UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
____________________________
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
January 28, 2015
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RAINMAKER SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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| Delaware | |
(State or other jurisdiction of incorporation) |
000-28009 | | 33-0442860 |
(Commission File Number) | | (IRS Employer Identification No.) |
900 East Hamilton Ave. Campbell, CA | | 95008 |
(Address of principal executive offices) | | (Zip Code) |
(408) 626-3800
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
____________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
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[ ] | | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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[ ] | | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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[ ] | | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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[ ] | | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 1 - Registrant’s Business and Operations
Item 1.01 - Entry into a Material Definitive Agreement.
On January 28, 2015, Rainmaker Systems, Inc. (the “Company”), Symantec Corporation (“Symantec”) and holders of the Company’s units consisting of secured convertible promissory notes, supplemental secured promissory notes and warrants entered into a confidential Settlement and Release Agreement (the “Settlement Agreement”). Pursuant to the Settlement Agreement, (i) the Company made a cash payment to Symantec and issued a promissory note to Symantec which is secured by the Company’s personal property, and (ii) the parties entered into a mutual release of claims. Further, pursuant to the Settlement Agreement, Symantec will file a request for dismissal with the Superior Court of California, County of Santa Clara (the “Court”) to dismiss with prejudice the litigation between the Company and Symantec that had been pending before the Court relating to the Master Services Agreement entered into by the Company and Symantec in June 2006, the statement of work entered into by the Company and Symantec in June 2008 and the Online Store Agreement for SMB and Midmarket Businesses entered into by the Company and Symantec in June 2010. The Company intends to file a redacted copy of the Settlement Agreement as an exhibit to its Quarterly Report on Form 10-Q for the quarter ending March 31, 2015, and will be requesting confidential treatment from the Commission for certain portions thereof.
As previously disclosed in our Current Report on Form 8-K filed with the Commission on July 21, 2014, on July 15, 2014, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with certain investors pursuant to which we agreed to issue units each consisting of (i) a secured convertible promissory note in the face amount of $1.00, (ii) a supplemental secured promissory note in the face amount of $0.50 and (iii) warrants to purchase up to four shares of the Company’s common stock (collectively, the “Financing Transaction”). On July 15, 2014, we completed an initial closing of the Financing Transaction for the sale of 2,550,000 units, representing gross proceeds to us of $2,550,000 and net proceeds of approximately $2,275,000 after deducting fees and estimated expenses payable by us. On August 12, 2014, we completed a second closing of the Financing Transaction for the sale of 450,000 units, representing gross proceeds to us of $450,000 and net proceeds of approximately $415,000. On August 22, 2014, we completed a third closing of the Financing Transaction for the sale of 90,000 units, representing gross proceeds to us of $90,000 and net proceeds of approximately $84,000.
On January 29, 2015, we completed a fourth closing of the Financing Transaction for the sale of 810,000 units, representing gross proceeds to us of $810,000 and net proceeds of approximately $780,000 after deducting fees and estimated expenses payable by us. The Company used a portion of the net proceeds from the fourth closing to make a cash payment to Symantec pursuant to the above-referenced Settlement Agreement and intends to use the balance of the net proceeds for general corporate purposes, including working capital.
In connection with the fourth closing of the Financing Transaction, on January 29, 2015, the Company and holders of the Company’s units entered into a First Amendment to Purchase Agreement, Secured Convertible Notes, Promissory Notes, Security Agreement and Warrants and Waiver (the “First Amendment”). The First Amendment amends the Purchase Agreement, the secured convertible promissory notes, the supplemental secured promissory notes and the warrants to, among other things, (i) reduce the non-default rate at which the secured convertible promissory notes and supplemental secured promissory notes accrue interest from 8% per annum to 5% per annum, (ii) extend the date on which the first quarterly interest payment under the secured convertible promissory notes and supplemental secured promissory notes is due from September 30, 2015 to March 31, 2016, and provide for capitalization of all interest accrued through December 31, 2015 under the secured convertible promissory notes and supplemental secured promissory notes, (iii) reduce the initial conversion rate at which the secured convertible promissory notes may be converted into common stock of the Company from $0.25 per share to $0.20 per share, (iv) reduce the exercise price of the warrants from $0.08 per share to $0.04 per share, and (v) issue additional warrants to purchase up to one (1) additional share of the Company’s common stock to each investor purchasing units in the fourth closing and/or consenting to the First Amendment, resulting in each investor participating in the fourth closing or otherwise consenting to the First Amendment receiving on an aggregate basis warrants to purchase up to a total of five (5) shares of the Company’s common stock for each unit purchased or otherwise held by such investor. In addition, pursuant to the First Amendment, the requisite majority of holders of the Company’s secured convertible promissory notes and supplemental secured promissory notes agreed to waive all existing events of default thereunder and rescind the acceleration thereof. The Company intends to file a redacted copy of the First Amendment as an exhibit to its Quarterly Report on Form 10-Q for the quarter ending March 31, 2015, and will be requesting confidential treatment from the Commission for certain portions thereof relating to the above-referenced Settlement Agreement.
