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 September 30, 2008
 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 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)9770 Patuxent Woods Drive 
Columbia, Maryland
    
    21046(Address of Principal Executive Offices)
    
    (Zip Code)
 (410) 290-1616
  þ o
  Large accelerated filer oAccelerated filer oNon-accelerated filer þ(Do not check if a smaller reporting company)Smaller reporting company o  o þ




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##### 



SOURCEFIRE, INC.
Form 10-Q
TABLE OF CONTENTS
 Part IItem 1.
    
    Financial Statements
    
    
    3Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Operations for the three months and nine months ended September 30, 2008 and 2007
    
    
    4Consolidated Statement of Changes
in Stockholders Equity for the nine months ended September 30, 2008
    
    
    5Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    27Part IIItem 1.
    
    Legal Proceedings
    
    
    29Item 1A.
    
    Risk Factors
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    42Item 3.
    
    Defaults Upon Senior Securities
    
    
    42Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    42Item 5.
    
    Other Information
    
    
    42Item 6.
    
    Exhibits
    
    
    43
 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)
 September 30,
    
    
    December 31,2008
    
    
    2007(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    28,599
    
    
    $
    33,071Short-term investments
    
    
    64,463
    
    
    
    69,816Accounts receivable, net of allowances of $186
as of September 30, 2008 and $160 as of
December 31, 2007
    
    
    24,411
    
    
    
    20,689Inventory
    
    
    4,192
    
    
    
    4,863Prepaid expenses and other current assets
    
    
    3,078
    
    
    
    2,651Total current assets
    
    
    124,743
    
    
    
    131,090Property and equipment, net
    
    
    7,888
    
    
    
    4,041Intangible assets, net of accumulated amortization
    
    
    497
    
    
    
    592Investments
    
    
    2,404
    
    
    
    4,140Restricted cash
    
    
    
    
    
    
    1,000Other assets
    
    
    1,280
    
    
    
    815Total assets
    
    $
    136,812
    
    
    $
    141,678Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    2,868
    
    
    $
    5,930Accrued compensation and related expenses
    
    
    3,269
    
    
    
    3,151Other accrued expenses
    
    
    2,362
    
    
    
    1,458Current portion of deferred revenue
    
    
    19,525
    
    
    
    18,417Current portion of capital lease obligations
    
    
    47
    
    
    
    Other current liabilities
    
    
    712
    
    
    
    832Total current liabilities
    
    
    28,783
    
    
    
    29,788Deferred revenue, less current portion
    
    
    2,944
    
    
    
    2,610Capital lease obligations, less current portion
    
    
    4
    
    
    
    Other long-term liabilities
    
    
    86
    
    
    
    86Total liabilities
    
    
    31,817
    
    
    
    32,484Commitments and ContingenciesStockholders equity:Preferred stock, $0.001 par value; 20,000,000
shares authorized; no shares issued and
outstanding at September 30, 2008 and December
31, 2007
    
    
    
    
    
    
    Common stock, $0.001 par value; 240,000,000
shares authorized; 25,865,977 and 24,642,433
shares issued and outstanding as of September 30,
2008 and December 31, 2007, respectively
    
    
    25
    
    
    
    24Additional paid-in capital
    
    
    158,051
    
    
    
    153,693Accumulated deficit
    
    
    (52,862
    )
    
    
    (44,523
    )Accumulated other comprehensive loss
    
    
    (219
    )
    
    
    Total stockholders equity
    
    
    104,995
    
    
    
    109,194Total liabilities and stockholders equity
    
    $
    136,812
    
    
    $
    141,678
  3




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##### 



SOURCEFIRE, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share and per share amounts)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue:Products
    
    $
    12,661
    
    
    $
    9,403
    
    
    $
    28,189
    
    
    $
    21,103Technical support and professional services
    
    
    7,628
    
    
    
    5,403
    
    
    
    21,769
    
    
    
    15,418Total revenue
    
    
    20,289
    
    
    
    14,806
    
    
    
    49,958
    
    
    
    36,521Cost of revenue:Products
    
    
    3,585
    
    
    
    2,665
    
    
    
    8,061
    
    
    
    5,809Technical support and professional services
    
    
    1,345
    
    
    
    800
    
    
    
    3,583
    
    
    
    2,277Total cost of revenue
    
    
    4,930
    
    
    
    3,465
    
    
    
    11,644
    
    
    
    8,086Gross profit
    
    
    15,359
    
    
    
    11,341
    
    
    
