150 N. Radnor-Chester Road
Suite B-101
Radnor, Pennsylvania 19087
(484) 654-2200

(Address and Telephone Number of Registrant’s Principal Executive Offices)

Alvin H. Clemens
Chief Executive Officer
Health Benefits Direct Corporation
150 N. Radnor-Chester Road
Suite B-101
Radnor, Pennsylvania 19087
(484) 654-2200

(Name, Address and Telephone Number of Agent for Service)

Copy to:
James W. McKenzie, Jr., Esq.
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
(215) 963-5000

      Approximate Date of Proposed Sale to the Public: As soon as practicable after the effective date of this registration statement.

     If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. o

PRELIMINARY PROSPECTUS Subject to Completion		February 1, 2008

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy the securities in any state where the offer or sale is not permitted.

2,589,913 shares of Common Stock

HEALTH BENEFITS DIRECT CORPORATION

     This prospectus relates to offers and resales of up to 1,739,913 shares of our common stock, par value $0.001 per share, including 850,000 shares issuable upon the exercise of warrants. We will not receive any of the proceeds from the disposition of these shares by the selling stockholders. We will bear all costs, expenses and fees relating to the registration of these shares. The selling stockholders will bear all commissions and discounts, if any, attributable to their respective sales of shares.

     Our common stock is quoted on the over-the-counter bulletin board, or OTCBB, under the symbol “HBDT.OB.”

     The average of the bid and asked prices of our common stock on the OTCBB on January 30, 2008 was $1.40 per share.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE SECTION ENTITLED “RISK FACTORS” BEGINNING ON PAGE 5.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is                          , 2008

TABLE OF CONTENTS

		Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			1
PROSPECTUS SUMMARY			3
RISK FACTORS			5
USE OF PROCEEDS			18
MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS			18
OUR BUSINESS			20
DESCRIPTION OF PROPERTY			26
LEGAL PROCEEDINGS			27
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION			28
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS			47
EXECUTIVE COMPENSATION			50
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			63
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			65
SELLING STOCKHOLDERS			67
DESCRIPTION OF SECURITIES			68
PLAN OF DISTRIBUTION			72
EXPERTS			73
TRANSFER AGENT AND REGISTRAR			73
LEGAL MATTERS			73
WHERE YOU CAN FIND MORE INFORMATION			73
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES			74
ACT LIABILITIES
FINANCIAL STATEMENTS			1
Opinion of Morgan Lewis & Bockius LLP
Consent of Sherb & Co., LLP
Certificate of Amendment to Certificate of Incorporation
Opinion of Morgan, Lewis & Bockius LLP
Code of Business Conduct and Ethics
Consent of Sherb & Co., LLP

          You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from the information contained in this prospectus. We will not make an offer to sell these securities in any jurisdiction where offers and sales are not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of when this prospectus is delivered or when any sale of our common stock occurs. All dollar amounts in this prospectus are in U.S. dollars unless otherwise stated.

          In this prospectus, unless the context specifically indicates otherwise:

	•		with respect to periods following the closing on November 23, 2005 of the merger that resulted in our current public company structure, all references to “the Company,” “we,” “us,” and “our” refer to Health Benefits Direct Corporation and its subsidiaries; and
	•		with respect to periods prior to the closing on November 23, 2005 of the merger that resulted in our current public company structure, all references to “the Company,” “we,” “us,” and “our” refer to the entity currently named “HBDC II, Inc.” as it existed prior to such merger under the name Health Benefits Direct Corporation and prior to becoming a wholly-owned subsidiary of Darwin Resources Corp., the Delaware corporation that currently is named Health Benefits Direct Corporation.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis or Plan of Operation” and “Our Business,” contains forward-looking statements. Forward-looking statements convey our current expectations or forecasts of future events. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements herein include, among others, statements relating to:

	•		our ability to obtain an increased market share in the rapidly expanding individual health and life insurance markets;
	•		the perceived benefits of our interactive insurance marketplace to consumers and insurance carriers;
	•		our ability to achieve growth;
	•		our expansion of the number of insurance carriers we represent, the variety of individual health and life insurance and related products that we offer or the number of states in which we are able to offer insurance products;
	•		the benefits of our interactive insurance marketplace in comparison with existing methods of marketing and selling individual health and life insurance and related products;
	•		our ability to increase our customer base through various means;
	•		the success of our future marketing and brand-building efforts;
	•		the further development of our technologies;
	•		our ability to protect our proprietary technologies;
	•		our ability to compete successfully against new and existing competitors;
	•		our future financial and operating results;
	•		our ability to fund our current level of operations through our cash and cash equivalents;
	•		our anticipated use of cash resources;
	•		projections and trends relating to cost of services;
	•		our capital requirements and the possible impact on us if we are unable to satisfy these requirements;
	•		our ability to attract or retain key personnel; and
	•		statements under the caption “Risk Factors” and other statements regarding matters not of historical fact.

     The words “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” and similar expressions may identify forward-looking statements, but the absence of these words does not

necessarily mean that a statement is not forward-looking. Forward-looking statements involve known and unknown risks, uncertainties and achievements, and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. While we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination of facts and factors currently known by us and projections of the future about which we cannot be certain. Many factors, including general business and economic conditions and the risks and uncertainties described in the “Risk Factors” section of this prospectus, affect our ability to achieve our objectives. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. In addition, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, if at all. We may not update these forward-looking statements, even though our situation may change in the future.

     We do not, as a matter of course, publicly disclose financial forecasts or projections and have recently adopted a policy against release of forward-looking revenue or earnings guidance. You should not rely on any prior statements by us that could be deemed to represent forward-looking statements of projected revenues or earnings, forecasts or projections. We do not deem any such prior statements to be reliable.

PROSPECTUS SUMMARY

      This summary highlights selected information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, including the “Risk Factors” section, before making a decision to invest in our common stock.

Our Business

     We are a contact center-based insurance agency that operates an online marketplace enabling consumers to shop for, compare and purchase individual health and life insurance and related products for individuals and families. We act as an independent agent, selling health and life insurance and related products on behalf of a number of nationally-branded, highly-rated insurance carriers.

     Our streamlined sales process, supported by our proprietary online technology, dialing application and voice signature process, ensures efficiency for consumers purchasing, and carriers underwriting, insurance products. Through our proprietary online technology and our dialing application, which we call “Quick-to-Call,” consumers who submit a request for quotes for health insurance and related products through our website are connected with a licensed agent in one of our contact centers in as little as 30 seconds from the time of submission. Our process enables us to reduce the amount of time it takes from the moment a consumer expresses interest in purchasing insurance to submission of an application to a carrier for underwriting to as little as 60 minutes.

     Our common stock is currently publicly traded under the symbol “HBDT.OB” on the OTCBB.

The Shares Being Registered

     On March 30, 2007, we completed a private placement of an aggregate of 5,000,000 shares of our common stock and warrants to purchase 2,500,000 shares of our common stock to certain institutional and individual accredited investors. We sold 5,000,000 investment units in the private placement at a per unit purchase price equal to $2.25 for gross proceeds to us of $11.25 million. These sales were made pursuant to a Securities Purchase Agreement that we entered into with certain institutional and individual accredited investors, effective as of March 30, 2007. Each investment unit sold in the private placement consisted of one share of our common stock and a warrant to purchase one-half of one share of common stock at an exercise price of $3.00 per share, subject to adjustment. A total of 6,000,000 of the shares issued in the private placement have already been registered. Our Chairman and Chief Executive Officer, Alvin H. Clemens, who purchased 1.0 million units in the private placement, had agreed to waive his registration rights for the 1.0 million shares of common stock he purchased in the private placement and the 500,000 shares of common stock underlying the warrant he purchased in the private placement until the later of six months following the effective date of the registration statement to register the shares and shares underlying warrants sold to other investors in the private placement, or the earliest date that may be permitted by the Securities and Exchange Commission, or the Commission. Mr. Clemens’ shares are being registered on this registration statement.

     In connection with the private placement, we also issued to Oppenheimer & Co. Inc., Sanders Morris Harris Inc. and Roth Capital Partners, as partial consideration for acting as placement agents, warrants to purchase an aggregate of 350,000 shares of our common stock at an exercise price of $2.80 per share. These placement agent shares also are being registered on this registration statement.

     On October 1, 2007, we acquired Atiam Technologies, L.P., or Atiam, pursuant to an Agreement and Plan of Merger, whereby System Consulting Associates, Inc., or SCA, the majority owner of Atiam,

was merged with and into one of our subsidiaries. We paid an aggregate amount of $2,000,000 for all outstanding shares of capital stock of SCA, which amount consisted of $850,000 in cash and a total of 515,697 unregistered shares of our common stock, which number of shares had a value of $1,150,000 based on the average closing price per share ($2.23) of our common stock on the OTCBB on the five consecutive trading days preceding the closing date of the acquisition.

     Immediately prior to the closing of the merger with SCA, we also entered into an Agreement to Transfer Partnership Interests with the former partners of BileniaTech, L.P., or Bilenia, whereby one of our subsidiaries purchased all of the outstanding general and limited partnership interests of Atiam owned by Bilenia, the minority owner of Atiam. We paid a total of $1,000,000 to the former partners of Bilenia for the Atiam partnership interests, which amount consisted of $500,000.00 in cash and 224,216 unregistered shares of our common stock, which number of shares had an aggregate value of $500,000 based on the average closing price per share ($2.23) of our common stock on the OTCBB on the five consecutive trading days preceding the closing date of the acquisition of the remaining Atiam partnership interests.

     In connection with each of the acquisitions, we entered into Registration Rights Agreements with each of the former shareholders of SCA and with Computer Command and Control Company, one of the former partners of Bilenia. Under the terms of the Registration Rights Agreements, we agreed to give prompt notice of the registration of any of our securities under the Securities Act of 1933, as amended, or the Securities Act, and the shareholders shall have the opportunity to have their shares included in such registration statement. We agreed that it was our intention to begin to prepare and file a registration statement within 60 days of the closing date.

Our Corporate Information

     Our principal executive offices are located at 150 N. Radnor-Chester Road, Suite B-101, Radnor, Pennsylvania 19087. The principal executive offices of our wholly-owned subsidiary, HBDC II, Inc., are located at 2200 S.W. 10th Street, Deerfield Beach, Florida 33442. The principal executive offices of our wholly-owned subsidiary, Atiam, are located at 350 Baldwin Tower, Eddystone, PA 19022. Our telephone number is (484) 654-2200. Our website address is www.hbdc.com. The information contained on our website is not incorporated by reference into, and does not form any part of, this prospectus.

RISK FACTORS

      Investing in our common stock involves significant risks. In addition to all of the other information contained in this prospectus, you should carefully consider the risks and uncertainties described below before deciding to invest in our common stock. If any of the following risks actually occur, they may materially harm our business, our financial condition or our results of operations. In this event, the market price of our common stock could decline and you could lose all or part of your investment.

Risks Relating to our Company

We have a limited operating history and have incurred significant operating losses since our inception, which we anticipate will continue for the foreseeable future.

     We are an early stage company with a limited operating history, which makes it difficult for investors to evaluate our business and prospects. Investors in our common stock must consider our prospects in light of the risks, expenses and difficulties that we face as an early stage company operating in a new, unproven and highly regulated business. There can be no assurance that we will successfully overcome these difficulties.

     Since our inception, we have incurred significant operating losses. As of September 30, 2007, we had an accumulated deficit of approximately $27.7 million. We incurred operating losses of approximately $9.8 million for the nine months ended September 30, 2007, $3.2 million for the year ended December 31, 2005 and approximately $1.1 million for the period from our inception on January 27, 2004 through December 31, 2004. We expect to incur significant and increasing operating expenses and capital expenditures relating to the development of our business, particularly as we pursue growth both internally and through strategic acquisitions, expand our marketing efforts, further the development of our technologies and add personnel. In addition, we will continue to incur significant legal, accounting and other expenses associated with our status as a reporting company under the Securities Exchange Act of 1934, as amended, or the Exchange Act. As a result, we will need to generate significant revenues to achieve profitability. Even if we achieve profitability, we may be unable to maintain or increase profitability on a quarterly or annual basis. If we are unable to achieve and then maintain profitability, the market value of our common stock will decline.

If we fail to increase our brand recognition, we may face difficulty in attracting new customers and insurance carrier partners.

     We believe that establishing, maintaining and enhancing our brand in a cost-effective manner is critical to achieving widespread acceptance of our current and future products and services and is an important element in our efforts to maintain and expand our relationships with insurance carriers and to grow our customer base, particularly in light of the competitive nature of our business. We believe that the importance of brand recognition will increase as competition in our market develops. Some of our competitors already have well-established brands in the individual health and life insurance market. Successful promotion of our brand will depend largely on our ability to maintain a sizeable and active customer base, the success of our marketing efforts and our ability to provide high quality individual health and life insurance and related products and reliable and useful service to our customers. There can be no assurance that brand promotion activities will yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing

customers to the extent necessary to realize a sufficient return on our brand-building efforts, in which case our business, financial condition and results of operations could be materially harmed.

We may be unable to obtain additional capital when necessary or on terms that are acceptable to us, if at all.

     Since our inception, we have used significant amounts of cash in our operations and in investing activities. As of September 30, 2007, we had a cash balance of approximately $8.9 million. We used cash in operations of approximately $3.1 million for the nine months ended September 30, 2007, approximately $6.5 million for the year ended December 31, 2006, $1.2 million for the year ended December 31, 2005 and approximately $0.5 million for the period from our inception on January 27, 2004 through December 31, 2004. We used cash in investing of approximately $1.0 million for the nine months ended September 30, 2007, approximately $3.2 million for the year ended December 31, 2006, $0.3 million for the year ended December 31, 2005 and approximately $0.2 million for the period from our inception on January 27, 2004 through December 31, 2004.

     We expect that we will need significant additional cash resources to operate and expand our business in the future. Our future capital requirements will depend on many factors, including our ability to maintain our existing cost structure and return on sales, fund obligations for additional capital and execute our business and strategic plans as currently conceived. If these resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities would result in additional dilution to our stockholders. Additional indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict our operations. In addition, financing might be unavailable in amounts or on terms acceptable to us, if at all.

