards were adopted during the fiscal year 2020:

In February 2016, Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases, which requires organizations that lease assets (“lessees”) to recognize on the balance sheet the right of use ("ROU") assets and liabilities for the rights and obligations created by those leases with lease terms of more than 12 months and to disclose key information about leasing arrangements. Under the new standard, both finance and operating leases will be required to be recognized on the balance sheet. Additional quantitative and qualitative disclosures, including significant judgments made by management, are also required. The Company adopted ASC 842 using the modified retrospective method on January 1, 2020. See Note 3 for the disclosure on the impact of adopting this standard.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires application of an impairment model known as the current expected credit loss (“CECL”) model to certain financial instruments held at amortized cost, including trade receivables. Using the CECL model, an entity recognizes an allowance for expected credit losses based on historical experience, current conditions, and forecasted information rather than the current methodology of delaying recognition of credit losses until it is probable loss has been incurred. The new guidance was effective for the Company in January 2020. The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurements, which provides new guidance on disclosures related to fair value measurements. The guidance is intended to improve the effectiveness of the notes to financial statements by facilitating clearer communication, and it includes multiple new, eliminated and modified disclosure requirements. The guidance was effective for the Company in January 2020. The adoption of this guidance did not have an impact on the Company's Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which clarifies the accounting for implementation costs in cloud computing arrangements. The guidance aligns the requirements for capitalizing implementation costs in a hosting arrangement that is a service contract with the requirements for capitalization costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. The new guidance was effective for the Company in January 2020. The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements.

-17-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - ADOPTION OF ASC 842, LEASES

Effective at the start of fiscal 2020, the Company adopted the provisions and expanded disclosure requirements described in Topic 842. The Company adopted the standard using the prospective method. Accordingly, the results for the prior comparable periods were not adjusted to conform to the current period measurement or recognition of results. The Company has operating leases for real estate and equipment with an option to renew the leases for up to one month to five years. Some of the leases include the option to terminate the leases upon 30-days’ notice with a penalty. The Company's leases have various remaining lease terms ranging from January 2021 to January 2027. The Company's lease agreements may include renewal or termination options for varying periods that are generally at the Company's discretion. The Company's lease terms only include those periods related to renewal options the Company believes are reasonably certain to exercise. The Company generally does not include these renewal options as it is not reasonably certain to renew at the lease commencement date. This determination is based on consideration of certain economic, strategic and other factors that the Company evaluates at lease commencement date and reevaluates throughout the lease term. Some leases also include options to terminate the leases and the Company only includes those periods beyond the termination date if it is reasonably certain not to exercise the termination option.

The Company uses a discount rate to calculate the ROU asset and lease liability. When the implicit rate is known or provided in the lease documents, the Company is required to use this rate. In cases in which the implicit rate is not known, the Company uses an estimated incremental borrowing rate.

Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance and tax payments. The variable portion of lease payments is not included in the Company's ROU assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses recorded in selling and administrative expenses on the Consolidated Statements of Operations.

The Company has lease agreements with both lease and non-lease components that are treated as a single lease component for all underlying asset classes. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.

The Company has elected to apply the short-term lease exception for all underlying asset classes. That is, leases with a term of 12 months or less are not recognized on the balance sheet, but rather expensed on a straight-line basis over the lease term. The Company's leases do not include significant restrictions or covenants, and residual value guarantees are generally not included within its operating leases. As of December 31, 2020, the Company did not have any material additional operating leases that have not yet commenced.

The components of operating lease expense and supplemental balance sheet information were as follows (in thousands):
Year Ended
December 31, 2020
Operating lease expense related to ROU assets and liabilities$6,192 
Other lease expense1,076 
  Total lease expense$7,268 

Other information related to leases was as follows (in thousands):
Supplemental Balance Sheet InformationDecember 31, 2020
Operating lease right-of-use assets, noncurrent$17,521 
Operating lease liabilities, current$3,940 
Operating lease liabilities, noncurrent15,993 
  Total operating lease liabilities$19,933 



RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of January 1, 2020, the Company had total operating lease right-of use assets of $18.8 million and total operating lease liabilities of $20.0 million.
Weighted Average Remaining Lease TermYears
Operating Leases4.8
Weighted Average Discount Rate
Operating Leases10.7 %

Maturities of operating lease liabilities as of December 31, 2020 were as follows (in thousands):
Year Ending December 31:
2021$5,820 
20225,255 
20234,532 
20244,266 
20253,096 
Thereafter2,650 
Total future undiscounted lease payments25,619 
Less imputed interest(5,686)
Total$19,933 

For the year ended December 31, 2020, the Company paid $6.1 million for operating leases.

Maturities of operating leases as of December 31, 2019 were as follow (in thousands):
Year Ending December 31, 2019
2020$5,609 
20215,155 
20224,067 
20232,993 
20242,670 
Thereafter5,065 
$25,559 




RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 — OTHER FINANCIAL INFORMATION
 
Cash, cash equivalents and restricted cash
 
For purposes of the consolidated statements of cash flows, as of December 31, 2020, 2019 and 2018 cash, cash equivalents and restricted cash are as follows (in thousands):
 20202019
Cash and cash equivalents$87,575 $37,952 
Restricted cash334 436 
Total cash, cash equivalents and restricted cash$87,909 $38,388 

Allowance for Doubtful Accounts
 
Activity in the allowance for doubtful accounts is set forth below for the years ended December 31, 2020, 2019 and 2018 (in thousands):
 202020192018
Allowance, beginning of year$1,608 $711 $51 
Provisions996 971 713 
Write offs, net of recoveries(1,881)(74)(53)
Allowance, end of year$723 $1,608 $711 
Write offs, net of recoveries significantly increased in 2020 due to collection issues and client bankruptcies resulting, in part, to the COVID-19 pandemic.

Prepaid Expenses and Other Current Assets
 
As of December 31, 2020 and 2019, prepaid expenses and other current assets consisted of the following (in thousands):
 20202019
Prepaid expenses and deposits$7,686 $12,390 
Foreign tax refunds receivable1,714 1,819 
Other4,056 996 
Total$13,456 $15,205 

Property and Equipment
 
As of December 31, 2020 and 2019, property and equipment consisted of the following (in thousands):
 20202019
Computer equipment$11,141 $8,786 
Furniture and fixtures2,837 2,836 
Capitalized software costs438 515 
Leasehold improvements1,292 1,251 
Construction-in-progress97 126 
Total property and equipment15,805 13,514 
Less accumulated depreciation(10,985)(9,847)
Property and equipment, net$4,820 $3,667 
 
Depreciation expense was $1.8 million, $1.9 million and $1.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.

-20-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred Contract Costs

Activity for deferred contract costs for the years ended December 31, 2020 and 2019 was provided below (in thousands):
Years Ended December 31,
20202019
Deferred contract costs, current and noncurrent as of the beginning of the period$28,049 $27,080 
Capitalized commissions during the period20,886 13,408 
Amortized deferred contract costs during the period(13,990)(12,439)
Deferred contract costs, current and noncurrent, as of the end of the period$34,945 $28,049 

Other Accrued Liabilities
 
As of December 31, 2020 and 2019, other accrued liabilities consist of the following (in thousands):
 20202019
Accrued sales and other taxes$5,213 $5,752 
Accrued professional fees5,912 4,367 
Accrued dividends on Redeemable Series A Preferred Stock3,842 3,889 
Current maturities of capital lease obligations429 222 
Income taxes payable2,245 1,091 
Appeal proceeds payable to insurance company 4,388 
Other accrued expenses3,513 3,638 
Total other accrued liabilities$21,154 $23,347 

Deferred Revenue

Activity for deferred revenue for the years ended December 31, 2020 and 2019 was provided below (in thousands):
Years Ended December 31,
20202019
Deferred revenue, current and noncurrent, as of the beginning of the period$235,498 $196,706 
Billings, net348,215 319,844 
Revenue recognized(326,780)(281,052)
Deferred revenue, current and noncurrent, as of the end of the period$256,933 $235,498 

Advertising
 
Advertising expenses were $3.1 million, $0.9 million and $1.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

-21-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other Expenses, Net
 
For the years ended December 31, 2020, 2019 and 2018, other expenses, net consists of the following (in thousands):
 202020192018
Interest income:
Post-judgment interest on litigation appeal award$ $212 $199 
Other24 45 54 
Write-off of deferred debt financing costs  (704)
Foreign currency transaction losses(77)(1,640)(1,476)
Other expenses(205)(112)(295)
Total other expenses, net$(258)$(1,495)$(2,222)

NOTE 5 — FORMER DEBT AGREEMENTS

Related Party Note Payable to GP Sponsor
Upon consummation of the merger with GP Investments Acquisition Corp. ("GPIA") in May 2017, an outstanding note payable to GP Sponsor with an initial face amount of approximately $3.0 million was assumed by the Company. This note was originally non-interest bearing and was not due and payable until the outstanding principal balance under the former Credit Facility was less than $95.0 million. At the inception of this note, the maturity date was expected to occur in June 2020 based on the scheduled principal payments under the Credit Facility. Interest was initially imputed under this note payable at the rate of 15.0% per annum. This note payable was amended twice in 2018, which resulted in further changes to the effective interest rate and maturity date.

The second amendment to the note payable was effective on December 21, 2018 and provided for an extension of the maturity date from January 4, 2019 to June 28, 2019. In addition, the parties agreed that the note payable would retroactively bear interest at 13.0% per annum from July 19, 2018 through the maturity date. Total retroactive interest amounted to $0.2 million which is accounted for as DDIC that was being accreted through the maturity date. The Company recognized accretion expense of $0.2 million and $0.9 million for the years ended December 31, 2019 and 2018, respectively

In addition, the second amendment provided for monthly principal payments starting in December 2018 of approximately $0.4 million plus accrued interest. In December 2018, the Company made a payment of $0.6 million, primarily consisting of payment of retroactive interest of $0.2 million and the first monthly principal payment of $0.4 million. The Company made principal and interest payments totaling $2.7 million during the year ended December 31, 2019. The effective interest rate for accretion of DDIC was 26.4% for the period from December 21, 2018 through June 28, 2019. The note was paid off on June 28, 2019.

Former Credit Facility

Overview. In June 2016, the Company entered into a multi-draw term loan Financing Agreement (the “Credit Facility”) with a syndicate of lenders (the “Lenders”). The Credit Facility would have matured in June 2020 but was repaid and terminated in July 2018 as discussed below. The Credit Facility provided for an aggregate commitment of up to $125.0 million, which consisted of an initial term loan for $30.0 million in June 2016, a “delayed draw A Term Loan” for $65.0 million, and a “delayed draw B Term Loan” for $30.0 million. An origination fee equal to 5.0% of the $125.0 million commitment was paid in cash to the Lenders from the proceeds of the initial term loan. The Credit Facility provided for an Original Issue Discount (“OID”) of 2.0% of the initial face amount of borrowings. Origination fees and OID were accounted for as DDIC.
 
