R
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Delaware
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98-0438502
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(State or Other Jurisdiction of
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(I.R.S. Employer
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Incorporation or Organization)
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Identification No.)
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150 N. Radnor-Chester Road
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Suite B-101
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Radnor, Pennsylvania
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19087
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(Address of Principal Executive Offices)
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(Zip Code)
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(484) 654-2200
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Registrant’s telephone number, including area code)
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
x
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TABLE OF CONTENTS
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Page
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PART I
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Item 1. Business
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4
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Item 2. Properties
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7
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Item 3. Legal Proceedings
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7
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PART II
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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8
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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8
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Item 8. Financial Statements and Supplementary Data
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F-1
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
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22
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Item 9A(T). Controls and Procedures
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22
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Item 9B. Other Information
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22
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PART III
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Item 10. Directors, Executive Officers and Corporate Governance
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23
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Item 11. Executive Compensation
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27
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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35
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Item 13. Certain Relationships and Related Transactions, and Director Independence
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38
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Item 14. Principal Accountant Fees and Services
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41
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Item 15. Exhibits and Financial Statement Schedules
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43
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ITEM 1.
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BUSINESS.
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ITEM 2.
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PROPERTIES.
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ITEM 3.
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LEGAL PROCEEDINGS.
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ITEM 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
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2009:
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High
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Low
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||||||
First quarter, ended March 31, 2009
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$ | 0.16 | $ | 0.05 | ||||
Second quarter, ended June 30, 2009
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$ | 0.16 | $ | 0.04 | ||||
Third quarter, ended September 30, 2009
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$ | 0.16 | $ | 0.05 | ||||
Fourth quarter, ended December 31, 2009
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$ | 0.13 | $ | 0.04 | ||||
2010:
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||||||||
First quarter, ended March 31, 2010
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$ | 0.12 | $ | 0.04 | ||||
Second quarter, ended June 30, 2010
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$ | 0.11 | $ | 0.04 | ||||
Third quarter, ended September 30, 2010
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$ | 0.18 | $ | 0.04 | ||||
Fourth quarter, ended December 31, 2010
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$ | 0.51 | $ | 0.05 | ||||
2011:
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||||||||
First quarter, ended March 31, 2011
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$ | 0.10 | $ | 0.05 |
ITEM 7.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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For the Year Ended December 31,
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||||||||
2010
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2009
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|||||||
Professional services
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$ | 3,694,125 | $ | 3,596,895 | ||||
ASP revenue
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1,487,880 | 1,480,322 | ||||||
Sales of software licenses
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125,000 | 1,162,500 | ||||||
Maintenance revenue
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761,250 | 578,000 | ||||||
Sub-leasing revenue
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9,103 | 30,050 | ||||||
Total
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$ | 6,077,358 | $ | 6,847,767 |
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·
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Professional services revenue increased as a result of higher post implementation services, which were provided to several of our largest clients. Implementation services included assisting clients in setting up their insurance products in InsPro, providing modifications to InsPro’s functionality to support the client’s business, interfacing InsPro with the client’s other systems, automation of client correspondence to their customers and data conversion from the client’s existing systems to InsPro.
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·
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ASP revenue marginally increased as a result of the commencement of hosting services to a recently implemented client partially offset by lower ASP revenue from three other clients. In 2010 we earned ASP revenue from seven InsPro clients. ASP hosting service enables a client to lease the InsPro software, paying only for that capacity required to support their business. In addition InsPro Technologies provides hosting service to client’s licensed InsPro software. InsPro’s ASP clients access InsPro installed on InsPro Technologies’ owned servers located at InsPro Technologies’ offices or at a third party’s site.
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·
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In 2010 and 2009 we earned sales of software licenses from one InsPro client in 2010 and three clients in 2009.
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·
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Maintenance revenue increased as a result of the addition of three maintenance contracts in 2010 compared to 2009. In 2010 we earned maintenance revenues from seven clients.
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·
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We earned sub-leasing revenue from the sub-leasing of space in our Radnor office. The subleasing commenced in March 2009 and ended in March 2010.
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For the Year Ended December 31,
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||||||||
2010
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2009
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|||||||
Salaries, employee benefits and related taxes
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$ | 3,953,596 | $ | 3,547,783 | ||||
Professional fees
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1,622,039 | 1,812,229 | ||||||
Rent, utilities, telephone and communications
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295,173 | 262,456 | ||||||
Other cost of revenues
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693,034 | 643,068 | ||||||
$ | 6,563,842 | $ | 6,265,536 |
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·
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Our salaries, employee benefits and related taxes component of cost of revenues in 2010 was $3,953,596 as compared to $3,547,783 for 2009 for an increase of $405,813 or 11%. Salaries, employee benefits and related taxes increased as a result of increased employee staffing. InsPro Technologies strengthened its management by hiring a COO in the fourth quarter of 2009 and hiring staff in quality assurance, customer implementation and business development areas.
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·
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Our professional fees component of cost of revenues in 2010 was $1,622,039 as compared to $1,812,229 for 2009 for a decrease of $190,190 or 11%. Professional fees decreased as a result of the hiring of two key former consultants as employees and reduced utilization of certain domestic based independent contractors partially offset by $167,571 of training and set up expense incurred pertaining to a new vendor, who will provide InsPro Technologies with offshore outsourcing capabilities, which we believe will provide us with cost effective and scalable technology resources in the future.
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·
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Our rent, utilities, telephone and communications component of cost of revenues in 2010 was $295,173 as compared to $262,456 for 2009 for an increase of $32,727 or 13%. Rent, utilities, telephone and communications increased as a result of an increase in the amount of leased space at InsPro’s Eddystone office during 2009 and to a lesser extent an increase in ASP data connection costs and corporate telephone and communications expense.
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·
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Our other cost of revenues component of cost of revenues in 2010 was $693,034 as compared to $643,068 in 2009, an increase of $49,966 or 8%. Other cost of revenues consisted of the following:
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For the Year Ended December 31,
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||||||||
2010
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2009
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|||||||
Office expenses
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$ | 5,606 | $ | 8,823 | ||||
Travel and entertainment
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107,325 | 91,897 | ||||||
Computer processing, hardware and software
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571,609 | 537,364 | ||||||
Other
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8,494 | 4,984 | ||||||
Total
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$ | 693,034 | $ | 643,068 |
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o
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Our travel and entertainment component of cost of revenues increased as a result of post implementation support, which was provided to a client whose InsPro licensed application was implemented in 2010. We incurred travel and entertainment expense in connection with customer relationship management and implementation of InsPro at client locations.
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o
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Our computer processing, hardware and software component of cost of revenues in 2010 was $571,609 as compared to $537,364 in 2009, an increase of $34,245 or 6%. The increase was the result of costs incurred to reorganize and move certain equipment in order to improve performance and ultimately reduce cost in the future and certain vendor discounts pertaining to computer processing provided to the Company in 2009 in connection with a new ASP client, which expired in 2009. We incur computer processing, hardware and software fees associated with ASP hosting services and these services increased due to incremental services and expense associated with a new InsPro client. InsPro has a hosting services contract with a third party, which can be terminated with notice and payment of a termination fee. This third party provides InsPro Technologies with hosting services for our client’s ASP environments.
