UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended September 30, 2022March 31, 2023
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from                              to                             
Commission File Number: 001-37397
Rimini Street, Inc.
(Exact name of registrant as specified in its charter)

Delaware36-4880301
(State or other jurisdiction of incorporation or
organization)		(I.R.S. Employer Identification No.)
3993 Howard Hughes Parkway,7251 West Lake Mead Blvd., Suite 500,300,
Las Vegas, NV
8916989128
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code:(702) 839-9671
Not Applicable
(Former name, former address and former fiscal year, if changed since last report) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:Trading Symbol(s)Name of each exchange on which registered:
  
Common Stock, par value $0.0001 per shareRMNIThe Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.         Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
Accelerated filer þ
Non-accelerated filer ¨
Smaller reporting company ☐
 
Emerging growth company ☐
 




If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).        
Yes ☐ No þ
The registrant had approximately 88,278,00088,914,000 shares of its $0.0001 par value common stock outstanding as of October 31, 2022.May 1, 2023. 





RIMINI STREET, INC.
TABLE OF CONTENTS
Page
2
ITEM 1.
2
Unaudited Condensed Consolidated Balance Sheets
2
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income
3
Unaudited Condensed Consolidated Statements of Stockholders' Deficit
4
Unaudited Condensed Consolidated Statements of Cash Flows
5
7
ITEM 2.
2420
ITEM 3.
3830
ITEM 4.
3931
4031
ITEM 1.
4032
ITEM 1A.
4032
ITEM 2.
6254
ITEM 3.
6354
ITEM 4.
6354
ITEM 5.
6354
ITEM 6.
6455
6556

1


PART I - FINANCIAL INFORMATION
 
ITEM 1. Financial Statements. 
RIMINI STREET, INC. 
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
September 30,December 31,March 31,December 31,
20222021 20232022
ASSETSASSETSASSETS
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$118,576 $119,571 Cash and cash equivalents$116,169 $109,008 
Restricted cashRestricted cash417 419 Restricted cash426 426 
Accounts receivable, net of allowance of $744 and $576, respectively59,223 135,447 
Accounts receivable, net of allowance of $745 and $723, respectivelyAccounts receivable, net of allowance of $745 and $723, respectively89,317 116,093 
Deferred contract costs, currentDeferred contract costs, current16,372 14,985 Deferred contract costs, current17,184 17,218 
Short-term investmentsShort-term investments11,147 — Short-term investments18,785 20,115 
Prepaid expenses and otherPrepaid expenses and other21,253 16,340 Prepaid expenses and other19,910 18,846 
Total current assetsTotal current assets226,988 286,762 Total current assets261,791 281,706 
Long-term assets:Long-term assets:Long-term assets:
Property and equipment, net of accumulated depreciation and amortization of $14,754 and $13,278, respectively5,565 4,435 
Property and equipment, net of accumulated depreciation and amortization of $16,015 and $15,441, respectivelyProperty and equipment, net of accumulated depreciation and amortization of $16,015 and $15,441, respectively6,554 6,113 
Operating lease right-of-use assetsOperating lease right-of-use assets10,843 12,722 Operating lease right-of-use assets6,325 7,142 
Deferred contract costs, noncurrentDeferred contract costs, noncurrent22,548 21,524 Deferred contract costs, noncurrent22,115 23,508 
Deposits and otherDeposits and other3,975 1,786 Deposits and other6,619 7,057 
Deferred income taxes, netDeferred income taxes, net63,430 64,033 Deferred income taxes, net64,700 65,515 
Total assetsTotal assets$333,349 $391,262 Total assets$368,104 $391,041 
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICITLIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICITLIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:Current liabilities:Current liabilities:
Current maturities of long-term debtCurrent maturities of long-term debt$4,227 $3,664 Current maturities of long-term debt$5,349 $4,789 
Accounts payableAccounts payable8,301 5,708 Accounts payable5,956 8,040 
Accrued compensation, benefits and commissionsAccrued compensation, benefits and commissions35,993 36,558 Accrued compensation, benefits and commissions31,375 37,459 
Other accrued liabilitiesOther accrued liabilities23,886 26,124 Other accrued liabilities25,568 32,676 
Operating lease liabilities, currentOperating lease liabilities, current4,123 4,227 Operating lease liabilities, current4,047 4,223 
Deferred revenue, currentDeferred revenue, current212,070 253,221 Deferred revenue, current257,329 265,840 
Total current liabilitiesTotal current liabilities288,600 329,502 Total current liabilities329,624 353,027 
Long-term liabilities:Long-term liabilities:Long-term liabilities:
Long-term debt, net of current maturitiesLong-term debt, net of current maturities71,445 79,655 Long-term debt, net of current maturities68,558 70,003 
Deferred revenue, noncurrentDeferred revenue, noncurrent36,117 47,047 Deferred revenue, noncurrent30,052 34,081 
Operating lease liabilities, noncurrentOperating lease liabilities, noncurrent9,987 12,511 Operating lease liabilities, noncurrent8,093 9,094 
Other long-term liabilitiesOther long-term liabilities2,575 2,933 Other long-term liabilities1,896 2,006 
Total liabilitiesTotal liabilities408,724 471,648 Total liabilities438,223 468,211 
Commitments and contingencies (Note 9)
Commitments and contingencies (Note 8)
Commitments and contingencies (Note 8)
Stockholders’ deficit:Stockholders’ deficit:Stockholders’ deficit:
Preferred stock; $0.0001 par value. Authorized 99,820 shares (excluding 180 shares of Series A Preferred Stock); no other series has been designated— — 
Common stock; $0.0001 par value. Authorized 1,000,000 shares; issued and outstanding 88,223 and 87,107 shares, respectively9 9 
Preferred stock; $0.0001 par value. Authorized 99,820 (excluding 180 shares of Series A Preferred Stock) no other series has been designatedPreferred stock; $0.0001 par value. Authorized 99,820 (excluding 180 shares of Series A Preferred Stock) no other series has been designated— — 
Common stock; $0.0001 par value. Authorized 1,000,000 shares; issued and outstanding 88,883 and 88,517 shares, respectivelyCommon stock; $0.0001 par value. Authorized 1,000,000 shares; issued and outstanding 88,883 and 88,517 shares, respectively9 9 
Additional paid-in capitalAdditional paid-in capital154,111 149,234 Additional paid-in capital158,449 156,401 
Accumulated other comprehensive lossAccumulated other comprehensive loss(5,382)(2,724)Accumulated other comprehensive loss(4,831)(4,195)
Accumulated deficitAccumulated deficit(222,997)(225,789)Accumulated deficit(222,630)(228,269)
Treasury stock, at costTreasury stock, at cost(1,116)(1,116)Treasury stock, at cost(1,116)(1,116)
Total stockholders' deficitTotal stockholders' deficit(75,375)(80,386)Total stockholders' deficit(70,119)(77,170)
Total liabilities and stockholders' deficitTotal liabilities and stockholders' deficit$333,349 $391,262 Total liabilities and stockholders' deficit$368,104 $391,041 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2


RIMINI STREET, INC. 
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except per share amounts)
Three Months Ended
September 30,		Nine Months Ended September 30,Three Months Ended
March 31,
2022202120222021 20232022
RevenueRevenue$101,931 $95,642 $301,041 $275,151 Revenue$105,512 $97,910 
Cost of revenueCost of revenue39,271 33,376 113,822 101,807 Cost of revenue39,343 37,207 
Gross profitGross profit62,660 62,266 187,219 173,344 Gross profit66,169 60,703 
Operating expenses:Operating expenses:Operating expenses:
Sales and marketingSales and marketing35,934 32,527 103,840 96,067 Sales and marketing34,479 31,700 
General and administrativeGeneral and administrative18,454 15,631 57,267 48,728 General and administrative18,227 19,951 
Impairment charges related to operating right of use assets— — — 393 
Reorganization costsReorganization costs59 — 
Litigation costs and related recoveries:Litigation costs and related recoveries:Litigation costs and related recoveries:
Professional fees and other costs of litigationProfessional fees and other costs of litigation6,145 6,581 12,837 14,130 Professional fees and other costs of litigation2,719 3,499 
Insurance costs and recoveries, netInsurance costs and recoveries, net92 — (389)— Insurance costs and recoveries, net— (389)
Litigation costs and related recoveries, net Litigation costs and related recoveries, net6,237 6,581 12,448 14,130  Litigation costs and related recoveries, net2,719 3,110 
Total operating expensesTotal operating expenses60,625 54,739 173,555 159,318 Total operating expenses55,484 54,761 
Operating incomeOperating income2,035 7,527 13,664 14,026 Operating income10,685 5,942 
Non-operating income and (expenses):Non-operating income and (expenses):Non-operating income and (expenses):
Interest expenseInterest expense(1,167)(653)(2,974)(738)Interest expense(1,339)(808)
Loss on change in fair value of redeemable warrants— (2,053)— (3,023)
Other income (expenses), netOther income (expenses), net(1,329)(1,161)(2,696)(885)Other income (expenses), net528 209 
Income (loss) before income taxes(461)3,660 7,994 9,380 
Income before income taxesIncome before income taxes9,874 5,343 
Income taxesIncome taxes56 (1,729)(5,202)(4,218)Income taxes(4,235)(2,256)
Net income (loss)(405)1,931 2,792 5,162 
Other comprehensive income (loss):
Foreign currency translation loss(1,667)(454)(3,878)(2,398)
Derivative instrument adjustments, net of tax1,220 — 1,220 — 
Comprehensive income (loss)$(852)$1,477 $134 $2,764 
Net incomeNet income5,639 3,087 
Other comprehensive incomeOther comprehensive income
Foreign currency translation gain (loss)Foreign currency translation gain (loss)139 (186)
Derivative instrument and other adjustments, net of taxDerivative instrument and other adjustments, net of tax(775)— 
Comprehensive incomeComprehensive income$5,003 $2,901 
Net income (loss) attributable to common stockholders$(405)$(6,691)$2,792 $(21,382)
Net income attributable to common stockholdersNet income attributable to common stockholders$5,639 $3,087 
Net income (loss) per share attributable to common stockholders:
Net income per share attributable to common stockholders:Net income per share attributable to common stockholders:
BasicBasic$— $(0.08)$0.03 $(0.26)Basic$0.06 $0.04 
Diluted Diluted$— $(0.08)$0.03 $(0.26) Diluted$0.06 $0.03 
Weighted average number of shares of Common Stock outstanding:Weighted average number of shares of Common Stock outstanding:Weighted average number of shares of Common Stock outstanding:
BasicBasic87,965 86,189 87,441 83,449 Basic88,690 87,124 
DilutedDiluted87,965 86,189 89,054 83,449 Diluted89,061 88,485 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3


RIMINI STREET, INC.
Unaudited Condensed Consolidated Statements of Stockholders' Deficit
(In thousands) 
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
202220212022202120232022
Common Stock, SharesCommon Stock, SharesCommon Stock, Shares
Beginning of period Beginning of period87,529 85,704 87,107 76,406  Beginning of period88,517 87,107 
Exercise of stock options for cash Exercise of stock options for cash193 383 518 1,183  Exercise of stock options for cash54 287 
Restricted stock units vested Restricted stock units vested701 708 1,391 1,456  Restricted stock units vested312 184 
Issuance of Common Stock— — 60 7,750 
Treasury shares— (137)— (137)
Retired shares of Common Stock Retired shares of Common Stock(200)— (853)—  Retired shares of Common Stock— (567)
End of period End of period88,223 86,658 88,223 86,658  End of period88,883 87,011 
Total Stockholders' Deficit, beginning of periodTotal Stockholders' Deficit, beginning of period$(76,487)$(156,299)$(80,386)$(203,060)Total Stockholders' Deficit, beginning of period$(77,170)$(80,386)
Common Stock, AmountCommon Stock, AmountCommon Stock, Amount
Beginning of period Beginning of period9 9 98 Beginning of period9 9 
Exercise of stock options for cash Exercise of stock options for cash— — — —  Exercise of stock options for cash— — 
Restricted stock units vested Restricted stock units vested— — — —  Restricted stock units vested— — 
Issuance of Common Stock— — — 1 
Treasury shares— — — — 
Retired shares of Common Stock Retired shares of Common Stock— — — —  Retired shares of Common Stock— — 
End of period End of period9 9 9 9  End of period9 9 
Additional Paid-in CapitalAdditional Paid-in CapitalAdditional Paid-in Capital
Beginning of period Beginning of period152,147 143,801 149,234 98,258  Beginning of period156,401 149,234 
Stock based compensation expense Stock based compensation expense2,443 2,393 8,653 7,104  Stock based compensation expense1,976 3,051 
Exercise of stock options for cash Exercise of stock options for cash513 1,933 964 5,046  Exercise of stock options for cash72 375 
Restricted stock units vested Restricted stock units vested— — — —  Restricted stock units vested— — 
Issuance of Common Stock in March 2021 Offering, net— — — 55,641 
Retired shares of Common Stock Retired shares of Common Stock(992)— (4,740)—  Retired shares of Common Stock— (3,240)
Redemption of 60,000 shares of Series A Preferred Stock:
Accretion related to redemption of Series A Preferred Stock— (8,020)— (13,693)
Make-whole dividends related to redemption of Series A Preferred Stock— (602)— (2,945)
Return on repurchase of Series A Preferred Stock shares in January 2021— — — (38)
Accretion of discount on Series A Preferred Stock— — — (2,277)
Accrued dividends on Series A Preferred Stock:
Payable in cash— — — (5,839)
Payable in kind— — — (1,752)
End of period End of period154,111 139,505 154,111 139,505  End of period158,449 149,420 
Accumulated Other Comprehensive LossAccumulated Other Comprehensive LossAccumulated Other Comprehensive Loss
Beginning of period Beginning of period(4,935)(2,262)(2,724)(318) Beginning of period(4,195)(2,724)
Other comprehensive loss Other comprehensive loss(447)(454)(2,658)(2,398) Other comprehensive loss(636)(186)
End of period End of period(5,382)(2,716)(5,382)(2,716) End of period(4,831)(2,910)
Accumulated DeficitAccumulated DeficitAccumulated Deficit
Beginning of period Beginning of period(222,592)(297,777)(225,789)(301,008) Beginning of period(228,269)(225,789)
Net income (loss)(405)1,931 2,792 5,162 
Net income Net income5,639 3,087 
End of period End of period(222,997)(295,846)(222,997)(295,846) End of period(222,630)(222,702)
Treasury Stock Treasury Stock(1,116)(1,116)(1,116)(1,116) Treasury Stock(1,116)(1,116)
Total Stockholders' Deficit, end of periodTotal Stockholders' Deficit, end of period$(75,375)$(160,164)$(75,375)$(160,164)Total Stockholders' Deficit, end of period$(70,119)$(77,299)

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



4



RIMINI STREET, INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended September 30,Three Months Ended March 31,
2022202120232022
CASH FLOWS FROM OPERATING ACTIVITIES:CASH FLOWS FROM OPERATING ACTIVITIES:CASH FLOWS FROM OPERATING ACTIVITIES:
Net incomeNet income$2,792 $5,162 Net income$5,639 $3,087 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Loss on change in fair value of redeemable warrants— 3,023 
Stock-based compensation expenseStock-based compensation expense8,653 7,104 Stock-based compensation expense1,976 3,051 
Depreciation and amortizationDepreciation and amortization1,871 1,772 Depreciation and amortization613 577 
Accretion and amortization of debt discount and issuance costsAccretion and amortization of debt discount and issuance costs728 196 Accretion and amortization of debt discount and issuance costs240 240 
Deferred income taxesDeferred income taxes327 1 Deferred income taxes496 671 
Impairment charges related to operating right of use assets— 393 
Amortization and accretion related to operating right of use assetsAmortization and accretion related to operating right of use assets4,140 4,625 Amortization and accretion related to operating right of use assets1,147 1,403 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Accounts receivableAccounts receivable75,068 41,021 Accounts receivable26,945 44,980 
Prepaid expenses, deposits and otherPrepaid expenses, deposits and other(6,417)(4,289)Prepaid expenses, deposits and other(425)(490)
Deferred contract costsDeferred contract costs(2,412)(1,780)Deferred contract costs1,427 (2,312)
Accounts payableAccounts payable2,710 5,605 Accounts payable(2,087)(2,277)
Accrued compensation, benefits, commissions and other liabilitiesAccrued compensation, benefits, commissions and other liabilities(3,842)(3,940)Accrued compensation, benefits, commissions and other liabilities(14,844)(2,815)
Deferred revenueDeferred revenue(46,861)(11,079)Deferred revenue(12,484)(266)
Net cash provided by operating activitiesNet cash provided by operating activities36,757 47,814 Net cash provided by operating activities8,643 45,849 
CASH FLOWS USED IN INVESTING ACTIVITIES:CASH FLOWS USED IN INVESTING ACTIVITIES:CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expendituresCapital expenditures(3,144)(1,455)Capital expenditures(1,029)(485)
Investment purchases(11,148)— 
Payment for purchases of investmentsPayment for purchases of investments(7,713)— 
Proceeds from sale of investmentsProceeds from sale of investments8,396 — 
Net cash used in investing activities Net cash used in investing activities(14,292)(1,455) Net cash used in investing activities(346)(485)
CASH FLOWS FROM FINANCING ACTIVITIES:CASH FLOWS FROM FINANCING ACTIVITIES:CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds related to Common Stock issuances in March 2021 Offering— 56,965 
Payments of professional fees related to Common Stock issuances in March 2021 Offering(27)(1,296)
Proceeds from issuance of Credit Facility— 89,313 
Debt issuance costs paid— (4,013)
Payments of professional fees related to March 2021 Common Stock offeringPayments of professional fees related to March 2021 Common Stock offering— (27)
Principal payments on the Credit FacilityPrincipal payments on the Credit Facility(8,375)(1,125)Principal payments on the Credit Facility(1,125)(1,125)
Payments to repurchase shares of Series A Preferred Stock— (156,753)
Payments of cash dividends on Series A Preferred Stock— (12,679)
Payments to repurchase and retire Common StockPayments to repurchase and retire Common Stock(4,740)— Payments to repurchase and retire Common Stock— (3,240)
Payments for treasury stock— (1,116)
Principal payments on capital leasesPrincipal payments on capital leases(235)(330)Principal payments on capital leases(47)(81)
Proceeds from exercise of employee stock optionsProceeds from exercise of employee stock options965 5,044 Proceeds from exercise of employee stock options71 375 
Net cash used in financing activitiesNet cash used in financing activities(12,412)(25,990)Net cash used in financing activities(1,101)(4,098)
Effect of foreign currency translation changesEffect of foreign currency translation changes(11,050)(4,838)Effect of foreign currency translation changes(35)(2,791)
Net change in cash, cash equivalents and restricted cashNet change in cash, cash equivalents and restricted cash(997)15,531 Net change in cash, cash equivalents and restricted cash7,161 38,475 
Cash, cash equivalents and restricted cash at beginning of periodCash, cash equivalents and restricted cash at beginning of period119,990 87,909 Cash, cash equivalents and restricted cash at beginning of period109,434 119,990 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period$118,993 $103,440 Cash, cash equivalents and restricted cash at end of period$116,595 $158,465 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 

5


RIMINI STREET, INC. 
Unaudited Condensed Consolidated Statements of Cash Flows, Continued
(In thousands)

Nine Months Ended September 30,
20222021
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest$2,195 $524 
Cash paid for income taxes1,886 3,053 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Discount on shares of Common Stock issued in March 2021 Public Offering:
  Underwriter discounts and commissions$— $2,948 
  Underwriter expenses— 1,050 
  Accrued professional fees related to the issuance of Common Stock— 27 
Redeemable Series A Preferred Stock Dividends and Accretion:
  Accrued cash dividends$— $— 
  Accrued PIK dividends— — 
  Accretion of discount on Series A Preferred Stock— 2,277 
  Issuance of Series A Preferred Stock for PIK dividends— 2,891 
Increase in payables for debt issuance costs$— $145 
Increase in principal related to the Credit Facility discount— 28 
Decrease in payables for capital expenditures(2)— 
Three Months Ended March 31,
20232022
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest$1,112 $568 
Cash paid for income taxes2,794 544 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Increase in payables for capital expenditures$— $168 


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


6

RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 — NATURE OF BUSINESS AND BASIS OF PRESENTATION
 
Nature of Business
 
Rimini Street, Inc. (the “Company”) is a global provider of end-to-end enterprise software support services. The Company’s subscription-based software support, products and services offerservices.The Company offers a comprehensive family of unified solutions to run, manage, support, customize, configure, connect, protect, monitor, and optimize clients’ enterprise application, database, and technology software licensees a choice of solutions that replace or supplement the support products and services offered by enterprise software vendors.platforms.

Basis of Presentation and Consolidation
 
The Unaudited Condensed 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. The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by U.S. GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Unaudited Condensed Consolidated Financial Statements have been included. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s auditedAudited Consolidated Financial Statements for the year ended December 31, 2021,2022, included in the Company’s 20212022 Annual Report on Form 10-K as filed with the SEC on March 2, 20221, 2023 (the “2021“2022 Form 10-K”).
 
The accompanying Unaudited Condensed Consolidated Balance Sheet and related disclosures as of December 31, 20212022 have been derived from the Company’s audited financial statements. The Company’s financial condition as of September 30, 2022,March 31, 2023, and operating results for both the three and nine months ended September 30, 2022,March 31, 2023, are not necessarily indicative of the financial condition and results of operations that may be expected for any future interim period or for the year ending December 31, 2022.2023.
 
NOTE 2 — LIQUIDITY AND SIGNIFICANT ACCOUNTING POLICIES
 
Liquidity
 
As of September 30, 2022,March 31, 2023, the Company’s current liabilities exceeded its current assets by $61.6$67.8 million, and the Company recorded a net lossincome of $0.4$5.6 million for the three months ended September 30, 2022.March 31, 2023. As of September 30, 2022,March 31, 2023, the Company had available cash, cash equivalents and restricted cash of $119.0$116.6 million and short-term investments of $11.1$18.8 million. As of September 30, 2022,March 31, 2023, the Company’s current liabilities included $212.1$257.3 million of deferred revenue whereby the historical costs of fulfilling the Company's commitments to provide services to its clients was approximately 39%37% of the related deferred revenue for the three months ended September 30, 2022.March 31, 2023.

On July 20, 2021, the Company redeemed the remaining 87,802 shares of its 13.00% Series A Redeemable Convertible Preferred Stock (“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 fromentered into 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 are 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.

7

RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


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. 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 $6.0$4.4 million. During the thirdfirst quarter of 2022,2023, the U.S. economy has continued to experience rising interest rates and inflationary pressures due in part to the recent bank failures within the U.S. banking sector, global supply chain issues, a rise in energy prices and the continuing effects of fiscal and monetary policies adopted by governments in response to the global outbreak of a novel strain of the coronavirus (“COVID-19”) that was declared by the World Health Organization to be a pandemic in March 2020. . As of 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 or related changes in the macroeconomic environment, and 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.
 
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
7

RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


accompanying notes. 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 accounting estimates include, but are not necessarily limited to, valuation of accounts receivable, valuation assumptions for stock options and leases, deferred income taxes and the related valuation allowances, and the evaluation and measurement of contingencies. To the extent there are material differences between the Company’s estimates and actual results, the Company’s future consolidated results of operationoperations may be affected.
 
Recent Accounting Pronouncements

Recently Adopted Standards. The following accounting standards were adopted during fiscal year 2022:2023:

In AugustMarch 2020, the FASB issued ASU 2020-6, Debt—Debt2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and amended in December 2022 with ConversionASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. ASU 2020-04 provides guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and Other Options (Subtopic 470-20)exceptions in applying U.S. GAAP to contracts, hedging relationships and Derivativesother transactions impacted by reference rate reform. The provisions apply only to those transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-04 are optional and Hedging - Contractsare effective from March 12, 2020 through December 31, 2024, as amended by ASU 2022-06. During the three months ended March 31, 2023, the Company adopted the optional relief guidance provided under ASU 2020-04 after modifying its interest rate swap agreement in Entity's Own Equity (Subtopic 815-40)connection with the amendment of the Credit Facility to implement certain changes in the reference rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”). The guidance eliminatesapplication of this expedient preserves 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 was effective for us as of January 1, 2022. The impactpresentation of the adoption of this guidancederivative consistent with past presentation and did not have a material impact on our Unaudited Condensed Consolidated Financial Statements.

NOTE 3 - DEFERRED CONTRACT COSTS AND DEFERRED REVENUE

Activity for deferred contract costs consisted of the following (in thousands):
Three Months Ended
September 30,		Nine Months Ended September 30,Three Months Ended
March 31,
202220212022202120232022
Deferred contract costs, current and noncurrent, as of the beginning of periodDeferred contract costs, current and noncurrent, as of the beginning of period$39,709 $36,561 $36,509 $34,945 Deferred contract costs, current and noncurrent, as of the beginning of period$40,726 $36,509 
Capitalized commissions during the periodCapitalized commissions during the period3,817 4,295 15,620 13,437 Capitalized commissions during the period3,162 6,525 
Amortized deferred contract costs during the periodAmortized deferred contract costs during the period(4,606)(4,132)(13,209)(11,658)Amortized deferred contract costs during the period(4,589)(4,213)
Deferred contract costs, current and noncurrent, as of the end of periodDeferred contract costs, current and noncurrent, as of the end of period$38,920 $36,724 $38,920 $36,724 Deferred contract costs, current and noncurrent, as of the end of period$39,299 $38,821 

Deferred revenue activity consisted of the following (in thousands):
Three Months Ended
March 31,
20232022
Deferred revenue, current and noncurrent, as of the beginning of period$299,921 $300,268 
Billings, net92,972 97,671 
Revenue recognized(105,512)(97,910)
Deferred revenue, current and noncurrent, as of the end of period$287,381 $300,029 

The Company’s remaining performance obligations represent all future non-cancellable revenue under contract that has not yet been recognized as revenue and includes deferred revenue and unbilled amounts. As of March 31, 2023, remaining performance obligations amounted to $556.1 million, of which $287.4 million was billed and recorded as deferred revenue. As of March 31, 2022, remaining performance obligations amounted to $556.9 million, of which $300.0 million was billed and recorded as deferred revenue.

8

RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Deferred revenue activity consistedis a contract liability that consists of billings issued that are non-cancellable and payments received in advance of revenue recognition. The Company typically invoices its customers at the beginning of the following (in thousands):
Three Months Ended
September 30,		Nine Months Ended September 30,
2022202120222021
Deferred revenue, current and noncurrent, as of the beginning of period$300,387 $265,638 $300,268 $256,933 
Billings, net49,731 73,686 248,960 261,900 
Revenue recognized(101,931)(95,642)(301,041)(275,151)
Deferred revenue, current and noncurrent, as of the end of period$248,187 $243,682 $248,187 $243,682 

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 transaction price allocatedCompany expects to recognize revenue on approximately $257.3 million of the billed remaining performance obligations represents contracted revenue that has not yet been recognized. As of September 30, 2022,over the next 12 months, with the remaining transaction price included in deferred revenue was $212.1 million in current and $36.1 million in noncurrent.balance recognized thereafter.


