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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
 Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission file number:
    005-50580
  INTERSECTIONS INC.
 (Exact name of registrant as
    specified in the charter)
  Delaware

54-1956515(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification Number)14901 Bogle Drive,
    Chantilly, Virginia(Address of principal
    executive office)

20151(Zip
    Code)   (703) 488-6100
 (Registrants telephone
    number including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, $.01 par value

The NASDAQ Stock Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None.
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated filer o

Accelerated
    filer þ

Non-accelerated
    filer o

Smaller reporting company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





INTERSECTIONS
    INC.
  TABLE OF
    CONTENTS
   
 PagePART IITEM 1.

BUSINESS


4ITEM 1A.

RISK FACTORS


14ITEM 1B.

UNRESOLVED STAFF COMMENTS


24ITEM 2.

PROPERTIES


24ITEM 3.

LEGAL PROCEEDINGS


24ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS


25PART IIITEM 5.

MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES


27ITEM 6.

SELECTED FINANCIAL DATA


29ITEM 7.

MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


31ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


51ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


52ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


52ITEM 9A.

CONTROLS AND PROCEDURES


52ITEM 9B.

OTHER INFORMATION


53PART IIIITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE


54ITEM 11.

EXECUTIVE COMPENSATION


54ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


54ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    AND DIRECTOR INDEPENDENCE


54ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES


54PART IVITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES


54EX-2.3EX-10.21.2EX-10.21.3EX-10.24EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   2




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FORWARD-LOOKING
    STATEMENTS
  Form 10-K
    
    our ability to replace subscribers we lose in the ordinary
    course of business;
    our ability to maintain our relationships with the three credit
    reporting agencies and other key providers;
    our ability to maintain our relationships with our key clients
    and obtain new clients;
    our ability to compete successfully with our competitors;
    our ability to introduce new products and services with broad
    appeal;
    our ability to protect and maintain our computer and telephone
    infrastructure;
    our ability to maintain the security of our data;
    changes in federal, state and foreign laws and regulations;
    our use of our cash and investments;
    our cash needs;
    implementation of our corporate strategy; and
    our financial performance.   3




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PART I  ITEM 1.
    BUSINESS  ®
           4




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(703) 488-6100. Form 10-K, Form 10-Q, Form 8-K,
    Consumer
    Products and Services
  Our
    Services and Subscribers
          Our
    Marketing
   5




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Our
    Clients
    
    Direct marketing arrangements:  Under direct
    marketing arrangements, we bear most of the new subscriber
    marketing costs and pay our client a commission for revenue
    derived from subscribers. These arrangements generally result in
    negative cash flow over the first several months after a program
    is launched due to the upfront nature of the marketing
    investments. In some arrangements we pay the client a service
    fee for access to the clients customers or billing of the
    subscribers by the client.
    Indirect marketing arrangements:  Under
    indirect marketing arrangements, our client bears the marketing
    expense and pays us a service fee or percentage of the revenue.
    Because the subscriber acquisition cost is borne by our client
    under these arrangements, our revenue per subscriber is
    typically lower than that under direct marketing arrangements.
    Indirect marketing arrangements generally provide positive cash
    flow earlier than direct arrangements and the ability to obtain
    subscribers and utilize marketing channels that the clients
    otherwise may not make available.
    Shared marketing arrangements:  Under shared
    marketing arrangements, marketing expenses are shared by us and
    the client in various proportions, and we may pay a commission
    to or receive a service fee from the client. Revenue generally
    is split in proportion to the investment made by our client and
    us.       6




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Operations
    Customer
    Service
  on-the-job
    Information
    Processing
      Information
    Technology
     7




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Data
    and Analytics Providers
      Competition
      Background
    Screening
  Our
    Services
    Our
    Marketing
   8




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Our
    Clients
    Operations
    Information
    Technology
    Data
    and Analytics Providers
    Competition
   9




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Other
  Our
    Services
      Our
    Marketing
      Our
    Clients
     10




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Operations,
    Information Technology & Customer
    Service
      and/or
  Data
    and Analysis Providers
      Competition
      Government
    Regulation
    Credit
    Reporting Laws
   11




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Privacy
     12




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Marketing
    Laws and Regulations
        Insurance
    Laws
    Canadian
    Laws
    Laws
    and Regulations Particularly Affecting Our Background Screening
    and Other Segments
     13




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Intellectual
    Property
    Financial
    Information About Segments and Geographic Areas
  Form 10-K
  Employees
    ITEM 1A.
    RISK
    FACTORS  We believe the following risk factors, as well as the other
    information contained in this Annual Report on
    Form 10-K,
    are material to an understanding of our company. Any of the
    following risks as well as other risks and uncertainties
    discussed in this Annual Report on
    Form 10-K
    could have a material adverse effect on our business, financial
    condition, results of operations or prospects and cause the
    value of our stock to decline. Additional risks and
    uncertainties that we are unaware of, or that are currently
    deemed immaterial, also may become important factors that affect
    us.
  Risks
    Related to our Business
  We
    must replace the subscribers we lose in the ordinary course of
    business and, if we fail to do so, our revenue and subscriber
    base will decline.
    
    changing subscriber preferences;
    competitive price pressures;
    general economic conditions;
    subscriber dissatisfaction;
    cancellation of subscribers due to credit card declines; and
    credit or charge card holder turnover.   14




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We
    historically have depended upon a few clients to derive a
    significant portion of our revenue.
    If one
    or more of our agreements with clients were to be terminated or
    expire, or one or more of our clients were to reduce or change
    (or threaten to reduce or change) the marketing of our services,
    we would lose access to prospective subscribers and could lose
    sources of revenue and profit.
      We are
    substantially dependent upon our consumer products and services
    for a significant portion of our revenue, and market demand for
    these services could decrease.
    If we
    lose our ability to purchase data from any of the three major
    credit reporting agencies, each of which is a competitor of
    ours, demand for our services could decrease.
   15




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We may
    incur substantial marketing expenses as we enter new businesses,
    develop new products or increase our direct marketing
    arrangements, which could cause our operating income to decline
    on a quarterly basis and our stock price to drop.
  direct-to-consumer direct-to-consumer
  If we
    experience system failures or interruptions in our
    telecommunications or information technology infrastructure, our
    revenue could decrease and our reputation could be
    harmed.
    We and
    our clients outsource telemarketing to third parties who may
    take actions that lead to negative publicity and consumer
    dissatisfaction.
  on-site
  We may
    lose subscribers and customers and significant revenue if our
    existing products and services become obsolete, or if we fail to
    introduce new products and services with broad appeal or fail to
    do so in a timely or cost-effective manner.
   16




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We may
    lose subscribers and significant revenue if our subscribers
    cease to maintain the accounts through which they are billed for
    our products and services, or our clients change their billing
    or credit practices or policies.
    We may
    not be able to develop and maintain relationships with third
    party providers, and failures by those third parties could harm
    our business and prospects.
    Our
    senior secured credit agreement provides our lenders with a
    first-priority lien against substantially all of our assets and
    contains financial covenants and other restrictions on our
    actions, and it could therefore limit our operational
    flexibility or otherwise adversely affect our financial
    condition.
    We may
    be unable to meet our future capital requirements to grow our
    business, which could adversely impact our financial condition
    and growth strategy.
    We
    depend on key members of our management and marketing
    personnel.
   17




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We are
    subject to legal claims, including a consumer class action
    litigation, that could require us to pay damages and/or change
    our business practices.
  Credit Inform
  If we
    determine in the future that we are required to establish
    reserves or we incur liabilities for any litigation that has
    been or may be brought against us, our results of operations,
    cash flow and financial condition could be materially and
    adversely affected.
  class-action
  We may
    not be able to consummate acquisitions that are accretive or
    which improve our financial condition.
    and/or
 18




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We may
    not realize planned benefits of our acquisitions.
    
    unexpected losses of key employees, customers and suppliers of
    the acquired operations;
    difficulties in integrating the financial, technological and
    management standards, processes, procedures and controls of the
    acquired businesses with those of our existing operations;
    challenges in managing the increased scope, geographic diversity
    and complexity of our operations;
    establishing the internal controls and procedures that we are
    required to maintain under the Sarbanes-Oxley Act of 2002;
    mitigating contingent or assumed liabilities or unexpected
    costs; and
    risks of entering new markets, such as the United Kingdom, or
    markets in which we have limited prior experience, such as the
    bail bond industry.  We may
    not realize planned benefits of our membership agreement or
    other customer portfolio acquisitions.
    Screening
    International is subject to additional risks due to its
    international scope.
     19




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Screening
    International, and any other business combination where we do
    not own 100% of the business, could be hindered if we fail to
    maintain a satisfactory working relationship with our
    partners.
    Fluctuations
    of foreign currency values may adversely affect our reported
    revenue, results of operations and financial
    condition
    Our stock price fluctuates and may continue to fluctuate
    significantly over a short period of time.
  period-to-period
  
    the timing and rate of subscription cancellations and additions;
    the loss of a key client or a change by a key client in the
    marketing of our products and services;
    our ability to introduce new and improve existing products and
    services on a timely basis;
    the introduction of competing products and services by our
    competitors;
    the demand for consumer subscription services generally; 20




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
    the ability of third parties to market and support our
    services; and
    general economic conditions.  Insiders
    have substantial control over us and could delay or prevent a
    change in corporate control, which may harm the market price of
    our common stock.
   21




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Risks
    Related to our Industry
  Our
    failure to protect private data could damage our reputation and
    cause us to expend capital and resources to protect against
    future security breaches or other unauthorized
    access.
    We are
    subject to government regulation and increasing public scrutiny,
    which could impede our ability to market and provide our
    services and have a material adverse effect on our
    business.
        Marketing
    laws and regulations may materially limit our or our
    clients ability to offer our products and services to
    consumers.
   22




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Laws
    requiring the free issuance of credit reports by credit
    reporting agencies, and other services that must be provided by
    credit reporting agencies under the law, could impede our
    ability to obtain new subscribers or maintain existing
    subscribers and could have a material adverse effect on our
    revenue.
    A
    significant downturn in the charge or credit card or mortgage
    industries or a trend in those industries to reduce or eliminate
    marketing programs could harm our business.
    Competition
    could reduce our market share or decrease our
    revenue.
     23




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ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    Approx.




