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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, 2008oro

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(State or other jurisdiction
    of
    incorporation or organization)

54-1956515(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 Global 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
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   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


25ITEM 2.

PROPERTIES


26ITEM 3.

LEGAL PROCEEDINGS


26ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS


27PART IIITEM 5.

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


29ITEM 6.

SELECTED FINANCIAL DATA


31ITEM 7.

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


33ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


62ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


63ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


63ITEM 9A.

CONTROLS AND PROCEDURES


63ITEM 9B.

OTHER INFORMATION


64PART IIIITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE


64ITEM 11.

EXECUTIVE COMPENSATION


64ITEM 12.

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


64ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    AND DIRECTOR INDEPENDENCE


64ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES


64PART IVITEM 15.

EXHIBITS AND FINANCIAL STATEMENT
    SCHEDULES


64Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2   2




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FORWARD-LOOKING
    STATEMENTS
  Form 10-K
    
    demand for our services;
    general economic conditions, including the ongoing recession in
    the U.S. and a worldwide economic slowdown;
    recent disruptions to the credit and financial markets in the
    U.S. and worldwide;
    economic conditions specific to our financial institutions
    clients;
    product development;
    maintaining acceptable margins;
    maintaining secure systems;
    ability to control costs;
    the impact of foreign, federal, state and local regulatory
    requirements on our business, specifically the consumer credit
    market;
    the impact of competition;
    our ability to continue our long-term business strategy,
    including growth through acquisition and investments;
    ability to attract and retain qualified personnel; and
    the uncertainty of economic conditions in general.    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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direct-to-consumer
    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 commissions could be payable
    upfront in a lump sum on a per newly enrolled subscriber basis,
    periodically over the life of a subscriber, or through a
    combination of both. 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, and we may reimburse the client for
    certain of its
    out-of-pocket
    marketing costs incurred in obtaining the subscriber.
    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 relative to the investment made by our client and us.        Operations
   6




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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
          Data
    and Analysis Providers
        Competition
     11




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Government
    Regulation
    Credit
    Reporting Laws
       12




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Privacy
      Marketing
    Laws and Regulations
        Insurance
    Laws
    Canadian
    Laws
   13




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Laws
    and Regulations Particularly Affecting Our Background Screening
    and Other Segments
      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
  Weakness
    in the U.S. economy may negatively impact our consumer base and
    financial institution clients.
   14




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Consumers.
  Financial Institutions.
    Disruptions
    in the world markets adversely affecting financial institutions
    could adversely affect 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. 15




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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.
   16




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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.
    Our
    consumer products and services depend on data and technology
    from third party suppliers, and any failure of that data or
    those technologies or their suppliers could harm our products
    and services and our business.
    A
    failure of any of the insurance companies that underwrite the
    insurance products or related benefits provided as part of our
    consumer products and services, or refusal by those insurance
    companies to provide the expected insurance, could harm our
    business.
    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.
   17




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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.
    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.
   18




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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.
    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.
    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
 19




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We may
    not be able to consummate acquisitions or investments that are
    accretive or which improve our financial
    condition.
  and/or
  and/or
  We may
    not realize planned benefits of our acquisitions or
    investments.
    
    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 and
    other global markets for our Background Screening and Other
    segments, 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.
   20




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Screening
    International is subject to additional risks due to its
    international scope.
      Screening
    International, and any other acquisition or investment 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
   21




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We
    recognized substantial impairment charges in 2008 and may
    continue to incur future impairments of goodwill and other
    assets, both tangible and intangible, in the
    future.
            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; 22




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
    the demand for consumer subscription services generally;
    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.
   23




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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.
   24




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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.
    Competition
    could reduce our market share or decrease our
    revenue.
      ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS   25




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ITEM 2.
    PROPERTIES    Approx.




LeaseLocation

Square Feet


Segment

ExpirationChantilly, VA(1)


71,566


Consumer Products and Services


2009Rio Rancho, NM


28,000


Consumer Products and Services


2013Manassas, VA


11,500


Consumer Products and Services


2013Winchester, VA


22,594


Background Screening


2010Hammersmith, West London, UK


6,372


Background Screening


2009Hammersmith, West London, UK


6,125


Background Screening


2013Albany, NY


7,730


Other


2011Phoenix, AZ


4,665


Other


2009Gainesville, FL


2,566


Other


2011     (1)
    
    In November 2008, we executed a new lease agreement to relocate
    our Chantilly, Virginia operations, effective July 2009. The
    approximate square footage of the new location is 150 thousand
    square feet and the lease expires in ten years, subject to early
    termination provisions.      ITEM 3.
    LEGAL
    PROCEEDINGS     26




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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


58


Chairman, Chief Executive Officer and DirectorNeal B. Dittersdorf


49


Chief Legal Officer and Chief  Administrative OfficerJohn G. Scanlon


41


Chief Operating Officer, Business ServicesSteven A. Schwartz


48


Executive Vice President, Consumer  ProductsChristopher W. Shenefelt


50


Executive Vice President, OperationsGeorge (Chip) K. Tsantes


49


Executive Vice President and Chief Technology OfficerMadalyn C. Behneman


45


Senior Vice President and Principal Financial Officer   Michael R. Stanfield
  Neal B. Dittersdorf
  John G. Scanlon,
  Steven A. Schwartz
  Christopher W. Shenefelt
 27




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George (Chip) K. Tsantes
  Madalyn C. Behneman
 28




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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


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   Sales Priceper ShareHigh


Low2008 Quarter ended:March 31, 2008

$
9.00


$
7.10June 30, 2008

$
11.47


$
8.61September 30, 2008

$
11.25


$
8.13December 31, 2008

$
9.41


$
1.97      29




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




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ITEM 6.
    SELECTED
    FINANCIAL DATA  SELECTED
    CONSOLIDATED FINANCIAL DATA
  Form 10-K.
  Years Ended December 31,2004


2005


2006


2007


2008(In thousands, except per share data)Statements of Operations Data(1):Revenue

$
152,916


$
165,171


$
201,051


$
271,723


$
361,607Operating expenses:Marketing


19,328



19,646



25,173



36,285



52,439Commission


46,719



26,687



25,786



52,624



86,008Cost of revenue


40,093



57,351



75,188



101,815



114,338General and administrative


23,330



34,518



49,978



59,386



67,801Goodwill, intangible and long-lived asset impairment charges


















44,702
(6)Depreciation


3,949



6,115



8,661



9,081



9,372Amortization


42



342



1,357



3,346



10,789Impairment of software development costs(2)






1,515











Total operating expenses


133,461



146,174



186,143



262,537



385,449Operating income (loss)


19,455



18,997



14,908



9,186



(23,842
)Interest income (expense)


56



1,183



780



(581
)


(2,365
)Other income (expense)


31



37



173



1,139



(1,686
)Income (loss) before income taxes and minority interest


19,542



20,217



15,861



9,744



(27,893
)Income tax (expense) benefit


(8,597
)(3)