Borrowings under the Credit Facility were collateralized by substantially all assets of the Company, including certain cash depository accounts that were subject to control agreements with the Lenders.
 
Interest and Fees. The outstanding principal balance under the Credit Facility provided for monthly interest payments at 15.0% per annum, consisting of 12.0% per annum that was payable in cash and 3.0% per annum that was payable through the issuance of additional borrowings beginning on the interest payment due date (referred to as paid-in-kind, or “PIK” interest). In addition,
-22-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
a make-whole applicable premium payment of approximately 15.0% per annum through June 2019 was required for certain principal prepayments as defined in the Credit Facility.
 
The Credit Facility provided for collateral monitoring fees at the rate of 2.5% of the outstanding principal balance during 2018 until the Credit Facility was terminated. The Credit Facility also required unused line fees of 5.0% per annum on the $17.5 million undrawn portion of the Credit Facility during 2018 until the termination date. All unused line fees and collateral monitoring fees were payable in monthly arrears and were recorded as a component of other debt financing expenses in the period incurred.
 
Accretion and Amortization. DDIC that relates to the entire Credit Facility was allocated pro rata between the funded and unfunded portions of the Credit Facility based on the relative amounts that were cumulatively borrowed versus the undrawn portion of the $125.0 million commitment. DDIC related to funded debt was accreted to interest expense using the effective interest method based on the aggregate principal obligations to the Lenders and consulting and Trigger Event obligations to the Origination Agent. DDIC associated with unfunded debt was amortized using the straight-line method from the date incurred through the maturity date of the Credit Facility, which was included in other debt financing expenses in the accompanying consolidated statements of operations and comprehensive loss.

Termination of the Credit Facility. In connection with the closing on July 19, 2018 of the Initial Private Placement, the Company used substantially all of the $133.0 million of gross proceeds from the Initial Private Placement (together with cash-on-hand) to repay all outstanding indebtedness and fees under the Credit Facility, and the Credit Facility was terminated. The aggregate cash payments to terminate the Credit Facility amounted to $132.8 million and consisted of the following (in thousands):
Contractual principal and exit fees:
  Principal balance$102,576 
  Mandatory trigger event exit fees13,624 
  Mandatory consulting2,000 
    Subtotal118,200 
Make-whole applicable premium7,307 
Amendment fees and related liabilities6,250 
Accrued interest and fees payable1,073 
    Total cash termination payments$132,830 

Funded Credit Facility Activity for 2018. Presented below is a summary of activity related to the funded debt, including allocated DIC, for the year ended December 31, 2018 (in thousands):
Contractual Liability PaymentsDDIC Write-off
December 31, 2017PIK AccrualLiability AdjustmentsScheduledPrepaymentsPay-offAccretion ExpensePrepaymentsPay-offDecember 31, 2018
Contractual liabilities:
Principal balance$125,872 $1,886 $ $(7,250)$(17,932)$(102,576)$ $— $— $ 
Mandatory trigger event exit fees9,672  3,952   (13,624) — —  
Mandatory consulting fees4,000   (2,000) (2,000) — —  
Total contractual liabilities139,544 1,886 3,952 (9,250)(17,932)(118,200) — —  
DDIC:
Original issue discount1,816       (234)(1,582) 
Origination fee4,538       (586)(3,952) 
Amendment fee11,521       (1,487)(10,034) 
Fair value of warrants6,424       (829)(5,595) 
Consulting fees to lenders6,519       (841)(5,678) 
Mandatory trigger event exit fees55,200  3,952     (7,314)(51,838) 
Other issuance costs3,600       (465)(3,135) 
Total DDIC89,618  3,952     (11,756)(81,814) 
Cumulative accretion(30,128)     (11,670)4,587 37,211  
Net discount59,490  3,952    (11,670)(7,169)(44,603) 
Net carrying value$80,054 $1,886 $ $(9,250)$(17,932)$(118,200)$11,670 $7,169 $44,603 $ 
-23-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Interest Expense
 
The components of interest expense for the years ended December 31, 2020, 2019 and 2018 are presented below (in thousands):
 202020192018
Credit Facility:   
Interest expense at 12.0%
$ $ $7,513 
PIK interest at 3.0%
  1,886 
Accretion expense for funded debt  11,670 
Make-whole applicable premium:
Credit Facility prepayments  3,103 
Payoff of funded Credit Facility  7,307 
Accretion expense for GP Sponsor note payable 185 905 
Interest on other borrowings77 213 146 
Total interest expense$77 $398 $32,530 

Other Debt Financing Expenses
 
The components of other debt financing expenses for the years ended December 31, 2020, 2019 and 2018 are presented below (in thousands):
 202020192018
Write-off of DDIC:
Credit Facility prepayments$ $ $7,169 
Payoff of funded Credit Facility  44,603 
Termination of unfunded Credit Facility  2,764 
Collateral monitoring fees  1,556 
Amortization of debt issuance costs related to unfunded debt  756 
Unused line fees  481 
Amortization of prepaid agent fees and other  1,002 
Total debt financing expenses$ $ $58,331 

Embedded Derivatives
 
The Credit Facility included features that were determined to be embedded derivatives requiring bifurcation and accounting as separate financial instruments. Prior to the termination of the Credit Facility on July 19, 2018, the Company determined that embedded derivatives included the requirements to pay make-whole applicable premium in connection with certain mandatory prepayments of principal, and default interest due to non-credit-related events of default. These embedded derivatives were classified within Level 3 of the fair value hierarchy.

Changes in the fair value of embedded derivative liabilities resulted in a gain of $1.6 million for the year ended December 31, 2018. These changes in fair value are reflected in the Company’s consolidated statements of operations as a gain from change in fair value of embedded derivatives.

NOTE 6 — REDEEMABLE SERIES A PREFERRED STOCK

2018 Securities Purchase Agreement

On July 19, 2018, the Company closed a Securities Purchase Agreement (the “2018 SPA”) with several accredited investors (the “Purchasers”) for a private placement (the “Initial Private Placement”) of (i) 140,000 shares of Series A Preferred Stock, (ii) approximately 2.9 million shares of Common Stock, and (iii) convertible secured promissory notes (the “Convertible
-24-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes”), with no principal amount outstanding at issuance that solely collateralize amounts, if any, that may become payable by the Company pursuant to certain redemption provisions of the Series A Preferred Stock.

Pursuant to the 2018 SPA, the Purchasers acquired an aggregate of 140,000 shares of Series A Preferred Stock, 2.9 million shares of Common Stock, and Convertible Notes with no principal amount outstanding as of the issuance date, for an aggregate purchase price equal to $133.0 million in cash (after taking into account a discount of $7.0 million, but before the incremental and direct transaction costs associated with the Private Placement of $4.6 million). The allocation of the net proceeds as of the Closing Date, along with changes in the net carrying value of the Series A Preferred Stock through December 31, 2019 are set forth below (dollars in thousands):
Series A Preferred StockCommonConvertible
SharesAmountStockNotesTotal
Fair value on July 19, 2018:
Series A Preferred Stock140,000 $126,763 
(1)
$— $— $126,763 
Common Stock— — 20,131 
(2)
— 20,131 
Convertible Notes— — — — — 
Total140,000 $126,763 $20,131 $— $146,894 
Relative fair value allocation on July 19, 2018:
Aggregate cash proceeds on July 19, 2018140,000 $114,773 
(3)
$18,227 
(3)
$— $133,000 
Incremental and direct costs— (3,994)
(4)
(634)
(4)
— (4,628)
Net carrying value on July 19, 2018140,000 $110,779 $17,593 $— $128,372 
_________________
1.The liquidation preference for each share of Series A Preferred Stock on the closing date for the Initial Private Placement was $1,000 per for an aggregate liquidation preference of $140.0 million. The estimated fair value of the Series A Preferred Stock was approximately $126.8 million on July 19, 2018, which is the basis for allocation of the net proceeds. Please refer to Note 13 for further discussion of the valuation methodology employed.
2.The fair value of the issuance of approximately 2.9 million shares of the Common Stock was based on the last closing price of $6.95 per share on the date prior to closing the transaction.
3.The aggregate cash proceeds of $133.0 million on July 19, 2018 were allocated pro rata based on the fair value of all consideration issued.
4.Incremental and direct costs of the Initial Private Placement were allocated pro rata based on the fair value of all consideration issued. Such costs include financial advisory and professional fees of $2.7 million that were incurred by the Company, and due diligence and professional fees incurred by the investors of $1.9 million.

At the closing, the Company used the $133.0 million of proceeds from the Initial Private Placement plus cash and cash equivalents of $2.7 million to (i) repay all outstanding indebtedness and various operating and financing fees and expenses under the former Credit Facility in the aggregate amount of $132.8 million as discussed in Note 5, (ii) pay incremental and direct transaction costs of $2.7 million, and (iii) pay a professional services retainer of $0.2 million.

In connection with the completion of the Initial Private Placement, the Company, among other customary closing actions, (i) filed a Certificate of Designations with the State of Delaware setting forth the rights, preferences, privileges, qualifications, restrictions and limitations on the Series A Preferred Stock, (ii) entered into a Registration Rights Agreement with the Purchasers setting forth certain registration rights of capital stock held by the Purchasers (the “Registration Rights Agreement”), (iii) delivered a Convertible Note to each Purchaser, and (iv) entered into a Security Agreement (the “Security Agreement”) in respect of the Company’s assets collateralizing the amounts that may become payable pursuant to the Convertible Notes if certain redemption provisions of the Series A Preferred Stock are triggered in the future.

March 2019 Securities Purchase Agreement

On March 7, 2019, the Company entered into a securities purchase agreement (the “March 2019 SPA”) with an accredited investor for a private placement (the "March 2019 Private Placement") of (i) 6,500 shares of Series A Preferred Stock, (ii) 134,483 shares of Common Stock, and (iii) a Convertible Note (as defined below) with no principal balance outstanding. The shares of Series A Preferred Stock were authorized pursuant to the Certificate of Designations (as defined below) and are subject to the provisions set forth in an amended Security Agreement (as defined below), a Convertible Note and a registration rights agreement that is substantially similar in all material respects to the Registration Rights Agreement (as defined below)
-25-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
entered into in connection with the 2018 Securities Purchase Agreement discussed below. The accredited investor in the March 2019 Private Placement is affiliated with one of the accredited investors in the Initial Private Placement.

