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 March 31, 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
    
    (I.R.S. EmployerIncorporation or Organization)
    
    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 StatementsConsolidated Balance Sheets as of March 31, 2009 (UNAUDITED) and December 31, 2008
    
    
    3Consolidated Statements of Operations (UNAUDITED) for the three months ended March
31, 2009 and 2008
    
    
    4Consolidated Statements of Changes in Shareholders Equity (UNAUDITED)
for the three months ended March 31, 2009
    
    
    5Consolidated Statements of Cash Flows (UNAUDITED) for the three months ended March
31, 2009 and 2008
    
    
    6Notes to Consolidated UNAUDITED Financial Statements
    
    
    7Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    35Item 4T Controls and Procedures
    
    
    51PART IIOTHER INFORMATIONItem 1 Legal Proceedings
    
    
    52Item 4 Submission of Matters to a Vote of Security Holders
    
    
    53Item 6 Exhibits
    
    
    53Signatures
    
    
    54
 Page 2




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##### 



PART I.
FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 HEALTH BENEFITS DIRECT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 March 31, 2009
    
    
    December 31, 2008(Unaudited)ASSETSCURRENT ASSETS:Cash
    
    $
    4,022,251
    
    
    $
    1,842,419Accounts receivable, less allowance for doubtful
accounts $1,069 and $0
    
    
    754,007
    
    
    
    461,875Tax receivable
    
    
    26,290
    
    
    
    31,290Prepaid expenses
    
    
    105,553
    
    
    
    126,804Other current assets
    
    
    6,073
    
    
    
    8,461Total current assets
    
    
    4,914,174
    
    
    
    2,470,849Restricted cash
    
    
    1,150,000
    
    
    
    1,150,000Property and equipment, net of accumulated depreciation $
296,114 and $267,384
    
    
    837,710
    
    
    
    729,881Intangibles, net of accumulated amortization $1,204,646 and $1,911,461
    
    
    1,705,612
    
    
    
    1,911,461Other assets
    
    
    116,914
    
    
    
    110,607Total assets
    
    $
    8,724,410
    
    
    $
    6,372,798LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    516,099
    
    
    $
    733,128Accrued expenses
    
    
    1,029,435
    
    
    
    697,255Current portion of capital lease obligations
    
    
    109,763
    
    
    
    89,297Due to related parties
    
    
    
    
    
    
    4,315Deferred revenue
    
    
    611,194
    
    
    
    457,500Liabilities of
discontinued operations
    
    
    1,247,951
    
    
    
    2,238,315Total current
liabilities
    
    
    3,514,442
    
    
    
    4,219,810LONG TERM LIABILITIES:Capital lease
obligations
    
    
    250,440
    
    
    
    209,511Total long term
liabilities
    
    
    250,440
    
    
    
    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
    
    
    45,511,515
    
    
    
    43,281,139Accumulated deficit
    
    
    (42,632,210
    )
    
    
    (41,378,941
    )Total shareholders
equity
    
    
    4,959,528
    
    
    
    1,943,477Total liabilities and shareholders equity
    
    $
    8,724,410
    
    
    $
    6,372,798
  Page 3




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HEALTH BENEFITS DIRECT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months EndedMarch 31,2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)Revenues
    
    $
    1,722,439
    
    
    $
    1,285,323Operating Expenses:Salaries, employee benefits and related taxes
    
    
    2,525,957
    
    
    
    1,785,963Advertising and other marketing
    
    
    103,725
    
    
    
    3,030Depreciation and amortization
    
    
    278,362
    
    
    
    284,485Rent, utilities, telephone and communications
    
    
    205,470
    
    
    
    162,995Professional fees
    
    
    696,479
    
    
    
    484,328Other general and administrative
    
    
    334,619
    
    
    
    441,7924,144,612
    
    
    
    3,162,593Loss from operations
    
    
    (2,422,173
    )
    
