RMNI US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Rimini Street, Inc. (referred to as the “Company”, “we” and “us”) was incorporated in Delaware on October 10, 2017. As discussed below, the Company’s predecessor was also named Rimini Street, Inc., a company incorporated in the state of Nevada in September 2005 and referred to herein as RSI. References to “management” or “management team” refer to the officers and directors of the Company and/or RSI as its predecessor.

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

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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, 2021, 2020 and 2019 presented in the consolidated financial statements reflect the operating results of RSI and its consolidated subsidiaries.

A discussion regarding our financial condition and results of operations for fiscal 2021 compared to fiscal 2020 is presented below. A discussion regarding our financial condition and results of operations for fiscal 2020 compared to fiscal 2019 can be found under Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report on the Form 10-K for the fiscal year ended December 31, 2020, which was filed with the SEC on March 3, 2021, and is available on the SEC’s website at sec.gov.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes to those statements included in Item 8 of this Report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” in Item 1A and elsewhere in this Report.

Certain figures, such as interest rates and other percentages included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.

Overview

Rimini Street, Inc. and its subsidiaries (together, the “Company or “we”) is a global provider of enterprise software support products and services, and the leading independent software support provider for Oracle and SAP products, based on both the number of active clients supported and recognition by industry analyst firms. We founded our company to disrupt and redefine the enterprise software support market by developing and delivering innovative new products and services that fill a then unmet need in the market. We believe we have achieved and sustained our leadership position in independent enterprise software support by delivering on our mission to provide extraordinary technology solutions that achieve each client’s strategic, operational, and financial goals.

Enterprise software support products and services is one of the largest categories of overall global information technology (“IT”) spending. We believe core enterprise resource planning (“ERP”), customer relationship management (“CRM”), product lifecycle management (“PLM”) and technology software platforms have become increasingly important in the operation of mission-critical business processes over the last 30 years, and also that the costs associated with failure, downtime, security exposure and maintaining the tax, legal and regulatory compliance of these core software systems have also increased. As a result, we believe that licensees often view software support as a mandatory cost of doing business, resulting in recurring and highly profitable revenue streams for enterprise software vendors. For example, for fiscal year 2021, SAP reported that support revenue represented approximately 41% of its total revenue and, for fiscal 2021, Oracle reported a margin of 85% for cloud services and license support.

We believe that software vendor support is an increasingly costly model that has not evolved to offer licensees the responsiveness, quality, breadth of capabilities or value needed to meet the needs of licensees. Organizations are under increasing pressure to reduce their IT costs while also delivering improved business performance through the adoption and integration of emerging technologies, such as mobile, virtualization, internet of things (“IoT”) and cloud computing. Today, however, the majority of IT budget is spent operating and maintaining existing infrastructure and systems. As a result, we believe organizations are increasingly seeking ways to redirect budgets from maintenance to new technology investments that provide greater strategic value, and our software products and services help clients achieve these objectives by reducing the total cost of support.

We believe that AMS for enterprise software is a large market with significant unmet needs in client satisfaction and value. Traditional AMS providers compete on price, but the traditional AMS model is broken with a focus a “land and expand” model based on initial cheaper, less-skilled workers but higher costs over time and frequently poor client satisfaction or degradation in service over time. Providers usually contract for lower-cost services with a goal to grow revenue through scope creep by adding hours to open tickets or selling new project work. These lower-cost AMS support models sound cost-effective,

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but their contractual structures can both enable and incent traditional AMS providers to maximize their own revenue at the expense of their clients by “addressing” issues (sometimes neither quickly nor efficiently), but not necessarily resolving them or their root causes. In addition, traditional AMS offerings are disparate and separate from software vendor support, with inherent inefficiencies and gaps that further limit responsiveness, root cause analysis and business value.

We believe organizations are realizing the value of an integrated, expert-led Support and AMS offering that eliminates inefficiencies, realizes joint value from the resolution of root causes that reduce issue volumes over time, and improves client satisfaction. Through our solution offerings, Rimini Street provides expert, ultra-responsive support and AMS, functioning as an extension of IT teams, with engineers available 24x7x365 around the globe for all AMS and enterprise software projects, and to fill skill gaps or help with rightsizing enterprise teams. Rimini Street teams deliver a wide variety of desired outcomes for a broad range of use cases such as supporting entire enterprise software systems, reducing costs, clearing backlogs, or facilitating the redeployment of IT teams for more strategic initiatives.

As of December 31, 2021, we employed over 1,660 professionals and supported over 2,840 active clients globally, including 72 Fortune 500 companies and 16 Fortune Global 100 companies across a broad range of industries. We define an active client as a distinct entity, such as a company, an educational or government institution, or a business unit of a company that purchases our services to support a specific product. For example, we count as two separate active client instances in circumstances where we provide support for two different products to the same entity. We market and sell our services globally, primarily through our direct sales force, and have wholly-owned subsidiaries in Australia, Brazil, Canada, UAE (Dubai), France, Germany, Hong Kong, India, Israel, Japan, Korea, Malaysia, Mexico, Netherlands, New Zealand, Poland, Singapore, Sweden, Taiwan, the United Kingdom and the United States. We believe our primary competitors are the enterprise software vendors whose products we service and support, including IBM, Microsoft, Oracle and SAP.

Our subscription-based revenue provides a strong foundation for, and visibility into, future period results. We generated revenue of $374.4 million, $326.8 million and $281.1 million for the years ended December 31, 2021. 2020, and 2019, respectively, representing a year-over-year increase of 15% and 16% for 2021 and 2020, respectively. We have a history of losses, and as of December 31, 2021, we had an accumulated deficit of $225.8 million. We earned net income of $75.2 million, $11.6 million and $21.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. We generated approximately 53% of our revenue in the United States and approximately 47% of our revenue from our international business for the year ended December 31, 2021.

Since our inception, we have financed our operations through cash collected from clients and net proceeds from equity financings and borrowings.

We intend to continue investing for long-term growth. We have invested and expect to continue investing in expanding our ability to market, sell and provide our current and future products and services to clients globally. We also expect to continue investing in the development and improvement of new and existing products and services to address client needs. We currently do not expect to be profitable in the near future.

Impact of COVID-19

Near the end of the first quarter of 2020, the emergence of the COVID-19 pandemic took hold and had widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices. These rapidly evolving and unpredictable impacts continue as virus variants have resulted in additional outbreaks to date. In response to the COVID-19 pandemic, federal and state governments have implemented multiple measures aimed at containing the spread of the virus, including social distancing, travel restrictions, border closures, quarantine guidance following travel to certain jurisdictions, limitations on public gatherings and continued closures of certain non-essential businesses, vaccination mandates or requirements for businesses to confirm employees’ vaccination status, and other restrictions. As a result, to protect the health and well-being of our employees, clients and the communities in which we operate, we transitioned as many of our employees as possible to a work-at-home model, temporarily closed our offices worldwide, placed restrictions on non-essential business travel, transitioned to a no in-person event marketing strategy and implemented a fully remote sales model. We believe these measures have been successful and have not significantly affected our financial results for the year ended December 31, 2021. We have implemented business continuity measures and will continue to respond to the COVID-19 pandemic as circumstances dictate.

As a result of the measures that we have taken in response to the COVID-19 pandemic described above, we have realized reduced costs of travel, reductions in costs resulting from cancelling certain in-person marketing events, reductions in office operating costs and potential rent abatement related to office closures around the world. While some of our offices have

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partially re-opened with limited staffing, our offices will not fully re-open until local authorities permit us to, and our own criteria and conditions to ensure employee health and safety are satisfied.We continue to expect to offset some of these reduced costs with accelerated investments including implementing virtual sales and other marketing programs, special compensation bonuses for lower-paid employees and special compensation bonuses for employees who have tested positive for COVID-19. For example, during the COVID-19 pandemic, we paid COVID-19 special bonuses to certain of our employees to help with pandemic-related special costs and for the few of our employees who have tested positive for COVID-19. We have authorized COVID-19 special bonuses during pandemic that have been paid throughout 2020 and 2021. The cost of these special bonuses were more than offset by the cost reductions relating to travel and in-person marketing event fees and expenses described above.

The COVID-19 pandemic had no significant net impact on our revenue or results of operations during the year ended December 31, 2021, and we continued to deliver uninterrupted and critical support services to our clients during this period. Our ability to utilize our secure remote-connectivity global infrastructure promotes the safety of our employees while abiding by the restrictions currently in place where they are located throughout the world. While we did implement discounted or extended payment terms for certain of our clients in 2020, in most cases it was in exchange for contractual concessions favorable to us, for example, extended contract terms or marketing support for references, and the collective impact of such changes was not material to our results. However, the COVID-19 pandemic has impacted business markets worldwide, primarily due to the uncertainty relating to the continued effects of the pandemic. As a result, we have experienced some clients not renewing our services as their businesses have been adversely impacted during the pandemic. Despite this, we expect to continue to be able to market, sell and provide our current and future products and services to clients globally. We also expect to continue investing in the development and improvement of new and existing products and services to address client needs.

The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably predict, including the duration and scope of the pandemic; governmental and business actions in response to the pandemic; and the impact on economic activity, including the possibility of recession or financial market instability. These factors may adversely impact consumer, business, and government spending on technology as well as our clients’ ability to pay for our services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including receivables and forward-looking guidance. As such, the effects of the COVID-19 pandemic may not be fully reflected in our financial results until future periods. Refer to “Risk Factors” (Part I, Item 1A of this Report) for a discussion of these factors and other risks.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law in the United States to address the economic impact of the COVID-19 pandemic. We elected to defer payroll tax payments which totaled $1.6 million as of December 31, 2021 as permitted by the CARES Act (such deferred payroll taxes are due in two installments: 50% by December 31, 2021 and 50% by December 31, 2022). We paid $1.6 million in December 2021 as required under the CARES Act. We continue to monitor any effects that may result from the CARES Act and other similar legislation or actions in geographies in which our business operates.