The aggregate cash proceeds from the March 2019 Private Placement were $5.8 million in cash (after an 11.0% discount or $0.7 million). The net proceeds were approximately $5.0 million after estimated transaction costs payable by the Company of $0.8 million. The transaction costs consisted of 85,000 shares of Common Stock issued to the existing holders of the Series A Preferred Stock for their consent at a cost of approximately $0.5 million and direct transaction costs of approximately $0.3 million related to due diligence and professional fees. The net proceeds were allocated based on their relative fair values at issuance of the Series A Preferred Stock and the Common Stock. The allocation of the net proceeds from the March 2019 Private Placement are set forth below (dollars in thousands):
Series A Preferred StockCommonConvertible
SharesAmountStockNotesTotal
Fair value on March 7, 2019:
Series A Preferred Stock6,500 $5,313 
(1)
$— $— $5,313 
Common Stock— — 722 
(2)
— 722 
Convertible Notes— — — — — 
Total6,500 $5,313 $722 $— $6,035 
Relative fair value allocation on March 7, 2019:
Aggregate cash proceeds on March 7, 20196,500 $5,093 
(3)
$692 
(3)
$— $5,785 
Incremental and direct costs— (661)
(4)
(90)
(4)
— (751)
Net carrying value on March 7, 20196,500 $4,432 $602 $— $5,034 

1.The liquidation preference for each share of Series A Preferred Stock on the closing date for the March 2019 Private Placement was $1,000 per share for an aggregate liquidation preference of $6.5 million. The estimated fair value of the Series A Preferred Stock was approximately $5.3 million on March 7, 2019, which is the basis for allocation of the net proceeds. Please refer to Note 13 for further discussion of the valuation methodology employed.
2.The fair value of the issuance of approximately 134,483 shares of the Common Stock was based on the closing price of $5.37 per share on the date prior to closing of the transaction.
3.The aggregate cash proceeds of $5.8 million on March 7, 2019 were allocated pro rata based on the fair value of all consideration issued.
4.Incremental and direct costs related to the March 2019 Private Placement were allocated pro rata based on the fair value of all consideration issued. Such costs included the issuance of 85,000 shares of Common Stock to the Initial Private Placement investors in the Series A Preferred Stock for their consent of approximately $0.5 million and financial advisory and professional fees that were incurred of approximately $0.3 million that were either paid or accrued directly by the Company as of March 31, 2019.

June 2019 Securities Purchase Agreement

On June 20, 2019, the Company entered into a securities purchase agreement (the "June 2019 SPA") with accredited investors for a private placement (the “June 2019 Private Placement”) of (i) 3,500 shares of Series A Preferred Stock, (ii) 72,414 shares of Common Stock, and (iii) a Convertible Note (as defined below) with no principal balance outstanding. The shares of the Series A Preferred Stock were authorized pursuant to the Certificate of Designations (as defined below) and are subject to the provisions set forth in an amended Security Agreement (as defined below), a Convertible Note and a registration rights agreement that is substantially similar in all material respects to the Registration Rights Agreement (as defined below) entered into connection with the 2018 Securities Purchase Agreement discussed below. The accredited investors in the June 2019 Private Placement are not affiliated with the accredited investors in the March 2019 Private Placement or the Initial Private Placement.

The aggregate cash proceeds from the June 2019 Private Placement were $3.3 million in cash (after a 5.0% discount or $0.2 million). The net proceeds were approximately $3.0 million after estimated transaction costs payable by the Company of $0.3 million. The transaction costs consisted of 35,000 shares of Common Stock issued to the existing holders of the Series A Preferred Stock for their consent at a cost of approximately $0.2 million and direct transaction costs of approximately $0.2 million related to professional fees of the investors, existing holders of Series A Preferred Stock and the Company. The net proceeds were allocated based on their relative fair values at issuance of the Series A Preferred Stock and the Common Stock. The allocation of the net proceeds from the June 2019 Private Placement are set forth below (dollars in thousands):
-26-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Series A Preferred StockCommonConvertible
SharesAmountStockNotesTotal
Fair value on June 20, 2019:
  Series A Preferred Stock3,500 $2,997 
(1)
$— $— $2,997 
  Common Stock— — 376 
(2)
— 376 
  Convertible Notes— — — — — 
    Total3,500 $2,997 $376 $— $3,373 
Relative fair value allocation on June 20, 2019:
  Aggregate cash proceeds on June 20, 20193,500 $2,954 
(3)
$371 
(3)
$— $3,325 
  Incremental and direct costs— (301)
(4)
(38)
(4)
— (339)
Net carrying value on June 20, 20193,500 $2,653 $333 $— $2,986 

1.The liquidation preference for each share of Series A Preferred Stock on the closing date for the June 2019 Private Placement was $1,000 per share for an aggregate liquidation preference of $3.5 million. The estimated fair value of the Series A Preferred Stock was approximately $3.0 million on June 20, 2019, which is the basis for allocation of the net proceeds. Please refer to Note 13 for further discussion of the valuation methodology employed.
2.The fair value of the issuance of approximately 72,414 shares of the Common Stock was based on the closing price of $5.19 per share on the date prior to closing of the transaction.
3.The aggregate cash proceeds of $3.3 million on June 20, 2019 were allocated pro rata based on the fair value of all consideration issued.
4.Incremental and direct costs related to the June 2019 Private Placement were allocated pro rata based on the fair value of all consideration issued. Such costs included the issuance of 35,000 shares of Common Stock to the Initial Private Placement investors in the Series A Preferred Stock for their consent of approximately $0.2 million and financial advisory and professional fees that were incurred of approximately $0.2 million that were either paid or accrued directly by the Company as of June 30, 2019.

On October 30, 2020, the Company entered into the Stock Repurchase Agreement with certain of the holders of its Series A Preferred Stock to repurchase 5,000 shares of Series A Preferred Stock and the associated Note Obligations for an aggregate purchase price of approximately $4.5 million representing a discount to the face value of such shares of Series A Preferred Stock and no make-whole payments were required. The Stock Repurchase Agreement contains customary representations, warranties and covenants of the parties and waivers relating to the purchased shares of Series A Preferred Stock.

Upon the closing of the transactions contemplated by the Stock Repurchase Agreement, the shares of Series A Preferred Stock purchased by the Company were retired (and the underlying Note Obligations cancelled) and are not eligible for re-issuance by the Company in accordance with the terms of the Certificate of Designations for the Series A Preferred Stock.

Subsequent Event

On January 5, 2021, the Company entered into an agreement with certain of the holders of its Series A Preferred Stock (the “Stock Repurchase Agreement”) to repurchase 10,000 shares of Series A Preferred Stock and the associated obligations pursuant to the Company’s Convertible Secured Promissory Notes outstanding in respect thereof (the “Note Obligations”) for an aggregate purchase price of approximately $8.95 million representing a discount to the face value of such shares of Series A Preferred Stock and no make-whole payments were required. The Stock Repurchase Agreement contains customary representations, warranties and covenants of the parties and waivers relating to the purchased shares of Series A Preferred Stock.

Upon the closing of the transactions contemplated by the Stock Repurchase Agreement, the shares of Series A Preferred Stock purchased by the Company were retired (and the underlying Note Obligations cancelled) and are not eligible for re-issuance by the Company in accordance with the terms of the Certificate of Designations for the Series A Preferred Stock.

-27-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The changes in the net carrying value of Series A Preferred Stock from July 19, 2018 to December 31, 2020, are set forth below (dollars in thousands):
Series A Preferred Stock
SharesAmount
Net carrying value on July 19, 2018140,000 $110,779 
Issuance of shares to settle PIK dividends on October 1, 2018846 846 
Accretion of discount for the year end December 31, 2018— 2,373 
  Net carrying value as of December 31, 2018140,846 113,998 
Issuance of shares to settle PIK dividends on January 2, 20191,062 1,062 
Additional shares issued on March 7, 20196,500 4,432 
Issuance of shares to settle PIK dividends on April 1, 20191,059 1,059 
Additional shares issued on June 20, 20193,500 2,653 
Issuance of shares to settle PIK dividends on July 1, 20191,115 1,115 
Issuance of shares to settle PIK dividends on October 1, 20191,149 1,149 
Accretion of discount for the year ended December 31, 2019— 5,848 
  Net carrying value as of December 31, 2019155,231 131,316 
Issuance of shares to settle PIK dividends on January 2, 20201,170 1,170 
Issuance of shares to settle PIK dividends on April 1, 20201,153 1,153 
Issuance of shares to settle PIK dividends on July 1, 20201,175 1,175 
Issuance of shares to settle PIK dividends on October 1, 20201,182 1,182 
Repurchase of 5,000 shares on October 30, 2020
(5,000)(4,417)
Accretion of discount for the year ended December 31, 2020— 6,275 
  Net carrying value for the year ended December 31, 2020154,911 $137,854 

For future calculations of earnings applicable to common stockholders, the aggregate discount applicable to the Series A Preferred Stock will be accreted using the effective interest method from the respective issuance dates through July 19, 2023 when the holders of all outstanding shares of Series A Preferred Stock may elect to redeem their shares for cash.

Agreements Related to Private Placement Transactions

In connection with the completion of the Initial Private Placement, the Company, among other customary closing actions, (i) filed a Certificate of Designations with the State of Delaware setting forth the rights, preferences, privileges, qualifications, restrictions and limitations on the Series A Preferred Stock (the “CoD”), (ii) entered into a Registration Rights Agreement with the Purchasers setting forth certain registration rights of the Purchasers (the “Registration Rights Agreement”), (iii) delivered a Convertible Note to each Purchaser, and (iv) entered into a Security Agreement (the “Security Agreement”) in respect of the Company’s assets collateralizing the amounts that may become payable pursuant to the Promissory Notes if certain redemption provisions of the Series A Preferred Stock are triggered in the future. In connection with both the March 2019 and June 2019 Private Placements, the Company entered into a securities purchase agreement, a Registration Rights Agreement, a First (March 2019) and Second (June 2019) Amendment to the Security Agreement, as well as issued Convertible Notes to each investor, in each case substantially in the same form as entered into by the Company in the Initial Private Placement.

Certificate of Designations of the Series A Preferred Stock and Dividends

The CoD authorizes the issuance of up to 180,000 shares of Series A Preferred Stock. The holders of Series A Preferred Stock are entitled to (i) a cash dividend of 10.0% per annum (the “Cash Dividend”), payable quarterly in arrears, and (ii) a payment-in-kind dividend of 3.0% per annum (the “PIK Dividend” and together with the Cash Dividend, the “Dividends”). The PIK dividend is accrued quarterly in arrears for the first five years following the Closing and thereafter all Dividends accruing on such Series A Preferred Stock will be payable in cash at a rate of 13.0% per annum. The Series A Preferred Stock is classified
-28-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
as mezzanine equity in the Company’s consolidated balance sheet as of December 31, 2020 since the holders have redemption rights beginning on July 19, 2023 (and earlier under certain circumstances).