NOTE 4 — OTHER FINANCIAL INFORMATION
  
Other Accrued Liabilities
 
Other accrued liabilities consisted of the following (in thousands): 
September 30,December 31,March 31,December 31,
20222021 20232022
Accrued sales and other taxesAccrued sales and other taxes$3,908 $8,805 Accrued sales and other taxes$6,481 $6,878 
Accrued professional feesAccrued professional fees6,287 4,502 Accrued professional fees4,783 9,184 
Accrued reorganization costsAccrued reorganization costs20 2,526 
Current maturities of capital lease obligationsCurrent maturities of capital lease obligations326 315 Current maturities of capital lease obligations372 333 
Income taxes payableIncome taxes payable1,160 1,546 Income taxes payable2,185 2,229 
Accrued litigation settlement costsAccrued litigation settlement costs7,415 7,530 Accrued litigation settlement costs6,982 6,979 
Other accrued expensesOther accrued expenses4,790 3,426 Other accrued expenses4,745 4,547 
Total other accrued liabilitiesTotal other accrued liabilities$23,886 $26,124 Total other accrued liabilities$25,568 $32,676 


NOTE 5 — DEBT

Debt is presented net of debt discounts and issuance costs in the Company's balance sheets and consisted of the following (in thousands):
September 30,December 31,March 31,December 31,
2022202120232022
Credit FacilityCredit Facility$75,672 $83,319 Credit Facility$73,907 $74,792 
Less current maturitiesLess current maturities4,227 3,664 Less current maturities5,349 4,789 
Long-term debt, net of current maturitiesLong-term debt, net of current maturities$71,445 $79,655 Long-term debt, net of current maturities$68,558 $70,003 

On May 31, 2022,February 22, 2023, the Company prepaid $5.0 million of indebtedness outstanding underamended its Credit Facility with no prepayment penalty. On September 30, 2022, June 30,Facility. The amendment implemented, among other things, certain changes in the reference rate from LIBOR to the SOFR. Effective February 28, 2023, the Company has a choice of interest rates between (a) Adjusted Term SOFR and (b) Base Rate *as defined in the Credit Facility), in each case plus an applicable margin. The applicable margin remains the same as the existing Credit Agreement and is based on the Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement) and whether the Company elects Adjusted Term SOFR (ranging from 1.75 to 2.50%) or Base Rate (ranging from 0.75 to 1.50%).

In addition, the amendment adjusted the definition of Consolidated EBITDA to provide an addback solely for the fourth fiscal quarter of 2022, and March 31, 2022,any period including such quarter, that costs and legal fees and expenses incurred by the Company in connection with its ongoing litigation with Oracle up to $10.0 million can be added back and included in the applicable calculation of Consolidated EBITDA.

Based on voluntary prepayments made its required three principal paymentsto date under the Credit Facility, the Company currently has available $40 million in incremental borrowings available for future use, subject to the terms of $1.1 million, respectively.the Credit Facility.

On May 31, 2022, the Company also amended the Credit Facility to increase the aggregate value of the Common Stock shares that can be repurchased by the Company to $50 million during the term of the Credit Facility.

9

RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


For the three months ended March 31, 2023 and 2022, the Company made both of its required principal payments of $1.1 million, respectively.

Effective July 20, 2021, the Company received $89.3 million of net proceeds pursuant to the Credit Facility. The borrowings under the Credit Facility were incurred with an original discount of 0.375%. As part of the transaction, the Company incurred issuance costs of $4.2 million, which were capitalized and are being amortized over the term of the Credit Facility.

9

RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The Credit Facility bearsoriginally bore interest at the London Interbank Offered Rate (“LIBOR”),LIBOR, plus a margin ranging from 1.75% to 2.50%. Effective April 1, 2022, the margin for through February 28, 2023. Subsequently, the Credit Facility was decreasedamended to 1.75% for the three months ended September 30, 2022.bear interest at SOFR as noted above. For the three months ended September 30,March 31, 2023 and 2022, the average interest rate on the Credit Facility was comprised of LIBOR was 2.5%6.31% and the margin was 1.75%.2.47%, respectively.

On May 18, 2022, the Company entered into an interest rate swap agreement with a notional value of $40 million, with a fixed payer LIBOR rate of 2.9935% and an initial floating LIBOR rate of 0.93557%. The floating rate is reset at each month end and has an embedded floor rate of 0.0%. The term of the interest rate swap agreement coincides with that of the Credit Facility. See Note 1211 for further information regarding the fair value accounting for the interest rate swap agreement. Effective February 28, 2023, the interest rate swap agreement was amended in connection with the amendment of the Credit Facility to implement certain changes in the reference rate from LIBOR to SOFR.

The fair value of the Credit Facility was $79.8$77.7 million (Level 2 inputs) as of September 30,March 31, 2023 compared to the carrying value of $76.7 million as of March 31, 2023. The fair value of the Credit Facility was $78.8 million (Level 2 inputs) as of December 31, 2022 compared to the carrying value of $78.9$77.8 million as of September 30, 2022. The LIBOR rate as of December 31, 2021 was not materially different from the interest rate for the year ended December 31, 2021. Hence the fair value of the Credit Facility approximated the carrying value as of December 31, 2021.2022.

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 balance of at least $20 million in U.S. cash. Annual minimum principal payments over the five year term for the Credit Facility are 5%, 5%, 7.5%, 7.5%, and 10%, respectively, with the remaining balance due at the end of the term.

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 Facility are guaranteed by 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.

The components of interest expense are presented below (in thousands):
Three Months EndedNine Months EndedThree Months Ended
September 30,September 30,March 31,
202220212022202120232022
Credit Facility:Credit Facility:Credit Facility:
Interest expense Interest expense$897 $435 $2,174 $435  Interest expense$1,078 $543 
Accretion expense related to discount and issuance costs Accretion expense related to discount and issuance costs245 196 728 196  Accretion expense related to discount and issuance costs240 240 
Interest on finance leasesInterest on finance leases25 22 72 107 Interest on finance leases21 25 
$1,167 $653 $2,974 $738 $1,339 $808 

For both the three months and nine months ended September 30, 2022,March 31, 2023, interest expense included a reduction related to interest rate swap expensespayments received of $0.1 million and $0.2 million, respectively.

NOTE 6 — REDEEMABLE SERIES A PREFERRED STOCK

On July 20, 2021, the Company redeemed the remaining 87,802 shares of its Series A Preferred Stock at an aggregate total redemption price of $88.4 million. The total 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 related to the dividends earned for the period from July 1, 2021 to but not including the July 19, 2021 redemption date. 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 under the Credit Facility. See Note 5 for further information regarding the Company's Credit Facility.

On April 16, 2021, the Company redeemed 60,000 shares of its 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, or $39.05 per share, 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 mandatorily redeemable on April 16, 2021.
10

RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



The Company funded the April 16, 2021 redemption with a portion of the proceeds from the March 2021 Offering and the August 2020 Offering, which raised aggregate net proceeds of approximately $80.7 million.

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

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

The changes in the net carrying value of Series A Preferred Stock from December 31, 2020 to September 30, 2021 (the quarter in which the Series A Preferred Stock was redeemed in full) are set forth below (dollars in thousands):
Series A Preferred Stock
SharesAmount
Net carrying value as of December 31, 2020154,911 $137,854 
Issuance of shares to settle PIK Dividends on January 4, 20211,193 1,193 
Repurchase of 10,000 shares on January 5, 2021(10,000)(8,913)
Accretion of discount for the three months ended March 31, 2021— 1,473 
Net carrying value as of March 31, 2021146,104 131,607 
Issuance of shares to settle PIK Dividends on April 1, 20211,051 1,051 
Redemption of 60,000 shares on April 16, 2021(60,000)(54,327)
Accretion of discount for the three months ended June 30, 2021— 804 
Net carrying value as of June 30, 202187,155 79,135 
Issuance of shares to settle PIK Dividends on July 1, 2021647 647 
Redemption of 87,802 shares on July 20, 2021(87,802)(79,782)
Net carrying value as of September 30, 2021— $— 

Presented below is a summary of total and per share dividends declared during fiscal year 2021 (dollars in thousands, except per share amounts):
11

RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Dividends Payable in:TotalDividends
CashPIKDividendsPer Share
Dividends payable as of December 31, 2020$3,842 $1,193 $5,035 $32.50 
  Cash Dividends @ 10% per annum3,660 — 3,660 23.40 
  PIK Dividends @ 3% per annum— 1,098 1,098 7.02 
Fractional PIK shares settled for cash47 (47)— — 
Less dividends settled January 4, 2021(4,009)(1,193)(5,202)(33.26)
Dividends payable as of March 31, 20213,540 1,051 4,591 32.14 
  Cash Dividends @ 10% per annum2,179 —��2,179 25.00 
  PIK Dividends @ 3% per annum— 654 654 7.50 
Fractional PIK shares settled for cash7 (7)— — 
Less dividends settled April 1, 2021(3,540)(1,051)(4,591)(52.68)
Dividends payable as of June 30, 20212,186 647 2,833 32.51 
Less dividends settled on July 1, 2021(2,186)(647)(2,833)(32.27)
Dividends payable as of September 30, 2021$— $— $— $— 

NOTE 76 — COMMON STOCK OFFERING, RESTRICTED STOCK UNITS, STOCK OPTIONS AND WARRANTS 

Common Stock Retired

On May 28, 2022, the Board of Directors authorized an increase to the Company’s previously announced Common Stock repurchase program to increase the value of the shares that could be acquired by the Company from up to $15.0 million over two years to up to $50.0 million over the next four years, subject to compliance with the Company’s Credit Facility, provided that all other applicable conditions and legal requirements are satisfied.

10

RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


On February 27, 2022, the Board of Directors approved the adoption of a stock repurchase program to acquire 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, which was amended effective January 14, 2022 to increase the aggregate value of the shares of Common Stock that could be acquired by the Company to no greater than $15.0 million during the term of the Credit Facility, provided that all other applicable conditions and legal requirements are satisfied.

DuringFor the three months ended September 30,March 31, 2023, the Company did not acquire any shares of Common Stock on the open market. For the three months ended March 31, 2022, the Company acquired 0.20.6 million shares of Common Stock on the open market at a cost of $1.0 million. For the nine months ended September 30, 2022, the Company acquired an aggregate 0.9 million shares of Common Stock on the open market at a total cost of $4.7$3.2 million. Upon completion of all repurchase transactions, the associated shares of Common Stock were retired.

Common Stock Offerings

On March 11, 2021, the Company completed the March 2021 Offering of 7.8 million shares of its 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 used the net proceeds from the March 2021 Offering to redeem 60,000 shares of Series A Preferred Stock in April 2021.

Treasury Stock

On August 6, 2021, the Company reacquired 0.1 million shares of Common Stock for $1.1 million related to restricted stock units (“RSUs”) that vested on that date. These shares are included as Treasury Stock as of September 30, 2022.

12

RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Stock Plans

The Company’s stock plans consist of the 2007 Stock Plan (the “2007 Plan”) and the 2013 Equity Incentive Plan, as amended and restated in July 2017 (the “2013 Plan”). The 2007 Plan and the 2013 Plan are collectively referred to as the “Stock Plans”. On February 22, 2022,23, 2023, pursuant to the “evergreen” provisions of the 2023 Plan, the Board of Directors authorized an increase of approximately 3.5 million shares available for grant under the 2013 Plan. For additional information about the Stock Plans, please refer to Note 8 to the Company’s Consolidated Financial Statements for the year ended December 31, 2021,2022, included in Part II, Item 8 of the 20212022 Form 10-K. The information presented below provides an update for activity under the Stock Plans for both the three and nine months ended September 30, 2022.March 31, 2023.
 
Restricted Stock Units
 
For the ninethree months ended September 30, 2022,March 31, 2023, the Board of Directors granted RSUs under the 2013 Plan to employees and to non-employee members of the Board of Directors for an aggregate of approximately 0.80.5 million shares of Common Stock. RSU grants vest over periods generally ranging from 12 to 36 months from the respective grant dates and the awards are subject to forfeiture upon termination of employment or service on the Board of Directors, as applicable. Based on the weighted average fair market value of the Common Stock on the date of grant of $5.10$4.55 per share, the aggregate fair value for the shares underlying the RSUs amounted to $4.2$2.2 million as of the grant date that will be recognized as compensation cost over the vesting period. Accordingly, compensation expense related to RSUs of approximately $1.8$1.4 million and $2.1$2.6 million was recognized for the three months ended September 30,March 31, 2023 and 2022, and 2021, respectively. Compensation expense related to RSUs of approximately $6.6 million and $6.2 million was recognized for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022,March 31, 2023, the unrecognized expense of $9.1$7.9 million net of forfeitures is expected to be charged to expense on a straight-line basis as the RSUs vest over a weighted-average period of approximately 1.91.5 years.
 
Stock Options
 
For the ninethree months ended September 30, 2022,March 31, 2023, the Board of Directors granted stock options for the purchase of an aggregate of approximately 1.20.7 million shares of Common Stock at exercise prices that were equal to the fair market value of the Common Stock on the date of grant. Options granted to employees generally vest as to one-third of the shares subject to the award on each anniversary of the designated vesting commencement date, which may precede the grant date of such award, and expire ten years after the grant date.
 
The following table sets forth a summary of stock option activity under the Stock Plans for the ninethree months ended September 30, 2022March 31, 2023 (shares in thousands): 
Shares
Price (1)
Term (2)
 Shares
Price (1)
Term (2)
Outstanding, December 31, 20216,824 $5.92 5.6
Outstanding, December 31, 2022Outstanding, December 31, 20226,994 $6.17 5.5
GrantedGranted1,243 5.64 Granted695 4.78 
ForfeitedForfeited(382)5.88 Forfeited(175)6.17 
ExpiredExpired(163)5.76 Expired(82)7.59 
ExercisedExercised(517)1.86 Exercised(55)1.31 
Outstanding, September 30, 2022 (3)(4)7,005 6.17 5.8
Vested, September 30, 2022 (3)4,543 6.15 4.0
Outstanding, March 31, 2023 (3)(4)Outstanding, March 31, 2023 (3)(4)7,377 6.06 5.7
Vested, March 31, 2023 (3)Vested, March 31, 2023 (3)4,841 6.21 4.0
11

RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


 
(1)Represents the weighted average exercise price.
(2)Represents the weighted average remaining contractual term until the stock options expire.expire, in years.
(3)As of September 30, 2022,March 31, 2023, the aggregate intrinsic value of all stock options outstanding was $0.5$0.1 million. As of September 30, 2022,March 31, 2023, the aggregate intrinsic value of vested stock options was $0.4$0.1 million.
(4)The number of outstanding stock options that are not expected to ultimately vest due to forfeiture amounted to 0.30.4 million shares as of September 30, 2022.March 31, 2023.

13

RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The following table presents activity affecting the total number of shares available for grant under the Stock Plans for the ninethree months ended September 30, 2022March 31, 2023 (in thousands):
 
Available, December 31, 202120224,3247,543 
Newly authorized by Board of Directors3,4843,541 
Stock options granted(1,243)(695)
RSUs granted(821)(482)
Expired options under Stock Plans16382 
Forfeited options under Stock Plans382175 
Forfeited RSUs under Stock Plans514 
     Shares issued(60)
     Shares repurchased853129 
Available, September 30, 2022March 31, 20237,59610,293 
 
The aggregate fair value of approximately 1.20.7 million stock options granted for the ninethree months ended September 30, 2022March 31, 2023 amounted to $3.3$1.9 million, or $2.64$2.67 per stock option as of the grant date utilizing the Black-Scholes-Merton (“BSM”) method. The fair valued derived under the BSM method will result in the recognition of compensation cost over the vesting period of the stock options. For the ninethree months ended September 30, 2022,March 31, 2023, the fair value of each stock option grant under the Stock Plans was estimated on the date of grant using the BSM option-pricing model, with the following weighted-average assumptions:
 
Expected life (in years)6.0
Volatility46%55%
Dividend yield0%
Risk-free interest rate2.63%4.05%
Fair value per share of Common Stock on date of grant$5.644.78
 
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, total unrecognized compensation costs related to unvested stock options, net of estimated forfeitures, was $4.4$4.7 million and $3.9$4.1 million, respectively. As of September 30, 2022,March 31, 2023, the unrecognized costs are expected to be charged to expense on a straight-line basis over a weighted-average vesting period of approximately 2.12.0 years.
 
Stock-Based Compensation Expense
 
Stock-based compensation expense attributable to RSUs and stock options is classified as follows (in thousands):
Three Months Ended
September 30,		Nine Months Ended September 30,Three Months Ended
March 31,
2022202120222021 20232022
Cost of revenueCost of revenue$535 $376 $1,616 $1,067 Cost of revenue$413 $508 
Sales and marketingSales and marketing787 752 2,467 2,353 Sales and marketing458 827 
General and administrativeGeneral and administrative1,121 1,265 4,570 3,684 General and administrative1,105 1,716 
TotalTotal$2,443 $2,393 $8,653 $7,104 Total$1,976 $3,051 

Warrants
 
As of September 30, 2022,March 31, 2023, warrants were outstanding for an aggregate of 18.1 million shares of Common Stock, including 3.4 million shares of Common Stock exercisable at $5.64 per share, and an aggregate of 14.7 million shares of Common Stock exercisable at $11.50 per share. The warrants exercisable at $11.50 per share expired unexercised in October 2022. For additional information about these warrants, please refer to Note 8 to the Company’s Consolidated Financial Statements for the year ended December 31, 2021,2022, included in Part II, Item 8 of the 20212022 Form 10-K.

On April 12, 2021, the SEC issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (the “SEC Staff Statement”). Upon review of the SEC Staff Statement, which
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


addressed certain accounting and reporting considerations related to warrants similar to the Company’s warrants to purchase approximately 6.1 million shares of Common Stock at $11.50 per share (the “GP Sponsor Private Placement Warrants”), and upon review of ASC 815-40, Contracts in Entity’s Own Equity, the Company determined that its GP Sponsor Private Placement Warrants should have been classified as a liability instead of equity. On October 29, 2021, the original holder of the warrants (the “GP Sponsor”) sold the warrants for $1.04 per warrant to outside holders. As a result of the sale, the new holders of the GP Sponsor Private Placement Warrants had the same rights as the holders of the Company’s warrants to purchase approximately 8.6 million shares of the Company’s Common Stock at $11.50 per share (the “Public Warrants”). Therefore, as of October 29, 2021, the Company reclassified the liability for redeemable warrants to additional paid-in capital for $6.3 million. See Note 12 for information regarding the fair value of the GP Sponsor Private Placement Warrants.
 
NOTE 87 — INCOME TAXES
 
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law. The IRA includes a 15% corporate alternative minimum tax for companies that report over $1 billion in U.S. profits to shareholders and a 1% excise tax on stock buy backs. The Company does not expect the IRA to have a material tax impact.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was passed into law, amending portions of relevant U.S. tax laws. The CARES Act contains changes to corporate taxation, including among other things, adjusting net operating loss (NOL) limitations and carryback rules, refundable AMT credits, bonus depreciation and interest expense limitations. The CARES Act also provides for an Employee Retention Credit, a fully refundable payroll tax credit for certain eligible employers and the ability for all eligible employers to defer payment of the employer share of payroll taxes owed on wages paid for the period ending December 31, 2020 (such deferred payroll taxes are due in two installments: 50% by December 31, 2021 and 50% by December 31, 2022). The Company elected to defer payroll tax payments which totaled $1.6 million as of September 30, 2022. The Company paid $1.6 million in December 2021 as required under the CARES Act. The remaining amount of $1.6 million is required to be paid in December 2022.

For the three months ended September 30,March 31, 2023 and 2022, and 2021, the Company’s effective tax rate was 12.1%42.9% and 47.2%, respectively. For the nine months ended September 30, 2022 and 2021, the Company’s effective tax rate was 65.1% and 45.0%42.2%, respectively. The Company’s income tax expense was primarily attributable to earnings in the United States and foreign jurisdictions subject to income taxes and foreign withholding taxes. The Company did not have any material changes to its conclusions regarding valuation allowances for deferred income tax assets or uncertain tax positions for the three and nine months ended September 30, 2022March 31, 2023 and 2021.

Given the near-break even results projected results for fiscal year 2022, the Company determined that any changes in pretax income would result in a significant impact on the estimated annual effective tax rate. As a result, the Company utilized the year-to-date effective tax rate as the estimated annual effective tax rate when determining the income taxes recorded during the three and nine months ended September 30, 2022,2022.

For additional information about income taxes, please refer to Note 9 to the Company’s Consolidated Financial Statements for the year ended December 31, 2021,2022, included in Part II, Item 8 of the 20212022 Form 10-K.

NOTE 98 — COMMITMENTS AND CONTINGENCIES
Retirement Plan

The Company has defined contribution plans for both its U.S. and foreign employees. For certain of these plans, employees may contribute up to the statutory maximum, which is set by law each year. The plans also provide for employer contributions. For the three months ended September 30,March 31, 2023 and 2022, and 2021, the Company’s matching contributions to these plans totaled $0.8 million for both years. For the nine months ended September 30, 2022 and 2021, the Company’s matching contributions to these plans totaled $2.7 million and $2.5 million, respectively.

Rimini I Litigation

In January 2010, certain subsidiaries of Oracle Corporation (together with its subsidiaries individually and collectively, “Oracle”) filed a lawsuit, Oracle USA, Inc. et al. v. Rimini Street, Inc. et al. (United States District Court for the District of Nevada) (the “District Court”) (“Rimini I”), against the Company and its Chief Executive Officer and President, Seth Ravin, alleging that certain of the Company’s processes (Process 1.0) violated Oracle’s license agreements with its customers and that the Company
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


committed acts of copyright infringement and violated other federal and state laws. The litigation involved the Company’s business processes and the manner in which the Company provided services to its clients.

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

Injunction Proceedings

Since November 2018, the Company has been subject to a permanent injunction (the “Injunction”) prohibiting it from using certain support processes that had been found in Rimini I to “innocently” infringe certain Oracle copyrights. The injunctionInjunction does not prohibit the Company’s provision of support services for any Oracle product lines, but rather defines the manner in which the Company can provide support services for certain Oracle product lines.

On July 10, 2020, Oracle filed a motion to show cause contending that the Company was in violation of the injunction,Injunction, and the Company opposed this motion, disputing Oracle’s claims. On January 12, 2022, the District Court issued its findings and order following an evidentiary hearing held in September 2021 regarding whether the Company (i) violated the injunctionInjunction for certain accused conduct and (ii) should be held in contempt in those instances where the District Court found a violation of the injunction,Injunction, and what sanctions, if any, are appropriate.

In the order, 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,Injunction, awarded sanctions to Oracle of $0.6 million and ordered
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


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 reserves all rights, including appellate rights, with respect to the District Court rulings and findings.

On February 7, 2022, Rimini filed a notice of appeal in the District Court, commencing an appeal of the District Court’s January 12, 2022 decision to the Ninth Circuit Court of Appeals (“Court of Appeals”). On February 8, 2022, the District Court stayed the briefing on Oracle’s bill of attorneys’ fees and costs until Rimini’s appeal is resolved. Briefing on Rimini’s appeal has been completed,completed. Oral argument on the appeal was held in San Francisco on February 6, 2023, and the parties are currently working with the Court of Appeals to schedule oral argumenthas not yet issued a decision on the appeal in early 2023.appeal. At this time, the Company believes that it is in substantial compliance with the injunctionInjunction and has complied with the order regarding the quarantining of certain computer files. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company had accrued $6.9 million, respectively, as an estimate related to reasonable attorneys’ fees and costs. During the ninethree months ended September 30,March 31, 2022, the Company paid $0.6 million to Oracle for the award sanctions.sanctions award. Regarding the Company’s estimate for reasonable attorneys’ fees and costs, significant judgment is required to determine the amount of loss related to this matter as the outcome is inherently unpredictable and subject to uncertainties.

Rimini II Litigation

In October 2014, the Company filed a separate lawsuit, Rimini Street Inc. v. Oracle Int’l Corp., in the District Court against Oracle seeking a declaratory judgment that the Company’s revised “Process 2.0” support practices, in use since at least July 2014, do not infringe certain Oracle copyrights (“Rimini II”). The Company’s operative complaint asserts declaratory judgment, tort, and statutory claims. Oracle’s operative counterclaim asserts declaratory judgment and copyright infringement claims and Lanham Act, breach of contract, and business tort violations.

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

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

The parties filed their joint pretrial order in Rimini II in December 2020. On September 3, 2021, the District Court granted Oracle’s motion to realign the parties with Oracle now designated as plaintiff and the Company and Mr. Ravin now designated as the defendants in the case caption and at trial. The District Court also granted Oracle’s motion to bifurcate the trial – originally providing for a jury trial on Oracle’s monetary damages claims against the Company, followed by a separate bench trial on the parties’ equitable claims for unfair competition and Oracle’s claim for an accounting.

On April 14, 2022, the District Court judge who had previously presided over the case entered an order referring the case for reassignment, resulting in the case being reassigned to another District Court judge. During a status conference with the District Court on October 14, 2022, attorneys for Oracle confirmed that Oracle would withdraw all of its monetary damages claims against the Company in Rimini II and proceed with a bench trial instead of a jury trial for its claims for equitable relief. Further, in accordance with a Minute Order issued by the District Court on October 14, 2022, good cause appearing, the start date for the Rimini II trial was changed from November 2, 2022 to November 29, 2022 in Las Vegas.

As ordered by the District Court, on October 21, 2022, the parties filed a joint stipulation (the “Stipulation”) to dismiss with prejudice the Rimini II claims affected by Oracle’s decision, including all of Oracle’s monetary damages claims against the Company and Mr. Ravin. On October 24, 2022, the District Court entered an order granting the Stipulation, dismissing with prejudice Oracle’s claims in Rimini II “for monetary relief of any kind under any legal theory [,] including but not limited to claims for damages, restitution, unjust enrichment, and engorgement [ . . . ].” In addition, Oracle’s claims for breach of contract, inducing breach of contract and an accounting were dismissed with prejudice. Per the Stipulation, the parties have each reserved the right to seek attorneys’ fees and/or costs to the extent permissible by law.

Prior to the date of the District Court’s order granting the Stipulation, no damages of any kind were awarded by the District Court in Rimini II. Whether to award any attorneys’ fees and/or costs will be a decision for the District Court.

The Rimini II bench trial began in Las Vegas on November 29, 2022 and concluded on December 15, 2022. The parties submitted their proposed findings of fact and conclusions of law to the District Court on February 23, 2023, and the matter remains pending.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


At this time, the Company does not have sufficient information regarding the possible recovery by Oracle of its attorneys’ fees and/or costs in the Rimini II litigation. The Company maintains that Oracle should not be permitted to recover its attorneys’ fees and/or costs. Both parties have sought injunctive relief in this matter, and the Company has reserved its rights to appeal regarding the possible recovery of damages by the Company in connection with the Company’s claims against Oracle. As a result, an estimate of the range of loss, if any, cannot be reasonably determined. The Company also believes that an award of Oracle’s attorneys’ fees and/or costs is not probable, so no accrual has been made as of September 30, 2022.March 31, 2023. However, the ultimate outcome may be different from the Company’s best estimates and could have a material adverse impact on the Company’s financial results and business. The Company reserves all rights, including appellate rights, with respect to the District Court’s rulings and findings in Rimini II.

Other Litigation

From time to time, the Company may be a party to litigation and subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of judgment, defense and settlement costs, diversion of management resources and other factors. At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies. Legal fees are expensed as incurred.

