SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of such terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under "Risk Factors", that may cause our, or our industry's, actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activities, performance or achievements expressed or implied by such forward-looking statements.

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 integrate acquisitions and expand our call center without disruption to our business, 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 client concentration given that the Company is currently dependent on a few large 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 or realignment of some client relationships, the financial condition of our clients' business, our ability to raise additional equity or debt financing and other factors detailed in Part II Item 1A - "Risk Factors" of this Form 10-Q.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. We assume no obligation to update such forward-looking statements publicly for any reason even if new information becomes available in the future.

Overview

We are a leading provider of sales and marketing solutions, combining hosted application software and execution services designed to drive more revenue for our clients. We have three primary product lines as follows: contract sales, lead development and training sales. We have developed an integrated solution, the Rainmaker Revenue Delivery PlatformSM, that combines proprietary, on-demand application software and advanced analytics with specialized sales and marketing execution services, which can include marketing strategy development, websites, e-commerce portal creation and hosting, both inbound and outbound e-mail, chat, direct mail and telesales services.

We use the Rainmaker Revenue Delivery Platform to drive more revenue for our clients in a variety of ways to:

• provide a hosted technology portal for our clients and their resellers to assist in selling renewals;

• sell, on behalf of our clients, the renewal of service contracts, software licenses and subscriptions, and warranties;

• generate, qualify and develop corporate leads, turning these prospects into qualified appointments for our clients' field sales forces or leads for their channel partners; and

• provide a hosted application software platform that enables our clients to more effectively generate additional revenue from sales of Internet-based and in-person training.

We operate as an extension of our clients, in that all of our interactions with our clients' customers, utilizing our multi-channel communications platform, incorporate our clients' brands and trademarks, complementing and enhancing our clients' sales and marketing efforts. Thus, our clients entrust us with some of their most valuable assets-their brand and reputation. In the course of delivering these services, we utilize our proprietary databases to access the appropriate technology buyers and key decision makers.

We currently have over 100 clients, primarily in the computer hardware and software, telecommunications and financial services industries.

We have acquired several businesses that have expanded our client base and geographic presence to include international operations in Canada and the Philippines and enhanced the functionality of our Revenue Delivery Platform. These acquisitions have extended our technology capabilities and added new services which we offer across our expanding client base.

Critical Accounting Policies/Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts in our consolidated financial statements. We evaluate our estimates on an on-going basis, including those related to our revenues, asset impairments, income taxes, stock-based compensation and commitments and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Although actual results have historically been reasonably consistent with management's expectations, the actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions.

Management has discussed the development of our critical accounting policies with the audit committee of the board of directors and they have reviewed the disclosures of such policies and management's estimates in this Management's Discussion and Analysis of Financial Condition and Results of Operations.

On January 1, 2007 we adopted Financial Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with Financial Accounting Standards Statement No. 109, "Accounting for Income Taxes." Accordingly, we have disclosed that our policy for recording interest and penalties associated with audits is to record such items as a component of income before taxes. Penalties, interest paid and interest received are recorded in interest and other income (expense), net, in the statement of operations. Interest and penalties are immaterial at the date of adoption of FIN 48. The adoption of FIN 48 did not have a material impact on our financial statements at January 1, 2007.

With the establishment of our Canadian foreign subsidiary and the subsequent purchase of Canadian based assets from CAS Systems on January 25, 2007, we adopted a policy for recording foreign currency transactions and translation in accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation" (SFAS No. 52). For our Canadian subsidiary, the functional currency has been determined to be the local currency, and therefore, assets and liabilities are translated at period-end exchange rates, and statement of operations items are translated at an average exchange rate prevailing during the period. Such translation adjustments are recorded in accumulated comprehensive income (loss), a component of stockholders' equity. In July 2007, we acquired Qinteraction Limited and its Philippine-based subsidiary. As a result of this acquisition, we also adopted the policy mentioned above for recording foreign currency transactions and translations for this subsidiary as the functional currency has been determined to be the local currency for the Philippine-based subsidiary. Gains and losses from foreign currency denominated transactions are included in interest and other income (expense), net in the consolidated statements of operations. Losses from foreign currency denominated transactions amounted to $8,000 for the three months ended March 31, 2008, and gains from foreign currency denominated transactions amounted to $12,000 for the three months ended March 31, 2007.

Management believes there have been no significant changes during the three months ended March 31, 2008 to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Results of Operations

The following table sets forth for the periods given selected financial data as a percentage of our revenue. The table and discussion below should be read in connection with the financial statements and the notes thereto which appear elsewhere in this report as well as with our financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007.

                                                      Three Months Ended
                                                          March 31,
                                                     2008           2007
         Net revenue                                  100.0 %        100.0 %
         Costs of services                             51.5           51.2

         Gross margin                                  48.5           48.8


         Operating expenses:
         Sales and marketing                           10.1           10.4
         Technology and development                    15.8           14.5
         General and administrative                    16.6           13.5
         Depreciation and amortization                  8.5            7.0

         Total operating expenses                      51.0           45.4

         Operating (loss) income                       (2.5 )          3.4
         Interest and other income (expense), net       1.7            0.8

         (Loss) income before income tax expense       (0.8 )          4.2
         Income tax expense                             0.5            0.8

         Net (loss) income                             (1.3 )%         3.4 %

Comparison of Three Months Ended March 31, 2008 and 2007

Net Revenue. Net revenue increased $4.3 million, or 27%, to $20.6 million in the three months ended March 31, 2008, as compared to the three months ended March 31, 2007. Our lead development product line generated $2.7 million of the increase which includes approximately $2.5 million resulting from the acquisition of Qinteraction in July 2007. Approximately $1.5 million of the increase is related to our contract sales product line as a result of increased sales to existing clients.

Costs of Services and Gross Margin. Costs of services increased $2.3 million, or 27%, to $10.6 million in the three months ended March 31, 2008, as compared to the 2007 comparative period. The increase is attributable to expenses to support the additional revenue for our contract sales and lead development product lines. Our gross margin percentage remained flat at 49% in the three months ended March 31, 2008.

Sales and Marketing Expenses. Sales and marketing expenses increased $384,000, or 23%, to $2.1 million in the three months ended March 31, 2008, as compared to the 2007 comparative period. The increase is primarily due to approximately $366,000 in increased commissions expenses and approximately $82,000 in increased pre-sales support as a result of the increases in revenue during the period. These increases were partially offset by lower personnel costs as compared to the prior year driven by the change in the staffing level. We expect sales and marketing expenses to continue to increase in absolute dollars and slightly as a percentage of revenue for the foreseeable future as we continue to grow.

Technology and Development Expenses. Technology and development expenses increased $897,000, or 38%, to $3.3 million during the three months ended March 31, 2008, as compared to the 2007 comparative period. The increase is primarily attributable to increases in expenses relating to supporting client driven initiatives including an increase in project management staff and data resources. Additionally, the increase was also attributable to an investment in help desk support, and additional staffing of leadership roles and development staff in the Philippines. We expect technology and development expenses to increase on an absolute dollar basis in 2008 as we continue to invest in development of our solutions, including internationalization of our solutions, for our customers and in technology infrastructure.

General and Administrative Expenses. General and administrative expenses increased $1.2 million, or 56%, to $3.4 million during the three months ended March 31, 2008, as compared to the three months ended March 31, 2007. The increase was primarily due to approximately $522,000 in increased compensation costs related to additional staff added to support the growth of the business and to assist in the Company's compliance efforts related to Sarbanes-Oxley. Included in

the $522,000 in compensation increases was $227,000 related to increased stock-based compensation charges during the 2008 period. Additionally, approximately $459,000 in expenses related to Qinteraction which was acquired in July 2007 contributed to the overall increase. We expect to continue to incur costs in 2008 to maintain compliance with the Sarbanes-Oxley Act and we will also need to achieve Sarbanes-Oxley compliance in 2008 for our businesses acquired during the 2007 fiscal year.

Depreciation and Amortization Expenses. Depreciation and amortization expenses increased $613,000, or 54%, to $1.8 million for the three months ended March 31, 2008, as compared to the 2007 period. Amortization of intangible assets increased by approximately $225,000 in the 2008 period, primarily as a result of our recent acquisitions. These include the acquisition of CAS Systems in January 2007 and Qinteraction in July 2007. The remaining increase is due to increased depreciation of property and equipment as a result of our acquisitions and capital expenditures over the last year. Because of our acquisitions and the investments being made in our infrastructure, we expect depreciation and amortization expense to continue to increase for the foreseeable future.

Interest and Other Income (Expense), Net. The components of interest and other income (expense), net are as follows (in thousands):

                                              Three Months Ended
                                                   March 31,
                                             2008            2007         Change
        Interest income                    $     352       $     167     $    185
        Interest expense                         (22 )           (51 )         29
        Currency translation (loss) gain          (8 )            12          (20 )
        Other                                     22               1           21

                                           $     344       $     129     $    215

The increase in interest income is attributable to the net proceeds of $27.2 million received from our follow-on offering of common stock in April 2007 which was invested in interest bearing deposit accounts. Interest expense is the result of the $3.0 million Term Loan obtained in February 2005 in connection with the acquisition of Sunset Direct, interest on the $1.5 million June 2005 Term Loan to fund the purchase and implementation of our new client management system and interest incurred with notes payable issued with the purchase of the assets of CAS Systems. We have been making principal payments on the term loans and the CAS Systems loan and have paid off the February 2005 Term Loan during the quarter ended March 31, 2008, and interest expense was therefore reduced in the 2008 period as a result.

The currency translation loss is primarily due to the fluctuation of currency exchange rates on a note payable to a third party denominated in United States dollars that is owed by our Canadian subsidiary in connection with our acquisition of CAS Systems. Fluctuations of currency exchange rates may have a negative effect in future periods on our financial results.

Income Tax Expense. Income tax expense decreased $18,000, or 14%, to $110,000 for the three months ended March 31, 2008, as compared to the three months ended March 31, 2007. Our income tax expense for the three month period ended March 31, 2008 is based on our estimate of taxable income for the full year ended December 31, 2008. The effective tax rate implied by our income tax expense may be adjusted if our estimate of taxable income/(loss) changes significantly during the year.

Liquidity and Sources of Capital

Cash used in operating activities for the three months ended March 31, 2008 was $284,000 as compared to cash provided by operating activities of $448,000 in the three months ended March 31, 2007. Cash provided by operating activities in 2008 was primarily the result of a net loss totaling $277,000, non-cash expenditures of depreciation and amortization of property and intangibles of $1.8 million, stock-based compensation charges of $404,000, the provision for allowance for doubtful accounts of $172,000, amortization of discount on notes receivable of $68,000, and changes in operating assets and liabilities, net of assets acquired and liabilities assumed, that used $2.4 million of cash for the year.

The two largest components of our changes in operating assets and liabilities are accounts payable and accounts receivable. When we sell a service or maintenance contract for a client, we record the sales price of the contract to the client's customer as our receivable and also record our payable to the client for our cost of the contract, which is effectively the same amount less our compensation for obtaining the contract for our client. For this reason, our accounts payable is composed primarily of amounts due to our clients for service and maintenance contracts we sold on their behalf. Accounts payable therefore increases in relation to our increased sales of service contracts on behalf of our clients. However, because

we report as revenue only the net difference between our account receivable from the customer of our client and our account payable to our client in accordance with EITF Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, any increase in net revenue from service contract sales results in a much larger increase in our accounts payable, which is treated as positive cash flow from operating activities.

Accounts receivable increased at March 31, 2008 as compared to March 31, 2007 as a result of higher overall sales in the three months ended March 31, 2008, as compared to the 2007 period. Our days sales outstanding, or DSO, decreased to 26 days at March 31, 2008 as compared to 31 days at December 31, 2007. Since we record the gross billing to the end customer of our clients in our accounts receivable, we calculate DSO based on our ability to collect those gross billings from the end customers. We expect DSO to increase in the future as lead development becomes a higher percentage of our revenue as these contracts have longer payment terms.

Cash provided by operating activities in the three months ended March 31, 2007 was primarily the result of net income totaling $555,000, non-cash expenditures of depreciation and amortization of property and intangibles of $1.1 million, stock-based compensation charges of $314,000, the provision for allowance for doubtful accounts of $64,000, and changes in operating assets and liabilities, net of assets acquired and liabilities assumed, that used $1.6 million.

Cash used in investing activities was $2.7 million and $2.6 million in the three months ended March 31, 2008 and 2007, respectively. The increase in cash used in investing activities was primarily due to investments of approximately $1.5 million in purchases of property and equipment during 2008 as compared to $1.1 million in 2007. In the CAS Systems acquisition, the purchase agreement provided for a potential additional payment of $1 million contingent on attaining certain performance metrics at the end of the 12 months following the acquisition, subject to adjustment. The performance metrics were achieved and the payment of $1 million was made by the Company in January 2008. Restricted cash represents the reserve for the refund due for non-service payments inadvertently paid to the Company by our clients' customers instead of paid directly to the Company's clients. At the time of cash receipt, the Company records a current liability for the amount of non-service payments received. The decrease in restricted cash represents the reduction of our balance of refunds due to customers.

Cash used in financing activities was $992,000 in the three months ended March 31, 2008 as compared to $258,000 in the 2007 period. Cash used in financing activities in 2008 was primarily a result of principal payments of $938,000 on our term loans and CAS notes and purchases of $66,000 of treasury stock from employees and directors for shares withheld for income taxes payable on restricted stock awards vested. We received approximately $12,000 from the exercise of stock options during the period. In the 2007 period, we had principal payments of $375,000 on our term loans. These payments were partially offset by $119,000 from the exercise of stock options and warrants.

In connection with our acquisitions of CAS Systems in January 2007 and Qinteraction Limited in July 2007, the purchase agreements provide for a potential additional payment at the end of twelve months following each acquisition, based on the achievement of certain financial milestones specific to each individual acquisition. In January 2008, the Company paid $1 million relating to the CAS Systems acquisition. The additional payment for the Qinteraction Limited acquisition, if any, will be due during the Company's third fiscal quarter of 2008 and could result in an additional payment of up to $4.5 million in cash and $3.5 million in common stock.

Our principal source of liquidity as of March 31, 2008 consisted of $33.6 million of cash and cash equivalents. In connection with a financial covenant related to our term loans, we are required to maintain unrestricted cash deposits of $250,000 with our lender Bridge Bank, N.A., or Bridge Bank, which is included in the $33.6 million of cash and cash equivalents. We anticipate that our existing capital resources and cash flow expected to be generated from future operations will enable us to maintain our current level of operations, our planned operations and our planned capital expenditures for at least the next twelve months.

In February 2008, we received written notification from Dell that they will be terminating our service agreement. Under Dell's transition plan set forth in the notice, Dell moved approximately half of the services provided by us under the agreement internally effective February 4, 2008, and moved the remainder over the subsequent three months. We are not performing any services for Dell subsequent to May 2, 2008. Dell represented approximately 29% of our net revenue for the 2007 fiscal year and approximately 38% of our net revenue in 2006. For the quarter ended March 31, 2008, Dell represented approximately 25% of our net revenue.

Credit Arrangements

On July 6, 2006, we executed a further amendment to our Revolving Credit Facility with our lender, Bridge Bank. The amendment extended the maturity date of the Revolving Credit Facility from December 10, 2006 to October 10, 2007. We are currently in negotiations to extend the maturity of the Revolving Credit Facility. As of March 31, 2008, we had no borrowings under the Revolving Credit Facility and had one undrawn letter of credit outstanding under the Revolving Credit Facility with a face amount of $100,000. We originally entered into this Revolving Credit Facility with our lender in April 2004.

In July 2005, we issued an irrevocable standby letter of credit in the amount of $100,000 to our landlord for a security deposit for our new corporate headquarters located in Campbell, California. In 2004, we issued an irrevocable standby letter of credit to one of our clients. The letter of credit was issued in the amount of $325,000 as a guarantee for service contracts sold by us on behalf of our client and expired in September 2007. The letters of credit were issued under the Revolving Credit Facility described above. As of March 31, 2008, no amounts have been drawn against the letters of credit.

In June 2005, we entered into a business loan agreement with Bridge Bank, pursuant to which we obtained a $1.5 million term loan, or the June 2005 Term Loan, that was utilized to fund the purchase and implementation of our new client management system. The June 2005 Term Loan is to be repaid in 36 monthly installments of $42,000 plus interest at a variable rate of prime per annum (5.25% per annum as of March 31, 2008).

Concurrently with the closing of the merger transaction with Sunset Direct in February 2005, we entered into a Business Loan Agreement and Commercial Security Agreement with Bridge Bank, and obtained a $3.0 million term loan, or the Term Loan, that we used to retire certain indebtedness and certain other liabilities of Sunset Direct. The Term Loan was repayable in 36 monthly installments of $83,000 plus interest at a variable rate of prime per annum. This loan matured and was paid off in February 2008.

The June 2005 Term Loan and Revolving Credit Facility are secured by substantially all of our consolidated assets, including intellectual property. We are subject to certain financial covenants, including maintenance of unrestricted cash with Bridge Bank, reducing from time to time to the outstanding amount of the June 2005 Term Loan referenced above rounded upwards to the nearest $250,000 increment ($250,000 at March 31, 2008). We are obligated to maintain a specified minimum net income and minimum debt service coverage ratio. The June 2005 Term Loan and the Revolving Credit Facility contain customary covenants that will, subject to limited exceptions, limit our ability to, among other things, (i) create liens; (ii) make capital expenditures;
(iii) pay cash dividends; and (iv) merge or consolidate with another company. The June 2005 Term Loan and the Revolving Credit Facility also provide for customary events of default, including nonpayment, breach of covenants, payment defaults of other indebtedness, and certain events of bankruptcy, insolvency and . . .