As required under the CoD and approved by the Company’s Board of Directors, the Cash Dividends and PIK Dividends for the period in which the Series A Preferred Stock was outstanding during the fourth quarter of 2020 were paid on January 4, 2021. Accrued Cash Dividends and PIK Dividends for the fourth quarter of 2019 were paid on January 4, 2021 to holders of record on December 20, 2020. Accordingly, the Company accrued a current liability for accrued dividends payable in cash through December 31, 2020 for $3.8 million. A long-term liability was recorded for $1.2 million of dividends that accrued through December 31, 2020, and that were settled through the issuance of additional shares of Series A Preferred Stock on January 4, 2021. Presented below is a summary of total and per share dividends declared through December 31, 2020 (dollars in thousands, except per share amounts):
Dividends Payable in:Total DividendsDividends
CashPIKPer Share
Cash Dividends at 10.0% per annum:
For the year ended December 31, 2018$6,360 $— $6,360 $99.56 
PIK Dividends at 3.0% per annum:
For the year ended December 31, 2018— 1,902 1,902 29.77 
Fractional shares payable in cash for the year ended December 31, 20186 — 6 0.09 
Dividends paid during the year ended December 31, 2018(2,845)(846)(3,691)(57.78)
Liability for unpaid dividends, December 31, 20183,521 1,056 4,577 32.50 
Cash Dividends at 10.0% per annum:
For the year ended December 31, 201915,073 — 15,073 99.98 
PIK Dividends at 3.0% per annum:
For the year ended December 31, 2019— 4,485 4,485 29.75 
Fractional shares payable in cash for the year ended December 31, 201937 — 37 0.25 
Dividends paid during the year ended December 31, 2019(14,742)(4,385)(19,127)(126.86)
Liability for unpaid dividends, December 31, 20193,889 1,156 5,045 32.50 
Cash Dividends at 10.0% per annum:
  For the year ended December 31, 202015,713 — 15,713 99.90 
PIK Dividends at 3.0% per annum:
  For the year ended December 31, 2020— 4,717 4,717 29.99 
  Fractional shares payable in cash for the year ended December 31, 202021 — 21 0.13 
  Dividends paid during the year ended December 31, 2020(15,781)(4,680)(20,461)(130.08)
Liability for unpaid dividends, December 31, 2020$3,842 $1,193 $5,035 32.50 
Each share of Series A Preferred Stock is entitled to vote with the Common Stock on an as-converted basis. In addition, the holders of the outstanding shares of Series A Preferred Stock are required to approve certain actions affecting the rights of the Series A Preferred Stock. The approval of a majority of the outstanding Series A Preferred Stock are required to approve any of the following: (i) the declaration or payment of any principal, dividend or distribution on securities junior in rights to the Series A Preferred Stock (“Junior Securities”) or pari passu in rights to the Series A Preferred Stock or the purchase, redemption or other acquisition by the Company of Junior Securities or pari passu securities if at the time of such declaration, payment, dividend or distribution, the Dividends for the Series A Preferred Stock have not been satisfied or paid in full; and (ii) any amendment or repeal of the Company’s certificate of incorporation or the CoD adversely affecting the rights, preferences or privileges of the Series A Preferred Stock. The approval of all holders of outstanding Series A Preferred Stock are required for (i) the authorization or creation of, issuance of, or reclassification into, any stock that ranks pari passu with or senior to the Series A Preferred Stock with respect to payment of dividends and liquidation preference and (ii) amendment of the CoD provisions regarding Dividends, liquidation rights, redemption rights, conversion rights, voting rights and reorganization events.

The liquidation value of the Series A Preferred Stock is convertible into shares of Common Stock at an initial conversion rate of $10.00 per share for a total of 15.5 million shares of Common Stock based on 154,911 shares of Series A Preferred Stock
-29-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
outstanding as of December 31, 2020. Each share of Series A Preferred Stock is convertible at the holder’s option into one share of Common Stock at a conversion price equal to the quotient of (i) the Liquidation Preference (as defined below), and (ii) $10.00 (subject to appropriate adjustment in the event of a stock split, stock dividend, combination or other similar recapitalization) (the “Per Share Amount”). The Company has the right to convert outstanding shares of Series A Preferred Stock into Common Stock for the Per Share Amount after July 19, 2021, if the Company’s volume weighted average stock price for at least 30 trading days of the 45 consecutive trading days immediately preceding such conversion is greater than $11.50 per share. The Company can exercise this right to convert twice per calendar year for a maximum number of shares of Common Stock that has publicly traded over the 60 consecutive trading days prior to the conversion date (less any shares of Common Stock that have been issued pursuant to any such conversion during such 60-day period).

The Series A Preferred Stock will become mandatorily redeemable, upon the election by the holders of a majority of the then outstanding Preferred Stock, on or after July 19, 2023. Any and all of the then outstanding liquidation value of the Series A Preferred Stock plus any capitalized PIK Dividends and any unpaid accrued Cash Dividends not previously included in the Liquidation Preference (the “Redemption Amount”) is required to be repaid in full in cash on such redemption date or satisfied in the form of obligations under the Convertible Notes, as further described below. Additionally, in certain circumstances the Company may require the holders of shares of the Series A Preferred Stock to convert into shares of Common Stock in lieu of cash payable upon redemption.

The Series A Preferred Stock will also become mandatorily redeemable at any time upon the reasonable determination of the holders of a majority of the Series A Preferred Stock then outstanding of the occurrence of a Material Adverse Effect or the occurrence of a Material Litigation Effect (as such terms are defined in the CoD), with the Redemption Amounts payable automatically becoming payment obligations pursuant to the Convertible Notes with a concurrent cancellation of the shares of the Series A Preferred Stock, unless under certain circumstances, the Company redeems the Series A Preferred Stock for cash at such time.

Prior to July 19, 2021, the Company will have the right to redeem up to $80.0 million of shares of the Series A Preferred Stock for cash amounts equal to the Redemption Amount which would include a make-whole premium that provides the holders thereof with full yield maintenance as if the Series A Preferred Stock was held until July 19, 2021, provided that such redemptions are subject to certain conditions and limitations. After July 19, 2021, the Company will have the right to redeem shares of Series A Preferred Stock for a cash per share amount equal to the Redemption Amount.

The holders of Series A Preferred Stock may exercise their conversion rights prior to any optional redemption. In the event of a liquidation, dissolution or winding up of the Company, the Series A Preferred Stock is entitled to a liquidation preference in the amount of the greater of (i) $1,000 plus accrued but unpaid Dividends (the “Liquidation Preference”), and (ii) the per share amount of all cash, securities and other property to be distributed in respect of the Common Stock such holder would have been entitled to receive for its Series A Preferred Stock on an as-converted basis. In the event of a liquidation, dissolution or winding up of the Company prior to July 19, 2021, the holders are entitled to a make-whole premium that provides the holders thereof with full yield maintenance as if the shares of Series A Preferred Stock were held until July 19, 2021.

Until approximately 95% of the Series A Preferred Stock or Convertible Notes are no longer outstanding, the Company is restricted from incurring Indebtedness (as defined in the Stock Purchase Agreement), subject to certain exceptions.

Security Agreement and Convertible Notes

The Company entered into the Security Agreement in respect of the Company’s assets collateralizing the amounts that may become payable pursuant to the Convertible Notes. The Company delivered a Convertible Note to each holder of Series A Preferred Stock to collateralize amounts, if any, that may become payable by the Company pursuant to certain redemption provisions of the shares of Series A Preferred Stock. No principal amount or interest will be outstanding under the Convertible Notes unless and until (i) there is a redemption event as described in the section above on the CoD, and (ii) the holders of Series A Preferred Stock elect to surrender their shares in exchange for the Convertible Notes. Prior to such time, the Convertible Notes may not be transferred by the Purchasers other than an automatic assignment in whole or in part in connection with a transfer by the Purchasers of the shares of Series A Preferred Stock issued pursuant to the Securities Purchase Agreement. The Convertible Notes will bear interest at the rate of 13.00% per annum (10.0% per annum in cash and 3.0% per annum payment-in-kind until July 19, 2023). The Convertible Notes mature July 19, 2023 or upon a Reorganization Event (as defined in the CoD) and are secured by substantially all of the assets of the Company and certain of its domestic subsidiaries. After a redemption of the Series A Preferred Stock which causes there to be outstanding obligations under the Convertible Notes, the
-30-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Convertible Notes are convertible at the option of the holder (but not the Company) on the same terms as the Series A Preferred Stock.

The Company may prepay for cash up to $80.0 million of the Convertible Notes on a pro rata basis prior to July 19, 2021 with full yield maintenance as if the Convertible Notes were held until July 19, 2021, provided that such redemptions are subject to certain conditions and limitations. The Company may prepay the Convertible Notes without penalty at any time on a pro rata basis after July 19, 2021. All prepayments are subject to the right of the holder of each Convertible Note to convert the prepayment amount into shares of Common Stock. The Convertible Notes also contain customary restrictions on the ability of the Company to, among other things, make certain restricted payments with respect to its capital stock, subordinated indebtedness and unsecured indebtedness, consummate certain mergers, consolidations or dissolutions and make certain dispositions, subject to specific exclusions.

Upon the occurrence of an Event of Default (as defined in the Convertible Notes), the holders of such Convertible Notes will have the right to accelerate all obligations of the Company thereunder (or in some instances, such obligations shall be accelerated with no action required on the part of the holders), and such obligations will become immediately due and payable. In addition, if such acceleration occurs prior to July 19, 2021, the holders will also have the right to receive a make-whole premium thereunder.

Registration Rights Agreement

The original Registration Rights Agreement required the Company to register the resale of the shares of Common Stock and Series A Preferred Stock issued pursuant to the 2018 SPA. The Company satisfied such registration requirements in November 2018. The Registration Rights Agreements, entered into in connection with both the March 2019 and June 2019 Private Placements, require the Company to register the resale of the shares of Common Stock and Series A Preferred Stock pursuant to the March 2019 SPA and the June 2019 SPA within 120 days of the respective March 7, 2019 and June 20, 2019 closing dates. The Company satisfied such registration requirements in July 2019. Each such Registration Rights Agreement also includes customary “piggyback” registration rights, suspension rights, indemnification, contribution, and assignment provisions.


NOTE 7 — CAPITAL STRUCTURE
 
Preferred Stock

Upon completion of the Delaware Domestication discussed in Note 1, the Company is authorized to issue 100,000,000 preferred shares with a par value of $0.0001 per share in one or more series. The Company’s board of directors is authorized to establish the voting rights, if any, designations, powers, preferences, special rights, and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. The Board of Directors has authorized the issuance of up to 180,000 shares of Series A Preferred Stock, and 154,911 shares were issued and outstanding as of December 31, 2020. The specific terms of the Series A Preferred Stock are discussed in detail in Note 6.

Common Stock
 
As of December 31, 2020 and 2019, Company is authorized to issue up to 1,000,000,000 shares of Common Stock, with a par value of $0.0001 per share. Holders of the Company’s shares of Common Stock are entitled to one vote for each share.

On August 18, 2020, the Company completed a firm commitment underwritten public offering (the "August 2020 Offering") of 6.1 million shares of its Common Stock at a price of $4.50 per share for total gross proceeds of $27.5 million. Underwriter discounts and commissions were $1.7 million and the underwriter expenses were $0.1 million. The Company also incurred additional professional fees of $0.6 million as part of the transaction, resulting in net proceeds from the August 2020 Offering of approximately $25.1 million. The Company intends to use the net proceeds from the August 2020 Offering for working capital and other general corporate purposes.

