UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number
1-33350
 
 SOURCEFIRE, INC.
 (Exact name of Registrant as Specified in its Charter)
 Delaware
    
    52-2289365(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)9770 Patuxent Woods DriveColumbia, Maryland
    
    21046(Address of Principal Executive Offices)
    
    (Zip Code)
 (410) 290-1616
 þ o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
    
    Smaller reporting Company o(Do not check if smaller reporting company)
 o þ




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##### 



SOURCEFIRE, INC.
Form 10-Q
TABLE OF CONTENTS
 Part IItem 1. Financial Statements
    
    
    3Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008
    
    
    3Consolidated Statements of Operations for the three months and six months ended June 30, 2009 and 2008
    
    
    4Consolidated Statement of Changes in Stockholders Equity for the six months ended June 30, 2009
    
    
    5Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008
    
    
    6Notes To Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    31Part II.Item 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    33Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 3. Defaults Upon Senior Securities
    
    
    46Item 4. Submission of Matters to a Vote of Security Holders
    
    
    47Item 5. Other Information
    
    
    47Item 6. Exhibits
    
    
    47Signatures
    
    
    48
  2




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##### 



Part I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 SOURCEFIRE, INC.
 CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
 June 30,
    
    
    December 31,2009
    
    
    2008(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    46,703
    
    
    $
    39,768Short-term investments
    
    
    56,538
    
    
    
    59,343Accounts receivable, net of allowances of $851
as of June 30, 2009 and $538 as of December
31, 2008
    
    
    21,789
    
    
    
    27,864Inventory
    
    
    3,316
    
    
    
    4,521Prepaid expenses and other current assets
    
    
    3,130
    
    
    
    2,115Total current assets
    
    
    131,476
    
    
    
    133,611Property and equipment, net
    
    
    8,010
    
    
    
    8,341Intangible assets, net of accumulated amortization
    
    
    402
    
    
    
    465Investments
    
    
    5,047
    
    
    
    2,457Other assets
    
    
    1,592
    
    
    
    1,431Total assets
    
    $
    146,527
    
    
    $
    146,305Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    1,413
    
    
    $
    4,505Accrued compensation and related expenses
    
    
    3,194
    
    
    
    4,229Other accrued expenses
    
    
    2,599
    
    
    
    3,558Current portion of deferred revenue
    
    
    23,395
    
    
    
    21,513Other current liabilities
    
    
    592
    
    
    
    789Total current liabilities
    
    
    31,193
    
    
    
    34,594Deferred revenue, less current portion
    
    
    2,860
    
    
    
    2,595Other long-term liabilities
    
    
    90
    
    
    
    75Total liabilities
    
    
    34,143
    
    
    
    37,264Commitments and ContingenciesStockholders equity:Preferred stock, $0.001 par value; 19,700,000
shares authorized; no shares issued or
outstanding at June 30, 2009 and December 31,
2008
    
    
    
    
    
    
    Series A junior participating preferred stock,
$0.001 par value; 300,000 shares authorized; no
shares issued or outstanding at June 30, 2009 and
December 31, 2008
    
    
    
    
    
    
    Common stock, $0.001 par value; 240,000,000
shares authorized; 26,444,943 and 25,917,519
shares issued and outstanding as of June 30, 2009
and December 31, 2008, respectively
    
    
    26
    
    
    
    25Additional paid-in capital
    
    
    163,272
    
    
    
    159,306Accumulated deficit
    
    
    (51,078
    )
    
    
    (50,594
    )Accumulated other comprehensive income
    
    
    164
    
    
    
    304Total stockholders equity
    
    
    112,384
    
    
    
    109,041Total liabilities and stockholders equity
    
    $
    146,527
    
    
    $
    146,305
  3




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##### 



SOURCEFIRE, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share and per share amounts)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue:Products
    
    $
    12,280
    
    
    $
    8,677
    
    
    $
    22,148
    
    
    $
    15,528Technical support and professional services
    
    
    9,891
    
    
    
    7,341
    
    
    
    18,623
    
    
    
    14,141Total revenue
    
    
    22,171
    
    
    
    16,018
    
    
    
    40,771
    
    
    
    29,669Cost of revenue:Products
    
    
    3,682
    
    
    
    2,479
    
    
    
    6,449
    
    
    
    4,476Technical support and professional services
    
    
    1,393
    
    
    
    1,197
    
    
    
    2,775
    
    
    
    2,238Total cost of revenue
    
    
    5,075
    
    
    
    3,676
    
    
    
    9,224
    
    
    
    6,714Gross profit
    
    
    17,096
    
    
    
    12,342
    
    
    
    31,547
    
    
    
    22,955Operating expenses:Research and development
    
    
    3,396
    
    
    
    3,147
    
    
    
    6,716
    
    
    
    6,258Sales and marketing
    
    
    8,428
    
    
    
    7,945
    
    
    
    16,298
    
    
    
    15,179General and administrative
    
    
    3,992
    
    
    
    4,531
    
    
    
    7,835
    
    
    
    8,945Depreciation and amortization
    
    
    830
    
    
    
    585
    
    
    
    1,651
    
    
    
    1,077Total operating expenses
    
    
    16,646
    
    
    
    16,208
    
    
    
    32,500
    
    
    
    31,459Income (loss) from operations
    
    
    450
    
    
    
    (3,866
    )
    
    
    (953
    )
    
    
    (8,504
    )Other income, net:Interest and investment income
    
    
    294
    
    
    
    828
    
    
    
    678
    
    
    
    1,983Interest expense
    
    
    (6
    )
    
    
    (36
    )
    
    
    (16
    )
    
    
    (36
    )Other income (expense)
    
    
    (36
    )
    
    
    (11
    )
    
    
    (49
    )
    
    
    38Total other income, net
    
    
    252
    
    
    
    781
    
    
    
    613
    
    
    
    1,985Income (loss) before income taxes
    
    
    702
    
    
    
    (3,085
    )
    
