10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

x Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2011

Or

¨ Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             

Commission File No. 1-33762

inContact, Inc.

(Exact name of registrant as specified in its charter)

Delaware	87-0528557
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

7730 S. Union Park Avenue, Suite 500, Salt Lake City, Utah 84047

(Address of principal executive offices and Zip Code)

(801) 320-3200

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Act: Common Stock, Par Value $0.0001

Securities registered under Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large Accelerated Filer	¨	Accelerated Filer	x
Non-Accelerated Filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $160,479,543.

The number of shares outstanding of the registrant’s class of $0.0001 par value common stock as of February 21, 2012 was 43,695,967.

DOCUMENTS INCORPORATED BY REFERENCE: Information required by Items 10 through 14 of Part III of this Form 10-K, to the extent not set forth herein, is incorporated herein by reference to portions of the registrant’s definitive proxy statement for the registrant’s 2012 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year ended December 31, 2011. Except with respect to the information specifically incorporated by reference in this Form 10-K, the registrant’s definitive proxy statement is not deemed to be filed as a part of this Form 10-K.

TABLE OF CONTENTS

Item Number and Caption		Page
PART I
Item 1.	Business		2
Item 1A.	Risk Factors		13
Item 1B.	Unresolved Staff Comments		19
Item 2.	Properties		19
Item 3.	Legal Proceedings		20
Item 4.	Mine Safety Disclosures		20
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		21
Item 6.	Selected Financial Data		23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		37
Item 8.	Financial Statements and Supplementary Data		38
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		39
Item 9A.	Controls and Procedures		39
Item 9B.	Other Information		39
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		40
Item 11.	Executive Compensation		40
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		40
Item 13.	Certain Relationships and Related Transactions, and Director Independence		40
Item 14.	Principal Accountant Fees and Services		40
PART IV
Item 15.	Exhibits and Financial Statement Schedules		41
	Signatures		45

FORWARD-LOOKING STATEMENTS

In addition to historical information, this annual report on Form 10-K contains forward-looking statements. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by the use of words such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “intend,” “anticipate,” “plan,” “continue” or similar expressions. In particular, information appearing under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” includes forward-looking statements. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans and expectations of our management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some, but not all, of the factors that could cause actual results or events to differ materially from those anticipated:

• The highly competitive and evolving nature of the industry in which we compete;

• Rapid technological changes;

• Failure by us to implement our strategies;

• Our ability to keep pace with changing customer needs;

• Financial difficulties experienced by any of our top customers;

• Our debt and debt service requirements that restrict our operating and financial flexibility, and impose interest and financing costs;

• Our ability to attract and retain key personnel;

• General economic conditions; and

• Possible terrorist attacks and ongoing military action throughout the world.

There may be other factors that may cause our actual results to differ materially from the forward-looking statements. Our actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them does, what impact they will have on our results of operations and financial condition. You should carefully read the factors described in the “Risk Factors” section of this Form 10-K for a description of certain risks that could, among other things, cause our actual results to differ from these forward-looking statements.

All forward-looking statements speak only as of the date of this Form 10-K and are expressly qualified in their entirety by the cautionary statements included in this Form 10-K. We undertake no obligation to update or revise forward-looking statements that may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Securities Exchange Act of 1934. Accordingly, we file periodic reports and other information with the Securities and Exchange Commission (“SEC”). We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports available through our Internet site, www.inContact.com as soon as reasonably practicable after electronically filing such materials with the SEC. They may also be obtained by writing to inContact, Inc., 7730 S. Union Park Avenue, Suite 500, Salt Lake City, Utah 84047. In addition, copies of these reports may be obtained through the Securities and Exchange Commission website at www.sec.gov or by visiting the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549 or by calling the SEC at 800-SEC-0330. Our common stock trades on The NASDAQ Capital Market under the symbol “SAAS.”

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PART I

ITEM 1. BUSINESS

Overview

What We Do

inContact, Inc. (“inContact,” “we,” “us,” “our,” or the “Company”) began in 1997 as a reseller of telecommunications services and has evolved to become a leading provider of cloud-based contact center solutions. “Cloud-based” is a term used to refer to on-demand computing, data storage and delivery of technology services through the Internet (“Cloud”), which includes software-as-a-service (“SaaS”). inContact helps contact centers around the world create effective customer experiences through its powerful portfolio of cloud-based contact center call routing, self-service and agent optimization solutions. The Company’s services and solutions enable contact centers to operate more efficiently, optimize the cost and quality of every customer interaction, create new pathways to profit and ensure ongoing customer-centric business improvement and growth.

We began offering cloud-based contact center solutions to the contact center market in 2005. Our dynamic technology platform provides our customers a solution without the costs and complexities of premise-based systems. Our proven delivery model provides compelling cost savings by removing the complexities of deploying and maintaining a premise-based solution, while providing flexibility to change with business needs.

Developments in 2011

Our primary financial objective is to generate recurring cloud-based software revenue from sustainable sources by investing in various cloud-based software growth initiatives, as we believe we are in the early stages of a large, long-term market. In the past, we have grown that business through our direct sales initiatives and referral partner arrangements. We added a new sales channel in 2011. In June 2011, we entered into our first reseller agreement for our cloud-based contact center solutions with Siemens Enterprise Communications (“Siemens”). Siemens is a world-wide distributor/reseller of our portfolio of cloud-based software solutions, which includes the exclusive right to sell our solutions in Europe (including Russia), Middle East, and Africa (“EMEA”). In November 2011, we entered into a North America reseller agreement with Verizon Business Communications (“Verizon”). Our new opportunity in 2011 is to leverage the marketing and sales capacity of these large enterprises selling to call center owners and operators to substantially increase our business in North America and establish our business overseas – all of which we believe will generate significant growth in our recurring cloud-based software revenue.

This new opportunity means we must invest in the infrastructure required to deliver our cloud-based software to new enterprise and international customers and increase our customer service and support capacity. We began making that investment in 2011, and were able to fund our expenditures in 2011, as well as expected expenditures in 2012, with the $23.6 million we raised from the sale of 7.2 million shares of common stock to a parent company of Siemens. Even so, the investment we made increased our cost of services and other operating expenses in 2011, which adversely affected our margins and results of operations. Our ability to recoup that investment depends on how successful our reseller strategy is in 2012 and beyond, but we are able to mitigate the risk associated with future realization of sales by obtaining minimum purchase commitments from Siemens to generate $5.0 million of net software revenue in 2012 and $10.0 million in 2013.

Products and Services

The inContact Cloud Portfolio

The inContact portfolio consists of the following integrated solutions:

• inContact ACD™: The goal of an Automatic Call Distributor (“ACD”) is to get callers to the right agent as quickly as possible. inContact provides advanced contact handling and routing functionality along with the management services required for our customers to monitor and manage the

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process. The inContact ACD includes skills-based routing, universal contact queues, automatic call back, and inbound/outbound call blending. Dynamic connections with the database enhance the call routing even further by leveraging real-time data for routing decisions to improve the caller experience. inContact ACD is also capable of aggregating multiple contact center sites into a single entity for improved management and reporting of large, complex contact center operations.

• inContact CTI™: Computer Telephony Integration (“CTI”) leverages the customer database to deliver a caller experience based on data relevant to the caller. inContact CTI integrates with customer data servers to provide agents with pre-populated customer data that reduce contact handling times. The inContact CTI can also link Interactive Voice Response applications with transaction databases, enabling caller self-service and reducing the need for agents where appropriate.

• inContact IVR™: inContact Interactive Voice Response (“IVR”) is a mature IVR that delivers a typical initial caller experience. IVR is the key to good self-service and assists the caller to get to the appropriate live-agent service. inContact IVR is unique because of the robust drag-and-drop utility that is used to create specialized call flows that are unique to each customer. Customers can retain control and develop the call flows for themselves or engage our professional services team to create a tailor made solution to create unique workflows.

• inContact Integrations: inContact was designed from the ground up to be open and integrate with various hardware and software solutions already in place at our customers’ sites. inContact can overlay an existing private branch exchange (“PBX”), while communicating hand-in-hand with the customer relationship management (“CRM”) solutions used by our customers.

• inContact ECHO^®: inContact ECHO gathers the opinion of the user and presents the analysis of the feedback directly to supervisors and agents to identify gaps in service and processes. Most companies try to gather user feedback, but many find it difficult to translate user opinion into meaningful data that promotes better service delivery. inContact ECHO is an essential component of the portfolio to close the loop between offering service and evaluating the results of the service for continuous improvement.

• inContact Workforce Management™: inContact Workforce Management (“WFM”) helps our customers forecast demand, workforce scheduling, analyze and optimize staffing and report real-time adherence in their contact centers. inContact WFM includes analysis to predict service levels, abandon rates and queue times as well as a break/lunch optimization wizard to improve staffing efficiency. In addition, agents can review their schedule, set up schedule preferences, request time off, and swap shifts with other agents on their own.

• inContact Quality Monitoring™: inContact’s Quality Management Software provides insights into agent performance and customer satisfaction. It works by scoring agent performance against objectives that a customer can define and monitor. The Quality Management scorecard then provides specific details about each agent’s performance that can be used to guide training and coaching programs.

• InContact Screen Recording™: inContact Screen Recording provides compliance level screen recording functionality for all voice channel interactions. It captures and stores recordings for quick playback to meet legal and regulatory requirements. The inContact ACD communicates directly with the screen recording gateway server located on the customer premise to initiate the start and stop of screen recording activity of the agent desktop.

• inContact eLearning™: inContact eLearning provides targeted, prioritized training, communications and testing directly to the agent’s desktop during dips in call volumes. Our customers experience reduced call escalations and minimized cost per call with better trained agents.

• inContact Network Connectivity: inContact runs a national carrier-class telecommunications network providing both TDM and VoIP connectivity as well as toll-free and local-number services. All incoming calls are handled on the inContact network that was designed from the ground up to support a broad range of software applications. Outgoing calls are routed through a portfolio of partners specially selected for call-quality as well as low-cost services to benefit our customers.

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• Professional Services: We offer professional support services from contact center experts who help customers establish, set up and optimize their contact centers for user satisfaction and revenue optimization. Our contact center experts assist customers in customizing detailed call routing and call distribution mapping to ensure calls are routed in the most effective and efficient manner possible using the inContact portfolio of services to their maximum potential needed by each unique contact center.

The Power of the Cloud Model

The cloud model enables subscribers to access a wide variety of application services that are developed specifically for delivery over the Internet on an as-needed basis. Purchasing cloud-based applications offers advantages to businesses over traditional software licensing and delivery models, including the following:

• Operational expense rather than a capital expense;

• Overlay existing infrastructure without additional investment;

• Low up-front expenditure reduces risk and is especially appealing in a challenging economic climate;

• Remove complexity of day-to-day management;

• Ability to use at-home agents or multi-site workforces because the software is delivered over the Internet and can be accessed from any location;

• Continued access to state-of-the-art technology and avoidance of technology lock-in with no need to install and manage third-party hardware and software in-house;

• Ability to scale as business needs change; and

• Instant built-in scalability, redundancy, security, hosting and IT expertise.

This type of lower cost subscription service is particularly attractive for start-up companies and medium-sized businesses. However, the model also is becoming increasingly appealing to larger organizations as they seek to reduce significant hardware and software expenses, while maintaining or improving contact center functionality and capacity.

For companies selling software application services under the cloud-based model, such as inContact, sales generally result in lower initial revenues than traditional software licensing and delivery models. However, because customers generally subscribe to this kind of product for a period of time, future revenues are more predictable than traditional software sales models where license revenue may be recognized in the quarter when signed. As a result of our use of the cloud model, we depend on monthly recurring revenues from our customers, which provide us with a much more predictable and stable revenue stream than if we sold our inContact platform as a premise-based product.

Telecom Products and Services

Our telecommunications network is the backbone of the inContact platform as our customers’ calls are routed across our carrier-grade network. Our ability to provide telecommunications connectivity as well as cloud software services create a strong competitive advantage for those customers who are looking for a single source supplier for both these services.

As a domestic and international long distance reseller and aggregator, we contract with a number of third party long distance service providers for the right to resell telecommunication services to our customers. Our primary providers are Qwest, Verizon and Global Crossing. The variety of traditional telecommunication services we offer enables our customers to: (1) buy most of the telecommunications services they need from one source, (2) combine those services into a customized package including our all-in-one, contact center solution,

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(3) receive one bill for those services, (4) call us at a single point of contact if service problems or billing issues arise, and (5) depend on our professional team of employees to manage their network and contact center solution, end-to-end, so our customers can focus on their business operations.

The contracts with our third party long distance service providers are standard and customary in the industry and designate inContact as the point of contact for all customer service calls. These agreements stand for one to three years and are generally renewable at the end of each contract term, when rates are often renegotiated on the basis of prevailing rates in the industry.

We also acquire, from our third party long distance service providers, dedicated long distance service, toll-free 800/888/877/866 services, dedicated data transmission service and calling cards. These services and fees are billed to us as stated in our contracts with our providers and are payable on the same terms as switched long distance service.

We maintain a contact center in Salt Lake City, Utah for receiving customer service and billing inquiries. Our customer service personnel are available during extended business hours and also provide emergency service 24 hours a day, seven days a week. We place a high priority on customer service since we believe it is a primary factor in acquiring and retaining customers.

Market Opportunity

Many businesses need to manage a large volume of telephone traffic with users and business contacts. With the traditional premise-based hardware and software solutions, the business: (1) purchases a system from an equipment provider, (2) installs the system on site, (3) purchases long distance service from a provider and (4) attaches one to the other. This separation between call management and call delivery has resulted in a fragmented market served by multiple vendors that offer either:

• High-end, onsite, hardware and software solutions, designed to improve worker productivity, for which the return on investment is lengthy and often hard to justify, except for contact center operations that are large enough to afford the significant investment needed to purchase the costly equipment, software and technical expertise; or

• Less expensive hardware and software solutions that are more affordable to the small and mid-sized contact center market, which have few features, little flexibility and limit the business’s ability to improve worker productivity.

Our strategy is to deploy an all-in-one contact management solution that is scalable to the business’s call traffic, enables a distributed workforce, improves worker productivity, offers the features found in the high-end hardware and software solutions, and is affordable to contact centers of all sizes.

In today’s challenging economy, the preferred practice of our prospective customers is to use outsourced services paid for as used over standard periods, rather than incurring large upfront capital expenditures that use working capital that is recovered over long periods of use.

We feel that the cloud delivery model is growing in acceptance, and the market is poised for ongoing growth. We believe inContact continues to be the only cloud-based provider to the contact center market that offers both telecommunications services with contact handling and workforce optimization solutions. We believe the trend in the mid-size and enterprise contact center market is for companies to prefer purchasing all-in-one solutions over purchasing multiple point solutions. These companies are looking for software available in a portfolio that they believe will save money, reduce implementation and integration complexity, and allow them to focus on dealing with one vendor.

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Sales and Marketing

Marketing continues to be a strategic growth engine for inContact. In 2011, we continued our targeted marketing activities to accelerate sales growth. We are driving demand for our services through the following key strategies:

• Build a strong consistent, recognizable brand across the contact center industry and consistently promote and communicate our value proposition;

• Develop customer references to support the story;

• Expand our PR presence and extend our relationships with key industry analysts;

• Leverage social media;

• Increase scale and impact of demand generation programs; and

• Nurture leads for more effective conversion to qualified opportunities.

The key audiences for our message include contact center operations management, IT management and C-level executives. Our current marketing efforts are focused on: (1) elevating the inContact brand to a position of industry leadership in cloud-based platforms, (2) identifying, attracting and pre-qualifying prospective leads that can be converted to new sales opportunities, and (3) expanding partner support and integration offerings to enable joint marketing and selling with key partners.

We maintain a referral partner network comprised primarily of telecommunication agents and adjacent market technology and service providers. These relationships benefit inContact because they introduce us to new sales channels and they add scalability to our sales, implementation, professional services and support operations.

In 2011 and prior years, inContact’s cloud-based software solutions have been sold predominately through our direct sales organization. In June 2011, we established a new sales channel by entering into a reseller agreement with Siemens, whereby Siemens became a world-wide distributor/reseller of our portfolio of hosted solutions. Siemens was granted a non-exclusive right to resell inContact’s cloud-based software solutions and other services globally with an exclusive right to sell the inContact services in EMEA. The initial term of the agreement is between June 14, 2011 and December 31, 2013. Siemens agreed to the following minimum purchase commitments during the term of the Agreement:

$5.0 million in net software revenue for calendar year 2012 with quarterly milestones of 15% for Quarter 1, 20% for Quarter 2, 25% for Quarter 3 and 40% for Quarter 4; and

$10.0 million in net software revenue for calendar year 2013 with quarterly milestones of 15% for Quarter 1, 20% for Quarter 2, 25% for Quarter 3 and 40% for Quarter 4.

If Siemens produces $4.0 million in net software revenue for the fourth quarter of 2013, the agreement can be extended at Siemens’ option for calendar year 2014 with a minimum purchase commitment of $4.0 million per quarter for a total commitment of $16.0 million for 2014.

Siemens has the right to brand or co-brand the portfolio of cloud-based software solutions with Siemens’ trade name or service mark. The relationship will begin with a co-branding solution and we agreed to pursue a full branding solution per a mutually agreeable timeline. inContact agreed to provide sales and marketing material, fund and manage the platform for the portfolio of software solutions in Europe, manage all operational functions of delivering the software solutions, and to support Siemens’ customer and internal support training programs. We believe this reseller agreement will provide additional opportunities, especially in EMEA, for inContact by leveraging Siemens’ sales force to sell our portfolio of hosted solutions.

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In October 2011, we entered into another reseller agreement with Verizon. The Verizon reseller agreement has no minimum purchase commitments, but we believe it will allow us to increase market share in North America by leveraging their sales and distribution force to sell our portfolio of cloud-based software solutions.

International

In 2011, we completed the build out of our European network facilities. The European network is identical to our network in the United States and features redundant data centers in Munich and Frankfurt. The new European network facilities will enable inContact to provide multi-national customers with regional access to cloud-based contact center software applications to better serve local needs. These capabilities include regionally-stored calls and contacts, broader language support for speech applications and data handling to comply with European data security regulations.

The Frankfurt and Munich network facilities further enable multi-national customers to take advantage of a true “Follow the Sun” model, where the appropriate contacts are delivered to properly skilled and available agents regardless of geography or time zone. It offers a universal queue, combined with an intelligent contact distribution platform with global reach, to ensure that the contact is always handled by the right agent, providing a consistent customer experience.

Additionally, we expanded our patent-pending voice gateway technology to Europe, the Philippines and Hong Kong. The voice gateway technology facilitates high quality interactions by routing both incoming and outgoing contact center calls through the inContact system within the continent. It eliminates static and voice delay problems frequently experienced by other providers who do not have infrastructure in the region and improves service to existing customers.

We also continued to prudently expand our operations in the Philippines, which provides us with a low cost approach to service mid-market customers.

Technology and Research and Development

Technology

We believe that our cloud-based technology platform enables us to develop functionality and deliver it to customers more efficiently than traditional premise or enterprise software vendors. We do not provide software that must be written to different operating systems, database and hardware platforms, or that is dependent upon a customer’s unique systems environment. Rather, we have optimized our inContact portfolio of cloud-based software solutions to run on a specific database and operating system using the tools and platforms best suited to serve our customers. Performance, usability and functionality of our inContact portfolio drive our technology decisions and product direction.

We build our inContact portfolio as a highly scalable, multi-tenant application written in C#, Microsoft. Net and SQL server. We use commercially available hardware and a combination of proprietary and commercially available software to provide our inContact portfolio. Our core ACD server is commercially available hardware and runs a proprietary software engine. We have other custom-built core services such as voice-stream session management, database connection pooling and user session management tuned to our specific architecture and environment, allowing us to continue to scale our inContact portfolio.

Our inContact portfolio treats all customers as logically separate tenants in central applications and databases. As a result, we are able to spread the cost of delivering our software services across our customer base. In addition, because we do not have to manage many distinct applications with their own custom business logic and database schemas, we believe we can scale our business faster than traditional software vendors, even those that have modified their products to be accessible over the Internet. This allows us to focus the majority of our resources on building new functionality to deliver to our entire customer base rather than on maintaining an infrastructure to support each of their distinct applications.

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The infrastructure of our inContact portfolio and VoIP technologies has both system redundancy within the applications as well as geographical redundancy with data centers in Los Angeles, California, Dallas, Texas and Munich and Frankfurt, Germany. Full backups of all our core customer data are performed weekly and differential backups are performed nightly. Transaction log backups take place every 30 minutes. We use secure sockets layer (“SSL”) encryption to protect sensitive areas of our customer information and service-oriented websites. Remote access to our systems is made possible through a 168-bit encrypted Virtual Private Network. System passwords are changed on a periodic basis and stored in a secure folder with restricted access. All local computers are scanned for viruses on a real-time basis and report to a central server. We believe our backup, maintenance and security systems are adequate for preserving the delivery of service to our customers and operation of our business without significant outages or interruptions. However, an unforeseen or catastrophic event is always possible and could have a significant impact on our business.

Research and Development

We incurred research and development expenses of $6.4 million in 2011, $5.3 million in 2010 and $4.8 million in 2009 primarily related to the development of our inContact portfolio of cloud-based software solutions. We continue to invest a significant portion of our revenue in research and development to leverage our strategic position as a technology provider. Our research and development efforts are focused on improving the features, functionality and security of our existing service offerings as well as developing new proprietary services. In addition, from time to time, we supplement our internal research and development activities with outside development resources and acquired technology. Because of our common, multi-tenant application architecture, we are able to provide all of our customers with a service based upon a single version of our applications. We are able to upgrade all of our customers at the same time with each release. As a result, we do not have to maintain multiple versions of our applications and are able to maintain relatively low research and development expenses as compared to enterprise or premises software vendors. Another contributor to our advantage is the diverse technical and communications expertise in our research and development group as it is composed of numerous professionals with backgrounds in software, hardware and telecommunications. This group is structured as product-centric teams each of which follows formal development processes for enhancements, new feature developments, release management and quality assurance.

Intellectual Property

We rely on a combination of trademark, copyright, trade secret and patent laws in the United States and other jurisdictions as well as confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We also enter into confidentiality and proprietary rights agreements with our employees, consultants and other third parties and control access to software, documentation and other proprietary information.

We have no issued patents and the majority of our patent applications concern our inContact portfolio platform infrastructure. The following are our registered trademarks in the U.S. and elsewhere:

• inContact^®

• inTouch^®

• ECHO^®

• inCloud

• Satisfaction as a Service

We have received in the past, and may receive in the future, communications from third parties claiming that we have infringed on the intellectual property rights of others. The cost to defend or settle these claims can be significant. Any intellectual property claims, regardless of merit, may also require us to seek licenses to that

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technology. At present, we are not aware of any claims being pursued against us. In addition, we license third-party technologies that are incorporated into some elements of our services. Licenses from third-party technologies may not continue to be available to us at a reasonable cost or on reasonable commercial terms, or at all. Additionally, the steps we have taken to protect our intellectual property rights may not be adequate. Third parties may infringe or misappropriate our proprietary rights. Competitors may also independently develop technologies that are substantially equivalent or superior to the technologies we employ in our services. If we fail to protect our proprietary rights adequately, our competitors could offer similar services, potentially significantly harming our competitive position and decreasing our revenues.

Competition

The majority of market share in the contact center infrastructure market and in the workforce optimization software market is still held by traditional premise-based equipment providers. The premise-based method of selling solutions, via onsite equipment and software, is now being challenged by cloud-based providers. However, market share among the group of cloud-based providers is fragmented and remains small.

We believe that today there is no clear cloud-based contact center market leader. However, according to the DMG Hosted Contact Center Infrastructure Market Report, inContact is the market share leader, based on agent seats¹. Because of our diligent efforts over the past several years and our experience with more than 1,000 implementations, we believe we are in a position to capitalize on the market fragmentation and become the clear leader in the cloud-based market for contact center software.

Government Regulation

General

The Telecommunications Act of 1996 vests the Federal Communications Commission (“FCC”) with jurisdiction over interstate telecommunications services, while preserving state and local jurisdiction over many aspects of these services. As a result, telecommunications services are regulated at both the federal and state levels in the United States. In addition, a specific form of Internet-based telephony that interconnects with the Public Switched Telephone Network (“PSTN”) called “interconnected Voice over Internet Protocol” (“I-VoIP”) service is also subject to certain analogous regulations at the federal and, increasingly, state level. More recently, pursuant to statutory requirement, the FCC promulgated regulations extending narrow duties to non-interconnected VoIP service. We believe we are in compliance with the laws and regulations applicable to our business.

The FCC regulates providers of interstate and international long distance services, interstate access, I-VoIP and non-I-VoIP services. Most states exercise jurisdiction over intrastate long distance services and local exchange services. A small, but growing number of states also exercise jurisdiction over I-VoIP services for narrow purposes, such as ensuring collection of state universal service contributions. Significant changes to applicable laws or regulations imposed by the FCC or state regulatory agencies could negatively impact our business, operating results and financial condition.

The following summarizes important, but not all, present and proposed federal and state regulations that could impact our operations. Federal and state regulations are subject to judicial proceedings and to legislative and administrative proposals that could materially affect how we and others in this industry operate. The specific impact, however, cannot be predicted at this time.

Federal Regulation of Internet Telephony and other IP-Enabled Voice Services

VoIP telephony and other forms of IP-enabled communications are increasingly becoming subject to regulation. As a result, certain cost benefits of IP-based services, which we currently take advantage of, may erode.

¹  2011/2012 Hosted Contact Center Infrastructure Market Report, DMG Consulting LLC, December 2011.

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The FCC has not classified all IP-enabled or VoIP communications services as unregulated information services or as regulated telecommunications services. Instead, the FCC has imposed certain legacy telecommunications regulations on I-VoIP services in a piecemeal, ad hoc manner. These regulations include requirements concerning emergency communications (“E911”), telecommunications relay services for hearing-impaired individuals (“TRS”), Customer Propriety Network Information (“CPNI”), and the facilitation of wiretaps and government surveillance under the Communications Assistance for Law Enforcement Act (“CALEA”). In addition, the FCC ruled that I-VoIP providers must contribute to the Federal Universal Service Fund (“USF”) regime.

In October 2010, legislation was signed into law that for the first time subjects providers of non-interconnected VoIP services to government regulation. Specifically, the Twenty-First Century Communications and Video Accessibility Act of 2010 (“CVAA”) required the FCC to adopt various measures to ensure that people with disabilities have access to emerging communications technologies, and to promulgate rules requiring non-interconnected VoIP providers to contribute to the TRS Fund. To implement the CVAA, the FCC adopted rules requiring non-interconnected VoIP service providers to contribute to the TRS Fund on the basis of their interstate end-user revenues. The contribution obligation is limited, and the rules do not affirmatively impose any other regulatory responsibilities on non-interconnected VoIP providers. Because the new rules are narrow and focused, we expect that they will have a minimal cost impact on the Company. But, the CVAA also signals a trend toward expansion of FCC regulations to a broader variety of enhanced communications services.

In addition, the regulatory treatment of IP-based conferencing services is currently under review. In a 2011 decision, the FCC’s Wireline Competition Bureau (“WCB”) denied MeetingOne.com’s request for review of a decision of USF administrator, the Universal Service Administrative Company (“USAC”) concluding that MeetingOne.com’s IP conferencing service is regulated telecommunications; MeetingOne appealed the decision. While the outcome of this appeal remains to be seen, it could have an impact on the regulatory treatment of IP conferencing services, and how our business treats these services.

Based on the nature of our IP-enabled services, we do not believe the FCC decisions to date will have a significant impact on our business, operating results, financial condition or future prospects. Nonetheless, we acknowledge that the regulatory classification of many IP-enabled services remains uncertain, and changes to the regulatory treatment of IP-based communications services could significantly affect our business.

Federal Regulation of Broadband Internet Access Services

In the past, the FCC has maintained a “hands-off” policy with regard to the regulation of Internet access services and adopted a series of decisions that classified broadband Internet access services as unregulated information services. Recently, however, the FCC has relied on its ancillary jurisdiction to regulate broadband Internet access services. In 2010, the FCC adopted the “Open Internet” or “Network Neutrality” rules, which require providers of fixed broadband Internet access services to disclose information regarding their network management practices, performance, and commercial terms. Further, the rules prohibit fixed broadband providers from unreasonably discriminating in their transmission of lawful network traffic and from blocking lawful content, applications, services or non-harmful devices unless such blocking is a part of a provider’s reasonable network management. The Open Internet rules are currently under appeal. We rely on third parties to provide or supply Internet access services and do not operate a broadband network. At this time, we do not believe the Open Internet rules will impact us.

Intercarrier Compensation and Universal Service Reform

As a long distance provider, we remit access fees directly to local exchange carriers or indirectly to our underlying long distance carriers for the origination and termination of our long distance telecommunications traffic pursuant to the FCC’s “intercarrier compensation” rules. In 2011, the FCC adopted reforms to the existing intercarrier compensation regime. The new rules subject VoIP traffic to the FCC’s intercarrier compensation

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rules. The FCC set the default charge for toll traffic exchanged between a VoIP provider and a local carrier at the interstate access rate. The charge for local traffic exchanged will be the reciprocal compensation rate. We are in the process of undertaking an internal review and implementing measures to comply with the new intercarrier compensation rules. We cannot predict exactly how the new regime will impact our business but expect that it will affect the cost of services provided to our customers, particularly long distance services.

In addition to undertaking intercarrier compensation reform, the FCC is considering comprehensive reforms to its USF regime. The FCC is seeking comment on proposals to expand the scope of USF contributors. For example, the FCC is considering requiring broadband Internet access providers to contribute to the USF. While USF contribution reform is anticipated, no timetable for implementation has been set.

As a regulated service provider, we contribute to the USF. We believe that we are currently in compliance with the FCC’s USF rules. We expect that reform may include an expansion of the range of contributors to include a broader scope of enhanced communications services. While any material changes to the USF contribution system could impact the company’s business, because the Company passes through USF fees on an equitable and non-discriminatory basis to end users, either as a component part of the rate charged for telecommunications services or as a separately invoiced line item, we do not anticipate any material financial impact.

In addition, some states are expanding the base of service providers required to contribute to state universal service funds. Such expansions could impact our business, but we do not expect a material effect on the Company.

Data Protection Regulations

Each company that collects, processes, shares, stores, or disposes of personal data must protect this data with the appropriate security measures. Numerous federal, state and international laws, regulations, and industry standards create requirements and restrictions that affect our corporate or commercial transactions, marketing and business development activities, and interaction with our workforce. We have procedures in place to ensure that we properly comply with all data protection and privacy regulations. To the extent that new regulations are adopted that significantly impact our business, our costs of providing service could increase.

Other General Regulations

The regulatory scheme for competitive telecommunications market will continue to evolve and can be expected to change the competitive environment for communications in general. It is not possible to predict how such evolution and changes will affect, if at all, our business or the industry in general.

Employees

As of December 31, 2011, we employed a total of 412 employees. Our employees are not represented by a labor union. We have not experienced any work stoppages and believe relations with our employees are good.

Executive Officers of inContact

The executive officers of inContact are elected each year at the organizational meeting of the Board of Directors, which follows the annual meeting of the shareholders, and at other Board of Directors’ meetings, as appropriate. We have employed each of the executive officers in the position or positions indicated in the list and pertinent notes below.

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At December 31, 2011, the following were executive officers of inContact:

Name	Age		Position	Since
Paul Jarman		42	Director and Chief Executive Officer		1997
Gregory S. Ayers		50	Executive Vice President and Chief Financial Officer		2009
Scott Welch		47	Executive Vice President and Chief Operating Officer		2004
Frank Maylett		49	Executive Vice President of Sales		2008
Mariann McDonagh		50	Executive Vice President and Chief Marketing Officer		2010
Sunny Gosain		40	Executive Vice President and Chief Product Officer		2011
Bassam Salem		39	Executive Vice President and Chief Business Officer		2011

Paul Jarman has served as President of inContact since December 2002 and as Chief Executive Officer of inContact since January 2005. Prior to December 2002, he served as an Executive Vice President. Mr. Jarman is one of the original founders of inContact.

Gregory S. Ayers was elected and has served as an Executive Vice President and Chief Financial Officer of inContact since March 2009. Mr. Ayers was a self-employed financial consultant for a year prior to March 2009. Mr. Ayers served as Chief Financial Officer for two years at ZARS Pharma.

Scott Welch was elected Executive Vice President and Chief Operating Officer of inContact in September 2004 and currently serves as Chief Operating Officer and Chief Security Officer. Mr. Welch began his association with inContact in September 2003 as Chief Information Officer. Before joining inContact, Mr. Welch served as Vice President of Information Technology at Access Long Distance.

Frank Maylett was elected Executive Vice President of Sales of inContact in May 2008. Prior to joining inContact, Mr. Maylett spent two years at Brocade Communications Systems, Inc. as the global sales manager.

Mariann McDonagh was elected as Executive Vice President and Chief Marketing Officer of inContact in April 2010. Prior to joining inContact, Ms. McDonagh was Senior Vice President of Corporate Marketing and Investor Relations for Xtralis from June 2008 to April 2010, where she led growth strategy for this global leader in early threat detection. Before Xtralis, she served as Senior Vice President of Corporate Marketing from March 2002 to May 2008 for Verint Systems Inc.

Sunny Gosain was elected as Executive Vice President and Chief Product Officer of inContact in August 2011. Prior to joining inContact, Mr. Gosain was the chief executive responsible for SAAS ERP product line operations for Consana, Inc. from June 2010 to June 2012. Prior to Consona, he was Chief Technology Officer and Chief Information Officer for Compiere, Inc. from March 2007 to June 2010.

Bassam Salem was elected Executive Vice President and Chief Business Officer of inContact in November 2011 and began his association with inContact in March 2010 as Senior Vice President of Professional Services. Prior to joining inContact, Mr. Salem was the Senior Director of Worldwide Client Services at the Omniture business unit of Adobe from March 2005 to March 2010.

Business Segments

We report financial information for our operating segments based on the way that management organizes the segments within the business for making operating decisions and assessing performance. We operate under two business segments: Software and Telecom. The Software segment includes all monthly recurring revenue related to the delivery of our inContact portfolio of software applications plus the associated professional services and setup fees related to the software services product features. The Telecom segment includes all voice and data long distance services provided to customers. Software revenue was 45% of total revenue in 2011, 41% in 2010, and 35% in 2009, and telecommunications revenue was 55% of total revenue in 2011, 59% in 2010, and 65% in 2009. Please see the financial information on our segments presented under Note 15 of the Notes to Consolidated Financial Statements.

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Management evaluates segment performance based on operating data (revenue, costs of revenue and other operating expenses). Management does not evaluate and manage segment performance based on assets.

For segment reporting, we classify operating expenses as either “direct” or “indirect.” Direct expense refers to costs attributable solely to either selling and marketing efforts or research and development efforts. Indirect expense refers to costs that management considers to be overhead in running the business. In evaluating segment performance, management evaluates expenditures for both selling and marketing and research and development efforts at the segment level without the allocation of overhead expenses, such as rent, utilities and depreciation on property and equipment.

ITEM 1A. RISK FACTORS

The following is a discussion of risks we believe to be significant with respect to our business, operations, financial condition, and other matters pertaining to our business and an investment in our common stock. Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below, in addition to the other cautionary statements and risks described elsewhere as well as the other information contained in this report and in our other filings with the SEC, including our reports on Forms 10-Q and 8-K. The risks and uncertainties described below are not the only ones we face. If any of these known or unknown risks or uncertainties actually occurs with material adverse effects, our business, financial condition and results of operations could be seriously harmed. In that event, the market price for our common stock could decline and you may lose all or part of your investment.

Our results of operations have shown significant losses over the past several years, which could impact the resources we have to pursue our business and adversely affect an investment in inContact.

Our net loss was $9.4 million, $1.1 million and $2.9 million for the years ended December 31, 2011, 2010 and 2009, respectively. Continued losses will diminish the working capital we have available to pursue development of our business. Sales within the Software segment continue to improve, but we have not achieved positive annual operating results and whether inContact will ultimately achieve positive results and cash flow should be considered a substantial risk with respect to our business.

The stability and growth of our revenues depends on our ability to attract and retain on-going customers.

The revenue model for companies selling software services under the cloud-based model, such as inContact, is to attract and retain customers who purchase services under contracts providing for monthly or periodic charges. Our ability to increase and maintain revenue depends substantially on the efficacy of our contact center and call routing solutions and maintaining customer satisfaction. Our failure to deliver services our customers need and want, and to keep our customers satisfied, would adversely affect our results or operations.

Incremental revenue from reseller partners and international sales may not exceed expenditures, which could adversely impact our results of operations.

In 2011, we expended a significant amount of money to develop our infrastructure and international delivery systems to be able to serve new customers we believe will come from the reseller sales channel established in 2011 and to support reseller partners. We expect to make additional expenditures for this purpose in 2012. Future revenue from our reseller arrangements may not be sufficient to cover our investment in infrastructure and facilities or our continuing cost of operating the expanded service capacity, which would have a significant adverse effect on our results of operations.

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Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our solutions.

Increasing our customer base and achieving broader market acceptance of our solutions will depend to a significant extent on our ability to expand our sales and marketing operations. We plan to continue to expand our direct sales force and engage additional third-party channel partners. This expansion will require us to invest significant financial and other resources. Our business will be seriously harmed if our efforts do not generate a corresponding increase in revenue. We may not achieve anticipated revenue growth from expanding our direct sales force if we are unable to hire and develop talented direct sales personnel, if our new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time, or if we are unable to retain our existing direct sales personnel. We also may not achieve anticipated revenue growth from our third-party channel partners if we are unable to attract and retain additional motivated channel partners, if any existing or future channel partners fail to successfully market, resell, implement or support our solutions for their users, or if they represent multiple providers and devote greater resources to market, resell, implement and support competing products and services.

We have a lengthy product sales cycle, which has contributed and may continue to contribute to the variability of quarterly operating results

We have experienced a lengthy initial sales and eventual “turn-up” cycle for our inContact portfolio in our Software segment, averaging approximately five to eight months. The lengthy sales cycle is one of the factors that has caused and may continue to cause our revenues and operating results to vary significantly from quarter to quarter. As our inContact portfolio is relatively new in the marketplace, we must provide a significant amount of education to prospective customers about the use and benefits of our products and services, which can cause potential customers to take many months to make these decisions. The length of the sales cycle can also be affected by other factors over which we have little or no control, including customer budgetary constraints, timing of customer budget cycles, and concerns by the customer about the introduction of new products by us or by our competitors. As a result, sales cycles for customer orders vary substantially from customer to customer. Excessive delay in sales could be significant and adversely affect our business, financial condition or results of operations.

Our quarterly results of operations may fluctuate in the future.

Our quarterly revenue and results of operations may fluctuate as a result of a variety of factors, many of which are outside of our control. If our quarterly revenue or results of operations fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Fluctuations in our results of operations may be due to a number of factors, including, but not limited to, those listed below and identified throughout this “Risk Factors” section:

• Our ability to retain and increase sales to existing customers, attract new customers and satisfy our customers’ requirements;

• Changes in the mix of revenue between our segments because the overall operating margin is significantly higher for the Software segment than for the Telecom segment;

• The timing and success of new product introductions and enhancements or product initiation by us or our competitors;

• Changes in our pricing policies or those of our competitors;

• The amount and timing of expenditures related to expanding our operations;

• The purchasing and budgeting cycles of our customers; and

• General economic, industry and market conditions.

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Because the sales cycle for the evaluation and implementation of our solutions is variable based on the specific customer needs, we may experience a delay between increasing operating expenses and the generation of corresponding revenue, if any. As a result, if revenue for a particular quarter is below our budgeted expectations, we may not be able to proportionally reduce operating expenses for that quarter, causing a disproportionate effect on our expected results of operations for that quarter.

Due to the foregoing factors, and the other risks discussed in this report, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance.

Our growth and results of operations are unknown, which means an investment in us has greater risk.

It is not possible to predict with any certainty the growth of our business over the next year. Our ability to continue our growth and improve our results of operations will depend on a number of factors, including our ability to promote and gain market acceptance of cloud-based software solutions, to maintain and expand our independent agent network, to fund maintenance and expansion of infrastructure to service our customers, to meet existing and emerging competition, and to maintain sufficient operating margins despite pricing pressures. Furthermore, the growth and development of our business may be harmed if we are unable to adapt and expand our systems, procedures and controls to support and manage our growth. All of these factors indicate there could be fluctuations in our results of operations and volatility in our stock price that could expose an investor to greater risk.

Our operating results may be negatively impacted by the pricing decisions of our competitors and our providers. We may not be able to mitigate this impact with our other services.

Our costs of revenues in our Telecom segment from period to period are affected by the pricing for long distance service we can obtain from the wholesale providers of these services. We must price our services at levels that are competitive, so costs of revenues affect the rates we offer to customers and our resulting revenues. This industry has a history of downward pressure on long distance service rates as a result of competition among providers. To acquire and retain customers, we offer these services at prices that are competitive in conjunction with the other benefits we provide. Consequently, falling prices will likely result in lowering our rates to users, which will reduce revenues. On the other hand, higher prices charged by our providers will increase our costs of revenues and cut into operating results, unless we raise prices to our customers, which may be difficult for us to do if our competitors are not subject to the same upward pricing pressures or choose not to increase prices notwithstanding such pressure. Our strategy is to mitigate the impact of pricing pressure in the Telecom segment by increasing Software segment revenue, which is not subject to these rate changes and has much higher margins. Sales of cloud-based software services still make up a smaller portion of our revenues. We may not be successful in making these cloud-based services a majority of our revenue mix and improve our overall operating margins.

Disruptions in the operation of our technology could adversely affect our operations.

We are dependent on our computer databases, billing and accounting computer programs, network and computer hardware that houses these systems to effectively operate our business and market our services. Our customers and providers may become dissatisfied by any system failures that interrupt our ability to provide our service to them. Substantial or repeated system failures would significantly reduce the attractiveness of our services. Significant disruption in the operation of these systems would adversely affect our business and results of operations.

Our enhanced services are dependent on leased telecommunications lines, and a significant disruption or change in these services could adversely affect our business.

Our inContact portfolio of cloud-based software services are provided to customers through a dedicated network of equipment we own connected through leased telecommunications lines with capacity dedicated to us that is

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based on Internet protocol. Communication initiated by the user is converted to data packs that are transmitted through the dedicated network and managed by our software that resides on our equipment attached to the network. We also move a portion of our voice long distance service over this dedicated network because it lowers our cost of providing the service from using traditional transmission methods.

We lease telecommunication lines and space at co-location facilities for our equipment from third-party suppliers, which represents the backbone of our dedicated network. If any of these suppliers is unable or unwilling to provide or expand their current levels of service to us, the services we offer to customers would be adversely affected. We may not be able to obtain substitute services from other providers at reasonable or comparable prices or in a timely fashion. Any resulting disruptions in the services we offer that are provided over our dedicated network would likely result in customer dissatisfaction and adversely affect our operations. Furthermore, pricing increases by any of the suppliers we rely on for the dedicated network could adversely affect our results of operations if we are unable to pass pricing increases through to our customers.

If there are interruptions or delays in our services through third-party error, our own error or the occurrence of unforeseeable events, delivery of our solutions could become impaired, which could harm our relationships with customers and subject us to liability.

We provide our services through computer hardware that we own and that is currently located in third-party web hosting co-location facilities maintained and operated in California, Texas, Utah, Germany, Hong Kong and the Philippines. Our hosting providers do not guarantee that our customers’ access to hosted solutions will be uninterrupted, error-free or secure. Our operations depend on our providers’ ability to protect their and our systems in their facilities against damage or interruption from natural disasters, power or telecommunications failures, criminal acts and similar events. Our back-up computer hardware and systems have not been tested under actual disaster conditions and may not have sufficient capacity to recover all data and services in the event of an outage occurring simultaneously at all facilities. In the event that our hosting facility arrangements were terminated, or there was a lapse of service or accidental or willful damage to such facilities, we could experience lengthy interruptions in our service as well as delays and/or additional expense in arranging new facilities and services. Any or all of these events could cause our customers to lose access to the services they are purchasing from us. In addition, the failure by our third-party hosting facilities to meet our capacity requirements could result in interruptions in our service or impede our ability to scale our operations.