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For the Year Ended December 31,
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||||||||
2010
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2009
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|||||||
Salaries, employee benefits and related taxes
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$ | 2,765,161 | $ | 3,489,204 | ||||
Advertising and other marketing
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160,903 | 279,450 | ||||||
Depreciation and amortization
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876,644 | 885,681 | ||||||
Rent, utilities, telephone and communications
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403,955 | 545,677 | ||||||
Professional fees
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653,123 | 1,286,064 | ||||||
Other general and administrative
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528,022 | 466,759 | ||||||
$ | 5,387,808 | $ | 6,952,835 |
For the Year Ended December 31,
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||||||||
2010
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2009
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|||||||
Salaries, wages and bonuses
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$ | 2,031,443 | $ | 2,187,342 | ||||
Share based employee and director compensation
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383,523 | 555,161 | ||||||
Commissions to employees
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40,319 | 25,454 | ||||||
Employee benefits
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131,001 | 107,451 | ||||||
Payroll taxes
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119,881 | 139,129 | ||||||
Severance and other compensation
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16,967 | 356,305 | ||||||
Directors’ compensation
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42,027 | 118,362 | ||||||
Total
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$ | 2,765,161 | $ | 3,489,204 |
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·
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Salaries, wages and bonuses were $2,031,443 in 2010 as compared to $2,187,342 in 2009, a decrease of $155,899 or 7%. The decrease is the result the elimination of two senior executive positions, four human resource positions and an accounting position. These reductions in corporate expenses were partially offset by increased staffing in InsPro’s sales and IT infrastructure areas.
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·
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Share based employee and director compensation expense was $383,523 in 2010 as compared to $555,161 in 2009.
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o
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In the third quarter of 2010 the Company granted to Mr. Oakes an immediately exercisable warrant to purchase 150,000 shares of Series A Preferred Stock at an exercise price equal to $4.00 per share. The Company recorded an expense of $332,994, which is the estimated fair value of warrant.
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o
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On October 29, 2009 all outstanding unvested options became vested and the associated unamortized deferred compensation expense was expensed as a result of a change of control as defined in the 2008 Equity Compensation Plan on that date. Consequently the only expense incurred in 2010 pertains to options granted after October 29, 2009.
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o
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Share based employee and director compensation consist of stock option and restricted stock grants, which are valued at fair-value at the date of the grant and expensed over the stock option’s vesting period or the duration of employment, whichever is shorter.
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·
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Commissions to employees were $40,319 in 2010 as compared to $25,454 in 2009, an increase of $14,865 or 58%. Commissions to employees increased as a result of increased commissionable revenue activity, which was paid to InsPro Technologies’ sales personnel.
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·
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Employee benefits expense was $131,001 in 2010 as compared to $107,451 in 2009, an increase of $23,550 or 22%. The increase is primarily the result of increased employee group health insurance cost as a result of a change in the Company’s employee benefits program in 2010 to provide all employees with comparable employee benefits at comparable cost.
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·
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Severance and other compensation was $16,967 in 2010 as compared to $356,505 in 2009. The decrease was the result of the accrual of severance expense as of March 31, 2009 as a result of the Separation of Employment and General Release Agreement with Mr. Eissa.
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For the Year Ended December 31,
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||||||||
2010
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2009
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|||||||
Amortization of intangibles acquired as a result of the InsPro acquisition
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$ | 437,706 | $ | 468,079 | ||||
Amortization of software and website development for external marketing
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43,574 | 87,148 | ||||||
Depreciation expense
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395,364 | 330,454 | ||||||
Total
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$ | 876,644 | $ | 885,681 |
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·
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In 2010 we incurred amortization expense of $437,706 for the intangible assets acquired from InsPro Technologies as compared to $468,079 in 2009. The decrease in 2010 as compared to 2009 is the result of employment and non-compete agreements acquired, which were amortized straight line over three years starting on October 1, 2007, that became fully amortized effective September 30, 2010.
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·
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In 2010 we incurred amortization expense of $43,574 for software development cost for external marketing pertaining to InsPro Technologies’ InsPro system as compared to $87,148 in 2009. The decrease was the result of the completion of the amortization in the second quarter of 2010.
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·
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In 2010 we incurred depreciation expense of $395,364 as compared to $330,454 in 2009. The increase was due to assets recently acquired by InsPro Technologies.
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For the Year Ended December 31,
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||||||||
2010
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2009
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|||||||
Revenues:
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||||||||
Commission and other revenue from carriers
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$ | 452,360 | $ | 2,157,217 | ||||
Gain recognized upon the execution of the Agreement
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- | 2,664,794 | ||||||
Transition policy commission pursuant to the Agreement
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1,114,477 | 1,786,480 | ||||||
Gain on the sale of Insurint
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578,569 | - | ||||||
Gain on disposal of property and equipment
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6,530 | 230,170 | ||||||
Lead sale revenue
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156 | 228 | ||||||
Insurint revenue
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53,340 | 163,947 | ||||||
Sub-lease revenue
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1,219,723 | 1,447,738 | ||||||
3,425,155 | 8,450,574 | |||||||
Operating expenses:
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||||||||
Salaries, employee benefits and related taxes
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238,698 | 1,838,247 | ||||||
Lead, advertising and other marketing
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- | 101,356 | ||||||
Depreciation and amortization
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- | 363,787 | ||||||
Rent, utilities, telephone and communications
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312,068 | 3,632,962 | ||||||
Professional fees
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182,424 | 596,765 | ||||||
Loss on impairment of property and equipment
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- | 416,764 | ||||||
Loss on impairment of intangible assets
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- | 1,222,817 | ||||||
Other general and administrative
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228,290 | 707,813 | ||||||
961,480 | 8,880,511 | |||||||
Gain (loss) from discontinued operations
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$ | 2,463,675 | $ | (429,937 | ) |
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·
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Commission and other revenue from carriers of $452,360 in 2010 as compared to $2,157,217 in 2009. The decrease is primarily the result of the execution of the Client Transition Agreement, or the Agreement, with eHealth Insurance Services, Inc., or eHealth, whereby we no longer receive commission revenue on certain policies transferred to eHealth effective on or about February 1, 2009. We continue to receive commissions from carriers other than certain specified carriers and commissions on policies other than the transferred policies.
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·
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Gain recognized upon the execution of the Agreement of $2,664,794 in the first quarter of 2009, which is the sum of the aggregate initial amount of consideration paid by eHealth and eHealth’s assumption of certain liabilities relating to historical commission advances on the transferred policies.
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·
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Transition policy commission pursuant to the Agreement of $1,114,478 in 2010 as compared to $1,786,480 in 2009. The decrease is due to the declines in our Telesales call center produced agency business.
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·
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During the first quarter of 2010 we recognized a $578,569 gain on the sale of Insurint effective upon the March 31, 2010 execution of an asset purchase agreement, or the Insurint Sale Agreement, with an unaffiliated third party.
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|
o
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Pursuant to the terms of the Insurint Sale Agreement we sold substantially all of Insurint’s assets used in Insurint’s business including the Insurint software, the
www.insurint.com
web site, other intellectual property specific to Insurint including but not limited to the customer base and all future revenue pertaining to Insurint. The buyer agreed to assume future Insurint commitments and expenses subsequent to March 31, 2010.
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|
o
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Pursuant to the Insurint Sale Agreement we will receive in aggregate $625,000 in cash from the buyer of Insurint, of which $312,500 was received on April 1, 2010 and the $312,500 balance will be received over twenty-three equal monthly installments in the amount of $13,020.83, with the first monthly payment due on May 1, 2010, and the last monthly payment in the amount of $13,020.91 due on April 1, 2012.
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|
o
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We incurred $21,829 of legal costs pertaining to the Insurint Sale Agreement.
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·
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Insurint revenue was $53,340 in 2010 and $163,947 in 2009. Insurint revenue ceased effective March 31, 2010 as a result of the Insurint Sale Agreement.
