UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission file number 333-123081
 
 HEALTH BENEFITS DIRECT CORPORATION
  Delaware
    
    98-0438502(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)
 150 North Radnor-Chester Rd.
Radnor Financial Center, Suite B101
Radnor, Pennsylvania 19087
 (484) 654-2200
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   o(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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HEALTH BENEFITS DIRECT CORPORATION
Form 10-Q Quarterly Report
INDEX
 PART IFINANCIAL INFORMATIONItem 1 Financial Statements
    
    
    3Consolidated Balance Sheets as of June 30, 2009 (UNAUDITED) and December 31, 2008
    
    
    3Consolidated Statements of Operations (UNAUDITED) for the three and six months ended
June 30, 2009 and 2008
    
    
    4Consolidated Statements of Changes in Shareholders Equity (UNAUDITED)
for the six months ended June 30, 2009
    
    
    5Consolidated Statements of Cash Flows (UNAUDITED) for the six months ended June 30,
2009 and 2008
    
    
    6Notes to Consolidated UNAUDITED Financial Statements
    
    
    7Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    38Item 4T Controls and Procedures
    
    
    63PART IIOTHER INFORMATIONItem 1 Legal Proceedings
    
    
    64Item 6 Exhibits
    
    
    65Signatures
    
    
    66
  Page 2




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##### 



PART I.
FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 HEALTH BENEFITS DIRECT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 June 30, 2009
    
    
    December 31, 2008(Unaudited)ASSETSCURRENT ASSETS:Cash
    
    $
    2,084,769
    
    
    $
    1,842,419Accounts receivable, less allowance for doubtful accounts $1,069 and $0
    
    
    683,628
    
    
    
    461,875Tax receivable
    
    
    26,290
    
    
    
    31,290Prepaid expenses
    
    
    123,433
    
    
    
    126,804Other current assets
    
    
    885
    
    
    
    8,461Total current assets
    
    
    2,919,005
    
    
    
    2,470,849Restricted cash
    
    
    1,150,000
    
    
    
    1,150,000Property and equipment, net of accumulated depreciation
$377,144 and $267,384
    
    
    918,167
    
    
    
    729,881Intangibles, net of accumulated amortization $1,410,496 and $1,021,187
    
    
    1,499,763
    
    
    
    1,911,461Other assets
    
    
    110,608
    
    
    
    110,607Total assets
    
    $
    6,597,543
    
    
    $
    6,372,798LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Note payable
    
    $
    29,351
    
    
    $
    Accounts payable
    
    
    482,830
    
    
    
    733,128Accrued expenses
    
    
    994,752
    
    
    
    697,255Current portion of capital lease obligations
    
    
    128,524
    
    
    
    89,297Due to related parties
    
    
    
    
    
    
    4,315Deferred revenue
    
    
    524,223
    
    
    
    457,500Liabilities of discontinued operations
    
    
    2,699,450
    
    
    
    2,238,315Total current liabilities
    
    
    4,859,130
    
    
    
    4,219,810LONG TERM LIABILITIES:Capital lease obligations
    
    
    270,350
    
    
    
    209,511Total long term liabilities
    
    
    270,350
    
    
    
    209,511SHAREHOLDERS EQUITY:Preferred stock ($.001 par value; 10,000,000 shares authorized; Series A
convertible preferred stock; 3,437,500 shares authorized, 1,000,000 shares issued
and outstanding (liquidation value $10,000,000)
    
    
    2,038,944
    
    
    
    Common stock ($.001 par value; 200,000,000 shares authorized;
41,279,645 shares issued and outstanding)
    
    
    41,279
    
    
    
    41,279Additional paid-in capital
    
    
    45,601,829
    
    
    
    43,281,139Accumulated deficit
    
    
    (46,213,989
    )
    
    
    (41,378,941
    )Total shareholders equity
    
    
    1,468,063
    
    
    
    1,943,477Total liabilities and shareholders equity
    
    $
    6,597,543
    
    
    $
    6,372,798
  Page 3




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HEALTH BENEFITS DIRECT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Revenues
    
    $
    1,535,271
    
    
    $
    1,409,467
    
    
    $
    3,257,710
    
    
    $
    2,694,790Operating Expenses:Salaries, employee benefits and related taxes
    
    
    1,820,438
    
    
    
    1,782,906
    
    
    
    4,346,395
    
    
    
    3,568,869Advertising and other marketing
    
    
    37,384
    
    
    
    20,770
    
    
    
    141,109
    
    
    
    23,800Depreciation and amortization
    
    
    287,045
    
    
    
    221,030
    
    
    
    565,407
    
    
    
    505,515Rent, utilities, telephone and communications
    
    
    205,847
    
    
    
    157,247
    
    
    
    411,317
    
    
    
    320,242Professional fees
    
    
    811,066
    
    
    
    573,944
    
    
    
    1,507,545
    
    
    
    1,058,272Other general and administrative
    
    
    381,614
    
    
    
    349,465
    
    
    
    716,233
    
    
    
    791,2573,543,394
    
    
    
    3,105,362
    
    
    
    7,688,006
    
    
    
    6,267,955Loss from operations
    
    
    (2,008,123
    )
    
    
    (1,695,895
    )
    
    
    (4,430,296
    )
    
    
    (3,573,165
    )Gain (loss) from discontinued operations
    
    
    (1,559,871
    )
    
    
    342,814
    
    
    
    (383,027
    )
    
    
    (2,127,044
    )Other income (expense):Interest income
    
    
    10,200
    
    
    
    22,229
    
    
    
    22,311
    
    
    
    52,735Interest expense
    
    
    (23,985
    )
    
    
    (11,605
    )
    
    
    (44,036
    )
    
    
    (16,215
    )Total other income (expense)
    
    
    (13,785
    )
    
    
    10,624
    
    
    
    (21,725
    )
    
    
    36,520Net loss
    
    $
    (3,581,779
    )
    
    $
    (1,342,457
    )
    
    $
    (4,835,048
    )
    
    $
    (5,663,689
    )Net loss per common share  basic and diluted:Loss from operations
    
    $
    (0.05
    )
    
    $
    (0.04
    )
    
    $
    (0.11
    )
    
    $
    (0.09
    )Gain (loss) from discontinued operations
    
    
    (0.04
    )
    
    
    0.01
    
    
    
    (0.01
    )
    
    
    (0.06
    )Net loss per common share  basic and diluted
    
    $
    (0.09
    )
    
    $
    (0.03
    )
    
    $
    (0.12
    )
    
    $
    (0.15
    )Weighted average common shares outstanding  basic and diluted
    
    
    41,279,645
    
    
    
    41,808,004
    
    
    
    41,279,645
    
    
    
    38,410,827
  Page 4




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HEALTH BENEFITS DIRECT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 FOR SIX MONTHS ENDED JUNE 30, 2009
 Preferred Stock, $.001
    
    Common Stock, $.001Par Value
    
    Par Value
    
    
    
    
    
    
    
    
    
    TotalNumber of
    
    
    
    
    
    Number of
    
    
    
    
    
    Additional
    
    Accumulated
    
    ShareholdersShares
    
    Amount
    
    Shares
    
    Amount
    
    Paid-in Capital
    
    Deficit
    
    EquityBalance  December 31, 2008
    
    
    
    
    
    $
    
    
    
