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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.


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Table of Contents


TABLE OF CONTENTS
  Page
  
 
  
 

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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
 

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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
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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








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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.

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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
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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.
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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.
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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.
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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.
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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.


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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.

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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.
 
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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
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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.

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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.
 
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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