We may be unsuccessful in attracting or retaining key sales, marketing and other personnel or in retaining the members of our senior management team.

     The success of our business is dependent on our ability to attract and retain highly skilled managers and sales and marketing personnel and to retain the members of our senior management team. In particular, there is intense competition for qualified sales and marketing personnel in the health and life insurance market, and we may be unable to attract, assimilate and retain qualified sales and marketing personnel on a timely basis. Our inability to retain key personnel and attract additional qualified personnel could harm our development and results of operations.

Our management team has limited experience managing a public company and regulatory compliance could divert its attention from the day-to-day management of our business.

     Prior to completing the merger transaction that resulted in our current public company structure in November 2005, our management team operated our business as a private company. Certain members of our current management team have little or no experience managing a public company or complying with the increasingly complex laws pertaining to public companies. There can be no assurance that our management team will continue to successfully or efficiently manage our operations as a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws. In particular, our obligations as a public company will continue to require substantial attention from our senior management and could divert its attention away from the day-to-day management of our business, which could materially and adversely impact our business and results of operations.

We may incur legal liability relating to information presented on our website or communicated through our agents or otherwise.

     Our customers rely on information we publish on our website or through our agents or otherwise regarding the health and life insurance and related products we offer, including information relating to insurance premiums, coverage, benefits, exclusions, limitations, availability and plan comparisons. A significant amount of effort and training is required to maintain the considerable amount of insurance plan information on our website and to educate our agents and oversee their conduct with respect to such information. If the information we provide on our website, through our agents or otherwise is not accurate, our customers, insurance carrier partners and regulatory authorities in the jurisdictions in which we conduct business could seek legal damages or other penalties as a result of any inaccuracy. In addition, these types of claims could be time-consuming and expensive to defend, could divert our management’s attention and other resources and could cause a negative perception of our service or company in general. Regardless of whether we are able to successfully resolve these claims or actions, they could harm our business, financial condition and results of operations.

We may be unable to sufficiently protect our intellectual property.

     Our business and competitive positions are dependent on our ability to use and protect our proprietary technologies. Our patent applications may not protect our technologies because, among other things:

	•		there is no guarantee that any pending patent applications will result in issued patents;
	•		we may develop additional proprietary technologies that are not patentable;
	•		there is no guarantee that any patent issued to us will provide us with any competitive advantage;
	•		there is no guarantee that any patents issued to us will not be challenged, circumvented or invalidated by third parties; and
	•		there is no guarantee that any patents previously issued to others or issued in the future will not have an adverse effect on our ability to do business.

     In addition, if we are unable to protect and control unpatented trade secrets, know-how and other technological innovation, we may suffer competitive harm. We also rely on trade secrets, know-how and technologies that are not protected by patents to maintain our competitive position. Trade secrets are difficult to protect. To maintain the confidentiality of trade secrets and proprietary information, we generally seek to enter into confidentiality agreements with our employees, consultants and collaborators upon the commencement of a relationship with us. However, we at times do not obtain these agreements, nor can we guarantee that these agreements will provide meaningful protection, that these agreements will not be breached or that we will have an adequate remedy for any such breach. In addition, adequate remedies may not exist in the event of unauthorized use or disclosure of this information. Others may have developed, or may develop in the future, substantially similar or superior know-how and technologies. The loss or exposure of our trade secrets, know-how and other proprietary information, or independent development of similar or superior know-how, could harm our business, financial condition and results of operations.

We may become subject to intellectual property rights claims in the future, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use the affected technologies.

     Our commercial success will depend in part on not infringing the patents or proprietary rights of third parties. Third parties could bring legal actions against us claiming damages and seeking to enjoin us

from using any technology found to be in violation of a third party’s rights. If we become involved in any litigation, it could consume a substantial portion of our resources, regardless of the outcome of the litigation. If any of these actions are successful, in addition to any potential liability for damages, we could be required to obtain a license to continue to use the affected technology, in which case we may be required to pay substantial fees. There can be no assurance that any such license will be available on acceptable terms or at all.

If we are unable to satisfy regulatory requirements relating to internal controls, or if our internal controls over financial reporting are not effective, our stock price could decline.

     As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the Commission adopted rules requiring public companies to include a report of management on the company’s internal controls over financial reporting in their annual reports required by Section 13(a) of the Exchange Act. In addition, the public accounting firm auditing the company’s financial statements must attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting. Ensuring that we have adequate internal financial and accounting controls and procedures in place to help ensure that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Any failure to maintain the adequacy of our internal controls, or the resulting inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our ability to operate our business. In addition, investor perception that our internal controls are inadequate or that we are unable to produce accurate financial statements on a consistent basis may adversely affect our stock price.

We may be unable to manage our growth effectively.

     Our ability to compete effectively and to manage our future growth, if any, requires us to:

	•		continue to improve our financial and management controls and reporting systems and procedures to support the proposed expansion of our business operations; and
	•		locate or hire, at reasonable compensation rates, qualified personnel and other employees necessary to expand our capacity in order to accommodate the proposed expansion of our business operations.

Our facilities and systems are vulnerable to natural disasters and other unexpected losses, and we may not have adequate insurance to cover such losses.

     Our computer hardware operations are located primarily in leased facilities in Deerfield Beach, Florida. We also maintain an off-site backup system. Our geographic location is susceptible to hurricanes and other natural disasters. If we experience a system failure or disruption, the performance of our website would be harmed and our service could be shut down. These systems also are vulnerable to damage or interruption from human error, fire, floods, power loss, telecommunications failures, physical or electronic break-ins, computer viruses, other attempts to harm our systems and similar events. If we seek to replicate our systems at other locations, we will face a number of technical challenges, particularly with respect to database replications, which we may be unable to address successfully. Although we maintain insurance to cover a variety of risks, the scope and amount of our insurance coverage may not be sufficient to cover all losses that we may incur.

We may be unable to find or complete strategic acquisitions of complementary businesses or technologies or to integrate acquired businesses or technologies.

     Our business strategy includes, among other things, achieving growth through the acquisition and integration into our business of complementary businesses or technologies. We may be unable to find additional complementary businesses or technologies to acquire. Future acquisitions may result in substantial per share financial dilution of our common stock from the issuance of equity securities. Completion of future acquisitions also would expose us to potential risks, including risks associated with:

	•		the assimilation of new operations, technologies and personnel;
	•		unforeseen or hidden liabilities or other unanticipated events or circumstances;
	•		the diversion of resources from our existing business;
	•		the inability to generate sufficient revenue to offset the costs and expenses of acquisitions, which may result in the impairment of assets acquired through acquisitions; and
	•		the potential loss of, or harm to, relationships with our employees, customers and insurance carrier partners as a result of the integration of new businesses.

Our operating results may fluctuate as a result of factors beyond our control.

     Our operating results may fluctuate significantly in the future as a result of a variety of factors, many of which are beyond our control. These factors include, but are not limited to:

	•		a reduction in commission rates from or loss of any of our insurance carrier partners;
	•		capital expenditures for the development of our technologies;
	•		marketing and promotional activities and other costs;
	•		changes in the pricing of our customers’ individual health and life insurance policies by our insurance carrier partners;
	•		changes in operating expenses;
	•		increased competition in our market; and
	•		other general economic and seasonal factors.

Risks Relating to Our Business

Our model of marketing and selling individual health and life insurance and related products through our interactive insurance marketplace might not achieve and maintain widespread consumer and insurance carrier acceptance.

     Selling health and life insurance and related products through sales methods other than traditional face-to-face methods, such as through the Internet or telephonically, is a relatively new development. If consumers and insurance carriers do not widely adopt our model of selling and purchasing such products through our interactive insurance marketplace, or if they determine that traditional face-to-face sales methods or other methods for selling and purchasing health and life insurance and related products are superior, our business, financial condition and results of operations would be materially harmed.

If we fail to adequately maintain our existing insurance carrier relationships and develop new insurance carrier relationships, our business could suffer.

     Our business could suffer if we fail to attract new insurance carrier partners or maintain our existing insurance carrier partners, by limiting the variety of health and life insurance and related products that we offer to consumers. In addition, our agreements with our insurance carrier partners typically are non-exclusive and terminable upon short notice by either party for any reason. Our insurance carrier partners may discontinue sales of products through us for a number of reasons, including, among others:

	•		competitive or regulatory reasons;
	•		reluctance to utilize non-traditional sales methods;
	•		reluctance to be associated with our brand;
	•		greater reliance by our insurance carrier partners on their internal distribution channels to sell their products, including through traditional in-house agents and carrier websites; or
	•		a carrier’s decision to discontinue sales in the individual health and life insurance market.

     In addition, we may decide to terminate our relationship with certain insurance carriers for a variety of reasons, including, among other things:

	•		as a result of a reduction in a carrier’s financial rating;
	•		a carrier’s reduction in commissions paid to us; or
	•		a carrier’s insistence upon utilizing a sales process that we believe impairs the value of our service or brand.

     The termination of our relationship with any of our insurance carrier partners could reduce the variety of insurance products we offer, which could harm our business, particularly in light of our current dependence on a limited number of insurance carriers. Upon any such termination, we also would lose a source of commissions for future sales, and, in certain cases, future commissions for pre-termination sales.

     In addition, we have agreements with certain of our insurance carries whereby certain of our insurance carriers advance us first year premium commissions before the commissions are earned. The unearned portion of premium commissions has been included in the consolidated balance sheet as a liability for unearned commission advances. These advance agreements represent a material source of cash to fund our operations. Our advance agreement with our largest insurance carrier is contractually limited to a maximum of $9,000,000, can be terminated by either party, and in the event of termination our outstanding advance balance can be called by the insurance carrier with seven days’ written notice. As of September 30, 2007, our outstanding advance balance with this carrier was $6,379,064. Our advance agreement with our second largest insurance carrier allows the insurance carrier to terminate future advances and convert the outstanding advance balance into a promissory note, which if not repaid within 30 days, would incur interest expense. As of September 30, 2007, our outstanding advance balance with this carrier was $1,554,234. During the third quarter of 2007, we began receiving advances of first year premium commissions before the commissions are earned from our third largest insurance carrier. Our understanding pertaining to the advance from this carrier is that the carrier may terminate future advances and demand repayment of the outstanding unearned commission advance balance if

certain performance standards are not met. We and this insurance carrier are working together on reaching an agreement pertaining to these advances. As of September 30, 2007, our outstanding advance balance with this carrier was $634,915. The termination of our relationship with any of these three insurance carriers may result in the carrier demanding the repayment of the outstanding advance balance. We may not have sufficient cash liquidity to repay our outstanding advance balance if any of these three carriers demand repayment.

There could be a reduction in the quality and affordability of the individual health and life insurance and related products that our insurance carrier partners offer.

     The demand for individual health and life insurance and related products that we offer is impacted by, among other things, the variety, quality and price of such products. If our insurance carrier partners do not provide us with high-quality products or properly service the policies they sell through us, our sales may decrease and our business, financial condition and results of operations could be harmed.

Our insurance carrier partners might decide to reduce the commissions they pay to us or change their underwriting practices in a way that reduces the number of insurance policies that we sell.

     The commissions we receive from our insurance carrier partners are either set by the carrier or negotiated between us and the carrier. Our insurance carrier partners could reduce the commissions they pay to us either by renegotiation or, in certain cases, by unilateral action. In addition, insurance carriers periodically change their underwriting criteria, any of which changes could result in a decrease in the number of insurance policies we are able to sell. Any such changes to our existing relationships with our insurance carrier partners could impact our sales volume negatively and harm our business, financial condition and results of operations.

We rely on our insurance carrier partners to accurately and regularly prepare commission reports, and if these reports are inaccurate or not sent to us in a timely manner, our results of operations could suffer.

     Our insurance carrier partners pay us a specified percentage of the premium amount collected by the carrier during the period that a member maintains coverage under a policy. We rely on our insurance carrier partners to report in a timely and accurate manner the amount of commissions earned by us, and we calculate our commission revenue, prepare our financial reports, projections and budgets and direct our marketing and other operating efforts based on these reports. It is difficult for us to independently determine whether or not our insurance carrier partners are reporting all commissions due to us, primarily because customers who terminate their policies often do so by discontinuing their premium payments to the insurance carrier without informing us of the cancellation. To the extent that our insurance carrier partners understate or fail to report the amount of commissions due to us in a timely manner or at all, we will not collect and recognize revenue to which we are entitled, which would adversely affect our results of operations and could cause the value of our stock to decline.

We may experience technological problems or service interruptions with any of our insurance carrier partners, which could negatively affect the quality of service on our website.

     A significant portion of our processes for submitting insurance applications and other information necessary to conduct business with carriers require that our web servers communicate with carriers’ computer systems. A malfunction in an insurance carrier’s computer system or in the Internet connection between our web servers and the insurance carrier’s system, or excess data traffic, could result in a delay in processing business to one or more carriers. Also, a computer malfunction could cause an insurance carrier to quote erroneous rates, in which case the insurance carrier would be required to take itself offline

until the malfunction can be corrected. Technological problems with or interruption of communications with insurance carriers’ computer systems could negatively affect the quality of service we provide to consumers, which in turn could harm our business.

The level of business we expect to generate through online search engines could fluctuate due to changes in search engine based algorithms.

     We expect to derive an increased volume of customers in the future through Internet search engines such as Google, MSN, AOL and Yahoo! A critical factor in attracting consumers to our website will be whether we are prominently displayed in response to an Internet search relating to health or life insurance or related products. Unpaid search result listings are determined and displayed in accordance with a set of algorithms developed by the particular Internet search engine. These algorithms determine the order of the listing of results in response to the consumer’s Internet search. From time to time, search engines revise these algorithms, which may cause our website to be listed less prominently in unpaid search results. Our website also may become listed less prominently in unpaid search results for other reasons, such as search engine technical difficulties, search engine technical changes and changes we decide to make to our website. In addition, search engines could, for a variety of reasons, decide not to list our website in search result listings. If we are not listed prominently in search result listings for any reason, we will be unable to generate a sufficient amount of traffic to our website, which could harm our business, financial condition and results of operations.

