SECURITIES
AND EXCHANGE COMMISSION
 Washington,
DC 20549
 
  
 FORM 10-Q
 
 x
              
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934For
      the quarterly period ended June 30, 2009Oro
              
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934For
      the transition period from toCommission
      file number 0-26083
 
  
 INSWEB
CORPORATION
 (Exact
name of Registrant as specified in its charter)
 
 Delaware
              
              94-3220749(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (IRS
      Employer
                Identification
      Number)11290
      Pyrites Way, Suite 200 Gold River, California
95670(Address
      of principal executive offices)(916)
      853-3300(Registrant’s
      telephone number, including area
code)
 
  
 Indicate
by check mark whether the Registrant (1) has filed all reports required to
be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
 
 Large
      accelerated filer o
              
              Accelerated
      filer oNon-accelerated
      filer o
              
              Smaller
      reporting company x(Do
      not check if a smaller reporting company)
 
 The
aggregate market value of registrant’s voting and non-voting common equity held
by non-affiliates of registrant, based upon the closing sale price of the common
stock as of the last business day of registrant’s most recently completed second
fiscal quarter (June 30, 2009), as reported on the Nasdaq Capital Market,
was approximately $6,945,000. Registrant is a smaller reporting company as
defined in Regulation S-K. Shares of common stock held by each officer, director
and holder of 5% or more of the outstanding common stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
 
 Indicate
by check mark whether the registrant is a shell company (as defined by
Rule 12b-2 of the Exchange Act).
 Yes o No x
 
 The
number of outstanding shares of the Registrant’s Common Stock, par value $0.001
per share, on July 31, 2009 were 4,802,566 shares.
  
 
  
 
 FORM 10-Q
 INSWEB
CORPORATION
 INDEX
 
 PART I
              FINANCIAL INFORMATIONITEM 1:
              Financial Statements
      (unaudited)Condensed Consolidated Balance Sheets as of
      June 30, 2009 and December 31, 2008
              3Condensed Consolidated Statements of Operations
      for the three and six months ended June 30, 2009 and
      2008
              4Condensed Consolidated Statements of Cash Flows
      for the six months ended June 30, 2009 and 2008
              5Notes to Condensed Consolidated Financial
      Statements
              6ITEM 2:
              Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
              14ITEM 3:
              Quantitative and Qualitative Disclosures About
      Market Risk
              21ITEM 4:
              Submission of Matters to a Vote of Security
      Holders
              21ITEM 4T:
              Controls and Procedures
              21PART II
              OTHER INFORMATION
              21ITEM 1:
              Legal
    Proceedings
              21ITEM 1A:
              Risk Factors
              21ITEM 6:
              Exhibits
              21Signature
              
              22Certifications
 
 2
   
 
 PART I:
              FINANCIAL
      INFORMATION
 
 ITEM
1.                      FINANCIAL
STATEMENTS
 
 INSWEB
CORPORATION
 
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 
 (in
thousands)
 (unaudited)
 
 June
      30,
                    2009
                  
                  December 31,
      2008AssetsCurrent
      assets:Cash
      and cash equivalents
                  
                  $
                  5,772
                  
                  $
                  9,238Accounts
      receivable, net
                  
                  1,977
                  
                  1,450Prepaid
      expenses and other current assets
                  
                  453
                  
                  711Restricted
      cash
                  
                  2,105
                  
                  —Total
      current assets
                  
                  10,307
                  
                  11,399Related
      party receivables
                  
                  307
                  
                  304Property
      and equipment, net
                  
                  179
                  
                  249Other
      assets
                  
                  269
                  
                  329Total
      assets
                  
                  $
                  11,062
                  
                  $
                  12,281Liabilities
      and stockholders’ equityCurrent
      liabilities:Accounts
      payable
                  
                  $
                  2,064
                  
                  $
                  2,138Accrued
      expenses
                  
                  769
                  
                  1,014Deferred
      revenue
                  
                  465
                  
                  437Total
      current liabilities
                  
                  3,298
                  
                  3,589Commitments
      and contingenciesStockholders’
      equity:Common
      stock
                  
                  8
                  
                  8Paid-in
      capital
                  
                  206,889
                  
                  206,719Treasury
      stock
                  
                  (6,334
                  )
                  (6,334
                  )Unrealized
      gain on available-for-sale securities
                  
                  —
                  
                  1Accumulated
      deficit
                  
                  (192,799
                  )
                  (191,702
                  )Total
      stockholders’ equity
                  
                  7,764
                  
                  8,692Total
      liabilities and stockholders’ equity
                  
                  $
                  11,062
                  
                  $
                  12,281
 
 See
accompanying notes.
 
 3
   
 INSWEB
CORPORATION
 
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 (in
thousands, except per share amounts)
 (unaudited)
 
 Three Months
                      Ended June 30,
                    
                    Six Months
                      Ended June 30,2009
                    
                    2008
                    
                    2009
                    
                    2008Revenues:Transaction
      fees
                    $
                    7,941
                    
                    $
                    8,751
                    
                    $
                    17,425
                    
                    $
                    21,722Other
                    42
                    
                    58
                    
                    84
                    
                    119Total
      revenues
                    7,983
                    
                    8,809
                    
                    17,509
                    
                    21,841Operating
      expenses:Direct
      marketing
                    5,334
                    
                    6,238
                    
                    11,879
                    
                    15,543Sales
      and marketing
                    1,671
                    
                    1,433
                    
                    3,441
                    
                    2,728Technology
                    901
                    
                    811
                    
                    1,859
                    
                    1,627General
      and administrative
                    643
                    
                    1,373
                    
                    1,446
                    
                    2,399Total
      operating expenses
                    8,549
                    
                    9,855
                    
                    18,625
                    
                    22,297Income
      from operations
                    (566
                    )
                    (1,046
                    )
                    (1,116
                    )
                    (456
                    )Interest
      income
                    6
                    
                    60
                    
                    20
                    
                    149Loss
      before income taxes
                    (560
                    )
                    (986
                    )
                    (1,096
                    )
                    (307
                    )Income
      tax provision (benefit)
                    35
                    
                    (9
                    )
                    —
                    
                    —Net
      loss
                    $
                    (595
                    )
                    $
                    (977
                    )
                    $
                    (1,096
                    )
                    $
                    (307
                    )Net
      income (loss) per share:Basic
                    $
                    (0.12
                    )
                    $
                    (0.21
                    )
                    $
                    (0.23
                    )
                    $
                    (0.07
                    )Diluted
                    $
                    (0.12
                    )
                    $
                    (0.21
                    )
                    $
                    (0.23
                    )
                    $
                    (0.07
                    )Weighted-average
      shares used in computing per share amountsBasic
      and diluted
                    4,791
                    
                    4,689
                    
                    4,789
                    
                    4,665
 See
accompanying notes.
 
