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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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Rimini Street, Inc.
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(Exact name of registrant as specified in its charter)
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Delaware
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36-4880301
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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3993 Howard Hughes Parkway, Suite 500,
Las Vegas, NV
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89169
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code:
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(702) 839-9671
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Title of each class:
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Trading Symbol(s)
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Name of each exchange on which registered:
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Common Stock, par value $0.0001 per share
|
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RMNI
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The Nasdaq Global Market
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Public Units, each consisting of one share of Common
Stock, $0.0001 par value, and one-half of one Warrant
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RMNIU
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OTC Pink Current Information Marketplace
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Warrants, exercisable for one share of Common Stock, $0.0001 par value
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RMNIW
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OTC Pink Current Information Marketplace
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Large accelerated filer
¨
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Accelerated filer
þ
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Non-accelerated filer
¨
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Smaller reporting company
¨
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Emerging growth company
þ
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Page
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Unaudited Condensed Consolidated Balance Sheets
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Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
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Unaudited Condensed Consolidated Statements of Stockholders' Deficit
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Unaudited Condensed Consolidated Statements of Cash Flows
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June 30,
|
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December 31,
|
||||
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2019
|
|
2018
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
49,847
|
|
|
$
|
24,771
|
|
Restricted cash
|
436
|
|
|
435
|
|
||
Accounts receivable, net of allowance of $503 and $489, respectively
|
71,423
|
|
|
80,599
|
|
||
Prepaid expenses and other
|
11,470
|
|
|
7,099
|
|
||
Total current assets
|
133,176
|
|
|
112,904
|
|
||
Long-term assets:
|
|
|
|
||||
Property and equipment, net of accumulated depreciation and amortization of $9,525 and $8,543, respectively
|
3,793
|
|
|
3,634
|
|
||
Deposits and other
|
1,769
|
|
|
1,438
|
|
||
Deferred income taxes, net
|
987
|
|
|
909
|
|
||
Total assets
|
$
|
139,725
|
|
|
$
|
118,885
|
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LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current maturities of long-term debt
|
$
|
—
|
|
|
$
|
2,372
|
|
Accounts payable
|
3,509
|
|
|
12,851
|
|
||
Accrued compensation, benefits and commissions
|
21,860
|
|
|
22,503
|
|
||
Other accrued liabilities
|
21,700
|
|
|
20,424
|
|
||
Deferred revenue
|
190,914
|
|
|
180,358
|
|
||
Total current liabilities
|
237,983
|
|
|
238,508
|
|
||
Long-term liabilities:
|
|
|
|
||||
Deferred revenue
|
28,637
|
|
|
28,898
|
|
||
Accrued PIK dividends payable
|
1,115
|
|
|
1,056
|
|
||
Other long-term liabilities
|
2,181
|
|
|
2,011
|
|
||
Total liabilities
|
269,916
|
|
|
270,473
|
|
||
Commitments and contingencies
(Note 8)
|
|
|
|
|
|
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Redeemable Series A Preferred Stock:
|
|
|
|
||||
Authorized 180 shares; issued and outstanding 153 shares and 141 shares as of June 30, 2019 and December 31, 2018, respectively. Liquidation preference of $152,967, net of discount for $26,955 and $140,846, net of discount for $26,848, as of June 30, 2019 and December 31, 2018, respectively.
|
126,012
|
|
|
113,998
|
|
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Stockholders’ deficit:
|
|
|
|
||||
Preferred stock; $0.0001 par value. Authorized 99,820 shares (excluding 180 shares of Series A Preferred Stock); no other series has been designated
|
—
|
|
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—
|
|
||
Common stock; $0.0001 par value. Authorized 1,000,000 shares; issued and outstanding 66,387 and 64,193 shares as of June 30, 2019 and December 31, 2018, respectively
|
7
|
|
|
6
|
|
||