Design and mechanical errors, spikes in usage volume and failure to follow system protocols and procedures could cause our systems to fail, resulting in interruptions in our customers’ service to their customers. Any interruptions or delays in our services, whether as a result of third-party error, our own error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with customers and our reputation. This in turn could reduce our revenue, subject us to liability, and cause us to issue credits or pay penalties or cause customers to fail to continue service, any of which could adversely affect our business, financial condition and results of operations. In the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur.

If the security of our customers’ confidential information contained in our systems or stored by use of our software is breached or otherwise subjected to unauthorized access, our service or our software may be perceived as not being secure and customers may curtail or stop using our service and our solutions.

Our systems and software store and transmit proprietary information and critical data belonging to our customers and their users. Any accidental or willful security breaches or other unauthorized access could expose us to a risk of information loss, litigation and other possible liabilities. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our software are exposed and exploited, and, as a result, a third party obtains unauthorized access to any of our clients’ data, our relationships with customers and our reputation will be damaged, our business may suffer and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and

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generally are not recognized until launched against a target, we and our third-party hosting co-location facilities may be unable to anticipate these techniques or to implement adequate preventative measures.

If outside unfriendly parties succeed in penetrating our network security or otherwise misappropriate our customer information, we could be subject to liability. Our liability could include claims for unauthorized purchases with credit card or banking information, impersonation or other similar fraud claims, as well as for other misuses of personal information, including for unauthorized marketing purposes. These claims could result in litigation and adverse publicity, which could have an adverse effect on our reputation, business and results of operations. As we continue to gain higher profile customers, the risk that unfriendly parties will attempt and succeed in penetrating our network security also increases.

We may not be able to secure additional financing on favorable terms, or at all, to meet our long-term capital needs.

We may determine that additional capital will be necessary in responding to business challenges, including the need to develop new solutions or enhance our existing solutions, enhance our operating infrastructure, fund expansion, respond to competitive pressures, acquire complementary businesses, products and technologies, or for other reasons. We may not be able to secure additional debt or equity financing on favorable terms, or at all, at the time when we need such funding to pursue our business objectives. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution in their percentage ownership of the Company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, if we decide to raise funds through debt or convertible debt financings, we may be unable to meet our interest or principal payments.

If we are unable to protect our intellectual property rights, our competitive position could be harmed or we could be required to incur significant expenses to enforce our rights.

Our success depends to a significant degree upon the protection of our software and other proprietary technology rights. We rely on trade secret, copyright, patent, and trademark laws and confidentiality agreements with employees and third parties, all of which offer only limited protection. The steps we have taken to protect our intellectual property may not prevent misappropriation of our proprietary rights or the reverse engineering of our solutions. We may not be able to obtain any further trademarks, and our pending applications may not result in the issuance of patents or trademarks. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in other countries are uncertain and may afford little or no effective protection of our proprietary technology. Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to international markets or require costly efforts to protect our technology. Policing the unauthorized use of our products, trademarks and other proprietary rights is expensive, difficult and, in some cases, impossible. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of management resources, either of which could harm our business. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property.

Our development of enhanced services could subject us to claims of patent infringement that would adversely affect our results of operations.

We offer enhanced telecommunications and related software services through our dedicated network. Certain enhanced services similar to some of the services we offer have been the subject of claims by certain patent holders that providing the enhanced services violates existing patent rights covering the manner and method by

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which the services are performed. We may not be aware of claims that have arisen alleging enhanced services we offer infringe on intellectual property rights of others. Infringement of intellectual property rights would have an adverse impact on the net revenue generated from sales of the enhanced services.

If our solutions fail to perform properly or if they contain technical defects, our reputation could be harmed, our market share may decline and we could be subject to product liability claims.

Our software products and services may contain undetected errors or defects that may result in product failures, slow response times, or otherwise cause our products to fail to perform in accordance with customer expectations. Because our customers use our products and services for important aspects of their business, any errors or defects in, or other performance problems with, our products and services could hurt our reputation and may damage our customers’ businesses. If that occurs, we could lose future sales, or our existing customers could elect to not renew or to delay or withhold payment to us, which could result in an increase in our provision for uncollectible accounts and an increase in collection cycles for accounts receivable. Clients also may make warranty claims against us, which could result in the expense and risk of litigation. Product performance problems could result in loss of market share, failure to achieve market acceptance and the diversion of development resources. If one or more of our products fails to perform or contains a technical defect, a customer may assert a claim against us for substantial damages, whether or not we are responsible for the product failure or defect. We do not currently maintain any warranty reserves. inContact has had no significant warranty costs in our historical experience.

Product liability claims could require us to spend significant time and money in litigation or to pay significant settlements or damages. Although we maintain general liability insurance, including coverage for errors and omissions, this coverage may not be sufficient to cover liabilities resulting from such product liability claims. Also, our insurer may disclaim coverage. Our liability insurance also may not continue to be available to us on reasonable terms, in sufficient amounts, or at all. Any product liability claims successfully brought against us would cause our business to suffer.

We provide service level commitments to our customers, which could cause us to issue credits for future services if the stated service levels are not met for a given period and could significantly harm our revenue.

Our customer agreements provide service level commitments. If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our service, we may be contractually obligated to provide these customers with credits for future services. Our revenue could be significantly impacted if we suffer unscheduled downtime that exceeds the allowed downtimes under our agreements with our customers. In light of our historical experience with meeting our service level commitments, we do not currently have any reserves on our balance sheet for these commitments. The failure to meet this level of service availability may require us to credit qualifying customers for the value of an entire month of their subscription fees, not just the value of the subscription fee for the period of the downtime. As a result, a failure to deliver services for a relatively short duration could cause us to issue these credits to all qualifying customers. Any extended service outages could harm our reputation, revenue and operating results.

We are expanding the sales of our services to customers located outside of the United States so our business will be susceptible to risks associated with international operations.

In 2010, we opened up offices outside of the United States and currently have operations, sales personnel or independent consultants in several foreign countries. We have limited experience operating in foreign jurisdictions. Our inexperience in operating our business outside of the United States increases the risk that our services and any future international expansion efforts will not be successful, which could result in us not meeting our revenue goals. Operating in international markets also requires management attention and financial resources. We cannot be certain that the investment and additional resources required in establishing, acquiring or integrating operations in other countries will produce desired levels of revenues or profitability. In addition,

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conducting international operations subjects us to new risks that we have not generally faced in the United States. These may include:

• Fluctuations in currency exchange rates;

• Unexpected changes in foreign regulatory requirements;

• Longer accounts receivable payment cycles and difficulties in collecting accounts receivable;

• Difficulties in managing and staffing international operations;

• Potentially adverse tax consequences, including the complexities of foreign value added tax systems and restrictions on the repatriation of earnings;

• General economic conditions in international markets, including the ongoing global economic downturn and continued uncertainty in the global financial markets, which may cause a decline in customer or consumer activity;

• Localization of our services, including translation into foreign languages and associated expenses;

• Dependence on certain third parties to increase customer sales;

• The burdens of complying with a wide variety of foreign laws and different legal standards, including laws and regulations related to privacy;

• Increased financial accounting and reporting burdens and complexities;

• Increased risk for international telecom fraud;

• Political instability abroad, terrorist attacks and security concerns in general; and

• Reduced or varied protection for intellectual property rights in some countries.

The occurrence of any one of these risks could negatively affect our international business and, consequently, our results of operations generally.

Regulation of IP telephony services is unclear, so the imposition of significant regulation in the future could adversely affect our operations.

We deliver our inContact portfolio of cloud-based software services and move other long distance service through our VoIP Network. We view government regulation as one of the conditions of the environment within which we conduct business that does impact, and will continue to impact, our business as we endeavor to comply with existing regulation and what may come in the future. At both the federal and state level there are initiatives, proposals, proceedings and investigations pending with respect to telecommunications and the Internet that we describe in some detail above in the “Government Regulation” section of ITEM 1. BUSINESS. This section describes areas where the regulatory landscape could change and significantly impact our business, and you should review that section carefully. Our failure to anticipate, plan for, and comply with new regulation as it comes along on a cost effective basis is a continuing risk of our business that could have a significant adverse effect on our business activity and results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

We have not received any comments from the Securities and Exchange Commission that remain unresolved.

ITEM 2. PROPERTIES

We lease our principal office space in Salt Lake City, Utah, which is our corporate headquarters, including our principal administrative, marketing, technical support and research and development facilities. The space consists of approximately 50,000 square feet and the lease for this office space expires in June 2015, but we have an

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option to renew the lease for an additional five years at the end of the lease period. We also lease smaller office spaces in California, England and the Philippines. We believe that our current facilities are suitable and adequate to meet our current needs, and that suitable additional or substitute space will be available as needed to accommodate expansion of our operations.

The hosting of our equipment and software at co-located third-party facilities is significant to our business and we have entered into agreements with third-party facilities in California, Texas, England, Germany, Hong Kong and the Philippines under multiple agreements that either continue month-to-month or expire between February 2014 and September 2016. We believe that our contracted space for our hardware and software at these facilities is both suitable and adequate for our current development plans and that suitable additional facilities will be available as needed.

ITEM 3. LEGAL PROCEEDINGS

In May 2009, inContact was served in a lawsuit titled California College, Inc., et al., v. UCN, Inc., et al. The lawsuit was filed in the Third Judicial District Court for Salt Lake County, Utah, Case No. 090907053. In the lawsuit California College and its affiliates allege that (1) inContact made intentional and/or negligent misrepresentations in connection with the sale of inContact services to California College and California College’s purchase of an outbound call software program from Insidesales.com, Inc, another defendant in the lawsuit, (2) that inContact breached its service contract with California College and the contract between California College and Insidesales.com by failing to deliver contracted services and product and failing to abide by implied covenants of good faith and fair dealing, and (3) the conduct of inContact interfered with prospective economic business relations of California College with respect to enrolling students. On each of the claims for misrepresentation, California College is seeking damages in an amount proven at trial, which amount is not less than $20 million. On each of the breach of contract claims pertaining to the inContact service agreement, California College is seeking damages in an amount proven at trial, which amount is not less than $1 million. On the interference in business relations claim, California College is seeking damages in an amount proven at trial, which amount is not less than $20 million. Pursuant to a motion filed by Insidesales.com, California College filed an amended complaint that was answered by Insidesales.com and us in February 2010. Furthermore, Insidesales.com and inContact filed cross-claims against one another, which they subsequently agreed to dismiss with prejudice. In October 2011, California College and Insidesales.com agreed to a settlement of the claims asserted against Insidesales.com, and Insidesales.com was dismissed from the lawsuit. The remaining parties are now pursuing discovery. inContact has denied all of the substantive allegations of the complaint and cross-claim and intends to defend the claims vigorously. Management believes the claims against inContact are without merit and no liability has been recorded.

We are the subject of certain legal matters, which we consider incidental to our business activities. It is the opinion of management that the ultimate disposition of these other matters will not have a material impact on our financial position, liquidity or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

This item does not apply to our business.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Price, Stockholder Matters, and Unregistered Sales

Our common stock trades on The NASDAQ Capital Market under the symbol “SAAS.” The following table presents the high and low closing sales prices per share of our common stock as reported on The NASDAQ Capital Market for the four calendar quarters of 2011 and 2010:

Calendar Quarter Ended:	High		Low
March 31, 2011	$	3.47	$	2.98
June 30, 2011	$	4.86	$	3.25
September 30, 2011	$	5.26	$	3.38
December 31, 2011	$	4.85	$	3.01

Calendar Quarter Ended:	High		Low
March 31, 2010	$	3.51	$	2.65
June 30, 2010	$	3.23	$	2.42
September 30, 2010	$	2.70	$	2.12
December 31, 2010	$	3.30	$	2.24

As of February 21, 2012, we had approximately 2, 961 holders of record of our common stock. Since inception, no dividends have been paid on the common stock. We intend to retain any earnings for use in our business activities, so it is not expected that any dividends on the common stock will be declared and paid in the foreseeable future.

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Stock Performance Graph

Notwithstanding any statement to the contrary in any of our filings with the SEC, the following information shall not be deemed “filed” with the SEC or “soliciting material” under the Securities Exchange Act of 1934 and shall not be incorporated by reference into any such filings irrespective of any general incorporation language contained in such filing.

The line graph below compares the cumulative stockholder return on our common stock with the cumulative total return of the Russell 2000 Index and the NASDAQ Computer and Data Processing Index for the five fiscal years ended December 31, 2011. The stock price information shown on the graph below is not necessarily indicative of future price performance.

Equity Compensation Plan Information

The following table provides information on our compensation plans under which equity securities are authorized for issuance.

Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants, and rights			(b) Weighted- average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		2,806,141		$	2.83		502,442
Equity compensation plans not approved by security holders		2,415,281	(1)	$	3.06		N/A
Total		5,221,422		$	2.94		502,442

(1) This figure includes options issued to officers and employees under individual compensation arrangements. The figure also includes options issued to directors for board and committee service that were approved by the Board of Directors.

Repurchases of Common Stock

There were no repurchases of equity securities by us during the year ended December 31, 2011.

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ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth selected financial data for each of the years in the five-year period ended December 31, 2011. The consolidated statements of operations data and balance sheet data are derived from the audited Consolidated Financial Statements of inContact. The following selected financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements, including the Notes thereto, appearing elsewhere in this report.

Consolidated Statement of Operations Data (in thousands-except per share data):

	Year Ended December 31,
	2011			2010			2009			2008			2007
Net revenue	$	88,985		$	82,155		$	84,183		$	79,625		$	79,482
Net loss	$	(9,428	)	$	(1,056	)	$	(2,922	)	$	(10,304	)	$	(7,537	)
Net loss applicable to common stockholders	$	(9,428	)	$	(1,056	)	$	(2,922	)	$	(10,304	)	$	(7,537	)
Net loss per share:
Basic and diluted	$	(0.23	)	$	(0.03	)	$	(0.09	)	$	(0.33	)	$	(0.26	)
Cash dividends per common share	$	—		$	—		$	—		$	—		$	—

Consolidated Balance Sheet Data (in thousands):

	As of December 31,
	2011		2010		2009		2008		2007
Total assets	$	58,414	$	40,585	$	38,929	$	28,747	$	31,368
Long-term obligations	$	7,071	$	8,973	$	9,475	$	6,583	$	918

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided as a supplement to the accompanying consolidated financial statements and notes to help provide an understanding of inContact’s financial condition, cash flows and results of operations. MD& A is organized as follows:

Overview. This section provides a general description of our business, as well as recent developments we believe are important in understanding the results of operations and financial condition or in understanding anticipated future trends.

Consolidated Results of Operations. This section provides an analysis of our consolidated results of operations for the three years ended December 31, 2011.

Segment Results of Operations. This section provides an analysis of our segment results of operations for the three years ended December 31, 2011.

Liquidity and Capital Resources. This section provides an analysis of our cash flows for the three years ended December 31, 2011, as well as a discussion of our outstanding debt and commitments that existed as of December 31, 2011. Included in the analysis of outstanding debt is a discussion of the amount of financial capacity available to fund our future commitments, as well as a discussion of other financing arrangements.

Contractual Obligations and Off-Balance Sheet Arrangements. This section provides a tabular presentation of our outstanding contractual obligations that existed as of December 31, 2011.

Critical Accounting Estimates. This section discusses accounting estimates that are considered important to our results of operations and financial condition, require significant judgment and require estimates on the part of management in application. Our significant accounting policies, including those considered to be critical accounting policies, are summarized in Note 1 to the accompanying consolidated financial statements.

Overview

We began in 1997 as a reseller of telecommunications services and have evolved to become a leading provider of end-to-end, cloud-based contact center software services and network connectivity. We strive to deliver the most proven solutions quickly and with ease, helping our customers reduce the cost and improve the quality of every user interaction.

We began offering cloud-based software solutions to the contact center market in 2005. Our dynamic technology platform provides our customers a solution without the costs and complexities of legacy systems. Our proven delivery model provides cost savings and removes the complexities of deploying and maintaining a premised-based solution, while providing flexibility to change with business needs.

We provide software which includes automatic call distribution with skills-based routing, interactive voice response with speech recognition, computer telephony integration capabilities, reporting, workforce optimization, e-learning, contact center agent hiring and customer feedback measurement tools. Taken together, the inContact cloud-based platform creates an integrated solution for contact centers, including those with distributed workforces—either at-home or multi-site.

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Recent Developments

Our primary financial objective is to generate recurring cloud-based software revenue from sustainable sources by investing in various cloud-based software growth initiatives, as we believe we are in the early stages of a large, long-term market. In the past, we have grown that business through our direct sales initiatives and referral partner arrangements. We added a new sales channel in 2011. In June 2011, we entered into our first reseller agreement for our cloud-based contact center solutions with Siemens. Siemens is a world-wide distributor/reseller of our portfolio of cloud-based software solutions, which includes the exclusive right to sell our solutions in EMEA. In November 2011, we entered into a North America reseller agreement with Verizon. Our new opportunity in 2011 is to leverage the marketing and sales capacity of these large enterprises selling to call center owners and operators to substantially increase our business in North America and establish our business overseas – all of which we believe will generate significant growth in our recurring cloud-based software revenue.

This new opportunity means we must invest in the infrastructure required to deliver our cloud-based software to new enterprise and international customers and increase our customer service and support capacity. We began making that investment in 2011, and were able to fund our expenditures in 2011, as well as expected expenditures in 2012, with the $23.6 million we raised from the sale of 7.2 million shares of common stock to a parent company of Siemens. Even so, the investment we made increased our cost of services and other operating expenses in 2011, which adversely affected our margins and results of operations. Our ability to recoup that investment depends on how successful our reseller strategy is in 2012 and beyond, but we are able to mitigate the risk associated with future realization of sales by obtaining minimum purchase commitments from Siemens to generate $5.0 million of net software revenue in 2012 and $10.0 million in 2013.

Trends in Our Business

There has been in increase in costs of revenue during 2011 due to greater professional service and customer service personnel costs as we employ more personnel, including higher-paid employees with more developed skill sets to service larger mid-market and enterprise customers, greater direct costs attributable to establishing our international infrastructure and international call traffic, and an increase in amortization of previously capitalized internal use software costs. We expect costs of revenue in absolute dollars to continue to increase, but we expect the costs of revenue as a percentage of sales to decrease as we anticipate an increase in revenue as a result of developing the infrastructure to service more enterprise and international customers, investing in sales and marketing activities, and from the additional sales channel added during 2011 from entering into reseller agreements with Siemens and Verizon.

We experienced an increase in Telecom segment revenue for the first time in several years. The increase is associated with the increase in Telecom revenue from our inContact portfolio customers exceeding lost revenue from attrition of our Telecom only customers. We expect the Telecom revenue from our inContact portfolio customer to continue to exceed the attrition of our Telecom only customers in 2012.

Sources of Revenue

We derive our revenues from two major business activities: (1) delivery and support of our inContact portfolio of software services and associated professional services and (2) reselling telecommunication services. Our primary business focus is marketing and selling our inContact portfolio.

Software

Software delivery and support of our inContact portfolio is provided on a monthly recurring subscription basis. Monthly recurring charges are billed in arrears and recognized for the period in which they are earned. In addition to the monthly recurring revenue, revenue is also received on a non-recurring basis for professional services included in implementing or improving a user’s inContact portfolio experience. Customers access

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“cloud-based” software and data through a secure Internet connection. Support services include technical assistance for our software products and product upgrades and enhancements on a when and if available basis. Our telecommunications and data network is fundamental to our inContact portfolio and allows us to provide the all-in-one inContact solution.

Telecom

We continue to derive revenue from traditional telecommunications services such as dedicated transport, switched long distance and data services. These services are provided over our network or through third party telecommunications providers. Revenue for transactional long distance usage is derived based on user specific rate plans and the user’s call usage and is recognized in the period the call is initiated. Users are also billed monthly charges in arrears and revenue is recognized for such charges over the billing period. If the billing period spans more than one month, earned but unbilled revenues are recognized as revenue for incurred usage to date.

Costs of Revenue and Operating Expenses

Costs of Revenue

Costs of revenue consist primarily of payments to third party long distance service providers for resold telecommunication services to our customers. Costs of revenue also include salaries (including stock-based compensation) and related expenses for our software services delivery, support and professional services organizations, equipment depreciation relating to our services, amortization of acquired intangible assets, amortization of capitalized internal use software development costs, and allocated overhead, such as rent, utilities and depreciation on property and equipment. As a result, overhead expenses are included in costs of revenue and each operating expense category. The cost associated with providing professional services is significantly higher as a percentage of revenue than the cost associated with delivering our software services due to the labor costs associated with providing professional services. We anticipate that we will incur additional costs for long distance service providers, hosting, support, employee salaries and related expenses, to support delivery of our software solutions in the future.

Selling and Marketing

Selling and marketing expenses consist primarily of salaries (including stock-based compensation) and related expenses for employees in sales and marketing, including commissions and bonuses, advertising, marketing events, corporate communications, expenses, travel costs and allocated overhead. Since our Software segment revenue is delivered and therefore recognized over time, we have experienced a delay between increasing sales and marketing expenses and the recognition of the corresponding revenue. We believe it is important to continue investing in selling and marketing to create brand awareness and lead generation opportunities, to increase market share and to support the resellers added in 2011. Accordingly, we expect selling and marketing expenses to increase in absolute dollars as we continue to support growth initiatives.

Research and Development

Research and development expenses consist primarily of the non-capitalized portion of salary (including stock-based compensation) and related expenses for development personnel and costs related to the development of new products, enhancement of existing products, quality assurance, market research, testing, product management and allocated overhead. We expect research and development expenses to increase in absolute dollars in the future as we intend to release new features and functionality on a frequent basis, expand our content offerings, upgrade and extend our service offerings and develop new technologies.

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General and Administrative

General and administrative expenses consist primarily of salary (including stock-based compensation) and related expenses for management, finance and accounting, legal, information systems and human resources personnel, professional fees, other corporate expenses and allocated overhead. We anticipate that we will incur additional employee salaries and related expenses, professional service fees and other corporate expenses related to the growth of our business and operations in the future. As such, we expect general and administrative expenses to increase in absolute dollars.

Results of Operations

Results of 2011 versus 2010

The following is a tabular presentation of our condensed operating results for the year ended December 31, 2011 compared to our condensed operating results for the year ended December 31, 2010 (in thousands):

	2011			2010			$ Change			% Change
Net revenue	$	88,985		$	82,155			6,830			8	%
Costs of revenue		52,577			46,593			5,984			13	%
Gross profit		36,408			35,562			846
Gross margin		41	%		43	%
Operating expenses:
Selling and marketing		24,563			19,158			5,405			28	%
Research and development		6,354			5,271			1,083			21	%
General and administrative		14,090			12,085			2,005			17	%
Total operating expenses		45,007			36,514			8,493
Loss from operations		(8,599	)		(952	)		(7,647	)
Other expense		(755	)		(83	)		672			810	%
Loss before income taxes		(9,354	)		(1,035	)		(8,319	)
Income tax expense		(74	)		(21	)		53
Net loss	$	(9,428	)	$	(1,056	)	$	(8,372	)

Revenue: Total revenues increased $6.8 million to $89.0 million during 2011 compared to revenues of $82.2 million during 2010. The increase relates to an increase of $6.2 million in Software segment revenue due to our continued focus and investment in sales and marketing efforts of our all-in-one inContact portfolio of cloud-based software solutions. Telecom segment revenue increased $652,000 as the increase of Telecom revenue associated with our inContact portfolio customers exceeded the attrition of our Telecom only customers.

Costs of revenue and gross margin: Costs of revenue increased $6.0 million or 13% to $52.6 million during 2011 compared to $46.6 million during 2010. As a result, our gross margin decreased two percentage points to 41% during 2011 from 43% during 2010. The decrease in gross profit is primarily due to greater professional service and customer service personnel costs as we employ more personnel, including higher-paid employees with more developed skill sets to service larger mid-market and enterprise customers and to support resellers ahead of the anticipated revenue. The decrease in gross profit is also due to greater costs attributable to international infrastructure and call traffic and an increase in amortization of previously capitalized internal use software costs.

Selling and marketing: Selling and marketing expense increased $5.4 million or 28% to $24.6 million during 2011 from $19.2 million during 2010. This increase is primarily a result of headcount additions for direct and channel sales employees and higher levels of investment in marketing efforts to create increased awareness of our services as well as increased lead generation efforts for our Software segment.

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Research and development: Research and development expense increased $1.1 million or 21% to $6.4 million during 2011 compared to $5.3 million during 2010. The increase relates to our efforts to expand our content offerings, upgrade and extend our service offerings and develop new technologies.

General and administrative: General and administrative expense increased $2.0 million or 17% to $14.1 million during 2011 compared to $12.1 million during 2010. The increase is primarily due to increased personnel costs incurred to support our international business expansion and a one-time expense of $330,000 related to personnel costs.

Other expense: Other expense increased $672,000 to $755,000 during 2011 compared to $83,000 during 2010. Net interest expense increased $220,000 during 2011 compared to 2010 due to a higher average outstanding balance on our revolving credit agreement in the first six months of 2011 as compared to the same period in 2010 and the interest related to the promissory noted entered into in the 4^th quarter of 2011. The remaining increase is primarily due to the change in fair value of our warrant liability. During 2011, the change in fair value of the warrant liability increased $158,000 compared to a decrease in the change in fair value of the warrants of $250,000 during 2010.

Income taxes: Income taxes consist of foreign taxes and various state income taxes and remained relatively flat for 2011 as compared to 2010. We have a full valuation allowance on all deferred tax assets.

Results of 2010 versus 2009

The following is a tabular presentation of our condensed operating results for the year ended December 31, 2010 compared to our condensed operating results for the year ended December 31, 2009 (in thousands):

	2010			2009			$ Change			% Change
Net revenue	$	82,155		$	84,183			(2,028	)		(2	%)
Costs of revenue		46,593			50,015			(3,422	)		(7	%)
Gross profit		35,562			34,168			1,394
Gross margin		43	%		41	%
Operating expenses:
Selling and marketing		19,158			17,355			1,803			10	%
Research and development		5,271			4,845			426			9	%
General and administrative		12,085			13,737			(1,652	)		(12	%)
Total operating expenses		36,514			35,937			577
Loss from operations		(952	)		(1,769	)		817
Other expense		(83	)		(1,091	)		(1,008	)		(92	%)
Loss before income taxes		(1,035	)		(2,860	)		1,825
Income tax expense		(21	)		(62	)		(41	)
Net loss	$	(1,056	)	$	(2,922	)	$	1,866

Revenue: Total revenues decreased $2.0 million to $82.2 million during 2010 compared to revenues of $84.2 million during 2009. The decrease is due to a decrease of $6.6 million in Telecom segment revenue due to anticipated attrition. The decrease is offset by an increase of $4.6 million in Software revenue as we continued to focus our sales and marketing efforts on our all-in-one hosted inContact portfolio of cloud-based software solutions.

Costs of revenue and gross margin: Costs of revenue decreased $3.4 million or 7% to $46.6 million during 2010 compared to $50.0 million during 2009. As a result, our gross margin increased two percentage points to 43% during 2010 from 41% during 2009. The increase in gross margin is primarily driven by the transition in sales

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mix from our Telecom segment that has lower margins to our Software segment as a result of increased sales of our inContact portfolio, which has much higher margins, and higher gross margin for the Telecom segment in 2010 compared to 2009 due to the termination of low-margin Telecom customers that we purposely moved off our network in the third quarter of 2009.

Selling and marketing: Selling and marketing expense increased $1.8 million or 10% to $19.2 million during 2010 from $17.4 million during 2009. This increase is a result of headcount additions for employees focused on managing and enhancing our partner relationships and our increased efforts to create lead generation opportunities for our Software segment. The increase in our selling and marketing efforts was partially offset by reduced commissions expense related to Telecom.

Research and development: Research and development expense increased $426,000 or 9% to $5.3 million during 2010 compared to $4.9 million during 2009. The increase relates to our efforts to expand our content offerings, upgrade and extend our service offerings and develop new technologies.

General and administrative: General and administrative expense decreased $1.7 million or 12% to $12.1 million during 2010 compared to $13.7 million during 2009. The decrease is primarily due to a reduction of overhead costs in the fourth quarter of 2009, which we maintained during 2010. Also, stock based compensation decreased due to the reduction of personnel in the fourth quarter of 2009 and the decrease in our allowance for uncollectible accounts due to improved collections and increased economic stability for our customer base in 2010 as compared to 2009.

Other expense: Other expense decreased $1.0 million to $83,000 during 2010 compared to $1.1 million during 2009. Net interest expense decreased $376,000 during 2010 compared to 2009 due to a lower outstanding balance on our revolving credit agreement and a lower interest rate in 2010 as compared to 2009. The remaining decrease of $632,000 primarily relates to the change in fair value of our warrant liability. During 2010, the fair value of our warrant liability decreased $250,000 and the fair value of our warrant liability increased $383,000 during 2009.

Income taxes: Income taxes consist of state income taxes and remained relatively flat for 2010 as compared to 2009. We have a full valuation allowance on all deferred tax assets.

Segment Reporting

We operate under two business segments: Software and Telecom. The Software segment includes all monthly recurring subscription revenue related to the delivery of our software applications plus the associated professional services and setup fees related to the software services product features (referred to as cloud-based or SaaS). The Telecom segment includes all voice and data long distance services provided to customers.

For segment reporting, we classify operating expenses as either “direct” or “indirect.” Direct expense refers to costs attributable solely to either selling and marketing efforts or research and development efforts. Indirect expense refers to costs that management considers to be overhead in running the business. Management evaluates expenditures for both selling and marketing and research and development efforts at the segment level without the allocation of overhead expenses, such as rent, utilities and depreciation on property and equipment.

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Software Segment Results

The following is a tabular presentation and comparison of our Software segment condensed operating results for the years ended December 31, 2011, 2010 and 2009 (in thousands):

	Year ended December 31,									2011 vs. 2010					2010 vs. 2009
	2011			2010			2009			$ Change		% Change			$ Change		% Change
Net revenue	$	39,870		$	33,692		$	29,103			6,178		18	%		4,589		16	%
Costs of revenue		16,940			12,051			9,681			4,889		41	%		2,370		24	%
Gross profit		22,930			21,641			19,422
Gross margin		58	%		64	%		67	%
Operating expenses:
Direct selling and marketing		19,810			14,662			11,322			5,148		35	%		3,340		30	%
Direct research and development		5,706			4,638			4,188			1,068		23	%		450		11	%
Indirect		12,734			10,342			10,178			2,392		23	%		164		2	%
Loss from operations	$	(15,320	)	$	(8,001	)	$	(6,266	)

Results of 2011 versus 2010

The Software segment revenue increased $6.2 million or 18% to $39.9 million during 2011 from $33.7 million during 2010. The increase is a result of the selling and marketing efforts we have undertaken to expand the inContact portfolio in the market. Software segment revenue includes revenue from professional services of $2.5 million for 2011 compared to $1.8 million for 2010.

Gross margin decreased 6 percentage points to 58% in 2011 compared to 64% in 2010. The decrease in gross margin is primarily attributable to greater professional service and customer service personnel costs as we employ more personnel, including higher-paid employees with more developed skill sets to service larger mid-market and enterprise customers and to support resellers ahead of the anticipated revenue, greater costs attributable to international infrastructure and call traffic and an increase in amortization of previously capitalized internal use software costs.

Direct selling and marketing expenses in the Software segment increased $5.2 million or 35% to $19.8 million in 2011 compared to $14.7 million during 2010. This increase is a result of headcount additions for employees focused on managing and enhancing our referral partner relationships, managing our reseller arrangements and increasing brand awareness and lead generation opportunities. Sales commission expense also increased with the increase in revenue. We also continue to develop the services provided in the Software segment by investing in research and development. During 2011 we incurred $5.7 million in direct research and development costs compared to $4.6 million during 2010 and have capitalized an additional $4.8 million of costs incurred during 2011 related to our internally developed software compared to $3.5 million during 2010. Indirect expenses, which consist of overhead, such as rent, utilities and depreciation on property and equipment, increased $2.4 million in 2011 compared to 2010 due to more indirect costs being allocated to the Software segment with the continued shift in revenue mix from Telecom segment to the Software segment and the overall increase in indirect expenses.

Results of 2010 versus 2009

The Software segment revenue increased $4.6 million or 16% to $33.7 million during 2010 from $29.1 million during 2009. The increase is a result of the selling and marketing efforts we have undertaken to expand the inContact portfolio of cloud-based software services in the market. Software segment revenue includes revenue from professional services of $1.8 million for 2010 compared to $1.5 million for 2009.

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Gross margin decreased 3 percentage points to 64% in 2010 compared to 67% in 2009. The decrease in gross margin is primarily attributable to an increase in amortization of previously capitalized internal use software and an increase in personnel costs to help support the growth in the Software segment.

Direct selling and marketing expenses in the Software segment increased $3.3 million or 30% to $14.7 million in 2010 compared to $11.3 million during 2009. This increase is a result of headcount additions for employees focused on managing and enhancing our partner relationships. We also continue to develop the services provided in the Software segment by investing in research and development. During 2010, we incurred $4.6 million in direct research and development costs compared to $4.2 million during 2009 and have capitalized an additional $3.5 million of costs incurred during 2010 related to our internally developed software compared to $3.6 million during 2009. Indirect expenses, which consist of overhead, such as rent, utilities and depreciation on property and equipment, increased $164,000 in 2010 compared to 2009 due to more indirect costs being allocated to the Software segment with the continued shift in revenue mix from Telecom to Software.

Telecom Segment Results

The following is a tabular presentation and comparison of our Telecom segment condensed operating results for the years ended December 31, 2011, 2010 and 2009 (in thousands):

	Year ended December 31,									2011 vs. 2010						2010 vs. 2009
	2011			2010			2009			$ Change			% Change			$ Change			% Change
Net revenue	$	49,115		$	48,463		$	55,080			652			1	%		(6,617	)		(12	%)
Costs of revenue		35,637			34,542			40,334			1,095			3	%		(5,792	)		(14	%)
Gross profit		13,478			13,921			14,746
Gross margin		27	%		29	%		27	%
Operating expenses:
Direct selling and marketing		3,421			3,467			5,123			(46	)		(1	%)		(1,656	)		(32	%)
Direct research and development		—			—			—			—			0	%		—			0	%
Indirect		3,336			3,405			5,126			(69	)		(2	%)		(1,721	)		(34	%)
Income from operations	$	6,721		$	7,049		$	4,497

Results of 2011 versus 2010

We experienced an increase in Telecom segment revenue for the first time in several years. Telecom segment revenue increased $652,000 or 1% to $49.1 million during 2011 from $48.5 million in 2010. This increase is associated with the Telecom revenue from our inContact portfolio customers exceeding the attrition of our Telecom only customers. Our costs of revenue increased $1.1 million or 3% due to higher direct Telecom costs attributable to international infrastructure and call traffic. Selling and marketing expenses decreased 1% due to lower third-party commissions associated with the attrition of our Telecom only customers offset partially by increased commissions for Telecom revenue associated with our inContact portfolio customers. Indirect expenses, which consist of overhead, such as compensation, rent, utilities and depreciation on property and equipment decreased 2% during 2011 compared to 2010 primarily due to more indirect costs being allocated to the Software segment.

Results of 2010 versus 2009

Overall Telecom segment revenue decreased $6.6 million or 12% to $48.5 million during 2010 from $55.1 million in 2009. This decrease is due to the expected attrition of our telecom-only customers as we focus our efforts on our inContact portfolio and a loss of revenue from low-margin customers that we purposely moved off our network in the third quarter of 2009. With the decline in revenues from the Telecom segment, we reduced

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operating costs in the segment as well. Our costs of revenue decreased 14% due to continued improvement in carrier rates, and a reduction in the low-margin business mentioned previously. Direct selling and marketing expenses decreased 32% during 2010 compared to 2009, primarily due to a decrease in commissions as we continue to focus more on our selling and marketing efforts of the Software segment. Indirect expenses, which consist of overhead, such as rent, utilities and depreciation on property and equipment, decreased 34% during 2010 compared to 2009 is primarily due to our efforts to reduce costs in the fourth quarter of 2009 and more indirect costs being allocated to the Software segment.

Liquidity and Capital Resources

Current Financial Condition

Our principal sources of liquidity are cash and cash equivalents and available borrowings under our revolving credit note, which expires in July 2013. At December 31, 2011, we had $17.7 million of cash and cash equivalents. In addition to our $17.7 million of cash and cash equivalents, subject to meeting covenant requirements, we have access to additional available borrowings under our revolving credit note with Zions First National Bank (“Zions”) entered into in July 2009. The available borrowings under the revolving credit note are $5.8 million at December 31, 2011, based on the maximum available advance amount calculated on the December 20, 2011 borrowing base certificate, resulting in total cash and additional availability under the revolving credit note of $23.5 million at December 31, 2011. The balance of our revolving credit note at December 31, 2011 was $2.5 million and the proceeds were used to take advantage of vendor discounts on early payment terms. We had no outstanding balance during most of the fourth quarter. The outstanding balance of our revolving credit agreement ranged from $0.0 to $8.5 million during 2011 and we paid the outstanding balance of $2.5 million in January 2012.

We experienced a net loss of $9.4 million during the year ended December 31, 2011. Significant non-cash expenses affecting operations during 2011 were $7.1 million of depreciation and amortization and $1.5 million of stock-based compensation. The non-cash expenses were offset by an increase in accounts receivable resulting in $3.2 million of cash being used in our operating activities during 2011.

Our working capital of $18.3 million at December 31, 2011 increased significantly from $9.2 million at December 31, 2010. The increase is primarily due to proceeds of $23.9 million received from the sale of stock in June 2011, partially offset by net payments of $4.8 million on our revolving credit note, $10.0 million used for investing activities and net cash of $3.2 used for operating activities.

In March 2011, we entered into an equipment leasing facility commitment with Zions Credit Corporation (“Zions Credit”). Under the terms of the leasing facility commitment, Zions Credit agreed to provide us with financing of up to $3.0 million to lease computer related equipment for our business operations, which Zions Credit will lease to us in the form of a capital lease. The term of the facility is 36 months upon acceptance of the leased property by us. The calculated interest rate is subject to change based on the three year LIBOR plus 4.5%. We had $1.7 million of capital lease obligations related to this leasing facility at December 31, 2011 and $1.3 million of this leasing facility had not been utilized at December 31, 2011 and is available for use. The final lease payments for the utilized portion of the leasing facility will be in November 2014.

We continue to take a proactive approach in managing our operating expenditures and cash flow from operations. We expect to rely on internally generated cash, our revolving credit facility and our equipment leasing facility to finance operations and capital requirements. We believe that existing cash and cash equivalents, cash from operations, available borrowings under our revolving credit note and available borrowings under our equipment leasing facility will be sufficient to meet our cash requirements during at least the next twelve months.

Revolving Credit Note

On July 16, 2009, we entered into a revolving credit loan agreement (the “Revolving Credit Agreement”) with Zions. Under the terms of the Revolving Credit Agreement, Zions has agreed to loan up to $8.5 million under a

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revolving credit note. The loan is secured by substantially all the assets of inContact. We paid down $17.5 million on the Revolving Credit Agreement during 2011 and drew $12.7 million from our Revolving Credit Agreement during 2011. All outstanding principal under the Zions agreement is due in July 2013. The amount outstanding at December 31, 2011 was $2.5 million. In January 2012, we paid the outstanding balance of $2.5 million.

The Zions Revolving Credit Agreement contains certain covenants, with the most significant covenants being a requirement to maintain a specified minimum liquidity position and minimum quarterly EBITDA (defined as earnings before interest expense, income tax expense, depreciation, amortization and other non-cash charges), a requirement to maintain a minimum working capital balance and a requirement to maintain a minimum cash balance, which were established by amendment to the Revolving Credit Agreement in June 2011. As of December 31, 2011, the minimum liquidity position and minimum quarterly EBITDA covenant requires that the aggregate value of cash, cash equivalents and marketable securities shall not be less than the outstanding balance on the Revolving Credit Agreement plus $2.5 million, and if at any time the aggregate value is less than the minimum liquidity position, a minimum quarterly EBITDA of $1.0 million, calculated as of the last day of each calendar quarter, is required. Based on our projections, we believe we will maintain compliance with our loan covenants through 2012, however if future operating results are less favorable than currently anticipated, we may need to seek further amendments to modify our loan covenants. If we are unable to modify the loan covenants on acceptable terms, we would intend to reduce spending levels or take other restructuring actions. The minimum working capital covenant requires minimum working capital of $1.0 million at all times during the term of the agreement and the minimum cash balance covenant requires a minimum cash balance of $3.5 million or the amount available under the line is reduced to 75% of billed accounts receivable. We were in compliance with all financial covenants related to the Revolving Credit Agreement for the year ended December 31, 2011.

The interest rate under the Zions revolving credit note is 90 day LIBOR plus 4.5%, adjusted as of the date of any change in the 90 LIBOR. Interest under the revolving credit note is paid monthly in arrears, and all principal is due in July 2013. The balance outstanding under the revolving credit note cannot exceed the lesser of (a) $8.5 million or (b) the sum of 85% of eligible billed receivables, and 65% of eligible earned but unbilled receivables, as calculated on the 5^th and 20^th of each month.

Promissory Note

In October 2011, we entered into a promissory note (“Promissory Note”) with Zions for $2.5 million to finance the acquisition and development of our infrastructure in Europe so that we have the infrastructure to enable Siemens to sell our portfolio of cloud-based software solutions in Europe. The interest rate under the Promissory Note is 4.5% per annum above the ninety day LIBOR rate or the LIBOR rate for a specified interest period as elected by us, adjusted as of the date of any change in the ninety day LIBOR or LIBOR. Interest under the Promissory Note is paid monthly in arrears, and principal is paid in 36 equal monthly installments ending in October 2014. The financial covenants are the same as the Revolving Credit Agreement, except that if at any time the aggregate value of cash, cash equivalents and marketable securities is less than the minimum liquidity position, a minimum quarterly EBITDA of $1.1 million, calculated as of the last day of each calendar quarter, is required. The Promissory Note is guaranteed by Siemens.

Cash Flows

In summary, our cash flows for the years ended December 31, 2011, 2010 and 2009 were as follows (in thousands):

	Year Ended December 31,
	2011			2010			2009
Net cash (used in) from operating activities	$	(3,232	)	$	5,060		$	2,159
Net cash used in investing activities	$	(10,022	)	$	(5,523	)	$	(5,461	)
Net cash from (used in) financing activities	$	20,657		$	(68	)	$	10,058

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During the year ended December 31, 2011, we used $3.2 million of cash for operating activities. During the year ended December 31, 2011, we used $10.0 million in investing activities. Cash used in investing activities was primarily used for development of internal use software other property and equipment. Cash received from financing activities was $20.7 million and was primarily due to proceeds of $23.9 million received from the sale of stock in June 2011 offset by net payments of $4.8 million on our revolving credit note. We had an overall net increase in cash of $7.4 million during the year ended December 31, 2011. The amount we have invested in our expansion and in our marketing activities has provided additional network capacity and additional resources to help grow our inContact portfolio.

Contractual Obligations and Off-Balance Sheet Arrangements

The following table discloses aggregate information about our material contractual obligations including notes payable and lease obligations, and the periods in which payments are due as of December 31, 2011 (in thousands):

	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
Revolving credit note and notes payable (1)	$	4,861	$	833	$	4,028	$	—	$	—
Interest obligation on term loan		146		86		60		—		—
Capital lease payments		4,225		2,173		2,052		—		—
Open purchase orders for remaining leasing facility (2)		91		91		—		—		—
Operating leases		5,451		1,464		3,797		190		—
Purchase obligations—hosting services		3,833		927		2,393		513		—
Purchase commitments (3)		500		500		—		—		—
Total contractual obligations	$	19,107	$	6,074	$	12,330	$	703	$	—

(1) Interest payments on the revolving credit note are excluded because the interest owed will fluctuate based on payments and draws made by the Company.