Recent Developments

On February 27, 2022, our Board approved adoption of a stock repurchase program to repurchase up to $15.0 million of our common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, through March 4, 2024, subject to compliance with our Credit Agreement dated July 2, 2021, and amended January 14, 2022 to increase the amount of securities that could be purchased by us to approximately $15.0 million during the term of the facility, and other applicable legal requirements.

On July 20, 2021, we redeemed the remaining 87,802 shares of our 13.00% Series A Preferred Stock at an aggregate total redemption price of $88.4 million. The total redemption price consisted of $87.8 million related to the outstanding shares of Series A Preferred Stock with a face value of $1,000 per share and $0.6 million or $6.86 per share of Series A Preferred Stock related to the dividends earned for the period from July 1, 2021 through July 19, 2021. The redeemed shares of the Series A Preferred Stock, along with the dividends, were recorded on the redemption date of July 20, 2021.

We funded the July 20, 2021 redemption with borrowings from a five year secured term loan of $90 million, which was entered into on July 20, 2021 (the “Credit Facility”). Annual minimum principal payments over the five year term for the Credit Facility will be 5%, 5%, 7.5%, 7.5% and 10%, respectively, with the remaining balance due at the end of the term. See Note 5 to our unaudited condensed consolidated financial statements included in Part II, Item 8 of this Report for further information regarding our Credit Facility.

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On April 16, 2021, we redeemed 60,000 shares of our 13.00% Series A Preferred Stock at an aggregate total redemption price of $62.3 million. The total price consists of $60.0 million related to the face value of $1,000 per share of Series A Preferred Stock and $2.3 million or $39.05 per share of Series A Preferred Stock related to the dividends to be earned for the period from April 1, 2021 through July 18, 2021. The redeemed shares of Series A Preferred Stock, along with the dividends to be earned, were recorded when the Series A Preferred Stock became mandatorily redeemable on April 16, 2021.

Additionally, reference is made to Notes 5 and 6 to our unaudited condensed consolidated financial statements included in Part II, Item 8 of this Report for a discussion of developments related to our Series A Preferred Stock and Credit Facility.

On March 11, 2021, we completed the March 2021 Offering of 7.8 million shares of our Common Stock at a price of $7.75 per share for total gross proceeds of $57.0 million. Underwriter discounts and commissions were $2.9 million and the underwriter expenses were $0.2 million. We also incurred additional professional fees and expenses of $1.3 million as part of the transaction, resulting in net proceeds from the March 2021 Offering of approximately $55.6 million. We used the net proceeds from the March 2021 Offering to redeem 60,000 shares of Series A Preferred Stock. Reference is made to Note 7 to our unaudited condensed consolidated financial statements included in Part II, Item 8 of this Report for information about the March 2021 Offering.

Also, reference is made to Note 10 to our unaudited condensed consolidated financial statements included in Part II, Item 8 of this Report for a discussion of developments in our litigation with Oracle.

Our Business Model

We believe most enterprise software vendors license the rights for customers to use their software. In a traditional licensing model, the customer typically procures a perpetual software license and pays for the license in a single upfront fee (“Perpetual License”), and base software support services can be optionally procured from the software vendor for an annual fee that are typically 20-23% of the total cost of the software license. In a subscription-based licensing model, such as software as a service, or SaaS, the customer generally pays as it goes for usage of the software on a monthly or annual basis (“Subscription License”). Under a Subscription License, the product license and a base level of software support are generally bundled together as a single purchase, and the base level of software support is not procured separately nor is it an optional purchase.

When we provide base software support for a Perpetual License, we generally offer our clients service for a fee that is equal to approximately 50% of the annual fees charged by the software vendor for their base support. When providing supplemental software support for a Perpetual License, where the client procures our support service in addition to retaining the software vendor’s base support, we generally offer our clients service for a fee that is equal to 25% of the annual fees charged by the software vendor for their base support. For supplemental software support on a Subscription License, we generally offer our clients services for a fee that is equal to 50% of the annual fees charged by the software vendor for their supplemental or premium support. We also offer a special support service, Rimini Street Extra Secure Support, for clients that require a higher level of security clearance for our engineers accessing their system. Rimini Street Extra Secure Support is an additional fee added to our base or supplemental support fee. Subscriptions for additional software products and services are available, designed to meet specific client needs and we believe provide exceptional value for the fees charged.

Our subscription-based software support products and services offer enterprise software licensees a choice of solutions that replace or supplement the support products and services offered by enterprise software vendors for their products. Features, service levels, service breadth, technology and pricing differentiate our software products and services. We believe clients utilize our software products and services to achieve substantial cost savings; receive more responsive and comprehensive support; obtain support for their customized software that is not generally covered under the enterprise software vendor’s service offerings; enhance their software functionality, capabilities, and data usage; and protect their systems and extend the life of their existing software releases and products. Our products and services enable our clients to keep their mission-critical systems operating smoothly and to remain in tax, legal and regulatory compliance; improve productivity; and better allocate limited budgets, labor and other resources to investments that provide competitive advantage and support growth.

We currently offer most of our support products and services on a subscription basis for a term that is generally 15 years in length with generally an initial, non-cancelable period of two to three years. The negotiated fees extend for the full term of the contract and usually include modest increases (averaging approximately three percent) after the initial non-cancelable period of each contract. For the year ended December 31, 2021, approximately 80% of our invoicing was generated inside a non-cancelable period, and approximately 20% of our invoicing was generated outside of a non-cancelable period.

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After a non-cancelable period, our clients generally have the ability to terminate their support contracts on an annual basis upon a notice period generally ranging from 60 to 90 days prior to the end of the support period or renegotiate a mutually-agreeable, additional support period – including potentially an additional multi-year, non-cancelable support period. We generally invoice our clients annually in advance of the support period. We record amounts invoiced for support periods that have not yet occurred as deferred revenue on our balance sheet. We net any unpaid accounts receivable amounts relating to cancellable support periods against deferred revenue on our balance sheet.

In November 2019, we announced the global availability of our Application Management Systems ("AMS") for Oracle, which includes coverage for Oracle Database, Middleware and a wide range of Oracle applications including E-Business Suite, JD Edwards, PeopleSoft and Siebel. In addition to leveraging our support services for Oracle that replaces expensive and less robust software vendor annual support with a more responsive and comprehensive support offering, our clients can now have us manage their Oracle systems day-to-day with an integrated application management and support service provided by a single trusted vendor. As an integrated service, we believe we can provide clients a better model, better people, and better outcomes with higher satisfaction and significant savings of time, labor and money. The AMS for Oracle includes system administration, operational support, health monitoring and enhancement support.

In August 2019, we announced plans to globally offer AMS for SAP enterprise software, expanding the scope of support services we offer clients globally. This AMS service is in addition to our traditional enterprise Support Services. We are already providing this new SAP AMS service to clients in North and South America. The service includes system administration and SAP Basis support, system health monitoring with proactive analysis, preventative system recommendations and event detection; and enhancement support for complex SAP software landscapes.

Our pricing model is a key component of our marketing and sales strategy and we believe delivers significant savings and value to our clients.

Key Business Metrics

Number of clients

Since we founded our company, we have made the expansion of our client base a priority. We believe that our ability to expand our client base is an indicator of the growth of our business, the success of our sales and marketing activities, and the value that our services bring to our clients. We define an active client as a distinct entity, such as a company, an educational or government institution, or a business unit of a company that purchases our services to support a specific product. For example, we count as two separate active clients when support for two different products is being provided to the same entity. As of December 31, 2021, 2020 and 2019, we had over 2,840, 2,480 and 2,060 active clients, respectively.

We define a unique client as a distinct entity, such as a company, an educational or government institution or a subsidiary, division or business unit of a company that purchases one or more of our products or services. We count as two separate unique clients when two separate subsidiaries, divisions or business units of an entity purchase our products or services. As of December 31, 2021, 2020 and 2019, we had over 1,470, 1,310 and 1,160 unique clients, respectively.

The increase in both our active and unique client counts have been almost exclusively from new unique clients and not from sales of new products and services to existing unique clients. However, as noted previously, we intend to focus future growth on both new and existing clients. We believe that the growth in our number of clients is an indication of the increased adoption of our enterprise software products and services.

Annualized subscription revenue

We recognize subscription revenue on a daily basis. We define annualized subscription revenue as the amount of subscription revenue recognized during a quarter and multiplied by four. This gives us an indication of the revenue that can be earned in the following 12-month period from our existing client base assuming no cancellations or price changes occur during that period. Subscription revenue excludes any non-recurring revenue, which has been insignificant to date. Our annualized subscription revenue was approximately $393 million, $349 million and $302 million as of December 31, 2021, 2020 and 2019, respectively.

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Revenue retention rate

A key part of our business model is the recurring nature of our revenue. As a result, it is important that we retain clients after the completion of the non-cancelable portion of the support period. We believe that our revenue retention rate provides insight into the quality of our products and services and the value that our products and services provide our clients.

We define revenue retention rate as the actual subscription revenue (dollar-based) recognized in a 12-month period from clients that existed on the day prior to the start of the 12-month period divided by our annualized subscription revenue as of the day prior to the start of the 12-month period. Our revenue retention rate was 92% for each of the years ended December 31, 2021, 2020 and 2019.