Additional paid-in capital
|
101,887
|
|
|
108,347
|
|
||
Accumulated other comprehensive loss
|
(1,636
|
)
|
|
(1,567
|
)
|
||
Accumulated deficit
|
(356,461
|
)
|
|
(372,372
|
)
|
||
Total stockholders' deficit
|
(256,203
|
)
|
|
(265,586
|
)
|
||
Total liabilities, redeemable preferred stock and stockholders' deficit
|
$
|
139,725
|
|
|
$
|
118,885
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenue
|
$
|
67,956
|
|
|
$
|
62,649
|
|
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$
|
134,216
|
|
|
$
|
122,454
|
|
Cost of revenue
|
25,034
|
|
|
26,084
|
|
|
48,871
|
|
|
49,625
|
|
||||
Gross profit
|
42,922
|
|
|
36,565
|
|
|
85,345
|
|
|
72,829
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Sales and marketing
|
26,345
|
|
|
23,097
|
|
|
49,721
|
|
|
43,304
|
|
||||
General and administrative
|
11,266
|
|
|
10,324
|
|
|
23,690
|
|
|
21,129
|
|
||||
Litigation costs and related recoveries:
|
|
|
|
|
|
|
|
||||||||
Professional fees and other defense costs of litigation
|
444
|
|
|
9,113
|
|
|
2,485
|
|
|
18,012
|
|
||||
Litigation appeal refunds
|
—
|
|
|
—
|
|
|
(12,775
|
)
|
|
(21,285
|
)
|
||||
Insurance costs and recoveries, net
|
(300
|
)
|
|
—
|
|
|
4,339
|
|
|
(7,583
|
)
|
||||
Litigation costs and related recoveries, net
|
144
|
|
|
9,113
|
|
|
(5,951
|
)
|
|
(10,856
|
)
|
||||
Total operating expenses
|
37,755
|
|
|
42,534
|
|
|
67,460
|
|
|
53,577
|
|
||||
Operating income (loss)
|
5,167
|
|
|
(5,969
|
)
|
|
17,885
|
|
|
19,252
|
|
||||
Non-operating expenses:
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(116
|
)
|
|
(9,323
|
)
|
|
(348
|
)
|
|
(22,732
|
)
|
||||
Other debt financing expenses
|
—
|
|
|
(1,339
|
)
|
|
—
|
|
|
(9,956
|
)
|
||||
Loss from change in fair value of embedded derivatives
|
—
|
|
|
(6,700
|
)
|
|
—
|
|
|
(6,200
|
)
|
||||
Other expense, net
|
(343
|
)
|
|
(1,568
|
)
|
|
(300
|
)
|
|
(1,240
|
)
|
||||
Income (loss) before income taxes
|
4,708
|
|
|
(24,899
|
)
|
|
17,237
|
|
|
(20,876
|
)
|
||||
Income tax expense
|
(621
|
)
|
|
(547
|
)
|
|
(1,326
|
)
|
|
(1,063
|
)
|
||||
Net income (loss)
|
4,087
|
|
|
(25,446
|
)
|
|
15,911
|
|
|
(21,939
|
)
|
||||
Other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation loss
|
(70
|
)
|
|
(315
|
)
|
|
(69
|
)
|
|
(352
|
)
|
||||
Comprehensive income (loss)
|
$
|
4,017
|
|
|
$
|
(25,761
|
)
|
|
$
|
15,842
|
|
|
$
|
(22,291
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to common stockholders
|
$
|
(2,233
|
)
|
|
$
|
(25,446
|
)
|
|
$
|
2,906
|
|
|
$
|
(21,939
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net earnings (loss) per share attributable to common stockholders:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.03
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.37
|
)
|
Diluted
|
$
|
(0.03
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.37
|
)
|
Weighted average number of shares of Common Stock outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
65,535
|
|
|
59,800
|
|
|
65,080
|
|
|
59,534
|
|
||||
Diluted
|
65,535
|
|
|
59,800
|
|
|
69,202
|
|
|
59,534
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Common Stock, Shares
|
|
|
|
|
|
|
|
||||||||
Beginning of period
|
65,242
|
|
|
59,440
|
|
|
64,193
|
|
|
59,314
|
|
||||
Exercise of stock options for cash
|
1,018
|
|
|
565
|
|
|
1,685
|
|
|
691
|
|
||||
Restricted stock units vested
|
19
|
|
|
—
|
|
|
157
|
|
|
—
|
|
||||
Issuance of Common Stock in Private Placement, net
|
73
|
|
|
—
|
|
|
207
|
|
|
—
|
|
||||
Issuance of Common Stock
|
35
|
|
|
—
|
|
|
145
|
|
|
—
|
|
||||
End of period
|
66,387
|
|
|
60,005
|
|
|
66,387
|
|
|
60,005
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total Stockholders' Deficit, beginning of period
|
$
|
(256,652
|
)
|
|
$
|
(205,811
|
)
|
|
$
|
(265,586
|
)
|
|
$
|
(210,301
|
)
|
Common Stock, Amount
|
|
|
|
|
|
|
|
||||||||
Beginning of period
|
7
|
|
|
6
|
|
|
6
|
|
|
6
|
|
||||
Exercise of stock options for cash
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Restricted stock units vested
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Issuance of Common Stock in Private Placement, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Issuance of Common Stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
End of period
|
7
|
|
|
6
|
|
|
7
|
|
|
6
|
|
||||
Additional Paid-in Capital
|
|
|
|
|
|
|
|
||||||||
Beginning of period
|
105,455
|
|
|
95,987
|
|
|
108,347
|
|
|
94,967
|
|
||||
Stock based compensation expense
|
1,052
|
|
|
1,098
|
|
|
2,208
|
|
|
1,965
|
|
||||
Exercise of stock options for cash
|
1,186
|
|
|
578
|
|
|
1,968
|
|
|
731
|
|
||||
Restricted stock units vested
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Issuance of Common Stock in Private Placement, net
|
332
|
|
|
—
|
|
|
934
|
|
|
—
|
|
||||
Issuance of Common Stock
|
182
|
|
|
—
|
|
|
780
|
|
|
—
|
|
||||
Accretion of discount on Series A Preferred Stock
|
(1,449
|
)
|
|
—
|
|
|
(2,808
|
)
|
|
—
|
|
||||
Accrued dividends on Series Preferred Stock:
|
|
|
|
|
|
|
|
||||||||
Payable in cash
|
(3,747
|
)
|
|
—
|
|
|
(7,340
|
)
|
|
—
|
|
||||
Payable in kind
|
(1,124
|
)
|
|
—
|
|
|
(2,202
|
)
|
|
—
|
|
||||
End of period
|
101,887
|
|
|
97,663
|
|
|
101,887
|
|
|
97,663
|
|
||||
Accumulated Other Comprehensive Loss