Liquidated Damages
 
The Company enters into agreements with clients that contain provisions related to liquidated damages that would be triggered in the event that the Company is no longer able to provide services to these clients. The maximum cash payments related to these liquidated damages is approximately $9.4$11.7 million and $8.3$8.1 million as of September 30, 2022March 31, 2023 and December 31, 2021,
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RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


2022, respectively. To date, the Company has not incurred any costs as a result of such provisions and has not accrued any liabilities related to such provisions in these Unaudited Condensed Consolidated Financial Statements.
 
NOTE 109 — RELATED PARTY TRANSACTIONS

Rimini Street, Inc. (“RSI”) was incorporated in the state of Nevada in September 2005. 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. Prior to the consummation of the mergers, the ultimate parent entity of GPIA was GP Investments, Ltd. (“GP Investments”), a global private equity firm and a former affiliate of the Company. An affiliate of GP Investments was a member of the Company’s Board of Directors until May 5, 2021.

In addition, an affiliate of Adams Street Partners and its affiliates (collectively referred to as “ASP”) is also a member of the Company’s Board of Directors. As of September 30, 2022,March 31, 2023, ASP owned approximately 26.7%26.5% of the Company’s issued and outstanding shares of Common Stock. In July 2018, ASP acquired 19,209 shares of Series A Preferred Stock and approximately 0.4 million shares of Common Stock for total consideration of approximately $19.2 million, all of which shares of Series A Preferred Stock were redeemed by the Company in 2021 on the same terms and conditions as for all other holders of Series A Preferred Stock.

NOTE 1110 —EARNINGS (LOSS) PER SHARE

The Company computes earnings per share in accordance with ASC Topic 260, Earnings per ShareShare. , which requires earnings per share for each class of stock to be calculated using the two-class method. The holders of Series A Preferred Stock were entitled to participate in Common Stock dividends, if and when declared, on a one-to-one per-share basis. Accordingly, in prior year periods in which the Company had net income, earnings per share were computed using the two-class method whereby the pro rata dividends on Common Stock that were also distributable to the holders of Series A Preferred Stock would have been deducted from earnings applicable to common stockholders, regardless of whether a dividend is declared for such undistributed earnings. Under the two-class method, earnings for the reporting period were allocated between the holders of the Company’s Common Stock and the Series A Preferred Stock based on their respective participation rights in undistributed earnings.

Basic earnings per share of Common Stock is computed by dividing net income attributable to common stockholders by the weighted average number of shares of basic Common Stock outstanding. Net income allocated to the holders of the Company’s Series A Preferred Stock is calculated based on the stockholders’ proportionate share of the weighted average shares of Common Stock outstanding on an if-converted basis. Diluted earnings per share of Common Stock is calculated by adjusting the basic earnings per share of Common Stock for the effects of potential dilutive Common Stock shares outstanding such as stock options, restricted stock units and warrants.

For both the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, basic and diluted net earnings per share of Common Stock were computed by dividing the net income attributable to common stockholders by the weighted average number of common shares outstanding during the respective periods. The following tables set forth the computation of basic and diluted net income (loss) attributable to common stockholders (in thousands, except per share amounts):
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RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Three Months Ended
September 30,		Nine Months Ended September 30,
2022202120222021
Income attributable to common stockholders:
  Net income (loss)$(405)$1,931 $2,792 $5,162 
  Return on repurchase of Series A Preferred Stock shares— — — (38)
  Accretion related to redemption of Series A Preferred Stock— (8,020)— (13,693)
  Make-whole dividends related to redemption of Series A Preferred Stock— (602)— (2,945)
  Dividends and accretion related to Series A Preferred Stock:
    Cash dividends declared— — — (5,839)
    PIK dividends declared— — — (1,752)
    Accretion of discount— — — (2,277)
     (405)(6,691)2,792 (21,382)
    Undistributed earnings allocated using the two-class method— — — — 
      Net income (loss) attributable to common stockholders$(405)$(6,691)$2,792 $(21,382)
Three Months Ended
September 30,		Nine Months Ended September 30,
2022202120222021
Weighted average number of shares of Common Stock outstanding87,965 86,189 87,441 83,449 
Additional shares outstanding if Series A Preferred Stock is converted to Common Stock— 1,813 — 8,698 
Total shares outstanding if Series A Preferred Stock is converted to Common Stock87,965 88,002 87,441 92,147 
      Percentage of shares allocated to Series A Preferred Stock— %2.1 %— %9.4 %
Three Months Ended
September 30,		Nine Months Ended September 30,
2022202120222021
Weighted average number of shares of Common Stock outstanding:  
  Basic87,965 86,189 87,441 83,449 
  Warrants— — — — 
  Stock options— — 543 — 
  RSUs— — 1,070 — 
  Diluted87,965 86,189 89,054 83,449 
Net income (loss) per share attributable to common stockholders:
  Basic$— $(0.08)$0.03 $(0.26)
  Diluted$— $(0.08)$0.03 $(0.26)
Three Months Ended
March 31,
20232022
Income attributable to common stockholders:
  Net income$5,639 $3,087 
   
Three Months Ended
March 31,
20232022
Weighted average number of shares of Common Stock outstanding:  
  Basic88,690 87,124 
  Warrants— — 
  Stock options49 512 
  RSUs322 849 
  Diluted89,061 88,485 
Net income per share attributable to common stockholders:
  Basic$0.06 $0.04 
  Diluted$0.06 $0.03 

The following potential Common Stock equivalents were excluded from the computation of diluted net income (loss) per share for the respective periods ending on these datesthree months ended March 31, 2023 and 2022, since the impact of inclusion was anti-dilutive (in thousands): 
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RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31,
 20232022
RSUs800 1,197 
Stock options6,968 4,329 
Warrants3,440 18,128 
Total11,208 23,654 


Three Months EndedNine Months Ended
 September 30, 2022September 30, 2022
RSUs1,243 460 
Stock options4,914 4,161 
Warrants18,128 18,128 
Total24,285 22,749 

For both the three and nine months ended September 30, 2021, all of the Common Stock equivalents were anti-dilutive as the Company had a net loss attributable to common stockholders.
NOTE 1211 — FINANCIAL INSTRUMENTS AND SIGNIFICANT CONCENTRATIONS
 
Fair Value Measurements
 
Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it transacts and considers assumptions that market participants would use when pricing the asset or liability. Additional information on fair value measurements is included in Note 13 to the Company’s Consolidated Financial Statements for the year ended December 31, 2021,2022, included in Part II, Item 8 of the 20212022 Form 10-K. The Company’s policy is to recognize asset or liability transfers among Level 1, Level 2 and Level 3 as of the actual date of the events or change in circumstances that caused the transfer.

Investments

During September 2022, the Company invested $20 million of its cash and cash equivalents into U.S. Federal agency bonds, U.S. government bonds, U.S. treasury notes and other securities. We consider all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The fair values of these investments approximate their carrying values.

In general, investments with original maturities of greater than three months and remaining maturities of less than one year are classified as short-term investments. Debt investments are classified as available-for-sale and gains and losses are recorded using the specific identification method. Changes in fair value are recorded in the operating statement. Fair value is calculated based on publicly available market information.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Listed below are the cash equivalent and short-term investment balances as of September 30, 2022March 31, 2023 (in thousands):
Fair Value LevelCost BasisGains (Losses)Recorded BasisCash EquivalentsShort-term InvestmentsFair Value LevelCost BasisUnrealized Gains (Losses)Recorded BasisCash EquivalentsShort-term InvestmentsLong-term Investments
Federal Agency BondsFederal Agency BondsLevel 2$13,356 $(5)$13,351 $6,161 $7,190 Federal Agency BondsLevel 2$18,110 $165 $18,275 $422 $17,207 $646 
US Government bondsLevel 2494 — 494 — 494 
US Treasury notesUS Treasury notesLevel 25,447 9 5,456 1,993 3,463 US Treasury notesLevel 22,064 10 2,074 496 1,578 — 
Variable NoteVariable NoteLevel 2703 — 703 703 — Variable NoteLevel 235 — 35 35 — — 
Cash— — — — — 
$20,000 $4 $20,004 $8,857 $11,147 $20,209 $175 $20,384 $953 $18,785 $646 

Derivatives

On May 18, 2022, the Company entered into an interest rate swap agreement for a notional value of $40.0 million. The derivative was recognized in the accompanying Unaudited Condensed Consolidated Balance Sheets at its estimated fair value as of September 30, 2022.March 31, 2023. The Company uses derivatives to manage the risk associated with changes in interest rates. The Company does not enter into derivatives for speculative purposes.

To estimate fair value for the Company's interest rate swap agreement as of September 30, 2022,March 31, 2023, the Company utilized a present value of future cash flows, leveraging a model-derived valuation that uses Level 2 observable inputs such as interest
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


rate yield curves. The Company estimated the fair value of the interest rate swap agreement to be $1.5$0.8 million as of September 30, 2022.March 31, 2023.

Changes in the fair value of the derivatives that qualify as cash flow hedges are recorded in Accumulated other comprehensive loss in the accompanying Unaudited Condensed Consolidated Balance Sheets until earnings are affected by the variability of the cash flows.

The Company incurredreceived interest swap payments of $0.1 million and $0.2 million during the three and nine months ended September 30, 2022,March 31, 2023, which were recorded as a reduction to interest expense.

The amounts recorded for the interest rate swap agreement are described below (in thousands):
Derivative InstrumentDerivative InstrumentBalance Sheet Classification  September 30, 2022December 31, 2021Derivative InstrumentBalance Sheet ClassificationMarch 31, 2023December 31, 2022
Interest rate swapInterest rate swapDeposits and other$1,550 $— Interest rate swapDeposits and other$838 $1,402 
Accumulated other comprehensive loss1,220 — Accumulated other comprehensive loss333 1,107 
For the Three Months Ended September 30,For the Nine Months Ended September 30,Three Months Ended March 31,
Derivative InstrumentDerivative InstrumentIncome Statement Classification2022202120222021Derivative InstrumentIncome Statement Classification20232022
Interest rate swapInterest rate swapInterest expense$81 $— $224 $— Interest rate swapInterest expense (benefit)$(157)$— 

Warrants

During the year ended December 31, 2021, the Company determined that its GP Sponsor Private Placement Warrants were subject to treatment as a liability. The GP Sponsor Private Placement Warrants could not be redeemed by the Company so long as these warrants were held by the initial purchasers or such purchasers’ permitted transferees. If these warrants were held by someone other than the initial purchasers or such purchasers’ permitted transferees, they were redeemable by the Company and exercisable on the same basis as certain warrants to purchase approximately 8.6 million shares of the Company’s Common Stock, at $11.50 per share (the “Public Warrants”). As a result, the GP Sponsor Private Placement Warrants were reclassified as a liability. On October 29, 2021, the GP Sponsor sold the warrants for $1.04 per warrant to outside holders. As a result of the sale, the new holders of the Private Placement Warrants had the same rights as that of the Public Warrant holders, which warrants expired in October 2022. Therefore as of October 29, 2021, the Company reclassified the liability for the GP Sponsor Private Placement Warrants to additional paid-in capital for $6.3 million. During the three months and nine months ended September 30, 2021, the key assumptions used to determine the fair value were the term period of the warrants, the risk-free rate and volatility. The Public Warrants and the Private Placement Warrants expired unexercised in October 2022. See Note 7 for further information related to the expired warrants.

The carrying amounts of the Company’s financial instruments including cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximate fair values due to their short-term maturities. Based on borrowing rates currently available to the Company for debt with similar terms, the carrying value of capital lease obligations approximate fair value as of the respective balance sheet dates.
Significant Concentrations
 
The Company attributes revenues to geographic regions based on the location of its clients’ contracting entities. The following table shows revenues by geographic region (in thousands):
Three Months Ended
September 30,		Nine Months Ended September 30,Three Months Ended
March 31,
2022202120222021 20232022
United States of AmericaUnited States of America$53,423 $50,479 $159,616 $147,600 United States of America$53,433 $52,284 
InternationalInternational48,508 45,163 141,425 127,551 International52,079 45,626 
TotalTotal$101,931 $95,642 $301,041 $275,151 Total$105,512 $97,910 
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


No clients represented more than 10% of revenue for both the three and the nine months ended September 30, 2022March 31, 2023 and 2021.2022. As of September 30,March 31, 2023 and December 31, 2022, no clients accounted for more than 10% of total net accounts receivable. As of December 31, 2021, the Company had one customer greater than 10% of total net accounts receivable. The Company tracks its assets by physical location. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the net carrying value of the Company’s property and equipment located outside of the United States amounted to approximately $1.7$1.8 million and $1.5$1.8 million, respectively. As of September 30, 2022,March 31, 2023, the Company had operating lease right-of-use assets of $6.1$2.2 million, $3.7$3.1 million and $1.0 million in the United States, India and the rest of the world, respectively. As of December 31, 2021,2022, the Company had operating lease right-of-use assets of $7.7$2.6 million, $4.7$3.4 million and $0.4$1.2 million in the United States, India and the rest of the world, respectively.
 
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, and accounts receivable. The Company maintains its cash, cash equivalents and restricted cash at high-quality financial institutions, primarily in the United States. Deposits, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company had cash, cash equivalents and restricted cash with a single financial institution for an aggregate of $62.5$26.0 million and $70.6$44.9 million, respectively. In addition, the Company had cash and cash equivalents with another single financial institution of $20.1 million. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company had restricted cash of $0.4 million. The Company has never experienced any losses related to these balances.
 
Generally, credit risk with respect to accounts receivable is diversified due to the number of entities comprising the Company’s client base and their dispersion across different geographies and industries. The Company performs ongoing credit evaluations on certain clients and generally does not require collateral on accounts receivable. The Company maintains reserves for potential bad debts and historically such losses are generally not significant.
 
NOTE 1312 - LEASES

Effective at the start of fiscal 2020, the Company adopted the provisions and expanded disclosure requirements described in Accounting Standards Codification (ASC) Topic 842, Leases. The Company adopted the standard using the prospective method. The Company has operating leases for real estate and equipment with an option to renew the leases for up to one month to five years. Some of the leases include the option to terminate the leases upon 30-days30-days’ notice with a penalty. The Company’s leases have various remaining lease terms ranging from November 2022April 2023 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 right of use (“ROU”) asset and lease liability. When the implicit rate is known or provided in the lease documents, the Company is required to use this rate. In cases in which the implicit rate is not known, the Company uses an estimated incremental borrowing rate.

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

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 September 30, 2022,March 31, 2023, the Company did not have any material additional operating leases that have not yet commenced.

The components of lease expense and supplemental balance sheet information were as follows (in thousands):
22
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RIMINI STREET, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The components of lease expense and supplemental balance sheet information were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
202220212022202120232022
Operating lease expense related to ROU assets and liabilitiesOperating lease expense related to ROU assets and liabilities$1,360 $1,526 $4,140 $4,626 Operating lease expense related to ROU assets and liabilities$1,147 $1,403 
Other lease expenseOther lease expense229 204 633 496 Other lease expense48 193 
Total lease expenseTotal lease expense$1,589 $1,730 $4,773 $5,122 Total lease expense$1,195 $1,596 

Other information related to leases was as follows (in thousands):
Supplemental Balance Sheet InformationSupplemental Balance Sheet InformationSeptember 30, 2022December 31, 2021Supplemental Balance Sheet InformationMarch 31, 2023December 31, 2022
Operating lease right-of-use assets, noncurrentOperating lease right-of-use assets, noncurrent$10,843 $12,722 Operating lease right-of-use assets, noncurrent$6,325 $7,142 
September 30, 2022December 31, 2021March 31, 2023December 31, 2022
Operating lease liabilities, currentOperating lease liabilities, current$4,123 $4,227 Operating lease liabilities, current$4,047 $4,223 
Operating lease liabilities, noncurrentOperating lease liabilities, noncurrent9,987 12,511 Operating lease liabilities, noncurrent8,093 9,094 
Total operating lease liabilities Total operating lease liabilities$14,110 $16,738  Total operating lease liabilities$12,140 $13,317 
Weighted Average Remaining Lease TermYears
Operating leases3.643.08
Weighted Average Discount Rate
Operating leases10.3 %

Maturities of operating lease liabilities as of September 30, 2022March 31, 2023 were as follows (in thousands):
Year ending September 30:
2023$5,336 
Year ending March 31Year ending March 31
202420244,666 2024$3,831 
202520253,546 20254,647 
202620262,428 20263,055 
20272027832 20272,445 
20282028208 
ThereafterThereafter— Thereafter— 
Total future undiscounted lease payments Total future undiscounted lease payments16,808  Total future undiscounted lease payments14,186 
Less imputed interestLess imputed interest(2,698)Less imputed interest(2,046)
TotalTotal$14,110 Total$12,140 

For the three months ended September 30,March 31, 2023 and 2022, and 2021, the Company paid $1.4$1.1 million and $1.5 million, respectively, for operating lease liabilities. For the nine months ended September 30, 2022 and 2021, the Company paid $4.1 million and $4.6$1.4 million, respectively, for operating lease liabilities.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
 
    This Quarterly Report on Form 10-Q (this “Report”) includes forward-looking statements. All statements other than statements of historical facts contained in this Report, including statements regarding our future results of operations and financial position, business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements include, but are not limited to, information concerning:

•the duration of and economic, operational and financial impacts on our business of any lingering impacts of the COVID-19 pandemic, as well as the actions taken by governmental authorities, clients or others in response to the pandemic;
•the evolution of the enterprise software management and support landscape facing our clients and prospects;
•our ability to educate the market regarding the advantages of our enterprise software management and support services and products;
•estimates of our total addressable market;
•expectations of client savings;savings relative to use of other providers;
•the occurrence of catastrophic events, including terrorism and geopolitical actions specific to an international region, that may disrupt our business or that of our current and prospective clients;
•our ability to maintain an adequate rate of revenue growth;
•our ability to maintain sufficient cash flow and capital;capital or raise additional capital necessary to fund our operations and invest in new services and products;
•the impact of our Credit Facility’s debt service obligations and financial and operational covenants on our business and related interest rate risk;
•our business plan and our ability to effectively manage our growth and associated investments;
•the impact of any recessionary economic trends, including inflation, rising interest rates and changes in foreign exchange rates;
•beliefs and objectives for future operations;
•our ability to expand our leadership position in independent enterprise software support and to sell our application management services (“AMS”); and Rimini ONE™ integrated services;
•our ability to attract and retain clients and our ability to further penetrate our existing client base;
•any future actions taken by governmental authorities, clients or others in response to any lingering impacts of the COVID-19 pandemic;
•our ability to maintain our competitive technological advantages against new entrants in our industry;
•our ability to timely and effectively scale and adapt our existing technology;
•our ability to innovate new products and bring them to market in a timely manner;
•our ability to maintain, protect, and enhance our brand and intellectual property;
•our ability to capitalize on changing market conditions including a market shift to hybrid and cloud/SaaS offerings for information technology environments and retirement of certain software releases by software vendors;
•our ability to develop strategic partnerships;
•benefits associated with the use of our services;
•our ability to expand internationally;
•our need and ability to raise equity or debt financing on favorable terms and our ability to generate cash flows from operations to help fund increased investment in our growth initiatives;
•the effects of increased competition in our market and our ability to compete effectively;
•our intentions with respect to our pricing model;
•cost of revenue, including changes in costs associated with production and client support;
•changes in laws or regulations, including tax laws or unfavorable outcomes of tax positions we take, or a failure by us to establish adequate reserves for tax events;
•our ability to maintain our good standing with the United States and international governments and capture new contracts;
•costs associated with defending intellectual property infringement and other claims, such as those claims discussed under “Legal Proceedings” in Part II, Item 1 of this Report and our expectations with respect to such litigation;
•our expectations concerning relationships with third parties, including channel partners and logistics providers;
•economic and industry trends or trend analysis;
•our ability to prevent unauthorized access to our information technology systems and other cybersecurity threats, protect the confidential information of our employees and clients and comply with privacy and data protection regulations;
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•the amount and timing of repurchases, if any, under our stock repurchase program and our ability to enhance stockholder value through such program;program or any other actions to provide value to stockholders;
•the attraction and retention of additional qualified employeespersonnel, including sales personnel, and the retention of key personnel;
•future acquisitions of or investments in complementary companies, products, subscriptions or technologies;
•uncertainty from the discontinuance of LIBOR and the transition to SOFR or other interest rate benchmarks;
•the effects of seasonal trends on our results of operations, including the contract renewal cycles for vendor-supplied software support and managed services;
•our ability to maintain an effective system of internal control over financial reporting and our ability to remediate any identified material weaknesses in our internal controls; and
•other risks and uncertainties, including those discussed under “Risk Factors” in Part II, Item 1A of this Report.

    We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those referred to under “Risk Factors” in Part II, Item 1A of this Report. Moreover, we operate in very competitive and rapidly changing markets. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
 
    You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements in this Report are made as of the date of the filing, and except as required by law, we disclaim and do not undertake any obligation to update or revise publicly any forward-looking statements in this Report. You should read this Report and the documents that we reference in this Report and have filed with the SEC as exhibits with the understanding that our actual future results, levels of activity and performance, as well as other events and circumstances, may be materially different from what we expect.
 
Overview
 
    The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the related notes to those statements included in Part I, Item 1 of this Report, and our auditedAudited Consolidated Financial Statements for the year ended December 31, 2021,2022, included in Part II, Item 8 of our 20212022 Form 10-K.
 
    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 based on 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 Unaudited Condensed Consolidated Financial Statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.

We were incorporated as Rimini Street, Inc. (“RSI”)was formed in the stateState of Nevada in September 2005. In May2005 and, through a merger in 2017 RSI entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GP Investments Acquisition Corp. (“GPIA”), a publicly-held special purpose acquisitionpublic company, incorporated in the Cayman Islands and formed for the purpose of effecting a business combination with one or more businesses. Substantially all of GPIA’s assets consisted of cash and cash equivalents. 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. Prior to consummation of the mergers, GPIA domesticated asbecame Rimini Street, Inc., a Delaware corporation, (the “Delaware Domestication”). Immediately aftertrading on the Delaware Domestication andNasdaq Global Market under the consummation of the second merger, GPIA was renamed “Rimini Street, Inc.ticker symbol “RMNI.” (referred to herein as the Company, as distinguished from RSI with the same legal name).

    WeRimini Street, Inc. and its subsidiaries (referred to as “Rimini Street”, the “Company”, “we” and “us”) are a global providerproviders of end-to-end enterprise software management and support, products and services,services. The Company offers a comprehensive family of unified solutions to run, manage, support, customize, configure, connect, protect, monitor, and optimize clients’ enterprise application, database, and technology software platforms.

Over the leading independent softwareyears, as our reputation for technical capability, value, innovation, responsiveness and trusted reliability grew, clients and prospects began asking us to expand the scope of our support, provider for Oracleproduct and SAP products, based on bothservice offerings to meet other current and evolving needs and opportunities related to their enterprise software. We also heard from prospects and clients that their goals include reducing the number of active clients supportedIT vendors to more manageable numbers from a governance perspective, with a desire to select vendors who can provide a wider scope of IT services and recognition by industry analyst firms. We founded our company to disrupt and redefine the enterprise software support marketbecome true trusted partners.
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by developing
To meet the needs of our clients and prospects and to service what we believe is a significantly expanded addressable market opportunity, we designed, developed and are now delivering innovativea new, products and services that fillexpanded solutions portfolio (our “Solutions Portfolio”) for a then unmet need in the market. We believe we have achieved and sustained our leadership position in independentwider array of enterprise software support by delivering on– including an expanded list of supported software; managed services for Oracle, SAP, IBM, Salesforce and open-source database software; and new solutions for security, interoperability, observability and consulting. We also now offer an integrated package of our mission to provide extraordinary technology solutions that achieve each client’s strategic, operational, and financial goals.

In July 2022, we announced the global availability ofservices as Rimini Protect™ONE™, our innovative suite of security solutions providing “zero-day” proactive security protectiona unique end-to-end, “turnkey” outsourcing option for Oracle and SAP environments, including applications, middlewarelandscapes designed to optimize our clients’ existing technologies with a minimum of 15 extended years of operating lifespan and databases. We believe the suite of offerings inenable our Rimini Protect™ security solutions provide a fasterclients to focus their IT talent and more comprehensive layer of security surrounding enterprise IT infrastructurebudget on potentially higher-value, innovative projects that will support competitive advantage and applications than traditional, dated software vendor patching models by using active security controls that monitor activities in real-time to identify malicious actions and proactively block processes that attempt to exploit known and new “zero-day” vulnerabilities.growth.

In September 2020, we announced the global availability of our award-winning, mission-critical, 24x7x365 support, application management, security and migration services beyond proprietary databases to leading open source database platforms, including MySQL, MariaDB, PostgreSQL and MongoDB.

In November 2019, we announced the global availability of our Application Management Services (“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.

In 2018 we announced support for Software as a Service (“SaaS”) solutions beginning with Salesforce products. As a partner of Salesforce, we provide our award-winning service and support for custom code, release updates and application integrations in addition to ongoing administrative, configuration and enhancement of Salesforce’s industry leading cloud solutions. We also provide support to clients for additional SaaS solutions that we will formally announce in the future. By providing support for SaaS as well as traditionally licensed enterprise software, Rimini Street unifies support for its clients across applications and software delivery models from one trusted provider, creating efficiencies and savings, simplifying support processes and enabling improved support outcomes.
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)(“ERP”), clientcustomer relationship management (CRM)(“CRM”), product lifecycle management (PLM)(“PLM”) database and technology software platformssystems have become increasingly important in the operation of mission-critical business processes over the last 30 years, and also thatyears. Also the costs associated with running and supporting these systems, system failure and downtime, security exposure, system integration and monitoring, and maintaining the tax, legal and regulatory compliance of these core software systems have also increased.each contributed to increases in both actual spend and as a percentage of the typical full IT budget. As a result, we believe that licensees often view enterprise software support, products and services as a mandatory cost of doing business, resulting in recurring and highly profitablebusiness. The majority of our revenue streams for enterprise software vendors. For example, for fiscal year 2021, SAP reported thatthrough March 31, 2023, was generated from our support revenue represented approximately 41% of its total revenue. For fiscal year 2022, Oracle reported a margin of 83% for cloud services and license support.solutions.

We believe thatIn 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 supportfor an annual fee that is an increasingly costly model that has not evolved to offer licensees the responsiveness, quality, breadthtypically 20-23% 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 budgets are spent operating and maintaining existing infrastructure and systems, in part as a result of software vendor policies and support models that are designed to benefit the vendor and force organizations to follow a vendor-dictated roadmap. As a result, we believe organizations are increasingly seeking ways to create competitive advantage and growth by redirecting budgets from expensive maintenance programs and costs to new technology investments that provide greater strategic value. We believe our software products and services help clients achieve these objectives by reducing the total cost of support.
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the software license. In a newer subscription-based licensing model, such as software as a service (“SaaS”), the customer generally pays for the 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.