If we are unable to maintain our existing relationships with the various third parties that currently provide us with consumer prospects, our business, financial condition and results of operations could be harmed.

     We currently rely on various third party services to provide us with a significant portion of our leads of individuals interested in purchasing health and life insurance and related products. We typically pay these parties a fixed fee for each prospect provided to us or resulting sale to such prospect. If we are unable to maintain successful relationships with these third party services or continue to generate a sufficient volume of prospects on terms acceptable to us through these third parties, we will need to develop new methods for acquiring consumer prospects, in which case our business, financial condition and results of operations could be harmed.

Risks Relating to Our Industry

Laws and regulations governing the insurance industry could expose us to legal penalties for noncompliance, or could require changes to our business.

     We are required to comply with myriad complex insurance laws, rules and regulations, which vary, often dramatically, from state to state. For example, state regulators require us to maintain a valid license in each state in which we transact insurance business and further require that we adhere to sales, documentation and administration practices specific to that state. In addition, each employee who transacts insurance business on our behalf must maintain a valid license in one or more states. Because we conduct business in a majority of jurisdictions in the United States, compliance with insurance laws, rules and regulations is difficult and imposes significant costs on our business. In addition, we intend to expand the number of insurance carriers we represent, the variety of individual health and life insurance and related products that we offer and the number of states in which we are able to offer these products, any of which may require us to comply with the insurance laws, rules and regulations of additional jurisdictions. Each jurisdiction’s insurance department typically has the power, among other things, to:

•

grant and revoke licenses to transact insurance business;

	•		conduct inquiries into the insurance-related activities and conduct of agents and agencies;
	•		require and regulate disclosure in connection with the sale and solicitation of insurance;
	•		authorize how, by which personnel and under what circumstances insurance premiums can be quoted and published and an insurance policy sold;
	•		approve which entities can be paid commissions from insurance carriers;
	•		regulate the content of insurance-related advertisements, including web pages;
	•		approve policy forms, require specific benefits and benefit levels and regulate premium rates;
	•		impose fines and other penalties; and
	•		impose continuing education requirements.

     Due to the complexity, periodic modification and differing interpretations of insurance laws and regulations, we might not have always been, and we may not always be, in compliance with these laws and regulations. Noncompliance could result in significant liability, additional licensing requirements or the revocation of licenses in a particular jurisdiction, which could significantly increase our operating expenses, prevent us from transacting insurance business in a particular jurisdiction and otherwise harm our business, financial condition and results of operations. Additionally, an adverse regulatory action in one jurisdiction could result in penalties and adversely affect our license status or reputation in other jurisdictions due to the requirement that adverse regulatory actions in one jurisdiction be reported to other jurisdictions. Even if the allegations in any regulatory or other action against us are proven false, any surrounding negative publicity could harm the confidence of consumers and insurance carriers in us, which could significantly damage our brand. Because some consumers and insurance carriers may be uncomfortable with the concept of purchasing health or life insurance or related products through means other than traditional, face-to-face means, any negative publicity may affect us more than it would others in the insurance industry and would harm our business, financial condition and results of operations.

Regulation of the sale of health insurance is subject to change, and future regulations could harm our business and operating results.

     The laws and regulations governing the offer, sale and purchase of health and life insurance and related products are subject to change, and we may be adversely affected by such changes. For example, once health insurance pricing is set by an insurance carrier and approved by state regulators, it is fixed and generally not subject to negotiation or discounting by insurance companies or agents.

     Another example of a potentially adverse regulatory change relates to the adoption of “guaranteed issue” laws and regulations in the individual and family health insurance markets. These requirements, which are currently in effect in a limited number of states such as Massachusetts, New Jersey and New York, prohibit insurance carriers from denying health insurance coverage to individuals based on their health status. We believe that substantially fewer insurance carriers offer plans in the individual and family health insurance market in states with guaranteed issue requirements compared to other states. In addition, we believe that those insurance carriers that offer individual and family plans in these states typically charge substantially higher premiums and/or pay reduced commissions to agents. We believe that limited choice and high premiums result in less demand for individual and family health insurance plans which, when coupled with reduced commissions to agents, results in substantially less revenue for us in these states. Although we currently do not expect a substantial number of states to adopt guaranteed

issue requirements for the individual and family market, our business, financial condition and results of operations would be harmed if the adoption of these requirements becomes more widespread.

     We are subject to additional insurance regulatory risks due to our use of the Internet and voice signature process in our interactive insurance marketplace. The manner and extent to which existing insurance laws and regulations could be applied to Internet-related insurance advertisements and transactions and voice signatures is largely unclear. To the extent that new laws or regulations are adopted that conflict with the way we conduct our business, or to the extent that existing laws and regulations are interpreted adversely to us, our business, financial condition and results of operations would be harmed.

“Do not call” laws and requirements could limit our ability to market our products and services.

     Our direct marketing operations are or may become subject to additional federal and state “do not call” laws and requirements. In January 2003, the Federal Trade Commission amended its rules to provide for a national “do not call” registry. Under these federal regulations, consumers may have their phone numbers added to the national “do not call” registry. Generally, we are prohibited from calling any consumer whose telephone number is listed in the registry unless the consumer has requested or initiated the contact or given his or her prior consent. Enforcement of the federal “do not call” provisions began in the fall of 2003, and the rule provides for fines of up to $11,000 per violation and other possible penalties. Our current business model relies heavily on outbound calls from our contact centers to consumers. The federal regulations and similar state laws may restrict our ability to effectively market to new consumers the products we sell on behalf of our insurance carrier partners. Furthermore, compliance with this rule may prove difficult, and we may incur penalties for improperly conducting our marketing activities.

We may be unable to compete successfully against new and existing competitors.

     We operate in a highly competitive market with few barriers to entry. We expect that competition will continue to intensify. Some of our competitors are more established than we are, and have significantly greater financial, technical, marketing, and other resources than we do. In addition, many of our current and potential competitors can devote substantially greater resources than we can to promotion, website development and systems development. Many of our competitors have greater name recognition and a larger customer base than we do. These competitors may be able to respond more quickly to new or changing opportunities and customer requirements and may be able to undertake more extensive promotional activities and offer more attractive terms to insurance carriers. Competition could reduce our market share in the individual health and life insurance market.

Changes and developments in the structure of the health insurance system in the United States could harm our business.

     Fundamental changes to the health insurance system in the United States could reduce or eliminate the demand for individual health insurance or increase our competition, which would harm our business. In the United States, there have been, and we expect that there will continue to be, a number of debates and legislative and regulatory proposals aimed at changing the healthcare system. For example, some advocates promote a universal healthcare system that would be largely underwritten by the government. The adoption of state or federal laws that promote or establish a government-sponsored universal healthcare system could reduce or eliminate the number of individuals seeking or permitted to purchase private health insurance or supplemental coverage, which would substantially reduce the demand for our service and harm our business, financial condition and results of operations.

If we are unable to safeguard the security and privacy of confidential online data, our business may be harmed.

     Our business involves the collection, storage and transmission of personally identifiable information such as names, addresses, social security and credit card numbers and information regarding the medical history of consumers over public networks. Although we utilize advanced protection from the threat of improper access to our networks and transaction data, such protection may be imperfect or inadequate. We may be required to expend significant additional capital and other resources to protect against security breaches or to alleviate problems caused by security breaches. Any compromise or perceived compromise of our security could damage our reputation and our relationship with consumers and insurance carrier partners, could reduce demand for our service and could subject us to significant liability and regulatory action, which would harm our business, financial condition and results of operations.

Uncertainty in the marketplace regarding the use of personal information, or proposed legislation, could reduce demand for our services and result in increased expenses.

     Concern among consumers and legislators regarding the use of personal information gathered from Internet users could create uncertainty in the marketplace. This could reduce demand for our services, increase the cost of doing business as a result of new security measures, possible litigation or otherwise, or increase service delivery costs, or otherwise adversely affect our business in other ways. Many state insurance codes limit the collection and use of personal information by insurance companies, agents, or insurance service organizations.

Governmental regulation of the Internet may adversely affect our business and operating results.

     The laws governing general commerce on the Internet remain unsettled and it may take years to fully determine whether and how existing laws such as those governing intellectual property, privacy and taxation apply to the Internet. Due to the rapid growth and widespread use of the Internet, federal and state governments have are considering enacting additional laws relating to the Internet. Any of these existing laws or future laws relating to the Internet could expose us to substantial compliance costs and liabilities and may impede the growth of Internet commerce.

Risks Relating to our Common Stock

Sales of substantial amounts of our common stock in the public market could depress the market price of our common stock.

     Our common stock currently is quoted on the OTCBB, which is a limited and illiquid market. If our stockholders sell substantial amounts of our common stock in the public market, including the shares being registered under this registration statement and shares issuable upon the exercise of outstanding warrants and options, or the market perceives that such sales may occur, the market price of our common stock could fall and we may be unable to sell our common stock in the future.

Our common stock may experience extreme price and volume fluctuations, which could lead to costly litigation for us and make an investment in us less appealing.

     The market price of our common stock may fluctuate substantially due to a variety of factors, including:

•

our business strategy and plans;

	•		announcements concerning our competitors or the individual health and life insurance market;
	•		rate of sales and customer acceptance;
	•		changing factors related to doing business in various jurisdictions within the United States;
	•		interruption of supply from or changes in our agreements with our insurance carrier partners;
	•		new regulatory pronouncements and changes in regulatory guidelines and timing of regulatory approvals;
	•		general and industry-specific economic conditions;
	•		additions to or departures of our key personnel;
	•		variations in our quarterly financial and operating results;
	•		changes in market valuations of other companies that operate in our business segments or in our industry;
	•		lack of adequate trading liquidity;
	•		announcements about our business partners;
	•		changes in accounting principles; and
	•		general market conditions.

     The market prices of the securities of early-stage companies, particularly companies like ours without consistent product revenues and earnings, have been highly volatile and are likely to remain highly volatile in the future. This volatility has often been unrelated to the operating performance of particular companies. In the past, companies that experience volatility in the market price of their securities have often faced securities class action litigation. Whether or not meritorious, litigation brought against us could result in substantial costs, divert our management’s attention and resources and harm our financial condition and results of operations.

Our directors, executive officers and entities affiliated with them beneficially own a substantial number of shares of our common stock, which gives them significant control over certain major decisions.

     As of January 21, 2008, our executive officers and directors and entities affiliated with them beneficially owned, in the aggregate, approximately 28.3% of our outstanding shares of common stock, based on a total of 35,026,384 shares outstanding. These executive officers, directors and their affiliates may have different interests than you. For example, they could act to delay or prevent a change of control of us, even if such a change of control would benefit our other stockholders, could prevent or frustrate attempts to replace or remove current management or could pursue strategies that are different from the wishes of other investors. This significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

Transactions in which a privately-held company merges into a largely inactive company with publicly traded stock are generally closely scrutinized by the Commission and we may encounter difficulties or delays in obtaining future regulatory approvals.

     Historically, the Commission and Nasdaq and securities exchanges have disfavored transactions in which a privately-held company merges into a largely inactive company with publicly traded stock, and there is a significant risk that we may encounter difficulties in obtaining the regulatory approvals necessary to conduct future financing or acquisition transactions, or to eventually achieve our common stock being quoted on Nasdaq or listed on a securities exchange. Effective August 22, 2005, the Commission adopted rules dealing with private company mergers into dormant or inactive public companies. As a result, it is likely that we will be scrutinized carefully by the Commission and possibly by the National Association of Securities Dealers or Nasdaq or a national securities exchange, which could result in difficulties or delays in achieving Commission clearance of any future registration statements or other Commission filings that we may pursue, in attracting NASD-member broker-dealers to serve as market-makers in our stock, or in achieving admission to Nasdaq or a national securities exchange. As a result, our financial condition and the value and liquidity of our shares may be negatively impacted.

As a stock quoted on the OTCBB, our common stock, which is deemed to be “penny stock,” currently has limited liquidity.

     Holders of shares of our common stock, which are quoted on the OTCBB, may find that the liquidity of our common stock is impaired as compared with the liquidity of securities listed on Nasdaq or one of the national or regional exchanges in the United States. This impairment of liquidity may result from reduced coverage of us by security analysts and news media and lower prices for our common stock than may otherwise be attained. In addition, our common stock is deemed to be “penny stock,” as that term is defined in rules under the Exchange Act. Penny stocks generally are equity securities that are not registered on certain national securities exchanges or quoted by Nasdaq and have a price per share of less than $5.00. Penny stock may be difficult for investors to resell. Federal rules and regulations impose additional sales practice requirements on broker-dealers who sell the stock to persons other than established customers and accredited investors. For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of these securities and obtain the purchaser’s written consent to the transaction prior to the sale. Prior to the sale, broker-dealers must also deliver to the potential purchaser a disclosure schedule prescribed by the Commission, describing the penny stock market and disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, broker-dealers must deliver to penny stock investors monthly statements disclosing recent price information for penny stocks held in the account and information on the limited market in penny stocks. These additional requirements restrict the ability of broker-dealers to sell our common stock and make it more difficult for investors to dispose of our common stock in the secondary market and may also adversely affect the price of our common stock.

Securities Authorized for Issuance under Equity Compensation Plans

     The following table shows certain information concerning our common stock to be issued in connection with our equity compensation plans as of December 31, 2007:

OUR BUSINESS

Overview

     We are a contact center-based insurance agency that operates an online marketplace enabling consumers to shop for, compare and purchase individual health and life insurance and related products for individuals and families. Our sales platform combines our proprietary, integrated online technology and dialing application to connect consumers who express an interest in purchasing health or life insurance or related products with knowledgeable licensed agents housed in our contact centers.

     We act as an independent agent, selling health and life insurance and related products on behalf of a number of nationally-branded, highly-rated insurance carriers. Our health insurance carrier partners include:

	•		Aetna, Inc.;
	•		Colorado Bankers Life Insurance Company;
	•		Golden Rule Insurance Company (a UnitedHealthcare company);
	•		Humana, Inc.;
	•		PacifiCare Life and Health Insurance Company (a UnitedHealthcare company);
	•		Time Insurance Company (marketed under the brand name Assurant Health); and
	•		UniCare Life and Health Insurance Company (a Wellpoint company).