|
|
|
|
|
|
|
|
||||||||
Beginning of period
|
(1,566
|
)
|
|
(904
|
)
|
|
(1,567
|
)
|
|
(867
|
)
|
||||
Foreign currency loss
|
(70
|
)
|
|
(315
|
)
|
|
(69
|
)
|
|
(352
|
)
|
||||
End of period
|
(1,636
|
)
|
|
(1,219
|
)
|
|
(1,636
|
)
|
|
(1,219
|
)
|
||||
Accumulated Deficit
|
|
|
|
|
|
|
|
||||||||
Beginning of period
|
(360,548
|
)
|
|
(300,900
|
)
|
|
(372,372
|
)
|
|
(304,407
|
)
|
||||
Net income (loss)
|
4,087
|
|
|
(25,446
|
)
|
|
15,911
|
|
|
(21,939
|
)
|
||||
End of period
|
(356,461
|
)
|
|
(326,346
|
)
|
|
(356,461
|
)
|
|
(326,346
|
)
|
||||
Total Stockholders' Deficit, end of period
|
$
|
(256,203
|
)
|
|
$
|
(229,896
|
)
|
|
$
|
(256,203
|
)
|
|
$
|
(229,896
|
)
|
|
Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income (loss)
|
$
|
15,911
|
|
|
$
|
(21,939
|
)
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Accretion and amortization of debt discount and issuance costs
|
185
|
|
|
11,652
|
|
||
Write-off of debt discount and issuance costs
|
—
|
|
|
7,169
|
|
||
Gain from change in fair value of embedded derivatives
|
—
|
|
|
6,200
|
|
||
Stock-based compensation expense
|
2,208
|
|
|
1,965
|
|
||
Paid-in-kind interest expense
|
—
|
|
|
1,724
|
|
||
Depreciation and amortization
|
966
|
|
|
950
|
|
||
Deferred income taxes
|
(74
|
)
|
|
(249
|
)
|
||
Make-whole applicable premium included in interest expense
|
—
|
|
|
3,103
|
|
||
Other
|
141
|
|
|
704
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
9,225
|
|
|
(349
|
)
|
||
Prepaid expenses, deposits and other
|
(4,591
|
)
|
|
(600
|
)
|
||
Accounts payable
|
(9,364
|
)
|
|
737
|
|
||
Accrued compensation, benefits, commissions and other liabilities
|
150
|
|
|
4,392
|
|
||
Deferred insurance settlement
|
—
|
|
|
(8,033
|
)
|
||
Deferred revenue
|
10,228
|
|
|
19,765
|
|
||
Net cash provided by operating activities
|
24,985
|
|
|
27,191
|
|
||
CASH FLOWS USED IN INVESTING ACTIVITIES:
|
|
|
|
||||
Capital expenditures
|
(641
|
)
|
|
(493
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from issuance of Series A Preferred Stock and Common Stock
|
9,110
|
|
|
—
|
|
||
Principal payments on borrowings
|
(2,555
|
)
|
|
(25,932
|
)
|
||
Payments for deferred offering and financing costs
|
(452
|
)
|
|
(1,681
|
)
|
||
Make-whole applicable premium related to prepayment of borrowings
|
—
|
|
|
(3,103
|
)
|
||
Payments of cash dividends on Series A Preferred Stock
|
(7,127
|
)
|
|
—
|
|
||
Principal payments on capital leases
|
(281
|
)
|
|
(342
|
)
|
||
Proceeds from exercise of employee stock options
|
1,969
|
|
|
731
|
|
||
Net cash provided by (used in) financing activities
|
664
|
|
|
(30,327
|
)
|
||
Effect of foreign currency translation changes
|
69
|
|
|
(911
|
)
|
||
Net change in cash, cash equivalents and restricted cash
|
25,077
|
|
|
(4,540
|
)
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
25,206
|
|
|
40,027
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
50,283
|
|
|
$
|
35,487
|
|
|
Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
||||
Cash paid for interest
|
$
|
183
|
|
|
$
|
10,316
|
|
Cash paid for income taxes
|
1,056
|
|
|
773
|
|
||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
||||
Discount on shares issued in Private Placements:
|
|
|
|
||||
Fair value of 207 shares of Common Stock issued for no consideration regarding Private Placements
|
$
|
1,098
|
|
|
$
|
—
|
|
Original issuance discount on Series A Preferred Stock
|
500
|
|
|
—
|
|
||
Transaction costs
|
390
|
|
|
—
|
|
||
Issuance of 120 shares of Common Stock for consent regarding Private Placement
|
638
|
|
|
—
|
|
||
Redeemable Series A Preferred Stock Dividends and Accretion:
|
|
|
|
||||
Accrued cash dividends
|
$
|
3,747
|
|
|
$
|
—
|
|
Accrued PIK dividends
|
1,124
|
|
|
—
|
|
||
Accretion of discount on Series A Preferred Stock
|
2,808
|
|
|
—
|
|
||
Issuance of Series A Preferred Stock for PIK dividends
|
2,121
|
|
|
—
|
|
||
|
|
|
|
||||
Adjustment for updated calculation of mandatory trigger event exit fees
|
$
|
—
|
|
|
$
|
3,952
|
|
Purchase of equipment under capital lease obligations
|
213
|
|
|
126
|
|
||
Increase in payables for:
|
|
|
|
||||
Deferred offering costs
|
$
|
—
|
|
|
$
|
1,514
|
|
Capital expenditures
|
281
|
|
|
102
|
|
|
2019
|
|
2018
|
||||
Accrued sales and other taxes
|
$
|
4,445
|
|
|
$
|
5,687
|
|
Accrued professional fees
|
6,557
|
|
|
7,035
|
|
||
Accrued dividends on Redeemable Series A Preferred Stock
|
3,756
|
|
|
3,521
|
|
||
Current maturities of capital lease obligations
|
278
|
|
|
387
|
|
||
Income taxes payable
|
802
|
|
|
767
|
|
||
Other accrued expenses
|
5,862
|
|
|
3,027
|
|
||
Total other accrued liabilities
|
$
|
21,700
|
|
|
$
|
20,424
|
|
|
2019
|
|
2018
|
||||
Note payable to GP Sponsor, net of DDIC
|
$
|
—
|
|
|
$
|
2,372
|
|
Less current maturities
|
—
|
|
|
2,372
|
|
||
Long-term debt, net of current maturities
|
$
|
—
|
|
|
$
|
—
|
|
Contractual principal and exit fees:
|
|
|
||
Principal balance
|
|
$
|
102,576
|
|
Mandatory trigger event exit fees
|
|
13,624
|
|
|
Mandatory consulting
|
|
2,000
|
|
|
Subtotal
|
|
118,200
|
|
|
Make-whole applicable premium
|
|
7,307
|
|
|
Amendment fees and related liabilities
|
|
6,250
|
|
|
Accrued interest and fees payable
|
|
1,073
