Exhibit 99.1
 Metastorm Inc. and Subsidiaries




---



##### 



CONTENTS
 PageReport of Independent Certified Public Accountants
    
    
    3Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    4Consolidated Statements of Operations for the years ended
December 31, 2008, 2007 and 2006
    
    
    6Consolidated Statements of Stockholders Equity (Deficit) for the years ended
December 31, 2008, 2007 and 2006
    
    
    7Consolidated Statements of Cash Flows for the years ended
December 31, 2008, 2007 and 2006
    
    
    8Notes to Consolidated Financial Statements
    
    
    10




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##### 



Report of Independent Certified Public Accountants




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##### 



Metastorm Inc. and Subsidiaries
 CONSOLIDATED BALANCE SHEETS
 December 31,2008
    
    
    2007ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    10,153,869
    
    
    $
    9,021,003Short-term investments
    
    
    1,260,872
    
    
    
    Accounts receivable, less allowance for
doubtful accounts of $133,684 and
$86,579, respectively
    
    
    16,294,527
    
    
    
    21,850,233Prepaid expenses and other current assets
    
    
    2,525,080
    
    
    
    2,006,023Deferred income taxes
    
    
    
    
    
    
    433,601Total current assets
    
    
    30,234,348
    
    
    
    33,310,860PROPERTY AND EQUIPMENT, net
    
    
    2,153,172
    
    
    
    2,244,449RESTRICTED CASH
    
    
    20,000
    
    
    
    361,068OTHER ASSETS
    
    
    700,515
    
    
    
    184,229SOFTWARE DEVELOPMENT COSTS, net
    
    
    20,159
    
    
    
    169,285INTANGIBLE ASSETS, net
    
    
    16,367,494
    
    
    
    23,179,846GOODWILL
    
    
    35,235,191
    
    
    
    34,746,405DEFERRED INCOME TAXES
    
    
    
    
    
    
    83,074$
    84,730,879
    
    
    $
    94,279,216
 The accompanying notes are an integral part of these financial statements.
  4




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##### 



Metastorm Inc. and Subsidiaries
 CONSOLIDATED BALANCE SHEETS (Continued)
 December 31,2008
    
    
    2007LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    11,362,058
    
    
    $
    11,426,571Deferred revenue
    
    
    16,142,555
    
    
    
    13,182,956Capital leases
    
    
    326,927
    
    
    
    179,951Notes payable
    
    
    56,831
    
    
    
    7,006Income taxes payable
    
    
    17,989
    
    
    
    60,032Total current liabilities
    
    
    27,906,360
    
    
    
    24,856,516LONG-TERM LIABILITIESDeferred rent
    
    
    849,593
    
    
    
    853,777Deferred revenue
    
    
    694,800
    
    
    
    739,870Capital leases
    
    
    434,948
    
    
    
    318,541Other long-term liabilities
    
    
    
    
    
    
    135,014Fair value of derivative
    
    
    4,192
    
    
    
    224,432Deferred tax liability
    
    
    145,387
    
    
    
    Notes payable, less current portion
    
    
    173,246
    
    
    
    73,6342,302,166
    
    
    
    2,345,268COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    SERIES AA REEDEEMABLE CONVERTIBLE PREFERRED
STOCK, $.01 par value, 71,012,991 shares
authorized, 56,000,334 shares issued and
outstanding at December 31, 2008 and 2007,
aggregate liquidation preference of $94,596,798
    
    
    92,761,895
    
    
    
    85,969,589SERIES CC REEDEEMABLE CONVERTIBLE PREFERRED
STOCK, $.01 par value, 18,844,221 shares authorized, 18,834,583 shares issued and
outstanding at December 31, 2008 and 2007,
aggregate liquidation preference of $33,375,076
    
    
    33,247,620
    
    
    
    30,813,160STOCKHOLDERS EQUITY (DEFICIT)Common stock, $.01 par value, 120,000,000
shares authorized, 941,717 shares issued and
outstanding at December 31, 2008 and 28,125
shares issued and outstanding at December
31, 2007
    
    
    9,417
    
    
    
    281Additional paid-in capital
    
    
    10,556,495
    
    
    
    19,312,102Accumulated other comprehensive (loss) income
    
    
    (428,670
    )
    
    
    423,564Accumulated deficit
    
    
    (81,624,404
    )
    
    
    (69,441,264
    )(71,487,162
    )
    
    
    (49,705,317
    )$
    84,730,879
    
    
    $
    94,279,216
 The accompanying notes are an integral part of these financial statements.
  5




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##### 



Metastorm Inc. and Subsidiaries
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Years Ended December 31,2008
    
    
    2007
    
    
    2006RevenuesSoftware licenses
    
    $
    28,074,927
    
    
    $
    25,772,327
    
    
    $
    17,772,317Maintenance and support
    
    
    23,509,829
    
    
    
    17,091,686
    
    
    
    12,860,893Professional services
    
    
    23,309,035
    
    
    
    16,848,405
    
    
    
    11,420,908Total revenues
    
    
    74,893,791
    
    
    
    59,712,418
    
    
    
    42,054,118Cost of revenuesSoftware licenses (includes amortization expense of $3,856,000, $2,252,333 and $1,700,000, respectively)
    
    
    4,658,609
    
    
    
    4,381,683
    
    
    
    3,225,519Maintenance and support (includes amortization expense of $229,352, $387,820 and $0, respectively)
    
    
    2,229,245
    
    
    
    1,863,739
    
    
    
    959,602Professional services (includes amortization expense of $0, $33,000 and $0, respectively)
    
    
    19,096,025
    
    
    
