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CAMPBELL, CA -- (Marketwire) -- 10/30/12 -- Rainmaker Systems, Inc. (NASDAQ: RMKR), a leading global e-Commerce software company that helps multi-national companies address the B2B market by maximizing sales revenue for their products and services, today reported financial results for its third quarter and nine months ended September 30, 2012.

Net revenue for the third quarter ended September 30, 2012 was $6.9 million. Net revenue in the nine months ended September 30, 2012 was $20.2 million, a 5% year-over-year increase from net revenue of $19.3 million in the same period of 2011.

Recent Business Highlights

• Achieved positive adjusted EBITDA of $100,000 for the third quarter of 2012 compared to negative $191,000 in the second quarter of 2012
• Announced during the quarter new $2 million two-year agreement for B2B sales with existing major global software client
• Launched new e-commerce platform, GrowCommerce for Renewals, on SalesForce.com's AppExchange
• Signed three new clients for the B2B e-commerce solution with Cox Communications, Leads360 and Vendavo
• Awarded multi-year expansion with Polycom that includes all customer, partner and employee training
• Ranked one of the world's top software companies by Software Magazine
• Named David Guercio as Senior Vice President of Sales and Marketing

Gross margin in the third quarter of 2012 increased to 45%, compared to 44% in the preceding quarter and 41% in the third quarter of 2011. Gross margin in the nine months ended September 30, 2012 increased to 44%, compared to 41% in the same period of 2011.

Net loss from continuing operations for the third quarter of 2012 was $944,000, or a loss of $0.03 per share, compared to a net loss from continuing operations in the third quarter of 2011 of $2.4 million, or a loss of $0.10 per share. Net loss from continuing operations for the nine months ended September 30, 2012 was $3 million, or a loss of $0.11 per share, compared to a net loss from continuing operations in the same period of 2011 of $8.5 million, or a loss of $0.38 per share.

Third quarter 2012 non-GAAP net loss, which excludes stock-based compensation expense, amortization of purchased intangible assets, and a loss due to change in fair value of warrant liability was $362,000, or a loss of $0.01 per share, compared to a non-GAAP net loss in the preceding quarter of $673,000, or a loss of $0.02 per share, and a non-GAAP net loss in the third quarter of 2011 of $1.8 million, or a loss of $0.07 per share. See Exhibit A for a reconciliation of GAAP net loss from continuing operations to non-GAAP net loss.

Third quarter 2012 adjusted EBITDA, which excludes non-cash stock compensation expense, was $100,000, compared to negative $191,000 in the preceding quarter and negative $1.3 million in the third quarter of 2011. See Exhibit B for a reconciliation of GAAP net loss from continuing operations to EBITDA and adjusted EBITDA.

Total shares outstanding at September 30, 2012 were approximately 27.3 million common shares, which include approximately 1.3 million unvested restricted shares. In addition, Rainmaker had 735,000 unexercised options outstanding with a weighted average exercise price of approximately $1.63 per share and 1.6 million unexercised warrants outstanding with a weighted average exercise price of approximately $1.38 per share.

Total cash and cash equivalents were $4.4 million at September 30, 2012, compared to $8.5 million at December 31, 2011. Approximately 75% of the Company's cash burn over the first nine months of 2012 related to its call center operations in Manila. Total cash used by discontinued operations was $2.6 million for the nine month ended September 30, 2012.

Conference Call
Rainmaker Systems will host a conference call and webcast today at 1:30 p.m. Pacific Time to discuss its third quarter 2012 financial results. Those wishing to participate in the live call should dial (877) 941-2332 using the password "Rainmaker." A replay of the call will be available for one week beginning approximately one hour after the call's conclusion by dialing (800) 406-7325 and entering 4571176 followed by the "#" key when prompted for a code. To access the live webcast of the call, go to the Investors section of Rainmaker'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
Rainmaker is an e-Commerce software company that helps multi-national companies address the B2B market by maximizing sales revenue for their products and services. The Rainmaker e-Commerce platform can be enhanced with Rainmaker global telesales agents to maximize revenue and customer satisfaction through the entire customer life cycle. For more information, visit www.rainmakersystems.com or call 800-631-1545.