    
    (1,877,270
    )Gain (loss) from discontinued operations
    
    
    1,176,844
    
    
    
    (2,469,858
    )Other income (expense):Interest income
    
    
    12,111
    
    
    
    30,506Interest expense
    
    
    (20,051
    )
    
    
    (4,610
    )Total other income (expense)
    
    
    (7,940
    )
    
    
    25,896Net loss
    
    $
    (1,253,269
    )
    
    $
    (4,321,232
    )Net loss per common share  basic and diluted:Loss from operations
    
    $
    (0.06
    )
    
    $
    (0.05
    )Gain (loss) from discontinued operations
    
    
    0.03
    
    
    
    (0.07
    )Net loss per common share
    
    $
    (0.03
    )
    
    $
    (0.12
    )Weighted average common shares outstanding  basic and diluted
    
    
    41,279,645
    
    
    
    35,335,465
  Page 4




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HEALTH BENEFITS DIRECT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
FOR THREE MONTHS ENDED MARCH 31, 2009
 Preferred Stock, $.001
    
    Common Stock, $.001Par Value
    
    Par ValueTotalNumber 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    284,937
    
    
    
    
    
    
    
    284,937Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,253,269
    )
    
    
    (1,253,269
    )Balance  March 31, 2009
    
    
    1,000,000
    
    
    $
    2,038,944
    
    
    
    41,279,645
    
    
    $
    41,279
    
    
    $
    45,511,515
    
    
    $
    (42,632,210
    )
    
    $
    4,959,528
  Page 5




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HEALTH BENEFITS DIRECT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Three Months EndedMarch 31,2009
    
    
    2008(Unaudited)
    
    
    (Unaudited)Cash Flows From Operating Activities:Net loss
    
    $
    (1,253,269
    )
    
    $
    (4,321,232
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    278,362
    
    
    
    307,378Stock-based compensation and consulting
    
    
    220,376
    
    
    
    854,688Loss 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
    
    
    (1,562
    )
    
    
    Provision for bad debt
    
    
    
    
    
    
    (22,029
    )Changes in assets and liabilities:Accounts receivable
    
    
    (292,132
    )
    
    
    (91,817
    )Tax receivable
    
    
    5,000
    
    
    
    (36,212
    )Prepaid expenses
    
    
    21,251
    
    
    
    (81,958
    )Other current assets
    
    
    2,388
    
    
    
    10,092Other assets
    
    
    (6,306
    )
    
    
    1,874Accounts payable
    
    
    (217,029
    )
    
    
    (271,177
    )Accrued expenses
    
    
    332,180
    
    
    
    (504,079
    )Due to related parties
    
    
    (4,315
    )
    
    
    (28,500
    )Deferred revenue
    
    
    153,694
    
    
    
    (80,250
    )Income tax payable
    
    
    
    
    
    
    (157,288
    )Liabilities of discontinued operations
    
    
    (2,628,381
    )
    
    
    889,619Net cash used in operating activities
    
    
    (1,750,162
    )
    
    
    (3,146,336
    )Cash Flows From Investing Activities:Purchase of property and equipment
    
    
    (117,344
    )
    
    
    (90,595
    )Proceeds from the sale of property and equipment of discontinued operations
    
    
    1,562
    
    
    
    Purchase of intangible assets and capitalization of software development
    
    
    
    
    
    
    (92,993
    )Net cash used in investing activities
    
    
    (115,782
    )
    
    
    (183,588
    )Cash Flows From Financing Activities:Gross proceeds from capital leases
    
    
    85,790
    
    
    
    37,411Payments on capital leases
    
    
    (24,397
    )
    
    
    (4,340
    )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
    
    
    4,045,776
    
    
    
    4,962,833Net increase in cash
    
    
    2,179,832
    
    
    
    1,632,909Cash  beginning of the year
    
    
    1,842,419
    
    
    
    5,787,585Cash  end of the period
    
    $
    4,022,251
    
    
    $
    7,420,494Supplemental 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
    