    12,972,275
    
    
    
    9,506,006Total cost of revenues
    
    
    25,983,879
    
    
    
    19,217,697
    
    
    
    13,691,127Gross profit
    
    
    48,909,912
    
    
    
    40,494,721
    
    
    
    28,362,991Operating expensesResearch and development
    
    
    10,381,904
    
    
    
    6,549,159
    
    
    
    4,473,806Sales and marketing
    
    
    33,443,418
    
    
    
    24,598,054
    
    
    
    16,018,285General and administrative
    
    
    9,987,440
    
    
    
    7,677,586
    
    
    
    7,194,641Write-off of costs related to initial public offering
    
    
    1,892,072
    
    
    
    
    
    
    
    Litigation-related expenses
    
    
    1,939,565
    
    
    
    322,243
    
    
    
    Depreciation
    
    
    1,191,951
    
    
    
    764,087
    
    
    
    523,112Amortization of intangible assets
    
    
    2,727,000
    
    
    
    1,105,001
    
    
    
    Total operating expenses
    
    
    61,563,350
    
    
    
    41,016,130
    
    
    
    28,209,844(Loss) income from operations
    
    
    (12,653,438
    )
    
    
    (521,409
    )
    
    
    153,147Other income (expense)Change in valuation of derivative and Series BB
warrants
    
    
    220,240
    
    
    
    (956,374
    )
    
    
    (432,671
    )Interest expense
    
    
    (283,781
    )
    
    
    (54,146
    )
    
    
    (296,579
    )Interest income
    
    
    163,587
    
    
    
    304,508
    
    
    
    243,939Other
    
    
    219,723
    
    
    
    (124,351
    )
    
    
    63,631319,769
    
    
    
    (830,363
    )
    
    
    (421,680
    )Loss before income taxes
    
    
    (12,333,669
    )
    
    
    (1,351,772
    )
    
    
    (268,533
    )Income tax (benefit) expense
    
    
    (150,529
    )
    
    
    (1,936,761
    )
    
    
    390,262Net (loss) income
    
    
    (12,183,140
    )
    
    
    584,989
    
    
    
    (658,795
    )Accretion of preferred stock and preferred stock dividends
    
    
    (9,226,766
    )
    
    
    (9,471,463
    )
    
    
    (4,528,423
    )Net loss attributable to common stockholders
    
    $
    (21,409,906
    )
    
    $
    (8,886,474
    )
    
    $
    (5,187,218
    )
 The accompanying notes are an integral part of these financial statements.
  6




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##### 



Metastorm Inc. and Subsidiaries
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 Years ended December 31, 2008, 2007 and 2006
  Series AA
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Preferred Stock
    
    
    Additional
    
    
    Deferred
    
    
    Other
    
    
    
    
    
    
    StockholdersNumber
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Paid-in
    
    
    Stock
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Equityof Shares
    
    
    Amount
    
    
    of Shares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Income
    
    
    Deficit
    
    
    (Deficit)Balance at January 1, 2006
    
    
    
    
    
    $
    
    
    
    
    37,056,696
    
    
    $
    370,567
    
    
    $
    83,245,731
    
    
    $
    (375,127
    )
    
    $
    378,645
    
    
    $
    (69,367,458
    )
    
    $
    14,252,358Accretion of accrued and undeclared dividend on redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (420,407
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (420,407
    )Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375,127
    
    
    
    
    
    
    
    
    
    
    
    375,127Stock- based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134,697
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134,697Comprehensive loss:Net loss in 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (658,795
    )
    
    
    (658,795
    )Other comprehensive loss:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,023
    )
    
    
    
    
    
    
    (8,023
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (666,818
    )Balance at December 31, 2006
    
    
    
    
    
    
    
    
    
    
    37,056,696
    
    
    
    370,567
    
    
    
    82,960,021
    
    
    
    
    
    
    
    370,622
    
    
    
    (70,026,253
    )
    
    
    13,674,957Stock options exercised
    
    
    28,125
    
    
    
    281
    
    
    
    
    
    
    
    
    
    
    
    7,594
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,875Conversion of Series AA Redeemable convertible Preferred Stock to Series AA
Redeemable Convertible Stock
    
    
    
    
    
    
    
    
    
    
    (37,056,696
    )
    
    
    (370,567
    )
    
    
    (49,285,409
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,655,976
    )Exchange of Series BB shares into Series AA shares and conversion of Series BB
warrants for Series AA shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,425,635
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,425,635
    )Accretion of accrued and undeclared dividend on Series AA Redeemable
Convertible Preferred Stock and Series CC Redeemable Convertible Preferred
Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,024,840
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,024,840
    )Accretion of accrued Series AA Redeemable Convertible Preferred Stock to
redemption value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (141,186
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (141,186
    )Accretion of issuance costs for Series CC Redeemable Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,822
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,822
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    236,379
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    236,379Comprehensive incomeNet income in 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    584,989
    
    
    
    584,989Other comprehensive income:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,942
    
    
    
    
    
    
    
    52,942Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    637,931Balance at December 31, 2007
    
    
    28,125
    
    
    
    281
    
    
    
    
    
    
    
    
    
    
    
    19,312,102
    
    
    
    
    
    
    
    423,564
    
    
    
    (69,441,264
    )
    
    
    (49,705,317
    )Stock options exercised
    
    
    1,132,475
    
    
    
    11,325
    
    
    
    
    
    
    
    
    
    
    
    308,448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    319,773Shares retired for cashless exercise of options
    
    
    (218,883
    )
    
    
    (2,189
    )
    
    
    
    
    
    
    
    
    