    38,314
    
    
    
    28,435Operating expenses:Research and development
    
    
    3,267
    
    
    
    2,895
    
    
    
    9,525
    
    
    
    8,076Sales and marketing
    
    
    8,655
    
    
    
    6,746
    
    
    
    23,834
    
    
    
    18,563General and administrative
    
    
    4,984
    
    
    
    2,540
    
    
    
    13,929
    
    
    
    7,288Depreciation and amortization
    
    
    775
    
    
    
    427
    
    
    
    1,852
    
    
    
    1,177In-process research and development
    
    
    
    
    
    
    2,947
    
    
    
    
    
    
    
    2,947Total operating expenses
    
    
    17,681
    
    
    
    15,555
    
    
    
    49,140
    
    
    
    38,051Loss from operations
    
    
    (2,322
    )
    
    
    (4,214
    )
    
    
    (10,826
    )
    
    
    (9,616
    )Other income, net:Interest and investment income
    
    
    683
    
    
    
    1,417
    
    
    
    2,666
    
    
    
    3,351Interest expense
    
    
    (2
    )
    
    
    
    
    
    
    (38
    )
    
    
    (35
    )Other income (expense)
    
    
    (39
    )
    
    
    3
    
    
    
    (1
    )
    
    
    (9
    )Total other income, net
    
    
    642
    
    
    
    1,420
    
    
    
    2,627
    
    
    
    3,307Loss before income taxes
    
    
    (1,680
    )
    
    
    (2,794
    )
    
    
    (8,199
    )
    
    
    (6,309
    )Income tax expense
    
    
    39
    
    
    
    50
    
    
    
    140
    
    
    
    120Net loss
    
    
    (1,719
    )
    
    
    (2,844
    )
    
    
    (8,339
    )
    
    
    (6,429
    )Accretion of preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (870
    )Net loss attributable to common stockholders
    
    $
    (1,719
    )
    
    $
    (2,844
    )
    
    $
    (8,339
    )
    
    $
    (7,299
    )Net loss attributable to common stockholders per share:Basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.12
    )
    
    $
    (0.33
    )
    
    $
    (0.38
    )Weighted average shares outstanding used in computing
per share amounts:Basic and diluted
    
    
    25,698,879
    
    
    
    24,218,634
    
    
    
    25,208,404
    
    
    
    19,027,750
  4




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##### 



SOURCEFIRE, INC.
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED)
(in thousands, except share amounts)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid In
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    TotalBalance as of January 1, 2008
    
    
    24,642,433
    
    
    $
    24
    
    
    $
    153,693
    
    
    $
    (44,523
    )
    
    $
    
    
    
    $
    109,194Exercise of common stock options
    
    
    674,063
    
    
    
    1
    
    
    
    840
    
    
    
    
    
    
    
    
    
    
    
    841Issuance of common stock under
employee stock purchase plan
    
    
    50,796
    
    
    
    
    
    
    
    264
    
    
    
    
    
    
    
    
    
    
    
    264Issuance of restricted common
stock
    
    
    524,550
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of common stock
    
    
    (25,865
    )
    
    
    
    
    
    
    (140
    )
    
    
    
    
    
    
    
    
    
    
    (140
    )Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    3,370
    
    
    
    
    
    
    
    
    
    
    
    3,370Excess tax benefit relating to
share-based payments
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    24Comprehensive income (loss):Net loss for the nine
months ended September 30,
2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,339
    )
    
    
    
    
    
    
    (8,339
    )Net unrealized loss on
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (220
    )
    
    
    (220
    )Currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Total comprehensive income
(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,558
    )Balance as of September 30, 2008
    
    
    25,865,977
    
    
    $
    25
    
    
    $
    158,051
    
    
    $
    (52,862
    )
    
    $
    (219
    )
    
    $
    104,995
  5




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##### 



SOURCEFIRE, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 Nine Months EndedSeptember 30,2008
    
    
    2007Operating activitiesNet loss
    
    $
    (8,339
    )
    
    $
    (6,429
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    1,874
    
    
    
    1,202Non-cash stock-based compensation
    
    
    3,370
    
    
    
    1,911Amortization of premium on investments
    
    
    (871
    )
    
    
    (933
    )Loss on disposal of assets
    
    
    7
    
    
    
    Realized gain from sales of investments
    
    
    (23
    )
    
    
    Write-off of acquired in-process research and development costs
    
    
    
    
    
