##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
   Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31,
    2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934  Commission file number:
    001-33790
   SoundBite Communications,
    Inc.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware(State or Other
    Jurisdiction
    of Incorporation or Organization)

04-3520763(I.R.S. Employer
    Identification Number)22 Crosby Drive
    Bedford, Massachusetts(Address of Principal
    Executive Offices)

01730(Zip Code)   Registrants telephone number, including area code:
 (781) 897-2500
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per share

The NASDAQ Global Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. þ
    Large accelerated filer o

Accelerated filer o

Non-accelerated filero
    (Do not check if a smaller reporting company)

Smaller Reporting company þ   Rule 12b-2 o þ
      Documents Incorporated by Reference
  Form 10-K.




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##### 






TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Business


2Item 1A.


Risk Factors


15Item 1B.


Unresolved Staff Comments


28Item 2.


Properties


28Item 3.


Legal Proceedings


29Item 4.


Reserved


29PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


29Item 6.


Selected Financial Data


30Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


31Item 7a.


Quantitative and Qualitative Disclosures About
    Market Risk


41Item 8.


Financial Statements and Supplementary Data


42Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


42Item 9A(T).


Controls and Procedures


42Item 9B.


Other Information


45PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


45Item 11.


Executive Compensation


45Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


45Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


45Item 14.


Principal Accounting Fees and Services


45PART IVItem 15.


Exhibits and Financial Statement Schedules


46SignaturesEX-23.1EX-31.1EX-31.2EX-32.1      Form 10-K
 i




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Forward-Looking
    Information
  This annual report on
    Form 10-K
    contains, in addition to historical information, forward-looking
    statements within the meaning of Section 21E of the
    Securities Exchange Act, including information relating to
    revenues generated from our on-demand automated voice messaging
    service to businesses, governments and other organizations, our
    efforts to expand our presence in large in-house, or
    first-party, collection departments, and other functional
    departments, of organizations and in, expected increases in cost
    of revenues, our expected gross margins for future periods, our
    spending on research and development, our ability to remain
    competitive and achieve future growth, information with respect
    to other plans and strategies for our business and factors that
    may influence our revenues for 2010 and thereafter. Words such
    as expect, anticipate,
    intend, plan, believe,
    seek, estimate and variations of these
    words and similar expressions are intended to identify our
    forward-looking statements. These forward-looking statements are
    not guarantees of future performance and involve risks and
    uncertainties including those described in Item 1A.
    Risk Factors and elsewhere in this annual report and that
    are otherwise described from time to time in our reports filed
    with the SEC after the filing of this annual report. The
    forward-looking statements included in this annual report
    represent our estimates as of the date of this annual report. We
    specifically disclaim any obligation to update these
    forward-looking statements in the future, except as specifically
    required by law or the rules of the SEC. These forward-looking
    statements should not be relied upon as representing our
    estimates or views as of any date subsequent to the date of this
    annual report.
  This annual report on
    Form 10-K
    also contains market data related to our business and industry.
    These market data include projections that are based on a number
    of assumptions. If these assumptions turn out to be incorrect,
    actual results may differ from the projections based on these
    assumptions. As a result, our markets may not grow at the rates
    projected by these data, or at all. The failure of these markets
    to grow at these projected rates may have a material adverse
    effect on our business, results of operations, financial
    condition and the market price of our common stock.
 1




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PART I  Item 1.
    Business  Overview
      business-to-consumer
  (781) 897-2500. www.soundbite.com Form 10-K.
  Industry
    Background and Trends
    Shift
    from Reactive to Proactive Customer Communications
     2




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
    Consumers now access and exchange information over a variety of
    communications channels, including email, text messaging, the
    Internet, instant messaging, social media and voice.
    Communicating with customers through varying and multiple
    channels will generally increase response rates.
    As they have gained experience with multiple communications
    channels, consumers have developed stronger preferences for the
    types of communications they wish to receive and the channels by
    which those communications are received. According to a May 2009
    Forrester Consulting publication, organizations that honored
    consumer communications preferences reported substantial
    business benefits, including higher response rates, stronger
    customer relationships and improved customer
    experiences  all of which resulted in higher revenue
    and profitability.
    Consumers increasingly rely on their mobile devices and mobile
    device applications and no longer consider the home phone, if it
    exists, as their primary communications device. With more than
    4.6 billion mobile subscribers around the world, businesses
    need to leverage the multiple communications channels accessible
    from a mobile device in order to provide relevant and timely
    information to customers effectively and efficiently.    Requirements
    for PCC Solutions
     3




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Our
    Solution
      Communications via multiple channels.
  Lower total cost of ownership.
  Automation of communications.
  Improvement of contact center performance.
  Burstable capacity.
  Rapid initiation and modification of
    campaigns.
  Our
    Strategy
    Target large B2C companies. business-to-consumer,
 4




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Extend technology leadership.
  Target international companies.
  Increase revenue from the indirect channel.
  Selectively seek strategic acquisitions.
  Our
    On-Demand Service
  e-mail
  Marketing

Customer Care

Payments

Collections   Loyalty programs
       Promotions
       Service activations

   Delivery notifications
       Program enrollment 
       Surveys

   Payment reminders
       Self-service payments
       Expedited payments

   Contingent collections
       Early-stage collections
       Settlement offers    5




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Client Access Layer.
  Client Web Interface
  FTP Automation
  Web Services API
  Agent Portal
  Enterprise Management.
 6




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Core Components.
  Contact and Preference Management
  Campaign Strategy Manager
  
    Flexible scripting languages to control the client interactions.
    This enables a client interaction to be both highly personalized
    and dynamic in nature.
    Multi-Pass Campaigns effects multiple overlapping passes through
    a contact list in accordance with client-defined parameters, in
    order to maximize contact list penetration and response rates.
    These passes may span different channels, occur over multiple
    days, and define the escalation conditions in which our service
    moves to a different phone number or
    e-mail
    address within a campaign.
    Contact Ordering prioritizes contacts based on client-specified
    criteria or on the likelihood that customers will be reached at
    a particular time.  Campaign and Contact Center Management
  
