RAINMAKER SYSTEMS INC

CIK:0001094007|SEC Filings

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net revenue	$ 1,882	$ 4,160	$ 9,139	$ 13,546
Cost of services	1,834	3,008	8,068	9,324
Gross profit	48	1,152	1,071	4,222
Operating expenses:
Sales and marketing	445	905	2,260	2,422
Technology and development	778	1,231	2,517	3,613
General and administrative	699	2,102	2,577	6,853
Restructuring expense	365	0	365	0
Depreciation and amortization	117	396	286	1,241
Total operating expenses	2,404	4,634	8,005	14,129
Operating loss	(2,356)	(3,482)	(6,934)	(9,907)
(Gain) loss due to change in fair value of warrant liability and derivative liability	(1,267)	66	(1,284)	(148)
Loss on issuance of convertible notes payable	483	0	483	0
Interest and other expense, net	321	59	589	205
Loss before income tax expense	(1,893)	(3,607)	(6,722)	(9,964)
Income tax expense	(86)	(20)	(53)	35
Net loss from continuing operations	(1,807)	(3,587)	(6,669)	(9,999)
Net income (loss) from discontinued operations, net of tax	0	(34)	0	53
Net loss	(1,807)	(3,621)	(6,669)	(9,946)
Foreign currency translation adjustments	10	85	(26)	(87)
Comprehensive loss	$ (1,797)	$ (3,536)	$ (6,695)	$ (10,033)
Basic and diluted net income (loss) per share:
Net loss from continuing operations (USD per share)	$ (0.04)	$ (0.09)	$ (0.16)	$ (0.28)
Net income (loss) from discontinued operations (USD per share)	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Net loss (USD per share)	$ (0.04)	$ (0.09)	$ (0.16)	$ (0.28)
Weighted average common shares - basic and diluted (in shares)	41,891	40,684	41,980	35,566

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Operating activities:
Net loss	$ (6,669)	$ (9,946)
Adjustment for income from discontinued operations, net of tax	0	(53)
Adjustment to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of property and equipment, incl. asset impairment	345	1,241
Amortization of debt discount	291	0
Gain due to change in fair value of warrant liability and derivative liability conversion feature	(1,284)	(148)
Stock-based compensation expense	291	1,352
Provision for allowance for doubtful accounts	(1)	0
Loss on issuance of convertible notes payable	483	0
Provision for allowance of credit card receivables	0	420
Provision for allowances for other assets	0	280
Changes in operating assets and liabilities:
Accounts receivable	2,318	(848)
Prepaid expenses and other assets	225	(207)
Accounts payable	2,557	3,475
Accrued compensation and benefits	(246)	576
Other accrued liabilities	(1,226)	230
Deferred tax liability	(26)	40
Deferred revenue	568	650
Net cash used in continuing operations	(2,374)	(2,938)
Net cash provided by discontinued operations	0	53
Net cash used in operating activities	(2,374)	(2,885)
Investing activities:
Purchases of property and equipment	(543)	(1,614)
Change in restricted cash, net	0	35
Net cash used in continuing operations	(543)	(1,579)
Net cash used in discontinued operations	0	0
Net cash used in investing activities	(543)	(1,579)
Financing activities:
Proceeds from issuance of common stock	0	5,534
Proceeds from borrowings	3,340	200
Repayment of borrowings	(3,787)	(1,397)
Restricted cash related to borrowings	(58)	0
Tax payments in connection with treasury stock surrendered	(5)	(132)
Net cash provided by (used in) continuing operations	(510)	4,205
Net cash provided by discontinued operations	0	0
Net cash provided by (used in) financing activities	(510)	4,205
Effect of exchange rate changes on cash	(36)	(69)
Net increase (decrease) in cash and cash equivalents	(3,463)	(328)
Cash and cash equivalents at beginning of period	3,633	4,494
Cash and cash equivalents at end of period	170	4,166
Supplemental disclosures of cash flow information:
Cash paid for interest	164	161
Cash paid for income taxes	16	49
Supplemental disclosures of non-cash investing and financing activities:
Retirement of fully depreciated property and equipment	0	590
Common stock issued in settlement of claim	200	0
Warrants issued to convertible note holders	2,050	0
Conversion feature of convertible notes payable	1,539	0
Supplemental notes payable	1,545	0
Accrued interest on convertible notes payable	$ 53	$ 0

BALANCE SHEET COMPONENTS (Tables)

9 Months Ended

Sep. 30, 2014

Balance Sheet Related Disclosures [Abstract]

Components of prepaids and other current assets

Prepaids and other current assets consist of the following (in thousands):



	September 30, 2014		December 31, 2013
Prepaids and other current assets:
Prepaid expenses	$	344	$	623
Deferred financing costs	295		—
Deferred professional service costs	275		252
VAT tax receivable	281		440
Other current assets	92		303
Prepaids and other current assets	$	1,287	$	1,618

Components of property and equipment

Property and equipment consist of the following (in thousands):



	Estimated Useful Life	September 30, 2014			December 31, 2013
Property and equipment:
Computer equipment	3 years	$	3,945		$	3,993
Capitalized software and development	2-5 years	13,899			13,208
Furniture and fixtures	5 years	308			309
Leasehold improvements	Lease term	110			123
		18,262			17,633
Accumulated depreciation and amortization		(17,375		)	(17,099		)
Construction in process		4			157
Property and equipment, net		$	891		$	691

Schedule of other non-current assets

Other non-current assets consist of the following (in thousands):



	September 30, 2014		December 31, 2013
Other non-current assets:
Credit card reserve deposits and other	$	95	$	395
Deferred professional service costs	824		445
Other non-current assets	$	919	$	840

Schedule of other accrued liabilities

Other accrued liabilities consist of the following (in thousands):




	September 30, 2014		December 31, 2013
Other accrued liabilities:
Payable to customers *	$	1,344	$	1,460
Accrued professional fees	89		663
VAT taxes payable	270		248
Settlement liability	—		200
Reseller rebates	—		190
Sales reserve	—		117
Other liabilities	560		787
Other accrued liabilities	$	2,263	$	3,665

* - Amounts represent collections on customer receivables associated with "product sales" in excess of amounts owed to state jurisdictions. The Company is in the process of evaluating remediation plans for the balances due.