    
    2,947Changes in operating assets and liabilities:Accounts receivable
    
    
    (3,722
    )
    
    
    2,587Inventory
    
    
    672
    
    
    
    (1,065
    )Prepaid expenses and other assets
    
    
    (891
    )
    
    
    (1,871
    )Accounts payable
    
    
    (3,062
    )
    
    
    (1,145
    )Accrued expenses
    
    
    2,022
    
    
    
    54Deferred revenue
    
    
    1,442
    
    
    
    1,773Other liabilities
    
    
    (113
    )
    
    
    303Net cash used in operating activities
    
    
    (7,634
    )
    
    
    (666
    )Investing activitiesPurchase of property and equipment
    
    
    (5,566
    )
    
    
    (2,494
    )Purchase of investments
    
    
    (73,137
    )
    
    
    (95,895
    )Proceeds from maturities of investments
    
    
    77,663
    
    
    
    34,000Proceeds from sales of investments
    
    
    3,230
    
    
    
    Cash paid for acquisition of ClamAV, including direct acquisition costs of $81
    
    
    
    
    
    
    (3,581
    )Cash held in escrow related to acquisition of ClamAV
    
    
    
    
    
    
    (1,000
    )Net cash provided by (used in) investing activities
    
    
    2,190
    
    
    
    (68,970
    )Financing activitiesBorrowings of long-term debt
    
    
    
    
    
    
    113Repayments of long-term debt and capital lease obligations
    
    
    (17
    )
    
    
    (1,424
    )Proceeds from issuance of common stock, net of underwriters discount of $6,495
    
    
    
    
    
    
    86,288Proceeds from employee stock-based plans
    
    
    1,105
    
    
    
    214Repurchase of common stock
    
    
    (140
    )
    
    
    Excess tax benefits related to share-based payments
    
    
    24
    
    
    
    Payment of equity offering costs
    
    
    
    
    
    
    (1,367
    )Net cash provided by financing activities
    
    
    972
    
    
    
    83,824Net (decrease) increase in cash and cash equivalents
    
    
    (4,472
    )
    
    
    14,188Cash and cash equivalents at beginning of period
    
    
    33,071
    
    
    
    13,029Cash and cash equivalents at end of period
    
    $
    28,599
    
    
    $
    27,217
  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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##### 



Income Taxes
 Accounting for Income
Taxes
 Accounting for Uncertainty
in Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes
 Recent Accounting Pronouncements
 Fair Value Measurements Effective Date of FASB Statement No. 157
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations
 8




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##### 



3. Investments
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueMoney market funds
    
    $
    20,179
    
    
    $
    
    
    
    $
    
    
    
    $
    20,179Corporate debt investments
    
    
    15,279
    
    
    
    8
    
    
    
    (261
    )
    
    
    15,026Asset-backed securities
    
    
    22,289
    
    
    
    6
    
    
    
    (21
    )
    
    
    22,274Commercial paper
    
    
    31,193
    
    
    
    58
    
    
    
    (2
    )
    
    
    31,249Government securities
    
    
    1,820
    
    
    
    
    
    
    
    (8
    )
    
    
    1,812Certificate of deposit
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,000Total investments
    
    
    91,760
    
    
    $
    72
    
    
    $
    (292
    )
    
    
    91,540Amounts classified as cash equivalents
    
    
    (24,665
    )
    
    
    (8
    )
    
    
    
    
    
    
    (24,673
    )Total available-for-sale investments
    
    $
    67,095
    
    
    $
    64
    
    
    $
    (292
    )
    
    $
    66,867
   Amortized
    
    
    EstimatedCost
    
    
    Fair ValueDue in one year or less
    
    $
    64,670
    
    
    $
    64,463Due after one year through five years
    
    
    2,425
    
    
    
    2,404Total
    
    $
    67,095
    
    
    $
    66,867
 4. Stock-Based Compensation
  9




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##### 



Valuation of Stock-Based Compensation
    Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Stock options:Average risk-free interest rate
    
    
    3.4
    %
    
    
    4.3
    %
    
    
    3.2
    %
    
    
    4.6
    %Expected dividend yield
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Expected useful life (years)
    
    
    6.25
    
    
    
    6.25
    
    
    
    6.25
    
    
    
    6.25Expected volatility
    
    
    62.7
    %
    
    
    71.1
    %
    
    
    64.0
    %
    
    
    74.9
    %Weighted-average fair value per grant
    
    $
    4.20
    
    
    $
    6.80
    
    
    $
    4.22
    
    
    $
    8.68Employee stock purchase plan:Average risk-free interest rate
    
    
    1.9
    %
    
    
    