|
|
|
Total cash termination payments
|
|
$
|
132,830
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Credit Facility:
|
|
|
|
|
|
|
|
||||||||
Interest expense at 12.0%
|
$
|
—
|
|
|
$
|
3,156
|
|
|
$
|
—
|
|
|
$
|
6,882
|
|
PIK interest at 3.0%
|
—
|
|
|
793
|
|
|
—
|
|
|
1,724
|
|
||||
Accretion expense for funded debt
|
—
|
|
|
5,181
|
|
|
—
|
|
|
10,599
|
|
||||
Make-whole applicable premium
|
—
|
|
|
—
|
|
|
—
|
|
|
3,103
|
|
||||
Accretion expense for GP Sponsor note payable
|
57
|
|
|
160
|
|
|
185
|
|
|
367
|
|
||||
Interest on other borrowings
|
59
|
|
|
33
|
|
|
163
|
|
|
57
|
|
||||
Total interest expense
|
$
|
116
|
|
|
$
|
9,323
|
|
|
$
|
348
|
|
|
$
|
22,732
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Write-off of DDIC related to Credit Facility
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,169
|
|
Collateral monitoring fees
|
—
|
|
|
659
|
|
|
—
|
|
|
1,435
|
|
||||
Amortization of DDIC related to unfunded debt
|
—
|
|
|
343
|
|
|
—
|
|
|
686
|
|
||||
Unused line fees
|
—
|
|
|
223
|
|
|
—
|
|
|
439
|
|
||||
Amortization of prepaid agent fees and other
|
—
|
|
|
114
|
|
|
—
|
|
|
227
|
|
||||
Total other debt financing fees
|
$
|
—
|
|
|
$
|
1,339
|
|
|
$
|
—
|
|
|
$
|
9,956
|
|
|
Series A Preferred Stock
|
|
Common
|
|
Convertible
|
|
|
|||||||||||
|
Shares
|
|
Amount
|
|
Stock
|
|
Notes
|
|
Total
|
|||||||||
Fair value on June 20, 2019:
|
|
|
|
|
|
|
|
|
|
|||||||||
Series A Preferred Stock
|
3,500
|
|
|
$
|
2,997
|
|
(1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,997
|
|
Common Stock
|
—
|
|
|
—
|
|
|
376
|
|
(2)
|
—
|
|
|
376
|
|
||||
Convertible Notes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
3,500
|
|
|
$
|
2,997
|
|
|
$
|
376
|
|
|
$
|
—
|
|
|
$
|
3,373
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Relative fair value allocation on June 20, 2019:
|
|
|
|
|
|
|
|
|
|
|||||||||
Aggregate cash proceeds on June 20, 2019
|
3,500
|
|
|
$
|
2,954
|
|
(3)
|
$
|
371
|
|
(3)
|
$
|
—
|
|
|
$
|
3,325
|
|
Incremental and direct costs
|
—
|
|
|
(301
|
)
|
(4)
|
(38
|
)
|
(4)
|
—
|
|
|
(339
|
)
|
||||
Net carrying value on June 20, 2019
|
3,500
|
|
|
$
|
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 11 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.
|
|
Series A Preferred Stock
|
|
Common
|
|
Convertible
|
|
|
|||||||||||
|
Shares
|
|
Amount
|
|
Stock
|
|
Notes
|
|
Total
|
|||||||||
Fair value on March 7, 2019:
|
|
|
|
|
|
|
|
|
|
|||||||||
Series A Preferred Stock
|
6,500
|
|
|
$
|
5,313
|
|
(1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,313
|
|
Common Stock
|
—
|
|
|
—
|
|
|
722
|
|
(2)
|
—
|
|
|
722
|
|
||||
Convertible Notes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
6,500
|
|
|
$
|
5,313
|
|
|
$
|
722
|
|
|
$
|
—
|
|
|
$
|
6,035
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Relative fair value allocation on March 7, 2019:
|
|
|
|
|
|
|
|
|
|
|||||||||
Aggregate cash proceeds on March 7, 2019
|
6,500
|
|
|
$
|
5,093
|
|
(3)
|
$
|
692
|
|
(3)
|
$
|
—
|
|
|
$
|
5,785
|
|
Incremental and direct costs
|
—
|
|
|
(661
|
)
|
(4)
|
(90
|
)
|
(4)
|
—
|
|
|
(751
|
)
|
||||
Net carrying value on March 7, 2019
|
6,500
|
|
|
$
|
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 11 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.
|
|
Series A Preferred Stock
|
|||||
|
Shares
|
|
Amount
|
|||
Net carrying value as of December 31, 2018
|
140,846
|
|
|
$
|
113,998
|
|
Issuance of shares to settle PIK Dividends on January 2, 2019
|
1,062
|
|
|
1,062
|
|
|
Additional shares issued on March 7, 2019
|
6,500
|
|
|
4,432
|
|
|
Accretion of discount for the three months ended March 31, 2019
|
—
|
|
|
1,359
|
|
|
Net carrying value as of March 31, 2019
|
148,408
|
|
|
120,851
|
|
|
Issuance of shares to settle PIK Dividends on April 1, 2019
|
1,059
|
|
|
1,059
|
|
|
Additional shares issued on June 20, 2019
|
3,500
|
|
|
2,653
|
|
|
Accretion of discount for the three months ended June 30, 2019
|
—
|
|
|
1,449
|
|
|
Net carrying value as of June 30, 2019
|
152,967
|
|
|
$
|
126,012
|
|
|
|
Dividends Payable in:
|
|
Total
|
|
Dividends
|
||||||||||
|
|
Cash
|
|
PIK
|
|
Dividends
|
|
Per Share
|
||||||||
Dividends payable as of December 31, 2018
|
|
$
|
3,521
|
|
|
$
|
1,056
|
|
|
$
|
4,577
|
|
|
$
|
32.50
|
|
Cash Dividends @ 10% per annum
|
|
3,593
|
|
|
—
|
|
|
3,593
|
|
|
25.00
|
|
||||
PIK Dividends @ 3% per annum
|
|
—
|
|
|
1,065
|
|
|
1,065
|
|
|
7.41
|
|
||||
Fractional PIK shares settled for cash
|
|
13
|
|
|
—
|
|
|
13
|
|
|
0.09
|
|
||||
Less dividends settled January 2, 2019
|
|
(3,566
|
)
|
|
(1,062
|
)
|
|
(4,628
|
)
|
|
(32.62
|
)
|
||||
Dividends payable as of March 31, 2019
|
|
3,561
|
|
|
1,059
|
|
|
4,620
|
|
|
31.13
|
|
||||
Cash Dividends @ 10% per annum
|
|
3,747
|
|
|
—
|
|
|
3,747
|
|
|
25.00
|
|
||||
PIK Dividends @ 3% per annum
|
|
—
|
|
|
1,115
|
|
|
1,115
|
|
|
7.44
|
|
||||
Fractional PIK shares settled for cash
|
|
9
|
|
|
—
|
|
|
9
|
|
|
0.06
|
|
||||
Less dividends settled April 1, 2019
|
|
(3,561
|
)
|
|
(1,059
|
)
|
|
(4,620
|
)
|
|
(30.82
|
)
|
||||
Dividends payable as of June 30, 2019
|
|
$
|
3,756
|
|
|
$
|
1,115
|
|
|
$
|
4,871
|
|
|
$
|
31.84
|
|
|
(1)
|
Represents the weighted average exercise price.