(2) Open purchase orders at December 31, 2011 of approximately $91,000 to purchase computer related equipment to utilize the remaining $1.7 million leasing facility with Zions.

(3) Our purchase commitments are with national long distance telecommunication providers. We have one purchase commitment that provides for a monthly minimum of $50,000, which can be terminated with a thirty day written notice. We exceeded our monthly minimums with this carrier in 2010. We have a commitment with another carrier that requires an annual usage commitment of $675,000 through August 2012 that we feel we will meet based on our current usage patterns.

Critical Accounting Estimates

Revenue Recognition: Revenue is recognized when all of the following four criteria are met: (1) persuasive evidence of an arrangement exists, (2) the fee is fixed or determinable, (3) collection is reasonably assured, and (4) delivery has occurred or services have been rendered.

Revenue is determined and recognized based on the type of service provided for the customer as follows:

• inContact portfolio of services. Revenue is derived from the delivery of any of our software services within the inContact portfolio which are provided on a monthly recurring subscription basis. Monthly recurring subscription charges are generally billed in arrears and recognized for the period in which they are earned. For subscription contracts with multiple elements (hosted software, training, installation and long distance services), we follow the guidance provided in ASC 605-25, Revenue Recognition for Multiple-Element Arrangements, because customers do not have the right to take possession of the software. As such, these arrangements are considered service contracts and are not

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within the scope of Industry Topic 985, Software. In addition to the monthly recurring subscription revenue, revenue is also derived on a non-recurring basis for professional services included in implementing or improving a customer’s inContact portfolio experience. Because our professional services, such as training and installation, are not considered to have standalone value, we defer revenue for upfront fees received for professional services in multiple element arrangements and recognize such fees as revenue over the estimated life of the customer. Professional services sold separately (i.e. not sold contemporaneously with the negotiation of a subscription contract) are recognized as revenue over the period that services are provided. Fees for telecommunications services in multiple element arrangements with in the inContact portfolio are based on usage and are recognized as revenue in the same manner as fees for telecommunications services discussed in the following paragraph.

• Telecommunications services. Revenue is derived from telecommunications services, such as dedicated transport, switched long distance and data services. These services are provided over our network or through third party telecommunications providers. Our network is the backbone of our inContact portfolio and allows us to provide the all-in-one inContact solution. Revenue for the telecommunications usage is derived based on customer specific rate plans and the customer’s call usage and is recognized in the period the call is initiated. Customers are also billed monthly charges in arrears and revenue is recognized for such charges over the billing period. If the billing period spans more than one month, earned but unbilled revenues are recognized as revenue for incurred usage to date.

During the three months ended December 31, 2011, we determined that we had a sufficient amount of transaction history to estimate the life of a customer and began recognizing the revenue for upfront fees for professional services over the estimated life of a customer. Previously, we had recognized upfront fees for professional services over the life of the contract, as we did not have sufficient history with our customer base to estimate customer life. Therefore, prior to the fourth quarter of 2011, we used contract life as a proxy for customer life. This change in estimate was accounted for prospectively for all new and existing arrangements, and resulted in recognizing approximately $200,000 less in revenue during the fourth quarter of 2011.

Accounts Receivable and Allowance for Uncollectible Accounts: Accounts receivable is composed of billed amounts as well as unbilled amounts for which revenue has been earned and recognized. The allowance for uncollectible accounts, an estimate of the amount of accounts receivable outstanding of which management believes may be uncollectible, is determined each month principally based on the aging of receivables. Management reviews the current trends and aged receivables periodically and adjusts the estimated bad debt expense to accrue for doubtful accounts as needed. An account is written off by management when deemed uncollectible, although collection efforts may continue.

Long-Lived Assets: We estimate the useful lives of long-lived assets in order to determine the amount of depreciation and amortization expense to be recorded during any reporting period. Depreciation and amortization expense is generally computed using the straight-line method over the estimated useful lives. Long-lived assets consist of property and equipment (computer equipment, software, furniture and equipment). We evaluate the carrying value of long-lived assets when events or circumstances indicate the existence of a possible impairment. In our evaluation, we estimate the net undiscounted cash flows expected to be generated by the assets, and recognize impairment when such cash flows will be less than carrying values.

Intangible Assets: We estimate the useful lives of intangibles, (which include acquired customer lists, patents and acquired technology), in order to determine the amount of amortization expense to be recorded during any reporting period. We use an accelerated method to amortize customer lists acquired after 2004. Other intangibles are amortized using the straight-line method. We test intangible assets for impairment annually or when events or circumstances indicate the existence of a possible impairment. In our evaluation, we estimate the net undiscounted cash flows expected to be generated by the assets, and recognize impairment when such cash flows

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will be less than carrying values. Events or circumstances that could indicate the existence of a possible impairment include obsolescence of the technology, an absence of market demand for the product, and/or the partial or complete lapse of continuing technology rights protection.

Goodwill: We evaluate goodwill for impairment, at a minimum, on an annual basis on September 30 of each year and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable using a two-step process. First, the fair values are estimated using a market-based valuation approach utilizing a multiple of revenues. Determining fair value requires the exercise of significant judgments, including judgments about relevant revenue multiples of comparable companies. We have two reporting units (identified as our segments, Telecom and Software). All of the goodwill of $4.1 million relates to the Software reporting unit. Therefore, only the carrying value of the Software reporting unit was evaluated. If the carrying value of the Software reporting unit exceeds its fair value, then the second step is performed, and an impairment charge is recognized for the amount, if any, by which the carrying amount of goodwill exceeds its implied fair value. At September 30, 2011, the fair value of the Software reporting unit exceeded its carrying value so no impairment charge was recorded during the year ended December 31, 2011. There were no events or circumstances from the date of our assessment through December 31, 2011 that would impact this assessment.

Income Taxes: All income tax amounts reflect the use of the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based on the expected future income tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. A valuation allowance is provided to offset deferred income tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred income tax assets will not be realized. To date, a valuation allowance has been recorded to eliminate the deferred income tax assets. Significant judgment is required in making this assessment, and it is difficult to predict when, if ever, our assessment may conclude that the remaining portion of the deferred tax assets are realizable.

The amounts relating to taxes also consider the ultimate resolution of revenue agent reviews based on estimates and assumptions. We believe we have adequately accounted for our uncertain tax positions; however, tax audits, changes in tax laws and other unforeseen matters may result in us owing additional taxes. Management believes that our tax positions comply with applicable tax law and that we have adequately provided for these matters. However, to the extent the final tax outcome of these matters is different than our recorded amounts, we may be required to adjust our tax amounts resulting in additional income tax expense or benefit in future periods.

Off -balance Sheet Arrangements: We have no off-balance sheet arrangements. However, we have purchase commitments with two national long distance telecommunication providers and our operating leases.

Stock-based Compensation: We account for stock-based compensation in accordance with ASC 718-10, Compensation—Stock Compensation. ASC 718-10 requires measurement of compensation cost for equity-based awards (i.e., stock options, warrants and restricted stock units) at fair value on date of grant and recognition of the fair value of compensation for awards expected to vest over the requisite service period.

We utilize the graded-vesting method, rather than a straight-line method, for recognizing compensation expense as management believes this graded-vesting method more closely matches the expense to associated services. Under this method, nearly 60% of the compensation cost is expensed in the first year of a typical three-year vesting term. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results differ from these estimates, such amounts will be recorded as an adjustment in the period estimates are revised. Management considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. Actual results may differ substantially from these estimates.

Recent Accounting Pronouncements

See Note 1 of our Notes to Consolidated Financial Statements for information regarding the effect of new accounting pronouncements on our financial statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our cash and cash equivalents are invested with high-quality issuers and limit the amount of credit exposure to any one issuer. Due to the short-term nature of the cash equivalents, we believe that we are not subject to any material interest rate risk as it relates to interest income.

Interest rates on some of our outstanding leases and revolving credit facility are variable so market fluctuations in interest rate may increase our interest expense.

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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements

The consolidated financial statements of inContact appear at the end of this report beginning with the index to financial statements on page F-1 (See Item 15), and are incorporated herein.

Supplementary Financial Information—(Unaudited)

Selected quarterly financial data for the years ended December 31, 2011 and 2010 are as follows (in thousands, except per share data):

	Quarter
2011	1st			2nd			3rd			4th
Net revenues	$	21,335		$	21,743		$	22,152		$	23,755
Gross Profit		8,847			9,017			8,615			9,929
Net loss		(1,002	)		(2,138	)		(3,170	)		(3,118	)
Basic and diluted net loss per share	$	(0.03	)	$	(0.06	)	$	(0.07	)	$	(0.07	)

	Quarter
2010	1st		2nd			3rd			4th
Net revenues	$	21,121	$	20,444		$	20,281		$	20,309
Gross Profit		9,283		8,721			8,808			8,750
Net income (loss)		1,502		(63	)		(1,319	)		(1,176	)
Basic and diluted net income (loss) per share	$	0.04	$	(0.00	)	$	(0.04	)	$	(0.03	)

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

This Report includes the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Securities Exchange Act of 1934 (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 9A includes information concerning the controls and control evaluations referred to in those certifications.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the Securities and Exchange Commission (“SEC”), and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this report, inContact’s management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, reassessed the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, inContact’s disclosure controls and procedures were effective as of December 31, 2011.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fourth quarter of 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

The report called for by Item 308(a) of Regulation S-K is presented at the end of this report before the consolidated financial statements and after the Index to Financial Statements on page F-1 (see Item 15).

Report of Independent Registered Public Accounting Firm

The report called for by Item 308(b) of Regulation S-K is presented at the end of this report before the consolidated financial statements and after the Index to Financial Statements on page F-1 (see Item 15).

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information regarding Section 16(a) compliance, the Audit Committee, our code of ethics and background of our directors will be presented in our Proxy Statement for the 2012 annual meeting of Shareholders and is incorporated herein by reference. The following information on our executive officers is presented below pursuant to General Instructions G(3) of Form 10-K.

ITEM 11. Executive Compensation

Information required by this Item 11 on executive compensation will be presented in our 2012 Proxy Statement and is incorporated herein by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required by this Item 12 on security ownership of certain beneficial owners and managements will be presented in our 2012 Proxy Statement and is incorporated herein by reference. Information regarding equity compensation plans is presented under Item 5 of this report on Form 10-K.

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

Information required by this Item 13 regarding certain related transactions and director independence will be presented in our 2012 Proxy Statement and is incorporated herein by reference.

ITEM 14. Principal Accountant Fees and Services

Information required by this Item 14 will be presented in our 2012 Proxy Statement and is incorporated herein by reference.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statements and Schedule

Documents filed as part of this report:

(1) Financial Statements. The following consolidated financial statements and the notes thereto, and the Reports of Independent Registered Public Accounting Firms are incorporated by reference as provided in Item 8 of this report:

	Page
Management’s Report on Internal Control over Financial Reporting	F-2
Reports of Independent Registered Public Accounting Firm	F-3
Consolidated Balance Sheets as of December 31, 2011 and 2010	F-5
Consolidated Statements of Operations for the Years Ended December 31, 2011, 2010 and 2009	F-6
Consolidated Statements of Stockholders’ Equity for the Years Ended December  31, 2011, 2010 and 2009	F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009	F-8
Notes to Consolidated Financial Statements	F-9
Schedule II—Valuation and Qualifying Accounts	F-32

Exhibits

Copies of the following documents are included as exhibits to this Form 10-K pursuant to Item 601 of Regulation S-K.

Exhibit No.	Title of Document
3.1	Certificate of Incorporation, as amended (1)
3.2	Amendment to the Certificate of Incorporation dated June 26, 2004 (2)
3.3	Amendment to the Certificate of Incorporation dated October 14, 2008 (3)
3.4	ByLaws (4)
4.1	Investor Rights Agreement dated June 14, 2011, with Enterprise Networks Holdings, Inc. (19)
10.1	Long-Term Stock Incentive Plan (4)
10.2	2005 Employee Stock Purchase Plan (2)
10.3	Form of Stock Option Agreement used prior to June 1999 (5)
10.4	Form of Stock Option Agreement used after June 1999 (5)
10.5	Form of Warrant – inContact/ ComVest (6)
10.6	Form of Registration Rights Agreement—inContact/ComVest (6)
10.7	Form of Warrant covering 55,000 shares issued to ComVest Capital on February 9, 2007 (7)
10.8	Form of Stock Option Agreement for awards granted under the Annual Executive Stock Option Plan (8)
10.9	Lease Agreement for Office Space at 7730 So Union Park Avenue, Salt Lake City, Utah 84047 (9)
10.10	Form of Notice of Restricted Stock Unit Grant to Non-Employee Directors (10)
10.11	Form of Restricted Stock Unit Award Agreement to Non-Employee Directors (10)

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Exhibit No.	Title of Document
10.12	Master Lease Agreement No. MCC1058 dated April 1, 2008 (11)
10.13	2008 Equity Incentive Plan (12)
10.14	Revolving Credit Loan Agreement between inContact and Zions dated July 16, 2009 (13)
10.15	Amendment to Loan Agreement between inContact and Zions dated February 22, 2010 (14)
10.16	Note Modification Agreement and Allonge between inContact and Zions dated August 3, 2010 (15)
10.17	Second Amendment to Loan Agreement between inContact and Zions dated August 3, 2010 (16)
10.18	Second Note Modification Agreement and Allonge between inContact and Zions dated March 1, 2011 (20)
10.19	Third Amendment to Loan Agreement between inContact and Zions dated March 1, 2011 (20)
10.20	Master Finance Lease Agreement No. 0012773 with Zions dated July 23, 2009 (20)
10.21	Form of Securities Purchase Agreement dated December 21, 2009 (17)
10.22	Form of Registration Rights Agreement dated December 21, 2009 (17)
10.23	Form of Common Stock Purchase Agreement dated June 14, 2011 (19)
10.24	Form of Registration Rights Agreement dated June 14, 2011 (19)
10.25	Fourth Amendment to Loan Agreement between inContact and Zions dated June 29, 2011 (21)
10.26	Master Reseller Agreement between inContact and Siemens (22)
10.27	Loan Agreement with Zions dated October 7, 2011
10.28	Promissory Note issued to Zions dated October 7, 2011
10.29	Guarantee Agreement by Siemens Enterprise Communications with Zions dated October 7, 2011
10.30	Security Transfer Agreement with Siemens Enterprise Communications dated October 7, 2011
10.31	First Amendment to Lease Agreement for Office Space at 7730 So Union Park Avenue, Salt Lake City, Utah 84047
14.1	Code of Ethics (18)
21.1	List of Subsidiaries
23.1	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certifications of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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Exhibit No.

Title of Document

101

The following financial statements, formatted in XBRL: (i) Consolidated Balance Sheets as of December 31, 2011 and December 31, 2010, (ii) Consolidated Statements of Operations for the years ended December 31, 2011, 2010 and 2009, (iii) Consolidated Statements of Cash Flows for years ended December 31, 2011, 2010 and 2009; (iv) Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2011, 2010 and 2009 and (iv) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text. The information in Exhibit 101 is “furnished” and not “filed,” as provided in Rule 402 of Regulation S-T.

(1) This document was filed as an exhibits to the annual report on Form 10-KSB for 2003 filed by inContact with the Securities and Exchange Commission on March 30, 2004, and is incorporated herein by this reference.

(2) These documents were filed as exhibits to the annual report on Form 10-K for 2004 filed by inContact with the Securities and Exchange Commission on March 30, 2005, and are incorporated herein by this reference.

(3) This document was filed as an exhibit to the quarterly report on Form 10-Q filed by inContact with the Securities and Exchange Commission on November 10, 2008, and is incorporated herein by this reference.

(4) These documents were filed as exhibits to the Registration Statement on Form 10-SB filed by inContact with the Securities and Exchange Commission on August 3, 1999, and are incorporated herein by this reference.

(5) These documents were filed as exhibits to the Registration Statement on Form SB-2, File No. 108655, initially filed by inContact with the Securities and Exchange Commission on September 9, 2003, and are incorporated herein by this reference.

(6) These documents were filed as exhibits to the current report on Form 8-K filed by inContact with the Securities and Exchange Commission on May 5, 2006, and are incorporated herein by this reference. Each of the form documents were signed and exchanged by inContact and ComVest Capital on May 23, 2006.

(7) This document was filed as an exhibit to the current report on Form 8-K filed by inContact with the Securities and Exchange Commission on January 31, 2007, and is incorporated herein by this reference.

(8) This document was filed as an exhibit to the current report on Form 8-K filed by inContact with the Securities and Exchange Commission on March 13, 2007, and is incorporated herein by this reference.

(9) This document was filed as an exhibit to the annual report on Form 10-K for 2007 filed by inContact with the Securities and Exchange Commission on April 1, 2008, and are incorporated herein by this reference.

(10) These documents were filed as exhibits to the quarterly report on Form 10-Q filed by inContact with the Securities and Exchange Commission on November 10, 2008, and are incorporated herein by this reference.

(11) This document was filed as an exhibit to the current report on Form 8-K filed by inContact with the Securities and Exchange Commission on April 11, 2008, and is incorporated herein by this reference.

(12) This document was filed as an exhibit to the current report on Form 8-K filed by inContact with the Securities and Exchange Commission on June 6, 2008, and is incorporated herein by this reference.

(13) This document was filed as an exhibit to the current report on Form 8-K filed by inContact with the Securities and Exchange Commission on July 21, 2009, and is incorporated herein by this reference.

(14) This document was filed as an exhibit to the current report on Form 8-K filed by inContact with the Securities and Exchange Commission on February 25, 2010, and is incorporated herein by this reference.

(15) This document was filed as an exhibit to the quarterly report on Form 10-Q filed by inContact with the Securities and Exchange Commission on August 6, 2010, and is incorporated herein by this reference.

(16) This document was filed as an exhibit to the quarterly report on Form 10-Q filed by inContact with the Securities and Exchange Commission on August 6, 2010, and is incorporated herein by this reference.

(17) These documents were filed as an exhibit to the current report on Form 8-K filed by inContact with the Securities and Exchange Commission on December 21, 2009, and are incorporated herein by this reference.

(18) This document was filed as an exhibit to the current report on Form 8-K filed by inContact with the Securities and Exchange Commission on June 12, 2007, and is incorporated herein by this reference.

(19) These documents were filed as an exhibit to the current report on Form 8-K filed by inContact with the Securities and Exchange Commission on June 15, 2011, and are incorporated herein by this reference.

43

(20) These documents were filed as an exhibit to the annual report on Form 10-K for 2010 filed by inContact with the Securities and Exchange Commission on March 11, 2011, and are incorporated herein by this reference.

(21) This document was filed as an exhibit to the current report on Form 8-K filed by inContact with the Securities and Exchange Commission on June 30, 2011, and is incorporated herein by this reference.

(22) This document was filed as an exhibit to the quarterly report on Form 10-Q filed by inContact with the Securities and Exchange Commission on August 5, 2011, and is incorporated herein by this reference. Confidential portions were omitted pursuant to a confidential treatment request filed separately with the SEC

44

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.

	INCONTACT, INC.
Date: March 9, 2012	/S/    PAUL JARMAN
	Paul Jarman Chief Executive Officer (Principal Executive Officer)
Date: March 9, 2012	/S/    GREGORY S. AYERS
	Gregory S. Ayers Chief Financial Officer (Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: March 9, 2012	/S/    THEODORE STERN
	Theodore Stern, Director
Date: March 9, 2012	/S/    STEVE M. BARNETT
	Steve M. Barnett, Director
Date: March 9, 2012	/S/    PAUL JARMAN
	Paul Jarman, Director
Date: March 9, 2012	/S/    BLAKE O. FISHER
	Blake O. Fisher, Director
Date: March 9, 2012	/S/    PAUL F. KOEPPE
	Paul F. Koeppe, Director
Date: March 9, 2012	/S/    MARK J. EMKJER
	Mark J. Emkjer, Director
Date: March 9, 2012	/S/    HAMID AKHAVAN
	Hamid Akhavan, Director

45

INCONTACT, INC.

Consolidated Financial Statements

TABLE OF CONTENTS

	Page
Management’s Report on Internal Control over Financial Reporting		F-2
Reports of Independent Registered Public Accounting Firm		F-3
Consolidated Balance Sheets as of December 31, 2011 and 2010		F-5
Consolidated Statements of Operations for the Years Ended December 31, 2011, 2010 and 2009		F-6
Consolidated Statements of Stockholders’ Equity for the Years Ended December  31, 2011, 2010 and 2009		F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009		F-8
Notes to Consolidated Financial Statements		F-9
Schedule II—Valuation and Qualifying Accounts		F-32

F-1

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Internal control over financial reporting is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes self-monitoring mechanisms and actions taken to correct deficiencies as they are identified. Because of the inherent limitations in any internal control, no matter how well designed, misstatements may occur and not be prevented or detected. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may decline.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2011. Management reviewed the results of their assessment with our Audit Committee.

The effectiveness of our internal control over financial reporting as of December 31, 2011 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included in Item 15 of this Annual Report on Form 10-K.

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of inContact, Inc.

Salt Lake City, Utah

We have audited the internal control over financial reporting of inContact, Inc. and subsidiaries (the “Company”) as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2011 of the Company and our report dated March 9, 2012 expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/ DELOITTE & TOUCHE LLP

Salt Lake City, Utah

March 9, 2012

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of inContact, Inc.

Salt Lake City, Utah

We have audited the accompanying consolidated balance sheets of inContact, Inc. and subsidiaries (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2011. Our audits also included the financial statement schedule II listed at Item 15(1). These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of inContact, Inc. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 9, 2012, expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Salt Lake City, Utah

March 9, 2012

F-4

INCONTACT, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	December 31, 2011			December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	17,724		$	10,321
Restricted cash		246			246
Accounts and other receivables, net of allowance for uncollectible accounts of $491 and $749 respectively		12,916			9,303
Other current assets		2,526			2,293
Total current assets		33,412			22,163
Property and equipment, net		18,685			12,041
Intangible assets, net		1,394			1,938
Goodwill		4,086			4,073
Other assets		837			370
Total assets	$	58,414		$	40,585
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	7,180		$	7,295
Accrued liabilities		2,769			2,079
Accrued commissions		1,291			1,058
Current portion of deferred revenue		1,056			898
Current portion of long-term debt and capital lease obligations		2,831			1,334
Warrant liability		—			246
Total current liabilities		15,127			12,910
Long-term debt and capital lease obligations		5,964			8,653
Deferred rent		161			286
Deferred revenue		946			34
Total liabilities		22,198			21,883
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.0001 par value; 100,000,000 shares authorized; 43,623,381 and 35,713,810 shares issued and outstanding as of December 31, 2011 and 2010, respectively		4			3
Additional paid-in capital		111,415			84,474
Accumulated deficit		(75,203	)		(65,775	)
Total stockholders’ equity		36,216			18,702
Total liabilities and stockholders’ equity	$	58,414		$	40,585

See accompanying notes to the consolidated financial statements.

F-5

INCONTACT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Year ended December 31,
	2011			2010			2009
Net revenue:
Software	$	39,870		$	33,692		$	29,103
Telecom		49,115			48,463			55,080
Total net revenue		88,985			82,155			84,183
Costs of revenue:
Software		16,940			12,051			9,681
Telecom		35,637			34,542			40,334
Total costs of revenue		52,577			46,593			50,015
Gross profit		36,408			35,562			34,168
Operating expenses:
Selling and marketing		24,563			19,158			17,355
Research and development		6,354			5,271			4,845
General and administrative		14,090			12,085			13,737
Total operating expenses		45,007			36,514			35,937
Loss from operations		(8,599	)		(952	)		(1,769	)
Other income (expense):
Interest income		1			1			4
Interest expense		(507	)		(287	)		(666	)
Change in fair value of warrants		(158	)		250			(383	)
Other expense		(91	)		(47	)		(46	)
Total other expense		(755	)		(83	)		(1,091	)
Loss before income taxes		(9,354	)		(1,035	)		(2,860	)
Income tax expense		(74	)		(21	)		(62	)
Net loss	$	(9,428	)	$	(1,056	)	$	(2,922	)
Net loss per common share:
Basic and diluted	$	(0.23	)	$	(0.03	)	$	(0.09	)
Weighted average common shares outstanding:
Basic and diluted		40,434			35,384			31,335

See accompanying notes to the consolidated financial statements.

F-6

INCONTACT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Common Stock				Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)
	Shares		Amount											Total
Balance at December 31, 2008		31,065	$	3	$	71,873		$	(62,335	)	$	(50	)	$	9,491
Cumulative effect of change in accounting principle		—		—		(651	)		538			—			(113	)
Common stock issued for options and warrants exercised		215		—		484			—			—			484
Stock-based compensation		—		—		1,425			—			—			1,425
Issuance of restricted stock for services		68		—		175			—			—			175
Issuance of common stock, net of issuance costs		3,429		—		7,885			—			—			7,885
Vesting of warrant issued for services		—		—		21			—			—			21
Comprehensive loss:
Net loss		—		—		—			(2,922	)		—
Unrealized gain on available for sale securities		—		—		—			—			50
Total comprehensive loss															(2,872	)
Balance at December 31, 2009		34,777	$	3	$	81,212		$	(64,719	)	$	—		$	16,496
Common stock issued for options and warrants exercised		864		—		1,816			—			—			1,816
Common stock issued under the employee stock purchase plan		28		—		53			—			—			53
Stock-based compensation		—		—		1,267			—			—			1,267
Issuance of restricted stock for services		45		—		126			—			—			126
Comprehensive loss:
Net loss		—		—		—			(1,056	)		—
Total comprehensive loss															(1,056	)
Balance at December 31, 2010		35,714	$	3	$	84,474		$	(65,775	)	$	—		$	18,702
Issuance of common stock, net of issuance costs		7,188		—		23,633			—			—			23,633
Common stock issued for options and warrants exercised		624		1		1,585			—			—			1,586
Common stock issued under the employee stock purchase plan		80		—		225			—			—			225
Stock-based compensation		—		—		1,431			—			—			1,431
Issuance of restricted stock for services		18		—		67			—			—			67
Comprehensive loss:
Net loss		—		—		—			(9,428	)		—
Total comprehensive loss															(9,428	)
Balance at December 31, 2011		43,624		4		111,415			(75,203	)		—			36,216

See accompanying notes to the consolidated financial statements.

F-7

INCONTACT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year ended December 31,
	2011			2010			2009
Cash flows from operating activities:
Net loss	$	(9,428	)	$	(1,056	)	$	(2,922	)
Adjustments to reconcile net loss to net cash (used in) from operating activities:
Depreciation of property and equipment		3,504			2,959			2,850
Amortization of software development costs		2,994			1,923			1,102
Amortization of intangible assets		544			563			983
Amortization of note financing costs		61			95			91
Interest accretion		16			11			—
Stock-based compensation		1,431			1,267			1,425
Warrants and stock issued for services		67			126			196
Change in fair value of warrants		158			(250	)		383
Loss on disposal of property and equipment		95			51			66
Changes in operating assets and liabilities:
Accounts and other receivables, net		(3,522	)		(138	)		(989	)
Other current assets		(405	)		(535	)		(461	)
Other non-current assets		(375	)		148			(26	)
Trade accounts payable		2			1,037			(821	)
Accrued liabilities		411			(730	)		482
Accrued commissions		233			(78	)		(22	)
Deferred rent		(88	)		(46	)		(63	)
Deferred revenue		1,070			(287	)		(115	)
Net cash (used in) from operating activities		(3,232	)		5,060			2,159
Cash flows from investing activities:
Gross increase in restricted cash		—			—			(246	)
Contingent purchase price payments		(135	)		(430	)		(719	)
Proceeds from redemption of auction rate preferred securities		—			125			150
Payments made for deposits		(98	)		(64	)		—
Proceeds from deposits		181			30			—
Capitalized software development costs		(4,753	)		(3,448	)		(3,622	)
Purchases of property and equipment		(5,217	)		(1,736	)		(1,024	)
Net cash used in investing activities		(10,022	)		(5,523	)		(5,461	)
Cash flows from financing activities:
Proceeds from issuance of common stock		23,865			—			8,399
Offering costs payments		(32	)		—			(514	)
Proceeds from exercise of options and warrants		1,182			1,816			484
Proceeds from sale of stock under employee stock purchase plan		225			53			—
Principal payments on long-term debt and capital leases		(2,234	)		(1,937	)		(1,440	)
Borrowings under promissory note		2,500			—			—
Debt financing fees		(79	)		—			(91	)
Borrowings under the revolving credit notes		12,730			20,500			12,420
Payments under the revolving credit notes		(17,500	)		(20,500	)		(9,200	)
Net cash from (used in) financing activities		20,657			(68	)		10,058
Net increase (decrease) in cash and cash equivalents		7,403			(531	)		6,756
Cash and cash equivalents at the beginning of the year		10,321			10,852			4,096
Cash and cash equivalents at the end of the year	$	17,724		$	10,321		$	10,852
Supplemental cash flow information:
Cash paid for interest	$	446		$	208		$	610
Cash paid for taxes	$	28		$	59		$	50
Supplemental schedule of non-cash investing and financing activities:
Unrealized gain on change in fair value of auction rate securities	$	—		$	—		$	50
Payments due for property and equipment included in trade accounts payable		189			77			5
Property and equipment and other assets financed with capital leases		3,311			1,556			1,479
Contingent purchase price payments included in accounts payable		—			122			56
Cashless exercise of warrants		404			—			—
Equity issuance costs included in accrued liabilities		200			—			—

See accompanying notes to the consolidated financial statements.

F-8

INCONTACT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

We changed our name from UCN, Inc. to inContact, Inc. (“inContact,” “we,” “us,” “our,” or the “Company”) on January 1, 2009. The accompanying consolidated financial statements and related footnotes refer to us as inContact for all years presented. We are incorporated in the state of Delaware.

We provide cloud-based contact center applications through our inContact^® portfolio, an advanced contact handling and performance management software application. “Cloud-based” is a term to refer to computing, data storage and delivery of technology services through the Internet, which includes software-as-a-service (“SaaS”). Our services provide a variety of connectivity options for carrying inbound calls to our inContact portfolio or linking agents to our inContact applications. We provide customers the ability to monitor agent effectiveness through our user survey tools and the ability to efficiently monitor their agent needs. We are also an aggregator and provider of telecommunications services. We contract with a number of third party providers for the right to resell the various telecommunication services and products they provide, and then offer all of these services to the customers. These services and products allow customers to buy only the telecommunications services they need, combine those services in a customized enhanced contact center package, receive one bill for those services, and call a single point of contact if a service problem or billing issue arises.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of inContact and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation.

Summary of Significant Accounting Policies

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates include unbilled revenue, the allowance for uncollectible accounts, attrition rates used to determine the amortization rate and estimated useful lives of customer lists acquired, the estimated customer life used to recognize revenue for professional services, and fair value calculations of the warrant liability and stock-based compensation.

Cash and Cash Equivalents

Cash and cash equivalents include money market funds, overnight deposits and other investments that are readily convertible into cash and have original maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value.

Restricted Cash

Restricted cash consists of a letter of credit related to an equipment leasing facility (Note 6) and cash held on deposit for credit card processing.

F-9

Accounts and Other Receivables and Allowance for Uncollectible Accounts

Accounts and other receivables are composed of billed amounts as well as unbilled amounts for which revenue has been earned and recognized, net of an allowance for uncollectible amounts. Finance charges are assessed to accounts once the amount owed is past due based on their specific terms. The allowance for uncollectible accounts is estimated by management and is based on specific information about customer accounts, past loss experience and general economic conditions. An account is written off by management when deemed uncollectible, although collections efforts may continue.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Major additions and improvements are capitalized, while minor repairs and maintenance costs are expensed when incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets as follows:

Asset Category	Estimated Useful Lives
Computer equipment	3 to 7 years
Computer software	3 years
Internal use software	3 years
Furniture and fixtures	3 to 7 years
Leasehold improvements	Shorter of 7 years or remainder of lease term

We evaluate the carrying value of property and equipment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Measurement of the amount of an impairment, if any, typically requires various estimates and assumptions including cash flows directly attributable to the asset, the useful life of the asset and residual value, if any. We did not record any impairment charges in relation to long-lived property and equipment during the years ended December 31, 2011, 2010 or 2009.

Internal Use Software

We capitalize certain costs incurred for the development of internal use software, which are included as internal use software in property and equipment in the consolidated balance sheets. These costs include the costs associated with coding, software configuration, upgrades and enhancements that are incurred during the application development stage. These costs, net of accumulated amortization, totaled $7.0 million and $6.7 million as of December 31, 2011 and 2010, respectively. Amortization of capitalized software costs was $3.0 million in 2011, $1.9 million in 2010 and $1.1 million in 2009.

Intangible Assets

Intangible assets consist of customer lists, patents, technology, trademarks, domain names and non-compete agreements. We estimate the useful lives of our acquired customer lists based on estimated attrition rates. Customer lists are generally amortized using an accelerated method over 24 to 120 months. Patents, technology and non-compete agreements are amortized on a straight-line basis over their estimated useful lives, which range from 24 to 96 months. Trademarks have indefinite lives, with the exception of one trademark that has a useful life of 15 years.

We review our finite-lived intangible assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When we determine that the carrying value of an intangible asset may not be recoverable, the related estimated future undiscounted cash flows expected to result from the use and eventual disposition of the asset are compared to the carrying value of the asset. If the sum of the estimated future undiscounted cash flows is less than the carrying amount, we record an impairment charge based on the difference between the carrying value of the asset and its fair value, which we

F-10

estimate based on discounted expected future net cash flows. Events or circumstances that could indicate the existence of a possible impairment include obsolescence of the technology, an absence of market demand for the product, and/or continuing technology rights protection. Management believes the net carrying amount of our long-lived assets will be recovered by future cash flows generated by commercialization of the technology related to the long-lived asset, and from cash flows generated from customer lists. We did not record any impairment charges in relation to long-lived intangible assets during the years ended December 31, 2011, 2010 and 2009.

Goodwill and Indefinite-lived Intangible Assets

We evaluate goodwill and indefinite-lived intangible assets for impairment as of the end of the third quarter, and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Goodwill impairment is determined using a two-step process. The first step of the process is to compare the fair value of a reporting unit with its carrying amount, including goodwill. In performing the first step, we determine the fair value of a reporting unit by using a market-based valuation approach utilizing a multiple of revenues. Determining fair value requires the exercise of significant judgments, including judgments about relevant revenue multiples of comparable companies. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is required to be performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The impairment test for other indefinite-lived intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of intangible assets not subject to amortization are determined using a discounted cash flow (“DCF”) valuation analysis. The DCF methodology used to value indefinite-lived intangibles entails identifying the projected discrete cash flows related to such intangibles and discounting them back to the valuation date. Significant judgments inherent in this analysis include the determination of discount rates, cash flows attributable to the intangibles and the terminal growth rates. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows generated as a result of the respective intangible assets.

Upon completion of the impairment test as of September 30, 2011, no indication of goodwill impairment existed. There were no events or circumstances from the date of assessment through December 31, 2011 that would impact this assessment.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements. However, we have purchase commitments with two national long distance telecommunication providers and operating leases (Note 13).

Revenue Recognition

Revenue is recognized when all of the following four criteria are met: (1) persuasive evidence of an arrangement exists, (2) the fee is fixed or determinable, (3) collection is reasonably assured, and (4) delivery has occurred or services have been rendered.

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Revenue is determined and recognized based on the type of service provided for the customer as follows:

• inContact portfolio of services. Revenue is derived from the delivery of any of our software services within the inContact portfolio which are provided on a monthly recurring subscription basis. Monthly recurring subscription charges are generally billed in arrears and recognized for the period in which they are earned. For subscription contracts with multiple elements (hosted software, training, installation and long distance services), we follow the guidance provided in ASC 605-25, Revenue Recognition for Multiple-Element Arrangements, because customers do not have the right to take possession of the software. As such, these arrangements are considered service contracts and are not within the scope of Industry Topic 985, Software. In addition to the monthly recurring subscription revenue, revenue is also derived on a non-recurring basis for professional services included in implementing or improving a customer’s inContact portfolio experience. Because our professional services, such as training and installation, are not considered to have standalone value, we defer revenue for upfront fees received for professional services in multiple element arrangements and recognize such fees as revenue over the estimated life of the customer. Professional services sold separately (i.e. not sold contemporaneously with the negotiation of a subscription contract) are recognized as revenue over the period that services are provided. Fees for telecommunications services in multiple element arrangements with in the inContact portfolio are based on usage and are recognized as revenue in the same manner as fees for telecommunications services discussed in the following paragraph.

• Telecommunications services. Revenue is derived from telecommunications services, such as dedicated transport, switched long distance and data services. These services are provided over our network or through third party telecommunications providers. Our network is the backbone of our inContact portfolio and allows us to provide the all-in-one inContact solution. Revenue for the telecommunications usage is derived based on customer specific rate plans and the customer’s call usage and is recognized in the period the call is initiated. Customers are also billed monthly charges in arrears and revenue is recognized for such charges over the billing period. If the billing period spans more than one month, earned but unbilled revenues are recognized as revenue for incurred usage to date.

During the three months ended December 31, 2011, we determined that we had a sufficient amount of transaction history to estimate the life of a customer and began recognizing the revenue for upfront fees for professional services over the estimated life of a customer. Previously, we had recognized upfront fees for professional services over the life of the contract, as we did not have sufficient history with our customer base to estimate customer life. Therefore, prior to the fourth quarter of 2011, we used contract life as a proxy for customer life. This change in estimate was accounted for prospectively for all new and existing arrangements, and resulted in recognizing approximately $200,000 less in revenue during the fourth quarter of 2011.

Advertising Costs

We advertise our services through the web, partners and trade journals. Costs associated with these advertising efforts are expensed as incurred in selling and marketing expenses, and were approximately $1.3 million in 2011, $650,000 in 2010, and $46,000 in 2009.

Stock-Based Compensation

We measure compensation cost for equity-based awards (i.e. stock options, warrants and restricted stock units) at fair value on date of grant and recognize the fair value of compensation for awards expected to vest over the requisite service period.

We utilize the graded-vesting method, rather than the straight-line method, for recognizing compensation expense as management believes the graded-vesting method more closely matches the expense to associated services. Under this method, approximately 60% of the compensation cost is expensed in the first year of a

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typical three-year vesting term. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results differ from estimates, such amounts will be recorded as an adjustment in the period estimates are revised. Management considers many factors when estimating expected forfeitures, including types of awards, employee class and historical experience. Actual results may differ substantially from these estimates (Note 10).

Operating Leases

We lease office space under an operating lease agreement. The lease agreement contains rent holidays and rent escalation provisions. We record the total rent payable during the lease term on a straight-line basis over the term of the lease and record the difference between the rent paid and the straight-line rent as deferred rent.

Income Taxes

Income taxes are accounted for using the asset and liability method. Under this method, we recognize a liability or asset for the income tax consequences of all net operating loss and tax credit carryforwards and temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the assets and liabilities are recovered or settled. These deferred income tax assets or liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. Recognition of deferred tax assets is limited to amounts considered by management to be more likely than not of realization in future periods. At December 31, 2011 and 2010, we have a full valuation allowance against our deferred tax assets. Significant judgment is required in making this assessment, and it is difficult to predict when, if ever, our assessment may conclude that the remaining portion of the deferred tax assets are realizable.

Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

Comprehensive Loss

Comprehensive loss is reported in the consolidated statement of shareholders’ equity as a component of retained earnings and consists of net loss and other gains and losses affecting shareholders’ equity that, under generally accepted accounting principles are excluded from net loss.

Net Loss Per Common Share

Basic net income (loss) per common share (“Basic EPS”) excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the year. Diluted net income (loss) per common share (“Diluted EPS”) reflects the potential dilution that could occur if stock options or other common stock equivalents were exercised or converted into common stock. In periods of net loss, common stock equivalents are excluded from the Diluted EPS computation, because they are antidilutive. Therefore, Diluted EPS equals Basic EPS for all years presented in the consolidated statements of operations in the accompanying consolidated financial statements.

Fair Value Measurements

The accounting guidance for fair value measurements defines fair value, establishes a market-based framework or hierarchy for measuring fair value and expands disclosures about fair value measurements. The guidance is applicable whenever assets and liabilities are measured and included in the financial statements at fair value. The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs.

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Liquidity

Our principal sources of liquidity are cash and cash equivalents and available borrowings under our revolving credit note, which expires in July 2013. At December 31, 2011, we had $17.7 million of cash and cash equivalents. In addition to our $17.7 million of cash and cash equivalents, we have access to additional available borrowings under our revolving credit facility, subject to meeting our covenant requirements. The available borrowings under the revolving credit facility at December 31, 2011 are $5.8 million, based on the maximum available advance amount calculated on the December 20, 2011 borrowing base certificate, resulting in total cash and additional availability under the revolving credit note of $23.5 million at December 31, 2011. The balance of our revolving credit note at December 31, 2011 was $2.5 million and the proceeds were used to take advantage of vendor discounts on early payment terms in December. In January 2012, we paid the outstanding balance on the revolving credit note of $2.5 million. The revolving credit note is collateralized by substantially all our assets.

In March 2011, we entered into an equipment leasing facility commitment with Zions Credit Corporation (“Zions Credit”). Under the terms of the leasing facility commitment, Zions Credit has agreed to provide us with financing of up to $3.0 million to lease computer related equipment for our business operations, which Zions Credit will lease to us in the form of a capital lease. The term of the facility is 36 months upon acceptance of the leased property by us. The calculated interest rate is subject to change based on the three year London InterBank Offered Rate (“LIBOR”) plus 4.5%. We had utilized $1.7 million of the leasing facility at December 31, 2011.

We believe that existing cash and cash equivalents, cash from operations, and available borrowings under our revolving credit note and equipment leasing facility commitment will be sufficient to meet our cash requirements during at least the next twelve months.

Concentration Risks

Approximately 40% and 60% of our costs of revenue for the years ended December 31, 2011 and 2010, respectively, was incurred from four telecommunication providers. Approximately 50% of our costs of revenue for the year ended December 31, 2009 was incurred from three telecommunication providers. We owed $331,000 and $1.6 million to these telecommunications providers at December 31, 2011 and 2010, respectively.

Recent Accounting Pronouncements

Effective January 1, 2011, the Company adopted the Financial Accounting Standards Board (“FASB”) revised accounting guidance related to revenue arrangements with multiple deliverables. The guidance applies to all deliverables under contractual arrangements in which a vendor will perform multiple revenue-generating activities. The guidance addresses how arrangement consideration should be allocated to the separate units of accounting, when applicable. The new guidance retains the criteria when delivered items in a multiple-deliverable arrangement should be considered separate units of accounting, but it removes the previous separation criterion that objective and reliable evidence of fair value of any undelivered items must exist for the delivered items to be considered a separate unit or separate units of accounting. Adoption of this guidance did not have a significant impact on the timing or amount of revenue recognized as we only have one unit of accounting for our arrangements that contain both our inContact portfolio of services and professional services.

In June 2011, the FASB issued new guidance, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. The guidance eliminates the option to present components of other comprehensive income as part of the statement of equity. In addition, in December 2011, the FASB issued an amendment to the accounting standard which defers the requirement to present components of reclassifications of other comprehensive income on the face of the income statement. The guidance will be effective for us beginning January 1, 2012. We have determined that the adoption of the guidance will not have a material effect on our operating results or financial position.

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In September 2011, the FASB issued new guidance on the annual testing of goodwill for impairment. The guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This guidance will be effective for us for the year ending December 31, 2012, with early adoption permitted. We have determined that the adoption of this new guidance will not have a material impact on our consolidated financial statements.

