##### 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, 2008oro

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-K Form 10-K Form 10-K. þ
  12b-2
 Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    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


29Item 2.


Properties


29Item 3.


Legal Proceedings


29Item 4.


Submission of Matters to a Vote of Security
    Holders


30PART IIItem 5.


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


30Item 6.


Selected Financial Data


30Item 7.


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


32Item 7a.


Quantitative and Qualitative Disclosures About
    Market Risk


44Item 8.


Financial Statements and Supplementary Data


44Item 9.


Changes In and Disagreements with Accountants on
    Accounting and Financial Disclosure


44Item 9A(T).


Controls and Procedures


44Item 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


46Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


46Item 14.


Principal Accounting Fees and Services


46PART IVItem 15.


Exhibits and Financial Statement Schedules


47Signatures


49Ex-21.1 List of subsidiaries of RegistrantEx-23.1 Consent of Deloitte & Touche LLPEx-23.2 Consent of Shields & Company, Inc.Ex-31.1 Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Ex-31.2 Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002Ex-32.1 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   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 2009 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.
 1




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PART I  Item 1.
    Business  Overview
        (781) 897-2500. www.soundbite.com Form 10-K.
  Industry
    Background and Trends
  e-mail,
  E-mails e-mails
 2




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Inefficiencies
    of Contact Centers
        Availability
    of
    IP-Enabled
    Contact Centers
    IP-based IP-based
    Opportunities
    for Multi-Channel Solutions
    channel-by-channel
 3




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Our
    Solution
      Multi-channel access.
  Lower total cost of ownership.
  Improved contact center agent
    productivity.
  Enhanced agentless interactions.
  Burstable capacity.
  Rapid service deployment and campaign
    modification.
 4




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Usage-based pricing model.
  Our
    Strategy
    Target first-party clients.
  Continue to enhance service platform.
  Develop OEM and reseller relationships.
  Selectively pursue strategic acquisitions and
    relationships.
  Our
    On-Demand Service
  e-mail
 5




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Collections

Customer Care

Marketing   Contingent collections
       Early-stage collections
       Payment reminders

   Contract and subscription renewals
       Delivery notifications
       Loyalty programs

   Credit card activations
       Surveys
       Welcome calls       SOUNDBITE
    INTELLIGENT COMMUNICATIONS PLATFORM
  
  Secure Web and Data Integration
    Interfaces.
 6




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additional applications that rely on real-time data exchange,
    for example, fraud notifications or enhanced computer-telephone
    integration.  Core Components.
  List Management
  Script Interaction
    
    Direct Connect to Contact Center allows a recipient to connect
    directly to a contact center in order to speak with a contact
    center agent.
    Campaign Strategy defines the frequency and nature of the
    customer interactions to be employed to achieve the goals of a
    campaign. This component includes the following features:  
    Multi-Pass Campaigns are multiple overlapping passes through a
    contact list determined in accordance with client-defined
    parameters and intended to maximize contact list penetration and
    response rates.
    Call Pass Escalation defines the conditions in which our service
    moves to a different phone number or
    e-mail
    address within a contact pass.
    Contact Ordering prioritizes contacts based on client-specified
    criteria, such as the amount owed, or on the likelihood that
    customers will be reached at a particular time.  Agent
    Management
  
    AutoManage monitors and controls campaign performance to adjust
    the pace of outgoing calls to balance the flow of calls to the
    contact center. Based on our proprietary algorithm, adjustments
    are made based on factors such as contact center agent
    availability, average talk time and average hold times.
    Call Forecasting provides continuously refreshed data concerning
    current and anticipated future contact attempts that contact
    center managers can use for contact center agent resource
    planning.
    Contact Center Reports are available in near real-time and
    provide details on customer interactions with contact centers,
    including ring time, waiting time and talk time.  Compliance Management
 7




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Reporting and Analytics
  Enterprise Management
  Security. e-mail
    Delivery Channels.
  Complementary Services.
  Our
    Client Management Services
      Implementation, Training and General Help Desk
 8




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Solutions Consulting
  Enterprise Program Directors
  Customer Analytics
  Business
    Segments and Geographic Information
    Clients
        T-Mobile
  Sales and
    Marketing
     9




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e-mail
  Technology,
    Development and Operations
  Technology
        Research
    and Development
      Operations
  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.     11




