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1. Nature of Business Carbonite, Inc. (the “Company”) was incorporated in the State of Delaware on February 10, 2005, and focuses on the development and marketing of computer backup services that enable users to backup, access, and restore data files online. The Company views its operations and manages its business in one operating segment.

2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. In addition, through its wholly owned subsidiary Carbonite (China) Co., Ltd. (“Carbonite China”), the Company effectively controls a variable interest entity (“VIE”), PanSheng AnXin Network Information Technology Co., Ltd., which is incorporated under the laws of the People’s Republic of China. The People’s Republic of China restricts foreign ownership of internet-related service companies. To comply with these foreign ownership restrictions, the Company operates its business in China through this VIE. The Company has entered into certain exclusive agreements with the VIE and its shareholders through Carbonite China, which provide the ability to direct the VIE’s most significant economic activities and to receive a majority of the VIE’s economic benefits. Based on these contractual arrangements, the Company consolidates the VIE as required by Financial Accounting Standards Codification (“ASC”) 810-10, Consolidation, because the Company is the primary beneficiary of the VIE through Carbonite China. Despite the lack of majority ownership, there exists a parent-subsidiary relationship between the Company and the VIE through the aforementioned agreements, whereby the equity holders of the VIE effectively assigned all of their voting rights underlying their equity interest in the VIE to Carbonite China. In addition, the Company has the ability and intention to continue to exercise its rights to obtain substantially all of the profits and to absorb all of the expected losses of the VIE. All intercompany accounts and transactions between the Company, its subsidiaries, and the VIE have been eliminated in consolidation. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The accompanying unaudited interim 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as filed on March 7, 2012. 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.   Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States 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. Translation of Foreign Currencies The functional currency of the Company’s foreign subsidiary and VIE are their local currency. The financial statements of the Company’s foreign subsidiary and VIE in China are translated into U.S. dollars. The Company translates assets and liabilities at the exchange rates in effect at period-end and revenues and expenses at the average exchange rates in effect during the period. Gains and losses from foreign currency translation are recorded as a component of other comprehensive income (loss). Concentration of Credit Risk Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents, marketable securities, and accounts receivable. The Company maintains its cash and cash equivalents and marketable securities with high-quality financial institutions and, consequently, the Company believes that such funds are subject to minimal credit risk. Cash equivalents and marketable securities consist of investment grade debt securities or money market funds investing in such securities. 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. The Company regularly reviews its accounts receivable related to customers billed on traditional credit terms and provides an allowance for expected credit losses. 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. Comprehensive Income (Loss) Comprehensive income (loss) consists of net income (loss) as well as other changes in stockholders’ equity that result from transactions and other economic events from non-owner sources. The Company’s only elements of other comprehensive income consist of foreign currency translation adjustments and unrealized gains or losses on available-for-sale investments for all periods.   Revenue Recognition 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 services via the internet. The Company recognizes revenue in accordance with ASC 605-10, Overall Revenue Recognition. Subscription revenue is recognized ratably on a daily basis upon activation over the subscription period, when persuasive evidence of an arrangement with a customer exists, the subscription period 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. Lease Exit Charge In March 2012, the Company closed its Boston, Massachusetts data center and transitioned the computer equipment and operations to its other Massachusetts data centers. This facility closure was accounted for in accordance with ASC 420, Accounting for Costs Associated with Exit or Disposal Activities, pursuant to which the Company recorded a charge of $1.2 million, of which $0.2 million was paid to relocate the Company’s computer equipment and $1.0 million was accrued related to the fair value of the remaining lease payments as of the date of the closure. The fair value of the remaining lease payments was determined based upon the discounted present value of remaining data center lease payments through the August 2013 lease expiration. At March 31, 2012, $0.7 million and $0.3 million related to the fair value of the remaining lease payments are included within accrued expenses and other long-term liabilities, respectively. Goodwill and Acquired Intangible Assets 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 30th and considers its business to be one reporting unit for the purpose of conducting this assessment. In its assessment, the Company evaluates qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative analysis. If qualitative factors indicate that it is more likely than not that an impairment has occurred, the Company is required to conduct a quantitative assessment by estimating the fair value of the reporting unit (based on the Company’s market capitalization) and comparing this amount to the carrying value of the reporting unit (as reflected by the Company’s total stockholders’ equity). Based on the recent evaluation, the Company determined that its goodwill was not impaired. 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.   Software and Website Development Costs The Company follows the guidance of ASC 350-40, Internal Use Software and ASC 350-50, Website Development Costs, 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. Because the Company believes the majority of its development efforts are categorized in operation stage (post-implementation), no costs have been capitalized to date. These costs are included in the accompanying statements of operations as research and development expense. Income Taxes 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. 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. Accounting for Stock-Based Compensation Stock-based compensation is recognized as an expense in the financial statements based on the grant date fair value of the stock awards granted. For awards that vest based on service conditions, the Company uses the straight-line method to allocate compensation expense for awards expected to vest over the requisite service period of those awards. 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, risk-free interest rate, and expected dividend yield. Recently Issued Accounting Standards Effective January 1, 2012, the Company adopted ASU No. 2011-08, Testing Goodwill for Impairment (the revised standard). 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 adoption of this guidance did not have an effect on the Company’s consolidated financial statements. Effective January 1, 2012, the Company adopted new guidance applicable to comprehensive income. Under this guidance, the Company 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. 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, adoption did not have an effect on the Company’s consolidated financial statements. In December 2011, the FASB indefinitely deferred the amendment’s requirement to present reclassification adjustments of other comprehensive income by line item on the face of the income statement.