    
    (340
    )
    
    
    (6,519
    )Income tax expense
    
    
    69
    
    
    
    39
    
    
    
    144
    
    
    
    101Net income (loss)
    
    $
    633
    
    
    $
    (3,124
    )
    
    $
    (484
    )
    
    $
    (6,620
    )Net income (loss):Basic
    
    $
    0.02
    
    
    $
    (0.12
    )
    
    $
    (0.02
    )
    
    $
    (0.27
    )Diluted
    
    $
    0.02
    
    
    $
    (0.12
    )
    
    $
    (0.02
    )
    
    $
    (0.27
    )Weighted average shares outstanding used in
computing per share amounts:Basic
    
    
    26,249,424
    
    
    
    25,154,568
    
    
    
    26,092,712
    
    
    
    24,960,471Diluted
    
    
    27,551,669
    
    
    
    25,154,568
    
    
    
    26,092,712
    
    
    
    24,960,471
  4




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##### 



SOURCEFIRE, INC.
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED)
(in thousands, except share amounts)
 Additional
    
    
    
    
    
    
    Accumulated
 OtherCommon Stock
    
    
    Paid In
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    TotalBalance as of January 1, 2009
    
    
    25,917,519
    
    
    $
    25
    
    
    $
    159,306
    
    
    $
    (50,594
    )
    
    $
    304
    
    
    $
    109,041Exercise of common stock options
    
    
    430,060
    
    
    
    1
    
    
    
    1,202
    
    
    
    
    
    
    
    
    
    
    
    1,203Issuance of common stock under employee stock purchase plan
    
    
    40,826
    
    
    
    
    
    
    
    176
    
    
    
    
    
    
    
    
    
    
    
    176Issuance of restricted common stock
    
    
    56,538
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    2,557
    
    
    
    
    
    
    
    
    
    
    
    2,557Excess tax benefits relating to share-based payments
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    31Comprehensive loss:Net loss for the six months ended June 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (484
    )
    
    
    
    
    
    
    (484
    )Change in net unrealized gains and losses on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140
    )
    
    
    (140
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (624
    )Balance as of June 30, 2009
    
    
    26,444,943
    
    
    $
    26
    
    
    $
    163,272
    
    
    $
    (51,078
    )
    
    $
    164
    
    
    $
    112,384
  5




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##### 



SOURCEFIRE, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 Six Months EndedJune 30,2009
    
    
    2008Operating activitiesNet loss
    
    $
    (484
    )
    
    $
    (6,620
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    1,692
    
    
    
    1,092Provision for (benefit from) doubtful accounts
    
    
    93
    
    
    
    (49
    )Non-cash stock-based compensation
    
    
    2,557
    
    
    
    1,803Excess tax benefits related to share-based payments
    
    
    (31
    )
    
    
    (10
    )Amortization of premium on investments
    
    
    (58
    )
    
    
    (656
    )Realized gain from sales of investments
    
    
    
    
    
    
    (23
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    5,982
    
    
    
    6,175Inventory
    
    
    1,205
    
    
    
    (252
    )Prepaid expenses and other assets
    
    
    (1,145
    )
    
    
    (586
    )Accounts payable
    
    
    (3,091
    )
    
    
    (3,178
    )Accrued expenses
    
    
    (1,994
    )
    
    
    2,745Deferred revenue
    
    
    2,147
    
    
    
    (46
    )Other liabilities
    
    
    (151
    )
    
    
    39Net cash provided by operating activities
    
    
    6,722
    
    
    
    434Investing activitiesPurchase of property and equipment
    
    
    (1,298
    )
    
    
    (4,552
    )Purchase of investments
    
    
    (44,417
    )
    
    
    (49,580
    )Proceeds from maturities of investments
    
    
    44,550
    
    
    
    56,113Proceeds from sales of investments
    
    
    
    
    
    
    3,230Net cash (used in) provided by investing activities
    
    
    (1,165
    )
    
    
    5,211Financing activitiesRepayments of capital lease obligations
    
    
    (32
    )
    
    
    Proceeds from employee stock-based plans
    
    
    1,379
    
    
    
    498Excess tax benefits related to share-based payments
    
    
    31
    
    
    
    10Net cash provided by financing activities
    
    
    1,378
    
    
    
    508Net increase in cash and cash equivalents
    
    
    6,935
    
    
    
    6,153Cash and cash equivalents at beginning of period
    
    
    39,768
    
    
    
    33,071Cash and cash equivalents at end of period
    
    $
    46,703
    
    
    $
    39,224
  6




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##### 



SOURCEFIRE, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 1. Description of Business
 ®
 ® ®
  2. Summary of Significant Accounting Policies
 Basis of Presentation
  Use of Estimates
   Investments
 Accounting for Certain Investments in
Debt and Equity Securities
 7




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##### 



Fair Value of Financial Instruments
  Allowance for Doubtful Accounts and Sales Returns
   Inventories
  As ofJune 30,
    
    
    December 31,2009
    
    
    2008Finished goods
    
    $
    2,447
    
    
    $
    3,436Evaluation units
    
    
    869
    
    
    
    1,085Total inventory
    
    $
    3,316
    
    
    $
    4,521
 8




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##### 



Revenue Recognition
   Modification of SOP 97-2, Software Revenue Recognition with Respect to
Certain Transactions
      9




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##### 



Warranty
   Income Taxes
 Accounting for Income Taxes
 Accounting for Uncertainty in
Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes
 Stock-Based Compensation
 Share-Based Payment Accounting for Stock Based Compensation Accounting
for Stock Issued to Employees
 Recent Accounting Pronouncements
 Fair Value Measurements. Effective Date of FASB Statement No. 157
 10




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##### 



Business Combinations
 Interim Disclosures about Fair
Value of Financial Instruments Disclosures about Fair Value of
Financial Instruments, Interim Financial Reporting
 Recognition and Presentation
of Other-Than-Temporary Impairments
 Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly
 Subsequent Events
 Reclassifications
  11