|
(2)
|
Represents the weighted average remaining contractual term until the stock options expire.
|
(3)
|
As of
June 30, 2019
, the aggregate intrinsic value of all stock options outstanding was
$17.2 million
. As of
June 30, 2019
, the aggregate intrinsic value of vested stock options was
$17.1 million
.
|
(4)
|
The number of outstanding stock options that are not expected to ultimately vest due to forfeiture amounted to
0.2 million
shares as of
June 30, 2019
.
|
Available, December 31, 2018
|
2,758
|
|
Stock options granted
|
(525
|
)
|
Restricted stock units granted
|
(878
|
)
|
Forfeited options and restricted stock units under Stock Plans
|
670
|
|
Newly authorized by Board of Directors
|
2,567
|
|
Available, June 30, 2019
|
4,592
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Cost of revenues
|
$
|
169
|
|
|
$
|
201
|
|
|
$
|
378
|
|
|
$
|
366
|
|
Sales and marketing
|
307
|
|
|
450
|
|
|
648
|
|
|
817
|
|
||||
General and administrative
|
576
|
|
|
447
|
|
|
1,182
|
|
|
782
|
|
||||
Total
|
$
|
1,052
|
|
|
$
|
1,098
|
|
|
$
|
2,208
|
|
|
$
|
1,965
|
|
Year Ending December 31:
|
|
Cash
|
|
PIK
|
|
Total
|
||||||
2019
|
|
$
|
15,075
|
|
|
$
|
4,522
|
|
|
$
|
19,597
|
|
2020
|
|
15,819
|
|
|
4,746
|
|
|
20,565
|
|
|||
2021
|
|
16,299
|
|
|
4,890
|
|
|
21,189
|
|
|||
2022
|
|
16,794
|
|
|
5,038
|
|
|
21,832
|
|
|||
2023
|
|
9,455
|
|
|
2,837
|
|
|
12,292
|
|
|||
Total
|
|
$
|
73,442
|
|
|
$
|
22,033
|
|
|
$
|
95,475
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Income attributable to common stockholders:
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
4,087
|
|
|
$
|
(25,446
|
)
|
|
$
|
15,911
|
|
|
$
|
(21,939
|
)
|
Dividends and accretion related to Series A Preferred Stock:
|
|
|
|
|
|
|
|
||||||||
Cash dividends declared
|
(3,747
|
)
|
|
—
|
|
|
(7,340
|
)
|
|
—
|
|
||||
PIK dividends declared
|
(1,124
|
)
|
|
—
|
|
|
(2,202
|
)
|
|
—
|
|
||||
Accretion of discount
|
(1,449
|
)
|
|
—
|
|
|
(2,808
|
)
|
|
—
|
|
||||
|
(2,233
|
)
|
|
(25,446
|
)
|
|
3,561
|
|
|
(21,939
|
)
|
||||
Undistributed earnings allocated using the two-class method
|
—
|
|
|
—
|
|
|
(655
|
)
|
|
—
|
|
||||
Net income (loss) attributable to common stockholders
|
$
|
(2,233
|
)
|
|
$
|
(25,446
|
)
|
|
$
|
2,906
|
|
|
$
|
(21,939
|
)
|
|
|
|
|
|
|
|
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Weighted average number of shares of Common Stock outstanding
|
65,535
|
|
|
59,800
|
|
|
65,080
|
|
|
59,534
|
|
||||
Additional shares outstanding if Series A Preferred Stock is converted to Common Stock
|
14,989
|
|
|
—
|
|
|
14,681
|
|
|
—
|
|
||||
Total shares outstanding if Series A Preferred Stock is converted to Common Stock
|
80,524
|
|
|
59,800
|
|
|
79,761
|
|
|
59,534
|
|
||||
Percentage of shares allocable to Series A Preferred Stock
|
18.6
|
%
|
|
—
|
%
|
|
18.4
|
%
|
|
—
|
%
|
||||
Weighted average number of shares of Common Stock outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
65,535
|
|
|
59,800
|
|
|
65,080
|
|
|
59,534
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Origination Agent warrants
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Stock options
|
—
|
|
|
—
|
|
|
4,028
|
|
|
—
|
|
||||
Restricted stock units
|
—
|
|
|
—
|
|
|
94
|
|
|
—
|
|
||||
Diluted
|
65,535
|
|
|
59,800
|
|
|
69,202
|
|
|
59,534
|
|
||||
Net earnings (loss) per share attributable to common stockholders:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.03
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.37
|
)
|
Diluted
|
$
|
(0.03
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.37
|
)
|
|
2019
|
|
2018
|
||
Series A Preferred Stock
|
15,297
|
|
|
—
|
|
Restricted stock units
|
918
|
|
|
176
|
|
Stock options
|
10,076
|
|
|
12,706
|
|
Warrants
|
18,128
|
|
|
18,128
|
|
Total
|
44,419
|
|
|
31,010
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
United States of America
|
$
|
44,019
|
|
|
$
|
39,297
|
|
|
$
|
86,890
|
|
|
$
|
79,042
|
|
International
|
23,937
|
|
|
23,352
|
|
|
47,326
|
|
|
43,412
|
|
||||
Total
|
$
|
67,956
|
|
|
$
|
62,649
|
|
|
$
|
134,216
|
|
|
$
|
122,454
|
|
•
|
the evolution of the enterprise software management and support landscape facing our customers 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 customer savings;
|
•
|
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 application managed services;
|
•
|
our ability to attract and retain customers;
|
•
|
our ability to further penetrate our existing customer 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 salesforce.com and 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 customer 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 capture new contracts;
|
•
|
costs associated with defending intellectual property infringement and other claims, such as those claims discussed under the section titled “
Business—Legal Proceedings
” in our 2018 Annual Report on Form 10-K, as filed with the SEC on March 14, 2019 (the “2018 Form 10-K”);
|
•
|
the final amount and timing of any refunds from Oracle related to our 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; and
|
•
|
other risks and uncertainties, including those discussed under "Risk Factors" in Part II, Item 1A of this Report.
