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<div align="left" style="font-family: 'Times New Roman',Times,serif">   <div align="left"> </div> <div align="center" style="font-size: 10pt; margin-top: 0pt"><b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>1. Nature of Business</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Carbonite, Inc. (the “Company”) was incorporated in the state of Delaware on February 10, 2005, and focuses on the development and marketing of personal computer backup services that enables users to backup, access, and restore data files online. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company views its operations and manages its business in one operating segment. </div> </div>

<div align="left" style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>2. Summary of Significant Accounting Policies</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Basis of Presentation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and the instructions to Form 10-Q and the provisions of Regulation S-X pertaining to interim financial statements. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto, included in the Company’s prospectus filed on August 11, 2011 with the SEC pursuant to Rule 424(b)(4) of the Securities Act of 1933. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position for the periods presented. The results for the periods presented are not necessarily indicative of future results. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Use of Estimates</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from management’s estimates if past experience or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Initial Public Offering</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In August 2011, the Company closed its initial public offering (“IPO”) of 7,187,500 shares of common stock, which were sold to the public at a price of $10.00 per share, including 937,500 shares of common stock sold pursuant to exercise of the underwriters’ option to purchase additional shares. The Company sold 6,303,973 shares of common stock and selling stockholders sold 883,527 shares of common stock. The Company received aggregate proceeds of $58.6 million from the IPO, net of underwriters’ discounts and commissions but before deducting offering expenses of $2.9 million. Upon the closing of the IPO, all shares of the Company’s outstanding convertible preferred stock converted into 13,483,473 shares of common stock and all outstanding warrants to purchase redeemable convertible preferred stock automatically converted into warrants to purchase 11,316 shares of common stock. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Translation of Foreign Currencies</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The financial statements of the Company’s foreign subsidiary in China are translated into U.S. dollars. The functional currency of the Company’s foreign subsidiary is its local currency. The Company translates the assets and liabilities of its foreign subsidiary at the exchange rates in effect at period-end. Revenues and expenses are translated using average exchange rates in effect during the period. Gains and losses from foreign currency translation are recorded to accumulated other comprehensive income (loss) included in stockholders’ deficit. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Concentration of Credit Risk</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents, short-term investments, and accounts receivable. The Company maintains its cash balances with high-quality financial institutions and, consequently, the Company believes that such funds are subject to minimal credit risk. Cash equivalents and short-term investments consist of investment grade debt securities or money market funds investing in such securities. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company sells its services primarily to consumer and small business customers. Payment for the majority of the Company’s sales occurs via credit card. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed by management to be probable in the Company’s accounts receivable. For the periods presented, no customer represented 10% or more of accounts receivable or revenue. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Revenue Recognition</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company derives revenue from online backup subscription services. These services are standalone independent service solutions, which are generally contracted for a one- to three-year term. Subscription arrangements include access to use the Company’s software via the internet. The Company recognizes revenue in accordance with the Financial Accounting Standards Codification (ASC) 605-10, <i>Overall Revenue Recognition. </i>Subscription revenue is recognized ratably on a daily basis over the subscription period, when persuasive evidence of an arrangement with a customer exists, the subscription has been activated, the price is fixed or determinable, and collection is reasonably assured. Deferred revenues represent payments received from customers for subscription services prior to recognizing the revenue related to those payments. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Goodwill and Acquired Intangible Assets</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company records goodwill when consideration paid in a business acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if facts and circumstances warrant a review. The Company performs its annual assessment for impairment of goodwill on November 30 and has determined that there is a single reporting unit for the purpose of conducting this annual goodwill impairment assessment. For purposes of assessing potential impairment, the Company annually estimates the fair value of the reporting unit (based on the Company’s market capitalization) and compares this amount to the carrying value of the reporting unit (as reflected by the Company’s total stockholders’ equity). If the Company determines that the carrying value of the reporting unit exceeds its fair value, an impairment charge would be recorded. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. As the pattern of consumption of the economic benefits of the intangible assets cannot be reliably determined, the Company amortizes acquired intangible assets over their estimated useful lives on a straight-line basis. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Research and Development Costs</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Research and development costs are expensed as incurred. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company follows the guidance of ASC 350-40, <i>Internal Use Software </i>and ASC 350-50, <i>Website Development Costs</i>, in accounting for its software and website development costs. The costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the application is substantially complete and ready for its intended use. The Company has determined that technological feasibility is established at the time that a scalable working model of the application is complete. Because the Company believes its current process for developing applications is essentially completed concurrent with the establishment of technological feasibility, no costs have been capitalized to date. These costs are included in the accompanying statements of operations as research and development expense. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Income Taxes</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company provides for income taxes under the liability method. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to reflect the uncertainty associated with their ultimate realization. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company accounts for uncertain tax positions recognized in the consolidated financial statements by prescribing a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Accounting for Stock-Based Compensation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Stock-based compensation is recognized as an expense in the financial statements based on the grant date fair value. Compensation expense recognized relates to stock awards, restricted stock and stock options granted, modified, repurchased, or cancelled on or after January 1, 2006. For awards that vest based on service conditions, the Company uses the straight-line method to allocate compensation expense to reporting periods over the requisite service period. The grant date fair value of options granted is calculated using the Black-Scholes option-pricing model, which requires the use of subjective assumptions including volatility, expected term and the fair value of the underlying common stock, among others. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Recently Issued and Adopted Accounting Standards</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In June 2011, the FASB issued new accounting guidance on the presentation of comprehensive income to provide companies with two options for presenting comprehensive income. Companies can present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. This guidance will be effective for the Company on January 1, 2012. As the new guidance relates only to how comprehensive income is disclosed and does not change the items that must be reported as comprehensive income. The Company does not believe that the adoption of this standard will have a material impact on the Company’s financial position or results of operations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In September 2011, the FASB issued ASU No. 2011-08, <i>Testing Goodwill for Impairment (the revised standard)</i>. The revised standard is intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities an option to perform a “qualitative” assessment to determine whether further impairment testing is necessary. The revised standard will be effective for the Company on January 1, 2012. The Company does not believe that the adoption of this amendment will have a material impact on the Company’s financial position or results of operations. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>3. Comprehensive Income (Loss)</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions, and other events and circumstances from non-owner sources. Accumulated other comprehensive income consists entirely of foreign currency translation adjustments for all periods. Comprehensive income (loss) was as follows (in thousands): </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Three months ended</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Nine months ended</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net loss </div></td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(7,416</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(6,658</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(17,405</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(20,771</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other comprehensive income (loss): </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustments </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Comprehensive loss </div></td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(7,417</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(6,656</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(17,403</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(20,769</td> <td nowrap="nowrap">)</td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>4. Net Loss per Share</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company calculates basic and diluted net loss per share of common stock by dividing the net loss adjusted for the dividend on the redeemable convertible preferred stock by the weighted average number of shares of common stock outstanding during the period. The Company has excluded (a) all unvested restricted shares that are subject to repurchase and (b) the Company’s other potentially dilutive shares, which include redeemable and convertible preferred stock, a warrant to purchase common or redeemable convertible preferred stock, and outstanding common stock options, from the weighted average number of shares of common stock outstanding as their inclusion in the computation for all periods would be anti-dilutive due to net losses. The Company’s redeemable and convertible preferred stock are participating securities as defined by ASC 260-10, <i>Earnings Per Share</i>, but are excluded from the earnings per share calculation as they do not have an obligation to share in the Company’s net losses. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The following potentially dilutive shares of common stock have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive (in thousands): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>For the three and nine months ended<br /> September 30,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2010</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Redeemable and convertible preferred stock </div></td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top">—</td> <td nowrap="nowrap" valign="top"> </td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top">13,483</td> <td nowrap="nowrap" valign="top"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Options to purchase common stock </div></td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top">2,055</td> <td nowrap="nowrap" valign="top"> </td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top">2,549</td> <td nowrap="nowrap" valign="top"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Warrants </div></td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top">11</td> <td nowrap="nowrap" valign="top"> </td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top">11</td> <td nowrap="nowrap" valign="top"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Restricted stock </div></td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top">14</td> <td