    
    5,746,148Warrants
    
    
    51,566,88757,313,035
 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.
    Page 15




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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
    March 31, 2009
    
    
    December 31, 2008Accounts receivable, less allowance for doubtful accounts $0 and $2,173
    
    $
    (343,201
    )
    
    $
    (457,994
    )Deferred compensation advances
    
    
    (17,244
    )
    
    
    (36,186
    )Prepaid expenses
    
    
    (8,769
    )
    
    
    (51,029
    )Other current assets
    
    
    (1,683
    )
    
    
    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
    
    
    272,977
    
    
    
    179,623Accrued expenses
    
    
    1,249,176
    
    
    
    1,333,693Sub-tenant security deposit
    
    
    39,093
    
    
    
    39,093Unearned commission advances
    
    
    102,507
    
    
    
    3,022,161Deferred revenue
    
    
    25,128
    
    
    
    Net current liabilities of discontinued operations
    
    $
    1,247,951
    
    
    $
    2,238,315
 Page 18




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DISCONTINUED OPERATIONS (continued)
  For the Three Months Ended March 31,2009
    
    
    2008Revenues:Commission and other revenue from carriers
    
    $
    1,351,966
    
    
    $
    4,905,877Gain recognized upon the execution of the Agreement
    
    
    2,664,794
    
    
    
    Transition policy commission pursuant to the Agreement
    
    
    224,338
    
    
    
    Lead sale revenue
    
    
    2,391
    
    
    
    184,319Sub-lease revenue
    
    
    357,927
    
    
    
    12,5024,601,416
    
    
    
    5,102,698Operating expenses:Salaries, commission and related taxes
    
    
    693,159
    
    
    
    3,991,023Lead, advertising and other marketing
    
    
    120,128
    
    
    
    1,995,703Depreciation and amortization
    
    
    95,619
    
    
    
    431,231Rent, utilities, telephone and communications
    
    
    561,926
    
    
    
    648,993Professional fees
    
    
    248,384
    
    
    
    44,399Loss on impairment of property and equipment
    
    
    416,764
    
    
    
    88,922Loss on impairment of intangible assets
    
    
    1,222,817
    
    
    
    295,633Other general and administrative
    
    
    67,337
    
    
    
    76,652(Gain) on disposal of property and equipment
    
    
    (1,562
    )
    
    
    3,424,572
    
    
    
    7,572,556Gain (loss) from discontinued operations
    
    $
    1,176,844
    
    
    $
    (2,469,858
    )
 Page 19




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PROPERTY AND EQUIPMENT
  UsefulLife
    
    At March 31,
    
    
    At December 31,(Years)
    
    2009
    
    
    2008Computer equipment and software
    
    3
    
    $
    734,535
    
    
    $
    657,205Office equipment
    
    4.6
    
    
    11,998
    
    
    
    11,998Office furniture and fixtures
    
    6.7
    
    
    353,258
    
    
    
    294,029Leasehold improvements
    
    9.8
    
    
    34,033
    
    
    
    34,0331,133,824
    
    
    
    997,265Less accumulated depreciation
    
    
    
    
    (296,114
    )
    
    
    (267,384
    )$
    837,710
    
    
    $
    729,881
  INTANGIBLE ASSETS
  UsefulLife
    
    At March 31,
    
    
    At December 31,(Years)
    
    2009
    
    
    2008Atiam intangible assets acquired
    
    4.7
    
    $
    2,097,671
    
    
    $
    2,097,672Software development costs for internal use
    
    2.6
    
    
    638,291
    
    
    
    660,680Software development costs for external marketing
    
    2
    
    
    174,296
    
    
    
    174,2962,910,258
    
    
    
    2,932,648Less: accumulated amortization
    
    
    
    
    (1,204,646
    )
    
    
    (1,021,187
    )$
    1,705,612
    
    
    $
    1,911,461
   Page 20




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INTANGIBLE ASSETS (continued)
  2009
    