-31-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — STOCK-BASED COMPENSATION AND WARRANTS
 
Overview of Equity Incentive Plans
 
The Company’s 2007 Stock Plan (the “2007 Plan”) reserved up to approximately 14.3 million shares of Common Stock for the grant of stock options and stock purchase rights to employees and directors. The 2007 Plan was terminated in November 2013; however, the terms of the 2007 Plan continue to govern any outstanding awards thereunder. As of December 31, 2020, stock options for approximately 1.6 million shares are outstanding under the 2007 Plan, all of which are vested.
 
In October 2013, the Company established the 2013 Equity Incentive Plan, as amended and restated in July 2017 (the “2013 Plan”) that provides for grants of stock options, stock appreciation rights, restricted stock, restricted stock units ("RSU's"), performance units and performance shares. As of December 31, 2020, options for approximately 7.0 million shares are outstanding and RSU's for approximately 3.3 million shares outstanding under the 2013 Plan. There are approximately 4.0 million shares available for future grants. Through December 31, 2020, grants under the 2013 Plan consist of stock options and RSU's. The 2013 Plan will expire in July 31, 2027.
 
The 2007 Plan and the 2013 Plan (collectively referred to as the “Stock Plans”) provide for stock options to be granted to employees and directors at an exercise price not less than 100% of the fair value at the grant date. The options granted generally have a maximum term of 10 years from grant date and are exercisable upon vesting. Option granted to employees generally vest as to one-third of the shares subject to the award on each anniversary of the designated vesting commencement date, which may precede the grant date of such award. Options granted to directors generally vest for all of the shares one year after the grant date.

On the first day of each fiscal year beginning in 2018, the 2013 Plan provides that the number of authorized shares available for issuance will increase in an amount equal to the lesser of (i) 4.8 million shares, (ii) 4% of the outstanding shares of all classes of the Company's Common Stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the Company's Board of Directors may determine. The Board of Directors approved an increase in the authorized shares for 3.1 million shares on February 23, 2021.

Stock Options
 
The following table sets forth the summary of stock option activity under the Company’s Stock Plans for the years ended December 31, 2020, 2019 and 2018, (shares in thousands):
 202020192018
 SharesPrice (1)Term (2)SharesPrice (1)Term (2)SharesPrice (1)Term (2)
Outstanding, beginning of year8,677 $4.55 11,904 $4.00 12,130 $2.95  
Granted600 4.34 718 5.22 1,870 7.87  
Forfeited(390)6.28 (539)7.68 (69)7.96  
Expired(191)6.17 (626)7.01 (45)5.96  
Exercised(1,689)1.07 (2,780)1.20 (1,982)1.03  
Outstanding, end of year (3)(4)
7,007 5.24 58,677 4.55 4.911,904 4.00 5.1
Vested, end of year (3)
5,842 5.22 4.36,986 4.05 4.19,211 2.91 3.9
____________________
(1)Represents the weighted average exercise price.
(2)Represents the weighted average remaining contractual term until the stock options expire.
(3)As of December 31, 2020, 2019 and 2018, the aggregate intrinsic value of stock options outstanding was $3.8 million, $7.7 million, and $23.0 million, respectively. As of December 31, 2020, 2019 and 2018, the aggregate intrinsic value of vested stock options was $3.6 million, $7.7 million and $23.0 million, respectively.
(4)The number of outstanding stock options that are not expected to ultimately vest due to forfeiture amounted to 0.1 million shares as of December 31, 2020.

-32-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the total number of shares available for grant under the 2013 Plan for the years ended December 31, 2020, 2019 and 2018 (in thousands):
 202020192018
Available, beginning of year2,885 2,758 2,413 
Stock options granted(600)(718)(1,870)
RSU's granted(1,846)(2,995)(199)
Expired options under 2007 Plan191 626 45 
Forfeited options under Stock Plans390 539 69 
Forfeited RSUs under Stock Plans317 108  
Newly authorized by Board of Directors2,700 2,567 2,300 
Available, end of year4,037 2,885 2,758 

Fair Value of Stock Options

The fair value of each stock option grant under the Stock Plans was estimated on the date of grant using the BSM option-pricing model, with the following weighted-average assumptions for the years ended December 31, 2020, 2019 and 2018: 
 202020192018
Expected life (in years)6.06.05.9
Volatility40 %35 %31 %
Dividend yield % % %
Risk-free interest rate0.5 %2.3 %2.8 %
 
The BSM model requires various highly subjective assumptions that represent management’s best estimates of the fair value of the Company’s Common Stock, volatility, risk-free interest rates, expected term, and dividend yield. The Common Stock option value is based on the Company’s closing market price on the date of grant.

The expected term represents the weighted-average period that options granted are expected to be outstanding giving consideration to vesting schedules. Since the Company does not have an extended history of actual exercises, the Company has estimated the expected term using a simplified method which calculates the expected term as the average of the time-to-vesting and the contractual life of the awards. The Company has never declared or paid cash dividends and does not plan to pay cash dividends in the foreseeable future; therefore, the Company used an expected dividend yield of zero. The risk-free interest rate is based on U.S. Treasury rates in effect during the expected term of the grant. The expected volatility is based on historical volatility of publicly-traded peer companies.
 
The intrinsic value of the vested employee options exercised during the years ended December 31, 2020, 2019, and 2018 was $6.1 million, $10.5 million and $9.5 million, respectively. The weighted-average grant date fair value per share of employee options granted for the years ended December 31, 2020, 2019 and 2018 was $1.65, $1.98 and $2.73, respectively.

Restricted Stock Units

For the year ended December 31, 2020, the Board of Directors granted RSU’s under the 2013 Plan for an aggregate of approximately 3.0 million shares of Common Stock to non-employee members of the Board of Directors, officers and employees of the Company. These RSU’s vest over periods ranging from 12 to 36 months from the respective grant dates and the awards are subject to forfeiture upon termination of employment or service on the Board of Directors. Based on the weighted average fair market value of the Common Stock of $4.69 per share on the date of grant, the aggregate fair value for the shares underlying the RSU’s amounted to $8.7 million as of the grant date that is being recognized as compensation cost over the vesting period. Accordingly, compensation expense of $6.2 million was recognized for the year ended December 31, 2020. The unrecognized portion of $10.5 million is expected to be charged to expense on a straight-line basis as the RSU’s vest over a weighted-average period of approximately 1.88 years.

-33-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock-Based Compensation Expense
 
The aggregate stock-based compensation expense for stock options and RSU's for the years ended December 31, 2020, 2019 and 2018 is classified as follows (in thousands):
 202020192018
Cost of revenues$1,174 $927 $885 
Sales and marketing2,450 1,821 1,865 
General and administrative3,837 2,784 1,644 
Total$7,461 $5,532 $4,394 

As of December 31, 2020, 2019 and 2018, total unrecognized compensation cost related to unvested stock options was $1.2 million, $2.2 million and $4.0 million, respectively. The remaining unrecognized costs are expected to be recognized on a straight-line basis over a weighted-average period of approximately 1.74 years.

Employee Stock Purchase Plan
At the Annual Meeting of Stockholders held on June 7, 2018, the Company’s stockholders approved the Rimini Street, Inc. 2018 Employee Stock Purchase Plan (the “ESPP”). The ESPP provides for the purchase by employees of up to an aggregate of 5.0 million shares of Common Stock. The purchase price per share at which shares are sold in an offering period under the ESPP will be equal to the lesser of 85% of the fair market value of the shares (i) on the first trading day of the offering period, or (ii) on the purchase date (i.e., the last trading day of the offering period). Offering periods will consist of two six-month periods generally commencing twice each calendar year. The purpose of the ESPP is to provide an opportunity for eligible employees of the Company to purchase shares of the Company at a discount through voluntary contributions from such employees’ eligible pay, thereby attracting, retaining and rewarding such persons and strengthening the mutuality of interest between such employees and the Company’s stockholders. Through December 31, 2020, no offering period under the ESPP had commenced and no shares of Common Stock have been issued under the ESPP.

Outstanding Warrants
 
All of the Company’s outstanding warrants are currently exercisable. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, recapitalization, reorganization, merger or consolidation. A summary of the terms of outstanding warrants and the number of shares of RMNI Common Stock issuable upon exercise, is presented below as of December 31, 2020 and 2019 (in thousands, except per share amounts):
 Issuance DateExpiration DateExercise PriceNumber
Descriptionof Shares
Origination Agent WarrantOctober 2017June 2026
(1)
$5.64 3,440 
(2)
GPIA Public WarrantsMay 2015October 202211.50 8,625 
(3)
GP Sponsor Private Placement WarrantsMay 2015October 202211.50 6,063 
(4)
Total   18,128 
_____________________
(1)The expiration date for the Origination Agent Warrant is the earlier to occur of the stated expiration date or the date when the Company experiences a change of control.
(2)The Origination Agent Warrant was issued upon consummation of the Mergers discussed in Note 4 and resulted in the elimination of the redemption features associated with two warrants issued in 2016 as discussed below under /RSI Redeemable Warrants.
(3)On May 26, 2015, GPIA completed an initial public offering that included warrants for 8.6 million shares of Common Stock (the “Public Warrants”). Each Public Warrant entitles the holder to the right to purchase one share of Common Stock at an exercise price of $11.50 per share. No fractional shares will be issued upon exercise of the Public Warrants. The Company may elect to redeem the Public Warrants, in whole or in part, at a price of $0.01 per Public Warrant if (i) 30 days’ prior written notice is provided to the holders, and (ii) the last sale price of the
-34-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company’s Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the notice of redemption is sent to the Public Warrant holders. Upon issuance of a redemption notice by the Company, the warrant holders have a period of 30 days to exercise for cash, or on a cashless basis.
(4)Simultaneously with GPIA’s initial public offering in May 2015, GP Sponsor purchased an aggregate of 6.1 million warrants at a purchase price of $1.00 per warrant in a private placement (the “Private Placement Warrants”). The Private Placement Warrants may not be redeemed by the Company so long as the Private Placement Warrants are held by the initial purchasers, or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or such purchasers’ permitted transferees, the Private Placement Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

NOTE 9 — INCOME TAXES
 
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was passed into law, amending portions of relevant US tax laws. The CARES Act contains changes to corporate taxation, including among other things, adjusting net operating loss (NOL) limitations and carryback rules, refundable AMT credits, bonus depreciation and interest expense limitations. The CARES Act also provides for an Employee Retention Credit, a fully refundable payroll tax credit for certain eligible employers and the ability for all eligible employers to defer payment of the employer share of payroll taxes owed on wages paid for the period ending December 31, 2020. The Company has elected to defer payroll tax payments which totaled $3.3 million as of December 31, 2020.
 
