Rainmaker Systems (VCTL) 8-K Results of Operations and Financial Condition

Exhibit 99.1

RAINMAKER REPORTS RECORD Q207 REVENUE UP 60% YEAR-OVER-YEAR AND 11%

SEQUENTIALLY

Company raises 2007 full year revenue guidance to $74 to $75 million

Campbell, Calif., August 1, 2007 – Rainmaker Systems, Inc. (NASDAQ: RMKR), a leading provider of sales and marketing solutions combining hosted application software and execution services, today reported financial results for the 2007 second quarter ended June 30, 2007.

Second Quarter Financial Highlights:

• Revenue increased to a record $18.0 million, up 60% year-over-year and 11% sequentially

• Organic revenue growth of 30% year-over-year

• GAAP net income of $570,000, or $0.03 per diluted share

• Non-GAAP net income of $1.5 million, or $0.08 per diluted share

• Cash and cash equivalents of $47.8 million

Rainmaker achieved record second quarter net revenue of $18.0 million, representing a 60% increase over net revenue of $11.3 million in the second quarter of 2006 and a 11% sequential increase from net revenue of $16.3 million in the first quarter of 2007.

Gross margin was 48% in the second quarter of 2007, compared to 50% in the second quarter of 2006, and 49% in the first quarter of 2007, reflecting increased investment to support business expansion with existing and new clients.

Second quarter GAAP net income was $570,000, or $0.03 per diluted share, compared to GAAP net income of $771,000, or $0.05 per diluted share, for the second quarter of 2006, and GAAP net income of $555,000, or $0.03 per diluted share, in the first quarter of 2007.

Second quarter non-GAAP net income was $1.5 million, or $0.08 per diluted share. Non-GAAP net income excludes stock based compensation of $399,000, amortization of intangible assets from acquisitions of $662,000, and net revenue adjustments related to fair value purchase accounting of $56,000, net of the tax effect of these adjustments of $211,000. This compares to non-GAAP net income of $1.1 million, or $0.07 per diluted share, for the second quarter of 2006, and non-GAAP net income of $1.4 million, or $0.08 per diluted share, in the first quarter of 2007. See Exhibit A for a reconciliation of GAAP net income to non-GAAP net income.

The effective tax rate for the second quarter was approximately 18.9%.

Second quarter 2007 diluted EPS results are based on 19.1 million weighted average shares outstanding, calculated using the treasury stock method.

Total shares outstanding at June 30, 2007 were approximately 18.9 million common shares which includes approximately 510,000 unvested restricted shares. In addition, Rainmaker had 2.8 million unexercised options and warrants with a weighted average exercise price of approximately $4.83 per share.

Total cash and cash equivalents at June 30, 2007 were $47.8 million, compared with $19.6 million at March 31, 2007, reflecting net proceeds to the Company of approximately $27.3 million from its follow-on public offering in April 2007 and strong cash generation from operations of approximately $2.1 million in the second quarter.

Recent Business Highlights

• Leading global software lead development client expanded agreement to include contract sales

• Fortune 50 global software lead development client expanded agreement to include contract sales

• Added leading global notebook computer manufacturer as a new client and awarded multi-year contract for lead generation

• Fortune 50 hardware client expanded relationship to deploy hosted reseller channel solution

• Global security and infrastructure software client significantly expanded contract sales agreement

• Selected by leading global enterprise decision management firm for lead development

• Named a Sybase 2007 Partner of the Year

• Acquired Philippines-based offshore call center Qinteraction, in July 2007

Business Update

“Our record second quarter revenue reflects the strong market acceptance of our strategy to provide clients integrated solutions to effectively grow their revenue,” said Michael Silton, CEO of Rainmaker Systems. “The investments we are making in technology and internationalization of our solutions, and our strong financial position further enhanced with our follow-on offering we closed in April, were instrumental in the significant level of contract signings this quarter, including cross-sales of our solutions and expansions with existing clients and the addition of new clients during the quarter.”

Financial Guidance

Rainmaker is raising its financial guidance to grow full year 2007 revenue to $74 million to $75 million, up from its prior guidance of $65 million to $67 million, representing growth of approximately 51% to 53% from 2006.