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·
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In 2010 we earned sub-lease revenue of $1,219,723 as compared to $1,447,738 in 2009 relating to the sub-lease of a portion of our former Agency and Insurint operations office in Florida and our former New York Agency sales office. The decline in sub-lease revenue is the result of lower sub-lease revenue from both our former New York sales office and Deerfield Beach office. Sub-lease revenue includes base rent, additional rent pertaining to utilities and occupancy costs and certain telephony, technology and facility services provided by us to certain of our sub-tenants. Sub-lease revenue from our former New York sales office terminated effective December 31, 2010 along with our sub-lease expense and obligation for this office. Sub-lease revenue from our Florida office will terminate effective February 28, 2011 along with our lease expense and obligation for this office.
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·
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Decreases in accounts receivable of $305,566, which is primarily the result of the collection of amounts pertaining to the sale of software licenses in the fourth quarter of 2009.
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·
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Decreases in accounts payable of $330,911, which is primarily the result of the Company’s reduction in its backlog of past due payables during 2010.
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·
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Decreases in accrued expenses of $469,925, which is primarily the result of the payment of severance to Mr. Eissa in 2010, which was accrued as of December 31, 2009, and the payment of accrued legal fees during 2010, which were accrued as of December 31, 2009.
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·
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Decreases in net liabilities of discontinued operations of $2,214,461, which is primarily the result of our payment of abandoned lease costs, that were accrued as of December 31, 2010, pertaining to our Deerfield Beach and New York offices.
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o
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As of December 31, 2010, we had $63,301 of net assets of discontinued operations as compared to $2,144,630 of net liabilities of discontinued operations as of December 31, 2009.
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|
o
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We do not anticipate our discontinued operations will continue to utilize cash from operations subsequent to December 31, 2010.
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§
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The sub-lease of our former New York office expired on December 31, 2010 and any remaining liabilities we have pertaining to this office will be funded out of our security deposit.
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§
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We anticipate future cash receipts from our former Agency and Insurint businesses combined with sublease revenue will exceed our remaining $117,935 liability, which we recorded pertaining to our abandoned lease for our Deerfield Beach office.
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·
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Recorded depreciation and amortization expense of $876,644 and $885,681 in 2010 and 2009, respectively.
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·
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Recorded stock-based compensation and consulting expense of $383,523 and $619,721 in 2010 and 2009, respectively.
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·
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Recognized a gain on change in fair value of warrants liabilities of $1,136,588 in 2010 and $534,391 in 2009.
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·
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In the first quarter of 2009 we recorded $1,639,581 pertaining to the impairment of certain long lived assets of our discontinued operations.
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·
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We recorded a loss of $6,530 and a gain of $233,228 on the disposal of property and equipment of discontinued operations in 2010 and 2009, respectively.
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·
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During the first quarter of 2010 we received $1,107,000 in gross proceeds as a result of the issuance of preferred stock and warrants as a result of the exercise of subscription units by certain shareholders pertaining to our rights offering, which was completed on March 26, 2010.
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o
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On January 14, 2010 we filed a prospectus for a rights offering on Form S-1/A, which the Commission declared effective on January 22, 2010, to distribute to shareholders at no charge, one non-transferable subscription right for each 12,256 shares of our common stock and 613 shares of our Series A Preferred Stock owned as of January 1, 2010, the record date, either as a holder of record or, in the case of shares held of record by brokers, dealers, custodian banks or other nominees on shareholders’ behalf, as a beneficial owner of such shares. This rights offering was designed to give all of the holders of the Company’s common stock the opportunity to participate in an equity investment in the Company on the same economic terms as the Company’s 2009 private placement.
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|
o
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The basic subscription right entitled the holder to purchase one unit, or a Subscription Unit, at a subscription price of $1,000. A Subscription Unit consisted of 250 shares of Series A Preferred Stock and a five-year warrant to purchase 5,000 shares of common stock at an exercise price of $0.20 per share. In the event that a holder of a Subscription Unit purchased all of the basic Subscription Units available to the holder then pursuant to their basic subscription right, the holder had the option to choose to subscribe for a portion of any Subscription Units that were not purchased by all other holders of Subscription Units through the exercise of their basic subscription rights.
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|
o
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Effective with the expiration of the subscription rights, which occurred on March 26, 2010, holders of subscription rights exercised in aggregate 1,061 basic subscription rights and 46 over subscription rights for a total 1,107 Subscription Units. As a result of the exercise of 1,107 Subscription Units we issued effective on March 26, 2010 in aggregate 276,750 shares of Series A Preferred Stock and five-year warrants to purchase in aggregate 5,535,000 shares of common stock at an exercise price of $0.20 per share. The Series A Preferred Stock issued in 2010 has the same terms as the Series A Preferred Stock issued in 2009.
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|
o
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Of the 1,107 subscription rights exercised, The Co-Investment Fund II, L.P., a Delaware limited partnership, or Co-Investment, exercised 1,000 basic subscription rights for $1,000,000 and on March 26, 2010, the Company issued to Co-Investment 250,000 shares of Series A Preferred Stock and five-year warrants to purchase in aggregate 5,000,000 shares of common stock at an exercise price of $0.20 per share.
|
|
o
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Effective with the expiration of the subscription rights all unexercised subscription rights expired.
|
|
·
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During the second quarter of 2010 we received $1,000,000 in gross proceeds as a result of the modification of the terms of the Loan Agreement and Note (each as defined below).
|
|
o
|
On June 15, 2010, the Company and Co-Investment agreed to modify the terms of the loan agreement, or the Loan Agreement, and the Secured Promissory Note, or the Note, between the parties to: (i) increase the loan from $1,250,000 to $2,250,000 on June 15, 2010 and (ii) allow Co-Investment to demand the Company to repay to Co-Investment an amount not to exceed the loan balance plus accrued interest in the form of the Company’s equity securities at the conversion price and terms identical to the price and terms of the Company’s next issuance of common or preferred stock issued for cash consideration occurring after June 15, 2010 (“Equity Issuance”). An Equity Issuance occurred on September 30, 2010.
|
|
o
|
The Company and Co-Investment agreed in the event that the Company did not have a sufficient number of authorized shares of its equity securities to issue to Co-Investment the Company and Co-Investment will jointly cooperate with one another in obtaining the necessary shareholder approval to increase the number of authorized shares of the Company’s equity securities and the effective date of the issuance and repayment will be the date of the Company’s shareholder approval.
|
|
o
|
The Company incurred $18,389 of costs associated with the Loan Agreement and Note in the second quarter of 2010.
|
|
·
|
During the third quarter of 2010 we received $5.4 million in gross proceeds as a result of the issuance of units of preferred stock and warrants in a private offering.
|
|
o
|
On September 30, 2010, the Company entered into and completed a private placement, or the 2010 Private Placement, with certain accredited investors, including Independence Blue Cross, a Pennsylvania hospital plan corporation, for an aggregate of 1,800,001 shares of Series B Preferred Stock, and warrants to purchase 18,000,010 shares of our common stock, pursuant to the terms of a securities purchase agreement, or the 2010 Purchase Agreement.
|
|
o
|
Under the terms of the 2010 Purchase Agreement, and subject to the approval of the Company’s shareholders of an amendment to the Certificate of Incorporation of the Company to increase the number of shares of authorized Common Stock of the Company, the Company has agreed to sell an additional 200,000 Units to the investors after September 30, 2010, on the same terms and conditions as described in the 2010 Purchase Agreement.
|
|
·
|
During the fourth quarter of 2010 we received $0.6 million in gross proceeds as a result of the issuance of preferred stock and warrants in the sale of 200,000 Units to Independence Blue Cross as part of the 2010 Private Placement.
|
|
·
|
In the first quarter of 2009 we completed a private placement (the “2009 Private Placement”) with Co-Investment and issued 1,000,000 shares of our Series A Preferred Stock and warrants to purchase 1,000,000 shares of our Series A Preferred Stock. Our gross proceeds were $4,000,000 and we paid $15,617 of legal and other expenses in connection with the 2009 Private Placement.
|
|
·
|
During the fourth quarter of 2009 the Company received $1,250,000 from Co-Investment upon entering into the Loan Agreement.
|
|
·
|
InsPro Technologies has entered into various capital lease obligations to purchase equipment used for operations.