    Pacing provides a client with the ability to select a model to
    control the rate of outgoing messages. The model selected may be
    either fixed-rate, time-based (rate determined by a time window)
    or agent- based. For Pacing involving contact center agents,
    adjustments are made based on factors such as agent
    availability, average talk time and average hold time.
    Call Forecasting provides continuously refreshed data concerning
    current and anticipated future contact attempts. Contact center
    managers use the data for contact center agent resource planning.
    Contact Center Reports, which are available in near real-time,
    provide details on customer interactions with contact centers
    and furnish performance metrics related to contact center
    performance.  Analytics and Reporting
  Dialog Engine text-to-speech
 7




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
    Automated Right-Party Verification enables the identity of a
    customer to be verified without contact center agent involvement
    by, for example, having a recipient enter a billing zip code.
    Direct Connect to Contact Center allows a voice recipient to
    connect directly to a contact center in order to speak with an
    agent.  Delivery Channels. Free-to-End
  Security and Compliance. need-to-know e-mail
  Reports on the Processing of Transactions by Service
    Organizations
  Our
    Client Management Services
      Enterprise Program Directors
  Professional Services
  Training, Documentation and General Help Desk around-the-clock
 8




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Business
    Segments and Geographic Information
    Clients
      
    7 of the 10 largest global issuing banks;
    7 of the 10 largest U.S. telecommunications and media
    providers;
    5 of the 20 largest U.S. retailers; and
    12 of the 20 largest U.S. utility providers.    T-Mobile T-Mobile
  Sales and
    Marketing
      e-mail
 9




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Technology,
    Development and Operations
  Technology
  text-to-speech
      Research
    and Development
      Operations
  around-the-clock on-site
     10




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Competition
    Predictive
    Dialers
    
    breadth of features;
    speed of deployment;
    capital investment required;
    pricing model for customers; and
    capacity, including burstability.        Hosted
    Customer Communications Solutions
   11




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
    return on investment;
    breadth of features;
    price;
    brand awareness based on referencable customer base; and
    security and reliability.        Intellectual
    Property
       12




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
    identify, license and integrate equivalent technology from
    another source;
    rewrite the technology ourselves; or
    rewrite portions of our source code to accommodate the change or
    no longer use the technology.    Government
    Regulation
    
    the Fair Debt Collection Practices Act, which regulates the
    timing and content of debt collection communications;
    the Telephone Consumer Protection Act, which restricts the
    circumstances under which automated telephone dialing systems
    and artificial or prerecorded messages may be used in placing
    calls to residences and wireless telephone numbers;
    Federal Trade Commission and Federal Communications Commission
    telemarketing regulations, which have been promulgated under the
    authority of the Telemarketing and Consumer Fraud and Abuse
    Prevention Act and the Telephone Consumer Protection Act and
    which restrict the timing, content and manner of telemarketing
    calls, including the use of automated dialing systems,
    predictive dialing techniques and artificial or prerecorded
    voice messages; 13




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
    the Controlling the Assault of Non-Solicited Pornography and
    Marketing (CAN-SPAM) Act, which sets standards for the sending
    of commercial
    e-mail;
    the Gramm-Leach-Bliley Act, which regulates the disclosure of
    consumer nonpublic personal information received from our
    financial institution clients and requires those clients to
    impose administrative, technical and physical data security
    measures in their contracts with us; and
    the Fair Credit Reporting Act, which defines permissible uses of
    consumer information furnished to or obtained from consumer
    reporting agencies.  out-of-pocket
      Employees
      Our
    History
  (781) 897-2500. www.soundbite.com Form 10-K, Form 10-Q Form 8-K
 14




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Form 10-K.
  Item 1A.
    Risk
    Factors  An investment in our common stock involves a high degree of
    risk. You should consider carefully the risks and uncertainties
    described below and all of the other information contained in
    this report before deciding whether to purchase our common
    stock. The market price of our common stock could decline due to
    any of these risks and uncertainties, and investors might lose
    all or part of their investments in our common stock.
  Risks
    Related to Our Business and Industry
  If the
    market for PCC solutions does not develop as we anticipate, our
    revenues would decline or fail to grow and we could incur
    operating losses.
  e-mail
      Defects
    in our platform, disruptions in our on-demand service or errors
    in execution could diminish demand for our PCC service and
    subject us to substantial liability.
   15




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Interruptions
    or delays in service from our key vendors would impair the
    delivery of our service and could substantially harm our
    business and operating results.
       16




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Our
    quarterly operating results can be difficult to predict and can
    fluctuate substantially, which could result in volatility in the
    price of our common stock.
    
    our ability to attract new clients, including the length of our
    sales cycles;
    our ability to sell new applications and increased usage of
    existing applications to existing clients;
    technical difficulties or interruptions in our on-demand service;
    changes in privacy protection and other governmental regulations
    applicable to the communications industry;
    changes in our pricing policies or the pricing policies of our
    competitors;
    changes in the rates we incur for services provided by
    telecommunication or data carriers or by text or email
    aggregators;
    the financial condition and business success of our clients;
    purchasing and budgeting cycles of our clients;
    acquisitions of businesses and products by us or our competitors;
    competition, including entry into the market by new competitors
    or new offerings by existing competitors;
    our ability to hire, train and retain sufficient sales, client
    management and other personnel;
    timing of development, introduction and market acceptance of new
    communication services or service enhancements by us or our
    competitors;
    concentration of marketing expenses for activities such as trade
    shows and advertising campaigns;
    expenses related to any new or expanded data centers; and
    general economic and financial market conditions.  quarter-to-quarter
     17




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The
    global recession and related credit crisis may continue to
    adversely affect our business.
    Our
    clients are not typically obligated to pay any minimum amount
    for our service on an on-going basis, and if they discontinue
    use of our service or do not use our service on a regular basis,
    our revenues would decline.
    We
    derive a significant portion of our revenues from the sale of
    our service for use in the collections process, and any event
    that adversely affects the collection agencies industry or
    in-house collection departments would cause our revenues to
    decline.
       18




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Actual
    or perceived breaches of our security measures could diminish
    demand for our service and subject us to substantial
    liability.
    Our
    business will be harmed if we fail to develop new features that
    keep pace with technological developments and emerging consumer
    trends.
    We
    face intense competition, and our failure to compete
    successfully would make it difficult for us to add and retain
    clients and would impede the growth of our
    business.
         19