(7,747
)


(6,328
)


(4,329
)


2,912
(5)Minority interest in net (income) loss of subsidiary










(97
)


1,451



9,004Net income (loss)

$
10,945


$
12,470


$
9,436


$
6,866


$
(15,977
)Net income (loss) per share:Basic

$
0.85


$
0.73


$
0.56


$
0.40


$
(0.93
)Diluted

$
0.64


$
0.70


$
0.54


$
0.39


$
(0.93
)Weighted average shares outstanding:Basic


12,929



17,002



16,770



17.096



17,264Diluted


17,517



17,815



17,606



17,479



17,264Balance Sheet Data:Cash and cash equivalents

$
12,027


$
17,555


$
15,580


$
19,780


$
10,762Deferred subscription solicitation costs


9,185



8,818



11,786



21,912



28,951Working capital


55,984



52,493



26,858



30,365



33,661Total assets


109,111



123,187



179,467



206,268



201,629Long-term debt


1,764



2,797



13,304



23,046



38,369Total stockholders equity

$
87,127


$
92,944


$
104,576


$
114,848


$
101,439Statement of Cash Flow Data:Cash inflows (outflows) from:Operating activities

$
21,808


$
17,597


$
17,897


$
4,589


$
20,761Investing activities


(68,320
)


(3,225
)


(33,596
)


(11,481
)


(47,180
)Financing activities


44,128



(8,844
)


13,583



11,098



17,464  31




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Years Ended December 31,2004


2005


2006


2007


2008(In thousands)Other Data:Subscribers at beginning of period


2,275



2,885



3,660



4,626



5,259New subscribers  indirect


1,609



2,182



2,460



2,270



1,831New subscribers  direct(4)


805



700



1,168



1,825



2,295Cancelled subscribers within first 90 days of subscription


(587
)


(846
)


(888
)


(1,031
)


(1,046
)Cancelled subscribers after first 90 days of subscription(7)


(1,217
)


(1,261
)


(1,774
)


(2,431
)


(3,609
)Subscribers at end of period


2,885



3,660



4,626



5,259



4,730Total revenue

$
152,916


$
165,171


$
201,051


$
271,723


$
361,607Revenue from transactional sales


(3,093
)


(16,263
)


(31,702
)


(35,349
)


(33,247
)Revenue from lost/stolen credit card registry


(85
)


(77
)


(81
)


(46
)


(36
)Subscription revenue

$
149,738


$
148,831


$
169,268


$
236,328


$
328,324Marketing and commissions

$
66,047


$
46,333


$
50,959


$
88,909


$
138,447Commissions paid on transactional sales


(759
)


(105
)


(30
)


(13
)


(5
)Commissions paid on lost/stolen credit card registry


(9
)


(36
)


(31
)


(38
)


(55
)Marketing and commissions associated with subscription revenue

$
65,279


$
46,192


$
50,898


$
88,858


$
138,387     (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, 2008. 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 charge 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
    charge of approximately $150 thousand.(3)
    
    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 Statement
    of Financial Accounting Standards (SFAS)
    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 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.(4)
    
    We classify subscribers from shared marketing arrangements with
    direct marketing arrangements.(5)
    
    The income tax benefit for the year ended December 31, 2008
    includes a non-cash increase to record a valuation allowance on
    the cumulative federal, state and foreign deferred tax assets of
    approximately $672 thousand, $116 thousand and
    $1.4 million, respectively. These deferred tax assets are
    primarily related to federal, state and foreign net operating
    loss carryforwards that we believe cannot be utilized in the
    foreseeable future. SFAS No. 109 requires a company to
    evaluate its deferred tax assets on a regular basis to determine
    if a valuation allowance against the net deferred tax assets is
    required. According to SFAS No. 109, a cumulative 32




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loss in recent years is significant negative evidence in
    considering whether deferred tax assets are realizable. Due to
    over two years of cumulative losses and projected near term
    losses at our subsidiary Background Screening, a valuation
    allowance was recorded in the fourth quarter of the year ended
    December 31, 2008.(6)
    
    A contract with a third party provider, for which we make
    minimum monthly payments for the usage of data and certain
    exclusively rights, was tested for impairment. As a result, in
    the fourth quarter of 2008, we recognized a non-cash impairment
    charge of approximately $15.8 million in accordance with
    SFAS No. 144, Accounting for the Impairment or
    Disposal of Long-Lived Assets. In addition, we impaired
    goodwill as part of our annual SFAS No. 142,
    Goodwill and Other Intangible Assets, impairment analysis
    in our Background Screening and Other segments of approximately
    $13.7 million and $12.6 million, respectively. We also
    impaired intangible assets in our Other segment of approximately
    $2.6 million per the provisions of SFAS No. 144.(7)
    
    Includes the loss of approximately 800 thousand subscribers from
    our wholesale relationship with Discover.  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
     33




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##### Table of Contents




    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 commissions could be payable
    upfront in a lump sum on a per subscriber basis for the
    subscribers enrollment, periodically over the life of a
    subscriber, or through a combination of both. 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, and we may
    reimburse the client for certain of its
    out-of-pocket
    marketing costs incurred in obtaining the subscriber.
    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 relative to the investment made by our client and us.     34




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##### Table of Contents



As of December 31,2006


2007


2008(In thousands)Indirect marketing arrangements


3,183



3,301



2,114Direct and shared marketing arrangements


1,443



1,958



2,616Total subscribers


4,626



5,259



4,730         Percentage
    of Revenue for the
    Years Ended December 31,
  Client

Relationship

2006


2007


2008Bank of America (includes MBNA)

Shared/Direct Marketing


13
%


33
%


48
%Capital One (direct and through Equifax agreement)

Indirect Marketing


13
%


10
%


7
%Discover

Indirect Marketing


11
%


10
%


6
%Citibank

Direct Marketing


6
%


5
%


4
%Citibank

Indirect Marketing


8
%


6
%


4
%Discover

Direct Marketing


5
%


3
%


2
%American Express

Shared Marketing


7
%






  35




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Background
    Screening
     36




---



##### Table of Contents



Other
          Critical
    Accounting Policies
   37




---



##### Table of Contents



Investments
  Accounting for Certain
    Investments in Debt and Equity Securities
  The Equity Method of
    Accounting for Investments in Common Stock
  03-01, The Meaning of
    Other-Than-Temporary
    Impairment and its Application to Certain Investments
  Foreign
    Currency Translation
  Foreign Currency Translation
    Derivative
    Financial Instruments
  Accounting for Derivative
    Instruments and Hedging Activities
 38




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##### Table of Contents



Cash Flow Hedges: Measuring the Ineffectiveness
    of a Cash Flow Hedge under Paragraph 30(b) When the
    Shortcut Method Is Not Applied
  Fair
    Value Measurements
  Fair Value Measurements, FAS 157-2 
  No. 157-3, Determining the Fair Value of an Asset When the Market For
    that Asset is not Active,
  The Fair Value Option for
    Financial Assets and Financial Liabilities  Including
    an amendment of FASB Statement No. 115, available-for-sale held-to-maturity
   39




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##### Table of Contents



Revenue
    Recognition
      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
   40




---



##### Table of Contents



EITF 99-19.
    Other
    Monthly Subscription Products
    Deferred
    Subscription Solicitation and Advertising
  93-7, Reporting on Advertising Costs SOP 93-7,
   41




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##### Table of Contents



Commission
    Costs
      SOP 93-7,
  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,
    Identifiable Intangibles and Other Long Lived
    Assets
  Goodwill and Other Intangible
    Assets
 42




---



##### Table of Contents



43




---



##### Table of Contents



Accounting for the Impairment and Disposal of Long lived
    Assets
        Income
    Taxes
  Accounting for Income Taxes
   44




---



##### Table of Contents



Accounting for Uncertainty in
    Income Taxes  an interpretation of FASB Statement
    No. 109, Accounting for Income Taxes
  Segment
    Reporting
  Disclosures About Segments of an
    Enterprise and Related Information
    Recent
    Accounting Pronouncements
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an Amendment of ARB No. 51.
 45




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##### Table of Contents



Disclosures about Derivative Instruments and Hedging
    Activities.
  No. 142-3, Determination of the Useful Life of Intangible Assets. No. 142-3 No. 142-3 No. 142-3
  The
    Hierarchy of Generally Accepted Accounting Principle The Meaning of Present Fairly in Conformity
    with Generally Accepted Accounting Principles
  No. 03-6-1, Determining Whether Instruments Granted in Share-Based
    Payment Transactions are Participating Securities No. 03-6-1 Earnings Per Share No. 03-6-1
  Trends
    Related to the Current Economic Environment
   46




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##### Table of Contents



Results
    of Operations
    Year Ended December 31,2006


2007


2008Revenue


100.0
%


100.0
%


100.0
%Operating expenses:Marketing


12.5



13.3



14.5Commission


12.8



19.3



23.8Cost of revenue


37.4



37.5



31.6General and administrative


24.9



21.9



18.7Goodwill, intangible and long-lived asset impairment charges










12.4Depreciation


4.3



3.4



2.6Amortization


0.7



1.2



3.0Total operating expenses


92.6



96.6



106.6Operating income (loss)


7.4



3.4



(6.6
)Interest income (expense)


0.4



(0.2
)


(0.7
)Other income (expense)


0.1



0.4



(0.5
)Income (loss) before taxes and minority interest


7.9



3.6



(7.8
)Income tax expense (benefit)


(3.2
)


(1.6
)


0.8Minority interest in net loss of subsidiary






0.5



2.5Net income (loss)


4.7
%


2.5
%


(4.5
)%          47




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##### Table of Contents



Years
    Ended December 31, 2007 and 2008 (in
    thousands):
    ConsumerProducts and


BackgroundServices


Screening


Other


ConsolidatedYear Ended December 31, 2007Revenue

$
235,908


$
29,508


$
6,307


$
271,723Operating expenses:Marketing


36,285











36,285Commission


52,110







514



52,624Cost of revenue


81,588



17,738



2,489



101,815General and administrative


43,446



14,542



1,398



59,386Depreciation


8,144



900



37



9,081Amortization


2,600



505



241



3,346Total operating expenses


224,173



33,685



4,679



262,537Income (loss) from operations

$
11,735


$
(4,177
)

$
1,628


$
9,186Year Ended December 31, 2008Revenue

$
326,708


$
27,843


$
7,056


$
361,607Operating expenses:Marketing


52,439











52,439Commission


85,527







481



86,008Cost of revenue


94,762



16,644



2,932



114,338General and administrative


48,292



14,656



4,853



67,801Goodwill, intangible and long-lived asset impairment charges


15,771



13,715



15,216



44,702Depreciation


8,411



946



15



9,372Amortization


9,221



505



1,063



10,789Total operating expenses


314,423



46,466



24,560



385,449Income (loss) from operations

$
12,285


$
(18,623
)

$
(17,504
)

$
(23,842
)  48




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##### Table of Contents



Consumer
    Products and Services Segment
    Years Ended December 31,2007


2008


Difference


%Revenue

$
235,908


$
326,708


$
90,800



38.5
%Operating expenses:Marketing


36,285



52,439



16,154



44.5
%Commissions


52,110



85,527



33,417



64.1
%Cost of revenue


81,588



94,762



13,174



16.1
%General and administrative


43,446



48,292



4,846



11.2
%Goodwill, intangible and long-lived asset impairment charges






15,771



15,771



100.0
%Depreciation


8,144



8,411



267



3.3
%Amortization


2,600



9,221



6,621



254.7
%Total operating expenses


224,173



314,423



90,250



40.3
%Income from operations

$
11,735


$
12,285


$
550



4.7
%   Revenue.
    Years EndedDecember 31,2007


2008Percentage of subscribers from direct marketing arrangements to
    total subscribers


37.2
%


55.3
%Percentage of new subscribers acquired from direct marketing
    arrangements to total new subscribers acquired


44.7
%


44.6
%Percentage of revenue from direct marketing arrangements to
    total subscription revenue


68.2
%


78.9
%   Marketing Expenses.
 49




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##### Table of Contents



Commission Expenses.
    Cost of Revenue.
    General and Administrative Expenses.
      Goodwill, intangible and long-lived asset impairment
    charge.
    Depreciation.
    Amortization.
 50




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##### Table of Contents



Background
    Screening Segment
    Years Ended December 31,2007


2008


Difference


%Revenue

$
29,508


$
27,843


$
(1,665
)


(5.6
)%Operating expenses:Cost of revenue


17,738



16,644



(1,094
)


(6.2
)%General and administrative


14,542



14,656



114



0.8
%Goodwill, intangible and long-lived asset impairment charges






13,715



13,715



100.0
%Depreciation


900



946



46



5.1
%Amortization


505



505







Total operating expenses


33,685



46,466



(12,781
)


(37.9
)%Loss from operations

$
(4,177
)

$
(18,623
)

$
(14,446
)


345.8
%   Revenue.
  Cost of Revenue.
    General and Administrative Expenses.
    Goodwill, intangible and long-lived asset impairment
    charge.
 51




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##### Table of Contents



Depreciation.
    Other
    Segment
    Years Ended December 31,2007


2008


Difference


%Revenue

$
6,307


$
7,056


$
749



11.9
%Operating expenses:Commissions


514



481



(33
)


(6.4
)%Cost of revenue


2,489



2,932



443



17.8
%General and administrative


1,398



4,853



3,455



247.1
%Goodwill, intangible and long-lived asset impairment charges






15,216



15,216



100.0
%Depreciation


37



15



(22
)


(59.5
)%Amortization


241



1,063



822



341.1
%Total operating expenses


4,679



24,560



19,881



424.9
%Income (loss) from operations

$
1,628


$
(17,504
)

$
(19,132
)


1,175.2
%   Revenue.
  Commissions Expense.
    Cost of Revenue.
   52




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##### Table of Contents



General and Administrative Expenses.
        Goodwill, intangible and long-lived asset impairment
    charge.
    Depreciation.
  Amortization.
    Interest
    Income
    Interest
    Expense
      Other
    Income (Expense)
   53




---



##### Table of Contents



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


BackgroundServices


Screening


Other


ConsolidatedYear Ended December 31, 2006Revenue

$
169,622


$
24,109


$
7,320


$
201,051Operating expenses:Marketing


25,173











25,173Commission


25,553







233



25,786Cost of revenue


59,968



12,644



2,576



75,188General and administrative


40,417



9,013



548



49,978Depreciation


8,085



576







8,661Amortization


919



438







1,357Total operating expenses


160,115



22,671



3,357



186,143Income from operations

$
9,507


$
1,438


$
3,963


$
14,908Year Ended December 31, 2007Revenue

$
235,908


$
29,508


$
6,307


$
271,723Operating expenses:Marketing


36,285











36,285Commission


52,110







514



52,624Cost of revenue


81,588



17,738



2,489



101,815General and administrative


43,446



14,542



1,398



59,386Depreciation


8,144



900



37



9,081Amortization


2,600



505



241



3,346Total operating expenses


224,173



33,685



4,679



262,537Income (loss) from operations

$
11,735


$
(4,177
)

$
1,628


$
9,186  54




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##### Table of Contents



Consumer
    Products and Services Segment
  Years Ended December 31,2006


2007


Difference


%Revenue

$
169,622


$
235,908


$
66,286



39.1
%Operating expenses:Marketing


25,173



36,285



11,112



44.1
%Commissions


25,553



52,110



26,557



103.9
%Cost of revenue


59,968



81,588



21,620



36.1
%General and administrative


40,417



43,446



3,029



7.5
%Depreciation


8,085



8,144



59



0.7
%Amortization


919



2,600



1,681



182.9
%Total operating expenses


160,115



224,173



64,058



40.0
%Income from operations

$
9,507


$
11,735


$
2,228



23.4
%   Revenue.
    Years Ended December 31,2006


2007Percentage of subscribers from direct marketing arrangements to
    total subscribers


31.2
%


37.2
%Percentage of new subscribers acquired from direct marketing
    arrangements to total new subscribers acquired


32.2
%


44.7
%Percentage of revenue from direct marketing arrangements to
    total subscription revenue


59.3
%


68.2
%   Marketing Expenses.
    Commission Expenses.
   55




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##### Table of Contents



Cost of Revenue.
    General and Administrative Expenses.
      Depreciation.
    Amortization.
    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


9,013



14,542



5,529



61.3
%Depreciation


576



900



324



56.2
%Amortization


438



505



67



15.3
%Total operating expenses


22,671



33,685



11,014



48.6
%Income (loss) from operations

$
1,438


$
(4,177
)

$
(5,615
)


(390.5
)%   Revenue.
 56




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##### Table of Contents



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


2007


Difference


%Revenue

$
7,320


$
6,307


$
(1,013
)


13.8
%Operating expenses:Commissions


233



514



281



120.6
%Cost of revenue


2,576



2,489



(87
)


(3.4
)%General and administrative


548



1,398



850



155.1
%Depreciation






37



37



100.0
%Amortization






241



241



100.0
%Total operating expenses


3,357



4,679



1,322



39.4
%Income (loss) from operations

$
3,963


$
1,628


$
(2,335
)


(58.9
)%   Revenue.
 57




---



##### Table of Contents



Commission.
    Cost of Revenue.
    General and Administrative Expenses.
            Depreciation.
  Amortization.
  Liquidity
    and Capital Resources
     58




---



##### Table of Contents



Years Ended December 31,2007


2008


Difference(In thousands)Net cash provided by operating activities

$
4,589


$
20,761


$
16,172Net cash used in investing activities


(11,481
)


(47,180
)


(35,699
)Net cash provided by financing activities


11,098



17,464



6,366Effect of exchange rate changes on cash and cash equivalents


(6
)


(63
)


(57
)Net increase (decrease) in cash and cash equivalents


4,200



(9,018
)


(13,218
)Cash and cash equivalents, beginning of year


15,580



19,780



4,200Cash and cash equivalents, end of year

$
19,780


$
10,762


$
(9,018
)        59




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##### Table of Contents



Cash Flow Hedges: Measuring the Ineffectiveness
    of a Cash Flow Hedge under Paragraph 30(b) When the
    Shortcut Method Is Not Applied
     60




---



##### Table of Contents



Year Ending December 31,Total


2009


2010


2011


2012


2013


ThereafterContractual Obligations at December 31, 2008Capital leases(1)

$
1,604


$
704


$
488


$
309


$
103


$



$
Operating leases


17,385



2,017



1,817



1,880



1,940



2,380



7,351Long term debt(2)


44,597



7,014



7,000



30,583











Software license & other arrangements(3)


9,648



4,823



4,825















$
73,234


$
14,558


$
14,130


$
32,772


$
2,043


$
2,380


$
7,351     (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 consolidated leverage ratio covenants, and 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. In addition, we have a
    $900 thousand on demand note to CRG for capital contributions in
    2007 that is currently classified as a current liability on our
    consolidated balance sheet.(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 based on usage of the data or
    analytics, and make certain minimum payments in exchange for
    defined limited exclusivity rights. We entered into a new
    agreement with a non-credit data provider, effective
    December 31, 2008, under which we will receive enhanced
    data and services and improved licensing terms. In addition,
    minimum noncanceable payments by us to this provider under the
    new agreement will be lower than under the old agreement by
    $3.0 million and $1.5 million in 2009 and 2010,
    respectively. In addition, we are obligated to pay approximately
    $648 thousand to a related party under contracts through
    December 31, 2009. The amounts in the table represent only
    the noncanceable portion of each respective arrangement. In
    general, contracts can be terminated with 90 day notice.     61




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##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Interest
    Rate
      Foreign
    Currency
          Fair
    Value
   62




---



##### Table of Contents



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)
  Internal
    Control over Financial Reporting
  Managements
    Report on Internal Control Over Financial Reporting
  Rule 13a-15(f)
     63




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##### Table of Contents



Attestation
    Report of Registered Public Accounting Firm
  page F-3 Form 10-K.
  Changes
    in Internal Control over Financial Reporting
    ITEM 9B.
    OTHER
    INFORMATION   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.
 64




---



##### 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.
    (Incorporated by reference to Exhibit 2.3, filed with the
    Form 10-K
    for the year ended December 31, 2007)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

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
.3.1

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
.3.2

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
.4.1

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
.4.2

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
.5.1

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)10
.5.2

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
.6

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
.7

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) 65




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##### Table of Contents



ExhibitNumber

Description10
.8

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
.9.1

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
.9.2

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
.10

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
.11

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
.12.1

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
.12.2

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
.12.3

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
.12.4

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
.13

Employment Agreement between the Registrant and Michael R.
    Stanfield (Incorporated by reference to Exhibit 10.1, filed
    with the
    Form S-1)10
.14

Employment Agreement between the Registrant and Neal Dittersdorf
    (Incorporated by reference to Exhibit 10.19, filed with the
    Form S-1)10
.15

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
.16

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
.17.1

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)10
.17.2

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.
    (Incorporated by reference to Exhibit 10.21.2, filed with
    the
    Form 10-K
    for the year ended December 31, 2007)10
.17.3

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. (Incorporated by reference to Exhibit 10.21.3,
    filed with the
    Form 10-K
    for the year ended December 31, 2007)10
.18

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
.19

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) 66




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##### Table of Contents



ExhibitNumber

Description10
.20

Stock Purchase Agreement dated November 9, 2007 among
    Registrant, Net Enforcers, Inc. and Joseph C. Loomis.
    (Incorporated by reference to Exhibit 10.24, filed with the
    Form 10-K
    for the year ended December 31, 2007)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. 67




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##### Table of Contents



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-3Consolidated Statements of Operations


F-4Consolidated Statements of Changes in
    Stockholders Equity


F-5Consolidated Statements of Cash Flows


F-6Notes to Consolidated Financial Statements


F-7Schedule II  Valuation and
    Qualifying Accounts


F-41  F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   
                 F-2




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##### Table of Contents



INTERSECTIONS
    INC.CONSOLIDATED BALANCE SHEETS
    December 31, 2007 and 2008
    (In thousands)
  December 31,2007


2008ASSETSCURRENT ASSETS:Cash and cash equivalents

$
19,780


$
10,762Short-term investments






4,955Accounts receivable, net of allowance for doubtful accounts of
    $37 (2007) and $235 (2008)


25,471



29,391Prepaid expenses and other current assets


6,217



5,697Income tax receivable


4,329



7,416Deferred subscription solicitation costs


21,912



28,951Total current assets


77,709



87,172PROPERTY AND EQUIPMENT, net


18,817



16,942LONG-TERM INVESTMENT






3,327GOODWILL


76,506



53,102INTANGIBLE ASSETS, net


16,855



32,030OTHER ASSETS


16,381



9,056TOTAL ASSETS

$
206,268


$
201,629LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Current portion of long-term debt

$
3,346


$
7,014Note payable to Control Risks Group Ltd.


900



900Capital leases  current portion


1,001



637Accounts payable


10,647



9,802Accrued expenses and other current liabilities


15,187



15,843Accrued payroll and employee benefits


4,945



4,998Commissions payable


2,413



2,401Deferred revenue


2,886



4,381Deferred tax liability ,net, current portion


6,019



7,535Total current liabilities


47,344



53,511LONG-TERM DEBT


22,347



37,583OBLIGATIONS UNDER CAPITAL LEASES  less current portion


699



786OTHER LONG-TERM LIABILITIES


2,071



4,686DEFERRED TAX LIABILITY  net, less current portion


8,935



2,611TOTAL LIABILITIES


81,396



99,177MINORITY INTEREST


10,024



1,013STOCKHOLDERS EQUITY:Common stock ($0.01 par): shares authorized; 50,000; shares
    issued 18,172 shares (2007) and 18,383 shares
    (2008); shares outstanding 17,106 shares (2007) and
    17,317 shares (2008)


182



184Additional paid-in capital


99,706



103,544Treasury stock, 1,067 shares at cost in 2007 and 2008


(9,516
)


(9,516
)Retained earnings


24,357



8,380Accumulated other comprehensive income:Cash flow hedge






(1,263
)Other


119



110Total stockholders equity


114,848



101,439TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
206,268


$
201,629    F-3




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##### Table of Contents



INTERSECTIONS
    INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 Years
    Ended December 31, 2006, 2007 and 2008
  2006


2007


2008(In thousands, except per share amounts)REVENUE

$
201,051


$
271,723


$
361,607OPERATING EXPENSES:Marketing


25,173



36,285



52,439Commissions


25,786



52,624



86,008Cost of revenue


75,188



101,815



114,338General and administrative


49,978



59,386



67,801Goodwill, intangible and long-lived asset impairment charges










44,702Depreciation


8,661



9,081



9,372Amortization


1,357



3,346



10,789Total operating expenses


186,143



262,537



385,449INCOME (LOSS) FROM OPERATIONS


14,908



9,186



(23,842
)Interest income


1,655



799



254Interest expense


(875
)


(1,380
)


(2,619
)Other income (expense)


173



1,139



(1,686
)INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST


15,861



9,744



(27,893
)INCOME TAX (EXPENSE ) BENEFIT


(6,328
)


(4,329
)


2,912MINORITY INTEREST IN NET (INCOME) LOSS OF SUBSIDIARY


(97
)


1,451



9,004NET INCOME (LOSS)

$
9,436


$
6,866


$
(15,977
)NET INCOME (LOSS) PER SHARE  basic

$
0.56


$
0.40


$
(0.93
)NET INCOME (LOSS) PER SHARE  diluted

$
0.54


$
0.39


$
(0.93
)Weighted average common shares outstanding  basic


16,770



17,096



17,264Weighted average common shares outstanding  diluted


17,606



17,479



17,264    F-4




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##### Table of Contents



INTERSECTIONS
    INC.
  CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 Years
    Ended December 31, 2006, 2007 and 2008
  AccumulatedCommon


Additional


Treasury





Other


TotalStock


Paid-in


Stock


Retained


Comprehensive


StockholdersShares


Amount


Capital


Shares


Income(Loss)


Earnings


Income (Loss)


Equity(In thousands)BALANCE, JANUARY 1, 2006


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



















10Share 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
)

$
17,447


$
89


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


336


$
4


$
1,031






$



$



$



$
1,035Share 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
)

$
24,357


$
119


$
114,848Issuance of common stock upon exercise of stock
    options & warrants


211



2



(343
)


















(341
)Share based compensation










4,069



















4,069Tax benefit of stock options exercised










112



















112Net loss






















(15,977
)






(15,977
)Foreign currency translation adjustments


























(9
)


(9
)Cash flow hedge


























(1,263
)


(1,263
)Comprehensive Loss






























(13,409
)BALANCE, DECEMBER 31, 2008


18,383


$
184


$
103,544



1,067


$
(9,516
)

$
8,380


$
(1,153
)

$
101,439    F-5




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##### Table of Contents



INTERSECTIONS
    INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31, 2006, 2007 and 2008
  2006


2007


2008(In thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)

$
9,436


$
6,866


$
(15,977
)Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Depreciation


8,756



9,210



9,411Amortization


1,357



3,346



10,789Amortization of gain from sale leaseback


(95
)


(94
)


(39
)Loss on disposal of fixed assets


54



60



Amortization of debt issuance cost


31



75



101Provision for doubtful accounts


33



(2
)


213Shared based compensation


1,121



2,715



4,069Amortization of deferred subscription solicitation costs


21,175



35,012



54,201Minority interest in net income (loss) of Screening
    International, LLC


97



(1,451
)


(9,004
)Foreign currency transaction losses, net






61



800Goodwill, intangible and long-lived asset impairment charges










44,702Changes in assets and liabilities, net of businesses acquired:Accounts receivable


(3,998
)


(2,663
)


(4,440
)Prepaid expenses and other current assets


129



(1,018
)


350Income tax receivable


(2,341
)


(2,740
)


(3,086
)Deferred subscription solicitation costs


(20,583
)


(46,718
)


(67,073
)Other assets


(4,085
)


(4,375
)


(2,296
)Accounts payable


(2,154
)


4,806



(782
)Accrued expenses and other current liabilities


3,921



(836
)


743Accrued payroll and employee benefits


2,932



(2,151
)


147Commissions payable


(771
)


1,220



(12
)Current tax payable


(1,115
)






Deferred revenue


1,403



(2,640
)


1,502Deferred income tax, net


2,142



4,417



(4,959
)Other long-term liabilities


452



1,489



1,401Net cash provided by operating activities

$
17,897


$
4,589


$
20,761NET CASH USED IN INVESTING ACTIVITIES:Acquisition of property and equipment

$
(8,331
)

$
(6,075
)

$
(7,437
)Sale (Purchase) of short-term investments


23,634



10,453



(4,955
)Cash received in the acquisition of Screening International, LLC


1,710







Purchase of long-term investment










(3,327
)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
)


(411
)Cash paid in the acquisition of intangible membership agreements










(31,050
)Net cash used in investing activities

$
(33,596
)

$
(11,481
)

$
(47,180
)CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:Repayments under credit agreement






(3,382
)


(16,708
)Note receivable


(750
)






Capital lease payments


(1,391
)


(1,037
)


(1,077
)Borrowings under credit agreement


15,000



14,900



35,611Debt issuance costs


(261
)






(133
)Cash proceeds from stock options exercised


471



1,035



176Tax benefit of stock options exercised


514



498



112Withholding tax payment on vesting of restricted stock units










(517
)Repurchase of treasury stock






(916
)


Net cash provided by financing activities

$
13,583


$
11,098


$
17,464EFFECT OF EXCHANGE RATE ON CASH


141



(6
)


(63
)(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS


(1,975
)


4,200



(9,018
)CASH AND CASH EQUIVALENTS  Beginning of period


17,555



15,580



19,780CASH AND CASH EQUIVALENTS  End of period

$
15,580


$
19,780


$
10,762SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid for interest

$
655


$
1,084


$
2,019Cash paid for taxes

$
5,384


$
3,078


$
4,520NONCASH FINANCING AND INVESTING ACTIVITIES:Equipment obtained under capital lease

$



$



$
621Equipment accrued but not paid

$
185


$
363


$
384    F-6




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##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
 Years Ended December 31, 2006, 2007 and 2008
  1.
    Organization
    and Business          2.
    Summary
    of Significant Accounting Policies  Basis
    of Presentation and Consolidation
    Use of
    Estimates
   F-7




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##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Cash
    and Cash Equivalents
    Investments
  Accounting for Certain
    Investments in Debt and Equity Securities
  The Equity Method of
    Accounting for Investments in Common Stock
  03-01, The Meaning of Other-Than-Temporary Impairment and its
    Application to Certain Investments
  Foreign
    Currency Translation
  Foreign Currency Translation
    Accounts
    and Note Receivable
   F-8




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##### 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,
    Identifiable Intangibles and Other Long Lived
    Assets
  Goodwill and Other Intangible
    Assets
       F-9




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##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
          Accounting for the Impairment and Disposal of Long lived
    Assets
   F-10




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##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Derivative
    Financial Instruments
  Accounting for Derivative
    Instruments and Hedging Activities
  Cash Flow Hedges: Measuring the Ineffectiveness
    of a Cash Flow Hedge under Paragraph 30(b) When the
    Shortcut Method Is Not Applied
  Fair
    Value Measurements
  Fair Value Measurements,
 F-11




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##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  FAS 157-2 
  No. 157-3, Determining the Fair Value of an Asset When the Market For
    that Asset is not Active,
  The Fair Value Option for
    Financial Assets and Financial Liabilities  Including
    an amendment of FASB Statement No. 115,
    Revenue
    Recognition
     F-12




---



##### 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-13




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  EITF 99-19.
    Other
    Monthly Subscription Products
    Deferred
    Subscription Solicitation and Advertising
  93-7, Reporting on Advertising Costs SOP 93-7,
    Commission
    Costs
   F-14




---



##### 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
 F-15




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Accounting for Uncertainty in
    Income Taxes  an interpretation of FASB Statement
    No. 109, Accounting for Income Taxes
  Stock-Based
    Compensation
    Share-Based
    Payment
  No. FAS 123R-3
   F-16




---



##### Table of Contents



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


2007


2008Expected dividend yield


0
%


0
%


0
%Expected volatility


44
%


38
%


38
%Weighted average risk free interest rate


4.73
%


4.19
%


3.06
%Weighed average expected life of options


6.2 years



6.2 years



6.2 years   Expected Dividend Yield.
  Expected Volatility.
  Risk-free Interest Rate.
  Expected Term.
 F-17




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Net
    Income (Loss) Per Common Share
  Earnings Per Share.
      2006


2007


2008Net income (loss) available to common shareholders 
    basic and diluted

$
9,436


$
6,866


$
(15,977
)Weighted average common shares outstanding  basic


16,770



17,096



17,264Dilutive effect of common stock equivalents


836



383



Weighted average common shares outstanding  diluted


17,606



17,479



17,264Income (Loss) per common share:Basic

$
0.56


$
0.40


$
(0.93
)Diluted

$
0.54


$
0.39


$
(0.93
)   Treasury
    Stock
    Segment
    Reporting
  Disclosures About Segments of an
    Enterprise and Related Information
    Recent
    Accounting Pronouncements
  Business Combinations
 F-18




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Noncontrolling Interests in Consolidated Financial
    Statements  an Amendment of ARB No. 51.
  Disclosures about Derivative Instruments and Hedging
    Activities.
  No. 142-3, Determination of the Useful Life of Intangible Assets. No. 142-3 No. 142-3 No. 142-3
  The
    Hierarchy of Generally Accepted Accounting Principle The Meaning of Present Fairly in Conformity
    with Generally Accepted Accounting Principles
  No. 03-6-1, Determining Whether Instruments Granted in Share-Based
    Payment Transactions are Participating Securities No. 03-6-1 Earnings Per Share No. 03-6-1
 F-19




---



##### Table of Contents



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





$
683Intangible assets:Trade name (estimated useful life of 5 years)

$
395Customer relationships (estimated useful life of 7 years)


2,290Non-compete agreement (estimated useful life of 5 years)


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


363Total intangible assets






3,608Goodwill






11,241Other current liabilities






(812
)Net assets acquired





$
14,720        F-20




---



##### Table of Contents



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

$
833Assumption of operating liabilities


637Forgiveness of loans and accrued interest from Intersections


1,567Transaction costs


105$
3,142     Current assets





$
12Property, plant and equipment






36Intangible 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






1,390Net assets acquired





$
3,142        F-21




---



##### 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-22




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Years Ended December 31,2007


2008Beginning balance

$
2,016


$
264Payments


(2,000
)


(264
)Other increases (decreases)


248



Ending balance

$
264


$
0     Year Ended December 31,2006(In thousands, exceptshare data)(Unaudited)Revenue

$
222,404Net Income

$
10,608Basic earning per share

$
0.63Diluted earnings per share

$
0.60   Screening
    International, LLC
         F-23




---



##### 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.
    Fair
    Value Measurement        Fair Value Measurements at Reporting Date using:Quoted Pricesin Active


SignificantMarkets for


other


SignificantIdentical Assets


Observable


UnobservableDecember 31, 2008


(Level 1)


Inputs (Level 2)


Inputs (Level 3)Assets:US Treasury bills

$
6,937


$
6,937


$



$
Liabilities:Interest rate swap contracts


1,263







1,263



  F-24




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  5.
    Prepaid
    Expenses and Other Current Assets    December 31,


December 31,2007


2008(In thousands)Prepaid services

$
1,167


$
1,998Prepaid contracts


1,825



1,582Other


3,225



2,117$
6,217


$
5,697     6.
    Deferred
    Subscription Solicitation Costs  SOP 93-7,
   F-25




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  7.
    Property
    and Equipment    December 31,


December 31,2007


2008(In thousands)Machinery and equipment

$
20,893


$
23,893Software


24,434



27,502Software
    development-in-progress


1,685



2,724Furniture and fixtures


2,101



2,020Leasehold improvements


3,862



4,002Building


725



725Land


25



2553,725



60,891Less: accumulated depreciation


(34,908
)


(43,949
)Property and equipment  net

$
18,817


$
16,942     December 31,


December 31,2007


2008(In thousands)Leased property consisting of machinery and equipment

$
5,125


$
3,213Less: accumulated depreciation


(3,843
)


(2,589
)$
1,282


$
624     8.
    Long-Term
    Investments  The Equity Method of
    Accounting for Investments in Common Stock
   F-26




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  9.
    Goodwill
    and Intangibles    ConsumerProducts


Backgroundand Services


Screening


Other


TotalBalance, 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


$
76,506Adjusted during the year










2,944



2,944Impairment






(13,716
)


(12,632
)


(26,348
)Balance, December 31, 2008

$
43,235


$
9,867


$



$
53,102       December 31, 2007


December 31, 2008Gross





Net


Gross








NetCarrying


Accumulated


Carrying


Carrying


Accumulated





CarryingAmount


Amortization


Amount


Amount


Amortization


Impairment


AmountAmortizable intangible assets:Customer related

$
12,284


$
(3,069
)

$
9,215


$
42,992


$
(11,916
)

$
(1,794
)

$
29,282Marketing related


4,499



(1,394
)


3,105



3,780



(2,449
)


(170
)


1,161Technology related


4,599



(615
)


3,984



3,159



(1,390
)


(182
)


1,587Non-Compete agreement


560



(9
)


551



559



(121
)


(438
)


Total amortizable intangible assets

$
21,942


$
(5,087
)

$
16,855


$
50,490


$
(15,876
)

$
2,584


$
32,030      F-27




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    For the years ending December 31,2009

$
8,2452010


5,9472011


4,4932012


3,3072013


2,748Thereafter


7,290$
32,030   10.
    Other
    Assets    December 31,


December 31,2007


2008(In thousands)Prepaid royalty payments

$
12,628


$
75Prepaid contracts


496



70Escrow receivable


1,030



501Prepaid commissions


1,579



7,412Other


648



998$
16,381


$
9,056    F-28




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  11.
    Accrued
    Expenses and Other Current Liabilities    December 31,


December 31,2007


2008(In thousands)Accrued marketing

$
894


$
2,908Accrued cost of sales, including credit bureau costs


6,083



5,195Accrued general and administrative expense and professional fees


3,883



5,121Transition costs


264



Insurance premiums


1,341



1,610Other


2,722



1,009$
15,187


$
15,843   12.
    Accrued
    Payroll and Employee Benefits    December 31,


December 31,2007


2008(In thousands)Accrued payroll

$
3,559


$
3,466Accrued severance


104



Accrued benefits


1,282



1,508Other






24$
4,945


$
4,998  F-29




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  13.
    Income
    Taxes    2006


2007


2008(In thousands)Current:Federal

$
(3,184
)

$
(67
)

$
(323
)State


(1,002
)


23



(82
)Foreign


28







330Total current income tax expense


(4,158
)


(44
)


(75
)Deferred:Federal


(1,962
)


(5,025
)


3,225State


(264
)


(411
)


597Foreign


56



1,151



(835
)Total deferred income tax (expense) benefit


(2,170
)


(4,285
)


2,987Total income tax (expense) benefit

$
(6,328
)

$
(4,329
)

$
2,912     2007


2008(In thousands)Deferred tax assets:Reserves and accrued expenses


1,515



3,712NOL carryforwards


1,100



2,404Total deferred tax assets


2,615



6,116Deferred tax liabilities:Prepaid expenses


(9,194
)


(13,292
)Property, plant, and equipment


(2,961
)


(2,994
)Intangible assets


(5,414
)


2,254Total deferred tax liabilities


(17,569
)


(14,032
)Valuation allowances






(2,230
)Net deferred tax liability


(14,954
)


(10,146
)      F-30




---



##### Table of Contents



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


2007


2008Tax (provision) benefit at statutory rate

$
(5,551
)

$
(3,413
)

$
9,758State income tax (benefit), net of federal benefit


(934
)


(428
)


539Effect of tax rates different than statutory






(191
)


(283
)Nondeductible executive compensation






(129
)


(46
)Impairment of goodwill and intangible assets










(4,626
)Valuation Allowances










(2,230
)Other


(157
)


(168
)


(200
)Net tax (expense) benefit

$
(6,328
)

$
(4,329
)

$
2,912       Balance at January 1, 2007

$
719Increases related to current year tax positions


94Balance at January 1, 2008


813Increases related to prior year tax positions


1,175Increases related to current year tax positions


48State taxes associated with FIN 48 items


124Balance at December 31, 2008

$
2,160         2000-2007 1999-2007 2006-2007
 F-31




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    14.
    Related
    Party Transactions  Digital Matrix Systems, Inc.
      RCS International, Inc.
  Lazard Freres & Co, LLC.
  Guard ID Systems, Inc.
  15.
    Debt and
    Other Financing  December 31,


December 31,2007


2008(In thousands)Term loan

$
11,667


$
21,583Revolving line of credit


14,000



23,000Note payable to CRG


900



900Other


26



1426,593



45,497Less current portion


(4,246
)


(7,914
)Total long term debt

$
22,347


$
37,583  F-32




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
              For the years ending December 312009

$
7,0142010


7,0002011


30,583$
44,597Demand loan


900Total

$
45,497  F-33




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  16.
    Commitments
    and Contingencies  Leases
    Operating


CapitalTwelve Months Ending December 31,

Leases


Leases(In thousands)2009

$
2,017


$
7042010


1,817



4882011


1,880



3092012


1,940



1032013


2,380



Thereafter


7,351



Total minimum lease payments

$
17,385



1,604Less: amount representing interest






(181
)Present value of minimum lease payments






1,423Less: current obligation






(637
)Long term obligations under capital lease





$
786         Legal
    Proceedings
   F-34




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Other
    17.
    Stockholders
    Equity  Share
    Repurchase
    Stock
    Based Compensation
       F-35




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  and/or
      Stock
    Options
      2006


2007


2008





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


3,987,117


$
12.61



3,944,566


$
13.10



3,839,274


$
12.22Granted


295,000



10.80



863,000



9.88



1,130,492



8.42Canceled


(155,859
)


14.18



(719,241
)


14.69



(306,300
)


11.19Exercised


(181,692
)


2.59



(249,051
)


5.63



(66,360
)


10.04Outstanding, end of year


3,944,566


$
12.88



3,839,274


$
12.22



4,597,106


$
11.41


$
931



5.66Exercisable at end of the year


3,624,056


$
13.10



2,865,688


$
12.97



2,970,940


$
12.93


$
931



3.97          F-36




---



##### 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


195,943



0.65


$
.45



195,943


$
.45$5.01  $10.00


2,278,109



7.32



8.69



729,867



8.38$10.01  $15.00


1,209,547



4.64



12.47



1,131,630



12.60$15.01  $20.00


629,096



5.37



16.99



629,096



16.99Greater than $20.00


284,411



0.83



25.23



284,404



25.234,597,106



5.66


$
11.41



2,970,940


$
12.93   Restricted
    Stock Units
    Weighted-


Weighted-Average


AverageGrant Date


RemainingNumber of


Fair


ContractualRSUs


Value


Life(In thousands)





(In years)Outstanding at December 31, 2006


459,000



9.43



2.2Granted


336,000



9.90Canceled


(132,728
)


9.52Vested


(93,760
)


9.43Outstanding at December 31, 2007


568,512



9.70



2.3Granted


155,000



8.39Canceled


(64,722
)


6.52Vested


(144,906
)


9.61Outstanding at December 31, 2008


513,884


$
9.33



1.9       Non-Employee Options and Warrants
  18.
    Employee
    Benefit Plan  full-time
 F-37




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    19.
    Major
    Clients    2006


2007


2008American Express


7
%






Capital One


13
%


10
%


7
%Citibank


14
%


11
%


8
%Discover


15
%


13
%


8
%Bank of America (includes MBNA)


13
%


33
%


48
%       20.
    Segment
    and Geographic Information   F-38




---



##### Table of Contents



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


Backgroundand Services


Screening


Other


Consolidated(In thousands)Year Ended December 31, 2006Revenue

$
169,622


$
24,109


$
7,320


$
201,051Depreciation


8,085



576







8,661Amortization


919



438







1,357Income before income taxes and minority interest


10,594



1,304



3,963



15,861Year Ended December 31, 2007Revenue

$
235,908


$
29,508


$
6,307


$
271,723Depreciation


8,144



900



37



9,081Amortization


2,600



505



241



3,346Income (loss) before income taxes and minority interest


12,362



(4,247
)


1,629



9,744Year Ended December 31, 2008Revenue

$
326,708


$
27,843


$
7,056


$
361,607Depreciation


8,411



946



15



9,372Amortization


9,221



505



1,063



10,789Income (loss) before income taxes and minority interest


9,291



(19,686
)


(17,498
)


(27,893
)As of December 31, 2007Property, plant and equipment, net

$
16,534


$
2,145


$
138


$
18,817Identifiable assets

$
191,868


$
12,869


$
1,531


$
206,268As of December 31, 2008Property, plant and equipment, net

$
14,862


$
2,004


$
76


$
16,942Identifiable assets

$
214,173


$
(4,451
)

$
(8,093
)

$
201,629     United States


United Kingdom


Other


Consolidated(In thousands)RevenueYear ended December 31, 2006


195,061



5,990







201,051Year ended December 31, 2007


261,130



10,584



9



271,723Year ended December 31, 2008


351,165



10,417



25



361,607Total assetsAs of December 31, 2007


196,419



9,976



(127
)


206,268As of December 31, 2008


200,717



1,947



(1,035
)


201,629  F-39




---



##### Table of Contents



INTERSECTIONS
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  21.
    Quarterly
    Financial Data (Unaudited)  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands)Year 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


$
3,323Year ended December 31, 2008:Revenue

$
85,894


$
94,211


$
93,415


$
88,087Income (loss) from operations


5,607



7,678



4,992



(42,119
)Income (loss) before income taxes and minority interest


5,124



7,049



4,060



(44,126
)Net income (loss)

$
3,439


$
4,352


$
2,697


$
(26,465
)  F-40




---



##### 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, 2008Allowance for doubtful accounts

$
36,696


$
239,047


$
41,144


$
234,599Year 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


$
38,392  F-41




---



##### Table of Contents



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

Title

Date/s/  
    Michael R. Stanfield
    Michael R. Stanfield

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

March 16, 2009/s/  Madalyn
    C. Behneman
    Madalyn C. Behneman

Senior Vice President (Principal Financial and Accounting
    Officer)

March 16, 2009/s/  
    John M. Albertine
    John M. Albertine

Director

March 16, 2009/s/  Thomas
    G. Amato/s/
    Thomas G. Amato

Director

March 16, 2009/s/  
    James L. Kempner
    James L. Kempner

Director

March 16, 2009/s/  
    Thomas L. Kempner
    Thomas L. Kempner

Director

March 16, 2009/s/  
    David A. McGough
    David A. McGough

Director

March 16, 2009/s/  
    Norman N. Mintz
    Norman N. Mintz

Director

March 16, 2009/s/  
    William J. Wilson
    William J. Wilson

Director

March 16, 2009