 4
  
 
 INSWEB
CORPORATION
 
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 (in
thousands)
 (unaudited)
 
 Six Months Ended
                    June 30,2009
                  
                  2008Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (1,096
                  )
                  $
                  (307
                  )Adjustments
      to reconcile net loss to net cash provided (used) by operating
      activities:Share-based
      compensation
                  
                  148
                  
                  412Depreciation
      and amortization
                  
                  95
                  
                  74Related
      party receivables
                  
                  (3
                  )
                  —Net
      changes in operating assets and liabilities:Accounts
      receivable
                  
                  (527
                  )
                  69Prepaid
      expenses and other current assets
                  
                  258
                  
                  126Other
      assets
                  
                  35
                  
                  —Accounts
      payable
                  
                  (74
                  )
                  170Accrued
      expenses
                  
                  (245
                  )
                  168Deferred
      revenue
                  
                  28
                  
                  (7
                  )Net
      cash provided (used) by operating activities
                  
                  (1,381
                  )
                  705Cash
      flows from investing activities:Change
      in restricted cash
                  
                  (2,105
                  )
                  —Purchases
      of intangible assets
                  
                  —
                  
                  (225
                  )Purchases
      of property and equipment
                  
                  (3
                  )
                  (80
                  )Net
      cash used in investing activities
                  
                  (2,108
                  )
                  (305
                  )Cash
      flows from financing activities:Settlement
      of equity awards
                  
                  —
                  
                  (850
                  )Proceeds
      from issuance of common stock through stock plans
                  
                  23
                  
                  347Net
      cash provided (used) by financing activities
                  
                  23
                  
                  (503
                  )Net
      decrease in cash and cash equivalents
                  
                  (3,466
                  )
                  (103
                  )Cash
      and cash equivalents, beginning of period
                  
                  9,238
                  
                  10,777Cash
      and cash equivalents, end of period
                  
                  $
                  5,772
                  
                  $
                  10,674
 
 See
accompanying notes.
 
 5
 
  
 
 INSWEB
CORPORATION
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 (unaudited)
 
 1.
Business of InsWeb
 
 InsWeb
operates an online insurance marketplace that electronically matches consumers
and providers of automobile, homeowners and term life insurance. InsWeb has
combined knowledge of the insurance industry, technological expertise and close
relationships with insurance companies, agents and other providers to develop an
integrated online marketplace. InsWeb’s marketplace enables consumers to
research insurance-related topics, search for, analyze and compare insurance
products, and apply for and receive quotes for coverage for automobile,
homeowners and term life insurance. Management believes that InsWeb provides
insurance providers with pre-qualified consumers at attractive acquisition
costs, with the scalable, cost-efficient distribution capabilities of InsWeb’s
Internet-based model.
 
 For the
automobile and homeowners insurance products, InsWeb’s principal source of
revenues is transaction fees from participating insurance providers. While
quotes obtained through InsWeb’s online insurance marketplace are provided to
consumers free of charge, InsWeb earns revenues when a qualified lead is
delivered to a participating insurance provider or local agent. In certain
instances, consumers are provided the opportunity to link directly to a third
party insurance provider’s website. In these situations, InsWeb will be paid a
fee for that consumer link or click-through.
 
 For term
life insurance, the majority of InsWeb’s revenues prior to April 2007
consisted of commissions earned by InsWeb’s insurance agency subsidiary, InsWeb
Insurance Services, Inc., upon the sale of a term life insurance policy.
InsWeb discontinued the term life agency operation in April 2007 but
continued to earn commissions throughout 2007 (in decreasing amounts) on a
limited number of policies written prior to the discontinuation of the agency
operations. Beginning in 2008, substantially all of InsWeb’s term life insurance
revenues were being generated by the sale of leads to third parties and to local
agents.
 
 Beginning
in 2008, InsWeb began generating both subscription and display advertising
revenues from sales of advertising on its Agent Directory pages. These pages
display listings of insurance companies and local agents for the consumer to
contact.
 
 Beginning
in 2009, InsWeb’s health and small business insurance revenues were being
generated by the sale of leads to third parties or agents.
 
 InsWeb is
subject to all of the risks inherent in the electronic commerce industry and
special risks related to the online insurance industry. These risks include, but
are not limited to, uncertain economic conditions which could result in lower
growth rates, the changing nature of the electronic commerce industry,
variations in the availability and cost of acquiring consumer traffic,
unpredictability of future revenues, reliance on key customers —insurance
carriers, agents and other providers – who are themselves subject to volatility
in their operating cycles, and reliance on a third party intermediaries who
provide leads to local insurance agents on InsWeb’s behalf. These risks and
uncertainties, among others, could cause InsWeb’s actual results to differ
materially from historical results or those currently anticipated. In light of
InsWeb’s ongoing modifications to its business model to better capitalize on its
position as a leading insurance portal, InsWeb believes that period-to-period
comparisons of its operating results are not necessarily meaningful and should
not be relied upon as an indication of future performance. Moreover, there is no
assurance that InsWeb will be able to attain or sustain
profitability.
 
 2.
Basis of Presentation
 
 The
condensed consolidated financial statements include the accounts of InsWeb
Corporation and its wholly-owned subsidiaries, InsWeb Insurance
Services, Inc. and Goldrush Insurance Services, Inc. (“InsWeb” or the
“Company”). All significant inter-company accounts and transactions have been
eliminated in the consolidated financial statements.
 
 6
   
 
 INSWEB CORPORATION
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 (unaudited)
 
 The accompanying unaudited interim
financial statements have been prepared in accordance with U.S. generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not contain all of the information and footnotes required
by U.S. generally accepted accounting principles for complete financial
statements. In the opinion of management, the accompanying unaudited interim
condensed consolidated financial statements reflect all adjustments, which
include only normal recurring adjustments, necessary to present fairly InsWeb’s
financial position as of June 30, 2009 and the results of operations for
the three and six months ended June 30, 2009 and 2008 and of cash flows for the
six months ended June 30, 2009 and 2008. The financial data and other
information disclosed in these notes to the condensed consolidated financial
statements related to these periods are unaudited. The results for the six
months ended June 30, 2009 are not necessarily indicative of the results to
be expected for any future period.
 
 These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in InsWeb’s
Annual Report on Form 10-K and other information as filed with the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to such rules and regulations. The December 31, 2008
condensed consolidated balance sheet was derived from audited financial
statements, but does not include all disclosures required by accounting
principles generally accepted in the United States. The Company believes the
disclosures in its notes to the condensed consolidated financial statements are
adequate to make the information presented not misleading.
 
 In
May 2009, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 165, “Subsequent
Events” (“SFAS 165”), effective for interim or annual financial periods ending
after June 15, 2009 which establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. InsWeb has
evaluated subsequent events through the time of filing these financial
statements on August 11, 2009.
 
 In
December 2007, the Financial Accounting Standard Board (FASB) revised Statement
of Financial Accounting Standards No. 141, Business
Combinations(“Statement 141(R)”). Statement 141(R) retains the
fundamental requirements in Statement 141 that the acquisition method of
accounting (which Statement 141 called the purchase method) be used for
all business combinations and for an acquirer to be identified for each business
combination. Statement 141(R) applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. An entity may not
apply it before that date. InsWeb adopted Statement 141(R) at the beginning of
2009, with no material impact to InsWeb’s consolidated financial statements upon
adoption.
  In
December 2007, the Financial Accounting Standard Board (FASB) issued Statement
of Financial Accounting Standards No. 160, Noncontrolling Interests in
Consolidated Financial Statements(“Statement 160”). Statement 160
amends FASB Accounting Research Bulletin No. 51 to establish accounting and
reporting standards for the on controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. Statement 160 is effective for fiscal years,
and interim periods within those fiscal years, beginning on or after December
15, 2008. InsWeb adopted Statement 160 at the beginning of 2009, with no
material impact to InsWeb’s consolidated financial statements upon
adoption.
 