Section 2 - Financial Information
Item 2.03 - Creation of a Direct Financial Obligation or an Obligation under an Off Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 above is incorporated by reference in this Item 2.03.
Section 3 - Securities and Trading Markets
Item 3.02 - Unregistered Sales of Equity Securities.
The information set forth under Item 1.01 above is incorporated by reference in this Item 3.02.
The securities issued pursuant to the Financing Transaction were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of certain states, and were issued in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws.
Section 5 - Corporate Governance and Management
Item 5.02 - Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(e) On January 28, 2015, the Company agreed to amend the executive employment agreement of Terry Lydon, Chief Executive Officer, in order to better align Mr. Lydon’s compensation with that of the Company’s Chief Financial Officer, Bryant Tolles, who was hired by the Company in September 2014. The amendment increases Mr. Lydon’s annual base salary to $208,000. Subject to approval by the Board of Directors, Mr. Lydon will also receive options to purchase up to 550,000 shares of the Company’s common stock, vesting 1/16 quarterly over four years from the date of grant.
Section 7 - Regulation FD
Item 7.01 - Regulation FD Disclosure.
On January 29, 2015, the Company issued a press release announcing the above-referenced Settlement Agreement with Symantec and the fourth closing of the Financing Transaction. A copy of the press release is furnished with this report as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 7.01 (including Exhibit 99.1) is being furnished, not filed, pursuant to Regulation FD. Accordingly, the information in this Item 7.01 will not be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.
Section 9 - Financial Statements and Exhibits
Item 9.01 - Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit No. | Description |
99.1 | Press Release dated January 29, 2015 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | RAINMAKER SYSTEMS, INC. |
| | (Registrant) |
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January 29, 2015 | | By: /s/ Bryant Tolles, III |
Date | | Name: Bryant Tolles, III
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| | Title: Chief Financial Officer
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EXHIBIT 99.1
Contact:
Bryant Tolles
Chief Financial Officer
408-340-2515
bryant.tolles@rmkr.com
Rainmaker Systems, Inc. Announces Strategic Settlement, Capital Raise; Lays Financial Foundation for Growth of ViewCentral Business
Key Investors Rally Behind Company
CAMPBELL, Calif. – January 29, 2015 – Rainmaker Systems, Inc. (OTCQX: RMKR) (“the Company”), a leading provider of external, for-profit based learning management solutions, today announced that it had reached terms with a major creditor to settle a lawsuit filed in September 2014.
The lawsuit, disclosed in an 8-K filing with the Securities and Exchange Commission on October 6, 2014, sought payment for amounts owing under a contract between the Company and creditor related to the Company’s former telesales and e-commerce business.
In conjunction, the Company raised net proceeds of approximately $780,000 to fund a settlement payment to the creditor and provide working capital for the Company’s growing ViewCentral™ SaaS Learning Management System (LMS) business. As part of the settlement, investors in the Company’s secured debt agreed to waive all existing events of default that had initially arisen in September 2014.
“Today’s settlement represents a watershed moment in the history of Rainmaker Systems,” commented Bryant Tolles, Chief Financial Officer of Rainmaker. “We are now exclusively focused on development and marketing of the ViewCentral platform and our ability to resolve financial issues stemming from past lines of business is a critical ingredient in our future growth. Not only have we addressed a significant liability and shored up our balance sheet, but we have done so with the resounding support of existing, and new, investors in the Company”.
“We look forward to renewed engagement with the investor community in 2015 as part of laying the financial foundation for the growth of ViewCentral,” added Terry Lydon, President and Chief Executive Officer of Rainmaker.
About Rainmaker Systems, Inc.
Rainmaker Systems is a learning management solution provider to organizations of all sizes across the technology, financial services, biosciences, human resources, and consulting industries, among others. Rainmaker’s ViewCentral Learning Management System (LMS) allows organizations to monetize and facilitate the delivery of training and certification programs, enabling them to capture both incremental and recurring revenue from subscriptions-based offerings. Rainmaker Systems is headquartered in Campbell, Calif. For more information, please visit www.viewcentral.com.
Rainmaker trades in the U.S. on OTCQX under the symbol “RMKR.”
Safe Harbor Statement
This press release contains 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 capital to meet our operating requirements, our ability to maintain compliance with our debt covenants, our ability to reduce our losses and achieve profitability, 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 high degree of uncertainty and our limited visibility due to economic conditions, our ability to execute our business strategy, 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 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 software technology 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.
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