NOTE 2. ACCOUNTS AND OTHER RECEIVABLES, NET

The accounts and other receivables, net balances consisted of the following (in thousands):

	December 31,
	2011			2010
Billed	$	4,752		$	3,116
Earned but unbilled		8,317			6,836
Other		338			100
		13,407			10,052
Less: allowance for uncollectible accounts		(491	)		(749	)
Total accounts and other receivables, net	$	12,916		$	9,303

Earned but unbilled consists of revenues earned in the period and billed in a subsequent period.

NOTE 3. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following (in thousands):

	December 31,
	2011			2010
Computer and office equipment	$	21,077		$	12,462
Computer software		5,997			5,213
Internal use software		14,330			11,065
Furniture and fixtures		1,803			1,409
		43,207			30,149
Less: accumulated depreciation and amortization		(24,522	)		(18,108	)
Total property and equipment, net	$	18,685		$	12,041

Total depreciation and amortization expense of property and equipment was approximately $6.5 million in 2011, $4.9 million in 2010 and $4.0 million in 2009.

Property and equipment capitalized under capital lease obligations were as follows (in thousands):

	December 31,
	2011			2010
Gross	$	5,771		$	5,094
Less: accumulated depreciation and amortization		(2,305	)		(2,742	)
Total	$	3,466		$	2,352

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NOTE 4. GOODWILL AND INTANGIBLE ASSETS

We completed the acquisitions of BenchmarkPortal, Inc. (“BenchmarkPortal”) and ScheduleQ, LLC (“ScheduleQ”) in February 2007. In addition to the amounts paid at closing of the BenchmarkPortal acquisition, we agreed to pay contingent purchase price payments to BenchmarkPortal stockholders in the following amounts:

• $2.0 million of additional contingent purchase price cash payments to BenchmarkPortal stockholders in 36 equal monthly installments of $55,556, subject to adjustment if monthly recurring revenue during the payout period from customers’ accounts acquired in the transaction does not remain at certain levels which are adjusted for estimated attrition; and

• Up to an additional $7.0 million maximum contingent quarterly earnout to BenchmarkPortal stockholders paid on a variable percentage of recurring revenue from the sale of Echo services in excess of $900,000 per quarter during the four-year period after the acquisition.

In addition to the amounts paid at closing of the ScheduleQ acquisition, we agreed to pay contingent purchase price payments to ScheduleQ stockholders over a term of 48 months based on the number of licenses sold by us, with a minimum aggregate earnout payment of $101,000 and a maximum of $982,000.

The changes in the carrying amount of goodwill for the years ended December 31, 2011 and 2010 were for contingent purchase price payments for the Benchmark Portal and ScheduleQ acquisitions and consisted of the following ( in thousands):

Balance as of December 31, 2009	$	3,577
Goodwill adjustment		496
Balance as of December 31, 2010	$	4,073
Goodwill adjustment		13
Balance as of December 31, 2011	$	4,086

Intangible assets consisted of the following (in thousands):

	December 31, 2011						December 31, 2010
	Gross Assets		Accumulated Amortization		Intangible assets, net		Gross Assets		Accumulated Amortization		Intangible assets, net
Customer lists acquired	$	16,495	$	16,222	$	273	$	16,495	$	16,161	$	334
Technology and patents		10,231		9,966		265		10,231		9,563		668
Tradenames and trademarks		1,194		392		802		1,194		312		882
Domain name		54		—		54		54		—		54
Total intangible assets	$	27,974	$	26,580	$	1,394	$	27,974	$	26,036	$	1,938

We recorded amortization expense for intangible assets of approximately $544,000 in 2011, $563,000 in 2010 and $1.0 million in 2009.

Based on the recorded intangibles at December 31, 2011, estimated amortization expense is expected to be $238,000 in 2012, $210,000 in 2013, $210,000 in 2014, $140,000 in 2015, $133,000 in 2016 and $409,000 thereafter.

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NOTE 5. ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in thousands):

	December 31,
	2011		2010
Accrued payphone and carrier charges	$	342	$	222
Accrued payroll and other compensation		1,895		1,204
Accrued professional fees		—		284
Current portion of deferred rent		150		112
Other		382		257
Total accrued liabilities	$	2,769	$	2,079

NOTE 6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-term debt and capital lease obligations consisted of the following (in thousands):

	December 31,
	2011			2010
Revolving credit note with Zions First National Bank, with maximum availability of $8.5 million, bearing interest at the 90 day LIBOR plus 4.5% (5.08% at December 31, 2011), requirement to repay outstanding principal balance in July 2013	$	2,500		$	7,270
Promissory note payable to Zions First National Bank, bearing interest at the 90 day LIBOR plus 4.5% (5.08% at December 31, 2011), payable monthly with final principal payment made in October 2014		2,361			—
Promissory notes payable to former ScheduleQ, LLC shareholders, interest imputed at 9.0% per annum, payable monthly, with final principal payments made in February 2011		—			2
Capital lease obligations		3,968			2,734
Total debt and capital lease obligations		8,829			10,006
Debt discounts		(34	)		(19	)
Net total debt and capital lease obligations	$	8,795		$	9,987
Current portion of debt	$	833		$	2
Current portion of capital lease obligations		2,010			1,351
Current portion of debt discounts		(12	)		(19	)
Total current portion of debt and capital lease obligations	$	2,831		$	1,334
Long-term portion of debt	$	4,028		$	7,270
Long-term portion of capital lease obligations		1,958			1,383
Long-term portion of debt discounts		(22	)		—
Total long-term portion of debt and capital lease obligations	$	5,964		$	8,653

Revolving Credit Note

On July 16, 2009, we entered into a revolving credit loan agreement (“Revolving Credit Agreement”) with Zions First National Bank (“Zions”). Under the terms of the Revolving Credit Agreement, Zions agreed to loan up to $8.5 million under a revolving credit note. The Revolving Credit Agreement is collateralized by substantially all the assets of inContact. The balance outstanding under the Revolving Credit Agreement cannot exceed the lesser of (a) $8.5 million or (b) the sum of 85% of eligible billed receivables, and 65% of eligible earned, but unbilled receivables as calculated on the 5^th and 20^th of each month. There was $5.8 million of unused commitment at December 31, 2011, based on the maximum available advance amount calculated on the December 20, 2011 borrowing base certificate.

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We drew $12.7 million from our Revolving Credit Agreement with Zions and paid down $17.5 million on the Revolving Credit Agreement during the year ended December 31, 2011. The outstanding balance for our Revolving Credit Agreement at December 31, 2011 was $2.5 million, which was paid in January 2012. The interest rate under the Revolving Credit Agreement is 4.5% per annum above the ninety day LIBOR, from time to time in effect, adjusted as of the date of any change in the ninety day LIBOR. Interest under the Revolving Credit Agreement is paid monthly in arrears, and all principal is due in July 2013.

The Zions Revolving Credit Agreement contains certain covenants, with the most significant covenants being a requirement to maintain a specified minimum liquidity position and minimum quarterly EBITDA (defined as earnings before interest expense, income tax expense, depreciation, amortization and other non-cash charges), a requirement to maintain a minimum working capital balance and a requirement to maintain a minimum cash balance, which were established by amendment to the Revolving Credit Agreement in June 2011. As of December 31, 2011, the minimum liquidity position and minimum quarterly EBITDA covenant requires that the aggregate value of cash, cash equivalents and marketable securities shall not be less than the outstanding balance on the Revolving Credit Agreement plus $2.5 million, and if at any time the aggregate value is less than the minimum liquidity position, a minimum quarterly EBITDA of $1.0 million, calculated as of the last day of each calendar quarter, is required. Based on our projections, we believe we will maintain compliance with our loan covenants through 2012, however if future operating results are less favorable than currently anticipated, we may need to seek further amendments to modify its loan covenants. If we are unable to modify the loan covenants on acceptable terms, we would intend to reduce spending levels or take other restructuring actions. The minimum working capital covenant requires minimum working capital of $1.0 million at all times during the term of the agreement and the minimum cash balance covenant requires a minimum cash balance of $3.5 million or the amount available under the line is reduced to 75% of billed accounts receivable. We were in compliance with all financial covenants related to the Revolving Credit Agreement at December 31, 2011.

The Revolving Credit Agreement imposes certain restrictions on inContact’s ability, without the approval of Zions, to incur additional debt, make distributions to stockholders, or acquire other businesses or assets.

Promissory Note Payable to Zions

In October 2011, we entered into a promissory note payable (“Promissory Note”) to Zions for $2.5 million. The interest rate under the Promissory Note is 4.5% per annum above the ninety day LIBOR rate or the LIBOR rate for a specified interest period as elected by us, adjusted as of the date of any change in the ninety day LIBOR or LIBOR. Interest under the Promissory Note is paid monthly in arrears, and principal is paid in 36 equal monthly installments commencing on November 1, 2011. The financial covenants are the same as the Revolving Credit Agreement, except that if at any time the aggregate value of cash, cash equivalents and marketable securities is less than the minimum liquidity position, a minimum quarterly EBITDA of $1.1 million, calculated as of the last day of each calendar quarter, is required. The Promissory Note is guaranteed by a subsidiary of the single investor described in Note 9.

Long-term debt maturities, excluding capital lease obligation payments, consisted of the following as of December 31, 2011 (in thousands):

Year ended December 31,
2012	$	833
2013		3,333
2014		695
Total long-term debt maturities	$	4,861

Capital Lease Obligations

In March 2011, we entered into an equipment leasing facility commitment with Zions Credit Corporation (“Zions Credit”). Under the terms of the leasing facility commitment, Zions Credit agreed to provide us with financing of

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up to $3.0 million to lease computer related equipment for our business operations, which Zions Credit will lease to us in the form of a capital lease. The term of the facility is 36 months upon acceptance of the leased property by us. The calculated interest rate is subject to change based on the three year LIBOR plus 4.5%. We had $1.7 million of capital lease obligations related to this leasing facility at December 31, 2011 and $1.3 million of this leasing facility had not been utilized at December 31, 2011. The final lease payments for the utilized portion of this facility will be in November 2014.

In February 2010, we entered into an equipment leasing facility with Zions Credit of up to $2.5 million. We have utilized the entire $2.5 million of the leasing facility. The interest rate is 5.8% and the final lease payments will be in December 2013. The balance of the capital lease obligations related to this leasing facility was $1.7 million at December 31, 2011.

In June 2010, we entered into a capital lease obligation for certain software licensing, which required three annual payments beginning in July 2010, totaling $536,000. The balance of the capital lease obligations related to this lease was $177,000 at December 31, 2011.

In 2009, we entered into a commitment agreement with Zions Credit for an equipment leasing facility of up to $1.0 million. We had utilized the entire $1.0 million of the leasing facility as of December 31, 2009. The interest rate is 6.4% and the final lease payments will be in December 2012. The balance of the capital lease obligations related to this leasing facility was $376,000 at December 31, 2011.

We entered into an equipment leasing facility with an equipment financing company (“Lessor”) in 2008. Under the terms of the leasing facility, the Lessor agreed to provide us financing of $2.8 million to lease computer related equipment and software for our business operations, which the Lessor will lease to us in the form of a capital lease. The term of the facility was 30 months upon our acceptance of the leased property. The calculated interest rate is subject to change based on changes in the Treasury yield, installation period of the lease and the residual value. We had utilized the full $2.8 million of the leasing facility at December 31, 2009 to acquire computer related equipment and software. During the year ended December 31, 2011, we extended the facility an additional 12 months and paid $115,000 to the lessor so that the Company will receive title to the property leased upon final payment of the extended lease in April 2012. The capital lease obligation related to the extension was approximately $69,000 at December 31, 2011 and no other amounts are due. Beginning January 1, 2009, we were required by the Lessor to provide a letter of credit equal to 30.0% of the $550,000 of additional borrowings made subsequent to that date under the equipment leasing facility. Accordingly, we have classified the associated letter of credit balance of $166,000 as current restricted cash on the accompanying balance sheet at December 31, 2011.

The following schedule shows the future minimum lease payments under capital lease obligations at December 31, 2011 (in thousands):

Year ended December 31,
2012	$	2,173
2013		1,484
2014		568
Total future minimum lease payments		4,225
Less amount representing interest		(257	)
Total capital lease obligations		3,968
Less current portion		(2,010	)
Long-term capital lease obligations, net of current portion	$	1,958

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NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The accounting guidance for fair value measurements defines fair value, establishes a market-based framework or hierarchy for measuring fair value and expands disclosures about fair value measurements. The guidance is applicable whenever assets and liabilities are measured and included in the financial statements at fair value. The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Recurring Level 3 Activity

The table below provides a reconciliation of the beginning and ending balances for the major classes of assets and liabilities measured at fair value using significant unobservable inputs (Level 3). The table reflects gains and losses for the year for all financial assets and liabilities categorized as Level 3 as of December 31, 2011 and 2010 (in thousands):

Auction rate preferred securities:
Balance at December 31, 2009	$	125
Total redemptions		(125	)
Balance at December 31, 2010	$	—
Warrants:
Balance at December 31, 2009		496
Total change in fair value		(250	)
Balance at December 31, 2010	$	246
Balance at December 31, 2010		246
Total change in fair value		158
Exercise of warrants		(404	)
Balance at December 31, 2011	$	—

Fair Value Estimates

We did not have any transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy during 2011 and 2010. Our fair value estimates at December 31, 2011 were as follows (in thousands):

	Fair value		Quoted Prices in Active Markets for Identifical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Losses during the year ended December 31, 2011
Liabilities:
ComVest warrants	$	—	$	—	$	—	$	—	$	(158	)
Total	$	—	$	—	$	—	$	—	$	(158	)

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Our fair value estimates at December 31, 2010 were as follows (in thousands):

	Fair value		Quoted Prices in Active Markets for Identifical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Gains during the year ended December 31, 2010
Liabilities:
ComVest warrants	$	246	$	—	$	—	$	246	$	250
Total	$	246	$	—	$	—	$	246	$	250

Auction Rate Preferred Securities

Auction Rate Preferred Securities (“ARPS”) were our only assets measured at fair value on a recurring basis in the year ended December 31, 2009. We classified the investment in ARPS as a Level 3 investment as these securities had significant unobservable inputs. The fair value of the investment in ARPS as of December 31, 2009 was $125,000, calculated utilizing a discounted cash flow analysis. This analysis considered, among other items, the collateralization of the underlying securities, the expected future cash flows and the expectation of when the security will be redeemed by the issuer, which was February 2010. In February 2010, all of the remaining ARPS were redeemed by the issuer and we received cash proceeds of $125,000.

Warrants

We had issued 385,000 warrants, which were exercised in May 2011, with provisions that protected holders from a decline in the stock price instrument if we issued equity shares for a price that was lower than the exercise price of those instruments or issue new warrants or convertible instruments that had a lower exercise price. In accordance with accounting guidance, these warrants were recognized as liabilities and recorded at fair value on each reporting date. We measured the estimated fair value of these warrants as of date of exercise, May 5, 2011, and recorded a $158,000 loss during the year ended December 31, 2011 to record the liabilities associated with these warrants at their estimated fair value totaling $404,000 as of the date of exercise as compared to their estimated fair value of $246,000 at December 31, 2010. The estimated fair value of these securities on the date of exercise was the difference between the stock price on the date of exercise and the warrants’ exercise price. The estimated fair value of the securities was calculated using a Black-Scholes valuation model, which approximated a lattice valuation model, at December 31, 2010. The assumptions used in the Black-Scholes model at December 31, 2010 were as follows: a volatility rate of 41.0%, a risk-free interest rate of 0.19%, an expected life of 0.39 years and no dividend yield.

Basis for Valuation

The carrying amounts reported in the accompanying consolidated balance sheets for cash and cash equivalents, accounts and other receivables, and trade accounts payable approximate fair value because of the immediate or short-term maturities of these financial instruments. The fair values of the revolving credit note and promissory notes payable were computed using a discounted cash flow model using estimated market rates adjusted for our credit risk as of December 31, 2011 and 2010. The fair value of the ComVest warrants were computed using a Black-Scholes option pricing model. The carrying value and estimated fair value of our revolving credit note, promissory notes payable and ComVest warrants are as follows (in thousands):

	December 31, 2011				December 31, 2010
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Revolving credit note	$	2,500	$	2,500	$	7,270	$	7,270
Promissory notes	$	2,361	$	2,361	$	2	$	2
ComVest warrants	$	—	$	—	$	246	$	246

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Our disclosure of the estimated fair value of our financial instruments is made in accordance with the requirements of ASC 825, Financial Instruments. The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data in order to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we could realize in a current market exchange. The use of different market assumptions and estimation methodologies may have a material effect on the estimated fair value amounts. The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2011 and 2010.

NOTE 8. INCOME TAXES

The components of income tax expense for the years ended December 31, 2011, 2010 and 2009, consisted of the following (in thousands):

	December 31,
	2011		2010		2009
Current:
Federal	$	—	$	—	$	—
Foreign		15		—		—
State		59		21		62
Total current		74		21		62
Deferred:
Federal		—		—		—
Foreign		—		—		—
State		—		—		—
Total deferred		—		—		—
Total	$	74	$	21	$	62

Income tax (benefit) expense differs from amounts computed by applying the statutory federal rate of 34.0% to pretax loss for the years ended December 31, 2011, 2010, and 2009, as follows (in thousands):

	December 31,
	2011			2010			2009
Computed federal income tax benefit at statutory rate of 34.0%	$	(3,180	)	$	(352	)	$	(972	)
State income taxes		42			40			33
Meals and entertainment		94			66			51
Other		49			(67	)		13
Foreign taxes		15			—			—
Stock-based compensation		138			158			108
Change in valuation allowance		2,916			176			829
Total income tax expense	$	74		$	21		$	62

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Deferred federal and state income tax assets and liabilities at December 31, 2011 and 2010, consisted of the following temporary differences and carry-forward items (in thousands):

	December 31,
	2011						2010
	Current			Non-current			Current			Non-current
Deferred income tax assets:
Net operating loss carry-forwards	$	—		$	19,554		$	—		$	15,799
AMT and foreign tax credit carry-forwards		—			83			—			69
Property and equipment, and intangible assets		—			1,771			—			2,411
Reserves, accrued liabilities, and other		324			473			408			103
Stock-based compensation		—			2,046			—			1,952
Total deferred income tax assets		324			23,927			408			20,334
Valuation allowance		(324	)		(23,927	)		(408	)		(20,334	)
Deferred income tax assets	$	—		$	—		$	—		$	—

We establish a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized. We are uncertain whether our deferred tax assets can be realized due to our history of operating losses. Accordingly, a valuation allowance has been recorded at December 31, 2011 and 2010 to reduce the deferred income tax assets to the amount which management believes is more likely than not to be realized.

The net change in our valuation allowance was an increase of $3.5 million in 2011, a decrease of $44,000 in 2010 and an increase of $795,000 in 2009.

As of December 31, 2011, we had net operating loss carry-forwards for federal income tax reporting purposes of approximately $48.9 million that will begin to expire starting in 2018 through 2031 if not utilized. We had state net operating loss carry-forwards of approximately $51.3 million which expire depending on the rules of the various states to which the net operating losses are allocated. Approximately $1.1 million of net operating loss carry-forwards as of December 31, 2011 were attributable to deductions associated with the exercise of Company stock options, the benefit of which will be credited to additional paid-in capital when realized. We also have alternate minimum tax credit carry-forwards of approximately $69,000 that have no expiration date. Utilization of our net operating loss and tax credit carry-forwards are subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. These annual limitations may result in the expiration of a portion of the net operating loss and credit carry-forwards before they are fully utilized.

The Company accounts for uncertainty in income taxes in accordance with ASC 740-10, Accounting for Uncertainty in Income Taxes. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with ASC 740, Income Taxes. This guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that would result in a material adverse effect on the Company’s financial condition, results of operations or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740-10.

The Company’s U.S. federal income tax returns for 2008 through 2011 are open tax years. The Company also files in various state jurisdictions. With few exceptions, the Company is no longer subject to state income tax examinations by tax authorities for years prior to 2008.

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NOTE 9. CAPITAL TRANSACTIONS

Issuances of Common Stock

In June 2011, we sold 7.2 million shares of common stock at $3.32 per share for a total of $23.9 million to a single investor. Net proceeds of the offering, after expenses of $232,000, were $23.6 million.

We received proceeds of $1.6 million, $1.8 million and $484,000 from the exercise of 624,000, 864,000 and 215,000 options and warrants during the years ended December 31, 2011, 2010 and 2009, respectively.

We issued 18,000, 45,000 and 68,000 shares of common stock valued at $67,000, $126,000 and $175,000 to a third party for investor relations services during the years ended December 31, 2011, 2010 and 2009, respectively.

In December 2009, we sold 3.4 million shares of common stock at $2.45 per share for a total of $8.4 million to an investment fund.

Net proceeds of the offering, after placement fees and expenses of $514,000, were $7.9 million.

Employee Stock Purchase Plan

We reestablished the ability for employees to participate in the 2005 Employee Stock Purchase Plan (“Purchase Plan”) commencing on October 1, 2010. The Purchase Plan provides that up to 1,000,000 shares of common stock may be sold to participating employees and expires at the beginning of 2014. Each participating period is three months in length. The purchase price a participant pays for the shares is equal to 85% of the closing market bid price of the common stock on the first business day or the last business day of each participating period, whichever is lower. We issued 80,000 and 28,000 shares of common stock for proceeds of $225,000 and $53,000 under the Purchase Plan to eligible employees during the years ended December 31, 2011 and 2010, respectively. Stock compensation expense recognized under the Purchase Plan was $72,000 and $17,000 during the years ended December 31, 2011 and 2010. The Company had 892,000 shares of common stock available for issuance under the Purchase Plan at December 31, 2011. No employees participated in the plan during 2009.

Preferred Stock

The Board of Directors is authorized to issue shares of our authorized but unissued preferred stock in one or more series. With respect to any series, the Board of Directors is authorized to determine the number of shares that constitutes such series; the rate of dividend, if any, payable on shares of such series; whether the shares of such series shall be cumulative, non-cumulative, or any other characteristics, preferences, limitations, rights, privileges, immunities or terms. There was no preferred stock outstanding at December 31, 2011 or 2010.

NOTE 10. STOCK-BASED COMPENSATION

Stock-based compensation cost is measured at the grant date based on the fair value of the award granted and recognized as expense using the graded-vesting method over the period in which the award is expected to vest. Stock-based compensation expense recognized during a period is based on the value of the portion of stock-based awards that is ultimately expected to vest during the period. As stock-based compensation expense recognized in the results for the year is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.

We recognize the estimated compensation cost of service-based awards, net of estimated forfeitures, over the vesting term. We recognize the estimated compensation cost of performance-based awards, net of estimated forfeitures. The awards are earned upon attainment of identified performance goals, some of which contain discretionary metrics. As such, these awards are revalued based on our traded stock price at the end of each

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reporting period. If the discretion is removed, the award will be classified as a fixed equity award. The fair value of the awards will be based on the measurement date, which is the date the award becomes fixed. The awards will be subsequently amortized over the remaining performance period.

We utilize the Black-Scholes model to determine the estimated fair value for grants of stock options and warrants. The Black-Scholes model requires the use of highly subjective and complex assumptions to determine the fair value of stock-based awards, including the option’s expected term, expected dividend yield, the risk-free interest rate and the price volatility of the underlying stock. The expected dividend yield is based on our historical dividend rates. Risk-free interest rates are based on U.S. treasury rates. Volatility is based on historical stock prices over a period equal to the estimated life of the option. We have issued stock options to employees under share-based compensation plans including the Long-Term Stock Incentive Plan, the 2008 Equity Incentive Plan and those granted by the Board of Directors and Compensation Committee. Stock options are issued at the current market price on the date of grant and are generally subject to a three-year vesting period with a contractual term of five years.

The grant date fair value of the restricted stock and restricted stock unit awards was estimated using the closing market price of the Company’s common stock on the grant date, with the compensation expense amortized over the vesting period of the restricted stock awards, net of estimated forfeitures.

Our stock-based compensation primarily consists of the following plans:

2008 Equity Incentive Plan: Effective July 1, 2008, we established the 2008 Equity Incentive Plan (“2008 Plan”). The 2008 Plan provides for a maximum of 3,272,500 shares of our common stock to be awarded to participants and their beneficiaries. The shareholders approved and we amended the inContact 2008 Equity Incentive Plan increasing the number of common shares available for awards from 2,272,500 to 3,272,500 in June 2010. The Compensation Committee (the “Committee”), as determined by the Board of Directors, determines and designates the eligible participants and awards to be granted under the 2008 Plan. The Committee may grant incentive stock options; non-qualified options; stock appreciation rights (“SAR”) and restricted stock units (“RSU”). The terms and exercise prices of options are established by the Committee; except that the exercise prices cannot be less than 100% of the fair market value of a share of common stock on the date of grant. As of December 31, 2011, incentive stock options and RSUs to purchase a total of 3,028,204 shares had been granted, and had either been exercised or were outstanding under the 2008 Plan.

Long-Term Stock Incentive Plan: Effective March 11, 1999, we established the Long-Term Stock Incentive Plan (“1999 Plan”). The 1999 Plan provides for a maximum of 1,200,000 shares of our common stock to be awarded to participants and their beneficiaries. The Committee, as determined by the Board of Directors, determines and designates the eligible participants and awards to be granted under 1999 Plan. The Committee may grant incentive stock options; non-qualified options; SARs; and on a limited basis, stock awards. The terms and exercise prices of options are established by the Committee; except that the exercise prices cannot be less than 100% of the fair market value of a share of common stock on the date of grant. As of December 31, 2011, stock options to purchase a total of 941,854 shares had been granted, and had either been exercised or were outstanding under the 1999 Plan.

Other Options: Our Board of Directors has from time to time authorized the grant of stock options to directors, officers, key employees and consultants as compensation and in connection with obtaining financing.

F-25

Stock-based compensation expense (including stock options, warrants, restricted stock, restricted stock units and employee stock purchase plan) was included in the following captions within the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009 (in thousands):

	2011		2010		2009
Costs of revenue	$	267	$	247	$	32
Selling and marketing		432		278		254
Research and development		139		101		322
General and administrative		660		767		1,013
Total stock-based compensation expense	$	1,498	$	1,393	$	1,621

Employee Stock Options

As of December 31, 2011, the total remaining unrecognized compensation cost related to unvested stock options, net of forfeitures, was approximately $1.3 million and is expected to be recognized over a weighted average period of 1.6 years.

We estimated the fair value of options granted under our employee stock-based compensation arrangements at the date of grant using the Black-Scholes model using the following weighted-average assumptions for the years ended December 31, 2011, 2010, and 2009:

	2011			2010			2009
Dividend yield		None			None			None
Volatility		71	%		71	%		66	%
Risk-free interest rate		1.21	%		1.78	%		1.67	%
Expected life (years)		4.0			4.0			4.6

The following tables summarize all stock option activity during the years ended December 31, 2011, 2010 and 2009, (in thousands, except per share amounts):

	Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)		Intrinsic Value
Balance at December 31, 2008		4,552		$	2.85
Granted		1,092		$	1.99
Exercised		(201	)	$	2.41
Cancelled or expired		(728	)	$	3.04
Balance at December 31, 2009		4,715		$	2.64
Granted		1,027		$	2.98
Exercised		(314	)	$	2.38
Cancelled or expired		(690	)	$	2.62
Balance at December 31, 2010		4,738		$	2.74
Granted		1,289		$	3.62
Exercised		(469	)	$	2.52
Cancelled or expired		(365	)	$	2.98
Balance at December 31, 2011		5,193		$	2.95		2.7	$	7,757
Vested and exercisable at December 31, 2011		3,195		$	2.78		2.0	$	5,327
Unvested at December 31, 2011		1,998		$	3.24		3.9	$	2,430

F-26

We received cash proceeds from the exercise of options of $1.2 million in 2011, $716,000 in 2010 and $484,000 in 2009. The total intrinsic value of options exercised during 2011, 2010 and 2009 was $840,000, $118,000 and $78,000, respectively. The intrinsic value is calculated as the difference between the market value on the date of exercise and the exercise price of the shares.

A summary of the options outstanding and options exercisable at December 31, 2011 is as follows (in thousands, except per share amounts):

	Options Outstanding						Options Vested and Exercisable
Exercise price range	Options		Weighted-Average Remaining Contractual Life (years)		Weighted-Average Exercise Price		Options Exercisable		Weighted-Average Exercise Price
$0.90 – $1.80		590		2.2	$	1.76		396	$	1.75
$1.81 – $2.70		1,425		2.1	$	2.28		1,262	$	2.26
$2.71 – $3.60		2,638		3.1	$	3.29		1,281	$	3.26
$3.61 – $4.50		253		3.6	$	4.02		88	$	4.14
$4.51 – $5.40		287		3.0	$	4.76		168	$	4.66
		5,193		2.7	$	2.95		3,195	$	2.78

A summary of the activity for unvested share awards for the years ended December 31, 2011, 2010 and 2009 is as follows (in thousands, except per share amounts):

	Options			Weighted-Average Fair Value
Balance at December 31, 2008		1,720		$	1.40
Granted		1,092		$	1.37
Vested		(625	)	$	1.43
Cancelled or expired		(360	)	$	1.43
Balance at December 31, 2009		1,827		$	1.35
Granted		1,027		$	1.60
Vested		(739	)	$	1.41
Cancelled or expired		(464	)	$	1.38
Balance at December 31, 2010		1,651		$	1.48
Granted		1,289		$	1.93
Vested		(661	)	$	1.44
Cancelled or expired		(281	)	$	1.49
Balance at December 31, 2011		1,998		$	1.77

Warrants to Purchase Common Shares

In November 2008, we entered into a consulting agreement and issued warrants to purchase a total of 50,000 shares of our common stock at $1.00 per share. The warrants vested evenly over 12 months. 25,000 of the warrants vested and the remaining 25,000 were cancelled during 2009 upon cancellation of the agreement. We recognized expense of $20,808 during the year ended December 31, 2009 related to the issued warrants.

In November 2008, we entered into a mutual release agreement with a former officer of inContact. Under the agreement, we agreed to issue this former officer warrants to purchase a total of 70,000 shares of our common stock at $1.00 per share. The warrants were fully vested at the time of issuance and were exercised in November 2011.

In May 2006 we issued 330,000 warrants to ComVest to purchase 330,000 shares of common stock at $2.75. In January 2007, we amended the ComVest convertible term note and revolving credit note agreement that existed

F-27

at that time. In conjunction with the amendment, we issued warrants to ComVest to purchase 55,000 shares of common stock at $2.90 per share. The warrants vested immediately. These warrants were included as a liability in the consolidated balance sheet under warrant liability at December 31, 2010 and were exercised in May 2011.

The following tables summarize the warrant activity for the years ended December 31, 2011, 2010 and 2009 as follows (in thousands, except per share amounts):

	Outstanding Warrants			Range of Exercise Prices		Weighted-Average Exercise Price
Balance at December 31, 2008		1,260			$1.00 – $4.00	$	2.42
Cancelled and expired		(170	)		1.00 – 4.00		3.56
Exercised		(25	)		1.00		1.00
Balance at December 31, 2009		1,065			1.00 – 2.95		2.27
Cancelled and expired		(60	)		2.95		2.95
Exercised		(550	)		2.00		2.00
Balance at December 31, 2010		455			1.00 – 2.90		2.50
Cancelled and expired		—			0.00		0.00
Exercised		(455	)		1.00 – 2.90		2.50
Balance at December 31, 2011		—			$0.00	$	0.00

Restricted Stock Units

In June 2010, the Board of Directors of inContact approved an annual compensation package for the non-employee Directors of inContact. Under the package, non-employee directors receive a cash payment of $50,000 per year paid in monthly installments and an award of restricted stock units on July 1 of each year commencing in 2010 in number equal to $50,000 divided by the fair market value of inContact’s common stock at July 1 of each annual period, which is the grant date. The restricted stock units vest in equal monthly installments over the one-year period following the date of the award; provided, that vesting is accelerated in the event of a greater than 50% change in voting control of inContact or membership of the Board of Directors or a disposition of more than 50% of the assets of inContact (a “Corporate Event”). Each restricted stock unit represents the right to receive one share of inContact common stock (subject to adjustment in the event of a stock dividend, share combination, recapitalization or similar event as provided in the Plan) upon termination of service as a director for any reason or the occurrence of a Corporate Event. The compensation package also provides for additional annual issuances of restricted stock units to the chairperson of the Audit Committee, Compensation Committee, or Corporate Governance and Nominating Committee of the Board, in number equal to $10,000 divided by the fair market value of inContact’s common stock on July 1 of each annual period, which is the grant date.

During the years ended December 31, 2011, 2010 and 2009, we granted 58,000, 112,178 and 106,740 restricted stock units, respectively. The grants were valued at $280,000, $280,000 and $215,000, respectively, based on the closing stock price of inContact common stock on the date of grant. The compensation is expensed over the vesting period using the graded-vesting method. The weighted average grant date fair value of restricted stock units granted during the years ended December 31, 2011, 2010 and 2009 was $4.87, $2.50 and $2.01, respectively. The total fair value of restricted stock units vested during 2011, 2010 and 2009 was approximately $280,000, $263,000 and $281,000, respectively. Total compensation costs related to unvested restricted stock awards expected to be recognized was $49,000 as of December 31, 2011. The compensation cost is expected to be recognized over the weighted average period of 0.5 years.

NOTE 11. RELATED PARTY TRANSACTIONS

We paid the Chairman of the Board of Directors (the “Chairman”) $84,000 in 2011, $78,000 in 2010 and $72,000 in 2009 for consulting, marketing and financing activities. We owed the Chairman $7,000 at both December 31, 2011 and 2010.

F-28

Concurrent with selling 7.2 million shares of common stock to an investor in June 2011 (Note 9), we entered into a commercial agreement with Siemens Enterprise Communications, Inc. (“Siemens”), a subsidiary of the investor, whereby Siemens became a world-wide reseller of inContact’s portfolio of cloud-based solutions with minimum revenue purchase commitments of $5.0 million and $10.0 million during 2012 and 2013, respectively. No revenue was recorded during the year ended December 31, 2011 related to this agreement. We purchased phones from Siemens for $146,000 during the year ended December 31, 2011. The investor paid $18,000 to be a sponsor at our user conference during the year ended December 31, 2011.

NOTE 12. COMMITMENTS AND CONTINGENCIES

We have purchase commitments with two national long distance telecommunication providers. One purchase commitment provides for monthly minimums of $50,000 per month on a month-to-month basis. We currently exceed our monthly minimum purchase commitment with this carrier. The other purchase commitment is with another carrier that requires an annual $675,000 usage commitment through August 2012; we believe we will meet this commitment based on current usage patterns.

Certain customer lists purchased in 2001 through 2003 were financed through loans from various investors. All loans were paid prior to December 31, 2006. As part of the loan agreements, we agreed to pay a percentage of revenue received from the purchased customers to these investors as long as the customers remain with inContact. We paid these investors $326,000 in 2011, $329,000 in 2010 and $523,000 in 2009.

Litigation

In May 2009, the Company was served in a lawsuit titled California College, Inc., et al., v. UCN, Inc., et al. In the lawsuit, California College allege that (1) the Company made intentional and/or negligent misrepresentations in connection with the sale of the Company’s services from Insidesales.com, Inc., another defendant in the lawsuit, (2) that the Company breached its service contract with California College and the contract between California College and Insidesales.com by failing to deliver contracted services and product and failing to abide by implied covenants of good faith and fair dealing, and (3) the conduct of the Company interfered with prospective economic business relations of California College with respect to enrolling students. California College is seeking damages, in an amount to be proven at trial, in excess of $20 million. Pursuant to a motion filed by Insidesales.com, California College filed an amended complaint that has been answered by Insidesales.com and us. Furthermore, Insidesales.com and inContact filed cross-claims against one another, which they subsequently agreed to dismiss with prejudice. In October 2011, California College reached a settlement with Insidesales.com, the terms of which have not been disclosed and remain confidential. The Company has denied all of the substantive allegations of the complaint and cross-claim and intends to defend the claims vigorously. Management believes the claims against inContact are without merit and no liability has been recorded.

We are the subject of certain other legal matters considered incidental to our business activities. It is the opinion of management that the ultimate disposition of these matters will not have a material impact on our financial position, liquidity or results of operations.

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Operating Leases

The following schedule summarizes the future minimum lease payments on operating leases at December 31, 2011 (in thousands):

Year ended December 31,
2012	$	1,464
2013		1,477
2014		1,437
2015		883
Thereafter		190
Total	$	5,451

Rent expense was $1.7 million in 2011, $1.4 million in 2010 and $1.7 million in 2009.

Hosting Services

The Company has agreements with third parties to provide co-location services for hosting operations. The agreements require payment of a minimum amount per month for a fixed period of time in return for which the hosting service provider provides certain guarantees of network availability.

The following schedule summarizes the future minimum payments under these arrangements at December 31, 2011 (in thousands):

Year ended December 31,
2012	$	927
2013		928
2014		754
2015		711
Thereafter		513
Total	$	3,833

NOTE 13. EMPLOYEE BENEFIT PLAN

The Company has a voluntary defined contribution retirement plan qualifying under Section 401(k) of the Internal Revenue Code of 1986. The plan covers substantially all full-time employees. Under the terms of the plan, participants may contribute up to the statutorily prescribed limit to the plan. Employees are eligible on the first day of the month following their employment date. The Company matches 50% of the first 4% of an employee’s salary contributed to the plan. The Company made matching contributions during 2011, 2010 and 2009 of $265,000, $228,000 and $187,000, respectively.

NOTE 14. SEGMENTS

We operate under two business segments: Software and Telecom. The Software segment includes all monthly recurring revenue related to the delivery of our software applications, plus the associated professional services and setup fees related to the software services product features. The Telecom segment includes all voice and data long distance services provided to customers.

Management evaluates segment performance based on operating data (revenue, costs of revenue, and other operating expenses). Management does not evaluate and manage segment performance based on assets.

For segment reporting, we classify operating expenses as either “direct” or “indirect”. Direct expense refers to costs attributable solely to either selling and marketing efforts or research and development efforts. Indirect

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expense refers to costs that management considers to be overhead in running the business. In evaluating segment performance, management evaluates expenditures for both selling and marketing and research and development efforts at the segment level without the allocation of overhead expenses, such as rent, utilities and depreciation on property and equipment.

Operating segment revenues and profitability for the year ended December 31, 2011 were as follows (in thousands):

	Year Ended December 31, 2011
	Software			Telecom			Consolidated
Net revenue	$	39,870		$	49,115		$	88,985
Costs of revenue		16,940			35,637			52,577
Gross profit		22,930			13,478			36,408
Gross margin		58	%		27	%		41	%
Operating expenses:
Direct selling and marketing		19,810			3,421			23,231
Direct research and development		5,706			—			5,706
Indirect		12,734			3,336			16,070
(Loss) income from operations	$	(15,320	)	$	6,721		$	(8,599	)

Operating segment revenues and profitability for the year ended December 31, 2010 were as follows (in thousands):

	Year Ended December 31, 2010
	Software			Telecom			Consolidated
Net revenue	$	33,692		$	48,463		$	82,155
Costs of revenue		12,051			34,542			46,593
Gross profit		21,641			13,921			35,562
Gross margin		64	%		29	%		43	%
Operating expenses:
Direct selling and marketing		14,662			3,467			18,129
Direct research and development		4,638			—			4,638
Indirect		10,342			3,405			13,747
(Loss) income from operations	$	(8,001	)	$	7,049		$	(952	)

Operating segment revenues and profitability for the year ended December 31, 2009 were as follows (in thousands):

	Year Ended December 31, 2009
	Software			Telecom			Consolidated
Net revenue	$	29,103		$	55,080		$	84,183
Costs of revenue		9,681			40,334			50,015
Gross profit		19,422			14,746			34,168
Gross margin		67	%		27	%		41	%
Operating expenses:
Direct selling and marketing		11,322			5,123			16,445
Direct research and development		4,188			—			4,188
Indirect		10,178			5,126			15,304
(Loss) income from operations	$	(6,266	)	$	4,497		$	(1,769	)

NOTE 15. SUBSEQUENT EVENTS

In January 2012, we paid $2.5 million of the outstanding Revolving Credit Agreement, which was $2.5 million at December 31, 2011.

F-31

INCONTACT, INC.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

Allowance for uncollectible accounts receivable:	Balance at beginning of year		Charged to costs and expenses		Write-offs, net of recoveries		Balance at end of year
Year ended December 31, 2011	$	749	$	350	$	608	$	491
Year ended December 31, 2010	$	1,371	$	—	$	622	$	749
Year ended December 31, 2009	$	1,871	$	375	$	875	$	1,371

F-32

EX-10.27

Exhibit 10.27

LOAN AGREEMENT

Between

ZIONS FIRST NATIONAL BANK

Lender

and

INCONTACT, INC.

Borrower

SIEMENS ENTERPRISE COMMUNICATIONS, INC.

Guarantor

Effective Date: October 7, 2011

TABLE OF CONTENTS

			Page
1.	Definitions			1
	1.1	Definitions		1
2.	Loan Description			5
	2.1	Amount of Loan		5
	2.2	Nature and Duration of Loan		5
	2.3	Promissory Note		5
	2.4	Loan Fee		6
3.	Security for Loan			6
	3.1	Collateral		6
	3.2	Release of Lender as Condition to Lien Termination		6
4.	Guarantee			6
	4.1	Guarantee		6
	4.2	Guarantor Organization and Qualification		6
	4.3	Guarantor Authorization		7
	4.4	Guarantor Financial Statements and Reports		7
	4.5	Accuracy of Guarantor Financial Statements		7
5.	Conditions to Loan Disbursements			8
	5.1	Conditions to Loan Disbursements		8
	5.2	No Default, Adverse Change, False or Misleading Statement		8
6.	Representations and Warranties			8
	6.1	Organization and Qualification		8
	6.2	Authorization		9
	6.3	No Governmental Approval Necessary		9
	6.4	Accuracy of Financial Statements		9
	6.5	No Pending or Threatened Litigation		9
	6.6	Full and Accurate Disclosure		10
	6.7	Compliance with ERISA		10
	6.8	Compliance with USA Patriot Act		11
	6.9	Compliance with All Other Applicable Law		11
	6.10	Environmental Representations and Warranties		11
	6.11	Operation of Business		11

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TABLE OF CONTENTS

			Page
	6.12	Payment of Taxes		11
7.	Borrower’s Covenants			12
	7.1	Use of Proceeds		12
	7.2	Continued Compliance with ERISA		12
	7.3	Compliance with USA Patriot Act		12
	7.4	Continued Compliance with Applicable Law		12
	7.5	Prior Consent for Amendment or Change		13
	7.6	Payment of Taxes and Obligations		13
	7.7	Financial Statements and Reports		13
	7.8	Insurance		14
	7.9	Inspection		14
	7.10	Operation of Business		14
	7.11	Maintenance of Records and Properties		14
	7.12	Notice of Claims		14
	7.13	Environmental Covenants		14
	7.14	Financial Covenants		15
	7.15	Negative Pledge		16
	7.16	Restriction on Debt		16
	7.17	Mergers, Consolidations, and Purchase and Sale of Assets		16
	7.18	Dividends and Loans		17
8.	Default			17
	8.1	Events of Default		17
	8.2	Cure Periods		18
	8.3	No Waiver of Event of Default		18
9.	Remedies			18
	9.1	Remedies upon Event of Default		18
	9.2	Rights and Remedies Cumulative		19
	9.3	No Waiver of Rights		19
10.	General Provisions			19
	10.1	Governing Agreement		19
	10.2	Borrower’s Obligations Cumulative		19

ii

TABLE OF CONTENTS

			Page
	10.3	Payment of Expenses and Attorney’s Fees		19
	10.4	Right to Perform for Borrower		20
	10.5	Assignability		20
	10.6	Third Party Beneficiaries		20
	10.7	Governing Law		20
	10.8	Severability of Invalid Provisions		20
	10.9	Interpretation of Loan Agreement		21
	10.10	Survival and Binding Effect of Representations, Warranties, and Covenants		21
	10.11	Indemnification		21
	10.12	Environmental Indemnification		21
	10.13	Interest on Expenses and Indemnification, Collateral, Order of Application		22
	10.14	Limitation of Consequential Damages		22
	10.15	Waiver of Defenses and Release of Claims		22
	10.16	Revival Clause		23
	10.17	Jury Trial Waiver, Arbitration, and Class Action Waiver		23
	10.18	Consent to Utah Jurisdiction and Exclusive Jurisdiction of Utah Courts		25
	10.19	Joint and Several Liability		25
	10.20	Notices		25
	10.21	Duplicate Originals; Counterpart Execution		26
	10.22	Disclosure of Financial and Other Information		26
	10.23	Integrated Agreement and Subsequent Amendment		26
SCHEDULES
6.5	Litigation
7.16	Existing Debt

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LOAN AGREEMENT

This Loan Agreement is made and entered into as of October 7, 2011 (the “Effective Date”) by and between Zions First National Bank and inContact, Inc.