|
|
Three Months Ended
June 30,
|
|
Variance
|
||||||||||
|
2019
|
|
2018
|
|
Amount
|
|
Percent
|
||||||
Revenue
|
$
|
67,956
|
|
|
$
|
62,649
|
|
|
$
|
5,307
|
|
|
8.5%
|
Cost of revenue:
|
|
|
|
|
|
|
|
||||||
Employee compensation and benefits
|
17,323
|
|
|
16,469
|
|
|
854
|
|
|
5.2%
|
|||
Engineering consulting costs
|
3,602
|
|
|
3,372
|
|
|
230
|
|
|
6.8%
|
|||
Administrative allocations
(1)
|
2,925
|
|
|
2,578
|
|
|
347
|
|
|
13.5%
|
|||
All other costs
|
1,184
|
|
|
3,665
|
|
|
(2,481
|
)
|
|
(67.7)%
|
|||
Total cost of revenue
|
25,034
|
|
|
26,084
|
|
|
(1,050
|
)
|
|
(4.0)%
|
|||
Gross profit
|
42,922
|
|
|
36,565
|
|
|
6,357
|
|
|
17.4%
|
|||
Gross margin
|
63.2
|
%
|
|
58.4
|
%
|
|
|
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|||
Sales and marketing
|
26,345
|
|
|
23,097
|
|
|
3,248
|
|
|
14.1%
|
|||
General and administrative
|
11,266
|
|
|
10,324
|
|
|
942
|
|
|
9.1%
|
|||
Litigation costs and related recoveries, net
|
144
|
|
|
9,113
|
|
|
(8,969
|
)
|
|
(98.4)%
|
|||
Total operating expenses
|
37,755
|
|
|
42,534
|
|
|
(4,779
|
)
|
|
(11.2)%
|
|||
Operating income (loss)
|
5,167
|
|
|
(5,969
|
)
|
|
11,136
|
|
|
(186.6)%
|
|||
Non-operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|||
Interest expense
|
(116
|
)
|
|
(9,323
|
)
|
|
9,207
|
|
|
(98.8)%
|
|||
Other debt financing expenses
|
—
|
|
|
(1,339
|
)
|
|
1,339
|
|
|
(100.0)%
|
|||
Loss from change in fair value of embedded derivatives
|
—
|
|
|
(6,700
|
)
|
|
6,700
|
|
|
(100.0)%
|
|||
Other expense, net
|
(343
|
)
|
|
(1,568
|
)
|
|
1,225
|
|
|
(78.1)%
|
|||
Income (loss) before income taxes
|
4,708
|
|
|
(24,899
|
)
|
|
29,607
|
|
|
(118.9)%
|
|||
Income tax expense
|
(621
|
)
|
|
(547
|
)
|
|
(74
|
)
|
|
13.5%
|
|||
Net income (loss)
|
$
|
4,087
|
|
|
$
|
(25,446
|
)
|
|
$
|
29,533
|
|
|
(116.1)%
|
|
(1)
|
Includes the portion of costs for information technology, security services and facilities costs that are allocated to cost of revenue. In our unaudited condensed consolidated financial statements, the total of such costs is allocated between cost of revenue, sales and marketing, and general and administrative expenses, based primarily on relative headcount, except for facilities which is based on occupancy.
|
|
2019
|
|
2018
|
|
Change
|
||||||
Professional fees and other defense costs of litigation
|
$
|
444
|
|
|
$
|
9,113
|
|
|
$
|
(8,669
|
)
|
Litigation appeal refunds
|
—
|
|
|
—
|
|
|
—
|
|
|||
Insurance costs and recoveries, net
|
(300
|
)
|
|
—
|
|
|
(300
|
)
|
|||
Litigation costs and related recoveries, net
|
$
|
144
|
|
|
$
|
9,113
|
|
|
$
|
(8,969
|
)
|
|
Six Months Ended
June 30,
|
|
Variance
|
||||||||||
|
2019
|
|
2018
|
|
Amount
|
|
Percent
|
||||||
Revenue
|
$
|
134,216
|
|
|
$
|
122,454
|
|
|
$
|
11,762
|
|
|
9.6%
|
Cost of revenue:
|
|
|
|
|
|
|
|
||||||
Employee compensation and benefits
|
34,126
|
|
|
32,187
|
|
|
1,939
|
|
|
6.0%
|
|||
Engineering consulting costs
|
6,418
|
|
|
7,238
|
|
|
(820
|
)
|
|
(11.3)%
|
|||
Administrative allocations
(1)
|
5,852
|
|
|
5,247
|
|
|
605
|
|
|
11.5%
|
|||
All other costs
|
2,475
|
|
|
4,953
|
|
|
(2,478
|
)
|
|
(50.0)%
|
|||
Total cost of revenue
|
48,871
|
|
|
49,625
|
|
|
(754
|
)
|
|
(1.5)%
|
|||
Gross profit
|
85,345
|
|
|
72,829
|
|
|
12,516
|
|
|
17.2%
|
|||
Gross margin
|
63.6
|
%
|
|
59.5
|
%
|
|
|
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|||
Sales and marketing
|
49,721
|
|
|
43,304
|
|
|
6,417
|
|
|
14.8%
|
|||
General and administrative
|
23,690
|
|
|
21,129
|
|
|
2,561
|
|
|
12.1%
|
|||
Litigation costs and related recoveries, net
|
(5,951
|
)
|
|
(10,856
|
)
|
|
4,905
|
|
|
(45.2)%
|
|||
Total operating expenses
|
67,460
|
|
|
53,577
|
|
|
13,883
|
|
|
25.9%
|
|||
Operating income
|
17,885
|
|
|
19,252
|
|
|
(1,367
|
)
|
|
(7.1)%
|
|||
Non-operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|||
Interest expense
|
(348
|
)
|
|
(22,732
|
)
|
|
22,384
|
|
|
(98.5)%
|
|||
Other debt financing expenses
|
—
|
|
|
(9,956
|
)
|
|
9,956
|
|
|
(100.0)%
|
|||
Loss from change in fair value of embedded derivatives
|
—
|
|
|
(6,200
|
)
|
|
6,200
|
|
|
(100.0)%
|
|||
Other expense, net
|
(300
|
)
|
|
(1,240
|
)
|
|
940
|
|
|
(75.8)%
|
|||
Income (loss) before income taxes
|
17,237
|
|
|
(20,876
|
)
|
|
38,113
|
|
|
(182.6)%
|
|||
Income tax expense
|
(1,326
|
)
|
|
(1,063
|
)
|
|
(263
|
)
|
|
24.7%
|
|||
Net income (loss)
|
$
|
15,911
|
|
|
$
|
(21,939
|
)
|
|
$
|
37,850
|
|
|
(172.5)%
|
|
(1)
|
Includes the portion of costs for information technology, security services and facilities costs that are allocated to cost of revenue. In our unaudited condensed consolidated financial statements, the total of such costs is allocated between cost of revenue, sales and marketing, and general and administrative expenses, based primarily on relative headcount, except for facilities which is based on occupancy.