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Mergers
    or other strategic transactions involving our competitors could
    weaken our competitive position, which could harm our operating
    results.
    Our
    planned expansion of our business into international markets
    will expose us to additional business risks, and failure to
    manage those risks could adversely affect our business and
    operating results.
  non-U.S. business
  
    difficulty in establishing, staffing and managing sales and
    other operations in countries outside of the United States;
    compliance with multiple, conflicting and changing laws and
    regulations, including employment and tax laws and regulations;
    longer payment cycles in some countries;
    currency exchange rate fluctuations;
    limited protection of intellectual property in some countries
    outside of the United States;
    challenges encountered under local business practices, which
    vary by country and often favor local competitors;
    challenges caused by distance, language and cultural
    differences; and
    difficulty in establishing and maintaining reseller
    relationships.    Failure
    to maintain our direct sales force will impede our
    growth.
   20




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Because
    competition for employees in our industry is intense, we might
    not be able to attract and retain the highly skilled employees
    we need to execute our business plan.
    If we
    are unable to protect our intellectual property rights, we would
    be unable to protect our technology and our brand.
    Our
    product development efforts could be constrained by the
    intellectual property of others, and we could be subject to
    claims of intellectual property infringement, which could be
    costly and time-consuming.
   21




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Our
    platform relies on technology licensed from third parties, and
    our inability to maintain licenses of this technology on similar
    terms or errors in the licensed technology could result in
    increased costs or impair the implementation or functionality of
    our on-demand service, which would adversely affect our business
    and operating results.
  text-to-speech
  We
    have in the past and may in the future enter into acquisitions;
    these acquisitions may be difficult to integrate, disrupt our
    business, dilute stockholder value or divert management
    attention.
    
    difficulties in integrating the operations and personnel of the
    acquired companies;
    maintenance of acceptable standards, controls, procedures and
    policies;
    potential disruption of ongoing business and distraction of
    management;
    impairment of relationships with employees and clients as a
    result of any integration of new management and other personnel;
    inability to maintain relationships with suppliers and clients
    of the acquired business;
    difficulties in incorporating acquired technology and rights
    into our service and platform;
    unexpected expenses resulting from the acquisition; 22




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
    potential unknown liabilities associated with acquired
    businesses; and
    unanticipated expenses related to acquired technology and its
    integration into our existing technology.    out-of-pocket
  Industry
    consolidation could reduce the number of our clients and
    adversely affect our business.
    Our
    ability to use net operating loss carryforwards in the United
    States may be limited.
    If we
    are unable to raise capital when needed in the future, we may be
    unable to execute our growth strategy, and if we succeed in
    raising capital, we may dilute investors percentage
    ownership of our common stock or may subject our company to
    interest payment obligations and restrictive
    covenants.
    
    fund ongoing operations;
    take advantage of opportunities, including more rapid expansion
    of our business or the acquisition of complementary products,
    technologies or businesses;
    develop new services and products; and
    respond to competitive pressures.   23




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Risks
    Related to Regulation of Use of Our Service
  We
    derive a significant portion of our revenues from the sale of
    our service for use in the collections process, and our business
    and operating results could be substantially harmed if new U.S.
    federal and state laws or regulatory interpretations in one or
    more jurisdictions either make our service unavailable or less
    attractive for use in the collections process or expose us to
    regulation as a debt collector.
      We
    could be subject to significant penalties or damages if our
    clients violate U.S. federal or state restrictions on the use of
    artificial or prerecorded messages to contact wireless telephone
    numbers, and our business and operating results could be
    substantially harmed if those restrictions make our service
    unavailable or less attractive.
   24




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We
    could be subject to penalties if we or our clients violate
    federal or state telemarketing restrictions due to a failure of
    our service or otherwise, which could harm our financial
    position and operating results.
  Do-Not-Call
 25




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Our
    failure to comply with numerous and overlapping information
    security and privacy requirements could subject us to fines and
    other penalties as well as claims by our clients for damages,
    any of which could harm our reputation and
    business.
       26




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Our
    expansion of our business into international markets will
    require us to comply with additional debt collection,
    telemarketing, data privacy or similar regulations, which could
    make it costly or difficult to operate in these
    markets.
        Risks
    Related to Ownership of Our Common Stock
  If
    equity research analysts do not publish research or reports
    about our business or if they issue unfavorable commentary or
    downgrade our common stock, the price of our common stock could
    decline.
    Future
    sales of our common stock by existing stockholders could cause
    our stock price to decline.
   27




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Our
    directors, executive officers and their affiliated entities will
    continue to have substantial control over us and could limit the
    ability of other stockholders to influence the outcome of key
    transactions, including changes of control.
    Our
    corporate documents and Delaware law make a takeover of our
    company more difficult, which could prevent certain changes in
    control and limit the market price of our common
    stock.
    We do
    not intend to pay dividends on our common stock in the
    foreseeable future.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties     28




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Item 3.
    Legal
    Proceedings   Item 4.   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    Price of Common Stock
    Fiscal Year Ended December 31, 2009

High


LowFirst quarter

$
1.90


$
1.21Second quarter

$
2.52


$
1.37Third quarter

$
3.45


$
2.25Fourth quarter

$
3.25


$
2.20   Fiscal Year Ended December 31, 2008

High


LowFirst quarter

$
8.00


$
4.50Second quarter

$
5.07


$
2.44Third quarter

$
3.60


$
2.26Fourth quarter

$
2.56


$
0.96       Issuer
    Purchases of Equity Securities
   29




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Item 6.
    Selected
    Financial Data    Years Ended December 31,2009


2008


2007


2006


2005(In thousands, except per share data)Statement of Operations Data:Revenues

$
40,183


$
43,211


$
39,492


$
29,069


$
16,448Cost of revenues


15,899



16,695



14,258



9,505



4,967Gross profit


24,284



26,516



25,234



19,564



11,481Operating expenses:Research and development


5,628



5,151



3,913



3,453



2,097Sales and marketing


14,784



17,974



14,702



12,172



5,888General and administrative


7,836



9,977



5,999



3,820



2,221Impairment of goodwill


121



248











Total operating expenses


28,369



33,350



24,614



19,445



10,206Operating (loss) income


(4,085
)


(6,834
)


620



119



1,275Other income (expense):Interest income


70



936



476



299



149Interest expense










( 222
)