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##### 



3. Investments
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueMoney market funds
    
    $
    25,227
    
    
    $
    
    
    
    $
    
    
    
    $
    25,227Corporate debt investments
    
    
    11,896
    
    
    
    22
    
    
    
    (6
    )
    
    
    11,912Commercial paper
    
    
    19,179
    
    
    
    53
    
    
    
    
    
    
    
    19,232Government-sponsored enterprises
    
    
    30,346
    
    
    
    94
    
    
    
    
    
    
    
    30,440Government securities
    
    
    999
    
    
    
    1
    
    
    
    
    
    
    
    1,000Certificate of deposit
    
    
    1,201
    
    
    
    
    
    
    
    
    
    
    
    1,201Total investments
    
    
    88,848
    
    
    $
    170
    
    
    $
    (6
    )
    
    
    89,012Amounts classified as cash equivalents
    
    
    (27,427
    )
    
    
    
    
    
    
    
    
    
    
    (27,427
    )Total available-for-sale investments
    
    $
    61,421
    
    
    $
    170
    
    
    $
    (6
    )
    
    $
    61,585
  Less Than 12 Months
    
    12 Months or More
    
    TotalGross
    
    
    
    
    
    Gross
    
    
    
    
    
    GrossFair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Fair
    
    UnrealizedValue
    
    Losses
    
    Value
    
    Losses
    
    Value
    
    LossesCorporate debt investments
    
    $
    3,486
    
    
    $
    6
    
    
    $
    
    
    
    $
    
    
    
    $
    3,486
    
    
    $
    6
   Amortized Cost
    
    
    Estimated Fair ValueDue in one year or less
    
    $
    56,388
    
    
    $
    56,538Due after one year through five years
    
    
    5,033
    
    
    
    5,047Total
    
    $
    61,421
    
    
    $
    61,585
 4. Stock-Based Compensation
   12




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##### 



Valuation of Stock-Based Compensation
 Share-Based Payment
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Stock options:Average risk-free interest rate
    
    
    2.53
    %
    
    
    2.96
    %
    
    
    2.37
    %
    
    
    2.97
    %Expected dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected useful life (years)
    
    
    6.25
    
    
    
    6.25
    
    
    
    6.25
    
    
    
    6.25Expected volatility
    
    
    64.7
    %
    
    
    64.5
    %
    
    
    64.7
    %
    
    
    65.6
    %Weighted-average fair value per grant
    
    $
    6.84
    
    
    $
    4.17
    
    
    $
    5.39
    
    
    $
    4.24Employee stock purchase plan:Average risk-free interest rate
    
    
    0.30
    %
    
    
    
    
    
    
    0.30
    %
    
    
    2.50
    %Expected dividend yield
    
    
    0.0
    
    
    
    
    
    
    
    0.0
    
    
    
    0.0Expected useful life (years)
    
    
    0.50
    
    
    
    
    
    
    
    0.50
    
    
    
    0.37Expected volatility
    
    
    77.5
    %
    
    
    
    
    
    
    77.5
    %
    
    
    57.5
    %Weighted-average fair value per purchase
    
    $
    3.52
    
    
    
    
    
    
    $
    3.52
    
    
    $
    1.64
 Average risk-free interest rate
 Expected dividend yield
 Expected useful life
 Share-Based Payment
  Expected volatility
 13




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##### 



Three Months Ended
    
    
    Six Months Ended,June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Product cost of revenue
    
    $
    14
    
    
    $
    9
    
    
    $
    25
    
    
    $
    16Services cost of revenue
    
    
    21
    
    
    
    11
    
    
    
    54
    
    
    
    32Stock-based compensation expense included in cost of revenue
    
    
    35
    
    
    
    20
    
    
    
    79
    
    
    
    48Research and development
    
    
    211
    
    
    
    167
    
    
    
    416
    
    
    
    341Sales and marketing
    
    
    397
    
    
    
    299
    
    
    
    780
    
    
    
    642General and administrative
    
    
    712
    
    
    
    395
    
    
    
    1,282
    
    
    
    772Stock-based compensation expense included in operating expenses
    
    
    1,320
    
    
    
    861
    
    
    
    2,478
    
    
    
    1,755Total stock-based compensation expense
    
    $
    1,355
    
    
    $
    881
    
    
    $
    2,557
    
    
    $
    1,803
 Stock Options
  Weighted-
    
    
    AggregateNumber of
    
    
    Range of
    
    
    Average
    
    
    IntrinsicShares
    
    
    Exercise Prices
    
    
    Exercise Price
    
    
    ValueOutstanding at December 31, 2008
    
    
    3,296,322
    
    
    $0.24  to  15.49
    
    $
    5.26
    
    
    $
    5,878Granted
    
    
    153,000
    
    
    
    5.58 to 12.51
    
    
    
    8.81Exercised
    
    
    (430,060
    )
    
    
    0.24 to 12.26
    
    
    
    2.80Forfeited
    
    
    (72,656
    )
    
    
    5.26 to 13.10
    
    
    
    9.74Outstanding at June 30, 2009
    
    
    2,946,606
    
    
    $
    0.24 to 15.49
    
    
    $
    5.69
    
    
    $
    19,863Vested and exercisable at June 30, 2009
    
    
    1,572,735
    
    
    $
    0.24 to 15.49
    
    
    $
    4.04
    
    
    $
    13,203Vested and expected to vest at June 30, 2009
    
    
    2,495,269
    
    
    
    
    
    
    $
    5.33
    
    
    $
    17,721
 14




---



##### 



Options Outstanding
    
    
    Options ExercisableWeighted-
    
    
    Weighted-
Average
    
    
    
    
    
    
    Weighted-Range of
    
    Number of
    
    
    Average
    
    
    Contractual
    
    
    Number of
    
    
    AverageExercise Prices
    
    Shares
    
    
    Exercise Prices
    
    
    Life (Years)
    