Rainmaker estimates revenue for the third quarter of 2007 including the recently acquired operations of Qinteraction, to be approximately $19.1 million to $19.3 million, representing growth of approximately 57% to 58% year-over-year. Rainmaker also estimates the third quarter will include integration costs related to the acquisition of Qinteraction of between $400,000 and $500,000, and on-going quarterly amortization of intangibles related to the acquisition of Qinteraction of approximately $400,000 to $500,000. Based on the Company’s near-term expansion opportunities with existing clients, including international activities, Rainmaker is continuing its significant investment in technology and development during the third quarter, as previously stated.

Conference Call

Rainmaker Systems will host a conference call and webcast today at 1:30 p.m. Pacific Time to discuss its fiscal 2007 second quarter results. Those wishing to participate in the live call should dial (800) 218-0713 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) 405-2236 and entering 11092752 followed by the “#” key when prompted for a code. To access the live webcast of the call, go to the Investor Relations section of Rainmaker’s website atwww.rmkr.com. A webcast replay of the conference call will be available for one year on the Calls/Events page of the Investor Relations section atwww.rmkr.com.

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 adjusted net income and adjusted net income per share, which are referred to as non-GAAP net income and non-GAAP net income per share, and 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. Non-GAAP net income, non-GAAP net income per share and EBITDA exclude certain expenses that management does not consider to be related to the Company’s core operating performance.

Non-GAAP net income consists of net income including an adjustment intended to reflect the full amount of revenue on assumed contracts in connection with acquisitions and excluding equity plan-related compensation expenses and amortization of purchased intangible assets. For purposes of comparability across other periods and against other companies in our industry, non-GAAP net income is adjusted by

the amount of additional taxes that Rainmaker would accrue using a normalized effective tax rate applied to the non-GAAP results. The net revenue adjustment was $56,000 for the three months ended June 30, 2007 and related primarily to contracts assumed in connection with Rainmaker’s acquisition of ViewCentral in September 2006 and to a lesser extent its acquisition of CAS Systems in January 2007. Stock compensation adjustments were $399,000 for the three months ended June 30, 2007 and related to option award and restricted stock awards granted since the adoption of FASB Statement No. 123R, Share Based Payments, in January 2006. Amortization of intangible assets was $662,000 for the three months ended June 30, 2007 and related primarily to the prior acquisitions of Sunset Direct, Launch Project, Metrics Corp, ViewCentral and CAS Systems. The tax effect of these adjustments was an expense of $211,000 for the three months ended June 30, 2007.

Second quarter EBITDA was $1.5 million. EBITDA consists of net income excluding interest income or expense, income taxes, depreciation and amortization. Interest and other income was $391,000 for the three months ended June 30, 2007 and related primarily to interest earned on cash deposits offset by interest expense on term loans. Provision for income taxes was $133,000 for the three months ended June 30, 2007. Non-cash charges for depreciation of property and equipment was $535,000 for the three months ended June 30, 2007. Non-cash charges for amortization of acquisition related intangibles was $662,000 for the three months ended June 30, 2007 and related primarily to our prior business acquisitions. See Exhibit B for a reconciliation of GAAP net income to EBITDA.

Non-GAAP net income, non-GAAP net income per share and 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 non-GAAP net income, non-GAAP net income per share and EBITDA 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 historically used non-GAAP net income, non-GAAP net income per share and EBITDA 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 analyses of past, present and future operating performance and as a supplemental means to evaluation of the Company’s ongoing core operations.

About Rainmaker

Rainmaker Systems, Inc. delivers sales and marketing solutions, combining hosted application software and execution services designed to drive more revenue for our clients. Our Revenue Delivery Platform^(SM) combines proprietary, on-demand application software and advanced analytics with specialized sales and marketing execution services. Rainmaker clients include large enterprises in a range of industries, including computer hardware and software, telecommunications, and financial services industries. For more information, visitwww.rmkr.com or call 800-631-1545.

NOTE: Rainmaker Systems, the Rainmaker logo, Sunset Direct and Contract Renewals Plus are registered with the U.S. Patent and Trademark Office. All other service marks or trademarks are the property of their respective owners.