(398
)


(264
)Warrant charge for change in fair value










( 352
)


(177
)


Gain on litigation settlement






4,600











Other, net














6



Total other income (expense), net


70



5,536



(98
)


(270
)


(115
)(Loss) income before provision for income taxes and cumulative
    change in accounting


(4,015
)


(1,298
)


522



(151
)


1,160Provision for income taxes


16



21



56







(Loss) income before cumulative change in accounting


(4,031
)


(1,319
)


466



(151
)


1,160Cumulative change in accounting














28



Net (loss) income


(4,031
)


(1,319
)


466



(123
)


1,160Accretion of preferred stock










(37
)


(44
)


(24
)Net (loss) income attributable to common stockholders

$
(4,031
)

$
(1,319
)

$
429


$
(167
)

$
1,136(Loss) income per common share:Basic:Before cumulative change in accounting

$
(0.25
)

$
(0.09
)

$
0.15


$
(0.35
)

$
2.41Cumulative change in accounting

$



$



$



$
0.05


$
Net (loss) income attributable to common stockholders

$
(0.25
)

$
(0.09
)

$
0.15


$
(0.30
)

$
2.41Diluted:Before cumulative change in accounting

$
(0.25
)

$
(0.09
)

$
0.03


$
(0.35
)

$
0.13Cumulative change in accounting

$



$



$



$
0.05


$
Net (loss) income attributable to common stockholders

$
(0.25
)

$
(0.09
)

$
0.03


$
(0.30
)

$
0.13Weighted average common shares outstanding:Basic


15,961



15,369



2,860



557



471Diluted


15,961



15,369



12,778



557



9,045   30




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As of December 31,2009


2008


2007


2006


2005(In thousands)Balance Sheet Data:Cash and cash equivalents

$
36,322


$
37,425


$
35,674


$
7,251


$
9,529Working capital


40,359



41,665



39,920



7,566



8,981Total assets


47,754



49,830



50,489



18,229



17,385Total indebtedness, including current portion














3,544



3,478Redeemable convertible preferred stock














30,788



31,076Total stockholders equity (deficit)


43,032



45,754



46,165



(19,765
)


(19,716
)   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  You should read the following discussion in conjunction with
    our financial statements and related notes appearing elsewhere
    in this
    Form 10-K.
    In addition to historical information, this discussion contains
    forward-looking statements that involve risks, uncertainties and
    assumptions that could cause our actual results to differ
    materially from our expectations. Factors that could cause such
    differences include those described in Item 1A. Risk
    Factors and elsewhere in this report.
  Overview
      business-to-consumer,
    Key
    Components of Results of Operations
  Revenues
     31




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Cost
    of Revenues
    Operating
    Expenses
  Research and Development.
  Sales and Marketing.
  General and Administrative.
  Additional
    Key Measures of Financial Performance
       32




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As of December 31,2009


2008


2007(In thousands)Cash flows (used in) provided by operating activities

$
(294
)

$
3,776


$
3,277Purchases of property and equipment


(885
)


(1,528
)


(4,833
)Free cash flow (non-GAAP)

$
(1,179
)

$
2,248


$
(1,556
)           Critical
    Accounting Policies
      Allowance
    for Doubtful Accounts
   33




---



##### Table of Contents



Valuation
    of Goodwill
    Income
    Taxes
   34




---



##### Table of Contents



Results
    of Operations
    Years Ended December 31,2009


2008


2007Statement of Operations Data:Revenues


100.0
%


100.0
%


100.0
%Cost of revenues


39.6



38.6



36.1Gross margin


60.4



61.4



63.9Operating expenses:Research and development


14.0



11.9



9.9Sales and marketing


36.8



41.6



37.2General and administrative


19.5



23.1



15.2Impairment of goodwill


0.3



0.6



Total operating expenses


70.6



77.2



62.3Operating (loss) income


(10.2
)


(15.8
)


1.6Total other income (expense), net


0.2



12.8



(0.3
)(Loss) income before provision for income taxes


(10.0
)


(3.0
)


1.3Provision for income taxes


0.0



0.1



0.1Net (loss) income


(10.0
)%


(3.1
)%


1.2
%   Comparison
    of Years Ended December 31, 2009 and 2008
  Revenues
  2009

2008

Year-to-Year ChangePercentage of



Percentage of



PercentageAmount

Revenues

Amount

Revenues

Amount

Change(Dollars in thousands)Revenues

$
40,183



100.0
%

$
43,211



100.0
%

$
(3,028
)


(7.0
)%     Cost of
    Revenues and Gross Profit
  2009

2008

Year-to-Year ChangePercentage of



Percentage of



PercentageAmount

Revenues

Amount

Revenues

Amount

Change(Dollars in thousands)Cost of revenues

$
15,899



39.6
%

$
16,695



38.6
%

$
(796
)


(4.8
)%Gross profit


24,284



60.4



26,516



61.4



(2,232
)


(8.4
)    35




---



##### Table of Contents



Operating
    Expenses
  2009


2008


Year-to-Year ChangePercentage of





Percentage of





PercentageAmount


Revenues


Amount


Revenues


Amount


Change(Dollars in thousands)Research and development

$
5,628



14.0
%

$
5,151



11.9
%

$
477



9.3
%Sales and marketing


14,784



36.8



17,974



41.6



(3,190
)


(17.7
)General and administrative


7,836



19.5



9,977



23.1



(2,141
)


(21.5
)Impairment of goodwill


121



0.3



248



0.6



(127
)


(51.2
)Total operating expenses

$
28,369



70.6
%

$
33,350



77.2
%

$
(4,981
)


(14.9
)%   Research and Development.
  Sales and Marketing.
  General and Administrative.
  Impairment of Goodwill.
 36




---



##### Table of Contents



Operating
    Loss and Other Income
  2009


2008


Year-to-Year ChangePercentage of





Percentage of





PercentageAmount


Revenues


Amount


Revenues


Amount


Change(Dollars in thousands)Operating loss

$
(4,085
)


(10.2
)%

$
(6,834
)


(15.8
)%

$
2,749



40.2
%Other income:Interest income


70



0.2



936



2.2



(866
)


(92.5
)Gain on litigation settlement










4,600



10.6



(4,600
)