    
    Shares
    
    
    Exercise Prices$0.24 to 2.03
    
    
    973,244
    
    
    $
    1.10
    
    
    
    4.82
    
    
    
    973,244
    
    
    $
    1.10$3.69 to 6.77
    
    
    1,166,494
    
    
    
    6.42
    
    
    
    8.77
    
    
    
    214,626
    
    
    
    5.82$7.10 to 12.51
    
    
    739,994
    
    
    
    9.81
    
    
    
    7.94
    
    
    
    346,927
    
    
    
    10.07$13.10 to 15.49
    
    
    66,874
    
    
    
    14.10
    
    
    
    7.34
    
    
    
    37,938
    
    
    
    14.092,946,606
    
    
    $
    5.69
    
    
    
    7.22
    
    
    
    1,572,735
    
    
    $
    4.04
   Restricted Stock Awards
  Weighted-AverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueUnvested at December 31, 2008
    
    
    656,361
    
    
    $
    7.77Granted
    
    
    56,538
    
    
    
    9.21Vested
    
    
    (148,747
    )
    
    
    7.38Forfeited
    
    
    
    
    
    
    Unvested at June 30, 2009
    
    
    564,152
    
    
    
    8.00
    15




---



##### 



Restricted Stock Units
  Weighted-AverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueUnvested at December 31, 2008
    
    
    
    
    
    $
    Granted
    
    
    544,500
    
    
    
    9.58Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Unvested at June 30, 2009
    
    
    544,500
    
    
    $
    9.58
    Employee Stock Purchase Plan
  5. Earnings per Share
  16




---



##### 



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    633
    
    
    $
    (3,124
    )
    
    $
    (484
    )
    
    $
    (6,620
    )Weighted-average shares of common stock outstanding  basic
    
    
    26,249,424
    
    
    
    25,154,568
    
    
    
    26,092,712
    
    
    
    24,960,471Dilutive effect of employee stock plans
    
    
    1,302,245
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average shares of common stock outstanding  diluted
    
    
    27,551,669
    
    
    
    25,154,568
    
    
    
    26,092,712
    
    
    
    24,960,471Net income (loss):Basic
    
    $
    0.02
    
    
    $
    (0.12
    )
    
    $
    (0.02
    )
    
    $
    (0.27
    )Diluted
    
    $
    0.02
    
    
    $
    (0.12
    )
    
    $
    (0.02
    )
    
    $
    (0.27
    )
  Three Months Ended
    
    Six Months Ended,June 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Options to purchase common stock
    
    
    690,857
    
    
    
    3,111,583
    
    
    
    3,206,181
    
    
    
    3,112,167Restricted stock units
    
    
    61,835
    
    
    
    
    
    
    
    226,779
    
    
    
    752,692
    
    
    
    3,111,583
    
    
    
    3,432,960
    
    
    
    3,112,167
 6. Comprehensive Income (Loss)
  Three Months Ended
    
    
    Six Months Ended,June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    633
    
    
    $
    (3,124
    )
    
    $
    (484
    )
    
    $
    (6,620
    )Change in net unrealized gains (losses) on investments
    
    
    (44
    )
    
    
    (263
    )
    
    
    (140
    )
    
    
    40Total comprehensive income (loss)
    
    $
    589
    
    
    $
    (3,387
    )
    
    $
    (624
    )
    
    $
    (6,580
    )
 7. Fair Value Measurement
   
    
    Level 1  Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical unrestricted assets or liabilities.
    
    Level 2  Quoted prices in markets that are not active or financial instruments for
which all significant inputs are observable, either directly or indirectly.
    
    Level 3  Prices or valuations that require inputs that are both significant to the
fair value measurement and unobservable.
 17




---



##### 



Assets at
    
    
    Fair Value Measurement UsingFair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Money market funds
    
    $
    25,227
    
    
    $
    25,227
    
    
    $
    
    
    
    $
    Corporate debt investments
    
    
    11,912
    
    
    
    
    
    
    
    11,912
    
    
    
    Commercial paper
    
    
    19,232
    
    
    
    
    
    
    
    19,232
    
    
    
    Government-sponsored enterprises
    
    
    30,440
    
    
    
    
    
    
    
    30,440
    
    
    
    Government securities
    
    
    1,000
    
    
    
    1,000
    
    
    
    
    
    
    
    Certificate of deposit
    
    
    1,201
    
    
    
    
    
    
    
    1,201
    
    
    
    Total cash equivalents and investments
    
    
    89,012
    
    
    $
    26,227
    
    
    $
    62,785
    
    
    $
    Cash
    
    
    19,276Total cash, cash equivalents and investments
    
    $
    108,288
  8. Business and Geographic Segment Information
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008United States
    
    $
    17,964
    
    
    $
    11,489
    
    
    $
    30,159
    
    
    $
    21,023All foreign countries
    
    
    4,207
    
    
    
    4,529
    
    
    
    10,612
    
    
    
    8,646Consolidated total
    
    $
    22,171
    
    
    $
    16,018
    
    
    $
    40,771
    
    
    $
    29,669
 9. Legal Proceedings
 Howard Katz v. Sourcefire, Inc., et al. Mark
Reaves v. Sourcefire, Inc. et al. Raveill v. Sourcefire, Inc. et
al., Barry Pincus v.
Sourcefire, Inc., et al., Pincus
  18




---



##### 



10. Commitments and Contingencies
   19




---



##### 



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Certain statements contained in this Quarterly Report on Form 10-Q may constitute
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases
would be, will allow, intends to, will likely result, are expected to, will continue,
is anticipated, estimate, project, or similar expressions, or the negative of such words or
phrases, are intended to identify forward-looking statements. We have based these forward-looking
statements on our current expectations and projections about future events. Because such statements
include risks and uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause or contribute to these
differences include those below and elsewhere in this Quarterly Report on Form 10-Q , particularly
in Risk Factors, and our other filings with the Securities and Exchange Commission. Statements
made herein are as of the date of the filing of this Form 10-Q with the Securities and Exchange
Commission and should not be relied upon as of any subsequent date. Unless otherwise required by
applicable law, we do not undertake, and we specifically disclaim, any obligation to update any
forward-looking statements to reflect occurrences, developments, unanticipated events or
circumstances after the date of such statement.
 The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our consolidated financial statements and related notes that
appear elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for
the fiscal year ended December 31, 2008.
 Introduction
  
    
    Overview. This section provides a general description of our business, the
performance indicators that we use in assessing our financial condition and results of
operations, and anticipated trends that we expect to affect our financial condition and
results of operations.
    