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Definitions

1.1    Definitions

Terms defined in the singular shall have the same meaning when used in the plural and vice versa. As used herein, the term:

“Accounting Standards” means (i) in the case of financial statements and reports, conformity with generally accepted accounting principles and fully and fairly representing the financial condition as of the date thereof and the results of operations for the period or periods covered thereby, consistent with other financial statements of that company previously delivered to Lender, and (ii) in the case of calculations, definitions, and covenants, generally accepted accounting principles consistent with those used in the preparation of financial statements of Borrower, Guarantor or Guarantor’s Parent, as applicable, previously delivered to Lender.

“Administrator” shall have the meaning set forth in Section 10.17 Jury, Trial, Arbitration and Class Action Waiver.

“Arbitration Order” shall have the meaning set forth in Section 10.17 Jury, Trial, Arbitration and Class Action Waiver.

“Banking Business Day” means any day not a Saturday, Sunday, legal holiday in the State of Utah, or day on which national banks in the State of Utah are authorized to close and, when used in reference to an Interest Period (as defined in the Promissory Notes), a day on which dealings in dollar deposits are also carried on in the London Interbank market and banks are open for business in London.

“Borrower” means inContact, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors, and, if permitted, assigns.

“Collateral” shall have the meaning set forth in Section 3.1 Collateral.

“Debt” means (i) indebtedness or liability for borrowed money; (ii) obligations evidenced by bonds, debentures, notes, or other similar instruments; (iii) obligations for the deferred purchase price of property or services (including trade obligations); (iv) obligations as lessee under capital leases; (v) current liabilities in respect of unfunded vested benefits under Plans covered by ERISA; (vi) obligations under letters of credit; (vii) obligations under acceptance facilities; (viii) all guarantees, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any person or entity, or otherwise to assure a creditor against loss; and (ix) obligations secured by any mortgage, deed of trust, lien, pledge, or security interest or other charge or encumbrance on property, whether or not the obligations have been assumed.

“Default Notice” shall have the meaning set forth in Section 8.2 Cure Periods.

“Dispute” shall have the meaning set forth in Section 10.17 Jury, Trial, Arbitration and Class Action Waiver.

“EBITDA” means earnings (excluding extraordinary gains and losses realized other than in the ordinary course of business and excluding the sale or writedown of intangible or capital assets) before Interest Expense, Income Tax Expense, depreciation, amortization, and other non-cash charges, determined in accordance with Accounting Standards.

“Effective Date” shall mean the date the parties intend this Loan Agreement to become binding and enforceable, which is the date stated at the introduction of this Loan Agreement.

“Environmental Condition” shall mean any condition involving or relating to Hazardous Materials and/or the environment affecting the Real Property, whether or not yet discovered, which could or does result in any damage, loss, cost, expense, claim, demand, order, or liability to or against Borrower or Lender by any third party (including, without limitation, any government entity), including, without limitation, any condition resulting from the operation of Borrower’s business and/or operations in the vicinity of the Real Property and/or any activity or operation formerly conducted by any person or entity on or off the Real Property.

“Environmental Health and Safety Law” shall mean any legal requirement that requires or relates to:

a. advising appropriate authorities, employees, or the public of intended or actual releases of Hazardous Materials, violations of discharge limits or other prohibitions, and of the commencement of activities, such as resource extraction or construction, that do or could have significant impact on the environment;

b. preventing or reducing to acceptable levels the release of Hazardous Materials;

c. reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated;

d. assuring that products are designed, formulated, packaged, and used so that they do not present unreasonable risks to human health or the environment when used or disposed of;

e. protecting resources, species, or ecological amenities;

f. use, storage, transportation, sale, or transfer of Hazardous Materials or other potentially harmful substances;

g. cleaning up Hazardous Materials that have been released, preventing the threat of release, and/or paying the costs of such clean up or prevention; or

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h. making responsible parties pay for damages done to the health of others or the environment or permitting self-appointed representatives of the public interest to recover for injuries done to public assets.

“Equipment Line” means one or more equipment finance or lease facilities between Borrower and Zions Credit Corporation outstanding from time to time.

“ERISA” shall have the meaning set forth in Section 6.7 Compliance with ERISA.

“ERISA Affiliate” shall have the meaning set forth in Section 6.7 Compliance with ERISA.

“Event of Default” shall have the meaning set forth in Section 8.1 Events of Default.

“Guarantee” means each guarantee described in Section 4.1 Guarantee, and any and all amendments, modifications, addendums, and replacements.

“Guarantor” means Siemens Enterprise Communications, Inc., a Delaware corporation, its successors and assigns.

“Guarantor’s Parent” means Enterprise Networks Holdings B.V., its successors and assigns.

“Hazardous Materials” means (i) “hazardous waste” as defined by the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et. seq.), including any future amendments thereto, and regulations promulgated thereunder, and as the term may be defined by any contemporary state counterpart to such act; (ii) “hazardous substance” as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et. seq.), including any future amendments thereto, and regulations promulgated thereunder, and as the term may be defined by any contemporary state counterpart of such act; (iii) asbestos; (iv) polychlorinated biphenyls; (v) underground or above ground storage tanks, whether empty or filled or partially filled with any substance; (vi) any substance the presence of which is or becomes prohibited by any federal, state, or local law, ordinance, rule, or regulation; and (vii) any substance which under any federal, state, or local law, ordinance, rule or regulation requires special handling or notification in its collection, storage, treatment, transportation, use or disposal.

“Income Tax Expense” means expenditures for federal and state income taxes determined in accordance with Accounting Standards.

“Indebtedness” means all liabilities, obligations, and indebtedness of Borrower arising under the Loan Documents, including the Promissory Note and including all costs and expenses, including reasonable attorneys fees and legal expenses, for which Borrower is liable under the Loan Documents.

“Interest Expense” means expenditures for interest determined in accordance with Accounting Standards.

“Lender” means Zions First National Bank, its successors, and assigns.

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“Loan” means the loan to be made pursuant to Section 2 Loan Description.

“Loan Agreement” means this agreement, together with any exhibits, amendments, addendums, and modifications.

“Loan Documents” means the Loan Agreement, Promissory Note, Guarantee, Security Documents, all other agreements and documents contemplated by any of the aforesaid documents, and all amendments, modifications, addendums, and replacements, whether presently existing or created in the future.

“Material Adverse Effect” means a material adverse effect on Borrower’s or any Guarantor’s financial condition, conduct of its business, or ability to perform its obligations under the Loan Documents.

“Minimum Liquidity Position” shall have the meaning set forth in Section 7.14a Minimum Liquidity Position and Minimum Quarterly EBITDA.

“Organizational Documents” means, in the case of a corporation, its Articles or Certificate of Incorporation and By-Laws; in the case of a general partnership, its Articles or Certificate of Partnership; in the case of a limited partnership, its Articles or Certificate of Limited Partnership; in the case of a limited liability company, its Articles of Organization or Certificate of Formation and Operating Agreement, Limited Liability Company Agreement, Member Control Agreement or Bylaws, if any; in the case of a limited liability partnership, its Articles of Limited Liability Partnership; and all similar formation or governing documents and all amendments, modifications, and changes to any of the foregoing which are currently in effect.

“PBGC” shall have the meaning set forth in Section 6.7 Compliance with ERISA.

“Person” means any natural person, any unincorporated association, any corporation, any partnership, any joint venture, any limited liability company, any trust, any other legal entity, or any governmental authority.

“Promissory Note” means the promissory note to be executed by Borrower pursuant to Section 2.3 Promissory Note and any and all renewals, extensions, modifications, and replacements thereof.

“Real Property” means any and all real property or improvements thereon owned or leased by Borrower or in which Borrower has any other interest of any nature whatsoever.

“Reseller Agreement” means that certain Master Reseller Agreement between Guarantor and Borrower dated June 14, 2011.

“RLOC Loan Agreement” means that certain Loan Agreement dated July 16, 2009, between Borrower and Lender, and any and all amendments, modifications, and replacements thereof.

“RLOC Loan Documents” means the RLOC Loan Agreement, RLOC Note, Security Agreement, any other Security Documents related to the RLOC Loan Agreement, all other agreements and documents contemplated by any of the aforesaid documents, and all amendments, modifications, addendums, and replacements, whether presently existing or created in the future, including, without limitation, any which extend the maturity date or increase the principal under the RLOC Note.

4

“RLOC Note” means that certain Promissory Note (Revolving Line of Credit) dated July 16, 2009, as amended by that certain Note Modification Agreement and Allonge dated August 3, 2010, and that certain Second Note Modification Agreement and Allonge dated March 1, 2011, each executed by Borrower in favor of Lender, including any and all renewals, extensions, modifications and replacements thereof, including, without limitation, any which extend the maturity or increase the principal amount thereof.

“Security Agreement” means that certain Security Agreement (All Assets) dated July 16, 2009 between Borrower and Lender, and any and all amendments, modifications, and replacements thereof.

“Security Documents” means all security agreements, assignments, pledges, financing statements, deeds of trust, mortgages, and other documents which create or evidence any security interest, assignment, lien or other encumbrance in favor of Lender to secure any or all of the obligations created or contemplated by any of the Loan Documents, and all amendments, modifications, addendums, and replacements, whether presently existing or created in the future.

“Security Transfer Agreement” means that certain Security Transfer Agreement between inContact, Ltd., a limited liability company organized under the laws of England and Wales, which is a wholly owned subsidiary of Borrower, and Guarantor, dated as of October 7, 2011.

“Working Capital” means all total current assets less total current liabilities. Current liabilities include, without limitation, (i) all obligations payable on demand or within one year after the date on which the determination is made, and (ii) final maturities and sinking fund payments required to be made within one year after the date on which the determination is made, but excluding all such liabilities or obligations which are renewable or extendable at the option of Borrower to a date more than one year from the date of determination.

2. Loan Description

2.1    Amount of Loan

Upon fulfillment of all conditions precedent set forth in this Loan Agreement, and so long as no Event of Default exists, which has not been waived or timely cured, and no other breach has occurred under the Loan Documents, which has not been waived or timely cured, Lender agrees to loan Borrower up to the maximum principal amount of $2,500,000.00.

2.2    Nature and Duration of Loan

The Loan shall be a term loan payable in full upon the date and upon the terms and conditions provided in the Promissory Note.

2.3    Promissory Note

5

The Loan shall be evidenced by the Promissory Note. The Promissory Note shall be executed and delivered to Lender upon execution and delivery of this Loan Agreement. Proceeds of the Promissory Note may be disbursed by Lender by wire transfer.

2.4    Loan Fee

Upon execution and delivery of this Loan Agreement, Borrower shall pay to Lender a loan fee of $25,000. No portion of such fee shall be refunded in the event of early termination of this Loan Agreement or any termination or reduction of the right of Borrower to request advances under this Loan Agreement.

3. Security for Loan

3.1    Collateral

The Loan, Promissory Note, and all obligations of Borrower under the Loan Documents shall be secured by such collateral as is provided in the Security Documents (the “Collateral”), which shall include, without limitation, a security interest in all assets of Borrower, as more particularly described in the Security Documents, including, without limitation, the Security Agreement, except that equipment purchased by Borrower to fulfill its obligations under the Reseller Agreement (limited to the equipment listed on Schedule 2 of the Security Transfer Agreement) is expressly excluded from Lender’s Collateral.

3.2    Release of Lender as Condition to Lien Termination

In recognition of Lender’s right to have all its attorneys fees and expenses incurred in connection with this Loan Agreement secured by the Collateral, notwithstanding payment in full of the Loan and all other obligations secured by the Collateral, Lender shall not be required to release, reconvey, or terminate any Security Document unless and until Borrower and all Guarantors have executed and delivered to Lender general releases in form and substance satisfactory to Lender.

4. Guarantee

4.1    Guarantee

Upon execution and delivery of this Loan Agreement, Guarantor shall execute and deliver to Lender a Guarantee in a form acceptable to Lender.

4.2    Guarantor Organization and Qualification

Guarantor represents and warrants to Lender as follows:

a. Guarantor is a corporation duly organized and existing in good standing under the laws of the State of Delaware. Guarantor is duly qualified to do business in each jurisdiction where the conduct of its business requires qualification.

b. Guarantor has the full power and authority to own its properties and to conduct the business in which it engages and to enter into and perform its obligations under the Loan Documents. Guarantor has delivered to Lender or Lender’s counsel accurate and complete copies of Guarantor’s Organizational Documents which are operative and in effect as of the Effective Date.

6

4.3    Guarantor Authorization

Guarantor represents and warrants to Lender that the execution, delivery, and performance by Guarantor of the Loan Documents have been duly authorized by all necessary action on the part of Guarantor and are not inconsistent with Guarantor’s Organizational Documents or any resolution of the Board of Directors of Guarantor, do not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract, or other instrument to which Guarantor is a party or by which it is bound, and that upon execution and delivery hereof and thereof, the Loan Documents will constitute legal, valid, and binding agreements and obligations of Guarantor, enforceable in accordance with their respective terms.

4.4    Guarantor Financial Statements and Reports

Until requested otherwise by Lender, Guarantor shall provide the following financial statements and reports to Lender:

a. Semi-annual and annual financial statements for each such fiscal period of Guarantor which are consistent with other financial statements previously delivered to Lender subject to providing a proforma statement of Guarantor’s standard internal reporting information with reasonable adjustments made in good faith by Guarantor for financial statements dated as of March 31, to be delivered to Lender within 120 days of March 31 and September 30 of each year.

b. Semi-annual and annual financial statements for each such fiscal period of Guarantor’s Parent, to be delivered to Lender within 120 days of March 31 and September 30 of each year. The financial statements delivered for the fiscal year end shall include a certification by the chief executive officer and chief financial officer of Guarantor’s Parent certifying that the financial statements fully and fairly represent Guarantor’s Parent’s financial condition as of the date thereof and the results of operations for the period covered thereby and are consistent with other financial statements previously delivered to Lender.

4.5    Accuracy of Guarantor Financial Statements

All of Guarantor’s and Guarantor’s Parent’s audited financial statements heretofore delivered to Lender, if any, have been prepared in accordance with Accounting Standards and fully and fairly represent Guarantor’s and Guarantor’s Parent’s financial condition as of the date thereof and the results of Guarantor’s and Guarantor’s Parent’s operations for the period or periods covered thereby.

All of Guarantor’s and Guarantor’s Parent’s unaudited financial statements heretofore delivered to Lender fully and fairly represent Guarantor’s and Guarantor’s Parent’s financial condition as of the date thereof and the results of Guarantor’s and Guarantor’s Parent’s operations for the period or periods covered thereby and are consistent with other financial statements previously delivered to Lender.

7

Since the date of such financial statements, there has been no change in Guarantor’s and Guarantor’s Parent’s financial condition which could have a Material Adverse Effect.

5. Conditions to Loan Disbursements

5.1    Conditions to Loan Disbursements

Lender’s obligation to disburse any of the Loan is expressly subject to, and shall not arise until all of the conditions set forth below have been satisfied. All of the documents referred to below must be in a form and substance acceptable to Lender.

a. All of the Loan Documents and all other documents contemplated to be delivered to Lender prior to funding have been fully executed and delivered to Lender.

b. All of the documents contemplated by the Loan Documents which require filing or recording have been properly filed and recorded so that all of the liens and security interests granted to Lender in connection with the Loan will be properly created and perfected, and Lender shall have a first priority security interest on all assets of Borrower except as set forth in Section 3.1 Collateral hereto.

c. All other conditions precedent provided in or contemplated by the Loan Documents or any other agreement or document have been performed.

d. As of the date of disbursement of all or any portion of the Loan, the following shall be true and correct: (i) all representations and warranties made by Borrower and Guarantor in the Loan Documents are true and correct in all material respects as of the date of such disbursement; and (ii) no Event of Default has occurred which has not been waived or timely cured, and no conditions exist and no event has occurred, which, with the passage of time or the giving of notice, or both, would constitute an Event of Default.

All conditions precedent set forth in this Loan Agreement and any of the Loan Documents are for the sole benefit of Lender and may be waived unilaterally by Lender.

5.2    No Default, Adverse Change, False or Misleading Statement

Lender’s obligation to advance any funds at any time pursuant to this Loan Agreement and the Promissory Note shall, at Lender’s sole discretion, terminate upon the occurrence of any Event of Default, any event which could have a Material Adverse Effect, or upon the determination by Lender that any of Borrower’s or Guarantor’s representations made in any of the Loan Documents were false or materially misleading when made. Upon the exercise of such discretion, Lender shall be relieved of all further obligations under the Loan Documents.

6. Representations and Warranties

Borrower represents and warrants to Lender as follows:

6.1    Organization and Qualification

8

Borrower is a corporation duly organized and existing in good standing under the laws of the State of Delaware, and Borrower is qualified and in good standing as a foreign corporation in the State of Utah. Borrower is duly qualified to do business in each jurisdiction where the conduct of its business requires qualification.

Borrower has the full power and authority to own its property and to conduct the business in which it engages and to enter into and perform its obligations under the Loan Documents. Borrower has delivered to Lender or Lender’s counsel accurate and complete copies of Borrower’s Organizational Documents which are operative and in effect as of the Effective Date.

6.2    Authorization

The execution, delivery, and performance by Borrower of the Loan Documents has been duly authorized by all necessary action on the part of Borrower and are not inconsistent with Borrower’s Organizational Documents or any resolution of the Board of Directors of Borrower, do not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract, or other instrument to which Borrower is a party or by which it is bound, and that upon execution and delivery thereof, the Loan Documents will constitute legal, valid, and binding agreements and obligations of Borrower, enforceable in accordance with their respective terms.

6.3    No Governmental Approval Necessary

No consent by, approval of, giving of notice to, registration with, or taking of any other action with respect to or by any federal, state, or local governmental authority or organization is required for Borrower’s execution, delivery, or performance of the Loan Documents.

6.4    Accuracy of Financial Statements

All of Borrower’s audited financial statements heretofore delivered to Lender have been prepared in accordance with Accounting Standards.

All of Borrowers unaudited financial statements heretofore delivered to Lender fully and fairly represent Borrower’s financial condition as of the date thereof and the results of Borrower’s operations for the period or periods covered thereby and are consistent with other financial statements previously delivered to Lender.

Since the dates of the most recent audited and unaudited financial statements delivered to Lender, there has been no event which would have a Material Adverse Effect on its financial condition.

All of Borrower’s pro forma financial statements heretofore delivered to Lender have been prepared consistently with Borrower’s actual financial statements and fully and fairly represent Borrower’s anticipated financial condition and the anticipated results of Borrower’s operation for the period or periods covered thereby.

6.5    No Pending or Threatened Litigation

9

Except as set forth on Schedule 6.5 attached hereto, there are no actions, suits, or proceedings pending or, to Borrower’s knowledge, threatened against or affecting Borrower in any court or before any governmental commission, board, or authority which, if adversely determined, would have a Material Adverse Effect.

6.6    Full and Accurate Disclosure

This Loan Agreement, the financial statements referred to herein, any loan application submitted to Lender, and all other statements furnished by Borrower to Lender in connection herewith contain no untrue statement of a material fact and omit no material fact necessary to make the statements contained therein or herein not misleading. Borrower represents and warrants that it has not failed to disclose in writing to Lender any fact that would have a Material Adverse Effect.

6.7    Compliance with ERISA

Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, and the regulations and published interpretations thereunder. Neither a Reportable Event as set forth in Section 4043 of ERISA or the regulations thereunder (“Reportable Event”) nor a prohibited transaction as set forth in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended, has occurred and is continuing with respect to any employee benefit plan established, maintained, or to which contributions have been made by Borrower or any trade or business (whether or not incorporated) which together with Borrower would be treated as a single employer under Section 4001 of ERISA (“ERISA Affiliate”) for its employees which is covered by Title I or Title IV of ERISA (“Plan”); no notice of intent to terminate a Plan has been filed nor has any Plan been terminated which is subject to Title IV of ERISA; no circumstances exist that constitute grounds under Section 4042 of ERISA entitling the Pension Benefit Guaranty Corporation (“PBGC”) to institute proceedings to terminate, or appoint a trustee to administer a Plan, nor has the PBGC instituted any such proceedings; neither Borrower nor any ERISA Affiliate has completely or partially withdrawn under Section 4201 or 4204 of ERISA from any Plan described in Section 4001(a)(3) of ERISA which covers employees of Borrower or any ERISA Affiliate (“Multi-employer Plan”); Borrower and each ERISA Affiliate has met its minimum funding requirements under ERISA with respect to all of its Plans and the present fair market value of all Plan assets equals or exceeds the present value of all vested benefits under or all claims reasonably anticipated against each Plan, as determined on the most recent valuation date of the Plan and in accordance with the provisions of ERISA and the regulations thereunder and the applicable statements of the Financial Accounting Standards Board (“FASB”) for calculating the potential liability of Borrower or any ERISA Affiliate under any Plan; neither Borrower nor any ERISA Affiliate has incurred any liability to the PBGC (except payment of premiums, which is current) under ERISA.

Borrower, each ERISA Affiliate and each group health plan (as defined in ERISA Section 733) sponsored by Borrower and each ERISA Affiliate, or in which Borrower or any ERISA Affiliate is a participating employer, are in compliance with, have satisfied and continue to satisfy (to the extent applicable) all requirements for continuation of group health coverage under Section 4980B of the Internal Revenue Code and Sections 601 et seq. of ERISA, and are in compliance with, have satisfied and continue to satisfy Part 7 of ERISA and all corresponding and similar state laws relating to portability, access and renewability of group health benefits and other requirements included in Part 7.

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6.8    Compliance with USA Patriot Act

Borrower is not subject to any law, regulation, or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits Lender from making any advance or extension of credit to Borrower or from otherwise conducting business with Borrower.

6.9    Compliance with All Other Applicable Law

Borrower has complied in all material respects with all applicable statutes, rules, regulations, orders, and restrictions of any domestic or foreign government, or any instrumentality or agency thereof having jurisdiction over the conduct of Borrower’s business or the ownership of its properties, which may have a Material Adverse Effect.

6.10    Environmental Representations and Warranties

Except as Lender has been otherwise previously advised by Borrower to Borrower’s knowledge after due inquiry and investigation, no Hazardous Materials are now located on, in, or under the Real Property, nor to Borrower’s knowledge after due inquiry and investigation is there any Environmental Condition on, in, or under the Real Property and neither Borrower nor, to Borrower’s knowledge, after due inquiry and investigation, any other person has ever caused or permitted any Hazardous Materials to be placed, held, used, stored, released, generated, located or disposed of on, in or under the Real Property, or any part thereof, nor caused or allowed an Environmental Condition to exist on, in or under the Real Property, except in the ordinary course of Borrower’s business under conditions that are generally recognized to be appropriate and safe and that are in compliance with all applicable Environmental Health and Safety Laws. Borrower further represents and warrants that to Borrower’s knowledge after due inquiry and investigation no investigation, administrative order, consent order and agreement, litigation or settlement with respect to Hazardous Materials and/or an Environmental Condition is proposed, threatened, anticipated or in existence with respect to the Real Property.

6.11    Operation of Business

Borrower possesses all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, to conduct its business substantially as now conducted and as presently proposed to be conducted, and Borrower is not in violation of any valid rights of others with respect to any of the foregoing.

6.12    Payment of Taxes

Borrower has filed all tax returns (federal, state, and local) required to be filed, or has filed timely return extensions and has paid all taxes, assessments, and governmental charges and levies, including interest and penalties, on Borrower’s assets, business and income, except such as are being contested in good faith by proper proceedings and as to which adequate reserves are maintained.

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7. Borrower’s Covenants

Borrower makes the following agreements and covenants, which shall continue so long as this Loan Agreement is in effect and so long as Borrower is indebted to Lender for obligations arising out of, identified in, or contemplated by this Loan Agreement.

7.1    Use of Proceeds

Borrower shall use the proceeds of the Loan solely for the purposes identified to Lender in applying for the Loan.

Borrower shall not, directly or indirectly, use any of the proceeds of the Loan for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, or to extend credit to any person or entity for the purpose of purchasing or carrying any such margin stock or for any purpose which violates, or is inconsistent with, Regulation X of said Board of Governors, or for any other purpose not permitted by Section 7 of the Securities Exchange Act of 1934, as amended, or by any of the rules and regulations respecting the extension of credit promulgated thereunder.

7.2    Continued Compliance with ERISA

Borrower covenants that, with respect to all Plans (as defined in Section 6.7 Compliance with ERISA) which Borrower or any ERISA Affiliate currently maintains or to which Borrower or any ERISA Affiliate is a sponsoring or participating employer, fiduciary, party in interest or disqualified person or which Borrower or any ERISA Affiliate may hereafter adopt, Borrower and each ERISA Affiliate shall continue to comply with all applicable provisions of the Internal Revenue Code and ERISA and with all representations made in Section 6.7 Compliance with ERISA, including, without limitation, conformance with all notice and reporting requirements, funding standards, prohibited transaction rules, multi-employer plan rules, necessary reserve requirements, and health care continuation, coverage and portability requirements.

7.3    Compliance with USA Patriot Act

Borrower shall (a) not be or become subject at any time to any law, regulation, or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits Lender from making any advance or extension of credit to Borrower or from otherwise conducting business with Borrower, and (b) provide documentary and other evidence of Borrower’s identity as may be requested by Lender at any time to enable Lender to verify Borrower’s identity or to comply with any applicable law or regulation, including, without limitation, Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

7.4    Continued Compliance with Applicable Law

Borrower shall conduct its business in a lawful manner and in material compliance with all applicable federal, state, and local laws, ordinances, rules, regulations, and orders; shall maintain in good standing all licenses and organizational or other qualifications reasonably necessary to its business and existence; and shall not engage in any business not authorized by and not in accordance with its Organizational Documents and other governing documents.

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7.5    Prior Consent for Amendment or Change

Borrower shall not modify, amend, waive, or otherwise alter, or fail to enforce, its Organizational Documents or other governing documents without Lender’s prior written consent.

7.6    Payment of Taxes and Obligations

Borrower shall pay when due all taxes, assessments, and governmental charges and levies on Borrower’s assets, business, and income, and all material obligations of Borrower of whatever nature, except such as are being contested in good faith by proper proceedings and as to which adequate reserves are maintained.

7.7    Financial Statements and Reports

Borrower shall provide Lender with such financial statements and reports as Lender may reasonably request. Audited financial statements and reports shall be prepared in accordance with Accounting Standards. Unaudited financial statements and reports shall fully and fairly represent Borrower’s financial condition as of the date thereof and the results of Borrower’s operations for the period or periods covered thereby and shall be consistent with other financial statements previously delivered to Lender.

Until requested otherwise by Lender, Borrower shall provide the following financial statements and reports to Lender:

a. Annual consolidated audited financial statements for each fiscal year of Borrower in a form acceptable to Lender, to be delivered to Lender within 120 days of the end of the fiscal year. The annual financial statements shall include a certification by the chief financial officer and chief executive officer of Borrower that the annual financial statements fully and fairly represent Borrower’s financial condition as of the date thereof and the results of operations for the period covered thereby and are consistent with other financial statements previously delivered to Lender.

b. Borrower’s annual forecast in a form acceptable to Lender to be delivered to Lender within 60 days of the end of the fiscal year.

c. Quarterly financial statements for each fiscal quarter of Borrower in a form acceptable to Lender, to be delivered to Lender within 45 days of the end of the fiscal quarter. The quarterly financial statements shall include a certification by the chief financial officer or chief executive officer of Borrower that the quarterly financial statements fully and fairly represent Borrower’s financial condition as of the date thereof and the results of operations for the period covered thereby and are consistent with other financial statements previously delivered to Lender.

d. Together with the delivery of each financial statement delivered in respect of a period ending as of the end of a fiscal quarter, a consolidated compliance certificate certifying that Borrower is in compliance with all terms and conditions of this Loan Agreement, including compliance with the financial covenants provided in Section 7.14 Financial Covenants. The compliance certificate shall include the data and calculations supporting all financial covenants, whether in compliance or not, and shall be signed by the chief executive officer or chief financial officer of Borrower

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7.8    Insurance

Borrower shall maintain insurance with financially sound and reputable insurance companies or associations in such amounts and covering such risks as are usually carried by companies engaged in the same or a similar business and similarly situated, which insurance may provide for reasonable deductibility from coverage thereof.

7.9    Inspection

Borrower shall at any reasonable time and from time to time permit Lender or any representative of Lender to examine and make copies of and abstracts from the records and books of account of, and visit and inspect the properties and assets of, Borrower, and to discuss the affairs, finances, and accounts of Borrower with any of Borrower’s officers and directors and with Borrower’s independent accountants.

7.10    Operation of Business

Borrower shall maintain all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, necessary or advisable to conduct its business and Borrower shall not violate any valid rights of others with respect to any of the foregoing. Borrower shall continue to engage in a business of the same general type as now conducted.

7.11    Maintenance of Records and Properties

Borrower shall keep adequate records and books of account in which complete entries will be made in accordance with Accounting Standards. Borrower shall maintain, keep and preserve all of its properties (tangible and intangible) necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted.

7.12    Notice of Claims

Borrower shall promptly notify Lender in writing of all actions, suits or proceedings filed or threatened against or affecting Borrower in any court or before any governmental commission, board, or authority which, if adversely determined, would have a Material Adverse Effect.

7.13    Environmental Covenants

Borrower covenants that it will:

a. Not permit the presence, use, disposal, storage or release of any Hazardous Materials on, in, or under the Real Property, except in the ordinary course of Borrower’s business under conditions that are generally recognized to be appropriate and safe and that are in compliance with all applicable Environmental Health and Safety Laws.

b. Not permit any substance, activity or Environmental Condition on, in, under or affecting the Real Property which is in violation of any Environmental Health and Safety Laws.

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c. Comply in all material respects with the provisions of all Environmental Health and Safety Laws.

d. Notify Lender promptly of any discharge of Hazardous Materials, Environmental Condition, or environmental complaint or notice received from any governmental agency or any other party.

e. Upon any discharge of Hazardous Materials or upon the occurrence of any Environmental Condition, immediately contain and remediate the same in compliance with all Environmental Health and Safety Laws, promptly pay any fine or penalty assessed in connection therewith, and immediately notify Lender of such events.

f. Permit Lender with reasonable time and notice to inspect the Real Property for Hazardous Materials and Environmental Conditions, to conduct tests thereon, and to inspect all books, correspondence, and records pertaining thereto.

g. From time to time upon Lender’s request, and at Borrower’s expense, provide a report (including all validated and unvalidated data generated for such reports) of a qualified independent environmental engineer acceptable to Lender, satisfactory to Lender in scope, form, and content, and provide to Lender such other and further assurances reasonably satisfactory to Lender, that Borrower is in compliance with these covenants concerning Hazardous Materials and Environmental Conditions, and that any past violation thereof has been corrected in compliance with all applicable Environmental Health and Safety Laws.

h. Immediately advise Lender of any additional, supplemental, new, or other information concerning any Hazardous Materials or Environmental Conditions relating to the Real Property.

7.14    Financial Covenants

Except as otherwise provided herein, each of the accounting terms used in this Section 7.14 shall have the meanings used in accordance with Accounting Standards.

a. Minimum Liquidity Position and Minimum Quarterly EBITDA. Borrower shall at all times maintain cash, cash equivalents, and marketable securities having an aggregate value, as determined in accordance with Accounting Standards and as reasonably acceptable to Lender, of not less than the outstanding balance on the revolving line of credit loan described in the RLOC Loan Documents plus $2,500,000 (“Minimum Liquidity Position”). If the aggregate value of Borrower’s cash, cash equivalents, and marketable securities is at any time less than the Minimum Liquidity Position, Borrower shall maintain a minimum quarterly EBITDA of not less than $1,100,000, measured as of the last day of each quarter.

b. Minimum Working Capital. Borrower shall at all times maintain minimum Working Capital of not less than $1,000,000.00, measured as of the last day of each quarter.

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7.15    Negative Pledge

Borrower will not create, incur, assume, or suffer to exist any mortgage, deed of trust, pledge, lien, security interest, hypothecation, assignment, deposit arrangement, or other preferential arrangement, charge, or encumbrance (including, without limitation, any conditional sale, other title retention agreement, or finance lease) of any nature, upon or with respect to any of its properties or assets, now owned or hereafter acquired, or sign or file, under the Uniform Commercial Code of any jurisdiction, a financing statement under which Borrower appears as debtor, or sign any security agreement authorizing any secured party thereunder to file such financing statement, except (a) those contemplated by this Loan Agreement and the RLOC Loan Agreement; (b) liens arising in the ordinary course of business (such as liens of carriers, warehousemen, mechanics, and materialmen) and other similar liens imposed by law for sums not yet due and payable or, if due and payable, those being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained in accordance with Accounting Standards; (c) easements, rights of way, restrictions, minor defects or irregularities in title or other similar liens which alone or in the aggregate do not interfere in any material way with the ordinary conduct of the business of Borrower; (d) liens for taxes and assessments not yet due and payable or, if due and payable, those being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained in accordance with Accounting Standards; (e) anti-assignment provisions included in any Qualified Account, Chattel Paper, General Intangible or promissory note in which Borrower has any right, title or interest; (f) the Equipment Line; and (g) liens arising under the Security Transfer Agreement.

7.16    Restriction on Debt

Borrower shall not create, incur, assume, or suffer to exist any debt except as permitted by this Section 7.16.

Permitted exceptions to this covenant are: (i) Debt contemplated by this Loan Agreement and the RLOC Loan Agreement; (ii) accounts payable to trade creditors for goods or services which are not aged more than ninety (90) days from the billing date and current operating liabilities (other than for borrowed money) which are not more than ninety (90) days past due, in each case incurred in the ordinary course of business, as presently conducted, and paid within the specified time, unless contested in good faith and by appropriate proceedings; (iii) Debt incurred under the Equipment Line; (iv) Debt due not to exceed an outstanding principal amount of two hundred thousand dollars ($200,000.00) per debt and not to exceed an aggregate, outstanding principal amount of five hundred thousand dollars ($500,000.00); (v) Debt existing on the Effective Date and set forth on Schedule 7.16 hereto; (vi) Debt secured by liens described in clause (f) of the definition of Permitted Encumbrances in the Security Agreement; (vii) extensions, refinancings, modifications, amendments and restatements of any items of the foregoing clauses, provided that the principal amount thereof is not increased and the terms thereof are not modified or impose more burdensome terms upon Borrower; (viii) subordinated Debt, which is approved in advance in writing by Lender; and (ix) recourse of Guarantor against Borrower pursuant to the Security Transfer Agreement.

7.17    Mergers, Consolidations, and Purchase and Sale of Assets

Borrower shall not wind up, liquidate, or dissolve itself, reorganize, merge, or consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise dispose of (whether in one

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transaction or a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to any person or entity, or acquire all or substantially all of the assets or the business of any person or entity.

7.18    Dividends and Loans

Borrower shall not (i) declare or pay any dividends, (ii) purchase, redeem, retire or otherwise acquire for value any of its capital stock or equity interests now or hereafter outstanding, (iii) make any distribution of assets to its stockholders, investors, or equity holders, whether in cash, assets, or in obligations of Borrower, (iv) allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption, or retirement of any shares of its capital stock or equity interests, or (v) make any other distribution by reduction of capital or otherwise in respect of any shares of its capital stock or equity interests.

Borrower shall not make any loans or pay any advances of any nature whatsoever to any person or entity, except advances in the ordinary course of business to vendors, suppliers, and contractors.

8. Default

8.1    Events of Default

Time is of the essence of this Loan Agreement. The occurrence of any of the following events shall constitute a default under this Loan Agreement and under the Loan Documents and shall be termed an “Event of Default”:

a. Borrower fails in the payment or performance of any obligation, covenant, agreement, or liability created by any of the Loan Documents.

b. Any representation, warranty, or financial statement made by or on behalf of Borrower in any of the Loan Documents, or any document contemplated by the Loan Documents, is materially false or materially misleading.

c. Default occurs or Borrower fails to comply with any term in any of the Loan Documents.

d. Any indebtedness of Borrower under any note, indenture, contract, agreement, or undertaking is accelerated.

e. Default or an event which, with the passage of time or the giving of notice or both, would constitute a default, by Borrower, occurs on any note, indenture, contract, agreement, or undertaking.

f. Borrower is dissolved or substantially ceases business operations.

g. A receiver, trustee, or custodian is appointed for any part of Borrower’s property, or any part of Borrower’s property is assigned for the benefit of creditors.

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h. Any proceeding is commenced or petition filed under any bankruptcy or insolvency law by or against Borrower.

i. Any judgment or regulatory fine is entered against Borrower which may materially affect Borrower.

j. Borrower becomes insolvent or fails to pay its debts as they mature.

k. Any change occurs in Borrower’s condition or any event occurs which may have a Material Adverse Effect.

l. Any default under the Equipment Line.

m. Any default occurs under the Reseller Agreement or the Security Transfer Agreement.

n. Any default occurs under the RLOC Loan Documents.

8.2    Cure Periods

For any Event of Default other than an Event of Default arising from the failure of Borrower to make a payment to Lender when due, Borrower may cure such default within 10 Banking Business Days of the receipt of written notice from Lender of such default (a “Default Notice”), or if it is commercially unreasonable to cure such default within 10 Banking Business Days and with Lender’s consent, within such longer period of time as is reasonably necessary to accomplish the cure, provided (i) Borrower promptly commences such cure upon receipt of the Default Notice, (ii) such cure period does not exceed 90 days under any circumstances, and (iii) Borrower shall pay to Lender all of Lender’s reasonable costs to confirm that the Event of Default has been cured. If an Event of Default is cured, provided Borrower immediately pays all of Lenders reasonable enforcement costs, including attorneys’ fees, through the date Lender received notice of the cure, Lender shall cease its enforcement actions and remedies, including any acceleration remedy provided herein or elsewhere in the Loan Documents, and the parties shall proceed under the Loan Documents as if no default has occurred. Notwithstanding Lender’s obligation to terminate its remedies upon a cure as set forth above, Lender shall have no obligation to suspend or delay its enforcement of its rights and remedies under the Loan Documents and at law during any applicable cure period. In no event shall Borrower have the right to cure Events of Default more than three (3) times during the term of this Agreement.

8.3    No Waiver of Event of Default

No course of dealing or delay or failure to assert any Event of Default shall constitute a waiver of that Event of Default or of any prior or subsequent Event of Default.

9. Remedies

9.1    Remedies upon Event of Default

Upon the occurrence of an Event of Default, and at any time thereafter, all or any portion of the obligations due or to become due from Borrower to Lender, whether arising under this

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Loan Agreement, the Promissory Note, the Security Documents or otherwise, at the option of Lender and without notice to Borrower of the exercise of such option, shall accelerate and become at once due and payable in full, and Lender shall have all rights and remedies created by or arising from the Loan Documents, and all other rights and remedies existing at law, in equity, or by statute.

Additionally, Lender shall have the right, immediately and without prior notice or demand, to set off against Borrower’s obligations to Lender, whether or not due, all money and other amounts owed by Lender in any capacity to Borrower, including, without limitation, checking accounts, savings accounts, and other depository accounts, and Lender shall be deemed to have exercised such right of setoff and to have made a charge against any such money or amounts immediately upon occurrence of an Event of Default, even though such charge is entered on Lender’s books subsequently thereto.

9.2    Rights and Remedies Cumulative

The rights and remedies herein conferred are cumulative and not exclusive of any other rights or remedies and shall be in addition to every other right, power, and remedy that Lender may have, whether specifically granted herein or hereafter existing at law, in equity, or by statute. Any and all such rights and remedies may be exercised from time to time and as often and in such order as Lender may deem expedient.

9.3    No Waiver of Rights

No delay or omission in the exercise or pursuance by Lender of any right, power, or remedy shall impair any such right, power, or remedy or shall be construed to be a waiver thereof.

10. General Provisions

10.1    Governing Agreement

In the event of conflict or inconsistency between this Loan Agreement and the other Loan Documents, excluding the Promissory Note, the terms, provisions and intent of this Loan Agreement shall govern.

10.2    Borrower’s Obligations Cumulative

Every obligation, covenant, condition, provision, warranty, agreement, liability, and undertaking of Borrower contained in the Loan Documents shall be deemed cumulative and not in derogation or substitution of any of the other obligations, covenants, conditions, provisions, warranties, agreements, liabilities, or undertakings of Borrower contained herein or therein.

10.3    Payment of Expenses and Attorney’s Fees

Borrower shall pay all reasonable expenses of Lender relating to the negotiation, drafting of documents, documentation of the Loan, and administration and supervision of the Loan, including, without limitation, appraisal fees, environmental inspection fees, field examination expenses, title insurance, recording fees, filing fees, and reasonable attorneys fees and legal expenses, whether incurred in making the Loan, in future amendments or modifications to the Loan Documents, or in ongoing administration and supervision of the Loan.

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Upon occurrence of an Event of Default, Borrower agrees to pay all costs, and expenses, including reasonable attorney fees and legal expenses, incurred by Lender in enforcing, or exercising any remedies under, the Loan Documents, and any other rights and remedies.

Borrower agrees to pay all expenses, including reasonable attorney fees and legal expenses, incurred by Lender in any bankruptcy proceedings of any type involving Borrower, Guarantor, the Loan Documents, or the Collateral, including, without limitation, expenses incurred in modifying or lifting the automatic stay, determining adequate protection, use of cash collateral or relating to any plan of reorganization.

10.4    Right to Perform for Borrower

Lender may, in its sole discretion and without any duty to do so, elect to discharge taxes, tax liens, security interests, or any other encumbrance upon the Collateral or any other property or asset of Borrower, to pay any filing, recording, or other charges payable by Borrower, or to perform any other obligation of Borrower under this Loan Agreement or under the Security Documents.

10.5    Assignability

Borrower may not assign or transfer any of the Loan Documents and any such purported assignment or transfer is void.

Lender may assign or transfer any of the Loan Documents. Funding of this Loan may be provided by an affiliate of Lender.

10.6    Third Party Beneficiaries

The Loan Documents are made for the sole and exclusive benefit of Borrower, Guarantor and Lender and are not intended to benefit any other third party. No third party may claim any right or benefit or seek to enforce any term or provision of the Loan Documents.

10.7    Governing Law

The Loan Documents shall be governed by and construed in accordance with the laws of the State of Utah, except to the extent that any such document expressly provides otherwise.

10.8    Severability of Invalid Provisions

Any provision of this Loan Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction only, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

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10.9    Interpretation of Loan Agreement

The article and section headings in this Loan Agreement are inserted for convenience only and shall not be considered part of the Loan Agreement nor be used in its interpretation.

All references in this Loan Agreement to the singular shall be deemed to include the plural when the context so requires, and vice versa. References in the collective or conjunctive shall also include the disjunctive unless the context otherwise clearly requires a different interpretation.