(100.0
)Total other income


70



0.2



5,536



12.8



(5,466
)


(98.7
)Loss before provision for income taxes

$
(4,015
)


(10.0
)%

$
(1,298
)


(3.0
)%

$
(2,717
)


(209.3
)%     Net
    Loss
    Comparison
    of Years Ended December 31, 2008 and 2007
  Revenues
  2008

2007

Year-to-Year ChangePercentage of



Percentage of



PercentageAmount

Revenues

Amount

Revenues

Amount

Change(Dollars in thousands)Revenues

$
43,211



100.0
%

$
39,492



100.0
%

$
3,719



9.4
%     Cost of
    Revenues and Gross Profit
  2008

2007

Year-to-Year ChangePercentage of



Percentage of



PercentageAmount

Revenues

Amount

Revenues

Amount

Change(Dollars in thousands)Cost of revenues

$
16,695



38.6
%

$
14,258



36.1
%

$
2,437



17.1
%Gross profit


26,516



61.4



25,234



63.9



1,282



5.1    37




---



##### Table of Contents



Operating
    Expenses
  2008


2007


Year-to-Year ChangePercentage of





Percentage of





PercentageAmount


Revenues


Amount


Revenues


Amount


Change(Dollars in thousands)Research and development

$
5,151



11.9
%

$
3,913



9.9
%

$
1,238



31.6
%Sales and marketing


17,974



41.6



14,702



37.2



3,272



22.3General and administrative


9,977



23.1



5,999



15.2



3,978



66.3Impairment of goodwill


248



0.6











248



100.0Total operating expenses

$
33,350



77.2
%

$
24,614



62.3
%

$
8,736



35.5
%   Research and Development.
  Sales and Marketing.
  General and Administrative.
  Impairment of Goodwill.
 38




---



##### Table of Contents



Operating
    and Other Income
  2008


2007


Year-to-Year ChangePercentage of





Percentage of





PercentageAmount


Revenues


Amount


Revenues


Amount


Change(Dollars in thousands)Operating income (loss)

$
(6,834
)


(15.8
)%

$
620



1.6
%

$
(7,454
)


*Other income (expense):Interest income


936



2.2



476



1.2



460



96.6
%Interest expense










(222
)


(0.6
)


222



*Warrant charge for change in fair value










(352
)


(0.9
)


352



*Gain on litigation settlement


4,600



10.6











4,600



*Total other income (expense), net


5,536



12.8



(98
)


(0.3
)


5,634



*Income(loss) before provision for income taxes and cumulative
    change in accounting

$
(1,298
)


(3.0
)%

$
522



1.3
%

$
(1,820
)


(348.7
)%     *
    
    Not meaningful    Net
    (Loss) Income
    Liquidity
    and Capital Resources
  Resources
     39




---



##### Table of Contents



Credit
    Facility Borrowings
      Operating
    Cash Flow
    Working
    Capital
    As of December 31,2009


2008


2007(Dollars in thousands)Cash and cash equivalents

$
36,322


$
37,425


$
35,674Accounts receivable, net of allowance for doubtful accounts


6,878



6,641



7,261Working capital

$
40,359


$
41,665


$
39,920       Requirements
  Capital
    Expenditures
   40




---



##### Table of Contents



Contractual
    Obligations and Requirements
    Less Than


1 to 3


3 to 5


More Than1 Year


Years


Years


5 Years


Total(Dollars in thousands)Operating leases  office space

$
819


$
2,438


$



$



$
3,257Operating leases  hosting facilities


812



339











1,151Total

$
1,631


$
2,777


$



$



$
4,408     Effects
    of Inflation
    Off-Balance-Sheet
    Arrangements
  Regulation S-K
  Recent
    Accounting Pronouncements
    Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk     41




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  page F-1
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A(T).
    Controls
    and Procedures  Managements
    Evaluation of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rule 13a-15(f) 15d-15(f)
  
    pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of the assets of a company;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with U.S. generally accepted accounting
    principles and that receipts and expenditures of a company are
    being made only in accordance with authorizations of management
    and directors of a company; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use, or disposition of a
    companys assets that could have a material effect on the
    financial statements.   42




---



##### Table of Contents



Internal Control-Integrated
    Framework
      Changes
    in Internal Control over Financial Reporting
   43




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control 
    Integrated Framework
        Internal Control  Integrated Framework
    
    44




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   45




---



##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    Exhibit



Filed



Filing DateNumber

Description of Exhibit

Herewith

Form

with SEC

Exhibit Number3
.1

Restated Certificate of Incorporation of the Registrant



10-Q

November 14, 2007


3
.13
.2

Amended and Restated By-Laws of the Registrant



S-1

October 15, 2007


3
.44
.1

Specimen certificate for shares of common stock of the Registrant



S-1

October 15, 2007


4
.110
.1

Lease dated May 18, 2007 between RAR2-Crosby Corporate
    Center QRS, Inc. and the Registrant



S-1

October 15, 2007


10
.1910
.2

Agreement dated as of August 29, 2003, as amended, between
    the Registrant and Internap Network Services Corporation



S-1

October 15, 2007


10
.310
.3

Agreement dated as of October 9, 2004, between the
    Registrant and ColoSpace, Inc.



S-1

October 15, 2007


10
.410
.4

Loan and Security Agreement dated as of November 2, 2009
    between Silicon Valley Bank and the Registrant



10-Q

November 6, 2009


10
.110
.5

Investors Rights Agreement dated as of June 17, 2005,
    among the Registrant, the Investors named therein, John
    McDonough and David Parker, as amended



S-1

October 15, 2007


4
.210
.6

2007 Stock Incentive Plan of the Registrant



S-1

October 15, 2007


10
.1210
.7

Form of Incentive Stock Option Agreement under 2007 Stock
    Incentive Plan of the Registrant



S-1

October 15, 2007


10
.1310
.8

Form of Nonstatutory Stock Option Agreement under 2007 Stock
    Incentive Plan of the Registrant



S-1

October 15, 2007


10
.1410
.9

Form of Restricted Stock Agreement under 2007 Stock Incentive
    Plan of the Registrant



S-1

October 15, 2007


10
.1510
.10

Employment Offer Letter entered into as of April 21, 2009
    between the Registrant and James A. Milton