    
    (232,016
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (234,205
    )Accretion of accrued and undeclared dividend on Series AA Redeemable
Convertible Preferred Stock and Series CC Redeemable Convertible Preferred
Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,606,835
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,606,835
    )Accretion of accrued Series AA Redeemable Convertible Preferred Stock to
redemption value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (584,241
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (584,241
    )Accretion of issuance costs for Series CC Redeemable Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,690
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,690
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    394,727
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    394,727Comprehensive lossNet loss in 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,183,140
    )
    
    
    (12,183,140
    )Other comprehensive loss:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (852,234
    )
    
    
    
    
    
    
    (852,234
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,035,374
    )Balance at December 31, 2008
    
    
    941,717
    
    
    $
    9,417
    
    
    
    
    
    
    $
    
    
    
    $
    10,556,495
    
    
    $
    
    
    
    $
    (428,670
    )
    
    $
    (81,624,404
    )
    
    $
    (71,487,162
    )
 The accompanying notes are an integral part of these financial statements.
  7




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##### 



Metastorm Inc. and Subsidiaries
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year ended December 31,2008
    
    
    2007
    
    
    2006Cash flows from operating activitiesNet (loss) income
    
    $
    (12,183,140
    )
    
    $
    584,989
    
    
    $
    (658,795
    )Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:Depreciation
    
    
    1,191,951
    
    
    
    764,087
    
    
    
    523,112Amortization of software development costs
    
    
    134,525
    
    
    
    365,684
    
    
    
    480,744Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    375,127Amortization of intangible assets
    
    
    6,812,352
    
    
    
    3,778,154
    
    
    
    1,700,000Noncash compensation
    
    
    78,688
    
    
    
    
    
    
    
    Deferred rent
    
    
    (4,184
    )
    
    
    (49,052
    )
    
    
    235,377Bad debt expense (recovery)
    
    
    349,207
    
    
    
    (143,133
    )
    
    
    23,378Loss (gain) on disposal of property and equipment
    
    
    5,483
    
    
    
    (94,518
    )
    
    
    390,478Stock-based compensation expense
    
    
    394,727
    
    
    
    236,379
    
    
    
    134,697Interest income on short-term investments
    
    
    (12,872
    )
    
    
    
    
    
    
    Change in fair value of derivative and Series BB
Warrants
    
    
    (220,240
    )
    
    
    956,374
    
    
    
    432,671Changes in operating assets and liabilities:Accounts receivable
    
    
    3,295,166
    
    
    
    (9,270,394
    )
    
    
    3,358,481Prepaid expenses and other current assets
    
    
    (1,136,293
    )
    
    
    (326,889
    )
    
    
    (244,108
    )Deferred income taxes
    
    
    (168,518
    )
    
    
    (2,055,893
    )
    
    
    390,262Accounts payable and accrued expenses
    
    
    702,112
    
    
    
    2,188,485
    
    
    
    (1,227,626
    )Income taxes payable
    
    
    (42,043
    )
    
    
    60,032
    
    
    
    Deferred revenue
    
    
    4,445,275
    
    
    
    2,658,153
    
    
    
    1,017,040Net cash provided by (used in)
operating activities
    
    
    3,642,196
    
    
    
    (347,542
    )
    
    
    6,930,838Cash flows from investing activitiesPurchase of property and equipment
    
    
    (543,960
    )
    
    
    (345,700
    )
    
    
    (813,262
    )Proceeds from sale of property and equipment
    
    
    1,300
    
    
    
    113,207
    
    
    
    22,450Receipt (payment) of restricted cash to collateralize
letter of credit
    
    
    341,068
    
    
    
    30,892
    
    
    
    (391,960
    )Cash paid for acquisition, net of cash acquired
    
    
    (488,786
    )
    
    
    (27,181,487
    )
    
    
    Short-term investments purchased
    
    
    (1,248,000
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (1,938,378
    )
    
    
    (27,383,088
    )
    
    
    (1,182,772
    )
 The accompanying notes are an integral part of these financial statements.
  8




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##### 



Metastorm Inc. and Subsidiaries
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 Year ended December 31,2008
    
    
    2007
    
    
    2006Cash flows from financing activitiesBorrowings under notes payable
    
    
    
    
    
    
    
    
    
    
    508,707Repayments of borrowings under notes payable
    
    
    (11,476
    )
    
    
    (797,392
    )
    
    
    (3,074,685
    )Repayments of capital leases
    
    
    (277,319
    )
    
    
    (82,405
    )
    
    
    Proceeds from stock options exercised
    
    
    6,900
    
    
    
    7,875
    
    
    
    Proceeds from issuance of redeemable convertible
preferred stock, net of issuance costs of $177,966
in 2007
    
    
    
    
    
    
    29,806,690
    
    
    
    Net cash (used in) provided by
financing activities
    
    
    (281,895
    )
    
    
    28,934,768
    
    
    
    (2,565,978
    )Effects of exchange rate changes on cash and cash
equivalents
    
    
    (289,057
    )
    
    
    37,157
    
    
    
    55,654Net increase in cash and cash
equivalents
    
    
    1,132,866
    
    
    
    1,241,295
    
    
    
    3,237,742Cash and cash equivalents at beginning of year
    
    
    9,021,003
    
    
    
    7,779,708
    
    
    
    4,541,966Cash and cash equivalents at end of year
    
    $
    10,153,869
    
    
    $
    9,021,003
    
    
    $
    7,779,708Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    285,129
    
    
    $
    55,940
    
    
    $
    313,854Income taxes
    
    
    48,801
    
    
    
    59,100
    
    
    