    Results of Operations. This section provides an analysis of our results of
operations for the three months and six months ended June 30, 2009 as compared to the
three months and six months ended June 30, 2008.
    
    Liquidity and Capital Resources. This section provides an analysis of our cash
flows for the six months ended June 30, 2009 and a discussion of our capital requirements
and the resources available to us to meet those requirements.
    
    Critical Accounting Policies and Estimates. This section discusses accounting
policies that are considered important to our financial condition and results of
operations, require significant judgment or require estimates on our part in applying
them. Our significant accounting policies, including those considered to be critical
accounting policies, are summarized in Note 2 to the accompanying consolidated financial
statements.
 Overview
 ®
 ® ®
 20




---



##### 



Key Financial Metrics and Trends
    Pricing and Discounts
  Credit and Collections
  Revenue
   21




---



##### 



Cost of Revenue
   22




---



##### 



Gross Profit
  Operating Expenses
 Research and Development.
  Sales and Marketing.
  General and Administrative.
 Stock-Based Compensation. Share-Based Payment
  23




---



##### 



Results of Operations
 Revenue
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    Variance
    
    
    June 30,
    
    
    Variance2009
    
    
    2008
    
    
    $
    
    
    %
    
    
    2009
    
    
    2008
    
    
    $
    
    
    %Products
    
    $
    12,280
    
    
    $
    8,677
    
    
    $
    3,603
    
    
    
    42
    %
    
    $
    22,148
    
    
    $
    15,528
    
    
    $
    6,620
    
    
    
    43
    %Percentage of total revenue
    
    
    55
    %
    
    
    54
    %
    
    
    
    
    
    
    
    
    
    
    54
    %
    
    
    52
    %Technical support and professional services
    
    
    9,891
    
    
    
    7,341
    
    
    
    2,550
    
    
    
    35
    %
    
    
    18,623
    
    
    
    14,141
    
    
    
    4,482
    
    
    
    32
    %Percentage of total revenue
    
    
    45
    %
    
    
    46
    %
    
    
    
    
    
    
    
    
    
    
    46
    %
    
    
    48
    %Total revenue
    
    $
    22,171
    
    
    $
    16,018
    
    
    $
    6,153
    
    
    
    38
    %
    
    $
    40,771
    
    
    $
    29,669
    
    
    $
    11,102
    
    
    
    37
    %
   Cost of revenue
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    Variance
    
    
    June 30,
    
    
    Variance2009
    
    
    2008
    
    
    $
    
    
    %
    
    
    2009
    
    
    2008
    
    
    $
    
    
    %Products
    
    $
    3,682
    
    
    $
    2,479
    
    
    $
    1,203
    
    
    
    49
    %
    
    $
    6,449
    
    
    $
    4,476
    
    
    $
    1,973
    
    
    
    44
    %Percentage of total revenue
    
    
    17
    %
    
    
    15
    %
    
    
    
    
    
    
    
    
    
    
    16
    %
    
    
    15
    %Technical support and professional services
    
    
    1,393
    
    
    
    1,197
    
    
    
    196
    
    
    
    16
    %
    
    
    2,775
    
    
    
    2,238
    
    
    
    537
    
    
    
    24
    %Percentage of total revenue
    
    
    6
    %
    
    
    7
    %
    
    
    
    
    
    
    
    
    
    
    7
    %
    
    
    8
    %Total cost of revenue
    
    $
    5,075
    
    
    $
    3,676
    
    
    $
    1,399
    
    
    
    38
    %
    
    $
    9,224
    
    
    $
    6,714
    
    
    $
    2,510
    
    
    
    37
    %Percentage of total revenue
    
    
    23
    %
    
    
    23
    %
    
    
    
    
    
    
    
    
    
    
    23
    %
    
    
    23
    %
  Gross profit
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    Variance
    
    
    June 30,
    
    
    Variance2009
    
    
    2008
    
    
    $
    
    
    %
    
    
    2009
    
    
    2008
    
    
    $
    
    
    %Products
    
    $
    8,598
    
    
    $
    6,198
    
    
    $
    2,400
    
    
    
    39
    %
    
    $
    15,699
    
    
    $
    11,052
    
    
    $
    4,647
    
    
    
    42
    %Product gross margin
    
    
    70
    %
    
    
    71
    %
    
    
    
    
    
    
    
    
    
    
    71
    %
    
    
    71
    %Technical support and professional services
    
    
    8,498
    
    
    
    6,144
    
    
    
    2,354
    
    
    
    38
    %
    
    
    15,848
    
    
    
    11,903
    
    
    
    3,945
    
    
    
    33
    %Technical support and professional
services gross margin
    
    
    86
    %
    
    
    84
    %
    
    
    
    
    
    
    
    
    
    
    85
    %
    
    
    84
    %Total gross profit
    
    $
    17,096
    
    
    $
    12,342
    
    
    $
    4,754
    
    
    
    39
    %
    
    $
    31,547
    
    
    $
    22,955
    
    
    $
    8,592
    
    
    
    37
    %Total gross margin
    
    
    77
    %
    
    
    77
    %
    
    
    
    
    
    
    
    
    
    
    77
    %
    
    
    77
    %
  24




---



##### 



Operating expenses
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    Variance
    