    
    
    
    2.3
    %
    
    
    Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    
    %
    
    
    Expected useful life (years)
    
    
    0.25
    
    
    
    
    
    
    
    0.34
    
    
    
    Expected volatility
    
    
    52.6
    %
    
    
    
    
    
    
    56.1
    %
    
    
    Weighted-average fair value per purchase
    
    $
    1.91
    
    
    
    
    
    
    $
    1.71
    
    
    
    
 Average risk-free interest rate
 Expected dividend yield
 10




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##### 



Expected useful life
 Share-Based Payment
  Expected volatility
      Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Product cost of revenue
    
    $
    11
    
    
    $
    11
    
    
    $
    27
    
    
    $
    16Services cost of revenue
    
    
    34
    
    
    
    38
    
    
    
    66
    
    
    
    50Stock-based compensation expense included in cost of revenue
    
    
    45
    
    
    
    49
    
    
    
    93
    
    
    
    66Research and development
    
    
    202
    
    
    
    88
    
    
    
    543
    
    
    
    257Sales and marketing
    
    
    375
    
    
    
    300
    
    
    
    1,017
    
    
    
    755General and administrative
    
    
    945
    
    
    
    282
    
    
    
    1,717
    
    
    
    833Stock-based compensation expense included in operating
expenses
    
    
    1,522
    
    
    
    670
    
    
    
    3,277
    
    
    
    1,845Total stock-based compensation expense
    
    $
    1,567
    
    
    $
    719
    
    
    $
    3,370
    
    
    $
    1,911
 11




---



##### 



Stock Options
  Weighted-
    
    
    AggregateNumber of
    
    
    Range of
    
    
    Average
    
    
    IntrinsicShares
    
    
    Exercise Prices
    
    
    Exercise Price
    
    
    ValueOutstanding at December 31, 2007
    
    
    3,063,588
    
    
    $
    0.24 to 15.49
    
    
    $
    4.05
    
    
    $
    15,266Granted
    
    
    1,156,593
    
    
    
    5.97 to 8.00
    
    
    
    6.83Exercised
    
    
    (674,063
    )
    
    
    0.24 to 6.47
    
    
    
    1.25Forfeited
    
    
    (228,203
    )
    
    
    1.14 to 13.10
    
    
    
    7.91Outstanding at September 30, 2008
    
    
    3,317,915
    
    
    $
    0.24 to 15.49
    
    
    $
    5.32
    
    
    $
    9,151Vested and exercisable at September 30, 2008
    
    
    1,727,067
    
    
    $
    0.24 to 15.49
    
    
    $
    3.34
    
    
    $
    8,061Vested and expected to vest at September 30, 2008
    
    
    2,663,979
    
    
    
    
    
    
    $
    4.79
    
    
    $
    8,670
  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 1.14
    
    
    862,985
    
    
    $
    0.62
    
    
    
    4.96
    
    
    
    862,985
    
    
    $
    0.62$1.62 to 6.47
    
    
    900,963
    
    
    
    3.92
    
    
    
    7.29
    
    
    
    529,917
    
    
    
    2.95$6.73 to 8.00
    
    
    849,924
    
    
    
    6.94
    
    
    
    9.58
    
    
    
    
    
    
    $9.48 to 15.49
    
    
    704,043
    
    
    
    10.93
    
    
    
    7.82
    
    
    
    334,165
    
    
    
    11.003,317,915
    
    
    $
    5.32
    
    
    
    7.38
    
    
    
    1,727,067
    
    
    $
    3.34
   Restricted Stock Awards
  Weighted-AverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueUnvested at December 31, 2007
    
    
    295,680
    
    
    $
    10.56Granted
    
    
    524,550
    
    
    
    6.72Restrictions Lapsed
    
    
    (140,221
    )
    
    
    9.55Forfeited
    
    
    (7,750
    )
    
    
    9.59Unvested at September 30, 2008
    
    
    672,259
    
    
    $
    7.78
 12




---



##### 



Employee Stock Purchase Plan
  5. Net Loss per Share
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Numerator:Net loss attributable to common stockholders
    
    $
    (1,719
    )
    
    $
    (2,844
    )
    
    $
    (8,339
    )
    
    $
    (7,299
    )Denominator:Weighted-average shares of common stock outstanding
    
    
    25,698,879
    
    
    
    24,218,634
    
    
    