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|
Page
Number
|
||
INSPRO TECHNOLOGIES CORPORATION
|
||
Report of Independent Registered Public Accounting Firm
|
F-2
|
|
Consolidated Balance Sheets at December 31, 2010 and December 31, 2009
|
F-3
|
|
Consolidated Statements of Operations for the Years Ended December 31, 2010 and December 31, 2009
|
F-4
|
|
Consolidated Statements of Changes in Shareholders' Equity (Deficit) for the Years Ended December 31, 2010 and December 31, 2009
|
F-5
|
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010 and December 31, 2009
|
F-6
|
|
Notes to Consolidated Financial Statements
|
F-7 to
F48
|
/s/
Sherb & Co., LLP
|
Certified Public Accountants
|
December 31, 2010
|
December 31, 2009
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash
|
$ | 4,429,026 | $ | 1,403,653 | ||||
Accounts receivable, net
|
709,503 | 1,015,069 | ||||||
Tax receivable
|
6,455 | 16,817 | ||||||
Prepaid expenses
|
158,245 | 83,834 | ||||||
Other current assets
|
1,756 | 43,227 | ||||||
Assets of discontinued operations
|
63,301 | - | ||||||
Total current assets
|
5,368,286 | 2,562,600 | ||||||
Restricted cash
|
1,152,573 | 1,154,044 | ||||||
Property and equipment, net
|
613,618 | 768,184 | ||||||
Intangibles, net
|
606,785 | 1,088,065 | ||||||
Other assets
|
92,558 | 110,608 | ||||||
Total assets
|
$ | 7,833,820 | $ | 5,683,501 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Note payable
|
$ | 17,311 | $ | 7,595 | ||||
Secured note from related party
|
- | 1,252,740 | ||||||
Accounts payable
|
918,972 | 1,249,883 | ||||||
Accrued expenses
|
346,808 | 816,733 | ||||||
Current portion of capital lease obligations
|
158,138 | 135,913 | ||||||
Due to related parties
|
8,370 | - | ||||||
Deferred revenue
|
377,500 | 232,500 | ||||||
Liabilities of discontinued operations
|
- | 2,144,630 | ||||||
Total current liabilities
|
1,827,099 | 5,839,994 | ||||||
LONG TERM LIABILITIES:
|
||||||||
Warrant liability
|
4,030,340 | 2,021,912 | ||||||
Capital lease obligations
|
165,612 | 201,627 | ||||||
Total long term liabilities
|
4,195,952 | 2,223,539 | ||||||
SHAREHOLDERS' EQUITY (DEFICIT):
|
||||||||
Preferred stock ($.001 par value; 20,000,000 shares authorized)
|
||||||||
Series A convertible preferred stock; 3,437,500 shares authorized, 1,276,750 and
1,000,000, shares issued and outstanding, respectively (liquidation value $12,767,500 and $10,000,000, respectively)
|
2,864,104 | 1,983,984 | ||||||
Series B convertible preferred stock; 5,000,000 and 2,250,000 shares authorized,
respectively, 2,797,379 and 0 shares issued and outstanding, respectively (liquidation value $8,392,137 and $0, respectively)
|
5,427,604 | - | ||||||
Common stock ($.001 par value; 300,000,000 and 200,000,000 shares authorized,
respectively; 41,543,655 shares issued and outstanding)
|
41,543 | 41,543 | ||||||
Additional paid-in capital
|
36,764,016 | 36,380,493 | ||||||
Accumulated deficit
|
(43,286,498 | ) | (40,786,052 | ) | ||||
Total shareholders' equity (deficit)
|
1,810,769 | (2,380,032 | ) | |||||
Total liabilities and shareholders' equity (deficit)
|
$ | 7,833,820 | $ | 5,683,501 |
For the Year Ended December 31,
|
||||||||
2010
|
2009
|
|||||||
Revenues
|
$ | 6,077,358 | $ | 6,847,767 | ||||
Cost of revenues
|
6,563,842 | 6,265,536 | ||||||
Gross profit (loss)
|
(486,484 | ) | 582,231 | |||||
Selling, general and administrative expenses:
|
||||||||
Salaries, employee benefits and related taxes
|
2,765,161 | 3,489,204 | ||||||
Advertising and other marketing
|
160,903 | 279,450 | ||||||
Depreciation and amortization
|
876,644 | 885,681 | ||||||
Rent, utilities, telephone and communications
|
403,955 | 545,677 | ||||||
Professional fees
|
653,123 | 1,286,064 | ||||||
Other general and administrative
|
528,022 | 466,759 | ||||||
5,387,808 | 6,952,835 | |||||||
Loss from operations
|
(5,874,292 | ) | (6,370,604 | ) | ||||
Gain (loss) from discontinued operations
|
2,463,675 | (429,937 | ) | |||||
Other income (expense):
|
||||||||
Gain on the change of the fair value of warrant liability
|
1,136,588 | 534,391 | ||||||
Interest income
|
21,000 | 29,579 | ||||||
Interest expense
|
(247,417 | ) | (94,739 | ) | ||||
Total other income (expense)
|
910,171 | 469,231 | ||||||
Net loss
|
$ | (2,500,446 | ) | $ | (6,331,310 | ) | ||
Net loss per common share - basic and diluted:
|
||||||||
Loss from operations
|
$ | (0.12 | ) | $ | (0.14 | ) | ||
Gain (loss) from discontinued operations
|
0.06 | (0.01 | ) | |||||
Net loss per common share - basic and diluted
|
$ | (0.06 | ) | $ | (0.15 | ) | ||
Weighted average common shares outstanding - basic and diluted
|
41,543,655 | 41,286,898 |
Series A Preferred Stock,
|
Series B Preferred Stock,
|
Common Stock, $.001
|
||||||||||||||||||||||||||||||||||
$.001 Par Value
|
$.001 Par Value
|
Par Value
|
||||||||||||||||||||||||||||||||||
Number of
Shares
|
Amount
|
Number of
Shares
|
Amount
|
Number of
Shares
|
Amount
|
Additional Paid-
in Capital
|
Accumulated
Deficit
|
Total
Shareholders'
Equity (Deficit)
|
||||||||||||||||||||||||||||
Balance - December 31, 2008
|
41,279,645 | $ | 41,279 | $ | 43,281,139 | $ | (41,378,941 | ) | $ | 1,943,477 | ||||||||||||||||||||||||||
Cumulative effect of a change in accounting principle-adoption of EITF 07-05 effective January 1, 2009
|
(7,603,090 | ) | 6,924,199 | (678,891 | ) | |||||||||||||||||||||||||||||||
Preferred stock and warrants issued in private placement
|
1,000,000 | 1,983,984 | 1,960,399 | 3,944,383 | ||||||||||||||||||||||||||||||||
Record fair value of warrant liability pertaining to warrants issued in private placement during 2009
|
(1,877,412 | ) | (1,877,412 | ) | ||||||||||||||||||||||||||||||||
Common stock issued to directors as compensation