nowrap="nowrap" valign="top"> </td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top">32</td> <td nowrap="nowrap" valign="top"> </td> </tr> <tr style="font-size: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top" style="border-top: 1px solid #000000"> </td> <td nowrap="nowrap" valign="top"> </td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top" style="border-top: 1px solid #000000"> </td> <td nowrap="nowrap" valign="top"> </td> </tr> <tr> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Total </div></td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top">2,080</td> <td nowrap="nowrap" valign="top"> </td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top">16,075</td> <td nowrap="nowrap" valign="top"> </td> </tr> <tr style="font-size: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top" style="border-top: 3px double #000000"> </td> <td nowrap="nowrap" valign="top"> </td> <td> </td> <td nowrap="nowrap" align="right" valign="top"> </td> <td align="right" valign="top" style="border-top: 3px double #000000"> </td> <td nowrap="nowrap" valign="top"> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>5. Fair Value of Financial Instruments</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As defined in ASC 820, <i>Fair Value Measurements and Disclosures</i>, (ASC 820) fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">     <i>Level 1: </i>Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">     <i>Level 2: </i>Other inputs that are observable directly or indirectly, such as quoted prices for similar assets and liabilities or market corroborated inputs. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">     <i>Level 3: </i>Unobservable inputs are used when little or no market data is available, which requires the Company to develop its own assumptions about how market participants would value the assets or liabilities. The fair value hierarchy gives the lowest priority to Level 3 inputs. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible in its assessment of fair value. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">     The Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy are summarized as follows (in thousands): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="20%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>September 30, 2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 1</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 2</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 3</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 1</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 2</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 3</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Assets: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td nowrap="nowrap"> <div style="margin-left:30px; text-indent:-15px">Cash equivalents — money market funds </div></td> <td> </td> <td align="left">$</td> <td align="right">53,627</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">53,627</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td nowrap="nowrap"> <div style="margin-left:30px; text-indent:-15px">Short-term investments — bank deposits </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">10,000</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">10,000</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Liabilities: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Preferred Stock Warrant </div></td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td> </td> <td align="right">—</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">82</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">82</td> <td> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>6. Accrued Expenses</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Accrued expenses consist of the following (in thousands): </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>September 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>December 31</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accrued compensation </div></td> <td> </td> <td align="left">$</td> <td align="right">2,326</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">1,501</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Accrued media spend </div></td> <td> </td> <td> </td> <td align="right">3,563</td> <td> </td> <td> </td> <td> </td> <td align="right">1,410</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accrued other expenses </div></td> <td> </td> <td> </td> <td align="right">1,841</td> <td> </td> <td> </td> <td> </td> <td align="right">1,036</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Total accrued expenses </div></td> <td> </td> <td align="left">$</td> <td align="right">7,730</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">3,947</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>7. Stock-based Compensation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Stock Options</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company’s 2005 Stock Incentive Plan (the “2005 Plan”) provided for granting of incentive stock options, non- qualified stock options, restricted stock, or other awards to the Company’s employees, officers, directors, and outside consultants up to an aggregate of 3,601,551 shares of the Company’s common stock. In conjunction with the effectiveness of the 2011 Equity Award Plan (the “2011 Plan”), the Board of Directors voted that no further stock options or other equity-based awards would be granted under the 2005 Plan. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In July 2011, the Company’s Board of Directors and stockholders adopted the 2011 Plan, which became effective concurrently with the consummation of the Company’s IPO on August 11, 2011. The 2011 Plan provides for the issuance of stock options, restricted stock, and other stock-based awards to the employees, officers, directors, and consultants of the Company or its subsidiaries. In connection with the approval of the 2011 Plan, the Company reserved 1,662,000 shares of common stock for issuance under the 2011 Plan. On January 1<sup style="font-size: 85%; vertical-align: text-top">st</sup> of each year, beginning on January 1, 2012, the number of shares reserved under the 2011 Plan will increase by the lesser of 1,500,000 shares, 4.0% of the outstanding shares of common stock and common stock equivalents, or another amount determined by the Company’s Board of Directors. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     As of September 30, 2011, 1,662,000 shares of common stock were available for future grant under the 2011 Plan. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Stock options granted to employees generally vest over a four-year period, and expire ten years from the date of grant. Certain option awards provide for accelerated vesting if there is a change of control, as defined in the 2005 Plan or 2011 Plan, as applicable. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options. The determination of the fair value of stock options awards on the date of grant using an option-pricing model is affected by the Company’s stock price, as well as a number of complex and subjective variables. These variables include the expected term of the awards, the Company’s expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate, and expected dividends. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Incentive Unit Agreements</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In April 2011, the Company’s Board of Directors authorized its subsidiary in China to enter into Incentive Unit Agreements pursuant to an Incentive Unit Plan (the “Unit Plan”) providing up to an aggregate of 60,000 incentive units (the “Units”) to certain employees of its subsidiary in China to afford these employees the benefit of any appreciation in the value of the Company. The Units have a five year term and vest upon the achievement of a performance condition, which was satisfied during the period, and a service period of up to four years. Upon vesting, the recipients of Units are entitled to a cash bonus based on the difference between the fair value of the Company’s common stock and the base value set forth in their respective Incentive Units Agreements. As of September 30, 2011, 38,000 Units are outstanding with weighted average base values of $7.80 and an additional 22,000 Units are available for grant under the Unit Plan. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Stock-based Compensation Expense</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Stock-based compensation is reflected in the consolidated statement of operations as follows (in thousands): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>Nine Months Ended</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cost of revenues </div></td> <td> </td> <td align="left">$</td> <td align="right">55</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">16</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">142</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">45</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Research and development </div></td> <td> </td> <td> </td> <td align="right">163</td> <td> </td> <td> </td> <td> </td> <td align="right">82</td> <td> </td> <td> </td> <td> </td> <td align="right">358</td> <td> </td> <td> </td> <td> </td> <td align="right">175</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">General and administrative </div></td> <td> </td> <td> </td> <td align="right">91</td> <td> </td> <td> </td> <td> </td> <td align="right">62</td> <td> </td> <td> </td> <td> </td> <td align="right">202</td> <td> </td> <td> </td> <td> </td> <td align="right">192</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Sales and marketing </div></td> <td> </td> <td> </td> <td align="right">102</td> <td> </td> <td> </td> <td> </td> <td align="right">20</td> <td> </td> <td> </td> <td> </td> <td align="right">261</td> <td> </td> <td> </td> <td> </td> <td align="right">40</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left">$</td> <td align="right">411</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">180</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">963</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">452</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>8. Income Taxes</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     No provision for federal or state income taxes has been recorded, as the Company has incurred cumulative net operating losses since inception. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. As required by the provisions of ASC 740, management has determined that it is more-likely-than-not that the Company will not utilize the benefits of federal and state deferred tax assets for financial reporting purposes. Accordingly, the deferred tax assets have been fully reserved at September 30, 2011 and December 31, 2010. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company’s income tax return reporting periods since December 31, 2007 are open to income tax audit examination by the federal and state tax authorities. In addition, because the Company has net operating loss carryforwards, the Internal Revenue Service is permitted to audit earlier years and propose adjustments up to the amount of net operating losses generated in those years. There are currently no federal or state audits in progress. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>9. Commitments and Contingencies</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Operating Leases</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company has lease agreements to rent office space in Boston, Massachusetts (corporate headquarters), Lewiston, Maine, Princeton, New Jersey, and Beijing, China, expiring in 2014 or earlier. The Company also has lease agreements to rent data center space in Wakefield, Massachusetts, expiring in 2015, and Boston, Massachusetts, expiring in 2013. The terms of the Boston and Maine office leases as well as the data center leases include escalating rent and a free rent period. Accordingly, the Company recorded a deferred rent liability related to the free rent and escalating rent payments and rent is being recognized on a straight-line basis over the terms of the leases. At September 30, 2011 and December 31, 2010, $0.3 million and $0.2 million, respectively, are included in accrued expenses and other long-term liabilities related to the deferred rent. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Future non-cancellable minimum lease payments under all operating leases as of September 30, 2011, are as follows (in thousands): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Remainder of 2011 </div></td> <td> </td> <td align="left">$</td> <td align="right">530</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2012 </div></td> <td> </td> <td> </td> <td align="right">2,239</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2013 </div></td> <td> </td> <td> </td> <td align="right">2,078</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2014 </div></td> <td> </td> <td> </td> <td align="right">943</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2015 </div></td> <td> </td> <td> </td> <td align="right">412</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="left">$</td> <td align="right">6,202</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In October 2011, the Company amended its Boston, Massachusetts headquarters lease to include additional space and to extend the term of the lease. This amendment resulted in an increase in future minimum lease payments of $0.1 million, $0.3 million, $0.5 million, $0.9 million, $1.4 million, and $1.4 million for 2011, 2012, 2013, 2014, 2015 and 2016, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Other Non-cancellable Commitments</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company has non-cancellable commitments primarily consisting of advertising and marketing agreements and data center hosting arrangements. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     Future minimum payments under non-cancellable commitments are as follows (in thousands): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Remainder of 2011 </div></td> <td> </td> <td align="left">$</td> <td align="right">2,597</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2012 </div></td> <td> </td> <td> </td> <td align="right">1,265</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2013 </div></td> <td> </td> <td> </td> <td align="right">722</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2014 </div></td> <td> </td> <td> </td> <td align="right">321</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="left">$</td> <td align="right">4,905</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Litigation</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In August 2010, Oasis Research, LLC, (“Oasis Research”), filed a lawsuit against the Company and several of its competitors and other online technology companies in the U.S. District Court for the Eastern District of Texas, alleging that our online backup storage services and the other companies’ products or services infringe certain of Oasis Research’s patents. Oasis Research seeks an award for damages in an unspecified amount. Oasis Research does not currently seek an injunction. Neither the ultimate outcome of this litigation nor an estimate of a probable loss or any reasonably possible losses can be assessed at this time. The Company intends to defend itself vigorously. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In the ordinary course of business the Company is involved in litigation incidental to its business; however, the Company’s management is not aware of any pending legal proceeding or other loss contingency, whether asserted or unasserted, affecting the Company for which it might become liable or the outcome of which management expects to have a material impact on the Company. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>10. Revolving Credit Facility</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In May 2011, the Company entered into a revolving line of credit with a bank pursuant to which the Company may borrow up to $15 million. Advances under the line of credit bear interest on the outstanding daily balance, at an annual rate equal to the lender’s prime reference rate plus 1%. The Company has pledged its accounts receivable, equipment, and shares of its subsidiaries to the lender to secure its obligations under the credit facility, and has also agreed not to grant a security interest in or pledge its intellectual property to any third party. The credit facility contains customary events of default, conditions to borrowings and restrictive covenants, including restrictions on the Company’s ability to dispose of assets, make acquisitions, incur additional debt, incur liens, make distributions to stockholders, make investments, or enter into certain types of related party transactions. The credit facility also includes financial and other covenants including covenants to maintain a minimum adjusted net worth and a minimum number of total subscribers. To date, the Company has not borrowed any amounts under this $15 million revolving line of credit. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>11. Intangible Assets and Goodwill</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     In June 2011, the Company acquired substantially all of the assets of Phanfare, Inc., for $1.9 million, net of cash acquired, and the assumption of certain liabilities. Phanfare’s service enables users to create, maintain, and share online photo and video albums. The Company continues to employ Phanfare’s five employees at its current location in Princeton, New Jersey. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The results of operations for the acquisition have been included in the Company’s operations since the date of acquisition and were not material for the periods presented. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The acquisition of Phanfare has been accounted for as a purchase of a business and, accordingly, the total purchase price has been allocated to the tangible and identifiable intangible assets acquired and the net liabilities assumed based on their respective fair values on the acquisition date. As a result of the acquisition of Phanfare, the Company recorded goodwill in the amount of $1.5 million and identifiable intangible assets of $1.2 million, which was comprised of $0.9 million related to developed technology, $0.2 million related to customer relationship and $0.2 million related to non-compete agreements. The overall weighted-average life of the identified intangible assets acquired in the purchase of Phanfare was 4.7 years. These identified intangible assets will be amortized on a straight-line basis over their estimated useful lives. Future estimated amortization expense of acquired intangibles is as follows (in thousands): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Remainder of 2011 </div></td> <td> </td> <td align="left">$</td> <td align="right">66</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2012 </div></td> <td> </td> <td> </td> <td align="right">266</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2013 </div></td> <td> </td> <td> </td> <td align="right">266</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2014 </div></td> <td> </td> <td> </td> <td align="right">231</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2015 </div></td> <td> </td> <td> </td> <td align="right">206</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">2016 </div></td> <td> </td> <td> </td> <td align="right">86</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Total </div></td> <td> </td> <td align="left">$</td> <td align="right">1,121</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>12. Retirement Plan</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     The Company has established a 401(k) defined contribution plan for its employees who meet certain employment status and age requirements. Contributions up to a 15% maximum of each covered employee’s salaries are permitted. To date, the Company has not contributed to this plan. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>13. Related Party Transactions</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">     One of the Company’s investors who purchased shares in several preferred stock investment rounds is also the Company’s Assistant Secretary and primary external legal counsel. Legal fees paid to this investor’s firm totaled $1.7 million and $0.1 million for the three months ended September 30, 2011 and 2010, respectively. Legal fees paid to this firm during the nine months ended September 30, 2011 and 2010 totaled $3.8 million and $1.0 million, respectively. At September 30, 2011 and December 31, 2010, the Company had outstanding payables and accruals to the legal firm of $0.2 million and $0.5 million, respectively. </div> </div>