8-K

April 21, 2009


10
.110
.11

Form of Executive Retention Agreement entered into as of
    May 1, 2009 between the Registrant and James A. Milton



8-K

April 21, 2009


10
.210
.12

Form of Executive Retention Agreement entered into as of
    November 28, 2008 between the Registrant and each of Mark
    D. Friedman, Robert C. Leahy, and Timothy R. Segall



8-K

November 28, 2008


99
.110
.13

Form of Change in Control Agreement entered into as of
    May 1, 2009 between the Registrant and James A. Milton



8-K

April 21, 2009


10
.3 46




---



##### Table of Contents



Exhibit



Filed



Filing DateNumber

Description of Exhibit

Herewith

Form

with SEC

Exhibit Number10
.14

Form of Change in Control Agreement entered into as of
    November 28, 2008 between the Registrant and each of Mark
    D. Friedman, Robert C. Leahy and Timothy R. Segall



8-K

November 28, 2008


99
.210
.15

Form of Indemnification Agreement entered into (or to be entered
    into) between the Registrant and each of its executive officers
    and directors from time to time



S-1

October 15, 2007


10
.1710
.16

Summary of 2009 Management Cash Compensation Plan



8-K

May 26, 2009


10
.110
.17

Compensation Arrangements with Outside Directors (Amended and
    Restated as of May 20, 2009)



8-K

May 26, 2009


10
.210
.18

Summary of 2010 Management Cash Compensation Plan



8-K

December 11. 2009


10
.110
.19

Compensation Arrangements with Outside Directors (Amended and
    Restated as of December 9, 2009)



8-K

December 11, 2009


10
.221
.1

List of subsidiaries of Registrant



10-K

March 18, 2009


21
.123
.1

Consent of Deloitte & Touche LLP

X31
.1

Certification of principal executive officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002

X31
.2

Certification of principal financial officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002

X32
.1

Certification of principal executive officer and principal
    financial officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350

X     
    
    Management contracts or compensatory plans or arrangements
    required to be filed as an exhibit hereto pursuant to
    Item 15(a) of the
    Form 10-K. 47




---



##### Table of Contents



SIGNATURES      By:
    /s/  James
    A. Milton      Form 10-K
  Signature

Title/s/  James
    A. MiltonJames
    A. Milton

President and Chief Executive Officer(Principal Executive Officer)/s/  Robert
    C. LeahyRobert
    C. Leahy

Chief Operating Officer and Chief Financial Officer(Principal Financial and Accounting Officer)/s/  Eric
    R. GilerEric
    R. Giler

Director/s/  James
    A. GoldsteinJames
    A. Goldstein

Director/s/  Vernon
    F. LoboVernon
    F. Lobo

Director/s/  Justin
    J. PerreaultJustin
    J. Perreault

Director/s/  James
    J. RoszkowskiJames
    J. Roszkowski

Director/s/  Eileen
    RuddenEileen
    Rudden

Director/s/  Regina
    O. SommerRegina
    O. Sommer

Director  48




---



##### 



SOUNDBITE
    COMMUNICATIONS, INC.
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
   
 PageReport of Independent Registered Public
    Accounting Firm


F-2Financial Statements:Consolidated Balance Sheets


F-3Consolidated Statements of Operations


F-4Consolidated Statements of Stockholders
    Equity


F-5Consolidated Statements of Cash Flows


F-6Notes to Consolidated Financial Statements


F-7   F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
        Internal Control  Integrated Framework
   
    F-2




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES



Consolidated
    Balance Sheets  December 31,2009


2008(In thousands, exceptshare and per shareamounts)ASSETSCurrent assets:Cash and cash equivalents

$
36,322


$
37,425Accounts receivable, net of allowance for doubtful accounts of
    $152 and $218 at December 31, 2009 and 2008


6,878



6,641Prepaid expenses and other current assets


1,344



1,221Total current assets


44,544



45,287Property and equipment, net


2,789



4,276Intangible assets, net


79



205Goodwill


213



Other assets


129



62Total assets

$
47,754


$
49,830LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
973


$
464Accrued expenses


3,212



3,158Total current liabilities


4,185



3,622Other liabilities


537



454Total liabilities


4,722



4,076Commitments and contingencies (note 6)Stockholders equity:Common stock, $0.001 par value 
    75,000,000 shares authorized; 16,506,730 and
    15,701,644 shares issued at December 31, 2009 and
    2008; 16,311,345 and 15,506,259 shares outstanding at
    December 31, 2009 and 2008


17



16Additional paid-in capital


68,011



66,703Treasury stock, at cost  195,385 shares at
    December 31, 2009 and 2008


(132
)


(132
)Accumulated other comprehensive loss


(72
)


(72
)Accumulated deficit


(24,792
)


(20,761
)Total stockholders equity


43,032



45,754Total liabilities and stockholders equity

$
47,754


$
49,830    F-3




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES



Consolidated
    Statements of Operations  Years Ended December 31,2009


2008


2007(In thousands, except shareand per share amounts)Revenues

$
40,183


$
43,211


$
39,492Cost of revenues


15,899



16,695



14,258Gross profit


24,284



26,516



25,234Operating expenses:Research and development


5,628



5,151



3,913Sales and marketing


14,784



17,974



14,702General and administrative


7,836



9,977



5,999Impairment of goodwill


121



248



Total operating expenses


28,369



33,350



24,614Operating (loss) income


(4,085
)


(6,834
)


620Other income (expense):Interest income


70



936



476Interest expense










(222
)Gain on litigation settlement






4,600



Warrant charge for change in fair value










(352
)Total other income (expense)


70



5,536



(98
)(Loss) income before provision for income taxes


(4,015
)


(1,298
)


522Provision for income taxes


16



21



56Net (loss) income


(4,031
)


(1,319
)


466Accretion of preferred stock










(37
)Net (loss) income attributable to common stockholders

$
(4,031
)

$
(1,319
)

$
429(Loss) income per common share:Basic

$
(0.25
)

$
(0.09
)

$
0.15Diluted

$
(0.25
)

$
(0.09
)