3. Net Loss per Share 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 in 2011 by the weighted average number of shares of common stock outstanding during the period. The Company has excluded (a) all unvested restricted shares of common stock that are subject to repurchase and (b) the Company’s other potentially dilutive shares, which include redeemable and convertible preferred stock in 2011, a warrant for redeemable convertible preferred stock in 2011 and common stock in 2012, and outstanding options to purchase common stock, 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, Earnings Per Share, but are excluded from the earnings per share calculation in 2011 as they did not have an obligation to share in the Company’s net losses. 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):   <table cellspacing="0" cellpadding="0" width="76%" border="0" style="border-collapse:collapse; text-align: left" align="center">  <tr> <td width="83%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="6" align="center" style="border-bottom:1px solid #000000">As of March 31,</td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">2012</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">2011</td> <td valign="bottom"> </td> </tr>   <tr bgcolor="#cceeff"> <td valign="top"> Redeemable and convertible preferred stock </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">13,483</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> Options to purchase common stock </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3,398</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,920</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> Warrant </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">11</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> Restricted stock </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">5</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">23</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> Total </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3,414</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">15,437</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr>  </table>

4. Fair Value of Financial Instruments The Company applies the guidance in ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”), which provides that 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: Level 1: 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.   Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets and liabilities or market corroborated inputs. Level 3: 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. 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. 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):   <table cellspacing="0" cellpadding="0" width="100%" border="0" style="border-collapse:collapse; text-align: left" align="center">  <tr> <td width="50%"> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="14" align="center" style="border-bottom:1px solid #000000">March 31, 2012</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="14" align="center" style="border-bottom:1px solid #000000">December 31, 2011</td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Level 1</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Level 2</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Level 3</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Total</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Level 1</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Level 2</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Level 3</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Total</td> <td valign="bottom"> </td> </tr>   <tr bgcolor="#cceeff"> <td valign="top"> Assets: </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> </tr> <tr> <td valign="top"> Cash equivalents — money market funds </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">39,443</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">39,443</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">40,943</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">40,943</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> Marketable securities — U.S. agency securities </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">10,091</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">10,091</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">12,684</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">12,684</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr> <td valign="top"> Total </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">39,443</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">10,091</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">49,534</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">40,943</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">12,684</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">53,627</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr>  </table>

5. Accrued Expenses Accrued expenses consist of the following (in thousands):   <table cellspacing="0" cellpadding="0" width="100%" border="0" style="border-collapse:collapse; text-align: left" align="center">  <tr> <td width="84%"> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center">March 31,</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center">December 31,</td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">2012</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">2011</td> <td valign="bottom"> </td> </tr>   <tr> <td height="8"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> Accrued compensation </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,138</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,706</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> Accrued media spend </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3,790</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,223</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> Accrued other expenses </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,602</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,070</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> Accrued lease exit charge </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">703</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> Total accrued expenses </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">7,233</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4,999</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr>  </table>

6. Stock-based Awards The Company’s 2005 Stock Incentive Plan (the “2005 Plan”) provided for granting of incentive stock options, non-qualified 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. In 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 plan, the Company reserved 1,662,000 shares of common stock for issuance under the 2011 Plan. On January 1 st 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. As of March 31, 2012, 918,293 shares of common stock were available for future grant under the 2011 Plan. Stock Options Stock options granted to employees generally vest over a three- or 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. The Company has generally granted stock options at exercise prices not less than the fair market value of its common stock on the date of grant. The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The determination of the fair value of stock option awards on the date of grant using this option-pricing model is affected by the Company’s stock price, as well as a number of complex and highly subjective variables, including expected stock price volatility, expected term of an award, risk-free interest rate, and expected dividend yield. Incentive Unit Agreements In 2011, the Company’s Board of Directors adopted the Incentive Unit Plan, which provides up to an aggregate of 60,000 incentive units (“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 a performance condition, which has been satisfied, 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 stock and the base value set forth in their respective Incentive Units Agreements. As of March 31, 2012, 39,250 Units are outstanding with a weighted average base value of $8.58. These outstanding Units are being accounted for as liability awards, with $0.1 million included in accrued expenses at March 31, 2012. In January 2012, the Board of Directors determined that they would not issue any further grants pursuant to the Incentive Unit Plan.   Stock-based Compensation Expense Stock-based compensation is reflected in the consolidated statement of operations as follows (in thousands):   <table cellspacing="0" cellpadding="0" width="100%" border="0" style="border-collapse:collapse; text-align: left" align="center">  <tr> <td width="88%"> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="6" align="center" style="border-bottom:1px solid #000000">Three Months Ended March  31,</td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">2012</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">2011</td> <td valign="bottom"> </td> </tr>   <tr> <td height="8"> </td> <td height="8" colspan="4"> </td> <td height="8" colspan="4"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> Cost of revenue </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">95</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">41</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> Research and development </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">292</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">65</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> General and administrative </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">366</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">50</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> Sales and marketing </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">203</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">68</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> Total </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">956</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">224</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr>  </table>