10.10     Survival and Binding Effect of Representations, Warranties, and Covenants

All agreements, representations, warranties, and covenants made herein by Borrower shall survive the execution and delivery of this Loan Agreement and shall continue in effect so long as any obligation to Lender contemplated by this Loan Agreement is outstanding and unpaid, notwithstanding any termination of this Loan Agreement. All agreements, representations, warranties, and covenants made herein by Borrower shall survive any bankruptcy proceedings involving Borrower. All agreements, representations, warranties, and covenants in this Loan Agreement shall bind the party making the same, its successors and, in Lender’s case, assigns, and all rights and remedies in this Loan Agreement shall inure to the benefit of and be enforceable by each party for whom made, their respective successors and, in Lender’s case, assigns.

10.11     Indemnification

Borrower hereby agrees to indemnify Lender for all liabilities and damages (including contract, tort and equitable claims) which may be awarded against Lender, and for all reasonable attorneys fees, legal expenses and other expenses incurred in defending such claims, arising from or relating in any manner to the negotiation, execution or performance by Lender of the Loan Documents (including all reasonable attorneys fees, legal expenses and other expenses incurred in defending any such claims brought by Borrower if Borrower does not prevail in such actions), excluding only breach of contract by Lender under such circumstances that such breach amounts to gross negligence or willful misconduct. Lender shall have sole and complete control of the defense of any such claims and is hereby given authority to settle or otherwise compromise any such claims as Lender in good faith determines shall be in its best interests.

10.12     Environmental Indemnification

Borrower shall indemnify Lender for any and all claims and liabilities, and for damages which may be awarded or incurred by Lender, and for all reasonable attorney fees, legal expenses, and other out-of-pocket expenses arising from or related in any manner, directly or indirectly, to (i) Hazardous Materials located on, in, or under the Real Property; (ii) any Environmental Condition on, in, or under the Real Property; (iii) violation of or non compliance with any Environmental Health and Safety Law; (iv) any breach or violation of Section 6.10 Environmental Representations and Warranties and/or Section 7.13 Environmental Covenants; and/or (v) any activity or omission, whether occurring on or off the Real Property, whether prior to or during the term of the loans secured hereby, and whether by Borrower or any other person or entity, relating to Hazardous Materials or an Environmental Condition. The indemnification obligations of Borrower under this Section shall survive any reconveyance, release, or foreclosure of the Real Property, any transfer in lieu of foreclosure, and satisfaction of the obligations secured hereby.

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Lender shall have the sole and complete control of the defense of any such claims. Lender is hereby authorized to settle or otherwise compromise any such claims as Lender in good faith determines shall be in its best interests.

10.13    Interest on Expenses and Indemnification, Collateral, Order of Application

All expenses, out-of-pocket costs, attorneys fees and legal expenses, amounts advanced in performance of obligations of Borrower, and indemnification amounts owing by Borrower to Lender under or pursuant to this Loan Agreement, the Promissory Note, and/or any Security Documents shall be due and payable upon demand. If not paid upon demand, all such obligations shall bear interest at the default rate provided in the Promissory Note from the date of disbursement until paid to Lender, both before and after judgment. Lender is authorized to disburse funds under the Promissory Note for payment of all such obligations.

Payment of all such obligations shall be secured by the Collateral and by the Security Documents.

All payments and recoveries shall be applied to payment of the foregoing obligations, the Promissory Note, and all other amounts owing to Lender by Borrower in such order and priority as determined by Lender. Unless provided otherwise in the Promissory Note, payments on the Promissory Note shall be applied first to accrued interest and the remainder, if any, to principal.

10.14    Limitation of Consequential Damages

Lender and its officers, directors, employees, representatives, agents, and attorneys, shall not be liable to Borrower or any Guarantor for consequential damages arising from or relating to any breach of contract, tort, or other wrong in connection with the negotiation, documentation, administration or collection of the Loan.

10.15    Waiver of Defenses and Release of Claims

Borrower hereby (i) represents that neither the Borrower nor any affiliate or principal of Borrower has any defenses to or setoffs against any obligations owing by Borrower, or by Borrower’s affiliates or principals, to Lender or Lender’s affiliates, nor any claims against Lender or Lender’s affiliates for any matter whatsoever, related or unrelated to any obligations, and (ii) releases Lender and Lender’s affiliates, officers, directors, employees, representatives and agents from all claims, causes of action, and costs, in law or equity, known or unknown, whether or not matured or contingent, existing as of the date hereof that Borrower has or may have by reason of any matter of any conceivable kind or character whatsoever, related or unrelated to the Loan, including the subject matter of the Loan Documents. The foregoing release does not apply, however, to claims for future performance of express contractual obligations that mature after the date hereof that are owing to Borrower by Lender or Lender’s affiliates. Borrower acknowledges that Lender has been induced to enter into or continue the obligations by, among other things, the waivers and releases in this paragraph.

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10.16    Revival Clause

If the incurring of any debt by Borrower or the payment of any money or transfer of property to Lender by or on behalf of Borrower or Guarantor should for any reason subsequently be determined to be “voidable” or “avoidable” in whole or in part within the meaning of any state or federal law (collectively “voidable transfers”), including, without limitation, fraudulent conveyances or preferential transfers under the United States Bankruptcy Code or any other federal or state law, and Lender is required to repay or restore any voidable transfers or the amount or any portion thereof, or upon the advice of Lender’s counsel is advised to do so, then, as to any such amount or property repaid or restored, including all reasonable costs, expenses, and attorneys fees of Lender related thereto, the liability of Borrower and Guarantor, and each of them, shall automatically be revived, reinstated and restored and shall exist as though the voidable transfers had never been made.

10.17    Jury Trial Waiver, Arbitration, and Class Action Waiver

This Section contains a jury waiver, arbitration clause, and a class action waiver. READ IT CAREFULLY.

a. Jury Trial Waiver. As permitted by applicable law, Borrower, Guarantor and Lender each waive their respective rights to a trial before a jury in connection with any Dispute (as “Dispute” is hereinafter defined), and Disputes shall be resolved by a judge sitting without a jury. If a court determines that this provision is not enforceable for any reason and at any time prior to trial of the Dispute, but not later than 30 days after entry of the order determining this provision is unenforceable, any party shall be entitled to move the court for an order compelling arbitration and staying or dismissing such litigation pending arbitration (“Arbitration Order”).

b. Arbitration. If a claim, dispute, or controversy arises between Borrower, Guarantor and Lender with respect to this Agreement, related agreements, or any other agreement or business relationship between Borrower, Guarantor, and Lender whether or not related to the subject matter of this Agreement (all of the foregoing, a “Dispute”), and only if a jury trial waiver is not permitted by applicable law or ruling by a court, any of the parties may require that the Dispute be resolved by binding arbitration before a single arbitrator at the request of any party. By agreeing to arbitrate a Dispute, Borrower and Guarantor give up any right they may have to a jury trial, as well as other rights it would have in court that are not available or are more limited in arbitration, such as the rights to discovery and to appeal.

Arbitration shall be commenced by filing a petition with, and in accordance with the applicable arbitration rules of, JAMS or National Arbitration Forum (“Administrator”) as selected by the initiating party. If the parties agree, arbitration may be commenced by appointment of a licensed attorney who is selected by the parties and who agrees to conduct the arbitration without an Administrator. Disputes include matters relating to a deposit account, application for or denial of credit, enforcement of any of the obligations the parties have to each other, compliance with applicable laws and/or regulations, performance or services provided under any agreement by any party, including but not limited to the validity, enforceability, meaning, or scope of this

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arbitration provision, and including a dispute based on or arising from an alleged tort or matters involving either of Borrower’s, Guarantor’s or Lender’s employees, agents, affiliates, or assigns of a party. However, Disputes do not include the validity, enforceability, meaning, or scope of this arbitration provision and such matters may be determined only by a court. If a third party is a party to a Dispute, Borrower, Guarantor and Lender each will consent to including the third party in the arbitration proceeding for resolving the Dispute with the third party. Venue for the arbitration proceeding shall be at a location determined by mutual agreement of the parties or, if there is no agreement, in Salt Lake City, Utah.

After entry of an Arbitration Order, the non-moving party shall commence arbitration. The moving party shall, at its discretion, also be entitled to commence arbitration but is under no obligation to do so, and the moving party shall not in any way be adversely prejudiced by electing not to commence arbitration. The arbitrator will (i) hear and rule on appropriate dispositive motions for judgment on the pleadings, for failure to state a claim, or for full or partial summary judgment, (ii) will render a decision and any award applying applicable law, (iii) give effect to any limitations period in determining any Dispute or defense, (iv) enforce the doctrines of compulsory counterclaim, res judicata, and collateral estoppel, if applicable, (v) with regard to motions and the arbitration hearing, apply rules of evidence governing civil cases, and (vi) apply the law of the state specified in the agreement giving rise to the Dispute. Filing of a petition for arbitration shall not prevent any party from (i) seeking and obtaining from a court of competent jurisdiction (notwithstanding ongoing arbitration) provisional or ancillary remedies including but not limited to injunctive relief, property preservation orders, foreclosure, eviction, attachment, replevin, garnishment, and/or the appointment of a receiver, (ii) pursuing non-judicial foreclosure, or (iii) availing itself of any self-help remedies such as setoff and repossession. The exercise of such rights shall not constitute a waiver of the right to submit any Dispute to arbitration.

Judgment upon an arbitration award may be entered in any court having jurisdiction except that, if the arbitration award exceeds $4,000,000, any party shall be entitled to a de novo appeal of the award before a panel of three arbitrators. To allow for such appeal, if the award (including Administrator, arbitrator, and attorney’s fees and costs) exceeds $4,000,000, the arbitrator will issue a written, reasoned decision supporting the award, including a statement of authority and its application to the Dispute. A request for de novo appeal must be filed with the arbitrator within 30 days following the date of the arbitration award; if such a request is not made within that time period, the arbitration decision shall become final and binding. On appeal, the arbitrators shall review the award de novo, meaning that they shall reach their own findings of fact and conclusions of law rather than deferring in any manner to the original arbitrator. Appeal of an arbitration award shall be pursuant to the rules of the Administrator or, if Administrator has no such rules, then the JAMS arbitration appellate rules shall apply.

Arbitration under this provision concerns a transaction involving interstate commerce and shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. The provisions of this arbitration provision shall survive any termination, amendment, or expiration of this Agreement. If the terms of this provision vary from the Administrator’s rules, this arbitration provision shall control.

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c. Class Action Waiver. BORROWER, GUARANTOR AND LENDER EACH WAIVE THE RIGHT TO LITIGATE IN COURT OR ARBITRATE ANY CLAIM OR DISPUTE AS A CLASS ACTION, EITHER AS A MEMBER OF A CLASS OR AS A REPRESENTATIVE, OR TO ACT AS A PRIVATE ATTORNEY GENERAL.

d. Reliance. Each party (i) certifies that no one has represented to such party that the other party would not seek to enforce jury and class action waivers in the event of suit, and (ii) acknowledges that it and the other party have been induced to enter into this Agreement by, among other things, the mutual waivers, agreements, and certifications in this section.

10.18    Consent to Utah Jurisdiction and Exclusive Jurisdiction of Utah Courts

Borrower and Guarantor acknowledge that by execution and delivery of the Loan Documents Borrower and Guarantor have transacted business in the State of Utah and Borrower and Guarantor voluntarily submit to, consent to, and waive any defense to the jurisdiction of courts located in the State of Utah as to all matters relating to or arising from the Loan Documents and/or the transactions contemplated thereby. EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER AND EXCEPT AS PROVIDED IN THE ARBITRATION PROVISIONS ABOVE, THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF UTAH SHALL HAVE SOLE AND EXCLUSIVE JURISDICTION OF ANY AND ALL CLAIMS, DISPUTES, AND CONTROVERSIES, ARISING UNDER OR RELATING TO THE LOAN DOCUMENTS AND/OR THE TRANSACTIONS CONTEMPLATED THEREBY. NO LAWSUIT, PROCEEDING, OR ANY OTHER ACTION RELATING TO OR ARISING UNDER THE LOAN DOCUMENTS AND/OR THE TRANSACTIONS CONTEMPLATED THEREBY MAY BE COMMENCED OR PROSECUTED IN ANY OTHER FORUM EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER.

10.19    Joint and Several Liability

Borrower and Guarantor shall each be jointly and severally liable for all obligations and liabilities relating to payment of Indebtedness.

10.20    Notices

All notices or demands by any party to this Loan Agreement shall, except as otherwise provided herein, be in writing and may be sent by certified mail, return receipt requested. Notices so mailed shall be deemed received when deposited in a United States post office box, postage prepaid, properly addressed to Borrower or Lender at the mailing addresses stated herein or to such other addresses as Borrower or Lender may from time to time specify in writing. Any notice so addressed and otherwise delivered shall be deemed to be given when actually received by the addressee.

Mailing addresses:

Lender:

Zions First National Bank

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Corporate Banking Group

One South Main Street, Suite 200

Salt Lake City, Utah 84111

Attention: Thomas C. Etzel, Sr. Vice President

With a copy to:

Scott R. Irwin

Holland & Hart LLP

222 South Main Street, Suite 2200

Salt Lake City, Utah 84101

Borrower:

inContact, Inc.

7730 South Union Park Avenue, Suite 500

Salt Lake City, Utah 84047

Attention: Greg Ayers

Guarantor:

Siemens Enterprise Communications, Inc.

1881 Campus Commons Drive, Suite 501

Reston, VA 20191

Attention: General Counsel

10.21    Duplicate Originals; Counterpart Execution

Two or more duplicate originals of the Loan Documents may be signed by the parties, each duplicate of which shall be an original but all of which together shall constitute one and the same instrument. Any Loan Documents may be executed in several counterparts, without the requirement that all parties sign each counterpart. Each of such counterparts shall be an original, but all counterparts together shall constitute one and the same instrument.

10.22    Disclosure of Financial and Other Information

Borrower and Guarantor hereby consent to Lender disclosing to any other lender who may participate in the Loan any and all information, knowledge, reports, and records, including, without limitation, financial statements, relating in any manner whatsoever to the Loan, Borrower and Guarantor, provided such other lender shall enter into a confidentiality and non-disclosure agreement limiting its use and all such information and data relating to Guarantor only for purposes of such participation in the Loan.

10.23    Integrated Agreement and Subsequent Amendment

The Loan Documents constitute the entire agreement between Lender, Borrower, and Guarantor, and may not be altered or amended except by written agreement signed by Lender, Borrower, and, if applicable, Guarantor. PURSUANT TO UTAH CODE SECTION 25-5-4, BORROWER AND GUARANTOR ARE NOTIFIED THAT THESE AGREEMENTS ARE A

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FINAL EXPRESSION OF THE AGREEMENT BETWEEN LENDER, BORROWER AND GUARANTOR, AND THESE AGREEMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED ORAL AGREEMENT.

All prior and contemporaneous agreements, arrangements and understandings between the parties hereto as to the subject matter hereof are, except as otherwise expressly provided herein, rescinded.

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IN WITNESS WHEREOF, this Loan Agreement has been executed and becomes effective as of the Effective Date.

Lender:
Zions First National Bank
By:
	Thomas C. Etzel
	Senior Vice President
Borrower:
inContact, Inc.
By:
Name:
Title:

Each undersigned Guarantor hereby acknowledges and consents to the foregoing Loan Agreement, makes the representations, warranties and covenants set forth in Section 4 Guarantee, and agrees to the provisions of Section 10.14 Limitation of Consequential Damages, Section 10.17 Jury Trial Waiver, Arbitration, and Class Action Waiver, Section 10.18 Consent to Utah Jurisdiction and Exclusive Jurisdiction of Utah Courts, Section 10.19 Joint and Several Liability, and Section 10.22 Disclosure of Financial and Other Information.

Guarantor:
Siemens Enterprise Communications, Inc.
By:
	Stephen Juge
	Sr. Vice President and General Counsel

SCHEDULE 6.5

LITIGATION DISCLOSURE

California College, Inc., et al v. UCN, Inc., et al, Third Judicial District Court in and for Salt Lake County, State of Utah, Case No. 090907053.

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SCHEDULE 7.16

EXISTING DEBT

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EX-10.28

Exhibit 10.28

PROMISSORY NOTE

(Amortizing Term Loan)

October 7, 2011

Borrower:	inContact, Inc., a Delaware corporation
Lender:	Zions First National Bank, a national banking association
Loan Amount:	$2,500,000.00
Maturity Date:	October 1, 2014

For value received, Borrower promises to pay to the order of Lender at Zions First National Bank, Corporate Banking Group, One South Main Street, Suite 200, Salt Lake City, Utah 84111, or at such other address as the holder of this Promissory Note at any given time may designate by written notice to Borrower, the sum of $2,500,000.00, in lawful money of the United States with interest thereon calculated and payable as provided herein.

Definitions

Terms used in the singular shall have the same meaning when used in the plural and vice versa. Capitalized term used but not defined herein shall have the meanings given to such terms in the Loan Agreement (as defined herein). As used in this Promissory Note, the term:

“Applicable Margin” means 4.50% per annum.

“Default Rate” means the interest rate in effect hereunder from time to time (including any applicable margin) plus 3.0% per annum.

“Dollars” and the sign “$” mean lawful money of the United States.

“FHLB Rate” means the rate per annum quoted by Lender as Lender’s FHLB rate based upon the FHLB Seattle rate as quoted in Bloomberg, or on the FHLB Seattle internet web site at www.FHLBsea.com, or other comparable service selected by Lender for the applicable Interest Period. This definition of FHLB Rate is to be strictly interpreted and is not intended to serve any purpose other than providing an index to determine the rate used herein. It is not necessarily the lowest rate charged by Lender on its loans. If the FHLB Rate becomes unavailable during the term of this Promissory Note, Lender may designate a substitute index after notifying Borrower.

“Interest Period” means, with respect to any advance or balance for which interest is based on the LIBOR Rate, the period commencing on the date such advance is made or, as to an existing balance, the date selected by Borrower and ending, as Borrower may select, on the numerically corresponding day in the third calendar month or first, second or third year thereafter, except that each such Interest Period that commences on the last Banking Business Day of a calendar month (or on any day for which there is no numerically corresponding day in

the appropriate subsequent calendar month) shall end on the last Banking Business Day of the appropriate subsequent calendar month; provided that all of the foregoing provisions relating to Interest Periods are subject to the following:

a. No Interest Period may extend beyond the termination of the Loan Agreement;

b. No Interest Period may extend beyond the aforesaid Maturity Date or such later date to which it is extended; and

c. If an Interest Period would end on a day that is not a Banking Business Day, such Interest Period shall be extended to the next Banking Business Day unless such Banking Business Day would fall in the next calendar month, in which event such Interest Period shall end on the immediately preceding Banking Business Day.

“LIBOR Rate” applicable to any Interest Period means the rate per annum quoted by Lender two (2) Banking Business Days prior to the commencement of the Interest Period as its LIBOR Rate based upon quotes from the London Interbank Offered Rate from the British Bankers Association Interest Settlement Rates as quoted for United States Dollars by Bloomberg or other comparable services selected by Lender for the applicable Interest Period. This definition of LIBOR Rate is to be strictly interpreted and is not intended to serve any purpose other than providing an index to determine the interest rate used herein. The LIBOR Rate of Lender may not necessarily be the same as the quoted offered side in the Eurodollar time deposit market quoted by any particular institution or service applicable to any Interest Period. It is not the lowest rate at which Lender may make loans to any of its customers, either now or in the future.

“Loan Agreement” means the Loan Agreement of even date herewith between Lender and Borrower, together with any exhibits, schedules, amendments, addenda, and modifications thereto.

“Maturity Date” shall have the meaning set forth in the heading of this Promissory Note.

“Ninety Day FHLB Rate” means the rate per annum quoted by Lender as Lender’s Ninety Day FHLB rate based upon the FHLB Seattle rate as quoted in Bloomberg, or on the FHLB Seattle internet web site at www.FHLBsea.com, or other comparable service selected by Lender. This definition of Ninety Day FHLB Rate is to be strictly interpreted and is not intended to serve any purpose other than providing an index to determine the rate used herein. It is not necessarily the lowest rate charged by Lender on its loans. If the Ninety Day FHLB Rate becomes unavailable during the term of this Promissory Note, Lender may designate a substitute index after notifying Borrower.

“Ninety Day LIBOR Rate” means the rate per annum quoted by Lender as its Ninety Day LIBOR Rate based upon quotes from the London Interbank Offered Rate from the British Bankers Association Interest Settlement Rates as quoted for United States Dollars by Bloomberg or other comparable services selected by Lender. This definition of Ninety Day LIBOR Rate is to be strictly interpreted and is not intended to serve any purpose other than providing an index to determine the interest rate used herein. The Ninety Day LIBOR Rate of Lender may not necessarily be the same as the quoted offered side in the Eurodollar time deposit market quoted by any particular institution or service. It is not necessarily the lowest rate at which Lender may make loans to any of its customers, either now or in the future.

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Payment Terms

Interest is to be paid in arrears commencing November 1, 2011, and on the same day of each month thereafter.

Principal outstanding is to be paid in 36 equal monthly installments commencing November 1, 2011 and on the same day of each month thereafter through the Maturity Date.

All outstanding principal, unpaid interest and all other amounts due under this Promissory Note or any of the other Loan Documents shall be paid in full on the Maturity Date.

All payments shall be applied (a) first, to reimbursable fees, late charges, costs and expenses payable by Borrower under this Promissory Note or any of the other Loan Documents, (b) second, to accrued interest and (c) the remainder, if any, to principal.

Interest shall accrue from the date of disbursement of the principal amount until paid, both before and after judgment, in accordance with the terms set forth herein.

Interest Rate Election

On the Effective Date, Borrower shall elect for interest to accrue based on either the Ninety Day LIBOR Rate or the LIBOR Rate for a specified Interest Period. Upon the expiration of any elected Interest Period, the interest rate hereunder shall automatically convert to one based on the Ninety Day LIBOR Rate unless Borrower gives three Banking Business Days prior written notice to Lender to renew the LIBOR Rate for a specified Interest Period; provided that no Event of Default has occurred and is continuing at the time of any such election.

Provided that no Event of Default has occurred and is continuing at the time of any election, at any time that interest is accruing hereunder based on the Ninety Day LIBOR Rate, Borrower may elect to convert the interest rate on the entire outstanding principal balance hereunder to one based on the LIBOR Rate for a specified Interest Period by giving three Banking Business Days prior written notice to Lender of such election.

Any election to convert to an interest rate based on the LIBOR Rate for a specified Interest Period may not be changed after notice is given by Borrower hereunder without consent of Lender until the expiration of the selected Interest Period.

Interest Based on Ninety Day LIBOR Rate

Interest based on the Ninety Day LIBOR Rate shall be calculated as follows:

1. Interest shall be at a variable rate computed on the basis of a 360 day year, actual days elapsed, at the Ninety Day LIBOR Rate from time to time in effect, adjusted as of any change in the Ninety Day LIBOR Rate, plus the Applicable Margin.

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2. Notwithstanding the foregoing, if Lender determines (which determination shall be conclusive) that (a) quotations of interest rates in the relevant amounts or for the relevant maturities are not being provided for purposes of Lender determining the Ninety Day LIBOR Rate, (b) the Ninety Day LIBOR Rate does not adequately cover the cost to Lender of making or maintaining advances based on the Ninety Day LIBOR Rate, or (c) the adoption of any applicable law, rule, or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by Lender with any request or directive (whether or not having the force of law) of any such authority, central bank, or comparable agency, shall make it unlawful or impossible for Lender to offer loans based on the Ninety Day LIBOR Rate, then (i) the right of Borrower to request interest pricing based on the Ninety Day LIBOR Rate shall be suspended until Lender notifies Borrower that the circumstances giving rise to such suspension no longer exist, and (ii) upon notice to Borrower by Lender, the outstanding principal amount of the balances based on the Ninety Day LIBOR Rate shall be immediately converted to a balance based on the Ninety Day FHLB Rate plus Applicable Margin. Any prepayment based upon such action shall not be subject to any prepayment fees or charges.

Interest Based on LIBOR Rate

Interest based on the LIBOR Rate shall be calculated as follows:

1. Interest shall be at a rate computed on the basis of a 360 day year at a rate equal to the LIBOR Rate for the applicable Interest Period, plus the Applicable Margin.

2. Notwithstanding the foregoing, if Lender determines (which determination shall be conclusive) that (a) quotations of interest rates in the relevant amounts or for the relevant maturities are not being provided for purposes of Lender determining the LIBOR Rate, (b) the LIBOR Rate does not adequately cover the cost to Lender of making or maintaining advances based on the LIBOR Rate, or (c) the adoption of any applicable law, rule, or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by Lender with any request or directive (whether or not having the force of law) of any such authority, central bank, or comparable agency, shall make it unlawful or impossible for Lender to offer loans based on the LIBOR Rate, then (i) the right of Borrower to request interest pricing based on the LIBOR Rate shall be suspended until Lender notifies Borrower that the circumstances giving rise to such suspension no longer exist, and (ii) upon notice to Borrower by Lender, the outstanding principal amount of the balances based on the LIBOR Rate shall be immediately converted to a balance based on the FHLB Rate plus Applicable Margin. Any prepayment based upon such action shall not be subject to any prepayment fees or charges.

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Prepayment

Borrower may prepay all or any portion of this Promissory Note at any time without penalty or premium; provided, however, that in the event of any voluntary or involuntary prepayment of any LIBOR Rate based balance prior to the end of an Interest Period, Borrower shall make Lender whole and Borrower shall pay to Lender all breakage costs incurred by Lender in connection with such prepayment and compensate Lender for any actual out-of-pocket loss suffered by reason of such principal payment not being made at the end of the Interest Period or as scheduled. Such costs and losses to Lender shall be limited to any loss or breakage costs arising from the re-employment of funds at rates lower than the rate provided by this Promissory Note, cost to Lender of such funds, any interest or fees payable by Lender to lenders of funds obtained by them in order to make or maintain the loan evidenced by this Promissory Note and any related costs. Unless specified otherwise by Borrower, (a) prepayments of principal shall be applied first to outstanding LIBOR Rate based balances, and (b) prepayments of principal applied to LIBOR Rate based balances should be made in the principal amount equal to the aggregate principal amount of the LIBOR Rate based balance, if any, that has an Interest Period ending on such date of prepayment, and so long as no Event of Default has occurred and is continuing, Borrower may, at its option, defer the balance of the prepayment to be applied against any other LIBOR Rate based balance until the next following Interest Period applicable to such LIBOR Rate based balance; provided that cash in an amount equal to the amount of any prepayment so deferred shall be deposited in a cash collateral account maintained with the Lender.

Any prepayment received by Lender after 2:00 p.m. mountain standard or daylight time (whichever is in effect on the date the prepayment is received) shall be deemed received on the following Banking Business Day.

General

Any prepayments shall reduce or excuse the last installment payments owing. All scheduled installment payments shall remain due and owing as scheduled until all outstanding principal has been paid in full.

Upon default in payment of any principal or interest when due, whether due at stated maturity, by acceleration, or otherwise, or upon the occurrence and during the continuance of any other Event of Default, all outstanding principal shall bear interest at the Default Rate.

This Promissory Note is made in accordance with the Loan Agreement and is secured by the Collateral identified in the Security Agreement (as defined in the Loan Agreement).

If an Event of Default occurs and is continuing, Lender shall have all the rights and remedies provided in the Loan Agreement, including, without limitation, provisions relating to expenses.

This Promissory Note shall be governed by and construed in accordance with the laws of the State of Utah.

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Borrower acknowledges that by execution and delivery of this Promissory Note Borrower has transacted business in the State of Utah and Borrower voluntarily submits to, consents to, and waives any defense to the jurisdiction of courts located in the State of Utah as to all matters relating to or arising from this Promissory Note. EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER AND EXCEPT AS PROVIDED IN THE ARBITRATION PROVISIONS IN THE LOAN AGREEMENT, THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF UTAH SHALL HAVE SOLE AND EXCLUSIVE JURISDICTION OF ANY AND ALL CLAIMS, DISPUTES, AND CONTROVERSIES, ARISING UNDER OR RELATING TO THIS PROMISSORY NOTE. NO LAWSUIT, PROCEEDING, OR ANY OTHER ACTION RELATING TO OR ARISING UNDER THIS PROMISSORY NOTE MAY BE COMMENCED OR PROSECUTED IN ANY OTHER FORUM EXCEPT AS EXPRESSLY AGREED IN WRITING BY LENDER.

Borrower and all endorsers, sureties and guarantors hereof hereby jointly and severally waive presentment for payment, demand, protest, notice of protest, notice of protest and of non-payment and of dishonor, and consent to extensions of time, renewal, waivers or modifications without notice and further consent to the release of any collateral or any part thereof with or without substitution.

[Signature Page(s) Follow]

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IN WITNESS WHEREOF, this Promissory Note has been executed by Borrower as of the date first written above.

Borrower:

inContact, Inc.

By:

Name:

Title:

EX-10.29

Exhibit 10.29

Guarantee

This Guarantee is made as of October 7, 2011, by the undersigned Siemens Enterprise Communications, Inc., a Delaware corporation (“Guarantor”) to Zions First National Bank (“Lender”), as an inducement to Lender to enter into a Loan Agreement with and to loan monies to inContact, Inc., a Delaware corporation (“Borrower”).

Lender, Borrower, and Guarantor are entering into a Loan Agreement of even date herewith (the “Loan Agreement”) pursuant to which Lender has agreed to make a loan to Borrower evidenced by a Promissory Note (Amortizing Term Loan) in the original principal amount of $2,500,000.00 (the “Promissory Note”).

For good and valuable consideration, receipt of which is hereby acknowledged, Guarantor agrees as follows:

1. Definitions. Except as otherwise provided herein, terms defined in the Loan Agreement shall have the same meanings when used herein. Terms defined in the singular shall have the same meaning when used in the plural and vice versa. As used herein, the term:

“Collateral” includes, in addition to the meaning set forth in the Loan Agreement, any other collateral for the Indebtedness which may be taken in the future.

“Guarantee” includes, in addition to the meaning set forth in the Loan Agreement, any other guarantee of the Indebtedness, now existing or given in the future.

“Guarantor” includes, in addition to the meaning set forth in the Loan Agreement, any other person or entity who guarantees the Indebtedness, now or in the future.

“Indebtedness” means all liabilities, obligations, and indebtedness of Borrower arising under the Loan Documents, including the Promissory Note and including all costs and expenses, including reasonable attorneys fees and legal expenses, for which Borrower is liable under the Loan Documents.

2. Guarantee. Guarantor absolutely and unconditionally guarantees to Lender that Borrower shall promptly and fully perform, pay and discharge the Indebtedness. If Borrower fails to pay any Indebtedness promptly as the same becomes due, Guarantor agrees to pay the Indebtedness on demand.

3. Guarantee Unconditional. This Guarantee is an absolute and unconditional guarantee of payment and not of collectability. The liability of Guarantor hereunder is not conditional or contingent upon the genuineness, validity, or enforceability of the Indebtedness or any of the Loan Documents or the value or sufficiency of any Collateral.

4. Agreement to Pay Attorneys Fees. Guarantor agrees to pay all collection costs, including reasonable attorneys fees and legal expenses, incurred by Lender in enforcing this Guarantee.

Guarantor agrees to pay all expenses, including attorneys fees and legal expenses, incurred by Lender in any bankruptcy proceedings of any type involving Guarantor, including, without limitation, expenses incurred in modifying or lifting the automatic stay, determining adequate protection, use of cash collateral, or relating to any plan of reorganization.

5. Waiver by Guarantor. Guarantor expressly and absolutely, without affecting the liability of Guarantor hereunder:

a. Waives notice of acceptance of this Guarantee, the offer of guarantee contemplated by this Guarantee, or any other notice which may be required relative to the acceptance of this Guarantee;

b. Waives demand, protest, notice of dishonor or nonpayment or presentment for payment of the Promissory Note or any other evidence of the Indebtedness;

c. Waives notice of transactions which have occurred under or relating to or affecting this Guarantee;

d. Waives notice of any adverse change in the condition, financial or otherwise, of Borrower or any Guarantor, any change concerning any Collateral, or of any other fact which might materially increase Guarantor’s risk, whether or not Lender has knowledge of the same;

e. Waives any right to require Lender to (i) proceed against Borrower by suit or otherwise, (ii) foreclose, proceed against, liquidate or exhaust any Collateral, or (iii) exercise, pursue or enforce any right or remedy Lender may have against Borrower, any Collateral, any Guarantor, any other person or entity, or otherwise, prior to proceeding against Guarantor; and

f. Waives any and all rights of subrogation, contribution or indemnification against Borrower or any Guarantor of any nature whatsoever, now existing or hereafter arising or created unless and until the Indebtedness has been finally and irrevocably paid in full.

6. Consent to Lender’s Acts. Guarantor hereby authorizes and consents to Lender at any time and from time to time, without notice or further consent of Guarantor, doing the following and Guarantor agrees that the liability of Guarantor shall not be released or affected by:

a. The taking or accepting, or the failure by Lender to take or accept, any other Collateral or Guarantee for the Indebtedness;

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b. The modification, amendment, extension, renewal, replacement, or termination of any of the Loan Documents, to the granting of any other credit, and to the acceleration of maturity of the Indebtedness;

c. Any complete or partial release, substitution, subordination, impairment, loss, compromise, or other modification of any Collateral or any Guarantee;

d. Any renewal, extension, modification, replacement, acceleration, consolidation, adjustment, indulgence, forbearance, waiver or compromise of the payment of any part or all of the Indebtedness, or any liability of any Guarantor, or the performance of any covenant contained in the Loan Documents;

e. Any neglect, delay, omission, failure, or refusal of Lender to take or prosecute any action for the collection of the Indebtedness or any part thereof, or for the enforcement of any provision of any of the Loan Documents, or any action in connection with any Collateral or any Guarantee, including, without limitation, the failure of Lender to perfect any security interest in any Collateral;

f. Any increase or decrease in the rate of interest on the Indebtedness;

g. Acceptance of any partial and/or late payments on the Indebtedness;

h. Application of payments by, or recoveries from, Borrower or any Guarantor, or any sums realized from any Collateral, in such manner and in such order of priority as Lender deems proper, whether or not the obligation to which the payment or recovery is applied is due at the time of such application; and

i. Lender exercising any and all rights and remedies available to Lender by law, at equity or by agreement, even if the exercise thereof may affect, modify, or eliminate any Guarantor’s right of subrogation against Borrower or any other party.

7. Subordination by Guarantor.

a. Collateral. Irrespective of the time, order, manner, or method of creation, attachment, or perfection, any and all security interests, liens, mortgages, deeds of trust, assignments, and any other right, title or interest in, to, or on any Collateral, whether obtained by agreement or by judicial process, (“Encumbrance”) in favor of Lender, all Encumbrances in favor of Lender, now existing or hereafter created, shall have priority over any and all Encumbrances in favor of Guarantor in, to, or on any Collateral, now existing or hereafter created. Guarantor hereby subordinates any and all Encumbrances in favor of Guarantor in, to, or on any Collateral, now existing or hereafter created, to any and all Encumbrances in favor of Lender in, to, or on any Collateral, now existing or hereafter created.

b. Payment. Upon occurrence of an Event of Default, (i) the right of Guarantor to receive any payment, whether of principal or interest, on any obligation owing by Borrower to Guarantor shall be subordinated to the right of Lender to receive payment due on the Indebtedness; (ii) Guarantor shall not receive or accept any payments

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from or on behalf of Borrower, any guarantor, or any other obligor on any obligation owing by Borrower to Guarantor without the prior written consent of Lender, and, if Guarantor receives such a payment without Lender’s prior written consent, such payment shall be received in trust for Lender and shall be immediately tendered to Lender to be applied towards the Indebtedness; and (iii) Guarantor shall direct Borrower to make all payments on any obligation owing to Guarantor by Borrower directly to Lender to be applied towards the Indebtedness, which direction may not be changed or terminated without the prior written consent of Lender.

8. Term of Guarantee. This Guarantee shall remain in full force and effect until all Indebtedness has been fully paid. No termination of this Guarantee by Guarantor shall be effective.

9. Cumulative Rights. The rights and remedies herein conferred are cumulative and not exclusive of any other rights or remedies, and shall be in addition to every other right, power, and remedy that Lender may have, whether specifically granted herein, or hereafter existing at law, in equity, or by statute; and any and all such rights and remedies may be exercised from time to time and as often and in such order as Lender may deem expedient.

No delay or omission in the exercise or pursuance by Lender of any right, power, or remedy shall impair any such right, power, or remedy or shall be construed to be a waiver thereof.

10. Governing Law . This Guarantee shall be governed by and construed in accordance with the laws of the State of Utah.

11. Binding Effect. This Guarantee may be executed and delivered to Lender prior to the execution and delivery of the Loan Documents. This Guarantee shall nonetheless be binding and enforceable upon its execution and delivery to Lender.

12. Revival Clause. If the incurring of any debt by Borrower or the payment of any money or transfer of property to Lender by or on behalf of Borrower, Guarantor, or any other party should for any reason subsequently be determined to be “voidable” or “avoidable” in whole or in part within the meaning of any state or federal law (collectively “voidable transfers”), including, without limitation, fraudulent conveyances or preferential transfers under the United States Bankruptcy Code or any other federal or state law, and Lender is required to repay or restore any voidable transfers or the amount or any portion thereof, or upon the advice of Lender’s counsel is advised to do so, then, as to any such amount or property repaid or restored, including all reasonable costs, expenses, and attorneys fees of Lender related thereto, the liability of Guarantor shall automatically be revived, reinstated and restored and shall exist as though the voidable transfers had never been made.

13. Severability and Interpretation. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction only, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The headings in this

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Guarantee are inserted for convenience only and shall not be considered part of the Guarantee nor be used in its interpretation. All references in this Guarantee to the singular shall be deemed to include the plural when the context so requires, and vice versa. References in the collective or conjunctive shall also include the disjunctive unless the context otherwise clearly requires a different interpretation.

14. Continuing Agreement. All agreements, representations, warranties, and covenants made herein by Guarantor shall survive the execution and delivery of this Guarantee and shall continue in effect so long as the Indebtedness or any portion thereof is outstanding and unpaid. All agreements, representations, warranties, and covenants made herein by Guarantor shall survive any bankruptcy proceedings. This Guarantee shall bind the party making the same, and /its successors, assigns, heirs, executors, and personal representatives. The death, insolvency, bankruptcy, disability, or lack of corporate power of Borrower, Guarantor, or any other person or entity at any time will not affect this Guarantee.

15. Entire Agreement. This Guarantee, together with the Loan Agreement, constitutes the entire agreement between Lender and Guarantor concerning the subject matter hereof, and may not be altered or amended except by written agreement signed by Lender and Guarantor. All other prior and contemporaneous agreements, arrangements, and understandings between the parties hereto as to the subject matter hereof are rescinded.

[Signature Page(s) Follow]

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IN WITNESS WHEREOF, this Guarantee has been executed as of the first day and year set forth above.

Guarantor:
Siemens Enterprise Communications, Inc.
By:
	Stephen Juge
	Senior Vice President and General Counsel

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EX-10.30

EXHIBIT 10.30

SECURITY TRANSFER AGREEMENT

(SICHERUNGSÜBEREIGNUNG)

between

inContact Ltd.

as Transferor

and

Siemens Enterprise Communications Inc.

as Collateral Holder

TABLE OF CONTENTS

		Page
1.	DEFINITIONS AND INTERPRETATION		3
2.	TRANSFER		4
3.	PURPOSE OF THE TRANSFER		4
4.	LIST OF TRANSFERRED ASSETS		4
5.	RETENTION OF TITLE ARRANGEMENTS		5
6.	USE AND DISPOSAL OF TRANSFERRED ASSETS		5
7.	INSURANCE OF THE TRANSFERRED ASSETS		5
8.	REVOCATION OF RIGHTS		5
9.	RIGHT OF REALISATION		6
10.	RETRANSFER OF TRANSFERRED ASSETS		6
11.	RIGHT OF INSPECTION		7
12.	BOOKKEEPING AND DATA-PROCESSING		7
13.	UNDERTAKINGS OF THE TRANSFEROR		7
14.	REPRESENTATIONS AND WARRANTIES		8
15.	INDEMNITY		8
16.	ASSIGNEES AND TRANSFEREES		9
17.	DURATION AND INDEPENDENCE		9
18.	COSTS AND EXPENSES		9
19.	NOTICES AND LANGUAGE		9
20.	PARTIAL INVALIDITY; NO IMPLIED WAIVER		10
21.	CHOICE OF LAW AND PLANCE OF JURISDICTION		10

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THIS SECURITY TRANSFER AGREEMENT (this “Agreement”) is made on October 7, 2011

BETWEEN:

1. inContact Ltd., a limited liability company organized under the laws of England and Wales, registered in the companies register of England and Wales under the Companies Act 2006, having its business address at 10 John Street, London England WC1N2EB, (the “Transferor”); and

2. Siemens Enterprise Communications, Inc., a Delaware corporation, having its business address at 1881 Campus Commons Drive, Reston, VA 20191, USA (the “Collateral Holder”).

WHEREAS:

(A) The Transferor is directly and/or indirectly a wholly-owned subsidiary of inContact, Inc., a Delaware corporation with offices located at 7730 South Union Park Avenue, Suite 500, Salt Lake City, UT 84047, U.S.A (“inContact”). The Collateral Holder’s parent company, Enterprise Networks Holdings, Inc., presently holds a 16.7 % shareholding in inContact.

(B) inContact has entered into a loan agreement dated October 7, 2011 (as amended or modified from time to time, the “Loan Agreement”) with Zions First National Bank, a national banking association with its principal offices at One South Main Street, Salt Lake City, Utah 84133, USA (the “Lender”) for a USD 2.5 million amortizing term loan (the “Loan”). The Collateral Holder has guaranteed payment of the Loan pursuant to a guarantee of even date with the Loan Agreement (as amended or modified from time to time, the “Guarantee”).

(C) As an inducement to the Collateral Holder to give the Guarantee, inContact is causing the Transferor to enter into this Agreement for the purpose of giving the Collateral Holder a security interest in the assets of the Transferor against which the Collateral Holder can recoup any amount it is required to pay should the Lender make a claim against the Collateral Holder on the Guarantee.

NOW, IT IS HEREBY AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 In this Agreement:

“Business Day” means every day with the exception of Saturdays, Sundays and such other days on which banks are generally closed for business in Munich, Germany or in the State of Utah.

“Event of Default” means the Collateral Holder has made payment to the Lender under the Guarantee and inContact has not fully reimbursed the Collateral Holder for such payment within five Business Days following the date the Collateral Holder makes payment under the Guarantee to the Lender.

“Secured Obligations” means any and all obligations (present and future, actual and contingent, matured or not matured, liquidated or unliquidated, whether incurred solely or jointly with any other person and whether as principal or surety, in any currency or currencies, together with all interest accruing thereon, and all costs, charges and expenses incurred in connection therewith) which are or become due, owing or payable by inContact to the Collateral Holder as a result of an Event of Default.

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1.2 A reference to any person in this Agreement includes such person’s successors, transferees and assignees.

Words importing the singular shall include the plural and vice versa unless the context requires otherwise.

2. TRANSFER

2.1 The Transferor hereby transfers to the Collateral Holder title to the assets (fixtures (bewegliches Anlagevermögen) and chattels (Umlaufvermögen), including without limitation raw materials, work in progress and finished stock) which are currently or in the future located at the Transferor’s premises as set out in Schedule 1 (the “Premises”). For notification purposes, such assets are more particularly described in the lists delivered pursuant to Clauses 4.1 and 4.2 and include without limitation all those fixtures and chattels described in any list delivered after the date hereof pursuant to Clause 4.2 (such goods and objects which are now or hereinafter located at the Premises shall hereinafter be referred to as the “Transferred Goods”).

2.2 To the extent that the Transferor has only part ownership (Miteigentum) of the Transferred Goods or the Transferor has any inchoate rights (Anwartschaftsrechte) in respect of the Transferred Goods, the Transferor hereby transfers to the Collateral Holder such part ownership or inchoate rights in respect of the Transferred Goods and it is agreed that the transfer of ownership, part ownership or inchoate rights in respect of the Transferred Goods takes place on the date hereof or on the date the Transferor acquires ownership, part ownership or inchoate rights in respect of such Transferred Goods (together with the Transferred Goods referred to as the “Transferred Assets”).