Gross margin

We derive revenue through the sale of our enterprise software products and services. All the costs incurred in providing these products and services are recognized as part of the cost of revenue. The cost of revenue includes all direct product line expenses, as well as the expenses incurred by our shared services organization which supports all product lines.

We define gross profit as the difference between revenue and the costs incurred in providing the software products and services. Gross margin is the ratio of gross profit divided by revenue. Our gross margin was approximately 63.6%, 61.4% and 62.6% for the years ended December 31, 2021, 2020 and 2019, respectively. We believe the gross margin provides an indication of how efficiently and effectively we are operating our business and serving our clients.

Factors Affecting Our Operating Performance

Litigation

The information from Item 3, Legal Proceedings and Item 1A, “Risk Factors-—Risks Related to Litigation—“We and our Chief Executive Officer are involved in litigation with Oracle. An adverse outcome in the ongoing litigation could result in the payment of substantial damages and/or an injunction against certain of our business practices, either of which could have a material adverse effect on our business and financial results,” is incorporated by reference herein. For claims on which Oracle has prevailed or may prevail, we have been and could be required to pay substantial damages for our current or past business activities or be enjoined from certain business practices. Any of these outcomes could result in a material adverse effect on our business.

Adoption of enterprise software products and services

We believe the existing market for independent enterprise software support services is underserved. We currently provide support services for IBM, Microsoft, SAP, Oracle and other enterprise software vendors’ products. We also believe the existing market for our other enterprise software products and services is underserved, and that we have unique products and services that can meet client needs in the marketplace. For example, we provide the Rimini Street Advanced Database Security product in partnership with McAfee, a global leader in cybersecurity.

We also believe that our total addressable market for our enterprise software products and services is substantially larger than our current client base and the products and services we currently offer. As a result, we believe we have the opportunity to expand our global client base and to further increase adoption of our software products and services within and across existing clients. However, as the market for independent enterprise software support services as well as our other software products and services is still emerging, it is difficult for us to predict the timing of when and if widespread acceptance will occur.

Sales cycle

We sell our services to our clients primarily through our direct sales organization. Our sales cycle, depending on the product or service, typically ranges from six months to a year from when a prospective client is engaged. While we believe that there is a significant market opportunity for our enterprise software products and services, we often must educate prospective clients about the value of our products and services, which can result in lengthy and multiple sales cycles, particularly for larger prospective clients, as well as the incurrence of significant marketing expenses. Our typical sales cycle with a prospective client begins with the generation of a sales lead through trade shows, industry events, online marketing, media interviews and articles, inbound calls, outbound calls or client, analyst or other referral. The sales lead is followed by an assessment of the prospect’s current software license contract terms, systems environment, products and releases being used, needs and objectives.

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The variability in our sales cycle for replacement or supplemental software support services is impacted by whether software vendors are able to convince potential clients that they should renew their software maintenance with the existing vendor or procure or renew supplemental support services from the existing vendor, respectively. Another driver of our sales cycle variability is any announcement by a software vendor of their discontinuation, reduction or limitation of support services for a particular software product or release for which we continue to offer a competing support service. In addition, our sales cycle variability is impacted by vendor discounts provided by software companies to retain existing clients or attract potential clients. Finally, our litigation with Oracle can also drive sales cycle variability as clients oftentimes perform their own legal due diligence, which can lengthen the sales cycle.

Key Components of Consolidated Statements of Operations

Revenue. We currently derive nearly all of our revenue from subscription-based contracts for software services. Revenue from these contracts is recognized ratably on a straight-line basis over the applicable service period.

Cost of revenue. Cost of revenue includes salaries, benefits and stock-based compensation expenses associated with our technical support and services organization, as well as allocated overhead and non-personnel expenses such as outside services, professional fees and travel-related expenses. Allocated overhead includes overhead costs for depreciation of equipment, facilities (consisting of leasehold improvements and rent) and technical operations (including costs for compensation of our personnel and costs associated with our infrastructure). We recognize expenses related to our technical support and services organization as they are incurred.

Sales and marketing expenses. Sales and marketing expenses consist primarily of personnel costs for our sales, marketing and business development employees and executives, amortization expense associated with capitalized sales commissions, sales commissions that do not qualify for capitalization, travel related expenses, outside services and allocated overhead. Sales commissions are costs of obtaining customer contracts and are capitalized and then amortized over a period of benefit that we have determined to be 4 years.

General and administrative expenses. General and administrative expenses consist primarily of personnel costs for our administrative, legal, human resources, finance and accounting employees and executives. These expenses also include non-employee expenses, such as travel-related expenses, outside services, legal, auditing and other professional fees, and general corporate expenses, along with an allocation of our general overhead expenses.

Impairment charges related to operating lease right-of-use 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.

Litigation costs and related recoveries, net. Litigation costs consist of legal settlements, pre-judgment interest, and third-party professional fees to defend against litigation claims. In the past, we have had liability insurance policies where a portion of our defense costs and litigation judgments or settlements have been reimbursed under the terms of the policies. Such insurance recoveries were reflected as a reduction of litigation costs upon notification of approval for reimbursement by the insurance company. For legal expenses related to Rimini II litigation, the deferred settlement liability was reduced with a corresponding reduction of legal expenses when the costs were incurred.

Interest expense. Interest expense is incurred under our Credit Facility and other debt obligations. The components of interest expense include the amount of interest payable in cash at the stated interest rate, interest that is payable in kind through additional borrowings, make-whole applicable premium, and accretion of debt discounts and issuance costs (“DDIC”) using the effective interest method.

Gain (loss) from change in fair value of redeemable warrants. We have revised certain prior period amounts on the audited condensed consolidated financial statements to correct a misstatement with respect to improperly classifying certain warrants to purchase approximately 6.1 million shares of our Common Stock, at $11.50 per share (the “GP Sponsor Private Placement Warrants”) as equity instead of as a warrant liability that is adjusted through charges or credits to the income statement each quarter to reflect changes in the fair value of the warrants, under the guidance of Accounting Standards Codification (“ASC”) 815-40, Contracts in Entity’s Own Equity. The changes in the fair value of the GP Sponsor Private Placement Warrants are recorded each period through October 29, 2021.

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Other expenses, net. Other expenses, net consists primarily of gains or losses on foreign currency transactions, write-off of deferred debt financing costs related to unsuccessful financings, and interest income.

Income taxes. The provision for income taxes is based on the amount of our taxable income and enacted federal, state and foreign tax rates, as adjusted for allowable credits and deductions. Our provision for income taxes consists primarily of foreign taxes for the periods presented, as our taxable income for U.S. federal and state purposes is offset by net operating losses. In addition, based on all available evidence, we determined that it was more likely than not that we could benefit from our deferred tax assets, resulting in a tax benefit of $62.3 million in the current period. In assessing the realizability of deferred tax assets, we considered whether it is more likely than not that some portion or all of the deferred tax assets would not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. In prior years, the domestic net deferred tax assets had been fully offset by a valuation allowance because of our lack of domestic earnings history.

Results of Operations

Comparison of Years ended December 31, 2021 and 2020

Our consolidated statements of operations for the years ended December 31, 2021 and 2020 are presented below (in thousands):

Variance

Cost of revenue:

Operating expenses:

Non-operating expenses:

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(1)Includes the portion of costs for information technology, security services and facilities costs that are allocated to cost of revenue. In our consolidated financial statements, such costs are 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.

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Revenue. Revenue increased from $326.8 million for the year ended December 31, 2020 to $374.4 million for the year ended December 31, 2021, an increase of $47.7 million or 15%. The vast majority of this increase was driven by a 14% increase in the average number of unique clients, as opposed to existing unique clients subscribing to additional services. On a regional basis, United States revenue grew from $191.4 million for fiscal 2020 to $199.8 million for fiscal 2021, an increase of $8.4 million or 4%, while international revenue grew from $135.3 million for fiscal 2020 to $174.6 million for fiscal 2021, an increase of $39.3 million or 29%. Accelerated growth in our international business was driven by an increase in sales headcount primarily in Asia and Europe and an increase in marketing and advertising spend targeted for prospective clients outside the United States.

Cost of revenue. Total cost of revenue increased from $126.2 million for the year ended December 31, 2020 to $136.5 million for the year ended December 31, 2021, an increase of $10.3 million or 8%. This increase was primarily due to additional support for the increasing number of clients that resulted in an increase in employee compensation and benefits of $11.1 million, an increase in all other costs of $1.4 million and an increase in allocated costs of $0.2 million. These cost increases were offset by a decrease in engineering consulting costs of $2.5 million.

The $11.1 million increase in cost of revenue attributable to employee compensation and benefits for the year ended December 31, 2021, was primarily due to (a) an increase in salaries, wages and benefit costs of $10.8 million due to a 16% increase in the average number of employees devoted to cost of revenue functions, annual pay increases, and increased bonus payouts. In addition, stock based compensation increased $0.3 million during the year ended December 31, 2021.

As discussed in Note 10 to our consolidated financial statements included in Item 8 of this Report, in August 2018 Oracle obtained a permanent injunction from the District Court that prohibits us from using certain processes that could require us to incur additional labor costs to provide support for our clients as contracted. In September 2018, the Company filed a motion with the Court of Appeals, seeking a stay of the permanent injunction pending appeal and requesting a decision before the expiration of the temporary stay entered by the District Court. In November 2018, the Court of Appeals denied the Company’s motion for a stay pending appeal of the injunction issued by the District Court without addressing the merits of the Company’s appeal, and it confirmed the briefing schedule for the appeal. The briefing on our appeal to the Court of Appeals was completed in March 2019, and a hearing on our appeal occurred in July 2019. In August 2019, the Court of Appeals entered an order affirming the permanent injunction and the award of attorneys’ fees that were previously paid to Oracle. However, the Court of Appeals agreed that the injunction was overbroad in two respects and instructed the District Court to remove the restriction on “local hosting” of J.D. Edwards and Siebel software and the prohibition against “accessing” J.D. Edwards and Siebel software source code. Since the date the temporary stay was lifted on the permanent injunction, we have incurred and will continue to incur additional expenses in the range of 1% to 2% of revenue for additional labor costs because, as drafted, the injunction contains language that could be read to cover some current support practices that are being litigated in the “Rimini II” lawsuit and that have not been found to be infringing.

