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Rainmaker Reports Third Quarter 2013 Financial Results

Rainmaker Reports Third Quarter 2013 Financial Results 
CAMPBELL, CA -- (Marketwired) -- 11/18/13 --  Rainmaker Systems, Inc.
(OTCQX: RMKR), a provider of B2B e-Commerce solutions and services,
today reported financial results for its fiscal quarter ended
September 30, 2013.  
Net revenue in the third quarter of 2013 was $4.2 million, compared
to net revenue in the preceding quarter of $4.7 million and net
revenue in the third quarter of 2012 of $6.9 million. Net revenue for
the nine months ended September 30, 2013 was $13.5 million compared
to $20.2 million in the 2012 comparative period.  
Net loss from continuing operations for the third quarter of 2013 was
$3.6 million, or a net loss of $0.09 per share, compared to a net
loss from continuing operations in the preceding quarter of $3.0
million, or a net loss of $0.08 per share, and a net loss from
continuing operations in the third quarter of 2012 of $0.9 million,
or a net loss of $0.03 per share. Net loss from continuing operations
for the nine months ended September 30, 2013 was $10.0 million, or a
net loss of $0.28 per share, compared to a net loss from continuing
operations of $3.0 million, or a net loss of $0.11 per share, in the
2012 comparative period. 
The results above include a charge in connection with a $458,000
overstatement of credit card receivables relating to a service
contract with a former customer. 
Total cash and cash equivalents were $4.2 million at September 30,
2013, compared to $4.5 million at December 31, 2012.  
"Please join us for our earnings conference call scheduled for this
Thursday, November 21, 2013, to learn about key updates regarding our
turnaround plan," said Don Massaro, President and CEO. 
Conference Call 
 Rainmaker Systems will host a conference call and
webcast Thursday, November 21, 2013, at 2 p.m. Pacific Daylight Time
(5 p.m. Eastern Daylight Time) to discuss its third quarter 2013
financial results. Those wishing to participate in the live call
should dial 888-539-3612 using the passcode 2593666. A replay of the
call will be available for one week beginning approximately two hours
after the call's conclusion by dialing 888-203-1112 and entering the
passcode 2593666. To access the live webcast of the call, go to the
Investors section of Rainma
ker's website at www.rainmakersystems.com.
A webcast replay of the conference call will be available for one
year on the Conference Calls/Events page of the Investors section at
www.rainmakersystems.com.  
About Rainmaker Systems, Inc.
 Rainmaker Systems is a B2B e-Commerce
company that helps organizations of all sizes, ranging from Fortune
500 enterprises to small-to-medium-sized businesses, create new
revenue streams from segments of their customer base that extend
beyond traditional sales team capabilities. With its unique approach,
Rainmaker Systems delivers proprietary cloud-based e-Commerce
technology, global and localized sales-assist agents, and
best-practice sales and marketing expertise, allowing customers to
discover and monetize untapped revenue opportunities.  
Rainmaker Systems trades in the U.S. on the OTCQX under the symbol
"RMKR." 
Rainmaker Systems and the Rainmaker logo are registered with the U.S.
Patent and Trademark Office. All other service marks or trademarks
are the property of their respective owners.  
Safe Harbor Statement
 This press release may contain forward-looking
statements regarding future events. These forward-looking statements
are based on information available to Rainmaker Systems as of this
date and we assume no obligation to update any such forward-looking
statements. These statements are not guarantees of future
performance, and actual results could differ materially from current
expectations. Among the important factors which could cause actual
results to differ materially from those in the forward-looking
statements are our ability to raise additional equity or debt
financing to fund our operations, our client concentration, as we
depend on a small number of clients for a significant percentage of
our revenue, the possibility of the discontinuation and/or
realignment of some client relationships, general market conditions,
our ability to maintain compliance with our debt covenants, the high
degree of uncertainty and our limited visibility due to economic
conditions, our ability to execute our business strategy, our ability
to integrate acquisitions without disruption to our business, the
effectiveness of our sales team and approach, our ability to target,
analyze and forecast the revenue to be derived from a client and the
costs associated with providing services to that client, the date
during the course of a calendar year that a new client is acquired,
the length of the integration cycle for new clients and the timing of
revenues and costs associated therewith, our ability to execute our
business strategy and manage growth, potential competition in the
marketplace, our ability to retain and attract employees, market
acceptance of our solutions and pricing options, our ability to
maintain our existing technology platform and to deploy new
technology, our ability to sign new clients and control expenses, the
financial condition of our clients' businesses, the protection of our
intellectual property and other factors detailed in the Company's
filings with the Securities and Exchange Commission ("SEC"),
including our filings on Forms 10-K and 10-Q.  
- Financial tables to follow -  