NOTE: 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 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 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, the current difficult macro-economic environment and its impact on our business, as our clients are reducing their overall marketing spending and our clients' customers are reducing their purchase of services contracts, 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, our ability to sell our Manila operations in a timely manner and reduce its use of our cash, our ability to transition to a new Chief Executive Officer 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 expand our channel hosted contract solution and drive adoption of this solution by resellers, potential competition in the marketplace, the ability to retain and attract employees, market acceptance of our service programs 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, our ability to raise additional equity or debt financing, 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 share data)
                                (Unaudited)

                                             September 30,    December 31,
                                                 2012             2011
                                            --------------   --------------
                  ASSETS
Current assets:
  Cash and cash equivalents                $         4,425  $         8,490
  Restricted cash                                       28               18
  Accounts receivable, net                           4,520            4,587
  Prepaid expenses and other current
   assets                                            1,543              876
  Assets held for sale                               4,023            4,164
                                           ---------------  ---------------
    Total current assets                            14,539           18,135
Property and equipment, net                          2,631            2,861
Intangible assets, net                                   2               85
Goodwill                                             5,337            5,268
Other non-current assets                               410              422
                                           ---------------  ---------------
    Total assets                           $        22,919  $        26,771
                                           ===============  ===============
   LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                  $6,888           $5,702
  Accrued compensation and benefits                    550              740
  Other accrued liabilities                          3,158            3,097
  Deferred revenue                                   2,154            2,629
  Current portion of notes payable                     955            4,306
  Liabilities related to assets held for
   sale                                              2,327            2,163
                                           ---------------  ---------------
    Total current liabilities                       16,032           18,637
Deferred tax liability                                 525              473
Long-term deferred revenue                              78              103
Common stock warrant liability                         832              517
Notes payable, less current portion                  3,593               --
                                           ---------------  ---------------
    Total liabilities                               21,060           19,730
                                           ---------------  ---------------
Commitments and contingencies
Stockholders' equity:
  Preferred stock, $0.001 par value;
   5,000,000 shares authorized, none
   issued and outstanding                               --               --
  Common stock, $0.001 par value;
   50,000,000 shares authorized,
   29,294,663 shares issued and 27,271,238
   shares outstanding at September 30,
   2012 and 28,686,486 shares issued and
   26,812,935 shares outstanding at
   December 31, 2011                                    27               26
  Additional paid-in capital                       130,129          129,373
  Accumulated deficit                             (123,662)        (117,926)
  Accumulated other comprehensive loss              (1,912)          (1,827)
  Treasury stock, at cost, 2,023,425
   shares at September 30, 2012 and
   1,873,551 shares at December 31, 2011            (2,723)          (2,605)
                                           ---------------  ---------------
    Total stockholders' equity                       1,859            7,041
                                           ---------------  ---------------
    Total liabilities and stockholders'
     equity                                $        22,919  $        26,771
                                           ===============  ===============



                           RAINMAKER SYSTEMS, INC.
        CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                  (In thousands, except per share amounts)
                                 (Unaudited)


                                  Three Months Ended     Nine Months Ended
                                     September 30,         September 30,
                                 --------------------  --------------------
                                    2012       2011       2012       2011
                                 ---------  ---------  ---------  ---------
Net revenue                      $   6,900  $   7,089  $  20,196  $  19,282
Cost of services                     3,808      4,189     11,315     11,341
                                 ---------  ---------  ---------  ---------
  Gross margin                       3,092      2,900      8,881      7,941
                                 ---------  ---------  ---------  ---------
Operating expenses:
  Sales and marketing                  524      1,015      1,569      2,935
  Technology and development         1,199      1,832      4,318      5,652
  General and administrative         1,486      1,898      4,238      5,725
  Depreciation and amortization        420        524      1,226      1,968
  Gain on fair value re-
   measurement                          --        114         --         44
                                 ---------  ---------  ---------  ---------
  Total operating expenses           3,629      5,383     11,351     16,324
                                 ---------  ---------  ---------  ---------
    Loss from operations              (537)    (2,483)    (2,470)    (8,383)
Loss (gain) due to change in
 fair value of warrant liability       337        (70)       315        (95)
Interest and other expense, net         63         43        134         99
                                 ---------  ---------  ---------  ---------
  Loss from continuing
   operations before income tax
   expense                            (937)    (2,456)    (2,919)    (8,387)
Income tax expense                       7        (15)       125         73
                                 ---------  ---------  ---------  ---------
  Net loss from continuing
   operations                    $    (944) $  (2,441) $  (3,044) $  (8,460)
  Loss from discontinued
   operations, net of tax        $    (706) $    (245) $  (2,692) $    (626)
                                 ---------  ---------  ---------  ---------
      Net loss                   $  (1,650) $  (2,686) $  (5,736) $  (9,086)
                                 =========  =========  =========  =========