|
264,010 | 264 | 12,936 | 13,200 | ||||||||||||||||||||||||||||||||
Amortization of deferred compensation
|
606,521 | 606,521 | ||||||||||||||||||||||||||||||||||
Net loss for the period
|
(6,331,310 | ) | (6,331,310 | ) | ||||||||||||||||||||||||||||||||
Balance - December 31, 2009
|
1,000,000 | 1,983,984 | 41,543,655 | 41,543 | 36,380,493 | (40,786,052 | ) | (2,380,032 | ) | |||||||||||||||||||||||||||
Preferred stock and warrants issued in rights offering
|
276,750 | 880,120 | 880,120 | |||||||||||||||||||||||||||||||||
Preferred stock and warrants issued in private placement
|
2,000,001 | 3,609,525 | 3,609,525 | |||||||||||||||||||||||||||||||||
Warrant issued to Robert Oakes as compensation
|
332,994 | 332,994 | ||||||||||||||||||||||||||||||||||
Preferred stock and warrants issued in connection with
conversion
of secured note from related party
|
797,378 | 1,818,079 | 1,818,079 | |||||||||||||||||||||||||||||||||
Amortization of deferred compensation
|
50,529 | 50,529 | ||||||||||||||||||||||||||||||||||
Net loss for the period
|
(2,500,446 | ) | (2,500,446 | ) | ||||||||||||||||||||||||||||||||
Balance - December 31, 2010
|
1,276,750 | $ | 2,864,104 | 2,797,379 | $ | 5,427,604 | 41,543,655 | $ | 41,543 | $ | 36,764,016 | $ | (43,286,498 | ) | $ | 1,810,769 |
For the Year Ended December 31,
|
||||||||
2010
|
2009
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net loss
|
$ | (2,500,446 | ) | $ | (6,331,310 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
876,644 | 885,681 | ||||||
Stock-based compensation and consulting
|
383,523 | 619,721 | ||||||
Gain on change of fair value of warrant liability
|
(1,136,588 | ) | (534,391 | ) | ||||
Loss on impairment of property and equipment of discontinued operations
|
- | 416,764 | ||||||
Loss on impairment of intangible assets of discontinued operations
|
- | 1,222,817 | ||||||
Gain (loss) on the disposal of equipment of discontinued operations
|
6,530 | (233,228 | ) | |||||
Provision for bad debt
|
- | 7,211 | ||||||
Changes in assets and liabilities:
|
||||||||
Accounts receivable
|
305,566 | (557,385 | ) | |||||
Tax receivable
|
10,362 | 14,473 | ||||||
Prepaid expenses
|
(74,411 | ) | 43,775 | |||||
Other current assets
|
(1,802 | ) | 8,506 | |||||
Other assets
|
18,050 | - | ||||||
Accounts payable
|
(330,911 | ) | 519,922 | |||||
Accrued interest on related secured note from related party
|
199,876 | - | ||||||
Accrued expenses
|
(469,925 | ) | 119,478 | |||||
Due to related parties
|
8,370 | (4,315 | ) | |||||
Deferred revenue
|
145,000 | (225,000 | ) | |||||
Assets and liabilities of discontinued operations
|
(2,214,461 | ) | (1,300,402 | ) | ||||
Net cash used in operating activities
|
(4,774,623 | ) | (5,327,683 | ) | ||||
Cash Flows From Investing Activities:
|
||||||||
Purchase of property and equipment
|
(239,607 | ) | (315,973 | ) | ||||
Proceeds from the sale of property and equipment of discontinued operations
|
- | 11,495 | ||||||
Net cash used in investing activities
|
(239,607 | ) | (304,478 | ) | ||||
Cash Flows From Financing Activities:
|
||||||||
Gross proceeds from note payable
|
119,875 | 32,831 | ||||||
Payments on note payable
|
(110,168 | ) | (25,236 | ) | ||||
Gross proceeds from secured note from related party
|
1,000,000 | 1,319,265 | ||||||
Payments on secured note from related party
|
(2 | ) | (60,404 | ) | ||||
Fees paid in connection with secured note from related party
|
(18,389 | ) | (43,273 | ) | ||||
Gross proceeds from capital leases
|
137,310 | 85,790 | ||||||
Payments on capital leases
|
(151,099 | ) | (55,917 | ) | ||||
Restricted cash in connection with letters of credit
|
1,471 | (4,044 | ) | |||||
Gross proceeds from sales of preferred stock and warrants
|
7,107,001 | 4,000,000 | ||||||
Fees paid in connection with offering
|
(46,396 | ) | (55,617 | ) | ||||
Net cash provided by financing activities
|
8,039,603 | 5,193,395 | ||||||
Net increase (decrease) in cash
|
3,025,373 | (438,766 | ) | |||||
Cash - beginning of the year
|
1,403,653 | 1,842,419 | ||||||
Cash - end of the year
|
$ | 4,429,026 | $ | 1,403,653 | ||||
Supplemental Disclosures of Cash Flow Information
|
||||||||
Cash payments for interest
|
$ | 47,541 | $ | 94,739 | ||||
Non cash financing activities:
|
||||||||
Accrued Interest on related party note
|
$ | 139,398 | $ | 2,740 | ||||
Repayment of secured note upon conversion into equity
|
$ | (2,392,134 | ) | $ | - | |||
Preferred stock and warrants issued upon the conversion of secured note
|
$ | 2,367,874 | $ | - |
As of December 31,
|
||||||||
2010
|
2009
|
|||||||
Largest InsPro client
|
42 | % | 56 | % | ||||
Second largest InsPro client
|
15 | % | 23 | % |
Warrant Issue
Date
|
Warrant Exercise
Price
|
Aggregate
Number of
Warrants
|
Expected Term
(Years) of
Warrants
|
Fair Value
|
||||||||||||
3/30/2007
|
$ | 2.48 | 3,024,186 | 3.2 | $ | 203,376 | ||||||||||
3/31/2008
|
$ | 0.80 | 6,250,000 | 4.2 | 475,515 | |||||||||||
$ | 678,891 |
Warrant Issue
Date
|
Warrant Exercise
Price
|
Aggregate
Number of
Warrants
|
Expected Term
(Years) of
Warrants
|
Fair Value
|
||||||||||||
3/31/2008
|
$ | 0.20 | 25,000,000 | 3.2 | $ | 1,123,520 | ||||||||||
1/15/2009
|
$ | 0.20 | 20,000,000 | 4.0 | 898,392 | |||||||||||
$ | 2,021,912 |
Warrant Issue
Date
|
Warrant
Exercise
Price
|
Common
Stock Closing
Price
|
Aggregate
Number of
Warrants
|
Volatility
|
Risk Free
Interest Rate
|
Fair Value
|
||||||||||||||||||
3/26/2010
|
$ | 0.20 | $ | 0.041 | 5,535,000 | 345 | % | 0.14 | % | $ | 226,880 | |||||||||||||
9/30/2010
|
0.15 | 0.120 | 18,000,010 | 392 | % | 0.19 | % | 2,159,973 | ||||||||||||||||
11/29/2010
|
0.15 | 0.100 | 2,000,000 | 404 | % | 0.18 | % | 199,998 | ||||||||||||||||
12/22/2010
|