    25,208,404
    
    
    
    19,027,750Net loss attributable to common stockholders per share:Basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.12
    )
    
    $
    (0.33
    )
    
    $
    (0.38
    )
  13




---



##### 



September 30,2008
    
    
    2007Options to purchase common stock
    
    
    3,317,915
    
    
    
    3,313,532Shares of common stock into which outstanding warrants are convertible
    
    
    
    
    
    
    36,944Unvested shares of restricted common stock
    
    
    
    
    
    
    12,315Total
    
    
    3,317,915
    
    
    
    3,362,791
 6. Comprehensive Income (Loss)
  Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30, 2008
    
    
    September 30, 2008Net loss
    
    $
    (1,719
    )
    
    
    (8,339
    )Comprehensive income (loss):Change in net unrealized loss on investments
    
    
    (260
    )
    
    
    (220
    )Change in cumulative translation adjustment
    
    
    1
    
    
    
    1Total comprehensive income (loss)
    
    $
    (1,978
    )
    
    $
    (8,558
    )
  7. Fair Value Measurement
 Fair Value Measurements
  
    
    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.
  14




---



##### 



Assets at
    
    
    Fair Value Measurement UsingFair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Money market funds
    
    $
    20,179
    
    
    $
    20,179
    
    
    $
    
    
    
    $
    Corporate debt investments
    
    
    15,026
    
    
    
    
    
    
    
    15,026
    
    
    
    Asset-backed securities
    
    
    22,274
    
    
    
    
    
    
    
    22,274
    
    
    
    Commercial paper
    
    
    31,249
    
    
    
    
    
    
    
    31,249
    
    
    
    Government securities
    
    
    1,812
    
    
    
    
    
    
    
    1,812
    
    
    
    Certificate of deposit
    
    
    1,000
    
    
    
    
    
    
    
    1,000
    
    
    
    Total cash equivalents and investments
    
    
    91,540
    
    
    $
    20,179
    
    
    $
    71,361
    
    
    $
    Cash
    
    
    3,926Total cash, cash equivalents and investments
    
    $
    95,466
 8. Business and Geographic Segment Information
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007United States
    
    $
    16,433
    
    
    $
    11,415
    
    
    $
    37,456
    
    
    $
    27,981All foreign countries
    
    
    3,856
    
    
    
    3,391
    
    
    
    12,502
    
    
    
    8,540Consolidated total
    
    $
    20,289
    
    
    $
    14,806
    
    
    $
    49,958
    
    
    $
    36,521
   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
  15




---



##### 



10. Commitments and Contingencies
   11. Change in Management
   16




---



##### 



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 discussed 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 in Risk Factors in Part II, Item 1A of
this Quarterly Report on Form 10-Q . Our actual results could differ materially from those discussed
in or implied by the forward-looking statements.
 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 nine months ended September 30, 2008 as compared to
the three months and nine months ended September 30, 2007.
    
    Liquidity and Capital Resources. This section provides an analysis of our cash
flows for the nine months ended September 30, 2008 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
 ®
  17




---



##### 



Key Financial Metrics and Trends
  Pricing and Discounts
  Revenue
     18




---



##### 



Cost of Revenue
   Gross Profit
  Operating Expenses
 Research and Development
  Sales and Marketing.
 19




---



##### 



General and Administrative.
  Stock-Based Compensation Share-Based Payment
  Results of Operations
 Revenue
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    Variance
    
    
    September 30,
    
    
    Variance2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %Products
    
    $
    12,661
    
    
    $
    9,403
    
    
    $
    3,258
    
    
    
    35
    %
    
    $
    28,189
    
    
    $
    21,103
    
    
    $
    7,086
    
    
    
    34
    %Percentage of
total revenue
    
    
    62
    %
    
    
    64
    %
    
    
    
    
    
    
    
    
    
    
    56
    %
    
    
    58
    %Technical support
and professional
services
    
    
    7,628
    
    
    
    5,403
    
    
    
    2,225
    
    
    
    41
    %
    
    
    21,769
    
    
    
    15,418
    
    
    
    6,351
    
    
    
    41
    %Percentage of
total revenue
    
    
    38
    %
    
    
    36
    %
    
    
    
    
    
    
    
    
    
    
    44
    %
    
    
    42
    %Total revenue
    
    $
    20,289
    
    
    $
    14,806
    
    
    $
    5,483
    
    
    
    37
    %
    
    $
    49,958
    
    
    $
    36,521
    
    
    $
    13,437
    
    
    