     Our life insurance carrier partners include:

	•		AIG American General; and
	•		Fidelity Life Insurance Company.

     The primary product we sell on behalf of insurance carriers is major medical health insurance for individuals and families. Annualized premium with respect to a specific insurance policy is the sum of premium payments to be made by the insured over the 12-month period after the issuance of the policy. We also sell short-term medical policies (term shorter than one year), health savings accounts and term life insurance. We believe these additional products represent significant cross-sell opportunities to our existing client base with minimal acquisition cost.

     Our service is free to consumers and our principal source of revenue is commissions paid to us by insurance carriers as compensation for policies sold. Our commissions are based on a percentage of the premium amount collected by a carrier during the period that a customer maintains coverage under a policy. These commissions include first year commissions and renewal commissions. First year commission rates are significantly higher than renewal commission rates. We also are eligible for incentive bonuses based on our ability to meet pre-determined criteria established by our insurance carriers. The amounts of commissions and incentive bonuses for which we are eligible vary, often significantly, by carrier and product.

     Our streamlined sales process, supported by our proprietary online technology, dialing application and voice signature process, ensures efficiency for consumers purchasing, and carriers underwriting, insurance products. Through our proprietary online technology and our dialing application, which we call “Quick-to-Call,” consumers who submit a request for quotes for health insurance and related products through our website are connected with a licensed agent in one of our contact centers in as little as 30 seconds from the time of submission. Our process enables us to reduce the amount of time it takes from the moment a consumer expresses interest in purchasing insurance to submission of an application to a carrier for underwriting to as little as 60 minutes. This compares with up to six weeks under traditional face-to-face agency sales models.

     Our licensed agents assist consumers in sorting through the complicated process of selecting and obtaining health or life insurance or related products by:

	•		explaining and clarifying complicated insurance concepts to the consumer;
	•		providing useful information about the range of products that our insurance carrier partners offer, including price and terms of coverage;
	•		comparing plans and guiding the consumer to the product most suitable for the consumer’s needs and preferences;
	•		providing detailed answers to the consumer’s questions and addressing other relevant concerns of the consumer; and
	•		explaining the application, and verification, issuance and ongoing billing procedures.

     Following the consumer’s selection of a product, one of our trained representatives, following a script pre-approved by the relevant carrier, completes the application with the consumer for submission to the carrier’s underwriting department. The tele-call, which is recorded with the consumer’s express consent, serves as the consumer’s “voice signature” on the application.

     Assuming an applicant meets the insurance carrier’s initial underwriting criteria, the application, along with the verification call recording, is submitted electronically to the insurance carrier’s underwriting department. Upon carrier approval of the consumer’s application, the carrier notifies us and, subsequently, our customer service department communicates this approval to the consumer. Alternatively, if the tele-application representative determines that a consumer does not meet a carrier’s underwriting criteria for a particular policy, we reconnect the consumer with a licensed agent who reviews additional product alternatives with the consumer. The goal of our sales and application process is to increase efficiency and enhance the likelihood that the application for the consumer’s selected product will meet the insurance carrier’s underwriting criteria and the policy will be issued.

     We maintain a comprehensive process to ensure the highest standards of training and professionalism for our sales agents. Newly-hired agents are immersed in various company- and carrier-sponsored training programs and receive one-on-one instruction and support from our sales managers and senior agents. Through our licensing department, we assist our agents in obtaining and maintaining the requisite licenses and carrier appointments to conduct sales of health and life insurance products in the various states in which we conduct business.

     As an independent agency, our goal is to retain our customers for the duration of their health insurance needs. We continuously evaluate customer retention initiatives, including regular follow-up communication to ensure satisfaction with policies purchased. Moreover, we work with both our

customers and carriers to determine how to improve the service we provide and how to make our processes more efficient.

     In April 2006, we and our wholly-owned subsidiary, ISG Merger Acquisition Corp., a Delaware corporation, or the Merger Sub, entered into a Merger Agreement with Insurance Specialist Group Inc., or ISG, and Ivan M. Spinner (the sole stockholder of ISG), pursuant to which, among other things, the Merger Sub merged with and into ISG. As consideration for this merger, we made a cash payment of $920,000 and issued 1,000,000 shares of our common stock to Mr. Spinner in exchange for all of the outstanding stock of ISG. In connection with this merger, we entered into an Employment Agreement with Mr. Spinner, under which he was appointed as an officer of HBDC II, LLC. As a result of this merger, ISG became our wholly-owned subsidiary.

     ISG provides sales support services to independent insurance agencies and agents in obtaining additional insurance products and appointments with insurance carriers. We refer to these agencies and agents as ISG’s “down-line.” ISG’s revenues consist primarily of override commissions from carriers for sales of products by ISG’s down-line agents. ISG’s override commission rates are significantly lower than the commissions we earn for products sold by our employee agents. ISG currently has approximately 480 agents in its down-line.

Our Opportunity in the Insurance Industry

     We believe that a significant opportunity exists to obtain an increased market share in the rapidly expanding individual health insurance market and the low cost term life insurance market. In recent years, the number of Americans seeking individual health insurance and related products has increased dramatically, largely as a result of a decline in the availability and cost advantage of employer-sponsored group plans.

     Specifically, according to the 2006 Annual Employer Health Benefits Survey by the Kaiser Family Foundation in Menlo Park, California, and the Health Research & Educational Trust in Chicago, Illinois, employers in the U.S. offering health insurance dropped from 69% in 2000 to 61% in 2006 and the percentage of U.S. workers covered by their employers’ health insurance plans dropped from 63% in 2000 to 59% in 2006. In addition, according to the Current Population Survey, the number of uninsured Americans rose from 15.3% in 2005 to 15.8% in 2006, the highest level since 1998. Insurance carriers and large agencies, which historically have focused their sales efforts on employer-sponsored group plans, have been slow to react to this increasing demand.

     Increasingly, individual consumers are utilizing the Internet to access useful information and to purchase products. While the Internet represents a potentially efficient channel to connect insurance carriers with this underserved market segment, we believe that the business model of conducting sales of health and life insurance and other products exclusively through the Internet has limitations. Most importantly, this model underestimates the effect of the complexity, importance and cost of health and life insurance and related products on a consumer’s willingness to purchase these products exclusively through the Internet. Consumers who are willing to purchase relatively simple, inexpensive goods such as compact discs, flowers and books over the Internet may be unwilling to purchase complicated and expensive items such as health and life insurance and related products in the same manner. Additionally, consumers who may be inclined to purchase other items on the Internet may prefer the guidance of a licensed agent in shopping for health or life insurance. Finally, consumers may be unwilling to divulge highly personal medical, financial and other information over the Internet.

     By combining the expansive reach, speed and efficiency of the Internet with the comfort of speaking to a knowledgeable live agent, we believe that our sales model overcomes the limitations of both

traditional face-to-face and Internet-only sales models. Through the Internet, we can instantly provide a prospective customer with product information regardless of his or her location. At the same time, the prospective customer can initiate an online request for a phone call from one of our knowledgeable licensed agents to receive additional guidance in connection with making a purchase of health or life insurance or a related product.

     We believe that our interactive insurance online marketplace provides the following benefits to consumers:

	•		assistance from a knowledgeable licensed agent conveniently accessible by phone;
	•		one-stop comparison shopping from multiple high-quality insurance carriers for multiple products;
	•		accurate, insurance carrier-linked quotes;
	•		easy access to insurance-related information and tools;
	•		convenience and privacy; and
	•		faster issuance of policies due to technological efficiencies.

     In addition, we believe that our interactive online insurance marketplace provides the following benefits to insurance carriers:

	•		lower client acquisition cost made possible by an Internet-based marketplace;
	•		scalable customer acquisition processes that allow substantial increases in activity and productivity;
	•		access to customers who have indicated initial purchasing intent, screened and verified through an insurance provider’s underwriting criteria; and
	•		improved timeliness and accuracy of information submitted to insurance carriers for underwriting.

     Currently, our primary customer acquisition method is through paid referrals from third-party online lead aggregators. Consumers searching for health and life insurance and related products also can speak to one of our licensed agents by calling a toll-free telephone number or by visiting our website. Recently, we have begun evaluating marketing opportunities to assist us in developing a broader mix of customer acquisition sources. Any proposed marketing and advertising will direct consumers to both our website and a toll-free telephone number.

     Traditional, offline marketing and advertising tactics currently being tested or considered include, among other things, the following:

	•		direct response television advertising;
	•		print advertising in select media;
	•		targeted direct mail initiatives; and

•

marketing partnerships with various companies.

     Online marketing and advertising initiatives currently being tested or considered include, among other things, the following:

	•		affiliate marketing programs;
	•		search engine marketing and website optimization;
	•		banner advertising; and
	•		e-mail campaigns.

Our Strategy

     Our strategy is to become the premier individual health and life insurance agency for individuals and families. The key elements of our strategy and solution include the following:

	•		Potential Growth . Our strategy includes internal growth as well as growth through strategic acquisitions in the individual health and life insurance market. We believe that we can benefit from strategic acquisitions, including acquisitions of existing call center operations, by leveraging our sophisticated sales platform and proprietary online technology and dialing application to increase the scale of our operations. Our growth strategy also includes increasing the number of licensed sales agents we employ.
	•		Expanded Products and Insurance Carrier Relationships . We intend to expand the number of insurance carriers we represent, the variety of individual health and life insurance and related products that we offer and the number of states in which we are able to offer these insurance products. We believe that each of these initiatives can provide us with additional sources of revenue and enhance the consumer’s experience of purchasing health and life insurance and related products through our interactive insurance marketplace.
	•		Enhanced Customer Experience . We seek to enhance the customer’s experience in shopping for health and life insurance and related products through our interactive insurance marketplace by providing service that is significantly more convenient, efficient and reliable than alternative sales models. We intend to achieve these enhancements through technological and other efficiency improvements to the process of selecting, applying for and purchasing health and life insurance and related products. To date, we have been able to substantially reduce the amount of time that is typically required from the time we receive an indication of a consumer’s interest in purchasing a policy to the issuance of the policy. Our goal is to facilitate the issuance of most policies within hours, rather than the days or weeks that traditional face-to-face methods generally require.
	•		Increased Marketing and Brand-Building Efforts . We intend to increase our customer base by increasing our marketing and brand-building efforts, as described above.

These competitors include large and small insurance carriers and agencies that operate on a national and regional basis. We also anticipate substantial new competition in this market, including from competitors with an interactive insurance marketplace substantially similar to ours.

     We expect to compete on, among other things, our growth strategy, our ability to expand our offerings, our relationships with insurance carriers and the number of jurisdictions in which we are able to offer products, our ability to enhance a customer’s experience of shopping for health and life insurance and related products through our interactive insurance marketplace and our ability to increase our customer base by increasing our marketing and brand-building efforts.

     Many of our competitors are more established than we are, and have significantly greater financial, technical, marketing, and other resources than we do. Many of our competitors have greater name recognition and a larger customer base than we do. These competitors may be able to respond more quickly to new or changing opportunities and customer requirements and may be able to undertake more extensive promotional activities and offer more attractive terms to insurance carriers.

Employees

     As of December 31, 2007, we had 272 employees. None of our employees are members of any labor union and we are not a party to any collective bargaining agreement. We believe that the relationship between our management and our employees is good.

Intellectual Property and Proprietary Rights

     We rely on a combination of trademark, copyright and trade secret laws in the United States and other jurisdictions as well as confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We also have filed patent applications that relate to certain of our technologies and business processes. We currently utilize proprietary software to support our online platform and proprietary processes and procedures related to customer acquisitions and insurance product sales.

Governmental Regulation

     Our insurance activities are subject to governmental regulation at both the state and federal level. Our non-insurance activities are subject to governmental regulation much like many other non-insurance companies. Our insurance carrier partners also are subject to governmental regulation at both the state and federal level. In addition, there are still relatively few laws or regulations specifically addressing our Internet activities. As a result, the manner in which existing laws and regulations could be applied to the Internet in general, and how they relate to our businesses in particular, is unclear in many cases. Such uncertainty arises under existing laws regulating matters including user privacy, defamation, pricing, advertising, taxation, gambling, sweepstakes, promotions, content regulation, quality of products and services, and intellectual property ownership and infringement.

     We expect to post privacy policy and practices concerning the use and disclosure of any user data on our websites. Failure to comply with posted privacy policies, Federal Trade Commission requirements, or other domestic or international privacy-related laws and regulations could result in governmental proceedings. There are multiple legislative proposals before federal and state legislative bodies regarding privacy issues. It is not possible to predict whether or when such legislation may be adopted, and certain proposals, if adopted, could harm our business through a decrease in use and revenue.

     Our direct marketing operations are or may become subject to additional federal and state “do not call” laws and requirements. In January 2003, the Federal Trade Commission amended its rules to provide for a national “do not call” registry. Under these federal regulations, consumers may have their phone numbers added to the national “do not call” registry. Generally, we are prohibited from calling any consumer whose telephone number is listed in the registry unless the consumer has requested or initiated the contact or given his or her prior consent. Enforcement of the Federal “do not call” provisions began in the fall of 2003, and the rule provides for fines of up to $11,000 per violation and other possible penalties. Our current business model relies heavily on outbound calls from our contact centers to consumers. The federal regulations and similar state laws may restrict our ability to effectively market to new consumers the products we sell on behalf of our insurance carrier partners. Furthermore, compliance with these rules may prove difficult, and we may incur penalties for improperly conducting our marketing activities.

Corporate Information

     Our principal executive offices are located at 150 N. Radnor-Chester Road, Suite B-101, Radnor, Pennsylvania 19087. The principal executive offices of our wholly-owned subsidiary, HBDC II, Inc., are located at 2200 S.W. 10th Street, Deerfield Beach, Florida 33442. Our telephone number is (484) 654-2200. Our website address is www.hbdc.com. The information contained on our website is not incorporated by reference into, and does not form any part of, this prospectus.