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Hosted
    Customer Communications Solutions
    
    price;
    return on investment;
    breadth of features;
    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.   13




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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 to contact
    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;
    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.        Employees
   14




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Our
    History
  (781) 897-2500. www.soundbite.com. Form 10-K.
    Item 1A.
    Risk
    Factors  An investment in our common stock involves a high degree of
    risk. Investors 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 our automated voice messaging services and other
    on-demand communication services does not develop as we
    anticipate, our revenues would decline or fail to grow and we
    could incur operating losses.
  e-mail
     15




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Defects
    in our platform, disruptions in our service or errors in
    execution could diminish demand for our service and subject us
    to substantial liability.
          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, or to sell increased usage of our service to
    existing clients;
    technical difficulties or interruptions in our service; 16




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
    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;
    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
    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.        Our
    clients are not obligated to pay any minimum amount for use of
    our service on an on-going basis, and if they discontinue use of
    any 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.
   17




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Actual
    or perceived breaches of our security measures could diminish
    demand for our service and subject us to substantial
    liability.
    Interruptions
    or delays in service from our key vendors would impair the
    delivery of our on-demand service and could substantially harm
    our business and operating results.
     18




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Our
    business will be harmed if we fail to develop new features that
    keep pace with technological developments.
    If the
    on-demand delivery model is not widely accepted for our service,
    our revenues would decline or fail to grow and we could incur
    operating losses.
  e-mail
  
    the security capabilities and reliability of our on-demand
    services;
    reluctance by organizations to trust third parties to store and
    manage critical customer data;
    our ability to continue to achieve and maintain high levels of
    client satisfaction;
    the level of customization of our service;
    our ability to meet the needs of broader segments of the
    customer contact market;
    a substantial decrease in the cost of hardware and software
    necessary for organizations to maintain their customer contact
    technology in-house; and
    adverse publicity about us, our service or on-demand
    communication solutions in general, whether based on poor
    performance by us or our competitors or on third-party reviews
    and industry analyst reports.    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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e-mail e-mail
      Mergers
    or other strategic transactions involving our competitors could
    weaken our competitive position, which could harm our operating
    results.
    If we
    fail to retain our executive officers and other key personnel,
    our business would be harmed and we might not be able to
    implement our business plan successfully.
   20




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Failure
    to maintain our direct sales force will impede our
    growth.
    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 proprietary technology and our
    brand.
   21




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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.
      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 service, which would adversely affect our business and
    operating results.
    Any
    expansion of our business into international markets would
    expose us to additional business risks, and failure to manage
    those risks could adversely affect our business and operating
    results.
    
    difficulty in establishing, staffing and managing international
    sales operations;
    challenges encountered under local business practices, which
    vary by country and often favor local competitors; 22




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
    challenges caused by distance, language and cultural differences;
    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; and
    limited protection of intellectual property in some countries
    outside of the United States.    Our
    limited operating history makes predicting future operating
    results more difficult.
    
    a single service offering accounted for more than 96% of our
    revenues for 2008, and we face risks in developing complementary
    services or new service offerings, including
    e-mail and
    text messaging;
    we could encounter difficulties in managing the growth, if any,
    of our business; and
    we could be unable to forecast accurately the behavior of
    existing and potential clients or the demand for customer
    contact products.    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 products and services and our platform;
    unexpected expenses resulting from the acquisition;
    potential unknown liabilities associated with acquired
    businesses; and
    unanticipated expenses related to acquired technology and its
    integration into our existing technology. 23




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The
    consolidation of our customers can reduce the number of our
    customers 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 products; and
    respond to competitive pressures.   24




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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.
   25




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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.
     26




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e-mail
  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.
         27




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Any
    expansion of our business into international markets would
    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.
   28




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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      Item 3.
    Legal
    Proceedings   29




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Item 4.
    Submission
    of Matters to a Vote of Security Holders   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, 2008

High


LowFirst quarter

$
8.00


$
4.50Second quarter

$
5.07


$
2.44Third quarter

$
3.60


$
2.26Fourth quarter

$
2.56


$
0.96Fiscal year ended
    December 31, 2007Fourth quarter (from November 6, 2007)

$
8.25


$
5.50       Form 10-K Form 10-Q
  Issuer
    Purchases of Equity Securities
    Item 6.
    Selected
    Financial Data   30




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Years Ended December 31,2008