    37
    %
  20




---



##### 



Cost of revenue
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    Variance
    
    
    September 30,
    
    
    Variance2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %Products
    
    $
    3,585
    
    
    $
    2,665
    
    
    $
    920
    
    
    
    35
    %
    
    $
    8,061
    
    
    $
    5,809
    
    
    $
    2,252
    
    
    
    39
    %Percentage of
total revenue
    
    
    18
    %
    
    
    18
    %
    
    
    
    
    
    
    
    
    
    
    16
    %
    
    
    16
    %Technical support
and professional
services
    
    
    1,345
    
    
    
    800
    
    
    
    545
    
    
    
    68
    %
    
    
    3,583
    
    
    
    2,277
    
    
    
    1,306
    
    
    
    57
    %Percentage of
total revenue
    
    
    7
    %
    
    
    5
    %
    
    
    
    
    
    
    
    
    
    
    7
    %
    
    
    6
    %Total cost of revenue
    
    $
    4,930
    
    
    $
    3,465
    
    
    $
    1,465
    
    
    
    42
    %
    
    $
    11,644
    
    
    $
    8,086
    
    
    $
    3,558
    
    
    
    44
    %Percentage of
total revenue
    
    
    24
    %
    
    
    23
    %
    
    
    
    
    
    
    
    
    
    
    23
    %
    
    
    22
    %
  Gross profit
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    Variance
    
    
    September 30,
    
    
    Variance2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %Products
    
    $
    9,076
    
    
    $
    6,738
    
    
    $
    2,338
    
    
    
    35
    %
    
    $
    20,128
    
    
    $
    15,294
    
    
    $
    4,834
    
    
    
    32
    %Percentage of total revenue
    
    
    45
    %
    
    
    46
    %
    
    
    
    
    
    
    
    
    
    
    40
    %
    
    
    42
    %Technical support and
professional services
    
    
    6,283
    
    
    
    4,603
    
    
    
    1,680
    
    
    
    36
    %
    
    
    18,186
    
    
    
    13,141
    
    
    
    5,045
    
    
    
    38
    %Percentage of total revenue
    
    
    31
    %
    
    
    31
    %
    
    
    
    
    
    
    
    
    
    
    36
    %
    
    
    36
    %Total gross profit
    
    $
    15,359
    
    
    $
    11,341
    
    
    $
    4,018
    
    
    
    35
    %
    
    $
    38,314
    
    
    $
    28,435
    
    
    $
    9,879
    
    
    
    35
    %Percentage of total revenue
    
    
    76
    %
    
    
    77
    %
    
    
    
    
    
    
    
    
    
    
    77
    %
    
    
    78
    %
  Operating expenses
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    Variance
    
    
    September 30,
    
    
    Variance2008
    
    
    2007
    
    
    $
    
    
    %
    
    
    2008
    
    
    2007
    
    
    $
    
    
    %Research and development
    
    $
    3,267
    
    
    $
    2,895
    
    
    $
    372
    
    
    
    13
    %
    
    $
    9,525
    
    
    $
    8,076
    
    
    $
    1,449
    
    
    
    18
    %Percentage of total revenue
    
    
    16
    %
    
    
    20
    %
    
    
    
    
    
    
    
    
    
    
    19
    %
    
    
    22
    %Sales and marketing
    
    
    8,655
    
    
    
    6,746
    
    
    
    1,909
    
    
    
    28
    %
    
    
    23,834
    
    
    
    18,563
    
    
    
    5,271
    
    
    
    28
    %Percentage of total revenue
    
    
    43
    %
    
    
    46
    %
    
    
    
    
    
    
    
    
    
    
    48
    %
    
    
    51
    %General and administrative
    
    
    4,984
    
    
    
    2,540
    
    
    
    2,444
    
    
    
    96
    %
    
    
    13,929
    
    
    
    7,288
    
    
    
    6,641
    
    
    
    91
    %Percentage of total revenue
    
    
    24
    %
    
    
    16
    %
    
    
    
    
    
    
    
    
    
    
    28
    %
    
    
    20
    %Depreciation and amortization
    
    
    775
    
    
    
    427
    
    
    
    348
    
    
    
    81
    %
    
    
    1,852
    
    
    
    1,177
    
    
    
    675
    
    
    
    57
    %Percentage of total revenue
    
    
    4
    %
    
    
    3
    %
    
    
    
    
    
    
    
    
    