Gross Profit. Gross profit increased from $200.6 million for the year ended December 31, 2020 compared to $238.0 million for the year ended December 31, 2021, an increase of $37.4 million or 19%. Gross margin for the year ended December 31, 2020 was 61.4% compared to 63.6% for the year ended December 31, 2021. Our revenue for the year ended December 31, 2021 increased by $47.7 million or 15% compared to the year ended December 31, 2020. Total cost of revenue for the year ended December 31, 2021 increased by $10.3 million, or 8%, compared to the year ended December 31, 2020. Given that the increase in the cost of revenue was 8% compared to the increase in revenue of 15%, it resulted in a 220 basis points improvement in our gross margin for the year ended December 31, 2021 compared to the year ended December 31, 2020. The higher gross margin for the year ended December 31, 2021 was primarily due to the decline in engineering consulting costs and small increase in our allocated costs.

Sales and marketing expenses. As a percentage of our revenue, sales and marketing expenses have decreased from 35% for the year ended December 31, 2020 to 34% for the year ended December 31, 2021. In dollar terms, sales and marketing expenses increased from $114.7 million for the year ended December 31, 2020 to $128.5 million for the year ended December 31, 2021, an increase of $13.8 million or 12%. This increase was primarily due to (i) a $15.8 million increase in employee compensation and benefits as a result of a 16% increase in average headcount, (ii) an increase in trade show costs of $1.7 million, (iii) an increase in recruitment costs of $0.7 million and (iv) an increase of all other costs of $0.6 million. These increases were offset by declines in advertising, marketing and promotion costs and travel expenses of $2.0 million, $0.8 million and $2.3 million, respectively.

The $15.8 million increase in sales and marketing expense attributable to employee compensation and benefits for the year ended December 31, 2021, was primarily due to an increase in (i) salaries, wages and benefit costs of $12.6 million due to a 16% increase in the average number of employees devoted to sales and marketing functions, annual pay increases, and higher

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bonus payouts and (ii) commissions of $3.2 million due to new customer wins in excess of the prior year. Our overall spending increased as we attempt to accelerate our future revenue growth by investing in more resources.

General and administrative. General and administrative expenses increased from $52.2 million for the year ended December 31, 2020 to $64.2 million for the year ended December 31, 2021, an increase of $12.0 million or 23%. This increase was primarily due to (i) increases in compensation and benefit costs of $10.3 million, (ii) an increase in computer software and license costs of $1.2 million, (iii) an increase of travel expenses of $0.9 million, (iv) an increase in other taxes of $0.4 million and (v) an increase in recruitment costs of $0.2 million. These unfavorable variances were offset, in part, by (i) a reduction of contract labor of $1.1 million, (ii) a favorable increase in administrative allocations of $0.6 million and (iii) a reduction in rent of $0.4 million.

The $10.3 million increase in general and administrative expenses attributable to employee compensation and benefits for the year ended December 31, 2021, was primarily due to an increase in salaries, wages and benefit costs of $8.9 million due to a 12% increase in the average number of employees devoted to general and administrative functions, annual pay increases, and increased bonus payouts, and an increase of $1.4 million in stock-based compensation expense.

We expect to continue to incur higher expenses associated with supporting the growth of our business, both in terms of size and geographical diversity, and to meet the increased compliance requirements associated with being a public company. Public company costs that are expected to increase in the future include additional information systems costs, costs for additional personnel in our accounting, human resources, IT and legal functions, SEC and Nasdaq fees, and incremental professional, legal, audit and insurance costs. As a result, we currently expect our general and administrative expenses to increase in dollar terms in future periods.

Impairment charges related to operating lease right-of-use assets. We recognized an impairment charge of $1.2 million for the year ended December 31, 2020 compared to $1.6 million for the year ended December 31, 2021, related to two of our office leases as we ceased to use portions of our office space due to increased use of remote work which has occurred during the COVID-19 pandemic.

Litigation costs and related recoveries, net. For the years ended December 31, 2021 and 2020, litigation costs and related recoveries, net consist of the following (in thousands):

Litigation settlement expense $ 7,530 $ — $ 7,530

Professional fees and other defense costs of litigation 16,457 13,493 2,964

Litigation costs, net of related insurance recoveries $ 16,876 $ 14,555 $ 2,321

Litigation settlement expense increased from no expense for the year ended December 31, 2020 to $7.5 million for the year ended December 31, 2021. Following nearly two years of discovery by Oracle, the District Court ruled in favor of the Company with respect to five of the items. With respect to the other five items, the District Court found the Company violated the permanent injunction, awarded sanctions to Oracle of $0.6 million and ordered that certain computer files be quarantined from use and notice and proof of such quarantining be provided to Oracle. The District Court also ruled that Oracle may recover its reasonable attorneys’ fees and costs. The Company has estimated those costs to be $6.9 million for the year ended December 31, 2021.

Professional fees and other defense costs associated with litigation increased from $13.5 million for the year ended December 31, 2020 to $16.5 million for the year ended December 31, 2021, an increase of $3.0 million. This increase was primarily due to increased costs associated with discovery work on the Rimini II litigation and the Rimini I appeal during the year ended December 31, 2021 compared to the year ended December 31, 2020.

Insurance costs and related recoveries, net decreased from a net cost of $1.1 million for the year ended December 31, 2020 to net benefit of $7.1 million for the year ended December 31, 2021. For the year ended December 31, 2020, we recognized costs of $1.1 million to revise the amount due to the insurance company (for portions of the Court of Appeals and U.S. Supreme Court awards), which we paid in September 2020. For the year ended December 31, 2021, we received insurance proceeds of $7.1 million related to our litigation costs incurred as part of the injunction proceedings. We are self-insured for any costs related to any current or future intellectual property litigation. We currently believe our cash on hand, accounts receivable and contractually committed backlog provides us with sufficient liquidity to cover costs related to our litigation with Oracle.

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Interest expense. Interest expense increased from $0.1 million for the year ended December 31, 2020 to $1.6 million for the year ended December 31, 2021, an increase of $1.5 million. Interest expense increased primarily due to entering into a five-year Credit Facility for $90 million on July 20, 2021.

Loss on change in fair value of redeemable warrants. Loss on change in fair value of redeemable warrants amounted to a loss of $1.4 million for the year ended December 31, 2020 compared to a loss of $4.2 million for the year ended December 31, 2021. The fair value per warrant changed from $0.35 per warrant as of December 31, 2020 to $1.04 per warrant as of October 29, 2021, which was the date whereby the GP Sponsor Warrants were determined to no longer be treated as a liability. The fair value per warrant changed from $0.12 as of December 31, 2019 compared to $0.35 as of December 31, 2020. The fair value per warrant changed was $0.76 per warrant as of December 31, 2018.

Other expenses, net. For the year ended December 31, 2020, we had other expenses, net of $0.3 million as compared to other expenses net of $1.6 million for the year ended December 31, 2021, a decrease of $1.3 million. For the year ended December 31, 2020, other expense, net was primarily comprised of foreign exchange losses of $0.1 million and other non-operating expenses of $0.2 million. For the year ended December 31, 2021, other expense, net of $1.6 million was primarily comprised of foreign exchange losses of $1.4 million and other non-operating expenses of $0.2 million.

Income taxes. Income taxes went from an expense of $4.6 million for the year ended December 31, 2020 to a tax benefit of $55.8 million for the year ended December 31, 2021, a change of $60.4 million or (1,321)%. This was primarily the result of reducing our valuation allowance by $65.7 million as we determined that it was more likely than not that we could benefit from our deferred tax assets based on all of the available evidence.

Liquidity and Capital Resources

Overview

As of December 31, 2021, we had a working capital deficit of $42.7 million and we had an accumulated deficit of $225.8 million. We recorded net income of $75.2 million and $11.6 million for the years ended December 31, 2021 and 2020, respectively.

Redemption of Series A Preferred Stock

On July 20, 2021, we redeemed the remaining 87,802 shares of our 13.00% Series A Preferred Stock at an aggregate total redemption price of $88.4 million. The total redemption price consisted of $87.8 million related to the outstanding shares of Series A Preferred Stock with a face value of $1,000 per share and $0.6 million related to the dividends earned for the period from July 1, 2021 through July 19, 2021. The redeemed shares of the Series A Preferred Stock, along with the dividends, were recorded on the redemption date of July 20, 2021.

We funded the redemption with borrowings from a five year term loan of $90 million, which was entered into on July 20, 2021 (the “Credit Facility”). The Credit Facility will bear interest at LIBOR plus a margin ranging from 1.75% to 2.50% and contains certain financial covenants, including a minimum fixed charge coverage ratio, a total leverage ratio, and a minimum liquidity of $20 million in U.S. cash. Annual minimum principal payments over the five year term for the Credit Facility will be 5%, 5%, 7.5%, 7.5%, and 10%, respectively, with the remaining balance due at the end of the term.

On April 16, 2021, we redeemed 60,000 shares of our 13.00% Series A Preferred Stock at an aggregate total redemption price of $62.3 million. The total price consisted of $60.0 million related to the face value of $1,000 per share of Series A Preferred Stock and $2.3 million related to the dividends to be earned for the period from April 1, 2021 through July 18, 2021. The redeemed shares of Series A Preferred Stock, along with the dividends were recorded when the Series A Preferred Stock became manditorily redeemable on April 16, 2021.

