UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2004
OR
| ¨ | 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 000-28009
RAINMAKER SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 33-0442860 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
1800 Green Hills Road
Scotts Valley, California 95066
(address of principal executive offices) (zip code)
Registrant’s telephone number, including area code: (831) 430-3800
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.
(1) Yes x No ¨
(2) Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act. ¨ Yes x No
As of July 31, 2004, the registrant had 44,274,140 shares of Common Stock outstanding.
FORM 10-Q
AS OF AND FOR THE QUARTER ENDED JUNE 30, 2004
TABLE OF CONTENTS
2
PART I. - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| June 30, 2004 |
December 31, 2003 * |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 12,663 | $ | 4,854 | ||||
| Restricted cash |
409 | 1,096 | ||||||
| Accounts receivable, less allowance for doubtful accounts of $147 in 2004 and $207 in 2003 |
7,119 | 5,952 | ||||||
| Prepaid expenses and other current assets |
927 | 1,007 | ||||||
| Total current assets |
21,118 | 12,909 | ||||||
| Property and equipment, net |
2,773 | 2,808 | ||||||
| Other noncurrent assets |
118 | 100 | ||||||
| Total assets |
$ | 24,009 | $ | 15,817 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 12,966 | $ | 10,213 | ||||
| Accrued compensation and benefits |
338 | 369 | ||||||
| Other accrued liabilities |
1,187 | 773 | ||||||
| Obligations under financing arrangements |
203 | 504 | ||||||
| Current portion of capital lease obligations |
106 | 80 | ||||||
| Total current liabilities |
14,800 | 11,939 | ||||||
| Capital lease obligations, less current portion |
60 | 31 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.001 par value; 20,000,000 shares authorized, none issued and outstanding |
— | — | ||||||
| Common stock, $0.001 par value; 80,000,000 shares authorized, 44,271,694 and 39,168,429 outstanding in 2004 and 2003 |
44 | 39 | ||||||
| Additional paid-in capital |
63,403 | 56,847 | ||||||
| Accumulated deficit |
(54,298 | ) | (53,039 | ) | ||||
| Total stockholders’ equity |
9,149 | 3,847 | ||||||
| Total liabilities and stockholders’ equity |
$ | 24,009 | $ | 15,817 | ||||
| * | Derived from the Company’s audited financial statements for the year ended December 31, 2003 |
The accompanying notes are an integral part of these financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
| Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net services revenue |
$ | 10,648 | $ | 9,657 | $ | 21,462 | $ | 20,066 | ||||||||
| Cost of services revenue |
7,035 | 6,524 | 14,134 | 13,688 | ||||||||||||
| Total gross profit |
3,613 | 3,133 | 7,328 | 6,378 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
2,246 | 1,685 | 4,296 | 3,360 | ||||||||||||
| Technology |
309 | 467 | 539 | 892 | ||||||||||||
| General and administrative |
1,462 | 1,511 | 2,965 | 3,062 | ||||||||||||
| Depreciation and amortization |
428 | 367 | 810 | 768 | ||||||||||||
| Total operating expenses |
4,445 | 4,030 | 8,610 | 8,082 | ||||||||||||
| Operating loss |
(832 | ) | (897 | ) | (1,282 | ) | (1,704 | ) | ||||||||
| Interest and other (expense) income, net |
14 | (9 | ) | 23 | (27 | ) | ||||||||||
| Loss before income taxes |
(818 | ) | (906 | ) | (1,259 | ) | (1,731 | ) | ||||||||
| Income tax benefit |
— | — | — | (23 | ) | |||||||||||
| Net loss |
$ | (818 | ) | $ | (906 | ) | $ | (1,259 | ) | $ | (1,708 | ) | ||||
| Basic and diluted net loss per share |
$ | (0.02 | ) | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.04 | ) | ||||
| Weighted average common shares outstanding - basic and diluted |
44,151 | 38,875 | 41,814 | 38,854 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(Unaudited)
| Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Operating activities: |
||||||||||||||||
| Net loss |
$ | (818 | ) | $ | (906 | ) | $ | (1,259 | ) | $ | (1,708 | ) | ||||
| Adjustment to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||||||||||
| Depreciation and amortization of property and equipment |
428 | 367 | 810 | 768 | ||||||||||||
| Provision (credit) for sales returns and allowances for doubtful accounts |
— | (42 | ) | (28 | ) | (83 | ) | |||||||||
| Gain on disposal of fixed assets |
— | (6 | ) | — | (6 | ) | ||||||||||
| Changes in operating assets and liabilities: |
||||||||||||||||
| Accounts receivable |
(198 | ) | 1,015 | (1,107 | ) | 172 | ||||||||||
| Income taxes receivable |
— | — | — | 211 | ||||||||||||
| Prepaid expenses and other assets |
103 | 202 | 49 | 296 | ||||||||||||
| Accounts payable |
1,645 | (1,091 | ) | 2,753 | (405 | ) | ||||||||||
| Accrued compensation and benefits |
(106 | ) | (61 | ) | (31 | ) | (225 | ) | ||||||||
| Accrued restructuring and related charges |
— | (55 | ) | — | (170 | ) | ||||||||||
| Other accrued liabilities |
(451 | ) | 345 | 378 | 219 | |||||||||||
| Net cash provided by (used in) operating activities |
603 | (232 | ) | 1,565 | (931 | ) | ||||||||||
| Investing activities: |
||||||||||||||||
| Purchases of property and equipment |
(448 | ) | (116 | ) | (771 | ) | (266 | ) | ||||||||
| Restricted cash, net |
154 | 37 | 687 | (65 | ) | |||||||||||
| Sale of long-term investments |
— | 3 | — | 10 | ||||||||||||
| Net cash provided by (used in) investing activities |
(294 | ) | (76 | ) | (84 | ) | (321 | ) | ||||||||
| Financing activities: |
||||||||||||||||
| Proceeds from issuance of common stock from option exercises |
88 | 6 | 221 | 7 | ||||||||||||
| Proceeds from issuance of common stock from ESPP |
38 | 13 | 38 | 13 | ||||||||||||
| Proceeds from issuance of common stock and warrants from private placement |
(49 | ) | — | 6,302 | — | |||||||||||
| Borrowings under capital lease agreements |
190 | — | 190 | |||||||||||||
| Repayment of capital lease obligations |
(82 | ) | (366 | ) | (122 | ) | (802 | ) | ||||||||
| Repayment of debt obligations |
(150 | ) | — | (301 | ) | — | ||||||||||
| Net cash used in financing activities |
35 | (347 | ) | 6,328 | (782 | ) | ||||||||||
| Net increase (decrease) in cash and cash equivalents |
344 | (655 | ) | 7,809 | (2,034 | ) | ||||||||||