    
    41,279,645
    
    
    $
    41,279
    
    
    $
    43,281,139
    
    
    $
    (41,378,941
    )
    
    $
    1,943,477Preferred stock issued in private placement
    
    
    1,000,000
    
    
    
    2,038,944
    
    
    
    
    
    
    
    
    
    
    
    1,945,439
    
    
    
    
    
    
    
    3,984,383Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375,251
    
    
    
    
    
    
    
    375,251Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,835,048
    )
    
    
    (4,835,048
    )Balance  June 30, 2009
    
    
    1,000,000
    
    
    $
    2,038,944
    
    
    
    41,279,645
    
    
    $
    41,279
    
    
    $
    45,601,829
    
    
    $
    (46,213,989
    )
    
    $
    1,468,063
  Page 5




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HEALTH BENEFITS DIRECT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Six Months EndedJune 30,2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)Cash Flows From Operating Activities:Net loss
    
    $
    (4,835,048
    )
    
    $
    (5,663,689
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    565,407
    
    
    
    505,784Stock-based compensation and consulting
    
    
    310,691
    
    
    
    1,371,631Loss on impairment of property and equipment of discontinued operations
    
    
    416,764
    
    
    
    88,922Loss on impairment of intangible assets of discontinued operations
    
    
    1,222,817
    
    
    
    295,633Gain on the disposal of property and equipment of discontinued operations
    
    
    (10,228
    )
    
    
    Provision for bad debt
    
    
    16,048
    
    
    
    63,850Changes in assets and liabilities:Accounts receivable
    
    
    (237,801
    )
    
    
    (433,388
    )Tax receivable
    
    
    5,000
    
    
    
    (36,212
    )Prepaid expenses
    
    
    3,371
    
    
    
    (143,720
    )Other current assets
    
    
    7,576
    
    
    
    9,477Other assets
    
    
    
    
    
    
    1,729Accounts payable
    
    
    (250,298
    )
    
    
    96,925Accrued expenses
    
    
    297,497
    
    
    
    (320,644
    )Due to related parties
    
    
    (4,315
    )
    
    
    (28,500
    )Deferred revenue
    
    
    66,723
    
    
    
    (149,125
    )Income tax payable
    
    
    
    
    
    
    (157,288
    )Liabilities of discontinued operations
    
    
    (1,168,218
    )
    
    
    (49,410
    )Net cash used in operating activities
    
    
    (3,594,014
    )
    
    
    (4,548,025
    )Cash Flows From Investing Activities:Purchase of property and equipment
    
    
    (288,930
    )
    
    
    (234,945
    )Proceeds from the sale of property and equipment of discontinued operations
    
    
    11,495
    
    
    
    Purchase of intangible assets and capitalization of software development
    
    
    
    
    
    
    (267,202
    )Net cash used in investing activities
    
    
    (277,435
    )
    
    
    (502,147
    )Cash Flows From Financing Activities:Gross proceeds from note
    
    
    32,831
    
    
    
    Payments on note
    
    
    (3,481
    )
    
    
    Gross proceeds from capital leases
    
    
    154,025
    
    
    
    126,097Payments on capital leases
    
    
    (53,959
    )
    
    
    (12,207
    )Gross proceeds from sales of preferred stock
    
    
    4,000,000
    
    
    
    Gross proceeds from sales of common stock
    
    
    
    
    
    
    5,000,000Fees paid in connection with offering
    
    
    (15,617
    )
    
    
    (70,238
    )Net cash provided by financing activities
    
    
    4,113,799
    
    
    
    5,043,652Net increase (decrease) in cash
    
    
    242,350
    
    
    
    (6,520
    )Cash  beginning of the year
    
    
    1,842,419
    
    
    
    5,787,585Cash  end of the period
    
    $
    2,084,769
    
    
    $
    5,781,065Supplemental Disclosures of Cash Flow InformationCash payments for income taxes
    
    $
    
    
    
    $
    193,500
  Page 6




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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of presentation
     Organization
   Page 7




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##### 



BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
   Use of estimates
  Cash and cash equivalents
  Restricted cash
  Accounts receivable
  Page 8




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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Fair value of financial instruments
  Property and equipment
  Intangible assets
    Page 9




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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed.
 Impairment of long-lived assets
   Income taxes
  Page 10




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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Loss per common share
  Convertible preferred stock
    
    
    20,000,000Options
    
    
    6,010,148Warrants
    
    
    51,566,88777,577,035
 Revenue recognition
      Page 11




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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
     Advertising and other marketing expense
  Concentrations of credit risk
   Page 12




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##### 



BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Stock-based compensation
  Non-employee stock based compensation
  Registration rights agreements
   Recent accounting pronouncements
  Page 13




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##### 



BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  
    
    Recognizes and measures in its financial statements the identifiable assets acquired,
the liabilities assumed, and any noncontrolling interest in the acquiree;
 
    
    Recognizes and measures the goodwill acquired in the business combination or a gain from
a bargain purchase; and
    
    Determines what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination.
  
    
    The ownership interests in subsidiaries held by parties other than the parent be clearly
identified, labeled, and presented in the consolidated statement of financial position
within equity, but separate from the parents equity.
 
    
    The amount of consolidated net income attributable to the parent and to the
noncontrolling interest be clearly identified and presented on the face of the consolidated
statement of income.
 
    
    Changes in a parents ownership interest while the parent retains its controlling
financial interest in its subsidiary be accounted for consistently. A parents ownership
interest in a subsidiary changes if the parent purchases additional ownership interests in
its subsidiary or if the parent sells some of its ownership interests in its subsidiary. It
also changes if the subsidiary reacquires some of its ownership interests or the subsidiary
issues additional ownership interests. All of those transactions are economically similar,
and this Statement requires that they be accounted for similarly, as equity transactions.
 
    
    When a subsidiary is deconsolidated, any retained noncontrolling equity investment in
the former subsidiary be initially measured at fair value. The gain or loss on the
deconsolidation of the subsidiary is measured using the fair value of any noncontrolling
equity investment rather than the carrying amount of that retained investment.
 
    
    Entities provide sufficient disclosures that clearly identify and distinguish between
the interests of the parent and the interests of the noncontrolling owners.
 Page 14




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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
   The Hierarchy of Generally Accepted Accounting Principles
(SFAS 162) Accounting Changes and Error Corrections The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles.
   Subsequent Events (SFAS 165)
 Page 15




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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  DISCONTINUED OPERATIONS
      Page 16




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##### 



DISCONTINUED OPERATIONS (continued)
 Revenue Recognition for Discontinued Operations
        Page 17




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DISCONTINUED OPERATIONS (continued)
  Impairment of Long Lived Assets
   Page 18




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DISCONTINUED OPERATIONS (continued)
  June 30, 2009
    
    
    December 31, 2008Accounts receivable, less allowance for doubtful accounts $0 and $2,173
    
    $
    (241,554
    )
    
    $
    (457,994
    )Deferred compensation advances
    
    
    (1,139
    )
    
    
    (36,186
    )Prepaid expenses
    
    
    (16,204
    )
    
    
    (51,029
    )Other current assets
    
    
    (5,918
    )
    
    
    Property and equipment, net of accumulated depreciation of $0 and $1,300,155
    
    
    
    
    
    
    (434,067
    )Intangibles, net of accumulated amortization of
$0 and $3,858,592
    
    
    
    
    