2.3 The Transferor and the Collateral Holder agree that the transfer of title by the Transferor to the Collateral Holder shall not be affected by the Transferor relocating any of the Transferred Assets to premises other than its respective Premises.

2.4 In lieu of transfer of possession of the Transferred Assets to the Collateral Holder the parties agree that the Transferor shall hold the Transferred Assets in the Transferor’s custody (unentgeltliche Vewahrung) free of charge for the account of the Collateral Holder as beneficiary of the Security Interest (defined below). The Transferor hereby further assigns all present and future claims against third parties obtaining actual possession of any of the Transferred Assets transferred by the Transferor to the Collateral Holder, which accepts such assignment.

2.5 The Collateral Holder hereby accepts the transfers constituted hereby.

3. PURPOSE OF THE TRANSFER

The Transferred Assets shall serve as security for the prompt and complete satisfaction of any and all Secured Obligations (the “Security Interest”).

4. LIST OF TRANSFERRED ASSETS

4.1 A list of Transferred Assets setting out (i) the location where the relevant Transferred Assets are stored, (ii) the nature of the Transferred Assets, (iii) the number thereof and (iv) the amount for which such assets were purchased (if applicable) is attached hereto as Schedule 2. Such list shall be in all material respects a correct and complete list of all Transferred Assets of the Transferor as of the end of the date hereof.

4.2 If reasonably necessary to safeguard the Security Interest, the Transferor shall provide to the Collateral Holder an updated list of the Transferred Assets. The updated lists shall set forth details of the Transferred Assets in accordance with the lists provided pursuant to Clause 4.1.

4.3 The lists referred to in Clauses 4.1 and 4.2 are for notification purposes only and if for any reason whatsoever the Transferred Assets are not, or are incompletely contained in the lists presented then the transfer of the Transferred Assets actually located at the Premises shall not be affected thereby.

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4.4 If the Transferor employs a third party for its bookkeeping and/or data-processing, upon the occurrence of an Event of Default, the Transferor hereby authorizes the Collateral Holder to obtain the respective lists directly from such third party at the Transferor’s expense.

5. RETENTION OF TITLE ARRANGEMENTS

The Transferor shall terminate any person’s retention of title arrangements (Eigentumsvorbehalt) in respect of any Transferred Assets by paying the purchase price thereof, and shall not allow any third party rights in or to the Transferred Assets to be created. The Collateral Holder shall be entitled to extinguish any retention of title arrangements by satisfying the holder thereof, at the Transferor’s expense.

6. USE AND DISPOSAL OF TRANSFERRED ASSETS

6.1 The Collateral Holder authorizes the Transferor (a) to use the Transferred Assets free of charge (unentgeltlich) for the operation of its business (the “Right of Use”) and (b) to temporarily relocate and otherwise deal with the Transferred Assets in its own name and for its own account (the “Authorization”). The Transferor shall in doing so act with the care of an orderly acting merchant (Sorgfalt eines ordentlichen Kaufmanns). Any permanent relocation or disposing of the Transferred Assets shall require the prior written consent of the Collateral Holder.

6.2 The Transferor shall keep the Transferred Assets in good working order, ordinary wear and tear excepted, at its cost and apply at all times the care of an orderly acting merchant.

7. INSURANCE OF THE TRANSFERRED ASSETS

7.1 The Transferor undertakes to maintain insurance for the Transferred Assets in the amount of their full replacement value against the usual risks as well as any further risks against which the Collateral Holder deems an insurance necessary.

7.2 The insurance premiums shall be paid by the Transferor.

7.3 The Transferor hereby assigns to the Collateral Holder any present and future claims against the respective insurers and shall notify the insurers of the assignment and transfer of title in the Transferred Assets to the Collateral Holder. The Collateral Holder hereby accepts such assignments. The Transferor will furthermore notify the respective insurer that the Collateral Holder does not assume any obligations under any insurance contract, and that the Transferor is not entitled to cancel the insurance coverage or proceeds without the consent of the Collateral Holder.

7.4 Upon request of by the Collateral Holder, the Transferor will submit to the Collateral Holder the insurance policy and proof of payment of the insurance premium. If the Transferor fails to sufficiently insure the Transferred Assets or to pay the premium when due, the Collateral Holder may do so at the risk and at the expense of the Transferor.

8. REVOCATION OF RIGHTS

8.1 At any time after the occurrence of an Event of Default, (a) the Transferor shall, at the request of the Collateral Holder, label the Transferred Assets to show that they have been transferred for security purposes to the Collateral Holder, and (b) the Collateral Holder shall be entitled to revoke the Authorization and the Right of Use in section 6.1 above and request and obtain a transfer of possession of the Transferred Assets to the Collateral Holder or its designee, including without limitation any affiliate.

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8.2 The Collateral Holder shall be further entitled to revoke the Authorization and the Right of Use relating to the Transferred Assets in section 6.1 above and request a transfer of possession of the Transferred Assets to the Collateral Holder or its designee, including without limitation any affiliate if the Transferor materially breaches its obligations under this Agreement, in particular its obligations to keep the Transferred Assets in good working order (Clause 6.2) and not to dispose of the Transferred Assets without the Collateral Holder’s consent (Clause 6.1).

9. RIGHT OF REALISATION

9.1 At any time after the occurrence of an Event of Default, the Collateral Holder shall be entitled to realize the Transferred Assets. The Collateral Holder shall give to the Transferor five (5) Business Days’ prior written notice of its intention to realize the Transferred Assets. Such notice is not necessary if an application for the institution of insolvency proceedings or similar proceedings is filed by or against the Transferor.

9.2 The Collateral Holder has the right to realize the Transferred Assets by way of a private sale, a public auction or by way of a declaration vis-à-vis the Transferor that the Collateral Holder or its designee, including without limitation any affiliate will permanently retain title to the Transferred Assets at the then current market price. Furthermore, the Collateral Holder may request the Transferor to realize the Transferred Assets in accordance with the Collateral Holder’s instructions.

9.3 The Collateral Holder may, in its sole discretion, determine which of the Transferred Assets shall be used to satisfy the Secured Obligations. The Collateral Holder will only realize the Transferred Assets to the extent necessary to satisfy the Secured Obligations.

9.4 The Transferor shall promptly provide to the Collateral Holder all documents of title and other documents relating to the Transferred Assets.

9.5 After the complete, unconditional and irrevocable discharge of all Secured Obligations any remaining proceeds resulting from the realization of the Transferred Assets shall be promptly transferred to the Transferor at its own cost and expense.

10. RETRANSFER OF TRANSFERRED ASSETS

10.1 Upon complete and irrevocable satisfaction of the Secured Obligations, the Collateral Holder shall at the cost of the Transferor retransfer any remaining Transferred Assets to the Transferor, who shall accept such retransfer, and surrender any excess proceeds resulting from any realization thereof. The Collateral Holder will transfer any Transferred Assets to a third person if and to the extent so required by law.

10.2 If at any time the total value of the Transferred Assets which can be expected to be realized after an Event of Default has occurred (the “Realizable Value”) other than temporarily exceeds 110% of the amount of the Secured Obligations (the “Limit”), the Collateral Holder shall upon the Transferor’s request retransfer or release such part of the Transferred Assets as the Collateral Holder may in its reasonable discretion determine so as to reduce the realizable value of the Transferred Assets to the Limit (Sicherheitenfreigabe).

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10.3 The Transferor and the Collateral Holder agree that the Realizable Value of the Transferred Assets shall be determined as follows:

10.3.1 The Realizable Value shall be determined on the basis of the fair market value of the Transferred Assets at the time of the Transferor’s request for release of any Transferred Assets. In the absence of a fair market value, the Realizable Value shall be determined on the basis of the book value.

10.3.2 In case any Transferred Assets are encumbered with any superior rights in favor of third parties, contrary to the provisions of section 5 above, the value pursuant to Clause 10.3.1 shall be reduced by the amount of all outstanding claims secured by such unauthorized rights.

10.3.3 From the value determined pursuant to Clause 10.3.2, an appropriate security discount shall be made taking into account any possible deficit in the proceeds, in particular due to the age of the Transferred Assets or the fact that they are being realized by way of a compulsory sale.

11. RIGHT OF INSPECTION

11.1 The Transferor undertakes to provide the Collateral Holder promptly at its request with all information and documents which are necessary for perfecting and/or enforcing the respective security created hereby.

11.2 The Transferor authorizes the Collateral Holder to inspect the Transferred Assets at the Premises during normal business hours and upon reasonable notice, or to have them inspected by a duly authorized representative.

11.3 To the extent that the relevant Transferred Assets are in the possession of a third party, the Transferor hereby instructs such third party to allow an inspection by the Collateral Holder of the Transferred Assets at such third party’s premises.

12. BOOKKEEPING AND DATA-PROCESSING

12.1 If proof or documents which are necessary to identify the Transferred Assets have been handed over by the Transferor to a third party (in particular a bookkeeping firm or a tax consultant) the Transferor hereby assigns to the Collateral Holder, which accepts such assignment, its right to demand from such third party the return of the information and documents. The Transferor hereby instructs the third party to provide to the Collateral Holder upon its demand such information and documents which the Collateral Holder deems necessary in its reasonable discretion to perfect and/or enforce the Security Interest.

12.2 If details concerning the Transferred Assets or any part thereof have been stored in an electronic data processing system, then upon the occurrence of an Event of Default, the Transferor shall grant to the Collateral Holder and its designees access to the computer and or data processing system, including the peripheral equipment and all data concerning the Transferred Assets or any part thereof. Any assistance required shall be provided to the Collateral Holder. If a third party handles the electronic processing of data, then upon the occurrence of an Event of Default the Transferor hereby assigns to the Collateral Holder, which accepts such assignment, all rights against such third party relating to these services, and instructs such third party to handle the processing of data for the Collateral Holder upon its demand as it did for the Transferor.

For the avoidance of doubt, nothing contained in or contemplated by this Agreement shall require the Transferor to act in violation of the German Data Protection Act (Bundesdatenschutzgesetz).

13. UNDERTAKINGS OF THE TRANSFEROR

13.1 During the term of this Agreement, the Transferor undertakes to the Collateral Holder:

(a) to take all actions or make all declarations the Collateral Holder may require for perfecting, protecting or enforcing the Security Interest intended to be created by this Agreement at the Transferor’s cost and expense;

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(b) not to create or permit to subsist any encumbrance over any of the Transferred Assets or any interest therein or otherwise sell, transfer or dispose of any of the Transferred Assets or knowingly do or permit to be done, anything which might depreciate, jeopardize or otherwise directly or indirectly prejudice the value of such Transferred Assets or any interest therein;

(c) to obtain, comply with the terms of and do all that is necessary to maintain in full force and effect all authorizations, approvals, licenses and consents required in or by law to enable the Transferor lawfully to enter into and perform its obligations under this Agreement and to ensure the legality, validity, enforceability or admissibility in evidence of this Agreement;

(d) to notify the Collateral Holder without undue delay (unverzüglich) of any event or circumstance which might reasonably be expected to have a material adverse effect on the Security Interests granted hereunder; and

(e) to notify the Collateral Holder without undue delay of any attachment (Pfändung) and/or any third parties bringing claims in respect of the Transferred Assets or any part thereof or any other measures which could jeopardize the Collateral Holder’s rights relating to the Transferred Assets or materially impair their value. The Transferor shall inform the relevant attaching creditor immediately about the Collateral Holder’s Security Interest.

13.2 In case any of the Transferred Assets are encumbered by a statutory lien (gesetzliches Pfandrecht), the Transferor shall provide to the Collateral Holder upon its request proof of due payment of any claim secured by such statutory lien. If the Transferor fails to provide such proof of payment, the Collateral Holder shall be entitled to discharge any secured obligations at the Transferor’s expense.

13.3 A consent required from the Collateral Holder under this Clause 13 may be withheld if the Transferor cannot prove that the contemplated action for which such consent is required would maintain the full legal and economic quality and effectiveness of the Security Interest.

14. REPRESENTATIONS AND WARRANTIES

The Transferor represents and warrants to the Collateral Holder that:

(a) at the date hereof it is not unable to pay its debts as and when they fall due (zahlungsunfähig), over-indebted (überschuldet) or subject to imminent illiquidity (drohende Zahlungsunfähigkeit), all within the meaning of Sections 17 to 19 of the German Insolvency Act (Insolvenzordnung) or subject to any insolvency proceedings (Insolvenzverfahren); and

(b) other than (i) liens arising under statutory law or (ii) contractual liens which are customary in the trade of the Transferor, it is and will be the sole legal and beneficial (wirtschaftlicher) owner, part owner or holder of an inchoate right in respect of the Transferred Assets and such Transferred Assets are free from any rights of third parties (including pre-emption rights) and in each case free from encumbrances and can be freely transferred.

15. INDEMNITY

15.1 The Collateral Holder shall not be liable for any loss or damage suffered by the Transferor save in respect of such loss or damage suffered as a result of the willful misconduct or gross negligence of the Collateral Holder.

15.2 The Transferor will indemnify and hold the Collateral Holder harmless against any losses, actions, claims, expenses, demands and liabilities which it may incur in connection with any act or omission in the exercising or purported exercising of the powers contained herein and occasioned by any breach of the Transferor of any of its obligations or undertakings herein contained other than to the extent that such losses, actions, claims, expenses, demands and liabilities are incurred or brought against the Collateral Holder as a result of the willful misconduct or gross negligence of the Collateral Holder.

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16. ASSIGNEES AND TRANSFEREES

The Collateral Holder shall be entitled to assign or otherwise transfer any and all of its rights and duties under this Agreement to a third party. The Transferor shall not be entitled to make any such transfer.

17. DURATION AND INDEPENDENCE

17.1 This Agreement shall remain in full force and effect until complete satisfaction of the Secured Obligations. This Agreement shall not cease to exist if the Secured Obligations have only temporarily been discharged.

17.2 This Agreement shall create a continuing security and no change, amendment, supplement or novation of the Loan Agreement shall affect the validity or the scope of this Agreement or the obligations which are imposed on the Transferor hereunder.

18. COSTS AND EXPENSES

All reasonable costs, charges, fees and expenses together with any applicable value added tax arising in connection with this Agreement, if any, or its preparation, execution, or amendment, including reasonable fees for legal advisers, shall be borne by the Transferor.

19. NOTICES AND LANGUAGE

19.1 Any notice or other communication under or in connection with this Agreement shall be in writing and shall be delivered personally, or sent by mail, fax transmission or cable to the following addresses:

to the Transferor:	inContact Ltd.
	Address: 7730 South Union Park Avenue, Suite 500, Salt Lake City, UT 84047
	Fax: 888.888.9115
	Attention: Gregory S. Ayers, CFO
to the Collateral Holder:	Siemens Enterprise Communications, Inc.
	Address: 1881 Campus Commons Drive, Reston, VA 20191, USA
	Fax: +1 703 262 3080
	Attention: General Counsel

or to such address as the recipient may have notified in writing. Proof of posting or dispatch of any notice or communication to the Transferor shall be deemed (widerlegbare Vermutung) to be proof of receipt in the case of a letter, on the third business day in the country of receipt after posting and in the case of a fax transmission or cable on the first business day in the country of receipt immediately following the date of its dispatch.

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19.2 Any notice or other communication under or in connection with this Agreement shall be in the English language or, if in any other language, accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail, except that where a German translation of a legal term appears in such text, the German translation shall prevail.

20. PARTIAL INVALIDITY; NO IMPLIED WAIVER

20.1 Without prejudice to any other provision hereof, if at any time any one (or more) provision(s) hereof is or becomes invalid, illegal or unenforceable in any respect in any jurisdiction or with respect to any party, or if the parties become aware of any omission (Vertragslücke) hereto of any terms which were intended to be included in this Agreement, such invalidity, illegality, unenforceability in such jurisdiction or with respect to such party or parties or such omission shall not, to the fullest extent permitted by applicable law, render invalid, illegal or unenforceable such provision or provisions in any other jurisdiction or with respect to any other party or parties hereto and shall not affect or impair the validity, legality and enforceability of the remaining provisions hereof. Such invalid, illegal or unenforceable provision or such omission shall be deemed to be replaced by the parties with a provision which comes as close as reasonably possible to the commercial intentions of the invalid, illegal, unenforceable or omitted provision.

20.2 No failure to exercise, nor any delay in exercising, on the part of the Collateral Holder, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies provided hereunder are cumulative and not exclusive of any rights or remedies provided by law.

21. CHOICE OF LAW AND PLACE OF JURISDICTION

21.1 This Agreement is governed by and shall be construed in accordance with the laws of the Federal Republic of Germany.

21.2 The District Court (Landgericht) in Munich, Federal Republic of Germany, shall have exclusive jurisdiction of any and all disputes arising in connection with this Agreement.

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Schedule 1

Site Plan of Premises

marked to show section(s) where Transferred Assets are kept

Addresses of Premises:

Equinix

Lärchenstrasse 110

65933 Frankfurt – Griesheim

Germany

Equinix

Arnulfstrasse 32

80335 Munich

Germany

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Schedule 2

List of Transferred Assets transferred

The list of Transferred Assets shall consist of the totality of assets listed on one or more Installation Certificates signed by the parties subsequent to the date hereof that specifically reference this Agreement and set forth (i) the location where the each Transferred Asset is stored, (ii) a specific description of each Transferred Asset, (iii) the number thereof and (iv) the amount for which each such asset was purchased (if applicable).

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EXECUTION PAGE

1. inContract Ltd.

as Transferor

By:

2. Siemens Enterprise Communications, Inc.

as Collateral Holder

By:
	Stephen Juge
	Sr. Vice President and General Counsel

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EX-10.31

EXHIBIT 10.31

FIRST AMENDMENT TO LEASE AGREEMENT

[Raddon Union Heights, LLC/UCN, Inc.]

This First Amendment to Lease Agreement (“Amendment”) is made as of December 6th, 2011 by and between RADDON UH OFFICE, LLC, a Utah limited liability company, the successor in interest to Raddon Union Heights, LLC, a Utah limited liability company (“Landlord”), and UCN, INC., a Utah corporation (“Tenant”).

RECITALS

A. Landlord and Tenant entered into that certain Lease Agreement, executed on or about June 30, 2007 (the “Lease”) with respect to the fourth and fifth floors of the Union Heights Office Building located at approximately 7730 South Union Park Avenue, Midvale. Any term used in this Amendment that is capitalized but not defined shall have the same meaning as set forth in the Lease, as amended by this Amendment.

B. The Initial Term of the Lease is set to expire on May 31, 2013. As more fully set forth below, Landlord and Tenant desire to amend the Lease to extend the expiration date of the Initial Term to June 30, 2015 and to amend the amount of the Monthly Rent payable by Tenant between January 1, 2012 and June 30, 2015.

AMENDMENT

NOW, THEREFORE, in consideration of the mutual covenants of the parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree to amend the Lease as follows:

1. Amendment. The Lease is hereby amended as follows:

A. Term of Lease. Section 7 of the Lease Summary is hereby deleted in its entirety and replaced with the following:

“7. Term of Lease: 103 consecutive months following the Commencement Date.”

B. Monthly Rent: Commencing on January 1, 2012, the Monthly Rent for the remaining Initial Term and, if applicable, the Extension Term, shall be as follows:

Period	Monthly Rent		$/SF
January 1, 2012 to June 30, 2015	$	101,503.50	$	24.50
July 1, 2015 to June 30, 2016	$	104,569.32	$	25.24
July 1, 2016 to June 30, 2017	$	107,718.00	$	26.00
July 1, 2017 to June 30, 2018	$	110,949.54	$	26.78
July 1, 2018 to June 30, 2019	$	114,263.94	$	27.58
July 1, 2019 to June 30, 2020	$	117,702.63	$	28.41

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C. Monthly Rent for Right of First Offer Space. In the event Tenant elects to lease the Right of First Offer Space pursuant to Section 2.3 of the Lease, Monthly Rent payable with respect to such Right of First Offer Space shall be calculated on the same basis per square foot or rentable space in the Right of First Offer Space as set forth in subsection 1.B. above.

D. Option to Extend: The second sentence of Section 3.2(a) of the Lease is hereby deleted in its entirety and replaced with the following:

“Tenant must notify Landlord at least twelve (12) months before the expiration of the Initial Term of its intent to exercise its Option to Extend.”

2. Reimbursement of Remodeling Costs. Landlord agrees to reimburse Tenant for Tenant’s out of pocket costs for preparing remodeling plans for the Leased Premises in an amount not to exceed $30,000. Landlord shall reimburse Tenant for such costs within thirty (30) days after Tenant delivers an invoice to Landlord evidencing such out of pocket costs.

3. General Provisions. In the event of any conflict between the provisions of the Lease and the provisions of this Amendment, the provisions of this Amendment shall control. Except as set forth in this Amendment, the Lease is ratified and affirmed in its entirety. This Amendment shall inure to the benefit of, and be binding on, the parties and their respective successors and assigns. This Amendment shall be governed by, and construed and interpreted in accordance with, the laws (excluding the choice of laws rules) of the State of Utah. This Amendment may be executed in any number of duplicate originals or counterparts, each of which when so executed shall constitute in the aggregate but one and the same document.

2

IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment to be effective as of the date first set forth above.

LANDLORD:

RADDON UH OFFICE, LLC, a Utah limited liability company

By:

Name:

Its:

TENANT:

inContact, Inc. (f/k/a UCN, INC.), a Utah corporation
By:
Name:	Gregory S. Ayers
Its:	Chief Financial Officer

3

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF INCONTACT, INC.

Name of Entity	State or Jurisdiction
Buyers United – Virginia, Inc.	Virginia
MyACD, Inc.	Utah
inContact Consulting and Commercial Services, LLC	Utah
inContact EMEA, LLC	Utah
inContact Limited	United Kingdom
inContact Philippines, Inc.	Philippines

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No.’s 333-116055, 333-123707, 333-153017, and 333-168666 on Form S-8 and Registration Statement No.’s 333-168665, 333-177553, and 333-1777554 on Form S-3 of our reports dated March 9, 2012, relating to the consolidated financial statements and financial statement schedule of inContact, Inc. and subsidiaries, and the effectiveness of inContact, Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of inContact, Inc. for the year ended December 31, 2011.

/s/    DELOITTE & TOUCHE LLP

Salt Lake City, Utah

March 9, 2012

EX-31.1

Exhibit 31.1

I, Paul Jarman, certify that:

1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2011 of inContact, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-a5(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2012	By:	/s/    PAUL JARMAN
		Paul Jarman
		Director and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Greg Ayers, certify that:

1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2011 of inContact, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-a5(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 9, 2012	By:	/s/    GREGORY S. AYERS
		Gregory S. Ayers
		Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

In connection with the Annual Report of inContact, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul Jarman, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 9, 2012	By:	/s/    PAUL JARMAN
		Paul Jarman
		Director and Chief Executive Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

In connection with the Annual Report of inContact, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Greg Ayers, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 9, 2012	By:	/s/    GREGORY S. AYERS
		Gregory S. Ayers
		Executive Vice President and Chief Financial Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

XML

Property And Equipment, Net

12 Months Ended

Dec. 31, 2011

Property And Equipment, Net [Abstract]

Property And Equipment, Net

NOTE 3. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following (in thousands):

	December 31,
	2011			2010
Computer and office equipment	$	21,077		$	12,462
Computer software		5,997			5,213
Internal use software		14,330			11,065
Furniture and fixtures		1,803			1,409
		43,207			30,149
Less: accumulated depreciation and amortization		(24,522	)		(18,108	)
Total property and equipment, net	$	18,685		$	12,041

Total depreciation and amortization expense of property and equipment was approximately $6.5 million in 2011, $4.9 million in 2010 and $4.0 million in 2009.

Property and equipment capitalized under capital lease obligations were as follows (in thousands):

	December 31,
	2011			2010
Gross	$	5,771		$	5,094
Less: accumulated depreciation and amortization		(2,305	)		(2,742	)
Total	$	3,466		$	2,352

XML

Accounts And Other Receivables, Net

12 Months Ended

Dec. 31, 2011

Accounts And Other Receivables, Net [Abstract]

Accounts And Other Receivables, Net

NOTE 2. ACCOUNTS AND OTHER RECEIVABLES, NET

The accounts and other receivables, net balances consisted of the following (in thousands):

	December 31,
	2011			2010
Billed	$	4,752		$	3,116
Earned but unbilled		8,317			6,836
Other		338			100
		13,407			10,052
Less: allowance for uncollectible accounts		(491	)		(749	)
Total accounts and other receivables, net	$	12,916		$	9,303

Earned but unbilled consists of revenues earned in the period and billed in a subsequent period.

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
ASSETS
Cash and cash equivalents	$ 17,724	$ 10,321
Restricted cash	246	246
Accounts and other receivables, net of allowance for uncollectible accounts of $491 and $749 respectively	12,916	9,303
Other current assets	2,526	2,293
Total current assets	33,412	22,163
Property and equipment, net	18,685	12,041
Intangible assets, net	1,394	1,938
Goodwill	4,086	4,073
Other assets	837	370
Total assets	58,414	40,585
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable	7,180	7,295
Accrued liabilities	2,769	2,079
Accrued commissions	1,291	1,058
Current portion of deferred revenue	1,056	898
Current portion of long-term debt and capital lease obligations	2,831	1,334
Warrant liability		246
Total current liabilities	15,127	12,910
Long-term debt and capital lease obligations	5,964	8,653
Deferred rent	161	286
Deferred revenue	946	34
Total liabilities	22,198	21,883
Commitments and contingencies
Stockholders' equity:
Common stock, $0.0001 par value; 100,000,000 shares authorized; 43,623,381 and 35,713,810 shares issued and outstanding as of December 31, 2011 and 2010, respectively	4	3
Additional paid-in capital	111,415	84,474
Accumulated deficit	(75,203)	(65,775)
Total stockholders' equity	36,216	18,702
Total liabilities and stockholders' equity	$ 58,414	$ 40,585

XML

Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash flows from operating activities:
Net loss	$ (9,428)	$ (1,056)	$ (2,922)
Adjustments to reconcile net loss to net cash (used in) from operating activities:
Depreciation of property and equipment	3,504	2,959	2,850
Amortization of software development costs	2,994	1,923	1,102
Amortization of intangible assets	544	563	983
Amortization of note financing costs	61	95	91
Interest accretion	16	11
Stock-based compensation	1,431	1,267	1,425
Warrants and stock issued for services	67	126	196
Change in fair value of warrants	158	(250)	383
Loss on disposal of property and equipment	95	51	66
Changes in operating assets and liabilities:
Accounts and other receivables, net	(3,522)	(138)	(989)
Other current assets	(405)	(535)	(461)
Other non-current assets	(375)	148	(26)
Trade accounts payable	2	1,037	(821)
Accrued liabilities	411	(730)	482
Accrued commissions	233	(78)	(22)
Deferred rent	(88)	(46)	(63)
Deferred revenue	1,070	(287)	(115)
Net cash (used in) from operating activities	(3,232)	5,060	2,159
Cash flows from investing activities:
Gross increase in restricted cash			(246)
Contingent purchase price payments	(135)	(430)	(719)
Proceeds from redemption of auction rate preferred securities		125	150
Payments made for deposits	(98)	(64)
Proceeds from deposits	181	30
Capitalized software development costs	(4,753)	(3,448)	(3,622)
Purchases of property and equipment	(5,217)	(1,736)	(1,024)
Net cash used in investing activities	(10,022)	(5,523)	(5,461)
Cash flows from financing activities:
Proceeds from issuance of common stock	23,865		8,399
Offering costs payments	(32)		(514)
Proceeds from exercise of options and warrants	1,182	1,816	484
Proceeds from sale of stock under employee stock purchase plan	225	53
Principal payments on long-term debt and capital leases	(2,234)	(1,937)	(1,440)
Borrowings under promissory note	2,500
Debt financing fees	(79)		(91)
Borrowings under the revolving credit notes	12,730	20,500	12,420
Payments under the revolving credit notes	(17,500)	(20,500)	(9,200)
Net cash from (used in) financing activities	20,657	(68)	10,058
Net increase (decrease) in cash and cash equivalents	7,403	(531)	6,756
Cash and cash equivalents at the beginning of the year	10,321	10,852	4,096
Cash and cash equivalents at the end of the year	17,724	10,321	10,852
Supplemental cash flow information:
Cash paid for interest	446	208	610
Cash paid for taxes	28	59	50
Supplemental schedule of non-cash investing and financing activities:
Unrealized gain on change in fair value of auction rate securities			50
Payments due for property and equipment included in trade accounts payable	189	77	5
Property and equipment and other assets financed with capital leases	3,311	1,556	1,479
Contingent purchase price payments included in accounts payable		122	56
Cashless exercise of warrants	404
Equity issuance costs included in accrued liabilities	$ 200

XML

Schedule II - Valuation And Qualifying Accounts

12 Months Ended

Dec. 31, 2011

Schedule II - Valuation And Qualifying Accounts [Abstract]

Schedule II - Valuation And Qualifying Accounts

INCONTACT, INC.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

Allowance for uncollectible accounts receivable:	Balance at beginning of year		Charged to costs and expenses		Write-offs, net of recoveries		Balance at end of year
Year ended December 31, 2011	$	749	$	350	$	608	$	491
Year ended December 31, 2010	$	1,371	$	—	$	622	$	749
Year ended December 31, 2009	$	1,871	$	375	$	875	$	1,371

XML

Description Of The Company And Summary Of Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Description Of The Company And Summary Of Significant Accounting Policies [Abstract]

Description Of The Company And Summary Of Significant Accounting Policies

NOTE 1. DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

We changed our name from UCN, Inc. to inContact, Inc. ("inContact," "we," "us," "our," or the "Company") on January 1, 2009. The accompanying consolidated financial statements and related footnotes refer to us as inContact for all years presented. We are incorporated in the state of Delaware.

We provide cloud-based contact center applications through our inContact^® portfolio, an advanced contact handling and performance management software application. "Cloud-based" is a term to refer to computing, data storage and delivery of technology services through the Internet, which includes software-as-a-service ("SaaS"). Our services provide a variety of connectivity options for carrying inbound calls to our inContact portfolio or linking agents to our inContact applications. We provide customers the ability to monitor agent effectiveness through our user survey tools and the ability to efficiently monitor their agent needs. We are also an aggregator and provider of telecommunications services. We contract with a number of third party providers for the right to resell the various telecommunication services and products they provide, and then offer all of these services to the customers. These services and products allow customers to buy only the telecommunications services they need, combine those services in a customized enhanced contact center package, receive one bill for those services, and call a single point of contact if a service problem or billing issue arises.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of inContact and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation.

Summary of Significant Accounting Policies

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates include unbilled revenue, the allowance for uncollectible accounts, attrition rates used to determine the amortization rate and estimated useful lives of customer lists acquired, the estimated customer life used to recognize revenue for professional services, and fair value calculations of the warrant liability and stock-based compensation.

Cash and Cash Equivalents

Cash and cash equivalents include money market funds, overnight deposits and other investments that are readily convertible into cash and have original maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value.

Restricted Cash

Restricted cash consists of a letter of credit related to an equipment leasing facility (Note 6) and cash held on deposit for credit card processing.

Accounts and Other Receivables and Allowance for Uncollectible Accounts

Accounts and other receivables are composed of billed amounts as well as unbilled amounts for which revenue has been earned and recognized, net of an allowance for uncollectible amounts. Finance charges are assessed to accounts once the amount owed is past due based on their specific terms. The allowance for uncollectible accounts is estimated by management and is based on specific information about customer accounts, past loss experience and general economic conditions. An account is written off by management when deemed uncollectible, although collections efforts may continue.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Major additions and improvements are capitalized, while minor repairs and maintenance costs are expensed when incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets as follows:

Asset Category	Estimated Useful Lives
Computer equipment	3 to 7 years
Computer software	3 years
Internal use software	3 years
Furniture and fixtures	3 to 7 years
Leasehold improvements	Shorter of 7 years or remainder of lease term

We evaluate the carrying value of property and equipment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Measurement of the amount of an impairment, if any, typically requires various estimates and assumptions including cash flows directly attributable to the asset, the useful life of the asset and residual value, if any. We did not record any impairment charges in relation to long-lived property and equipment during the years ended December 31, 2011, 2010 or 2009.

Internal Use Software

We capitalize certain costs incurred for the development of internal use software, which are included as internal use software in property and equipment in the consolidated balance sheets. These costs include the costs associated with coding, software configuration, upgrades and enhancements that are incurred during the application development stage. These costs, net of accumulated amortization, totaled $7.0 million and $6.7 million as of December 31, 2011 and 2010, respectively. Amortization of capitalized software costs was $3.0 million in 2011, $1.9 million in 2010 and $1.1 million in 2009.

Intangible Assets

Intangible assets consist of customer lists, patents, technology, trademarks, domain names and non-compete agreements. We estimate the useful lives of our acquired customer lists based on estimated attrition rates. Customer lists are generally amortized using an accelerated method over 24 to 120 months. Patents, technology and non-compete agreements are amortized on a straight-line basis over their estimated useful lives, which range from 24 to 96 months. Trademarks have indefinite lives, with the exception of one trademark that has a useful life of 15 years.

We review our finite-lived intangible assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When we determine that the carrying value of an intangible asset may not be recoverable, the related estimated future undiscounted cash flows expected to result from the use and eventual disposition of the asset are compared to the carrying value of the asset. If the sum of the estimated future undiscounted cash flows is less than the carrying amount, we record an impairment charge based on the difference between the carrying value of the asset and its fair value, which we estimate based on discounted expected future net cash flows. Events or circumstances that could indicate the existence of a possible impairment include obsolescence of the technology, an absence of market demand for the product, and/or continuing technology rights protection. Management believes the net carrying amount of our long-lived assets will be recovered by future cash flows generated by commercialization of the technology related to the long-lived asset, and from cash flows generated from customer lists. We did not record any impairment charges in relation to long-lived intangible assets during the years ended December 31, 2011, 2010 and 2009.

Goodwill and Indefinite-lived Intangible Assets

We evaluate goodwill and indefinite-lived intangible assets for impairment as of the end of the third quarter, and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Goodwill impairment is determined using a two-step process. The first step of the process is to compare the fair value of a reporting unit with its carrying amount, including goodwill. In performing the first step, we determine the fair value of a reporting unit by using a market-based valuation approach utilizing a multiple of revenues. Determining fair value requires the exercise of significant judgments, including judgments about relevant revenue multiples of comparable companies. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is required to be performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The impairment test for other indefinite-lived intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of intangible assets not subject to amortization are determined using a discounted cash flow ("DCF") valuation analysis. The DCF methodology used to value indefinite-lived intangibles entails identifying the projected discrete cash flows related to such intangibles and discounting them back to the valuation date. Significant judgments inherent in this analysis include the determination of discount rates, cash flows attributable to the intangibles and the terminal growth rates. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows generated as a result of the respective intangible assets.

Upon completion of the impairment test as of September 30, 2011, no indication of goodwill impairment existed. There were no events or circumstances from the date of assessment through December 31, 2011 that would impact this assessment.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements. However, we have purchase commitments with two national long distance telecommunication providers and operating leases (Note 13).

Revenue Recognition

Revenue is recognized when all of the following four criteria are met: (1) persuasive evidence of an arrangement exists, (2) the fee is fixed or determinable, (3) collection is reasonably assured, and (4) delivery has occurred or services have been rendered.

Revenue is determined and recognized based on the type of service provided for the customer as follows:

• inContact portfolio of services. Revenue is derived from the delivery of any of our software services within the inContact portfolio which are provided on a monthly recurring subscription basis. Monthly recurring subscription charges are generally billed in arrears and recognized for the period in which they are earned. For subscription contracts with multiple elements (hosted software, training, installation and long distance services), we follow the guidance provided in ASC 605-25, Revenue Recognition for Multiple-Element Arrangements, because customers do not have the right to take possession of the software. As such, these arrangements are considered service contracts and are not within the scope of Industry Topic 985, Software. In addition to the monthly recurring subscription revenue, revenue is also derived on a non-recurring basis for professional services included in implementing or improving a customer's inContact portfolio experience. Because our professional services, such as training and installation, are not considered to have standalone value, we defer revenue for upfront fees received for professional services in multiple element arrangements and recognize such fees as revenue over the estimated life of the customer. Professional services sold separately (i.e. not sold contemporaneously with the negotiation of a subscription contract) are recognized as revenue over the period that services are provided. Fees for telecommunications services in multiple element arrangements with in the inContact portfolio are based on usage and are recognized as revenue in the same manner as fees for telecommunications services discussed in the following paragraph.

• Telecommunications services. Revenue is derived from telecommunications services, such as dedicated transport, switched long distance and data services. These services are provided over our network or through third party telecommunications providers. Our network is the backbone of our inContact portfolio and allows us to provide the all-in-one inContact solution. Revenue for the telecommunications usage is derived based on customer specific rate plans and the customer's call usage and is recognized in the period the call is initiated. Customers are also billed monthly charges in arrears and revenue is recognized for such charges over the billing period. If the billing period spans more than one month, earned but unbilled revenues are recognized as revenue for incurred usage to date.

During the three months ended December 31, 2011, we determined that we had a sufficient amount of transaction history to estimate the life of a customer and began recognizing the revenue for upfront fees for professional services over the estimated life of a customer. Previously, we had recognized upfront fees for professional services over the life of the contract, as we did not have sufficient history with our customer base to estimate customer life. Therefore, prior to the fourth quarter of 2011, we used contract life as a proxy for customer life. This change in estimate was accounted for prospectively for all new and existing arrangements, and resulted in recognizing approximately $200,000 less in revenue during the fourth quarter of 2011.

Advertising Costs

We advertise our services through the web, partners and trade journals. Costs associated with these advertising efforts are expensed as incurred in selling and marketing expenses, and were approximately $1.3 million in 2011, $650,000 in 2010, and $46,000 in 2009.

Stock-Based Compensation

We measure compensation cost for equity-based awards (i.e. stock options, warrants and restricted stock units) at fair value on date of grant and recognize the fair value of compensation for awards expected to vest over the requisite service period.

We utilize the graded-vesting method, rather than the straight-line method, for recognizing compensation expense as management believes the graded-vesting method more closely matches the expense to associated services. Under this method, approximately 60% of the compensation cost is expensed in the first year of a typical three-year vesting term. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results differ from estimates, such amounts will be recorded as an adjustment in the period estimates are revised. Management considers many factors when estimating expected forfeitures, including types of awards, employee class and historical experience. Actual results may differ substantially from these estimates (Note 10).

Operating Leases

We lease office space under an operating lease agreement. The lease agreement contains rent holidays and rent escalation provisions. We record the total rent payable during the lease term on a straight-line basis over the term of the lease and record the difference between the rent paid and the straight-line rent as deferred rent.

Income Taxes

Income taxes are accounted for using the asset and liability method. Under this method, we recognize a liability or asset for the income tax consequences of all net operating loss and tax credit carryforwards and temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the assets and liabilities are recovered or settled. These deferred income tax assets or liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. Recognition of deferred tax assets is limited to amounts considered by management to be more likely than not of realization in future periods. At December 31, 2011 and 2010, we have a full valuation allowance against our deferred tax assets. Significant judgment is required in making this assessment, and it is difficult to predict when, if ever, our assessment may conclude that the remaining portion of the deferred tax assets are realizable.

Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

Comprehensive Loss

Comprehensive loss is reported in the consolidated statement of shareholders' equity as a component of retained earnings and consists of net loss and other gains and losses affecting shareholders' equity that, under generally accepted accounting principles are excluded from net loss.

Net Loss Per Common Share

Basic net income (loss) per common share ("Basic EPS") excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the year. Diluted net income (loss) per common share ("Diluted EPS") reflects the potential dilution that could occur if stock options or other common stock equivalents were exercised or converted into common stock. In periods of net loss, common stock equivalents are excluded from the Diluted EPS computation, because they are antidilutive. Therefore, Diluted EPS equals Basic EPS for all years presented in the consolidated statements of operations in the accompanying consolidated financial statements.

Fair Value Measurements

The accounting guidance for fair value measurements defines fair value, establishes a market-based framework or hierarchy for measuring fair value and expands disclosures about fair value measurements. The guidance is applicable whenever assets and liabilities are measured and included in the financial statements at fair value. The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs.

Liquidity

Our principal sources of liquidity are cash and cash equivalents and available borrowings under our revolving credit note, which expires in July 2013. At December 31, 2011, we had $17.7 million of cash and cash equivalents. In addition to our $17.7 million of cash and cash equivalents, we have access to additional available borrowings under our revolving credit facility, subject to meeting our covenant requirements. The available borrowings under the revolving credit facility at December 31, 2011 are $5.8 million, based on the maximum available advance amount calculated on the December 20, 2011 borrowing base certificate, resulting in total cash and additional availability under the revolving credit note of $23.5 million at December 31, 2011. The balance of our revolving credit note at December 31, 2011 was $2.5 million and the proceeds were used to take advantage of vendor discounts on early payment terms in December. In January 2012, we paid the outstanding balance on the revolving credit note of $2.5 million. The revolving credit note is collateralized by substantially all our assets.

In March 2011, we entered into an equipment leasing facility commitment with Zions Credit Corporation ("Zions Credit"). Under the terms of the leasing facility commitment, Zions Credit has agreed to provide us with financing of up to $3.0 million to lease computer related equipment for our business operations, which Zions Credit will lease to us in the form of a capital lease. The term of the facility is 36 months upon acceptance of the leased property by us. The calculated interest rate is subject to change based on the three year London InterBank Offered Rate ("LIBOR") plus 4.5%. We had utilized $1.7 million of the leasing facility at December 31, 2011.

We believe that existing cash and cash equivalents, cash from operations, and available borrowings under our revolving credit note and equipment leasing facility commitment will be sufficient to meet our cash requirements during at least the next twelve months.

Concentration Risks

Approximately 40% and 60% of our costs of revenue for the years ended December 31, 2011 and 2010, respectively, was incurred from four telecommunication providers. Approximately 50% of our costs of revenue for the year ended December 31, 2009 was incurred from three telecommunication providers. We owed $331,000 and $1.6 million to these telecommunications providers at December 31, 2011 and 2010, respectively.

Recent Accounting Pronouncements

Effective January 1, 2011, the Company adopted the Financial Accounting Standards Board ("FASB") revised accounting guidance related to revenue arrangements with multiple deliverables. The guidance applies to all deliverables under contractual arrangements in which a vendor will perform multiple revenue-generating activities. The guidance addresses how arrangement consideration should be allocated to the separate units of accounting, when applicable. The new guidance retains the criteria when delivered items in a multiple-deliverable arrangement should be considered separate units of accounting, but it removes the previous separation criterion that objective and reliable evidence of fair value of any undelivered items must exist for the delivered items to be considered a separate unit or separate units of accounting. Adoption of this guidance did not have a significant impact on the timing or amount of revenue recognized as we only have one unit of accounting for our arrangements that contain both our inContact portfolio of services and professional services.

In June 2011, the FASB issued new guidance, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. The guidance eliminates the option to present components of other comprehensive income as part of the statement of equity. In addition, in December 2011, the FASB issued an amendment to the accounting standard which defers the requirement to present components of reclassifications of other comprehensive income on the face of the income statement. The guidance will be effective for us beginning January 1, 2012. We have determined that the adoption of the guidance will not have a material effect on our operating results or financial position.

In September 2011, the FASB issued new guidance on the annual testing of goodwill for impairment. The guidance will allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This guidance will be effective for us for the year ending December 31, 2012, with early adoption permitted. We have determined that the adoption of this new guidance will not have a material impact on our consolidated financial statements.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Consolidated Balance Sheets [Abstract]
Accounts and other receivables, allowance for uncollectible accounts	$ 491	$ 749
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	43,623,381	35,713,810
Common stock, shares outstanding	43,623,381	35,713,810

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Related Party Transactions

12 Months Ended

Dec. 31, 2011

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 11. RELATED PARTY TRANSACTIONS

We paid the Chairman of the Board of Directors (the "Chairman") $84,000 in 2011, $78,000 in 2010 and $72,000 in 2009 for consulting, marketing and financing activities. We owed the Chairman $7,000 at both December 31, 2011 and 2010.