 
                                                                            
                          RAINMAKER SYSTEMS, INC.                           
                        CONSOLIDATED BALANCE SHEETS                         
                 (In thousands, except for per share data)                  
                                (Unaudited)                                 
                                                                            
                                               September 30,   December 31, 
                                                    2013           2012     
                                               -------------  ------------- 
                    ASSETS                                                  
Current assets:                                                             
  Cash and cash equivalents                    $       4,166  $       4,494 
  Restricted cash                                         17             52 
  Accounts receivable, net                             4,159          3,720 
  Prepaid expenses and other current assets              829          1,292 
                                               -------------  ------------- 
    Total current assets                               9,171          9,558 
Property and equipment, net                            2,829          2,455 
Goodwill                                               5,334          5,337 
Other non-current assets                                 804            416 
                                               -------------  ------------- 
      Total assets                             $      18,138  $      17,766 
                                               =============  ============= 
                                                                            
     LIABILITIES AND STOCKHOLDERS' DEFICIT                                  
Current liabilities:                                                        
  Accounts payable                             $      10,620  $       7,159 
  Accrued comp
ensation and benefits                    1,026            425 
  Other accrued liabilities                            3,384          3,142 
  Deferred revenue                                     1,677          2,311 
  Notes payable                                        2,430          2,727 
                                               -------------  ------------- 
    Total current liabilities                         19,137         15,764 
Deferred tax liability                                   607            567 
Deferred revenue, less current portion                 1,328             44 
Common stock warrant liability                           200            348 
Notes payable, less current portion                      900          1,800 
                                               -------------  ------------- 
    Total liabilities                                 22,172         18,523 
                                               -------------  ------------- 
Stockholders' deficit:                                                      
  Preferred stock, $0.001 par value; 5,000                                  
   shares authorized, none issued and                                       
   outstanding                                            --             -- 
  Common stock, $0.001 par value; 50,000                                    
   shares authorized, 44,545 shares issued and                              
   42,288 shares outstanding at September 30,                               
   2013, and 30,454 shares issued and 28,428                                
   shares outstanding at December 31, 2012                41             27 
  Additional paid-in capital                         137,277        130,402 
  Accumulated deficit                               (138,144)      (128,198)
  Accumulated other comprehensive loss                  (349)          (261)
  Treasury stock, at cost; 2,257 shares at                                  
   September 30, 2013 and 2,026 shares at                                   
   December 31, 2012                                  (2,859)        (2,727)
                                               -------------  ------------- 
      Total stockholders' deficit                     (4,034)          (757)
                                               -------------  ------------- 
      Total liabilities and stockholders'                                   
       deficit                                 $      18,138  $      17,766 
                                               =============  ============= 
                                                                            
                                                                            
                          RAINMAKER SYSTEMS, INC.                           
               CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS                
                  (In thousands, except per share amounts)                  
                                (Unaudited)                                 
                                                                            
                                  Three Months Ended     Nine Months Ended  
                                     September 30,         September 30,    
                                 --------------------  -------------------- 
                                    2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
Net revenue                      $   4,160  $   6,900  $  13,546  $  20,196 
Cost of services                     2,906      3,808      9,010     11,315 
                                 ---------  ---------  ---------  --------- 
Gross profit                         1,254      3,092      4,536      8,881 
                                 ---------  ---------  ---------  --------- 
Operating expenses:                                                         
  Sales and marketing                  905        524      2,422      1,569 
  Technology and development         1,333      1,199      3,927      4,318 
  General and administrative         2,102      1,486      6,853      4,238 
  Depreciation and amortization        396        420      1,241      1,226 
                                 ---------  ---------  ---------  --------- 
Total operating expenses             4,736      3,629     14,443     11,351 
                                 ---------  ---------  ---------  --------- 
Operating loss                      (3,482)      (537)    (9,907)    (2,470)
Loss (gain) due to change in                                                
 fair value of warrant liability        66        337       (148)       315 
Interest and other expense, net         59         63        205        134 
                                 ---------  ---------  ---------  --------- 
Loss before income tax (benefit)                                            
 expense                            (3,607)      (937)    (9,964)    (2,919)
Income tax (benefit) expense           (20)         7         35        125 
                                 ---------  ---------  ---------  --------- 
Net loss from continuing                                                    
 operations                         (3,587)      (944)    (9,999)    (3,044)
Net income (loss) from                                                      
 discontinued operations               (34)      (706)        53     (2,692)
                                 ---------  ---------  ---------  --------- 
Net loss                         $  (3,621) $  (1,650) $  (9,946) $  (5,736)
                                 =========  =========  =========  ========= 
                                                                            