We believeWhen we provide our support solutions for a perpetual software license, we generally offer our clients service for a fee that AMS for enterprise software is a large market with significant unmet needs in client satisfaction and value. Traditional AMS providers compete on price, butequal to approximately 50% of the traditional AMS model is broken with a focus on 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 creepannual fees charged by adding hours to open tickets or selling new project work. These lower-cost AMS support models sound cost-effective, 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 for their base support. When providing supplemental software support with inherent inefficienciesfor 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 approximately 25% of the annual fees charged by the software vendor for their base support. We also offer a special support service, Rimini Street Extra Secure Support, available to clients that require a more rigorous level of security background checks and/or government security clearance for engineers accessing a client’s system than our standard employment security background check and gaps that further limit responsiveness, root cause analysis and business value.requirements. Clients may be asked to pay an additional fee for Rimini Street Extra Secure Support.

We believe organizations are realizing the valueIn addition to our support services, we also offer a breadth 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,support, products and to fill skill gaps or help with rightsizing enterprise teams. Rimini Street teams deliverservices through our full portfolio of solutions at an additional fee that is calculated based on a wide variety of desired outcomesfactors and metrics. Our solutions are designed to meet specific client needs and are designed to provide what we believe is exceptional value and return for a broad rangethe fees charged. For more details about our Solutions Portfolio, please see Item 1 “Business” included in Part I 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.our 2022 Form 10-K.    

    As of September 30, 2022,March 31, 2023, we employed over 1,8701,860 professionals and supported over 3,000 active clients globally, including 7578 Fortune 500 companies and 1617 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 clientclients instances in circumstances where we provide support for two different products to the same entity.
 
    Our subscription-based revenue provides a strong foundation for, and visibility into, future period results. For the three months ended September 30,March 31, 2023 and 2022, and 2021, we generated revenue of $101.9$105.5 million and $95.6$97.9 million, respectively, representing an increase of 7%8%. During the three months ended September 30, 2022,March 31, 2023, we had arecorded net lossincome of $0.4$5.6 million, and as of September 30, 2022,March 31, 2023, we had an accumulated deficit of $223.0$222.6 million. Approximately 52%51% and 53% of our revenue was generated in the United States for the three months ended September 30,March 31, 2023 and 2022, and 2021, respectively. Approximately 48%49% and 47% of our revenue was generated in foreign jurisdictions for the three months ended September 30,March 31, 2023 and 2022, and 2021, respectively.
 
    Since our inception, we have financed our operations through cash collected from clients and net proceeds from equity financings and borrowings.
Impact of the COVID-19 Pandemic and Current Economic Conditions

In the first quarter of 2020, the emergence of the COVID-19 pandemic created rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices. These rapidly evolving and unpredictable impacts continued as virus variants resulted in additional outbreaks during 2021 and 2022. In response to the COVID-19 pandemic, we implemented business continuity measures and will continue to respond to the continuing impact of the COVID-19 pandemic as circumstances dictate while continuing to prioritize employee and community health and safety. We have reopened our offices located in the United States to verified vaccinated employees and guests and we have reinstated employee travel and in-person marketing, sales and employee appreciation events in accordance with applicable regional guidance.

As a result of certain measures that we took in response to the COVID-19 pandemic, 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. As many of the governmental restrictions implemented to contain the COVID-19 pandemic are no longer in effect, we expect that our travel and entertainment costs will continue to increase. However, there can be no assurances that additional restrictions will not be implemented again in the future that would decrease travel and entertainment activity and related costs. While some of our offices have re-opened to verified vaccinated employees and guests, 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, which bonuses have been paid from 2020 through the nine months ended September 30, 2022. The cost of these special bonuses were more than offset by
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the cost reductions relating to travel
Global Economic Uncertainty and in-person marketing event fees and expenses described above. Our ability to utilize our secure remote-connectivity global infrastructure promotes the safetyImpact of our employees while abiding by the restrictions currently in place where they are located throughout the world.COVID-19

We have experienced some clients not renewing our services as their businesses have been adversely impacted during the COVID-19 pandemic and the resultingcurrent global economic uncertainty. In addition,uncertainty, as well as by the further economic disruption caused by the Russian invasion of Ukraine in early fiscal 2022 has led to further economic disruption.and recent political turmoil in China. While we do not physically operate in Russia, or the Ukraine the conflict,or in mainland China, these global events, together with fiscal and monetary policy adopted during the COVID-19 pandemic, has increased inflationary cost pressures, negatively impacting the global economy and causing the U.S. Federal Reserve began to raisebegin raising interest rates in March 2022. We expect additional rate increases in the future. Despite these macroeconomic and geopolitical pressures, 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. Further, although our operations are influenced by general economic conditions, we do not believe that inflationthe impacts of economic disruptions described above, including the lingering COVID-19 pandemic had a significant net impact on our revenue or results of operations during the three months and nine months ended September 30, 2022.March 31, 2023.

The extent to which rising inflation, interest rate increases, continuing global economic and geopolitical uncertainty, and any lingering impacts of the COVID-19 pandemic rising inflation, interest rate increases and continuing global economic and geopolitical uncertainty impact our business going forward, however, will depend on numerous evolving factors we cannot reliably predict, including continued governmental and business actions in response to any lingering impacts of the pandemic and increasing global economic uncertainty, including the possibility of recession or financial market instability. These factors may adversely impact consumer, business,instability, 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 varietyany lingering impacts of areas that depend on these estimates and assumptions, including receivables and forward-looking guidance.the COVID-19 pandemic. As such, the effects of the COVID-19 pandemic, rising inflation, interest rate increases and other negative impacts, such as the COVID-19 pandemic, on the global economy may not be fully reflected in our financial results until future periods. Refer to “Risk Factors” (Part II, Item 1A of this Report) for a discussion of these factors and other risks.

On March 27, 2020, 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 $3.2 million, 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 and expect to pay the remaining amount by December 31, 2022, 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 22, 2023, the Company amended its Credit Facility. The amendment implemented certain changes in the reference rate from LIBOR to SOFR. As of February 28, 2023, the Company has a choice of interest rates between (a) Adjusted Term SOFR and (b) Base Rate, in each case plus an applicable margin. The applicable margin remains the same as the existing Credit Agreement and is based on the Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement) and whether the Company elects Adjusted Term SOFR (ranging from 1.75 to 2.50%) or Base Rate (ranging from 0.75 to 1.50%).
Recent Developments
In addition, the amendment adjusted the definition of Consolidated EBITDA to provide an addback solely for the fourth fiscal quarter of 2022, and any period including such quarter, that costs and legal fees and expenses incurred by the Company in connection with its ongoing litigation with Oracle up to $10.0 million can be added back and included in the applicable calculation of the Consolidated EBITDA.

On October 10, 2022, our Public Warrants, including the one-half Public Warrant underlying each of our then-outstanding units, and our Private Placement Warrants expired unexercised in accordance with their terms. Prior to this date, each of the units consisted of one-half Public Warrant and one share of our Common Stock. As such, upon the expiration of the Public Warrants, our units were separated into the component underlying securities so that each former holder of one unit holder became the beneficial owner of one share of our Common Stock.
 
On May 28, 2022, the Board of Directors authorized an increase to our previously announced Common Stock repurchase program to increase the value of the securities that could be acquired by us from up to $15.0 million over two years to up to $50.0 million over the next four years, subject to continuing compliance with our Credit Facility, provided that all other applicable conditions and legal requirements are satisfied.

On February 27, 2022, the Board of Directors approved the adoption of a stock repurchase program to acquire 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 Facility, which was amended effective January 14, 2022 to increase the aggregate value of the shares of Common Stock that could be acquired by us to no greater than $15.0 million during the term of the Credit Facility, provided that all other applicable conditions and legal requirements are satisfied.

During the three months ended September 30,March 31, 2022, we acquired 0.20.6 million shares of Common Stock on the open market at a cost of $1.0$3.2 million. For the nine monthsyear ended September 30,December 31, 2022, we acquired an aggregate 0.9 million shares of Common Stock on the open market at a total cost of $4.7 million. Upon completion of all repurchase transactions, the acquired shares of Common Stock were retired.
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Reference is made to Note 98 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report for a discussion of recent developments in our litigation with Oracle.

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 September 30,March 31, 2023 and 2022, and 2021, we had over 3,000 and 2,7902,880 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 September 30,March 31, 2023 and 2022, and 2021, we had over 1,5101,500 and 1,4501,470 unique clients, respectively.
 
    The increases 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 recurring revenue
 
    We recognize subscription revenue on a daily basis. We define annualized recurring 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 recurring revenue was $400$408 million and $377$385 million as of September 30,March 31, 2023 and 2022, and 2021, respectively. We believe the sequential increase in annualized recurring revenue demonstrates a growing client base, which is an indicator of stability in future subscription revenue.
 
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-cancellable 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 recurring revenue as of the day prior to the start of the 12-month period. Our revenue retention rate was 94%92% and 93%94% for the 12 months ended September 30,March 31, 2023 and 2022, and 2021, respectively.
 
Gross profit margin
 
    We derive revenue through the provision 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 profit margin is the ratio of gross profit divided by revenue. Our gross profit margin was approximately 61.5%62.7% and 65.1%62.0% for the three months ended September 30,March 31, 2023 and 2022, and 2021, respectively. We believe the gross profit margin provides an indication of how efficiently and effectively we are operating our business and serving our clients.

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Results of Operations
 
Comparison of Three Months Ended September 30,March 31, 2023 and 2022 and 2021
 
Our consolidated statements of operations for the three months ended September 30,March 31, 2023 and 2022, and 2021, are presented below (in thousands): 
Three Months Ended
September 30,		VarianceThree Months Ended
March 31,		Variance
20222021AmountPercent20232022AmountPercent
RevenueRevenue$101,931 $95,642 $6,289 6.6%Revenue$105,512 $97,910 $7,602 7.8%
Cost of revenue:Cost of revenue:Cost of revenue:
Employee compensation and benefitsEmployee compensation and benefits25,493 23,174 2,319 10.0%Employee compensation and benefits25,138 26,596 (1,458)(5.5)%
Engineering consulting costsEngineering consulting costs6,252 4,648 1,604 34.5%Engineering consulting costs6,677 4,722 1,955 41.4%
Administrative allocations (1)
Administrative allocations (1)
3,970 3,574 396 11.1%
Administrative allocations (1)
3,732 3,761 (29)(0.8)%
All other costsAll other costs3,556 1,980 1,576 79.6%All other costs3,796 2,128 1,668 78.4%
Total cost of revenueTotal cost of revenue39,271 33,376 5,895 17.7%Total cost of revenue39,343 37,207 2,136 5.7%
Gross profitGross profit62,660 62,266 394 0.6%Gross profit66,169 60,703 5,466 9.0%
Gross margin Gross margin61.5 %65.1 % Gross margin62.7 %62.0 %
Operating expenses:Operating expenses:    Operating expenses:    
Sales and marketingSales and marketing35,934 32,527 3,407 10.5%Sales and marketing34,479 31,700 2,779 8.8%
General and administrativeGeneral and administrative18,454 15,631 2,823 18.1%General and administrative18,227 19,951 (1,724)(8.6)%
Reorganization costsReorganization costs59 — 59 N/A
Litigation costs and related recoveries, netLitigation costs and related recoveries, net6,237 6,581 (344)(5.2)%Litigation costs and related recoveries, net2,719 3,110 (391)(12.6)%
Total operating expensesTotal operating expenses60,625 54,739 5,886 10.8%Total operating expenses55,484 54,761 723 1.3%
Operating incomeOperating income2,035 7,527 (5,492)(73.0)%Operating income10,685 5,942 4,743 79.8%
Non-operating income and (expenses):Non-operating income and (expenses):    Non-operating income and (expenses):    
Interest expenseInterest expense(1,167)(653)(514)78.7%Interest expense(1,339)(808)(531)65.7%
Loss on change in fair value of redeemable warrants— (2,053)2,053 (100.0)%
Other income (expenses), net(1,329)(1,161)(168)14.5%
Income (loss) before income taxes(461)3,660 (4,121)(112.6)%
Other income, netOther income, net528 209 319 152.6%
Income before income taxesIncome before income taxes9,874 5,343 4,531 84.8%
Income taxesIncome taxes56 (1,729)1,785 (103.2)%Income taxes(4,235)(2,256)(1,979)87.7%
Net income (loss)$(405)$1,931 $(2,336)(121.0)%
Net incomeNet income$5,639 $3,087 $2,552 82.7%

(1)Includes the portion of costs for IT, security services and facilities costs that are allocated to cost of revenue. In our Unaudited Condensed Consolidated Financial Statements, the total of such costs is allocated between cost of revenue, sales and marketing, and general and administrative expenses, based primarily on relative headcount, except for facilities which is based on occupancy.

    Revenue. Revenue increased from $95.6$97.9 million for the three months ended September 30, 2021March 31, 2022 to $101.9$105.5 million for the three months ended September 30, 2022,March 31, 2023, an increase of $6.3$7.6 million or 7%8%. The increase was driven by an 5%2% increase in the average number of unique clients from 1,4201,475 for the three months ended September 30, 2021March 31, 2022 to 1,4911,509 for the three months ended September 30, 2022.March 31, 2023. On a geographic basis, United States revenue grew from $50.5$52.3 million for the three months ended September 30, 2021March 31, 2022 to $53.4 million for the three months ended September 30, 2022,March 31, 2023, an increase of $2.9$1.1 million or 6%2%. Our international revenue grew from $45.2$45.6 million for the three months ended September 30, 2021March 31, 2022 to $48.5$52.1 million for the three months ended September 30, 2022,March 31, 2023, an increase of $3.3$6.5 million or 7%14%.
 
    Cost of revenue. Cost of revenue increased from $33.4$37.2 million for the three months ended September 30, 2021March 31, 2022 to $39.3 million for the three months ended September 30, 2022,March 31, 2023, an increase of $5.9$2.1 million or 18%6%. The key drivers related to the cost of revenue increase were a $2.3 million increase in employee compensation costs, a $1.6$2.0 million increase in engineering consulting costs and a $1.9$1.6 million increase in administrative allocations and all other costs. TheThese cost increases were offset by a reduction in employee compensation cost increase was attributable to an increase of 24% in the average number of employees required to support our revenue growth.costs as employee bonuses decreased $0.9 million and paid time off declined $0.5 million.

As discussed in Note 98 to our Unaudited Condensed Consolidated Financial Statements included in Part 1,I, Item 1 of this Report, following post-trial motions, the District Court entered a permanent injunction prohibiting us from using certain
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processes, including processes adjudicated as infringing at trial, that we ceased using no later than July 2014, which we subsequently appealed to the Court of Appeals. In August 2019, the Court of Appeals affirmed the permanent injunction issued by the District Court, while also correcting certain legal errors that narrowed the scope of the injunction. As a result of the injunction, we have incurred and expect 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 (Process 2.0) that are being litigated in the “Rimini II” lawsuit and that have not been found to be infringing.
 
    Gross profit. Gross profit increased slightly from $62.3$60.7 million for the three months ended September 30, 2021March 31, 2022 compared to $62.7$66.2 million for the three months ended September 30, 2022,March 31, 2023, an increase of $0.4$5.5 million or 1%9%. Gross profit margin for the three months ended September 30, 2021March 31, 2022 was 65.1%62.0% compared to 61.5%62.7% for the three months ended September 30, 2022.March 31, 2023. For the three months ended September 30, 2022,March 31, 2023, the total cost of revenue increased by 18%6% compared to an increase in revenue of 7%8% for the three months ended September 30, 2022.March 31, 2023. As a result, our gross profit margin declinedimproved by 36070 basis points period over period.

    Sales and marketing expenses. As a percentage of our revenue, sales and marketing expenses were 35%33% and 34%32% for the three months ended September 30,March 31, 2023 and 2022, and 2021, respectively. In dollar terms, sales and marketing expenses increased from $32.5$31.7 million for the three months ended September 30, 2021March 31, 2022 to $35.9$34.5 million for the three months ended September 30, 2022,March 31, 2023, an increase of $3.4$2.8 million or 10%9%. This increase was primarily due to (i) an increase in employee compensation and benefits of $1.9$1.4 million, (ii) an increase in advertising and marketing costs of $1.0$1.3 million, and (iii) an increase in travel and entertainment costs of $0.8$0.5 million and (iii)(iv) an increase in contract labor of $0.3 million. These increases were offset, in part, by (v) a decrease in administrative allocations and all other costs of $0.1 million. These increases were offset, in part, by$0.5 million and (vi) a decrease in recruitment costs of $0.4$0.2 million. We will continue to accelerate our future revenue growth by investing in more resources.
 
    The $1.9$1.4 million increase in sales and marketing expense attributable to employee compensation and benefits for the three months ended September 30, 2022,March 31, 2023, was primarily due to an increase in salaries, wages and benefits of $0.9$0.2 million, commissions of $0.7$1.0 million and bonuses of $0.3$0.2 million.
 
    General and administrative expenses. General and administrative expenses increaseddecreased from $15.6$20.0 million for the three months ended September 30, 2021March 31, 2022 to $18.5$18.2 million for the three months ended September 30, 2022, an increaseMarch 31, 2023, a decline of $2.8$1.7 million or 18%9%. This increasedecline was comprisedprimarily due to a decrease of several items, which included (i) increased costs associated in salaries, wages and benefits of $0.9$1.9 million as the average number of employees increasedbonuses decreased $1.3 million and stock based compensation decreased $0.6 million. These decreases were offset by 23%, (ii) an increase of our computer software and license costs of $0.9 million, (iii) ana slight increase in traveltaxes and entertainment expenses of $0.6 million and (iv) an increase in all other costs of $0.7 million for the three months ended September 30, 2022. These unfavorable variances were offset, in part, by an increase in administrative allocations of $0.3$0.2 million.
Looking forward on a quarter-over-quarter basis, we are monitoring the demand for our services in light of any potential future lingering impacts of the COVID-19 pandemic and the current global economic conditions and will adjust our expenditures accordingly. However, we expect 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 no longer being classified as an “emerging growth company” or “smaller reporting company” for purposes of SEC reporting. Our company costs that are expected to increase in the future include costs relating to 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, not taking into account temporary reductions in certain expenses resulting from the COVID-19 pandemic, we expect our general and administrative expenses related to public company costs will continue to increase in future periods.

    Litigation costs, net of related insurance recoveries. Litigation costs, net of related insurance recoveries, consist of the following (in thousands):
 
Three Months Ended
September 30,		Three Months Ended March 31,
20222021Change 20232022Change
Professional fees and other costs of litigationProfessional fees and other costs of litigation$6,145 $6,581 $(436)Professional fees and other costs of litigation$2,719 $3,499 $(780)
Insurance costs and recoveries, netInsurance costs and recoveries, net92 — 92 Insurance costs and recoveries, net— (389)389 
Litigation costs and related recoveries, netLitigation costs and related recoveries, net$6,237 $6,581 $(344)Litigation costs and related recoveries, net$2,719 $3,110 $(391)
 
    Professional fees and other costs associated with litigation decreased from $6.6$3.5 million for the three months ended September 30, 2021March 31, 2022 to $6.1$2.7 million for the three months ended September 30, 2022,March 31, 2023, a decrease of $0.4$0.8 million. This decrease
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was primarily due to the timing of trial costs. During the three months ended September 30, 2022, we incurred trial costs associated with our upcoming November 29, 2022 trial related to Rimini II. During the three months ended September 30, 2021, we incurred costs associated with the September 2021 hearing related to determining if we had been in contempt of the permanent injunction. Based on the trial calendar being set, we anticipate that our litigation related expenses will now be in the mid-$20 million range for 2022.

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Insurance costs and related recoveries, net increased from a net benefit of $0.4 million for the three months ended March 31, 2022 compared to no activity for the three months ended September 30, 2021 to a net expense of $0.1 million for the three months ended September 30, 2022.March 31, 2023. 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 our ongoing attorneys’ fees and related costs, such as travel, hotels and consultants, associated with ongoing litigation, including Rimini II.

    Interest expense. Interest expense increased from $0.7$0.8 million for the three months ended September 30, 2021March 31, 2022 to $1.2$1.3 million for the three months ended September 30, 2022,March 31, 2023, an increase of $0.5 million. Interest expense increased primarily due to us entering into arising interest rates on our five-year Credit Facility for $90 million on July 20, 2021, resultingFacility. These rising interest rates were offset, in only 73 dayspart, by a reduction of interest in the prior period as well as an increase in the LIBOR rate during the three months ended September 30, 2022. In addition, we incurred $0.1costs of $0.2 million of interest costs related to payments associated with our interest rate swap, which was entered into on May 18, 2022.

Loss on change in fair value of redeemable warrants.Loss on change in fair value of redeemable warrants amounted to a loss of $2.1 million for the three months ended September 30, 2021 as the fair value per warrant changed from $0.51 per warrant as of June 30, 2021 to $0.85 per warrant as of September 30, 2021. On October 29, 2021,the GP Sponsor Private Placement Warrants were sold by the original holder to unaffiliated parties. As a result, the GP Sponsor Private Placement Warrants were determined to be no longer treated as a liability. Hence, there is no longer any mark to market activity recorded for each period related to these warrants. The GP Sponsor Private Placement Warrants expired unexercised on October 10, 2022.
 
    Other income (expenses), net. Other income (expenses), net is primarily comprised of interest income, foreign exchange gains and losses, and other non-operating income and expenses. For the three months ended September 30,March 31, 2023, net other income of approximately $0.5 million was comprised of gains from cash equivalents and investments of $0.9 million which were offset, in part, by foreign exchange losses of approximately $0.4 million. For the three months ended March 31, 2022, net other expensesincome of approximately $1.3$0.2 million was comprised primarily of foreign exchange lossesgains of approximately $1.4 million. For the three months ended September 30, 2022, we continued to experience a significant change in foreign currency exchange rates as the U.S. dollar strengthened against the majority of foreign currencies where our foreign entities operate. These transactions are designated in foreign currencies and impacted us unfavorably during the three months ended September 30, 2022. For the three months ended September 30, 2021, net other expense of $1.2 million was also comprised primarily of foreign exchange losses of approximately $1.1$0.4 million.
 
    Income tax expense. We had income tax expense of $1.7$2.3 million for the three months ended September 30, 2021March 31, 2022 compared to an income tax benefitexpense of $0.1$4.2 million for the three months ended September 30, 2022. At the end of fiscal year 2021, 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, resulting in a significant reduction in our valuation allowance.March 31, 2023. For the three months ended September 30, 2022, our United States operations were subject to income taxes, which isMarch 31, 2023, the primary reason for the increase in income tax expense. For the three months ended September 30, 2021, our income taxes were primarily attributable to income taxes on our foreign operations and foreign withholding taxes.

Comparison of Nine Months Ended September 30, 2022 and 2021
Our consolidated statements of operations for the nine months ended September 30, 2022 and 2021, are presented below (in thousands): 


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Nine Months Ended September 30,Variance
20222021AmountPercent
Revenue$301,041 $275,151 $25,890 9.4%
Cost of revenue:
  Employee compensation and benefits77,562 71,522 6,040 8.4%
  Engineering consulting costs16,397 13,663 2,734 20.0%
  Administrative allocations (1)
11,693 10,883 810 7.4%
  All other costs8,170 5,739 2,431 42.4%
Total cost of revenue113,822 101,807 12,015 11.8%
           Gross profit187,219 173,344 13,875 8.0%
           Gross margin62.2%63.0%
Operating expenses:
  Sales and marketing103,840 96,067 7,773 8.1%
  General and administrative57,267 48,728 8,539 17.5%
  Impairment charges related to right of use assets— 393 (393)(100.0)%
  Litigation costs and related recoveries, net12,448 14,130 (1,682)(11.9)%
Total operating expenses173,555 159,318 14,237 8.9%
Operating income13,664 14,026 (362)(2.6)%
Non-operating income and (expenses):
  Interest expense(2,974)(738)(2,236)303.0%
  Loss on change in fair value of redeemable warrants— (3,023)3,023 (100.0)%
  Other income (expenses), net(2,696)(885)(1,811)204.6%
Income before income taxes7,994 9,380 (1,386)(14.8)%
Income taxes(5,202)(4,218)(984)23.3%
   Net income$2,792 $5,162 $(2,370)(45.9)%

(1)Includes the portion of costs for IT, security services and facilities costs that are allocated to cost of revenue. In our Unaudited Condensed Consolidated Financial Statements, the total of such costs is allocated between cost of revenue, sales and marketing, and general and administrative expenses, based primarily on relative headcount, except for facilities which is based on occupancy.

Revenue. Revenue increased from $275.2 million for the nine months ended September 30, 2021 to $301.0 million for the nine months ended September 30, 2022, an increase of $25.9 million or 9%. The increaseexpense was driven by an 8% increase in the average number of unique clients from 1,377 for the nine months ended September 30, 2021 to 1,483 for the nine months ended September 30, 2022. On a geographic basis, United States revenue grew from $147.6 million for the nine months ended September 30, 2021 to $159.6 million for the nine months ended September 30, 2022, an increase of $12.0 million or 8%. Our international revenue grew from $127.6 million for the nine months ended September 30, 2021 to $141.4 million for the nine months ended September 30, 2022, an increase of $13.9 million or 11%.
    Cost of revenue. Cost of revenue increased from $101.8 million for the nine months ended September 30, 2021 to $113.8 million for the nine months ended September 30, 2022, an increase of $12.0 million or 12%. The key drivers related to the cost of revenue increase were a $6.0 million increase in employee compensation and benefits, a $2.7 million in engineering consulting costs, a $2.4 million increase in all other costs and a $0.8 million increase in administrative allocations. The compensation cost increase was attributabledue to an increase of 21% in the average number of employees required to support our revenue growth.

    Gross profit. Gross profit increased from $173.3 million for the nine months ended September 30, 2021 compared to $187.2 million for the nine months ended September 30, 2022, an increase of $13.9 million or 8%. Gross profit margin for the nine months ended September 30, 2021 was 63.0% compared to 62.2% for the nine months ended September 30, 2022. For the nine months ended September 30, 2022, the total cost of revenue increased by 12% compared to an increase in revenue of 9%
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for the nine months ended September 30, 2022. As a result, our gross profit margin declined by 80 basis points period over period.

    Sales and marketing expenses. As a percentage of our revenue, sales and marketing expenses were 34% and 35% for the nine months ended September 30, 2022 and 2021, respectively. In dollar terms, sales and marketing expenses increased from $96.1 million for the nine months ended September 30, 2021 to $103.8 million for the nine months ended September 30, 2022, an increase of $7.8 million or 8%. This increase was primarily due to (i) an increase in employee compensation and benefitsincome before taxes of $4.5 million (ii) an increase in travel and entertainment costs of $2.5 million and (iii) an increase in administrative allocations and all other costs of $1.2 million. These increases were offset, in part, by a decrease in recruitment costs of $0.4 million. We will continue to accelerate our future revenue growth by investing in more resources.
    The $4.5 million increase in sales and marketing expense attributable to employee compensation and benefits for the nine months ended September 30, 2022, was primarily due to an increase in salaries, wages and benefits of $3.4 million and commissions of $1.1 million.
    General and administrative expenses. General and administrative expenses increased from $48.7 million for the nine months ended September 30, 2021 to $57.3 million for the nine months ended September 30, 2022, an increase of $8.5 million or 18%. This increase was comprised of several items, which included (i) increased costs in salaries, wages and benefits of $4.7 million as the average number of employees increased by 21%, (ii) an increase of our computer software and license costs of $2.4 million, (iii) an increase in travel and entertainment expenses of $1.4 million and (iv) an increase in contract labor and recruitment costs of $1.2 million for the nine months ended September 30, 2022. These unfavorable variances were offset, in part, by an increase in administrative allocations of $1.0 million.