    $
    617,5462010
    
    
    481,2832011
    
    
    346,7342012
    
    
    260,050$
    1,705,613
 RELATED PARTY TRANSACTIONS
  SHAREHOLDERS EQUITY
 Common Stock
 2008
   Page 21




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SHAREHOLDERS EQUITY (continued)
    2009
   Page 22




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SHAREHOLDERS EQUITY (continued)
 Preferred Stock
    pari passu
 Page 23




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SHAREHOLDERS EQUITY (continued)
     Page 24




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SHAREHOLDERS EQUITY (continued)
 Stock Options
        Expected volatility
    
    
    200
    %Risk-free interest rate
    
    
    0.28
    %Expected life in years
    
    
    5Assumed dividend yield
    
    
    0
    %
 Page 25




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##### 



SHAREHOLDERS EQUITY (continued)
  Number
    
    
    WeightedOf Shares
    
    
    Average
    
    
    WeightedUnderlying
    
    
    Exercise
    
    
    AverageOptions
    
    
    Price
    
    
    Fair ValueOutstanding at December 31, 2008
    
    
    4,291,200
    
    
    $
    1.99
    
    
    $
    0.86For the period ended March 31, 2009Granted
    
    
    1,805,000
    
    
    
    0.10
    
    
    
    0.10Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    350,052
    
    
    
    2.53
    
    
    
    0.22Outstanding at March 31, 2009
    
    
    5,746,148
    
    
    
    1.37
    
    
    
    0.66Outstanding and exercisable at March 31, 2009
    
    
    3,720,131
    
    
    $
    1.96
    
    
    $
    0.83
  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
    
    
    5.0
    
    $
    0.06
    
    
    
    
    $
    0.10
    
    
    1,650,000
    
    
    4.9
    
    
    0.10
    
    
    
    
    
    0.24
    
    
    15,000
    
    
    4.6
    
    
    0.24
    
    
    
    
    
    0.78
    
    
    10,000
    
    
    4.1
    
    
    0.78
    
    
    
    
    
    1.00
    
    
    1,300,000
    
    
    6.7
    
    
    1.00
    
    
    1,300,000
    
    
    1.001.01
    
    
    550,000
    
    
    9.0
    
    
    1.01
    
    
    466,664
    
    
    1.011.05
    
    
    10,000
    
    
    2.9
    
    
    1.05
    
    
    
    
    
    2.50
    
    
    972,648
    
    
    3.5
    
    
    2.50
    
    
    963,212
    
    
    2.502.55
    
    
    25,000
    
    
    2.3
    
    
    2.55
    
    
    16,500
    
    
    2.552.62
    
    
    20,000
    
    
    2.7
    
    
    2.62
    
    
    13,200
    
    
    2.622.70
    
    
    475,000
    
    
    2.1
    
    
    2.70
    
    
    441,500
    
    
    2.702.95
    
    
    45,000
    
    
    2.1
    
    
    2.95
    
    
    29,700
    
    
    2.953.00
    
    
    43,500
    
    
    3.1
    
    
    3.00
    
    
    14,355
    
    
    3.003.50
    
    
    75,000
    
    
    7.0
    
    
    3.50
    
    
    75,000
    
    
    3.503.60
    
    
    400,000
    
    
    2.1
    
    
    3.60
    
    
    400,000
    
    
    3.605,746,148
    
    
    
    
    
    
    
    
    
    
    3,720,131
 Page 26




---



##### 



SHAREHOLDERS EQUITY (continued)
    Common Stock warrants
     Page 27




---



##### 



SHAREHOLDERS EQUITY (continued)
  WeightedCommon
    
    
    AverageStock
    
    
    ExerciseWarrants
    
    
    PriceOutstanding at December 31, 2008
    
    
    13,636,686
    
    
    $
    0.38For the period ended March 31, 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 March 31, 2009
    