Foreign currency translation                                                
 adjustments                            85         31        (87)       (78)
                                 ---------  ---------  ---------  --------- 
Comprehensive loss               $  (3,536) $  (1,619) $ (10,033) $  (5,814)
                                 =========  =========  =========  ========= 
                                                                            
Basic and diluted net income                                                
 (loss) per per share:                                                      
  Net loss from continuing                                                  
   operations                    $   (0.09) $   (0.03) $   (0.28) $   (0.11)
  Net income (loss) from                                                    
   discontinued operations              --      (0.03)        --      (0.10)
                                 ---------  ---------  ---------  --------- 
  Net loss                       $   (0.09) $   (0.06) $   (0.28) $   (0.21)
                                 =========  =========  =========  ========= 
                                                                            
Weighted average common shares:                                             
  Basic and diluted                 40,684     27,066     35,566     27,013 
                                 =========  =========  =========  ========= 
                                                                            
                                              
                              
                          RAINMAKER SYSTEMS, INC.                           
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
                               (In thousands)                               
                                (Unaudited)                                 
                                                                            
                                                          Nine Months Ended 
                                                            September 30,   
                                                         ------------------ 
                                                           2013      2012   
                                                         --------  -------- 
Operating activities:                                                       
  Net loss                                               $ (9,946) $ (5,736)
  Adjustment for income (loss) from discontinued                            
   operations, net of tax                                     (53)    2,692 
  Adjustments to reconcile net loss to net cash used in                     
   operating activities:                                                    
    Depreciation and amortization of property and                           
     equipment                                              1,241     1,141 
    Amortization of intangible assets                          --        85 
    Loss (gain) due to change in fair value of warrant                      
     liability                                               (148)      315 
    Stock-based compensation expense                        1,352       607 
    Provision (credit) for allowances for doubtful                          
     accounts                                                  (4)      (35)
    Provision for allowance of credit card receivables        420        -- 
    Provision for allowances for other assets                 280        -- 
    Changes in operating assets and liabilities:                            
      Accounts receivable                                    (844)      227 
      Prepaid expenses and other assets                      (207)     (762)
      Accounts payable                                      3,475     1,705 
      Accrued compensation and benefits                       576       (19)
      Other accrued liabilities                               230      (330)
      Deferred tax liability                                   40        51 
      Deferred revenue                                        650      (501)
                                                         --------  -------- 
        Net cash used in continuing operations             (2,938)     (560)
        Net cash provided by (used in) discontinued                         
         operations                                            53    (1,021)
                                                         --------  -------- 
        Net cash used in operating activities              (2,885)   (1,581)
                                                         ========  ======== 
                                                                            
Investing activities:                                                       
  Purchases of property and equipment                      (1,614)     (907)
  Change in restricted cash, net                               35       (10)
                                                         --------  -------- 
        Net cash used in continuing operations             (1,579)     (917)
        Net cash used in discontinued operations               --      (837)
                                                         --------  -------- 
        Net cash used in investing activities              (1,579)   (1,754)
                                                         ========  ======== 
                                                                            
Financing activities:                                                       
  Proceeds from issuance of common stock                    5,534        -- 
  Proceeds from borrowings                                    200     4,555 
  Repayment of borrowings                                  (1,397)   (3,933)
  Repayment of acquisition earnout                             --      (113)
  Net proceeds from overdraft facility                         --      (381)
  Tax payments in connection with treasury stock                            
   surrendered                                               (132)     (233)
                                                         --------  -------- 
        Net cash provided by (used in) continuing                           
         operations                                         4,205      (105)
        Net cash provided by (used in) discontinued                         
         operations                                            --      (708)
                                                         --------  -------- 
        Net cash provided by (used in) financing                            
         activities                                         4,205      (813)
                                                         ========  ======== 
                                                                            
Effect of exchange rate changes on cash                       (69)       83 
                                                         --------  -------- 
                                                                            
Net decrease in cash and cash equivalents                    (328)   (4,065)
Cash and cash equivalents at beginning of year              4,494     8,490 
                                                         --------  -------- 
Cash and cash equivalents at end of year                 $  4,166  $  4,425 
                                                         ========  ======== 

  
Contact:
Bradford Peppard
Chief Financial Officer
Rainmaker Systems, Inc.
408-340-2510
brad.peppard@rmkr.com 
Investor Relations Contact:
Jeffrey Waters
Director of Investor Relations
410-294-6802
jeffrey.waters@rmkr.com