In December 2017, the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Act”) was enacted into law which significantly revises the Internal Revenue Code of 1986, as amended. The Tax Act, among other things, contains significant changes to corporate taxation, including a flat corporate tax rate of 21%, limitation of the deduction for newly generated net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated (the “Transition Tax”), future taxation of certain classes of offshore earnings regardless of whether they are repatriated, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits beginning in 2018.

The Tax Act also included a limitation of the tax deduction for interest expense to 30% of adjusted earnings (“Sec 163(j)”). Interest expense that was limited by Sec 163(j) was suspended and carried forward to subsequent tax years. Furthermore, the CARES Act”) modified the percentage limitation in 2019 and 2020 by raising the percentage of adjusted taxable income from 30% to 50%.

The foreign subsidiaries undistributed earnings through December 31, 2017 have been taxed under the one-time transition tax under the Tax Act. This one-time transition tax was reflected on the 2017 federal tax return as filed with the IRS, and also reported on the relevant forms 965 on the 2018 tax return as filed. The Company continues to maintain that any undistributed foreign subsidiaries’ earnings are permanently reinvested and has therefore not made any provision for additional income taxes on undistributed earnings of its foreign subsidiaries. However, the Company may still be liable for withholding taxes, state taxes, or other income taxes that might be incurred upon the repatriation of foreign earnings in the form or dividends or otherwise.

For the years ended December 31, 2020, 2019 and 2018, income (loss) before income tax expense is as follows (in thousands):
 202020192018
Domestic$8,517 $13,557 $(68,221)
International9,032 6,686 6,262 
 $17,549 $20,243 $(61,959)
 
-35-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2020, 2019 and 2018, the reconciliation between the income tax benefit computed by applying the statutory U.S. federal income tax rate to the pre-tax loss before income taxes and total income tax expense recognized in the financial statements is as follows (in thousands):
 202020192018
Income tax (expense) benefit at statutory U.S. federal rate$(3,685)$(4,251)$13,011 
Income tax expense attributable to U.S. states, net(639)(607)(362)
Permanent differences:
Non-deductible expenses(107)(110)(247)
Stock-based compensation324 905 918 
Other274 57 (24)
Global intangible low taxed income(226)(1,770)(1,027)
Foreign rate differential and foreign tax credits(400)(219)(511)
Foreign withholding taxes(1,686)(631) 
Capital loss carryforward expiration (1,138) 
Reclassification of warrant to equity and other(515)(144)69 
(Increase) decrease in valuation allowance2,091 5,194 (13,819)
Total income tax expense$(4,569)$(2,714)$(1,992)

For tax years beginning after January 1, 2018, Global Intangible Low Tax Income (GILTI) requires companies to report income from its foreign subsidiaries that exceeds 10% of the calculated deemed tangible return on its fixed assets. The Company determined the tax effect (before valuation allowance) of the GILTI income inclusion for the year ended December 31, 2020 was $0.2 million.

Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). The Company has elected to treat GILTI as a current period expense and will not record GILTI deferred taxes.

For the years ended December 31, 2020, 2019 and 2018, income tax expense consisted of the following (in thousands):
 202020192018
Current income tax expense:   
Federal$ $ $ 
State(321)(117)(112)
Foreign(4,762)(2,934)(2,115)
Total current income tax expense(5,083)(3,051)(2,227)
Deferred income tax benefit:   
Federal   
State   
Foreign514 337 235 
Total deferred income tax benefit514 337 235 
Total income tax expense$(4,569)$(2,714)$(1,992)

-36-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2020 and 2019, the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows (in thousands):
 20202019
Deferred income tax assets:  
Net operating loss carryforwards$38,737 $45,195 
Deferred revenue3,914 2,514 
Accounts payable and accrued expenses14,067 2,298 
Stock-based compensation1,887 1,876 
Operating lease liabilities 3,071  
Tax credit carryforwards423 423 
Deferred rent and other193 582 
Foreign deferred assets2,055 1,892 
Business interest carryforwards15,598 22,719 
Gross deferred income tax assets79,945 77,499 
Valuation allowance for deferred income tax assets(66,100)(68,567)
Net deferred income tax assets13,845 8,932 
Deferred income tax liabilities:
Deferred contract costs(8,208)(6,686)
Operating lease right-of-use assets(2,573) 
Other(1,193)(998)
Deferred tax assets, net$1,871 $1,248 

Net deferred tax assets consist solely of foreign net deferred tax assets which are expected to be realized in the future, and that are included in long-term assets in the accompanying consolidated balance sheets. For the years ended December 31, 2020 and 2019, the net decrease in the valuation allowance was $2.1 million and $5.2 million, respectively. The valuation allowance decreased in 2020 due to the decrease in deferred tax assets primarily related to 163j carryforward limitations and the current year NOL utilization. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Because of the Company’s lack of domestic earnings history, the domestic net deferred tax assets have been fully offset by a valuation allowance.
 
At December 31, 2020, the Company has federal net operating tax loss carryforwards of approximately $144.1 million and varying amounts of U.S. state net operating loss carryforwards, totaling $136.2 million, that begin to expire in 2030 and 2019, respectively. At December 31, 2020, the Company has federal foreign tax credits carryforwards of $0.4 million expiring beginning in 2021.
 
Federal and state laws impose substantial restrictions on the utilization of net operating loss and tax credit carryforwards in the event of an ownership change for tax purposes, as defined in Section 382 of the Internal Revenue Code. Depending on the significance of past and future ownership changes, the Company’s ability to realize the potential future benefit of tax losses and tax credits that existed at the time of the ownership change may be significantly reduced. Through December 31, 2020, the Company has not experienced an ownership change, as defined in Section 382.
 
The Company considers any undistributed foreign subsidiaries’ earnings to be indefinitely reinvested and, accordingly, no related provision for U.S. federal or state income taxes has been provided. This has not changed subsequent to the one-time transition tax under the Tax Act as discussed above. Upon distribution of the foreign earnings in the form of dividends or otherwise, the company could be subject to both U.S. income taxes subject to an adjustment for foreign tax credits and withholding taxes in the various countries. As of December 31, 2020, the cumulative amount of unremitted earnings of the Company's foreign subsidiaries was approximately $26.0 million. The unrecognized deferred tax liability for these earnings was approximately $1.9 million, consisting primarily of foreign withholding taxes.
 
-37-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company files income tax returns in the U.S. federal jurisdiction, the State of California and various other state and foreign jurisdictions. The Company’s federal and state tax years for 2007 and forward are subject to examination by taxing authorities, due to unutilized net operating losses. All foreign jurisdictions tax years are also subject to examination. The Company does not have any unrecognized tax benefits to date.

NOTE 10 — COMMITMENTS AND CONTINGENCIES 

Finance leases
 
The Company has entered into various financing lease agreements for certain computer equipment. The lease terms range from 12 months to 60 months with annual interest rates ranging from 7% to 8%. As of December 31, 2020, the future annual minimum lease payments under financing lease obligations are as follows (in thousands):
Year ending December 31: 
2021$549 
2022405 
2023398 
2024398 
2025332 
Total minimum lease payments2,082 
Less amounts representing interest324 
Present value of minimum lease payments1,758 
Less current portion, included in accrued expenses429 
Long term obligation, included in other long-term liabilities$1,329 
 
As of December 31, 2020 and 2019, the carrying values of leased equipment (included as a component of property and equipment) in the consolidated balance sheets, are as follows (in thousands):
 20202019
Leased computer equipment$4,954 $3,315 
Less accumulated depreciation(3,202)(2,881)
Net$1,752 $434 

Series A Preferred Stock Dividends
 
In connection with the issuances of Series A Preferred Stock for the Initial Private Placement, the March 2019 Private Placement and the June 2019 Private Placement, the Company is obligated to pay Cash Dividends and issue additional shares of Series A Preferred Stock in settlement of PIK Dividends. For the remaining period through July 19, 2023 that the Series A Preferred Stock is expected to be outstanding, estimated Cash Dividends and PIK Dividends required to be declared are as follows (in thousands):
Year Ending December 31:CashPIKTotal
2021$14,797 (1)$4,439 (1)$19,236 
202215,229 (1)4,569 (1)19,798 
20238,574 (1)2,572 (1)11,146 
Total$38,600 $11,580 $50,180 
____________________
(1)Amounts shown assume there are no conversions to Common Stock and include the Series A Preferred Stock repurchases on October 30, 2020 and January 5, 2021 for the remaining period through July 19, 2023.

-38-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Retirement Plan
 
The Company has defined contribution plans for both its U.S. and foreign employees. For certain of these plans, employees may contribute up to the statutory maximum, which is set by law each year. The plans also provide for employer contributions. The Company’s matching contribution to these plans totaled $2.7 million, $2.6 million and $2.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Rimini I Litigation

In January 2010, certain subsidiaries of Oracle Corporation (together with its subsidiaries individually and collectively, “Oracle”) filed a lawsuit, Oracle USA, Inc. et al. v. Rimini Street, Inc. et al. (United States District Court for the District of Nevada) (the “District Court”) (“Rimini I”), against the Company and its Chief Executive Officer, Seth Ravin, alleging that certain of the Company’s processes (“Process 1.0”) violated Oracle’s license agreements with its customers and that the Company committed acts of copyright infringement and violated other federal and state laws. The litigation involved the Company’s business processes and the manner in which the Company provided services to its clients.

After completion of jury trial in 2015 and subsequent appeals, the final outcome of Rimini I was that Mr. Ravin was found not liable for any claims and the Company was found liable for only one claim: “innocent infringement,” a jury finding that the Company did not know and had no reason to know that its former support processes were infringing. The jury also found that the infringement did not cause Oracle to suffer lost profits. The Company was ordered to pay a judgment of $124.4 million in 2016, which the Company promptly paid and then pursued appeals. With interest, attorneys’ fees and costs, the total judgment paid by the Company to Oracle after the completion of all appeals was approximately $89.9 million. A portion of such judgment was paid by the Company’s insurance carriers.

Proceeds from U.S. Supreme Court Decision

The total judgment paid by the Company and its insurance carriers reflects a reduction of approximately $12.8 million that the Company had previously paid to Oracle (plus interest of $0.2 million), representing an award of non-taxable expenses to Oracle that was eventually overturned by unanimous decision of the U.S. Supreme Court in March 2019. As mandated by the U.S. Supreme Court, $13.0 million (the principal amount plus post-judgment interest) was refunded to the Company by Oracle in April 2019. A portion of the funds received by the Company will be shared on a pro rata basis with an insurance company that had paid for part of the judgment and a portion of Rimini’s defense costs. This reimbursement will reflect a deduction of the costs of the Company’s past and pending appeal and remand proceedings. As a result of the U.S. Supreme Court decision, the Company recognized a recovery of the non-taxable expenses for $12.8 million and interest income of $0.2 million for the year ended December 31, 2019, excluding any contractual amounts due to the insurance company. The Company recognized costs of $1.1 million for the year ended December 31, 2020, as the Company revised its current estimate of the amounts owed to the insurance company (for portions of all previously-paid judgments refunded to the Company on appeal, including the proceeds from the U.S. Supreme Court Decision) to $5.5 million, which was paid in September 2020.