    
    (1,286,946
    )Other assets
    
    
    (70,033
    )
    
    
    (70,033
    )Accounts payable
    
    
    141,856
    
    
    
    179,623Accrued expenses
    
    
    2,804,298
    
    
    
    1,333,693Sub-tenant security deposit
    
    
    39,093
    
    
    
    39,093Unearned commission advances
    
    
    49,051
    
    
    
    3,022,161Deferred revenue
    
    
    
    
    
    
    Net current liabilities of discontinued operations
    
    $
    2,699,450
    
    
    $
    2,238,315
  Page 19




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DISCONTINUED OPERATIONS (continued)
 For the Three Months Ended June 30,
    
    
    For the Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues:Commission and other revenue from carriers
    
    $
    369,189
    
    
    $
    4,841,258
    
    
    $
    1,721,155
    
    
    $
    9,747,135Gain recognized upon the execution of the Agreement
    
    
    
    
    
    
    
    
    
    
    2,664,794
    
    
    
    Transition policy commission pursuant to the Agreement
    
    
    552,517
    
    
    
    
    
    
    
    776,855
    
    
    
    Lead sale revenue
    
    
    51
    
    
    
    103,176
    
    
    
    2,442
    
    
    
    287,495Sub-lease revenue
    
    
    323,578
    
    
    
    40,535
    
    
    
    681,505
    
    
    
    53,0371,245,335
    
    
    
    4,984,969
    
    
    
    5,846,751
    
    
    
    10,087,667Operating expenses:Salaries, commission and related taxes
    
    
    122,807
    
    
    
    2,395,808
    
    
    
    908,859
    
    
    
    6,386,831Lead, advertising and other marketing
    
    
    5,223
    
    
    
    1,049,995
    
    
    
    125,351
    
    
    
    3,045,698Depreciation and amortization
    
    
    
    
    
    
    386,684
    
    
    
    95,619
    
    
    
    817,915Rent, utilities, telephone and communications
    
    
    2,438,615
    
    
    
    532,444
    
    
    
    3,000,541
    
    
    
    1,181,437Professional fees
    
    
    109,484
    
    
    
    94,437
    
    
    
    357,868
    
    
    
    138,836Loss on impairment of property and equipment
    
    
    
    
    
    
    
    
    
    
    416,764
    
    
    
    88,922Loss on impairment of intangible assets
    
    
    
    
    
    
    
    
    
    
    1,222,817
    
    
    
    295,633Other general and administrative
    
    
    137,742
    
    
    
    182,787
    
    
    
    112,186
    
    
    
    259,439(Gain) on disposal of property and equipment
    
    
    (8,665
    )
    
    
    
    
    
    
    (10,227
    )
    
    
    2,805,206
    
    
    
    4,642,155
    
    
    
    6,229,778
    
    
    
    12,214,711Gain (loss) from discontinued operations
    
    $
    (1,559,871
    )
    
    $
    342,814
    
    
    $
    (383,027
    )
    
    $
    (2,127,044
    )
 PROPERTY AND EQUIPMENT
  UsefulLife
    
    
    
    
    
    
    At December 31,(Years)
    
    
    At June 30, 2009
    
    
    2008Computer equipment and software
    
    
    3
    
    
    $
    877,060
    
    
    $
    657,205Office equipment
    
    
    4.6
    
    
    
    194,360
    
    
    
    11,998Office furniture and fixtures
    
    
    6.7
    
    
    
    189,858
    
    
    
    294,029Leasehold improvements
    
    
    9.8
    
    
    
    34,033
    
    
    
    34,0331,295,311
    
    
    
    997,265Less accumulated depreciation
    
    
    
    
    
    
    (377,144
    )
    
    
    (267,384
    )$
    918,167
    
    
    $
    729,881
  Page 20




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##### 



INTANGIBLE ASSETS
  UsefulLife
    
    
    
    
    
    
    At December 31,(Years)
    
    
    At June 30, 2009
    
    
    2008InsPro intangible assets acquired
    
    
    4.7
    
    
    $
    2,097,672
    
    
    $
    2,097,672Software development costs for internal use
    
    
    2.6
    
    
    
    638,291
    
    
    
    660,680Software development costs for external marketing
    
    
    2
    
    
    
    174,296
    
    
    
    174,296Internet domain (www.healthbenefitsdirect.com)
    
    
    3
    
    
    
    
    
    
    
    2,910,259
    
    
    
    2,932,648Less: accumulated amortization
    
    
    
    
    
    
    (1,410,496
    )
    
    
    (1,021,187
    )$
    1,499,763
    
    
    $
    1,911,461
    2009
    
    $
    411,6962010
    
    
    481,2832011
    
    
    346,7342012
    
    
    260,050$
    1,499,763
 Page 21




---



##### 



RELATED PARTY TRANSACTIONS
  SHAREHOLDERS EQUITY
 Common Stock
 2008
     Page 22




---



##### 



SHAREHOLDERS EQUITY (continued)
  2009
   Preferred Stock
    Page 23




---



##### 



SHAREHOLDERS EQUITY (continued)
 pari passu
    Page 24




---



##### 



SHAREHOLDERS EQUITY (continued)
  Stock Options
        Page 25




---



##### 



SHAREHOLDERS EQUITY (continued)
  Expected volatility
    
    
    201
    %Risk-free interest rate
    
    
    3.69
    %Expected life in years
    
    
    4.6Assumed dividend yield
    
    
    3
    %
  Number
    
    
    WeightedOf Shares
    
    
    Average
    
    
    WeightedUnderlying
    
    
    Exercise
    
    
    AverageOptions
    
    
    Price
    
    
    Fair ValueOutstanding at December 31, 2008
    
    
    4,291,200
    
    
    $
    1.99
    
    
    $
    0.86For the period ended June 30, 2009Granted
    
    
    2,125,000
    
    
    
    0.08
    
    
    
    0.08Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    406,052
    
    
    
    2.55
    
    
    
    0.26Outstanding at June 30, 2009
    
    
    6,010,148
    
    
    
    1.28
    
    
    
    0.63Outstanding and exercisable at June 30, 2009
    
    
    4,361,574
    
    
    $
    1.69
    
    
    $
    0.74
 Page 26




---



##### 



SHAREHOLDERS EQUITY (continued)
  Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageExercise
    
    Number of Shares
    
    Contractual
    
    Exercise
    
    
    
    
    
    ExercisePrice
    
    Underlying Options
    
    Life
    
    Price
    
    Number Exercisable
    
    Price$
    0.06
    
    
    
    155,000
    
    
    
    4.7
    
    
    $
    0.06
    
    
    
    
    
    
    $
    0.10
    
    
    
    1,970,000
    
    
    
    4.6
    
    
    
    0.10
    
    
    
    550,000
    
    
    
    0.100.24
    
    
    
    15,000
    
    
    
    4.4
    
    
    
    0.24
    
    
    
    
    
    
    
    0.78
    
    
    
    10,000
    
    
    
    3.8
    
    
    
    0.78
    
    
    
    
    
    
    
    1.00
    
    
    
    1,300,000
    
    
    
    6.4
    
    
    
    1.00
    
    
    
    1,300,000
    
    
    
    1.001.01
    
    
    
    550,000
    
    
    
    8.8
    
    
    
    1.01
    
    
    
    550,000
    
    
    
    1.011.05
    
    
    