$ | 0.15 | $ | 0.070 | 7,973,780 | 476 | % | 0.18 | % | 558,165 | ||||||||||||||
$ | 3,145,016 |
Warrant Issue
Date
|
Warrant
Exercise Price
|
Aggregate
Number of
Warrants
|
Expected Term
(Years) of
Warrants
|
Volatility
|
Fair Value
|
|||||||||||||||
1/15/2009
|
$ | 0.15 | 26,666,667 | 3.0 | 408 | % | $ | 1,732,347 | ||||||||||||
3/26/2010
|
0.15 | 7,380,000 | 4.2 | 446 | % | 479,697 | ||||||||||||||
9/30/2010
|
0.15 | 18,000,010 | 4.8 | 472 | % | 1,170,000 | ||||||||||||||
11/29/2010
|
0.15 | 2,000,000 | 4.9 | 480 | % | 130,000 | ||||||||||||||
12/22/2010
|
$ | 0.15 | 7,973,780 | 5.0 | 484 | % | 518,296 | |||||||||||||
$ | 4,030,340 |
Warrant liability balance as of December 31, 2009
|
$ | 2,021,912 | ||
Fair value of warrants issued during the year ended December 31, 2010
|
3,145,017 | |||
Fair value of warrants whose anti-dultion provisions expired during the year ended December 31, 2010
|
(1,123,710 | ) | ||
Decrease in the fair value of warrants liability during the year ended December 31, 2010
|
(12,879 | ) | ||
Warrant liability balance as of December 31, 2010
|
$ | 4,030,340 |
December 31,
2010
|
December 31,
2009
|
|||||||
Series A convertible preferred stock issued and outstanding
|
25,535,000 | 20,000,000 | ||||||
Series B convertible preferred stock issued and outstanding
|
55,947,580 | - | ||||||
Options, issued, outstanding and exercisable
|
4,240,000 | 5,426,648 | ||||||
Warrants to purchase common stock, issued, outstanding and exercisable
|
93,162,344 | 51,566,887 | ||||||
Warrants to purchase series A convertible preferred stock, issued, outstanding and exercisable
|
3,000,000 | - | ||||||
181,884,924 | 76,993,535 |
For the Years ended December 31,
|
||||||||
2010
|
2009
|
|||||||
Largest InsPro client
|
33 | % | 37 | % | ||||
Second largest InsPro client
|
16 | % | 28 | % |
December 31, 2010
|
December 31, 2009
|
|||||||
Accounts receivable, less allowance for doubtful accounts $0 and $4,735
|
$ | 149,913 | $ | 322,619 | ||||
Deferred compensation advances
|
200 | - | ||||||
Prepaid expenses
|
4,332 | - | ||||||
Other current assets
|
174,103 | 22,907 | ||||||
Other assets
|
51,227 | 91,809 | ||||||
Accounts payable
|
(82,431 | ) | (183,722 | ) | ||||
Accrued expenses
|
(134,203 | ) | (2,273,024 | ) | ||||
Sub-tenant security deposit
|
(99,840 | ) | (121,007 | ) | ||||
Unearned commission advances
|
- | (3,461 | ) | |||||
Deferred revenue
|
- | (751 | ) | |||||
Net current assets (liabilities) of discontinued operations
|
$ | 63,301 | $ | (2,144,630 | ) |
For the Year Ended December 31,
|
||||||||
2010
|
2009
|
|||||||
Revenues:
|
||||||||
Commission and other revenue from carriers
|
$ | 452,360 | $ | 2,157,217 | ||||
Gain recognized upon the execution of the Agreement
|
- | 2,664,794 | ||||||
Transition policy commission pursuant to the Agreement
|
1,114,477 | 1,786,480 | ||||||
Gain on the sale of Insurint
|
578,569 | - | ||||||
Gain on disposal of property and equipment
|
6,530 | 230,170 | ||||||
Lead sale revenue
|
156 | 228 | ||||||
Insurint revenue
|
53,340 | 163,947 | ||||||
Sub-lease revenue
|
1,219,723 | 1,447,738 | ||||||
3,425,155 | 8,450,574 | |||||||
Operating expenses:
|
||||||||
Salaries, employee benefits and related taxes
|
238,698 | 1,838,247 | ||||||
Lead, advertising and other marketing
|
- | 101,356 | ||||||
Depreciation and amortization
|
- | 363,787 | ||||||
Rent, utilities, telephone and communications
|
312,068 | 3,632,962 | ||||||
Professional fees
|
182,424 | 596,765 | ||||||
Loss on impairment of property and equipment
|
- | 416,764 | ||||||
Loss on impairment of intangible assets
|
- | 1,222,817 | ||||||
Other general and administrative
|
228,290 | 707,813 | ||||||
961,480 | 8,880,511 | |||||||
Gain (loss) from discontinued operations
|
$ | 2,463,675 | $ | (429,937 | ) |
Cash payments to sellers
|
$ | 1,350,000 | ||
Fair value of common stock issued to sellers
|
1,650,006 | |||
Other
|
80,738 | |||
$ | 3,080,744 |
Cash
|
$ | 608,534 | ||
Accounts receivable
|
643,017 | |||
Prepaid expenses & other assets
|
22,623 | |||
Property and equipment, net
|
158,819 | |||
Other Assets - Refunds
|
3,400 | |||
Intangible Assets
|
2,097,672 | |||
Accounts payable
|
(34,278 | ) | ||
Accrued expenses
|
(122,675 | ) | ||
Income Taxes Payable
|
(157,288 | ) | ||
Deferred Revenue
|
(120,000 | ) | ||
Long and short term capital lease obligations
|
(19,081 | ) | ||
$ | 3,080,743 |
Useful
Life
(Years)
|
At December 31,
2010
|
At December 31,
2009
|
|||||||||
Computer equipment and software
|
3 | $ | 1,139,721 | $ | 900,428 | ||||||
Office equipment
|
4.6 | 194,360 | 194,360 | ||||||||
Office furniture and fixtures
|
6.7 | 191,363 | 189,857 | ||||||||
Leasehold improvements
|
9.8 | 34,034 | 34,034 | ||||||||
1,559,478 | 1,318,679 | ||||||||||
Less accumulated depreciation
|
(945,860 | ) | (550,495 | ) | |||||||
$ | 613,618 | $ | 768,184 |
Useful
Life
(Years)
|
At December 31,
2010
|
At December 31,
2009
|
|||||||||
InsPro LLC intangible assets acquired
|
4.7 | $ | 2,097,672 | $ | 2,097,672 | ||||||
Software development costs for external marketing
|
2 | 174,296 | 174,296 | ||||||||
2,271,968 | 2,271,968 | ||||||||||
Less: accumulated amortization
|
(1,665,183 | ) | (1,183,903 | ) | |||||||
$ | 606,785 | $ | 1,088,065 |
2011
|
$ | 346,735 | ||
2012
|
260,050 | |||
$ | 606,785 |
For the year ended December 31,
|
||||||||
2010
|
2009
|
|||||||
Salaries, commission and related taxes
|
$ | 38,229 | $ | 569,068 | ||||
Loss from discontinued operations
|
12,300 | 37,453 | ||||||
$ | 50,529 | $ | 606,521 |
Number
|
Weighted
|
|||||||||||
Of Shares
|
Average
|
Weighted
|
||||||||||
Underlying
|
Exercise
|
Average
|
||||||||||
Options
|
Price
|
Fair Value
|
||||||||||
Outstanding at December 31, 2008
|
4,291,200 | $ | 1.99 | $ | 0.86 | |||||||