On March 11, 2021, we completed the March 2021 Offering of 7.8 million shares of our Common Stock at a price of $7.75 per share for total gross proceeds of $57.0 million. Net proceeds from the March 2021 Offering were $55.6 million after underwriter and offering expenses. We used the net proceeds from the March 2021 Offering to redeem 60,000 shares of Series A Preferred Stock.

On January 5, 2021, we entered into an agreement with certain of the holders of its Series A Preferred Stock (the “January 2021 Stock Repurchase Agreement”) to repurchase 10,000 shares of Series A Preferred Stock and the associated obligations pursuant to our Convertible Secured Promissory Notes outstanding in respect thereof (the “Note Obligations”) for

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an aggregate purchase price of approximately $9.0 million representing a discount to the face value of such shares of Series A Preferred Stock and no make-whole payments were required.

The holders of Series A Preferred Stock were entitled to, from the respective issuance date, a cash dividend of 10.0% per annum and a payment-in-kind dividend of 3.0% per annum for the first five years following the initial June 2018 closing and thereafter all dividends accruing on such Series A Preferred Stock will be payable in cash at a rate of 13.0% per annum.

Credit Facility

Effective July 20, 2021, we received $89.3 million of net proceeds related to the Credit Facility. The borrowings under the Credit Facility were discounted at 0.375%. As part of the transaction, we incurred issuance costs of $4.2 million, which were capitalized and will be amortized over the term of the Credit Facility.

The Credit Facility bears interest at the London Interbank Offered Rate (“LIBOR”), plus a margin ranging from 1.75% to 2.50%. For the year ended December 31, 2021, the interest rate on the Credit Facility was 2.4%.

The Credit Facility contains certain financial covenants, including a minimum fixed charge coverage ratio greater than 1.25, a total leverage ratio less than 3.75, and a minimum liquidity of $20 million in U.S. cash. Annual minimum principal payments over the five year term for the Credit Facility will be 5%, 5%, 7.5%, 7.5%, and 10%, respectively, with the remaining balance due at the end of the term. For the year ended December 31, 2021, the Company made principal payments of $2.3 million.

Pursuant to a Guaranty and Security Agreement, dated July 2, 2021 (the “Guaranty and Security Agreement”), among the Credit Parties and Capital One, National Association, as agent, the obligations under the Credit Agreement are guaranteed by certain of our subsidiaries (the Company and the guarantors, collectively, the “Credit Parties”) and are secured, subject to customary permitted liens and exceptions, by a lien on substantially all assets of the Credit Parties.

Related Party Note Payable to GP Sponsor

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

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

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

Please refer to Notes 5 through 8 to the unaudited condensed consolidated financial statements included in Part II, Item 8 of this Report for information regarding our Credit Facility, our Series A Preferred Stock and our Common Stock Offerings.

A key component of our business model generally requires that customers prepay us annually for the services we will provide over the following year or longer. As a result, we collect cash from our customers in advance of when the related service costs are incurred, which resulted in deferred revenue of $253.2 million that is included in current liabilities as of December 31, 2021. Therefore, we believe that working capital deficit is not as meaningful in evaluating our liquidity since the costs of fulfilling our commitments to provide services to customers are currently limited to approximately 36% of the related deferred revenue based on our gross margin of 64% for the year ended December 31, 2021.

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For the next 12 months, assuming that our operations are not significantly impacted by the COVID-19 pandemic, we believe that cash, cash equivalents, and restricted cash of $120.0 million as of December 31, 2021, plus future cash flow from operating activities will be sufficient to meet our anticipated cash needs including working capital requirements, planned capital expenditures, and our contractual obligations of approximately $12.8 million that are due during the 12 months ending December 31, 2022.

As discussed below in greater detail, for the year ended December 31, 2021, we generated cash flows from our operating activities of $66.9 million, which were derived from cash earnings of $37.4 million and favorable changes in operating assets and liabilities of $29.5 million. We believe our operating cash flows for the year ending December 31, 2021 will be sufficient to fund the portion of our contractual obligations that is not funded with existing capital resources.

Cash Flows Summary

Presented below is a summary of our operating, investing and financing cash flows for the years ended December 31, 2021 and 2020 (in thousands):

Net cash provided by (used in):

Cash Flows Provided by Operating Activities

A key component of our business model generally requires that customers prepay us annually for the services we will provide over the following year or longer. As a result, we collect cash in advance of the date when the vast majority of the related services are provided. During 2020, we focused on our collection efforts as the COVID-19 pandemic emerged to minimize the unfavorable impact of our accounts receivable. For the years ended December 31, 2021 and 2020, cash flows provided by operating activities amounted to $66.9 million and $42.1 million, respectively. The key components in the calculation of our cash provided by operating activities for the years ended December 31, 2021 and 2020, are as follows (in thousands):

Changes in operating assets and liabilities, net 29,518 12,957

Net cash provided by operating activities $ 66,945 $ 42,103

For the year ended December 31, 2021, cash flows provided by operating activities amounted to $66.9 million. We recognized net income of $75.2 million, non-cash expenses resulting in a use of $37.8 million and favorable changes in operating assets and liabilities, net of $29.5 million for the year ended December 31, 2021. For year ended December 31, 2021, the non-cash expenses, net amounted to a use of $37.8 million and were comprised of the following; stock-based compensation expense of $9.7 million, amortization and accretion related to ROU assets and liabilities of $6.1 million, a loss from change in in fair value of redeemable warrants of $4.2 million, depreciation and amortization expense of $2.4 million, a non-cash impairment charge related to a ROU asset of $1.6 million and a write-off of debt discounts and issuance costs of $0.4 million. These expenses were offset by a change in our deferred tax asset provision which amounted to a benefit of $62.3 million, related primarily to the reduction in our valuation allowance during 2021.

For the year ended December 31, 2021, changes in operating assets and liabilities were favorable by $29.5 million to the operating cash flows due to an increase of deferred revenue of $47.3 million, a decrease in prepaid expenses, deposits, accrued liabilities for $3.5 million and accounts payable of $2.5 million. These favorable changes were offset by unfavorable changes in accounts receivable for $18.8 million, prepaid expenses, deposits and other assets for $3.5 million and deferred contract costs for $1.6 million.

For the year ended December 31, 2020, cash flows provided by operating activities amounted to $42.1 million. We recognized net income of $11.6 million, non-cash expenses of $17.6 million and favorable changes in operating assets and liabilities, net of $13.0 million for the year ended December 31, 2020. For year ended December 31, 2020, the non-cash expenses, net amounted to $17.6 million and were comprised of stock-based compensation expense of $7.5 million,

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amortization and accretion related to ROU assets and liabilities of $6.2 million, depreciation and amortization expense of $1.8 million, a loss from change in in fair value of redeemable warrants of $1.4 million and a non-cash impairment charge related to a ROU asset of $1.2 million.

For the year ended December 31, 2020, changes in operating assets and liabilities were favorable by $13.0 million to the operating cash flows due to an increase of deferred revenue of $22.7 million, a decrease in prepaid expenses, deposits and other assets of $3.2 million, an increase in accrued liabilities of $1.6 million and an increase in accounts payable of $0.9 million. These favorable changes were offset by unfavorable changes in accounts receivable for $8.5 million and deferred contract costs for $6.9 million.

Cash Flows Used in Investing Activities

Cash flows used in investing activities were primarily driven by capital expenditures for leasehold improvements and computer equipment as we continued to invest in our business infrastructure and advance our geographic expansion. Such capital expenditures totaled $2.1 million and $1.5 million for the years ended December 31, 2021 and 2020, respectively.

For the year ended December 31, 2021, capital expenditures of $2.1 million consisted of new computer equipment and leasehold improvements of $1.1 million for our U.S. facilities, and $1.0 million for computer equipment at our foreign locations, primarily in India.

For the year ended December 31, 2020, capital expenditures of $1.5 million consisted of new computer equipment and leasehold improvements of $0.8 million for our U.S. facilities, and $0.7 million for computer equipment at our foreign locations, primarily in India.

Cash Flows from Financing Activities

For the year ended December 31, 2021, cash utilized in financing activities of $26.6 million was attributable to payments to repurchase shares of Series A Preferred Stock totaling $156.8 million, which included $87.8 million in July 2021, $60.0 million in April 2021 and $9.0 million in January 2021; recurring dividend payments $9.7 million and a make-whole dividend payments of $2.9 million; payments related to debt issuance costs of $4.2 million; payments for professional fees associated with our March 2021 Offering of $1.3 million; principal payments related to the Credit Facility of $2.3 million; payments of $1.1 million related to treasury stockand capital lease payments of $0.4 million. These cash uses were offset by proceeds of $89.3 million from the new Credit Facility, proceeds of $57.0 million generated from the March 2021 Offering and proceeds of $5.9 million received from stock option exercises.

For the year ended December 31, 2020, cash provided by financing activities of $6.4 million was attributable to net proceeds of $25.7 million generated from our August 2020 Offering and proceeds of $1.8 million received from stock option exercises. These cash proceeds were offset by dividend payments of $15.8 million, payments of $4.5 million related to repurchasing 5,000 shares of the Series A Preferred Stock, payments for professional fees associated with our August 2020 Offering of $0.6 million and capital lease payments of $0.3 million.