    Supplemental schedule of non-cash investing and
financing activities:Leasehold improvements, paid by landlord
    
    $
    
    
    
    $
    90,342
    
    
    $
    548,683Fixed assets purchased under capital leases
    
    
    531,202
    
    
    
    580,897
    
    
    
    Fixed assets purchased included in accounts
payable at year-end
    
    
    
    
    
    
    207,900
    
    
    
    Process Competence purchase price payable
    
    
    
    
    
    
    210,159
    
    
    
    Fixed assets purchased under notes payable
    
    
    136,690
    
    
    
    
    
    
    
    Issuance of 9,276,033 shares of Convertible
Preferred Stock as partial consideration to
Proforma Corporation
    
    
    
    
    
    
    12,429,884
    
    
    
    Proforma acquisition purchase price receivable
    
    
    
    
    
    
    248,337
    
    
    
    
 The accompanying notes are an integral part of these financial statements.
  9




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization
  2. Significant Accounting Policies
 Principles of Consolidation
  Use of Estimates
  Cash and Cash Equivalents
   10




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Short-Term Investments
  Property and Equipment
  Deferred Equity Offering Costs
  Financial Instruments
  Accounting for Derivative Instruments and
Hedging Activities
  11




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Financial Instruments (Continued)
 Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and
Equity Issuers Accounting under FASB Statement No. 150
for Freestanding Warrants and Other Similar Instruments on Shares That Are Redeemable (FSP
150-5).
   Software Development Costs
 Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed
  12




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Software Development Costs (Continued)
  Business Combinations
 Business
Combinations
   13




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Goodwill and Intangible Assets
  Goodwill and Other
Intangible Assets
 Deferred Rent
   14




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Revenue Recognition
 Software Revenue Recognition, Software Revenue Recognition
   15




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Revenue Recognition (Continued)
     16




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Revenue Recognition (Continued)
 
    
    If a significant portion of the fee is due after the Companys established payment
terms, revenue recognition is deferred until payment has been received from the customer.
 
    
    If a transaction is subject to customer acceptance provisions where delivery is
uncertain, revenue recognition is deferred until evidence of the customers acceptance of
the product is received.
 
    
    If the price is subject to refund or forfeiture, concession or other adjustment,
revenue recognition is deferred until these rights expire.
    17




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Revenue Recognition (Continued)
  06-3).
 Restricted Cash
  Concentrations of Credit Risk
   18




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Concentrations of Credit Risk (Continued)
   2008
    
    
    2007
    
    
    2006Balance beginning of year
    
    $
    86,579
    
    
    $
    254,195
    
    
    $
    259,878Additions charged to cost and expenses
    
    
    349,207
    
    
    
    
    
    
    
    23,378Deductions (1)
    
    
    (302,102
    )
    
    
    (167,616
    )
    
    
    (29,061
    )Balance end of the year
    
    $
    133,684
    
    
    $
    86,579
    
    
    $
    254,195
 (1)
    
    Uncollectable amounts written off, net of recoveries.  2008
    
    
    2007
    
    
    2006Revenues:North America
    
    $
    50,902,895
    
    
    $
    41,531,196
    
    
    $
    30,655,383United Kingdom
    
    
    11,540,612
    
    
    
    9,909,972
    
    
    
    7,406,347Rest of world
    
    
    12,450,284
    
    
    
    8,271,250
    
    
    
    3,992,388$
    74,893,791
    
    
    $
    59,712,418
    
    
    $
    42,054,118
   19




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Concentrations of Credit Risk (Continued)
  Impairment of Long-Lived Assets
  Foreign Currency Translation
   Advertising Costs
   20




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Research and Development Expenses
  Income Taxes
 Accounting for
Income Taxes Accounting for Uncertainty in Income Taxes, an interpretation of SFAS 109
    21




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Stock-Based Compensation
 Accounting for
Stock Issued to Employees Accounting for Stock-Based Compensation Accounting for
Stock-Based CompensationTransition and Disclosure
 Share-Based Payment
   22




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Stock-Based Compensation (Continued)
    2008
    
    
    2007Risk-free interest rate
    
    
    3.46
    %
    
    
    4.59
    %Expected dividend rate
    
    
    0.00
    %
    
    
    0.00
    %Expected useful life
    
    5.4 years
        
    5.4 yearsExpected volatility
    
    
    43.2
    %
    
    
    52.5
    %Fair value of stock option awards during the year
    
    $
    0.45
    
    
    $
    0.25
 Risk-free interest rate
 Expected dividend yield
 Expected term
  23




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Stock-Based Compensation (Continued)
 Expected volatility
   December 31,2008
    
    
    2007
    
    
    2006Cost of revenuesMaintenance and support
    
    $
    5,900
    
    
    $
    3,571
    
    
    $
    2,702Professional services
    
    
    15,118
    
    
    
    12,678
    
    
    
    7,566Stock-based compensation expense
included in cost of revenues
    
    
    21,018
    
    
    
    16,249
    
    
    
    10,268Operating expensesResearch and development
    
    
    54,367
    
    
    
    19,094
    
    
    
    12,160Sales and marketing
    
    
    179,119
    
    
    
    109,973
    
    
    
    60,487General and administrative
    
    
    140,223
    
    
    
    91,063
    
    
    
    51,782Total stock-based compensation expense
    
    $
    394,727
    
    
    $
    236,379
    
    
    $
    134,697
  24




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Comprehensive (Loss) Income
 Reporting
Comprehensive Income.
 Litigation Reserves
  Recent Accounting Pronouncements
 Disclosures about Derivative Instruments and
Hedging Activities, an amendment of FAS 133
  25