    
    June 30,
    
    
    Variance2009
    
    
    2008
    
    
    $
    
    
    %
    
    
    2009
    
    
    2008
    
    
    $
    
    
    %Research and development
    
    $
    3,396
    
    
    $
    3,147
    
    
    $
    249
    
    
    
    8
    %
    
    $
    6,716
    
    
    $
    6,258
    
    
    $
    458
    
    
    
    7
    %Percentage of total revenue
    
    
    15
    %
    
    
    20
    %
    
    
    
    
    
    
    
    
    
    
    16
    %
    
    
    21
    %Sales and marketing
    
    
    8,428
    
    
    
    7,945
    
    
    
    483
    
    
    
    6
    %
    
    
    16,298
    
    
    
    15,179
    
    
    
    1,119
    
    
    
    7
    %Percentage of total revenue
    
    
    38
    %
    
    
    50
    %
    
    
    
    
    
    
    
    
    
    
    40
    %
    
    
    51
    %General and administrative
    
    
    3,992
    
    
    
    4,531
    
    
    
    (539
    )
    
    
    (12
    )%
    
    
    7,835
    
    
    
    8,945
    
    
    
    (1,110
    )
    
    
    (12
    )%Percentage of total revenue
    
    
    18
    %
    
    
    28
    %
    
    
    
    
    
    
    
    
    
    
    19
    %
    
    
    30
    %Depreciation and amortization
    
    
    830
    
    
    
    585
    
    
    
    245
    
    
    
    42
    %
    
    
    1,651
    
    
    
    1,077
    
    
    
    574
    
    
    
    53
    %Percentage of total revenue
    
    
    4
    %
    
    
    4
    %
    
    
    
    
    
    
    
    
    
    
    4
    %
    
    
    4
    %Total operating expenses
    
    $
    16,646
    
    
    $
    16,208
    
    
    $
    438
    
    
    
    3
    %
    
    $
    32,500
    
    
    $
    31,459
    
    
    $
    1,041
    
    
    
    3
    %Percentage of total revenue
    
    
    75
    %
    
    
    101
    %
    
    
    
    
    
    
    
    
    
    
    80
    %
    
    
    106
    %
     25




---



##### 



Other income, net and income tax expense
 Three Months Ended
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    Variance
    
    June 30,
    
    Variance2009
    
    2008
    
    $
    
    %
    
    2009
    
    2008
    
    $
    
    %Other income, net
    
    $
    252
    
    
    $
    781
    
    
    $
    (529
    )
    
    
    (68
    )%
    
    $
    613
    
    
    $
    1,985
    
    
    $
    (1,372
    )
    
    
    (69
    )%Percentage of total revenue
    
    
    1
    %
    
    
    5
    %
    
    
    
    
    
    
    
    
    
    
    2
    %
    
    
    7
    %Income tax expense
    
    $
    69
    
    
    $
    39
    
    
    $
    30
    
    
    
    77
    %
    
    $
    144
    
    
    $
    101
    
    
    $
    43
    
    
    
    43
    %Percentage of total revenue
    
    
    0
    %
    
    
    0
    %
    
    
    
    
    
    
    
    
    
    
    0
    %
    
    
    0
    %
   Seasonality
  Quarterly Timing of Revenue
  26




---



##### 



Liquidity and Capital Resources
 Cash Flows
 Six Months EndedJune 30,2009
    
    
    2008(in thousands)Cash and cash equivalents:Provided by operating activities
    
    $
    6,722
    
    
    $
    434(Used in) provided by investing activities
    
    
    (1,165
    )
    
    
    5,211Provided by financing activities
    
    
    1,378
    
    
    
    508Increase in cash and cash equivalents
    
    
    6,935
    
    
    
    6,153Net cash and cash equivalents at beginning of period
    
    
    39,768
    
    
    
    33,071Net cash and cash equivalents at end of period
    
    
    46,703
    
    
    
    39,224Investments
    
    
    61,585
    
    
    
    64,911Total cash, cash equivalents and investments
    
    $
    108,288
    
    
    $
    104,135
 Operating Activities
 Investing Activities
 Financing Activities
 Liquidity Requirements
     27




---



##### 



Critical Accounting Policies and Estimates
   Revenue Recognition.
   Accounting for Stock-Based Compensation.
 28




---



##### 



Average risk-free interest rate
 Expected dividend yield
 Expected useful life
   Expected volatility
      Accounting for Income Taxes. Accounting for Income Taxes
 29




---



##### 



Accounting for Uncertainty in
Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes
 Allowance for Doubtful Accounts and Sales Returns.
  Inventories.
 Investments. Accounting for
Certain Investments in Debt and Equity Securities
  Recent Accounting Pronouncements
 Fair Value Measurements. Effective Date of FASB Statement No. 157
 30




---



##### 



Business Combinations
 Interim Disclosures about Fair
Value of Financial Instruments Disclosures about Fair Value of
Financial Instruments, Interim Financial Reporting
 Recognition and Presentation
of Other-Than-Temporary Impairments
 Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly
 Subsequent Events
 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
 Evaluation of Sourcefires Disclosure Controls and Internal Controls.
 31




---



##### 



Limitations.
 Changes in Internal Control Over Financial Reporting.
 32




---



##### 



PART II. OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
   
 Item 1A. RISK FACTORS
  Economic, market and political conditions, including the current global recession, may adversely
affect our revenue and results of operations.
  
    
    general economic and business conditions;
    
    the overall demand for network security products and services; and
    
    constraints on budgets and changes in spending priorities of corporations and government
agencies.
  We have had operating losses each year since our inception, our operating expenses may continue to
increase and we may never reach or maintain profitability.
  33




---



##### 



We face intense competition in our market, especially from larger, better-known companies, and we
may lack sufficient financial or other resources to maintain or improve our competitive position.
     New competitors could emerge and could impair our sales.
  34




---



##### 



Our quarterly operating results are likely to vary significantly and be unpredictable, in part
because of the purchasing and budget practices of our customers, which could cause the trading
price of our stock to decline.
  