Concurrent with selling 7.2 million shares of common stock to an investor in June 2011 (Note 9), we entered into a commercial agreement with Siemens Enterprise Communications, Inc. ("Siemens"), a subsidiary of the investor, whereby Siemens became a world-wide reseller of inContact's portfolio of cloud-based solutions with minimum revenue purchase commitments of $5.0 million and $10.0 million during 2012 and 2013, respectively. No revenue was recorded during the year ended December 31, 2011 related to this agreement. We purchased phones from Siemens for $146,000 during the year ended December 31, 2011. The investor paid $18,000 to be a sponsor at our user conference during the year ended December 31, 2011.

XML

Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2011	Feb. 21, 2012	Jun. 30, 2011
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY
Entity Registrant Name	inContact, Inc.
Entity Central Index Key	0001087934
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		43,695,967
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 160,479,543

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Commitments And Contingencies

12 Months Ended

Dec. 31, 2011

Commitments And Contingencies [Abstract]

Commitments And Contingencies

NOTE 12. COMMITMENTS AND CONTINGENCIES

We have purchase commitments with two national long distance telecommunication providers. One purchase commitment provides for monthly minimums of $50,000 per month on a month-to-month basis. We currently exceed our monthly minimum purchase commitment with this carrier. The other purchase commitment is with another carrier that requires an annual $675,000 usage commitment through August 2012; we believe we will meet this commitment based on current usage patterns.

Certain customer lists purchased in 2001 through 2003 were financed through loans from various investors. All loans were paid prior to December 31, 2006. As part of the loan agreements, we agreed to pay a percentage of revenue received from the purchased customers to these investors as long as the customers remain with inContact. We paid these investors $326,000 in 2011, $329,000 in 2010 and $523,000 in 2009.

Litigation

In May 2009, the Company was served in a lawsuit titled California College, Inc., et al., v. UCN, Inc., et al. In the lawsuit, California College allege that (1) the Company made intentional and/or negligent misrepresentations in connection with the sale of the Company's services from Insidesales.com, Inc., another defendant in the lawsuit, (2) that the Company breached its service contract with California College and the contract between California College and Insidesales.com by failing to deliver contracted services and product and failing to abide by implied covenants of good faith and fair dealing, and (3) the conduct of the Company interfered with prospective economic business relations of California College with respect to enrolling students. California College is seeking damages, in an amount to be proven at trial, in excess of $20 million. Pursuant to a motion filed by Insidesales.com, California College filed an amended complaint that has been answered by Insidesales.com and us. Furthermore, Insidesales.com and inContact filed cross-claims against one another, which they subsequently agreed to dismiss with prejudice. In October 2011, California College reached a settlement with Insidesales.com, the terms of which have not been disclosed and remain confidential. The Company has denied all of the substantive allegations of the complaint and cross-claim and intends to defend the claims vigorously. Management believes the claims against inContact are without merit and no liability has been recorded.

We are the subject of certain other legal matters considered incidental to our business activities. It is the opinion of management that the ultimate disposition of these matters will not have a material impact on our financial position, liquidity or results of operations.

Operating Leases

The following schedule summarizes the future minimum lease payments on operating leases at December 31, 2011 (in thousands):

Year ended December 31,
2012	$	1,464
2013		1,477
2014		1,437
2015		883
Thereafter		190
Total	$	5,451

Rent expense was $1.7 million in 2011, $1.4 million in 2010 and $1.7 million in 2009.

Hosting Services

The Company has agreements with third parties to provide co-location services for hosting operations. The agreements require payment of a minimum amount per month for a fixed period of time in return for which the hosting service provider provides certain guarantees of network availability.

The following schedule summarizes the future minimum payments under these arrangements at December 31, 2011 (in thousands):

Year ended December 31,
2012	$	927
2013		928
2014		754
2015		711
Thereafter		513
Total	$	3,833

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Consolidated Statements Of Operations (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Net revenue:
Software	$ 39,870	$ 33,692	$ 29,103
Telecom	49,115	48,463	55,080
Total net revenue	88,985	82,155	84,183
Costs of revenue:
Software	16,940	12,051	9,681
Telecom	35,637	34,542	40,334
Total costs of revenue	52,577	46,593	50,015
Gross profit	36,408	35,562	34,168
Operating expenses:
Selling and marketing	24,563	19,158	17,355
Research and development	6,354	5,271	4,845
General and administrative	14,090	12,085	13,737
Total operating expenses	45,007	36,514	35,937
Loss from operations	(8,599)	(952)	(1,769)
Other income (expense):
Interest income	1	1	4
Interest expense	(507)	(287)	(666)
Change in fair value of warrants	(158)	250	(383)
Other expense	(91)	(47)	(46)
Total other expense	(755)	(83)	(1,091)
Loss before income taxes	(9,354)	(1,035)	(2,860)
Income tax expense	(74)	(21)	(62)
Net loss	$ (9,428)	$ (1,056)	$ (2,922)
Net loss per common share:
Basic and diluted	$ (0.23)	$ (0.03)	$ (0.09)
Weighted average common shares outstanding:
Basic and diluted	40,434	35,384	31,335

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Long-Term Debt And Capital Lease Obligations

12 Months Ended

Dec. 31, 2011

Long-Term Debt And Capital Lease Obligations [Abstract]

Long-Term Debt And Capital Lease Obligations

NOTE 6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-term debt and capital lease obligations consisted of the following (in thousands):

	December 31,
	2011			2010
Revolving credit note with Zions First National Bank, with maximum availability of $8.5 million, bearing interest at the 90 day LIBOR plus 4.5% (5.08% at December 31, 2011), requirement to repay outstanding principal balance in July 2013	$	2,500		$	7,270
Promissory note payable to Zions First National Bank, bearing interest at the 90 day LIBOR plus 4.5% (5.08% at December 31, 2011), payable monthly with final principal payment made in October 2014		2,361			—
Promissory notes payable to former ScheduleQ, LLC shareholders, interest imputed at 9.0% per annum, payable monthly, with final principal payments made in February 2011		—			2
Capital lease obligations		3,968			2,734
Total debt and capital lease obligations		8,829			10,006
Debt discounts		(34	)		(19	)
Net total debt and capital lease obligations	$	8,795		$	9,987
Current portion of debt	$	833		$	2
Current portion of capital lease obligations		2,010			1,351
Current portion of debt discounts		(12	)		(19	)
Total current portion of debt and capital lease obligations	$	2,831		$	1,334
Long-term portion of debt	$	4,028		$	7,270
Long-term portion of capital lease obligations		1,958			1,383
Long-term portion of debt discounts		(22	)		—
Total long-term portion of debt and capital lease obligations	$	5,964		$	8,653

Revolving Credit Note

On July 16, 2009, we entered into a revolving credit loan agreement ("Revolving Credit Agreement") with Zions First National Bank ("Zions"). Under the terms of the Revolving Credit Agreement, Zions agreed to loan up to $8.5 million under a revolving credit note. The Revolving Credit Agreement is collateralized by substantially all the assets of inContact. The balance outstanding under the Revolving Credit Agreement cannot exceed the lesser of (a) $8.5 million or (b) the sum of 85% of eligible billed receivables, and 65% of eligible earned, but unbilled receivables as calculated on the 5^th and 20^th of each month. There was $5.8 million of unused commitment at December 31, 2011, based on the maximum available advance amount calculated on the December 20, 2011 borrowing base certificate.

We drew $12.7 million from our Revolving Credit Agreement with Zions and paid down $17.5 million on the Revolving Credit Agreement during the year ended December 31, 2011. The outstanding balance for our Revolving Credit Agreement at December 31, 2011 was $2.5 million, which was paid in January 2012. The interest rate under the Revolving Credit Agreement is 4.5% per annum above the ninety day LIBOR, from time to time in effect, adjusted as of the date of any change in the ninety day LIBOR. Interest under the Revolving Credit Agreement is paid monthly in arrears, and all principal is due in July 2013.

The Zions Revolving Credit Agreement contains certain covenants, with the most significant covenants being a requirement to maintain a specified minimum liquidity position and minimum quarterly EBITDA (defined as earnings before interest expense, income tax expense, depreciation, amortization and other non-cash charges), a requirement to maintain a minimum working capital balance and a requirement to maintain a minimum cash balance, which were established by amendment to the Revolving Credit Agreement in June 2011. As of December 31, 2011, the minimum liquidity position and minimum quarterly EBITDA covenant requires that the aggregate value of cash, cash equivalents and marketable securities shall not be less than the outstanding balance on the Revolving Credit Agreement plus $2.5 million, and if at any time the aggregate value is less than the minimum liquidity position, a minimum quarterly EBITDA of $1.0 million, calculated as of the last day of each calendar quarter, is required. Based on our projections, we believe we will maintain compliance with our loan covenants through 2012, however if future operating results are less favorable than currently anticipated, we may need to seek further amendments to modify its loan covenants. If we are unable to modify the loan covenants on acceptable terms, we would intend to reduce spending levels or take other restructuring actions. The minimum working capital covenant requires minimum working capital of $1.0 million at all times during the term of the agreement and the minimum cash balance covenant requires a minimum cash balance of $3.5 million or the amount available under the line is reduced to 75% of billed accounts receivable. We were in compliance with all financial covenants related to the Revolving Credit Agreement at December 31, 2011.

The Revolving Credit Agreement imposes certain restrictions on inContact's ability, without the approval of Zions, to incur additional debt, make distributions to stockholders, or acquire other businesses or assets.

Promissory Note Payable to Zions

In October 2011, we entered into a promissory note payable ("Promissory Note") to Zions for $2.5 million. The interest rate under the Promissory Note is 4.5% per annum above the ninety day LIBOR rate or the LIBOR rate for a specified interest period as elected by us, adjusted as of the date of any change in the ninety day LIBOR or LIBOR. Interest under the Promissory Note is paid monthly in arrears, and principal is paid in 36 equal monthly installments commencing on November 1, 2011. The financial covenants are the same as the Revolving Credit Agreement, except that if at any time the aggregate value of cash, cash equivalents and marketable securities is less than the minimum liquidity position, a minimum quarterly EBITDA of $1.1 million, calculated as of the last day of each calendar quarter, is required. The Promissory Note is guaranteed by a subsidiary of the single investor described in Note 9.

Long-term debt maturities, excluding capital lease obligation payments, consisted of the following as of December 31, 2011 (in thousands):

Year ended December 31,
2012	$	833
2013		3,333
2014		695
Total long-term debt maturities	$	4,861

Capital Lease Obligations

In March 2011, we entered into an equipment leasing facility commitment with Zions Credit Corporation ("Zions Credit"). Under the terms of the leasing facility commitment, Zions Credit agreed to provide us with financing of up to $3.0 million to lease computer related equipment for our business operations, which Zions Credit will lease to us in the form of a capital lease. The term of the facility is 36 months upon acceptance of the leased property by us. The calculated interest rate is subject to change based on the three year LIBOR plus 4.5%. We had $1.7 million of capital lease obligations related to this leasing facility at December 31, 2011 and $1.3 million of this leasing facility had not been utilized at December 31, 2011. The final lease payments for the utilized portion of this facility will be in November 2014.

In February 2010, we entered into an equipment leasing facility with Zions Credit of up to $2.5 million. We have utilized the entire $2.5 million of the leasing facility. The interest rate is 5.8% and the final lease payments will be in December 2013. The balance of the capital lease obligations related to this leasing facility was $1.7 million at December 31, 2011.

In June 2010, we entered into a capital lease obligation for certain software licensing, which required three annual payments beginning in July 2010, totaling $536,000. The balance of the capital lease obligations related to this lease was $177,000 at December 31, 2011.

In 2009, we entered into a commitment agreement with Zions Credit for an equipment leasing facility of up to $1.0 million. We had utilized the entire $1.0 million of the leasing facility as of December 31, 2009. The interest rate is 6.4% and the final lease payments will be in December 2012. The balance of the capital lease obligations related to this leasing facility was $376,000 at December 31, 2011.

We entered into an equipment leasing facility with an equipment financing company ("Lessor") in 2008. Under the terms of the leasing facility, the Lessor agreed to provide us financing of $2.8 million to lease computer related equipment and software for our business operations, which the Lessor will lease to us in the form of a capital lease. The term of the facility was 30 months upon our acceptance of the leased property. The calculated interest rate is subject to change based on changes in the Treasury yield, installation period of the lease and the residual value. We had utilized the full $2.8 million of the leasing facility at December 31, 2009 to acquire computer related equipment and software. During the year ended December 31, 2011, we extended the facility an additional 12 months and paid $115,000 to the lessor so that the Company will receive title to the property leased upon final payment of the extended lease in April 2012. The capital lease obligation related to the extension was approximately $69,000 at December 31, 2011 and no other amounts are due. Beginning January 1, 2009, we were required by the Lessor to provide a letter of credit equal to 30.0% of the $550,000 of additional borrowings made subsequent to that date under the equipment leasing facility. Accordingly, we have classified the associated letter of credit balance of $166,000 as current restricted cash on the accompanying balance sheet at December 31, 2011.

The following schedule shows the future minimum lease payments under capital lease obligations at December 31, 2011 (in thousands):

Year ended December 31,
2012	$	2,173
2013		1,484
2014		568
Total future minimum lease payments		4,225
Less amount representing interest		(257	)
Total capital lease obligations		3,968
Less current portion		(2,010	)
Long-term capital lease obligations, net of current portion	$	1,958

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Accrued Liabilities

12 Months Ended

Dec. 31, 2011

Accrued Liabilities [Abstract]

Accrued Liabilities

NOTE 5. ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in thousands):

	December 31,
	2011		2010
Accrued payphone and carrier charges	$	342	$	222
Accrued payroll and other compensation		1,895		1,204
Accrued professional fees		—		284
Current portion of deferred rent		150		112
Other		382		257
Total accrued liabilities	$	2,769	$	2,079

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Employee Benefit Plan

12 Months Ended

Dec. 31, 2011

Employee Benefit Plan [Abstract]

Employee Benefit Plan

NOTE 13. EMPLOYEE BENEFIT PLAN

The Company has a voluntary defined contribution retirement plan qualifying under Section 401(k) of the Internal Revenue Code of 1986. The plan covers substantially all full-time employees. Under the terms of the plan, participants may contribute up to the statutorily prescribed limit to the plan. Employees are eligible on the first day of the month following their employment date. The Company matches 50% of the first 4% of an employee's salary contributed to the plan. The Company made matching contributions during 2011, 2010 and 2009 of $265,000, $228,000 and $187,000, respectively.

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Capital Transactions

12 Months Ended

Dec. 31, 2011

Capital Transactions [Abstract]

Capital Transactions

NOTE 9. CAPITAL TRANSACTIONS

Issuances of Common Stock

In June 2011, we sold 7.2 million shares of common stock at $3.32 per share for a total of $23.9 million to a single investor. Net proceeds of the offering, after expenses of $232,000, were $23.6 million.

We received proceeds of $1.6 million, $1.8 million and $484,000 from the exercise of 624,000, 864,000 and 215,000 options and warrants during the years ended December 31, 2011, 2010 and 2009, respectively.

We issued 18,000, 45,000 and 68,000 shares of common stock valued at $67,000, $126,000 and $175,000 to a third party for investor relations services during the years ended December 31, 2011, 2010 and 2009, respectively.

In December 2009, we sold 3.4 million shares of common stock at $2.45 per share for a total of $8.4 million to an investment fund.

Net proceeds of the offering, after placement fees and expenses of $514,000, were $7.9 million.

Employee Stock Purchase Plan

We reestablished the ability for employees to participate in the 2005 Employee Stock Purchase Plan ("Purchase Plan") commencing on October 1, 2010. The Purchase Plan provides that up to 1,000,000 shares of common stock may be sold to participating employees and expires at the beginning of 2014. Each participating period is three months in length. The purchase price a participant pays for the shares is equal to 85% of the closing market bid price of the common stock on the first business day or the last business day of each participating period, whichever is lower. We issued 80,000 and 28,000 shares of common stock for proceeds of $225,000 and $53,000 under the Purchase Plan to eligible employees during the years ended December 31, 2011 and 2010, respectively. Stock compensation expense recognized under the Purchase Plan was $72,000 and $17,000 during the years ended December 31, 2011 and 2010. The Company had 892,000 shares of common stock available for issuance under the Purchase Plan at December 31, 2011. No employees participated in the plan during 2009.

Preferred Stock

The Board of Directors is authorized to issue shares of our authorized but unissued preferred stock in one or more series. With respect to any series, the Board of Directors is authorized to determine the number of shares that constitutes such series; the rate of dividend, if any, payable on shares of such series; whether the shares of such series shall be cumulative, non-cumulative, or any other characteristics, preferences, limitations, rights, privileges, immunities or terms. There was no preferred stock outstanding at December 31, 2011 or 2010.

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Fair Value Of Financial Instruments

12 Months Ended

Dec. 31, 2011

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The accounting guidance for fair value measurements defines fair value, establishes a market-based framework or hierarchy for measuring fair value and expands disclosures about fair value measurements. The guidance is applicable whenever assets and liabilities are measured and included in the financial statements at fair value. The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. The fair value hierarchy prioritizes the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Recurring Level 3 Activity

The table below provides a reconciliation of the beginning and ending balances for the major classes of assets and liabilities measured at fair value using significant unobservable inputs (Level 3). The table reflects gains and losses for the year for all financial assets and liabilities categorized as Level 3 as of December 31, 2011 and 2010 (in thousands):

Auction rate preferred securities:
Balance at December 31, 2009	$	125
Total redemptions		(125	)
Balance at December 31, 2010	$	—
Warrants:
Balance at December 31, 2009		496
Total change in fair value		(250	)
Balance at December 31, 2010	$	246
Balance at December 31, 2010		246
Total change in fair value		158
Exercise of warrants		(404	)
Balance at December 31, 2011	$	—

Fair Value Estimates

We did not have any transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy during 2011 and 2010. Our fair value estimates at December 31, 2011 were as follows (in thousands):

	Fair value		Quoted Prices in Active Markets for Identifical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Losses during the year ended December 31, 2011
Liabilities:
ComVest warrants	$	—	$	—	$	—	$	—	$	(158	)
Total	$	—	$	—	$	—	$	—	$	(158	)

Our fair value estimates at December 31, 2010 were as follows (in thousands):

	Fair value		Quoted Prices in Active Markets for Identifical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Gains during the year ended December 31, 2010
Liabilities:
ComVest warrants	$	246	$	—	$	—	$	246	$	250
Total	$	246	$	—	$	—	$	246	$	250

Auction Rate Preferred Securities

Auction Rate Preferred Securities ("ARPS") were our only assets measured at fair value on a recurring basis in the year ended December 31, 2009. We classified the investment in ARPS as a Level 3 investment as these securities had significant unobservable inputs. The fair value of the investment in ARPS as of December 31, 2009 was $125,000, calculated utilizing a discounted cash flow analysis. This analysis considered, among other items, the collateralization of the underlying securities, the expected future cash flows and the expectation of when the security will be redeemed by the issuer, which was February 2010. In February 2010, all of the remaining ARPS were redeemed by the issuer and we received cash proceeds of $125,000.

Warrants

We had issued 385,000 warrants, which were exercised in May 2011, with provisions that protected holders from a decline in the stock price instrument if we issued equity shares for a price that was lower than the exercise price of those instruments or issue new warrants or convertible instruments that had a lower exercise price. In accordance with accounting guidance, these warrants were recognized as liabilities and recorded at fair value on each reporting date. We measured the estimated fair value of these warrants as of date of exercise, May 5, 2011, and recorded a $158,000 loss during the year ended December 31, 2011 to record the liabilities associated with these warrants at their estimated fair value totaling $404,000 as of the date of exercise as compared to their estimated fair value of $246,000 at December 31, 2010. The estimated fair value of these securities on the date of exercise was the difference between the stock price on the date of exercise and the warrants' exercise price. The estimated fair value of the securities was calculated using a Black-Scholes valuation model, which approximated a lattice valuation model, at December 31, 2010. The assumptions used in the Black-Scholes model at December 31, 2010 were as follows: a volatility rate of 41.0%, a risk-free interest rate of 0.19%, an expected life of 0.39 years and no dividend yield.

Basis for Valuation

The carrying amounts reported in the accompanying consolidated balance sheets for cash and cash equivalents, accounts and other receivables, and trade accounts payable approximate fair value because of the immediate or short-term maturities of these financial instruments. The fair values of the revolving credit note and promissory notes payable were computed using a discounted cash flow model using estimated market rates adjusted for our credit risk as of December 31, 2011 and 2010. The fair value of the ComVest warrants were computed using a Black-Scholes option pricing model. The carrying value and estimated fair value of our revolving credit note, promissory notes payable and ComVest warrants are as follows (in thousands):

	December 31, 2011				December 31, 2010
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Revolving credit note	$	2,500	$	2,500	$	7,270	$	7,270
Promissory notes	$	2,361	$	2,361	$	2	$	2
ComVest warrants	$	—	$	—	$	246	$	246

Our disclosure of the estimated fair value of our financial instruments is made in accordance with the requirements of ASC 825, Financial Instruments. The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data in order to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we could realize in a current market exchange. The use of different market assumptions and estimation methodologies may have a material effect on the estimated fair value amounts. The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2011 and 2010.

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Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

NOTE 8. INCOME TAXES

The components of income tax expense for the years ended December 31, 2011, 2010 and 2009, consisted of the following (in thousands):

	December 31,
	2011		2010		2009
Current:
Federal	$	—	$	—	$	—
Foreign		15		—		—
State		59		21		62
Total current		74		21		62
Deferred:
Federal		—		—		—
Foreign		—		—		—
State		—		—		—
Total deferred		—		—		—
Total	$	74	$	21	$	62

Income tax (benefit) expense differs from amounts computed by applying the statutory federal rate of 34.0% to pretax loss for the years ended December 31, 2011, 2010, and 2009, as follows (in thousands):

	December 31,
	2011			2010			2009
Computed federal income tax benefit at statutory rate of 34.0%	$	(3,180	)	$	(352	)	$	(972	)
State income taxes		42			40			33
Meals and entertainment		94			66			51
Other		49			(67	)		13
Foreign taxes		15			—			—
Stock-based compensation		138			158			108
Change in valuation allowance		2,916			176			829
Total income tax expense	$	74		$	21		$	62

Deferred federal and state income tax assets and liabilities at December 31, 2011 and 2010, consisted of the following temporary differences and carry-forward items (in thousands):

	December 31,
	2011						2010
	Current			Non-current			Current			Non-current
Deferred income tax assets:
Net operating loss carry-forwards	$	—		$	19,554		$	—		$	15,799
AMT and foreign tax credit carry-forwards		—			83			—			69
Property and equipment, and intangible assets		—			1,771			—			2,411
Reserves, accrued liabilities, and other		324			473			408			103
Stock-based compensation		—			2,046			—			1,952
Total deferred income tax assets		324			23,927			408			20,334
Valuation allowance		(324	)		(23,927	)		(408	)		(20,334	)
Deferred income tax assets	$	—		$	—		$	—		$	—

We establish a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized. We are uncertain whether our deferred tax assets can be realized due to our history of operating losses. Accordingly, a valuation allowance has been recorded at December 31, 2011 and 2010 to reduce the deferred income tax assets to the amount which management believes is more likely than not to be realized.

The net change in our valuation allowance was an increase of $3.5 million in 2011, a decrease of $44,000 in 2010 and an increase of $795,000 in 2009.

As of December 31, 2011, we had net operating loss carry-forwards for federal income tax reporting purposes of approximately $48.9 million that will begin to expire starting in 2018 through 2031 if not utilized. We had state net operating loss carry-forwards of approximately $51.3 million which expire depending on the rules of the various states to which the net operating losses are allocated. Approximately $1.1 million of net operating loss carry-forwards as of December 31, 2011 were attributable to deductions associated with the exercise of Company stock options, the benefit of which will be credited to additional paid-in capital when realized. We also have alternate minimum tax credit carry-forwards of approximately $69,000 that have no expiration date. Utilization of our net operating loss and tax credit carry-forwards are subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. These annual limitations may result in the expiration of a portion of the net operating loss and credit carry-forwards before they are fully utilized.

The Company accounts for uncertainty in income taxes in accordance with ASC 740-10, Accounting for Uncertainty in Income Taxes. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with ASC 740, Income Taxes. This guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that would result in a material adverse effect on the Company's financial condition, results of operations or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740-10.

The Company's U.S. federal income tax returns for 2008 through 2011 are open tax years. The Company also files in various state jurisdictions. With few exceptions, the Company is no longer subject to state income tax examinations by tax authorities for years prior to 2008.

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 10. STOCK-BASED COMPENSATION

Stock-based compensation cost is measured at the grant date based on the fair value of the award granted and recognized as expense using the graded-vesting method over the period in which the award is expected to vest. Stock-based compensation expense recognized during a period is based on the value of the portion of stock-based awards that is ultimately expected to vest during the period. As stock-based compensation expense recognized in the results for the year is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.

We recognize the estimated compensation cost of service-based awards, net of estimated forfeitures, over the vesting term. We recognize the estimated compensation cost of performance-based awards, net of estimated forfeitures. The awards are earned upon attainment of identified performance goals, some of which contain discretionary metrics. As such, these awards are revalued based on our traded stock price at the end of each reporting period. If the discretion is removed, the award will be classified as a fixed equity award. The fair value of the awards will be based on the measurement date, which is the date the award becomes fixed. The awards will be subsequently amortized over the remaining performance period.

We utilize the Black-Scholes model to determine the estimated fair value for grants of stock options and warrants. The Black-Scholes model requires the use of highly subjective and complex assumptions to determine the fair value of stock-based awards, including the option's expected term, expected dividend yield, the risk-free interest rate and the price volatility of the underlying stock. The expected dividend yield is based on our historical dividend rates. Risk-free interest rates are based on U.S. treasury rates. Volatility is based on historical stock prices over a period equal to the estimated life of the option. We have issued stock options to employees under share-based compensation plans including the Long-Term Stock Incentive Plan, the 2008 Equity Incentive Plan and those granted by the Board of Directors and Compensation Committee. Stock options are issued at the current market price on the date of grant and are generally subject to a three-year vesting period with a contractual term of five years.

The grant date fair value of the restricted stock and restricted stock unit awards was estimated using the closing market price of the Company's common stock on the grant date, with the compensation expense amortized over the vesting period of the restricted stock awards, net of estimated forfeitures.

Our stock-based compensation primarily consists of the following plans:

2008 Equity Incentive Plan: Effective July 1, 2008, we established the 2008 Equity Incentive Plan ("2008 Plan"). The 2008 Plan provides for a maximum of 3,272,500 shares of our common stock to be awarded to participants and their beneficiaries. The shareholders approved and we amended the inContact 2008 Equity Incentive Plan increasing the number of common shares available for awards from 2,272,500 to 3,272,500 in June 2010. The Compensation Committee (the "Committee"), as determined by the Board of Directors, determines and designates the eligible participants and awards to be granted under the 2008 Plan. The Committee may grant incentive stock options; non-qualified options; stock appreciation rights ("SAR") and restricted stock units ("RSU"). The terms and exercise prices of options are established by the Committee; except that the exercise prices cannot be less than 100% of the fair market value of a share of common stock on the date of grant. As of December 31, 2011, incentive stock options and RSUs to purchase a total of 3,028,204 shares had been granted, and had either been exercised or were outstanding under the 2008 Plan.

Long-Term Stock Incentive Plan: Effective March 11, 1999, we established the Long-Term Stock Incentive Plan ("1999 Plan"). The 1999 Plan provides for a maximum of 1,200,000 shares of our common stock to be awarded to participants and their beneficiaries. The Committee, as determined by the Board of Directors, determines and designates the eligible participants and awards to be granted under 1999 Plan. The Committee may grant incentive stock options; non-qualified options; SARs; and on a limited basis, stock awards. The terms and exercise prices of options are established by the Committee; except that the exercise prices cannot be less than 100% of the fair market value of a share of common stock on the date of grant. As of December 31, 2011, stock options to purchase a total of 941,854 shares had been granted, and had either been exercised or were outstanding under the 1999 Plan.

Other Options: Our Board of Directors has from time to time authorized the grant of stock options to directors, officers, key employees and consultants as compensation and in connection with obtaining financing.

Stock-based compensation expense (including stock options, warrants, restricted stock, restricted stock units and employee stock purchase plan) was included in the following captions within the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009 (in thousands):

	2011		2010		2009
Costs of revenue	$	267	$	247	$	32
Selling and marketing		432		278		254
Research and development		139		101		322
General and administrative		660		767		1,013
Total stock-based compensation expense	$	1,498	$	1,393	$	1,621

Employee Stock Options

As of December 31, 2011, the total remaining unrecognized compensation cost related to unvested stock options, net of forfeitures, was approximately $1.3 million and is expected to be recognized over a weighted average period of 1.6 years.

We estimated the fair value of options granted under our employee stock-based compensation arrangements at the date of grant using the Black-Scholes model using the following weighted-average assumptions for the years ended December 31, 2011, 2010, and 2009:

	2011			2010			2009
Dividend yield		None			None			None
Volatility		71	%		71	%		66	%
Risk-free interest rate		1.21	%		1.78	%		1.67	%
Expected life (years)		4.0			4.0			4.6

The following tables summarize all stock option activity during the years ended December 31, 2011, 2010 and 2009, (in thousands, except per share amounts):

	Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)		Intrinsic Value
Balance at December 31, 2008		4,552		$	2.85
Granted		1,092		$	1.99
Exercised		(201	)	$	2.41
Cancelled or expired		(728	)	$	3.04
Balance at December 31, 2009		4,715		$	2.64
Granted		1,027		$	2.98
Exercised		(314	)	$	2.38
Cancelled or expired		(690	)	$	2.62
Balance at December 31, 2010		4,738		$	2.74
Granted		1,289		$	3.62
Exercised		(469	)	$	2.52
Cancelled or expired		(365	)	$	2.98
Balance at December 31, 2011		5,193		$	2.95		2.7	$	7,757
Vested and exercisable at December 31, 2011		3,195		$	2.78		2.0	$	5,327
Unvested at December 31, 2011		1,998		$	3.24		3.9	$	2,430

We received cash proceeds from the exercise of options of $1.2 million in 2011, $716,000 in 2010 and $484,000 in 2009. The total intrinsic value of options exercised during 2011, 2010 and 2009 was $840,000, $118,000 and $78,000, respectively. The intrinsic value is calculated as the difference between the market value on the date of exercise and the exercise price of the shares.

A summary of the options outstanding and options exercisable at December 31, 2011 is as follows (in thousands, except per share amounts):

	Options Outstanding						Options Vested and Exercisable
Exercise price range	Options		Weighted-Average Remaining Contractual Life (years)		Weighted-Average Exercise Price		Options Exercisable		Weighted-Average Exercise Price
$0.90 – $1.80		590		2.2	$	1.76		396	$	1.75
$1.81 – $2.70		1,425		2.1	$	2.28		1,262	$	2.26
$2.71 – $3.60		2,638		3.1	$	3.29		1,281	$	3.26
$3.61 – $4.50		253		3.6	$	4.02		88	$	4.14
$4.51 – $5.40		287		3.0	$	4.76		168	$	4.66
		5,193		2.7	$	2.95		3,195	$	2.78

A summary of the activity for unvested share awards for the years ended December 31, 2011, 2010 and 2009 is as follows (in thousands, except per share amounts):

	Options			Weighted-Average Fair Value
Balance at December 31, 2008		1,720		$	1.40
Granted		1,092		$	1.37
Vested		(625	)	$	1.43
Cancelled or expired		(360	)	$	1.43
Balance at December 31, 2009		1,827		$	1.35
Granted		1,027		$	1.60
Vested		(739	)	$	1.41
Cancelled or expired		(464	)	$	1.38
Balance at December 31, 2010		1,651		$	1.48
Granted		1,289		$	1.93
Vested		(661	)	$	1.44
Cancelled or expired		(281	)	$	1.49
Balance at December 31, 2011		1,998		$	1.77

Warrants to Purchase Common Shares

In November 2008, we entered into a consulting agreement and issued warrants to purchase a total of 50,000 shares of our common stock at $1.00 per share. The warrants vested evenly over 12 months. 25,000 of the warrants vested and the remaining 25,000 were cancelled during 2009 upon cancellation of the agreement. We recognized expense of $20,808 during the year ended December 31, 2009 related to the issued warrants.

In November 2008, we entered into a mutual release agreement with a former officer of inContact. Under the agreement, we agreed to issue this former officer warrants to purchase a total of 70,000 shares of our common stock at $1.00 per share. The warrants were fully vested at the time of issuance and were exercised in November 2011.

In May 2006 we issued 330,000 warrants to ComVest to purchase 330,000 shares of common stock at $2.75. In January 2007, we amended the ComVest convertible term note and revolving credit note agreement that existed at that time. In conjunction with the amendment, we issued warrants to ComVest to purchase 55,000 shares of common stock at $2.90 per share. The warrants vested immediately. These warrants were included as a liability in the consolidated balance sheet under warrant liability at December 31, 2010 and were exercised in May 2011.

The following tables summarize the warrant activity for the years ended December 31, 2011, 2010 and 2009 as follows (in thousands, except per share amounts):

	Outstanding Warrants			Range of Exercise Prices		Weighted-Average Exercise Price
Balance at December 31, 2008		1,260			$1.00 – $4.00	$	2.42
Cancelled and expired		(170	)		1.00 – 4.00		3.56
Exercised		(25	)		1.00		1.00
Balance at December 31, 2009		1,065			1.00 – 2.95		2.27
Cancelled and expired		(60	)		2.95		2.95
Exercised		(550	)		2.00		2.00
Balance at December 31, 2010		455			1.00 – 2.90		2.50
Cancelled and expired		—			0.00		0.00
Exercised		(455	)		1.00 – 2.90		2.50
Balance at December 31, 2011		—			$0.00	$	0.00

Restricted Stock Units

In June 2010, the Board of Directors of inContact approved an annual compensation package for the non-employee Directors of inContact. Under the package, non-employee directors receive a cash payment of $50,000 per year paid in monthly installments and an award of restricted stock units on July 1 of each year commencing in 2010 in number equal to $50,000 divided by the fair market value of inContact's common stock at July 1 of each annual period, which is the grant date. The restricted stock units vest in equal monthly installments over the one-year period following the date of the award; provided, that vesting is accelerated in the event of a greater than 50% change in voting control of inContact or membership of the Board of Directors or a disposition of more than 50% of the assets of inContact (a "Corporate Event"). Each restricted stock unit represents the right to receive one share of inContact common stock (subject to adjustment in the event of a stock dividend, share combination, recapitalization or similar event as provided in the Plan) upon termination of service as a director for any reason or the occurrence of a Corporate Event. The compensation package also provides for additional annual issuances of restricted stock units to the chairperson of the Audit Committee, Compensation Committee, or Corporate Governance and Nominating Committee of the Board, in number equal to $10,000 divided by the fair market value of inContact's common stock on July 1 of each annual period, which is the grant date.

During the years ended December 31, 2011, 2010 and 2009, we granted 58,000, 112,178 and 106,740 restricted stock units, respectively. The grants were valued at $280,000, $280,000 and $215,000, respectively, based on the closing stock price of inContact common stock on the date of grant. The compensation is expensed over the vesting period using the graded-vesting method. The weighted average grant date fair value of restricted stock units granted during the years ended December 31, 2011, 2010 and 2009 was $4.87, $2.50 and $2.01, respectively. The total fair value of restricted stock units vested during 2011, 2010 and 2009 was approximately $280,000, $263,000 and $281,000, respectively. Total compensation costs related to unvested restricted stock awards expected to be recognized was $49,000 as of December 31, 2011. The compensation cost is expected to be recognized over the weighted average period of 0.5 years.

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Subsequent Events

12 Months Ended

Dec. 31, 2011

Subsequent Events [Abstract]

Subsequent Events

NOTE 15. SUBSEQUENT EVENTS

In January 2012, we paid $2.5 million of the outstanding Revolving Credit Agreement, which was $2.5 million at December 31, 2011.

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Consolidated Statements Of Stockholders' Equity (USD $) In Thousands, unless otherwise specified	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Beginning Balance, value at Dec. 31, 2008	$ 3	$ 71,873	$ (62,335)	$ (50)	$ 9,491
Beginning Balance, shares at Dec. 31, 2008	31,065
Cumulative effect of change in accounting principle		(651)	538		(113)
Common stock issued for options and warrants exercised, value		484			484
Common stock issued for options and warrants exercised, shares	215
Stock-based compensation		1,425			1,425
Issuance of restricted stock for services, value		175			175
Issuance of restricted stock for services, shares	68
Issuance of common stock, net of issuance costs, value		7,885			7,885
Issuance of common stock, net of issuance costs, shares	3,429
Vesting of warrant issued for services		21			21
Comprehensive loss:
Net loss			(2,922)		(2,922)
Unrealized gain on available for sale securities				50
Total comprehensive loss					(2,872)
Ending Balance, value at Dec. 31, 2009	3	81,212	(64,719)		16,496
Ending Balance, shares at Dec. 31, 2009	34,777
Common stock issued for options and warrants exercised, value		1,816			1,816
Common stock issued for options and warrants exercised, shares	864
Common stock issued under the employee stock purchase plan, value		53			53
Common stock issued under the employee stock purchase plan, shares	28
Stock-based compensation		1,267			1,267
Issuance of restricted stock for services, value		126			126
Issuance of restricted stock for services, shares	45
Comprehensive loss:
Net loss			(1,056)		(1,056)
Total comprehensive loss					(1,056)
Ending Balance, value at Dec. 31, 2010	3	84,474	(65,775)		18,702
Ending Balance, shares at Dec. 31, 2010	35,714
Common stock issued for options and warrants exercised, value	1	1,585			1,586
Common stock issued for options and warrants exercised, shares	624
Common stock issued under the employee stock purchase plan, value		225			225
Common stock issued under the employee stock purchase plan, shares	80
Stock-based compensation		1,431			1,431
Issuance of restricted stock for services, value		67			67
Issuance of restricted stock for services, shares	18
Issuance of common stock, net of issuance costs, value		23,633			23,633
Issuance of common stock, net of issuance costs, shares	7,188
Comprehensive loss:
Net loss			(9,428)		(9,428)
Total comprehensive loss					(9,428)
Ending Balance, value at Dec. 31, 2011	$ 4	$ 111,415	$ (75,203)		$ 36,216
Ending Balance, shares at Dec. 31, 2011	43,624

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Goodwill And Intangible Assets

12 Months Ended

Dec. 31, 2011

Goodwill And Intangible Assets

Goodwill And Intangible Assets

NOTE 4. GOODWILL AND INTANGIBLE ASSETS

We completed the acquisitions of BenchmarkPortal, Inc. ("BenchmarkPortal") and ScheduleQ, LLC ("ScheduleQ") in February 2007. In addition to the amounts paid at closing of the BenchmarkPortal acquisition, we agreed to pay contingent purchase price payments to BenchmarkPortal stockholders in the following amounts:

• $2.0 million of additional contingent purchase price cash payments to BenchmarkPortal stockholders in 36 equal monthly installments of $55,556, subject to adjustment if monthly recurring revenue during the payout period from customers' accounts acquired in the transaction does not remain at certain levels which are adjusted for estimated attrition; and

• Up to an additional $7.0 million maximum contingent quarterly earnout to BenchmarkPortal stockholders paid on a variable percentage of recurring revenue from the sale of Echo services in excess of $900,000 per quarter during the four-year period after the acquisition.

In addition to the amounts paid at closing of the ScheduleQ acquisition, we agreed to pay contingent purchase price payments to ScheduleQ stockholders over a term of 48 months based on the number of licenses sold by us, with a minimum aggregate earnout payment of $101,000 and a maximum of $982,000.

The changes in the carrying amount of goodwill for the years ended December 31, 2011 and 2010 were for contingent purchase price payments for the Benchmark Portal and ScheduleQ acquisitions and consisted of the following ( in thousands):

Balance as of December 31, 2009	$	3,577
Goodwill adjustment		496
Balance as of December 31, 2010	$	4,073
Goodwill adjustment		13
Balance as of December 31, 2011	$	4,086

Intangible assets consisted of the following (in thousands):

	December 31, 2011						December 31, 2010
	Gross Assets		Accumulated Amortization		Intangible assets, net		Gross Assets		Accumulated Amortization		Intangible assets, net
Customer lists acquired	$	16,495	$	16,222	$	273	$	16,495	$	16,161	$	334
Technology and patents		10,231		9,966		265		10,231		9,563		668
Tradenames and trademarks		1,194		392		802		1,194		312		882
Domain name		54		—		54		54		—		54
Total intangible assets	$	27,974	$	26,580	$	1,394	$	27,974	$	26,036	$	1,938

We recorded amortization expense for intangible assets of approximately $544,000 in 2011, $563,000 in 2010 and $1.0 million in 2009.

Based on the recorded intangibles at December 31, 2011, estimated amortization expense is expected to be $238,000 in 2012, $210,000 in 2013, $210,000 in 2014, $140,000 in 2015, $133,000 in 2016 and $409,000 thereafter.

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Segments

12 Months Ended

Dec. 31, 2011

Segments [Abstract]

Segments

NOTE 14. SEGMENTS

We operate under two business segments: Software and Telecom. The Software segment includes all monthly recurring revenue related to the delivery of our software applications, plus the associated professional services and setup fees related to the software services product features. The Telecom segment includes all voice and data long distance services provided to customers.

Management evaluates segment performance based on operating data (revenue, costs of revenue, and other operating expenses). Management does not evaluate and manage segment performance based on assets.

For segment reporting, we classify operating expenses as either "direct" or "indirect". Direct expense refers to costs attributable solely to either selling and marketing efforts or research and development efforts. Indirect expense refers to costs that management considers to be overhead in running the business. In evaluating segment performance, management evaluates expenditures for both selling and marketing and research and development efforts at the segment level without the allocation of overhead expenses, such as rent, utilities and depreciation on property and equipment.

Operating segment revenues and profitability for the year ended December 31, 2011 were as follows (in thousands):

	Year Ended December 31, 2011
	Software			Telecom			Consolidated
Net revenue	$	39,870		$	49,115		$	88,985
Costs of revenue		16,940			35,637			52,577
Gross profit		22,930			13,478			36,408
Gross margin		58	%		27	%		41	%
Operating expenses:
Direct selling and marketing		19,810			3,421			23,231
Direct research and development		5,706			—			5,706
Indirect		12,734			3,336			16,070
(Loss) income from operations	$	(15,320	)	$	6,721		$	(8,599	)

Operating segment revenues and profitability for the year ended December 31, 2010 were as follows (in thousands):

	Year Ended December 31, 2010
	Software			Telecom			Consolidated
Net revenue	$	33,692		$	48,463		$	82,155
Costs of revenue		12,051			34,542			46,593
Gross profit		21,641			13,921			35,562
Gross margin		64	%		29	%		43	%
Operating expenses:
Direct selling and marketing		14,662			3,467			18,129
Direct research and development		4,638			—			4,638
Indirect		10,342			3,405			13,747
(Loss) income from operations	$	(8,001	)	$	7,049		$	(952	)

Operating segment revenues and profitability for the year ended December 31, 2009 were as follows (in thousands):

	Year Ended December 31, 2009
	Software			Telecom			Consolidated
Net revenue	$	29,103		$	55,080		$	84,183
Costs of revenue		9,681			40,334			50,015
Gross profit		19,422			14,746			34,168
Gross margin		67	%		27	%		41	%
Operating expenses:
Direct selling and marketing		11,322			5,123			16,445
Direct research and development		4,188			—			4,188
Indirect		10,178			5,126			15,304
(Loss) income from operations	$	(6,266	)	$	4,497		$	(1,769	)