This press release contains forward-looking statements regarding future events. These forward-looking statements are based on information available to Rainmaker as of this date and they 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 general market conditions, unfavorable 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 client concentration given that we are currently dependent on a few significant client relationships, 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 possibility of the discontinuation and/or realignment of some client relationships, and the financial condition of our clients’ businesses, and other factors detailed in the Company’s filings with the Securities and Exchange Commission, including our filings on Forms 10-K and 10-Q.

CONTACT:

Steve Valenzuela	Todd Kehrli or Jim Byers
Chief Financial Officer	Investor Relations
Rainmaker Systems, Inc.	MKR Group, Inc.
(408) 626-2439	(323) 468-2300
stevev@rmkr.com	rmkr@mkr-group.com

– Financial tables to follow –

RAINMAKER SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

	June 30, 2007			December 31, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	47,802		$	21,996
Restricted cash		244			315
Accounts receivable, less allowance for doubtful accounts of $226 at June 30, 2007 and $233 at December 31, 2006		18,575			13,547
Prepaid expenses and other current assets		2,377			1,172
Total current assets		68,998			37,030
Property and equipment, net		5,618			4,293
Intangible assets, net		5,499			5,604
Goodwill		8,607			7,006
Other noncurrent assets		313			325
Total assets	$	89,035		$	54,258
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	25,914		$	22,522
Accrued compensation and benefits		2,031			1,979
Other accrued liabilities		2,932			2,368
Deferred revenue		3,404			3,457
Current portion of capital lease obligations		—			2
Current portion of notes payable		1,834			1,500
Total current liabilities		36,115			31,828
Deferred tax liability		98			43
Long term deferred revenue		420			268
Notes payable, less current portion		1,333			417
Total liabilities		37,966			32,556
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, 18,894,341 shares outstanding at June 30, 2007 and 15,088,294 shares outstanding at December 31, 2006		18			15
Additional paid-in capital		109,633			81,265
Accumulated deficit		(58,453	)		(59,578	)
Accumulated other comprehensive loss		(129	)		—
Total stockholders’ equity		51,069			21,702
Total liabilities and stockholders’ equity	$	89,035		$	54,258

RAINMAKER SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2007		2006			2007		2006
Net revenue	$	18,042	$	11,267		$	34,307	$	22,337
Cost of services		9,340		5,586			17,668		11,084
Gross margin		8,702		5,681			16,639		11,253
Operating expenses:
Sales and marketing		1,738		892			3,428		1,624
Technology and development		2,793		1,408			5,148		2,629
General and administrative		2,662		1,779			4,860		3,849
Depreciation and amortization		1,197		790			2,337		1,486
Total operating expense		8,390		4,869			15,773		9,588
Operating income		312		812			866		1,665
Interest and other income (expense), net		391		(23	)		520		(2	)
Income before income tax expense		703		789			1,386		1,663
Income tax expense		133		18			261		72
Net income	$	570	$	771		$	1,125	$	1,591
Basic income per share	$	0.03	$	0.06		$	0.07	$	0.12
Diluted income per share	$	0.03	$	0.05		$	0.06	$	0.12
Weighted average common share
Basic		17,401		13,545			16,040		12,905
Diluted		19,074		14,424			17,782		13,785

RAINMAKER SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Six Months Ended June 30,
	2007			2006
Operating activities:
Net income	$	1,125		$	1,591
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment		1,032			951
Amortization of intangible assets		1,305			535
Stock-based compensation expense		713			31
Provision for allowances for doubtful accounts		135			124
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed:
Accounts receivable		(4,378	)		(1,064	)
Prepaid expenses and other assets		(797	)		40
Accounts payable		3,221			(182	)
Accrued compensation and benefits		5			158
Other accrued liabilities		257			484
Deferred tax liability		55			—
Deferred revenue		(71	)		453
Net cash provided by operating activities		2,602			3,121
Investing activities:
Purchases of property and equipment		(2,126	)		(844	)
Restricted cash, net		71			108
Acquisition of business, net of cash acquired		(1,510	)		(70	)
Net cash used in investing activities		(3,565	)		(806	)
Financing activities:
Proceeds from issuance of common stock from option exercises		294			512
Proceeds from issuance of common stock from ESPP		46			23
Proceeds from issuance of common stock from warrant exercises		54			180
Net proceeds from issuance of common stock and warrants from private placement		—			5,312
Net proceeds from follow-on offering of common stock		27,264			—
Principal payment of notes payable		(750	)		(2,750	)
Principal payment of financing arrangements		—			(201	)
Principal payment of capital lease obligations		(2	)		(89	)
Net cash provided by financing activities		26,906			2,987
Effect of exchange rate changes on cash:		(137	)		—
Net increase in cash and cash equivalents		25,806			5,302
Cash and cash equivalents at beginning of period		21,996			9,746
Cash and cash equivalents at end of period	$	47,802		$	15,048

