**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K**

**x**          ANNUAL REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 for the fiscal year ended December 31, 2006.

**o**             TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934 for the transition period from *             * to*             *.

**Commission File No. 000-26781**

**INSURE.COM,INC.**

(Exactname of Registrant as specified in its charter)

| **Delaware**                      |   | **36-3299423**         |
|-----------------------------------|--------|------------------------|
| State or other jurisdiction       |   | (IRS Employer          |
| of incorporation or organization) |   | Identification Number) |

 

**8205South Cass Avenue, Suite 102**

**Darien,Illinois 60561**

**(630) 515-0170**

(Address, including zip code,and telephone number, including

areacode, of Registrant’s principal executive offices)

Securitiesregistered pursuant to Section 12(b) of the Act: 

|                                 | **Title of Each Class** | ** ** |
|---------------------------------|-------------------------|------------|
| Common Stock, $.003 par value   |
| Preferred Stock Purchase Rights |

 

Securitiesregistered pursuant to Section 12(g) of the Act: **None**

**Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act.**o Yes  x No

Indicate by checkmark if theregistrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act. o Yes  x No

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. x Yes  o No

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of the registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K. x

Indicate by a check markwhether the registrant is a large accelerated filer, an accelerated filer or anon-accelerated filer. See definition of “accelerated filer” and “largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

| Large Accelerated Filer o | Accelerated Filer  o | Non Accelerated  Filer x |
|---------------------------|----------------------|--------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Act). o Yes  x No

Aggregate market value of theRegistrant’s voting stock held by non-affiliates on March 8, 2007, basedon the closing price of said stock on the Nasdaq Capital Market on such date,was $9,702,337.

As of March 8, 2007,7,301,469****shares of the Registrant’sCommon Stock, $.003 par value of the Registrant were outstanding.

**Documents Incorporated by Reference**

Portions of the Registrant’s definitive proxystatement for the annual meeting of stockholders to be held on May 17,2007, to be filed pursuant to Regulation 14(A) are incorporated byreference into Part III of this Form 10-K.

 

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**PART I**

**CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS**

Because we want toprovide you with more meaningful and useful information, this Annual Report on Form 10-Kincludes forward-looking statements within the meaning of Section 27A ofthe Securities Act of 1933, as amended, or the Securities Act, and Section 21Eof the Securities Exchange Act of 1934, as amended, or the Exchange Act. Theseforward-looking statements reflect our current expectations and projectionsabout our future results, performance, prospects and opportunities. We haveattempted to identify these forward-looking statements by using words such as “may,”“will,” “expects,” “anticipates,” “believes,” “intends,” “estimates,” “could,”or similar expressions. These forward-looking statements are based oninformation currently available to us and are subject to a number of risks in2007 and beyond. Actual events may differ materially from those expressed in,or implied by, these forward-looking statements. These risks, uncertainties,and other factors include, without limitation, the following:

·       ourability to achieve or sustain profitability;

·       demandfor life insurance;

·       significantfluctuations in our quarterly results;

·       ourability to develop our brand recognition;

·       ournumber of agency contracts;

·       ourability to generate revenue from the sale of Internet leads for lines ofinsurance other than life;

·       theclosing of the sale of our building in Colorado, scheduled for April 30,2007;

·       ourability to manage our growth;

·       providingaccurate insurance quotes;

·       ourability to manage our expenses, quickly respond to changes in our marketplaceand meet consumer expectations;

·       thecomplexity of our technology and our use of new technology;

·       ourability to hire and retain senior management and other qualified personnel;

·       intensecompetition in the insurance industry;

·       ourability to keep pace with technological changes and future regulationsaffecting our business;

·       constraintsof the systems we employ; and

·       ourability to raise additional capital if necessary.

See the section of this Annual Report on Form 10-Kentitled “Risk Factors” for a description of these and other risks,uncertainties, and factors.

You should not place unduereliance on any forward-looking statements. Except as required by the federalsecurities laws, we undertake no obligation to publicly update or revise anyforward-looking statements, whether as a result of new information, futureevents, changed circumstances, or any other reason after the date of this annualreport. Unless otherwise expressly stated, all references to “we,” “us,” “our,”“Insure.com,” and the “Company” refer to Insure.com, Inc. and itssubsidiaries. The information contained on our Web sites, or Web sites that arelinked to our Web sites, is specifically not incorporated herein by reference.

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**ITEM 1.**                BUSINESS

**Overview**

We are an insurance agency and brokerage headquarteredin Darien, Illinois. We own and operate a comprehensive online consumerinsurance information service, accessible at www.Insure.com, which caters tothe needs of self-directed insurance shoppers. Since our inception in 1984, wehave been continuously developing a proprietary and comprehensive insuranceprice comparison and order-entry system that provides instant quotes from over30 life insurance companies. We use this database to provide customers with alarge array of comparative life insurance quotes online, over the phone or bymail, and we allow the customer to purchase insurance from the company of theirchoice either online or over the phone with our licensed insurance customerservice staff. Our website also provides insurance information anddecision-making tools, along with access to other forms of personal insurance,such as auto, homeowners, renters, long-term care, health and travel insurancethrough various third parties. We generate revenues from the receipt ofcommissions and fees paid by various sources that are tied directly to thevolume of insurance sales or traffic that we produce. We conduct our insuranceagency and brokerage operations using licensed agents who are compensated, inpart, based on the volume of business sold and we generate prospective customerinterest using traditional direct response advertising methods conductedprimarily offline.

For the ten-year periodended December 31, 2006, we have spent a total of $79.5 million indirect-to-consumer advertising and have sold approximately 183,000 newpolicies.

**Industry Background**

*The TraditionalInsurance Market in the United States*

The insurance market inthe United States represents over $1 trillion in annual paid premiums. Insuranceproducts are widely held by households and businesses. The United Statesinsurance market is broadly divided into two categories: life and healthinsurance and property and casualty insurance. Over 4,000 insurance companiesdistribute their products through a network of agents and brokers or selldirectly to consumers. There are approximately one million individuals licensedas agents and brokers to sell insurance in the United States. A variety ofdistribution systems have evolved, including “captive” one-company agentsand independent agents and brokers that typically represent only two to fiveinsurance companies.

*Challenges toPurchasing and Delivering Insurance*

There are numerous challenges to the informed purchaseand delivery of insurance products. Some of these challenges are due to thespecialized nature of insurance products and other challenges result from theway in which insurance has been traditionally distributed.

These challengesinclude:

·       *Fragmented delivery.  *Insurance products are availablefrom captive agents, independent agents and direct distribution channels aswell as new entrants, including banks and other financial institutions. Becauseof this fragmentation, there has been no single source of policy coverage andpricing information from which a consumer can obtain unbiased and completeinformation.

·       *Quantity and variation of products.  *Insurance policiesvary by type of insurance product, underwriting guidelines, insurance company,jurisdiction and the particular characteristics and preferences of the consumer.This creates a complex pricing structure that is not readily understandable orcomparable without the use of technology.

·       *Information-intensive underwriting process.  *Theunderwriting process requires consumers to submit, and insurance companies tocollect, large amounts of individualized and personal 

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information. This processis difficult, time consuming and, if not accurately completed, will delay theapproval of a policy.

·       *Negative consumer perception.  *Consumers often believethat they paid too much for their insurance and were not properly informed byinsurance agents. Face-to-face contact with an insurance agent mayconvey the sense of a high-pressure sales environment with a lack ofunbiased information.

·       *Misalignment of interests between insurance agents and consumers.  *Commission-basedinsurance agents represent only a limited number of insurance companies. Accordingly,they are compensated to promote and sell a limited range of products, which isin direct conflict with the consumer’s need to obtain insurance at the lowestprice.

·       *Inconvenient and time-consuming purchase.  *Researchingpolicy coverage, contacting competing insurance companies, collecting informationand obtaining insurance quotes require large blocks of time usually duringregular working hours. Consumers are often unable to shop for insurance ontheir own time and from the convenience of their own home.

Distribution of insurancethrough traditional agent and broker sales forces is expensive and inefficientfor insurance companies. Traditional agency distribution methods have highfixed costs associated with establishing and maintaining numerous branch andlocal offices, high commission structures, recurring training costs and highagent turnover. In addition, insurance companies often do not target allsegments of the population because of the inability to profitably serve thesesegments through traditional distribution channels.

*Online Insurance*

The growing acceptance of the Internet and electroniccommerce presents a significant opportunity for the insurance industry byallowing consumers to more efficiently and effectively research and transactwith insurance companies. The fragmentation of the insurance industry and thesignificant price and product variation has led consumers to seek alternativemeans of purchase and insurance companies to seek alternative means ofdistribution. We believe that the vast information sharing and communicationspower of the Internet will significantly improve the insurance industry forboth consumers and insurance companies.

Characteristics ofthe insurance product that make it particularly well suited for delivery overthe Internet include:

·       insuranceis an information-based product that needs no physical shipment orwarehousing of merchandise;

·       througha single medium, consumers can access information and compare a wide variety ofinsurance companies’ products;

·       effectivetwo-way communication flow via the Internet allows insurance companies tointeract with consumers and rapidly collect underwriting information;

·       enhancedconvenience, privacy and control over the process of researching and purchasinginsurance without the pressure of a commissioned agent; and

·       abilityof insurance companies to target and serve segments of the market whichpreviously were unprofitable through traditional distribution channels byreducing the need for large sales staff and costly local offices.

Many companies are trying to address the onlineinsurance opportunity. Some companies have created “lead referral” Web sitesfor the purpose of capturing consumer name and address information to 

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be forwarded, as aprospective sales lead, to a specified insurance company or its traditional salesforce. Many of these Web sites are paid up-front referral fees, are alignedwith a limited number of insurance companies and often do not quote many of thelowest priced insurance policies. Consumers are often still required tocomplete their purchase through a commissioned salesperson. Additionally, thesecompanies typically do not offer any personalized customer service or insurancefulfillment capabilities and, therefore, do not offer a completequote-to-policy-delivery insurance solution.

Existing insurance companies and their agents andbrokers have created Web sites to sell their insurance products online as analternative to their traditional sales activities. Some companies have createdWeb sites with the primary purpose of creating an insurance sale online for asingle insurance company or group of insurance companies with little or nocomparative overview of prices. These companies perpetuate the fragmentation inthe industry by not offering a comprehensive database of pricing and coverageinformation.

As a result of theshortcomings inherent in the online lead referral and single companyapproaches, we have developed a large-scale, comprehensive and unbiasedInternet-based insurance service. Self-directed consumers willlikely be attracted to the broadest selection of insurance companies and acompelling value proposition based upon price, time and transactionfulfillment.

**The Insure.comSolution**

We believe that Insure.com provides the mostcomprehensive Internet-based insurance service available. Our websiteenables consumers to obtain instant quotes from over 30 life insurancecompanies and provides access to quotes for several different insuranceproducts, including health, auto and home insurance, through third parties. Customerswho prefer an offline experience can receive comparative life insurance quotesfrom our licensed insurance professionals and can complete an insuranceapplication over the phone. Our web site provides consumers withinsurance-related information and decision-making tools. Combining the reachand efficiency of the Internet with our proprietary database and industryexpertise developed over the past 20 years, we provide a complete “quote-to-policy-delivery”insurance solution.

We believe we havecreated a model that addresses the challenges faced by traditional insurancedistribution methods in a manner that offers significant benefits to bothconsumers and insurance companies. Our model allows consumers to:

·       researchand become informed about insurance coverage issues;

·       efficientlysearch for, analyze and compare insurance products;

·       quicklyrequest and obtain insurance quotes, either online or by phone; and

·       easilyselect and purchase insurance from the insurance company of their choice.

Our solution provides the following principaladvantages to both consumers and insurance companies:

*ComprehensiveSource of Insurance Information and Products.**  *Using our easy-to-navigate web site, consumers canaccess insurance-related information and decision-making tools, as well as alibrary of thousands of insurance articles. Our Web site also providesinsurance quotes from over 30 life insurance companies, and access to quotesfrom third parties for several other types of insurance including privatepassenger automobile, dental, individual and family medical, long-term care,disability and small group medical. We believe we offer consumers access to thelargest, most complete repository of comparative information on insuranceproducts, insurance pricing and insurance providers. We empower consumers withrelevant current pricing knowledge, coverage information and independent ratinginformation so consumers can make informed buying decisions.

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*Guaranteed-AccurateInstant Quotes.**  *Over thepast 20 years, we have developed what we believe to be the most complete,regularly updated database used to determine insurance quotes. This databaseserves both the Internet shopper as well as the customer receiving quotes overthe phone from a licensed customer service representative. The ability toobtain instant quotes on the Internet is the first priority for consumerspurchasing insurance online, according to a recent survey by an independentresearch group. We obtain and regularly update all of our pricing, underwritingand policy coverage information contained in our databases with informationobtained directly from the insurance company to ensure accuracy. We offer consumersa unique $500 cash reward guarantee that we will provide an accurate quote. Inaddition, we also offer a $500 cash reward guarantee that we will provide thelowest price quote available with respect to term life insurance policies. Webelieve these Insure.com guarantees are unmatched by any competitor.

*Consumerin Control.**  *We putconsumers in control of their insurance purchase decisions by providing themwith the ability to efficiently search, analyze and compare prices of insuranceproducts from multiple insurance companies in complete privacy, on their owntime and free from the pressure to buy associated with traditional face-to-facesales. Consumers choose from what we believe is the largest selection ofinsurance companies using their own preferences regarding price and insurancecompany rating. Consumers are able to purchase insurance directly through uswithout ever speaking to a salesperson if they so choose.

*Convenience.**  *Consumers who use our services no longer need tocontact different insurance companies or salespeople, one by one, in order togather information to make educated decisions. Unlike traditional agents whoonly recommend and promote a limited number of insurance companies’ policies,we provide real time access to a large database of over 30 insurance companies’products. Our comparison service presents users with a comprehensive listing ofinsurance quotes, ranked by price. We believe that this large array ofavailable insurance providers in a single destination saves consumers time andeffort in searching for and obtaining the most suitable coverage.

*Quote to Policy DeliverySupport.**  *Consumerscan purchase insurance directly through us. Unlike insurance lead referralservices, at Insure.com we do not abandon the consumer once the insurancecompany has been selected, but continue to provide value-added supportand service throughout the insurance purchase process. We facilitate thisprocess by:

·       providinga licensed agent’s explanation of various pricing, coverage and independentrating information when asked;

·       providingaccess to our licensed agents to assist consumers in completing insuranceapplications;

·       offeringapplications that can be filled out online or over the phone while speakingwith a licensed insurance professional; and

·       arrangingand monitoring the collection of outside underwriting information includingparamedical examinations, laboratory reports and medical records.

*Focuson Customer Service.**  *Customerservice is both our foundation and a strategic priority. We provide a highlevel of customer service throughout the application process and aim toeliminate consumer dissatisfaction and frustration. Our customer service staffhas an average of approximately 10 years of experience in the insuranceindustry.

We implement ourcustomer service objectives by:

·       requiringall new employees to attend “Insure.com University,” a training course thatteaches all of the service tasks we perform for our customers;

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·       monitoringcall center employees to ensure prompt and consistent responses to phone, mailand e-mail inquiries;

·       providingregular application status reports and Web access to our customers on aconsistent basis through policy delivery; and

·       offeringa 30-day cancellation option on term life policies.

*LicensedNational Insurance Agency.**  *Unliketraditional insurance agents who are often only licensed in one or a limitednumber of states, our Company and/or certain of its employees are licensed todistribute insurance throughout the United States. This allows us to processand offer insurance policies to consumers nationwide.

*User Friendly System.**  *At our web site, www.Insure.com, consumers can accessour Internet-based services, research policy options and initiatepurchase requests 24 hours a day, 7 days a week. Our easy to use website is designed for fast viewing and general compatibility with all commonlyused web browsers. Callers can also receive quotes, discuss policy options withour licensed insurance agents and initiate purchase requests over thetelephone.

**Our Strategy**

Our strategy is to be the leading service for allinsurance needs of individuals. The key elements of our strategy include:

*Continueto Build the Insure.com Brand.**  *Wewill continue to pursue a cost-effective marketing strategy designed to promoteour Insure.com brand and consumer awareness of the benefits of researching andbuying insurance through us.

*Continueto provide the customer with the ability to receive life insurance quotes andbuy either online or through a telephone based sales staff.*   Ourwebsite features our proprietary online application technology for most of ourterm life insurance offerings. While providing a very efficient and costeffective method of fulfillment, it is our belief many potential buyers arestill uncomfortable buying insurance online. For that reason, we also providea telephone-based complement to our online sales model for term life insurance.

*Continueto generate revenue from the sale of non-life insurance Internet leads.**  *Our Website attracts visitors whoare interested in information about lines of insurance other than lifeinsurance. We provide this information through our library of articles and withvarious insurance tools. We also provide these visitors with access to quotesfor insurance other than life by directing them to the Websites of variousthird parties, for which we receive fee revenue.

*LeverageCustomer Base.**  *We haveexpanded our insurance product offerings and believe there is significantopportunity to leverage our existing customer base and provide new products tothem without significant customer acquisition costs. We plan to tailor ourmarketing efforts based on consumer profiles contained in our database ofexisting customers. We also believe that the content acquired in the purchaseof the Insure.com Web site will continue to provide us with a permanent newcustomer gateway, thereby allowing us to reduce our future customer acquisitioncosts and our reliance on direct-to-consumer advertising as our primary sourceof new customers.

*Strengthenand Pursue Strategic Relationships and Agreements.**  *We believe that strategic joint ventures andlicensing arrangements are attractive methods of expansion, as they will enableus to combine our expertise in Internet-based insurance offerings withother brand names, complementary services or technology. We plan to pursueadditional relationships and agreements in the future. In addition, we may seekto acquire additional complementary technologies or businesses.

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*Continue to Focus onCustomer Service.**  *Weprovide insurance products and services for consumers from initial evaluationthrough policy delivery. In order to provide the highest level of servicethroughout the insurance buying process, we will monitor feedback fromconsumers and add new features designed to increase customer usage and loyalty.

**Our Business Model**

Our model enablesconsumers to research, shop for and purchase insurance in a manner that webelieve is simpler, faster and more convenient than traditional methods. Evenif the customer prefers to transact this business by phone, we can provideinstant quotes from our database of over 30 life insurance companies, and ouronline application technology provides an efficient order entry platform. Weprovide a complete “quote-to-policy-delivery” insurance solution. Our model:

·       allowsconsumers to *specify the desired coverage* and *indicate their personal**medical conditions* to generate appropriateindividualized quotes;

·       allowsconsumers to *indicate a range**of substitutability* among insurance companies and policyfeatures—for example, consumers may want to purchase insurance from a companyrated “A” or better by A.M. Best;

·       allowsconsumers to *choose the premium* range they areprepared to pay for the policy they want;

·       allowsconsumers to *purchase insurance* with orwithout the involvement of a salesperson;

·       allowsus to *monitor and care* for applicants throughthe underwriting process and policy delivery stage; and

·       allowsinsurance companies to *offer additional policies*withintheir existing pricing structures.

We employ a team approach to customer service. If acustomer wishes to initiate an insurance application request or obtaininformation concerning an application already in process, each and everycustomer service representative is able to provide assistance.

Our process is comprised of four primary stages.

*InitialInformation Evaluation.**  *Consumersvisit our user-friendly web site or speak with a licensed insuranceprofessional to access our comprehensive database of insurance policy pricerates, underwriting guidelines, policy coverage and exclusion information, andfinancial stability ratings of over 30 life insurance companies. To helpconsumers understand the underwriting process, our web site providesinformation and helpful tips on how the underwriting process works.

*Search, Retrieval andComparison.**  *Online**consumerscan quickly obtain a customized cost comparison report in a single search bycompleting a brief and anonymous questionnaire at the start of the onlinesession. Customers who call or request a quote by mail will receive the sameinformation. Each anonymous consumer inquiry triggers a proprietary cost searchand comparison algorithm that sorts through a database of thousands ofinsurance options that is updated daily. The search result, delivered inseconds, is a comprehensive comparison of insurance policies ranked by thelowest price that matches the consumer’s criteria. Consumers can then click toview (or callers can discuss with a licensed insurance professional):

·       specificcoverage details about the policy;

·       exclusionsand guarantees (including policy acceptance guidelines); and

·       latestfinancial stability ratings from five independent rating services.

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*ApplicationProcessing.**  *If aconsumer desires to purchase a policy, the consumer selects an insurancecompany and policy, and then fills out an application while online or on thephone with a licensed insurance professional.  We offer online applications to accelerate theunderwriting process for the most popular of the insurance companies within ourterm life offerings. After the consumer completes, receives via download ormail and signs the completed online application, the consumer returns theapplication to us. We then submit the application to the insurance company forunderwriting on behalf of the consumer. We provide toll-free supportduring business hours to assist the consumer in completing the application.

*Underwriting.**  *During the underwriting process, we regularly trackthe progress of the consumer’s outstanding items. We also assist the insurancecompany by arranging for a paramedical examination and facilitating thecollection of any other outside information needed. We obtain status reportsfrom the insurance company at least every ten days regarding the applicationand regularly communicate this information to the consumer. We review allpolicies for accuracy prior to delivery to the consumer.

If an insurance company declines to issue the policyor issues a counter offer at a higher premium, we send a letter to the consumerstating the reasons that the policy is not being issued as applied for. In thisinstance, we also assist the consumer in finding suitable alternative coveragewhenever asked and wherever possible.

Once a policy has beenissued and been paid for by the consumer, we receive a commission from theinsurance company. We do not charge consumers for using our technology and donot currently sell banner advertising at our Insure.com web site.

**Insurance Products**

Insure.comhistorically offered quote and policy-related information regarding termlife insurance. We now also  offerinstant quotes and related information on additional insurance products forboth individuals and small businesses. Our current product offerings include:

·       *Individual term life.  *This is lifeinsurance coverage that has no cash value and continues for a fixed period oftime such as 15, 20 or 25 years. We have been offering instant quotes anddelivering term life policies since 1993.

·       *Private passenger automobile.  *This provides collisionand liability insurance to individuals for private cars and vehicles. Weprovide an auto insurance price comparison service using third-partytechnology.

·       *Homeowner’s.  *This provides insuranceagainst fire and other perils for personal residences. We provide this serviceusing third-party technology.

·       *Dental.  *This currently includesfixed discount plans, although we have, in the past, offered traditionalindemnity plans. We provide this service using third-party technology.

·       *Individual and family medical.  *This is also known ascomprehensive major medical insurance.  We provide this service using third-partytechnology.

·       *International travel medical.  *Thisprovides medical insurance for U.S. citizens traveling abroad and for foreigncitizens traveling in the United States, as well as other risks associated withinternational travel. We provide a multi-company international medical andtravel insurance price comparison service using third-party technology.

·       *Small group medical.  *Small group medical insurance arethose comprehensive medical plans offered to firms that employ from 2 to 100people. We provide this service using third-party technology.

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·       *“No-exam” life.  *This provides insurance forpersons who want life insurance coverage without a paramedical examination. Weoffer instant quotes using our own, as well as third party, technology.

·       *Renters Insurance.  *Thisprovides insurance against the perils of fire, theft and windstorm for renters.We provide instant quotes using third party technology.

We constantly evaluate ourofferings based on a number of factors, including market acceptance andprofitability. We may decide to add or delete lines of coverage at any time.

**Technology**

*ProprietaryInsurance Information Database.**  *Wemaintain a proprietary database of premium rates and policy coverageinformation from over 30 life insurance companies. We do not rely upon stateinsurance departments or any other regulatory agencies to obtain any insurancepricing information. Instead, we obtain and regularly update all of thepricing, underwriting and policy coverage information contained in ourdatabases directly from each quoted insurance company. We obtain financialstability ratings from A.M. Best, Fitch, Inc., Moody’s, Standard &Poor’s and Weiss Ratings, Inc. and hold licenses to distribute thecopyrighted rating from each of these ratings services. Our dedicated staff offull-time market reporters regularly contacts the insurance companiesquoted on our service and monitors and updates our databases as marketconditions warrant. Each business day we make hundreds of changes to ourinsurance database.

*TechnologySystems.**  *Oursystems for processing quotes and purchase requests, application progresstracking, customer notification and revenue recognition are highly automatedand integrated. Agents and customer service representatives equipped withonline computer terminals can access a customer’s account information from ourdatabase on demand. Our core technology systems use a combination of our ownproprietary technologies and commercially available, licensed technologies. Wehave internally developed and enhanced our proprietary programs over a periodof 20 years using scalable tools and platforms to allow us to rapidlyexpand our network and computing capacity.

An internal programming and system administrationstaff supports our technology. In addition to supporting the systems, our staffcontinually enhances our software and hardware and develops new systems andservices to better service our customers and business objectives.

*Server Hosting and Backup.**  *Our Web sites are hosted by InterNap Network Servicesin Chicago, Illinois.  This grade “A”telecommunications data center provides redundant communications lines to theInternet backbone, emergency power backup, and security, as well as 24-hourmonitoring and engineering support. In addition, we have implemented load balancingsystems and our own redundant servers to provide for fault tolerance. Theseredundancies permit us to perform scheduled maintenance without taking our websites offline. Finally, tape backups are performed nightly to prevent a loss ofdata.

**Marketing**

We attract new consumers and communicate theavailability of new products and services primarily through direct responsemarketing methods. We have established ourselves as a leading Internet-basedinsurance brand through an offline marketing campaign consisting primarily ofmagazine advertisements, radio and direct mail. We employ in-house volumemedia buying and other strategies to minimize the expenses of broad-basedadvertising. Using our proprietary information processing systems and consumerdatabase as well as other resources, we employ statistical analyses to measurethe effectiveness and efficiency of our marketing efforts.

We intend to aggressively pursue a marketing strategydesigned to promote our Insure.com brand and consumer awareness of the benefitsof buying insurance through us.

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Our marketingstrategy is to promote our brand and attract self-directed consumers toour web sites. Our marketing initiatives include:

·       usingdirect response print advertisements placed primarily in financially orientedmagazines and newspapers;

·       advertisingvia radio, television and direct mail; and

·       entering into strategicrelationships with other financial services and general purpose web sites toincrease our access to online consumers.

**Material StrategicRelationships and Agreements**

We selectively pursuestrategic relationships and agreements to expand our access to onlineconsumers, to build our brand name recognition and to expand our products andservices with a variety of companies. Revenue associated with our agreementswith strategic partners comprised approximately 32% of total revenue for theyear ended December 31, 2006, primarily from the sale of leads forinsurance other than term life.

**Competition**

We compete with online and traditional providers of insuranceproducts. The market for selling insurance products over the Internet is new,rapidly evolving and intensely competitive. Current and new competitors may beable to launch new sites at a relatively low cost. There are a number ofcompanies that either sell insurance online or provide lead referral servicesonline.

We believe that we are the most comprehensive Internet-basedinsurance service because we provide consumers completequote-to-policy-delivery insurance services, instant quotes from over 30 lifeinsurance companies and the ability to buy online or over the phone. OurInternet-based, lead-referral competitors generally captureconsumer name and address information to be forwarded, as a prospective saleslead, to a specified insurance company, without personalized customer serviceor fulfillment capabilities. Other Internet-based competitors havecreated Web sites as alternatives to their traditional sales activities andoffer products from a single insurance company or a relatively small group ofinsurance companies with little or no comparative overview of prices. While webelieve that our complete quote-to-policy-delivery service offers a morecomprehensive Internet-based insurance service solution than thesecompetitors, we nonetheless expect to face intense competition from these othertypes of insurance services.

We also face competition from the traditionaldistributors of insurance such as captive agents, independent brokers andagents and direct distributors of insurance. Insurance companies anddistributors of insurance products are increasingly competing with banks,securities firms and mutual fund companies that sell insurance or alternativeproducts to similar consumers.

We potentially face competition from unanticipatedalternatives to our insurance service from a number of large Internet companiesand services that have expertise in developing online commerce and infacilitating Internet traffic. These potential competitors could choose tocompete with us directly or indirectly through affiliations with otherelectronic commerce companies, including direct competitors. Other largecompanies with strong brand recognition, technical expertise and experience inInternet commerce could also seek to compete with us. Competition from theseand other sources could harm our business, results of operations and financialcondition.

We believe that the principal competitive factors inour markets are price, brand recognition, web site useability, ability tofulfill customer purchase requests, customer service, reliability of delivery,ease of use, and technical expertise and capabilities. Many of our current andpotential competitors, including Internet directories and search engines andtraditional insurance agents and brokers, have longer operating 

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histories, larger customerbases, greater brand recognition and significantly greater financial,marketing, technical and other resources than us. Several of these competitorsmay be able to secure products and services on more favorable terms than we canobtain. In addition, many of these competitors may be able to devotesignificantly greater resources than we can for developing Web sites andsystems, marketing and promotional campaigns, attracting traffic to their Websites and attracting and retaining key employees.

Increased competition mayresult in reduced operating margins, loss of market share and damage to ourbrand. We cannot assure you that we will be able to compete successfullyagainst current and future competitors or that competition will not harm ourbusiness, results of operations and financial condition.

**Regulation**

The insurance industry and the marketers of insuranceproducts are subject to extensive regulation by state governments and by theDistrict of Columbia. This regulation extends to the operations of insurancecompanies, insurance agents and to our service.

Our products aresold throughout the United States through licenses held by us and/or one of ouremployees, as is required by each state’s insurance department. In general,state insurance laws establish supervisory agencies with broad administrativeand supervisory powers to:

·       grantand revoke licenses to transact business;

·       imposecontinuing education requirements;

·       regulatetrade practices;

·       requirestatutory financial statements of the insurance companies;

·       approveindividuals and entities to which commissions can be paid;

·       monitorthe activity of our non-licensed customer service representatives;

·       regulatemethods of transacting business and advertising; and

·       approvepolicy forms, and regulate premium rates for some forms of insurance.

Moreover, existing state insurance regulations requirethat a firm, or individual within that firm, must be licensed in order to quotean insurance premium. State insurance regulatory authorities regularly makeinquiries, hold investigations and administer market conduct examinations withrespect to compliance with applicable insurance laws and regulations byinsurance companies and their agents. In recent years, a number of insuranceagents and the life insurance companies they represent have been the subject ofregulatory proceedings and litigation relating to alleged improper lifeinsurance pricing and sales practices. Some of these agents and insurancecompanies have incurred or paid substantial amounts in connection with theresolution of these matters. We do not currently sell the types of lifeinsurance—primarilycash value life insurance policies such as universal life—that are thesubject of these actions.

In addition, licensing laws applicable to insurancemarketing activities and the receipt of commissions vary by jurisdiction andare subject to interpretation as to the application of these requirements tospecific activities or transactions. We and/or many of our employees arecurrently licensed to sell insurance in every state and the District ofColumbia. All interaction with customers is done through our licensed customerservice staff. We do not permit any of our unlicensed personnel whooccasionally have contact with customers to act as insurance agents. We monitorthe regulatory compliance of our sales, marketing and advertising practices andthe related activities of our employees. We also provide continuing educationand training to our staff in an effort to ensure compliance with applicableinsurance laws and regulations. However, we cannot assure you that a stateinsurance department will not make a determination that one 

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or more of theseactivities constitute the solicitation of insurance and that personnel must belicensed. Such a determination could harm our business.

We can give you no assurance that we would be deemedto be in compliance with all applicable insurance licensing requirements andmarketing regulations of each jurisdiction in which we operate. Nor can weassure you that we do not need to obtain any additional licenses.

The federal government does not directly regulate themarketing of most insurance products. However, some products, such as variablelife insurance, must be registered under federal securities laws and thereforethe entities selling these products must be registered with the NationalAssociation of Securities Dealers, Inc. We do not currently sell anyfederally regulated insurance products. If we elect to sell these federallyregulated products in the future, we would be required to qualify for andobtain the required licenses and registrations. We cannot assure you that wewould be able to obtain these licenses.

Further, we are subject to various federal laws andregulations affecting matters such as pensions, age and sex discrimination,financial services, securities and taxation. Congress recently passedlegislation that provides for national licensing of insurance agents andbrokers. The legislation provides an impetus for states to enact uniform lawsand regulations governing licensing of individuals and entities authorized tosell and solicit the purchase of insurance, as well as reciprocity laws andregulations governing the licensing of non-resident individuals. Thislegislation and other future federal or state legislation could result inincreased regulation of our business.

The future regulation ofinsurance sales via the Internet as a part of the new and rapidly growingelectronic commerce business sector is unclear. We believe that we arecurrently in compliance with all current regulations. However, if additionalstate or federal regulations are adopted, they may have an adverse impact onus.

**Employees**

As of December 31,2006, we had 108 employees. We have never had a work stoppage. Ouremployees are not represented by a collective bargaining unit. We consider ourrelations with our employees to be good. Our future success will depend, inpart, on our ability to continue to attract, integrate, retain and motivatehighly qualified technical and managerial personnel, for whom competition isintense.

**Item1A.**             Risk Factors

**Risks Related toOur Business**

**Our insurancebrokerage business has not been profitable and may not become profitable in thefuture**

Our first complete year offocusing on our Internet based insurance service was 1997. We incurredoperating losses each year subsequent to 1997, through the year ended December 31,2006. Because of our overhead structure, including the ongoing costs ofemploying highly-skilled technical personnel, we will need to generate higherrevenues than we did in 2006 in order to achieve profitability. Even if weachieve profitability, we may not be able to maintain profitability in thefuture.

**If the term life insurance industry declines, ourbusiness will suffer because approximately 66% of our 2006 revenues werederived from the sale of term life insurance**

For the year ended December 31,2006, approximately 66% of our revenue was derived from the sale of individualterm life insurance. Because of this high concentration of revenue from oneline of insurance, our current financial condition is largely dependent on theeconomic health of the term life insurance industry. If sales of term lifeinsurance decline, for any reason, our business would be substantially harmed. 

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Inaddition, in recent years, term life insurance premiums have been declining. Ifterm life insurance premiums continue to decline, it will become even moredifficult for us to become profitable.

**We may generate limited commission revenues becauseconsumers can obtain free quotes and other information without purchasinginsurance through our Web site**

We generate commissionrevenues only if a consumer purchases insurance through our service. Consumerscan access our Web site and obtain quotes and other information free of chargewithout any obligation to purchase insurance through us. Because all of theinsurance policies quoted at our Web site can be purchased through sourcesother than us, consumers may take the quotes and other information that weprovide to them and purchase one of our quoted policies from the agent orbroker of their choice. If consumers only use our Web site for insurance quoteinformation purposes, we will not generate revenues and our business would besignificantly harmed.

**We expect to continue to experience significantfluctuations in our quarterly results, which makes it difficult for investorsto make reliable period-to-period comparisons and may contribute tovolatility in our stock price**

Our quarterlyrevenues and operating results have fluctuated widely in the past and maycontinue to fluctuate widely in the future. Causes of these fluctuations couldor have included, among other factors:

·       changesin selling and marketing expenses, as well as other operating expenses;

·       thelength of time it takes for an insurance company to verify that an applicantmeets the specified underwriting criteria—this process can be lengthy,unpredictable and subject to delays over which we have little or no control,including underwriting backlogs of the insurance company and the accuracy ofinformation provided by the applicant; we tend to place a significant number ofpolicies with the most price-competitive insurance companies, who, due tovolume, have longer and more unpredictable underwriting time frames;

·       volatilityin bonus commissions paid to us by insurance companies which typically arehighest in the fourth quarter;

·       volatilityin renewal commission income;

·       theconversion and fulfillment rates of consumers’ applications;

·       newWeb sites, services and products by our competitors;

·       pricecompetition by insurance companies in the sale of insurance policies; and

·       thelevel of Internet usage for insurance products and services.

In addition, we have a very long revenue cycle forterm life insurance. The time from the date the application is requested by thecustomer until revenue is recorded averages over three months. As a result,substantial portions of our expenses, including selling and marketing expenses,are incurred and recorded in the financial statements well in advance ofpotential matching revenue generation. If revenues do not meet our expectationsas a result of these selling and marketing expenses, our results of operationswill be negatively affected.

Any one or more of theabove-mentioned factors could harm our business and results ofoperations, which makes quarterly predictions difficult and often unreliable. Asa result, we believe that quarter-to-quarter comparisons of ouroperating results are not necessarily meaningful and not good indicators of ourfuture performance. Due to the above-mentioned and other factors, it ispossible that in one or more future quarters our operating results will fallbelow the expectations of securities analysts and investors. If this happens,the trading price of our common stock would likely decrease.

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**We must furtherdevelop our brand recognition in order to remain competitive**

There are many otherinsurance brokers, insurance carriers and Web sites that offer services thatare competitive with our services. Therefore, we believe that broaderrecognition and a favorable consumer perception of the Insure.com brand is  essential to our future success. Accordingly,we intend to continue to pursue an aggressive brand-enhancement strategyconsisting of advertising, online marketing, and promotional efforts. If theseexpenditures do not result in a sufficient increase in revenues to cover theseadditional selling and marketing expenses, our business, results of operationsand financial condition would be harmed.

**The sale of Internet leads for lines of insuranceother than life insurance may not generate a material amount of revenues for us**

As part of our marketingstrategy, we sell Internet traffic that comes to our Web site and indicates aninterest in an insurance product other than life insurance to third party Websites and others in order to increase the realized revenue from visitors to ourWeb site. We generated fee revenues totaling $5.5 and $2.0 million from thesesources in 2006 and 2005, respectively. Most of the agreements with these thirdparties permit either party to terminate the agreement with short notice. As aresult, we cannot assure you that any of these relationships or agreements willbe profitable or generate any material amount of revenues in the future. If oursales of non-life insurance traffic do not meet our expectations regardingrevenues and earnings, our business could be harmed.

**If we are unable toclose the sale of our building in Colorado, our business could be harmed**

We have signed anagreement to sell the building that had housed our Colorado call center, with aclosing date of April 30, 2007. Located in Evergreen, Colorado, thatbuilding was acquired as part of the 2004 acquisition of certain assets of theformer Life Quotes, Inc. During 2006, we recorded impairment charges of$1.8 million to reduce the carrying value of the land and building to thecontract price, net of estimated closing costs, of  $3.4 million as of December 31, 2006. Ifwe are unable to close the sale of that property at a price at or above thecurrent book value within a reasonable period of time, we may have to recordadditional impairment charges.

**If we lose any of our key executive officers ourbusiness may suffer because we rely on their knowledge of our business**

We believe that oursuccess is significantly dependent upon the continued employment and collectiveskills of our executive officers, including founder and Chief ExecutiveOfficer, Robert S. Bland, and Executive Vice President and Chief OperatingOfficer, William V. Thoms. We maintain key man life insurance policies onMessrs. Bland and Thoms and both of these officers have entered intoemployment contracts with us. The loss of either of these two executives or anyof our other key executive officers could harm us.

**If we must pay outcash reward guarantees, our business could be harmed**

We offer consumers a $500 cash reward guarantee thatwe provide an accurate insurance quote. In addition, we also offer a $500 cashreward guarantee that we will provide the lowest price quote available withrespect to term life insurance policies. For the year ended December 31,2004, we paid $3,500, for the year ended December 31, 2005, we paid $1,000and for the year ended December 31, 2006 we paid $1,500 in such cashrewards. If our quotes or those of services whose technology we utilize areinaccurate and we are required to pay a material number of cash rewardguarantees, it could have a negative effect on our operation results.

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**The former owner ofLife Quotes has a limited non-competition agreement with us**

Kenneth Manley, the formerowner of Life Quotes, has a non-competition agreement with us that prevents himfrom competing with us for up to six years. However, the agreement allowsManley to form a life insurance agency with members of his family provided thathe acts only as a general agent, placing business through Insure.com asmanaging general agent. He is limited to being able to produce a maximum of $2million per year in commissionable premium, subject to annual inflationaryadjustments. This arrangement could result in Manley obtaining business that wemight otherwise have obtained directly.

**Risks Related to the Insurance Industry**

**Our bonus commission revenues are highly unpredictableand may cause fluctuations in our operating results**

Our bonus commission revenues relate to the amount ofpremiums paid for new insurance policies to a single insurance company. Inother words, if consumers purchase policies from a fewer number of insurancecompanies our bonus commissions may be higher than if the same policies werepurchased from a larger number of insurance companies. The decision to purchasea policy from a particular insurance company typically relates to, among otherfactors, price of the policy and rating of the insurance company, both of whichare factors over which we have no control. Insurance companies often changetheir prices in the middle of the year for competitive reasons. This may reducethe number of policies placed with that insurance company which may then reduceour potential bonus commissions. In addition, we have no control over the bonuscommission rates that are set by each individual insurance company. As a resultof these factors, we are unable to control the amount and timing of bonuscommission revenues we receive in any particular quarter or year and theseamounts may fluctuate significantly. Bonus commission revenues were $1.7million for the year ended December 31, 2006, $2.3 million for the year endedDecember 31, 2005, and $2.9 million for the year ended December 31,2004.

**The insurance sales industry is intensely competitive,and if we fail to successfully compete in this industry our market share andbusiness will be harmed**

The markets for the products and services we offer areintensely competitive and characterized by rapidly changing technology,evolving regulatory requirements and changing consumer demands. We compete withtraditional insurance distribution channels, including insurance agents andbrokers, new non-traditional channels such as commercial banks andsavings and loan associations, and a growing number of direct distributorsincluding other online services, such as InsWeb Corporation and SelectQuote.

We also potentially face competition from a number oflarge online services that have expertise in developing online commerce and infacilitating a high volume of Internet traffic for or on behalf of ourcompetitors. For instance, some of our competitors have relationships withmajor electronic commerce companies. Other large companies with strong brandrecognition, technical expertise and experience in online commerce and directmarketing could also seek to compete in the online insurance market.

There can be no assurancethat we will be able to successfully compete with any of these current orpotential insurance providers.

**Insurance companiesthat have appointed us as agents may cancel those appointments**

Most of our agencycontracts allow the insurance company to cancel our agency appointment at anytime. Should any of the companies with which we place significant amounts ofbusiness decide to cancel our appointments, our business could be harmed.

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**Risks Related to Regulation**

**Our compliance with the strict regulatory environmentapplicable to the insurance industry is costly, and if we fail to comply withthe numerous laws and regulations that govern the industry we could be subjectto penalties**

We must comply withthe complex rules and regulations of each jurisdiction’s insurancedepartment which impose strict and burdensome guidelines on us regarding ouroperations. Compliance with these rules and regulations imposessignificant costs on our business. Each jurisdiction’s insurance departmenttypically has the power, among other things, to:

·       authorizehow, by which personnel and under what circumstances an insurance premium canbe quoted and published;

·       approvewhich entities can be paid commissions from insurance companies;

·       licenseinsurance agents and brokers;

·       monitorthe activity of our non-licensed customer service representatives; and

·       approvepolicy forms and regulate some premium rates.

Due to the complexity, periodic modification anddiffering statutory interpretations of these laws, we may not have always beenand we may not always be in compliance with all these laws. In addition, wehave at times been subject to regulatory action for failing to comply withthese laws. Failure to comply with these numerous laws in the future couldresult in fines, additional licensing requirements or the revocation of ourlicense in the particular jurisdiction. These penalties could significantlyincrease our general operating expenses and harm our business. In addition,even if the allegations in any regulatory action against us turn out to befalse, negative publicity relating to any allegations could result in a loss ofconsumer confidence and significant damage to our brand. We believe thatbecause many consumers and insurance companies are not yet comfortable with theconcept of purchasing insurance online, the publicity relating to any suchregulatory or legal issues could harm our business.

**Regulation of the sale of insurance over the Internetand other electronic commerce is unsettled, and future regulations could forceus to change the way we do business or make operating our business more costly**

As a company involved in the sale of insurance overthe Internet, we are subject to additional regulatory risk as insuranceregulations have not been fully modified to cover Internet transactions. Currently,many state insurance regulators are exploring the need for specific regulationof insurance sales over the Internet. Any new regulation could dampen thegrowth of the Internet as a means of providing insurance services. Moreover,the laws governing general commerce on the Internet remain largely unsettled,even in areas where there has been some legislative action. It may take yearsto determine whether and how existing laws such as those governing intellectualproperty, privacy and taxation apply to the Internet. In addition, the growthand development of the market for electronic commerce may prompt calls for morestringent consumer protection laws that may impose additional burdens oncompanies conducting business over the Internet. Any new laws or regulations ornew interpretations of existing laws or regulations relating to the Internetcould harm our business.

**If we become subject to legal liability for theinformation we distribute on our Web site or communicate to our customers, ourbusiness could be harmed**

Our customers rely uponinformation we provide regarding insurance quotes, coverage, exclusions,limitations and ratings. To the extent that the information we provide is notaccurate, we could be liable for damages from both consumers and insurancecompanies. These types of claims have been brought, sometimes successfully,against agents, online services and print publications in the past. These typesof 

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claimscould be time-consuming and expensive to defend, divert management’sattention, and could cause consumers to lose confidence in our service. As aresult, these types of claims, whether or not successful, could harm ourbusiness, financial condition and results of operations.

**Risks Related tothe Internet and Electronic Commerce**

**Any failures of, or capacity constraints in, oursystems or the systems of third parties on which we rely could reduce or limitvisitors to our Web site and harm our ability to generate revenue**

We use both internallydeveloped and third-party systems to operate our service. If the numberof users of our service increases substantially, we will need to significantlyexpand and upgrade our technology, transaction processing systems and networkinfrastructure. We do not know whether we will be able to accurately projectthe rate or timing of any of these increases, or expand and upgrade our systemsand infrastructure to accommodate these increases in a timely manner. Ourability to facilitate transactions successfully and provide high qualitycustomer service also depends on the efficient and uninterrupted operation ofour computer and communications hardware systems. Our service has experiencedperiodic system interruptions, and it is likely that these interruptions willcontinue to occur from time to time. Additionally, our systems and operationsare vulnerable to damage or interruption from human error, natural disasters,power loss, telecommunication failures, break-ins, sabotage, computerviruses, acts of vandalism and similar events. We may not carry sufficientbusiness interruption insurance to compensate for losses that could occur. Anysystem failure that causes an interruption in service or decreases theresponsiveness of our service would impair our revenue-generatingcapabilities, and could damage our reputation and our brand name.

**Our successdepends, in part, on our ability to protect our proprietary technology**

We believe that our success depends, in part, onprotecting our intellectual property. Other than our trademarks, most of ourintellectual property consists of proprietary or confidential information thatis not subject to patent or similar protection. Competitors may independentlydevelop similar or superior products, software or business models.

We cannot guarantee that we will be able to protectour intellectual property. Unauthorized third parties may try to copy ourproducts or business model or use our confidential information to developcompeting products. Legal standards relating to the validity, enforceabilityand scope of protection of proprietary rights in Internet-relatedbusinesses are uncertain and still evolving. As a result, we cannot predict thefuture viability or value of our proprietary rights and those of othercompanies within the industry.

**We may be subject to claims of infringement that maybe costly to resolve and, if successful, could harm our business**

Our business activities and products may infringe uponthe proprietary rights of others. Parties may assert valid or invalidinfringement claims against us. Any infringement claims and resultinglitigation, should it occur, could subject us to significant liability fordamages and could result in invalidation of our proprietary rights. Even if weeventually won, any resulting litigation could be time-consuming andexpensive to defend and could divert our management’s attention.

**If we are unable to adapt to the rapid technologicalchange in our industry, we will not remain competitive and our business willsuffer**

Our market is characterized by rapidly changingtechnologies, frequent new product and service introductions, and evolvingindustry standards. The recent growth of the Internet and intense competitionin our industry exacerbate these market characteristics. Our future successwill depend on our ability to adapt to rapidly changing technologies bycontinually improving the features and reliability of our database 

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and service. We mayexperience difficulties that could delay or prevent the successful introductionor marketing of new products and services. In addition, new enhancements mustmeet the requirements of our current and prospective customers and must achievesignificant market acceptance. We could also incur substantial costs if we needto modify our service or infrastructures or adapt our technology to respond tothese changes.

**Demand for our services may be reduced if we areunable to safeguard the security and privacy of our customer’s information**

A significant barrier toelectronic commerce and online communications has been the need for securetransmission of confidential information over the Internet. Our ability tosecure the transmission of confidential information over the Internet isessential in maintaining consumer and insurance company confidence in ourservice. In addition, because we handle confidential and sensitive informationabout our customers, any security breaches would damage our reputation andcould expose us to litigation and liability. We cannot guarantee that oursystems will prevent security breaches.

**Our businessassumes the continued dependability of the Internet infrastructure**

Our success will dependupon the development and maintenance of the Internet’s infrastructure to copewith its significant growth and increased traffic. This will require a reliablenetwork backbone with the necessary speed, data capacity and security, and thetimely development of complementary products, such as high-speed modems,for providing reliable Internet access and services. The Internet hasexperienced a variety of outages and other delays as a result of damage toportions of its infrastructure and could face outages and delays in the future.Outages and delays are likely to cause a loss of business by affecting thelevel of Internet usage and the processing of insurance quotes and applicationsrequests made through our Web site. We are unlikely to make up for this loss ofbusiness.

**Risks Related to the Ownership of Our Common Stock**

**Zions Bancorporation, together with two of ourofficers and directors, own a significant portion of our stock and controlInsure.com and their interests may not be the same as our public stockholders**

As of March 8,2007, Robert Bland, our chairman, President and Chief Executive Officerdirectly or indirectly controlled 30.2% of our outstanding common stock,William Thoms, our Executive Vice President and Chief Operating Officer,directly controlled 7.8% of our outstanding common stock, and ZionsBancorporation controlled 32.4% of our common stock. As a result, if Zions and Messrs. Blandand Thoms act together, or if Zions and Mr. Bland act together, they willbe able to take any of the following actions without the approval of additionalpublic stockholders:

·       elect our directors;

·       amendcertain provisions of our certificate of incorporation;

·       approve a merger, sale ofassets or other major corporate transaction;

·       defeat any takeoverattempt, even if it would be beneficial to our public stockholders; and

·       otherwisecontrol the outcome of all matters submitted for a stockholder vote.

If these persons act together and take any of theactions described above, the interests of our other stockholders may be harmed.For example, these persons could discourage or prevent potential mergers,takeovers or other change of control transactions that could be beneficial toour public stockholders, which could adversely affect the market price of ourcommon stock. They may also be able to prevent or frustrate attempts to replaceor remove incumbent management through their ability to elect directors. 

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Furthermore, they maychoose to advance their own interests at the expense of other stockholders,such as by acting to entrench themselves in a management position or electingthemselves as directors.

**The investor rights agreement we signed with Zionscontains supermajority board voting provisions that could make it moredifficult for stockholders to change the policies of our Board of Directors andelect new members to our Board of Directors**

So long as Zionsholds 40% of the shares issued to them, the investor rights agreement we signedwith Zions gives Zions the right to nominate or appoint one member of our Boardof Directors. We must also receive a vote of 75% of our directors for us to:

·       authorize,issue or sell any equity security (including options), other than certainspecified options or pursuant to our employee stock purchase plan (of whichthere are presently 288,760 options available for grant under our stock optionplans and 63,929 shares available for purchase under our employee stockpurchase plan):

·       increasethe authorized number of shares of our stock;

·       enterinto any registration rights agreement;

·       repurchaseor redeem any of our securities other than on a pro rate basis;

·       (i) merge,combine or consolidate with, or agree to merge, combine or consolidate with anyentity, (ii) purchase, or agree to purchase all or substantially all ofthe securities of, any entity, or (iii) purchase, or agree to purchase,all or substantially all of the assets and properties of, or otherwise acquire,or agree to acquire, all or any portion of, any entity, in each case, forconsideration in an amount, which when combined with all other suchtransactions in a fiscal year, exceeds $5,000,000;

·       (i) merge,combine or consolidate with, or agree to merge, combine or consolidate with anyentity in which it is not the surviving entity or (ii) sell, assign,convey, transfer, lease or otherwise dispose of all or substantially all of itsassets;

·       sellor dispose of business or assets in excess of $1,000,000;

·       alteror change materially and adversely the rights of holders of our common stock;

·       incurindebtedness or guarantees in excess of $2,500,000 individually or $5,000,000in the aggregate;

·       amendor proposed to amend our charter or bylaws

·       liquidate,dissolve, recapitalize, or effect a stock split or reverse stock split, orobligate ourselves to do so;

·       engagein any other business other than the business we are currently engaged in; or

·       declareany dividends or distributions.

The supermajority provision, combined with Zions’right to nominate or appoint one member of our Board of Directors, coulddiscourage others from initiating a potential merger, takeover or anotherchange of control transaction that could be beneficial to our publicstockholders. In addition this supermajority provision could make it moredifficult for stockholders to change the members and policies of the Board ofDirectors because any of the actions described above would require the approvalof six of our seven directors. As a result, the market price of our stock couldbe harmed.

**If  Zionschooses to exercise its registration rights and sell its stock, the marketprice of our common stock could decrease and our ability to raise capital inthe public markets may be adversely affected**

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The 2,363,636 shares we issued to Zions are notregistered and are restricted securities. However, the holders of these shareshave registration rights under the investor rights agreement. The investorrights agreement provides both demand registration rights and piggybackregistration rights to the holders of these shares. Sales of significantamounts of these shares following registration in accordance with the investorrights agreement or the perception that such sales will occur could adverselyaffect the market price of our common stock or our future ability to raisecapital through an offering of equity securities or debt securities convertibleinto equity securities.

**If our remaining goodwill becomes impaired, we will berequired to write off some or all of it against earnings, which may negativelyimpact the price of our common stock**

We recorded goodwill in the amount of $6.9 million asa result of our 2004 purchase of assets of Life Quotes, Inc. Whilegoodwill is not amortized, it is subject to periodic reviews for impairment (atleast annually, or more frequently if impairment indicators arise). We reviewgoodwill for impairment periodically and whenever events or changes in businesscircumstances indicate that the carrying value of the assets may not berecoverable. Such impairment reviews are performed at the entity level withrespect to goodwill, as we have one reporting unit. Under those circumstances,if the fair value were less than the carrying amount of the entity, anindicator of impairment would exist and further analysis would be required todetermine whether or not a loss would need to be charged against current periodearnings. We did take note of such indicators during the fourth quarter of 2005.These indicators included declining revenues from life insurance sales and adrop in the market price of our common stock. An impairment review wasconducted as of December 31, 2005, and it was determined that animpairment existed. The determinations of impairment indicators and fair valueare based on estimates and assumptions related to the amount and timing offuture cash flows and future interest rates. The use of different estimates orassumptions could produce different results. As a result of this impairmentdetermination, the Company recorded an impairment charge against earnings inthe fourth quarter of 2005 amounting to $3.75 million. There were no indicatorsof impairment of which we took note during 2006.

During 2007, and for as long as we have goodwill onour balance sheet, we will continue to review for indicators of goodwillimpairment. If it were determined that the fair value of the entity were lessthan the carrying amount of the entity, an additional impairment charge wouldbe recorded. Recording such a charge would decrease earnings and could lead toa decline in the price of our common stock.

**Our common stock is currently trading at low prices,which could further reduce the liquidity of the market for, and the price ofour common stock**

We believe that the current per share price level ofthe common stock has reduced the effective marketability of our shares ofcommon stock because of the reluctance of many leading brokerage firms torecommend low-priced stock to their clients. Certain investors view low-pricedstock as speculative and unattractive, although certain other investors may beattracted to low-priced stock because of the greater trading volatilitysometimes associated with such securities. In addition, a variety of brokeragehouse policies and practices tend to discourage individual brokers within thosefirms from dealing in low-priced stock. Such policies and practices pertain tothe payment of brokers’ commissions and to time-consuming procedures thatfunction to make the handling of low-priced stocks unattractive to brokers froman economic standpoint.

In addition, because brokerage commissions onlow-priced stock generally represent a higher percentage of the stock pricethan commissions on higher-priced stock, the current share price of the commonstock can result in individual stockholders paying transaction costs (commissions,markups or markdowns) that represent a higher percentage of their total sharevalue than would be the case if the share price were substantially higher. Thisfactor also may limit the willingness of institutions to purchase the commonstock at its current low share price.

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We believe that thecurrent price of our common stock may have a negative impact on the liquidityand price of our common stock and investors may find it more difficult topurchase or dispose of, or to obtain accurate quotations as to the market valueof, our common stock.

**Our stock price mayhave wide fluctuations and Internet-related stocks have been particularlyvolatile**

The market price of our common stock has been highlyvolatile and subject to wide fluctuations. The Nasdaq stock market hasexperienced significant price and volume fluctuations and the market prices ofsecurities of technology companies, particularly Internet-relatedcompanies, have been highly volatile. Market fluctuations, as well as generalpolitical and economic conditions, such as a recession or interest ratefluctuations, could adversely affect the market price of our common stock. Inaddition, the market prices for stocks of Internet-related and technologycompanies, particularly following an initial public offering, frequently reachlevels that bear no relationship to the operating performance of such companies.These market prices generally are not sustainable and are subject to widevariations. If our common stock trades to unsustainably high levels, it likelywill thereafter experience a material decline.

In the past, securities class action litigation hasoften been brought against a company following periods of volatility in themarket price of their securities. We may in the future be the target of similarlitigation. Securities litigation could result in substantial costs, divertmanagement’s attention and resources, and harm our financial condition andresults of operations.

**Certain provisions in our charter documents andDelaware law, together with our concentration of stock ownership in a fewpersons, could discourage takeover attempts and lead to management entrenchment**

Our certificate ofincorporation and bylaws and Delaware law contain anti-takeoverprovisions that could have the effect of delaying or preventing changes incontrol that a stockholder may consider favorable. The provisions in ourcharter documents include the following:

·       wehave a classified Board of Directors with three-year staggered terms thatwill delay the ability of stockholders to change the membership on the Board ofDirectors;

·       ourBoard of Directors has the ability to issue shares of preferred stock and todetermine the price and other terms, including preferences and voting rights,of those shares without stockholder approval;

·       stockholderaction may be taken only at a special or regular meeting; and

·       wehave advance notice procedures that must be complied with by stockholders forthem to nominate candidates to our Board of Directors.

Our preferred stock purchase rights could causesubstantial dilution to any person or group who attempts to acquire asignificant interest in Insure.com without advance approval of our Board ofDirectors. We have amended our rights plan to exempt acquisitions of shares ofour common stock by Zions from the operation of the rights plan. In addition,our executive officers have employment agreements that may entitle them tosubstantial payments in the event of a change of control. We entered intoamendments to our employment agreements with Messrs. Bland and Thoms thatexempted the issuance of stock to Zions from constituting a change of controlunder these employment agreements.

Furthermore, as of March 8, 2007, Messrs. Blandand Thoms, together with Zions, directly or indirectly controlled approximately70.4% of our outstanding common stock. This high concentration of stockownership, together with the anti-takeover measures described above, couldprevent or frustrate attempts to remove or replace incumbent management,including Messrs. Bland and Thoms. These persons may act to further theirinterests as management rather than the interests of the public stockholders.

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The foregoing could have the effect of delaying,deferring or preventing a change in control of Insure.com, discourage bids for ourcommon stock at a premium over the market price, or harm the market price of,and the voting and other rights of the holders of, our common stock. We alsoare subject to Delaware laws that could have similar effects. One of these lawsprohibits us from engaging in a business combination with any significantstockholder for a period of three years from the date the person became asignificant stockholder unless specific conditions are met.

**Continued terrorist attacks or war could lead tofurther economic instability and adversely affect our stock price, operations,and profitability**

The terrorist attacks thatoccurred in the United States on September 11, 2001 caused periodic majorinstability in the U.S. and other financial markets. Possible further acts ofterrorism and current and future war risks could have a similar impact. TheUnited States continues to take military action against terrorism and has takenmilitary action in Iraq. Terrorist attacks and continued hostilities in theMiddle East may lead to additional armed hostilities or to further acts ofterrorism and civil disturbance in the United States or elsewhere, which mayfurther contribute to economic instability. Any such attacks could, among otherthings, cause further instability in financial markets and could directly, orindirectly through reduced demand, negatively affect our facilities andoperations or those of its customers or suppliers.

**Item 1B.**               UnresolvedStaff Comments

Not applicable.

**ITEM 2.**                Properties

Our executive,administrative and operating offices are located in approximately 19,000 squarefeet of leased office space in Darien, Illinois under a lease that expires on December 31,2013. We also own a 43,000 square foot office building in Evergreen, Colorado,that previously housed a call center that was closed on January 31, 2006. Thisbuilding is currently under contract for sale, with an expected closing date ofApril 30, 2007.

**ITEM 3.**                LegalProceedings

From time to time we havebeen, and expect to continue to be, subject to legal and regulatory proceedingsand claims in the ordinary course of business. Legal and regulatory proceedingsand claims may include claims of alleged infringement of third partyintellectual property rights, notices from state regulators that we may haveviolated state regulations, and litigation instituted by dissatisfied policyholders. These claims, even if without merit, could result in the significantexpenditure of our financial and managerial resources. We are not aware of anysuch claims that we believe will, individually or in the aggregate, materiallyaffect our business, financial condition or results of operations.

**ITEM 4.**                Submissionof Matters to a Vote of Security Holders.

There were no matters submitted to a vote of ourstockholders during the quarter ended December 31, 2006.

22

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**PART II**

**ITEM5.**                Market forRegistrant’s Common Equity and Related Stockholder Matters.

All common stock and pershare information in this annual report have been retroactively adjusted toreflect a one-for-three reverse stock split that became effective on March 7,2001.

*Market Information.**  *Our common stock began trading on the Nasdaq NationalMarket under the symbol “QUOT” on August 3, 1999, the date of our initialpublic offering. Prior to this date, no established public trading market forour common equity existed. Effective the opening of business on July 20,2001, our stock listing was transferred from the Nasdaq National Market to theNasdaq SmallCap Market, which is now known as the Nasdaq Capital Market,retaining its existing symbol, QUOT. On January 8, 2007, the ticker symbolfor our common stock was changed to NSUR. As of March 8, 2007 theapproximate number of record holders of our common stock was 1,200. The lastsale price of our common stock on March 8, 2007 was $4.50. The followingtable sets forth, for the period indicated, the high and low last sale price ofour common stock as reported on the Nasdaq Capital Market, as applicable.
|                | ** ** | **High** | ** ** | **Low** | ** ** |
|----------------|------------|----------|------------|---------|------------|
| 2006:          |       |     |       |    |       |
| First Quarter  |       | $        | 3.14       |    | $          | 2.58 |   |
| Second Quarter |       | 3.34     |       | 2.53    |       |
| Third Quarter  |       | 3.35     |       | 2.50    |       |
| Fourth Quarter |       | 3.90     |       | 2.60    |       |
| 2005:          |       |     |       |    |       |
| First Quarter  |       | $        | 5.49       |    | $          | 4.80 |   |
| Second Quarter |       | 4.84     |       | 3.53    |       |
| Third Quarter  |       | 5.42     |       | 3.31    |       |
| Fourth Quarter |       | 3.58     |       | 2.17    |       |

 

*Dividends.**  *We have never declared or paid any cash dividends onour common stock and do not anticipate paying cash dividends on our commonstock in the foreseeable future. The investor rights agreement we have enteredinto with Zions Bancorporation, or Zions, prohibits us from paying cashdividends on our common stock unless certain conditions are met. We currentlyintend to retain all future earnings to finance the growth and development ofour business. Any future determination as to the payment of dividends will bemade by our board of directors and will depend on our results of operations,financial condition, capital requirements, and any other factors our board ofdirectors considers relevant, including the restrictions contained in theinvestor rights agreement.

*Issuer purchases of equitysecurities.*   On October 31, 2005, theCompany announced that its Board of Directors had authorized the repurchase ofup to 650,000 shares of its common stock. Following is information concerningthe results of that program during the fourth quarter of 2006:

**ISSUER PURCHASES OF EQUITY SECURITIES**
|                                                 | ** ** | ** **         | ** ** | ** **          | ** ** | **Total Number of**               | ** ** | **Maximum Number of**                | ** ** |
|-------------------------------------------------|------------|--------------------|------------|---------------------|------------|---------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                      | ** ** | **Total**          | ** ** | **Average**         | ** ** | **Shares Purchased as Part** | ** ** | **Shares that May Yet Be** | ** ** |
| ** **                                      | ** ** | **Number of** | ** ** | **Price Paid** | ** ** | **of Publicly Announced**         | ** ** | **Purchased Under the**              | ** ** |
| **Period**                                      | ** ** | ** **         | ** ** | **Shares**          | ** ** | **Per Share**                          | ** ** | **Plans or Programs**                | ** ** | **Plans or Programs** | ** ** |
| October 1 through October 31,  2006   |       |               | 1,800      |                |       |                                        | $          | 2.80                                           |       |   |   | 1,800 |   |   |   | 624,201 |   |   |
| November 1 through November 30,  2006 |       |               | 2,400      |                |       |                                        | $          | 3.28                                           |       |   |   | 4,200 |   |   |   | 621,801 |   |   |
| December 1 through December 31,  2006 |       |               | 600        |                |       |                                        | $          | 3.56                                           |       |   |   | 4,800 |   |   |   | 621,201 |   |   |
| Total                                           |       |               | 4,800      |                |       |                                        | $          | 3.14                                           |       |   |   | 4,800 |   |   |   | 621,201 |   |   |
|                                                 |            |                    |            |                     |            |                                             |            |                                                |            |  |  |  |  |  |  |  |  |  |  |  |

 

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**ITEM 6.**                SelectedFinancial Data.

The historical statementof operations data and balance sheet data in the table below is derived fromour financial statements, which are included elsewhere in this annual report. Thisdata should be read in conjunction with “Management’s Discussion and Analysisof Financial Condition and Results of Operations” and with the financialstatements, related notes, and other financial information included elsewherein this annual report. The historical results presented below are notnecessarily indicative of the results to be expected for any future period.
|                                                                                | ** ** | **Year Ended December 31,**                         | ** ** |
|--------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                                     | ** ** | **2006**                                                           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                                     | ** ** | **(in thousands, except per share data)** | ** ** |
| **Statement of Operations Data:**                                              |       |                                                               |       |   |   |   |   |   |   |   |   |
| Revenues                                                                       |       | $                                                                  | 17,219     |   | $ | 17,101 |   | $ | 15,910 |   | $ | 9,737 |   | $ | 10,777 |   |
| Expenses:                                                                      |       |                                                               |       |   |   |   |   |   |   |   |   |
| Selling and marketing                                                          |       | 8,784                                                              |       | 6,541 |   | 6,866 |   | 4,735 |   | 2,912 |   |
| Operations                                                                     |       | 6,165                                                              |       | 7,275 |   | 6,531 |   | 3,034 |   | 7,032 |   |
| General and administrative                                                     |       | 3,531                                                              |       | 3,764 |   | 3,148 |   | 2,656 |   | 2,513 |   |
| Depreciation and amortization                                                  |       | 853                                                                |       | 973 |   | 1,279 |   | 1,053 |   | 1,405 |   |
| Impairment of land and building                                                |       | 1,801                                                              |       | — |   | — |   | — |   | — |   |
| Impairment of goodwill                                                         |       | —                                                             |       | 3,750 |   | — |   | — |   | — |   |
| Total expenses                                                                 |       | 21,134                                                             |       | 22,303 |   | 17,824 |   | 11,478 |   | 13,862 |   |
| Operating loss                                                                 |       | (3,915                                                             | )          | (5,202 | ) | (1,914 | ) | (1,741 | ) | (3,085 | ) |
| Interest income,  net                                                          |       | 327                                                                |       | 276 |   | 138 |   | 368 |   | 359 |   |
| Realized gain  (loss) on sale of securities                                    | * *   | —                                                             |       | — |   | (45 | ) | 92 |   | — |   |
| Net loss                                                                       |       | $                                                                  | (3,588     | ) | $ | (4,926 | ) | $ | (1,821 | ) | $ | (1,281 | ) | $ | (2,726 | ) |
| Basic and diluted  net loss per share                                     |       | $                                                                  | (0.49      | ) | $ | (0.67 | ) | $ | (0.31 | ) | $ | (0.26 | ) | $ | (0.55 | ) |
| Weighted average common  shares and equivalents outstanding, basic and diluted |       | 7,312                                                              |       | 7,329 |   | 5,851 |   | 4,917 |   | 4,964 |   |

 
|                                  | ** ** | **December 31,**   | ** ** |
|----------------------------------|------------|-------------------------|------------|
| ** **                       | ** ** | **2006**                | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                       | ** ** | **(in thousands)** | ** ** |
| **Balance Sheet Data:**          |       |                    |       |   |   |   |   |   |   |   |   |
| Cash and  equivalents            |       | $                       | 1,300      |   | $ | 747 |   | $ | 1,356 |   | $ | 677 |   | $ | 1,640 |   |
| Working capital                  |       | 11,383                  |       | 7,190 |   | 5,140 |   | 5,607 |   | 10,485 |   |
| Total assets                     |       | 20,671                  |       | 24,055 |   | 28,843 |   | 17,526 |   | 19,559 |   |
| Long-term  liabilities           |       | —                  |       | — |   | — |   | — |   | 35 |   |
| Total liabilities                |       | 1,348                   |       | 1,441 |   | 1,228 |   | 760 |   | 1,464 |   |
| Total stockholders’  equity |       | 19,324                  |       | 22,614 |   | 27,615 |   | 16,766 |   | 18,095 |   |
|                                  |            |                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
|                                    | ** ** | **Year Ended December 31,** | ** ** |
|------------------------------------|------------|--------------------------------------------|------------|
| ** **                         | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
| **Selected Operating Statistics:** |       |                                       |       |   |   |   |   |   |   |   |   |
| Policies sold                      |       |                                       |       |   |   |   |   |   |   |   |   |
| Term life                          |       | 12,080                                     |       | 16,845 |   | 17,485 |   | 11,011 |   | 16,498 |   |
| Health and other                   |       | —                                     |       | 315 |   | 3,236 |   | 4,845 |   | 4,753 |   |
| Total policies  sold               |       | 12,080                                     |       | 17,160 |   | 20,721 |   | 15,856 |   | 21,251 |   |

 

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**Selected QuarterlyOperating Results**

The following tables setforth unaudited quarterly statements of operations data for 2006 and 2005. Theinformation for each of these quarters has been prepared on substantially thesame basis as the audited financial statements included elsewhere in thisannual report, and, in our opinion, include all adjustments, consisting only ofnormal recurring adjustments, necessary for a fair presentation of the resultsof operations for these periods. Historical results are not necessarilyindicative of the results to be expected in the future, and results of interimperiods are not necessarily indicative of results for the entire year.
|                                                | ** ** | **Quarter Ended**                                             | ** ** |
|------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                     | ** ** | **Mar. 31,**                                                  | ** ** | **June 30,** | ** ** | **Sept. 30,** | ** ** | **Dec. 31,** | ** ** |
| ** **                                     | ** ** | **(in thousands, except per share data)** | ** ** |
| **2006**                                       | * *   |                                                               | * *   |   |   | * * | * * | * * | * * | * * | * * |
| Revenues                                       |       |                                                               | $          | 4,870 |   |   | $ | 3,941 |   | $ | 3,766 |   | $ | 4,642 |   |
| Expenses:                                      |       |                                                               |       |   |   |   |   |   |   |   |   |
| Selling and marketing                          |       |                                                               | 2,505      |   |   | 2,446 |   | 2,219 |   | 1,614 |   |
| Operations                                     |       |                                                               | 1,579      |   |   | 1,380 |   | 1,363 |   | 1,843 |   |
| General and administrative                     |       |                                                               | 919        |   |   | 888 |   | 822 |   | 902 |   |
| Depreciation and amortization                  |       |                                                               | 236        |   |   | 228 |   | 192 |   | 197 |   |
| Impairment of land and building                |       |                                                               | —     |   |   | — |   | 1,321 |   | 480 |   |
| Total expenses                                 |       |                                                               | 5,239      |   |   | 4,942 |   | 5,917 |   | 5,036 |   |
| Operating income  (loss)                       |       |                                                               | (369       | ) |   | (1,001 | ) | (2,151 | ) | (394 | ) |
| Interest income                                |       |                                                               | 81         |   |   | 84 |   | 84 |   | 78 |   |
| Net income (loss)                              |       |                                                               | $          | (288 | ) |   | $ | (917 | ) | $ | (2,067 | ) | $ | (316 | ) |
| Net income (loss) per  share basic and diluted |       |                                                               | $          | (0.04 | ) |   | $ | (0.13 | ) | $ | (0.28 | ) | $ | (0.04 | ) |

 
|                                                | ** ** | **Quarter Ended**                                             | ** ** |
|------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                     | ** ** | **Mar. 31,**                                                  | ** ** | **June 30,** | ** ** | **Sept. 30,** | ** ** | **Dec. 31,** | ** ** |
| ** **                                     | ** ** | **(in thousands, except per share data)** | ** ** |
| **2005**                                       |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                                       |       |                                                               | $          | 4,381 |   |   |   | $ | 4,737 |   |   |   | $ | 4,079 |   |   | $ | 3,905 |   |
| Expenses:                                      |       |                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling and marketing                          |       |                                                               | 1,982      |   |   |   | 1,378 |   |   |   | 1,580 |   |   | 1,602 |   |
| Operations                                     |       |                                                               | 1,786      |   |   |   | 1,848 |   |   |   | 1,901 |   |   | 1,740 |   |
| General and administrative                     |       |                                                               | 945        |   |   |   | 905 |   |   |   | 993 |   |   | 921 |   |
| Depreciation and amortization                  |       |                                                               | 254        |   |   |   | 240 |   |   |   | 237 |   |   | 241 |   |
| Impairment of goodwill                         | * *   | * *                                                           | *—*   |   | * * | * * | *—* |   | * * | * * | *—* |   | * * | 3,750 | * * |
| Total expenses                                 |       |                                                               | 4,967      |   |   |   | 4,371 |   |   |   | 4,711 |   |   | 8,254 |   |
| Operating income  (loss)                       |       |                                                               | (586       | ) |   |   | 366 |   |   |   | (632 | ) |   | (4,349 | ) |
| Interest income                                |       |                                                               | 61         |   |   |   | 65 |   |   |   | 71 |   |   | 79 |   |
| Net income (loss)                              |       |                                                               | $          | (525 | ) |   |   | $ | 431 |   |   |   | $ | (561 | ) |   | $ | (4,270 | ) |
| Net income (loss) per  share basic and diluted |       |                                                               | $          | (0.07 | ) |   |   | $ | 0.06 |   |   |   | $ | (0.08 | ) |   | $ | (0.58 | ) |

 

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**Item 7.**                        MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

**Overview andCritical Accounting Policies**

We generate revenues primarily from the receipt ofcommissions paid to us by insurance companies based upon the insurance policiessold to consumers through our service. These revenues come in the form of firstyear, bonus and renewal commissions that vary by company and product. Werecognize the full first year commission revenues on term life insurance afterthe insurance company approves the policy and accepts the initial premiumpayment. At the time revenue is recognized, an allowance is recorded based onhistorical information for estimated commissions that will not be received dueto the non-payment of installment first year premiums and any premiumrefunds made by the insurance carriers. We recognize commission revenue onother lines of insurance, primarily health insurance, after we receive noticethat the insurance company has received payment of the related premium. Firstyear commission revenues per policy can fluctuate due to changing premiums,commission rates, and types or amount of insurance sold. We receive bonusesbased upon individual criteria set by insurance companies. We recognize bonusrevenues when we receive notification from the insurance company of the bonusdue to us. Bonus revenues are typically higher in the fourth quarter of ourfiscal year due to the bonus system used by many life insurance companies,which pay greater amounts based upon the achievement of certain levels ofannual production. Revenues for renewal commissions are recognized after wereceive notice that the insurance company has received payment for a renewalpremium. Renewal commission rates are significantly less than first year commissionrates and may not be offered by every insurance company. We also generaterevenue from the sale of leads for lines of insurance other than life insuranceto third parties. Such revenues are recognized when we receive notificationfrom those sources of the revenue due to us. Our revenue recognition accountingpolicy has been applied to all periods presented in this report.

The timing between when we submit a consumer’sapplication for insurance to the insurance company and when we generaterevenues has varied over time. The type of insurance product and the insurancecompany’s backlog are the primary factors that impact the length of timebetween submitted applications and revenue recognition. Over the past threeyears, the time between application submission and revenue recognition hasaveraged approximately four months. Any changes in the amount of time betweensubmitted application and revenue recognition, which will be influenced by manyfactors not under our control, will create fluctuations in our operatingresults and could affect our business, operating results and financialcondition.

Operations expenses are comprised of both variable andsemi-variable expenses, including wages, commissions, benefits andexpenses associated with processing insurance applications and maintaining ourdatabase and web sites. The historical lag between the time an application issubmitted to the insurance companies and when we recognize revenuessignificantly impacts our operating results as most of our variable expensesare incurred prior to application submission.

Selling and marketing expenses consist primarily ofdirect advertising costs. The costs of communicating the advertising areexpensed in the period the advertising is communicated.

We have established the 1997 Stock Option Plan and the2004 Non-Qualified Stock Option Plan, or the plans, to provide additionalincentives to our employees, officers, and directors. Under the plans, anaggregate of 800,000 shares of Insure.com common stock may be granted to participantsin the plans. In 2004, the Financial Accounting Standards Board (FASB) issuedFASB Statement No. 123 (revised 2004), Share-Based Payments, which is arevision of FASB Statement No. 123, Accounting for Stock-BasedCompensation. Statement 123 (R) supersedes APB Opinion 25 and amends FASBStatement No. 95, Statement of Cash Flows. Generally, the approach inStatement 123 (R) requires all share-based payments to employees,including grants of employee stock options, to be recognized in the income statementbased on their fair values.

26

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The Company adopted Statement 123 (R) on January 1,2006, using the modified prospective method in which compensation cost isrecognized beginning with the effective date (a) based on the requirementsof Statement 123 (R) for all share-based payments granted after theeffective date and (b) based on the requirements of Statement 123 for allawards granted to employees prior to the effective date of Statement 123 (R) thatremain unvested on January 1, 2006. As a result, no compensation cost wasrecognized in connection with stock options that vested prior to 2006. Stockcompensation accounting is discussed more fully in Notes 2 and 7 to thefinancial statements included in this annual report.

Intangible assets acquired in 2001 in the acquisitionof Insurance News Network, LLC were amortized on a straight-line basis overthree years. These assets were fully amortized as of December 31, 2004.

Intangible assets acquiredin 2004 in the acquisition of certain assets of Life Quotes, Inc. consistof the following:

| ** **                   | ** ** | **Intangible** | ** ** | **Estimated** | ** ** | ** **       | ** ** |
|------------------------------|------------|----------------|------------|---------------|------------|------------------|------------|
| ** **                   | ** ** | **Asset**      | ** ** | **Useful**    | ** ** | **Amortization** | ** ** |
| ** **                   | ** ** | **Balance**    | ** ** | **Life**      | ** ** | **Method**       | ** ** |
| Insurance  contract renewals |       | $              | 3,538,000  |          |       | 10 years         |       |   | Accelerated |   |
| Non-compete  agreement       |       | 589,000        |       |          | 6 years    |             |       | Straight line |   |
| Total                        |       | $              | 4,127,000  |          |       |             |       |   |   |   |

 

The fair value of insurance contract renewals wasestimated based on the actual policies in force as of the acquisition date, andthe renewal commission rates paid by each insurance carrier. These commissionswere estimated to have a useful life of ten years, based on the terms of thecontracts with the insurance carriers, and an annual lapse rate was applied tothe expected renewals for each carrier based on historical trends. Amortizationis on an accelerated basis, as renewal commissions will decline each year dueto lapses. The ultimate realization of the value of the contract renewals isdependant on a number of factors, including actual lapse ratios, which can beaffected by factors not under our control, such as death rates and the pricinglevel of insurance policies that could be purchased to replace the policies inthe renewal stream. As a result, the actual amount realized from the contractrenewals acquired may differ significantly from the estimated amount, causingimpairment.

Goodwill is not subject to amortization. Allocation ofintangible assets between goodwill and other intangible assets and thedetermination of estimated useful lives are based on valuations that we receivefrom independent appraisers. The calculations of these amounts are based onestimates and assumptions using historical and pro forma data and recognizedvaluation methods. The use of different estimates or assumptions could producedifferent results.

While goodwill is notamortized, it is subject to periodic reviews for impairment (at least annually,or more frequently if impairment indicators arise). We review goodwill forimpairment periodically and whenever events or changes in businesscircumstances indicate that the carrying value of the assets may not berecoverable. Such impairment reviews are performed at the entity level withrespect to goodwill, as we have one reporting unit. Under those circumstances,if the fair value were less than the carrying amount of the entity, furtheranalysis would be required to determine whether or not a loss would need to becharged against current period earnings. No indicators of impairment werenoticed in our December 31, 2006 impairment review. The determination offair value and the impairment are based on a combination of a market valuationbased on a comparison with similar public companies (guideline company method)and a discounted cash flow analysis, which includes making various judgmentalassumptions, including assumptions about future cash flows, growth rates anddiscount rates. The use of different estimates or assumptions could producedifferent results. During the fourth quarter of 2005, the Company experienceddeclining revenues from life insurance sales and a drop in the market price ofits common stock. Our annual impairment review was conducted as of December 31,2005, and it was determined that an 

27

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impairmentexisted. As a result of this determination, the Company recorded an impairmentcharge against earnings in the fourth quarter of 2005 amounting to $3.75million.

No income tax credits havebeen recognized relating to our tax loss carryforwards due to uncertaintiesrelating to future taxable income.

**Results of Operations**

**Comparison of Years Ended December 31, 2006 and2005**

*Revenues*

Revenues increased$118,000 or less than 1%, to $17.2 million in 2006 from $17.1 million in 2005. Thecomponents of revenue are as follows:
|                                    | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------|------------|--------------------------------------------|------------|
| ** **                         | ** ** | **2006**                                   | ** ** | **2005** | ** ** |
| Revenues:                          |       |                                       |       |   |   |
| Commissions -Life                  |       | $                                          | 11,349,454 |   | $ | 14,456,897 |   |
| Commissions-Health                 |       | 372,270                                    |       | 614,648 |   |
| Sales of non-life  insurance leads |       | 5,497,590                                  |       | 2,022,787 |   |
| Other revenue                      | * *   | *—*                                   | * *   | *6,976* | * * |
| Total revenue                      |       | $                                          | 17,219,314 |   | $ | 17,101,308 |   |

 

Life insurance commissionsdecreased $3.1 million, or 21%. Sales of life insurance by telephone decreased$3.2 million, primarily due to the closing of our Colorado call center on January 31,2006. The call center was closed in favor of consolidating all of our callcenter operations in our Darien, Illinois home office. This was done to reducethe overhead expense of having a second location as well as to improve theefficiency of the call center. This resulted in a significant decrease in thenumber of phone agents during most of 2006, as we rebuilt the staff in Illinoisunder a new sales management team. As a result of this change, the number oflife insurance policies sold declined to 12,080 in 2006 from 16,845 in 2005, adecrease of 28%. Commission from health insurance decreased 39% in 2006, as wediscontinued brokerage sales for health insurance during the first quarter of2005, and are now outsourcing this business to third parties. As a result,there were no new health insurance policies sold during 2006. All of thecommissions result from previously-sold policies that continue in force. Feesfrom the sale of internet leads for lines of insurance other than lifeincreased 172% to $5.5 million in 2006, compared to $2 million in 2005. Thisincrease results primarily from an increase in the price received for insuranceleads that we sell, along with an increase in the number of leads being sold.

*Expenses*

*Selling and Marketing.**  *Selling and marketing expensesincreased $2.2 million, or 34%, in 2006 when compared with 2005, to a total of$8.8 million. We intentionally increased our advertising spending in 2006 inorder to take advantage of the higher rates being paid for insurance leads.This resulted in higher revenue from lead sales, which helped to offset thelower life commission revenue that resulted from the closing of the Coloradocall center.  Selling and marketingexpenses increased to 51% of revenue, compared to  38% of revenue in 2005.

*Operations.*   Operationsexpenses decreased 15% to $6.2 million in 2006 from $7.3 million in 2005,primarily as a result of closing the Colorado call center, as mentioned above. Wehad fewer agents and less overhead as a result of having only one locationafter January 31, 2006.

*General and Administrative.**  *General and administrative expensesdecreased 6%, or $234,000, in 2006 to a total of $3.5 million. Lower legal feesand insurance costs more than offset the new expense for stock optioncompensation.

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*Depreciation and amortization.**  *Depreciation and amortizationdecreased $120,000 in 2006 when compared to 2005. Amortization costs related tothe life insurance renewals acquired in 2004 declines each year in anticipationof policy lapses that will result in steadily declining revenue from theserenewal contracts.

*Impairment of land and building*

*The landand building that formerly housed our Colorado call center was placed on themarket for sale. During the third quarter of 2006, the Company recognized thatthe potential net value that could be realized in a sale of the property waslower than the carrying value and accordingly recognized an impairment chargeof $1.3 million. This determination was made based on an offer that had beenreceived and accepted by the Company. During the fourth quarter of 2006, thatoffer to purchase the building was cancelled by the purchaser. In March 2007,the Company received and accepted a lower offer for the property and,accordingly, has recognized an additional impairment charge of $480,000 in thefourth quarter of 2006.*

***Impairment of goodwill***

We recorded goodwill inthe amount of $6.9 million in connection with our May 2004 acquisition ofcertain assets of Life Quotes, Inc. While goodwill is not amortized, it issubject to periodic reviews for impairment (at least annually, or morefrequently if impairment indicators arise). As discussed earlier, the Companyrecorded an impairment charge against earnings in the fourth quarter of 2005amounting to $3.75 million. There was no impairment charge in 2006.

*Interest Income, Net*

Interest income was$327,000 in 2006 compared to $276,000 in 2005. There was no interest expense in2006 or 2005. Interest income increased due to higher interest rates in 2006.

In 2006, there wererealized losses on the sale of securities of $559. During 2005, there were nosales of securities, so there were no realized gains or losses.

*Income Taxes (Credit)*

We had no income taxcredit for 2006 and 2005 due to valuation allowances provided against netdeferred tax assets.

**Comparison of Years Ended December 31,2005 and 2004**

*Revenues*

Revenues increased $1.2million, or 7%, to $17.1 million in 2005 from $15.9 million in 2004. Thecomponents of revenue are as follows:

| ** **                         | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------|------------|--------------------------------------------|------------|
| ** **                         | ** ** | **2005**                                   | ** ** | **2004** | ** ** |
| Revenues:                          |       |                                       |       |   |   |
| Commissions -Life                  |       | $                                          | 14,456,897 |   | $ | 13,220,872 |   |
| Commissions-Health                 |       | 614,648                                    |       | 1,046,580 |   |
| Sales of non-life  insurance leads |       | 2,022,787                                  |       | 1,626,179 |   |
| Other revenue                      |       | 6,976                                      |       | 16,361 |   |
| Total revenue                      |       | $                                          | 17,101,308 |   | $ | 15,909,992 |   |

 

Life insurance commissionsincreased $1.2 million, or 9%. Sales of life insurance by telephone increased$3.2 million, primarily due to the May 2004 acquisition of Life Quotes, Inc.,which provided us 

29

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with aphone sales capability. Sales of life insurance at our website declined $2.2 million,as we directed a significant portion of our advertising in 2005 towardsupporting the phone sales center. An increase in renewal commission of$200,000 accounted for the remainder of the increase in life insurancecommissions. This increase in revenue was achieved despite a drop in the numberof life insurance policies sold to 16,845 in 2005 from 17,485 in 2004, adecrease of 4%, as our average total commission per policy sold increased. Commissionsfrom health insurance decreased 41% in 2005, as we discontinued brokerage salesfor health insurance during the first quarter of 2005, and are now outsourcingthis business to third parties. As a result, total health insurance policiessold decreased 90% to 315 in 2005 from 3,236 in 2004. Fees from the sale ofinternet leads for lines of insurance other than life increased 24% to $2million in 2005, resulting from higher revenue from the sale of auto insurancetraffic as well as new revenue from the sale of health insurance traffic.

*Expenses*

*Selling and Marketing.**  *Selling and marketing expensesdecreased $325,000, or 5%, in 2005 when compared with 2004, to a total of $6.5million. We intentionally decreased our advertising spending during the secondand third quarters of 2005, as we found that we were generating more telephoneleads than our agents could efficiently handle. Selling and marketing expenseshave dropped to 38% of revenue in 2005, compared with 43% of revenue in 2004.

*Operations.*   Operationsexpenses increased 11% to $7.3 million in 2005 from $6.5 million in 2004. The2005 expenses include a full year of operating the Life Quotes division, while2004 expenses only include that operation subsequent to the May 2004acquisition.

*General and Administrative.**  *General and administrative expensesincreased 20%, or $617,000, in 2005 to a total of $3.8 million. Increases inlegal and accounting fees, as well as higher insurance costs and an increase inproperty taxes resulting from owning the Life Quotes building for a full yearin 2005 accounted for this increase.

*Depreciation andamortization.**  *Depreciationand amortization decreased $306,000 in 2005 when compared to 2004. Full yeardepreciation on the Life Quotes building and fixed assets, along withamortization of intangibles acquired in the Life Quotes acquisition, resultedin an increase of  $240,000 in thiscategory. However, results for 2004 included amortization charges of $438,000related to intangible assets acquired in the 2001 acquisition of selectedassets of Insurance News Network. Those intangible assets were fully amortizedin 2004, so there were no similar charges in 2005.

***Impairment of goodwill***

We recorded goodwill inthe amount of $6.9 million in connection with our May 2004 acquisition ofcertain assets of Life Quotes, Inc. While goodwill is not amortized, it issubject to periodic reviews for impairment (at least annually, or morefrequently if impairment indicators arise). As discussed earlier, the Companyrecorded an impairment charge against earnings in the fourth quarter of 2005amounting to $3.75 million.

*Interest Income, Net*

Interest income, net was$276,000 in 2005 compared to $138,000 in 2004. The components of interestincome are as follows:
|                      | ** ** | **Years ended December 31,** | ** ** |
|----------------------|------------|---------------------------------------------|------------|
| ** **           | ** ** | **2005**                                    | ** ** | **2004** | ** ** |
| Interest income      |       | $                                           | 276,001    |   | $ | 218,968 |   |
| Interest expense     |       | —                                      |       | (80,765 | ) |
| Interest income, net |       | $                                           | 276,001    |   | $ | 138,203 |   |

 

30

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Interest income increased due to a larger averageportfolio of invested assets and higher interest rates in 2005. There was nodebt in 2005.

During 2005, there were nosales of securities, so there were no realized gains or losses. In 2004, therewere realized losses of  $45,000.

*Income Taxes(Credit)*

We had no income taxcredit for 2005 and 2004 due to valuation allowances provided against netdeferred tax assets.

**Liquidity andCapital Resources**

We currently expect that our cash and fixed maturityinvestments of $8.2 million at December 31, 2006 will be sufficient tomeet our anticipated cash requirements for at least the next 12 months. Thetiming and amounts of our working capital expenditures are difficult topredict, and if they vary materially, we may require additional financing. Ifwe require additional equity financing, it may be dilutive to our stockholdersand the equity securities issued in a subsequent offering may have rights orprivileges senior to our common stock. If debt financing is available, it mayrequire additional restrictive covenants with respect to dividends, raisingcapital and other financial and operational matters, which could impact orrestrict our operations. If we cannot obtain adequate financing on acceptableterms, we may be required to reduce the scope of our marketing or operations,which could harm our business, results of operations and our financialcondition.

Our sources of funds will consist primarily of commissionsgenerated from the sale of life insurance products, fee revenue from the saleof leads for other lines of insurance, investment income, and maturity proceedsfrom our fixed maturity portfolio. The principal uses of funds are selling andmarketing expenses, operations, general and administrative expenses, andacquisitions of furniture, equipment and software.

Cash used by operating activities was approximately$814,000 in 2006, while cash provided by operating activities was approximately$171,000 in 2005 and $503,000 in 2004, as shown in our statements of cash flowsincluded elsewhere in this annual report. The decrease in cash flow in 2006,compared to the amounts provided in 2005 and 2004, was primarily the result ofan increase in the net loss after adjustment for non-cash expenses, such asdepreciation, amortization and impairment charges.

Cash provided by investment activities in 2006 totaled$1.4 million, and resulted from the proceeds of investment maturities and salesexceeding the amount reinvested.  Cashused for investing activities in 2005 totaled $759,000, consisting of thepurchase of fixed income investments in excess of investment maturities of$503,000, and the purchase of fixed assets of $256,000. Cash used for investingactivities in 2004 totaled $12.5 million, consisting primarily of theacquisition of Life Quotes. Fixed maturity securities were sold, generating$11.9 million, to help fund the $18.7 million acquisition. The purchase ofsecurities in excess of maturities used $5.5 million of cash.

Cash used for financingactivities in 2006 and 2005 totaled $63,000 and $21,000, respectively, andconsisted of the repurchase of shares of our common stock. Cash provided byfinancing activities in 2004 totaled $12.7 million, consisting primarily of thesale of common stock to fund the Life Quotes acquisition. The Company alsoborrowed and later repaid $6.5 million in connection with the acquisition.

31

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**Cash FlowObligations**

In thenormal course of business, we enter into financing transactions, leaseagreements, or other commitments. These commitments may obligate us to certaincash flows during future periods. The following table summarizes suchobligations as of December 31, 2006.

| ** **                       | ** ** | **Payments due by Period** | ** ** |
|----------------------------------|------------|-------------------------------------------|------------|
| **Contractual Obligations** | ** ** | ** **                                | ** ** | **Total** | ** ** | **Less than  1 Year** | ** ** | **1-3 Years** | ** ** | **3-5 Years** | ** ** | **More than  5 Years** | ** ** |
| Long-term debt  obligations      |       | $                                         | —     |   |   | $ | — |   |   | $ | — |   | $ | — |   | $ | — |   |
| Capital lease  obligations       |       | —                                    |       |   | — |   |   | — |   | — |   | — |   |
| Operating lease  obligations     |       | 2,027,255                                 |       |   | 193,632 |   |   | 506,068 |   | 644,228 |   | 683,327 |   |
| Purchase obligations             |       | —                                    |       |   | — |   |   | — |   | — |   | — |   |
|                                  |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**Item 7A.**                Quantitativeand Qualitative Disclosures about Market Risk

**The primary objective of ourinvestment activities is to preserve principal while at the same timemaximizing yields without significantly increasing risk. To achieve thisobjective, we maintain a portfolio of cash and equivalents and  investments in a variety of marketablesecurities, including both government and corporate obligations.**

Substantially all of our investments are subject tointerest rate risk. We consider all of our investments as available-for-sale. Asof December 31, 2006, there were net unrealized losses of $83,538 on thoseinvestments. There were net unrealized losses on those investments totaling$198,098 at December 31, 2005.

We did not hold any derivative financial instrumentsas of December 31, 2006, and have never held such instruments in the past.Additionally, all our transactions have been denoted in U.S. currency and donot have any risk associated with foreign currency transactions.

Due to the short termnature of our investments, a 1% increase in interest rates would not decreasethe fair market value of our investments by a material amount.

**Item 8.**                        FinancialStatements and Supplementary Data

The financial statementsare indexed in the Index to Financial Statements, which appear on Pages F-1through F-17 hereof, and are incorporated in this Item by referencethereto.

**Item 9.**                        Changesin and Disagreements with Accountants on Accounting and Financial Disclosures

Not applicable.

**Item 9A.**                Controlsand Procedures

The Company’s management,with the participation of the Company’s Chief Executive Officer and ChiefFinancial Officer, has evaluated the effectiveness of the Company’s disclosurecontrols and procedures as of December 31, 2006. Based on that evaluation,the Company’s Chief Executive Officer and Chief Financial Officer concludedthat the Company’s disclosure controls and procedures were effective as of December 31,2006 in ensuring that all material information required to be filed in thisannual report have been made known to them in a timely fashion. There were nochanges in the Company’s internal control over financial reporting during thefourth quarter of 2006 that have materially affected or are reasonably likelyto materially affect the Company’s internal controls over financial reporting.

**Item 9B.**               OtherInformation

**Not applicable**

32

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**PART III**

**Item10.**                 Directors,Executive Officers and Corporate Governance

The sections entitled “Management”and “Section 16(a) Beneficial Ownership Reporting Compliance” areincorporated herein by reference from our proxy statement to be filed with theSecurities and Exchange Commission in connection with our 2007 annual meetingof stockholders scheduled for May 17, 2007.

The following table setsforth information regarding our executive officers and certain other keyemployees.

| Name                | ** ** | ** ** | ** ** | ** **                                                    | **Age** | ** ** | ** ** | ** ** | **Position** | ** ** |
|---------------------|------------|------------|------------|---------------------------------------------------------------|---------|------------|------------|------------|--------------|------------|
| Robert S. Bland     |       | 53         |       | Chairman of the Board,  President and Chief Executive Officer |
| William V. Thoms    |       | 54         |       | Executive Vice President,  Chief Operating Officer            |
| Phillip A. Perillo  |       | 57         |       | Senior Vice President,  Chief Financial Officer               |
| Richard C. Claahsen |       | 42         |       | Vice President, Corporate Secretary                           |

 

*Robert S. Bland***has served as our Chairman of the Board, President andChief Executive Officer since he founded Insure.com in 1984. From 1979 to 1984,Mr. Bland was president and sole stockholder of Security FundingCorporation, an insurance agency. In March 1984, Mr. Bland soldSecurity Funding Corporation in order to raise capital to found Insure.com.Mr. Bland holds a B.S. in marketing from the University of Colorado.

*William V. Thoms*has served as our Executive Vice President since 1994. From 1988 to 1993, Mr. Thomswas responsible for our operations and customer service departments. Mr. Thomsis a founding stockholder. Prior to joining us, Mr. Thoms was a salesmanager for Western Dressing, Inc., a privately held salad dressingmanufacturing company, from 1972 to 1987.

*Phillip A. Perillo*has served as our Senior Vice President and Chief Financial Officer since May of2002. Mr. Perillo has over twenty years of insurance industry experience,with companies such as the Zurich American Insurance Group and Marsh &McLennan. Mr. Perillo holds an MBA in Finance from DePaul University and aB.S. in Accounting from the University of Illinois at Chicago, and is aCertified Public Accountant.

*Richard C. Claahsen***has served as our Vice President of Regulatory Affairssince May 1999. From June 1997 to May 1999, Mr. Claahsenserved as our director of regulatory affairs. From October 1996 to June 1997,he was a special agent with Northwestern Mutual Life Insurance Company. From1993 to 1996, Mr. Claahsen was a litigation paralegal at Templeton &Associates of Chicago, Illinois. In 1999, Mr. Claahsen received hisChartered Life Underwriter designation from The American College of Bryn Mawr,Pennsylvania. Mr. Claahsen holds a B.A. and an M.A. in philosophy from theCatholic University of America and a J.D. from ITT Chicago Kent College of Law.

***Code of Ethics***

We have adopted a Code ofEthics which applies to all financial officers, including our Chief Executive Officerand our Chief Financial Officer. We believe our Code of Ethics is compliantwith Item 406 of SEC Regulation S-K and the Nasdaq listing standards.Any waivers of the Code of Ethics must be approved by a committee of the Boardof Directors comprised solely of independent directors. There have been nowaivers to the Code of Ethics since its adoption.

**Item11.**                 ExecutiveCompensation

The sections entitled “ExecutiveCompensation,” excluding the Compensation Committee Report and the stock priceperformance graph, “Management—Director Compensation” and “Management—CompensationCommittee Interlocks and Insider Participation” are incorporated herein byreference from 

33

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ourproxy statement to be filed with the Securities and Exchange Commission inconnection with our 2007 annual meeting of stockholders scheduled for May 17,2007.

**Item12.**                 SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters

The section entitled “PrincipalShareholders” is incorporated herein by reference from our proxy statement tobe filed with the Securities and Exchange Commission in connection with our2007 annual meeting of stockholders scheduled for May 17, 2007.

The following table setsforth the following information as of December 31, 2006: (i) thenumber of shares of our common stock to be issued upon the exercise ofoutstanding options, warrants and rights, (ii) the weighted-averageexercise price of such options, warrants and rights and (iii) the numberof shares of our common stock remaining available for future issuance under ourequity compensation plans, other than the outstanding options, warrants andrights described above.

**EquityCompensation Plan Information**

| ** **                                                  | **Plan category** | ** ** | ** ** | **Number of securities to  be issued upon exercise  of outstanding options,  warrants and rights  (a)** | ** ** | **Weighted-average  exercise price of  outstanding  options, warrants  and rights  (b)** | ** ** | **Number of securities  remaining available for  future issuance under  equity compensation  plans (excluding  securities reflected in  column (a))  (c)** | ** ** |
|-------------------------------------------------------------|------------------------|------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Equity compensation  plans approved by security holders     |                   |       | 380,561    |                                                                                                                                                      |       |                                                                                                         | $          | 6.77                                                                                                                                                                                                              |       |   |   | 338,760 |   |   |
| Equity compensation  plans not approved by security holders |                   |       | —     |                                                                                                                                                      |       |                                                                                                         | —     |                                                                                                                                                                                                              |       |   | — |   |   |
| **Total**                                                   |                   |       | 380,561    |                                                                                                                                                      |       |                                                                                                         | $          | 6.77                                                                                                                                                                                                              |       |   |   | 338,760 |   |   |

 

Please see note 7 to theaudited financial statements of Insure.com included elsewhere in this AnnualReport on Form 10-K for a description of the material features ofthe Insure.com, Inc. Stock Option Plans.

**Item13.**                 CertainRelationships and Related Transactions, and Director Independence

The section entitled “CertainRelationships and Related Transactions” is incorporated herein by referencefrom our proxy statement to be filed with the Securities and ExchangeCommission in connection with our 2007 annual meeting of stockholders scheduledfor May 17, 2007.

**Item14.**                 PrincipalAccounting Fees and Services

**Audit Fees**

**Theaggregate fees for each of the last two fiscal years for professional servicesrendered by Ernst & Young LLP for the audit of our annual financialstatements and review of financial statements included in our Forms 10-Qwere $259,000 in 2006 and $283,000 in 2005.**

**Audit-Related Fees**

The aggregate fees billedin each of the last two fiscal years for assurance and related services byErnst & Young LLP that are reasonably related to the performance ofthe audit or review of our financial statements and are not reported aboveunder the caption “Audit Fees” were $0 in 2006 and $0 in 2005.

**Tax Fees**

For the last two years,there were no fees billed for professional services rendered by Ernst &Young LLP for tax compliance, tax advice and tax planning.

34

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**All Other Fees**

The aggregate fees billedin each of the last two fiscal years for products and services provided byErnst & Young LLP, other than the services reported above, were $1,500in 2006 and $1,500 in 2005. The fees were for use of the Ernst & Youngonline service.

**Pre-ApprovalPolicies and Procedures**

The Audit Committee has adopted a policy that requiresadvance approval of all audit, audit-related, tax services, and other servicesperformed by the independent registered public accounting firm. The policyprovides for pre-approval by the Audit Committee of specifically defined auditand non-audit services. Unless the specific service has been pre-approved withrespect to that year, the Audit Committee must approve the permitted servicebefore the independent auditor is engaged to perform it. The Audit Committeehas delegated to the Chair of the Audit Committee the authority to approvepermitted services provided that the Chair reports any decisions to theCommittee at its next scheduled meeting.

All of the above servicesfor 2006 were approved in advance by our Audit Committee, as required by theAudit Committee Charter.

**PART IV**

**Item 15.**                 Exhibits,Financial Statement Schedules and Reports on Form 8-K:

(a)           1.     Financial Statements:

The financialstatements, which appear on Pages F-1 through F-16 hereof, areindexed in the Index to Financial Statements and are incorporated herein byreference in this Item by reference thereto.

2.     FinancialStatement Schedules:

No schedules arerequired due to the absence of conditions under which they are required orbecause the required information is provided in the financial statements ornotes thereto.

3.     ExecutiveCompensation Plans and Arrangements.

The following management contracts or compensatoryplans or arrangements are listed as exhibits to this annual report.

Quotesmith.com1997 Stock Option Plan (as amended and restated March 29, 1999).

Quotesmith.com1999 Employee Stock Purchase Plan.

Quotesmith.com2004 Stock Option Plan.

EmploymentAgreement between the Company and Robert S. Bland, as amended.

EmploymentAgreement between the Company and William V. Thoms, as amended.

EmploymentAgreement between the Company and Phillip A. Perillo.

Form of Director Indemnification Agreement

See Exhibit Index(immediately following the signature pages) for exhibits filed with this annualreport.

(b)          Exhibits

See Exhibits Index(immediately following the signature pages).

(c)           Schedules

All required schedules are included.

35

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**INSURE.COM, INC**

**INDEX TO FINANCIALSTATEMENTS**

|                                                                                                      | ** ** | **Page** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|----------|------------|
| **Audited Financial Statements**                                                                     |       |     |       |   |   |
| Report  of Independent Registered Public Accounting Firm                                             |       |     | F-2        |   |   |
| Balance Sheets as of  December 31, 2006 and 2005                                                |       |     | F-3        |   |   |
| Statements  of Operations for the Years Ended December 31, 2006, 2005, and 2004                 |       |     | F-4        |   |   |
| Statements  of Stockholders’ Equity for the Years Ended December 31, 2006, 2005, and  2004 |       |     | F-5        |   |   |
| Statements of  Cash Flows for the Years Ended December 31, 2006, 2005, and 2004                 |       |     | F-6        |   |   |
| Notes to Financial Statements                                                                        |       |     | F-7        |   |   |

 

F-1

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**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

Boardof Directors

Insure.com, Inc.

We have audited the accompanying balance sheets ofInsure.com, Inc. as of December 31, 2006 and 2005, and the relatedstatements of operations, stockholders’ equity, and cash flows for each of thethree years in the period ended December 31, 2006. These financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. We were not engaged to perform an audit of the Company’s internalcontrol over financial reporting. Our audits included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.

As discussed in Note 2 to the financial statements, in2006 the Company changed its method of accounting for stock based compensation.

In our opinion, thefinancial statements referred to above present fairly, in all materialrespects, the financial position of Insure.com, Inc. at December 31,2006 and 2005, and the results of its operations and its cash flows for each ofthe three years in the period ended December 31, 2006 in conformity withU.S. generally accepted accounting principles.
|                   | /s/ ERNST &  YOUNG LLP |
|-------------------|---------------------------------|
| Chicago, Illinois |                            |
| March 15, 2007    |                            |

 

F-2

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**INSURE.COM, INC.**

**BALANCE SHEETS**

| ** **                                                                                                                        | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                                                        | ** ** | **2006**              | ** ** | **2005** | ** ** |
| **ASSETS**                                                                                                                        |       |                  |       |   |   |
| Cash and equivalents                                                                                                              |       | $                     | 1,300,243  |   | $ | 746,708 |   |
| Fixed maturity  investments—available for sale at fair value*(Note 3)*                                                       |       | 4,990,563             |       | 4,937,040 |   |
| Commissions  receivable, less allowances (2006—$331,000;  2005—$435,000)                                                |       | 2,599,520             |       | 2,599,937 |   |
| Land and  building, held for sale*(Note 8)*                                                                                       |       | 3,446,000             |       | — |   |
| Other assets                                                                                                                      |       | 393,882               |       | 348,205 |   |
| Total current  assets                                                                                                             |       | 12,730,208            |       | 8,631,890 |   |
| Fixed maturity investments—available for sale at  fair value *(Note 3)*                                                      |       | 1,949,970             |       | 3,425,145 |   |
| Land                                                                                                                              |       | —                |       | 830,000 |   |
| Building, less  accumulated depreciation (2005—$195,000)                                                                     |       | —                |       | 4,475,417 |   |
| Furniture,  equipment, and computer software at cost, less accumulated depreciation  (2006—$3,578,000; 2005—$3,445,000) |       | 333,853               |       | 481,424 |   |
| Intangible assets  at cost, less accumulated amortization  (2006—$1,587,000; 2005—$1,033,000)*(Note 2)*                 |       | 2,539,564             |       | 3,093,959 |   |
| Goodwill*(Notes 2 and 5)*                                                                                                         |       | 3,117,470             |       | 3,117,470 |   |
| Total assets                                                                                                                      |       | $                     | 20,671,065 |   | $ | 24,055,305 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                     |       |                  |       |   |   |
| Accounts payable and accrued liabilities—current                                                                             |       | $                     | 1,347,519  |   | $ | 1,441,474 |   |
| Total liabilities                                                                                                                 |       | 1,347,519             |       | 1,441,474 |   |
| Stockholders’  equity *(Notes 6 and 7):*                                                                                     |       |                  |       |   |   |
| Common stock, $.003 par value; shares authorized: 60,000,000;  shares issued: 9,688,709                                           |       | 29,066                |       | 29,066 |   |
| Additional paid-in capital                                                                                                        |       | 77,060,144            |       | 76,814,067 |   |
| Retained-earnings deficit                                                                                                         |       | (53,804,513           | )          | (50,216,482 | ) |
| Treasury stock at cost: 2006—2,388,140 shares; 2005—  2,366,816 shares                                                  |       | (3,877,613            | )          | (3,814,722 | ) |
| Accumulated other comprehensive income (loss)                                                                                     |       | (83,538               | )          | (198,098 | ) |
| Total  stockholders’ equity                                                                                                  |       | 19,323,546            |       | 22,613,831 |   |
| Total liabilities and  stockholders’ equity                                                                                  |       | $                     | 20,671,065 |   | $ | 24,055,305 |   |

 

See accompanying notes.

F-3

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**INSURE.COM, INC.STATEMENTS OF OPERATIONS**

| ** **                                                                     | ** ** | **Years Ended December 31,** | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                     | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Revenues:                                                                      |       |                                        |       |   |   |   |   |
| Commissions and fees                                                           |       | $                                           | 17,219,314 |   | $ | 17,094,332 |   | $ | 15,893,631 |   |
| Other                                                                          |       | —                                      |       | 6,976 |   | 16,361 |   |
| Total revenues                                                                 |       | 17,219,314                                  |       | 17,101,308 |   | 15,909,992 |   |
| Expenses:                                                                      |       |                                        |       |   |   |   |   |
| Selling and marketing *(Note 2)*                                          |       | 8,784,153                                   |       | 6,540,954 |   | 6,866,341 |   |
| Operations *(Note 7)*                                                          |       | 6,164,814                                   |       | 7,274,606 |   | 6,531,308 |   |
| General and administrative *(Note 7)*                                          |       | 3,530,269                                   |       | 3,764,996 |   | 3,147,865 |   |
| Depreciation                                                                   |       | 298,908                                     |       | 367,853 |   | 413,394 |   |
| Amortization                                                                   |       | 554,395                                     |       | 605,090 |   | 865,296 |   |
| Impairment of land and building *(Notes 2 and 8)*                              |       | 1,801,042                                   |       | — |   | — |   |
| Impairment of goodwill *(Notes 2 and 5)*                                       |       | —                                      |       | 3,750,000 |   | — |   |
| Total expenses                                                                 |       | 21,133,581                                  |       | 22,303,499 |   | 17,824,204 |   |
| Operating loss                                                                 |       | (3,914,267                                  | )          | (5,202,191 | ) | (1,914,212 | ) |
| Interest income,  net *(Note 2)*                                          |       | 326,795                                     |       | 276,001 |   | 138,203 |   |
| Net realized loss  on sale of securities                                       |       | (559                                        | )          | — |   | (45,428 | ) |
| Loss before income taxes                                                  |       | (3,588,031                                  | )          | (4,926,190 | ) | (1,821,437 | ) |
| Income tax credit  *(Note 4)*                                             |       | —                                      |       | — |   | — |   |
| Net loss                                                                       |       | $                                           | (3,588,031 | ) | $ | (4,926,190 | ) | $ | (1,821,437 | ) |
| Net loss per  common share, basic and diluted                                  |       | $                                           | (0.49      | ) | $ | (0.67 | ) | $ | (0.31 | ) |
| Weighted average common shares  and equivalents outstanding, basic and diluted |       | 7,311,788                                   |       | 7,328,595 |   | 5,851,237 |   |

 

See accompanying notes.

F-4

----

**INSURE.COM, INC.**

**STATEMENTS OF STOCKHOLDERS’EQUITY**

| ** **                                                         | ** ** | **Common Stock** | ** ** | ** ** | ** ** | ** **     | ** ** | ** **    | ** ** | **Accumulated** | ** ** | ** **             | ** **  |
|--------------------------------------------------------------------|------------|-----------------------|------------|------------|------------|----------------|------------|---------------|------------|-----------------|------------|------------------------|-------------|
| ** **                                                         | ** ** | **Number of**    | ** ** | ** ** | ** ** | **Additional** | ** ** | **Retained-** | ** ** | ** **      | ** ** | **Other**              | ** **  | **Total** | ** ** |
| ** **                                                         | ** ** | **Shares**            | ** ** | **Par**    | ** ** | **Paid-In**    | ** ** | **Earnings**  | ** ** | **Treasury**    | ** ** | **Comprehensive**      | ** **  | **Stockholders’** | ** ** |
| ** **                                                         | ** ** | **Issued**            | ** ** | **Value**  | ** ** | **Capital**    | ** ** | **Deficit**   | ** ** | **Stock**       | ** ** | **Income (Loss)** | ** **  | **Equity** | ** ** |
| 2004:                                                              |       |                  |       |       |       |           |       |          |       |            |       |                   |        |   |   |   |   |   |   |   |   |
| Balance at January 1                                          |       |                  | 7,317,573  |       |       | $              | 21,953     |          | $          | 64,075,686      |       | $                      | (43,468,855 | ) | $ | (3,793,985 | ) |   | $ | (69,184 | ) |   |   | $ | 16,765,615 |   |   |
| Net loss                                                           |       |                  | —     |       |       | —         |       | —        |       | (1,821,437      | )          | —                 |        |   | — |   |   |   | (1,821,437 | ) |   |
| Other comprehensive loss—  net unrealized loss on investments |       |                  | —     |       |       | —         |       | —        |       | —          |       | —                 |        |   | (74,133 | ) |   |   | (74,133 | ) |   |
| Total comprehensive loss                                           |       |                  |       |       |       |           |       |          |       |            |       |                   |        |   |   |   |   |   | (1,895,570 | ) |   |
| Proceeds  from sale of common stock:                               |       |                  |       |       |       |           |       |          |       |            |       |                   |        |   |   |   |   |   |   |   |   |
| —Zions Purchase                                               |       |                  | 2,363,636  |       |       | 7,091          |       | 12,727,759    |       |            |       |                   |        |   |   |   |   |   | 12,734,850 |   |   |
| —exercise of  stock options                                   |       |                  | 7,500      |       |       | 22             |       | 10,622        |       | —          |       | —                 |        |   | — |   |   |   | 10,644 |   |   |
| Balance at December 31                                        |       |                  | 9,688,709  |       |       | 29,066         |       | 76,814,067    |       | (45,290,292     | )          | (3,793,985             | )           |   | (143,317 | ) |   |   | 27,615,539 |   |   |
| 2005:                                                              |       |                  |       |       |       |           |       |          |       |            |       |                   |        |   |   |   |   |   |   |   |   |
| Net loss                                                           |       |                  | —     |       |       | —         |       | —        |       | (4,926,190      | )          | —                 |        |   | — |   |   |   | (4,926,190 | ) |   |
| Other comprehensive loss—  net unrealized loss on investments |       |                  | —     |       |       | —         |       | —        |       | —          |       | —                 |        |   | (54,781 | ) |   |   | (54,781 | ) |   |
| Total comprehensive loss                                           |       |                  |       |       |       |           |       |          |       |            |       |                   |        |   |   |   |   |   | (4,980,971 | ) |   |
| Purchase of 7,475 shares of treasury stock                         |       |                  | —     |       |       | —         |       | —        |       | —          |       | (20,737                | )           |   | — |   |   |   | (20,737 | ) |   |
| Balance at December 31                                        |       |                  | 9,688,709  |       |       | 29,066         |       | 76,814,067    |       | (50,216,482     | )          | (3,814,722             | )           |   | (198,098 | ) |   |   | 22,613,831 |   |   |
| 2006:                                                              |       |                  |       |       |       |           |       |          |       |            |       |                   |        |   |   |   |   |   |   |   |   |
| Net loss                                                           |       |                  | —     |       |       | —         |       | —        |       | (3,588,031      | )          | —                 |        |   | — |   |   |   | (3,588,031 | ) |   |
| Other comprehensive gain—  net unrealized gain on investments |       |                  | —     |       |       | —         |       | —        |       | —          |       | —                 |        |   | 114,560 |   |   |   | 114,560 |   |   |
| Total comprehensive loss                                           |       |                  |       |       |       |           |       |          |       |            |       |                   |        |   |   |   |   |   | (3,473,471 | ) |   |
| Stock option compensation                                          |       |                  | —     |       |       | —         |       | 246,077       |       | —          |       | —                 |        |   | — |   |   |   | 246,077 |   |   |
| Purchase of 21,324 shares of treasury stock                        |       |                  | —     |       |       | —         |       | —        |       | —          |       | (62,891                | )           |   | — |   |   |   | (62,891 | ) |   |
| Balance at  December 31                                       |       |                  | 9,688,709  |       |       | $              | 29,066     |          | $          | 77,060,144      |       | $                      | (53,804,513 | ) | $ | (3,877,613 | ) |   | $ | (83,538 | ) |   |   | $ | 19,323,546 |   |   |

 

See accompanying notes.

F-5

----

**INSURE.COM, INC.**

**STATEMENTS OF CASH FLOWS**

| ** **                                                                     | ** ** | **Years Ended December 31,** | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                     | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Cash flows from operating  activities:**                                     |       |                                        |       |   |   |   |   |
| Net loss                                                                       |       | $                                           | (3,588,031 | ) | $ | (4,926,190 | ) | $ | (1,821,437 | ) |
| Adjustments to  reconcile to net cash provided (used) by operating activities: |       |                                        |       |   |   |   |   |
| Depreciation expense                                                           |       | 298,908                                     |       | 367,853 |   | 413,394 |   |
| Amortization                                                                   |       | 527,986                                     |       | 664,431 |   | 974,539 |   |
| Impairment of land and building                                                |       | 1,801,042                                   |       | — |   | — |   |
| Impairment of goodwill                                                         |       | —                                      |       | 3,750,000 |   | — |   |
| Accounts payable and accrued liabilities                                       |       | (93,955                                     | )          | 213,790 |   | 486,984 |   |
| Stock option compensation                                                      |       | 246,077                                     |       | — |   | — |   |
| Commissions receivable                                                         |       | 417                                         |       | 148,563 |   | 326,053 |   |
| Other                                                                          |       | (6,866                                      | )          | (47,928 | ) | 123,438 |   |
| Net cash provided (used) by operating activities                               |       | (814,422                                    | )          | 170,519 |   | 502,971 |   |
| **Cash  flows from investing activities:**                                     |       |                                        |       |   |   |   |   |
| Purchase of investments                                                        |       | (3,437,608                                  | )          | (2,502,631 | ) | (6,543,222 | ) |
| Proceeds from investment maturities                                            |       | 4,750,000                                   |       | 2,000,000 |   | 1,000,000 |   |
| Proceeds from sales of investments                                             |       | 249,670                                     |       | — |   | 11,935,876 |   |
| Purchase of selected assets of Life Quotes                                     |       | —                                      |       | — |   | (18,703,066 | ) |
| Purchase of furniture, equipment and software                                  |       | (131,214                                    | )          | (256,413 | ) | (223,793 | ) |
| Net cash provided (used) by investing activities                               |       | 1,430,848                                   |       | (759,044 | ) | (12,534,205 | ) |
| **Cash  flows from financing activities:**                                     |       |                                        |       |   |   |   |   |
| Proceeds of note payable                                                       |       | —                                      |       | — |   | 6,500,000 |   |
| Repayment of note payable                                                      |       | —                                      |       | — |   | (6,500,000 | ) |
| Proceeds from issuance of common stock                                         |       | —                                      |       | — |   | 12,745,494 |   |
| Purchase of treasury stock                                                     |       | (62,891                                     | )          | (20,737 | ) | — |   |
| Payment of capital lease obligation                                            |       | —                                      |       | — |   | (35,018 | ) |
| Net cash provided (used) by financing activities                               |       | (62,891                                     | )          | (20,737 | ) | 12,710,476 |   |
| **Net  increase (decrease) in cash and equivalents**                           |       | 553,535                                     |       | (609,262 | ) | 679,242 |   |
| **Cash  and equivalents at beginning of year**                                 |       | 746,708                                     |       | 1,355,970 |   | 676,728 |   |
| **Cash and equivalents at end of  year**                                       |       | $                                           | 1,300,243  |   | $ | 746,708 |   | $ | 1,355,970 |   |

 

See accompanying notes.

F-6

----

**INSURE.COM, INC. NOTES TO FINANCIAL STATEMENTS**

**1.      Descriptionof Business**

Insure.com, Inc. (the Company) is an insuranceagency and brokerage. Since its inception in 1984, the Company has beencontinuously developing a proprietary and comprehensive insurance pricecomparison and order-entry system that provides instant quotes from over 30life insurance companies for term life insurance products. The Company usesthis database to provide customers with a large array of comparative lifeinsurance quotes online, over the phone or by mail, and allows the customer topurchase insurance from the insurance company of their choice either online orover the phone with the Company’s licensed insurance customer service staff. TheCompany’s website also provides insurance information and decision-makingtools, along with access to other forms of personal insurance, such as auto,health, homeowners, renters, long-term care and travel insurance throughvarious third party web sites and other sources. The Company generates revenuesfrom the receipt of commissions and fees paid by various sources, that are tieddirectly to the volume of insurance sales or traffic that is produced. TheCompany conducts its insurance agency and brokerage operations using salariedpersonnel and generates prospective customer interest using traditional directresponse advertising methods conducted primarily offline.

On May 7, 2004, the Company acquired selectedassets of Life Quotes, Inc. for approximately $18,700,000. Life Quotes wasan Evergreen, Colorado-based life insurance brokerage that marketed term life insurance utilizing direct responsemarketing methods combined with a call center staffed with licensed agents. As a part of the acquisition, the Companygranted 262,000 options to acquire common shares to employees of Life Quotes, Inc.The Company acquired approximately $2.0 million of receivables, $5.5 million ofbuilding and land, intangible assets and other assets and liabilities.

In the period covered inthe accompanying financial statements, the Company’s primary revenue source hasbeen commissions derived from the sale of individual term life insurance. Applicationsare underwritten and commissions are received from numerous life insurancecompanies. Revenues from some of these companies have exceeded ten percent ofthe Company’s total revenues. In 2006, this includes one company with revenuesof $1.9 million. In 2005, these include three companies with revenues of $2.6million, $2.0 million and $1.7 million. In 2004, these included four companieswith revenues of $3.7 million, $3.0 million, $2.0 million and $1.6 million. TheCompany’s business represents one business segment.

**2.**                 Summaryof Significant Accounting Policies

**Use of Estimates**

The preparation of thefinancial statements in conformity with U.S. generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe amounts reported in the financial statements and accompanying notes. Suchestimates and assumptions could change, as more information becomes known,which could impact the amounts reported and disclosed herein.

**Revenue Recognition**

The Company recognizes annual first year commissionsfor life insurance business as revenues when the policy has been approved bythe underwriter and an initial premium payment (which may be annual, semi-annual,quarterly, or monthly) has been made by the customer. An allowance is providedfor estimated commissions that will not be received due to the nonpayment ofinstallment first year premiums.

F-7

----

**INSURE.COM, INC. NOTES TO FINANCIAL STATEMENTS (Continued)**

Revenues on all otherlines of business, as well as for renewal and bonus commissions and otherrevenues, are recognized when the Company receives notification that suchrevenues have been earned.

**Advertising Costs**

Selling and marketingexpenses in the accompanying financial statements are comprised of advertisingcosts. The costs of producing advertising are expensed in the first period thatthe advertising takes place. The costs of communicating the advertising areexpensed in the period the advertising is communicated.

**Investments**

The Company classifies itsfixed maturity investments as available-for-sale and, accordingly, suchinvestments are carried at fair value. The cost of fixed maturity investmentsis adjusted for amortization of premiums and discounts and for declines invalue that are other than temporary. Temporary changes in the fair values ofinvestments are reflected directly in stockholders’ equity as accumulated othercomprehensive income or loss net of income taxes with no effect on net incomeor loss. Realized gains or losses are calculated using the specificidentification method.

**Cash andEquivalents**

Money market investmentsare included as part of cash and equivalents.

**Land and Building**

During****2006, the Company decided to sell its landand building and, accordingly, recorded the net book value as a current, heldfor sale asset, effective June 30, 2006. Prior to that date, buildingcosts were depreciated over an estimated useful life of 40 years. Land costswere not depreciated. Repair and maintenance costs are charged to expense asincurred. As the land and building are now classified as held for sale, it issubject to review, on an ongoing basis, for indicators of impairment.

**Furniture,Equipment, and Computer Software**

Furniture, equipment, andcapitalized application development costs of internal-use computersoftware are depreciated over useful lives of three to five years usingprincipally the straight-line method of depreciation. Repair and maintenancecosts are charged to expense as incurred.

**Intangible Assets**

As a result of the acquisition of selected assets ofLife Quotes, Inc. described above, the Company prepared an allocation ofthe cost of the acquisition to the assets acquired.

Intangible assets acquiredin 2004 in the acquisition of certain assets of Life Quotes, Inc., consistof the following:
|                              | ** ** | **Intangible Asset ** | ** ** | **Estimated**        | ** ** | **Amortization** | ** ** |
|------------------------------|------------|---------------------------------|------------|----------------------|------------|------------------|------------|
| ** **                   | ** ** | **Balance**                     | ** ** | **Useful Life** | ** ** | **Method**       | ** ** |
| Insurance  contract renewals |       |                            | $          | 3,538,000            |       |             |       | 10 years |   |   | Accelerated | ** ** |
| Non-compete agreement        | * *   |                            | 589,000    |                 |       |             | 6 years    |   |   | Straight  line | ** ** |
| Total                        | * *   |                            | $          | 4,127,000            |       |             |       |   |   |   |   | ** ** |

 

F-8

----

**INSURE.COM, INC. NOTES TO FINANCIAL STATEMENTS (Continued)**

The fair value ofinsurance contract renewals was estimated based on the actual policies in forceas of the acquisition date, and the renewal commission rates paid by each insurancecarrier. These commissions were estimated to have a useful life of ten years,based on the terms of the contracts with the insurance carriers, and an annuallapse rate was applied to the expected renewals for each carrier based onhistorical trends. Amortization is on an accelerated basis, as renewalcommissions will decline each year due to lapses. The ultimate realization ofthe value of the contract renewals is dependant on a number of factors,including actual lapse ratios, which can be affected by factors not under ourcontrol, such as death rates and the pricing level of insurance policies thatcould be purchased to replace the policies in the renewal stream. As a result,the actual amount realized from the contract renewals acquired may differ significantlyfrom the amount recorded in the financial statements, causing impairment. Amortizationexpense from these intangible assets totaled $554,000 in 2006, $605,000 in 2005and $428,000 in 2004, and is expected to total $509,000 in 2007, $468,000 in 2008,$431,000 in 2009, $332,000 in 2010 and $269,000 in 2011.

Intangible assets as of December 31,2003 represent the value assigned to the insure.com Web site which was acquiredin the 2001 purchase of selected assets of Insurance News Network, LLC. Thisasset was amortized on a straight-line basis over three years. Amortizationexpense was $438,000 in 2004.

**Goodwill**

The Company recordedgoodwill in the amount of $6.9 million in connection with its May 2004acquisition of certain assets of Life Quotes, Inc. While goodwill is notamortized, FAS 142 requires that it be subject to periodic reviews forimpairment (at least annually, or more frequently if impairment indicatorsarise) using a two step process. Such impairment reviews are performed at theentity level, as the Company has one reporting unit. The first step of thegoodwill impairment test is used to identify potential impairment by comparingthe fair value of the Company with its carrying amount, including goodwill. Thefair value of the Company is determined using a combination of a marketvaluation based on a comparison with similar public companies (guidelinecompany method), and a discounted cash flow analysis, which includes makingvarious judgmental assumptions, including assumptions about future cash flows,growth rates and discount rates. The assumptions about future cash flows andgrowth rates are based on the Company’s budget and long range plans. Discountrate assumptions are based on an assessment of risk inherent in the Company. Ifthe calculated fair value of the Company exceeds its carrying amount, goodwillis considered not impaired and the second step of the impairment test isunnecessary. If the carrying amount of the entity exceeds the calculated fairvalue, the second step of the goodwill impairment test is performed to measurethe amount of impairment loss, if any. The second step of the goodwillimpairment test compares the implied fair value of the Company’s goodwill withthe carrying amount of that goodwill. If the carrying amount exceeds theimplied fair value of the goodwill, an impairment loss is recognized in anamount equal to that excess. The implied fair value of goodwill is determinedin the same manner as the amount of goodwill recognized in a businesscombination. That is, the fair value of the Company is allocated to all of theassets and liabilities of the Company (including any unrecognized intangibleassets) as if the Company had been acquired in a business combination and thefair value of the Company was the purchase price paid to acquire the Company.

**Treasury Stock**

The cost of reacquiringthe Company’s common stock is reported as a separate component of stockholders’equity.

F-9

----

**INSURE.COM, INC. NOTES TO FINANCIAL STATEMENTS (Continued)**

**Income Taxes**

Deferred income taxes aredetermined based on the temporary differences between financial reporting andtax bases of assets and liabilities and the effect of net operating losscarryforwards, and are measured using enacted tax rates.

**Non-operatingIncome and Expense**

Interestincome, net in the accompanying statements of operations includes thefollowing:
|                      | ** ** | **Years ended December 31,** | ** ** |
|----------------------|------------|---------------------------------------------|------------|
| ** **           | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Interest income      |       | $                                           | 326,795    |   | $ | 276,001 |   | $ | 218,968 |   |
| Interest expense     |       | —                                      |       | — |   | (80,765 | ) |
| Interest income, net |       | $                                           | 326,795    |   | $ | 276,001 |   | $ | 138,203 |   |

 

In 2006, the Company realized losses of $559 on thesale of fixed maturity investments. There were no realized gains or losses in2005. In 2004, the Company realized losses of $45,000 on the sale of fixedmaturity investments.

**Net Loss Per Share**

Basic and diluted net lossper share reflects net loss divided by the weighted average number of commonshares outstanding. Diluted net loss per share does not include the effect ofcommon share equivalents because the effect would be antidilutive.

**ComprehensiveIncome or Loss**

Comprehensiveloss includes net loss and unrealized gain or loss on investments, as follows:
|                                                                           | ** ** | **Years ended December 31,** | ** ** |
|---------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Unrealized gain  (loss) on investments                                    |       | $                                           | 114,001    |   | $ | (54,781 | ) | $ | (119,561 | ) |
| Less: Reclassification  adjustment for realized losses included in income |       | 559                                         |       | — |   | 45,428 |   |
| Other  comprehensive income (loss)                                        |       | $                                           | 114,560    |   | $ | (54,781 | ) | $ | (74,133 | ) |

 

The specificidentification method was used for calculating gains or losses on securitiesreclassified.

**Stock Options**

Effective January 1, 2006, the Company beganaccounting for stock option grants in accordance with Statement of FinancialAccounting Standards No. 123 (revised2004), *Share-Based Payment*(Statement123 (R)), which requires the recognition of compensation expense for stockoptions granted to employees where the exercise price is equal to orgreater than the market price at the date of the grant. Prior to that date, theCompany accounted for stock option grants in accordance with Accounting PrinciplesBoard Opinion 25, “Accounting for Stock Issued to Employees” and relatedinterpretations, and, accordingly, recognized no compensation expense for stockoptions granted to employees where the exercise price is equal to or greaterthan the market price at the date of the grant. During the year ended December 31,

F-10

----

**INSURE.COM, INC. NOTES TO FINANCIAL STATEMENTS (Continued)**

2006, the Company recordedcompensation expense related to stock options in its income statement in theamount of $246,000, with no related income tax benefit recognized. As a result,net loss was $246,000 higher and net loss per common share (basic and diluted)was $.03 higher under Statement 123 (R).  No income tax benefit was recognized in theincome statement for this expense. Unrecognized compensation expense related tostock options totaled $66,000 as of December 31, 2006. Expense wascalculated using the Black-Scholes options pricing model. Due to a lack ofhistorical information, the expected term is based on the midpoint between thevesting term and contract term. The volatility assumption is based onhistorical information.

TheCompany implemented Statement 123 (R) using the “modified prospective”method in which compensation cost is recognized beginning with the effectivedate (a) based on the requirements of Statement 123 (R) for allshare-based payments granted after the effective date and (b) based on therequirements of Statement 123 for all awards granted to employees prior to theeffective date of Statement 123 (R) that remain unvested on the effectivedate. Under this method, there is no restatement of prior periods to recognizethe effects as though Statement 123 (R) had been implemented in thoseprior periods. Had compensation expense for the Company’s stock option plansbeen determined based on the estimated fair value at the date of grantconsistent with the methodology prescribed under SFAS 123 (R), approximate netloss and net loss per share would have been as follows:
|                                                            | ** ** | **Years Ended December 31,**                    | ** ** |
|------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| ** **                                                 | ** ** | **2005**                                                       | ** ** | **2004** | ** ** |
| ** **                                                 | ** ** | **(in thousands,  except per share data)** | ** ** |
| Net loss as  reported                                      |       |                                                           | $          | (4,926 | ) |   |   | $ | (1,821 | ) |   |
| Less pro forma  stock compensation using fair value method |       |                                                           | (136       | ) |   |   | (211 | ) |   |
| Pro forma net  loss                                        |       |                                                           | $          | (5,062 | ) |   |   | $ | (2,032 | ) |   |
| Pro forma net loss per  common share, basic and diluted    |       |                                                           | $          | (0.69 | ) |   |   | $ | (0.35 | ) |   |

 

**3.**                 Investments

Investmentsare classified as available-for-sale securities and are reported at fair value,as follows:
|                                       | ** ** | ** **    | ** ** | **Gross**      | ** ** | **Gross**      | ** ** | ** ** | ** ** |
|---------------------------------------|------------|---------------|------------|----------------|------------|----------------|------------|------------|------------|
| ** **                            | ** ** | **Amortized** | ** ** | **Unrealized** | ** ** | **Unrealized** | ** ** | **Fair**   | ** ** |
| ** **                            | ** ** | **Cost**      | ** ** | **Gains**      | ** ** | **Losses**     | ** ** | **Value**  | ** ** |
| **December 31,  2006:**          | ** ** | ** **    | ** ** |           | ** ** | ** **     |       |       | ** ** | ** ** |   | ** ** | ** ** |
| U.S. Government  agency bonds         | ** ** | $             | 4,496,259  |           |       | $              | 1,611      | ** ** |       |   | $ | 4,402 | ** ** |   | $ | 4,493,468 |   |
| Corporate bonds  and commercial paper | * *   | 2,527,812     |       |           | —     | ** **     |       |       | 80,747     | ** ** |   | 2,447,065 |   |
| Total                                 |       | $             | 7,024,071  |           |       | $              | 1,611      | ** ** |       |   | $ | 85,149 | ** ** |   | $ | 6,940,533 |   |
| ** **                            | ** ** | ** **    | ** ** |           | ** ** | ** **     |       |       | ** ** | ** ** |   | ** ** | ** ** |
| **December 31,  2005:**          | ** ** | ** **    | ** ** |           | ** ** | ** **     |       |       | ** ** | ** ** |   | ** ** | ** ** |
| U.S. Government  agency bonds         |       | $             | 3,999,044  |           |       | $              | —     | ** ** |       |   | $ | 35,889 | ** ** |   | $ | 3,963,155 |   |
| Corporate bonds  and commercial paper |       | 4,561,239     |       |           | —     | ** **     |       |       | 162,209    | ** ** |   | 4,399,030 |   |
| Total                                 |       | $             | 8,560,283  |           |       | $              | —     | ** ** |       |   | $ | 198,098 | ** ** |   | $ | 8,362,185 | ** ** |

 

F-11

----

**INSURE.COM, INC. NOTES TO FINANCIAL STATEMENTS (Continued)**

As of December 31,2006, investments maturities are as follows:
|                          | ** ** | **Amortized** | ** ** | **Fair**  | ** ** |
|--------------------------|------------|---------------|------------|-----------|------------|
| ** **               | ** ** | **Cost**      | ** ** | **Value** | ** ** |
| Due in one year  or less |       | $             | 5,005,120  |      | $          | 4,990,563 |   |
| Due in 1-2  years        |       | 2,018,951     |       | 1,949,970 |       |
| Total                    |       | $             | 7,024,071  |      | $          | 6,940,533 |   |

 

The Company’s fixedmaturity investment portfolio is sensitive to interest rate fluctuations, whichimpact the fair value of individual securities. Unrealized losses reportedabove were generally caused by the effect of a rising interest rate environmenton certain securities with stated interest rates currently below market rates. TheCompany has the ability and the intent to hold these securities until theirfull cost can be recovered. Therefore, the Company does not believe theunrealized losses represent an other-than-temporary impairment as of December 31,2006.

**4.**                 IncomeTaxes

Areconciliation of income taxes (credit) based on the federal tax rate toamounts reported in the statements of operations is as follows:
|                                  | ** ** | **Years Ended December 31,** | ** ** |
|----------------------------------|------------|---------------------------------------------|------------|
| ** **                       | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Pre-tax  loss times federal rate |       | $                                           | (1,220,000 | ) | $ | (1,675,000 | ) | $ | (619,000 | ) |
| State income tax credit          |       | (172,000                                    | )          | (236,000 | ) | (87,000 | ) |
| Increase in valuation allowance  |       | 1,313,000                                   |       | 1,916,000 |   | 711,000 |   |
| Other                            |       | 79,000                                      |       | (5,000 | ) | (5,000 | ) |
| Income tax credit                |       | $                                           | —     |   | $ | — |   | $ | — |   |

 

Deferred income taxesreflect the net tax effect of temporary differences between the amounts ofassets and liabilities for financial reporting purposes and the amounts usedfor income tax purposes and the effect of net operating loss carryforwards.

**Significantcomponents of the Company’s deferred tax assets and liabilities are as follows**
|                                  | ** ** | **December 31,** | ** ** |
|----------------------------------|------------|-----------------------|------------|
| ** **                       | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Deferred tax  liabilities        |       | $                     | —     |   | $ | — |   |
| Deferred tax  assets:            |       |                  |       |   |   |
| Net operating loss carryforwards |       | 17,961,000            |       | 17,193,000 |   |
| Capital loss carryforward        |       | 18,000                |       | 18,000 |   |
| Depreciation and amortization    |       | 2,483,000             |       | 1,958,000 |   |
| Other                            |       | 313,000               |       | 293,000 |   |
| Total gross  deferred tax assets |       | 20,775,000            |       | 19,462,000 |   |
| Valuation  allowance             |       | (20,775,000           | )          | (19,462,000 | ) |
| Net deferred tax  assets         |       | —                |       | — |   |
| Net deferred tax amounts         |       | $                     | —     |   | $ | — |   |

 

F-12

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**INSURE.COM, INC. NOTES TO FINANCIAL STATEMENTS (Continued)**

As of December 31,2006, the Company had net operating loss carryforwards of approximately$46,300,000 available to offset future taxable income, which expire in 2007 to2026. There were no income taxes paid or recovered in 2004, 2005 or 2006. TheCompany had a capital loss carryforward of approximately $46,000 to offsetfuture capital gain income, which expire in 2009 through 2011.

**5.**                 Goodwill

As discussed in Note 2,the Company reviews goodwill for impairment periodically and whenever events orchanges in business circumstances indicate that the carrying value of theassets may not be recoverable. Under those circumstances, if the fair value wereless than the carrying amount of the entity, further analysis would be requiredto determine whether or not a loss would need to be charged against currentperiod earnings. During the fourth quarter of 2005, the Company experienceddeclining revenues from life insurance sales and a decline in the market priceof its common stock. The annual impairment review was conducted as of December 31,2005, and it was determined that an impairment existed. The determinations offair value were based on a combination of the market price of our common stockand a discounted cash flow analysis based on estimates and assumptionsincluding the amount and timing of future cash flows and future interest rates.The use of different estimates or assumptions could produce different results. Asa result of this impairment determination, the Company recorded a non-cashimpairment charge against earnings in 2005 amounting to $3.75 million.

**6.**                 Stockholders’Equity

**Treasury Stock**

As of December 31,2006, the Company is authorized to repurchase 621,000 additional shares of itscommon stock.

**Employee StockPurchase Plan**

The Company has a planunder which employees could purchase shares of the Company’s common stockthrough payroll deductions of up to 10% of each employee’s compensation. Sharesmay be purchased at 85% of the lower of the fair value of the common stock onthe first or the last day of each six-month offering period. The Companyreserved 83,333 shares for purchase under the plan, of which 63,929****were available at December 31, 2006. However,this plan is currently inactive.

**Preferred Stoc**k

The Company has 5,000,000authorized shares of $0.001 par value preferred stock. No shares have beenissued.

**Stockholder RightsPlan**

One preferred stock purchase right is outstanding foreach outstanding share of the Company’s common stock, and the Company intendsto issue those rights along with future issuances of common shares. The rightsbecome exercisable only if a person or group acquires or announces the intentto acquire 15% or more of the Company’s common stock. Prior to the rightsbecoming exercisable, the Company may redeem the rights for $0.03 per right. Ifthe rights become exercisable, the Company may exchange each right for oneshare of common stock providing that 50% of the Company has not been acquired. Therights expire in 2009.

F-13

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**INSURE.COM, INC. NOTES TO FINANCIAL STATEMENTS (Continued)**

If the rights become exercisable and they have notbeen exchanged, holders of each right, other than the acquiring person orgroup, would be entitled to acquire three hundredths of a share of the Company’spreferred stock at an exercise price equal to five times the initial offeringprice of the Company’s common stock. If issued, each preferred share wouldentitle the holder to cumulative quarterly dividends of the greater of$1.00 per share or 33.3 times the common share dividends. The preferredshareholders would receive 33 votes per share and have a liquidation preferenceof $0.333 per share over the common shares.

In lieu of purchasingpreferred shares, holders of each right, other than the acquiring person orgroup, on payment of the exercise price, would be entitled to acquire thenumber of shares of the Company’s common stock or other assets with a value oftwo times the exercise price. In addition, if 50% of the Company is acquired,the holders of each right would be entitled to acquire the number of shares ofthe acquiring company’s common stock having a value of two times the exerciseprice.

**Investor RightsAgreement**

Zions Bancorporation(Zions) acquired 2.4 million shares of the Company’s common stock during 2004. Inconnection with that transaction, the Company and Zions signed an InvestorRights Agreement which provides that, as long as Zions continues to hold 40% ofthe shares issued to them, Zions has the right to nominate or appoint one memberof the Company’s Board of Directors. Additionally, certain transactions wouldrequire the approval of 75% of our directors, including the merger with, oracquisition of another company, the sale of business or assets in excess of $1million, incurring debt in excess of $2.5 million, declaring dividends orissuing additional capital stock.

**7.**                 StockOptions

The Company has established the 1997 Stock Option Planand the 2004 Non-Qualified Stock Option Plan, (the Plans), to provideadditional incentives to our employees, officers, and directors. The Companybelieves that such awards better align the interests of its employees withthose of its shareholders. Under the Plans, an aggregate of 800,000 shares ofInsure.com common stock may be granted to participants in the plan. Optionawards are generally granted with an exercise price equal to the market priceof the Company’s stock at the date of the grant. Options granted under theplans vest over periods ranging from one to three years, and expire if not exercisedwithin ten years. As of December 31, 2006, there were options outstandingon 380,561 shares of stock under these plans.

Thefair value of each option is estimated on the date of the grant using theBlack-Scholes model with the assumptions noted in the table below. In order tocalculate stock option compensation expense in 2006, and for purposes of thepro forma disclosures presented in Note 2 for 2005 and 2004, the estimated fairvalues of the option grants are amortized to expense over the options’ vestingperiod.
|                          | ** ** | **Years Ended December 31,** | ** ** |
|--------------------------|------------|---------------------------------------------|------------|
| ** **               | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| Dividend yield           |       |                                        | 0.0        | % |   |   | 0.0 | % |   |   | 0.0 | % |   |
| Risk-free  interest rate |       |                                        | 4.4        | % |   |   | 3.8 | % |   |   | 2.1 | % |   |
| Volatility               |       |                                        | 58.6       | % |   |   | 75.2 | % |   |   | 79.4 | % |   |
| Expected life (years)    |       |                                        | 5.5        |   |   |   | 5.0 |   |   |   | 5.0 |   |   |

 

There were no stock options granted below theestimated fair value of the Company’s common stock in 2006, 2005 or 2004.

F-14

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**INSURE.COM, INC. NOTES TO FINANCIAL STATEMENTS (Continued)**

In connection with the 2001 acquisition of selectedassets of Insurance News Network, LLC, the Company issued options to acquire50,000 shares of its common of stock at a price of $2.00 per share. Theseoptions remain outstanding as of December 31, 2006.

Asummary of options activity as of December 31, 2006, and changes duringthe year then ended is presented below:
|                             | ** ** | ** ** | ** ** | ** **   | ** ** | **Weighted**          | ** ** | ** **    | ** ** |
|-----------------------------|------------|------------|------------|--------------|------------|-----------------------|------------|---------------|------------|
| ** **                  | ** ** | ** ** | ** ** | **Weighted** | ** ** | **Average**           | ** ** | ** **    | ** ** |
| ** **                  | ** ** | **Shares** | ** ** | **Average**  | ** ** | **Remaining**         | ** ** | **Aggregate** | ** ** |
| ** **                  | ** ** | **Under**  | ** ** | **Exercise** | ** ** | **Contractual**       | ** ** | **Intrinsic** | ** ** |
| ** **                  | ** ** | **Option** | ** ** | **Price**    | ** ** | **Term (Years)** | ** ** | **Value**     | ** ** |
| Beginning Balance           |       | 412,061    |       |         | $          | 6.71                  |       |          |       |   |   |   |   |   |
| Granted                     |       | 85,000     |       |         | 3.00       |                  |       |          |       |   |   |   |   |
| Exercised                   |       | —     |       |         | —     |                  |       |          |       |   |   |   |   |
| Forfeited                   |       | (66,500    | )          |         | 5.17       |                  |       |          |       |   |   |   |   |
| Outstanding                 |       | 430,561    |       |         | $          | 6.22                  |       |          |       | 6.0 |   |   | $ | 267,599 |   |
| Exercisable at  end of year |       | 287,895    |       |         | $          | 7.61                  |       |          |       | 4.9 |   |   | $ | 143,849 |   |

 

Theweighted average fair value per share of options granted were as follows:

|       | **2006** | ** ** | ** ** | ** ** | **2005** | ** ** | ** ** | ** ** | **2004** | ** ** | ** ** |
|-------|----------|------------|------------|------------|----------|------------|------------|------------|----------|------------|------------|
| $1.70 |     |       | $          | 3.24       |     |       |       | $          | 3.40     |       |       |
|       |          |            |            |            |          |            |            |            |          |            |            |  |  |  |  |  |  |

 

The total intrinsic value of options exercised duringthe year ended December 31, 2004 was $33,464. There were no optionsexercised during the years ended December 31, 2006 or 2005.

Asummary of the status of the Company’s nonvested options as of December 31,2006, and changes during the year then ended, is presented below:
|                                    | ** ** | **Shares** | ** ** | **Weighted-Average** | ** ** |
|------------------------------------|------------|------------|------------|----------------------|------------|
| ** **                         | ** ** | **Under**  | ** ** | **Grant-Date**       | ** ** |
| ** **                         | ** ** | **Option** | ** ** | **Fair Value**  | ** ** |
| Nonvested at  January 1, 2006 |       | 108,000    |       |                 | $          | 3.50 |   |   |
| Granted                            |       | 85,000     |       |                 | 1.68       |   |   |
| Vested                             |       | (30,834    | )          |                 | 3.64       |   |   |
| Forfeited                          |       | (44,667    | )          |                 | 3.32       |   |   |
| Outstanding                        |       | 117,499    |       |                 | 2.22       |   |   |

 

As of December 31,2006, there was $66,000 of total unrecognized compensation cost related tonon-vested share-based compensation arrangements granted under the Plans. Thatcost is expected to be recognized over a weighted-average period of 0.5 years. Thetotal fair value of shares vested during the years ended December 31,2006, 2005 and 2004 was $112,000, $210,000 and $129,000, respectively.

**8.**                 Landand Building

As discussed in Note 2,the Company reviews the carrying value of the land and building for impairmentperiodically and whenever events or changes in circumstances indicate that thecarrying value of the assets may not be recoverable. Under those circumstances,if the fair value were less than the 

F-15

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**INSURE.COM, INC. NOTES TO FINANCIAL STATEMENTS (Continued)**

carryingamount of the land and building, a loss would need to be charged againstcurrent period earnings. During the third quarter of 2006, the Company acceptedan offer to sell the land and building for less than the carrying value at thattime. After estimating closing costs and broker commissions, the Companyrecorded an impairment charge of $1,321,000 against income for the quarterended September 30, 2006. During the fourth quarter of 2006, this proposedsale was cancelled by the buyer. Based on a March 2007 agreement to sellthe land and building for $3,400,000, net of estimated closing costs, theCompany recorded an additional impairment charge against the land and buildingof $480,000 as of December 31, 2006.

**9.**                 Commitmentsand Contingencies

As of December 31, 2006, the Company leasesoffice space in Darien, IL under an operating lease agreement in which theCompany is committed to rent expense of approximately $290,000 in 2007, 2008,2009, 2010 and 2011.

Rent expense was $267,000 in 2004, $272,000 in 2005and $290,000 in 2006.

The Company has employment agreements with two of itsexecutives under which the Company would be required to pay severance of one totwo years of annual salary to terminate those agreements. The Company has anemployment agreement with one additional executive under which the Companywould be required to pay severance of one year of annual salary in the event ofa change in control.

The Company is subject to legal proceedings and claimsin the ordinary course of business. The Company is not aware of any legalproceedings or claims that are believed to have a material effect on theCompany’s financial position.

F-16

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**SIGNATURES**

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, as amended, the Registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized on March 15,2007.
| INSURE.COM, INC. |   |
|------------------|--------|
| By:              |   | /s/ ROBERT S. BLAND |   |
|             |   | Robert S. Bland, |   |
|             |   | Chairman, President and Chief |   |
|             |   | Executive Officer |   |
|             |   | /s/ WILLIAM V. THOMS |   |
|             |   | William V. Thoms, Executive Vice President, |   |
|             |   | Chief Operating Officer, and Director |   |
|             |   | /s/ PHILLIP A. PERILLO |   |
|             |   | Phillip A. Perillo, Senior Vice President and Chief  Financial Officer |   |
|             |   | (Principal Financial and Accounting Officer) |   |
|             |   | /s/ BRUCE J. RUEBEN |   |
|             |   | Bruce J. Rueben, Director |   |
|             |   | /s/ TIMOTHY F. SHANNON |   |
|             |   | Timothy F. Shannon, Director |   |
|             |   | /s/ JEREMIAH A. DENTON, JR. |   |
|             |   | Jeremiah A. Denton, Jr., Director |   |
|             |   | /s/ RICHARD F. GRETSCH |   |
|             |   | Richard F. Gretsch, Director |   |
|             |   | /s/ JOHN B. HOPKINS |   |
|             |   | John B. Hopkins, Director |   |

 

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**EXHIBITS**

**FORM 10-K**

**INDEXTO EXHIBITS**
| Exhibit Number                | ** ** | ** **                                                                                                                                                                                         | ** ** | **Description of Document** | ** ** | ** ** |
|-------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|------------|
| 3.1††               |       | Restated  Certificate of Incorporation of Company.                                                                                                                                                 |
| 3.2††               |       | Amended and  Restated By-Laws of the Company.                                                                                                                                                      |
| 4.3††               |       | Form of  Rights Agreement.                                                                                                                                                                    |
| 4.3(a) ††      |       | Certificate of  Designation, Preferences and Rights.                                                                                                                                               |
| 10.1††              |       | Quotesmith.com  1997 Stock Option Plan (as amended and restated March 29, 1999) of  Registrant                                                                                                |
| 10.2††              |       | Quotesmith.com  1999 Employee Stock Purchase Plan.                                                                                                                                                 |
| 10.3††              |       | Employment  Agreement between the Company and Robert S. Bland.                                                                                                                                |
| 10.4††              |       | Employment  Agreement between the Company and William V. Thoms.                                                                                                                               |
| 10.5†††        |       | Employment  Agreement between the Company and Phillip A. Perillo.                                                                                                                                  |
| 10.6††              |       | Form of  Director Indemnification Agreement.                                                                                                                                                  |
| 10.7††              |       | Lease dated as of  August 1994, between the Company and LaSalle National Trust N.A.                                                                                                           |
| 10.8††              |       | Lease Amendment  Agreement dated as of November 1995, between the Company and LaSalle  National Trust N.A.                                                                               |
| 10.9††              |       | Lease Amendment  Agreement as of September 1997, between the Company and LaSalle National  Trust N.A.                                                                                         |
| 10.10††             |       | Lease Amendment  Agreement dated as of July 1998, between the Company and LaSalle  National Trust N.A.                                                                                   |
| 10.11††             |       | Services  Agreement, dated as of September 9, 1998, by and between the Company and  Intuit Insurance Services, Inc.                                                                      |
| 10.12††             |       | Investor Rights  Agreement, dated February 10, 1999, between the Company and Intuit Inc.                                                                                                      |
| 10.13†                   |       | Stock Purchase  Agreement, dated as of March 1, 2004, between the Company and Zions  Bancorporation                                                                                           |
| 10.14†                   |       | Investor Rights  Agreement, dated as of March 1, 2004, between the Company, Zions  Bancorporation, Robert S. Bland and William V. Thom                                                        |
| 10.15†                   |       | Amendment and  Waiver to July 7, 1999 Employment Agreement between the Company and with  Robert S. Bland (12/15/03), dated March 1, 2004                                                 |
| 10.16†                   |       | Amendment and  Waiver to July 7, 1999 Employment Agreement between the Company and  William V. Thoms (2/10/03), dated March 1, 2004                                                      |
| 10.17†                   |       | Asset Purchase  Agreement, dated as of January 31, 2004, by and among the Company, Life  Quotes Acquisition, Inc., Life Quotes, Inc. and Kenneth L. Manley                          |
| 10.18†                   |       | Real Estate  Purchase and Sale Agreement, dated as of January 31, 2004, between Life  Quotes Acquisition, Inc. and The Kenneth L. Manley Revocable Trust dated  as of June 10, 1987 |
| 10.19†††† |       | Quotesmith.com, Inc.  2004 Non-Qualified Stock Option Plan                                                                                                                                    |
| 21.0                          |       | Subsidiaries of  the Company                                                                                                                                                                       |
| 23.1                          |       | Consent of  Ernst & Young LLP (filed herewith)                                                                                                                                            |
|                               |            |                                                                                                                                                                                                    |            |                             |            |            |  |

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| 31.1                         |   | Certification of  Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley  Act              |
|------------------------------|--------|-----------------------------------------------------------------------------------------------------------------|
| 31.2                         |   | Certification of  Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley  Act              |
| 32.1                         |   | Certification of  Chief Executive Officer, Pursuant to Section 1350 of Title 18 of the  United States Code |
| 32.2                         |   | Certification of  Chief Financial Officer, Pursuant to Section 1350 of Title 18 of the  United States Code |
| 99.1†††† |   | Code of Ethics                                                                                                  |

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| †                   |   | Incorporated by  reference to the Company’s Current Report on Form 8-K, filed  March 4, 2004.                                                                                                           |
|--------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ††             |   | Incorporated by  reference to the Company’s Registration statement on Form S-1  (Registration no. 333-79355), initially filed with the Securities and  Exchange Commission on May 26, 1999, as amended. |
| †††       |   | Incorporated by  reference to the Company’s 2002 Annual Report on Form 10-K, filed  with the Securities and Exchange Commission on March 26, 2003.                                                      |
| †††† |   | Incorporated by  reference to the Company’s 2003 Annual Report on Form 10-K, filed  with the Securities and Exchange Commission on March 22, 2004.                                                      |

 

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