$
0.03Weighted average common shares outstanding:Basic


15,961,491



15,369,089



2,859,797Diluted


15,961,491



15,369,089



12,778,255    F-4




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES



Consolidated
    Statements of Stockholders Equity  AccumulatedAdditional





Other





Total


TotalCommon Stock


Paid-In


Treasury


Comprehensive


Accumulated


Shareholders


ComprehensiveShares


Amount


Capital


Stock


Income


Deficit


Equity (Deficit)


Income (Loss)(in thousands, except share and per share amounts)Balance, January 1, 2007


821,471


$
1


$
274


$
(132
)





$
(19,908
)

$
(19,765
)Initial public offering, net of offering costs


4,947,022



4



33,500















33,504Conversion of preferred stock into common stock


9,613,942



10



30,815















30,825Issuance of common stock for option exercises


38,453







16















16Accretion of transaction costs for preferred stock










(37
)














(37
)Stock-based compensation expense










318















318Reclassification of preferred stock warrant liability










834















834Comprehensive income:Net income






















466






$
466Translation adjustments


















4











4Total comprehensive income





























$
470Balance, December 31, 2007


15,420,888



15



65,720



(132
)


4



(19,442
)


46,165Issuance of common stock for option exercises


234,680



1



125















126Issuance of common stock for cashless warrant exercises


46,076























Stock-based compensation expense










858















858Comprehensive loss:Net loss






















(1,319
)





$
(1,319
)Translation adjustments


















(76
)










(76
)Total comprehensive loss





























$
(1,395
)Balance, December 31, 2008


15,701,644



16



66,703



(132
)


(72
)


(20,761
)


45,754Issuance of common stock for option exercises


805,086



1



331















332Stock-based compensation expense










977















977Comprehensive loss:Net loss and total comprehensive loss






















(4,031
)





$
(4,031
)



















Balance, December 31, 2009


16,506,730


$
17


$
68,011


$
(132
)

$
(72
)

$
(24,792
)

$
43,032    F-5




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Consolidated Statements of Cash
    Flows
  Years Ended December 31,2009


2008


2007(In thousands)Cash flows from operating activities:Net (loss) income

$
(4,031
)

$
(1,319
)

$
466Adjustments to reconcile net (loss) income to net cash provided
    by operating activities:Depreciation of property and equipment


2,486



3,205



2,869Amortization of intangible assets


126



145



Provision for doubtful accounts


33



42



56Change in carrying value of preferred stock warrant liability










352Stock-based compensation


977



858



318Impairment of goodwill


121



248



Loss (gain) on disposal of property and equipment


25



(20
)


132Change in operating assets and liabilities, net of effect of
    acquisition:Accounts receivable


(270
)


626



(1,396
)Prepaid expenses and other current assets


(123
)


86



(699
)Other assets


(67
)


87



(149
)Accounts payable


370



85



7Accrued expenses and other liabilities


59



(267
)


1,321Net cash (used in) provided by operating activities


(294
)


3,776



3,277Cash flows from investing activities:Proceeds received from sale of equipment






28



Cash paid related to acquisition of business


(256
)


(651
)


Purchases of property and equipment


(885
)


(1,528
)


(4,833
)Net cash used in investing activities


(1,141
)


(2,151
)


(4,833
)Cash flows from financing activities:Proceeds from equipment and bank line of credit










2,345Repayments of equipment and bank line of credit










(5,890
)Proceeds from issuance of common stock upon initial public
    offering, net of offering costs










33,504Proceeds from exercise of stock options


332



126



16Net cash provided by financing activities


332



126



29,975Effect of exchange rate changes on cash and cash equivalents










4Net (decrease) increase in cash and cash equivalents


(1,103
)


1,751



28,423Cash and cash equivalents, beginning of year


37,425



35,674



7,251Cash and cash equivalents, end of year

$
36,322


$
37,425


$
35,674Supplemental disclosure of cash flow information:Cash paid during the period for interest

$



$



$
250Cash paid during the period for income taxes

$
20


$
46


$
7Supplemental disclosure of non-cash investing and financing
    activities:Accretion of redeemable convertible preferred stock

$



$



$
37Property and equipment, included in accounts payable

$
139


$
4


$
82Contingent cash payment to Mobile Collect included in accrued
    expenses

$
118


$
40


$
Reclassification to equity of fair value of preferred stock
    warrant liability

$



$



$
834Conversion of redeemable preferred stock to common stock

$



$



$
30,825    F-6




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES



Notes to
    Consolidated Financial Statements  1.
    Nature
    of Business    2.
    Summary
    of Significant Accounting Policies  Subsequent
    Events
    Use of
    Estimates
    Principles
    of Consolidation
    Foreign
    Currency
    Segment
    Data
   F-7




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Cash
    and Cash Equivalents
    Accounts
    Receivable and Allowance for Doubtful Accounts
      Years Ended December 31,2009


2008


2007Balance, beginning

$
218


$
176


$
88Provision for bad debts


33



42



56Net uncollectible accounts (written off) recovered


(99
)






32Balance, end

$
152


$
218


$
176   Concentration
    of Credit Risk
      Development
    of Software for Internal Use
   F-8




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Property
    and Equipment
    Goodwill
    Long-lived
    Assets
    Revenues
        Research
    and Development Costs
   F-9




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Accounting
    for Stock-Based Compensation
    Income
    Taxes
      Basic
    and Diluted (Loss) Income Per Share
   F-10




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Years Ended December 31,2009


2008


2007Numerator:Net (loss) income attributable to common stockholders

$
(4,031
)

$
(1,319
)

$
429Denominator:Weighted average shares used in computing net (loss) income per
    common share  basic


15,961,491



15,369,089



2,859,797Add dilutive securities:Stock options










1,674,284Unvested stock










5,078Warrants










100,170Conversion of redeemable convertible preferred stock










8,138,926Weighted average shares used in computing net (loss) income per
    common share  diluted


15,961,491



15,369,089



12,778,255     Years Ended December 31,2009


2008


2007Stock options


2,764,267



2,571,995



85,749Unvested stock






2,744



Warrants


33,686



62,772



   Comprehensive
    (Loss) Income
    Recent
    Accounting Pronouncements
   F-11




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
   3.
    Property
    and Equipment    As of December 31,2009


2008Computer equipment

$
9,352


$
8,510Computer software


3,505



3,390Furniture and fixtures


556



556Office equipment & machinery


402



402Leasehold improvements


543



543Total


14,358



13,401Less  accumulated depreciation and amortization


(11,569
)