Litigation costs, net of related insurance recoveries. Litigation costs, net of related insurance recoveries, consist of the following (in thousands):
Nine Months Ended September 30,
20222021Change
Professional fees and other costs of litigation$12,837 $14,130 $(1,293)
Insurance costs and recoveries, net(389)— (389)
        Litigation costs and related recoveries, net$12,448 $14,130 $(1,682)

Professional fees and other costs associated with litigation decreased from $14.1 million for the nine months ended September 30, 2021 to $12.8 million for the nine months ended September 30, 2022, a decrease of $1.3 million. This decrease was primarily due to timing of trial costs. During the nine months ended September 30, 2022, we have incurred costs relatedcurrent year period compared to the upcoming November 29, 2022 trial related to Rimini II. During the nine months ended September 30, 2021, we incurred costs related to the September 2021 hearing related to the contempt of the permanent injunction as well as discovery work on the Rimini II litigation.

Insurance costs and related recoveries, net increased from no activity for the nine months ended September 30, 2021 to a net benefit of $0.4 million for the nine months ended September 30, 2022. For the nine months ended September 30, 2022, we received insurance proceeds of $0.4 million related to our litigation costs incurred. 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 our ongoing attorneys’ fees and related costs, such as travel, hotels and consultants, associated with ongoing litigation, including Rimini II.

    Interest expense. Interest expense increased from $0.7 million for the nine months ended September 30, 2021 to $3.0 million for the nine months ended September 30, 2022, an increase of $2.2 million. Interest expense increased primarily due to us entering into a five-year Credit Facility for $90 million on July 20, 2021 as well as increase in the LIBOR rate during the nine months ended September 30, 2022. In addition, we incurred $0.2 million of interest costs related to payments associated with our interest rate swap, which was entered into on May 18, 2022.

Loss on change in fair value of redeemable warrants. Loss on change in fair value of redeemable warrants amounted to a loss of $3.0 million for the nine months ended September 30, 2021 as the fair value per warrant changed from $0.35 per warrant as of December 31, 2020 to $0.85 per warrant as of September 30, 2021. On October 29, 2021,the GP Sponsor Private Placement Warrants were sold by the original holder to unaffiliated parties. As a result, the GP Sponsor Private Placement
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Warrants were determined to be no longer treated as a liability. Hence, there is no longer any mark to market activity recorded for each period related to these warrants. The GP Sponsor Private Placement Warrants expired unexercised on October 10, 2022.
    Other income (expenses), net. Other income (expenses), net is primarily comprised of interest income, foreign exchange gains and losses, and other non-operating income and expenses. For the nine months ended September 30, 2022, net other expenses of approximately $2.7 million was comprised primarily of foreign exchange losses of approximately $2.4 million. For the nine months ended September 30, 2022, we experienced a significant change in foreign currency exchange rates as the U.S. dollar strengthened against the majority of foreign currencies where our foreign entities operate. These transactions are designated in foreign currencies and impacted us unfavorably during the nine months ended September 30, 2022. For the nine months ended September 30, 2021, net other expense of $0.9 million, which was also comprised primarily of foreign exchange losses of approximately $0.7 million.
    Income tax expense. We had income tax expense of $4.2 million for the nine months ended September 30, 2021 compared to $5.2 million for the nine months ended September 30, 2022. At the end of fiscalprior year 2021, 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, resulting in a significant reduction in our valuation allowance. For the nine months ended September 30, 2022, our United States operations were subject to income taxes, which is the primary reason for the increase in income tax expense. For the nine months ended September 30, 2021, our income taxes were primarily attributable to income taxes on our foreign operations and foreign withholding taxes.period.
    
Liquidity and Capital Resources
 
Overview
 
    As of September 30, 2022,March 31, 2023, we had a working capital deficit of $61.6$67.8 million and an accumulated deficit of $223.0$222.6 million. For the three months ended September 30, 2022,March 31, 2023, we had arecorded net lossincome of $0.4$5.6 million. As of September 30, 2022,March 31, 2023, we had available cash, cash equivalents and restricted cash of $119.0$116.6 million and short-term investments of $11.1$18.8 million.

OnEffective July 20, 2021, we redeemed the remaining 87,802 sharesreceived $89.3 million of our 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 borrowingsnet proceeds from our Credit Facility. The Credit Facility, bearswhich previously bore interest at LIBOR plus a margin ranging from 1.75% to 2.50%. On February 22, 2023, we amended our Credit Facility to implement certain changes in the reference rate from LIBOR to SOFR. As of February 28, 2023, we have a choice of interest rates between (a) Adjusted Term SOFR and contains certain financial covenants, including(b) Base Rate, in each case plus an applicable margin. The applicable margin remains the same as the existing Credit Agreement and is based on our Consolidated Leverage Ratio (as defined in the Credit Agreement) and whether we elect an Adjusted Term SOFR (ranging from 1.75 to 2.50%) or a minimum fixed charge coverage ratio, a total leverage ratio, and a minimum liquidity of at least $20 million in U.S. cash.Base Rate (ranging from 0.75 to 1.50%). Annual minimum principal payments over the five year term for the Credit Facility are 5%, 5%, 7.5%, 7.5%, and 10%, respectively, with the remaining balance due at the end of the term.

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 discounts and offering expenses. We used the net proceeds from the March 2021 Offering to redeem 60,000 shares of Series A Preferred Stock.

Please refer to NotesNote 5 through 7 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report for information regarding our Credit Facility, our Series A Preferred Stock and our Common Stock Offerings.Facility.

    A key component of our business model requires that substantially all clients prepay us annually for the services we will provide over the following year or longer. As a result, we typically collect cash from our clients in advance of when the related service costs are incurred, which resulted in deferred revenue of $212.1$257.3 million that is included in current liabilities as of September 30, 2022.March 31, 2023. Therefore, we believe that working capital deficit is not as meaningful in evaluating our liquidity since the historical costs of fulfilling our commitments to provide services to clients are currently limited to approximately 39%37% of the related deferred revenue based on our gross profit percentage of 61%63% for the three months ended September 30, 2022.March 31, 2023.

    For the next year, assuming that our operations are not significantly impacted by any lingering effects of the COVID-19 pandemic, rising inflation, interest rate increases or other global economic uncertainties, we believe that cash, cash
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equivalents and restricted cash of $119.0$116.6 million as of September 30, 2022,March 31, 2023, plus future cash flows from operating activities will be sufficient to meet our anticipated cash needs including working capital requirements, planned capital expenditures and our contractual obligations. Our future capital requirements depend on many factors, including any lingering impact of the COVID-19 pandemic, client growth, number of employees, expansion of sales and marketing activities, and the introduction of new and enhanced services offerings. We may also enter into arrangements to acquire or invest in complementary businesses, services, technologies, or intellectual property rights in the future. We may choose to seek additional debt or equity financing to
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support these long-term capital requirements. Alternatively, we may also consider reducing amounts outstanding under our Credit Facility to minimize our exposure to rising interest rates. If interest rates continue to increase as expected and adverse economic changes occur, we may not be able to access credit on terms favorable to us, impacting our ability to support these long-term capital requirements. In an economic downturn, we may also be unable to raise capital through debt or equity financings on terms acceptable to us or at all. Covenants in our Credit Facility could also have consequences on our operations, including restricting or delaying our ability to obtain additional financing, potentially limiting our ability to adjust to rapidly changing market conditions or respond to business opportunities. Additionally, in challenging and uncertain economic environments, we cannot predict when macroeconomic uncertainty may arise, whether or when such circumstances may improve or worsen or what impact such circumstances could have on our business and our liquidity requirements.

    For the ninethree months ended September 30, 2022,March 31, 2023, we generated cash flows from our operating activities of approximately $36.8$8.6 million, which was derived from ournet income of $5.6 million as well as adjustments to reconcile net income to net cash earnings of approximately $18.5$4.5 million and offset by favorable changesan unfavorable change in operating assets and liabilities of approximately $18.2$1.5 million. We believe that our operating cash flows for the year ending December 31, 20222023 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 (in thousands): 
Nine Months Ended
September 30,		Three Months Ended March 31,
20222021 20232022
Net cash provided by (used in):Net cash provided by (used in):Net cash provided by (used in):
Operating activitiesOperating activities$36,757 $47,814 Operating activities$8,643 $45,849 
Investing activitiesInvesting activities(14,292)(1,455)Investing activities(346)(485)
Financing activitiesFinancing activities(12,412)(25,990)Financing activities(1,101)(4,098)
 
The effect of foreign currency translation was unfavorable by $11.1 million$35 thousand and $4.8$2.8 million for the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, respectively, due to unfavorable foreign exchange impacts related to foreign cash. For the ninethree months ended September 30,March 31, 2022, we experienced a significant change in foreign currency exchange rates as the U.S. dollar strengthened against the majority of foreign currencies where our foreign entities operate. The strengthening of the U.S. dollar reduced the reported amount of our foreign-denominated cash and cash equivalents which are translated into U.S. dollars and reported in our Unaudited Condensed Consolidated Financial Statements for the ninethree months ended and as of September 30,March 31, 2022.

Cash Flows Provided by Operating Activities
 
    A key component of our business model requires that    As clients typically prepay us annually for the services which we will provide over the following year or longer. As a result,longer, we typically collect cash in advance of the date when the vast majority of the related services are provided. The key components in the calculation of our cash provided by operating activities, are as follows (in thousands):
Nine Months Ended
September 30,
 20222021
Net income$2,792 $5,162 
Non-cash expenses, net15,719 17,114 
Changes in operating assets and liabilities, net18,246 25,538 
  Net cash provided by operating activities$36,757 $47,814 

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    For the ninethree months ended September 30, 2022,March 31, 2023, cash flows provided by operating activities amounted to approximately $36.8$8.6 million. The key drivers resulting in our cash provided by operating activities for the ninethree months ended September 30, 2022,March 31, 2023, included net income of $2.8 million, as adjusted for non-cash and non-operating expenses totaling $15.7$5.6 million and favorableadjustments to reconcile net income to net cash totaling $4.5 million. These two items were offset, in part, by unfavorable changes in operating assets and liabilities of $18.2$1.5 million, resulting in net cash provided by operating activities of $36.8$8.6 million.

For the ninethree months ended September 30, 2022, the non-cash expenses,March 31, 2023, adjustments to reconcile net income to net cash consisted primarily of stock-based compensation expense of $8.7$2.0 million, amortization and accretion related to operating lease right of use ("ROU"(“ROU”) assets of $4.1$1.1 million, depreciation and amortization expense of $1.9$0.6 million and accretion, amortization of debt discount and issuance costs of $0.7$0.2 million and deferred income taxes of $0.3$0.5 million. For the ninethree months ended September 30,March 31, 2023, the changes in operating assets and liabilities, net consisted of favorable changes to accounts receivable of $26.9 million and deferred contract costs of $1.4 million. The favorable change to accounts receivable was a result of collecting $121.0 million during the three months ended March 31, 2023 which was offset by billings, net of $93.0 million during the three months ended March 31, 2023. As a result, our days sales outstanding for accounts receivable was 96 days as of March 31, 2023. The favorable change in deferred contract costs was due to capitalizing $3.2 million of commissions and amortizing $4.6 million of deferred contract costs during the three months ended March 31, 2023.

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Offsetting these favorable changes were unfavorable changes to accrued liabilities of $14.8 million, deferred revenue of $12.5 million, accounts payable of $2.1 million and prepaid expenses, deposits and other assets of $0.4 million. The unfavorable use of cash for accrued liabilities was due to making payments of $2.5 million related to our reorganization plan, incurring incremental professional fee payments of $4.4 million, and paying incremental compensation related primarily to bonuses and commissions of $6.6 million during the current period. Regarding the related use of cash for deferred revenue, it was due to recognizing $105.5 million in revenue for the current period, which was offset by recording billings, net of $93.0 million during the current period.

For the three months ended March 31, 2022, cash flows provided by operating activities amounted to approximately $45.8 million. The key drivers resulting in our cash provided by operating activities for the three months ended March 31, 2022, included net income of $3.1 million, as well as adjustments to reconcile net income to net cash totaling $5.9 million and favorable changes in operating assets and liabilities of $36.8 million. These items resulted in net cash provided by operating activities of $45.8 million.

For the three months ended March 31, 2022, adjustments to reconcile net income to net cash consisted primarily of stock-based compensation expense of $3.1 million, amortization and accretion related to operating lease ROU assets of $1.4 million, depreciation and amortization expense of $0.6 million and accretion and amortization of debt discount and issuance costs of $0.2 million. For the three months ended March 31, 2022, the changes in operating assets and liabilities, net consisted of favorable changes to accounts receivable of $75.1$45.0 million. The favorable change to accounts receivable was a result of collecting $143.8 million andduring the three months ended March 31, 2022 compared to billings, net of $97.7 million during the three months ended March 31, 2022. As a result, our days sales outstanding for accounts payablereceivable was 91 days as of $2.7 million. TheseMarch 31, 2022.

The favorable cash sources noted above were offset by unfavorable changesuses of cash related to accrued liabilities of $2.8 million, accounts payable of $2.3 million, deferred revenuecontract costs of $46.9$2.3 million, prepaid expenses, deposits and other assets of $6.4 million, accrued liabilities of $3.8$0.5 million and deferred revenue of $0.3 million. The unfavorable use of cash related to accrued liabilities was primarily due to making incremental payments for accrued sales and other taxes of $3.1 million. The unfavorable use of cash of $2.3 million related to accounts payable was due to a decrease in the number of payment days by 36%. Deferred contract costs were unfavorable as we capitalized $6.5 million of $2.4 million.

For the nine months ended September 30, 2021, cash flows provided by operating activities amounted to approximately $47.8 million. The key drivers resulting in our cash provided by operating activities for the nine months ended September 30, 2021, included net incomecommissions and amortized $4.2 million of $5.2 million, as adjusted for non-cash and non-operating expenses totaling $17.1 million and favorable changes in operating assets and liabilities of $25.5 million, resulting in net cash provided by operating activities of $47.8 million.

For the nine months ended September 30, 2021, the non-cash expenses, net consisted primarily of a loss on change in fair value of redeemable warrants of $3.0 million, stock-based compensation expense of $7.1 million, amortization and accretion related to operating lease ROU assets of $4.6 million, depreciation and amortization expense of $1.8 million, and an impairment charge related to operating lease ROU assets of $0.4 million. For the nine months ended September 30, 2021, the changes in operating assets and liabilities, net consisted of favorable changes to accounts receivable of $41.0 million and accounts payable of $5.6 million. These favorable cash sources were offset by unfavorable changes to deferred revenue of $11.1 million, prepaid expenses, deposits and other of $4.3 million, accrued liabilities of $3.9 million, and deferred contract costs of $1.8 million.during the three months ended March 31, 2022.
    
Cash Flows Used in Investing Activities
 
    Cash used in investing activities was primarily driven by investment purchases and capital expenditures for leasehold improvements and computer equipment. Cash used in investing activities totaled $14.3$0.3 million and $1.5$0.5 million for the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, respectively.

    For the ninethree months ended September 30, 2022,March 31, 2023, cash used in investing activities of $14.3$0.3 million consisted of investment purchases of $11.1$7.7 million, andwhich were offset by proceeds from sales of investments of $8.4 million, as well as capital expenditures of $3.1$1.0 million. The capital expenditures consisted of $2.1$0.8 million primarily for new computer equipment and capitalized development costs for a new payroll system in our U.S. entity and $1.0$0.2 million for computer equipment at our foreign locations, primarily in India of $0.5$0.1 million and in Brazil of $0.3$0.1 million.

For the ninethree months ended September 30, 2021,March 31, 2022, capital expenditures of $1.5$0.5 million consisted of $0.6$0.2 million, primarily for new computer equipment in our U.S. facilities and $0.9$0.3 million for computer equipment at our foreign locations, primarily in India with $0.4 million.India.

Cash Flows from Financing Activities
 
    For the ninethree months ended September 30, 2022,March 31, 2023, cash utilized in financing activities of $12.4$1.1 million was attributable to principal payments related to the Credit Facility of $8.4$1.1 million and capital lease payments of $47 thousand. These cash uses were offset by proceeds of $0.1 million received from stock option exercises.

For the three months ended March 31, 2022, cash utilized in financing activities of $4.1 million was attributable to payments to repurchase shares of Common Stock totaling $4.7$3.2 million, principal payment related to the Credit Facility of $1.1 million, and capital lease payments of $0.2$0.1 million. These cash uses were offset by proceeds of $1.0$0.4 million received from stock option exercises.

For the nine months ended September 30, 2021, cash utilized in financing activities of $26.0 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, totaling $9.7 million and make-whole dividend payments of $2.9 million; payments related to debt issuance costs of $4.0 million; payments for professional fees associated with our March 2021 Offering of $1.3 million; principal payment related to the Credit Facility of $1.1 million; payments of $1.1 million related to treasury stockand capital lease payments of $0.3 million. These cash uses were offset by
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proceeds of $89.3 million from the new Credit Facility, proceeds of $57.0 million generated from the March 2021 Offering and proceeds of $5.0 million received from stock option exercises.

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. 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 September 30, 2022,March 31, 2023, we had cash and cash equivalents of $49.6$70.4 million held by our foreign subsidiaries.
 
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 Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. 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. We describe our significant accounting policies in Note 2 to our Consolidated Financial Statements for the year ended December 31, 2021,2022, included in Part II, Item 8 of our 20212022 Form 10-K, and we discuss our critical accounting policies and estimates in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section included in Part II, Item 7 of our 20212022 Form 10-K.

Recent Accounting Pronouncements
 
    From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by us as of the specified effective date. For additional information on recently issued accounting standards and our plans for adoption of those standards, please refer to the section titled Recent Accounting Pronouncements under Note 2 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report.

Recently Issued Accounting Standards

The Company believes that no recently issued accounting standards will have a material impact on its Unaudited Condensed Consolidated Financial Statements, or apply to its operations.

ITEM 3. 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. For the three months ended September 30,March 31, 2023 and 2022, and 2021, we generated approximately 48%49% and 47% of our revenue from our international business, respectively. 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 of initiating such a program and we may in the future hedge selected significant transactions denominated in currencies other than the U.S. Dollar.

DuringAs of March 31, 2023, the three months ended September 30, 2022, we did experienceeffect of a significanthypothetical 10% change in foreign currency exchange rates applicable to our business that hadwould have impacted our income before income taxes by a material impact on our Unaudited Condensed Consolidated Financial Statements due to the strengtheningplus or minus of the U.S. dollar against the majority of our foreign currencies. Our international operations have provided and are expected to continue to provide a portion of our consolidated revenues and expenses, which are reported in U.S. dollars$0.6 million in our Unaudited Condensed Consolidated Financial Statements. Therefore,Statements of Operations and Comprehensive Income and would have impacted the effect of foreign currency changes on cash by a plus or minus $7.0 million in our Unaudited
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Condensed Consolidated Financial Statements are affected and will continue to be affected by changes in the U.S. dollar against major foreign currencies. Fluctuations in foreign currencies impact the amountStatement of total assets, liabilities, earnings and cash flows that we report for each reporting period and as of each reporting period end.Cash Flows.

Interest Rate Risk
 
Risk with Respect to Investments
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    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

In July 2021, we entered into the Credit Facility, which bearsoriginally bore interest at LIBOR plus a margin. ranging from 1.75% to 2.50%. and now bears interest at SOFR plus a margin ranging from 1.75% to 2.50% as a result of the amendment to our Credit Facility described above. Accordingly, we are exposed to market risk due to variable interest rates based on LIBOR.SOFR. As of September 30, 2022,March 31, 2023, we had $79.4$77.1 million outstanding debt under the Credit Facility. As of this date, a hypothetical adverse change of 100 basis points in LIBORSOFR would have resulted in an increase of approximately $0.8 million in annual interest expense. On May 18, 2022, we entered into an interest rate swap for a notional value of $40.0 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 as well as Note 5 and Note 1211 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report for more information related to the Credit Facility.

ITEM 4. Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
    We maintain a system of disclosure controls and procedures that are designed to reasonably ensure that information required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to reasonably ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
 
    Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) (“Disclosure Controls”) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls will be modified as systems change and conditions warrant.
 
    In connection with the preparation of this Report, as of September 30, 2022,March 31, 2023, an evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on this evaluation, we concluded that our disclosure controls and procedures were effective to provide reasonable assurance that
information required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to reasonably ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting
 
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There were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2022March 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II - OTHER INFORMATION

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ITEM 1. Legal Proceedings.
 
    The legal proceedings described in Note 98 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report are incorporated herein by reference. In addition, from time to time, we may be a party to litigation and subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of judgment, defense and settlement costs, diversion of management resources and other factors.

ITEM 1A. Risk Factors.
 
    Factors that could cause our actual results to differ materially from those in this Report are any of the risks described in this Item 1A. Any of these factors could result in a significant or material adverse effect on our business, financial condition, results of operations and cash flows. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. In addition, risk factors relating to economic uncertainties and downturns in the general economy or the industries in which our clients operate should be interpreted as heightened risks in the current macroeconomic global environment.
 
    Our business operations are subject to a number of risk factors that may adversely affect our business, financial condition, results of operations or cash flows. If any significant adverse developments resulting from these risk factors should occur, the trading price of our securities could decline, and moreover, investors in our securities could lose all or part of their investment in our securities.
 
    You should refer to the explanation of the qualifications and limitations on forward-looking statements under the section titled “Cautionary Note About Forward-Looking Statements” set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Report. All forward-looking statements made by us are qualified by the risk factors described below.
 
The following is a summary of some of the principal risk factors which are more fully described below.

Risks Related to Our Business, Operations and Industry
•Since 2010, we and our Chief Executive Officer and President have been involved in continuing litigation with Oracle. An adverse outcome in the litigation could result in the payment of substantial attorneys’ fees and/or costs and/or an injunction against certain of our business practices.
•The Oracle software products that are part of our ongoing injunction compliance and Rimini II litigation with Oracle represent a significant portion of our revenue.
•Our ongoing litigation with Oracle presents challenges for growing our business.
•Oracle has a history of litigation against companies offering alternative support programs for Oracle products.
•The duration of and continued impacts on our business of any lingering effects of the COVID-19 pandemic, as well as the actions taken by governments or clients in response to the pandemic in the future, may have a material adverse effect on our business.
•Economic uncertainties, changes in economic conditions, including rising inflation, or downturns in the general economy or the industries in which our clients operate could disproportionately affect the demand for our products and services and may have a material adverse effect on our business.
•The market for independent software support services is relatively undeveloped and may not grow.
•We face significant competition.competition for all components of our Solutions Portfolio.
•We have had a history of losses and may not achieve or sustain revenue growth or profitability in the future.
•If we are unable to attract new clients or retain and sell additional products or services to existing clients, our revenue growth will be adversely affected.
•Because we recognize revenue from subscriptions over the term of the relevant contract, downturns or upturns in sales are not immediately reflected in full in our results of operations.
•Our future liquidity and results of operations may be adversely affected by the timing of new orders, the level of client renewals and cash receipts from clients.
•The loss of one or more key employees could harm our business.
•The failure to attract and retain additional qualified personnel, including sales personnel, or to expand our marketing and sales capacities could prevent us from executing our business strategy.
•Our past growth is not indicative of future growth, and, if we grow rapidly, we may not be able to manage our growth effectively.
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•Our failure to generate significant capital or raise additional capital necessary to fund our operations and invest in new services and products could reduce our ability to compete and could harm our business.
•Our business may suffer if it is alleged or determined that our technology infringes others’ intellectual property rights.
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•The loss of one or more key employees could harm our business.
•The failure to attract and retain additional qualified personnel or to expand our marketing and sales capacities could prevent us from executing our business strategy.
•Interruptions to or degraded performance of our services, including as a result of interruptions or performance problems with technologies provided by third parties, could result in client dissatisfaction, damage to our reputation, loss of clients, limited growth and reduction in revenue.
•We may experience fluctuations in our results of operations due to the sales cycles for our products and services, which makes our future results difficult to predict and could cause our results of operations to fall below expectations or our guidance.
•We may be subject to additional obligations to collect and remit sales tax and other taxes, and we may be subject to tax liability, interest and/or penalties for past sales, which could adversely harm our business.
•Our reputation and/or business could be negatively impacted by ESG matters and/or our reporting of such matters.
•Any actions taken by governments or clients in response to any lingering impacts of the COVID-19 pandemic in the future may have a material adverse effect on our business.
•We may need to change our pricing to compete successfully.
•If we are not able to scale our business quickly and grow efficiently, our results of operations could be harmed.
•Our business will be susceptible to risks associated with global operations as our growth strategy involves further expansion of our sales to clients outside the United States.
•Consolidation in our target sales markets is continuing at a rapid pace, which could harm our business.
•If there is a widespread shift by clients or potential clients to enterprise software vendors, products and releases for which we do not provide software products or services, our business would be adversely impacted.
•Cybersecurity threats continue to increase in frequency and sophistication; if our data security measures are compromised or our services are perceived as not being secure, clients may curtail or cease their use of our services, our reputation may be harmed, and we may incur significant liabilities.
•We are subject to governmental and other legal obligations related to privacy, and our actual or perceived failure to comply with such obligations could harm our business.
•If we are not able to maintain an effective system of internal control over financial reporting, investors could lose confidence in our financial reporting, which could harm our business and have an adverse effect on our stock price.
•If we fail to enhance our brand, our ability to expand our client base will be impaired.
•If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, experience reduced revenue and incur costly litigation to protect our rights.
•The amount of and ultimate realization of the benefits from the net operating loss carryforwards for income tax purposes is dependent, in part, upon future events, the effects of which cannot be determined; if we are not able to use a significant portion of our net operating loss carryforwards, our profitability could be adversely affected.
•We are a multinational organization, and we could be obligated to pay additional taxes in various jurisdictions.
•Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our Common Stock.

Risks Related to our Indebtedness, Capitalization Matters and Corporate Governance
•Our level of indebtedness and any future indebtedness we may incur may limit our operational and financing flexibility.
•The terms of our Credit Facility impose operating and financial restrictions on us.
•Our variable rate indebtedness subjects us to interest rate risk, which, along with the phase-out of LIBOR and transition to SOFR, could cause our indebtedness service obligations to increase significantly.
•The price of our Common Stock may be volatile.
•Any issuance of Common Stock upon the exercise of remaining warrants will cause dilution to existing stockholders and may depress the market price of our Common Stock.
•Certain of our common stockholders can exercise significant control, which could limit our stockholders’ ability to influence the outcome of key transactions, including a change of control.
•Future resales of our Common Stock held by significant stockholders may cause the market price of our Common Stock to drop significantly.
•Our stock repurchase program could affect the price of our Common Stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our Common Stock.
•We do not currently intend to pay dividends on our Common Stock.
•The DGCL and our organizational documents contain provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
•Our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders or employees could be limited by our choice of forum in our bylaws.

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Risks Related to Our Business, Operations and Industry

Risks Related to Litigation
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We and our Chief Executive Officer and President have been involved in continuing litigation with Oracle since 2010. An adverse outcome in the ongoing litigation could result in the payment of substantial attorneys’ fees and/or costs and/or an injunction against certain of our business practices, which could have a material adverse effect on our business and financial results.