    10,000
    
    
    
    2.7
    
    
    
    1.05
    
    
    
    3,333
    
    
    
    2.50
    
    
    
    936,648
    
    
    
    3.1
    
    
    
    2.50
    
    
    
    934,544
    
    
    
    2.502.55
    
    
    
    25,000
    
    
    
    2.0
    
    
    
    2.55
    
    
    
    16,500
    
    
    
    2.552.62
    
    
    
    20,000
    
    
    
    2.5
    
    
    
    2.62
    
    
    
    13,200
    
    
    
    2.622.70
    
    
    
    475,000
    
    
    
    1.8
    
    
    
    2.70
    
    
    
    458,333
    
    
    
    2.702.95
    
    
    
    45,000
    
    
    
    1.8
    
    
    
    2.95
    
    
    
    45,000
    
    
    
    2.953.00
    
    
    
    23,500
    
    
    
    2.9
    
    
    
    3.00
    
    
    
    15,664
    
    
    
    3.003.50
    
    
    
    75,000
    
    
    
    6.8
    
    
    
    3.50
    
    
    
    75,000
    
    
    
    3.503.60
    
    
    
    400,000
    
    
    
    1.8
    
    
    
    3.60
    
    
    
    400,000
    
    
    
    3.606,010,148
    
    
    
    
    
    
    
    
    
    
    
    4,361,574
    Page 27




---



##### 



SHAREHOLDERS EQUITY (continued)
 Common Stock warrants
     Page 28




---



##### 



SHAREHOLDERS EQUITY (continued)
  WeightedCommon
    
    
    AverageStock
    
    
    ExerciseWarrants
    
    
    PriceOutstanding at December 31, 2008
    
    
    13,636,686
    
    
    $
    0.38For the period ended June 30, 2009Granted
    
    
    20,000,000
    
    
    
    0.20Adjustment to warrants issued in 2007 for Preferred Stock and 2009 Warrants
    
    
    1,942,701
    
    
    
    1.51Adjustment to warrants issued in 2008 for Preferred Stock and 2009 Warrants
    
    
    18,750,000
    
    
    
    0.20Exercised
    
    
    
    
    
    
    Expired
    
    
    (2,762,500
    )
    
    
    1.50Outstanding at June 30, 2009
    
    
    51,566,887
    
    
    $
    0.38Exercisable at June 30, 2009
    
    
    51,566,887
    
    
    $
    0.38
  CommonYear of
    
    Stock
    
    ExerciseExpiration
    
    Warrants
    
    Price2010
    
    
    
    75,000
    
    
    $
    1.502010
    
    
    
    350,000
    
    
    
    2.802011
    
    
    
    1,175,000
    
    
    
    1.502012
    
    
    
    4,966,887
    
    
    
    1.512013
    
    
    
    25,000,000
    
    
    
    0.202014
    
    
    
    20,000,000
    
    
    $
    0.2051,566,887
  Page 29




---



##### 



SHAREHOLDERS EQUITY (continued)
 Registration Rights
  CAPITAL LEASE OBLIGATIONS
   Useful Life (Years)
    
    
    June 30, 2008
    
    
    December 31, 2008Computer equipment and software
    
    
    3
    
    
    $
    482,099
    
    
    $
    328,074Phone system
    
    
    3
    
    
    
    15,011
    
    
    
    15,011497,110
    
    
    
    343,085Less accumulated depreciation
    
    
    
    
    
    
    (139,082
    )
    
    
    (68,090
    )$
    358,028
    
    
    
    274,995
 Page 30




---



##### 



CAPITAL LEASE OBLIGATIONS (continued)
  2009
    
    $
    80,0142010
    
    
    169,7892011
    
    
    150,1692012
    
    
    70,2032013
    
    
    6,663Total future payments
    
    
    476,838Less amount representing interest
    
    
    77,964Present value of future minimum payments
    
    
    398,874Less current portion
    
    
    128,524Long-term portion
    
    $
    270,350
 DEFINED CONTRIBUTION 401(k) PLAN
  Page 31




---



##### 



RESTRICTED CASH, COMMITMENTS AND CONTINGENCIES
 Employment and Separation Agreements
  Restricted Cash and Operating Leases
    Page 32




---



##### 



RESTRICTED CASH, COMMITMENTS AND CONTINGENCIES (continued)
    Page 33




---



##### 



RESTRICTED CASH, COMMITMENTS AND CONTINGENCIES (continued)
 Guarantee of Indebtedness by the Company to Third Parties Pertaining to Unearned Commission
Advances Paid to Non-employee ISG Agents
  Litigation
  Page 34




---



##### 



RESTRICTED CASH, COMMITMENTS AND CONTINGENCIES (continued)
   License Agreement with Realtime Solutions Group
    Page 35




---



##### 



SUBSEQUENT EVENTS
  Page 36




---



##### 



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
    Page 37




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
        Page 38




---



##### 



Software
Revenue Recognition
    Page 39




---



##### 



Revenues
  For the Three Months Ended June 30,2009
    
    
    2008Consulting and implementation services
    
    $
    985,534
    
    
    $
    967,173ASP revenue
    
    
    349,469
    
    
    
    293,294Maintenance revenue
    
    
    144,500
    
    
    
    99,000Insurint technology fees
    
    
    46,768
    
    
    
    50,000Sub-leasing revenue
    
    
    9,000
    
    
    
    Total
    
    $
    1,535,271
    
    
    $
    1,409,467
 Page 40




---



##### 




    
    Consulting and implementation services are from seven InsPro clients. Implementation
services provided to these clients included assisting clients in setting up their insurance
products in InsPro, providing modifications to InsPros functionality to support the
clients business, interfacing InsPro with the clients other systems, automation of client
correspondence to their customers and data conversion from the clients existing systems to
InsPro.
    
    In Second Quarter 2009 we earned ASP revenue from seven InsPro clients. ASP hosting
service enables a client to lease the InsPro software, paying only for that capacity
required to support their business. ASP clients access InsPro installed on InsPro
Technologies owned servers located at InsPro Technologies offices or at a third partys
site.
    
    In Second Quarter 2009 we earned maintenance revenues from four clients compared to two
clients in Second Quarter 2008.
    
    In Second Quarter 2009 we earned revenue of $46,768 relating to Insurint technology
fees. The Companys Insurint subsidiary provides a proprietary, professional-grade, web
based agent portal to support and assist insurance agents in the business of marketing and
selling health insurance and related products. Insurints technology fees commenced in the
second quarter of 2008.
    