    
    the budgeting cycles, internal approval requirements and funding available to our
existing and prospective customers for the purchase of network security products;
    
    the timing, size and contract terms of orders received, which have historically been
highest in the fourth quarter, but may fluctuate seasonally in different ways;
    
    the level of perceived threats to network security, which may fluctuate from period to
period;
    
    the level of demand for products sold by resellers, distributors, MSSPs, government
integrators and other partners;
    
    the market acceptance of open-source software solutions;
    
    the announcement or introduction of new product offerings by us or our competitors, and
the levels of anticipation and market acceptance of those products;
    
    price competition;
    
    general economic conditions, both domestically and in our foreign markets;
    
    the product mix of our sales; and
    
    the timing of revenue recognition for our sales.
   The market for network security products is rapidly evolving, and the complex technology
incorporated in our products makes them difficult to develop. If we do not accurately predict,
prepare for and respond promptly to technological and market developments and changing customer
needs, our competitive position and prospects will be harmed.
  35




---



##### 



If our new products and product enhancements do not achieve sufficient market acceptance, our
results of operations and competitive position will suffer.
   
    
    delays in introducing new, enhanced or modified products;
    
    defects, errors or failures in any of our products;
    
    inability to operate effectively with the networks of our prospective customers;
    
    inability to protect against new types of attacks or techniques used by hackers;
    
    negative publicity about the performance or effectiveness of our intrusion prevention or
other network security products;
    
    reluctance of customers to purchase products based on open source software; and
    
    disruptions or delays in the availability and delivery of our products, which problems
are more likely due to our just-in-time manufacturing and inventory practices.
  If existing customers do not make subsequent purchases from us or renew their support arrangements
with us, or if our relationships with our largest customers are impaired, our revenue could
decline.
   36




---



##### 



The U.S. government has contributed to our revenue growth and has become an important customer for
us. If we cannot attract sufficient government agency customers, our revenue and competitive
position will suffer.
  
    
    Procurement.Contracting with public sector customers is highly competitive and can be
expensive and time-consuming, often requiring that we incur significant upfront time and
expense without any assurance that we will win a contract;
    
    Budgetary Constraints and Cycles.Demand and payment for our products and services are
impacted by public sector budgetary cycles and funding availability, with funding reductions
or delays adversely impacting public sector demand for our products, including delays caused
by continuing resolutions or other temporary funding arrangements;
    
    Modification or Cancellation of Contracts.Public sector customers often have
contractual or other legal rights to terminate current contracts for convenience or due to a
default. If a contract is cancelled for convenience, which can occur if the customers
product needs change, we may only be able to collect for products and services delivered
prior to termination. If a contract is cancelled because of default, we may only be able to
collect for products and alternative products and services delivered to the customer;
    
    Governmental Audits.National governments and state and local agencies routinely
investigate and audit government contractors administrative processes. They may audit our
performance and pricing and review our compliance with applicable rules and regulations. If
they find that we improperly allocated costs, they may require us to refund those costs or
may refuse to pay us for outstanding balances related to the improper allocation. An
unfavorable audit could result in a reduction of revenue, and may result in civil or
criminal liability if the audit uncovers improper or illegal activities; and
    
    Replacing Existing Products.Many government agencies already have installed network
security products of our competitors. It can be very difficult to convince government
agencies or other prospective customers to replace their existing network security solutions
with our products, even if we can demonstrate the superiority of our products.
 We are subject to risks of operating internationally that could impair our ability to grow our
revenue abroad.
  
    
    economic or political instability in foreign markets;
    
    greater difficulty in accounts receivable collection and longer collection periods;
    
    unexpected changes in regulatory requirements;
    
    difficulties and costs of staffing and managing foreign operations;
    
    import and export controls;
    
    the uncertainty of protection for intellectual property rights in some countries;
    
    costs of compliance with foreign laws and laws applicable to companies doing business in
foreign jurisdictions;
    
    management communication and integration problems resulting from cultural differences and
geographic dispersion;
    
    multiple and possibly overlapping tax structures; and
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
    
    foreign currency exchange rate fluctuations.
  In the future, we may not be able to secure financing necessary to operate and grow our business
as planned, or to make acquisitions.
  If we are not able to acquire additional businesses, products or technologies, our long-term
growth strategy could be harmed; acquisitions could also negatively affect our results of
operations and financial condition.
  
    
    we may not effectively integrate an acquired business, product or technology into our
existing business and operations;
    
    completing a potential acquisition and integrating an acquired business could
significantly divert managements time and resources from the operation of our business;
    
    a completed acquisition may not be accretive to earnings;
    
    acquisitions may result in substantial accounting charges for restructuring and other
expenses, write-offs of in-process research and development, amortization of intangible
assets and stock-based compensation expense;
    
    acquired companies, particularly privately held and non-US companies, may have internal
controls, policies and procedures that do not meet the requirements of the Sarbanes-Oxley
Act and public accounting standards;
    
    we may use a significant portion of our cash resources to fund acquisitions; and
    
    we may issue stock to fund acquisitions, which could dilute the interests of our existing
stockholders.
 If other parties claim commercial ownership rights to Snort or ClamAV, our reputation, customer
relations and results of operations could be harmed.
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Our products contain third party open source software, and failure to comply with the terms of the
underlying open source software licenses could restrict our ability to sell our products.
   
    
    the terms of open source license agreements may be unclear and subject to varying
interpretations, which could result in unforeseen obligations regarding our proprietary
products;
    
    it may be difficult to determine the developers of open source software and whether such
licensed software infringes another partys intellectual property rights (including patent
rights);
    
    competitors will have greater access to information by obtaining these open source
products, which may help them develop competitive products;
    
    open source software potentially increases customer support costs because licensees can
modify the software and potentially introduce errors; and
    
    the open source software licenses generally do not include a license to any patents.
 We could be prevented from selling or developing our products if the GNU General Public License
and similar licenses under which our products are developed and licensed are not enforceable or
are modified so as to become incompatible with other open source licenses.
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Our proprietary rights may be difficult to enforce, which could enable others to copy or use
aspects of our products without compensating us.
   Efforts to assert intellectual property ownership rights in our products could impact our standing
in the open source community, which could limit our product innovation capabilities.
  Claims that our products infringe the proprietary rights of others could harm our business and
cause us to incur significant costs.
  