2007


2006


2005


2004(In thousands, except per share data)Statement of Operations Data:Revenues

$
43,211


$
39,492


$
29,069


$
16,448


$
7,754Cost of revenues


16,695



14,258



9,505



4,967



2,750Gross profit


26,516



25,234



19,564



11,481



5,004Operating expenses:Research and development


5,151



3,913



3,453



2,097



1,208Sales and marketing


17,974



14,702



12,172



5,888



2,715General and administrative


9,977



5,999



3,820



2,221



1,714Impairment of goodwill


248















Total operating expenses


33,350



24,614



19,445



10,206



5,637Operating (loss) income


(6,834
)


620



119



1,275



(633
)Other income (expense):Interest income


936



476



299



149



12Interest expense






(222
)


(398
)


(264
)


(245
)Warrant charge for change in fair value






(352
)


(177
)






Gain on litigation settlement


4,600















Other, net










6







Total other income (expense), net


5,536



(98
)


(270
)


(115
)


(233
)(Loss) income before provision for income taxes and cumulative
    change in accounting


(1,298
)


522



(151
)


1,160



(866
)Provision for income taxes


21



56











(Loss) income before cumulative change in accounting


(1,319
)


466



(151
)


1,160



(866
)Cumulative change in accounting










28







Net (loss) income


(1,319
)


466



(123
)


1,160



(866
)Accretion of preferred stock






(37
)


(44
)


(24
)


Deemed dividend


















(117
)Net (loss) income attributable to common stockholders

$
(1,319
)

$
429


$
(167
)

$
1,136


$
(983
)(Loss) income per common share:Basic:Before cumulative change in accounting

$
(0.09
)

$
0.15


$
(0.35
)

$
2.41


$
(2.14
)Cumulative change in accounting

$



$



$
0.05


$



$
Net (loss) income attributable to common stockholders

$
(0.09
)

$
0.15


$
(0.30
)

$
2.41


$
(2.14
)Diluted:Before cumulative change in accounting

$
(0.09
)

$
0.03


$
(0.35
)

$
0.13


$
(2.14
)Cumulative change in accounting

$



$



$
0.05


$



$
Net (loss) income attributable to common stockholders

$
(0.09
)

$
0.03


$
(0.30
)

$
0.13


$
(2.14
)Weighted average common shares outstanding:Basic


15,369



2,860



557



471



459Diluted


15,369



12,778



557



9,045



459   31




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As of December 31,2008


2007


2006


2005


2004(In thousands)Balance Sheet Data:Cash and cash equivalents

$
37,425


$
35,674


$
7,251


$
9,529


$
2,179Working capital


41,665



39,920



7,566



8,981



1,403Total assets


49,830



50,489



18,229



17,385



4,703Total indebtedness, including current portion










3,544



3,478



1,911Redeemable convertible preferred stock










30,788



31,076



22,619Total stockholders equity (deficit)


45,754



46,165



(19,765
)


(19,716
)


(20,867
)   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
    Free-to-End-User,
    Key
    Components of Results of Operations
  Revenues
     32




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Cost
    of Revenues
    Operating
    Expenses
  Research and Development.
  Sales and Marketing.
  General and Administrative.
  Additional
    Key Measures of Financial Performance
       33




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As of December 31,2008


2007


2006(In thousands)Cash flows from operating activities

$
3,776


$
3,277


$
750Purchases of property and equipment


(1,490
)


(4,833
)


(3,149
)Free cash flow (non-GAAP)

$
2,286


$
(1,556
)

$
(2,399
)           Critical
    Accounting Policies
      Allowance
    for Doubtful Accounts
   34




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Valuation
    of Goodwill
  Goodwill and Other Intangible Assets
  Stock-Based
    Compensation
  Accounting for Stock Issued to Employees, Accounting for Certain Transactions Involving Stock
    Compensation, an Interpretation of APB Opinion No. 25.
  Share-Based
    Payment
     35




---



##### Table of Contents



Income
    Taxes
   36




---



##### Table of Contents



Results
    of Operations
    Years Ended December 31,2008


2007


2006Statement of Operations Data:Revenues


100.0
%


100.0
%


100.0
%Cost of revenues


38.6



36.1



32.7Gross margin


61.4



63.9



67.3Operating expenses:Research and development


11.9



9.9



11.9Sales and marketing


41.6



37.2



41.9General and administrative


23.1



15.2



13.1Impairment of goodwill


0.6







Total operating expenses


77.2



62.3



66.9Operating (loss) income


(15.8
)