|
|
2019
|
|
2018
|
|
Change
|
||||||
Professional fees and other defense costs of litigation
|
$
|
2,485
|
|
|
$
|
18,012
|
|
|
$
|
(15,527
|
)
|
Litigation appeal refunds
|
(12,775
|
)
|
|
(21,285
|
)
|
|
8,510
|
|
|||
Insurance costs and recoveries, net
|
4,339
|
|
|
(7,583
|
)
|
|
11,922
|
|
|||
Litigation costs and related recoveries, net
|
$
|
(5,951
|
)
|
|
$
|
(10,856
|
)
|
|
$
|
4,905
|
|
Year Ending December 31:
|
|
Cash
|
|
PIK
|
|
Total
|
||||||
2019
|
|
$
|
15,075
|
|
|
$
|
4,522
|
|
|
$
|
19,597
|
|
2020
|
|
15,819
|
|
|
4,746
|
|
|
20,565
|
|
|||
2021
|
|
16,299
|
|
|
4,890
|
|
|
21,189
|
|
|||
2022
|
|
16,794
|
|
|
5,038
|
|
|
21,832
|
|
|||
2023
|
|
9,455
|
|
|
2,837
|
|
|
12,292
|
|
|
2019
|
|
2018
|
||||
Note payable to GP Sponsor, net of discount
|
$
|
—
|
|
|
$
|
2,372
|
|
Less current maturities
|
—
|
|
|
2,372
|
|
||
Long-term debt, net of current maturities
|
$
|
—
|
|
|
$
|
—
|
|
|
2019
|
|
2018
|
||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
24,985
|
|
|
$
|
27,191
|
|
Investing activities
|
(641
|
)
|
|
(493
|
)
|
||
Financing activities
|
664
|
|
|
(30,327
|
)
|
|
2019
|
|
2018
|
||||
Net income
|
$
|
15,911
|
|
|
$
|
(21,939
|
)
|
Non-cash expenses and non-operating expenses, net
|
3,426
|
|
|
33,218
|
|
||
Changes in operating assets and liabilities, net
|
5,648
|
|
|
15,912
|
|
||
Net cash provided by operating activities
|
$
|
24,985
|
|
|
$
|
27,191
|
|
•
|
price our products and services effectively so that we are able to attract new clients and retain existing clients without compromising our profitability;
|
•
|
introduce our products and services to new geographic markets;
|
•
|
introduce new enterprise software products and services supporting additional enterprise software vendors, products and releases;
|
•
|
satisfactorily conclude the Oracle litigation and any other litigation that may occur and our governmental inquiry; and
|
•
|
increase awareness of our company, products and services on a global basis.
|
•
|
sales and marketing efforts;
|
•
|
training to optimize our opportunities to overcome litigation risk concerns of our clients;
|
•
|
expanding in new geographical areas;
|
•
|
growing our product and service offerings and related capabilities;
|
•
|
adding additional product and service offerings; and
|
•
|
general administration, including legal and accounting expenses related to being a public company.
|
•
|
maintain our operations;
|
•
|
develop or enhance our products and services;
|
•
|
continue to expand our sales and marketing functions;
|
•
|
devote resources to research and development activities;
|
•
|
acquire complementary technologies, products or businesses;
|
•
|
expand operations, in the United States or globally;
|
•
|
hire, train and retain employees; or
|
•
|
respond to competitive pressures or unanticipated working capital requirements.
|
•
|
changes in spending on enterprise software products and services by our current or prospective clients;
|
•
|
pricing of our products and services so that we are able to attract and retain clients;
|
•
|
acquisition of new clients and increases of our existing clients’ use of our products and services;
|
•
|
client renewal rates and the amounts for which agreements are renewed;
|
•
|
budgeting cycles of our clients;
|
•
|
changes in the competitive dynamics of our market, including consolidation among competitors or clients;
|
•
|
the amount and timing of payment for operating expenses, particularly sales and marketing expenses and employee benefit expenses, as well as the quarterly Cash Dividends required to be made on our Series A Preferred Stock;
|
•
|
the amount and timing of non-cash expenses, including stock-based compensation, in-kind dividends on our Series A Preferred Stock and other non-cash charges;
|
•
|
the amount and timing of costs associated with recruiting, training and integrating new employees;
|
•
|
the amount and timing of cash collections from our clients;
|
•
|
unforeseen costs and expenses related to the expansion of our business, operations and infrastructure;
|
•
|
the amount and timing of our legal costs, particularly related to our litigation with Oracle;
|
•
|
changes in the levels of our capital expenditures; foreign currency exchange rate fluctuations; and
|
•
|
general economic and political conditions in our global markets.