    
    51,566,887
    
    
    $
    0.38Exercisable at March 31, 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 28




---



##### 



SHAREHOLDERS EQUITY (continued)
 Registration Rights
  CAPITAL LEASE OBLIGATIONS
   Useful Life (Years)
    
    March 31, 2009
    
    
    December 31, 2008Computer equipment and software
    
    3
    
    $
    413,865
    
    
    $
    328,074Phone System
    
    3
    
    
    15,011
    
    
    
    15,011428,876
    
    
    
    343,085Less accumulated depreciation
    
    
    
    
    (101,447
    )
    
    
    (68,090
    )$
    327,429
    
    
    $
    274,995
 Page 29




---



##### 



CAPITAL LEASE OBLIGATIONS (continued)
  2009
    
    $
    105,7522010
    
    
    146,4572011
    
    
    126,8372012
    
    
    50,2112013
    
    
    2,261Total future payments
    
    
    431,518Less amount representing interest
    
    
    71,315Present value of future minimum payments
    
    
    360,203Less current portion
    
    
    109,763Long-term portion
    
    $
    250,440
 DEFINED CONTRIBUTION 401(k) PLAN
  Page 30




---



##### 



RESTRICTED CASH, COMMITMENTS AND CONTINGENCIES
 Employment and Separation Agreements
  Restricted Cash and Operating Leases
   Page 31




---



##### 



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 32




---



##### 



RESTRICTED CASH, COMMITMENTS AND CONTINGENCIES (continued)
   License Agreement with Realtime Solutions Group
    Page 33




---



##### 



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
    Page 34




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
        Page 35




---



##### 



Software
Revenue Recognition
    Page 36




---



##### 



Revenues
  For the Three Months Ended March 31,2009
    
    
    2008Consulting and implementation services
    
    $
    1,183,357
    
    
    $
    831,648ASP revenue
    
    
    351,854
    
    
    
    248,675Sales of software licenses
    
    
    
    
    
    
    115,000Maintenance revenue
    
    
    144,500
    
    
    
    90,000Insurint technology fees
    
    
    39,728
    
    
    
    Sub-leasing revenue
    
    
    3,000
    
    
    
    Total
    
    $
    1,722,439
    
    
    $
    1,285,323
 Page 37




---



##### 




    
    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 First 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 Atiam owned
servers located at Atiams offices or at a third partys site.
    
    In First Quarter 2009 we earned maintenance revenues from four clients.
    
    In First Quarter 2009 we earned revenue of $39,728 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 First Quarter 2009 we earned Sub-leasing revenue of $3,000 from the sub leasing of
space in our Radnor office.
 Total Operating Expenses
  For the Three Months Ended March 31,2009
    
    
    2008Salaries, employee benefits and related taxes
    
    $
    2,525,957
    
    
    $
    1,785,963Advertising and other marketing
    
    
    103,725
    
    
    
    3,030Depreciation and amortization
    
    
    278,362
    
    
    
    284,485Rent, utilities, telephone and communications
    
    
    205,470
    
    
    
    162,995Professional fees
    
    
    696,479
    
    
    
    484,328Other general and administrative
    
    
    334,619
    
    
    
    441,792Total
    
    $
    4,144,612
    
    
    $
    3,162,593
 Page 38




---



##### 



For the Three Months Ended March 31,2009
    
    
    2008Salaries, wages and bonuses
    
    $
    1,694,208
    
    
    $
    951,955Share based employee and director compensation
    
    
    220,376
    
    
    
    611,371Commissions to employees
    
    
    20,450
    
    
    
    Employee benefits
    
    
    94,008
    
    
    
    41,541Payroll taxes
    
    
    146,645
    
    
    
    140,581Severance and other compensation
    
    
    341,939
    
    
    
    25,230Directors compensation
    
    
    8,331
    
    
    