For the year ended December 31, 2009
|
||||||||||||
Granted
|
2,375,000 | 0.10 | 0.09 | |||||||||
Exercised
|
- | - | - | |||||||||
Forfeited
|
(989,552 | ) | 2.50 | 0.36 | ||||||||
Outstanding at December 31, 2009
|
5,676,648 | 1.11 | 0.63 | |||||||||
For the year ended December 31, 2010
|
||||||||||||
Granted
|
2,250,000 | 0.10 | 0.10 | |||||||||
Exercised
|
- | - | - | |||||||||
Forfeited
|
(1,336,648 | ) | 1.31 | 0.30 | ||||||||
Outstanding at December 31, 2010
|
6,590,000 | $ | 0.41 | $ | 0.43 | |||||||
Outstanding and exercisable at December 31, 2010
|
4,240,000 | $ | 0.95 | $ | 0.64 |
For the Year Ended
December 31, 2010
|
For the Year Ended
December 31, 2009
|
|||||||
Expected volatility
|
380 | % | 214 | % | ||||
Risk-free interest rate
|
0.19 | % | 3.30 | % | ||||
Expected life in years
|
5.0 | 4.7 | ||||||
Assumed dividend yield
|
0 | % | 0 | % |
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||||
Exercise
Price
|
Number of
Shares
Underlying
Options
|
Weighted
Average
Remaining
Contractual
Life
|
Exercise
Price
|
Number
Exercisable
|
Exercise
Price
|
|||||||||||||||||
$ | 0.060 | 405,000 | 3.8 | $ | 0.060 | 205,000 | $ | 0.060 | ||||||||||||||
0.07 | 500,000 | 4.5 | 0.065 | - | 0.065 | |||||||||||||||||
0.10 | 2,220,000 | 3.1 | 0.100 | 2,070,000 | 0.100 | |||||||||||||||||
0.11 | 1,500,000 | 4.6 | 0.111 | - | 0.111 | |||||||||||||||||
1.00 | 1,000,000 | 4.9 | 1.000 | 1,000,000 | 1.000 | |||||||||||||||||
2.62 | 20,000 | 1.0 | 2.620 | 20,000 | 2.620 | |||||||||||||||||
2.70 | 425,000 | 0.2 | 2.700 | 425,000 | 2.700 | |||||||||||||||||
2.95 | 45,000 | 0.4 | 2.950 | 45,000 | 2.950 | |||||||||||||||||
3.50 | 75,000 | 5.3 | 3.500 | 75,000 | 3.500 | |||||||||||||||||
$ | 3.600 | 400,000 | 5.3 | $ | 3.600 | 400,000 | $ | 3.600 | ||||||||||||||
6,590,000 | 4,240,000 |
Weighted
|
||||||||
Common
|
Average
|
|||||||
Stock
|
Exercise
|
|||||||
Warrants
|
Price
|
|||||||
Outstanding at December 31, 2008
|
13,636,686 | $ | 0.25 | |||||
For the year ended December 31, 2009
|
||||||||
Granted
|
20,000,000 | 0.20 | ||||||
Adjustment to warrants issued in 2007 for Preferred Stock and 2009 Warrants
|
1,942,701 | 1.51 | ||||||
Adjustment to warrants issued in 2008 for Preferred Stock and 2009 Warrants
|
18,750,000 | 0.20 | ||||||
Exercised
|
- | - | ||||||
Expired
|
(2,762,500 | ) | 1.50 | |||||
Outstanding at December 31, 2009
|
51,566,887 | $ | 0.38 | |||||
For the year ended December 31, 2010
|
||||||||
Granted
|
33,508,790 | 0.16 | ||||||
Adjustment to warrants issued in 2009 for Preferred Stock and 2010 Warrants
|
6,666,667 | 0.15 | ||||||
Adjustment to warrants issued in 2010 for Preferred Stock and 2010 Warrants
|
1,845,000 | 0.15 | ||||||
Exercised
|
- | - | ||||||
Expired
|
(425,000 | ) | 2.57 | |||||
Outstanding at December 31, 2010
|
93,162,344 | 0.25 | ||||||
Exercisable at December 31, 2010
|
93,162,344 | $ | 0.25 |
Common
Stock
Warrants
|
Exercise
Price
|
|||
1,175,000
|
$ | 1.50 | ||
4,966,887
|
1.51 | |||
25,000,000
|
0.20 | |||
26,666,667
|
0.15 | |||
35,353,790
|
$ | 0.15 | ||
93,162,344
|
Weighted
|
||||||||
Preferred
|
Average
|
|||||||
Stock
|
Exercise
|
|||||||
Warrants
|
Price
|
|||||||
Outstanding at December 31, 2009
|
- | $ | - | |||||
For the year ended December 31, 2010
|
||||||||
Granted
|
150,000 | 4.00 | ||||||
Exercised
|
- | - | ||||||
Expired
|
- | - | ||||||
Outstanding at December 31, 2010
|
150,000 | 4.00 | ||||||
Exercisable at December 31, 2010
|
150,000 | $ | 4.00 |
December 31, 2010
|
December 31, 2009
|
||||||||||
Useful Life (Years)
|
|||||||||||
Computer equipment and software
|
3 | $ | 595,899 | 483,129 | |||||||
Phone System
|
3 | 15,011 | 15,011 | ||||||||
Leasehold improvements
|
- | ||||||||||
610,910 | 498,140 | ||||||||||
Less accumulated depreciation
|
(413,837 | ) | (222,134 | ) | |||||||
$ | 197,073 | 276,006 |
2011
|
$ | 176,242 | ||
2012
|
100,694 | |||
2013
|
37,420 | |||
2014
|
30,757 | |||
2015
|
12,815 | |||
Total future payments
|
357,928 | |||
Less amount representing interest
|
34,178 | |||
Present value of future minimum payments
|
323,750 | |||
Less current portion
|
158,138 | |||
Long-term portion
|
$ | 165,612 |
2011
|
$ | 1,009,825 | ||
2012
|
648,838 | |||
2013
|
277,184 | |||
2014
|
255,843 | |||
2015
|
257,451 | |||
thereafter
|
326,677 | |||
Total
|
$ | 2,775,818 |
2010
|
2009
|
|||||||
Computed “expected” benefit
|
$ | (874,346 | ) | $ | (2,215,959 | ) | ||
State tax benefit, net of federal effect
|
(74,944 | ) | (189,939 | ) | ||||
Amortization/impairment of acquisition related assets
|
182,924 | 564,002 | ||||||
Stock based compensation
|
145,739 | 230,478 | ||||||
Gain on change in fair value of warrants
|
(431,903 | ) | (203,069 | ) | ||||
Other permanent differences
|
6,140 | 57,180 | ||||||
Increase in valuation allowance
|
1,046,390 | 1,757,307 | ||||||
$ | - | $ | - |
2010
|
2009
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carry forward
|
$ | 13,727,271 | $ | 11,888,403 | ||||
Unearned commission advances
|
- | 1,315 | ||||||
Compensation expense
|
29,142 | 90,125 | ||||||
Lease abandonment
|
- | 848,798 | ||||||
All Other Miscellaneous Other
|
98,633 | 121,889 | ||||||
Total deferred tax asset
|
13,855,046 | 12,950,530 | ||||||
Deferred tax liabilities:
|
||||||||
Depreciation
|
(68,149 | ) | (91,561 | ) | ||||
Software development costs
|
- | (118,462 | ) | |||||
Total deferred tax liabilities
|
(68,149 | ) | (210,023 | ) | ||||
Net deferred tax asset
|
13,786,897 | 12,740,507 | ||||||
Less: Valuation allowance
|
(13,786,897 | ) | (12,740,507 | ) | ||||
$ | - | $ | - |
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINACIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES.
|
ITEM 9B.
|
OTHER INFORMATION.