1.6



0.4Total other income (expense), net


12.8



(0.3
)


(0.9
)(Loss) income before provision for income taxes and cumulative
    change in accounting


(3.0
)


1.3



(0.5
)Provision for income taxes


0.1



0.1



(Loss) income before cumulative change in accounting


(3.1
)


1.2



(0.5
)Cumulative change in accounting










0.1Net (loss) income


(3.1
)%


1.2
%


(0.4
)%   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
    Income (Loss)
    Comparison
    of Years Ended December 31, 2007 and 2006
  Revenues
  2007

2006

Year-to-Year ChangePercentage of



Percentage of



PercentageAmount

Revenues

Amount

Revenues

Amount

Change(Dollars in thousands)Revenues

$
39,492



100.0
%

$
29,069



100.0
%

$
10,423



35.9
%    39




---



##### Table of Contents



Cost of
    Revenues and Gross Profit
  2007

2006

Year-to-Year ChangePercentage of



Percentage of



PercentageAmount

Revenues

Amount

Revenues

Amount

Change(Dollars in thousands)Cost of revenues

$
14,258



36.1
%

$
9,505



32.7
%

$
4,753



50.0
%Gross profit


25,234



63.9



19,564



67.3



5,670



29.0     Operating
    Expenses
  2007


2006


Year-to-Year ChangePercentage of





Percentage of





PercentageAmount


Revenues


Amount


Revenues


Amount


Change(Dollars in thousands)Research and development

$
3,913



9.9
%

$
3,453



11.9
%

$
460



13.3
%Sales and marketing


14,702



37.2



12,172



41.9



2,530



20.8General and administrative


5,999



15.2



3,820



13.1



2,179



57.0Total operating expenses

$
24,614



62.3
%

$
19,445



66.9
%

$
5,169



26.6
%   Research and Development.
  Sales and Marketing.
  General and Administrative.
 40




---



##### Table of Contents



Operating
    and Other Income
  2007


2006


Year-to-Year ChangePercentage of





Percentage of





PercentageAmount


Revenues


Amount


Revenues


Amount


Change(Dollars in thousands)Operating income

$
620



1.6
%

$
119



0.4
%

$
501



421.0
%Other income (expense):Interest income


476



1.2



299



1.0



177



56.2Interest expense


(222
)


(0.6
)


(398
)


(1.3
)


176



50.8Warrant charge for change in fair value


(352
)


(0.9
)


(177
)


(0.6
)


(175
)


*Other, net










6



0.0



(6
)


*Total other expense, net


(98
)


(0.3
)


(270
)


(0.9
)


172



63.7Income(loss) before provision for income taxes and cumulative
    change in accounting

$
522



1.3
%

$
(151
)


(0.5
)%

$
673



445.7
%     *
    
    Not meaningful    No. 150-5, Issuers Accounting under FASB Statement No. 150
    for Freestanding Warrants and Other Similar Instruments on
    Shares that are Redeemable
  Net
    Income (Loss)
    Liquidity
    and Capital Resources
  Resources
     41




---



##### Table of Contents



Credit
    Facility Borrowings
    Operating
    Cash Flow
    Working
    Capital
    As of December 31,2008


2007


2006(Dollars in thousands)Cash and cash equivalents

$
37,425


$
35,674


$
7,251Accounts receivable, net of allowance for doubtful accounts


6,641



7,261



5,921Working capital


41,665



39,920



7,566       Requirements
  Capital
    Expenditures
   42




---



##### 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

$
782


$
1,674


$
1,582


$



$
4,038Operating leases  hosting facilities


1,046



36











1,082Total

$
1 ,828


$
1,710


$
1,582


$



$
5,120     Effects
    of Inflation
    Off-Balance-Sheet
    Arrangements
  Regulation S-K
  Recent
    Accounting Pronouncements
  ,
    Fair Value Measurements No. 157-2, Effective Date of FASB Statement No. 157, No. 157-2
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities, Including an Amendment of FASB Statement
    No. 115 instrument-by-instrument
  Business Combinations,
 43




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk      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)
 44




---



##### Table of Contents



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.    Internal Control-Integrated
    Framework
      Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Item 11.
    Executive
    Compensation   45