    15,285Total
    
    $
    2,525,957
    
    
    $
    1,785,963
       Page 39




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##### 



For the Three Months Ended March 31,2009
    
    
    2008Amortization of intangibles acquired as a result of the Atiam acquisition
    
    $
    117,020
    
    
    $
    117,020Amortization of software and website development for external marketing
    
    
    21,787
    
    
    
    Amortization of software and website development for internal use
    
    
    67,042
    
    
    
    37,041Depreciation expense
    
    
    72,513
    
    
    
    130,424Total
    
    $
    278,362
    
    
    $
    284,485
 
    
    In First Quarter 2009 we incurred amortization expense of $117,020 for the intangible
assets acquired from Atiam on October 1, 2007. Intangible assets acquired from Atiam 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 First Quarter 2009 we incurred amortization expense of $21,787 for software
development cost for external marketing pertaining to Atiams InsPro system.
    
    In First Quarter 2009 we incurred amortization expense of $67,042 as compared to
$37,041 in First Quarter 2008 for software and website development for internal use
pertaining to Insurint.
    
    In First Quarter 2009 we incurred depreciation expense of $72,513 as compared to
$130,424 in First Quarter 2008. The decrease was due to the impairment of assets on
discontinued operations.
 Page 40




---



##### 



For the Three Months Ended March 31,2009
    
    
    2008Rent, utilities and other occupancy
    
    $
    152,287
    
    
    $
    127,453Telephone and communications
    
    
    53,182
    
    
    
    35,542Total
    
    $
    205,470
    
    
    $
    162,995
 
    
    In First 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 Atiams
Eddystone office.
  For the Three Months Ended March 31,2009
    
    
    2008Accounting and auditing
    
    $
    41,817
    
    
    $
    109,035Legal
    
    
    13,211
    
    
    
    59,452Technology
    
    
    563,520
    
    
    
    184,054All other
    
    
    77,931
    
    
    
    131,787$
    696,479
    
    
    $
    484,328
 
    
    In First Quarter 2009 we had an increase of $379,466 in technology fees as compared to
First Quarter 2008. The increase was attributable mainly to an increase in technology
consultants needed to support additional InsPro client requirements.
 Page 41




---



##### 



For the Three Months Ended March 31,2009
    
    
    2008Office expenses
    
    $
    45,956
    
    
    $
    120,256Travel and entertainment
    
    
    56,935
    
    
    
    77,095Insurance
    
    
    41,191
    
    
    
    42,341Computer processing, hardware and software
    
    
    149,390
    
    
    
    116,577Other
    
    
    41,147
    
    
    
    85,523Total
    
    $
    334,619
    
    
    $
    441,792
 
    
    In First Quarter 2009 office expense decreased $74,300 as compared to First Quarter 2008
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.
    
    We incur computer processing fees associated with ASP hosting services. Atiam 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 Atiam with hosting services for
our clients ASP production and test environments. In First Quarter 2009 computer
processing fees increased $32,813 as compared to First Quarter 2008 due to the
implementation of two additional ASP hosting agreements.
 Loss from operations
  Page 42




---



##### 



Gain (loss) on discontinued operations
  For the Three Months Ended March 31,2009
    
    
    2008Revenues:Commission and other revenue from carriers
    
    $
    1,351,966
    
    
    $
    4,905,877Gain recognized upon the execution of the Agreement
    
    
    2,664,794
    
    
    
    Transition policy commission pursuant to the Agreement
    
    
    224,338
    
    
    
    Lead sale revenue
    
    
    2,391
    
    
    
    184,319Sub-lease revenue
    
    
    357,927
    
    
    
    12,5024,601,416
    
    
    
    5,102,698Operating expenses:Salaries, commission and related taxes
    
    
    693,159
    
    
    
    3,991,023Lead, advertising and other marketing
    
    
    120,128
    
    
    
    1,995,703Depreciation and amortization
    
    
    95,619
    
    
    
    431,231Rent, utilities, telephone and communications
    
    
    561,926
    
    
    
    648,993Professional fees
    
    
    248,384
    
    
    