     We were incorporated under the laws of the state of Nevada on October 21, 2004 as Darwin Resources Corp., or Darwin-NV, an exploration stage company engaged in mineral exploration. On November 22, 2005, Darwin-NV merged with and into its newly-formed wholly-owned subsidiary, Darwin Resources Corp., a Delaware corporation, or Darwin-DE, solely for the purpose of changing the company’s state of incorporation from Nevada to Delaware. On November 23, 2005, HBDC II, Inc., a newly-formed wholly-owned subsidiary of Darwin-DE, was merged with and into Health Benefits Direct Corporation, a privately-held Delaware corporation engaged in direct marketing and distribution of health and life insurance and related products primarily over the Internet, and the name of the resulting entity was changed from Health Benefits Direct Corporation to HBDC II, Inc. Following this merger, Darwin-DE changed its name to Health Benefits Direct Corporation and, as a result, HBDC II, Inc. became our wholly-owned subsidiary.

initial term of the sublease terminates on December 30, 2010. The monthly rent increases every 12 months, starting at approximately $25,250 and ending at approximately $28,420.

     We also lease approximately 5,524 square feet of space in Eddystone, Pennsylvania. We lease this office space under a lease agreement with BPG Officer VI Baldwin Tower L.P. The term of this lease commenced on August 1, 2007, and will expire on December 31, 2012. The monthly rent increases every 12 months, starting at approximately $8,516 and ending at approximately $9,667.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this document.

Overview

     Health Benefits Direct Corporation specializes in the direct marketing of health and life insurance and related products to individuals, families and groups. We have developed proprietary technologies and processes to connect prospective insurance customers with our agents and service personnel using an integrated on-line platform with call center follow up. We employ licensed agents supported by verification, customer service and technology employees for the purpose of providing immediate information to prospective customers and selling insurance products. We receive commission and other fees from the insurance companies for the sale of their products.

     We were originally incorporated under the laws of the state of Nevada on October 21, 2004 as Darwin Resources Corp., or Darwin-NV, an exploration stage company engaged in mineral exploration. On November 22, 2005, Darwin-NV merged with and into its newly-formed wholly-owned subsidiary, Darwin Resources Corp., a Delaware corporation, or Darwin-DE, solely for the purpose of changing our state of incorporation from Nevada to Delaware. On November 23, 2005, HBDC II, Inc., a newly-formed wholly-owned subsidiary of Darwin-DE, was merged with and into Health Benefits Direct Corporation, a privately-held Delaware corporation, and the name of the resulting entity was changed from Health Benefits Direct Corporation to HBDC II, Inc. Following the merger, Darwin-DE then changed its name to Health Benefits Direct Corporation.

Critical Accounting Policies

     Financial Reporting Release No. 60, which was released by the Commission, encourages all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. Our consolidated financial statements include a summary of the significant accounting policies and methods used in the preparation of the consolidated financial statements. Management believes the following critical accounting policies affect the significant judgments and estimates used in the preparation of the financial statements.

      Use of Estimates — Management’s Discussion and Analysis is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates these estimates, including those related to allowances for doubtful accounts receivable and long-lived assets. Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     We generate revenues primarily from the receipt of commissions paid to us by insurance companies based upon the insurance policies sold to consumers through our service. These revenues are in the form of first year, bonus and renewal commissions that vary by company and product. We recognize commission revenue from the sale of primarily health insurance, after we receive notice that the insurance company has received payment of the related premium. First year commission revenues per policy can fluctuate due to changing premiums, commission rates, and types or amount of insurance sold. We receive bonuses based upon individual criteria set by insurance companies. We recognize bonus revenues when we receive notification from the insurance company of the bonus due to us. Bonus revenues are typically higher in the fourth quarter of our fiscal year due to the bonus system used by many health insurance companies, which pay greater amounts based upon the achievement of certain levels of annual production. Revenues for renewal commissions are recognized after we receive notice that the insurance company has received payment for a renewal premium. Renewal commission rates are significantly less than first year commission rates and may not be offered by every insurance company. We also generate revenue from the sale of leads to third parties. Such revenues are recognized when we receive notification from those sources of the revenue due to us. Our revenue recognition accounting policy has been applied to all periods presented in this report. The timing between when we submit a consumer’s application for insurance to the insurance company and when we generate revenues has varied over time. The type of insurance product and the insurance company’s backlog are the primary factors that impact the length of time between submitted applications and revenue recognition. Any changes in the amount of time between submitted application and revenue recognition, which will be influenced by many factors not under our control, will create fluctuations in our operating results and could affect our business, operating results and financial condition.

     Under the criteria set forth in SOP 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” capitalization of software development costs begins upon the establishment of technological feasibility of the software. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors, including, but not limited to, anticipated future gross product revenues, estimated economic life, and changes in software and hardware technology. Capitalized software development costs are amortized utilizing the straight-line method over the estimated economic life of the software not to exceed three years. We regularly review the carrying value of software development assets and a loss is recognized when the unamortized costs are deemed unrecoverable based on the estimated cash flows to be generated from the applicable software.

     On April 3, 2006 we entered into a merger agreement with ISG Merger Acquisition Corp., a Delaware corporation and one of our wholly-owned subsidiaries, or Merger Sub, Insurance Specialist Group Inc., a Florida corporation, or ISG, and Ivan M. Spinner. As a result of the merger agreement, we acquired all of the outstanding stock of ISG, an insurance agency involved in the business of selling health insurance to small business owners and individuals. On October 6, 2006, we entered into a working capital settlement and release agreement with Mr. Spinner whereby we agreed to pay Mr. Spinner $65,000 as settlement of the working capital provision of the ISG merger agreement.

     We have accounted for the acquisition of ISG using the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141 “Business Combinations”. The results of ISG’s operations have been included in our statement of operations as of April 4, 2006. ISG’s operations for the period April 1 through April 4, 2006 are considered immaterial. We calculated the fair value of ISG based on the fair value of the consideration paid for ISG and assigned fair values to the individual tangible and intangible assets purchased based on managements estimates. Our preliminary calculation for the consideration paid for ISG in aggregate was $5,154,329 and was made up of the following:

     We estimated the fair values of ISG’s assets acquired and liabilities assumed at the date of acquisition as follows:

     We acquired intangible assets from ISG, which consisted of the following; value of purchased commission override revenue with an assigned value of $1,411,594 amortized over five years in proportion to expected future value, value of acquired carrier contracts and agent relationships with an assigned value of $2,752,143 amortized straight line over the expected useful life of 5 years and value of employment and non-compete agreement acquired with an assigned value of $800,593 amortized straight line over a weighted average useful life of 3.1 years.

     We review the carrying value of property and equipment and intangible assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.

     Effective January 1, 2006, we adopted the provisions of SFAS No. 123(R), “Share-Based Payment,” under the modified prospective method. SFAS No. 123(R) eliminates accounting for share-based compensation transactions using the intrinsic value method prescribed under APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and requires instead that such transactions be accounted for using a fair-value-based method. Under the modified prospective method, we are required to recognize compensation cost for share-based payments to employees based on their grant-date fair value from the beginning of the fiscal period in which the recognition provisions are first applied. For periods prior to adoption, the financial statements are unchanged, and the pro forma disclosures previously required by SFAS No. 123, as amended by SFAS No. 148, will continue to be required under SFAS No. 123(R) to the extent those amounts differ from those in the Statement of Operations.

	•		In third quarter 2007 we earned revenues of $4,064,572 excluding revenue associated with ISG and lead revenue as compared to $2,224,224 in third quarter 2006. The primary reasons for the increase is the increase sales, which was the result of the increase in number of licensed insurance agents employed by the Company from 90 at September 30, 2006 to 111 at September 30, 2007 and the increase of the number of insurance products being sold.
	•		In third quarter 2007 we earned periodic bonuses from carriers of $340,864 as compared to $0 in 2006. The Company receives bonuses from certain carriers, which are based primarily on the Company’s sales performance and criteria established by carriers, which varies over time and generally do not extend beyond the current calendar year. Accordingly the Company cannot determine what criteria, if any, may be offered by its carriers pertaining to bonuses beyond the current calendar year.
	•		In third quarter 2007 we earned revenues of $432,714 relating to ISG as compared to $668,253 in third quarter 2006. We acquired ISG during the second quarter 2006. ISG revenue declined as a result of excess lapsation of inforce business that was caused by significant rate increases implemented by a carrier no longer actively sold by the Company, and to a lesser extent reduced commission rates earned by the Company on new and inforce business.
	•		In third quarter 2007 we earned revenues of $209,989 relating to the sale of leads to third parties as compared to $329,957 in third quarter 2006. We re-sell certain leads purchased in order to recoup a portion of our lead cost. The primary reason for the decrease is an increased emphasis on retaining leads for sale by the Company’s employee agents and to a lesser extent better targeting of leads purchased, which results in fewer leads available for resale.

Total Operating Expenses

The Company’s total operating expenses for third quarter 2007 was $8,640,135 as compared to $7,334,578 for third quarter 2006 or an increase of $1,305,557 or 18% as compared to third quarter 2006. Total operating expenses consisted of the following:

•

In third quarter 2007 we incurred salaries, commission and related taxes of $4,413,794 as compared to $3,917,483 for third quarter 2006. Salaries, commission and related taxes consisted of the following:

	•		Salaries and wages in third quarter 2007 were $2,806,818 as compared to $2,311,342 for third quarter 2006, an increase of $495,476 or 21%. This increase is the result of the hiring of additional personnel employed by the Company. The Company had 263 and 232 employees at September 30, 2007 and 2006, respectively.
	•		Share based employee and director compensation expense was $309,157 in third quarter 2007 as compared to $694,556 in third quarter 2006. Share based employee and director compensation consists 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. The decrease in expense in third quarter 2007 as compared to third quarter 2006 is the result of the vesting schedules of stock options issued in 2005 and the first quarter of 2006.
	•		Commissions to employees were $653,774 in third quarter 2007 as compared to $449,826 in third quarter 2006, an increase of $203,948 or 45%. This increase was the result of an increase in sales that resulted in higher sales commission expense.
	•		Commissions to non employees were $62,878 in third quarter 2007 as compared to $85,159 in third quarter 2006. We pay commissions to non employee ISG agents. This decrease was the result of decreased in ISG revenue.

	•		Severance and other compensation expense was $231,397 in third quarter 2007 as compared to $14,060 in third quarter 2006. The increase was the result of $180,736 higher severance, vehicle and equipment allowances.
	•		Lead, advertising and other marketing was $2,177,789 in third quarter 2007 as compared to $1,511,262 in third quarter 2006, an increase of $666,527 or 44%.

	•		In third quarter 2007 we had an increase in lead expense of $620,895 as compared to third quarter 2006. As we increase the number of licensed agents we employ, we expect our lead expense to increase in the future in order to facilitate the flow of quality leads to our sale agents.
	•		In third quarter 2007 we had an increase in advertising and other marketing of $45,632 as compared to third quarter 2006. The increase is the result of direct mail marketing activities in 2007.

•

Depreciation and amortization expense was $518,088 in third quarter 2007 as compared to $645,802 in third quarter 2006. Depreciation and amortization expense consisted of the following:

•

In third quarter 2007 we incurred amortization expense of $302,515 as compared to $425,685 for the intangible assets acquired from ISG. The reason for the decrease in expense is the decline in the purchased commission override revenue due to lapsation and aging of the underlying insurance book of business, which was anticipated in the amortization implemented at the time of the Company’s acquisition of ISG. The ISG acquisition was effective April 3, 2006. The intangible assets acquired from ISG represent the value of purchased commission override revenue with an assigned value of $1,411,594 amortized over five years in proportion to expected future value, value of acquired carrier contracts and agent relationships with an assigned value of $2,752,143 amortized straight line over the expected useful life of 5 years and value of employment and non-compete agreement acquired with an assigned value of $800,593 amortized straight line over a weighted average useful life of 3.1 years.

	•		In third quarter 2006 we recorded amortization expense of $18,985 for the intangible assets acquired as a result of the HealthPlan Choice asset purchase, which was fully amortized in third quarter 2006.
	•		In third quarter 2007 we incurred amortization expense of $49,543 compared to $69,853 in third quarter 2006 for the software and website development. Expense in third quarter 2007 pertains to the Company’s new web site whereas third quarter 2006 expense pertains to the Company’s old web site.
	•		In third quarter 2007 we incurred amortization expense of $13,433 pertaining to the Company’s July 17, 2006 purchase of the Internet domain name www.healthbenefitsdirect.com.
	•		In third quarter 2007 we incurred depreciation expense of $152,607 as compared to $131,279 in third quarter 2006. The increase pertains to the depreciation of fixed assets acquired subsequent to September 30, 2006.
	•		In third quarter 2007 we incurred rent, utilities, telephone and communications expenses of $669,847 as compared to $536,267 in third quarter 2006. Rent, utilities, telephone and communications expenses consisted of the following:

	•		In third quarter 2007 we had increases in rent, utilities and other occupancy as compared to third quarter 2006 attributable to the cost of new and larger facilities. We relocated our New York sales office to a larger office in the third quarter of 2006. In November, 2006 we moved our corporate offices in Radnor to a new and larger office.
	•		In third quarter 2007 we had an increase in telephone and communications expense as compared to third quarter 2006 due to the increase in the number of sales agents.
	•		In third quarter 2007 we incurred professional fees of $383,617 as compared to $206,273 in third quarter 2006, an increase of $177,344. The increase was attributable to legal, accounting, employee recruiting and technology outsourcing fees.

•

In third quarter 2007 we incurred other general and administrative expenses of $476,990 as compared to $517,491 in third quarter 2006, a decrease of $40,501 or 8%. Other general and administrative expenses consisted of the following:

	•		We incur licensing and appointment costs associated with the licensing of our employee insurance agents. In third quarter 2007 we had a decrease in licensing and appointment costs as compared to 2006 due to decreased new agent recruiting and licensing.
	•		In third quarter 2007 we had an increase in office expense as compared to 2006 due to increase in office space and operations.

Other income (expenses)

Interest income in third quarter 2007 and third quarter 2006 was attributable to interest-bearing cash deposits resulting from the capital raised in private placements.