Foreign Subsidiaries

Our foreign subsidiaries and branches are dependent on our U.S.-based parent for continued funding. We currently do not intend to repatriate any amounts that have been invested overseas back to the U.S.-based parent. The imposition of the Transition Tax set forth in the U.S. Tax Cuts and Jobs Act of 2017 may reduce or eliminate U.S. federal deferred taxes on the unremitted earnings of our foreign subsidiaries. However, we may still be liable for withholding taxes, state taxes, or other income taxes that might be incurred upon the repatriation of foreign earnings. We have not made any provision for additional income taxes on undistributed earnings of our foreign subsidiaries. As of December 31, 2021, we had cash and cash equivalents of $51.3 million in our foreign subsidiaries.

Contractual Obligations

The following table summarizes our contractual obligations on an undiscounted basis as of December 31, 2021, and the period in which each contractual obligation is due (in thousands):

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Year Ending December 31:

Credit Facility

Lease obligations:

Off-Balance Sheet Arrangements

During the periods presented, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue and expenses during the reporting periods. These items are monitored and analyzed for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions.

With respect to our significant accounting policies that are described in Note 2 to our consolidated financial statements included in Item 8 of this Report, we believe that the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

Income Taxes and Valuation of Deferred Tax Assets

We account for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). Significant judgment is required in determining income tax benefit or expense and in evaluating uncertainties under ASC 740. Deferred taxes are recorded for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are established when it is determined that it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company’s deferred tax assets are primarily the result of U.S. federal net operating loss carryforwards (“NOLs”) and tax credit carryforwards.

During the year ended December 31, 2021, we released our valuation allowance related to our deferred tax assets and recognized a $55.8 million income tax benefit. Management determined that, as a result of generating pretax earnings, utilization of net operating loss carryovers and projected pre-tax earnings, there is sufficient positive evidence to conclude that it is more likely than not that its U.S. deferred taxes are realizable. The realization of deferred tax assets is dependent upon on our ability to generate sufficient future taxable income during the periods in which those temporary differences become deductible, prior to the expiration of the tax attributes. The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns and forecasting future profitability.

We assessed the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets within the applicable expiration period. While we believe that we have utilized a reasonable method to determine our deferred tax assets and the related release of our valuation allowance, should factors and

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conditions differ materially from those used by us, the actual realization of deferred tax assets could differ materially from the reported amounts.

Loss Contingencies

We are 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, we accrue that amount. Alternatively, when no amount within a range of probable loss appears to be a better estimate than any other amount, we accrue the lowest amount in the range. If we determine that a loss is reasonably possible and the range of the loss is estimable, then we disclose the range of the possible loss if the upper end of the range is material. If we cannot estimate the range of loss, we 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. We regularly evaluate 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.

Recent Accounting Pronouncements

The following accounting standards are not yet effective and management has not completed its evaluation of the recent accounting pronouncements to determine the impact that adoption of these standards will have on our consolidated financial statements.

In August 2020, the FASB issued ASU 2020-6, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40). The guidance eliminates the beneficial conversion and cash conversion accounting for convertible instruments. The new guidance also modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The new guidance is effective for us as of January 1, 2022. We are assessing the impact of the adoption of this guidance on our Consolidated Financial Statements.

For additional information on recently issued and adopted accounting standards, please refer to the section titled Recent Accounting Pronouncements under Note 2 to our consolidated financial statements included in Item 8 of this Report.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Risk

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. Dollar, primarily the Euro, British Pound Sterling, Brazilian Real, Australian Dollar, Indian Rupee and Japanese Yen. We generated between 36% and 47% of our revenue from our international business for the years ended December 31, 2021, 2020 and 2019. Increases in the relative value of the U.S. Dollar to other currencies may negatively affect our revenue, partially offset by a positive impact to operating expenses in other currencies as expressed in U.S. Dollars. We have experienced and will continue to experience fluctuations in our net income (loss) as a result of transaction gains or losses related to revaluing certain current asset and current liability balances, including intercompany receivables and payables, which are denominated in currencies other than the functional currency of the entities in which they are recorded. While we have not engaged in the hedging of our foreign currency transactions to date, we are evaluating the costs and benefits with the expectation that we will initiate such a program and we may in the future hedge selected significant transactions denominated in currencies other than the U.S. Dollar.

During the fiscal years ended December 31, 2021, 2020 and 2019, the effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our consolidated financial statements.

Interest Rate Sensitivity

We hold cash and cash equivalents for working capital purposes. We do not have material exposure to market risk with respect to investments, as any investments we enter into are primarily highly liquid investments.

Variable Rate Debt

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In July 2021, we entered into the Credit Facility, which will bear interest at LIBOR plus a margin. ranging from 1.75% to 2.50%. Accordingly, we are exposed to market risk due to variable interest rates based on LIBOR.As of December 31, 2021, we had $83.3 million outstanding debt under the Credit Facility. As of this date, a reasonably possible hypothetical adverse change of 100 basis points in would have resulted in an increase of approximately $0.1 million in annual interest expense. While we have not engaged in the hedging of variable interest rates under our Credit Facility, we are evaluating the costs and benefits of initiating such a program and we may in the future hedge all or a portion of our variable interest rate debt. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 and Note 5 of our unaudited condensed consolidated financial statements included in Part II, Item 8 of this Report for more information related to the Credit Facility.

Inflation Risk

With regards to inflation risk and other economic conditions, please refer to Item 1A. Risk Factors included in Part I of this Report.

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Item 8. Financial Statements and Supplementary Data

TABLE OF CONTENTS

Page

Report of Independent Registered Public Accounting Firm 57

Financial Statements:

Consolidated Balance Sheets 60

Consolidated Statements of Operations and Comprehensive Income 61

Consolidated Statements of Stockholders’ Deficit 62

Consolidated Statements of Cash Flows 63

Notes to Consolidated Financial Statements 65

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Rimini Street, Inc.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Rimini Street, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, stockholders’ deficit, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company had changed its method of accounting for leases as of January 1, 2020 due to the adoption of Topic 842, Leases.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, 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 consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the consolidated financial statements 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 audit 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. 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 audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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

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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.

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.

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 $374 million in revenue which was primarily derived from the subscription-based software support revenue for the year ended December 31, 2021. A significant portion of the Company’s contracts contain non-standard provisions which require 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.

Evaluation of the realizability of deferred tax assets

As discussed in Note 2 and Note 9 to the consolidated financial statements, the Company assesses the estimated future realizability of the gross carrying value of its deferred tax assets at each reporting period. A valuation allowance is required when, based upon an assessment of various factors, it is more likely than not that some portion or all of the deferred tax assets will not be realized. During 2021, the Company recognized an income tax benefit of $55.8 million based on management’s reassessment of the amount of its U.S. federal and other state deferred tax assets that are more likely than not to be realized. The Company’s deferred tax assets, net were $64.0 million as of December 31, 2021, which include U.S. federal net operating losses and business interest expense carryforwards.

We identified the evaluation of the realizability of the deferred tax assets as a critical audit matter. Subjective and challenging auditor judgment was required to evaluate the realizability of the deferred tax assets based on the projected future taxable income over the periods in which those deferred tax assets will be used.

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 income taxes, including controls related to the Company’s evaluation of the realizability of the deferred tax assets. We evaluated positive and negative evidence used in assessing whether the deferred tax assets were more likely than not to be realized in the future, including evaluating the current and cumulative taxable income or losses, as well as future projections of taxable income. We evaluated management’s projections of future taxable income by considering (1) recent financial profitability trends of the Company and (2) the Company’s ability to project future taxable income based on comparisons of the Company’s

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previous annual projections to actual results. We performed a sensitivity analysis over the amount and timing of future taxable income to assess the impact on utilization of the deferred tax assets. We involved income tax professionals with specialized skills and knowledge, who assisted in evaluating the positive and negative evidence used to assess the realizability of the deferred tax assets.

/s/ KPMG LLP

We have served as the Company’s auditor since 2016.

Santa Clara, California

March 2, 2022

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RIMINI STREET, INC.

Consolidated Balance Sheets

(In thousands, except per share amounts)

December 31,

ASSETS

Current assets:

Long-term assets:

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

Current liabilities:

Current maturities of long-term debt $ 3,664 $ —

Accrued compensation, benefits and commissions 36,558 38,026

Operating lease liabilities, current 4,227 3,940

Long-term liabilities:

Long-term debt, net of current maturities 79,655 —

Operating lease liabilities, noncurrent 12,511 15,993

Accrued PIK dividends payable — 1,193

Liability for redeemable warrants — 2,122

Commitments and contingencies (Note 10)

Redeemable Series A Preferred Stock:

Stockholders’ deficit:

Accumulated other comprehensive loss (2,724) (318)

Treasury stock (1,116) —

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

(In thousands, except per share amounts)

Years Ended December 31,

Operating expenses:

Impairment charges related to operating lease right-of-use assets 1,649 1,167 —

Litigation costs and related recoveries:

Litigation settlement expense 7,530 — —

Litigation appeal refunds — — (12,775)

Non-operating expenses:

Other comprehensive income:

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)

Shares Amount

Stock-based compensation expense — — 5,532 — — — 5,532

Restricted stock units vested 178 — — — — — —

Issuance of Common Stock in Private Placement, net 207 — 935 — — — 935

Accretion of discount on Series A Preferred Stock — — (5,848) — — — (5,848)

Paid and payable in cash on Series A Preferred Stock — — (15,073) — — — (15,073)

Paid and payable in kind on Series A Preferred Stock — — (4,522) — — — (4,522)

Foreign currency translation gain — — — 138 — — 138

Stock-based compensation expense — — 7,461 — — — 7,461

Restricted stock units vested 1,114 — — — — — —

Return related to repurchase of Series A Preferred Stock — — (83) — — — (83)

Accretion of discount on Series A Preferred Stock — — (6,275) — — — (6,275)