 In
June 2009, the FASB issued SFAS No. 168, The “FASB Accounting
Standards Codification” and the Hierarchy of Generally Accepted Accounting
Principles. This standard replaces SFAS No. 162, The Hierarchy of Generally
Accepted Accounting Principles, and establishes only two levels of U.S. GAAP,
authoritative and nonauthoritative. The FASB Accounting Standards Codification
(the “Codification”) will become the source of authoritative, nongovernmental
GAAP, except for rules and interpretive releases of the SEC, which are sources
of authoritative GAAP for SEC registrants. All other nongrandfathered, non-SEC
accounting literature not included in the Codification will become
nonauthoritative. This standard is effective for financial statements for
interim or annual reporting periods ending after September 15, 2009. We
will begin to use the new guidelines and numbering system prescribed by the
Codification when referring to GAAP in the third quarter of 2009. As the
Codification does not change or alter existing GAAP, it will not have any impact
on our consolidated financial statements.
  7




INSWEB CORPORATION
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 (unaudited)
 
 
 3.
Share-Based Payments
 
 InsWeb
maintains a stock option plan and an employee stock purchase plan. The following
table sets forth the total share-based compensation expense relating to these
plans included in InsWeb’s operating expenses in its condensed consolidated
statements of operations for the three and six months ended June 30, 2009
and 2008 (in thousands):
 
 Three Months Ended
                      June 30,
                    
                    Six Months Ended
                      June 30,2009
                    
                    2008
                    
                    2009
                    
                    2008Technology
                    $
                    1
                    
                    $
                    1
                    
                    $
                    7
                    
                    $
                    55Sales
      and marketing
                    17
                    
                    37
                    
                    45
                    
                    131General
      and administrative
                    28
                    
                    40
                    
                    96
                    
                    226$
                    46
                    
                    $
                    78
                    
                    $
                    148
                    
                    $
                    412
 
 4.
Concentration of Risk — Significant Customers
 
 For the
three months ended June 30, 2009, three customers each accounted for 10% of
total revenues, respectively.  For the six months ended June 30, 2009,
one customer accounted for 10% of total revenues. For the three and six months
ended June 30, 2008, three customers accounted for 16%, 13% and 11%; and 17%,
15%, and 11% of total revenues, respectively.  At June 30, 2009, four
customers accounted for 15%, 11%, 11%, and 10% of accounts receivable,
respectively. At December 31, 2008, one customer accounted for 17% of
accounts receivable.
 
 5. 
Fair Value Measurements
 
 The
Company adopted Statement of Financial Accounting Standard No. 157, Fair Value Measurements
(“Statement 157”) for its financial assets and liabilities effective January 1,
2008, and has adopted Statement 157 for nonfinancial assets and liabilities as
of January 1, 2009. The two-step adoption is in accordance with Financial
Accounting Standards Board Staff Position,Effective Date of FASB Statement No.
157, (“FSP FAS 157-2), which allows for the delay of the effective date
of Statement 157 for nonfinancial assets and liabilities. There was no impact
relating to the adoption of Statement 157 and FSP FAS 157-2 to InsWeb’s
consolidated financial statements.
 
 Statement
157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and expands disclosures about fair
value measurements. Statement 157 also establishes a fair value hierarchy that
prioritizes the inputs used to measure fair value:
 
 •
              
              Level
      1: Observable inputs that reflect unadjusted quoted prices for identical
      assets or liabilities traded in active markets.•
              
              Level
      2: Inputs other than quoted prices included within Level 1 that are
      observable for the asset or liability, either directly or
      indirectly.•
              
              Level
      3: Inputs that are generally unobservable. These inputs may be used with
      internally developed methodologies that result in management’s best
      estimate of fair value.
 
 
 8
 
  
 INSWEB CORPORATION
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 (unaudited)
 
 The
following table presents the financial assets and liabilities measured at fair
value on a recurring basis as of June 30, 2009 (in thousands):
  Jun
      30,2009
                    
                    
                    Level
      1
                    
                    
                    Level
      2
                    
                    
                    Level
      3Assets:Cash
      equivalents
                    
                    $
                    2,129
                    
                    
                    $
                    2,129
                    
                    
                    $
                    —
                    
                    
                    $
                    —Restricted
      cash
                    
                    
                    2,105
                    
                    
                    
                    2,105Total
                    
                    $
                    4,234
                    
                    
                    $
                    4,234
                    
                    
                    $
                    —
                    
                    
                    $
                    —
  Cash
equivalents, short-term investments and restricted cash include U.S. treasury
bills, money market funds and commercial paper from corporations whose credit
ratings are P-1 by Moody’s or A-1 by Standard & Poor’s. For these
securities, the Company uses quoted prices in active markets for identical
assets to determine their fair value, thus they are considered to be Level 1
instruments.
 
 6.
Related Party Receivables
 
 As of
June 30, 2009 and December 31, 2008, related party receivables relate to
promissory notes totaling $300,000 from three non-officer employees of InsWeb in
exchange for cash and the related interest accrued on these
notes.  These notes are unsecured loans with a per annum rate of
2.42%.  Principal and interest are payable in full on or before July,
2011.
 
 7.
Prepaid Expenses and Other Current Assets
 
 Prepaid expenses and other current
assets consist of the following (in thousands):
  June 30,
                      2009
                    
                    December 31,
                      2008Prepaid
      software licenses
                    $
                    93
                    
                    $
                    293Tax
      related assets
                    
                    30
                    
                    
                    120Prepaid
      insurance
                    137
                    
                    124Prepaid
      rent and current portion of lease deposits
                    94
                    
                    93Other
      prepaid  and current assets
                    99
                    
                    81$
                    453
                    
                    $
                    711
 8.
Restricted Cash
 
 As of
June 30, 2009, restricted cash consists of $2.1 million in short-term
investments used as collateral to obtain a commercial credit line. Pursuant to
the agreement the collateral value of the securities account should be no less
than $2.0 million, based upon the net margin percentage of the investment
portfolio holdings. The collateral value may become unrestricted, upon
notification from InsWeb to the issuing bank.
 
 
 
 9
   
 INSWEB CORPORATION
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 (unaudited)
 
 9.
Accrued Expenses
 
 Accrued
expenses consist of the following (in thousands):
  June
      30,
                      2009
                    
                    December 31,
                      2008Amounts
      due to fee sharing partners
                    
                    $
                    16
                    
                    $
                    271Deferred
      rent
                    
                    206
                    
                    262Accrued
      employee compensation
                    
                    540
                    
                    481Other
                    
                    
                    7
                    
                    
                    —$
                    769
                    
                    $
                    1,014
  10.
Comprehensive Loss
  Three months ended
                        June
      30,
                      
                      Six months ended
                        June
      30,2009
                      
                      2008
                      
                      2009
                      
                      2008Net
      loss
                      $
                      (595)
                      
                      $
                      (977)
                      
                      $
                      (1,096)
                      
                      $
                      (307)Other
      comprehensive income (loss) - change in unrealized gain or loss on
      investments
                      —
                      
                      —
                      
                      —
                      
                      —Comprehensive
      loss
                      $
                      (595)
                      
                      $
                      (977)
                      
                      $
                      (1,096)
                      
                      $
                      (307)
 11.
Net Loss Per Share
 
 Basic net
loss per share is computed using the weighted-average number of shares of common
stock outstanding. Diluted loss per share is a measure of the potential dilution
that would occur if stock options had been exercised. Potentially dilutive
securities have been excluded from the computation of diluted net loss per
share, for the three and six months ended June 30, 2009, as their effect would
be anti-dilutive.
 
 The
following table reconciles the numerator and denominator used to calculate basic
and diluted net income per share of common stock:
  Three months ended
                      June
      30,
                    
                    Six months ended
                      June
      30,(In thousands, except per share amounts)
                    2009
                    
                    2008
                    
                    2009
                    
                    2008Numerator
      for basic and diluted net loss per share:Net
      loss available to common stockholders
                    $
                    (595
                    )
                    $
                    (977
                    )
                    $
                    (1,096
                    )
                    $
                    (307
                    )Denominator
      for net loss per share:Basic—weighted
      average shares of common stock outstanding
                    4,791
                    
                    4,689
                    
                    4,789
                    
                    4,665Dilutive
      effect of employee stock options
                    —
                    
                    —
                    
                    —
                    
                    —Diluted
                    4,791
                    
                    4,689
                    
                    4,789
                    
                    4,665Net
      loss per share:Basic
      and diluted —as reported
                    $
                    (0.12
                    )
                    $
                    (0.21
                    )
                    $
                    (0.23
                    )
                    $
                    (0.07
                    )
 
 10
 
  
 
 INSWEB CORPORATION
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 (unaudited)
  As a
result of our net loss for the three and six months ended June 30, 2009,
certain stock awards have been excluded from the diluted loss per share
calculation as their inclusion would have been anti-dilutive. Had InsWeb
reported net income for this period, an additional 108,000 shares and 81,000
shares of common stock would have been included in the number of shares used to
calculate diluted earnings per share for the three and six months ended
June 30, 2009, respectively.
  Options
to purchase 2.0 million shares of common stock were excluded from the
computation of diluted shares for the three and six months ended June 30,
2009, as their inclusion would have been anti-dilutive. For the three and six
months ended June 30, 2009, the weighted-average exercise price of these
shares was $5.19 per share.
 
 12.
Commitments and Contingencies
 
 Leases
 
 InsWeb
has a non-cancelable 10-year operating lease agreement through April 2011 for
office space in the Sacramento area which houses its corporate headquarters.
InsWeb has an option to extend the lease at the end of the lease term, and has
the right of first refusal on other office space in the complex.
 
 Securities
Class Action
 
 A
securities class action lawsuit was filed on December 5, 2001 in the United
States District Court for the Southern District of New York, (the “Court”)
purportedly on behalf of all persons who purchased our common stock from
July 22, 1999 through December 6, 2000. The complaint named as
defendants InsWeb, certain current and former officers and directors, and three
investment banking firms that served as underwriters for InsWeb’s initial public
offering in July 1999. The complaint, as subsequently amended, alleges
violations of Sections 11 and 15 of the Securities Act of 1933 and Sections 10
and 20 of the Securities Exchange Act of 1934, on the grounds that the
prospectuses incorporated in the registration statements for the offering failed
to disclose, among other things, that (i) the underwriters had solicited
and received excessive and undisclosed commissions from certain investors in
exchange for which the underwriters allocated to those investors material
portions of the shares of our stock sold in the offerings and (ii) the
underwriters had entered into agreements with customers whereby the underwriters
agreed to allocated shares of the stock sold in the offering to those customers
in exchange for which the customers agreed to purchase additional shares of
InsWeb stock in the aftermarket at pre-determined prices. No specific damages
are claimed. Similar allegations have been made in lawsuits relating to more
than 300 other initial public offerings conducted in 1999 and 2000, all of which
have been consolidated for pretrial purposes. In October 2002, all claims
against the individual defendants were dismissed without prejudice. In
February 2003, the Court dismissed the claims in the InsWeb action alleging
violations of the Securities Exchange Act of 1934 but allowed the plaintiffs to
proceed with the remaining claims. In June 2003, the plaintiffs in all of
the cases presented a settlement proposal to all of the issuer defendants. Under
the proposed settlement, the plaintiffs would dismiss and release all claims
against participating defendants in exchange for a contingent payment guaranty
by the insurance companies collectively responsible for insuring the issuers in
all the related cases, and the assignment or surrender to the plaintiffs of
certain claims the issuer defendants may have against the underwriters. InsWeb
and most of the other issuer defendants have accepted the settlement proposal.
While the District Court was considering final approval of the settlement, the
Second Circuit Court of Appeals vacated the class certification of plaintiffs’
claims against the underwriters in six cases designated as focus or test cases.
On December 14, 2006, the District Court ordered a stay of all proceedings
in all of the lawsuits pending the outcome of plaintiffs’ petition to the Second
Circuit for rehearing en banc and resolution of the class certification issue.
On April 6, 2007, the Second Circuit denied the plaintiffs’ petition for
rehearing, but clarified that the plaintiffs may seek to certify a more limited
class in the District Court. Because of the significant technical barriers
presented by the Court’s decision, the parties withdrew the proposed settlement
and the plaintiffs filed an amended complaint. In September 2008,
representatives of all of the parties to the IPO litigation agreed in principle
to a revised settlement, subject to preparation of formal documentation.
As
  11
   
 
 INSWEB CORPORATION
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 (unaudited)
 
 12.
Commitments and Contingencies (continued)
 
 with the
earlier settlement proposal, the revised settlement proposal does not require
InsWeb to contribute any cash. There is no assurance that the new settlement
will be finalized, and then approved. If the settlement is not finalized and
subsequently approved, InsWeb intends to defend the lawsuit vigorously. The
litigation and settlement process is inherently uncertain and management cannot
predict the outcome, though, if unfavorable, it could have a material adverse
effect on InsWeb’s financial condition, results of operations and cash
flows.
 
 Section 16(b) Lawsuit
 
 On
October 12, 2007, Vanessa Simmonds, a purported stockholder of InsWeb,
filed a complaint in the United States District Court for the Western District
of Washington, against InsWeb and two investment banking firms that served as
underwriters for the initial public offering of our common stock in
July 1999. The complaint alleges that:  (i) the defendants, other
underwriters of the offering, and unspecified officers, directors and principal
stockholders of InsWeb constituted a “group” that owned in excess of 10% of
InsWeb’s outstanding common stock between July 23, 1999 and July 20,
2000; (ii) the defendants were therefore subject to the “short swing”
prohibitions of Section 16(b) of the Securities Exchange Actgroup of
1934; and (iii) the defendants engaged in purchases and sales, or sales and
purchases, of InsWeb’s common stock within periods of less than six months in
violation of the provisions of Section 16(b). The complaint seeks
disgorgement of all profits allegedly received by the defendants, with interest
and attorneys fees, for transactions in violation of Section 16(b). InsWeb,
as the statutory beneficiary of any potential Section 16(b) recovery,
is named as a nominal defendant in the complaint. A number of similar lawsuits
against underwriters of other public offerings have recently been filed by the
same plaintiff and law firm. On February 11, 2008, the court approved a
stipulated order that InsWeb need not answer or otherwise respond to the
complaint. On February 28, 2008, the plaintiff filed an amended complaint,
and InsWeb was again excused from filing an answer. On March 12, 2009 the court
issued an order dismissing the lawsuit with prejudice, but the plaintiff has
appealed this order.  If the lawsuit is reinstated on appeal, InsWeb
intends to defend the lawsuit vigorously. The litigation and settlement process
is inherently uncertain and management cannot predict the outcome, though, if
unfavorable, it could have a material adverse effect on InsWeb’s financial
condition, results of operations and cash flows.
 
 Patent
Litigation Settlements
 
 On
November 30, 2007, Autobytel, Inc.filed a complaint in the United
States District Court for the Eastern District of Texas against InsWeb and three
other defendants (“Autobytel Patent Litigation”). The complaint alleged that
InsWeb and the other defendants infringed U.S. Patent No. 6,282,517 (the “
‘517 patent”), which appears to disclose a method and apparatus to allow a
potential automobile purchaser to create and submit a purchase request for a new
or used automobile over a computer network. The complaint contained generic
allegations that InsWeb infringed the ‘517 patent by making, using, offering to
sell and selling systems and/or methods that embody the invention claimed in the
‘517 patent and/or actively inducing and/or contributing to others’ infringement
of such inventions. The complaint sought unspecified monetary damages and
injunctive relief.
 
 On
March 11, 2008, InsWeb filed a complaint in the United States District
Court for the Southern District of California against Autobytel, Inc.,
Autobytel I Corporation (formerly known as AVV, Inc.) and Dominion
Enterprises (“InsWeb Patent Litigation”). InsWeb filed an amended complaint on
July 3, 2008 adding OneCommand, Inc. as a defendant.The amended
complaint alleged that the defendants infringed InsWeb’s U.S. Patent
No. 6,898,597, which relates to an event logging system that monitors for
the occurrence of predefined website usage events. Defendant Autobytel, through
its wholly-owned subsidiary AVV, marketed and sold a product known as WebControl
that embodies the invention claimed in the ‘597 patent. In January 2008,
Autobytel sold AVV, including the WebControl product, to Dominion Enterprises.
Autobytel also owned an asset named Retention Performance Marketing (RPM) that
embodied the invention claimed in InsWeb’s patent. Autobytel sold the RPM asset
to OneCommand in July 2007. The amended complaint also added Internet
Brands, Inc., Leadpoint, Inc., and Auto Internet Marketing, Inc.
as co-plaintiffs with InsWeb following InsWeb’s assignment of a partial interest
in the ‘597 patent to these companies.
 
 
 12
 
 
  
 
 INSWEB CORPORATION
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
 
 (unaudited)
 
 12.
Commitments and Contingencies (continued)
 
 
 Patent
Litigation Settlements
 
 On
April 23, 2009 InsWeb announced that it entered into a settlement agreement
with Autobytel settling and dismissing with prejudice the Autobytel Patent
Litigation and the InsWeb Patent Litigation. Under the settlement terms,
Autobytel granted to Insweb, Internet Brands and Leadpoint, and Insweb, Internet
Brands and Leadpoint each granted to Autobytel, a non-exclusive perpetual
license to their respective patents, as well as long-term covenants not to sue
any of the parties for infringement of current or future patents, and mutual
releases of claims. In addition, InsWeb and Autobytel entered into a Content
License Agreement pursuant to which Autobytel will receive specific auto
insurance editorial content, data and interactive tools from InsWeb. The content
and tools will contain links to one of InsWeb’s insurance websites, and
Autobytel and InsWeb will share the revenue associated with consumer activity
generated by the links. All claims against Dominion, OneCommand and RPM were
also dismissed with prejudice, with Internet Brands, Leadpoint, and InsWeb each
providing Dominion, OneCommand and RPM covenants not to sue for infringement of
the InsWeb ‘597 Patent, and Dominion, OneCommand and RPM each granting to
InsWeb, Internet Brands and Leadpoint, and InsWeb, Internet Brands and Leadpoint
each granting to Dominion, OneCommand and RPM long-term mutual releases of
claims.
 
 
  13
 
  
 ITEM
2.MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 
 This
Quarterly Report on Form 10-Q, and in particular Management’s Discussion
and Analysis of Financial Condition and Results of Operations, contains
“forward-looking statements” with respect to InsWeb’s future financial
performance. The words or phrases “expects,” “anticipates,” “intends,” “plans,”
“believes,” “seeks,” “estimates,” and similar expressions are generally intended
to identify forward-looking statements. Such forward-looking statements are
subject to various known and unknown risks and uncertainties, and InsWeb
cautions you that any forward-looking information provided by, or on behalf of,
InsWeb is not a guarantee of future performance. Actual results could differ
materially from those anticipated in such forward-looking statements due to a
number of factors, some of which are beyond InsWeb’s control, including, but not
limited to, uncertain economic conditions which could result in lower growth
rates, fluctuations in revenues, anticipated and unanticipated losses, the
unpredictability of consumer shopping and/or buying behavior, especially on the
internet, potential increases in advertising and marketing costs on the
internet, the rate of participation by insurance companies and agents, reliance
on key customers, who are themselves subject to volatility in their operating
cycles, reliance on  third party lead aggregators who provide leads to
their networks of insurance providers on InsWeb’s behalf, competition, risks
associated with system development and operation risks, management of potential
growth and risks of new business areas, business combinations, litigation in
which InsWeb is a party, and strategic alliances. These risks and uncertainties,
as well as other risks and uncertainties, which are described in greater detail
in InsWeb’s Annual Report on Form 10-K for the year ended December 31,
2008 and other documents filed with the Securities and Exchange Commission,
could cause InsWeb’s actual results to differ materially from historical results
or those currently anticipated. All forward-looking statements are based on
information available to InsWeb on the date hereof, and InsWeb assumes no
obligation to update such statements.
 
 Overview
 
 InsWeb
(the “Company,” “InsWeb,” “we,” “us,” or “our”) operates an online insurance
marketplace that electronically matches consumers and providers of automobile,
homeowners and term life insurance. InsWeb has combined extensive knowledge of
the insurance industry, technological expertise and close relationships with a
significant number of insurance companies, agents and insurance providers to
develop an integrated online marketplace.
 
 For the
automobile and homeowners insurance products, our principal source of revenues
is transaction fees from participating insurance providers. While quotes
obtained through our online insurance marketplace are provided to consumers free
of charge, we earn revenues when a qualified lead is delivered to a
participating insurance provider or local agent. In certain instances, consumers
are provided the opportunity to link directly to a third party insurance
provider’s website. In these situations, we will be paid a fee for that consumer
link or click-through.
 
 For term
life insurance, the majority of our revenues prior to April 2007 consisted
of commissions earned by our insurance agency subsidiary, InsWeb Insurance
Services, Inc., upon the sale of a term life insurance policy. We
discontinued the term life agency operation in April 2007 but continued to
earn commissions throughout 2007 (in decreasing amounts) on a limited number of
policies written prior to the discontinuation of the agency operations.
Beginning in 2008, substantially all of our term life insurance revenues were
being generated by the sale of leads to third parties and to local
agents.
 
 Beginning
in 2008, InsWeb began generating both subscription and display advertising
revenues from sales of advertising on its Agent Directory pages. These pages
display listings of several insurance companies and not more than eight local
agents for the consumer to contact.
 
 Beginning
in 2009, our health and small business insurance revenues were being generated
by the sale of leads to third parties and to local agents.
 
 We have
focused our efforts on automobile insurance, which accounted for approximately
84% of our transaction revenues in 2008 and 2007. For the six month period
ending June 30, 2009 automobile insurance accounted for 83% of our
transaction revenues.  For the comparable six month period in 2008,
automobile insurance accounted for approximately 85% of transaction revenues.
 We anticipate that automobile insurance will continue to account for a
substantial portion of our revenues for the foreseeable future.
 
 14
   
 Results
of Operations
 
 The
following financial highlights and key metrics are provided as a resource for
our investors
 
 Three months Ended
                    
                    Six months EndedJune
      30,
                    
                    June
      30,
                    
                    June 30,
                    
                    June 30,2009
                    
                    2008
                    
                    2009
                    
                    2008Revenues
      (in thousands):Auto
                    $
                    6,554
                    
                    $
                    7,266
                    
                    $
                    14,540
                    
                    $
                    18,462Property
                    860
                    
                    1,015
                    
                    
                    1,755
                    
                    
                    1,947Term
      life
                    359
                    
                    360
                    
                    
                    808
                    
                    
                    845Agent
      directory
                    123
                    
                    105
                    
                    
                    234
                    
                    
                    456All
      other
                    45
                    
                    5
                    
                    
                    88
                    
                    
                    12Total
      transaction fees
                    $
                    7,941
                    
                    $
                    8,751
                    
                    $
                    17,425
                    
                    $
                    21,722Direct
      marketing costs (in thousands):
                    $
                    5,334
                    
                    $
                    6,238
                    
                    $
                    11,879
                    
                    $
                    15,543Direct
      marketing costs as a percent of revenues:
                    67
                    %
                    71
                    %
                    68
                    %
                    71
                    %Cash,
      cash equivalents, short term investments, and restricted cash (in
      thousands):
                    $
                    7,877
                    
                    $
                    10,674
                    
                    $
                    7,877
                    
                    $
                    10,674Account
      receivable (in thousands):
                    $
                    1,977
                    
                    $
                    2,360
                    
                    $
                    1,977
                    
                    $
                    2,360Day
      sales outstanding (DSO):
                    31
                    
                    31
                    
                    31
                    
                    31Staffing:
                    87
                    
                    84
                    
                    87
                    
                    84
  Transaction Fees.Automobile insurance transaction fees (consisting of lead fees and click
through fees) decreased to $6.6 million and $14.5 million for the three and six
months ended June 30, 2009, from $7.3 million and $18.5 million for the
comparable periods in 2008. Revenue per consumer was $2.76 and $2.73 for the
three and six months ended June 30, 2009, a decrease from $3.57 and $3.77 for
the comparable periods in 2008. The decrease in revenue per consumer is a direct
result of more consumers being acquired through other lead
aggregators.  Consumers acquired through other aggregators generate
less revenue since we are only able to sell these leads to insurance companies
that the consumer has not already seen from the other aggregators.
 
 Property
insurance transaction fees (consisting primarily of lead fees) decreased to
$0.9 million and $1.8 million for the three and six months ended
June 30, 2009, from $1.0 million and $1.9 million for the comparable
periods in 2008.
 
 Term life
insurance transaction fees (consisting primarily of lead fees) remained level at
$0.4 million and $0.8 million for the three and six months ended June 30, 2008
and 2009.
 
 Auto,
property and term life transaction fees are expected to remain at current levels
for the third quarter, but they are expected to decrease during our
traditionally slower fourth quarter.
 
 Agent
directory revenues (consisting of subscription revenue and advertising revenues)
remained level at $0.1 million for the three months ended June 30, 2009 and 2008
and decreased to $0.2 million for the six months ended June 30, 2009 from $0.5
million for the comparable period in 2008.  This decrease was due
primarily to lower advertising revenues generated by selling banner ads on the
directory site. Agent directory revenues are expected to remain at current
levels for the remainder of 2009.
 
 15
 
  
 
 Operating
Expenses
  Three months ended
                      June 30,
                    
                    
                    Percentage
                      change from(in thousands, except percentages)
                    
                    2009
                    
                    
                    2008
                    
                    
                    prior periodOperating
      expenses:Direct
      marketing
                    
                    $
                    5,334
                    
                    
                    $
                    6,238
                    
                    
                    
                    (14
                    )
                    %Sales
      and marketing
                    
                    
                    1,671
                    
                    
                    
                    1,433
                    
                    
                    
                    17
                    
                    %Technology
                    
                    
                    901
                    
                    
                    
                    811
                    
                    
                    
                    11
                    
                    %General
      and administrative
                    
                    
                    643
                    
                    
                    
                    1,373
                    
                    
                    
                    (53
                    )
                    %
 
 
 Six months ended
                      June 30,
                    
                    
                    Percentage
                      change from(in thousands, except percentages)
                    
                    2009
                    
                    
                    2008
                    
                    
                    prior periodOperating
      expenses:Direct
      marketing
                    
                    $
                    11,879
                    
                    
                    $
                    15,543
                    
                    
                    
                    (24
                    )
                    %Sales
      and marketing
                    
                    
                    3,441
                    
                    
                    
                    2,728
                    
                    
                    
                    26
                    
                    %Technology
                    
                    
                    1,859
                    
                    
                    
                    1,627
                    
                    
                    
                    14
                    
                    %General
      and administrative
                    
                    
                    1,446
                    
                    
                    
                    2,399
                    
                    
                    
                    (40
                    )
                    %
 Direct
Marketing. Direct marketing expenses consist of advertising, promotions
and fees incurred to drive consumer traffic to the InsWeb online marketplace.
Our marketing strategy is designed to increase consumer traffic to our website
and to drive awareness of our insurance products and services. We employ various
means of advertising, which consist primarily of online advertising, sponsored
search, portal advertising, e-mail campaigns and strategic partnerships with
high-profile online companies and other online lead generators that use our
network to complement their network of providers. Fees related to our online
marketing are expensed in the period in which the consumer clicks through from a
partner’s website to InsWeb’s website, or in some cases, when the consumer’s
activity on the InsWeb website generates a lead to an insurance
provider.
 
 Direct
marketing expenses for the three and six months ending June 30, 2009
decreased to $5.3 million and $11.9 million from $6.2 million and $15.5 million
in the comparable periods in 2008. Direct marketing expense as a percent of
total revenues was 67% and 68% for the three and six months ended June 30, 2009,
compared to 71% for both comparable periods in 2008. Direct marketing expenses
per consumer was $1.12 and $1.34 for the three and six months ended June 30,
2009, a decrease from $2.28 and $2.39 for the comparable periods in 2008. There
has also been a significant increase in consumers being acquired through the
agent directory program, with minimal costs associated with the acquisition.
Excluding agent directory consumers, more consumers were acquired from other
aggregators with whom we have revenue sharing arrangements. As a result, direct
marketing expense per consumer fell to $1.92 and $1.97 for the three and six
months ending June 30, 2009 from $2.71 and $2.82 for the comparable periods in
2008.  As mentioned earlier, consumers acquired through other
aggregators generate less revenue per consumer. Direct marketing expenses are
expected to remain at current levels for the third quarter, but  are
expected to be lower during the traditionally slower fourth
quarter.  Marketing costs per consumer are expected to remain at
current levels for the remainder of 2009.
 
 Sales and
Marketing. Sales and marketing expenses consist primarily of payroll and
related expenses, including employee benefits, facility costs,
telecommunications and systems costs, for our sales and marketing personnel.
Sales and marketing expenses increased to $1.7 million and $3.4 million for the
three and six months ended June 30, 2009, from $1.4 million and $2.7 million for
the comparable periods in 2008. The increase was primarily due to an increase in
headcount related and consulting expenses. Sales and marketing expenses for the
remainder of 2009 are expected to remain consistent with current spending
levels.
  16
   
 Technology.
Technology expenses consist primarily of payroll and related expenses, including
employee benefits, facility and systems costs, for product and site development
personnel involved with our technology initiatives. Technology expenses
increased to $0.9 million and $1.9 million for the three and six months ended
June 30, 2009, from $0.8 million and $1.6 million for the comparable periods in
2008. The increase was primarily due to an increase in headcount related
expenses and software licenses. Technology expenses for the remainder of 2009
are expected to remain consistent with current spending levels.
 
 General and
Administrative. General and administrative expenses consist primarily of
payroll and related expenses, including employee benefits, facility costs,
telecommunications and systems costs, for our general management, administrative
and accounting personnel, as well as other general corporate expenses. General
and administrative expenses decreased to $0.6 million and $1.4 million for the
three and six months ended June 30, 2009, from $1.4 million and $2.4 million for
the comparable periods in 2008. The decrease was primarily due to a decrease in
legal costs associated with the patent litigation settlement in April 2009, a
decrease in share-based compensation expense and recognition of severance
related costs associated to the departure of the chief operating officer in June
2008. General and administrative expenses are expected to remain consistent with
current spending levels for the remainder of 2009.
 
 Income
Taxes.
 
 Theprovision for income
taxes was $35,000 for the three months ended June 30, 2009, compared to a
benefit from income taxes of $9,000 for the comparable period in 2008. No
provision or benefit was recognized for the six months ended June 30, 2009 and
for the comparable period in 2008.
 
 Interest
Income
 
 Interest income was $6,000 and $20,000
for the three and six months ended June 30, 2009, a decrease from $60,000 and
$149,000 for the comparable periods in 2008 relating to the decrease in InsWeb’s
cash and investment balances and decrease in yield on InsWeb’s investment
securities. Interest income represents interest earned on InsWeb’s investment
securities.
 
  17
 
  
 Critical
Accounting Policies
 
 InsWeb’s
discussion and analysis of its financial condition and results of operations are
based on InsWeb’s consolidated financial statements which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires InsWeb to make estimates
and judgments that affect the reported amounts of assets and liabilities and 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. InsWeb bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions. InsWeb believes the following
critical accounting policies affect its more significant judgments and estimates
used in the preparation of its consolidated financial statements.
 
 Revenue Recognition.InsWeb’s
principal source of revenues is transaction fees from participating insurance
providers, either directly from an insurance company or from a local insurance
agent. While quotes and other information obtained through InsWeb’s online
insurance marketplace are provided to consumers free of charge, InsWeb earns
revenues from participating insurance companies or agents based on the delivery
of qualified leads. In certain instances, consumers are provided the opportunity
to link directly to a third-party insurance provider’s website (“Sponsored Web
Link” program). In these situations, the consumer will complete the third-party
company’s online application, and InsWeb will be paid a fee for that consumer
link or “click-through.” InsWeb recognizes revenue when (i) persuasive evidence
of an arrangement between InsWeb and the customer exists, (ii) delivery of the
product to the customer has occurred or service has been provided to the
customer, (iii) the price to the customer is fixed or determinable and (iv)
collectability of the sales price is reasonably assured.
 
 Contingencies. As discussed in
Part I, Item 1, “Financial Statements — Note 12 — Commitments and
Contingencies.”Notes to Consolidated Financial Statements of this report, InsWeb
is a defendant in: i) a class action lawsuit that alleges InsWeb violated
certain federal securities laws at the time of its initial public offering; and
ii) a securities lawsuit alleging certain officers and directors and significant
shareholders violated the short swing trading prohibition of
Section 16(b) of the Securities Exchange Act.  InsWeb cannot
accurately predict the ultimate outcome of these matters at this time and
therefore, cannot estimate the range of probable loss, if any, due to the
inherent uncertainties of litigation. InsWeb believes it has meritorious
defenses; however InsWeb cannot assure that it will prevail in any of these
actions. An unfavorable outcome could have a material adverse effect on InsWeb’s
financial condition, results of operations and cash flows.
 
 Share-Based Compensation.InsWeb accounts for share-based compensation in accordance with Statement
of Financial Accounting Standards No. 123(R), Share-Based Payment. Under
the provisions of Statement 123(R), share-based compensation cost is generally
estimated at the grant date based on the award’s fair value as calculated by the
Black-Scholes-Merton (BSM) option-pricing model. The BSM model requires various
highly judgmental assumptions including expected option life, volatility, and
forfeiture rates. If any of the assumptions used in the BSM model change
significantly, share-based compensation expense may differ materially in the
future from that recorded in the current period. Generally, compensation cost is
recognized over the requisite service period. However, to the extent performance
conditions affect the vesting of an award; compensation cost will be recognized
only if the performance condition is satisfied. Compensation cost will not be
recognized, and any previously recognized compensation cost will be reversed, if
the performance condition is not satisfied.
 
  18
 
  
 
 
 Critical
Accounting Policies (continued)
 
 Income
Taxes.InsWeb accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes.
The deferred tax assets and/or liabilities are determined by multiplying the
differences between the financial reporting and tax reporting bases for assets
and liabilities by the enacted tax rates expected to be in effect when such
differences are recovered or settled.
 
 InsWeb
has unrecognized tax benefits of approximately $0.3 million (none of which, if
recognized, would favorably affect InsWeb’s effective tax rate). InsWeb does not
believe there will be material changes in its unrecognized tax positions over
the next twelve months.
 
 As of
December 31, 2008, InsWeb had net operating loss carry forwards of
approximately $190 million for federal income tax purposes and $76 million for
state income tax purposes, respectively. The federal net operating loss carry
forwards will begin to expire in the year 2011 and state net operating loss
carry forwards will begin to expire in 2012. InsWeb’s ability to utilize a
portion of its net operating loss carry forwards to offset future taxable income
may be subject to restrictions attributable to equity transactions that result
in changes in ownership as defined in the Tax Reform Act of 1986. These
restrictions may limit, on an annual basis, InsWeb’s future use of its net
operating loss carry forwards.
 
 The
carrying value of our deferred tax assets, which was approximately $70 million
at December 31, 2008, is dependent upon our ability to generate sufficient
future taxable income. We have established a full valuation allowance against
our net deferred tax assets to reflect the uncertainty of realizing the deferred
tax benefits, given historical losses. A valuation allowance is required when it
is more likely than not that all or a portion of a deferred tax asset will not
be realized. This assessment requires a review and consideration of all
available positive and negative evidence, including our past and future
performance, the market environment in which we operate, the utilization of tax
attributes in the past, and the length of carryforward periods and evaluation of
potential tax planning strategies. We expect to continue to maintain a full
valuation allowance until an appropriate level of profitability is sustained or
we are able to develop tax strategies that would enable us to conclude that it
is more likely than not that a portion of our deferred tax assets would be
realizable.
 
 
 19
 
 Liquidity
and Capital Resources
 
 Summarized cash flow information is as
follows (in thousands):
 
 Six months ended
                    June 30,2009
                  
                  2008Cash
      provided (used) by operating activities
                  
                  $
                  (1,381
                  )
                  $
                  705Cash
      used in investing activities
                  
                  (2,108
                  )
                  (305
                  )Cash
      provided (used) by financing activities
                  
                  23
                  
                  (503
                  )
 
 At June
30, 2009, InsWeb’s principal source of liquidity was $5.8 million in cash
and cash equivalents. Since inception, we have financed our operations primarily
through the sale of preferred and common stock.
 
 For the
six months ended June 30, 2009, net cash used by operating activities was $1.4
million, primarily consisting of our net loss adjusted for non-cash share-based
compensation and depreciation and amortization of property, equipment and
intangible assets of $0.9 million.  An increase in accounts receivable
of $0.5 million and a decrease in accrued expenses and accounts payable of $0.3
million decreased cash provided by operations, but was partially offset by a
decrease in prepaid expenses and other assets of $0.3 million and an increase in
deferred revenue of $28,000.  For the comparable six month period
ended June 30, 2008, net cash provided by operating activities was $0.7 million,
primarily due to our net loss of $0.3 million as adjusted for non-cash
share-based compensation of $0.4 million, depreciation and amortization of
property, equipment and intangible assets of $74,000, a decrease in accounts
receivable of $69,000, a decrease in prepaid expenses of $126,000, an increase
in accounts payable of $170,000, and an increase in accrued expenses of
$168,000.
 
 For the
six months ended June 30, 2009, net cash used in investing activities was $2.1
million relating to cash restricted for the use as collateral to obtain a
commercial credit line.  InsWeb uses this commercial credit line for
many of its larger, recurring accounts payable and will earn a cash rebate of
approximately 50-95 basis points, dependent upon the purchase volume during the
2009 calendar year.  For the comparable six months ended June 30,
2008, net cash used in investing activities was $305,000, representing purchases
of property, equipment and intangible assets.
 
 For the
six months ended June 30, 2009, net cash provided by financing activities was
$23,000, and was primarily attributable to proceeds from our employee stock
purchase plan. For the comparable six month period ended June 30, 2008, net
cash used by financing activities was $0.5 million, consisting of $0.9 million
used for a cash settlement of equity awards in connection with the departure of
the president and COO in June, 2008, offset by proceeds from exercise of stock
options and stock issued from our employee stock purchase plan of $0.4
million.
 
 We have a
non-cancelable 10-year operating lease agreement through April 2011 for office
space in the Sacramento area which currently houses our corporate headquarters.
We have options to extend the lease at the end of the lease term, and have the
right of first refusal on other office space in the complex.
 
 Aggregate
contractual cash obligations, net of contractual sublease income, as of
June 30, 2009 is summarized as follows (in thousands):
  Gross lease
                      commitments
                    
                    Sublease
                      income
                    
                    Net lease
                      commitmentSix
      months ending December 31, 2009
                    
                    $
                    539
                    
                    $
                    (30)
                    
                    $
                    509Year
      ending December 31, 2010
                    
                    1,078
                    
                    (17)
                    
                    1,061Year
      ending December 31, 2011
                    
                    359
                    
                    —
                    
                    359Thereafter
                    
                    —
                    
                    —
                    
                    —$
                    1,976
                    
                    $
                    (47)
                    
                    $
                    1,929
 
 We
currently anticipate that our cash and cash equivalents will be sufficient to
meet our anticipated cash needs for working capital and capital expenditures for
at least the next 12 months. Although we do not anticipate the need for
additional financing, we nevertheless may require additional funds to meet
operating needs, or to expand our business internally or through acquisition. We
cannot be certain that additional financing will be available when required, on
favorable terms or at all. If we are not successful in raising additional
capital as required, our business could be materially harmed. If additional
funds were raised through the issuance of equity securities, the percentage
ownership of our then-current stockholders would be reduced.
 
 20
 
  
 ITEM
      3.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK.
 
 There
have been no material changes to our disclosures related to certain market risks
as reported under Part II, Item 7A, “Quantitative and Qualitative
Disclosures About Market Risk,” in our Annual Report on Form 10-K for the
year ended December 31, 2008, as filed with the U.S. Securities and
Exchange Commission.
 
 ITEM
4.                                SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
 None.
 
 ITEM
      4T.
              CONTROLS
      AND PROCEDURES
 
 (a)
              Under
      the supervision and with the participation of our management, including
      our Chief Executive Officer and Chief Financial Officer, we evaluated the
      effectiveness of our disclosure controls and procedures, as such term is
      defined under Rule 13a-15(e) promulgated under the Securities
      Exchange Act of 1934, as amended. Based upon that evaluation, our Chief
      Executive Officer and Chief Financial Officer concluded that our
      disclosure controls and procedures were effective as of the end of the
      period covered by this quarterly
report.
 
 (b)
              There
      has been no change in our internal control over financial reporting during
      the three months ended June 30, 2009 that has materially affected, or
      is reasonably likely to materially affect, our internal control over
      financial reporting.
 
 PART II:
              OTHER
      INFORMATION
 
 ITEM
1.                      LEGAL
PROCEEDINGS
 
 See Part I, Item 1,
“Financial Statements — Note 12 — Commitments and Contingencies.”
 
 ITEM
      1A.
              RISK
      FACTORS.
 
 Our
future business, operating results and financial condition are subject to
various risks and uncertainties, including those disclosed in Part I, Item
1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended
December 31, 2008, as filed with the U.S. Securities and Exchange
Commission. There have been no material changes to the risk factors as so
disclosed.
 
 ITEM
6.                      EXHIBITS
 
 Exhibit
                Number
              
              Description
      of Document31.1
              
              Certification
      of Chief Executive Officer, pursuant to Exchange Act
      Rule 13a-14(a).31.2
              
              Certification
      of Chief Financial Officer, pursuant to Exchange Act
      Rule 13a-14(a).32
              
              Certification
      of Chief Executive Officer and Chief Financial Officer, pursuant to 18
      U.S.C. Section 1350.
 
 21
 
  
 SIGNATURE
 
 In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
 
 
 Dated:
      August 11, 2009
              INSWEB
      CORPORATION(Registrant)/s/
      STEVEN J. YASUDASteven
      J. YasudaChief
      Accounting Officer
 
  22
 
 
  EXHIBIT
31.1
 
 INSWEB
CORPORATION
 
 CERTIFICATION
OF CHIEF EXECUTIVE OFFICER
 
 I,
Hussein A. Enan, Chairman and Chief Executive Officer of InsWeb Corporation,
certify that:
 
 (1)
              I
      have reviewed this quarterly report on Form 10-Q of InsWeb
      Corporation;
 
 (2)
              Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;
 
 (3)
              Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      registrant as of, and for, the periods presented in this
      report;
 
 (4)
              The
      registrant’s other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e), for the
      registrant and we have:
 
 a.
              Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;
 
 b.
              Evaluated
      the effectiveness of the registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and
 
 c.
              Disclosed
      in this report any change in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent
      fiscal quarter that has materially affected, or is reasonably likely to
      materially affect, the registrant’s internal control over financial
      reporting.
 
 (5)
              The
      registrant’s other certifying officer and I have disclosed, based on our
      most recent evaluation of internal control over financial reporting, to
      the registrant’s auditors and the audit committee of registrant’s board of
      directors:
 
 a.
              All
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant’s ability to record,
      process, summarize and report financial information;
  and
 
 b.
              Any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant’s internal control
      over financial reporting.
 
 
 /s/
      HUSSEIN A. ENANDated:
      August11, 2009
              Hussein
      A. EnanChairman
      and Chief Executive Officer












INSWEB
CORPORATION





CERTIFICATION
OF CHIEF FINANCIAL OFFICER





I, Kiran
Rasaretnam, Chief Financial Officer of InsWeb Corporation, certify
that:





(1)
            I
      have reviewed this quarterly report on Form 10-Q of InsWeb
      Corporation;





(2)
            Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;





(3)
            Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      registrant as of, and for, the periods presented in this
      report;





(4)
            The
      registrant’s other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e), for the
      registrant and we have:





a.
            Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;





b.
            Evaluated
      the effectiveness of the registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and





c.
            Disclosed
      in this report any change in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent
      fiscal quarter that has materially affected, or is reasonably likely to
      materially affect, the registrant’s internal control over financial
      reporting.





(5)
            The
      registrant’s other certifying officer and I have disclosed, based on our
      most recent evaluation of internal control over financial reporting, to
      the registrant’s auditors and the audit committee of registrant’s board of
      directors:





a.
            All
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant’s ability to record,
      process, summarize and report financial information;
  and





b.
            Any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant’s internal control
      over financial reporting.








/s/
      KIRAN RASARETNAMDated:
      August 11, 2009
            Kiran
      RasaretnamChief
      Financial Officer







EXHIBIT
32





INSWEB
CORPORATION





CERTIFICATION
PURSUANT TO


18
U.S.C. SECTION 1350,


AS
ADOPTED PURSUANT TO


SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002





In
connection with the Quarterly Report of InsWeb Corporation (the “Company”) on
Form 10-Q for the quarter ended June 30, 2009 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), each of the
undersigned, hereby certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:





(1)
            The
      Report fully complies with the requirements of Section 13(a) of
      the Securities Exchange Act of 1934;
and





(2)
            The
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.





A signed
original of this written statement required by Section 906 has been
provided to InsWeb Corporation, and will be retained by InsWeb Corporation and
furnished to the Securities Exchange Commission or its staff upon
request.








/s/
      HUSSEIN A. ENANHussein
      A. EnanChairman
      and Chief Executive OfficerDated:
      August 11, 2009/s/
      KIRAN RASARETNAMKiran
      RasaretnamChief
      Financial OfficerDated
      : August 11, 2009