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Recent Accounting Pronouncements (Continued)
 Non-controlling Interests in Consolidated
Financial Statements
 Business Combinations
 Fair Value Measurements
  26




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2. Significant Accounting Policies (Continued)
 Recent Accounting Pronouncements (Continued)
 The Fair Value Option for Financial Assets and
Financial Liabilities
 3. Acquisitions
 Proforma Corporation
   27




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 3. Acquisitions (Continued)
 Proforma Corporation (Continued)
  Cash paid
    
    $
    24,751,679Series AA Redeemable Convertible Preferred Stock
    
    
    12,429,884Transaction costs
    
    
    289,434Cash acquired on acquisition
    
    
    (261,641
    )$
    37,209,356
   Trade receivables
    
    $
    3,049,552Prepaid expenses and other current assets
    
    
    294,572Fixed assets
    
    
    275,629Customer relationships with a useful life of 4.4 years
    
    
    10,184,000Acquired technologies with a useful life of 6.2 years
    
    
    8,487,000Customer order backlog with a useful life of 3.3 years
    
    
    637,000Goodwill
    
    
    18,000,217Deferred tax liability recognized for acquired definite-lived assets
    
    
    (7,616,041
    )Reduction in valuation allowance attributable to deferred tax assets
    
    
    6,564,651Accounts payable and accrued expenses
    
    
    (773,360
    )Deferred revenue
    
    
    (1,571,289
    )Notes payable
    
    
    (322,575
    )Total acquired assets and liabilities
    
    $
    37,209,356
  28




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 3. Acquisitions (Continued)
 Proforma Corporation (Continued)
 Accounting in a Business Combination for Deferred Revenue of an Acquiree.
    (Unaudited)Years ended December 31,2007
    
    
    2006Pro Forma revenues
    
    $
    71,737,278
    
    
    $
    57,518,475Pro Forma net loss
    
    $
    (3,728,751
    )
    
    $
    (114,475
    )Accretion of preferred stock and preferred stock dividends
    
    
    (9,471,463
    )
    
    
    (4,528,423
    )Pro Form net loss attributable to common stockholders
    
    $
    (13,200,214
    )
    
    $
    (4,642,898
    )
 Process Competence B.V.
   29




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 3. Acquisitions (Continued)
 Process Competence B.V. (Continued)
   Spotlight Data Solution, Inc.
    30




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 4. Property and Equipment
  Years ended December 31,2008
    
    
    2007Computer equipment
    
    $
    2,041,300
    
    
    $
    1,800,314Office furniture and equipment
    
    
    482,994
    
    
    
    436,451Equipment under capital lease
    
    
    1,112,099
    
    
    
    580,897Leasehold improvements
    
    
    1,168,618
    
    
    
    1,095,3304,805,011
    
    
    
    3,912,992Accumulated depreciation
    
    
    (2,651,839
    )
    
    
    (1,668,543
    )$
    2,153,172
    
    
    $
    2,244,449
  5. Goodwill
  Americas
    
    
    InternationalOperating
    
    
    OperatingSegment
    
    
    Segment
    
    
    TotalBalance at January 1, 2007
    
    $
    15,447,131
    
    
    $
    
    
    
    $
    15,477,131Proforma Corporation acquisition
    
    
    17,995,186
    
    
    
    
    
    
    
    17,995,186Process Competence acquisition
    
    
    
    
    
    
    1,304,088
    
    
    
    1,304,088Balance at December 31, 2007
    
    
    33,442,317
    
    
    
    1,304,088
    
    
    
    34,746,405Adjustments to purchase price allocations
    
    
    5,031
    
    
    
    483,755
    
    
    
    488,786Balance at December 31, 2008
    
    $
    33,447,348
    
    
    $
    1,787,843
    
    
    $
    35,235,191
  31




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 6. Acquired Intangible Assets
  Weighted-Average
    
    
    Gross
    
    
    
    
    
    
    NetUseful Life
    
    
    Carrying
    
    
    Accumulated
    
    
    Carryingin Years
    
    
    Amount
    
    
    Amortization
    
    
    AmountDecember 31, 2008:Customer relationships
    
    
    4.4
    
    
    $
    10,184,000
    
    
    $
    (3,834,000
    )
    
    $
    6,350,000Acquired technology
    
    
    5.3
    
    
    
    18,207,000
    
    
    
    (8,231,334
    )
    
    
    9,975,666Backlog
    
    
    3.4
    
    
    
    692,000
    
    
    
    (650,172
    )
    
    
    41,828December 31, 2007:Customer relationships
    
    
    4.4
    
    
    $
    10,184,000
    
    
    $
    (1,106,000
    )
    
    $
    9,078,000Acquired technology
    
    
    5.3
    
    
    
    18,207,000
    
    
    
    (4,376,334
    )
    
    
    13,830,666Backlog
    
    
    3.4
    
    
    
    692,000
    
    
    
    (420,820
    )
    
    
    271,180
  AmortizationYears ending December 31,
    
    Expense2009
    
    $
    6,134,3572010
    
    
    5,017,4812011
    
    
    2,594,4042012
    
    
    1,261,2522013 and thereafter
    
    
    1,360,000
  32




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 7. Software Development Costs
  December 31,2008
    
    
    2007Internal development costs
    
    $
    2,748,746
    
    
    $
    2,659,067Capitalized interest
    
    
    42,152
    
    
    
    49,5452,790,898
    
    
    
    2,708,612Accumulated amortization
    
    
    (2,770,739
    )
    
    
    (2,539,327
    )$
    20,159
    
    
    $
    169,285
  8. Notes Payable
 December 31,2008
    
    
    2007Note payable issued to the landlord in February
2006 to fund leasehold improvements. The note is
being repaid monthly in installments of principal
and interest through March 1, 2016. The note
accrues interest at 9%.
    