Interest expense pertains to imputed interest on certain employee obligations.

Net loss

As a result of these factors, we reported a net loss of $3,493,081 or $.10 loss per share in third quarter 2007 as compared to a net loss of $4,061,475 or $0.14 loss per share in third quarter 2006.

	•		In 2007 we earned commission revenue from carriers excluding periodic bonuses and ISG revenues of $11,736,573 as compared to $5,128,417 in 2006. The primary reasons for the increase is the increase in number of licensed insurance agents employed by the Company from 90 at September 30, 2006 to 111 at September 30, 2007 and the increase of the number of insurance products being sold.
	•		In 2007 we earned periodic bonuses from carriers of $853,477 as compared to $172,858 in 2006. The Company receives bonuses from certain carriers, which are based primarily on the Company’s sales performance and criteria established by carriers and generally do not extend beyond the current calendar year. Accordingly the Company cannot determine what criteria, if any, may be offered by its carriers pertaining to bonuses beyond the current calendar year.
	•		In 2007 we earned revenue of $1,408,571 relating to ISG as compared to $1,252,688 in 2006. We acquired ISG during the second quarter of 2006 and we only recognized ISG revenue in the second and third quarters of 2006 whereas we recognized ISG revenue in first, second and third quarters of 2007.
	•		In 2007 we earned revenues of $705,926 relating to the sale of leads to third parties as compared to $528,450 in 2006. We re-sell certain leads purchased in order to recoup a portion of our lead cost. The primary reasons for the increase is an increased emphasis on identifying leads suitable for sale and the increased number of leads purchased.

	•		Salaries and wages were $7,571,207 as compared to $5,615,458 for 2006, an increase of $1,955,749 or 35%. This increase is the result of the hiring of additional personnel employed by the Company.
	•		Share based employee and director compensation expense was $1,124,370 in 2007 as compared to $1,539,507 in 2006. Share based employee and director compensation consists 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. The decrease in expense in 2007 as compared to 2006 is the result of the vesting schedules of stock options issued in 2005 and the first quarter of 2006.
	•		Commissions to employees were $1,957,612 in 2007 as compared to $1,114,067 in 2006. The increase was the result of an increase in sales that resulted in higher sales commission expense.
	•		Commissions to non employees were $272,516 in 2007 as compared to $229,410 in 2006. We pay commissions to non employee ISG agents. We acquired ISG during the second quarter of 2006 and we only recognized commission expense to non employees in the second and third quarters of 2006 whereas we recognized commission expense to non employees in first, second and third quarters of 2007.
	•		Employee benefits expense was $322,528 in 2007 as compared to $204,875 in 2006. The Company implemented an expanded employee benefits package during 2006, which included group medical, dental and life insurance coverage and further enhanced employee benefits in 2007 with the addition of a 401(k) plan. The employee pays the majority of the cost of group insurance coverage.

	•		Payroll taxes expense was $683,293 in 2007 as compared to $574,130 in 2006. The increase was the result of higher salaries, wages, bonuses and commissions to employees.
	•		Severance and other compensation expense was $305,725 in 2007 as compared to $26,560 in 2006. The increase was the result of $180,736 higher severance, vehicle and equipment allowances.
	•		Lead, advertising and other marketing was $5,973,442 in 2007 as compared to $3,082,819 in 2006, an increase of $2,890,623 or 94%.

	•		In 2007 we had an increase in lead expense of $2,729,057 as compared to 2006. As we increase the number of licensed agents we employ, we expect our lead expense to increase in the future in order to facilitate the flow of quality leads to our sale agents.
	•		In 2007 we had an increase in advertising and other marketing of $161,566 as compared to 2006, which increased as a result of direct mail marketing activities in 2007.

•

Depreciation and amortization expense was $1,631,172 in 2007 as compared to $1,485,115 in 2006. Depreciation and amortization expense consisted of the following:

	•		In 2007 we incurred amortization expense of $966,415 as compared to $905,821 for the intangible assets acquired from ISG. The ISG acquisition was effective April 3, 2006. The intangible assets acquired from ISG represent the value of purchased commission override revenue with an assigned value of $1,411,594 amortized over five years in proportion to expected future value, value of acquired carrier contracts and agent relationships with an assigned value of $2,752,143 amortized straight line over the expected useful life of 5 years and value of employment and non-compete agreement acquired with an assigned value of $800,593 amortized straight line over a weighted average useful life of 3.1 years.
	•		In 2006 we recorded amortization expense of $186,518 for the intangible assets acquired as a result of the HealthPlan Choice asset purchase, which was fully amortized in 2006.

	•		In 2007 we incurred amortization expense of $186,040 compared to $103,332 in 2006 for the software and website development. As of September 30, 2006, the Company determined that intangible assets pertaining to the Company’s former website were impaired. Expense in 2007 pertains to the Company’s new web site whereas 2006 expense pertains to the Company’s old web site.
	•		In 2007 we incurred amortization expense of $40,300 pertaining to the Company’s July 17, 2006 purchase of the Internet domain name www.healthbenefitsdirect.com .
	•		In 2007 we incurred depreciation expense of $438,417 as compared to $289,444 in 2006 period. The increase pertains to the depreciation of fixed assets acquired subsequent to September 30, 2006.
	•		In 2007 we incurred rent, utilities, telephone and communications expense of $1,934,299 as compared to $1,323,462 in 2006. Rent, utilities, telephone and communications expenses consisted of the following:

	•		In 2007 we had increases in rent, utilities and other occupancy as compared to 2006 attributable to the cost of new and larger facilities. We relocated our New York sales office to a larger office in the third quarter of 2006. In November, 2006 we moved our corporate offices in Radnor to a new and larger office.
	•		In 2007 we had an increase in telephone and communications expense as compared to 2006 due to the increase in the number of sales agents.
	•		In 2007 we incurred professional fees of $1,277,345 as compared to $994,535 in 2006, an increase of $282,810 primarily attributable to technology outsourcing fees and to a lesser extent employee recruiting, legal, and accounting fees.

•

In 2007 we incurred other general and administrative expenses of $1,283,126 as compared to $1,379,912 in 2006, a decrease of $96,786 or 7%. Other general and administrative expenses consisted of the following:

	•		We incur licensing and appointment costs associated with the licensing of our employee insurance agents. In 2007 we had a decrease in licensing and appointment costs as compared to 2006 due to decreased growth rate in new agent recruiting and licensing.
	•		During 2006 we incurred $102,615 pertaining to the cost of integrating HealthPlan Choice’s office as our Atlanta satellite sales office, which we subsequently closed in the fourth quarter of 2006.
	•		In 2007 we had an increase in office expense as compared to 2007 due to increase in office space and operations.

Other income (expenses)

In 2006 we reported income of $60,537 from the reversal of the registration rights penalty accrued at December 31, 2005. The registration of the shares was effective July 7, 2006, which was prior to the date after which a penalty would have been incurred.

Interest income in 2007 and 2006 was attributable to interest-bearing cash deposits resulting from the capital raised in private placements.

Interest expense in 2007 pertains to imputed interest on certain employee obligations whereas interest expense in 2006 pertains to both our closed line of credit, which was repaid in full during the second quarter of 2006, and imputed interest on certain employee obligations.

Net loss

As a result of these factors, we reported a net loss of $9,468,718 or $0.29 loss per share in 2007 as compared to a net loss of $10,338,320 or $0.38 loss per share in 2006.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2007, we had a cash balance of $8,868,990 and working capital of $467,940.

On March 30, 2007, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) and completed a private placement with certain institutional and individual accredited investors and issued 5,000,000 shares of our Common Stock, par value $0.001 per share and warrants to purchase 2,500,000 shares of our Common Stock. Pursuant to the Purchase Agreement, we sold investment units (each, a “Unit”) in the Private Placement at a per Unit purchase price equal to $2.25. Each Unit sold in the Private Placement consisted of one share of Common Stock and a Warrant to purchase one-half (1/2) of one share of Common Stock at an initial exercise price of $3.00 per share, subject to adjustment (the “Warrant”). The gross proceeds from the Private Placement were $11,250,000 and we intend to use the net proceeds of the Private Placement for working capital purposes. The Company’s Chief Executive Officer and Chairman, Alvin H. Clemens, purchased 1,000,000 Units in the Private Placement.

In connection with the 2007 private placement, the Company paid the placement agents an aggregate placement fee equal to $787,500 plus the reimbursement of certain expenses in the amount of $42,500. The Company also issued to the placement agents Warrants (the “Placement Agent Warrants”) to purchase in the aggregate 350,000 shares of the Company’s Common Stock with an exercise price of $2.80 and exercisable from September 30, 2007 through March 30, 2010. The Company also incurred legal and other expenses in the amount of $65,240 in connection with the 2007 private placement.

On January 11, 2006, we completed the closing of a private placement of a total of 169 units, each unit (“2006 Unit”) consisting of 50,000 shares of our common stock and a detachable, transferable warrant to purchase shares of our common stock, at a purchase price of $50,000 per 2006 Unit. Each warrant issued in the private placement entitles the holder to purchase shares of our common stock at an exercise price of $1.50 per share and expires on the three-year anniversary of the date of issuance, subject to certain redemption provisions. We received aggregate net proceeds from the private placement of $7,240,502 in 2005 and aggregate net proceeds of $6,164,174 in 2006. During 2007 certain holders of the warrants issued in connection with the private placement completed in 2006 exercised their warrants to purchase in aggregate 225,000 shares of our common stock at an exercise price of $1.50 per share for an aggregate exercise price of $337,500.

At September 30, 2007, we had a restricted cash balance of $1,150,000, which represents money market account balances with a restricted balance pertaining to 2 letters of credit for the benefit of the landlords of the Company’s Deerfield Beach Florida and New York offices. The money market accounts are on deposit with the issuer of the letters of credit. The terms of the Company’s money market accounts and letters of credit allow the Company to receive the interest on the money market accounts but prohibits the Company’s use of the balance.

Net cash used by operations was $3,146,280 in 2007 as compared to net cash used in operations of $5,798,650 in 2006. In 2007 the Company used cash to fund the Company’s net loss of $9,468,718 and:

	•		Decreases in accounts receivable of $227,675 related to the collection of bonus commissions earned in the fourth quarter of 2006, increased unearned commission advances and to a lesser extent increased earned revenues;
	•		Increases in unearned commission advances of $3,619,793 relating to increased commission payments from certain of the Company’s insurance carriers that advance the Company future commission revenue. The Company has agreements with certain of its insurance carriers whereby the Company’s insurance carriers advance the Company first year premium commissions before the commissions are earned. The unearned portion of premium commissions has been included in the consolidated balance sheet as a liability for unearned commission advances. These advance agreements represent a material source of cash to fund the Company’s operations. The Company’s advance agreement with its largest insurance carrier cannot exceed $9,000,000, can be terminated by either party and in the event of termination the Company’s outstanding advance balance can be called by the insurance carrier with 7 days written notice. As of September 30, 2007, the Company’s outstanding advance balance with this carrier was $6,379,064. The Company’s advance agreement with its second largest insurance carrier allows the insurance carrier to terminate future advances and convert the outstanding advance balance into a promissory note, which if not repaid within 30 days, would incur interest expense. As of September 30, 2007, the Company’s outstanding advance balance with this carrier was $1,554,234. During the third quarter of 2007 the Company began receiving first year premium commissions before the commissions are earned from its third largest insurance carrier. The Company’s understanding pertaining to the advance from this carrier is that the carrier may terminate future advances and demand repayment of the outstanding unearned commission advance balance if certain performance standards are not met. As of September 30, 2007, the Company’s outstanding advance balance with this carrier was $634,915.

In addition to cash used in operating activities, during the nine months ended September 30, 2007 we:

	•		Recorded $1,144,845 of stock-based compensation and consulting expense. Effective January 1, 2006, we adopted the provisions of SFAS No. 123(R), “Share-Based Payment,” under the modified prospective method. SFAS No. 123(R) eliminates accounting for share-based compensation transactions using the intrinsic value method prescribed under APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and requires instead that such transactions be accounted for using a fair-value-based method. Under the modified prospective method, we are required to recognize compensation cost for share-based payments to employees based on their grant-date fair value from the beginning of the fiscal period in which the recognition provisions are first applied.
	•		On February 15, 2007, the Company granted 125,000 restricted shares of Common Stock to each of Charles A. Eissa, the Company’s President and Chief Operating Officer, and Ivan M. Spinner, the Company’s Senior Vice President, in accordance with the terms of the Company’s 2006 Omnibus Equity Compensation Plan (the “Plan”). The shares granted to Messrs. Eissa and Spinner were valued at $3.00 per share and will vest as follows: 50,000 shares on February 15, 2008; 50,000 additional shares on February 15, 2009; 2,083 shares per month on the 15th day of each month thereafter beginning on March 15, 2009 through January 15, 2010; and 2,087 shares on February 15, 2010. The expense pertaining to these restricted stock grants is included in the aforementioned stock based compensation and consulting expense.

Net cash used by investing activities in 2007 was $1,045,022 as compared to $2,896,716 in 2006. The decrease in cash used was primarily attributable to the 2006 purchase of ISG. During the second quarter of 2006 we completed the acquisition of ISG for approximately $1.2 million, capitalization of software development costs of $81,596 and the acquisition of property and equipment of $958,340 including assets acquired as a result of HealthPlan Choice asset purchase. Investing activities in 2007 pertain to internal development of software and the purchase of property and equipment supporting current and future operations.

Net cash provided by financing activities in 2007 was $10,748,510 as compared to $5,335,040 in 2006.