    44,399Loss on impairment of property and equipment
    
    
    416,764
    
    
    
    88,922Loss on impairment of intangible assets
    
    
    1,222,817
    
    
    
    295,633Other general and administrative
    
    
    67,337
    
    
    
    76,652(Gain) on disposal of property and equipment
    
    
    (1,562
    )
    
    
    3,424,572
    
    
    
    7,572,556Gain (loss) from discontinued operations
    
    $
    1,176,844
    
    
    $
    (2,469,858
    )
   Page 43




---



##### 



Revenue Recognition for Discontinued Operations
   Page 44




---



##### 




    
    During the first quarter of 2009 the Company recognized commission and other revenue
from carriers of $1,351,967 as compared to $4,905,877 in First 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 first quarter of 2009 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 the first quarter of 2009 the Company recognized $224,338 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 first quarter of 2009 the Company earned lead sale-revenue of $2,391 as
compared to $184,319 in First 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 first quarter of 2009.
 Page 45




---



##### 




    
    During the first quarter of 2009 the Company earned sub-lease revenue of $357,927 as
compared to $12,502 in First 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 will 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 is available for the Company to draw against in the event 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.
 Gain (loss) from discontinued operations
  Page 46




---



##### 



Other income (expenses)
   Net loss
        
    
    Increases in accounts receivable of $292,132 in 2009, which is primarily the result of
increased billings to certain of Atiams clients.
    
    Decreases in accounts payable of $217,029 in 2008, which is primarily the result of the
payment of lead and marketing costs.
 Page 47




---



##### 




    
    Increases in accrued expenses of $332,180, which is the result of accrued severance as
a result of the Separation of Employment and General Release Agreement with Mr. Eissa.
    
    Decreases in liabilities of discontinued operations of $2,628,383, which is primarily
the result of 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 $220,376 and $854,688 in
2009 and 2008, respectively.
    
    Recorded depreciation and amortization expense of $278,362 and $307,378 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 Atiam business segment has entered into several capital lease obligations
to purchase equipment used for operations.
 Off-Balance Sheet Arrangements
  Page 48




---



##### 



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 49




---



##### 



Page 50




---



##### 



Item 4T. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
   (b) Change in Internal Control over Financial Reporting.
  Page 51




---



##### 



PART II.
OTHER INFORMATION
 
 Item 1. Legal Proceedings
     Page 52




---



##### 



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
   FOR
    
    AGAINST
    
    ABSTAIN
    
    Broker Non Votes
    
    NOT VOTED
    
    TOTALCommon shareholders
    
    
    21,002,818
    
    
    
    6,943,021
    
    
    
    234,234
    
    
    
    0
    
    
    
    13,099,572
    
    
    
    41,279,645Preferred shareholders
    
    
    20,000,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    20,000,000Total
    
    
    41,002,818
    
    
    
    6,943,021
    
    
    
    234,234
    
    
    
    0
    
    
    
    13,099,572
    
    
    
    61,279,645
  FOR
    
    AGAINST
    
    ABSTAIN
    
    Broker Non Votes
    
    NOT VOTED
    
    TOTALCommon shareholders
    
    
    21,048,220
    
    
    
    7,079,853
    
    
    
    2,431
    
    
    
    0
    
    
    
    13,149,141
    
    
    
    41,279,645Preferred shareholders
    
    
    20,000,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    20,000,000Total
    
    
    41,048,220
    
    
    
    7,079,853
    
    
    
    2,431
    
    
    
    0
    
    
    
    13,149,141
    
    
    
    61,279,645
 
 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 53




---



##### 



SIGNATURES
  Date: May 14, 2009
    HEALTH BENEFITS DIRECT CORPORATIONBy:
    /s/ ANTHONY R. VERDIAnthony R. VerdiChief Financial Officer and Chief Operating Officer
(Principal Executive and Financial Officer) Page 54




---



##### 



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 55