Foreign currency translation
 adjustments                            24        (38)       (85)      (315)
                                 ---------  ---------  ---------  ---------
  Comprehensive loss             $  (1,626) $  (2,724) $  (5,821) $  (9,401)
                                 =========  =========  =========  =========

Basic and diluted net loss per
 share - continuing operations   $   (0.03) $   (0.10) $   (0.11) $   (0.38)
Basic and diluted net loss per
 share - discontinued operations $   (0.03) $   (0.01) $   (0.10) $   (0.03)
                                 ---------  ---------  ---------  ---------
Basic and diluted net loss per
 share                           $   (0.06) $   (0.11) $   (0.21) $   (0.41)
                                 =========  =========  =========  =========

  Weighted average common shares
   - Basic and diluted              27,066     24,900     27,013     22,385



                           RAINMAKER SYSTEMS, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In thousands)
                                 (Unaudited)

                                                        Nine Months Ended
                                                          September 30,
                                                      ---------------------
                                                         2012        2011
                                                      ---------   ---------
Operating activities:
Net loss                                              $  (5,736)  $  (9,086)
  Adjustment for loss from discontinued operations,
   net of tax                                             2,692         626
  Adjustments to reconcile net loss to net cash used
   in operating activities:
    Depreciation and amortization of property and
     equipment                                            1,141       1,774
    Amortization of intangible assets                        85         194
    Gain on fair value re-measurement                        --          44
    Loss (gain) due to change in fair value of
     warrant liability                                      315         (95)
    Stock-based compensation expense                        607       1,564
    Credit for allowances for doubtful accounts             (35)        (21)
    Changes in operating assets and liabilities:
      Accounts receivable                                   227      (1,167)
      Prepaid expenses and other assets                    (762)       (205)
      Accounts payable                                    1,705       1,465
      Accrued compensation and benefits                     (19)         89
      Other accrued liabilities                            (360)        816
      Income tax payable                                     30         (39)
      Deferred tax liability                                 51          73
      Deferred revenue                                     (501)       (591)
                                                      ---------   ---------
          Net cash used in continuing operations           (560)     (4,559)
        Net cash provided by (used in) discontinued
         operations                                      (1,021)        530
                                                      ---------   ---------
        Net cash used in operating activities            (1,581)     (4,029)
                                                      =========   =========
Investing activities:
    Purchases of property and equipment                    (907)     (1,279)
    Restricted cash, net                                    (10)         75
                                                      ---------   ---------
          Net cash used in continuing operations           (917)     (1,204)
        Net cash used in discontinued operations           (837)        (70)
                                                      ---------   ---------
        Net cash used in investing activities            (1,754)     (1,274)
                                                      =========   =========
Financing activities:
    Proceeds from issuance of common stock                   --       3,290
    Proceeds from issuance of common stock from
     option exercises                                        --          15
    Proceeds from borrowings                              4,555       1,224
    Repayment of borrowings                              (3,933)       (660)
    Repayment of Optima acquisition earnout                (113)         --
    Net proceeds of overdraft facility                     (381)         26
    Tax payments in connection with treasury stock
     surrendered                                           (233)       (217)
                                                      ---------   ---------
          Net cash provided by (used in) continuing
           operations                                      (105)      3,678
        Net cash provided by (used in) discontinued
         operations                                        (708)        148
                                                      ---------   ---------
        Net cash provided by (used in) financing
         activities                                        (813)      3,826
                                                      =========   =========
Effect of exchange rate changes on cash                      83        (120)
                                                      ---------   ---------
Net decrease in cash and cash equivalents                (4,065)     (1,597)
                                                      =========   =========

Cash and cash equivalents at beginning of period          8,490      11,757
                                                      ---------   ---------
Cash and cash equivalents at end of period            $   4,425   $  10,160
                                                      =========   =========

Supplemental disclosures of cash flow information:
  Cash paid for interest                              $     106   $     128
                                                      =========   =========
  Cash paid for income taxes                          $      42   $      91
                                                      =========   =========