LeaseLocation

Square Feet


Segment

ExpirationChantilly, VA


71,566


Consumer Products and Services


2009Rio Rancho, NM


28,000


Consumer Products and Services


2013Manassas, VA


11,500


Consumer Products and Services


2008Arlington Heights, IL


2,670


Consumer Products and Services


2008Winchester, VA


22,594


Background Screening


2010Hammersmith, West London, UK


13,000


Background Screening


2008Albany, NY


7,730


Other


2011Phoenix, AZ


3,347


Other


2008Gainesville, FL


2,700


Other


2008       ITEM 3.
    LEGAL
    PROCEEDINGS  Credit
    Inform
   24




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ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    Executive
    Officers of the Registrant
    Name

Age

PositionMichael R. Stanfield


57


Chairman, Chief Executive Officer and DirectorMadalyn C. Behneman


44


Senior Vice President and Principal Financial OfficerJohn G. Scanlon


40


Chief Operating Officer, Business ServicesNeal B. Dittersdorf


48


Chief Legal Officer and Chief Administrative OfficerGeorge (Chip) K. Tsantes


48


Executive Vice President and Chief Technology OfficerSteven A. Schwartz


47


Executive Vice President, Consumer ProductsChristopher W. Shenefelt


49


Executive Vice President, Operations   Michael R. Stanfield
  Madalyn C. Behneman
  John G. Scanlon
 25




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Neal B. Dittersdorf
  George (Chip) K. Tsantes
  Steven A. Schwartz
  Christopher W. Shenefelt
 26




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PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    Sales Priceper ShareHigh


Low2006 Quarter ended:March 31, 2006

$
11.63


$
8.29June 30, 2006

$
11.87


$
9.31September 30, 2006

$
11.19


$
8.75December 31, 2006

$
11.05


$
8.84   Sales Priceper ShareHigh


Low2007 Quarter ended:March 31, 2007

$
10.10


$
9.76June 30, 2007

$
10.07


$
9.89September 30, 2007

$
10.32


$
9.94December 31, 2007

$
8.35


$
8.01         Total Number


Approximate Dollarof Shares


Value of SharesTotal





Purchased as


that May Yet BeNumber


Average


Part of Publicly


Purchased Underof Shares


Price Paid


Announced Plans


the Plans orFiscal Period

Purchased


per Share(1)


or Programs


Programs(2)September 30, 2007













$
10,966,683October 1, 2007 through October 31, 2007













$
10,966,683November 1, 2007 through November 30, 2007


48,694


$
8.97



48,694


$
10,534,414December 1, 2007 through December 31, 2007


1,300


$
9.48



1,300


$
10,522,045TOTAL


49,994


$
9.03



49,994


$
10,522,045     (1)
    
    Average price per share excludes commissions.(2)
    
    For the three months ended December 31, 2007, the aggregate
    cost of shares of common stock repurchased, including
    commissions, was approximately $445 thousand. 27




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Comparison
    of 44 Month Cummulative total Return*
 *$100 invested on 04/30/04 in
    stock or index-including reinvestment of dividends. Fiscal year
    ending December 31
  
 28




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ITEM 6.
    SELECTED
    FINANCIAL DATA SELECTED
    CONSOLIDATED FINANCIAL DATA  Form 10-K.
  Year Ended December 31,2003


2004


2005


2006


2007(In thousands, except per share data)Statement of Operations Data(1):Revenue

$
147,306


$
152,916


$
165,171


$
201,051


$
271,723Operating expenses:Marketing


20,325



19,328



19,646



25,173



36,285Commission


55,206



46,719



26,687



25,786



52,624Cost of revenue


35,669



40,093



57,351



75,188



101,815General and administrative


18,312



23,330



34,518



49,978



59,386Depreciation and amortization


2,233



3,991



6,457



10,018



12,427Impairment of software development costs(2)










1,515







Total operating expenses


131,745



133,461



146,174



186,143



262,537Operating income


15,561



19,455



18,997



14,908



9,186Interest (expense) income


(1,008
)


56



1,183



780



(581
)Other income


12



31



37



173



1,139Income before income taxes and minority interest


14,565



19,542



20,217



15,861



9,744Income tax benefit (expense)


4,811
(3)


(8,597
)(4)


(7,747
)


(6,328
)


4,329Minority interest in net income (loss) of subsidiary


35











(97
)


1,451Net income

$
19,411


$
10,945


$
12,470


$
9,436


$
6,866Net income per share:Basic

$
3.92


$
0.85


$
0.73


$
0.56


$
0.40Diluted

$
1.36


$
0.64


$
0.70


$
0.54


$
0.39Weighted average shares outstanding:Basic


4,954



12,929



17,002



16,770



17.096Diluted


14,965



17,517



17,815



17,606



17,479Balance Sheet Data:Cash and cash equivalents

$
14,411


$
12,027


$
17,555


$
15,580


$
19,780Deferred subscription solicitation costs


9,768



9,185



8,818



11,786



21,912Working capital


10,344



55,984



52,493



26,858



30,365Total assets


49,900



109,111



123,187



179,467



206,268Long-term obligations


972



1,764



2,797



13,304



23,046Total stockholders (deficit) equity

$
5,485


$
87,127


$
92,944


$
104,576


$
114,848Statement of Cash Flow Data:Cash (outflows) inflows from:Operating activities

$
11,193


$
21,808


$
17,597


$
17,897


$
4,589Investing activities


(5,297
)


(68,320
)


(3,225
)


(33,596
)


(10,731
)Financing activities


(944
)


44,128



(8,844
)


13,583



10,348   29




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Year Ended December 31,2003


2004


2005


2006


2007(Dollars in thousands)Other Data:Subscribers at beginning of period


1,562,537



2,274,605



2,885,223



3,659,975



4,625,831New subscribers  indirect


1,491,282



1,609,469



2,180,964



2,459,032



2,270,211New subscribers  direct(5)


793,365



805,217



700,297



1,168,002



1,825,205Cancelled subscribers within first 90 days of subscription


(662,058
)


(586,680
)


(845,522
)


(887,629
)


(1,030,678
)Cancelled subscribers after first 90 days of subscription


(910,521
)


(1,217,388
)


(1,260,987
)


(1,773,549
)


(2,431,234
)Subscribers at end of period


2,274,605



2,885,223



3,659,975



4,625,831



5,259,335Total revenue

$
147,306


$
152,916


$
165,171


$
201,051


$
271,723Revenue from transactional sales


(18,450
)


(3,093
)


(16,263
)


(31,702
)


(35,349
)Revenue from lost/stolen credit card registry


(93
)


(85
)


(77
)


(81
)


(46
)Subscription revenue

$
128,763


$
149,738


$
148,831


$
169,268


$
236,328Marketing and commissions

$
75,531


$
66,047


$
46,333


$
50,959


$
88,909Commissions paid on transactional sales


(10,475
)


(759
)


(105
)


(30
)


(13
)Commissions paid on lost/stolen credit card registry


(12
)


(9
)


(36
)


(31
)


(38
)Marketing and commissions associated with subscription revenue

$
65,044


$
65,279


$
46,192


$
50,898


$
88,858     (1)
    
    Our financial results include American Background Information
    Services for the period November 12, 2004 through
    May 30, 2006, and Screening International, which combined
    American Background Information Services with Control Risks
    Group background screening business, for the period May 31,
    2006 through December 31, 2007. Our financial results also
    include Intersections Insurance Services, which we acquired on
    July 3, 2006. In addition, our financial results include
    Captira Analytical, LLC beginning August 2007 and Net Enforcers,
    Inc. beginning December 2007.(2)
    
    During the year ended December 31, 2005, we re-assessed the
    development effort related to our small business product. As a
    result, we recognized an impairment loss of approximately
    $1.4 million related to software development costs. In
    addition, we agreed with a client to change certain processes
    that required new software resulting in an additional impairment
    loss of approximately $150 thousand.(3)
    
    For periods prior to 2003, we did not record a tax benefit from
    net operating losses but instead recorded an off-setting
    valuation allowance. The valuation allowance was required
    because it was more likely than not that some or all of the net
    deferred tax assets would not be realized. Based on positive and
    anticipated projected income it was determined during the third
    quarter of 2003 that the valuation allowance was no longer
    necessary and we recognized a $6.5 million tax benefit.(4)
    
    Income tax expense in 2004 reflects a write-off based on the
    reduction of approximately $912,000 in deferred tax assets
    related to the conversion, at the time of the Companys
    initial public offering, of a senior secured convertible note
    obligation. The write-off was made in connection with FASB
    Statement No. 109, Accounting for Income Taxes,
    which requires an analysis of deferred tax items at year-end,
    and in accordance with Emerging Issues Task Force
    94-10,
    Accounting by a Company for the Income Tax Effects of
    Transactions 30




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among or with Its Shareholders Under FASB Statement
    No. 109. As a result of the reduction, the companys
    federal tax rate for 2004 was approximately 44%, as opposed to
    39% without the reduction.  (5)
    
    We classify subscribers from shared marketing arrangements with
    direct marketing arrangements.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following discussion and analysis of our financial
    condition and results of operations should be read together with
    Selected Consolidated Financial Data, and our
    financial statements and accompanying notes appearing elsewhere
    in this Annual Report on
    Form 10-K.
    This discussion contains forward-looking statements, based on
    current expectations and related to future events and our future
    financial performance, that involve risks and uncertainties. Our
    actual results may differ materially from those anticipated in
    these forward-looking statements as a result of many important
    factors, including those set forth under Risk
    Factors Forward-Looking Statements and
    elsewhere in this Annual Report on
    Form 10-K.
  Overview
    Consumer
    Products and Services
         31




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
    Direct marketing arrangements:  Under direct
    marketing arrangements, we bear most of the new subscriber
    marketing costs and pay our client a commission for revenue
    derived from subscribers. These arrangements generally result in
    negative cash flow over the first several months after a program
    is launched due to the upfront nature of the marketing
    investments. In some arrangements we pay the client a service
    fee for access to the clients customers or billing of the
    subscribers by the client.
    Indirect marketing arrangements:  Under
    indirect marketing arrangements, our client bears the marketing
    expense and pays us a service fee or percentage of the revenue.
    Because the subscriber acquisition cost is borne by our client
    under these arrangements, our revenue per subscriber is
    typically lower than that under direct marketing arrangements.
    Indirect marketing arrangements generally provide positive cash
    flow earlier than direct arrangements and the ability to obtain
    subscribers and utilize marketing channels that the clients
    otherwise may not make available.
    Shared marketing arrangements:  Under shared
    marketing arrangements, marketing expenses are shared by us and
    the client in various proportions, and we may pay a commission
    to or receive a service fee from the client. Revenue generally
    is split in proportion to the investment made by our client and
    us.        As of December 31,2005


2006


2007Indirect marketing arrangements


2,470,883



3,182,728



3,301,429Direct and shared marketing arrangements


1,189,092



1,443,103



1,957,906Total subscribers


3,659,975



4,625,831



5,259,335      32




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##### Table of Contents



Percentage
    of Revenue for the
    Years Ended December 31,
  Client

Relationship

2005


2006


2007American Express

Shared Marketing


22
%


7
%


Discover

Direct Marketing


7
%


5
%


3
%Discover

Indirect Marketing


9
%


11
%


10
%Capital One (direct and through Equifax agreement)

Indirect Marketing


12
%


13
%


10
%Citibank

Direct Marketing


6
%


6
%


5
%Citibank

Indirect Marketing


6
%


8
%


6
%Bank of America (includes MBNA)

Shared/Direct Marketing


11
%


13
%


33
%      33




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##### Table of Contents



Background
    Screening
        Other
   34




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##### Table of Contents



Critical
    Accounting Policies
    Revenue
    Recognition
      Identity
    Theft, Credit Management and Background Services
  Revenue
    Recognition in Financial Statements Revenue Recognition.
 35




---



##### Table of Contents



99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent
  Accidental
    Death Insurance and other Membership Products
    EITF 99-19.
   36




---



##### Table of Contents



Other
    Monthly Subscription Products
    Deferred
    Subscription Solicitation and Commission Costs
    93-7, Reporting on Advertising Costs (SOP 93-7). SOP 93-7,
       37




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##### Table of Contents



Software
    Development Costs
  SOP 98-1, Accounting for the Costs of Computer Software Developed or
    Obtained for Internal Use EITF 00-2, Accounting for Web Site Development Cost.
  SOP 98-1, Accounting for the Impairment or
    Disposal of Long-Lived Assets.
  Goodwill
    and Other Intangibles
    Goodwill and Other Intangible Assets
      Recent
    Accounting Pronouncements
  Fair Value Measurements No. FAS 157-2, Effective Dates of FASB Statement No. 157,
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115
 38




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##### Table of Contents



Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an Amendment of ARB No. 51.
  Results
    of Operations
    Year Ended December 31,2005


2006


2007Revenue


100.0
%


100.0
%


100.0
%Operating expenses:Marketing


11.9



12.5



13.3Commission


16.2



12.8



19.3Cost of revenue


34.7



37.4



37.5General and administrative


20.9



24.9



21.9Depreciation and amortization


3.9



5.0



4.6Impairment of software development


0.9







Total operating expenses


88.5



92.6



96.6Operating income


11.5



7.4



3.4Interest income, net


0.7



0.4



(0.2
)Other income, net






0.1



0.4Income before taxes and minority interest


12.2



7.9



3.6Income tax (expense) benefit


(4.7
)


(3.2
)


(1.6
)Minority interest in net loss of subsidiary










0.5Net income


7.5
%


4.7
%


2.5
%    39




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##### Table of Contents



Years
    Ended December 31, 2006 and 2007 (in
    thousands):
    ConsumerProducts and


BackgroundServices


Screening


Other


ConsolidatedYear Ended December 31, 2006Revenue

$
176,942


$
24,109


$



$
201,051Operating expenses:Marketing


25,173











25,173Commission


25,786











25,786Cost of revenue


62,544



12,644







75,188General and administrative


41,023



8,955







49,978Depreciation and amortization


9,004



1,014







10,018Total operating expenses


163,530



22,613







186,143Operating income

$
13,412


$
1,496


$



$
14,908Year Ended December 31, 2007Revenue

$
241,968


$
29,508


$
247


$
271,723Operating expenses:Marketing


36,285











36,285Commission


52,624











52,624Cost of revenue


83,891



17,738



186



101,815General and administrative


44,028



14,542



816



59,386Depreciation and amortization


10,745



1,405



277



12,427Total operating expenses


227,573



33,685



1,279



262,537Operating income

$
14,395


$
(4,177
)

$
(1,032
)

$
9,186   Consumer
    Products and Services Segment
  Years Ended December 31,2006


2007


Difference


%Revenue

$
176,942


$
241,968


$
65,026



36.8
%Operating expenses:Marketing


25,173



36,285



11,112



44.1
%Commissions


25,786



52,624



26,838



104.1
%Cost of revenue


62,544



83,891



21,347



34.1
%General and administrative


41,023



44,028



3,005



7.3
%Depreciation and amortization


9,004



10,745



1,741



19.3
%Total operating expenses


163,530



227,573



64,043



39.2
%Operating income

$
13,412


$
14,395


$
983



7.3
%   Revenue.
 40




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##### Table of Contents



Years Ended December 31,2006


2007Percentage of subscribers from indirect marketing arrangements
    to total subscribers


68.8
%


62.8
%Percentage of new subscribers acquired from indirect marketing
    arrangements to total new subscribers acquired


67.8
%


55.3
%Percentage of revenue from indirect marketing arrangements to
    total subscription revenue


40.7
%


31.8
%   Marketing Expenses.
    Commission Expenses.
    Cost of Revenue.
 41




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##### Table of Contents



General and Administrative Expenses.
      Depreciation and Amortization.
    Operating Income.
  Background
    Screening Segment
  Years Ended December 31,2006


2007


Difference


%Revenue

$
24,109


$
29,508


$
5,399



22.4
%Operating expenses:Cost of revenue


12,644



17,738



5,094



40.3
%General and administrative


8,955



14,542



5,587



62.4
%Depreciation and amortization


1,014



1,405



391



38.6
%Total operating expenses


22,613



33,685



11,072



49.0
%Operating (loss) income

$
1,496


$
(4,177
)

$
(5,673
)


379.2
%   Revenue.
 42




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##### Table of Contents



Cost of Revenue.
    General and Administrative Expenses.
      Depreciation and Amortization.
    Other
    Segment
  Years Ended December 31,2006


2007Revenue

$



$
247Operating expenses:Cost of revenue






186General and administrative






816Depreciation and amortization






277Total operating expenses






1,279Operating loss

$



$
(1,032
)    43




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##### Table of Contents



Interest
    Income
    Interest
    Expense
      Other
    Income
    Income
    Taxes
   44




---



##### Table of Contents



Years
    Ended December 31, 2005 and 2006 (in
    thousands):
    ConsumerProducts and


BackgroundServices


Screening


Other


ConsolidatedYear Ended December 31, 2005Revenue

$
151,326


$
13,845


$



$
165,171Operating expenses:Marketing


19,646











19,646Commission


26,687











26,687Cost of revenue


50,814



6,537







57,351General and administrative


28,838



5,680







34,518Impairment of software development costs


1,515











1,515Depreciation and amortization


5,798



659







6,457Total operating expenses


133,298



12,876







146,174Operating income

$
18,028


$
969


$



$
18,997Year Ended December 31, 2006Revenue

$
176,942


$
24,109


$



$
201,051Operating expenses:Marketing


25,173











25,173Commission


25,786











25,786Cost of revenue


62,544



12,644







75,188General and administrative


41,023



8,955







49,978Depreciation and amortization


9,004



1,014







10,018Total operating expenses


163,530



22,613







186,143Operating income (loss)

$
13,412


$
1,496


$



$
14,908   Consumer
    Products and Services Segment
  Years Ended December 31,2005


2006


Difference


%Revenue

$
151,326


$
176,942


$
25,616



16.9
%Operating expenses:Marketing


19,646



25,173



5,527



28.1
%Commissions


26,687



25,786



(901
)


(3.4
)%Cost of revenue


50,814



62,544



11,730



23.1
%General and administrative


28,838



41,023



12,185



42.3
%Impairment of software development costs


1,515







(1,515
)


100.0
%Depreciation and amortization


5,798



9,004



3,206



55.3
%Total operating expenses


133,298



163,530



30,232



22.7
%Operating income

$
18,028


$
13,412


$
(4,616
)


(25.6
)%   Revenue.
 45




---



##### Table of Contents



Year EndedDecember 31,2005


2006Percentage of subscribers from indirect marketing arrangements
    to total subscribers


67.5
%


68.8
%Percentage of new subscribers acquired from indirect marketing
    arrangements to total new subscribers acquired


75.1
%


67.8
%Percentage of revenue from indirect marketing arrangements to
    total subscription revenue


33.8
%


40.7
%   Marketing Expenses.
       46




---



##### Table of Contents



Commission Expenses.
    Cost of Revenue.
      General and Administrative Expenses.
        Depreciation and Amortization.
      Impairment of Software Development
    Costs.
 47




---



##### Table of Contents



Background
    Screening Segment
  Years Ended December 31,2005


2006


Difference


%Revenue

$
13,845


$
24,109


$
10,264



74.1
%Operating expenses:Cost of revenue


6,537



12,644



6,107



93.4
%General and administrative


5,680



8,955



3,275



57.7
%Depreciation and amortization


659



1,014



355



53.9
%Total operating expenses


12,876



22,613



9,737



75.6
%Operating income

$
969


$
1,496


$
527



54.4
%   Revenue.
  Cost of Revenue.
    General and Administrative Expenses.
    Depreciation and Amortization.
    Income
    Taxes
    Liquidity
    and Capital Resources
   48




---



##### Table of Contents



49




---



##### Table of Contents



Year Ending December 31,Total


2008


2009


2010


2011


2012


ThereafterContractual Obligations at December 31, 2007Capital leases(1)

$
1,754


$
1,077


$
498


$
179


$



$



$
Operating leases


5508



2,382



1,311



770



375



340



330Long term debt(2)


25,693



3,346



3,347



3,333



15,667







Software license & other arrangements(3)


9,784



6,784



3,000















$
42,739


$
13,589


$
8,156


$
4,282


$
16,042


$
340


$
330  50




---



##### Table of Contents



(1)
    
    Includes interest expenses(2)
    
    Effective as of January 31, 2008, we amended our Credit
    Agreement in order to increase the term loan facility to
    $28 million. The amendment provides that the maturity date
    for the revolving credit facility and the term loan facility
    under the Credit Agreement will be December 31, 2011. The
    amendment also amends certain financial covenants which we are
    required to maintain compliance with under the Credit Agreement,
    including minimum consolidated EBIDTA and consolidated leverage
    ratio covenants, provides new mandatory term loan prepayments
    based on excess cash flow and the sale or issuance of equity
    interests, provides a new amortization schedule for the term
    loan and revises the acquisition covenant to reduce permitted
    costs of acquisitions. This does not include interest expense.(3)
    
    Other arrangements include payments related to agreements to a
    service provider under which we receive data and other
    information for use in our new fraud protection services. Under
    these arrangements we pay royalties based on usage of the data
    or analytics, and make certain minimum royalty payments in
    exchange for defined limited exclusivity rights. In 2008 the
    Company is obligated to pay a) an additional
    $6.0 million of minimum royalties in which any further
    minimum royalty payments by us are either paid at our sole
    discretion or are subject to termination by us under certain
    contingent conditions, b) an increasing adjustment based on
    the greater of the cumulative change in the Consumer Price Index
    over the prior 60 months or 2% and c) $432 thousand to
    our related party under these contracts through
    December 31, 2008. The amounts in the table represent only
    the noncanceable portion of each respective arrangement. In
    general, contracts can be terminated with 90 day notice.    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Interest
    Rate
        Foreign
    Currency
   51




---



##### Table of Contents



Fair
    Value
      ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  page F-1 Form 10-K.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
  Rule 13a-15(e)
 52




---



##### Table of Contents



Internal
    Control over Financial Reporting
  Managements
    Report on Internal Control Over Financial Reporting
  Rule 13a-15(f)
        Attestation
    Report of Registered Public Accounting Firm
  page F-3 Form 10-K.
  Changes
    in Internal Control over Financial Reporting
    ITEM 9B.
    OTHER
    INFORMATION   53




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES    ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  (a)
    1. and 2.
    Financial Statements and Financial Statement Schedules  page F-1.
 54




---



##### Table of Contents



3.
    Exhibits  ExhibitNumber

Description2
.1

Merger Agreement, by and among the Registrant, CMSI Merger Inc.,
    Chartered Marketing Services, Inc., and Chartered Holdings, LLC
    and other shareholders of Chartered Marketing Services, Inc.,
    dated as of June 9, 2006 (Incorporated by reference to Exhibit
    2.1, filed with the Form 8-K dated July 7, 2006)2
.2

Letter Agreement by and among the Registrant, Chartered
    Marketing Services, Inc. and Michael J. Kennealy, dated as of
    June 30, 2006 (Incorporated by reference to Exhibit 2.2, filed
    with the Form 8-K dated July 7, 2006)2
.3*

Membership Purchase Agreement dated January 31, 2008 between
    Registrant and Citibank (South Dakota), N.A.2
.4

Asset Purchase Agreement dated August 7, 2007 among Registrant,
    Captira Analytical, LLC, Hide NSeek, LLC and certain
    members of Hide NSeek, LLC (Incorporated by reference to
    Exhibit 2.1 filed with the Form 8-k dated August 7, 2007).3
.1

Restated Certificate of Incorporation (Incorporated by reference
    to Exhibit 3.1, filed with the Registrants Registration
    Statement on Form S-1 (File No. 333-111194) (the Form
    S-1))3
.2

Amended and Restated Bylaws (Incorporated by reference to
    Exhibit 3.1, filed with the Form 8-K dated October 14, 2007)10
.1

Amended and Restated Marketing and Services Agreement dated
    April 20, 2007, by and between the Registrant, on the one hand,
    and Capital One Bank and Capital One Services Inc., on the other
    hand (Incorporated by reference to Exhibit 10.1, filed with the
    Registrants Form 8-K dated April 20, 2007).10
.2.1

Consumer Credit Information Service Agreement, dated as of March
    12, 1997, by and between CreditComm Services LLC and American
    Express Travel Related Services Company, Inc., as amended.
    (Incorporated by reference to Exhibit 10.2, filed with the Form
    S-1)10
.2.2

Services Transition Agreement, dated as of December 21, 2005,
    between the Registrant and American Express Travel Related
    Services (Incorporated by reference to Exhibit 10.1, filed with
    Form 8-K dated December 29, 2005).10
.3

Agreement, dated as of April 29, 2001, between the Registrant
    and Discover Financial Services, Inc. (Incorporated by reference
    to Exhibit 10.3, filed with the Form S-1)10
.4

Agreement for Services Administration, dated as of March 11,
    2002, between the Registrant and Discover Bank (Incorporated by
    reference to Exhibit 10.4, filed with the Form S-1)10
.5

Program Provider Agreement, dated as of August 1, 2002, among
    the Registrant, Citibank (South Dakota), N.A., Citibank USA N.A.
    and Citicorp Credit Services, Inc. (Incorporated by reference to
    Exhibit 10.5, filed with the Form S-1)10
.6.1

Agreement -- Consumer Disclosure Services, dated as of April 7,
    1997, by and between CreditComm Services LLC, Equifax Credit
    Information Services, Inc. and Digital Matrix Systems, as
    amended by the First Addendum dated March 30, 2001 and the
    Second Addendum dated November 27, 2001. (Incorporated by
    reference to Exhibit 10.6, filed with the Form S-1)10
.6.2

Amendment, effective as of January 24, 2006, of Agreement --
    Consumer Disclosure Service, between the Registrant and Equifax
    Credit Information Services, Inc. (Incorporated by reference to
    Exhibit 10.3, filed with the Form 8-K dated January 30, 2006).10
.7.1

Agreement for Credit Monitoring Batch Processing Services, dated
    as of November 27, 2001, among the Registrant, CreditComm
    Services LLC and Equifax Services, Inc. (Incorporated by
    reference to Exhibit 10.7, filed with the Form S-1)10
.7.2

Amendment, effective as of January 24, 2006, of Agreement for
    Credit Monitoring Batch Processing Services, between the
    Registrant and Equifax Consumer Services, Inc. (Incorporated by
    reference to Exhibit 10.2, filed with the Form 8-K dated January
    30, 2006).10
.8.1

Master Agreement for Marketing, Operational and Cooperative
    Services, dated as of November 27, 2001, among the Registrant,
    CreditComm Services LLC and Equifax Consumer Services, Inc., as
    amended, together with Addendum Number Two, dated May 31, 2002.
    (Incorporated by reference to Exhibit 10.8, filed with the Form
    S-1) 55




---



##### Table of Contents



ExhibitNumber

Description10
.8.2

Amendment, effective as of January 24, 2006, of Master Agreement
    for Marketing, Operational and Cooperative Services, between the
    Registrant and Equifax Consumer Services, Inc. (Incorporated by
    reference to Exhibit 10.1, filed with the Form 8-K dated January
    30, 2006).10
.9

CapitalOne Project Agreement pursuant to Addendum Number Two to
    Master Agreement for Marketing, Operational and Cooperative
    Services, dated May 31, 2002. (Incorporated by reference to
    Exhibit 10.9, filed with the Form S-1)10
.10

CapitalOne Project Agreement Two pursuant to Addendum Number Two
    to Master Agreement for Marketing, Operational and Cooperative
    Services, dated December 23, 2002. (Incorporated by reference to
    Exhibit 10.10, filed with the Form S-1)10
.11

CapitalOne Project Agreement Three pursuant to Addendum Number
    Three to Master Agreement for Marketing, Operational and
    Cooperative Services, dated November 22, 2002. (Incorporated by
    reference to Exhibit 10.11, filed with the Form S-1)10
.12.1

Consumer Review Service Reseller Service Agreement between the
    Registrant and Experian Information Solutions, Inc.
    (Incorporated by reference to Exhibit 10.12, filed with the Form
    S-1)10
.12.2

Amendment, dated November 15, 2006, to the Pricing Schedule to
    the Consumer Review Services Reseller Agreement, dated July 1,
    2003 between the Registrant and Experian Information Solutions,
    Inc. (Incorporated by reference to Exhibit 10.12.2 filed with
    the Form 10-K for the year ended December 31, 2006).10
.13

Agreement, effective as of December 1, 2003, between Citibank
    (South Dakota), N.A., Citibank USA, N.A. and Citicorp Credit
    Services, Inc. and the Registrant. (Incorporated by reference to
    Exhibit 10.13, filed with the Form S-1)10
.14

Service Agreement for Consumer Resale, dated as of August 31,
    1999 by and between CreditComm Services LLC and TransUnion
    Corporation. (Incorporated by reference to Exhibit 10.14, filed
    with the Form S-1)10
.15.1

Master Agreement dated March 8, 2007 by and between Digital
    Matrix Systems, Inc. and the Registrant. (Incorporated by
    reference to Exhibit 10.3 filed with the Form 10-Q for the
    quarter ended March 31, 2007).10
.15.2

Data Services Agreement For Credit Bureau Simulator, effective
    as of September 1, 2004, between Digital Matrix Systems, Inc.
    and the Registrant. (Incorporated by reference to Exhibit 10.1,
    filed with the Registrants Quarterly Report on Form 10-Q
    for the quarter ended September 30, 2005)10
.15.3

Professional Services Agreement, dated November 11, 2005,
    between Digital Matrix Systems, Inc. and the Registrant.
    (Incorporated by reference to Exhibit 10.15.4 filed with
    the
    Form 10-K
    for the year ended December 31, 2006).10
.15.4

Disaster Recovery Site Agreement, by and among the Registrant
    and Digital Matrix Systems, dated as of March 16, 2006
    (Incorporated by reference to Exhibit 10.1, filed with the Form
    10-Q dated May 5, 2006)10
.16

Employment Agreement between the Registrant and Michael R.
    Stanfield (Incorporated by reference to Exhibit 10.1, filed with
    the Form S-1)10
.17

Severance and Release Agreement, by and between the Registrant
    and Kenneth D. Schwarz, dated as of January 5, 2007
    (Incorporated by reference to Exhibit 10.1, filed with the Form
    8-K dated January 5, 2007)10
.18

Employment Agreement between the Registrant and Neal
    Dittersdorf. (Incorporated by reference to Exhibit 10.19, filed
    with the Form S-1)10
.19

Data Services Agreement for Credit Browser, dated as of December
    17, 2004, by and between Digital Matrix Systems, Inc. and the
    Registrant (Incorporated by reference to Exhibit 10.21, filed
    with the 2004 10-K)10
.20

Employment Agreement, dated as of January 13, 2005, by and
    between the Registrant and George K. Tsantes (Incorporated by
    reference to Exhibit 10.22, filed with the 2004 10-K).10
.21.1

Credit Agreement, by and among the Registrant, certain
    Subsidiaries thereof, Bank of America, N.A., and L/C Issuer,
    dated as of July 3, 2006 (Incorporated by reference to Exhibit
    10.1, filed with the Form 8-K dated July 7, 2006) 56




---



##### Table of Contents



ExhibitNumber

Description10
.21.2*

Amendment dated November 29, 2007 to Credit Agreement dated as
    of July 3, 2006 by and among Registrant, certain Subsidiaries
    thereof, Bank of America, N.A. and L/C Issuer.10
.21.3*

Amendment effective as of January 31, 2008 to Credit Agreement
    dated as of July 3, 2006 by and among Registrant, certain
    Subsidiaries thereof, Bank of America, N.A. and L/C Issuer.10
.22

Joint Venture Agreement, between the Registrant, Control Risk
    Group Limited, Control Risk Group Holdings Limited, and
    Screening International LLC, dated as of May 15, 2006
    (Incorporated by reference to Exhibit 10.1, filed with the Form
    10-Q dated August 8, 2006)10
.23

Employment Agreement by and between the Registrant and John G.
    Scanlon (Incorporated by reference to Exhibit 10.2, filed with
    the Form 8-K dated January 5, 2007)10
.24*

Stock Purchase Agreement dated November 9, 2007 among
    Registrant, Net Enforcers, Inc. and Joseph C. Loomis.14
.1

Code of Ethics of the Registrant (Incorporated by reference to
    Exhibit 14.1, filed with the 2004 10-K).21
.1*

Subsidiaries of the Registrant.23
.1*

Consent of Deloitte & Touche LLP31
.1*

Certification of Michael R. Stanfield, President and Chief
    Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.31
.2*

Certification of Madalyn Behneman, Principal Financial Officer,
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
.1*

Certification of Michael R. Stanfield, Chief Executive Officer,
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2*

Certification of Madalyn Behneman, Principal Financial Officer,
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith.
    
    Confidential treatment requested as to certain portions, which
    portions are omitted and filed separately with the Securities
    and Exchange Commission. 57




---



##### 



INDEX TO
    FINANCIAL STATEMENTS AND SCHEDULE INTERSECTIONS INC.
   
 Reports of Independent Registered Public
    Accounting Firm


F-2Consolidated Financial Statements of Intersections Inc.:Consolidated Balance Sheets


F-4Consolidated Statements of Operations


F-5Consolidated Statements of Changes in
    Stockholders Equity


F-6Consolidated Statements of Cash Flows


F-7Notes to Consolidated Financial Statements


F-8Schedule II  Valuation and
    Qualifying Accounts


F-37   F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
        Internal Control  Integrated Framework
      F-2




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  
  Internal Control  Integrated Framework
        Internal Control  Integrated Framework
        F-3




---



##### Table of Contents



INTERSECTIONS
    INC.CONSOLIDATED BALANCE SHEETS
    December 31, 2006 and 2007
    (In thousands)
  December 31,2006


2007ASSETSCURRENT ASSETS:Cash and cash equivalents

$
15,580


$
19,780Short-term investments


10,453



Accounts receivable, net of allowance of doubtful accounts of
    $38 and $37


22,369



25,471Prepaid expenses and other current assets


5,241



6,217Income tax receivable


2,113



4,329Note receivable


750



Deferred subscription solicitation costs


11,786



21,912Total current assets


68,292



77,709PROPERTY AND EQUIPMENT  net


21,699



18,817GOODWILL


66,663



76,506INTANGIBLE ASSETS  net


12,388



16,855OTHER ASSETS


10,425



16,381TOTAL ASSETS

$
179,467


$
206,268LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Note payable  current portion

$
3,333


$
3,346Note payable to Control Risks Group Ltd.






900Capital leases  current portion


1,176



1,001Accounts payable


5,193



10,647Accrued expenses and other current liabilities


15,690



15,187Accrued payroll and employee benefits


7,073



4,945Commissions payable


1,194



2,413Deferred revenue


5,292



2,886Deferred tax liability  current portion


2,483



6,019Total current liabilities


41,434



47,344NOTE PAYABLE  less current portion


11,667



22,347OBLIGATIONS UNDER CAPITAL LEASES  less current portion


1,637



699OTHER LONG-TERM LIABILITIES


551



2,071DEFERRED TAX LIABILITY  less current portion


8,152



8,935TOTAL LIABILITIES


63,441



81,396MINORITY INTEREST


11,450



10,024STOCKHOLDERS EQUITY:Common stock ($0.01 par); shares authorized: 50,000; shares
    issued 17,836 shares (2006) and 18,172 shares
    (2007); 16,871 shares outstanding (2006) and 17,105
    (2007)


178



182Additional paid-in capital


95,462



99,706Treasury stock, 965 and 1,067 shares at cost in 2006 and
    2007


(8,600
)


(9,516
)Retained earnings


17,447



24,357Accumulated other comprehensive income


89



119Total stockholders equity


104,576



114,848TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
179,467


$
206,268    F-4




---



##### Table of Contents



INTERSECTIONS
    INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 Years
    Ended December 31, 2005, 2006 and 2007
  2005


2006


2007(In thousands, except per share amounts)REVENUE

$
165,171


$
201,051


$
271,723OPERATING EXPENSES:Marketing


19,646



25,173



36,285Commission


26,687



25,786



52,624Cost of revenue


57,351



75,188



101,815General and administrative


34,518



49,978



59,386Depreciation and amortization


6,457



10,018



12,427Impairment of software development costs


1,515







Total operating expenses


146,174



186,143



262,537INCOME FROM OPERATIONS


18,997



14,908



9,186Interest income


1,265



1,655



799Interest expense


(82
)


(875
)


(1,380
)Other income  net


37



173



1,139INCOME BEFORE INCOME TAXES AND MINORITY INTEREST


20,217



15,861



9,744INCOME TAX EXPENSE


(7,747
)


(6,328
)


(4,329
)MINORITY INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY






(97
)


1,451NET INCOME

$
12,470


$
9,436


$
6,866NET INCOME PER SHARE  basic

$
0.73


$
0.56


$
0.40NET INCOME PER SHARE  diluted

$
0.70


$
0.54


$
0.39Weighted average common shares outstanding  basic


17,002



16,770



17,096Weighted average common shares outstanding  diluted


17,815



17,606



17,479    F-5




---



##### Table of Contents



INTERSECTIONS
    INC.
  CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 Years
    Ended December 31, 2005, 2006 and 2007
  AccumulatedCommon


Additional


Treasury


OtherStock


Paid-in


Stock


Comprehensive


RetainedShares


Amount


Capital


Shares


Amount


Income


Earnings


Total(In thousands)BALANCE, JANUARY 1, 2005


17,325


$
173


$
91,413






$



$



$
(4,459
)

$
87,127Issuance of common stock upon exercise of stock
    options & warrants


285



3



1,140



















1,143Amortization of deferred compensation










20



















20Repurchase of Company stock














965



(8,600
)










(8,600
)Tax benefit of stock options exercised










784



















784Net income


























12,470



12,470BALANCE, DECEMBER 31, 2005


17,610


$
176


$
93,357



965


$
(8,600
)

$



$
8,011


$
92,944Issuance of common stock upon exercise of stock
    options & warrants


226


$
2


$
470






$



$



$



$
472Amortization of deferred compensation










10



















10Stock based compensation










1,111



















1,111Tax benefit of stock options exercised










514



















514Net income


























9,436



9,436Foreign currency translation adjustments






















89







89Comprehensive Income






























9,525BALANCE, DECEMBER 31, 2006


17,836


$
178


$
95,462



965


$
(8,600
)

$
89


$
17,447


$
104,576Issuance of common stock upon exercise of stock
    options & warrants


336


$
4


$
1,031






$



$



$



$
1,035Stock based compensation










2,715



















2,715Tax benefit of stock options exercised










498



















498Adoption of FIN No. 48


























44



44Repurchase of Company stock














102



(916
)










(916
)Net income


























6,866



6,866Foreign currency translation adjustments






















30







30Comprehensive Income






























6,896BALANCE, DECEMBER 31, 2007


18,172


$
182


$
99,706



1,067


$
(9,516
)

$
119


$
24,357


$
114,848    F-6




---



##### Table of Contents



INTERSECTIONS
    INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 Years
    Ended December 31, 2005, 2006 and 2007
  2005


2006


2007(In thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
12,470


$
9,436


$
6,866Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


6,457



10,113



12,556Amortization of gain from sale leaseback






(95
)


(94
)Loss on disposal of fixed assets


15



54



60Excess tax benefit from share based compensation


784







Amortization of debt issuance cost






31



75Provision for doubtful accounts


19



33



(2
)Deferred income tax


2,418



2,142



4,417Shared based compensation


20



1,121



2,715Amortization of deferred subscription solicitation costs


21,714



21,175



35,012Impairment of software development costs


1,515







Minority interest in net income (loss) of Screening
    International, LLC






97



(1,451
)Foreign currency transaction losses, net










61Changes in assets and liabilities, net of businesses acquired:Accounts receivable


(4,795
)


(3,998
)


(2,663
)Prepaid expenses and other current assets


(294
)


129



(1,018
)Income tax receivable






(2,341
)


(2,740
)Deferred subscription solicitation costs


(21,347
)


(20,583
)


(46,718
)Other assets


(5,807
)


(4,085
)


(4,375
)Accounts payable


183



(2,154
)


4,806Accrued expenses and other current liabilities


1,969



3,921



(836
)Accrued payroll and employee benefits


888



2,932



(2,151
)Commissions payable


34



(771
)


1,220Current tax payable


1,116



(1,115
)


Deferred revenue


197



1,403



(2,640
)Other long-term liabilities


41



452



1,489Net cash provided by operating activities

$
17,597


$
17,897


$
4,589NET CASH USED IN INVESTING ACTIVITIES:Acquisition of property and equipment

$
(10,552
)

$
(8,331
)

$
(6,075
)Cash received in the acquisition of Screening International, LLC






1,710



Cash paid in the acquisition of Intersections Insurances
    Services Inc.






(50,609
)


(5
)Cash paid in the acquisition of Hide N Seek, LLC, net of
    cash received










(1,686
)Cash paid in the acquisition of Net Enforcers, Inc., net of cash
    received










(14,168
)Proceeds from sale-leaseback


1,243







Sale of short-term investments


6,084



23,634



10,453Net cash used in investing activities

$
(3,225
)

$
(33,596
)

$
(11,481
)CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:Cash proceeds from stock options exercised


1,143



471



1,035Excess tax benefit of stock options exercised






514



498Proceeds from debt issuance






15,000



14,900Debt issuance costs






(261
)


Note receivable






(750
)


Repurchase of common stock


(8,600
)






(916
)Repayments on note payable










(3,382
)Capital lease payments


(1,387
)


(1,391
)


(1,037
)Net cash (used in) provided by financing activities

$
(8,844
)

$
13,583


$
11,098EFFECT OF EXCHANGE RATE ON CASH






141



(6
)INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


5,528



(1,975
)


4,200CASH AND CASH EQUIVALENTS  Beginning of period


12,027



17,555



15,580CASH AND CASH EQUIVALENTS  End of period

$
17,555


$
15,580


$
19,780SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid for interest

$
117


$
655


$
1,084Cash paid for taxes

$
3,437


$
5,384


$
3,078NONCASH FINANCING AND INVESTING ACTIVITIES:Equipment obtained under capital lease

$
1,596


$



$
Equipment financed

$
203


$



$
Equipment accrued but not paid

$
248


$
185


$
363Equipment under sale lease back

$
1,243


$



$
    F-7




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 Years
    Ended December 31, 2005, 2006 and 2007
  1.
    Organization
    and Business          2.
    Summary
    of Significant Accounting Policies  Basis
    of Presentation and Consolidation
   F-8




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Use of
    Estimates
    Cash
    and Cash Equivalents
    Short-Term
    Investments
    Foreign
    Currency Translation
  Foreign
    Currency Translation
    Accounts
    Receivable and Note Receivable
     F-9




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Property
    and Equipment
    Life(In years)Machinery and equipment

3-5Software

3-5Furniture and fixtures

5Leasehold improvements

Shorter of lease term or useful lifeBuilding

30   Goodwill
    and Intangible Assets
  Business Combinations
  Goodwill and Other Intangible
    Assets
    Impairment
    of Long-Lived Assets
    Fair
    Value of Financial Instruments
    Revenue
    Recognition
     F-10




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Identity
    Theft, Credit Management and Background Services
  Revenue
    Recognition in Financial Statements Revenue Recognition
      99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent
  Accidental
    Death Insurance and other Membership Products
   F-11




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    EITF 99-19.
    Other
    Monthly Subscription Products
    Deferred
    Subscription Solicitation and Commission Costs
    93-7, Reporting on Advertising Costs
  SOP 93-7,
     F-12




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  SOP 93-7,
    Deferred
    Debt Issuance Costs
    Software
    Development Costs
  SOP 98-1, Accounting for the Costs of Computer Software Developed or
    Obtained for Internal Use EITF 00-2, Accounting for Web Site Development Costs
  SOP 98-1, Accounting for the Impairment or
    Disposal of Long-Lived Assets
  Income
    Taxes
  Accounting for Income Taxes
  Accounting for Uncertainty in
    Income Taxes  an interpretation of FASB Statement
    No. 109, Accounting for Income Taxes
 F-13




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Stock-Based
    Compensation
    Accounting for Stock Issued to Employees
  Share-Based
    Payment
  No. FAS 123R-3
       F-14




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Accounting for Stock Issued to Employees Accounting
    for Stock-Based Compensation Accounting for Stock-Based
    Compensation  Transition and Disclosure 
    an Amendment of FASB Statement No. 123 No. 96-18, Accounting for Equity Instruments That Are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling
    Goods or Services.
    2005Net income:As reported

$
12,470Deduct: total stock-based employee compensation expense
    determined under the fair value method, net of tax


(4,975
)Pro forma

$
7,495Net income per basic share:As reported

$
0.73Pro forma

$
0.44Net income per diluted share:As reported

$
0.70Pro forma

$
0.42       Expected Dividend Yield.
  Expected Volatility.
 F-15




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Risk-free Interest Rate.
  Expected Term.
    2005


2006


2007Expected dividend yield


0
%


0
%


0
%Expected volatility


52
%


44
%


38
%Weighted average risk free interest rate


3.62
%


4.73
%


4.19
%Weighed average expected life of options


4 years



6.2 years



6.2 years   Net
    Income Per Common Share
  Earnings Per
    Share.
      2005


2006


2007Net income available to common shareholders  basic
    and diluted

$
12,470


$
9,436


$
6,866Weighted average common shares outstanding  basic


17,002



16,770



17,096Dilutive effect of common stock equivalents


813



836



383Weighted average common shares outstanding  diluted


17,815



17,606



17,479Income per common share:Basic

$
0.73


$
0.56


$
0.40Diluted

$
0.70


$
0.54


$
0.39  F-16




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Treasury
    Stock
    Segment
    Reporting
  Disclosures About Segments of an
    Enterprise and Related Information
  Recent
    Accounting Pronouncements
  Fair Value Measurements No. FAS 157-2, ffective Dates of FASB Statement No. 157,
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an Amendment of ARB No. 51.
 F-17




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    3.
    Business
    Acquisitions  Net
    Enforcers
        Current assets





$
576Intangible assets:Trade name (indefinite)

$
1,114Customer relationships (estimated useful life of 9 years)


2,632Non-compete agreement (estimated useful life of 5 years)


560Existing developed technology assets (estimated useful life of
    4 years)


1,803Total intangible assets






6,109Goodwill






8,437Other current liabilities






(829
)Net assets acquired





$
14,293      F-18




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Captira
    Analytical
      Cash paid

$
833Assumption of operating liabilities


637Forgiveness of loans and accrued interest from Intersections


1,567Transaction costs


105$
3,142       Current assets





$
13Property, plant and equipment






174Intangible assets:Trade name (estimated useful life of 4 years)

$
407Existing developed technology assets (estimated useful life of
    4 years)


1,297Total intangible assets






1,704Goodwill






1,251Net assets acquired





$
3,142        F-19




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Intersections
    Insurance Services
        Current assets





$
11,047Property, plant and equipment






1,368Other assets






135Intangible assets:Registered trademarks (estimated useful life of 3 years)

$
1,886Existing subscriber base (estimated useful life of 10 years)


7,641Carrier and network provider agreements (estimated useful life
    of 5 years)


731Existing developed technology assets (estimated useful life of
    5 years)


1,499Total intangible assets






11,757Goodwill






43,235Total assets






67,542Deferred tax and current liabilities






(8,073
)Deferred tax and long term liabilities






(5,192
)Total liabilities






(13,265
)Net assets acquired





$
54,277     No. 95-3, Recognition of Liabilities in Connection with a Purchase
    Business Combination.
 F-20




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Year Ended December 31,2006


2007Beginning balance

$
2,332


$
2,016Payments


(316
)


(2,000
)Other increases (decreases)






248Ending balance

$
2,016


$
264     Year Ended December 31,2005


2006(In thousands, exceptshare data)(Unaudited)Revenue

$
211,988


$
222,404Net Income

$
15,515


$
10,608Basic earning per share

$
0.91


$
0.63Diluted earnings per share

$
0.87


$
0.60   Screening
    International, LLC
         F-21




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Current assets

$
4,126Property and equipment


378Goodwill


6,842Intangible assets


663Deferred tax liability


(199
)Total consideration

$
11,810       4.
    Prepaid
    Expenses and Other Current Assets.    December 31,


December 31,2006


2007(In thousands)Prepaid services

$
1,400


$
1,167Prepaid contracts


989



1,825Other


2,852



3,225$
5,241


$
6,217   5.
    Deferred
    Subscription Solicitation Costs  SOP 93-7,
   F-22




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  6.
    Property
    and Equipment    December 31,








December 31,2006








2007(In thousands)Machinery and equipment

$
18,920










$
20,893Software


19,420











24,434Software
    development-in-progress


2,913











1,685Furniture and fixtures


1,767











2,101Leasehold improvements


3,793











3,862Building


725











725Land


25











2547,563











53,725Less: accumulated depreciation


(25,864
)










(34,908
)Property and equipment  net

$
21,699










$
18,817     December 31,


December 31,2006


2007(In thousands)Leased property consisting of machinery and equipment

$
5,056


$
5,125Less: accumulated depreciation


(2,742
)


(3,843
)$
2,314


$
1,282     7.
    Goodwill
    and Intangibles    ConsumerProducts


Backgroundand Services


Screening


Other


TotalBalance, December 31, 2005

$



$
16,741


$



$
16,741Acquired during the year


43,080



6,842







49,922Balance, December 31, 2006

$
43,080


$
23,583


$



$
66,663Adjusted during the year


155











155Acquired during the year










9,688



9,688Balance, December 31, 2007

$
43,235


$
23,583


$
9,688


$
76,506  F-23




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    December 31, 2006


December 31, 2007Gross





Net


Gross





NetCarrying


Accumulated


Carrying


Carrying


Accumulated


CarryingAmount


Amortization


Amount


Amount


Amortization


AmountAmortizable intangible assets:Customer related

$
9,652


$
(1,133
)

$
8,519


$
12,284


$
(3,069
)

$
9,215Marketing related


2,978



(458
)


2,520



4,499



(1,394
)


3,105Technology related


1,499



(150
)


1,349



4,599



(615
)


3,984Non-Compete agreement














560



(9
)


551Total amortizable intangible assets

$
14,129


$
(1,741
)

$
12,388


$
21,942


$
(5,087
)

$
16,855     For the years ending December 31,2008

$
4,0502009


3,2712010


2,4262011


1,9212012


1,331Thereafter


3,856$
16,855   8.
    Other
    Assets.    December 31,


December 31,2006


2007(In thousands)Prepaid royalty payments

$
9,705


$
14,207Prepaid contracts


512



496Escrow receivable






1,030Other


208



648$
10,425


$
16,381    F-24




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  9.
    Accrued
    Expenses and Other Current Liabilities.    December 31,


December 31,2006


2007(In thousands)Accrued marketing

$



$
894Accrued cost of sales, including credit bureau costs


7,201



6,083Accrued general and administrative expense and professional fees


4,481



3,883Transition costs


2,016



264Insurance premiums


1,830



1,341Other


162



2,722$
15,690


$
15,187   10.
    Accrued
    Payroll and Employee Benefits.    December 31,


December 31,2006


2007(In thousands)Accrued payroll

$
699


$
3,559Accrued severance


1,142



104Accrued benefits






1,282Other


5,232



$
7,073


$
4,945   11.
    Income
    Taxes    2005


2006


2007(In thousands)Current:Federal

$
(4,715
)

$
(3,184
)

$
(67
)State


(614
)


(1,002
)


23Foreign






28



Total current income tax expense


(5,329
)


(4,158
)


(44
)Deferred:Federal


(2,237
)


(1,962
)


(5,025
)State


(181
)


(264
)


(411
)Foreign






56



1,151Total deferred income tax expense


(2,418
)


(2,170
)


(4,285
)Total income tax expense

$
(7,747
)

$
(6,328
)

$
(4,329
)  F-25




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2006


2007(In thousands)Deferred tax assets:Reserves and accrued expenses

$
2,129



1,515NOL carryforwards


28



1,100Total deferred tax assets


2,157



2,615Deferred tax liabilities:Prepaid expenses


(4,640
)


(9,194
)Property, plant, and equipment


(2,885
)


(2,961
)Intangible assets


(5,267
)


(5,414
)Total deferred tax liabilities


(12,792
)


(17,569
)Net deferred tax liability

$
(10,635
)


(14,954
)         December 31,2005


2006


2007Tax provision at statutory rate

$
(7,076
)

$
(5,551
)

$
(3,413
)State income tax, net of federal benefit


(529
)


(934
)


(428
)Effect of tax rates different than statutory










(191
)Nondeductible executive compensation










(129
)Other


(142
)


(157
)


(168
)Net tax provision

$
(7,747
)

$
(6,328
)

$
(4,329
)   FIN No. 48-1, Definition for Settlement in FASB Interpretation No. 48,
    Balance at January 1, 2007

$
719Increases related to current year tax positions


94Balance at December 31, 2007

$
813  F-26




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        2000-2006 1999-2006
    12.
    Related
    Party Transactions  Digital Matrix Systems, Inc.
      RCS International, Inc.
  Lazard Freres & Co, LLC.
 F-27




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  13.
    Commitments
    and Contingencies  Leases
    Operating


CapitalTwelve Months Ending December 31,

Leases


Leases(In thousands)2008

$
2,382


$
1,0772009


1,311



4982010


770



1792011


375



2012


340



thereafter


330



Total minimum lease payments

$
5,508



1,754Less: amount representing interest






(546
)Present value of minimum lease payments






1,700Less: current obligation






(1,001
)Long term obligations under capital lease





$
699         Other
   F-28




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Contingencies
    14.
    Long-Term
    Debt        As of December 31,2008

$
3,3462009


3,3472010


3,3332011


15,667$
25,693Demand loan


900Total

$
26,593      F-29




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    15.
    Stockholders
    Equity  Share
    Repurchase
    Stock
    Based Compensation
      and/or
     F-30




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Stock
    Options
        2005


2006


2007





WeightedWeighted





Weighted





Weighted





AverageAverage





Average





Average





RemainingNumber of


Exercise


Number of


Exercise


Number of


Exercise


Aggregate


ContractualShares


Price


Shares


Price


Shares


Price


Intrinsic Value


Term(In years)Outstanding, beginning of year


3,502,511


$
12.08



3,987,117


$
12.61



3,944,566


$
13.10Granted


976,000



13.07



295,000



10.80



863,000



9.88Canceled


(242,296
)


14.09



(155,859
)


14.18



(719,241
)


14.69Exercised


(249,098
)


4.59



(181,692
)


2.59



(249,051
)


5.63Outstanding, end of year


3,987,117


$
12.61



3,944,556


$
12.88



3,839,274


$
12.22


$
2,127



5.79Exercisable at end of the year


3,788,421


$
12.84



3,624,056


$
13.10



2,865,688


$
12.97


$
2,127



4.61            F-31




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Options Outstanding


Options ExercisableWeighted Average


Weighted





WeightedRemaining


Average Exercise





AverageExercise Price

Shares


Contractual Term


Price


Shares


Exercise Price(In years)$0  $5.00


243,742



1.65


$
.45



243,742


$
.45$5.01  $10.00


1,410,935



7.17



9.10



584,426



7.98$10.01  $15.00


1,220,797



5.63



12.46



1,073,721



12.70$15.01  $20.00


679,396



6.38



17.04



679,396



17.04Greater than $20.00


284,404



1.88



25.23



284,403



25.233,839,274



5.79


$
12.22



2,865,688


$
12.97   Restricted
    Stock Units
    Weighted-AverageRemaining


AggregateNumber of


Contractual


FairRSUs


Life


Value(In thousands)


(In years)


(In thousands)Outstanding at December 31, 2005









$
Granted


574,000



2.2



5,418Canceled


(110,000
)






(1,037
)Vested


(5,000
)






(47
)Outstanding at December 31, 2006


459,000



2.2


$
4,334Granted


336,000



2.3



3,326Canceled


(55,728
)






(534
)Forfeited


(77,000
)






(726
)Vested


(93,760
)






(884
)Outstanding at December 31, 2007


568,512



2.3


$
5,516       Non-Employee Options and Warrants
 F-32




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  16.
    Employee
    Benefit Plan    17.
    Major
    Clients    2005


2006


2007American Express


22
%


7
%


Capital One


12
%


13
%


10
%Citibank


12
%


14
%


11
%Discover


16
%


15
%


13
%Bank of America (includes MBNA)


11
%


13
%


33
%       18.
    Segment
    and Geographic Information   F-33




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Consumer Products


Backgroundand Services


Screening


Other


Consolidated(In thousands)Year Ended December 31, 2005Revenue

$
151,326


$
13,845


$



$
165,171Depreciation and amortization


5,798



659







6,457Income before income taxes and minority interest


19,246



971







20,217Year Ended December 31, 2006Revenue

$
176,942


$
24,109


$



$
201,051Depreciation and amortization


9,004



1,014







10,018Income before income taxes and minority interest


14,500



1,361







15,861Year Ended December 31, 2007Revenue

$
241,968


$
29,508


$
247


$
271,723Depreciation and amortization


10,745



1,405



277



12,427Income (loss) before income taxes and minority interest


15,022



(4,247
)


(1,031
)


9,744As of December 31, 2006Property, plant and equipment, net

$
19,697


$
2,002


$



$
21,699Identifiable assets

$
144,170


$
35,297


$



$
179,467As of December 31, 2007Property, plant and equipment, net

$
16,534


$
2,145


$
138


$
18,817Identifiable assets

$
192,343


$
12,869


$
1,056


$
206,268     United States


United Kingdom


Other


Consolidated(In thousands)RevenueYear ended December 31, 2005

$
165,171


$



$



$
165,171Year ended December 31, 2006


195,061



5,990







201,051Year ended December 31, 2007


261,130



10,584



9



271,723Total assetsYear ended December 31, 2006

$
168,937


$
10,530


$



$
179,467Year ended December 31, 2007


196,419



9,976



(127
)


206,268  F-34




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  19.
    Quarterly
    Financial Data (Unaudited)  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands)Year ended December 31, 2006:Revenue

$
45,688


$
45,369


$
55,261


$
54,733Income from operations


5,200



3,859



4,722



1,127Income before income taxes and minority interest


5,644



4,708



4,618



891Net income

$
3,413


$
2,749


$
2,636


$
638Year ended December 31, 2007:Revenue

$
58,201


$
65,105


$
71,403


$
77,014Income from operations


552



1,811



2,847



3,976Income before income taxes and minority interest


456



1,733



2,696



4,859Net income

$
484


$
1,335


$
1,724


$
3,323   20.
    Subsequent
    Events  Amendment
    to Existing Credit Agreement
        Interest
    Rate Swap
    Membership
    Purchase Agreement
  ®
 F-35




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
       F-36




---



##### Table of Contents



SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS  AdditionsBalance at


Charged to


Deductions


Balance atBeginning of


Costs and


from


End ofDescription

Period


Expenses


Allowance


PeriodYear Ended December 31, 2007Allowance for doubtful accounts

$
38,392


$
6,248


$
7,944


$
36,696Year Ended December 31, 2006Allowance for doubtful accounts

$
106,638


$
34,300


$
102,546


$
38,392Year Ended December 31, 2005Allowance for doubtful accounts

$
63,597


$
145,447


$
102,406


$
106,638    F-37




---



##### Table of Contents



SIGNATURES
        By:
    /s/  Michael
    R. Stanfield   Title:
    Chief Executive Officer      Signature

Title

Date/s/  Michael
    R. StanfieldMichael
    R. Stanfield

Chairman, Chief Executive Officer and Director (Principal
    Executive Officer)

March 14, 2008/s/  Madalyn
    C. BehnemanMadalyn
    C. Behneman

Senior Vice President (Principal Financial and Accounting
    Officer)

March 14, 2008/s/  Thomas
    G. AmatoThomas
    G. Amato

Director

March 14, 2008/s/  James
    L. KempnerJames
    L. Kempner

Director

March 14, 2008/s/  Thomas
    L. KempnerThomas
    L. Kempner

Director

March 14, 2008/s/  David
    A. McGoughDavid
    A. McGough

Director

March 14, 2008/s/  Norman
    N. MintzNorman
    N. Mintz

Director

March 14, 2008/s/  Steven
    F. PiakerSteven
    F. Piaker

Director

March 14, 2008/s/  William
    J. WilsonWilliam
    J. Wilson

Director

March 14, 2008