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

After completion of a jury trial in 2015 and subsequent appeals, the final outcome of Rimini I was that Mr. Ravin was found not liable for any claims and we were found liable for only one claim: “innocent infringement,” a jury finding that we did not know and had no reason to know that our former support processes were infringing. The jury also found that the infringement did not cause Oracle to suffer lost profits. We were ordered to pay a judgment of $124.4 million in 2016, which we promptly paid and then pursued appeals. With interest, attorneys’ fees and costs, the total judgment paid by us to Oracle after the completion of all appeals was approximately $89.9 million. A portion of such judgment was paid by our insurance carriers (for additional information on this topic, see Note 98 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report).

Since November 2018, we have been subject to a permanent injunction which prohibits us from using certain support processes that had been found in Rimini I to “innocently” infringe certain Oracle copyrights.copyrights (the “Injunction”). The Injunction does not prohibit the Company’s provision of support services for any Oracle product lines, but rather defines the manner in which the Company can provide support services for certain Oracle product lines.

On July 10, 2020, Oracle filed a motion to show cause contending that we are in contempt of the injunction,Injunction, which we opposed. On January 12, 2022, the District Court issued its findings and order following an evidentiary hearing held in September 2021, regarding whether we (i) violated the injunctionInjunction for certain accused conduct and (ii) should be held in contempt in those instances where the District Court found a violation of the injunction,Injunction, and what sanctions, if any, are appropriate.

In the order, the District Court ruled in favor of us with respect to five out of ten items. With respect to the other five items, the District Court found that we violated the permanent injunction,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. We reserve all rights, including appellate rights, with respect to the District Court rulings and findings.

On February 7, 2022, we filed a notice of appeal in the District Court, commencing an appeal of the District Court’s January 12, 2022 decision to the Ninth Circuit Court of Appeals (“Court of Appeals”). On February 8, 2022, the District Court stayed the briefing on Oracle’s bill of attorneys’ fees and costs until our appeal is resolved. BriefingOral argument on our appeal has been completed,was held in San Francisco on February 6, 2023, and the parties are currently working with the Court of Appeals to schedule oral argumenthas not yet issued a decision on the appeal in early 2023.appeal. At this time, we believe that we are in substantial compliance with the injunctionInjunction and have complied with the order regarding the quarantining of certain computer files. As of September 30,March 31, 2023 and December 31, 2022, we have accrued $6.9 million for an estimate related to Oracle’s reasonable attorneys’ fees and costs.costs for this matter. Regarding our estimate for reasonable attorneys’ fees and costs, significant judgment is required to determine the amount of loss related to this matter as the outcome is inherently unpredictable and subject to uncertainties. We reserve all rights, including appellate rights, with respect to the District Court’s rulings and findings in the contempt matter, including any award of legal fees and costs.

Oracle may file additional contempt motions against us at any time to attempt to enforce its interpretation of the injunctionInjunction or if it has reason to believe we are not in compliance with the express terms of the injunction.Injunction. Such contempt proceedings or any judicial finding of contempt could result in a material adverse effect on our business and financial condition. In addition, the pendencyexistence of the injunction,Injunction, alone, or the District Court’s January 12, 2022 order, could dissuade clients from purchasing or continuing to purchase our services. If we are obligated to pay substantial civil assessments arising from any finding of contempt, this could reduce the amount of cash flows available to pay principal, interest, fees and other amounts due under our Credit Facility, which could result in an event of default, in which case the lenders could demand accelerated payment of principal, accrued and unpaid interest, and other fees. We cannot assure youprovide assurances that we will have sufficient assets which would allow us to repay such indebtedness in full at such time. As a result, we could be forced into bankruptcy or liquidation.
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In October 2014, we filed a separate lawsuit, Rimini Street Inc. v. Oracle Int’l Corp., in the District Court against Oracle seeking a declaratory judgment that our support practices, in use since at least July 2014, do not infringe certain Oracle copyrights (“Rimini II”). Our operative complaint asserts declaratory judgment, tort, and statutory claims. Oracle’s operative counterclaim asserts declaratory judgment and copyright infringement claims and Lanham Act, breach of contract, and business tort violations.

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

During a status conference with the District Court on October 14, 2022, attorneys for Oracle confirmed that Oracle would withdraw all of its monetary damages claims against us in Rimini II and proceed with a bench trial instead of a jury trial for its claims for equitable relief. Further, in accordance with a Minute Order issued by the District Court on October 14, 2022, good cause appearing, the start date for the Rimini II trial was changed from November 2, 2022 to November 29, 2022 in Las Vegas.

As ordered by the District Court, on October 21, 2022, the parties filed a joint stipulation (the “Stipulation”) to dismiss with prejudice the Rimini II claims affected by Oracle’s decision, including all of Oracle’s monetary damages claims against us and Mr. Ravin. On October 24, 2022, the District Court entered an order granting the Stipulation, dismissing with prejudice Oracle’s claims in Rimini II “for monetary relief of any kind under any legal theory [,] including but not limited to claims for damages, restitution, unjust enrichment, and engorgement [ . . . ].” In addition, Oracle’s claims for breach of contract, inducing breach of contract and an accounting were dismissed with prejudice. Per the Stipulation, the parties have each reserved the right to seek attorneys’ fees and/or costs to the extent permissible by law.

Prior to the date of the District Court’s order granting the Stipulation, no damages of any kind were awarded by the District Court in Rimini II. Whether to award any attorneys’ fees and/or costs will be a decision for the District Court. We reserve all rights, including appellate rights, with respect to the District Court’s rulings and findings in Rimini II.

The Rimini II bench trial began in Las Vegas on November 29, 2022 and concluded on December 15, 2022. The parties submitted their proposed findings of fact and conclusions of law to the District Court on February 23, 2023, and the matter remains pending.

We could be required to pay substantial attorneys’ fees and/or costs in connection with litigation relating to our current or past business activities and/or be enjoined from certain business practices. Any of these outcomes could result in a material adverse effect on our business and financial condition, and the pendency of the litigation alone could dissuade clients from purchasing or continuing to purchase our services. If we are obligated to pay substantial attorneys’ fees and/or costs to Oracle or are enjoined from certain business practices, this could reduce the amount of cash flows available to pay principal, interest, fees and other amounts due under our Credit Facility, which could result in an event of default, in which case the lenders could demand accelerated payment of principal, accrued and unpaid interest, and other fees. If we default in our payment obligations under the Credit Facility and the indebtedness under the Credit Facility were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full, and we could be forced into bankruptcy or liquidation.

Our business has been and may continue to be materially harmed by this litigation and Oracle’s conduct. During the course of these cases, we anticipate there will be rulings by the District Court in Rimini II, the District Court in the contempt proceedings, and the Court of Appeals in both the contempt proceedings and in Rimini II in connection with hearings, motions, decisions, and other matters, as well as other interim developments related to the litigations. If securities analysts or investors regard these rulings as negative, the market price of our Common Stock may decline. If current or prospective clients regard these rulings as negative, it could negatively impact our new client sales or renewal sales.

While we plan to continue to vigorously litigate the pending matters in the contempt proceedings and in Rimini II, we are unable to predict the timing or outcome of these matters. No assurance is or can be given that we will prevail on any appeal, contempt proceeding, claim, or counterclaim.

See the section titled “Legal Proceedings” in Part II, Item 1 and Note 98 to our Unaudited, Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report for more information related to this litigation.

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The Oracle software products that are part of our ongoing Injunction compliance and Rimini II litigation with Oracle represent a significant portion of our current revenue.
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In Rimini II,addition to the ongoing litigation with Oracle over compliance with the Injunction, Oracle filed counterclaims in Rimini II relating to our support services for Oracle’s PeopleSoft, J.D. Edwards, Siebel, E-Business Suite, and Database software products. For the ninethree months ended September 30, 2022,March 31, 2023, approximately 63%62% of our revenue was derived from the support services that we provide for our clients using Oracle’s PeopleSoft, J.D. Edwards, Siebel, E-Business Suite and Database software products. The percentage of revenue derived from services we provide for PeopleSoft software only was approximately 9% of our total revenue during this same period. Although we provide support services for additional Oracle product lines that are not subject to the Injunction and litigation and support serviceswith Oracle, as well as for software products provided by companies other than Oracle, our current revenue depends significantly on the product lines that are the subject of the Injunction and Rimini II litigation. Should Oracle prevail on its claims in Rimini II or should a contempt proceeding on the Injunction result in a final order holding us in contempt, we could be required to change the way we provide support services to some of our clients, which could result in the loss of clients and revenue, and may also give rise to claims for compensation from our clients, any of which could have a material adverse effect on our business, financial condition and results of operations.

Our ongoing litigation with Oracle presents challenges for growing our business.

We have experienced challenges growing our business as a result of our ongoing litigation with Oracle. Many of our existing and prospective clients have expressed concerns regarding our ongoing litigation and, in some cases, have been subjected to various negative communications by Oracle in connection with the litigation. We have experienced in the past, and may continue to experience in the future, volatility and slowness in acquiring new clients, as well as clients not renewing their agreements with us, due to these challenges relating to our ongoing litigation with Oracle. Further, certain of our prospective and existing clients may be subject to additional negative communications from software vendors. We have taken steps to minimize disruptions to our existing and prospective clients regarding the litigation, but we continue to face challenges growing our business while the litigation remains ongoing. In certain cases, we have agreed to pay certain liquidated damages to our clients if we are no longer able to provide services to these clients, and/or reimburse our clients and our former lenders for their reasonable legal fees incurred in connection with any litigation-related subpoenas and depositions or to provide certain client indemnification or termination rights if any outcome of litigation results in our inability to continue providing any of the paid-for services. In addition, we believe the length of our sales cycle is longer than it otherwise would be due to prospective client diligence on possible effects of the Oracle litigation on our business. We cannot assure youprovide assurances that we will continue to overcome the challenges we face as a result of the litigation and continue to renew existing clients or secure new clients.

Additionally, the existence of this ongoing litigation, including the January 12, 2022 District Court order, could negatively impact the value of our equity securities, and could negatively impact our ability to raise additional equity or debt financing.

We are self-insured for any costs related to any current or future intellectual property litigation, although we maintain and have tendered our errors and omissions insurance coverage for the wrongful acts alleged in Oracle’s contempt proceeding in order to seek determinations of a duty to defend. We obtained a determination of a duty to defend with respect to our primary errors and omission insurance carrier and have soughtare seeking a determination of a duty to defend by one of our excess errors and omissions insurance carriers. We cannot provide assurances that we will prevail on this claim or any other similar claims that we may tender in the future.

While we currently believe our cash on hand, accounts receivable and contractually committed backlog provides us with liquidity to cover attorneys’ fees and related costs, such as travel, hotels, and consultants, associated with the ongoing litigation with Oracle, we cannot assure our liquidity will be sufficient.

Oracle has a history of litigation against companies offering alternative support programs for Oracle products, and Oracle could pursue additional litigation with us.

Oracle has been active in litigating against companies that have offered competing maintenance and support services for their products. For example, in March 2007, Oracle filed a lawsuit against SAP and its wholly-owned subsidiary, TomorrowNow, Inc. After a jury verdict awarding Oracle $1.3 billion, the parties stipulated to a final judgment of $306 million subject to appeal. After the appeal, the parties settled the case in November 2014 for $356.7 million. In February 2012, Oracle filed suit against ServiceKey, Inc. and settled the case in October 2013 after the District Court issued an injunction against ServiceKey and its CEO. Oracle also filed suit against CedarCrestone Corporation in September 2012 and settled the case in July 2013. TomorrowNow and CedarCrestone offered maintenance and support for Oracle software products, and Service Key offered maintenance and support for Oracle technology products. Given Oracle’s history of litigation against companies offering alternative support programs for Oracle products, we can provide no assurance, regardless of the outcome of our
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current litigations with Oracle, that Oracle will not pursue additional litigation against us. Such additional litigation could be costly, distract our management team from running our business and reduce client interest and our sales revenue.

Other Risks Related to Our Business, Operations and Industry

The duration of and continued economic, operational and financial impacts on our business of any lingering effects of the COVID-19 pandemic, as well as the actions taken by governmental authorities, clients or others in response to the pandemic in the future may have a material adverse effect on our business, financial condition, results of operations, and cash flows.

At the beginning of the COVID-19 pandemic, we established work-at-home arrangements for most of our employees, placed restrictions on non-essential business travel and implemented a no in-person event marketing strategy and a partially remote sales model. While we now permit some travel and in-person marketing, sales and employee appreciation events in accordance with applicable regional guidance, we believe that many of our clients are continuing to maintain or partially maintain selected COVID-19-related precautionary measures and will continue to do so. These precautionary measures could impact our clients’ and potential clients’ ability or willingness to participate in our sales, marketing and client success efforts, which could adversely affect our business, financial condition and results of operations. Further, there is still some remaining uncertainty around any lingering impacts of the pandemic on the global economy and consumer confidence. While some of our offices have re-opened to verified vaccinated employees and guests, 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. The COVID-19 pandemic could have a sustained adverse impact on economic and market conditions, which may delay prospective clients’ decisions regarding engaging our services, impair the ability of our current clients to make timely payments to us, cause our current clients to ask for payment concessions or discounts, impact client renewal rates and adversely affect our revenue. If such conditions occur, we may be required to increase our reserves, allowances for doubtful accounts and write-offs of accounts receivable, and our results of operations would be harmed.

We are unable to accurately predict any future impact of the COVID-19 pandemic due to various uncertainties, including the duration and scope of new variants and surges, particularly if virus variants result in additional outbreaks, and actions that may be taken by governmental authorities to contain the virus in the future. We closely monitor any remaining impact of the COVID-19 pandemic, continually assessing its potential effects on our business. The extent to which our results may be affected will largely depend on future developments which cannot be accurately predicted and are uncertain, but any lingering impacts of the COVID-19 pandemic or the perception of its effects could have a material adverse effect on our business, financial condition, results of operations, or cash flows. Further, due to our subscription-based business model, the effect of the pandemic may not be fully reflected in our results of operations until future periods, and any global macroeconomic effects of the pandemic may persist for an indefinite period. The COVID-19 pandemic may also have the effect of heightening many of the other risks described in this “Risk Factors” section. Refer to the section titled “Impact of the COVID-19 Pandemic and Current Economic Conditions” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Report for additional information.

Economic uncertainties, changes in economic conditions, including rising inflation, or downturns in the general economy or the industries in which our clients operate, may result in increased costs of operations, could disproportionately affect the demand for our products and services and could negatively impact our results of operations.

General worldwide economic conditions have experienced significant fluctuations in recent years, and market volatility and uncertainty remain widespread, with the expectation that inflation (including hyperinflation), other economic challenges and possible recession will be exacerbated for an extended period. Inflation has accelerated in the U.S. and globally due in part to global supply chain issues, a rise in energy prices, fiscal and monetary policypolicies adopted during the COVID-19 pandemic and continued strong consumer demand as economies reopen from restrictions related to the pandemic.demand. An inflationary environment may increase our and our clients’ cost of labor due to higher wages, as well as result in higher financing costs and/or higher supplier prices for both us and our clients. As a result, we and our clients may find it extremely difficult to accurately forecast and plan future business activities. In addition, these conditions could cause our clients or prospective clients to reduce their IT budgets, which could decrease corporate spending on our products and services, resulting in delayed and lengthened sales cycles, a decrease in new client acquisition and loss of clients. Furthermore, during challenging economic times, our clients may face issues with their cash flows and in gaining timely access to sufficient credit or obtaining credit on reasonable terms, which could impair their ability to make timely payments to us, impact client renewal rates and adversely affect our revenue. If such conditions occur, we may be required to increase our reserves, allowances for doubtful accounts and write-offs of accounts receivable, and our results of operations would be harmed. We cannot predict the timing, strength or duration of any economic slowdown or recovery, whether global, regional or within specific markets. If the
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conditions of the general economy or markets in which we operate worsen, our business could be harmed. In addition, even if the overall economy improves, the market for our products and services may not experience growth. Moreover, multiple events, including Brexit, changes in U.S. trade policies and responsive changes in policy by foreign jurisdictions, governmental and multinational organizations’ responses to the COVID-19 pandemic and geopolitical developments and uncertainty in the European Union and elsewhere, such as the current conflict between Russia and Ukraine, and governmental and multinational organizations’ responses to the COVID-19 pandemic have increased levels of political and economic unpredictability globally, and may increase the volatility of global financial markets and the global and regional economies.

The market for independent software support services is relatively undeveloped and may not grow.

The market for independent enterprise software support services is still relatively undeveloped, has not yet achieved widespread acceptance and may not grow quickly or at all. Our success will depend to a substantial extent on the willingness of companies to engage a third party such as us to provide software support services for their enterprise software. Many enterprise software licensees remain hesitant to use a third party to provide such support services, choosing instead to rely on support services provided by the enterprise software vendor. Other enterprise software licensees have invested substantial personnel, infrastructure and financial resources in their own organizations with respect to support of their licensed enterprise software products and may choose to self-support with their own internal resources instead of purchasing services from the enterprise software vendor or an independent provider such as ourselves. Particularly because our market is relatively undeveloped, we must address any potential clients’ concerns and explain the benefits of our approach to convince them of the value of our services. If companies are not sufficiently convinced that we can address their concerns and that the benefits of our services are compelling, then the market for our services may not develop as we anticipate, and our business will not grow.

We face significant competition for the services comprising each component of our Solutions Portfolio, from both enterprise software vendors and other companies offering independent enterprise software support, products and services, as well as from software licensees that attempt to self-support, which may harm our ability to add new clients, retain existing clients and grow our business.client base across all of our Solutions Portfolio offerings.

Our current and potential competitors across each component of our Solutions Portfolio, which include enterprise software vendors, may have significantly more financial, technical, sales and marketing teams and other resources than we have, may be able to devote greater resources to the development, promotion, sale and support of their products and services, may have more extensive customer bases and broader customer relationships than we have and may have longer operating histories and greater name recognition than we have. WeSpecifically, we face intense competition from enterprise software vendors, such as Oracle and SAP, who provide software support services for their own products. Enterpriseproducts, as well as from other competitors who provide independent enterprise software support, products and services. Competitors, including enterprise software vendors, have offered, and may continue to offer, discounts to companies to whom we have marketed our services. In addition, competitors, including enterprise software vendors, may take other actions in an attempt to maintain their support service business, including
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changing the terms of their customer agreements, the functionality of their support, products or services, or their pricing terms. For example, starting in the second quarter of 2017 Oracle has prohibited us from accessing its support websites to download software updates on behalf of our clients who are authorized to do so and permitted to authorize a third party to do so on their behalf. In addition, variousthe support, license or other contractual policies of our future and current competitors, including Oracle and SAP, may include clauses that could penalize customers that choose to use our or any independent provider’s services or products. Further, the contractual policies of enterprise software support vendors, orsuch as Oracle and SAP, may contain clauses that following a departure from the software vendor’s support program,penalize customers that seek to return to the software vendor to purchase new licenses or services.Further,following a departure from the software vendor’s support program. In addition, our current and potential competitors and enterprise software vendors may develop and market new technologies that render our existing or future enterprise software support, products or services less competitive or obsolete. Finally, we also face competition from software licensees that choose to self-support. Competition could significantly impede our ability to sell our enterprise support, products and services on terms favorable to us, and we may need to decrease the prices for our support, products or services to remain competitive. If we are unable to maintain our current pricing due to competitive pressures, our margins will be reduced and our results of operations will be negatively affected.

There are also several smaller support services vendors in the independent enterprise software support services market with whom we compete with respect to certain of our support services. We expect competition to continue to increase in the future, particularly if we prevail in Rimini II, which could harm our ability to increase sales, maintain or increase renewals and maintain our prices. In addition, certain providers of independent enterprise software support, organizationsproducts and services may have or may develop more cooperativestrategic relationships with enterprise software vendors, which may allow them to compete more effectively than us over the long term. To the extent any of our competitors have existing relationships with potential clients for enterprise software products and support services,any component of our Solutions Portfolio, those potential clients may be unwilling to purchase our services because of those existing relationships, which could cause the demand for our services to be substantially impacted. Further, our competitors may attempt to use the pendencyOracle litigation and the existence of the injunction, or the January 12, 2022 District Court order relating to the injunctionInjunction described above under the section titled “Risks Related to Litigation,” to dissuade certain of our prospective or existing clients from purchasing or continuing to purchase any or all of the components of our Solutions Portfolio, including our enterprise software support services.

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We have had a history of losses and may not achieve or sustain revenue growth or profitability in the future. Further, if we are unable to attract new clients or retain and/or sell additional products or services to our existing clients, our revenue growth willcould be adversely affected.

We recorded a net lossincome of $0.4$5.6 million for the three months ended September 30, 2022,March 31, 2023, and we had an accumulated deficit of $223.0$222.6 million as of September 30, 2022.March 31, 2023. We will need to generate and sustain increased revenue levels in future periods while managing our costs to be profitable, and, even if we do, we may not be able to maintain or increase our level of profitability. To increase our revenue, we must add new clients, secure renewals or service extensions by existing clients on terms favorable to us and sell additional products and services to existing clients. As competitors introduce low-cost and/or differentiated services that are perceived to compete with ours, or as enterprise software vendors introduce competitive pricing or additional products and services or implement other sales strategies to compete with us, our ability to sell to new clients and renew agreements with existing clients based on pricing, service levels, technology and functionality could be impaired. In addition, certain of our existing clients may choose to license a new or different version of enterprise software from an enterprise software vendor, and such clients’ license agreements with the enterprise software vendor will typically include a minimum one-year mandatory maintenance and support services agreement. In such cases, it is unlikely that these clients would renew their maintenance and support services agreements with us, at least during the early term of the license agreement. In addition, such existing clients could move to another enterprise software vendor, product or release for which we do not offer any products or services. As a result, we may be unable to renew or extend our agreements with existing clients or attract new clients or new business from existing clients on terms that would be favorable or comparable to prior periods, which could have an adverse effect on our revenue and growth.

Additionally, we intend to continue to expend significant funds to expand our sales and marketing operations, enhance our service offerings, expand into new markets, launch new product offerings and meet the increased compliance requirements associated with our operations as a public company. Our efforts to grow our business may be costlier than we expect, and we may not be able to increase our revenue enough to offset our higher operating expenses. Further, many companies with which we compete have larger and longer-tenured sales and marketing teams, which may impact the ability to grow our business, which could have an adverse effect on our revenue and growth. If we are unable to achieve and sustain revenue growth or profitability, the market price of our securities may significantly decrease.

If our retention rates decrease, or we do not accurately predict retention rates, our future revenue and results of operations may be harmed.

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Our clients have no obligation to renew their product or service subscription agreements with us after the expiration of a non-cancelable agreement term. In addition, the majority of our multi-year, non-cancelable client agreements are not pre-paid other than the first year of the non-cancelable service period. We may not accurately predict retention rates for our clients. Our retention rates may decline or fluctuate as a result of a number of factors, including our clients’ decision to license a new product or release from an enterprise software vendor, our clients’ decision to move to another enterprise software vendor, product or release for which we do not offer products or services, any remaining impact of the COVID-19 pandemic and global economic conditions, including rising inflation and interest rates on our clients’ businesses, client satisfaction with our products and services, the acquisition of our clients by other companies, any remaining impact of the COVID-19 pandemic, and clients going out of business. If our clients do not renew their agreements for our products and services or if our clients decrease the amount they spend with us, our revenue will decline and our business will suffer. In addition, certain of our existing clients may choose to license a new or different version of enterprise software from an enterprise software vendor, and such clients’ license agreements with the enterprise software vendor will typically include a minimum one-year mandatory maintenance and support services agreement. In such cases, it is unlikely that these clients would renew their maintenance and support services agreements with us, at least during the early term of the license agreement. In addition, such existing clients could move to another enterprise software vendor, product or release for which we do not offer any products or services.

Because we recognize revenue from subscriptions over the term of the relevant contract, downturns or upturns in sales are not immediately reflected in full in our results of operations.

As a subscription-based business, we recognize revenue over the service period of our contracts. As a result, much of our reported revenue each quarter results from contracts entered into during previous quarters. Consequently, while a shortfall in demand for our products and services or a decline in new or renewed contracts in any one quarter may not significantly reduce our revenue for that quarter, it could negatively affect our revenue in future quarters and full year periods. Accordingly, the effect of significant downturns in new sales, renewals or extensions of our service agreements for a quarter will not be reflected in full in our results of operations until future periods. Our revenue recognition model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new clients must be recognized over the applicable service contract term.
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Due to the variability of timing in our sales cycle, if we fail to forecast our revenue accurately, or if we fail to match our expenditures with corresponding revenue, our results of operations and liquidity could be adversely affected.

We do not have a long operating history upon which to base forecasts of future operating revenue. In addition, theThe variability of the sales cycle for the evaluation and implementation of our products and services, which typically has been six to twelve months once a client is engaged, may also cause us to experience a delay between increasing operating expenses for such sales efforts, and the generation of corresponding revenue. Accordingly, we may be unable to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of delays arising from these factors. As a result, our results of operations and liquidity in future reporting periods may be significantly below the expectations of the public market, securities analysts or investors, which could negatively impact the price of our Common Stock.

Our future liquidity and results of operations may be adversely affected by the timing of new orders, the level of client renewals and cash receipts from clients.

Due to the collection of cash from our clients before services are provided, our revenue is recognized over future periods when there are no corresponding cash receipts from such clients. Accordingly, our future liquidity depends upon the ability to continue to attract new clients and to enter into renewal arrangements with existing clients. If we experience a decline in orders from new clients or renewals from existing clients, our revenue may continue to increase while our liquidity and cash levels decline. Any such decline, however, will negatively affect our revenues in future quarters. Accordingly, the effect of declines in orders from new clients or renewals from existing clients may not be fully reflected in our results of operations and cash flows until future periods. Comparing our revenues and operating results on a period-to-period basis may not be meaningful, as it may not be an indicator of the future sufficiency of our cash and cash equivalents to meet our liquidity requirements. You should not rely on our past results as an indication of our future performance or liquidity.

We rely on our management team and other key employees, including our Chief Executive Officer and President, and the loss or disability of one or more key employees could harm our business. Additionally, the failure to attract and retain additional qualified personnel, including sales personnel, or to expand our marketing and sales capabilities could prevent us from executing our business strategy.

The loss of or a disability that would prevent our Chief Executive Officer and President or any of our key senior members of management from substantially performing their duties could have a material adverse effect on our business,
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operating results and financial condition, particularly if we are unable to hire and integrate suitable replacements on a timely basis. Mr. Ravin has been under long-standing medical care for kidney disease, which includes ongoing treatment. Although Mr. Ravin’s condition has not adversely impacted his performance as Chief Executive Officer and President or on the overall management of the Company, we can provide no assurance that his condition will not affect his ability to perform the role of Chief Executive Officer and President in the future. Further, as we continue to grow our business, we will continue to adjust our senior management team to best address our growth opportunities. If we are unable to attract or retain the right individuals for the team, it could hinder our ability to grow our business and could disrupt our operations or otherwise have a material adverse effect on our business. We do not maintain key man life insurance on any of our employees.