    
    be very expensive and time consuming to defend;
    
    require us to indemnify our customers or others for losses resulting from such claims;
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
    
    cause us to cease making, licensing or using software or products that incorporate the
challenged intellectual property;
    
    cause product shipment and installation delays;
    
    require us to redesign our products, which may not be feasible;
    
    require us to enter into royalty or licensing agreements, which may not be available on
acceptable terms, or at all, in order to obtain the right to use a necessary product or
component;
    
    divert the attention of management and technical personnel and other resources; or
    
    result in our paying significant amounts to settle such claims.
   We rely on software licensed from other parties, the loss of which could increase our costs and
delay software shipments.
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Defects, errors or vulnerabilities in our products would harm our reputation and business and
divert resources.
  
    
    expenditure of significant financial and product development resources in efforts to
analyze, correct, eliminate or work-around errors or defects or to address and eliminate
vulnerabilities;
    
    loss of existing or potential customers;
    
    delayed or lost revenue;
    
    delay or failure to attain market acceptance;
    
    increased service, warranty, product replacement and product liability insurance
costs; and
    
    negative publicity, which would harm our reputation.
  Future litigation could have a material adverse impact on our results of operation, financial
condition and liquidity.
  Our networks, products and services are vulnerable to, and may be targeted by, hackers.
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We primarily utilize a just-in-time contract manufacturing and inventory process and depend on a
limited number of manufacturers of our hardware products, which increases our vulnerability to
supply disruption.
   In some cases, we purchase products from contract manufacturers and hold them in inventory pending
sale to our customers. If demand for these products does not meet our expectations, or if these
products become obsolete, we could be required to write down the value of our inventory, which
would adversely affect our results of operations.
  We depend on resellers, distributors and other partners for our sales; if they fail to perform as
expected, our revenue will suffer.
  If we do not continue to establish and effectively manage our indirect distribution channels, our
revenue could decline.
  Our inability to hire or retain key personnel would slow our growth.
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Our inability to effectively manage our expected headcount growth and expansion and our additional
obligations as a public company could seriously harm our ability to effectively run our business.
   The price of our common stock may be subject to wide fluctuations.
  
    
    quarterly variations in our operating results compared to market expectations;
    
    changes in expectations as to our future financial performance, including financial
estimates or reports by securities analysts;
    
    changes in market valuations of similar companies;
    
    liquidity and activity in the market for our common stock;
    
    actual or expected sales of our common stock by our stockholders;
    
    strategic moves by us or our competitors, such as acquisitions or restructurings;
    
    general market conditions; and
    
    domestic and international economic, legal and regulatory factors unrelated to our
performance.
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Sales of substantial amounts of our common stock in the public markets, or the perception that
they might occur, could reduce the price that our common stock might otherwise attain.
  Our business is subject to complex corporate governance, public disclosure, accounting and tax
requirements that have increased both our costs and the risk of noncompliance.
    Any material disruption or problem with the operation of our enterprise resource planning system
may result in disruption to our business, operating processes and internal controls.
   Potential uncertainty resulting from unsolicited acquisition proposals and related matters may
adversely affect our business.
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Anti-takeover provisions in our charter documents and under Delaware law and our adoption of a
stockholder rights plan could make an acquisition of us, which may be beneficial to our
stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our
current management.
   
 Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 Item 3. DEFAULTS UPON SENIOR SECURITIES
  46




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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Votes For
    
    WithheldMichael Cristinziano
    
    
    18,115,313
    
    
    
    2,771,661Steven R. Polk
    
    
    17,316,374
    
    
    
    3,570,600
  
 Item 5. OTHER INFORMATION
  
 Item 6. EXHIBITS
  47




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##### 



SIGNATURES
  SOURCEFIRE, INC.By:
    
    /s/ John C. BurrisJohn C. BurrisChief Executive Officer(duly authorized officer)By:
    
    /s/ Todd P. HeadleyTodd P. HeadleyChief Financial Officer
and Treasurer(principal financial and accounting officer)
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##### 



Exhibit Index
 Incorporation by ReferenceExhibit
    
    
    
    
    
    File
    
    
    
    
    
    
    
    Filed withNumber
    
    Exhibit Description
    
    Form
    
    Number
    
    Exhibit
    
    File Date
    
    this 10-Q3.1
    
    Sixth Amended and Restated Certificate
of Incorporation
    
    10-Q
    
    1-33350
    
    
    3.1
    
    
    5/4/20073.2
    
    Fifth Amended and Restated Bylaws
    
    10-K
    
    1-33350
    
    
    3.2
    
    
    3/16/20093.3
    
    Certificate of Designation of the
Series A Junior Participating Preferred
Stock
    
    8-A
    
    1-33350
    
    
    3.1
    
    
    10/30/20084.1
    
    Form of stock certificate of common stock
    
    S-1/A
    
    333-138199
    
    
    4.1
    
    
    3/6/20074.2
    
    Rights Agreement, dated as of
October 30, 2008, by and between the
Company and Continental Stock Transfer &
Trust Co., as rights agent
    
    8-A
    
    1-33350
    
    
    4.1
    
    
    10/30/200831.1
    
    Certification of Chief Executive Officer
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    
    
    
    
    
    
    
    
    
    X31.2
    
    Certification of Chief Financial Officer
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    
    
    
    
    
    
    
    
    
    X32.1
    
    Certification of Chief Executive Officer
and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
    
    
    
    
    
    
    
    
    
    
    
    X
 49