(9,125
)Property and equipment, net

$
2,789


$
4,276     4.
    Line
    of Credit      5.
    Accrued
    Expenses    December 31,2009


2008Accrued payroll related items

$
874


$
1,196Accrued telephony


646



656Accrued professional fees


543



377Accrued other


1,149



929Total accrued expenses

$
3,212


$
3,158   6.
    Commitments
    and Contingencies   F-12




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2010

$
8192011


8562012


8922013


6902014


Total future minimum lease payments

$
3,257     Litigation
    and Claims
        7.
    Common
    Stock and Warrants  Authorized
    Shares
    Warrants to purchase common stock


33,686Outstanding options to purchase common stock


3,019,595Shares reserved for future option grants


282,8833,336,164   Initial
    Public Offering
   F-13




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Warrants
    8.
    Stock-based
    compensation  Stock
    Options
  2000
    Stock Incentive Plan
    2007
    Stock Incentive Plan
   F-14




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Year Ended December 31, 2009Weighted


Weighted


AggregateAverage


Average Remaining


IntrinsicNumber of


Exercise


Contractual Term


ValueOptions


Price


(in years)


(in 000s)Outstanding  January 1, 2009


2,471,044


$
2.24Granted


1,469,000



1.99Exercised


(805,086
)


0.41Forfeited


(115,363
)


4.78Outstanding  December 31, 2009


3,019,595


$
2.51



8.0


$
3,055Exercisable  end of year


1,209,150


$
2.47



6.2


$
1,604Vested & Expected to vest  end of year


2,618,217


$
2.53



7.8


$
2,732              F-15




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Year Ended December 31,2009

2008

2007Risk Free Rate

1.81 - 3.40%

2.71 - 3.77%

4.50 - 5.71%Expected Life

6.02 - 6.25 years

6.02 - 6.25 years

6.02 - 6.25 yearsExpected Volatility

61.0 - 64.3%

57.2 - 65.4%

75.3%Weighted Average Volatility

63.8%

61.5%

75.3%Expected Dividend Yield

0%

0%

0%       Year Ended December 31,2009


2008


2007Cost of revenues

$
22


$
33


$
6Research and development


101



85



17Sales and marketing


352



403



120General and administrative


502



337



175Total stock-based compensation

$
977


$
858


$
318   9.
    Goodwill
    And Intangibles  Free-To-End-User
   F-16




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Balance at January 1, 2008:Goodwill

$
Accumulated impairment losses


Addition to goodwill


248Impairments recognized


(248
)Balance at December 31, 2008:Goodwill

$
248Accumulated impairment losses


(248
)Additions to goodwill


334Impairments recognized


(121
)Balance at December 31, 2009:Goodwill

$
582Accumulated impairment losses


(369
)$
213     NetGross


Accumulated


CarryingDecember 31, 2009

Value


Amortization


ValueTechnology

$
10


$
10


$
Non-compete agreements


20



7



13Customer relationships


320



254



66$
350


$
271


$
79December 31,
    2008Technology

$
10


$
8


$
2Non-compete agreements


20



3



17Customer relationships


320



134



186$
350


$
145


$
205    F-17




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Year Ending December 31,

Amount2010

$
632011


122012


4Total

$
79   10.
    Fair value
            Fair Value Measurements at Reporting Date UsingQuoted Prices inActive Markets


Significant Other


Significantfor Identical


Observable


UnobservableInstruments


Inputs


Inputs


Total(Level 1)


(Level 2)


(Level 3)


BalanceDecember 31, 2009:AssetsCash equivalents:Money market fund deposits

$



$
35,626


$



$
35,626Total assets measured at fair value

$



$
35,626


$



$
35,626December 31, 2008:AssetsCash equivalents:Money market fund deposits

$



$
36,036


$



$
36,036Total assets measured at fair value

$



$
36,036


$



$
36,036  F-18




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
   11.
    Income taxes
      As of December 31,2009


2008Deferred tax assets:Net operating loss carryforwards

$
6,809


$
5,820Accounts receivable


61



88Intangibles amortization and goodwill


222



143Accrued expenses


177



168Research and development credits


1,356



1,115Deferred revenue


62



Stock compensation


162



92Depreciation


102



115Deferred tax assets


8,951



7,541Valuation allowance


(8,951
)


(7,541
)Total deferred tax assets

$



$
     December 31,2009


2008


2007Tax at U.S. federal statutory rate

$
(1,365
)

$
(445
)

$
178State taxes, net of federal benefit


9



6



19Research and development and other credits (generated) used


(292
)


44



190Nondeductible meals and entertainment


28



51



57Nondeductible stock options


223



255



68Nondeductible warrants










120Canadian subsidiary






2



(3
)Change in valuation allowance


1,413



108



(573
)$
16


$
21


$
56    F-19




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
        12. Benefit Plan
    13.
    Selected Quarterly Financial Data (unaudited)
  Mar. 31,


June 30,


Sept. 30,


Dec. 31,2009


2009


2009


2009(In thousands, except per share data)Revenues

$
9,433


$
9,684


$
10,457


$
10,609Cost of revenues


3,754



3,784



4,202



4,159Gross profit


5,679



5,900



6,255



6,450Net loss


(1,049
)


(1,589
)


(689
)


(704
)Basic and diluted loss per share

$
(0.07
)

$
(0.10
)

$
(0.04
)

$
(0.04
)   F-20




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (1)Mar. 31,


June 30,


Sept. 30,


Dec. 31,2008


2008


2008


2008Revenues

$
10,635


$
11,308


$
10,613


$
10,655Cost of revenues


4,077



4,322



4,155



4,141Gross profit


6,558



6,986



6,458



6,514Net (loss) income


(1,519
)


2,916



(1,509
)


(1,207
)Basic (loss) earnings per share


(0.10
)


0.19



(0.10
)


(0.08
)Diluted (loss) earnings per share

$
(0.10
)

$
0.18


$
(0.10
)

$
(0.08
)     (1)
    
    Net (loss) income and basic and diluted (loss) earnings per
    share include a $4.6 million gain in connection with the
    settlement of the lawsuit with Universal Recovery Systems,
    offset by $1.9 million of related expenses for the quarter
    ended June 30, 2008. F-21