RAINMAKER SYSTEMS, INC.

EXHIBIT A

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (1)

(In thousands, except per share)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2007			2006			2007			2006
Net income – GAAP basis	$	570		$	771		$	1,125		$	1,591
Net revenue adjustment (2)		56			—			133			—
Stock compensation adjustments (3):
Cost of services		92			3			161			4
Sales and marketing		86			8			146			8
Technology and development		46			1			84			3
General and administrative		175			5			322			16
Amortization of intangible assets (4)		662			300			1,305			535
Tax effect of adjustment (5)		(211	)		(7	)		(404	)		(24	)
Net income – Non-GAAP basis	$	1,476		$	1,081		$	2,872		$	2,133
Diluted weighted average shares outstanding		19,074			14,424			17,782			13,785
Non-GAAP diluted income per share	$	0.08		$	0.07		$	0.16		$	0.15

(1) To supplement our financial results presented on a GAAP basis, we use non-GAAP net income, which excludes certain business combination accounting entries and expenses related to acquisitions as well as other expenses including stock-based compensation. As we have completed five acquisitions from January 1, 2005, through June 30, 2007, we believe non-GAAP net income 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 income is not meant to be considered in isolation or as a substitute for GAAP net income, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

(2) Business combination accounting rules require us to record the fair value of contracts assumed in connection with acquisitions. The non-GAAP adjustment is intended to reflect the full amount of revenue on assumed contracts that would have otherwise been recorded during the three and six months ended June 30, 2007 which are related to our acquisitions of ViewCentral on September 15, 2006 and CAS Systems, Inc. on January 25, 2007. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business because we have historically experienced high renewal rates on these types of contracts, although we cannot be sure that customers will renew these contracts. These adjustments will continue through our fiscal year ending 2008.

(3) Stock-based compensation: We adopted FASB Statement No. 123R, Share Based Payments, on January 1, 2006 under the modified prospective method. Statement 123R requires us to record non-cash cost of services and operating expenses associated with stock option awards at their estimated fair values. Prior to our Statement 123R adoption, we recorded stock-based compensation expenses at intrinsic values. In accordance with the modified prospective method, our financial statements for periods prior to January 1, 2006 have not been restated to reflect, and do not include, the changes in methodology to expense options at fair values in accordance with Statement 123R. Stock-based compensation expenses will recur in future periods.

(4) We have excluded the effect of amortization of intangibles from our non-GAAP net income. 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.

(5) The income tax provision was calculated reflecting an effective tax rate of 18.9% and 2.3% for the three months ended June 30, 2007 and 2006, respectively, and 18.8% and 4.3% in the six months ended June 30, 2007 and 2006, respectively.

RAINMAKER SYSTEMS, INC.

EXHIBIT B

RECONCILIATION OF NET INCOME (GAAP) TO EBITDA (1)

(In thousands)

(Unaudited)

	Three months ended June 30,					Six months ended June 30,
	2007			2006		2007			2006
Net income – GAAP basis	$	570		$	771	$	1,125		$	1,591
Add:
Provision for income taxes		133			18		261			72
Non-cash charges for depreciation of property and equipment		535			490		1,032			951
Non-cash charges for amortization of acquisition related intangibles		662			300		1,305			535
Interest and other income		(391	)		23		(520	)		2
		939			831		2,078			1,560
EBITDA – Non GAAP basis	$	1,509		$	1,602	$	3,203		$	3,151

(1) To supplement our financial results presented on a GAAP basis, we use EBITDA, which excludes certain cash and non-cash expenses. We believe EBITDA provides 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 is 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 internally to manage our business and make operating decisions.

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