|
•
|
changes in a specific country’s or region’s political or economic conditions;
|
•
|
changes in regulatory requirements, taxes or trade laws such as Brexit;
|
•
|
more stringent regulations relating to data security, such as where and how data can be housed, accessed and used, and the unauthorized use of, or access to, commercial and personal information;
|
•
|
differing labor regulations, especially in countries and geographies where labor laws are generally more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations in these locations;
|
•
|
challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs as well as hire and retain local management, sales, marketing and support personnel;
|
•
|
difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems;
|
•
|
increased travel, real estate, infrastructure and legal compliance costs associated with global operations;
|
•
|
currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we choose to do so in the future;
|
•
|
limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;
|
•
|
laws and business practices favoring local competitors or general preferences for local vendors;
|
•
|
limited or insufficient intellectual property protection;
|
•
|
political instability or terrorist activities;
|
•
|
exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act and similar laws and regulations in other jurisdictions; and
|
•
|
adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
|
•
|
inadequate controls in relation to recognition of liabilities for embedded derivatives in connection with our former Credit Facility (2016);
|
•
|
inadequate controls in relation to revenue recognition from support service sales contracts whereby RSI incorrectly accounted for multi-year, non-cancellable support service sales contracts as a single delivery arrangement and incorrectly accounting for revenue for certain non-standard contract provisions (2015 and 2016);
|
•
|
various sales tax control matters related to manual processes and determination of tax liabilities in certain states (2015); and
|
•
|
inadequate controls for accrual of loss contingencies related to RSI’s litigation with Oracle (2015).
|
•
|
developments in our continuing litigation with Oracle;
|
•
|
actions that may be taken by our holders of Series A Preferred Stock and the Convertible Notes;
|
•
|
any future equity or debt financing by us;
|
•
|
our ability to pay cash dividends payable on our Series A Preferred Stock or to effectively service any outstanding debt obligations;
|
•
|
the announcement of new products or product enhancements by us or our competitors;
|
•
|
developments concerning intellectual property rights;
|
•
|
changes in legal, regulatory and enforcement frameworks impacting our products;
|
•
|
developments in the governmental inquiry instituted in March 2018 and any legal proceedings instituted involving us, if any, from such inquiry;
|
•
|
variations in our and our competitors’ results of operations;
|
•
|
the addition or departure of key personnel;
|
•
|
announcements by us or our competitors of acquisitions, investments or strategic alliances;
|
•
|
actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in our industry
|
•
|
the level and changes in our year-over-year revenue growth rate;
|
•
|
the failure of securities analysts to publish research about us, or shortfalls in our results of operations compared to levels forecast by securities analysts;
|
•
|
any delisting of our Common Stock from Nasdaq Global Market (“Nasdaq”) due to any failure to meet listing requirements;
|
•
|
our Public Warrants and units are quoted on the OTC Pink Current Information Marketplace which is a significantly more limited market than Nasdaq; and
|
•
|
the general state of the securities market.
|
•
|
a classified Board of Directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board of Directors;
|
•
|
the ability of our Board of Directors to issue shares of preferred stock, including “blank check” preferred stock, and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer, pursuant to which we have issued Series A Preferred Stock entitled to receive a liquidation preference and certain amounts in connection with a change of control of the Company and other similar extraordinary transactions;
|
•
|
the limitation of the liability of, and the indemnification of our directors and officers;
|
•
|
the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors;
|
•
|
the requirement that directors may only be removed from our Board of Directors for cause;
|
•
|
a prohibition on common stockholder action by written consent, which forces common stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors;
|
•
|
the requirement that a special meeting of stockholders may be called only by our Board of Directors, the chairperson of our Board of Directors, our chief executive officer or our president (in the absence of a chief executive officer),
|
•
|
controlling the procedures for the conduct and scheduling of Board of Directors and stockholder meetings;
|
•
|
the requirement for the affirmative vote of holders of at least
66 2/3%
of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal any provision of our certificate of incorporation or our bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board of Directors and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt;
|
•
|
the ability of our Board of Directors to amend the bylaws, which may allow our Board of Directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and
|
•
|
advance notice procedures with which stockholders must comply to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board of Directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
|
•
|
any derivative action or proceeding brought on behalf of us;
|
•
|
any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers or other employees;
|
•
|
any action asserting a claim against us or any of our directors, officers or employees arising out of or relating to any provision of the DGCL, our certificate of incorporation or our bylaws; or
|
•
|
any action asserting a claim against us or any of our directors, officers, stockholders or employees that is governed by the internal affairs doctrine of the Court of Chancery.
|
|
|
|
|
Incorporated by Reference
|
||||||
Exhibit
Number
|
|
Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
10.1*
|
|
|
8-K
|
|
001-37397
|
|
10.1
|
|
June 21, 2019
|
|
10.2*
|
|
|
8-K
|
|
001-37397
|
|
10.3
|
|
June 21, 2019
|
|
31.1†
|
|
|
|
|
|
|
|
|
|
|
31.2†
|
|
|
|
|
|
|
|
|
|
|
32.1†
|
|
|
|
|
|
|
|
|
|
|
32.2†
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
RIMINI STREET, INC.
|
|
|
Date: August 8, 2019
|
/s/ Seth A. Ravin
|
|
Name: Seth A. Ravin
|
|
Title: Chief Executive Officer
|
|
(Principal Executive Officer)
|
Date: August 8, 2019
|
/s/ Thomas B. Sabol
|
|
Name: Thomas B. Sabol
|
|
Title: Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
|
/s/ Seth A. Ravin
|
|
Seth A. Ravin
|
|
Title: Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
/s/ Thomas B. Sabol
|
|
Thomas B. Sabol
|
|
Title: Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
Dated: August 8, 2019
|
By:
|
/s/ Seth A. Ravin
|
|
|
Seth A. Ravin
|
|
|
Title: Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
Dated: August 8, 2019
|
By:
|
/s/ Thomas B. Sabol
|
|
|
Thomas B. Sabol
|
|
|
Title: Chief Financial Officer
|
|
|
(Principal Financial and Accounting Officer)
|