Supplemental disclosures of non-cash investing and
 financing activities:
  Common stock issued in acquisitions                 $     112   $      --
                                                      =========   =========

Discussion of Non-GAAP Financial Measures
Rainmaker Systems' management evaluates and makes operating decisions using various performance measures. In addition to GAAP results, Rainmaker also considers non-GAAP net loss and non-GAAP net loss per share, EBITDA and adjusted EBITDA, which excludes non-cash stock compensation expense from EBITDA. These non-GAAP measures are derived from the revenue generated by Rainmaker's business and the costs directly related to the generation of that revenue, such as costs of services, sales and marketing expenses, technology expenses and general and administrative expenses, that management considers in evaluating the Company's operating performance. These non-GAAP measures exclude certain expenses that management does not consider to be related to the Company's core operating performance.

Non-GAAP net loss, non-GAAP net loss per share, EBITDA and adjusted EBITDA are supplemental measures of Rainmaker's performance that are not required by, or presented in accordance with, GAAP. Moreover, they should not be considered as an alternative to any performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of liquidity. Rainmaker presents these non-GAAP measures because management considers them to be important supplemental measures of Rainmaker's operating performance and profitability trends, and because management believes they give investors useful information on period-to-period performance as evaluated by management. Rainmaker believes that the use of these non-GAAP measures provides consistency and comparability with Rainmaker's past financial reports and also facilitates comparisons with other companies in Rainmaker's industry, a number of which use similar non-GAAP financial measures to supplement their GAAP results. Management has used these non-GAAP measures when evaluating operating performance because management believes that the inclusion or exclusion of the items described above provides an additional measure of the Company's core operating results and facilitates comparisons of the Company's core operating performance against prior periods and the Company's business model objectives. Rainmaker has chosen to provide this information to investors to enable them to perform additional analysis of past, present and future operating performance and as a supplemental means to evaluate the Company's ongoing core operations.

Non-GAAP net loss was $362,000 for the third quarter of 2012 and consists of net loss from continuing operations excluding stock based compensation expense, amortization of purchased intangible assets and a loss due to change in fair value of warrant liability. The change in fair value of warrant liability was a $337,000 loss for the three months ended September 30, 2012 and related to an increase in the fair value of the common stock warrant liability. Stock based compensation expense was $217,000 for the three months ended September 30, 2012 and represents the current quarter recognition of compensation expense related to stock options and restricted stock awards granted prior to and during the quarter. Amortization of intangible assets was $28,000 for the three months ended September 30, 2012. See Exhibit A for a reconciliation of GAAP net loss from continuing operations to non-GAAP net loss.

EBITDA was negative $117,000 for the third quarter of 2012. EBITDA consists of net loss from continuing operations excluding interest and other expense, income taxes, depreciation & amortization and certain other non-cash items. Non-cash charges for depreciation of property and equipment were $392,000 for the three months ended September 30, 2012. Non-cash charge for the change in fair value of warrant liability was a $337,000 loss for the three months ended September 30, 2012 and related to an increase in the fair value of the common stock warrant liability. Net interest and other expense was $63,000 for the three months ended September 30, 2012. Non-cash charges for amortization of acquisition related intangibles were $28,000 for the three months ended September 30, 2012. Income tax expense was $7,000 for the three months ended September 30, 2012.

Adjusted EBITDA was positive $100,000 for the three months ended September 30, 2012 and adds back to EBITDA non-cash stock based compensation expense of $217,000 incurred in the third quarter of 2012. See Exhibit B for a reconciliation of GAAP net loss from continuing operations to EBITDA and adjusted EBITDA.