---



##### Table of Contents



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   46




---



##### 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 July 19, 2007
    between Silicon Valley Bank and the Registrant



10-Q

November 14, 2007


10
.710
.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

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



8-K

November 28, 2008


99
.110
.11

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, Timothy R. Segall, Peter R.
    Shields and Jeffrey J. Struzenski



8-K

November 28, 2008


99
.210
.12

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
.17 47




---



##### Table of Contents



Exhibit



Filed



Filing DateNumber

Description of Exhibit

Herewith

Form

with SEC

Exhibit Number10
.13

Summary of 2008 Management Cash Compensation Plan



10-K

March 14, 2008


10
.1310
.14

Compensation Arrangements with Outside Directors (effective
    November 13, 2007)



10-Q

November 14, 2007


10
.621
.1

List of subsidiaries of Registrant

X23
.1

Consent of Deloitte & Touche LLP

X23
.2

Consent of Shields & Company, Inc.

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. 48




---



##### Table of Contents



SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the
    Securities Exchange Act of 1934, the registrant has duly caused
    this report to be signed on its behalf by the undersigned,
    thereunto duly authorized.



SOUNDBITE COMMUNICATIONS, INC. By:
    /s/  Peter
    R. Shields       Form 10-K
  Signature

Title/s/  Peter
    R. ShieldsPeter
    R. Shields

Chief Executive Officer, President and Director(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  49




---



##### 



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


F-2Financial Statements:Consolidated Balance Sheets


F-3Consolidated Statements of Operations


F-4Consolidated Statements of Stockholders
    Equity (Deficit)


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           Accounting for Uncertainty in
    Income Taxes
      F-2




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Consolidated
    Balance Sheets
  December 31,2008


2007(In thousands, except share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
37,425


$
35,674Accounts receivable, net of allowance for doubtful accounts of
    $218 and $176 at December 31, 2008 and 2007


6,641



7,261Prepaid expenses and other current assets


1,221



1,309Total current assets


45,287



44,244Property and equipment, net


4,276



6,096Intangible assets, net


205



Other assets


62



149Total assets

$
49,830


$
50,489LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
464


$
457Accrued expenses


3,158



3,867Total current liabilities


3,622



4,324Other liabilities


454



Total liabilities


4,076



4,324Commitments and contingencies (note 6)Stockholders equity:Common stock, $0.001 par value 
    75,000,000 shares authorized; 15,701,644 shares issued
    and 15,506,259 shares outstanding at December 31,
    2008; 15,420,888 shares issued and 15,225,503 shares
    outstanding at December 31, 2007


16



15Additional paid-in capital


66,703



65,720Treasury stock, at cost  195,385 shares at
    December 31, 2008 and 2007


(132
)


(132
)Accumulated other comprehensive (loss) income


(72
)


4Accumulated deficit


(20,761
)


(19,442
)Total stockholders equity


45,754



46,165Total liabilities and stockholders equity

$
49,830


$
50,489    F-3




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Consolidated
    Statements of Operations
  Years Ended December 31,2008


2007


2006(In thousands, except shareand per share amounts)Revenues

$
43,211


$
39,492


$
29,069Cost of revenues


16,695



14,258



9,505Gross profit


26,516



25,234



19,564Operating expenses:Research and development


5,151



3,913



3,453Sales and marketing


17,974



14,702



12,172General and administrative


9,977



5,999



3,820Impairment of goodwill


248







Total operating expenses


33,350



24,614



19,445Operating (loss) income


(6,834
)


620



119Other income (expense):Interest income


936



476



299Interest expense






(222
)


(398
)Gain on litigation settlement


4,600







Warrant charge for change in fair value






(352
)


(177
)Other, net










6Total other income (expense)


5,536



(98
)


(270
)(Loss) income before provision for income taxes and cumulative
    change in accounting


(1,298
)


522



(151
)Provision for income taxes


21



56



(Loss) income before cumulative change in accounting


(1,319
)


466



(151
)Cumulative change in accounting










28Net (loss) income


(1,319
)


466



(123
)Accretion of preferred stock






(37
)


(44
)Net (loss) income attributable to common stockholders

$
(1,319
)

$
429


$
(167
)(Loss) income per common share:Basic:Before cumulative change in accounting

$
(0.09
)

$
0.15


$
(0.35
)Cumulative change in accounting

$



$



$
0.05Net (loss) income attributable to common stockholders

$
(0.09
)