	•		In 2007 we completed a private placement with certain institutional and individual accredited investors and issued 5,000,000 shares of our Common Stock, par value $0.001 per share and warrants to purchase 2,500,000 shares of our Common Stock. Gross proceeds were $11,250,000 and placement and other fees paid in connection with the 2007 private placement were $895,240.
	•		In 2007 certain holders of the Company’s warrants exercised their warrants to purchase in aggregate 262,500 shares of the Company’s common stock at an exercise price of $1.50 per share and the Company received $393,750.
	•		In 2006 the Company completed a private placement, which began in 2005. During the first quarter of 2006 we received net proceeds from the sale of common stock of $6,164,174.
	•		In 2006 Alvin Clemens exercised an option to purchase 200,000 shares of the Company’s common stock at an exercise price of $1 per share and the Company received $200,000.
	•		In 2006 we disbursed $1,150,000 from cash and deposited this amount into a certificate of deposit, which is reported as restricted cash. The certificate of deposit, which was subsequently converted into an interest bearing money market account, on deposit with the same bank that issued 2 letters of credit for the benefit of the Company’s landlords of our new Florida and New York offices.
	•		In 2006 we repaid our $399,630 outstanding balance of a line of credit with Regions Bank dated August 2004. The Company has no further obligations regarding this line of credit and this line of credit is not available for future borrowing.

Acquisition of ATIAM

On October 1, 2007, HBDC Acquisition, LLC (“HBDC Sub”), a Delaware limited liability company and wholly-owned subsidiary of Health Benefits Direct Corporation, a Delaware corporation (the “Company”), entered into an Agreement to Transfer Partnership Interests (the “Bilenia Agreement”) with the former partners (the “Bilenia Partners”) of BileniaTech, L.P., a Delaware limited partnership (“Bilenia”), whereby HBDC Sub purchased all of the outstanding general and limited partnership interests of Atiam Technologies, L.P., a Delaware limited partnership (“Atiam”), owned by the Bilenia Partners. The execution of the Bilenia Agreement and the transfer of the Atiam partnership interests to HBDC Sub there under were conditions precedent to the closing of the Merger Agreement (as defined below) on October 1, 2007 (the “Closing Date”).

The aggregate amount paid by HBDC Sub to the Bilenia Partners for the Atiam partnership interests under the Bilenia Agreement was $1,000,000, consisting of $500,000 in cash and 224,216 shares of Common Stock, which shares had an aggregate value of $500,000 based on the average closing price per share ($2.23) of Company Common Stock on The Over the Counter Bulletin Board on the five consecutive trading days preceding the Closing Date.

In connection with the Bilenia Agreement, the Company and Computer Command and Control Company, a Pennsylvania corporation (“CCCC”), also entered into a Registration Rights Agreement (the “Bilenia Registration Rights Agreement”). Under the terms of the Bilenia Registration Rights Agreement, the Company has agreed to give prompt written notice to CCCC of the registration of any of the Company’s securities under the Securities Act, and CCCC shall have the opportunity, upon 20 days’ written notice to the Company, to request that the shares of Company Common Stock issued to CCCC under the Bilenia Agreement be included in such registration statement. The Company agreed that its current intention is to begin to prepare and file a registration statement with the Commission within 60 days of the Closing Date.

On September 21, 2007, the “Company entered into an Agreement and Plan of Merger (the “Atiam Merger Agreement”) by and among the Company, HBDC, System Consulting Associates, Inc., a Pennsylvania corporation (“SCA”), and the shareholders of SCA party thereto (the “Shareholders”). The Company and SCA closed on the Merger on October 1, 2007.

The Atiam Merger Agreement provided for a business combination whereby SCA would be merged with and into HBDC Sub, with HBDC Sub continuing as the surviving corporation and as a wholly-owned subsidiary of the Company (the “Merger”). The aggregate amount paid by the Company with respect to all outstanding shares of capital stock of SCA (such amount, the “Atiam Merger Consideration”) was $2,000,000, consisting of (a) $850,000 in cash and (b) 515,697 unregistered shares of Common Stock, which number of shares had a value of $1,150,000 based on the average closing price per share ($2.23) of Common Stock on The Over the Counter Bulletin Board on the five consecutive trading days preceding the closing date. Upon the effectiveness of the Merger, each share of SCA Common Stock issued and outstanding immediately prior to the closing date was converted into the right to receive a pro rata portion of the Merger Consideration. The Company placed certificates representing 134,529 shares, or an amount equal to $300,000, of the Company Common Stock that otherwise would be payable to the Shareholders as Merger Consideration into an escrow account, which shares will be held in escrow for a period of one year to satisfy any indemnification claims by the Company or HBDC Sub under the Atiam Merger Agreement.

In connection with the Atiam Merger Agreement, the Company and Shareholders also entered into a Registration Rights Agreement (the “Shareholder Registration Rights Agreement”). Under the terms of the Shareholder Registration Rights Agreement, the Company has agreed to give prompt written notice to each Shareholder of the registration of any of the Company’s securities under the Securities Act and the Shareholders shall have the opportunity, upon 20 days’ written notice to the Company, to request that the shares of Company Common Stock issued to the Shareholders under the Atiam Merger Agreement be included in such registration statement. The Company agreed that its current intention is to begin to prepare and file a registration statement with the Commission within 60 days of the Closing Date.

The Company estimates the fair value of SCA, which accounted for Atiam as a majority owned subsidiary, and the remaining minority interest in Atiam not owned by SCA based on the fair value of the aggregate consideration paid by the Company in connection with the Bilenia Agreement and Atiam Merger Agreement, which is estimated at $3,000,000 and will be accounted for using the purchase method of accounting in accordance with SFAS No. 141. We will assign fair values to the individual tangible and intangible assets purchased based on management’s estimates. As a result of the Bilenia Agreement and Atiam Merger Agreement, the Company acquired tangible assets valued at $1,400,000, short-term liabilities valued at $380,000 and long term liabilities consisting of deferred tax liabilities of $197,000. The excess of $3,000,000 over the tangible assets acquired net of liabilities assumed will be allocated to intangible assets with useful lives not anticipated to exceed 5 years. The estimated purchase price, estimated purchase price allocation and estimated useful lives of intangible assets acquired are preliminary and the final purchase accounting adjustments may differ from aforementioned.

In connection with the ATIAM acquisition, ATIAM entered into three-year employment agreements with four key employees of ATIAM effective October 1, 2007. These employment agreements provide that these four key employees will be compensated at an aggregate annual base salary of $700,000 with bonus compensation at the discretion of the Company’s board. These agreements may be terminated by the Company for “cause” (as such term is defined in the agreements) and without “cause” upon 30 days notice. These agreements may be terminated by the Company without “cause”, in which case the terminated employee will be entitled to their base salary for a period ranging from 6 to 12 months. These agreements also contain non-competition and non-solicitation provisions for the duration of the agreements plus a period ranging from 6 to 12 months after termination of employment.

There are no material proceedings known to us to which any of our directors, officers or affiliates, or any owner of record or beneficially of more than 5% of any class of our voting securities, or any affiliate of such persons, is a party adverse to us or has a material interest adverse to our interests. The following brief biographies contain information about our directors and our executive officers. The information includes each person’s principal occupation and business experience for at least the past five years. This information has been furnished to us by the individuals named. There are no family relationships known to us between the directors and executive officers. We do not know of any legal proceedings that are material to the evaluation of the ability or integrity of any of the directors or executive officers.

Alvin H. Clemens has served as one of our directors since November 2005 and as Executive Chairman of our board of directors since January 2006. Since 2001, Mr. Clemens has performed business and insurance industry consulting services in addition to managing his private investments. In 1998, he founded HealthAxis Inc., a publicly-traded company specializing in direct sales of insurance products utilizing the Internet, as a subsidiary of Provident American Corporation. In 1989, Mr. Clemens acquired a controlling interest in Provident American Corporation, an insurance holding company, and he served as its Chairman and Chief Executive Officer until 2001. In 1970, Mr. Clemens founded Academy Insurance Group, a company specializing in direct marketing of life and health insurance products. He currently serves on the board of trustees and the Building, Finance, and Executive Committees of The Pennsylvania State University.

Charles A. Eissa has served as our President and Chief Operating Officer, and as one of our directors since November 2005 and is our co-founder. In April 2004, Mr. Eissa founded InTransit Media, a specialized advertising and marketing services company, and served as its President and Chief Executive Officer until the sale of the company in February 2006. He was involved in the 1998 inception of Seisint Inc., a leading database and technology services company subsequently acquired by Lexis Nexis. From 1998 until 2004, Mr. Eissa was part of the team at Seisint Inc. that co-founded and spun off a division named eDirect.com, which went on to make several key mergers and acquisitions consolidating under the name of Naviant, a company specializing in permission-based Internet marketing that was subsequently acquired by Equifax. From 1989 until 1997, Mr. Eissa served as Vice President Sales for Lens Express

Inc. During Mr. Eissa’s tenure, Lens Express Inc. earned its place on the Inc. 500 for three consecutive years, and was subsequently acquired by 1-800-Contacts.

Anthony R. Verdi has served as our Chief Financial Officer and Assistant Secretary since November 2005. From 2001 until November 2005, Mr. Verdi has provided consulting services to life, health and property and casualty insurance company agency and venture capital clients. From December 1998 until March 2001, Mr. Verdi served as Chief Operating Officer of Provident and Chief Financial Officer of HealthAxis. From January 1990 until December 1998 Mr. Verdi served as Chief Financial Officer of Provident American Corporation. From July 1986 until January 1990, he was the Vice President and Controller of InterCounty Hospitalization and Health Plans, a nonprofit group medical insurer. From April 1971 until July 1986, he served in various finance and accounting capacities for the Academy Insurance Group, ultimately serving as the Assistant Controller.

Ivan M. Spinner has served as our Senior Vice President since April 2006 and as our Executive Vice President since December 2007. In 1999, he founded Insurance Specialist Group Inc. and he served as its President and Chief Executive Officer from 1999 until Insurance Specialist Group Inc. was acquired by us in April 2006. From 1995 until 1999, Mr. Spinner served as an independent licensed insurance agent.

Warren V. Musser has served as one of our directors since January 2006 and as the Vice Chairman of our board of directors since March 2006. He also has served as President of The Musser Group, a financial consulting company, since 2001. Mr. Musser served as Chairman and Chief Executive Officer of Safeguard Scientifics, Inc. from 1953 until 2001. Mr. Musser is a director of Internet Capital Group, Inc. and Chairman of the board of directors of each of Telkonet, Inc. and InfoLogix, Inc. Mr. Musser serves on a variety of civic, educational and charitable boards of directors.

John Harrison has served as one of our directors since November 2005. He is a founding Partner and Executive Director of The Keystone Equities Group, Inc., a full service investment banking group and a registered NASD broker-dealer founded in 2003. Mr. Harrison also is a Managing Director of Covenant Partners, a hedge fund that invests in direct marketing services companies. In 1999, Mr. Harrison became a founding Partner of Emerging Growth Equities, Ltd., a full service investment banking and brokerage firm focused on raising capital for emerging technology companies addressing high-growth industry sectors. From 1985 to 2000, Mr. Harrison served as President of DiMark, a direct marketing agency that was subsequently acquired by Harte-Hanks in 1996. He also has held senior management positions with CUNA Mutual, RLI Insurance and CNA Insurance where he directed their direct marketing practice. Mr. Harrison is Chairman of the board of Professional Insurance Marketing Association (PIMA) and is on the advisory board of DePaul University’s Interactive and Direct Marketing Institute. He serves as a director of The Credo Group, a digital insurance agency, IXI Corporation, a database marketing company that uses proprietary wealth and asset information, and Solutionary, Inc., a full-service provider of managed security services.

C. James Jensen has served as one of our directors since April 2006. He is the co-founder and managing partner of Mara Gateway Associates, L. P., a privately owned real estate investment company that owns real estate properties in the western United States and Hawaii. Additionally, Mr. Jensen is the co-managing partner of Stronghurst, LLC, which provides advisory and financial services to emerging growth companies. Mr. Jensen previously has served as Chairman and Chief Executive Officer of Thousand Trails, Inc., a national network and the industry leader of private campground resorts, as President of Grantree Furniture Rental Corporation, and as National Sales Manager of Australia and New Zealand, International Sales Manager and Senior Vice President and Chief Operating Officer of the Great Books Division of the Western World for Encyclopedia Britannica, Inc. Mr. Jensen also has served as President of J J Advisors, LLC, where he provided full service sales and marketing support to select

luxury master-planned communities. Mr. Jensen is an active member of the World Presidents’ Organization and a past director of the Boys and Girls Club and the Leukemia Society of America.

Sanford Rich has served as one of our directors since April 2006. He is currently the Senior Vice President of Investments and Portfolio Manager at GEM Capital Management Inc., a specialist manager of High Yield and Convertible Securities portfolios for institutions, and has held this position since November 1995. From 1993 to 1995, Mr. Rich was a Managing Director of High Yield Finance, Capital Markets & North American Loan Syndicate, Sales and Trading at Citicorp Securities. From 1985 to 1993, he served as Managing Director of Debt Capital Markets at Merrill Lynch. From 1978 to 1985, Mr. Rich held various Analyst positions in numerous companies, including Cypress Capital Management, Inc. (Vice President and Analyst from 1983 to 1985), FIAMCO (Distressed/High Yield Bond Analyst from 1981 to 1983), Progressive Corporation (Financial Analyst from 1980 to 1981) and Prescott, Ball and Turben (Distressed/High Yield Bond Analyst from 1978 to 1980).

L.J. Rowell has served as one of our directors since April 2006. He is a past President (1984-1996), Chief Executive Officer (1991-1996) and Chairman of the Board (1993-1996) of Provident Mutual Life Insurance Company, where he also held various other executive and committee positions from 1980 until his retirement in 1996. Mr. Rowell currently serves on the boards of directors of the Southeast Pennsylvania Chapter of the American Red Cross, The PMA Group, the American College, The Foundation at Paoli, and The Milton S. Hershey Medical Center. Mr. Rowell also has served on the Board of Trustees of The Pennsylvania State University as a business and industry trustee since 1992. In 1991, he served as the Chairman of the Major Business Division for the United Way of Southeastern Pennsylvania. Mr. Rowell also has served as chairman of The American Red Cross Ad Blood Campaign and has previously served on its Major Contributions Donor Campaign.

Paul Soltoff has served as one of our directors since November 2005. He also has served as Chairman and Chief Executive Officer of SendTec, Inc. since its inception in February 2000. From 1997 until February 2000, Mr. Soltoff served as Chief Executive Officer of Soltoff Direct Corporation, a specialized direct marketing consulting company. From September 2004 until October 2005, Mr. Soltoff served as a director of theglobe.com.