    
    4
    %
    
    
    3
    %In-process research and development
    
    
    
    
    
    
    2,947
    
    
    
    (2,947
    )
    
    
    (100
    )%
    
    
    
    
    
    
    2,947
    
    
    
    (2,947
    )
    
    
    (100
    )%Percentage of total revenue
    
    
    
    %
    
    
    20
    %
    
    
    
    
    
    
    
    
    
    
    
    %
    
    
    8
    %Total operating expenses
    
    $
    17,681
    
    
    $
    15,555
    
    
    $
    2,126
    
    
    
    14
    %
    
    $
    49,140
    
    
    $
    38,051
    
    
    $
    11,089
    
    
    
    29
    %Percentage of total revenue
    
    
    87
    %
    
    
    105
    %
    
    
    
    
    
    
    
    
    
    
    99
    %
    
    
    104
    %
 21




---



##### 



Other income, net and income tax expense
 Three Months Ended
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    Variance
    
    September 30,
    
    Variance2008
    
    2007
    
    $
    
    %
    
    2008
    
    2007
    
    $
    
    %Other income, net
    
    $
    642
    
    
    $
    1,420
    
    
    $
    (778
    )
    
    
    (55
    )%
    
    $
    2,627
    
    
    $
    3,307
    
    
    $
    (680
    )
    
    
    (21
    )%Percentage of total revenue
    
    
    3
    %
    
    
    10
    %
    
    
    
    
    
    
    
    
    
    
    5
    %
    
    
    9
    %Income tax expense
    
    $
    39
    
    
    $
    50
    
    
    $
    (11
    )
    
    
    (22
    )%
    
    $
    140
    
    
    $
    120
    
    
    $
    20
    
    
    
    17
    %Percentage of total revenue
    
    
    0
    %
    
    
    0
    %
    
    
    
    
    
    
    
    
    
    
    0
    %
    
    
    0
    %
 22




---



##### 



Seasonality
  Quarterly Timing of Revenue
  Liquidity and Capital Resources
 Cash Flows
 Nine Months EndedSeptember 30,2008
    
    
    2007(in thousands)Cash and cash equivalents:Used in operating activities
    
    $
    (7,634
    )
    
    $
    (666
    )Provided by (used in) investing activities
    
    
    2,190
    
    
    
    (68,970
    )Provided by financing activities
    
    
    972
    
    
    
    83,824(Decrease) increase
    
    
    (4,472
    )
    
    
    14,188Net cash at beginning of period
    
    
    33,071
    
    
    
    13,029Net cash at end of period
    
    
    28,599
    
    
    
    27,217Investments
    
    
    66,867
    
    
    
    76,120Total cash, cash equivalents and investments
    
    $
    95,466
    
    
    $
    103,337
 Operating Activities
 23




---



##### 



Investing Activities
 Financing Activities
 Liquidity Requirements
      Contractual Obligations
  Payments Due by PeriodLess thanTotal
    
    One Year
    
    1-3 Years
    
    3-5 YearsCapital Leases
    
    $
    51
    
    
    $
    47
    
    
    $
    4
    
    
    $
    Operating Leases
    
    
    3,578
    
    
    
    1,678
    
    
    
    1,737
    
    
    
    163Purchase Commitments(1)
    
    
    4,396
    
    
    
    4,396
    
    
    
    
    
    
    
    
 
 (1)
    
    We purchase components from a variety of suppliers and use several contract
manufacturers to provide manufacturing services for our products. During the normal course of
business, in order to manage manufacturing lead times and help ensure adequate component
supply, we enter into agreements with contract manufacturers and suppliers that allow them to
procure inventory based upon information provided by us. In certain instances, these
agreements allow us the option to cancel, reschedule, and adjust our requirements based on our
business needs prior to firm orders being placed. Consequently, a portion of our reported
purchase commitments arising from these agreements are firm, non-cancelable and unconditional
commitments. As of September 30, 2008, we had total purchase commitments for inventory of
approximately $4.4 million. 24




---



##### 



Critical Accounting Policies and Estimates
   Revenue Recognition. Software Revenue Recognition,
   Accounting for Stock-Based Compensation. Accounting for Stock Based Compensation Accounting for Stock Issued to Employees,
   25




---



##### 



Accounting for Income Taxes. Accounting for Income Taxes
 Accounting for Uncertainty in
Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes
 Allowance for Doubtful Accounts.
 Inventories
 Recent Accounting Pronouncements
 Fair Value Measurements Effective Date of FASB Statement No. 157
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations
 26