$
0.15


$
(0.30
)Diluted:Before cumulative change in accounting

$
(0.09
)

$
0.03


$
(0.35
)Cumulative change in accounting

$



$



$
0.05Net (loss) income attributable to common stockholders

$
(0.09
)

$
0.03


$
(0.30
)Weighted average common shares outstanding:Basic


15,369,089



2,859,797



557,063Diluted


15,369,089



12,778,255



557,063    F-4




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Consolidated
    Statements of Stockholders Equity (Deficit)
  AccumulatedAdditional





Other





TotalCommon Stock


Paid-In


Treasury


Comprehensive


Accumulated


ShareholdersShares


Amount


Capital


Stock


Income


Deficit


Equity (Deficit)(In thousands, except share and per share amounts)Balance, January 1, 2006


700,236


$
1


$
198


$
(131
)

$



$
(19,785
)

$
(19,717
)Issuance of common stock for option exercises


121,235







56















56Purchase of treasury stock














(1
)










(1
)Accretion of transaction costs for preferred stock










(44
)














(44
)Stock-based compensation expense










64















64Comprehensive and net loss






















(123
)


(123
)Balance, December 31, 2006


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







4Comprehensive 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
)Comprehensive loss


























(1,395
)Balance, December 31, 2008


15,701,644


$
16


$
66,703


$
(132
)

$
(72
)

$
(20,761
)

$
45,754    F-5




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Consolidated
    Statements of Cash Flows
  Years Ended December 31,2008


2007


2006(In thousands)Cash flows from operating activities:Net (loss) income

$
(1,319
)

$
466


$
(123
)Adjustments to reconcile net (loss) income to net cash provided
    by operating activities:Depreciation of property and equipment


3,205



2,869



1,947Amortization of intangible assets


145







Provision for doubtful accounts


42



56



147Change in carrying value of preferred stock warrant liability






352



177Cumulative change in accounting










(28
)Stock-based compensation


858



318



64Noncash charge attributable to warrants










22Impairment of goodwill


248







(Gain) loss on disposal of property and equipment


(20
)


132



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


626



(1,396
)


(2,414
)Prepaid expenses and other current assets


86



(699
)


(278
)Other assets


87



(149
)


Accounts payable


85



7



139Accrued expenses


(267
)


1,321



1,097Net cash provided by operating activities


3,776



3,277



750Cash flows from investing activities:Proceeds received from sale of equipment


28







Acquisition of business


(651
)






Purchases of property and equipment


(1,528
)


(4,833
)


(3,149
)Net cash used in investing activities


(2,151
)


(4,833
)


(3,149
)Cash flows from financing activities:Proceeds from equipment and bank line of credit






2,345



1,467Repayments of equipment and bank line of credit






(5,890
)


(1,401
)Treasury stock purchase










(1
)Proceeds from issuance of common stock upon initial public
    offering, net of offering costs






33,504



Proceeds from exercise of stock options


126



16



56Net cash provided by financing activities


126



29,975



121Effect of exchange rate changes on cash and cash equivalents






4



Net increase (decrease) in cash and cash equivalents


1,751



28,423



(2,278
)Cash and cash equivalents, beginning of year


35,674



7,251



9,529Cash and cash equivalents, end of year

$
37,425


$
35,674


$
7,251Supplemental disclosure of cash flow information:Cash paid during the period:Interest

$



$
250


$
326Supplemental disclosure of non-cash investing and financing
    activities:Accretion of redeemable convertible preferred stock

$



$
37


$
44Property and equipment, included in accounts payable

$
4


$
82


$
265Reclassification of fair value of preferred stock warrant
    liability

$



$



$
332Reclassification to equity of fair value of preferred stock
    warrant liability

$



$
834


$
Conversion of redeemable preferred stock to common stock

$



$
30,825


$
    F-6




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes
    to Consolidated Financial Statements
  1.  Nature
    of Business
      2.  Summary
    of Significant Accounting Policies
  Use of
    Estimates
    Principles
    of Consolidation
    Foreign
    Currency
    Segment
    Data
    Cash
    and Cash Equivalents
    Accounts
    Receivable and Allowance for Doubtful Accounts
   F-7




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Years Ended December 31,2008