Furthermore, to execute our business strategy, we must attract and retain highly qualified personnel, including sales personnel. Our ability to increase our client base and achieve broader market acceptance of our services will depend to a significant extent on our ability to expand our marketing and sales operations. We plan to continue expanding our sales force globally. We are experiencing a very competitive recruiting environment, creating difficulty in hiring and retaining sufficient numbers of highly skilled sales personnel and other employees with appropriate qualifications. In particular, we have experienced extreme hiring competition in the San Francisco Bay Area, where we have a significant amount of operations, but also face extremely competitive hiring environments across the United States and the other countries in which we operate. Our efforts to attract, develop, integrate and retain highly skilled employees with appropriate qualifications may be compounded by intensified restrictions on travel (including restrictions implemented during a pandemic or similar circumstance), immigration, or the availability of work visas. Many companies with which we compete for experienced personnel have greater resources and less stock price volatility than we do. In making employment decisions, job candidates often consider the value of the equity incentives they are to receive in connection with their employment. If the price of our stock continues to experience significant volatility, our ability to attract or retain qualified employees will be adversely affected. In addition, as we continue to expand into new geographic markets, there can be no assurance that we will be able to attract and retain the required management, sales, marketing and support services personnel to profitably grow our business. If we fail to attract highly qualified new sales and other personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed.

Moreover, our sales personnel typically take an average of between nine to twelve months before any new sales personnel can operate at the capacity typically expected of experienced sales personnel. This ramp cycle, combined with our typical six- to twelve-month sales cycle for engaged prospects, means that we will not immediately recognize a return on this investment in our sales results. In addition, the cost to acquire clients is high due to the cost of these marketing and sales efforts. Further, the cost of marketing and sales efforts will likely increase as we continue to offer new products and services, as even our experienced sales personnel will need to receive specialized training on our new offerings. Our business may be materially harmed if our efforts do not generate a corresponding increase in revenue. We may not achieve anticipated revenue growth from expanding our sales force if we are unable to hire, develop and retain talented sales personnel, if our new sales personnel are unable to achieve desired productivity levels in a reasonable period of time or if our sales and marketing programs are not effective.

Our past growth is not indicative of our future growth, and if we grow rapidly, we may not be able to manage our growth effectively.

Our revenue grew from $95.6$97.9 million for the three months ended September 30, 2021March 31, 2022 to $101.9$105.5 million for the three months ended September 30, 2022,March 31, 2023, representing a period over period increase of 7%8%. You should not consider our past growth as indicative of our future performance. We believe growth of our revenue depends on a number of factors, including our ability to:

•price our products and services effectively so that we are able to attract new clients and retain existing clients without compromising our profitability;
•introduce our products and services to new geographic markets;
•introduce new enterprise software products and services supporting additional enterprise software vendors, products and releases;
•satisfactorily conclude the Oracleany Oracle-related litigation and any other litigation or governmental inquiry that may occur; and
•increase awareness of our company, products and services on a global basis.

We may not successfully accomplish all or any of these objectives.

In addition, our historical rapid growth has placed and may continue to place significant demands on our management and our operational and financial resources. Our organizational structure is becoming more complex as we add additional staff, and
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we will need to improve our operational, financial and management controls, as well as our reporting systems and procedures. Further, we believe that our corporate culture has been a critical component of our success. We have invested substantial time and resources in building our team and nurturing our culture. As we continue to expand our business and operate as a public company, we may find it difficult to maintain our corporate culture while managing our employee growth. We will require significant capital expenditures and the allocation of valuable management resources to grow and change in these areas without undermining our corporate culture of rapid innovation, teamwork and attention to client service that has been central to our growth. Any failure to manage our anticipated growth and related organizational changes in a manner that preserves our culture could negatively impact future growth and achievement of our business objectives.

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Our failure to generate significant capital through our operations or raise additional capital necessary to fund and expand our operations, invest in new services and products, and service our debt could reduce our ability to compete and could harm our business.

We may need to raiseincur additional debt under our Credit Facility andand/or raise additional capital beyond thosewhat is available under theour Credit Facility and funds raised from our August 2020 Offering and our March 2021 Offering if we cannot fund our growth or service our debt through our operating cash flows. Should this occur, we may not be able to obtain additional debt or additional equity financing on favorable terms, if at all, which could harm our business, results of operations and financial condition. We are also subject to certain restrictions for future financings as discussed in the risk factor “The terms of our Credit Facility impose operating and financial restrictions on us.” If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests and the value of our Common Stock could decline. If we engage in additional debt financings, the holders of the debt securities or lenders would have priority over the holders of our Common Stock. We may also be required to accept terms that further restrict our ability to incur additional indebtedness, take other actions that would adversely impact the short-term price of our Common Stock, or force us to maintain specified liquidity or other ratios, any of which could harm our business, results of operations and financial condition and reduce the value of our Common Stock.

Our business may suffer if it is alleged or determined that our technology infringes the intellectual property rights of others.

The software industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets and other intellectual and proprietary rights. Companies in the software industry are often required to defend against claims and litigation alleging infringement or other violations of intellectual property rights. Many of our competitors and other industry participants have been issued patents and/or have filed patent applications and may assert patent or other intellectual property rights within the industry. Our ongoing litigation with Oracle relates in part to copyright infringement claims and, from time to time, we may receive threatening letters or notices alleging infringement or may be the subject of claims that our services and underlying technology infringe or violate the intellectual property rights of others. Any allegation of infringement, whether innocent or intentional, can adversely impact marketing, sales and our reputation.

We rely on our management team and other key employees, including our Chief Executive Officer, and the loss of one or more key employees could harm our business. Additionally, the failure to attract and retain additional qualified personnel or to expand our marketing and sales capabilities could prevent us from executing our business strategy.

The loss of our Chief Executive Officer or any of our key senior members of management could have a material adverse effect on our business, operating results and financial condition, particularly if we are unable to hire and integrate suitable replacements on a timely basis. Mr. Ravin has been under long-standing medical care for kidney disease, which includes ongoing treatment. Although Mr. Ravin’s condition has not adversely impacted his performance as Chief Executive Officer or on the overall management of the Company, we can provide no assurance that his condition will not affect his ability to perform the role of Chief Executive Officer in the future. Further, as we continue to grow our business, we will continue to adjust our senior management team. If we are unable to attract or retain the right individuals for the team, it could hinder our ability to grow our business and could disrupt our operations or otherwise have a material adverse effect on our business. We do not maintain key man life insurance on any of our employees.

Furthermore, to execute our business strategy, we must attract and retain highly qualified personnel, including sales personnel. Our ability to increase our client base and achieve broader market acceptance of our services will depend to a significant extent on our ability to expand our marketing and sales operations. We plan to continue expanding our sales force globally. We are experiencing a very competitive recruiting environment, creating difficulty in hiring and retaining sufficient numbers of highly skilled sales personnel and other employees with appropriate qualifications. In particular, we have experienced extreme hiring competition in the San Francisco Bay Area, where we have a significant amount of operations, but also face extremely competitive hiring environments across the United States and the other countries in which we operate. Our efforts to attract, develop, integrate and retain highly skilled employees with appropriate qualifications may be compounded by intensified restrictions on travel (including restrictions implemented during a pandemic or similar circumstance), immigration, or the availability of work visas. Many companies with which we compete for experienced personnel have greater resources and less stock price volatility than we do. In making employment decisions, job candidates often consider the value of the equity incentives they are to receive in connection with their employment. If the price of our stock continues to experience significant volatility, our ability to attract or retain qualified employees will be adversely affected. In addition, as we continue to expand into new geographic markets, there can be no assurance that we will be able to attract and retain the required management, sales, marketing and support services personnel to profitably grow our business. If we fail to attract highly qualified new sales and other personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed.
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Moreover, our sales personnel typically take an average of between nine to twelve months before any new sales personnel can operate at the capacity typically expected of experienced sales personnel. This ramp cycle, combined with our typical six- to twelve-month sales cycle for engaged prospects, means that we will not immediately recognize a return on this investment in our sales results. In addition, the cost to acquire clients is high due to the cost of these marketing and sales efforts. Further, the cost of marketing and sales efforts will likely increase as we continue to offer new products and services, as even our experienced sales personnel will need to receive specialized training on our new offerings. Our business may be materially harmed if our efforts do not generate a corresponding increase in revenue. We may not achieve anticipated revenue growth from expanding our sales force if we are unable to hire, develop and retain talented sales personnel, if our new sales personnel are unable to achieve desired productivity levels in a reasonable period of time or if our sales and marketing programs are not effective.

Interruptions to or degraded performance of our service could result in client dissatisfaction, damage to our reputation, loss of clients, limited growth and reduction in revenue.

Our software support agreements with our clients generally guarantee a 10-minute response time with respect to certain high-priority issues. If we do not meet the 10-minute guarantee, our clients may in some instances be entitled to liquidated damages, service credits or refunds. To date, no such payments have been made.

We also deliver tax, legal and regulatory updates to our clients. If there are inaccuracies in these updates, or if we are not able to deliver them on a timely basis to our clients, our reputation may be damaged, and we could face claims for compensation from our clients and potentially lose clients.

Any interruptions or delays in our service, whether as a result of third-party error, our own error, natural disasters or other catastrophic events, security breaches or a result of any other issues, whether accidental or willful, could harm our relationships with clients and cause our revenue to decrease and our expenses to increase. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors, in turn, could further reduce our revenue, subject us to liability, cause us to pay liquidated damages, issue credits or cause clients not to renew their agreements with us, any of which could materially adversely affect our business.

We depend and rely on SaaS technologies and related services from third parties in order to operate critical functions of our business and interruptions or performance problems with these technologies or services may adversely affect our business and operating results.

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We depend and rely on software-as-a-service, or SaaS, technologies and related services from third parties in order to operate critical functions of our business, including billing and order management, financial accounting services, and customer relationship management services. If these services become unavailable due to extended outages or interruptions, security vulnerabilities, or cyber-attacks, because they are no longer available on commercially reasonable terms or prices, or due to other unforeseen circumstances, our expenses could increase, our ability to manage these critical functions could be interrupted, and our processes for and ability to manage sales of our products, recognize revenue, and support our customers could be impaired, all of which could adversely affect our business and operating results.

We may experience fluctuations in our results of operations due to the sales cycles for our products and services, which makes our future results difficult to predict and could cause our results of operations to fall below expectations or our guidance.

Our results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control, including seasonality linked to certain of the sales cycles for our products and services. Historically, our sales cycle has been tied to the renewal dates for our clients’ existing and prior vendor support agreements for the products that we support. Because our clients make support vendor selection decisions in conjunction with the renewal of their existing support agreements with Oracle and SAP, among other enterprise software vendors, we have experienced an increase in business activity during the quarterly periods in which those agreements are up for renewal. However, because we have introduced and intend to continue to introduce products and services for additional software products that do not follow the same renewal timeline or pattern, our past results may not be indicative of our future performance, and comparing our results of operations on a period-to-period basis may not be meaningful. Also, if we are unable to engage a potential client before its renewal date for software support services in a particular year, it will likely be at least another year before we would have the opportunity to engage that potential client again, given that such potential client likely
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had to renew or extend its existing support agreement for at least an additional year’s worth of service with its existing support provider. Furthermore, our existing clients generally renew their agreements with us at or near the end of each calendar year, so we have also experienced and expect to continue to experience heavier renewal rates in the fourth quarter.

We may not be able to accurately forecast the amount and mix of future product and service subscriptions, revenue and expenses, and as a result, our results of operations may fall below our estimates or the expectations of securities analysts and investors. If our revenue or results of operations fall below the expectations of investors or securities analysts, or below any guidance we may provide, the price of our Common Stock could decline.

Our reputation and/or business could be negatively impacted by ESG matters and/or our reporting of such matters.

There is an increasing focus from regulators, certain investors, certain clients, the communities in which we operate and other stakeholders concerning environmental, social, and governance (“ESG”) matters, both in the United States and internationally. These stakeholders may have differing priorities and expectations regarding ESG matters. In particular, certain of our clients or potential clients might require that we implement specified ESG procedures or standards in order to do business or continue to do business with them. In addition, proxy advisory firms and certain institutional investors who manage investments in public companies are increasingly integrating ESG factors into their investment analysis. The consideration of ESG factors in making business, investment and voting decisions is relatively new. Accordingly, the frameworks and methods for assessing ESG policies are not fully developed, likely vary across our various stakeholders and will likely continue to evolve over time.

Moreover, the subjective nature of methods used by our various stakeholders to assess a company with respect to ESG criteria could result in erroneous perceptions or a misrepresentation of our actual ESG policies and practices. In addition, we could also incur additional costs and require additional resources to monitor, report and comply with various ESG practices and associated legal, legislative and regulatory requirements. To the extent that our required and voluntary disclosures about ESG matters increase, we could be criticized for the accuracy, adequacy, or completeness of such disclosures. If we fail to comply with specific ESG-related client/potential client or investor expectations and standards, or to provide the disclosure relating to ESG issues that any third parties may believe is necessary or appropriate (regardless of whether there is a legal requirement to do so), our reputation, business, financial condition, and/or results of operations, as well as the price of our common stock, could be negatively impacted.

Any actions taken by governmental authorities, clients or others in response to any lingering impacts of the COVID-19 pandemic in the future may have a material adverse effect on our business, financial condition, results of operations, and cash flows.

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The COVID-19 pandemic has adversely affected the global economy, created significant financial market volatility and disrupted global supply chains, business operations and consumer confidence. In response to the COVID-19 pandemic, we have taken, and expect to continue to take, measures designed to protect the health of our employees and to minimize our operational disruption and resulting provision of services to our clients. However, there is still some remaining uncertainty around any lingering impacts of the COVID-19 pandemic on the global economy and consumer confidence. The COVID-19 pandemic could have a sustained adverse impact on economic and market conditions, which may delay prospective clients’ decisions regarding engaging our services, impair the ability of our current clients to make timely payments to us, cause our current clients to ask for payment concessions or discounts, impact client renewal rates and adversely affect our revenue. If such conditions occur, we may be required to increase our reserves, allowances for doubtful accounts and write-offs of accounts receivable, and our results of operations would be harmed.

We are unable to accurately predict any future impact of the COVID-19 pandemic due to various uncertainties, including the duration and scope of new variants and surges, and actions that may be taken by governmental authorities to contain the virus in the future. We continue to monitor the remaining impact of the COVID-19 pandemic to assess its potential effects on our business. The extent to which our results may be affected will largely depend on future developments which cannot be accurately predicted and are uncertain, but any lingering impacts of the COVID-19 pandemic could have a material adverse effect on our business, financial condition, results of operations, or cash flows. Further, due to our subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in our results of operations until future periods, and any global macroeconomic effects of the pandemic may persist for an indefinite period. The COVID-19 pandemic may also have the effect of heightening many of the other risks described in this “Risk Factors” section. Refer to the section titled “Global Economic Uncertainty and Impact of COVID-19” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Report for additional information.

We may need to change our pricing models to compete successfully.

We currently offer our clients support services for a fee that is equal to a percentage of the annual fees charged by the enterprise software vendor; therefore, changes in such vendors’ fee structures would impact the fees we would receive from our clients. If the enterprise software vendors offer deep discounts on certain services or lower prices generally, we may need to change our pricing models, which could have an adverse effect on our results of operations. In addition, we continue to add new productsour other product and service offerings, such as our Rimini ONE integrated services, have pricing models that use a variety of different metrics and formulas as compared to our offerings.support solutions. To the extent that we do not have substantial experience with pricing such new products and services, we may need to adjust our pricing models for these offerings over time to ensure that we remain competitive and realize a return on our investment in developing these new products and services. If we do not adapt our pricing models as necessary or appropriate, our revenue could decrease and adversely affect our results of operations.

We may not be able to scale our business systems quickly enough to meet our clients’ growing needs, and if we are not able to grow efficiently, our results of operations could be harmed.

As enterprise software products become more advanced and complex, we will need to devote additional resources to innovating, improving and expanding our offerings to provide relevant products and services to our clients using these more advanced and complex products. In addition, we will need to appropriately scale our internal business systems and our global operations and client engagement teams to serve our growing client base, particularly as our client demographics expand over time. Any such expansion may be expensive and complex, requiring financial investments, management time and attention. Any failure of or delay in these efforts could adversely affect the quality or success of our services and negatively impact client satisfaction, resulting in potential decreased sales to new clients and possibly lower renewal rates by existing clients.

We could also face inefficiencies or operational failures as a result of our efforts to scale our infrastructure. There can be no assurance that the expansion and improvements to our infrastructure and systems will be fully or effectively implemented within budgets or on a timely basis, if at all. Any failure to efficiently scale our business could result in reduced revenue and increased expenditures and adversely impact our operating margins and results of operations.

Because our long-term growth strategy involves further expansion of our sales to clients outside the United States, our business will be susceptible to risks associated with global operations.operations, including currency exchange rate fluctuations.

A significant component of our growth strategy involves the further expansion of our operations and client base outside the United States. Accordingly, our international revenue grew from $45.2$45.6 million for the three months ended September 30, 2021March 31, 2022 to $48.5$52.1 million for the three months ended September 30, 2022,March 31, 2023, an increase of $3.3$6.5 million or 7%14%. We currently have subsidiaries outside of the United States in Australia, Brazil, Canada, UAE (Dubai), France, Germany, Hong Kong, India,
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Israel, Japan, Korea, Malaysia, Mexico, Netherlands, New Zealand, Poland, Singapore, Sweden, Taiwan and the United Kingdom, which focus primarily on selling our services in those regions.

In the future, we may expand to other locations outside of the United States. Our current global operations and future initiatives will involve a variety of risks, including among others:

•changes in a specific country’s or region’s political or economic conditions;
•the occurrence of catastrophic events, including natural disasters, that may disrupt our business;
•changes in regulatory requirements, taxes or trade laws or the imposition of trade sanctions;
•currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into currency exchange rate hedging transactions;
•more stringent regulations relating to data security, such as where and how data can be housed, accessed and used, and the unauthorized use of, or access to, commercial and personal information;
•differing labor regulations, especially in countries and geographies where labor laws are more advantageous to employees as compared to the United States, including deemed hourly wage and overtime regulations;
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•challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs as well as hire and retain local management, sales, marketing and support personnel, along with the ability to recapture costs to open up new geographies;
•difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems;
•increased logistics, travel, real estate, infrastructure and legal compliance costs associated with global operations;
•currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into currency exchange rate hedging transactions;
•limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;
•laws and business practices favoring local competitors or general preferences for local vendors;
•limited or insufficient intellectual property protection;
•war, political instability or terrorist activities, including geopolitical actions specific to an international region, such as the current conflict between Russia and Ukraine;
•exposure to liabilities under anti-corruption and anti-money laundering laws, including the United States Foreign Corrupt Practices Act and similar laws and regulations in other jurisdictions; and
•adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.

Our exposure in operating our business globally with the risks noted above and the unique challenges of each new geography increase the risk that any potential future expansion efforts that we may undertake will not be successful. If we invest substantial time and resources to expand our global operations and are unable to do so successfully and in a timely manner, our business and results of operations will be adversely affected.

Consolidation in our target sales markets is continuing at a rapid pace, which could harm our business in the event that our clients are acquired and their agreements are terminated, or not renewed or extended.

Consolidation among companies in our target sales markets has been robust in recent years, and this continuing trend poses a risk for us. If such consolidation rates continue, we expect that some of the acquiring companies will terminate, renegotiate and elect not to renew our agreements with the clients they acquire, which may have an adverse effect on our business and results of operations.

If there is a widespread shift by clients or potential clients to enterprise software vendors, products and releases for which we do not provide software products or services, our business, financial condition and results of operations would be adversely impacted.

Our current revenue is primarily derived from the provision of support services for Oracle and SAP enterprise software products. If other enterprise software vendors, products and releases emerge to take substantial market share from current Oracle and SAP products and releases we support, and we are unable to, or do not, offer products or services for such vendors, products or releases, demand for our products and services may decline or our products and services may become obsolete. Developing new products and services to address different emerging enterprise software vendors, products and releases could take a substantial investment of time and financial resources, and we cannot guarantee that we will be successful. If fewer clients use enterprise software products for which we provide products and services, and we are not able to provide services for new vendors, products and releases, our business may be adversely impacted.

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We continue to invest resources in research and development to enhance our current product and service offerings, and other new offerings that will appeal to clients and potential clients, for example, our partnership with Salesforce to support SaaS solutions, and our Application Management Services (AMS) for SAP and Oracle products.products and our Rimini ONE integrated services. The development of new product and service offerings may not generate sufficient revenue to offset the increased research and development expenses and may not generate gross profit margins consistent with our current margins. Also, our new product and service offerings may be in markets that are more competitive than markets for our existing product and service offerings, making it more difficult to introduce them to clients and potential clients effectively or provide them profitably.

If our new or modified products, services or technology do not work as intended, are not responsive to client needs or industry or regulatory changes, are not appropriately timed with market opportunity, or are not effectively brought to market,
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we may lose existing and prospective clients or related opportunities, in which case our financial condition and results of operations may be adversely impacted, and if we are not successful in implementing any new product and service offerings, we may need to write off the value of our investment in such offerings.

Cybersecurity threats continue to increase in frequency and sophistication; if our data security measures are compromised or unauthorized access to or misuse of client data occurs, our services may be perceived as not being secure, clients may curtail or cease their use of our services, our reputation and our business may be harmed, and we may incur significant liabilities.

Our services sometimes involve accessing, processing, sharing, using, storing and transmitting proprietary information and protected data of our clients. We rely on proprietary and commercially available systems, software, tools and monitoring, as well as other processes, to provide security for accessing, processing, sharing, using, storing and transmitting such information and data. If our security measures are compromised as a result of third-party action, employee, vendor or client error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business and our clients may be harmed, and we could incur significant liabilities. Cyberattacks continue to increase in frequency and in magnitude generally, and these threats are being driven by a variety of sources, including nation-state sponsored espionage and hacking activities, industrial espionage, organized crime, sophisticated organizations and hacking groups and individuals. Furthermore, due to geopolitical tensions related to the current conflict between Russia and Ukraine and developments in China, the risk of cyber-attacks may be elevated. We have been the subject of cybersecurity threats and expect such threats to continue in the future. In addition, if the security measures of our clients are compromised, even without any actual compromise of our own systems or security measures, we may face negative publicity or reputational harm if our clients or anyone else incorrectly attributes the blame for such security breaches to us, our products and services, or our systems. We may also be responsible for repairing any damage caused to our clients’ systems that we support, and we may not be able to make such repairs in a timely manner or at all.

We may be unable to anticipate or prevent techniques used to obtain unauthorized access or to sabotage systems because they change frequently and generally are not detected until after an incident has occurred. As we increase our client base and our brand becomes more widely known and recognized, we may become more of a target for third parties seeking to compromise our systems or security measures or gain unauthorized access to our clients’ proprietary information and protected data as was the case in a 2021 successful phishing incident where we were a victim, which resulted in some unauthorized sharing of client addresses and outstanding billing data information, but did not significantly impact our business or client relationships.

Although we attempt to mitigate these risks by employing a number of measures, including insurance, monitoring of our systems and networks, employee training and maintenance of backup and protective systems, our systems, networks, products and services remain potentially vulnerable to increasingly sophisticated advanced persistent threats that may have a material effect on our business. In addition, the devotion of additional resources to the security of our information technology systems in the future could significantly increase the cost of doing business or otherwise adversely impact our financial results.

In addition, many governments have enacted laws requiring companies to notify individuals of data security incidents involving certain types of personal data, and some of our clients contractually require notification of any data security compromise. In the event of a data security compromise, we may have difficulty timely complying with notification requirements that are unreasonably short or burdensome. Security compromises experienced by our clients, by our competitors or by us may lead to public disclosures, which may lead to widespread negative publicity. Any data security compromise in our industry, whether actual or perceived, could harm our reputation, erode client confidence in the effectiveness of our security measures, negatively impact our ability to attract new clients, cause existing clients to elect not to renew their agreements with us, or subject us to third party lawsuits, government investigations, regulatory fines or other action or liability, all or any of which could materially and adversely affect our business, financial condition and results of operations.

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We cannot assure youprovide assurances that any limitations of liability provisions in our contracts for a security breach would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. Further, certain of our contracts do not contain limitations of liability specific to security breaches, which could expose us to significant liabilities or damages, all or any of which could materially and adversely affect our business, financial condition and results of operations. We also cannot be sure that our existing general liability insurance coverage and coverage for errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more claims, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of substantial deductible or co-insurance requirements, could have a material adverse effect on our business, financial condition and results of operations.
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We are subject to governmental and other legal obligations related to privacy and security, and our actual or perceived failure to comply with such obligations could harm our business.

As an expanding global company, we are subject to the laws and regulations of numerous jurisdictions worldwide regarding accessing, processing, sharing, using, storing, transmitting, disclosure and protection of personal data, the scope of which are constantly changing, subject to differing interpretation and related to jurisdictions where we have operations, customers, or where we conduct marketing, and such laws may be inconsistent between countries or in conflict with other laws, legal obligations or industry standards. For example, the General Data Protection Regulation (“GDPR”) in the European Union (“EU”), creates a broad range of requirements and imposes substantial penalties for non-compliance, including possible fines of up to 4% of global annual revenue for the preceding financial year or €20 million (whichever is higher) for the most serious infringements. We are also subject to certain requirements in other international jurisdictions with or developing strong privacy and security legislation, as well as expanding U.S. state law, including the California Consumer Privacy Act of 2018, the California Privacy Rights Act of 2020, the Virginia Consumer Data Protection Act of 2021 (effective Jan 1, 2023), the Colorado Consumer Privacy Act of 2021 (effective July 1, 2023), as well as privacy and security legislation in other states, including Nevada, each of which add to the range of privacy-relatedprivacy- and security-related compliance requirements. We generally comply with industry standards and strive to comply with all applicable legal obligations relating to privacy, and data protection and security, but it is possible that these laws and other legal obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with industry standards or our practices or may be mandated at a pace that exceeds our ability to comply. Compliance with such requirements may be costly and may require us to modify our business practices, which could adversely affect our business and profitability. Any failure or perceived failure by us to comply with these laws, policies or other obligations may result in governmental enforcement actions or litigation against us, with potential consequences such as fines and other expenses related to such governmental actions, an order requiring that we change our data practices or business practices, and could cause our clients to lose trust in us, any of which could have an adverse effect on our business.

If our products and services fail due to defects or similar problems, and if we fail to correct any defect or other software problems, we could lose clients, become subject to service performance or warranty claims or incur significant costs.

Our products and services and the systems infrastructure necessary for the successful delivery of our products and services to clients are inherently complex and may contain material defects or errors unknown to us. We have from time to time found defects in our products and services after delivery to our customers and may discover additional defects in the future. In particular, we have developed our own tools and processes to deliver comprehensive tax, legal and regulatory updates tailored for each client, which we endeavor to deliver to our clients in a shorter timeframe than our competitors, which may result in an increased risk of material defects or errors occurring. We may not be able to detect and correct all defects or errors before clients begin to use our products and services, as some may be unknown. Consequently, defects or errors may be discovered after our products and services are provided and used. These defects or errors could also cause inaccuracies in the data we collect and process for our clients, or even the loss, damage or inadvertent release of such confidential data. Even if we are able to implement fixes or corrections to our tax, legal and regulatory updates in a timely manner, any history of defects or inaccuracies in the data we collect for our clients, or the loss, damage or inadvertent release of such confidential data could cause our reputation to be harmed, and clients may elect not to renew, extend or expand their agreements with us and subject us to service performance credits, warranty or other claims or increased insurance costs. The costs associated with any material defects or errors in our products and services or other performance problems may be substantial and could materially adversely affect our financial condition and results of operations.