Injunction

Following post-trial motions, the District Court entered a permanent injunction prohibiting the Company from using certain processes. In August 2019, the United States Court of Appeals for the Ninth Circuit Court of Appeals affirmed the permanent injunction issued by the District Court, while also correcting certain legal errors that narrowed the scope of the injunction. The injunction prohibits Rimini from using support processes that had been found in Rimini I to “innocently” infringe certain Oracle copyrights, which Rimini ceased using no later than July 31, 2014.

On July 10, 2020, Oracle filed a motion to show cause contending that the Company is in contempt of the injunction. The Company is opposing the motion. The matter is now fully briefed to the District Court, with no known timeline for a ruling. At this time, the Company does not have sufficient information regarding possible damages for the contempt asserted by Oracle. As a result, an estimate of the range of loss cannot be reasonably determined. Because the Company believes that it has complied with the injunction and that an award for damages and/or attorneys’ fees is not probable, no accrual has been made as of December 31, 2020. If the District Court grants Oracle’s motion to show cause, and if the Company is later found to be in contempt of the injunction, Oracle may seek equitable, punitive, and compensatory relief, the outcome of which may have a material adverse effect on the Company’s business and financial condition.
-39-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Rimini II Litigation

In October 2014, the Company filed a separate lawsuit, Rimini Street Inc. v. Oracle Int’l Corp., in the District Court against Oracle seeking a declaratory judgment that the Company’s revised support practices, in use since at least July 2014, do not infringe certain Oracle copyrights (“Rimini II”). The Company’s operative complaint asserts declaratory judgment, tort, and statutory claims. Oracle’s operative counterclaim asserts declaratory judgment and copyright infringement claims and Lanham Act, breach of contract, and business tort violations.

On September 15, 2020, the District Court issued an order resolving the parties’ motions for summary judgment. It found infringement of 17 Oracle PeopleSoft copyrights for work the Company performed for a set of “gap customers” that were supported by processes litigated in Rimini I, and that became the Company's customers after Rimini I was filed. The District Court also found infringement of four Oracle PeopleSoft copyrights involving support of two specific Company clients, described by the District Court as “limited cases” and involving “limited circumstance[s].” There was no finding of infringement on any other Oracle copyrights at issue.

The order also resolved several of the non-copyright claims asserted by the parties: (i) allowing the Company’s claim for injunctive relief against Oracle for unfair competition in violation of the California Business & Professions Code §17200 et seq. to proceed to trial; (ii) granting summary judgment for Oracle on the Company’s affirmative claims for damages under the Nevada and California unfair and deceptive trade practices statutes; and (iii) holding that Oracle had the right to revoke the Company’s access to its websites. The Court also reiterated that the Company has the legal right to provide aftermarket support for Oracle’s enterprise software.

The parties filed their joint pretrial order in Rimini II in December 2020. Also in December 2020, Oracle filed a motion to realign the parties and bifurcate trial, asking the District Court to (i) realign the parties, with Oracle designated as plaintiff and the Company and Mr. Ravin designated as the defendants in the case caption and at trial, and (ii) bifurcate the trial with a jury trial phase proceeding, first, followed by a separate bench phase on the parties’ equitable claims for unfair competition and Oracle’s claim for an accounting. In January 2021, the Company filed a motion to modify the order of proof and for an advisory jury verdict, asking the District Court to (i) modify the order of proof in the case so that, at trial, Oracle will present its case-in-chief first, followed by the Company’s case-in-chief, (ii) not bifurcate the parties’ unfair competition claims or Oracle’s accounting claim from the other claims, (iii) empanel an advisory jury to make findings of fact with respect to the parties’ unfair competition claims and Oracle’s accounting claim; and (iv) hold a single jury trial.

As of this date, no damages of any kind have been awarded by the District Court in Rimini II. Damages, if any, will be a decision for the Rimini II jury. The Company reserves all rights, including appellate rights, with respect to the District Court and jury rulings and findings in Rimini II. There is currently no trial date scheduled, and while the Company does not expect a trial to occur in this matter earlier than the first half of 2022, the trial could occur earlier or later than that.

At this time, the Company does not have sufficient information regarding possible damages exposure for the counterclaims asserted by Oracle. As to the claims asserted by Oracle, in Rimini I, the jury awarded damages in the form of a fair market value license of $35.4 million for the 93 copyrighted works at issue, which the Company has paid. The parties dispute the relevance of that award for Rimini II, and the Court has not yet resolved that dispute. The Company maintains that zero damages should be awarded in Rimini II. A jury will ultimately determine what amount, if any, of damages to award. Both parties have sought injunctive relief in addition to monetary damages in this matter, and the Company has reserved its rights to appeal regarding the possible recovery of damages by the Company in connection with the Company’s claims against Oracle. As a result, an estimate of the range of loss cannot be reasonably determined. The Company also believes that an award for damages payable to Oracle is not probable, so no accrual has been made as of December 31, 2020. However, as with any jury trial, the ultimate outcome may be different from our best estimates and could have a material adverse impact on our financial results and our business.

Other Litigation

From time to time, the Company may be a party to litigation and subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business. Regardless of the outcome,
-40-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
litigation can have an adverse impact on the Company because of judgment, defense and settlement costs, diversion of management resources and other factors. At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies. Legal fees are expensed as incurred.

Governmental Inquiry

In March 2018, the Company received a federal grand jury subpoena, issued from the United States District Court for the Northern District of California, requesting the Company to produce certain documents relating to specified support and related operational practices. The Company fully cooperated with this inquiry and the related document requests by April 2019 and has received no further requests since that date. Accordingly, this will be the last update regarding this topic going forward unless and until any developments warrant further disclosure.
 
Liquidated Damages
 
The Company enters into agreements with customers that contain provisions related to liquidated damages that would be triggered in the event that the Company is no longer able to provide services to these customers. The maximum cash payments related to these liquidated damages is approximately $13.8 million and $22.7 million as of December 31, 2020 and 2019, respectively. To date, the Company has not incurred any costs as a result of such provisions and has not accrued any liabilities related to such provisions in these consolidated financial statements.

NOTE 11 — RELATED PARTY TRANSACTIONS

As discussed in Note 5, the GP Sponsor loan was amended twice and repaid in full on June 28,2019. An affiliate of GP Sponsor is a member of the Company's Board of Directors. In addition, an affiliate of Adams Street Partners and its affiliates (collectively referred to as "ASP") is also a member of the Company's Board of Directors.

An affiliate of ASP is a member of the Company’s Board of Directors. As of December 31, 2020, ASP owned approximately 31.0% of the Company’s issued and outstanding shares of Common Stock. In October 2016, ASP subscribed for shares of RSI Series C Preferred Stock in exchange for a cash contribution of $10.0 million. In July 2018, ASP acquired 19,209 shares of Series A Preferred Stock and approximately 0.4 million shares of Common Stock issued in the Private Placement discussed in Note 6 for total consideration of approximately $19.2 million. As of December 31, 2020, ASP had voting control of approximately 28.0% of the Company’s issued and outstanding shares of Common Stock, including voting rights associated with the 20,498 shares of Series A Preferred Stock. For the years ended December 31, 2020, 2019 and 2018, the Company recognized no related party transactions. Prior to termination on July 19, 2018 of the amended Credit Facility, ASP owned a $10.0 million indirect interest in the amended Credit Facility.

-41-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 —LOSS PER SHARE

For the years ended December 31, 2020, 2019 and 2018, basic and diluted net loss per share of Common Stock was computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the year. For the years ended December 31, 2020, 2019 and 2018, basic and diluted net loss per share were the same since all Common Stock equivalents were anti-dilutive. The following table sets forth the computation of basic and diluted net loss per share of Common Stock for the years ended December 31, 2020, 2019 and 2018 (in thousands, except per share amounts):
202020192018
Loss attributable to common stockholders:
Net income (loss)$12,980 $17,529 $(63,951)
Return on repurchase of Series A Preferred Stock shares(83)  
Dividends and accretion related to Series A Preferred Stock:
Cash dividends declared(15,713)(15,073)(6,366)
PIK dividends declared(4,738)(4,522)(1,902)
Accretion of discount(6,275)(5,848)(2,373)
Undistributed earnings using the two-class method   
Loss attributable to common stockholders$(13,829)$(7,914)$(74,592)
202020192018
Weighted average number of shares of Common Stock outstanding71,231 66,050 61,384 
Additional shares outstanding if Series A Preferred Stock is converted15,729 15,077 6,388 
Total shares outstanding if Series A Preferred Stock is converted to Common Stock86,960 81,127 67,772 
  Percentage of shares allocable to Series A Preferred Stock18.1 %18.6 %9.4 %
Weighted average number of shares of Common Stock outstanding (basic & diluted)71,231 66,050 61,384 
Net loss per share attributable to Common Stock (basic and diluted)$(0.19)$(0.12)$(1.22)

The holders of Series A Preferred Stock are entitled to participate in Common Stock dividends, if and when declared, on a one-to-one per-share basis. For the years ended December 31, 2020, 2019 and 2018, the Company incurred a net loss and, accordingly, there were no undistributed earnings to allocate under the two-class method.
 
As of December 31, 2020, 2019 and 2018, the following potential Common Stock equivalents were excluded from the computation of diluted net loss per share since the impact of inclusion was anti-dilutive (in thousands): 
 202020192018
Warrants18,128 18,128 18,128 
Series A Preferred Stock15,491 15,523 14,085 
Stock options7,007 8,677 11,904 
Restricted stock units3,322 2,909 199 
Total43,948 45,237 44,316 

-42-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 — FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS
 
Fair Value Measurements
 
Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair measurement:
 
Level 1—Quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date
 
Level 2—Other than quoted prices included in Level 1 that are observable for the asset and liability, either directly or indirectly through market collaboration, for substantially the full term of the asset or liability
 
Level 3—Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any market activity for the asset or liability at measurement date
 
As discussed in Note 6, the fair value of our Series A Preferred Stock issuances on June 20, 2019, March 7, 2019 and July 19, 2018 were determined to be $3.0 million, $5.3 million and $126.8 million, respectively, which was the basis for allocating the net proceeds. The fair value was determined by utilizing a combination of a discounted cash flow methodology related to funds generated by the Series A Preferred Stock, along with the BSM option-pricing model in relation to the conversion feature. Key assumptions applied for the discounted cash flow and BSM analysis included (i) three different scenarios whereby the Series A Preferred Stock would remain outstanding between 4 and 5 years along with a probability weighting assigned to each scenario, (ii) an implied yield of the Series A Preferred Stock ranging from 20.9% to 22.9% calibrated to the transaction values as of June 20, 2019, March 7, 2019 and July 19, 2018, respectively, (iii) a risk-free interest rate of 1.72%, 2.44% and 2.8%, and (iv) historical volatility of 30%.