    $
    73,634
    
    
    $
    80,640Note payable issued to a vendor in December 2008
to fund the implementation of accounting software.
The note is being repaid monthly in installments
of principal through December 2011. The note
accrues interest at 0%.
    
    
    156,443
    
    
    
    230,077
    
    
    
    80,640Less current portion
    
    
    (56,831
    )
    
    
    (7,006
    )$
    173,246
    
    
    $
    73,634
  33




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 8. Notes Payable (Continued)
  Years
    
    Amount2009
    
    $
    56,8312010
    
    
    62,0192011
    
    
    62,8062012
    
    
    10,0282013 and thereafter
    
    
    38,393
 9. Accounts Payable and Accrued Expenses
  December 31,2008
    
    
    2007Accounts payable
    
    $
    4,488,787
    
    
    $
    3,700,623Accrued expenses
    
    
    3,767,801
    
    
    
    3,475,534Accrued commissions
    
    
    2,116,057
    
    
    
    2,546,183Other accrued compensation and related expenses
    
    
    989,413
    
    
    
    1,704,231$
    11,362,058
    
    
    $
    11,426,571
 10. Preferred Stock
 Series AA Redeemable Convertible Preferred Stock
    34




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 10. Preferred Stock (Continued)
 Series AA Redeemable Convertible Preferred Stock (Continued)
       35




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 10. Preferred Stock (Continued)
 Series AA Redeemable Convertible Preferred Stock (Continued)
  Series CC Redeemable Convertible Preferred Stock
      36




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 10. Preferred Stock (Continued)
 Series CC Redeemable Convertible Preferred Stock (Continued)
     Series BB Redeemable Convertible Preferred Stock
    37




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 10. Preferred Stock (Continued)
 Series BB Redeemable Convertible Preferred Stock (Continued)
  11. Stock Purchase Warrants
  Number
    
    
    
    
    
    Exerciseof Shares
    
    Class
    
    
    Price
    
    
    Expiration Date1,257
    
    Series AA
    
    
    29.84
    
    
    February 20098,486
    
    Series AA
    
    
    14.14
    
    
    February 20104,536
    
    Series AA
    
    
    7.35
    
    
    October 201039,155
    
    Common
    
    
    1.28
    
    
    March 201253,434
 Accounting for Derivative
Instruments and Hedging Activities
  38




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 11. Stock Purchase Warrants (Continued)
  Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity Issuers Accounting under FASB Statement No. 150 for Freestanding Warrants and Other Similar
Instruments on Shares That Are Redeemable (FSP 150-5).
  Series BBDerivative
    
    
    WarrantLiability
    
    
    Liability
    
    
    TotalFair value at January 1, 2006
    
    $
    110,366
    
    
    $
    3,228,140
    
    
    $
    3,338,506Change in value
    
    
    52,890
    
    
    
    379,781
    
    
    
    432,671Fair value at December 31, 2006
    
    
    163,256
    
    
    
    3,607,921
    
    
    
    3,771,177Change in value
    
    
    61,176
    
    
    
    895,198
    
    
    
    956,374Conversion of Series BB
warrants to Series AA
Preferred Stock
    
    
    
    
    
    
    (4,503,119
    )
    
    
    (4,503,119
    )Fair value at December 31, 2007
    
    
    224,432
    
    
    
    
    
    
    
    224,432Change in value
    
    
    (220,240
    )
    
    
    
    
    
    
    (220,240
    )Fair value at December 31, 2008
    
    $
    4,192
    
    
    $
    
    
    
    $
    4,192
  39




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 12. Shares Reserved for Future Issuance
  Conversion of Series AA
    
    
    71,012,991Conversion of Series CC
    
    
    18,844,221Exercise and conversion of Restricted Stock Units
    
    
    1,443,780Exercise of common stock purchase warrants
    
    
    39,155Exercise of stock options
    
    
    8,404,192Stock options reserved by the Board of Directors
    
    
    3,205,440102,949,779
 13. Stock Option Plan
 Equity Incentive Plans
    40




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 13. Stock Option Plan (Continued)
 Equity Incentive Plans (Continued)
  WeightedWeighted
    
    
    AverageRange of
    
    
    Average
    
    
    RemainingNumber
    
    
    Exercise
    
    
    Exercise
    
    
    Contractualof Shares
    
    
    Prices
    
    
    Prices
    
    
    LifeOutstanding at December 31, 2005
    
    
    2,709,000
    
    
    
    0.28
    
    
    
    0.28Granted
    
    
    2,710,000
    
    
    
    0.28
    
    
    
    0.28Forfeited
    
    
    (293,375
    )
    
    
    0.28
    
    
    
    0.28Outstanding at December 31, 2006
    
    
    5,125,625
    
    
    
    0.28
    
    
    
    0.28Granted
    
    
    3,192,500
    
    
    
    0.28  0.46
    
    
    
    0.45Exercised
    
    
    (28,125
    )
    
    
    0.28
    
    
    
    0.28Forfeited
    
    
    (77,500
    )
    
    
    0.28  0.46
    
    
    
    0.37Outstanding at December 31, 2007
    
    
    8,212,500
    
    
    
    0.28  0.46
    
    
    
    0.35Granted
    
    
    1,451,667
    
    
    
    1.09
    
    
    
    1.09Exercised
    
    
    (1,132,475
    )
    