2007


2006Balance, beginning

$
176


$
88


$
114Provision for bad debts


42



56



147Net uncollectible accounts (written off) recovered






32



(173
)Balance, end

$
218


$
176


$
88   Concentration
    of Credit Risk
      Development
    of Software for Internal Use
  98-1, Accounting for the Costs of Computer Software Developed or
    Obtained for Internal Use.
  Property
    and Equipment
   F-8




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Goodwill
  Goodwill and Other Intangible Assets
  Long-lived
    Assets
    Guarantees:
    Indemnified Obligations
    Revenues
       F-9




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Research
    and Development Costs
    Accounting
    for Stock-Based Compensation
  Share-Based Payment
  Income
    Taxes
    Accounting for Uncertainty
    in Income Taxes
  Freestanding
    Preferred Stock Warrants
  No. 150-5, Issuers Accounting under FASB Statement No. 150
    for Freestanding Warrants and Other Similar Instruments on
    Shares that are Redeemable (FSP 150-5). FSP 150-5, FSP 150-5 FSP 150-5.
 F-10




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  FSP 150-5.
  Basic
    and Diluted (Loss) Income Per Share
    Years Ended December 31,2008


2007


2006Numerator:Net (loss) income attributable to common stockholders

$
(1,319
)

$
429


$
(167
)Denominator:Weighted average shares used in computing net (loss) income per
    common share  basic


15,369,089



2,859,797



557,063Add dilutive securities:Stock options






1,674,284



Restricted stock






5,078



Warrants






100,170



Conversion of redeemable convertible preferred stock






8,138,926



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


15,369,089



12,778,255



557,063     Years Ended December 31,2008


2007


2006Stock options


2,571,995



85,749



1,954,110Restricted stock


2,744







7,040Warrants


62,772







151,645Conversion of redeemable convertible preferred stock










9,613,942   Comprehensive
    (Loss) Income
   F-11




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Recent
    Accounting Pronouncements
  ,
    Fair Value Measurements No. 157-2 (FSP 157-2) FSP 157-2
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities, Including an Amendment of FASB Statement
    No. 115 instrument-by-instrument
  Business Combinations
 F-12




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  3.  Property
    and Equipment
    As of December 31,2008


2007Computer equipment

3 years

$
8,510


$
7,733Computer software

3 years


3,390



3,041Lesser of usefulFurniture and fixtures

life or lease term


556



556Office equipment & machinery

3 years


402



402Leasehold improvements

Lesser of usefullife or lease term


543



539Total




13,401



12,271Less  accumulated depreciation and amortization




(9,125
)


(6,175
)Property and equipment, net



$
4,276


$
6,096     4.  Line
    of Credit
     F-13




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  5.  Accrued
    Expenses
    December 31,2008


2007Accrued payroll related items

$
1,196


$
1,375Accrued telephony


656



539Accrued professional fees


377



768Accrued rent






199Accrued other


929



986Total accrued expenses

$
3,158


$
3,867   6.  Commitments
    and Contingencies
    2009

$
1,8282010


8542011


8562012


8922013


690Total future minimum lease payments

$
5,120     Litigation
    and Claims
     F-14




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
          7.  Redeemable
    Convertible Preferred Stock
    8.  Common
    Stock and Warrants
  Authorized
    Shares
    Warrants to purchase common stock


33,686Outstanding options to purchase common stock


2,471,044Shares reserved for future option grants


861,2083,365,938   Warrants
    Reverse
    Stock Split
  1-for-5.681818
 F-15




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Initial
    Public Offering
    9.  Stock-based
    compensation
  Stock
    Options
  2000
    Stock Incentive Plan
    2007
    Stock Incentive Plan
   F-16




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Year Ended December 31, 2008Weighted


WeightedAverage


Average Remaining


AggregateNumber of


Exercise


Contractual Term


IntrinsicOptions


Price


(in years)


ValueOutstanding  beginning of year


2,176,048


$
1.512Granted


757,550



4.104Exercised


(234,680
)


0.663Forfeited


(227,874
)


3.224Outstanding  end of year


2,471,044


$
2.242



7.0


$
1,154Exercisable  end of year


1,832,466


$
1.525



5.96


$
1,084Vested & Expected to vest  end of year


2,289,954


$
2.102



6.85


$
1,140         Weighted AverageGrant DateNon-Vested Shares

Shares


Fair ValueNon-vested as of January 1, 2008


4,400


$
0.49Vested


(2,640
)