For the year ended December 31, 2018, the Company’s embedded derivative liability was the only liability that was carried at fair value on a recurring basis and were classified within Level 3 of the fair value hierarchy. All embedded derivative liabilities were eliminated on July 19, 2018 upon termination of the Credit Facility. The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events or change in circumstances that caused the transfer. During the years ended December 31, 2020 and 2019, the Company had no transfers of its assets or liabilities between levels of the fair value hierarchy. As of December 31, 2020, the Company does not have any assets or liabilities that are carried at fair value on a recurring basis.
 
The carrying amounts of the Company’s financial instruments including cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximate fair values due to their short-term maturities. Based on borrowing rates currently available to the Company for debt with similar terms, the carrying value of capital lease obligations and the related party note payable to GP Sponsor both approximate fair value as of the respective balance sheet dates.
 
Significant Concentrations
 
The Company attributes revenues to geographic regions based on the location of its customers’ contracting entity. The following shows revenues by geographic region for the years ended December 31, 2020, 2019 and 2018 (in thousands):
 202020192018
United States of America$191,448 $179,677 $163,683 
International135,332 101,375 89,777 
Total revenue$326,780 $281,052 $253,460 

-43-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
No customers represented more than 10% of revenue for the years ended December 31, 2020, 2019 and 2018. As of December 31, 2020 and 2019, no customers represented 10% or more of total net accounts receivable. The Company tracks its assets by physical location. As of December 31, 2020 and 2019, the net carrying value of the Company’s property and equipment located outside of the United States amounted to approximately $1.3 million and $1.4 million, respectively. As of December 31, 2020, the Company had operating lease right-of-use assets of $11.0 million, $5.8 million and $0.8 million in the United States, India and the rest of the world, respectively.
 
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, and accounts receivable. The Company maintains its cash, cash equivalents and restricted cash at high-quality financial institutions, primarily in the United States of America. Deposits, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. As of December 31, 2020 and 2019, the Company had cash and restricted cash with a single financial institution for an aggregate of $50.2 million and $33.1 million, respectively. The Company also had $0.3 million of restricted cash with a second financial institution as of December 31, 2020. The Company has never experienced any losses related to these balances.
 
Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company’s customer base and their dispersion across different geographies and industries. The Company performs ongoing credit evaluations on certain customers and generally does not require collateral on accounts receivable. The Company maintains reserves for potential bad debts, and historically such losses are generally not significant.

-44-

RIMINI STREET, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 — UNAUDITED QUARTERLY FINANCIAL DATA
 
The Company’s unaudited quarterly financial information for the two-year period ended December 31, 2020 is as follows (in thousands, except per share amounts):
 20202019
 Q1Q2Q3Q4Q1Q2Q3Q4
Revenue$78,032 $78,402 $82,518 $87,828 $65,873 $69,869 $69,182 $76,128 
Cost of revenue30,199 30,437 31,991 33,584 23,837 25,034 25,915 30,320 
Gross profit47,833 47,965 50,527 54,244 42,036 44,835 43,267 45,808 
Operating expenses:        
Sales and marketing28,412 26,836 29,195 30,298 23,955 26,899 26,756 29,670 
General and administrative
12,001 13,133 13,025 14,063 12,988 10,630 11,041 12,705 
Impairment charges related to operating lease right-of-use assets
   1,167     
Litigation costs, net of recoveries
3,673 2,863 3,773 4,246 (6,095)144 3,303 1,814 
Total operating expenses
44,086 42,832 45,993 49,774 30,848 37,673 41,100 44,189 
Operating income
3,747 5,133 4,534 4,470 11,188 7,162 2,167 1,619 
Interest expense
(13)(12)(10)(42)(232)(116)(27)(23)
Other income (expenses), net
(218)(567)54 473 43 (343)(329)(866)
Income before income taxes
3,516 4,554 4,578 4,901 10,999 6,703 1,811 730 
Income tax expense
(971)(1,084)(1,272)(1,242)(705)(621)(451)(937)
Net income (loss)
$2,545 $3,470 $3,306 $3,659 $10,294 $6,082 $1,360 $(207)
Net income (loss) attributable to common stockholders (1)
$(4,085)$(3,217)$(3,439)$(3,086)$4,265 $(239)$(5,159)$(6,780)
Earnings (loss) per share attributable to common stockholders:
Basic (2)
$(0.06)$(0.05)$(0.05)$(0.04)$0.07 $ $(0.08)$(0.10)
Diluted (2)
$(0.06)$(0.05)$(0.05)$(0.04)$0.06 $ $(0.08)$(0.10)
Weighted average number of common shares outstanding:
        
Basic (2)
67,863 68,290 72,377 76,325 64,622 65,535 66,696 67,310 
    Diluted (2)
67,863 68,290 72,377 76,325 69,101 65,535 66,696 67,310 
__________________
(1) Amount consists of net income (loss) less dividends and accretion of discount related to Series A Preferred Stock discussed in Note 6.
(2) Quarterly amounts may not sum to annual amounts due to rounding and the nature of the calculations.
-45-


Item 9A. Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
We maintain a system of disclosure controls and procedures that are designed to reasonably ensure that information required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to reasonably ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
 
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) (“Disclosure Controls”) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls will be modified as systems change and conditions warrant.

An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this Report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on this evaluation, and as a result of the material weakness in our internal control over financial reporting as described below, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2020 to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC..
 
Management’s Report on Internal Control over Financial Reporting
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance to management and the Board of Directors regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the control documentation, evaluation of the design effectiveness of controls, testing the operating effectiveness of controls and a conclusion on this evaluation. Based on our evaluation, we have concluded that our internal control over financial reporting was not effective as of December 31, 2020, due to the material weakness in internal control over financial reporting relating in improperly applying the accounting guidance for its GP Sponsor Private Placement Warrants, recognizing them as equity instead of a warrant liability, under the guidance of Accounting Standards Codification (“ASC”) 815-40, Contracts in Entity’s Own Equity.

Our independent registered public accounting firm, KPMG LLP, has issued an adverse report with respect to the effectiveness of our internal control over financial reporting, which appears in Part II, Item 8 of this Annual Report on Form 10-K/A.
-46-



Changes in Internal Control over Financial Reporting
 
There were no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Remediation Plan

We and our Board of Directors are committed to maintaining a strong internal control environment. Management, with oversight from our Audit Committee, have evaluated the material weakness described above and designed a remediation plan to address the material weakness and enhance our internal control environment. In response to this material weakness, the Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we are improving these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards. Our plans at this time include acquiring enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding the application of complex accounting transactions. Our remediation plan can only be accomplished over time and will be continually reviewed to determine that it is achieving its objectives. We can offer no assurance that these initiatives will ultimately have the intended effects. The remediation plan is being implemented and includes a robust risk assessment process coupled with additional controls and procedures. Management is committed to successfully implementing the remediation plan as promptly as possible.

-47-


PART IV

Item 15.   Exhibits and Financial Statement Schedules
 
(a)(1) and (a)(2) Financial Statements and Financial Statement Schedules:
 
Reference is made to the Index to Financial Statements of the Company under Item 8 of Part II. All financial statement schedules are omitted because they are not applicable, or the amounts are immaterial, not required, or the required information is presented in the financial statements and notes thereto in Item 8 of Part II above.
 
(b) Exhibits. Certain of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:
 
may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements;
may apply standards of materiality that differ from those of a reasonable investor; and
were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.
 
The exhibits listed in the following Exhibit Index are filed or incorporated by reference as part of this Report. The following are exhibits to this Report and, if incorporated by reference, we have indicated the document previously filed with the SEC in which the exhibit was included.
 
EXHIBIT INDEX
  Incorporated by Reference
Exhibit
Number
Description 
Form
 
File No.
 
Exhibit
 
Filing Date
2.1*8-K001-373972.1May 17, 2017
2.2*8-K001-373972.1June 30, 2017
3.1*8-K001-373973.1October 16, 2017
3.2*8-K001-373973.2October 16, 2017
3.3*8-K001-373973.1July 19, 2018
4.1*S-4333-2191014.5June 30, 2017
4.2*10-K001-373974.2March 3, 2021
4.3*S-1333-2035004.3April 17, 2015
4.4*8-K001-373974.1June 1, 2015
4.5*8-K001-3739710.2June 1, 2015
4.6*8-K001-3739710.3June 1, 2015
4.7*S-4333-2191014.8June 30, 2017
-48-


4.8*8-K001-3739710.1June 18, 2018
4.9*8-K001-3739710.1July 19, 2018
4.10*DEF 14A 001-37397 Annex D July 2, 2018
4.11*8-K001-3739710.3July 19, 2018
4.12*8-K/A001-3739710.1March 12, 2019
4.13*8-K/A001-3739710.2March 12, 2019
4.14*8-K/A001-3739710.3March 12, 2019
4.15*8-K/A001-3739710.4March 12, 2019
4.16*8-K001-3739710.1June 21, 2019
4.17*8-K001-3739710.3June 21, 2019
4.18*8-K001-373974.1December 13, 2017
10.1*8-K001-3739710.1October 16, 2017
10.2*†S-4333-21910110.19June 30, 2017
10.3*†S-4/A333-21910110.20August 9, 2017
10.4*†10-K001-3739710.40March 3, 2021
10.5*†S-4/A333-21910110.52August 9, 2017
10.6*†S-4333-21910110.21June 30, 2017
10.7*†8-K001-3739710.2June 5, 2020
10.8*†S-4333-21910110.24June 30, 2017
10.9*†S-4333-21910110.25June 30, 2017
 10.10*†8-K001-3739710.1June 5, 2020
10.11*†8-K001-3739710.1October 1, 2020
10.12*†8-K001-3739710.1December 23, 2020
10.13*S-4333-21910110.38June 30, 2017
-49-


10.14*S-4333-21910110.39June 30, 2017
10.15*S-4333-21910110.40June 30, 2017
10.16*10-K001-3739710.16March 3, 2021
10.17*8-K001-3739710.1June 8, 2018
10.18*8-K001-3739710.1November 2, 2020
10.19*8-K001-3739710.1January 6, 2021
21.1*10-K001-3739721.1 March 3, 2021
    
    
    
    
    
101.INS+XBRL Instance Document    
101.SCH+XBRL Taxonomy Extension Schema    
101.CAL +XBRL Taxonomy Extension Calculation Linkbase    
101.DEF+XBRL Taxonomy Extension Definition Linkbase    
101.LAB+XBRL Taxonomy Extension Label Linkbase    
101.PRE+XBRL Taxonomy Extension Presentation Linkbase    
104+
Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101)

* Previously filed and incorporated herein by reference.
+ Filed herewith.
† Management contract or compensatory plan or arrangement.
 
In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

-50-


SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



 RIMINI STREET, INC.
   
Date: May 10, 2021By:/s/ Seth A. Ravin
  Seth A. Ravin
  
Chief Executive Officer and Chairman of the Board
(Principal Executive Officer)