    
    0.28  0.46
    
    
    
    0.29Forfeited
    
    
    (127,500
    )
    
    
    0.28  0.46
    
    
    
    0.45Outstanding at December 31, 2008
    
    
    8,404,192
    
    
    
    0.28  1.09
    
    
    
    0.48
    
    
    
    7.83Exercisable at December 31, 2008
    
    
    4,301,223
    
    
    
    0.28  1.09
    
    
    
    0.36
    
    
    
    7.11Vested and expected to vest at December 31, 2008
    
    
    7,886,397
    
    
    
    
    
    
    
    0.46
    
    
    
    6.89
    41




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 13. Stock Option Plan (Continued)
 Restricted Stock Units
  14. Income Taxes
  2008
    
    
    2007
    
    
    2006Federal
    
    $
    343,577
    
    
    $
    102,680
    
    
    $
    343,576State and local
    
    
    64,275
    
    
    
    75,409
    
    
    
    46,686Foreign
    
    
    (558,381
    )
    
    
    (2,114,850
    )
    
    
    Total income tax expense
    
    $
    (150,529
    )
    
    $
    (1,936,761
    )
    
    $
    390,262Current
    
    $
    17,989
    
    
    $
    119,132
    
    
    
    Deferred
    
    
    (168,518
    )
    
    
    (2,055,893
    )
    
    
    390,262Total income tax (benefit) expense
    
    $
    (150,529
    )
    
    $
    (1,936,761
    )
    
    $
    390,262
  42




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 14. Income Taxes (Continued)
  2008
    
    
    2007Net operating loss carryforwards
    
    $
    14,077,592
    
    
    $
    14,846,922Deferred stock compensation
    
    
    1,040,760
    
    
    
    935,536Accrued expenses and deferred revenue
    
    
    1,518,642
    
    
    
    624,693Amortization of intangible assets and goodwill
    
    
    4,250,507
    
    
    
    1,822,184Provision for bad debts
    
    
    39,032
    
    
    
    10,195Depreciation
    
    
    233,092
    
    
    
    182,595AMT credit
    
    
    98,772
    
    
    
    102,680Capital loss carryover
    
    
    34,153
    
    
    
    34,153R&D credit carryover
    
    
    85,246
    
    
    
    85,246Other
    
    
    18,306
    
    
    
    Total deferred tax assets
    
    
    21,396,102
    
    
    
    18,644,204Valuation allowance for deferred assets
    
    
    (12,304,866
    )
    
    
    (9,279,279
    )Net deferred tax assets
    
    
    9,091,236
    
    
    
    9,364,925Deferred tax liabilities
Prepaid expenses
    
    
    325,134
    
    
    
    335,360Goodwill
    
    
    1,295,448
    
    
    
    896,849Basis difference for intangibles on acquisitions
    
    
    7,616,041
    
    
    
    7,616,041Total deferred tax liabilities
    
    
    9,236,623
    
    
    
    8,848,250Net deferred tax asset (liability)
    
    $
    (145,387
    )
    
    $
    516,675
  43




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 14. Income Taxes (Continued)
  December 31,2008
    
    
    2007Balance at beginning of year
    
    $
    (9,279,279
    )
    
    $
    (21,113,324
    )(Increase) reduction due to operations
    
    
    (3,025,587
    )
    
    
    2,806,780Reduction to the release of the U.K. valuation allowance
    
    
    
    
    
    
    2,462,614Reduction due to the purchase of Proforma
    
    
    
    
    
    
    6,564,651Balance at end of year
    
    $
    (12,304,866
    )
    
    $
    (9,279,279
    )
     44




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 14. Income Taxes (Continued)
   December 31,2008
    
    
    2007
    
    
    2006Tax (benefit) expense at U.S. statutory rate
    
    $
    (4,196,424
    )
    
    $
    (459,602
    )
    
    $
    (91,300
    )Effect of permanent differences
    
    
    586,793
    
    
    
    1,272,614
    
    
    
    221,104State income benefits, net of federal effect
    
    
    (645,123
    )
    
    
    (16,625
    )
    
    
    3,373Foreign income tax rates different from
U.S. statutory rate
    
    
    (105,666
    )
    
    
    (105,799
    )
    
    
    (42,599
    )Alternative minimum tax
    
    
    
    
    
    
    52,709
    
    
    
    Other reconciling items
    
    
    (131
    )
    
    
    52,564
    
    
    
    (169,592
    )Change in valuation allowance
    
    
    4,210,022
    
    
    
    (2,732,622
    )
    
    
    469,276$
    (150,529
    )
    
    $
    (1,936,761
    )
    
    $
    390,262
   45




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 15. Leases
  Years
    
    Amount2009
    
    $
    2,097,6212010
    
    
    1,764,8402011
    
    
    1,473,5252012
    
    
    1,182,9492013
    
    
    941,295Thereafter
    
    
    1,059,743
   Years
    
    Amount2009
    
    $
    393,3682010
    
    
    296,7872011
    
    
    132,0862012
    
    
    66,5332013
    
    
    Future minimum payments
    
    
    888,774Less:Amounts representing interest
    
    
    71,898Amounts representing taxes
    
    
    55,001Current portion of capital leases
    
    
    326,927Long-term portion of capital leases
    
    $
    434,948
  46




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 16. Employee Defined Contribution Retirement Plans
   17. Related Party Transaction
    47




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 18. Commitments and Contingencies
      48




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 19. Geographic and Segment Information
 Disclosures about Segments of an Enterprise and Related Information
     49




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 19. Geographic and Segment Information (Continued)
  Americas
    