Paid and payable in cash on Series A Preferred Stock — — (15,713) — — — (15,713)

Paid and payable in kind on Series A Preferred Stock — — (4,738) — — — (4,738)

Foreign currency translation gain — — — 1,111 — — 1,111

Stock-based compensation expense — — 9,710 — — — 9,710

Restricted stock units vested 1,604 — — — — — —

Accretion of discount on Series A Preferred Stock — — (2,277) — — — (2,277)

Paid and payable in cash on Series A Preferred Stock — — (5,839) — — — (5,839)

Paid and payable in kind on Series A Preferred Stock — — (1,752) — — — (1,752)

Reclassification of GP Sponsor Warrant liability — — 6,305 — — — 6,305

Foreign currency translation loss — — — (2,406) — — (2,406)

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,

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash provided by operating activities:

Accretion and amortization of debt discount and issuance costs 441 — 185

Amortization and accretion related to ROU assets 6,139 6,192 —

Loss (gain) from change in fair value of redeemable warrants 4,183 1,394 (3,880)

Changes in operating assets and liabilities:

CASH FLOWS USED IN INVESTING ACTIVITIES:

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of Credit Facility 89,313 — —

Debt issuance costs paid (4,184) — —

Principal payments on borrowings (2,250) — (2,555)

Payments to repurchase shares of Series A Preferred Stock (8,951) (4,500) —

Payment of cash dividends of Series A Preferred Stock (9,735) (15,781) (14,742)

Payments for treasury stock (1,116) — —

Payments for deferred offering and finance costs — — (452)

Proceeds from exercise of employee stock options 5,864 1,808 3,335

Principal payments on financing leases (428) (256) (433)

Net cash provided by (used in) financing activities (26,565) 6,375 (5,737)

Effect of foreign currency changes on cash (6,191) 2,526 405

Net change in cash, cash equivalents and restricted cash 32,081 49,521 13,182

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,

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Underwriter discounts and commissions 1,050 143 —

Underwriter expenses 27 300 —

Discount on shares issued in Private Placement:

Original issuance discount on Series A Preferred Stock — — 500

Transaction costs — — 390

Redeemable Series A Preferred Stock Dividends and Accretion:

Accrued cash dividends $ — $ 3,842 $ 3,889

Accretion of discount on Series A Preferred Stock 2,277 6,275 5,848

Issuance of Series A Preferred Stock for PIK Dividends 2,891 4,680 4,385

Increase in principal related to the Credit Facility discount $ 62 $ — $ —

Purchase of equipment under capital lease obligations — 1,640 206

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, 2021, 2020 and 2019 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, 2021, the Company's current liabilities exceeded its current assets by $42.7 million, and the Company earned net income of $75.2 million for the year ended December 31, 2021. As of December 31, 2021, the Company had available cash, cash equivalents and restricted cash of $120.0 million. As of December 31, 2021, the Company’s current liabilities included $253.2 million of deferred revenue whereby the historical costs of fulfilling the Company’s commitments to provide services to its customers was approximately 36% of the related deferred revenue for the year ended December 31, 2021.

On July 20, 2021, the Company redeemed the remaining 87,802 shares of its 13.00% Series A Preferred Stock at an aggregate total redemption price of $88.4 million. The total redemption price consisted of $87.8 million related to the outstanding shares of Series A Preferred Stock with a face value of $1,000 per share and $0.6 million or $6.86 per share of Series A Preferred Stock related to the dividends earned for the period from July 1, 2021 through July 19, 2021. The redeemed shares of the Series A Preferred Stock, along with the dividends, were recorded on the redemption date of July 20, 2021.

The Company funded the July 20, 2021 redemption with borrowings from a five year term loan of $90 million, which was entered into on July 20, 2021 (the “Credit Facility”). Annual minimum principal payments over the five year term for the Credit Facility will be 5%, 5%, 7.5%, 7.5% and 10%, respectively, with the remaining balance due at the end of the term. See Note 5 for further information regarding the Company's Credit Facility.

As discussed in Note 7, the Company completed a firm commitment underwritten public offering on March 11, 2021 (the “March 2021 Offering”) of 7.8 million shares of its common stock, par value $0.0001 per share (“Common Stock”), at a price of $7.75 per share for total gross proceeds of $57.0 million. Underwriter discounts and commissions were $2.9 million and the underwriter expenses were $0.2 million. The Company also incurred additional professional fees and expenses of $1.3 million as part of the transaction, resulting in net proceeds from the March 2021 Offering of approximately $55.6 million. The Company had previously 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.

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RIMINI STREET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Additionally, the Company is obligated to make operating and financing lease payments that are due within the next 12 months in the aggregate amount of $6.1 million. In March 2020, the World Health Organization declared the outbreak of a novel strain of the coronavirus (“COVID-19”) to be a pandemic. After the issuance date of these financial statements, the Company’s ability to operate continues not to be significantly adversely impacted by the COVID-19 pandemic, 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 Credit Facility repayments, working capital needs, capital expenditures and other contractual obligations for at least 12 months from the issuance date of these financial statements.

Revision of Previously Issued Financial Statements

The Company has revised certain prior period amounts on the audited condensed consolidated financial statements to correct immaterial misstatements with respect to improperly classifying certain warrants to purchase approximately 6.1 million shares of the Company’s Common Stock, at $11.50 per share (the “GP Sponsor Private Placement Warrants”) as equity instead of as a warrant liability that is adjusted through charges or credits to the income statement each quarter to reflect changes in the fair value of the warrants, under the guidance of Accounting Standards Codification (“ASC”) 815-40, Contracts in Entity’s Own Equity. The Company recorded a liability for the warrants of $2.1 million as of December 31, 2020 and adjusted its additional paid-in capital and accumulated deficit accordingly. The impact to the statement of operations and statement of cash flows for the years ended December 31, 2020 and 2019, was a loss of $1.4 million and a gain of $3.9 million, respectively. There was no income tax impact associated with this revision. Total stockholders’ deficit increased by $2.1 million as of December 31, 2020.

See Note 13 for additional information regarding the assumptions made to determine the fair value of the GP Sponsor Private Placement Warrants.

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-

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RIMINI STREET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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 $16.0 million, $14.0 million and $12.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company accounts for uncertain tax positions in accordance with ASC 740, Income Taxes (“ASC 740”), which applies to all tax positions related to income taxes. Under ASC 740, tax benefits are recognized when it is more-likely-than-not that a tax

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RIMINI STREET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

position will be sustained upon examination by the authorities. The Company recognizes interest and penalties accrued related to uncertain tax benefits as a component of income tax expense.

Impairment of Long-lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment is recognized only if the carrying amount of the long-lived assets is not recoverable and exceeds their fair value. The carrying amount of a long-lived asset is not recoverable, if the carrying amounts of such assets exceed the estimates of future net undiscounted cash flows expected to be generated by such assets. 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 $1.6 million and $1.2 million for the years ended December 31, 2021 and 2020, respectively, related to two of its office leases as the Company ceased use of a portion of the office space due to increased remote work 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 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 sheet 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.

Accounting for Series A Preferred Stock

Series A Preferred Stock was 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 was being accreted using the effective interest method. Accordingly, the carrying value of the Series A Preferred Stock was 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 were 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. As noted above, the remaining shares of Series A Preferred Stock were redeemed on July 20, 2021.

Revenue Recognition

Revenue is primarily derived from support services, and to a lesser extent, software licensing and related maintenance and professional services.

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. However, the Company's contracts may include non-standard terms negotiated with each respective client that may impact the amount and timing of revenue recognized.

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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 $3.3 million, $2.1 million and $0.9 million for the years ended December 31, 2021, 2020 and 2019, 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 $253.2 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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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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings (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 2021:

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The guidance removes certain exceptions to the general income tax accounting principles, and clarifies and amends existing guidance to facilitate consistent application of the accounting principles. The new guidance was effective for the Company as of January 1, 2021. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In January 2020, the FASB issued ASU 2020-1, Investments—Equity Securities (Topic 321), Investments - Equity and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The guidance clarifies interactions between current accounting standards on equity securities, equity method and joint ventures, and derivatives and hedging. The new guidance addresses accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. The new guidance was effective for the Company as of January 1, 2021. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

NOTE 3 — LEASES

Operating 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 in the range of 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 2022 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. As most of the Company's leases do not provide an implicit rate, the Company uses an estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2021, 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 for the years ended December 31, were as follows (in thousands):

Operating lease expense related to ROU assets and liabilities $ 6,139 $ 6,192

Other information related to leases as of December 31, was as follows (in thousands):

Supplemental Balance Sheet Information 2021 2020

Operating lease right-of-use assets, noncurrent $ 12,722 $ 17,521

Operating lease liabilities, current $ 4,227 $ 3,940

Operating lease liabilities, noncurrent 12,511 15,993

Total operating lease liabilities $ 16,738 $ 19,933

Weighted Average Remaining Lease Term Years

Operating Leases 4.0

Weighted Average Discount Rate

Operating Leases 10.5 %

Maturities of operating lease liabilities as of December 31, 2021 were as follows (in thousands):

Year Ending December 31:

Total future undiscounted lease payments 20,576

Less imputed interest (3,838)

For both the years ended December 31, 2021 and 2020, the Company paid $6.1 million, respectively, for operating leases.