    In Second Quarter 2009 we earned Sub-leasing revenue of $9,000 from the sub leasing of
space in our Radnor office, which commenced in the first quarter of 2009.
 Total Operating Expenses
  For the Three Months Ended June 30,2009
    
    
    2008Salaries, employee benefits and related taxes
    
    $
    1,820,438
    
    
    $
    1,782,906Advertising and other marketing
    
    
    37,384
    
    
    
    20,770Depreciation and amortization
    
    
    287,045
    
    
    
    221,030Rent, utilities, telephone and communications
    
    
    205,847
    
    
    
    157,247Professional fees
    
    
    811,066
    
    
    
    573,944Other general and administrative
    
    
    381,614
    
    
    
    349,465Total
    
    $
    3,543,394
    
    
    $
    3,105,362
 Page 41




---



##### 



For the Three Months Ended June 30,2009
    
    
    2008Salaries, wages and bonuses
    
    
    1,497,163
    
    
    $
    1,079,005Share based employee and director compensation
    
    
    90,315
    
    
    
    506,691Commissions to employees
    
    
    17,095
    
    
    
    Employee benefits
    
    
    60,421
    
    
    
    56,528Payroll taxes
    
    
    98,755
    
    
    
    98,853Severance and other compensation
    
    
    20,191
    
    
    
    13,329Directors compensation
    
    
    36,498
    
    
    
    28,500Total
    
    $
    1,820,438
    
    
    $
    1,782,906
 
    
    Salaries, wages and bonuses were $1,497,163 in Second Quarter 2009 as compared to
$1,079,005 in Second Quarter 2008, an increase of $418,158 or 39%. The increase is the
result of the hiring of additional staff in InsPro Technologies sales and technology
departments and Insurints sales departments to promote the growth in revenue and to
service an expanding client base.
    
    Share based employee and director compensation expense was $90,315 in Second Quarter
2009 as compared to $506,691 in Second Quarter 2008, a decrease of $416,376 or 82%. The
decrease is primarily attributable to expense pertaining to an option grant to Mr. Alvin
Clemens, who is the Companys former CEO, in the Second Quarter 2008, and to a lesser
extent the vesting of stock grants and options to directors and employees. Share based
employee and director compensation consist of stock option and restricted stock grants,
which are valued at fair-value at the date of the grant and expensed over the stock
options vesting period or the duration of employment, whichever is shorter.
    
    Commissions to employees represents commissions paid to InsPro Technologies and Insurint
sales personnel.
    
    Employee benefits expense increased as a result of the hiring of additional staff in
InsPro Technologies and Insurint. The Companys employee benefit cost consists of the
company paid portion of group medical, dental and life insurance coverage and partial
Company matching of employee contributions to a 401(k) plan. The increase was the result of
an increase in InsPro Technologies and Insurints staffing.
  Page 42




---



##### 



For the Three Months Ended June 30,2009
    
    
    2008Amortization of intangibles acquired as a result of the InsPro acquisition
    
    $
    117,019
    
    
    $
    117,021Amortization of software and website development for external marketing
    
    
    21,787
    
    
    
    Amortization of software and website development for internal use
    
    
    67,042
    
    
    
    50,232Depreciation expense
    
    
    81,197
    
    
    
    53,777Total
    
    $
    287,045
    
    
    $
    221,030
 
    
    In Second Quarter 2009 we incurred amortization expense of $117,019 for the
intangible assets acquired from InsPro Technologies on October 1, 2007. Intangible assets
acquired from InsPro Technologies were assigned the following values:
 
    
    value of client contracts and relationships other than license with an
assigned value of $1,089,223 amortized straight line over five years
    
    value of purchased software for sale and licensing value with an assigned
value of $644,449 amortized straight line over five years
    
    employment and non-compete agreements acquired with an assigned value of
$364,000 amortized straight line over three years.
 
    
    In Second Quarter 2009 we incurred amortization expense of $21,787 for software
development cost for external marketing pertaining to InsPro Technologies InsPro
system.
    
    In Second Quarter 2009 we incurred amortization expense of $67,042 as compared to
$50,232 in Second Quarter 2008 for software and website development for internal use
pertaining to Insurint.
    
    In Second Quarter 2009 we incurred depreciation expense of $81,197 as compared to
$53,777 in Second Quarter 2008. The decrease was due to the impairment of assets on
discontinued operations.
 Page 43




---



##### 



For the Three Months Ended June 30,2009
    
    
    2008Rent, utilities and other occupancy
    
    $
    165,237
    
    
    $
    124,976Telephone and communications
    
    
    40,611
    
    
    
    32,271Total
    
    $
    205,848
    
    
    $
    157,247
 
    
    In Second Quarter 2009 we had an increase in rent, utilities and other occupancy due to
the leasing of additional space to accommodate the increase in staffing in InsPro
Technologies Eddystone office.
  For the Three Months Ended June 30,2009
    
    
    2008Accounting and auditing
    
    $
    64,110
    
    
    $
    64,237Legal
    
    
    196,069
    
    
    
    114,931Technology
    
    
    494,507
    
    
    
    273,924All other
    
    
    56,379
    
    
    
    120,852$
    811,065
    
    
    $
    573,944
 
    
    In Second Quarter 2009 we had an increase in legal fees as compared to Second Quarter
2008, which was primarily due to increased external legal support in general corporate
matters
    
    In Second Quarter 2009 we had an increase in technology fees as compared to Second
Quarter 2008, which was attributable to an increase in technology consultants needed to
support additional InsPro client requirements.
    
    All other consulting consists of recruiting, investor relations and general management
consulting expense, which decreased as a result of expense reduction actions in all three
areas.
 Page 44




---



##### 



For the Three Months Ended June 30,2009
    
    
    2008Office expenses
    
    $
    103,352
    
    
    $
    93,986Travel and entertainment
    
    
    33,151
    
    
    
    68,861Insurance
    
    
    22,799
    
    
    
    21,367Computer processing, hardware and software
    
    
    161,442
    
    
    
    117,225Other
    
    
    60,870
    
    
    
    48,025Total
    
    $
    381,614
    
    
    $
    349,464
 
    
    In Second Quarter 2009 office expense increased compared to Second Quarter 2008 due to
costs associated with additional leased space at InsPro Technologies Eddystone office.
    
    We incur travel and entertainment expense in connection with marketing, sales and
implementation of InsPro at client locations.
    
    We incur computer processing fees associated with ASP hosting services. InsPro
Technologies has a hosting services contract with a third party, which can be terminated
with notice and payment of a termination fee. This third party provides InsPro
Technologies with hosting services for our clients ASP production and test environments.
In Second Quarter 2009 computer processing fees increased compared to Second Quarter 2008
due to the implementation of two additional ASP hosting agreements.
 Loss from operations
  Page 45




---



##### 



Gain (loss) on discontinued operations
  For the Three Months Ended June 30,2009
    
    
    2008Revenues:Commission and other revenue from carriers
    
    $
    369,189
    
    
    $
    4,841,258Gain recognized upon the execution of the Agreement
    
    
    
    
    
    
    Transition policy commission pursuant to the Agreement
    
    
    552,517
    
    
    
    Lead sale revenue
    
    
    51
    
    
    
    103,176Sub-lease revenue
    
    
    323,578
    
    
    
    40,5351,245,335
    
    
    
    4,984,969Operating expenses:Salaries, commission and related taxes
    
    
    122,807
    
    
    
    2,395,808Lead, advertising and other marketing
    
    
    5,223
    
    
    
    1,049,995Depreciation and amortization
    
    
    
    
    
    
    386,684Rent, utilities, telephone and communications
    
    
    2,438,615
    
    
    
    532,444Professional fees
    
    
    109,484
    
    
    
    94,437Loss on impairment of property and equipment
    
    
    
    
    
    
    Loss on impairment of intangible assets
    
    
    
    
    
    
    Other general and administrative
    
    
    137,742
    
    
    
    182,787(Gain) on disposal of property and equipment
    
    
    (8,665
    )
    
    
    2,805,206
    
    
    
    4,642,155Gain (loss) from discontinued operations
    
    $
    (1,559,871
    )
    
    $
    342,814
   Page 46




---



##### 



Revenue Recognition for Discontinued Operations
   Page 47




---



##### 




    
    During the Second Quarter of 2009 the Company recognized commission and other revenue
from carriers of $369,189 as compared to $4,841,258 in Second Quarter 2008. The decrease
is primarily the result of the execution of the Agreement whereby the Company no longer
receives commission revenue on Transferred Policies effective on or about February 1, 2009.
The Company continues to receive commissions from carriers other than Specified Carriers
and commissions on policies other than Transferred Policies.
    
    During the Second Quarter of 2009 the Company recognized $552,517 from commission
payments from eHealth subsequent to the sale of the Agency Business. The Company
recognizes as revenue commission payments received from eHealth upon the Companys
notification by eHealth of such amounts.
    
    During the Second Quarter of 2009 the Company earned lead sale-revenue of $51 as
compared to $103,176 in Second Quarter 2008. We re-sold certain Telesales leads that we
purchase in order to recoup a portion of our lead cost. The decrease in lead sales revenue
is a result of the cessation of direct marketing in the Second Quarter of 2009.
 Page 48




---



##### 




    
    During the Second Quarter of 2009 the Company earned sub-lease revenue of $323,578 as
compared to $40,535 in Second Quarter 2008 relating to the sub-lease of a portion of our
Florida office and our former New York sales office. Sub-lease revenue includes base rent,
additional rent pertaining to utilities and occupancy costs and certain telephony,
technology and facility services provided by us to certain of our sub-tenants.
 o
    
    On February 21, 2008 the Company entered into a sub-lease agreement with
a third party whereby the third party sub-leased approximately 5,200 square feet of
our Deerfield Beach office space beginning March 1, 2008 through February 28, 2009.
This sub-lease agreement was amended and restated on October 3, 2008 to increase the
sub-leased square footage to 13,900 and extend the lease term through January 31,
2010.o
    
    On October 1, 2008 the Company entered into a sub-lease agreement with a
third party whereby the third party sub-leased approximately 8,000 square feet of
our Deerfield Beach office space beginning October 15, 2008 through January 31,
2010. In accordance with this sub-lease agreement the Company recognizes base rent,
additional rent representing a portion of certain actual occupancy expenses for our
Deerfield Beach office and certain telephony, technology and facility services
provided to our sub-tenant.o
    
    On April 17, 2008 the Company entered into a sub-lease agreement with a
third party whereby the third party agreed to sub-lease our New York office space
for the balance of the Companys Sublease Agreement and pay the Company sub-lease
payments essentially equal to the Companys costs under the Sublease Agreement. The
third party commenced paying sub-sublease payments to the Company in September 2008;
however the third party failed to pay their December 2008 and subsequent rent when
due. The Company is a beneficiary to a letter of credit in the amount of $151,503,
which the Company has drawn against as a result of the third partys failure to pay
their rent when due. We have notified the third party that they have breached their
lease, that we have made draws against the letter of credit for amounts past due,
cancelled the sub-lease as a result of their breach and demanded their surrender of
the sub-leased premises.
  
    
    The primary reason for the decrease in operating expenses of discontinued operations is
attributable to the cessation of direct marketing and selling activities in the first
quarter of 2009.
    
    Effective June 30, 2009, the Company accrued $2,031,210 related to the non-cancelable
lease for the abandoned portion of the Deerfield Beach office, which is net present value
of the Companys future lease payments through March 31, 2011 and consideration for early
termination due under Lease plus managements estimate of contractually required expenses
pertaining to the Deerfield Beach office, which are estimated to be $3,565,126, less a
portion of the Deerfield Beach office used in operations, which is estimated to be
$143,546, less future sub-lease revenue, which is estimated to be $1,386,786.
 Gain (loss) from discontinued operations
  Page 49




---



##### 



Other income (expenses)
   Net loss
   Revenues
  For the Six Months Ended June 30,2009
    
    
    2008Consulting and implementation services
    
    $
    2,168,892
    
    
    $
    1,798,821ASP revenue
    
    
    701,322
    
    
    
    541,969Sales of software licenses
    
    
    
    
    
    
    115,000Maintenance revenue
    
    
    289,000
    
    
    
    189,000Insurint technology fees
    
    
    86,496
    
    
    
    50,000Sub-leasing revenue
    
    
    12,000
    
    
    
    Total
    
    $
    3,257,710
    
    
    $
    2,694,790
 Page 50




---



##### 




    
    Consulting and implementation services are from seven InsPro clients. Implementation
services provided to these clients included assisting clients in setting up their insurance
products in InsPro, providing modifications to InsPros functionality to support the
clients business, interfacing InsPro with the clients other systems, automation of client
correspondence to their customers and data conversion from the clients existing systems to
InsPro.
    
    In 2008 To Date we earned $115,000 from sales of software licenses from a single InsPro
client.
    
    In 2009 to Date we earned ASP revenue from seven InsPro clients as compared to five in
2008 To Date. ASP hosting service enables a client to lease the InsPro software, paying
only for that capacity required to support their business. ASP clients access InsPro
installed on InsPro Technologies owned servers located at InsPro Technologies offices or
at a third partys site.
    
    In Second Quarter 2009 we earned maintenance revenues from four clients compared to two
clients in Second Quarter 2008.
    
    In 2009 To Date we earned revenue of $86,496 relating to Insurint technology fees. The
Companys Insurint subsidiary provides a proprietary, professional-grade, web based agent
portal to support and assist insurance agents in the business of marketing and selling
health insurance and related products. Insurints technology fees commenced in the second
quarter of 2008.
    
    In 2009 To Date we earned Sub-leasing revenue of $12,000 from the sub leasing of space
in our Radnor office.
 Total Operating Expenses
  For the Six Months Ended June 30,2009
    
    
    2008Salaries, employee benefits and related taxes
    
    $
    4,346,395
    
    
    $
    3,568,869Advertising and other marketing
    
    
    141,109
    
    
    
    23,800Depreciation and amortization
    
    
    565,407
    
    
    
    505,515Rent, utilities, telephone and communications
    
    
    411,317
    
    
    
    320,242Professional fees
    
    
    1,507,545
    
    
    
    1,058,272Other general and administrative
    
    
    716,233
    
    
    
    791,257Total
    
    $
    7,688,006
    
    
    $
    6,267,955
 Page 51




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##### 



For the Six Months Ended June 30,2009
    
    
    2008Salaries, wages and bonuses
    
    $
    3,191,371
    
    
    $
    2,030,960Share based employee and director compensation
    
    
    310,691
    
    
    
    1,118,062Commissions to employees
    
    
    37,545
    
    
    
    Employee benefits
    
    
    154,429
    
    
    
    98,069Payroll taxes
    
    
    245,400
    
    
    
    239,434Severance and other compensation
    
    
    362,130
    
    
    
    38,559Directors compensation
    
    
    44,829
    
    
    
    43,785Total
    
    $
    4,346,395
    
    
    $
    3,568,869
 
    
    Salaries, wages and bonuses were $3,191,371 in 2009 To Date as compared to $2,030,960 in
2008 To Date, an increase of $1,160,411 or 57%. The increase is the result of the hiring
of additional staff in InsPro Technologies sales and technology departments and Insurints
sales departments to promote the growth in revenue and to service an expanding client base
and $150,000 of bonuses to certain executives.
    
    Share based employee and director compensation expense was $310,691 in 2009 To Date as
compared to $1,118,062 in 2008 To Date, a decrease of $807,371 or 72%. The decrease is
attributable to expense pertaining to an option grant to Mr. Alvin Clemens, who is the
Companys former CEO, in the Second Quarter 2008, and due to the vesting of an option grant
to a director and options to directors and employees. Share based employee and director
compensation consist of stock option and restricted stock grants, which are valued at
fair-value at the date of the grant and expensed over the stock options vesting period or
the duration of employment, whichever is shorter.
    
    Commissions to employees represents commissions paid to InsPro Technologies and Insurint
sales personnel.
    
    Employee benefits expense increased as a result of the hiring of additional staff in
InsPro Technologies and Insurint. The Companys employee benefit cost consists of the
company paid portion of group medical, dental and life insurance coverage and partial
Company matching of employee contributions to a 401(k) plan. The increase was the result of
an increase in InsPro Technologies and Insurints staffing.
    
    Payroll taxes expense increased as a result of the hiring of additional staff in InsPro
Technologies and Insurint partially offset by a greater number of salaries exceeding the
maximum FICA contribution limit.
    
    Severance and other compensation increased primarily as a result of the Separation of
Employment and General Release Agreement with Mr. Eissa.
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For the Six Months Ended June 30,2009
    
    
    2008Amortization of intangibles acquired as a result of the InsPro acquisition
    
    $
    234,039
    
    
    $
    234,041Amortization of software and website development for external marketing
    
    
    43,574
    
    
    
    Amortization of software and website development for internal use
    
    
    134,084
    
    
    
    87,273Depreciation expense
    
    
    153,710
    
    
    
    184,201Total
    
    $
    565,407
    
    
    $
    505,515
 
    
    In 2009 To Date we incurred amortization expense of $234,039 for the intangible assets
acquired from InsPro Technologies on October 1, 2007. Intangible assets acquired from
InsPro Technologies were assigned the following values:
 
    
    value of client contracts and relationships other than license with an
assigned value of $1,089,223 amortized straight line over five years
    
    value of purchased software for sale and licensing value with an assigned
value of $644,449 amortized straight line over five years
    
    employment and non-compete agreements acquired with an assigned value of
$364,000 amortized straight line over three years.
 
    
    In 2009 To Date we incurred amortization expense of $43,574 for software development
cost for external marketing pertaining to InsPro Technologies InsPro system.
    
    In 2009 To Date we incurred amortization expense of $134,084 as compared to $87,273
in 2008 To Date for software and website development for internal use pertaining to
Insurint.
    
    In 2009 To Date we incurred depreciation expense of $153,710 as compared to $184,201
in 2008 To Date. The decrease was due to the impairment of assets on discontinued
operations.
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For the Six Months Ended June 30,2009
    
    
    2008Rent, utilities and other occupancy
    
    $
    317,524
    
    
    $
    252,429Telephone and communications
    
    
    93,793
    
    
    
    67,813Total
    
    $
    411,317
    
    
    $
    320,242
 
    
    In 2009 To Date we had an increase in rent, utilities and other occupancy due to the
leasing of additional space to accommodate the increase in staffing in InsPro Technologies
Eddystone office and annual rent increases in our Radnor office.
  For the Six Months Ended June 30,2009
    
    
    2008Accounting and auditing
    
    $
    133,910
    
    
    $
    173,272Legal
    
    
    209,280
    
    
    
    174,383Technology
    
    
    1,030,045
    
    
    
    457,978All other
    
    
    134,310
    
    
    
    252,639$
    1,507,545
    
    
    $
    1,058,272
 
    
    In 2009 To Date we had a decrease of $39,362 in accounting and auditing fees as compared
to 2008 To Date, which was attributable to reduced consulting costs associated with
Sarbanes Oxley.
    
    In 2009 To Date we had an increase of $572,067 in technology fees as compared to 2008 To
Date, which was attributable to an increase in technology consultants needed to support
additional InsPro client requirements.
    
    All other consulting consists of executive recruiting, investor relations and management
consulting expense, which decreased as a result of expense reduction actions in all three
areas.
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##### 



For the Six Months Ended June 30,2009
    
    
    2008Office expenses
    
    $
    149,308
    
    
    $
    214,242Travel and entertainment
    
    
    90,086
    
    
    
    145,956Insurance
    
    
    63,990
    
    
    
    63,708Computer processing, hardware and software
    
    
    310,832
    
    
    
    233,802Other
    
    
    102,017
    
    
    
    133,548Total
    
    $
    716,233
    
    
    $
    791,256
 
    
    In 2009 To Date office expense decreased due to the reduction in staff in our Florida
office.
    
    We incur travel and entertainment expense in connection with marketing, sales and
implementation of InsPro at client locations.
    
    In 2009 To Date computer processing, hardware and software expense increased due to an
increase in InsPro ASP clients to seven in 2009 compared to five in 2008. We incur
computer processing fees associated with ASP hosting services. InsPro Technologies has a
hosting services contract with a third party, which can be terminated with notice and
payment of a termination fee. This third party provides InsPro Technologies with hosting
services for our clients ASP production and test environments. In 2009 To Date computer
processing fees increased compared to Second Quarter 2008 due to the implementation of two
additional ASP hosting agreements.
 Loss from operations
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##### 



Gain (loss) on discontinued operations
  For the Six Months Ended June 30,2009
    
    
    2008Revenues:Commission and other revenue from carriers
    
    $
    1,721,155
    
    
    $
    9,747,135Gain recognized upon the execution of the Agreement
    
    
    2,664,794
    
    
    
    Transition policy commission pursuant to the Agreement
    
    
    776,855
    
    
    
    Lead sale revenue
    
    
    2,442
    
    
    
    287,495Sub-lease revenue
    
    
    681,505
    
    
    
    53,0375,846,751
    
    
    
    10,087,667Operating expenses:Salaries, commission and related taxes
    
    
    908,859
    
    
    
    6,386,831Lead, advertising and other marketing
    
    
    125,351
    
    
    
    3,045,698Depreciation and amortization
    
    
    95,619
    
    
    
    817,915Rent, utilities, telephone and communications
    
    
    3,000,541
    
    
    
    1,181,437Professional fees
    
    
    357,868
    
    
    
    138,836Loss on impairment of property and equipment
    
    
    416,764
    
    
    
    88,922Loss on impairment of intangible assets
    
    
    1,222,817
    
    
    
    295,633Other general and administrative
    
    
    112,186
    
    
    
    259,439(Gain) on disposal of property and equipment
    
    
    (10,227
    )
    
    
    6,229,778
    
    
    
    12,214,711Gain (loss) from discontinued operations
    
    $
    (383,027
    )
    
    $
    (2,127,044
    )
   Page 56




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##### 




    
    2009 To Date the Company recognized commission and other revenue from carriers of
$1,721,155 as compared to $9,747,135 in 2008 To Date. The decrease is primarily the result
of the execution of the Agreement whereby the Company no longer receives commission revenue
on Transferred Policies effective on or about February 1, 2009. The Company continues to
receive commissions from carriers other than Specified Carriers and commissions on policies
other than Transferred Policies.
    
    During 2009 To Date the Company recognized a gain upon the execution of the Agreement of
$2,664,794, which is the sum of the aggregate initial amount of consideration paid by
eHealth to the Company and eHealths assumption of certain liabilities relating to
historical commission advances on the Transferred Policies.
    
    During 2009 To Date the Company recognized $776,855 from commission payments from
eHealth subsequent to the sale of the Agency Business. The Company recognizes as revenue
commission payments received from eHealth upon the Companys notification by eHealth of
such amounts.
    
    During 2009 To date the Company earned lead sale-revenue of $2,442 as compared to
$287,495 in 2008 To Date. We re-sold certain Telesales leads that we purchase in order to
recoup a portion of our lead cost. The decrease in lead sales revenue is a result of the
cessation of direct marketing in the first quarter of 2009.
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##### 




    
    During 2009 To Date the Company earned sub-lease revenue of $681,505 as compared to
$53,037 in 2008 To Date relating to the sub-lease of a portion of our Florida office and
our former New York sales office. Sub-lease revenue includes base rent, additional rent
pertaining to utilities and occupancy costs and certain telephony, technology and facility
services provided by us to certain of our sub-tenants.
 o
    
    On February 21, 2008 the Company entered into a sub-lease agreement with
a third party whereby the third party sub-leased approximately 5,200 square feet of
our Deerfield Beach office space beginning March 1, 2008 through February 28, 2009.
This sub-lease agreement was amended and restated on October 3, 2008 to increase the
sub-leased square footage to 13,900 and extend the lease term through January 31,
2010.o
    
    On October 1, 2008 the Company entered into a sub-lease agreement with a
third party whereby the third party sub-leased approximately 8,000 square feet of
our Deerfield Beach office space beginning October 15, 2008 through January 31,
2010. In accordance with this sub-lease agreement the Company recognizes base rent,
additional rent representing a portion of certain actual occupancy expenses for our
Deerfield Beach office and certain telephony, technology and facility services
provided to our sub-tenant.o
    
    On April 17, 2008 the Company entered into a sub-lease agreement with a
third party whereby the third party agreed to sub-lease our New York office space
for the balance of the Companys Sublease Agreement and pay the Company sub-lease
payments essentially equal to the Companys costs under the Sublease Agreement. The
third party commenced paying sub-sublease payments to the Company in September 2008;
however the third party failed to pay their December 2008 and subsequent rent when
due. The Company is a beneficiary to a letter of credit in the amount of $151,503,
which the Company has drawn against as a result of the third partys failure to pay
their rent when due. We have notified the third party that they have breached their
lease, that we have made draws against the letter of credit for amounts past due,
cancelled the sub-lease as a result of their breach and demanded their surrender of
the sub-leased premises.
  
    
    The primary reason for the decrease in operating expenses of discontinued operations is
attributable to the cessation of direct marketing and selling activities in the first
quarter of 2009.
    
    During the first quarter of 2009 we determined certain long term assets were impaired as
a result of the cessation of direct marketing and sales in the Telesales call center. The
Company recorded expense in 2009 to write-off the value of these long term assets, which
included property and equipment net of depreciation of $416,764, intangible assets net of
accumulated amortization acquired from ISG of $1,200,428 and the value of internet domain
name www.healthbenefitsdirect.com net of accumulated amortization of $22,389.
    
    Effective June 30, 2009, the Company accrued $2,031,210 related to the non-cancelable
lease for the abandoned portion of the Deerfield Beach office, which is net present value
of the Companys future lease payments through March 31, 2011 and consideration for early
termination due under Lease plus managements estimate of contractually required expenses
pertaining to the Deerfield Beach office, which are estimated to be $3,565,126, less a
portion of the Deerfield Beach office used in operations, which is estimated to be
$143,546, less future sub-lease revenue, which is estimated to be $1,386,786.
 Page 58




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##### 



Gain (loss) from discontinued operations
  Other income (expenses)
   Net loss
       Page 59




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##### 




    
    Decreases in accounts receivable of $237,801 in 2009, which is primarily the result of
decreased billings to certain of InsPro Technologies clients.
    
    Decreases in accounts payable of $250,298 in 2008, which is primarily the result of the
payment of lead and marketing costs.
    
    Increases in accrued expenses of $297,497, which is the result of accrued severance as
a result of the Separation of Employment and General Release Agreement with Mr. Eissa.
    
    Increases in liabilities of discontinued operations of $1,168,218, which is primarily
the result of the accrual of the non-cancelable lease for the abandoned portion of the
Deerfield Beach office in the amount of $2,031,210 partially offset by the repayment and
assumption of certain unearned commission advances as a result of the sale of the
Companys Telesales call center produced agency business (the Agency Business).
  
    
    Recorded stock-based compensation and consulting expense of $310,691 and $1,371,632 in
2009 and 2008, respectively.
    
    Recorded depreciation and amortization expense of $565,407 and $505,784 in 2009 and
2008, respectively.
    
    We recorded $1,639,581 and $384,555 pertaining to the impairment of certain long lived
assets of our discontinued operations in 2009 and 2008, respectively.
   
    
    In first quarter 2009 we completed a private placement with an institutional accredited
investor and issued 1,000,000 shares of our Series A Preferred Stock and warrants to
purchase 1,000,000 shares of our Series A Preferred Stock. Our gross proceeds were
$4,000,000 and we incurred $15,617 of legal and other expenses in connection with the 2009
Private Placement.
    
    In first quarter 2008 we completed a private placement with certain institutional
accredited investors and issued 6,250,000 shares of our Common Stock and warrants to
purchase 6,250,000 shares of our Common Stock. Our gross proceeds were $5,000,000 and we
incurred $70,238 of legal and other expenses in connection with the 2008 Private Placement.
    
    The Companys InsPro Technologies business segment has entered into several capital
lease obligations to purchase equipment used for operations.
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##### 



Off-Balance Sheet Arrangements
   Guarantee of Indebtedness by the Company to Third Parties Pertaining to Unearned Commission
Advances Paid to Non-employee ISG Agents
  License Agreement With Realtime Solutions Group
  Page 61




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##### 



Page 62




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##### 



Item 4T. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
   (b) Change in Internal Control over Financial Reporting.
  Page 63




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##### 



PART II.
OTHER INFORMATION
 
 Item 1. Legal Proceedings
     Page 64




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##### 



Item 6. Exhibits
 ExhibitNo.
    
    Description31.1
    
    Chief Executive Officers Rule 13a-14(a)/15d-14(a) Certification *31.2
    
    Chief Financial Officers Rule 13a-14(a)/15d-14(a) Certification *32.1
    
    Chief Executive Officers Section 1350 Certification 32.2
    
    Chief Financial Officers Section 1350 Certification 
 
 *
    
    Filed herewith.
    
    Furnished herewith. Page 65




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##### 



SIGNATURES
  Date: August 14, 2009
    HEALTH BENEFITS DIRECT CORPORATIONBy:
    /s/ ANTHONY R. VERDIAnthony R. VerdiChief Financial Officer and Chief Operating Officer
(Principal Executive and Financial Officer) Page 66




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##### 



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Principal Executive Officers Rule 13a-14(a)/15d-14(a) Certification *31.2
    
    Chief Financial Officers Rule 13a-14(a)/15d-14(a) Certification *32.1
    
    Principal Executive Officers Section 1350 Certification 32.2
    
    Chief Financial Officers Section 1350 Certification 
 
 *
    
    Filed herewith.
    
    Furnished herewith. Page 67