    
    International
    
    
    Total2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006RevenuesSoftware licenses
    
    $
    18,937
    
    
    $
    16,954
    
    
    $
    13,126
    
    
    $
    9,138
    
    
    $
    8,818
    
    
    $
    4,646
    
    
    $
    28,075
    
    
    $
    25,772
    
    
    $
    17,772Professional services
    
    
    18,705
    
    
    
    13,882
    
    
    
    9,651
    
    
    
    4,604
    
    
    
    2,966
    
    
    
    1,770
    
    
    
    23,309
    
    
    
    16,848
    
    
    
    11,421Maintenance and
support
    
    
    15,884
    
    
    
    11,315
    
    
    
    7,879
    
    
    
    7,626
    
    
    
    5,777
    
    
    
    4,982
    
    
    
    23,510
    
    
    
    17,092
    
    
    
    12,861Revenues
    
    
    53,526
    
    
    
    42,151
    
    
    
    30,656
    
    
    
    21,368
    
    
    
    17,561
    
    
    
    11,398
    
    
    
    74,894
    
    
    
    59,712
    
    
    
    42,054Cost of revenuesSoftware licenses
    
    
    608
    
    
    
    1,003
    
    
    
    958
    
    
    
    195
    
    
    
    1,126
    
    
    
    567
    
    
    
    803
    
    
    
    2,129
    
    
    
    1,525Professional services
    
    
    15,238
    
    
    
    10,367
    
    
    
    7,654
    
    
    
    3,842
    
    
    
    2,559
    
    
    
    1,844
    
    
    
    19,080
    
    
    
    12,926
    
    
    
    9,498Maintenance and
support
    
    
    1,889
    
    
    
    662
    
    
    
    455
    
    
    
    105
    
    
    
    811
    
    
    
    502
    
    
    
    1,994
    
    
    
    1,473
    
    
    
    957Cost of revenues
    
    
    17,735
    
    
    
    12,032
    
    
    
    9,067
    
    
    
    4,142
    
    
    
    4,496
    
    
    
    2,913
    
    
    
    21,877
    
    
    
    16,528
    
    
    
    11,980Segment gross profitSoftware licenses
    
    
    18,329
    
    
    
    15,951
    
    
    
    12,168
    
    
    
    8,943
    
    
    
    7,692
    
    
    
    4,079
    
    
    
    27,272
    
    
    
    23,643
    
    
    
    16,247Professional services
    
    
    3,467
    
    
    
    3,515
    
    
    
    1,997
    
    
    
    762
    
    
    
    407
    
    
    
    (74
    )
    
    
    4,229
    
    
    
    3,922
    
    
    
    1,923Maintenance and
support
    
    
    13,995
    
    
    
    10,653
    
    
    
    7,424
    
    
    
    7,521
    
    
    
    4,966
    
    
    
    4,480
    
    
    
    21,516
    
    
    
    15,619
    
    
    
    11,904Segment gross profit
    
    
    35,791
    
    
    
    30,119
    
    
    
    21,589
    
    
    
    17,226
    
    
    
    13,065
    
    
    
    8,485
    
    
    
    53,017
    
    
    
    43,184
    
    
    
    30,074Operating expensesResearch and
development
    
    
    5,490
    
    
    
    4,691
    
    
    
    2,632
    
    
    
    4,835
    
    
    
    1,839
    
    
    
    1,830
    
    
    
    10,325
    
    
    
    6,530
    
    
    
    4,462Sales and marketing
    
    
    18,642
    
    
    
    13,258
    
    
    
    7,539
    
    
    
    10,959
    
    
    
    8,294
    
    
    
    5,986
    
    
    
    29,601
    
    
    
    21,552
    
    
    
    13,525Operating expenses
    
    
    24,132
    
    
    
    17,949
    
    
    
    10,171
    
    
    
    15,794
    
    
    
    10,133
    
    
    
    7,816
    
    
    
    39,926
    
    
    
    28,082
    
    
    
    17,987Segment operating profit
    
    $
    11,659
    
    
    $
    12,170
    
    
    $
    11,418
    
    
    $
    1,432
    
    
    $
    2,932
    
    
    $
    669
    
    
    $
    13,091
    
    
    $
    15,102
    
    
    $
    12,087
  2008
    
    
    2007
    
    
    2006Americas
    
    $
    18,937
    
    
    $
    16,954
    
    
    $
    13,126United Kingdom
    
    
    3,671
    
    
    
    3,765
    
    
    
    3,172Foreign
    
    
    5,467
    
    
    
    5,053
    
    
    
    1,474$
    28,075
    
    
    $
    25,772
    
    
    $
    17,772
  50




---



##### 



Metastorm Inc. and Subsidiaries
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 19. Geographic and Segment Information (Continued)
  2008
    
    
    2007
    
    
    2006Total margin from operating segments
    
    $
    13,091
    
    
    $
    15,102
    
    
    $
    12,087Corporate and general and administrative expenses
    
    
    (18,538
    )
    
    
    (11,610
    )
    
    
    (9,724
    )Amortization of intangible assets
    
    
    (6,812
    )
    
    
    (3,778
    )
    
    
    (1,700
    )Stock-based compensation
    
    
    (395
    )
    
    
    (236
    )
    
    
    (510
    )Interest expense
    
    
    (284
    )
    
    
    (54
    )
    
    
    (297
    )Non-operating income (expense), net
    
    
    604
    
    
    
    (776
    )
    
    
    (125
    )Loss before provision for income taxes
    
    $
    (12,334
    )
    
    $
    (1,352
    )
    
    $
    (269
    )
  51