Finance Leases

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has entered into various financing lease agreements for certain computer equipment. The remaining lease terms range from 1 month to 46 months with annual interest rates ranging from 7% to 8%. As of December 31, 2021, the future annual minimum lease payments under financing lease obligations are as follows (in thousands):

Year ending December 31:

Total minimum lease payments 1,533

Less amounts representing interest 205

Present value of minimum lease payments 1,328

Less current portion, included in accrued expenses 315

Long-term obligation, included in other long-term liabilities $ 1,013

As of December 31, 2021 and 2020, the carrying values of leased equipment (included as a component of property and equipment) in the consolidated balance sheets, were as follows (in thousands):

Leased computer equipment $ 4,954 $ 4,954

Less accumulated depreciation (3,907) (3,202)

NOTE 4 — OTHER FINANCIAL INFORMATION

Cash, cash equivalents and restricted cash

As of December 31, 2021 and 2020 cash, cash equivalents and restricted cash were as follows (in thousands):

Total cash, cash equivalents and restricted cash $ 119,990 $ 87,909

Allowance for Doubtful Accounts

Activity in the allowance for doubtful accounts is set forth below for the years ended December 31, 2021, 2020 and 2019 (in thousands):

Write offs, net of recoveries (402) (1,881) (74)

Write offs, net of recoveries significantly increased in 2020 due to collection issues and client bankruptcies resulting, in part, to the COVID-19 pandemic.

Prepaid Expenses and Other Current Assets

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RIMINI STREET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021 and 2020, prepaid expenses and other current assets consisted of the following (in thousands):

Prepaid expenses and deposits $ 9,387 $ 7,686

Foreign tax refunds receivable 3,068 1,714

Property and Equipment

As of December 31, 2021 and 2020, property and equipment consisted of the following (in thousands):

Capitalized software costs 435 438

Construction-in-progress 465 97

Property and equipment, net $ 4,435 $ 4,820

Depreciation expense was $2.4 million, $1.8 million and $1.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Deferred Contract Costs

Activity for deferred contract costs for the years ended December 31, 2021 and 2020 was provided below (in thousands):

Capitalized commissions during the period 17,519 20,886

Amortized deferred contract costs during the period (15,955) (13,990)

Other Accrued Liabilities

As of December 31, 2021 and 2020, other accrued liabilities consisted of the following (in thousands):

Accrued sales and other taxes $ 8,805 $ 5,213

Accrued dividends on Redeemable Series A Preferred Stock — 3,842

Current maturities of capital lease obligations 315 429

Accrued litigation settlement costs 7,530 —

Deferred Revenue

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RIMINI STREET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Activity for deferred revenue for the years ended December 31, 2021 and 2020 was provided below (in thousands):

Advertising

Advertising expenses were $1.2 million, $3.1 million and $0.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Other Expenses, Net

For the years ended December 31, 2021, 2020 and 2019, other expenses, net consisted of the following (in thousands):

Interest income:

Post-judgment interest on litigation appeal award $ — $ — $ 212

Foreign currency transaction losses (1,394) (77) (1,640)

NOTE 5 — DEBT

Debt is presented net of debt discounts and issuance costs in the Company's balance sheets. As of December 31, 2021 and December 31, 2020, debt consisted of the following (in thousands):

Credit Facility $ 83,319 $ —

Less current maturities 3,664 —

Long-term debt, net of current maturities $ 79,655 $ —

Effective July 20, 2021, the Company received $89.3 million of net proceeds related to the Credit Facility. The borrowings under the Credit Facility were discounted at 0.375%. As part of the transaction, the Company incurred issuance costs of $4.2 million, which were capitalized and will be amortized over the term of the Credit Facility.

The Credit Facility bears interest at the London Interbank Offered Rate (“LIBOR”), plus a margin ranging from 1.75% to 2.50%. For the year ended December 31, 2021, the effective interest rate on the Credit Facility was 3.5%. The LIBOR rate as of December 31, 2021 was not materially different from the interest rate for the year ended December 30, 2021. Hence the fair value of the Credit Facility approximated the book value as of December 31, 2021.

The Credit Facility contains certain financial covenants, including a minimum fixed charge coverage ratio greater than 1.25, a total leverage ratio less than 3.75, and a minimum liquidity of $20 million in U.S. cash. Annual minimum principal payments over the five year term for the Credit Facility will be 5%, 5%, 7.5%, 7.5%,and 10%, respectively, with the remaining balance due at the end of the term. For the year ended December 31, 2021, the Company made principal payments of $2.3 million.

Pursuant to a Guaranty and Security Agreement, dated July 2, 2021 (the “Guaranty and Security Agreement”), among the Credit Parties and Capital One, National Association, as agent, the obligations under the Credit Agreement are guaranteed by

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

certain of the Company’s subsidiaries (the Company and the guarantors, collectively, the “Credit Parties”) and are secured, subject to customary permitted liens and exceptions, by a lien on substantially all assets of the Credit Parties.

On January 14, 2022, the Company entered into an amendment regarding the Credit Facility. The Credit Facility was amended to (a) increase from $10.0 million to $15.0 million the aggregate value of shares of Common Stock, par value $0.0001 per share, that can be repurchased by the Company during the term of the Credit Facility and (b) clarify that the Company may repurchase shares of Common Stock from any holder thereof, provided that all other applicable conditions are satisfied, and other conforming amendments.

On February 27, 2022, the Board approved adoption of a stock repurchase program to repurchase up to $15.0 million of the Company’s common stock both on the open market and in privately negotiated transactions, including through Rule 10b5-1 plans, through March 4, 2024, subject to compliance with the Company's Credit Facility dated July 2, 2021, and amended January 14, 2022 to increase the amount of securities that could be purchased by the Company to approximately $15.0 million during the term of the facility, and other applicable legal requirements.

Related Party Note Payable to GP Sponsor

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

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

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

Interest Expense

The components of interest expense for the years ended December 31, 2021, 2020 and 2019 are presented below (in thousands):

Credit Facility:

Interest expense $ 977 $ — $ —

Accretion expense related to discount and issuance costs 442 — —

Accretion expense for GP Sponsor note payable — — 185

NOTE 6 — REDEEMABLE SERIES A PREFERRED STOCK

2018 Securities Purchase Agreement

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On July 19, 2018, the Company closed a Securities Purchase Agreement (the “2018 SPA”) with several accredited investors (the “Purchasers”) for a private placement (the “Initial Private Placement”) of (i) 140,000 shares of Series A Preferred Stock, (ii) approximately 2.9 million shares of Common Stock, and (iii) convertible secured promissory notes (the “Convertible Notes”), with no principal amount outstanding at issuance that solely collateralize amounts, if any, that may become payable by the Company pursuant to certain redemption provisions of the Series A Preferred Stock.

Pursuant to the 2018 SPA, the Purchasers acquired an aggregate of 140,000 shares of Series A Preferred Stock, 2.9 million shares of Common Stock, and Convertible Notes with no principal amount outstanding as of the issuance date, for an aggregate purchase price equal to $133.0 million in cash (after taking into account a discount of $7.0 million, but before the incremental and direct transaction costs associated with the Private Placement of $4.6 million). The allocation of the net proceeds as of the Closing Date, along with changes in the net carrying value of the Series A Preferred Stock through December 31, 2019 are set forth below (dollars in thousands):

Series A Preferred Stock Common Convertible

Shares Amount Stock Notes Total

Convertible Notes — — — — —

Relative fair value allocation on July 19, 2018:

_________________

1.The liquidation preference for each share of Series A Preferred Stock on the closing date for the Initial Private Placement was $1,000 per for an aggregate liquidation preference of $140.0 million. The estimated fair value of the Series A Preferred Stock was approximately $126.8 million on July 19, 2018, which is the basis for allocation of the net proceeds. Please refer to Note 13 for further discussion of the valuation methodology employed.

2.The fair value of the issuance of approximately 2.9 million shares of the Common Stock was based on the last closing price of $6.95 per share on the date prior to closing the transaction.

3.The aggregate cash proceeds of $133.0 million on July 19, 2018 were allocated pro rata based on the fair value of all consideration issued.

4.Incremental and direct costs of the Initial Private Placement were allocated pro rata based on the fair value of all consideration issued. Such costs include financial advisory and professional fees of $2.7 million that were incurred by the Company, and due diligence and professional fees incurred by the investors of $1.9 million.

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

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

March 2019 Securities Purchase Agreement

On March 7, 2019, the Company entered into a securities purchase agreement (the “March 2019 SPA”) with an accredited investor for a private placement (the "March 2019 Private Placement") of (i) 6,500 shares of Series A Preferred Stock, (ii) 134,483 shares of Common Stock, and (iii) a Convertible Note (as defined below) with no principal balance outstanding. The shares of Series A Preferred Stock were authorized pursuant to the Certificate of Designations and are subject to the provisions

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

set forth in an amended Security Agreement, a Convertible Note and a registration rights agreement that is substantially similar in all material respects to the Registration Rights Agreement entered into in connection with the 2018 Securities Purchase Agreement discussed below. The accredited investor in the March 2019 Private Placement is affiliated with one of the accredited investors in the Initial Private Placement.

The aggregate cash proceeds from the March 2019 Private Placement were $5.8 million in cash (after an 11.0% discount or $0.7 million). The net proceeds were approximately $5.0 million after estimated transaction costs payable by the Company of $0.8 million. The transaction costs consisted of 85,000 shares of Common Stock issued to the existing holders of the Series A Preferred Stock for their consent at a cost of approximately $0.5 million and direct transaction costs of approximately $0.3 million related to due diligence and professional fees. The net proceeds were allocated based on their relative fair values at issuance of the Series A Preferred Stock and the Common Stock. The allocation of the net proceeds from the March 2019 Private Placement are set forth below (dollars in thousands):

Series A Preferred Stock Common Convertible

Shares Amount Stock Notes Total

Fair value on March 7, 2019:

Convertible Notes — — — — —

Relative fair value allocation on March 7, 2019: