SUMMARY OF SIGNIFICIANT ACCOUNTING POLICIES

Business

The accompanying consolidated financial statements include the accounts of Rainmaker Systems, Inc. and its wholly-owned subsidiaries (“Rainmaker”, “we”, “our” or “the Company”). Rainmaker is a leading global provider of business-to-business, or B2B, e-commerce solutions that drive online sales and renewal for products, subscriptions and training for our clients and their channel partners. Rainmaker provides these solutions on a global basis supporting multiple payment methods, currencies and language capabilities. The Rainmaker solution combines cloud-based e-commerce solutions for online sales enhanced by global sales agents to increase client satisfaction and deliver maximum revenue while increasing ease of doing business at each phase of the customer buying cycle.

We are headquartered in Silicon Valley in Campbell, California, and have additional operations in or near Austin, Texas, Manila, Philippines, London, England and Paris, France. Our global clients consist primarily of large enterprises operating in the computer hardware and software and information services industries.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Rainmaker Systems, Inc. and its wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.

Basis of Presentation

The consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP in the United States of America have been omitted pursuant to such rules and regulations. The interim financial statements are unaudited but reflect all normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of the results of these periods.

The results of our operations for the three and six months ended June 30, 2011 are not necessarily indicative of results to be expected for the year ending December 31, 2011, or any other period. These consolidated financial statements should be read in conjunction with our financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission (“SEC”) on March 4, 2011. Balance sheet information as of December 31, 2010, has been derived from the audited financial statements for the year then ended.

Certain amounts reported in the accompanying financial statements for 2010 have been reclassified to conform to the 2011 presentation. Such reclassifications had no effect on previously reported results of operations, total assets or accumulated deficit.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Our estimates are based on historical experience, input from sources outside of the Company, and other relevant facts and circumstances. Actual results could differ materially from those estimates. Accounting policies that include particularly significant estimates are revenue recognition and presentation policies, valuation of accounts receivable, measurement of our deferred tax asset and the corresponding valuation allowance, allocation of purchase price in business combinations, fair value estimates for the expense of employee stock options and warrants and the assessment of recoverability and impairment of goodwill, intangible assets, private company investments, fixed assets and commitments and contingencies.

Cash and Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents generally consist of money market funds and certificates of deposit. The fair market value of cash equivalents represents the quoted market prices at the balance sheet dates and approximates their carrying value.

The following is a summary of our cash and cash equivalents at June 30, 2011 and December 31, 2010 (in thousands):



	June 30, 2011		December 31, 2010
Cash and cash equivalents:
Cash	$	9,898	$	6,253
Money market funds	1,933		5,918
Total cash and cash equivalents	$	11,831	$	12,171

On March 23, 2011, we renewed our borrowings with HSBC Bank (the “Loan Line Facility”). The Loan Line Facility provides borrowing availability up to a maximum of $630,000 secured by a standby documentary credit (“SDC”) and matures on November 2, 2011. The SDC is secured by a cash balance of approximately $702,000 held with HSBC Bank as of June 30, 2011.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers or clients’ customers to make required payments of amounts due to us. The allowance is comprised of specifically identified account balances for which collection is currently deemed doubtful. In addition to specifically identified accounts, estimates of amounts that may not be collectible from those accounts whose collection is not yet deemed doubtful but which may become doubtful in the future are made based on historical bad debt write-off experience. If the financial condition of our clients or our clients' customers was to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. At June 30, 2011 and December 31, 2010, our allowance for potentially uncollectible accounts was $85,000 and $102,000, respectively.

Property and Equipment

Property and equipment are stated at cost. Depreciation of property and equipment is recorded using the straight-line method over the assets’ estimated useful lives. Computer equipment and capitalized software are depreciated over two to five years and furniture and fixtures are depreciated over five years. Amortization of leasehold improvements is recorded using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets. Amortization of fixed assets under capital leases is included in depreciation expense.

Costs of internal-use software are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350-40, Internal Use Software, and FASB ASC 350-50, Website Development Costs. The guidance requires that we expense computer software and website development costs as they are incurred during the preliminary project stage. Once the capitalization criteria of ASC 350-40 and ASC 350-50 have been met, external direct costs of materials and services consumed in developing or obtaining internal-use software, including website development costs, payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use computer software and associated interest costs are capitalized. We capitalized approximately $381,000 and $734,000 of such costs during the three and six months ended June 30, 2011, respectively, and approximately $586,000 and $942,000 during the three and six months ended June 30, 2010, respectively. Capitalized costs are amortized using the straight-line method over the shorter of the term of related client agreement, if such development relates to a specific outsource client, or the software’s estimated useful life, ranging from two to five years. Capitalized internal-use software and website development costs are included in property and equipment in the accompanying balance sheets.

Goodwill and Other Intangible Assets

We completed several acquisitions during the period January 1, 2005 through June 30, 2011. Goodwill represents the excess of the acquisition purchase price over the estimated fair value of net tangible and intangible assets acquired. Goodwill is not amortized, but instead tested for impairment at least annually or more frequently if events and circumstances indicate that the asset might be impaired. In our analysis of goodwill and other intangible assets, we apply the guidance of FASB ASC 350-20-35, Intangibles – Goodwill and Other-Subsequent Measurement, in determining whether any impairment conditions exist. In our analysis of other finite lived amortizable intangible assets, we apply the guidance of FASB ASC 360-10-35, Property, Plant and Equipment-Subsequent Measurement, in determining whether any impairment conditions exist. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. Intangible assets are attributable to the various technologies, customer relationships and trade names of the businesses we have acquired. At June 30, 2011 and December 31, 2010, we had accumulated impairment losses of $11.5 million.

In the fourth quarter of 2010, we performed our annual goodwill impairment evaluation required under FASB ASC 350-20-35, Intangibles – Goodwill and Other-Subsequent Measurement, and concluded that goodwill was not impaired. The estimated fair value of each of these reporting units exceeded their carrying values by greater than 20% as of December 31, 2010. At June 30, 2011 and December 31, 2010, we had approximately $3.8 million in goodwill recorded on our contract sales reporting unit and approximately $1.5 million recorded on our Rainmaker Europe reporting unit.

We report segment results in accordance with FASB ASC 280, Segment Reporting. The method for determining what information is reported is based on the way that management organizes the operating segments for making operational decisions and assessments of financial performance. The Company’s chief operating decision maker reviews financial information presented on a consolidated basis, accompanied by detailed information listing revenues by customer and product line, for purposes of making operating decisions and assessing financial performance. Currently, the chief operating decision maker does not use product line financial performance as a basis for business operating decisions. Accordingly, the Company has concluded that it has one operating and reportable segment. However, in accordance with FASB ASC 350-20-35, we are required to test goodwill for impairment at the reporting unit level, which is an operating segment or one level below an operating segment. Thus, our reporting units for goodwill impairment testing are Contract Sales, Lead Development, Rainmaker Asia and Rainmaker Europe.

Long-Lived Assets

Long-lived assets including our purchased intangible assets are amortized over their estimated useful lives. In accordance with FASB ASC 360-10-35, Property, Plant and Equipment-Subsequent Measurement, long-lived assets, such as property, equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. In the fourth quarter of 2010, we evaluated our long-lived assets and noted no impairment.

Based on information we received on April 30, 2010 from a private company in which we invested in 2007 in the form of a secured note and a minority equity investment, we took a non-cash charge in the first quarter of 2010 for the carrying value of our minority equity investment of $740,000.

Revenue Recognition and Presentation

Substantially all of our revenue is generated from the sale of service contracts and maintenance renewals, lead development services and software subscriptions for hosted internet sales of web-based training. Revenue is recorded using the proportional performance model, where revenue is recognized as performance occurs over the term of the contract and any initial set up fees are recognized over the estimated customer life. We recognize revenue from the sale of our clients’ service contracts and maintenance renewals on the “net basis”, which represents the amount billed to the end customer less the amount paid to our client. Revenue from the sale of service contracts and maintenance renewals is recognized when a purchase order from a client’s customer is received, the service contract or maintenance agreement is delivered, the fee is fixed or determinable, the collection of the receivable is reasonably assured, and no significant post-delivery obligations remain unfulfilled. Revenue from lead development services we perform is recognized as the services are accepted and is generally earned ratably over the service contract period. Some of our lead development service revenue is earned when we achieve certain attainment levels and is recognized upon customer acceptance of the service. We earn revenue from our software application subscriptions of hosted online sales of web-based training ratably over each contract period. Since these software subscriptions are usually paid in advance, we have recorded a deferred revenue liability on our balance sheet that represents the prepaid portions of subscriptions that will be earned over the next one to three years.

The FASB’s Emerging Issues Task Force has issued new accounting guidance for revenue arrangements with multiple deliverables. We evaluated our agreements for multiple element arrangements under the new guidance based on sales contracts entered into during 2011. Based on the results of our evaluation, our agreements typically do not contain multiple deliverables. In the few instances where our agreements have contained multiple deliverables, they do not have value to our customers on a standalone basis, and therefore the deliverables are considered together as one unit of accounting. However, we may enter into sales contracts with multiple deliverable element conditions with stand-alone value in the future which may affect the timing of our revenue recognition and may have an impact on our future financial statements.

Our revenue recognition policy involves significant judgments and estimates about collectability. We assess the probability of collection based on a number of factors, including past transaction history and/or the creditworthiness of our clients’ customers, which is based on current published credit ratings, current events and circumstances regarding the business of our clients’ customers and other factors that we believe are relevant. If we determine that collection is not reasonably assured, we defer revenue recognition until such time as collection becomes reasonably assured, which is generally upon receipt of cash payment.

In addition, we provide an allowance in accrued liabilities for the cancellation of service contracts that occurs within a specified time after the sale, which is typically less than 30 days. This amount is calculated based on historical results and constitutes a reduction of the net revenue we record for the commission we earn on the sale.

Cost of Services

Cost of services consists of costs associated with promoting and selling our clients’ products and services including compensation costs of sales personnel, sales commissions and bonuses, costs of designing, producing and delivering marketing services, and salaries and other personnel expenses related to fee-based activities. Cost of services also includes the costs of allocated facility and telephone usage for our telesales representatives as well as other direct costs associated with the delivery of our services. Most of the costs are personnel related and are mostly variable in relation to our net revenue. Bonuses and sales commissions will typically change in proportion to revenue or profitability.

Advertising

We expense advertising costs as incurred. These costs were not material and are included in sales and marketing expense.

Income Taxes

We account for income taxes using the liability method. The liability method requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements, but have not been reflected in our taxable income. A valuation allowance is established to reduce deferred tax assets to their estimated realizable value. Therefore, we provide a valuation allowance to the extent that we do not believe it is more likely than not that we will generate sufficient taxable income in future periods to realize the benefit of our deferred tax assets. At June 30, 2011 and December 31, 2010, we had gross deferred tax assets of $31.8 million and $27.8 million, respectively. At June 30, 2011 and December 31, 2010, the deferred tax assets were subject to a 100% valuation allowance and therefore are not recorded on our balance sheet as assets. Realization of our deferred tax assets is limited and we may not be able to fully utilize these deferred tax assets to reduce our tax rates.

FASB ASC 740, Income Taxes, prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under this guidance, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, FASB ASC 740 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Our policy for recording interest and penalties related to uncertain tax positions is to record such items as a component of income before taxes. Penalties, interest paid and interest received are recorded in interest and other expense, net, in the statement of operations. There were immaterial amounts accrued for interest and penalties related to uncertain tax positions as of June 30, 2011.

Stock-Based Compensation

FASB ASC 718, Compensation-Stock Compensation, establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, primarily focusing on accounting for transactions where an entity obtains employee services in share-based payment transactions. This guidance requires companies to estimate the fair value of share-based payment awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s Consolidated Statements of Operations. See Note 7 for further discussion of this standard and its effects on the financial statements presented herein.

Concentrations of Credit Risk and Credit Evaluations

Our financial instruments that expose us to concentrations of credit risk consist primarily of cash and cash equivalents and trade accounts receivable.

We place our cash and cash equivalents in a variety of financial institutions and limit the amount of credit exposure through diversification and by investing the funds in money market accounts and certificates of deposit which are insured by the Federal Deposit Insurance Corporation (“FDIC”). At times, the balance of cash deposits is in excess of the FDIC insurance limits.

We sell our clients’ products and services primarily to business end users and, in most transactions, assume full credit risk on the sale. Credit is extended based on an evaluation of the financial condition of our client’s customer, and collateral is generally not required. Credit losses have traditionally been immaterial, and such losses have been within management’s expectations.

We have generated a significant portion of our revenue from sales to customers of a limited number of clients. In the three months ended June 30, 2011, three clients accounted for 10% or more of our net revenue, with Symantec representing approximately 16% of our net revenue, Microsoft representing approximately 14% of our net revenue and TechTeam representing approximately 11% of our net revenue. In the six months ended June 30, 2011, four clients accounted for 10% or more of our net revenue, with Symantec representing approximately 15% of our net revenue, Microsoft and TechTeam each representing approximately 12% of our net revenue, respectively, and Hewlett-Packard representing approximately 11% of our net revenue.

In the three months ended June 30, 2010, two clients accounted for 10% or more of our net revenue, with Hewlett-Packard representing approximately 22% of our net revenue, and Symantec representing approximately 12% of our net revenue. In the six months ended June 30, 2010, three clients accounted for 10% or more of our net revenue, with Sun Microsystems representing approximately 30% of our net revenue, Hewlett-Packard representing approximately 14% of our net revenue and Symantec representing approximately 10% of our net revenue.

No individual client’s end-user customer accounted for 10% or more of our revenues in any period presented.

We have outsourced services agreements with our significant clients that expire at various dates ranging through August 2013. Our agreements with Symantec expire at various dates from March 2012 through June 2012, and can generally be terminated prior to expiration with ninety days notice. Our agreements with Microsoft expire at various dates from June 2012 through August 2013, and generally can be terminated with thirty days notice. Our agreement with TechTeam expires in May of 2012, and can be terminated prior to expiration with ninety days notice. Our agreements with Hewlett-Packard expire at various dates from October 2011 through May 2012 and can generally be terminated prior to expiration with ninety days notice.

We had various agreements with Sun Microsystems, our largest client during 2010, with various termination provisions. On February 5, 2010, we received written notice from Sun Microsystems that they had elected to terminate the Global Inside Sales Program Statement of Work agreement dated March 31, 2009, effective as of February 28, 2010. The notice followed the acquisition of Sun Microsystems by Oracle Corporation and affected the contract sales services that we were performing for Sun. The Global Inside Sales agreement had a minimum term with notice periods to August 31, 2010. We entered into a settlement agreement on March 8, 2010, and received a cash payment of $4,550,000 from Oracle Corporation for the buyout of the Global Inside Sales agreement. The settlement payment was recognized as revenue in the first quarter of 2010. In addition, Oracle agreed to reimburse us $347,000 for employee severance costs related to terminating employees who worked on the Global Inside Sales program. This reimbursement was recognized in payroll and payroll tax expense to offset the employee severance costs.

Fair Value of Financial Instruments

The amounts reported as cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short-term maturities.

The fair value of short-term and long-term capital lease and debt obligations is estimated based on current interest rates available to us for debt instruments with similar terms, degrees of risk and remaining maturities. The carrying values of these obligations, as of each period presented, approximate their respective fair values.

Segment Reporting

In accordance with FASB ASC 280, Segment Reporting, the Company has concluded that it has one operating and reportable segment. We have call center operations within the United States of America, the Philippines, the United Kingdom and France where we perform services on behalf of our clients. While we exited our Canadian call center facility in September 2010, we continue to maintain a network of managed telesales representatives in the region.

The following is a breakdown of net revenue by product line for the three and six months ended June 30, 2011 and 2010 (in thousands):



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Contract sales (1)	$	3,904	$	4,041	$	7,513	$	13,780
Lead development	4,304		4,380		8,595		8,454
Training sales	884		929		1,773		1,925
Total	$	9,092	$	9,350	$	17,881	$	24,159

_____________


(1)	The six months ended June 30, 2010 includes revenue of approximately $4.6 million for the one-time settlement payment for a contract termination/buyout.

Foreign revenues are attributed to the country of the business entity that executed the contract. The Company utilizes our call centers in the United States, the Philippines, the United Kingdom and France and a network of managed telesales representatives in Canada to fulfill these contracts. Although we do not have a call center in the Cayman Islands, our Cayman Islands-based holding company, obtained as part of the Qinteraction Limited acquisition, has operations in the Philippines. The following is a geographic breakdown of our net revenue for the three and six months ended June 30, 2011 and 2010 (in thousands):



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
United States (1)	$	5,749	$	6,525	$	11,104	$	19,013
Cayman Islands	1,969		1,939		4,421		3,244
Europe	656		313		1,027		836
Philippines	718		573		1,329		1,066
Total	$	9,092	$	9,350	$	17,881	$	24,159

_____________


(1)	The six months ended June 30, 2010 includes revenue of approximately $4.6 million for the one-time settlement payment for a contract termination/buyout.

Property and equipment information is based on the physical location of the assets, and goodwill and intangible information is based on the country of the business entity to which these are allocated. The following is a geographic breakdown of net long-lived assets as of June 30, 2011 and December 31, 2010 (in thousands):



	Property & Equipment, Net		Goodwill		Intangible Assets, Net
June 30, 2011
United States	$	2,800	$	3,777	$	144
Cayman Islands	—		—		58
Philippines	2,185		—		—
Canada	33		—		—
Europe	160		1,546		22
Total	$	5,178	$	5,323	$	224
December 31, 2010
United States	$	3,277	$	3,777	$	241
Cayman Islands	—		—		121
Philippines	2,689		—		—
Canada	43		—		—
Europe	131		1,492		70
Total	$	6,140	$	5,269	$	432

Foreign Currency Translation

The functional currency of our foreign subsidiaries was determined to be their respective local currencies (Canadian Dollar, Philippine Peso and Great Britain Pound). Foreign currency assets and liabilities are translated at the current exchange rates at the balance sheet date. Revenues and expenses are translated at weighted average exchange rates in effect during the year. The related unrealized gains and losses from foreign currency translation are recorded in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity in the consolidated balance sheet and consolidated statement of stockholders’ equity and comprehensive income (loss). Net gains and losses resulting from foreign exchange transactions are included in interest and other expense, net, in the consolidated statements of operations.

Exit or Disposal Cost Obligations

FASB ASC 420, Exit or Disposal Cost Obligations, considers exit or disposal cost obligations including costs to terminate a contract other than a capital lease, costs to close facilities and relocate employees, and one-time employee termination benefits. A liability for exit or disposal costs shall be recognized and measured initially at its fair value in the period the liability is incurred. Future obligations are measured at current fair value. Subsequent changes to the measurement liability are reported in the statement of operations during the period of change.

On September 24, 2008, we entered into an agreement to lease approximately 20,000 square feet of space for our Canadian operations. The lease has a minimum term of three years and commenced on January 1, 2009. Annual gross rent is $400,000 Canadian dollars. Based on the exchange rate at June 30, 2011, annual rent is approximately $410,000 U.S. dollars. Additionally, we are responsible for our proportionate share of utilities, taxes and other common area maintenance charges during the lease term. In September 2010, we exited our Canadian call center and took a restructuring charge in 2010 for this lease commitment of $416,000, a write off of certain leasehold improvements of $106,000 and other facility costs of $46,000. In March 2011, we removed the sublease assumption from our estimate of the remaining lease liability resulting in an additional charge $99,000. At June 30, 2011 and December 31, 2010, the remaining liability for the Montreal facility closure was $284,000 and $324,000, respectively.

Related Party Transactions

In June 2011, we issued and sold 3.7 million shares of our common stock, together with warrants to purchase up to an aggregate 1.5 million additional shares, in a public offering. Members of our board of directors purchased 135,660 shares at a price of $1.29 per share. They also received warrants to purchase up to an additional 54,264 shares with an initial exercise price of $1.40 per share. See Note 7 for more information regarding our recent equity offering,

In October 2007, we closed an OEM licensing agreement with Market2Lead, Inc. (“Market2Lead”), a software-as-a-service provider of business-to-business automated marketing solutions, to further enhance LeadWorks, Rainmaker's on-demand marketing automation application. In connection with this agreement, Rainmaker provided Market2Lead with growth financing of $2.5 million in secured convertible and term debt. In October 2008, one-half of the debt was converted into preferred shares of Market2Lead. In May 2010, we received payment from Market2Lead for the $1,250,000 in remaining term debt plus accrued interest of approximately $170,000 as Market2Lead was sold. In connection with this sale, we took a non-cash charge in the first quarter of 2010 for the carrying value of our minority equity investment of $740,000.

Recent Accounting Standards

In June 2011, the FASB issued new accounting guidance, Accounting Standards Update (“ASU”) No. 2011-05 – Presentation of Comprehensive Income. This update requires that all nonowner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This new guidance is effective for the first reporting period beginning after December 15, 2011.

Effective January 1, 2011, we adopted ASU No. 2010-28 – When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. This update provided amendments to FASB ASC Topic 350 – Intangibles, Goodwill and Other, that requires an entity to perform a Step 2 impairment test even if a reporting unit has a zero or negative carrying amount. Step 1 tests whether the carrying amount of a reporting unit exceeds its fair value. Previously, reporting units with zero or negative carrying value passed Step 1 because the fair value was generally greater than zero. Step 2 requires impairment testing and impairment valuation to be calculated in between annual tests if an event or circumstances indicate that it is more likely than not that goodwill has been impaired. As a result of this standard, goodwill impairments may be reported sooner than under current practice. ASU No. 2010-28 did not have a material impact on our financial statements.

Effective January 1, 2011, we adopted ASU No. 2009-13 – Multiple-Deliverable Revenue Arrangements – a Consensus of the FASB Emerging Issues Task Force, which amends FASB ASC Topic 605 – Revenue Recognition, to require companies to allocate revenue in multiple-element arrangements based on an element’s estimated selling price if vendor-specific or other third-party evidence of value is not available. Based on current sales contracts in place at June 30, 2011, the adoption of ASU No. 2009-13 did not have a material impact on our financial results. We may enter into sales contracts with multiple deliverable element conditions with stand-alone value in the future which may affect the timing of our revenue recognition and may have an impact on our future financial statements. See Revenue Recognition and Presentation above for further discussion of this standard.