                           RAINMAKER SYSTEMS, INC.
                                  EXHIBIT A
 RECONCILIATION OF GAAP NET LOSS FROM CONTINUING OPERATIONS TO NON-GAAP NET
                                   LOSS (1)
                      (In thousands, except per share)
                                 (Unaudited)

                                             Three months ended
                                -------------------------------------------
                                September 30,     June 30,    September 30,
                                     2012           2012           2011
                                -------------  -------------  -------------
Net loss from continuing
 operations - GAAP basis        $        (944) $        (901) $      (2,441)
Stock compensation adjustments
 (2):
  Cost of services                         24             28             15
  Sales and marketing                      12             12             57
  Technology and development               32             32             51
  General and administrative              149            143            399
Amortization of intangible
 assets (3)                                28             28             47
Gain on fair value re-
 measurement (4)                           --             --            114
Loss (gain) due to change in
 fair value of warrant
 liability (5)                            337            (15)           (70)
                                -------------  -------------  -------------
Net loss - Non-GAAP basis       $        (362) $        (673) $      (1,828)
                                =============  =============  =============

Diluted weighted average shares
 outstanding                           27,066         27,049         24,900
                                =============  =============  =============

Non-GAAP diluted net loss per
 share                          $       (0.01) $       (0.02) $       (0.07)
                                =============  =============  =============

(1)  To supplement our financial results presented on a GAAP basis, we use
     non-GAAP net loss, which excludes certain business combination
     accounting entries and expenses related to acquisitions as well as
     other expenses including stock-based compensation and non-recurring
     items. As we have completed several acquisitions since 2005, we believe
     non-GAAP net loss provides useful information to investors regarding
     the underlying business trends and performance of the Company's ongoing
     operations and is useful for period over period comparisons of such
     operations. Non-GAAP net loss is not meant to be considered in
     isolation or as a substitute for GAAP net loss from continuing
     operations, and should be read only in conjunction with our
     consolidated financial statements prepared in accordance with GAAP.
(2)  We estimate the fair value of share based payment awards on the date of
     grant using an option-pricing model for option grants and our closing
     share price as reported on NASDAQ for restricted share grants. The
     value of the portion of the award that is ultimately expected to vest
     is recognized as expense over the requisite service periods. Stock-
     based compensation expenses will recur in future periods.
(3)  We have excluded the effect of amortization of intangibles from our
     non-GAAP net loss. We believe this helps investors understand a
     significant reason why our GAAP operating expenses increase following
     acquisitions. Investors should note that the use of intangible assets
     contributed to revenue earned during the period and will contribute to
     future revenue generation and should also note that these amortization
     expenses are recurring.
(4)  In the quarter ended September 30, 2011, we recorded a loss on fair
     value re-measurement of $114,000 related to the change in the accrued
     estimated liability for the earnout payable by us in connection with
     our acquisition of Optima.
(5)  We have recorded gains or losses in fair value of warrant liability
     related to the change in the common stock warrant liability.



                           RAINMAKER SYSTEMS, INC.
                                  EXHIBIT B
RECONCILIATION OF NET LOSS FROM CONTINUING OPERATIONS TO EBITDA AND ADJUSTED
                                  EBITDA (1)
                               (In thousands)
                                 (Unaudited)

                                             Three months ended
                                -------------------------------------------
                                September 30,     June 30,    September 30,
                                     2012           2012           2011
                                -------------  -------------  -------------
Net loss from continuing
 operations                     $        (944) $        (901) $      (2,441)
Add:
  Provision for income taxes                7             65            (15)
  Depreciation of property and
   equipment                              392            374            477
  Amortization of intangible
   assets                                  28             28             47
  Gain on fair value re-
   measurement                             --             --            114
  Loss (gain) due to change in
   fair value of warrant
   liability                              337            (15)           (70)
  Interest and other expense,
   net                                     63             43             43
                                -------------  -------------  -------------
                                          827            495            596
                                -------------  -------------  -------------

    EBITDA - Non-GAAP basis     $        (117) $        (406) $      (1,845)
Add:
  Stock based compensation                217            215            522

                                -------------- -------------- --------------
    Adjusted EBITDA - Non-GAAP
     basis                      $         100  $        (191) $      (1,323)
                                =============  =============  =============

(1)  To supplement our financial results presented on a GAAP basis, we use
     EBITDA, which excludes certain cash and non-cash expenses, and adjusted
     EBITDA, which excludes stock based compensation from EBITDA. We believe
     EBITDA and adjusted EBITDA provide useful information to investors
     regarding the underlying business trends and performance of the
     Company's ongoing operations and are useful for period over period
     comparisons of such operations. EBITDA and adjusted EBITDA are not
     meant to be considered in isolation or as a substitute for comparable
     GAAP measures, and should be read only in conjunction with our
     consolidated financial statements prepared in accordance with GAAP. We
     regularly use EBITDA and adjusted EBITDA internally to manage our
     business and make operating decisions.