---



##### 



Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Foreign Currency Risk
  Interest Rate Sensitivity
  Credit Market Risk
  Item 4. CONTROLS AND PROCEDURES
 Evaluation of Sourcefires Disclosure Controls and Internal Controls.
 Limitations.
 27




---



##### 



Changes in Internal Control Over Financial Reporting.
 28




---



##### 



PART II. OTHER INFORMATION
 Item 1. LEGAL PROCEEDINGS
  Item 1A. RISK FACTORS
  Economic, market and political conditions 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 are in the process of implementing a new enterprise resource planning system and any material
disruption or problem with the implementation or operation of this system may result
in disruption to our business, operating processes and internal controls.
   29




---



##### 



As a result of becoming a public company, we are obligated to develop and maintain proper and
effective internal controls over financial reporting and are subject to other requirements that
will be burdensome and costly. We may not complete our analysis of our internal controls over
financial reporting in a timely manner, or these internal controls may not be determined to be
effective, which may adversely affect investor confidence in our company and, as a result, the
value of our common stock.
    We have had operating losses since our inception, we expect operating expenses to increase in the
foreseeable future and we may never reach or maintain profitability.
  30




---



##### 



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 or our customers or distributors could internally develop alternatives
to our products, and either such development could impair our sales.
  31




---



##### 



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 original equipment manufacturers, or OEMs,
resellers and distributors that incorporate and resell our technologies;
    
    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.
  32




---



##### 



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 if our relationships with our
largest customers are impaired, our revenue could decline.
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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
    
    foreign currency exchange rate fluctuations.
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In the future, we may not be able to secure financing necessary to operate and grow our business as
planned.
  Our inability to acquire and integrate other businesses, products or technologies could seriously
harm our competitive position.
  If other parties claim commercial ownership rights to Snort or ClamAV, our reputation, customer
relations and results of operations could be harmed.
  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.
 ® ®
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
    
    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;
    
    competitors will have greater access to information by obtaining these open source
products, which may help them develop competitive products; and
    
    open source software potentially increases customer support costs because licensees can
modify the software and potentially introduce errors.
 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.
    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.
  Our proprietary rights may be difficult to enforce, which could enable others to copy or use
aspects of our products without compensating us.
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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;
    
    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;
    
    result in our paying significant amounts to settle such claims.
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We rely on software licensed from other parties, the loss of which could increase our costs and
delay software shipments.
    Defects, errors or vulnerabilities in our products would harm our reputation 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.
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Our networks, products and services are vulnerable to, and may be targeted by, hackers.
  We utilize a just-in-time contract manufacturing and inventory process, which increases our
vulnerability to supply disruption.
  We depend on a single source to manufacture our enterprise class intrusion sensor product; if that
sole source were to fail to satisfy our requirements, our sales revenue would decline and our
reputation would be harmed.
  Our inability to hire or retain key personnel would slow our growth.
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We depend on resellers and distributors 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 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.
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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.
  We and certain of our officers and directors have been named as co-defendants in, and are the
subject of, certain legal proceedings which may result in substantial costs and divert managements
attention and resources.
   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.
   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 recent 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
  Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Item 5. OTHER INFORMATION
  42




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##### 



Item 6. EXHIBITS
  43




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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 officer)By:
    /s/ Nicholas G. MargaritesNicholas G. MargaritesChief Accounting Officer and
VP of Finance
(principal accounting officer) 44




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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
    
    Fourth Amended and Restated Bylaws
    
    10-Q
    
    1-33350
    
    
    3.2
    
    
    5/4/20073.3
    
    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
    
    
    10/30/200810.1
    
    Participation Agreement with Thomas M.
McDonough under the Sourcefire, Inc.
Executive Retention Plan
    
    
    
    
    
    
    
    
    
    
    
    þ10.2
    
    Participation Agreement with Thomas M.
McDonough under the Sourcefire, Inc.
Executive Change in Control Severance Plan
    
    
    
    
    
    
    
    
    
    
    
    þ10.3
    
    Consulting Agreement with E. Wayne Jackson III
    
    
    
    
    
    
    
    
    
    
    
    þ31.1
    
    Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
    
    
    
    
    
    
    
    
    
    
    
    þ31.2
    
    Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
    
    
    
    
    
    
    
    
    
    
    
    þ32.1
    
    Certification of Chief Executive Officer and
Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
    
    
    
    
    
    
    
    
    
    
    
    þ
 45