Frederick C. Tecce has served as one of our directors since August 2007. He currently serves as of counsel with Buchanan Ingersoll & Rooney. He was an attorney with Klett Rooney Lieber & Schorling when it joined Buchanan in 2006. Mr. Tecce also serves as of counsel to Cross Atlantic Capital Partners and has served on the investment committees of three of the funds managed by Cross Atlantic Partners. Mr. Tecce previously served as Senior Vice President and General Counsel of Academy Life Insurance Company. Mr. Tecce served on the transition team for Pennsylvania Governor Tom Ridge and was appointed by Governor Ridge to serve as a member of the board of the $50 billion Public School Employees Retirement System (PSERS), where he served as chairman of the Finance Committee until his retirement in September of 2001. He was appointed by U.S. Senator Rick Santorum to the Federal Judicial Nominating Committee where he served for several terms and also served on Dr. Robert Gallo’s Board of Visitors at the University of Maryland Institute for Human Virology. He has served on the board of directors of several listed companies.

Board Independence

The Board has determined that Messrs. Harrison, Jensen, Rich, Rowell, Tecce and Soltoff are “independent” directors as defined by Rule 4200(a)(15) of the Nasdaq listing standards and as defined by Rule 10A-3(b)(1)(ii) promulgated by the Commission.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table summarizes the compensation paid to, awarded to or earned during the fiscal years ended December 31, 2007 and 2006 by our Chief Executive Officer and each of our two other most highly compensated executive officers whose total salary and bonus exceeded $100,000 for services rendered to us in all capacities during 2007. The executive officers listed in the table below are referred to in this prospectus as our named executive officers. There were no non-equity incentive plan compensation, or non-qualified deferred compensation earnings for any of the named executives for the three years ended December 31, 2007.

     Effective January 1, 2006, we adopted the provisions of SFAS No. 123(R), “Share-Based Payment,” under the modified prospective method. SFAS No. 123(R) eliminates accounting for share-based compensation transactions using the intrinsic value method prescribed under APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and requires instead that such transactions be accounted for using a fair-value-based method. Under the modified prospective method, we are required to recognize compensation cost for share-based payments to employees based on their grant-date fair value from the beginning of the fiscal period in which the recognition provisions initially are applied. For periods prior to adoption, the financial statements are unchanged, and the pro forma disclosures previously required by SFAS No. 123, as amended by SFAS No. 148, will continue to be required under SFAS No. 123(R) to the extent those amounts differ from those in the Statement of Operations. Expense in 2006 pertaining to employee stock options for all named executive officers other than Mr. Spinner is recorded in salaries, commissions and related taxes. Expense pertaining to Mr. Spinner’s stock option is recorded in depreciation and amortization expense as part of the value of the employment and non-compete agreement acquired as a result of our acquisition of ISG.

     Through December 31, 2005, we accounted for stock options issued to employees in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. As such, compensation cost is measured on the date of grant as the excess of the current market price of the underlying stock over the exercise price. Such compensation amounts are amortized over the respective vesting periods of the option grant. The Company adopted the disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS 148, “Accounting for Stock-Based Compensation -Transition and Disclosure”, which permits entities to provide pro forma net income (loss) and pro forma earnings (loss) per share disclosures for employee stock option grants as if the fair-valued based method defined in SFAS No. 123 had been applied. We account for stock options and stock issued to non-employees for goods or services in accordance with the fair value method of SFAS 123.

(8) All other compensation paid to our named executive officers in the fiscal year ended December 31, 2007 consisted of the following:

Outstanding Equity Awards at Fiscal Year-End

     The following table sets forth information for the outstanding equity awards for our named executive officers for the year ended December 31, 2007. The information below pertains to stock options, which were granted under 2005 Incentive Stock Plan, and restricted stock grants, which were granted accordance with the terms of our 2006 Omnibus Equity Compensation Plan. The number of shares of stock that have not vested pertains to the February 15, 2007 restricted stock grant to the named executive officers below. The market value of the number of shares of stock that have not vested was based on the closing price per share ($1.86) of our common stock on the OTCBB on December 31, 2007.

Employment, Severance and Other Agreements

Scott Frohman

     Pursuant to a written employment agreement, Mr. Frohman served as our Chief Executive Officer effective October 10, 2005 through December 7, 2006. He was paid an annual base salary of $258,300 and was entitled to receive such bonus compensation as a majority of our board of directors would determine. On December 7, 2006, Scott Frohman resigned as our Chief Executive Officer and as one of our directors. In connection with Mr. Frohman’s resignation, we and Mr. Frohman entered into a separation agreement dated December 7, 2006.

     Under the separation agreement, Mr. Frohman’s employment with us ceased to be effective on December 7, 2006, or the separation date. The separation agreement provides for the resolution of all matters with respect to Mr. Frohman’s employment, including all obligations to Mr. Frohman under his employment agreement with us dated as of October 10, 2005, with respect to his outstanding options to purchase shares of our common stock and with respect to any other similar amounts or benefits payable to Mr. Frohman pursuant to the employment agreement or otherwise.

     The separation agreement provides for the payment to Mr. Frohman of his monthly salary immediately preceding his resignation for a period of 18 months, less taxes, in satisfaction of all obligations under his employment agreement, and in recognition that a material portion is in consideration of Mr. Frohman’s confidentiality, non-competition and non-solicitation obligations. In addition, under the separation agreement, Mr. Frohman was entitled to receive (i) a lump sum payment equal to $21,525 for four weeks of accrued but unused vacation, less $8,075 for certain business expenses and (ii) payment of, or reimbursement for, monthly COBRA premiums for a period of 18 months following the separation date. The separation agreement further provides that upon his termination of employment, Mr. Frohman’s option to purchase 600,000 shares of our common stock, exercisable at $2.50 per share and originally granted on November 10, 2005, would become vested as to 375,000 shares (150,000 of which were already vested immediately prior to his resignation and 225,000 of which became vested on December 7, 2006). These 375,000 shares shall remain exercisable by Mr. Frohman for one year following the separation date. The option would terminate with respect to the remaining 225,000 shares that would not become vested under the separation agreement.

     Certain of Mr. Frohman’s shares of our common stock (1,566,007 shares) remained locked up until November 23, 2007 under the terms of a lock-up agreement with us, dated as of November 23, 2005. A portion of Mr. Frohman’s shares (1,191,006 shares) and his option to acquire 375,000 shares of our common stock were released from his original lock-up agreement. Under the separation agreement, Mr. Frohman has agreed that the released securities will remain subject to general lock-up terms for a period of 18 months following the separation date, subject to certain exceptions as set forth in the separation agreement.

     The separation agreement also provides for mutual non-disparagement by Mr. Frohman and us. Mr. Frohman also is subject to confidentiality provisions and an 18 month non-competition, non-solicitation and no-hire period under the separation agreement.

     On April 5, 2007, we entered into a Consent and Lock-Up Agreement with Scott Frohman. Under the Consent and Lock-Up Agreement, we consented to the release from lock-up of 1,300,000 shares out of 1,559,007 shares of Common Stock (or securities exercisable for or convertible into shares of Common Stock) held by Mr. Frohman, or the Released Securities, that were locked up in favor of us until June 7, 2008 pursuant to the Separation Agreement between us and Mr. Frohman dated December 7, 2006. We consented to this release in consideration for a lock-up until May 23, 2008 by Mr. Frohman in favor of us of 50% of Mr. Frohman’s remaining 1,566,007 shares of Common Stock (or securities exercisable for or convertible into shares of Common Stock) that were otherwise locked up until November 23, 2007 under the Lock-Up Agreement between us and Mr. Frohman dated November 23, 2005. Prior to the Consent and Lock-Up Agreement, the lock-up restrictions in the Separation Agreement allowed Mr. Frohman to sell or otherwise transfer up to 50,000 shares of Released Securities in any given month. Under the Lock-Up Agreement, Mr. Frohman will not be entitled to this 50,000 share exception until on or after July 5, 2007 as it relates to the 259,007 shares of Released Securities that were not released from lock-up under the Consent and Lock-Up Agreement.

     On May 1, 2007, we entered into an Amendment to Consent and Lock-Up Agreement with Mr. Frohman. Under the Amendment to the Consent and Lock-Up Agreement, we consented to the release from lock-up of 200,000 shares that were locked up until July 5, 2007 under the Consent and Lock-Up Agreement. In consideration for this release, Mr. Frohman agreed that 200,000 shares of Common Stock that were locked up until November 23, 2007 under the Lock-Up Agreement between us and Mr. Frohman dated November 23, 2005 would continue to be locked up until February 21, 2008.

     On December 7, 2007, we entered into an Amendment Agreement to the Separation Agreement with Mr. Frohman. Under this agreement, Mr. Frohman agreed to forego any rights he had to receive the approximately 6 remaining months of severance to which he was entitled under the Separation Agreement in consideration for our extension of the post-termination exercise period of Mr. Frohman’s option to purchase 375,000 shares of Common Stock for an additional year. According to this agreement, if the closing bid price of the Common Stock on any trading following December 7, 2007 is $5.00 or more, Mr. Frohman shall be obligated to exercise the option within five business days of such trading date. If Mr. Frohman fails to exercise any or all of the options, the options will terminate within five business days of the trading date with regard to the unexercised shares.

Alvin H. Clemens and Ivan M. Spinner

     On November 27, 2007 we entered into amended and restated employment agreements with each of Alvin H. Clemens and Ivan M. Spinner. The employment agreements replaced and superseded the executives’ existing employment agreements.

     Each employment agreement has an initial term of three years beginning on November 27, 2007. The employment agreements automatically renew for successive additional one-year periods each unless either we or the executive gives the other 60 days’ written notice prior to the end of the then current term.

     Under the respective employment agreements, (i) Mr. Clemens would continue to serve as our Executive Chairman and Chief Executive Officer with a base salary equal to his existing base salary of $450,000 per year and (ii) Mr. Spinner would serve as our Executive Vice President with a base salary of $371,000 per year until April 2, 2007 and a base salary of $300,000 thereafter.

     Each executive also is entitled to receive annual bonus compensation in cash, capital stock or other property as determined by our board of directors and to participate in all benefit plans offered from time to time to our senior executives. In addition, each executive is entitled to a car allowance of at least $1,000 per month and reimbursement for up to $15,000 in dues associated with the executive’s membership in professional and business organizations.

     Certain other terms are identical among all of the employment agreements and are set forth below:

	•		We may terminate the employment agreements (i) for “Cause” (as defined in the employment agreements), (ii) upon 60 days’ prior written notice to the executive if without Cause, or (iii) upon the executive’s “Permanent Disability” as defined in the employment agreements. Each executive may terminate his employment agreement (i) for “Good Reason” as defined in the employment agreements or (ii) upon 30 days’ prior written notice to us for any reason.
	•		If (i) we terminate an executive’s employment without Cause or (ii) the executive terminates his employment agreement for Good Reason, the executive will be entitled to receive (x) 18 months’ base salary at the then current rate, payable in accordance with our usual practices, (y) continued participation for 18 months in our benefit plans and (z) payment, within a commercially reasonable time and on a prorated basis, of any bonus or other payments earned in connection with our bonus plan existing at the time of termination. In addition, if an employment agreement is terminated in accordance with the foregoing sentence within two months prior to, or 24 months following, a change in control (as described in the employment agreement), the executive will be entitled to receive 18 months’ base salary at the then current rate upon the date of termination, regardless of our usual practices, and all stock options held by the executive at the date of termination will immediately become 100%

			vested and all restrictions on such options will lapse.
	•		If we terminate an executive’s employment for Cause or the executive terminates his employment agreement without Good Reason, the executive will be entitled to receive (i) all accrued and unpaid salary and vacation pay through the date of termination and (ii) continued participation for one month in our benefit plans.
	•		If we terminate an executive’s employment due to a Permanent Disability, the executive will be entitled to receive (i) 18 months’ base salary at the then current rate, payable in accordance with our usual practices, (ii) continued participation for 18 months in our benefit plans and (iii) payment, within a commercially reasonable time and on a prorated basis, of any bonus or other payments earned in connection with our bonus plan existing at the time of termination. We may credit any such amounts against any proceeds paid to the executive with respect to any disability policy maintained and paid for by us for the executive’s benefit.
	•		If an executive dies during the term of his employment agreement, the employment agreement will automatically terminate and the executive’s estate or beneficiaries will be entitled to receive (i) three months’ base salary at the then current rate, payable in a lump sum and (ii) continued participation for one year in our benefit plans.
	•		Each executive is prohibited from competing with us or soliciting our employees, independent contractors, or outside agents, directly or indirectly, for another business and is subject to standard confidentiality obligations during the term of the employment agreements and for a period of 18 months thereafter.
	•		We and each executive will be prohibited, following a termination of the executive’s employment with us from disparaging each other.

Charles A. Eissa

     Pursuant to a written employment agreement, Mr. Eissa serves as our President and Chief Operating Officer. Pursuant to his employment agreement, his annual base salary was initially $214,200 per year through April, 1, 2006, was then increased to $250,000 through March 19, 2007 and then increased to $300,000 thereafter. He is entitled to receive such bonus compensation as a majority of the members of our board of directors may determine from time to time. Mr. Eissa’s employment agreement automatically renewed on November 18, 2007 and expires on November 18, 2008.

     In the event of Mr. Eissa’s termination without cause or for good reason, he or his estate would receive his then current base annual salary, plus unpaid accrued employee benefits, which is primarily accrued vacation, plus the continuation of his employee benefits for a period of one year, less all applicable taxes. In the event of his voluntary termination, death or disability, he or his estate would receive unpaid accrued employee benefits, plus the continuation of his employee benefits for a period of 1 month, less all applicable taxes.

Compensation of Directors

     The following table sets forth information concerning the compensation of all individuals who served on our board of directors during the fiscal year ended December 31, 2007. There were no non-equity incentive plan compensation or nonqualified deferred compensation earnings to any of our directors for the year ended December 31, 2007.