7. Income Taxes For the three months ended March 31, 2012, the Company recorded a tax provision of $10 thousand related to tax amortization of goodwill. The Company did not provide for income taxes in 2011 due to net losses. 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 March 31, 2012 and December 31, 2011. The statute of limitations for assessment by the Internal Revenue Service (“IRS”) and state tax authorities is open for tax years ending December 31, 2008, 2009, 2010, and 2011, although carryforward attributes that were generated prior to tax year 2008 may still be adjusted upon examination by the IRS or state tax authorities if they either have been or will be used in a future period. There are currently no federal or state audits in progress.

8. Commitments and Contingencies Operating Leases The Company leases various facilities under leases that expire at varying dates through 2016. Certain of these leases contain renewal options, and require the Company to pay operating costs, including property taxes, insurance, and maintenance. The Company has lease agreements to rent office space in Boston, Massachusetts (corporate headquarters), Lewiston, Maine, Princeton, New Jersey, and Beijing, China, expiring in 2016 or earlier. The Company has lease agreements to rent data center space in Wakefield, Massachusetts and Phoenix, Arizona, expiring in 2016 or earlier. The terms of several of these leases include escalating rent and free rent periods. 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 each of March 31, 2012 and December 31, 2011, $0.4 million is included in accrued expenses and other long-term liabilities related to the deferred rent. Future non-cancellable minimum lease payments under all operating leases as of March 31, 2012, are as follows (in thousands):   <table cellspacing="0" cellpadding="0" width="100%" border="0" style="border-collapse:collapse; text-align: left" align="center">  <tr> <td width="81%"> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Office Leases</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Data Center Leases</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Total</td> <td valign="bottom"> </td> </tr>   <tr bgcolor="#cceeff"> <td valign="top"> Remainder of 2012 </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,022</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,200</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,222</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> 2013 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,670</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,565</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3,235</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> 2014 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,313</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,612</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,925</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> 2015 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,368</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,430</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,798</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> 2016 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,408</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">63</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,471</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr> <td valign="top"> Total </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">6,781</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">5,870</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">12,651</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr>  </table> Other Non-cancellable Commitments As of March 31, 2012, the Company had non-cancellable commitments of $2.3 million payable in the remainder of 2012, $0.7 million payable in 2013, and $0.3 million payable in 2014, primarily consisting of marketing and technology services contracts. Litigation In August 2010, Oasis Research, LLC (“Oasis Research”) filed a lawsuit against the Company and many other companies in the U.S. District Court for the Eastern District of Texas, alleging, with respect to the Company, that the Company’s online backup storage services infringe four patents held by Oasis Research. Oasis Research seeks an award for damages in an unspecified amount. A trial date has been set for March 4, 2013. 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. 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.

9. Revolving Credit Facility The Company maintains a revolving line of credit with a bank pursuant to which the Company may borrow up to $15 million through August 31, 2012. 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, a minimum number of total subscribers, and a minimum cash deposit with the bank. To date, the Company has not borrowed any amounts under this $15 million revolving line of credit.

10. Intangible Assets and Goodwill 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 maintains the former service, employees, and office location of Phanfare. 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. 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 $1.2 million. These identified intangible assets will be amortized on a straight-line basis over their estimated useful lives. Future estimated amortization expense of acquired intangibles is as follows (in thousands):   <table cellspacing="0" cellpadding="0" width="100%" border="0" style="border-collapse:collapse; text-align: left" align="center">  <tr> <td width="95%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> </tr>   <tr bgcolor="#cceeff"> <td valign="top"> Remainder of 2012 </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">199</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> 2013 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">266</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> 2014 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">231</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> 2015 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">206</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> 2016 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">86</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr> <td valign="top"> Total </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">988</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr>  </table>

11. Related Party Transactions One investor in certain of the Company’s preferred stock financings is also the Company’s Assistant Secretary and primary outside legal counsel. Legal fees paid to this firm totaled $0.7 million and $1.2 million for the three months ended March 31, 2012 and 2011, respectively. At March 31, 2012 and December 31, 2011, the Company had outstanding payables and accruals to the legal firm of $0.1 million and $0.4 million, respectively.