If we are not able to maintain an effective system of internal control over financial reporting, current and potential investors could lose confidence in our financial reporting, which could harm our business and have an adverse effect on our Common Stock price.

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We have had material weaknesses in our internal control over financial reporting. As described under “Controls and Procedures” in Part II, Item 9A of our 2021 Annual Report on Form 10-K, as filed with the SEC on March 2, 2022 (the “2021 Form 10-K”), our management concluded that we had a material weakness in our internal control over financial reporting as of March 31, 2021 and December 31, 2020, due to inadequate controls in relation to improperly applying the accounting guidance for our GP Sponsor Private Placement Warrants, recognizing the warrants as equity instead of as a liability.

In addition, in connection with the audit of our Consolidated Financial Statements for the years ended December 31, 2016 and 2015, our management determined that we had material weaknesses in our internal control over financial reporting related to the following:
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•inadequate controls in relation to recognition of liabilities for embedded derivatives in connection with our former credit facility, which was repaid in 2018 (2016);
•inadequate controls in relation to revenue recognition from support service sales contracts whereby we incorrectly accounted for multi-year, non-cancelable support service sales contracts as a single delivery arrangement and incorrectly accounting for revenue for certain non-standard contract provisions (2015 and 2016);
•various sales tax control matters related to manual processes and determination of tax liabilities in certain states (2015); and
•inadequate controls for accrual of loss contingencies related to our litigation with Oracle (2015).

As described under “Controls and Procedures” in Part II, Item 9A of our 2021 Form 10-K, we remediated the material weakness in relation to the accounting for our GP Sponsor Private Placement Warrants. We previously remediated the remaining material weaknesses described above during the years ended December 31, 2017 and 2016;Warrants; however, we cannot provide assurance that material weaknesses in our internal control over financial reporting will not be identified in the future.

With respect to controls over revenue accounting procedures, we intend to continue to work on automating our processes, especially around Accounting Standards Codification 606 (“ASC 606”), Revenue from Contracts with Customers, as well as to continue to enhance our review processes around new and renewal contracts. In addition, we are required to have our independent registered public accounting firm attest to and report on management’s assessment of the effectiveness of our internal control over financial reporting. If we are unable to conclude that we have effective internal control over financial reporting, or if our independent registered public accounting firm is unable to provide us with an attestation and an unqualified report as to the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our securities. For further information regarding our controls and procedures, see “Controls and Procedures” in Part I, Item 4 of this Report.

If we fail to enhance and protect our brand, our ability to expand our client base will be impaired and our financial condition may suffer.

We believe that our development and protection of the Rimini Street brand is critical to achieving widespread awareness of our products and services, and as a result, is important to attracting new clients and maintaining existing clients. We also believe that the importance of brand recognition will increase as competition in our market increases. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable products and services at competitive prices, as well as the outcome of our ongoing litigation with Oracle. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incurred in building our brand. If we fail to successfully promote, maintain and protect our brand, our business could be adversely impacted.

If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, experience reduced revenue and incur costly litigation to protect our rights.

Our success depends, in part, upon protecting our proprietary products, services, knowledge, software tools and processes. We rely on a combination of copyrights, trademarks, service marks, trade secret laws and contractual restrictions to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Any of our copyrights, trademarks, service marks, trade secret rights or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy or use information that we regard as proprietary to create products and services that compete with ours. In addition, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States. To the extent we expand our global activities, our exposure to unauthorized copying and use of our brand, processes and software tools may increase.

We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances. No assurance can be given that these agreements will be effective in controlling access to and distribution of our proprietary intellectual property.
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Further, these agreements may not prevent our competitors from independently developing products and services that are substantially equivalent or superior to our products and services.

Although we have been successful in the past, there can be no assurance that we will receive any additional patent protection for our proprietary software tools and processes. Even if we were to receive patent protection, those patent rights could be invalidated at a later date. Furthermore, any such patent rights may not adequately protect our processes, our software tools or prevent others from designing around our patent claims.

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To protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our inability to protect our products, processes and software tools against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our products and services, impair the functionality of our products and services, delay introductions of new products and services, result in our substituting inferior or more costly technologies into our products and services, or injure our reputation.

We may be subject to additional obligations to collect and remit sales tax and other taxes, and we may be subject to tax liability, interest and/or penalties for past sales, which could adversely harm our business.

State, local and foreign jurisdictions have differing and complex rules and regulations governing sales, use, value-added and other taxes, and these rules and regulations can be subject to varying interpretations that may change over time. In particular, the applicability of such taxes to our products and services in various jurisdictions is unclear. Further, these jurisdictions’ rules regarding tax nexus are complex and can vary significantly. As a result, we could face the possibility of tax assessments and audits, and our liability for these taxes and associated interest and penalties could exceed our original estimates. Should these jurisdictions determine that we should be collecting additional sales, use, value-added or other taxes, it could result in substantial tax liabilities and related penalties for past sales, discourage clients from purchasing our products and services or otherwise harm our business and results of operations.

The amount of and ultimate realization of the benefits from the net operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, our future earnings, and other future events, the effects of which cannot be determined; if we are not able to use a significant portion of our net operating loss carryforwards, our profitability could be adversely affected.

We have United States federal and state net operating loss carryforwards due to prior period losses, which could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if we experience an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws in the United States. While our ownership changes to date have not triggered any limitations under Section 382, it is possible that any future ownership changes or issuances of our capital stock, could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.

We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions.

As a multinational organization, we may be subject to taxation in several jurisdictions worldwide with increasingly complex tax laws, the application of which can be uncertain. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. As such, our results may differ from previous estimates and may materially affect our financial position.

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The amount of taxes we pay in jurisdictions in which we operate could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have a material adverse effect on our liquidity and results of operations. In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could have a material impact on our business and results of operations.

We previously took advantage of certain exemptions from reporting and disclosure requirements available to smaller reporting companies that are also accelerated filers within the meaning of the Securities Act that will no longer be available in future years.

For the fiscal year ended December 31, 2021, we were considered a smaller reporting company (“SRC”) within the meaning of the Securities Act, which allowed us to take advantage of certain exemptions from various reporting requirements that are applicable to other accelerated filers that are not SRCs, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

As a result, our stockholders may not have had access to certain information they may deem important in our filings with the SEC for periods through December 31, 2021, including the proxy statement for our 2022 Annual Meeting of Stockholders, which was filed with the SEC on April 29, 2022. We cannot predict whether investors will find our securities less attractive because we relied on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the market price of our Common Stock may be lower than they otherwise would be, there may be a less active trading market for our Common Stock and the market price of our Common Stock may be more volatile.

Risks Related to our Indebtedness and Securities

Our level of indebtedness and any future indebtedness we may incur may limit our operational and financing flexibility and negatively impact our business.
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On September 30, 2022,March 31, 2023, our outstanding indebtedness under the Credit Facility and finance leases totaled $79.9$77.6 million. We may incur substantial additional indebtedness in the future. Our Credit Facility and other debt instruments we may enter into in the future may significantly impact our business, including the following among others:

•our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired;
•our requirement to use a significant portion of our cash flows from operations to pay principal and interest on our indebtedness, which will reduce the funds available to us for operations and other purposes;
•our level of indebtedness could place us at a competitive disadvantage compared to our competitors that may have proportionately less debt;
•our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate may be limited; and
•our level of indebtedness may make us more vulnerable to economic downturns and adverse developments in our business.

We expect to depend primarily on cash generated by our operations for funds to pay our expenses and any amounts due under our Credit Facility and any other indebtedness we may incur. Our ability to make these payments depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control, including theany lingering impacts of the COVID-19 pandemic, inflation and global economic conditions. Our business may not generate sufficient cash flows from operations in the future and our currently anticipated growth in net sales and cash flows may not be realized, either or both of which could result in our being unable to repay indebtedness or to fund other liquidity needs. If we do not generate adequate resources, we may be required to refinance all or part of our then existing debt, sell assets or borrow more money, in each case on terms that may not be acceptable to us. In addition, the terms of existing or future debt agreements, including our existing Credit Facility, may restrict us from adopting some or any of these alternatives. Our inability to incur additional debt in the future could also delay or prevent a change in control of our Company, make some transactions more difficult and impose additional financial or other covenants on us. In addition, any significant levels of indebtedness in the future could make us more vulnerable to economic downturns and adverse developments in our business. Our current
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indebtedness and any inability to pay our debt obligations as they come due or an inability to incur additional debt could adversely affect our business and results of operations.

The terms of our Credit Facility impose operating and financial restrictions on us.

Our Credit Facility contains certain restrictions and covenants that generally limit our ability to, among other things, create liens on assets, sell assets, engage in mergers or consolidations, make loans or investments, incur additional indebtedness, engage in certain transactions with affiliates, incur certain material ERISA or pension liabilities and pay dividends or repurchase capital stock and in each case, subject to certain exceptions set forth in our credit agreement. Our Credit Facility may limit our ability to engage in these types of transactions even if we believe that a specific transaction would contribute to our future growth or improve our operating results. Our Credit Facility also requires us to achieve specified financial and operating results and maintain compliance with specified financial ratios, including as a condition to accessing additional amounts available for borrowing. As of September 30, 2022,March 31, 2023 and on the date of filing this Report, we were in compliance with each of these financial covenants. Our ability to comply with these provisions may be affected by events beyond our control. A breach of any of these financial covenants or our inability to comply with required financial ratios in our Credit Facility could result in a default under the Credit Facility in which case the lenders would have the right to declare all borrowings, which includes any principal amount outstanding, together with all accrued, unpaid interest and other amounts owing in respect thereof, to be immediately due and payable. If we are unable to repay all borrowings when due, whether at maturity or if declared due and payable following a default, the lenders would have the right to proceed against the collateral granted to secure the indebtedness. If we breach these covenants or fail to comply with other terms of the Credit Facility and the lenders accelerate the amounts outstanding under the Credit Facility, our business and results of operations would be adversely affected. Additionally, we may need to refinance our Credit Facility at maturity or upon default, and future financing may not be available on acceptable terms, or at all.

Our variable rate indebtedness subjects us to interest rate risk, which, along with the phase-out of LIBOR and transition to SOFR, could cause our indebtedness service obligations to increase significantly.

As a result of market interest rate fluctuations, interest rates under our Credit Facility or other variable rate indebtedness we may incur in the future could be higher or lower than current levels. As interest rates increase, our debt service obligations under our Credit Facility may increase even though the amounts borrowed remain the same, and our net income (loss) and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease. In addition, a transition awayWe have
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entered into an interest rate swap agreement that involves the exchange of floating for fixed rate interest payments in order to partially reduce interest rate volatility under our Credit Facility. However, we currently do not maintain interest rate swap agreements with respect to all of our variable rate indebtedness, and any interest rate swap agreements we enter into in the future may not fully mitigate our interest rate risk.

Effective February 28, 2023, we amended both our Credit Facility and our then-effective interest rate swap agreement to implement certain changes in the reference rate from LIBOR as a benchmark for establishingto SOFR in response to the applicable interest rate may affect the cost of servicing our debt under the Credit Facility. In July 2017, the Financial Conduct Authority of the U.K. announced that it plans to phase out LIBORprevious announcement by the end of calendar year 2021. On March 5, 2021, however, the ICE Benchmark Administration, the administrator of LIBOR, announced its intention tothat it would cease the publication of all settings of non-U.S. dollar LIBOR and only the one-week and two-monthremaining U.S. dollarDollar LIBOR settings on December 31, 2021, with the publication of the remaining U.S. dollar LIBOR settings being discontinued after Septembereffective June 30, 2023. WhileAs a result, we expecthave a choice of interest rates between (a) Adjusted Term SOFR and (b) a Base Rate, in each case plus an applicable margin and as further defined in the Credit Facility. The applicable margin is based on our Consolidated Leverage Ratio (as defined in the Credit Facility) and whether we elect Adjusted Term SOFR (ranging from 1.75 to 2.50%) or Base Rate (ranging from 0.75 to 1.50%). SOFR is a relatively new reference rate, and its composition and characteristics are not the same as LIBOR. SOFR is calculated based on short-term repurchase agreements, backed by Treasury securities. As such, SOFR is observed and backward looking, which stands in contrast with LIBOR under the previous methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting bank panel members. Given SOFR’s limited history, the future performance of SOFR cannot be availablepredicted based on historical performance, and there is no assurance that SOFR will perform in substantially its current form untilthe same way as LIBOR would have performed at least the end of September 30, 2023,any time or that it is possible that LIBOR will become unavailable prior to that point. This could result,a comparable substitute for example, if sufficient banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative base rate will be accelerated and magnified. Our borrowing arrangements provide for alternative base rates, but such alternative base rates may or may not be related to LIBOR, and theLIBOR.The consequences of the phase out of LIBOR cannot be entirely predicted at this time. For example, if any alternative base rate or means of calculating interest with respecttransitioning to our outstanding variable rate indebtedness leads to an increase in the interest rates charged, itSOFR could result in an increase in the cost of suchour variable rate indebtedness, orwhich may impact our ability to refinance some or all of our existing indebtedness or otherwise have a material adverse impact on our business, financial condition and results of operations.

Our stock repurchase program could affect the price of our Common Stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our Common Stock.

Our Board of Directors has authorized a $50.0 million stock repurchase program. During the three months ended September 30, 2022,March 31, 2023, we acquired 0.2 millionno shares of Common Stock on the open market at a cost of $1.0 million. Upon completion of this repurchase, these shares of Common Stock were retired.market. Repurchases pursuant to any such stock repurchase program could affect our Common Stock price and increase its volatility. The existence of a stock repurchase program could also cause our Common Stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our Common Stock. Such repurchase program will not obligate us to repurchase any further specific dollar amount or number of shares of Common Stock within that authorization and may be suspended or discontinued at any time, which could cause the market price of our Common Stock to decline. The timing and actual number of further shares
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repurchased under any such stock repurchase program depends on a variety of factors including the timing of open trading windows, price, corporate and regulatory requirements, and other market conditions. Further, the provisions of the Inflation Reduction Act of 2022 impose an excise tax of 1% tax on the fair market value of stock repurchases made after December 31, 2022, net of certain adjustments for issuances of incentive and other equity. The impact of this provision will depend on the extent of share repurchases and qualified reductions for issuances made in future periods. There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our Common Stock may decline below the levels at which we repurchased shares of Common Stock. Although our stock repurchase program is intended to enhance stockholder value, short-term stock price fluctuations could reduce the program’s effectiveness.

The price of our Common Stock may be volatile, and any issuance of Common Stock upon the exercise of remaining warrants will dilute existing stockholders and such issuances and/or any sales of Common Stock by large stockholders may depress the market price of our Common Stock.

The price of our Common Stock may fluctuate due to various factors enumerated in this Risk Factors section and elsewhere in this Report. Additional factors impacting the price of our Common Stock could include:

•the failure of securities analysts to publish research about us, or shortfalls in our results of operations compared to levels forecast by securities analysts;
•any delisting of our Common Stock from Nasdaq Global Market due to any failure to meet listing requirements; and
•the general state of securities markets.

These factors may materially reduce the market price of our Common Stock, regardless of our operating performance. Additionally, we have registered for resale the shares of Common Stock of certain of our significant holders of our Common Stock, including our largest stockholder, Adams Street Partners, LLC. Any sale of large amounts of our Common Stock on the open market or in privately negotiated transactions could have the effect of increasing the volatility in the price of our Common Stock or putting significant downward pressure on the price of our Common Stock. Also, the issuance of Common Stock upon exercise of warrants that remain outstanding and exercisable may result in immediate and substantial dilution to the equity interests of our existing common stockholders and might result in dilution in the tangible net book value of a share of Common Stock,
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depending upon the price on which the additional shares are issued. We may also seek to engage in further capital optimization transactions in the future, the result of which could trigger some dilution or have other impacts on the market price of our Common Stock and not achieve an improved capital structure. Any issuance of equity we may undertake in the future to raise additional capital could cause the price of our Common Stock to decline or require us to issue shares at a price that is lower than that paid by holders of our Common Stock in the past, which would result in those newly issued shares being dilutive.

Certain of our common stockholders can exercise significant control, which could limit our stockholders’ ability to influence the outcome of key transactions, including a change of control.

Based on the number of shares of Common Stock outstanding as of September 30, 2022,March 31, 2023, two of our stockholders have aggregate voting power of 39.8%38.5% of our outstanding capital stock. As of September 30, 2022,March 31, 2023, (i) approximately 26.7%26.5% of our outstanding voting capital stock is held by Adams Street Partners LLC and certain Adams Street fund limited partnerships and (ii) approximately 13.1%12.0% of our outstanding voting capital stock is beneficially owned by our Chief Executive Officer.Officer and President. Our directors and officers or persons affiliated with our directors and officers have aggregate voting power of approximately 42.2%39.8% as of September 30, 2022.March 31, 2023.

As a result, these stockholders, acting together, have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. Corporate action might be taken even if other stockholders oppose the action being taken. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.

We do not currently intend to pay dividends on our Common Stock and, consequently, the ability to achieve a return on investment in our Common Stock will depend on appreciation in the price of our Common Stock.

We have not paid any cash dividends on our Common Stock to date. The payment of any cash dividends on our Common Stock will depend upon our revenue, earnings, cash flow and financial condition from time to time. The payment of any dividends is at the discretion of our Board of Directors and is also limited under the terms of our Credit Facility. Our ability to declare dividends on our Common Stock may also be limited by the terms of future financing and other agreements entered into by us from time to time. It is presently expected that we will retain all earnings for use in our business operations and, accordingly, it is not expected that our Board of Directors will declare any dividends on our Common Stock in the foreseeable future. Therefore, the success of an investment in shares of our Common Stock will depend upon any future appreciation in its value. There is no guarantee that shares of our Common Stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.
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Risks Relating to our Corporate Governance

The DGCL and our certificate of incorporation, bylaws and corporate governance policies contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.

Our certificate of incorporation and bylaws, and Delaware General Corporation Law (the “DGCL”), contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our Board of Directors and therefore depress the trading price of our Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of our Board of Directors or taking other corporate actions, including effecting changes in our management and corporate governance policies and practices. Among other things, our certificate of incorporation and bylaws include provisions regarding:

•a classified Board of Directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board of Directors;
•the ability of our Board of Directors to issue shares of preferred stock, including “blank check” preferred stock, and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
•the limitation of the liability of, and the indemnification of our directors and officers;
•the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors;
•the requirement that directors may only be removed from our Board of Directors for cause;
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•a prohibition on common stockholder action by written consent, which forces common stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors;
•the requirement that a special meeting of stockholders may be called only by our Board of Directors, the chairperson of our Board of Directors, our chief executive officer or our president (in the absence of a chief executive officer), which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors;
•controlling the procedures for the conduct and scheduling of Board of Directors and stockholder meetings;
•the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal any provision of our certificate of incorporation or our bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board of Directors and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt;
•the ability of our Board of Directors to amend the bylaws, which may allow our Board of Directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and
•advance notice procedures with which stockholders must comply to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board of Directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our Board of Directors or management and corporate governance policies.

In addition, as a Delaware corporation, we are subject to provisions of Delaware law, including Section 203 of the DGCL, which may prohibit certain stockholders holding 15% or more of our outstanding capital stock from engaging in certain business combinations with us for a specified period of time.

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Any provision of our certificate of incorporation, bylaws or DGCL that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Common Stock and could also affect the price that some investors are willing to pay for our Common Stock.

Our bylaws designate a state or federal court located within the State of Delaware as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders or employees.

Our bylaws provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for:

•any derivative action or proceeding brought on behalf of us;
•any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers or other employees;
•any action asserting a claim against us or any of our directors, officers or employees arising out of or relating to any provision of the DGCL, our certificate of incorporation or our bylaws; or
•any action asserting a claim against us or any of our directors, officers, stockholders or employees that is governed by the internal affairs doctrine of the Court of Chancery.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition. This choice of forum provision does not operate to restrict suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act.

General Risks

Future acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of management, disrupt our business, dilute stockholder value and adversely affect our financial condition and results of operations.
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We may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our services, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not the acquisitions are completed. If we acquire businesses, we may not be able to integrate successfully the acquired personnel, operations and technologies, or effectively manage the combined business following the acquisition. We may not be able to find and identify desirable acquisition targets or be successful in entering into an agreement with any particular target or obtain adequate financing to complete such acquisitions. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our results of operations. In addition, if an acquired business fails to meet our expectations, our business, financial condition and results of operations may be adversely affected.

The commercial insurance market is changing rapidly in response to rising insurance losses and claims, changes in available insurance capacity and adverse worldwide economic conditions, uncertainties, and risks, which may lead to higher premium costs, higher policy deductibles, self-insured retentions, and/or lower coverage limits, potentially impacting our ability to continue our present limits of insurance coverage, obtain sufficient insurance capacity to adequately insure our risks or maintain adequate insurance at a reasonable cost.

Commercial insurance availability and coverage terms, including deductibles, self-insured retentions and pricing, continue to vary with market conditions. While we believe our insurance coverage addresses all material risks to which we are exposed and is adequate and customary for our current global operations, we have observed rapidly changing conditions in the insurance markets relating to nearly all areas of traditional corporate insurance, resulting in higher premium costs, rising policy deductibles/self-insured retentions and lower coverage limits. If these changes continue, we may not be able to continue our present limits of insurance coverage, obtain sufficient insurance capacity to adequately insure our risks and/or obtain and maintain adequate insurance at a reasonable cost. Our insurance policies cover a number of risks and potential liabilities, such as general liability, property coverage, errors and omissions liability, employment liability, business interruptions, cybersecurity
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liability, crime, and directors’ and officers’ liability. We cannot be certain that our insurance coverage will be adequate to cover liabilities actually incurred, that insurance will continue to be available to us on commercially reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim or become insolvent. The successful assertion of one or more large claims against us that exceed available insurance coverage, the occurrence of changes in our insurance policies, including premium increases, decreases in coverage and the imposition of large deductible, self-insured retentions, or co-insurance requirements, or the insolvency of any of our insurers, could have a material adverse effect on our business, results of operations and financial condition.

Catastrophic events may disrupt our business.

We rely heavily on our network infrastructure and information technology systems for our business operations. A disruption or failure of these systems in the event of an online attack, earthquake, fire, terrorist attack, geopolitical instability including the ongoing conflict between Russia and Ukraine, war, power loss, telecommunications failure, extreme weather conditions (such as hurricanes, wildfires or floods) or other catastrophic event could cause system interruptions, delays in accessing our service, reputational harm, loss of critical data or could prevent us from providing our products and services to our clients. In addition, several of our employee groups reside in areas particularly susceptible to earthquakes, such as the San Francisco Bay Area and Japan, and a major earthquake or other catastrophic event could affect our employees, who may not be able to access our systems, or otherwise continue to provide our services to our clients. A catastrophic event that results in the destruction or disruption of our data centers, or our network infrastructure or information technology systems, or access to our systems could affect our ability to conduct normal business operations and adversely affect our business, financial condition and results of operations. Additionally, the emergence or spread of a pandemic or other widespread health emergency (or concerns over and response to the possibility of such an emergency), including any lingering impacts of the COVID-19 pandemic that causes any of our employee groups to become ill, quarantined or otherwise unable to work and/or travel due to health reasons or governmental or client corporate restrictions, or causes our clients to have ill or logistically restricted workforces, or who choose to cease or delay meetings with us or decisions regarding engaging our services could adversely affect our business, financial condition and results of operations.

Failure to comply with laws and regulations applicable to our operations could harm our business.

Our business is subject to regulation by various global governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, environmental laws, consumer protection laws, anti-bribery laws, import/export controls, securities laws and tax laws and regulations. For example, transfer of certain software outside of the United States or to certain persons is regulated by export controls.

In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States. Noncompliance with applicable requirements could subject us to investigations, sanctions, enforcement actions, disgorgement
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of profits, fines, damages, civil and criminal penalties or injunctions and may result in our inability to provide certain products and services. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, or if clients make claims against us for compensation for such non-compliance, our business, financial condition and results of operations could be harmed, and responding to any such type of action will likely result in a significant diversion of management’s attention and resources.

Reports published by analysts, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our Common Stock.

Securities research analysts may establish and publish their own periodic projections for us. These projections may vary widely and may not accurately predict the results we actually achieve. Our share price may decline if our actual results do not meet the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our share price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline. If no additional analysts commence coverage of us, the market price and volume for our common shares could be adversely affected.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On May 28, 2022, the Board of Directors authorized an increase to its previously announced common stock repurchase program approved on February 27, 2022 to increase the value of the securities that could be acquired by us from up to
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$15.0 million over two years to up to $50.0 million over the next four years, subject to continuing compliance with the Credit Facility, provided that all other applicable conditions and legal requirements are satisfied.

On February 27, 2022, the Board of Directors approved the adoption of a stock repurchase program to acquire up to $15.0 millionThere were no repurchases 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 Facility, which was amended effective January 14, 2022 to increase the aggregate value of the shares of Common Stock that could be acquired by us to no greater than $15.0 million during the term of the Credit Facility, provided that all other applicable conditions and legal requirements are satisfied.

The following table sets forth the monthly acquisitions of our Common Stock that occurred during the three months ended September 30, 2022.

PeriodTotal number of shares purchasedAverage price paid per share
Total number of shares purchased as part of publicly announced plan (1)
Approximate dollar value of shares that may yet be purchased (2)
July 1-31, 2022— $— — $46,252,000 
August 1-31, 2022100,000 $5.09 100,000 $45,743,000 
September 1-30, 2022100,000 $4.84 100,000 $45,260,000 
Total200,000 200,000  

(1) Shares were repurchased under a $15 million stock repurchase program authorized by the Board of Directors on February 27, 2022, and subsequently, increased, by authorization of the Board of Directors, to an aggregate of $50 million stock repurchase program on May 28, 2022. No shares were purchased other than through publicly announced programs during the periods shown.

(2) Amounts in this column reflect amounts remaining under the applicable $50 million (August and September 2022) stock repurchase program referenced above.March 31, 2023.

ITEM 3. Defaults Upon Senior Securities.
 
    None.
 
ITEM 4. Mine Safety Disclosures.
 
    Not applicable.

ITEM 5. Other Information.
 
    None.
 
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ITEM 6. Exhibits.
 
  Incorporated by Reference
Exhibit
Number		DescriptionFormFile No.ExhibitFiling Date
8-K001-373973.1October 16, 2017
8-K001-373973.2October 16, 2017
8-K001-3739710.1February 23, 2023
101.INS†
Inline XBRL Instance Document
101.SCH†
Inline XBRL Taxonomy Extension Schema
101.CAL†
Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF†
Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB†
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE†
Inline XBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
____________________
† Filed herewith.
* Previously filed and incorporated herein by reference.
** Furnished herewith.

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SIGNATURES
 
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 RIMINI STREET, INC.
  
Date: November 2, 2022May 3, 2023/s/ Seth A. Ravin
 Name: Seth A. Ravin
 Title: Chief Executive Officer, Chairman of the Board and President
 (Principal Executive Officer)




Date: November 2, 2022May 3, 2023/s/ Michael L. Perica
Name: Michael L. Perica
Title: Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

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