0.49Non-vested as of December 31, 2008


1,760


$
0.49   Accounting for Stock Issued to
    Employees.
   F-17




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
            Year Ended December 31,2008

2007

2006Risk Free Rate

2.71 - 3.77%

4.50 - 5.71%

4.37 - 5.08%Expected Life

6.02 - 6.25 years

6.02 - 6.25 years

6.02 - 6.25 yearsExpected Volatility

57.2 - 65.4%

75.3%

78.4%Expected Dividend Yield

0%

0%

0%      F-18




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##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Year Ended December 31,2008


2007


2006Cost of revenues

$
33


$
6


$
1Research and development


85



17



6Sales and marketing


403



120



28General and administrative


337



175



29Total stock-based compensation

$
858


$
318


$
64   10.
    Acquisition and Intangibles
  Free-To-End-User
    Purchase Price:Cash paid

$
500Transaction costs


61Contingent consideration earned as of December 31, 2008


90Total

$
651Allocations:Current assets

$
53Intangible assets:Customer relationships


320Non-compete agreements


20Technology


10Goodwill


248Total assets acquired

$
651  F-19




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    NetGross


Accumulated


CarryingDecember 31, 2008

Value


Amortization


ValueTechnology

$
10


$
8


$
2Non-compete agreements


20



3



17Customer relationships


320



134



186$
350


$
145


$
205     Year Ending December 31,

Amount2009


1262010


632011


122012


4Total

$
205   11.
    Impairment
    of Goodwill        Balance  January 1, 2008

$
Add: acquisition consummated in February 2008 (Note 10)


158Add: contingent consideration (Note 10)


90Less: impairment charge


(248
)Balance at December 31, 2008

$
  F-20




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  12.  Income
    taxes
    Year Ended December 31,2008


2007


2006Current tax expense

$
21


$
56


$
Deferred tax expense (benefit)


(281
)


(116
)


60Research credits generated


(204
)


(162
)


(4
)Net operating losses utilized


377



851



290Valuation allowance increase (decrease)


108



(573
)


(346
)Total

$
21


$
56


$
       As of December 31,2008


2007Deferred tax assets:Net operating loss carryforwards

$
5,820


$
6,197Accounts receivable


88



71Intangibles amortization and goodwill


143



Accrued expenses


168



110Research and development credits


1,115



911Depreciation


207



144Deferred tax assets


7,541



7,433Valuation allowance


(7,541
)


(7,433
)Total deferred tax assets

$



$
     December 31,2008


2007


2006Tax at U.S. federal statutory rate


(34.0
)%


34.0
%


(34.0
)%State taxes, net of federal benefit


0.5



3.6



Non-deductible items-meals


3.9



10.9



41.1Non-deductible items-stock options


19.5



13.0



17.4Non-deductible items-warrants






22.9



42.2Canadian subsidiary loss without benefit


0.1



(0.7
)


Change in valuation allowance (including net operating loss used
    or not benefited)


8.3



(72.8
)


(66.7
)(1.7
)%


10.9
%



%  F-21




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Accounting for Uncertainty in Income Taxes, an interpretation
    of FAS 109
    13.  Benefit
    Plan
   F-22




---



##### Table of Contents



SOUNDBITE
    COMMUNICATIONS, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  14.  Selected
    Quarterly Financial Data (unaudited)
  (2)Mar. 31,


June 30,


Sept. 30,


Dec. 31,2008


2008


2008


2008(In thousands, except per share data)Revenues

$
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
)   Mar. 31,


June 30,


Sept. 30,


Dec. 31,2007


2007


2007


2007Revenues

$
8,761


$
9,338


$
10,067


$
11,326Cost of revenues


3,165



3,695



3,619



3,780Gross profit


5,596



5,643



6,448



7,546Net (loss) income(1)


(839
)


428



(277
)


1,154Basic (loss) earnings per share(1)


(1.36
)


0.65



(0.44
)


0.12Diluted (loss) earnings per share(1)

$
(1.36
)

$
0.03


$
(0.44
)

$
0.08     (1)
    
    Net (loss) income and basic and diluted (loss) earnings per
    share include the effect of (charges) income related to the
    change in fair value of the Companys preferred stock
    warrants for each of the four quarters ended December 31,
    2007 as follows: ($808,000), $251,000, ($389,000) and $595,000,
    respectively.(2)
    
    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-23