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
Name
|
Age
|
Position
|
||
Anthony R. Verdi
|
62
|
Acting Principal Executive Officer, Chief Financial Officer and Chief Operating Officer
|
||
Robert J. Oakes
|
52
|
President and Chief Executive Officer of InsPro Technologies, LLC
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
Name and Principal Position
|
Fiscal Year
|
Salary ($)
|
Bonus ($) (6)
|
Stock
Awards ($)
|
Option Awards
($) (4)
|
All Other
Compensation
($) (5)
|
Total ($)
|
|||||||||||||||||||
Anthony R. Verdi (1)
|
2010
|
237,981 | - | - | - | 16,531 | 254,512 | |||||||||||||||||||
Acting Principal Executive Officer,
|
2009
|
225,000 | 100,000 | - | 63,978 | 12,773 | 401,751 | |||||||||||||||||||
Chief Financial Officer & Chief
|
||||||||||||||||||||||||||
Operating Officer
|
||||||||||||||||||||||||||
Robert J. Oakes (2)
|
2010
|
274,908 | 50,000 | - | 499,491 | 24,157 | 848,556 | |||||||||||||||||||
President InsPro Technologies LLC
|
2009
|
250,000 | 50,000 | - | 98,428 | 23,623 | 422,051 | |||||||||||||||||||
James Rourke (3)
|
2010
|
164,900 | 15,000 | - | 24,748 | 14,279 | 218,927 | |||||||||||||||||||
Senior Vice President
|
2009
|
- | - | - | - | - | - |
Name
|
Fiscal Year
|
Fair Value
at Date of
Grant ($)
|
Number of
Options
Granted (#)
|
Option
Exercise
Price ($)
|
Closing
Stock Price
on the Date
of Grant ($)
|
Date of
Grant
|
Expected
Volatility
|
Risk Free
Interest
Rate
|
||||||||||||||||||||||
Anthony R. Verdi
|
2010
|
- | - | - | - | - | - | - | ||||||||||||||||||||||
2009
|
63,978 | 650,000 | 0.10 | 0.10 |
2/5/2009
|
200 | % | 0.29 | % | |||||||||||||||||||||
Robert J. Oakes
|
2010
|
166,497 | 1,500,000 | 0.111 | 0.111 |
8/18/2010
|
384 | % | 0.19 | % | ||||||||||||||||||||
2010
|
332,994 | 150,000 | 4.000 | 4.000 |
8/18/2010
|
384 | % | 0.19 | % | |||||||||||||||||||||
2009
|
98,428 | 1,000,000 | 0.10 | 0.10 |
2/5/2009
|
200 | % | 0.29 | % | |||||||||||||||||||||
James Rourke
|
2010
|
14,998 | 250,000 | 0.060 | 0.060 |
3/25/2010
|
345 | % | 0.14 | % | ||||||||||||||||||||
2010
|
9,750 | 150,000 | 0.065 | 0.065 |
7/9/2010
|
376 | % | 0.20 | % |
Name
|
Payments for
Auto and
Equipment ($)
(a)
|
Company Paid
Health, Life and
Disabilitly
Insurance ($)
(b)
|
Severance ($)
|
Company
Matching of
Employee
401(k)
Contributions
(c)
|
Total ($)
|
|||||||||||||||
Anthony R. Verdi
|
13,200 | 981 | - | 2,350 | 16,531 | |||||||||||||||
Robert J. Oakes
|
500 | 20,861 | - | 2,796 | 24,157 | |||||||||||||||
James Rourke
|
600 | 13,679 | - | - | 14,279 |
Option Awards
|
|||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
||||||||||||
Anthony R. Verdi
|
650,000 | - | - | 0.10 |
2/4/2014
|
||||||||||||
350,000 | - | - | 1.00 |
11/09/2015
|
|||||||||||||
Robert J. Oakes
|
- | 1,500,000 | - | 0.11 |
8/18/2015
|
||||||||||||
150,000 | - | - | 4.00 |
8/18/2015
|
|||||||||||||
1,000,000 | - | 0.10 |
2/4/2014
|
||||||||||||||
James Rourke
|
- | 150,000 | - | 0.07 |
7/9/2010
|
||||||||||||
50,000 | 200,000 | - | 0.06 |
3/25/2010
|
Name
|
Fees Earned or
Paid in Cash
($) (1)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Total
($)
|
||||||||||||
Donald Caldwell
|
4,500 | - | - | 4,500 | ||||||||||||
John Harrison
|
3,500 | - | - | 3,500 | ||||||||||||
Warren V. Musser
|
4,000 | - | - | 4,000 | ||||||||||||
Sanford Rich
|
6,500 | - | - | 6,500 | ||||||||||||
L.J. Rowell
|
6,000 | - | - | 6,000 | ||||||||||||
Paul Soltoff
|
4,000 | - | - | 4,000 | ||||||||||||
Frederick Tecce
|
3,500 | - | - | 3,500 | ||||||||||||
Edmond Walters
|
4,000 | - | - | 4,000 |
Aggregate Number of
Options Available as of
December 31, 2010
|
||||
Donald Caldwell
|
- | |||
John Harrison
|
250,000 | |||
Warren V. Musser
|
675,000 | |||
Sanford Rich
|
200,000 | |||
L.J. Rowell
|
200,000 | |||
Paul Soltoff
|
150,000 | |||
Frederick C. Tecce
|
- | |||
Edmond Walters
|
- |
|
·
|
Each non employee director is entitled to receive the following cash compensation:
|
|
o
|
$5,000 annual retainer for each director, which the Company’s board of directors determined to waive for 2010
|
|
o
|
$2,000 annual retainer for the Audit Committee Chairperson, which the Company’s board of directors determined to waive for 2010
|
|
o
|
$1,000 annual retainer for the Compensation Committee Chairperson, which the Company’s board of directors determined to waive for 2010
|
|
o
|
$1,000 annual retainer for the Nominating and Governance Committee Chairperson, which the Company’s board of directors determined to waive for 2010
|
|
o
|
$1,000 meeting fee for each board meeting attending in person or via teleconference
|
|
o
|
$500 meeting fee for each committee meeting attending in person or via teleconference.
|
|
·
|
Each non employee director is entitled to receive the following equity compensation:
|
|
o
|
Upon election to our board of a directors, a newly elected director will receive a grant of restricted shares of common stock under our 2010 Equity Compensation Plan with an aggregate fair market value of $100,000, as determined by the closing market price of one share of our common stock on the date of the directors election to the board of directors, which shall vest in the following increments: (i) one-third on the date of the director’s election to the board of directors; (ii) one-third on the date of the first anniversary of the director’s election to the board of directors; (iii) one-third on the date of the second anniversary of the director’s election to the board of directors.
|
|
o
|
On a date specified by the Compensation Committee of the board, each director who serves as a director on that specified date will receive an annual grant of 10,000 fully vested shares of common stock granted under the 2010 Equity Compensation Plan. The Compensation Committee determined not to specify a date in 2010 and effectively waive this grant of stock in 2010, which our board of directors ratified.
|
|
o
|
On a date specified by the Compensation Committee of the board, each director who serves as a chairperson of a committee of the board of directors on that specified date will receive an annual grant of 5,000 fully vested shares of common stock granted under the 2008 Equity Compensation Plan. The Compensation Committee determined not to specify a date in 2010 and effectively waive this grant of stock in 2010, which our board of directors ratified.
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
|
|
·
|
each of our directors;
|
|
·
|
our named executive officers;
|
|
·
|
all of our directors, director nominees and executive officers as a group; and
|
|
·
|
each person or group of affiliated persons or entities known by us to beneficially own 5% or more of our common stock, Series A Convertible Preferred Stock or Series B Convertible Preferred Stock.
|
Name of Beneficial Owner
|
Number of Shares
Beneficially
Owned
|
Title of Class
|
Percent of
Shares
Beneficially
|
||||||
Directors and Executive Officers:
|
|||||||||
Donald R. Caldwell
|
116,008,935 | (2)(12) |
Common Stock
|
80.1 | % | ||||
1,250,000 | (3) |
Series A Preferred Stock
|
97.9 | % | |||||
797,378 | (3) |
Series B Preferred Stock
|
28.5 | % | |||||
Warren V. Musser
|
720,000 | (4) |
Common Stock
|
1.7 | % | ||||
Robert J. Oakes
|
4,832,232 | (5) |
Common Stock
|
11.3 | % | ||||
151,250 | (5a) |
Series A Preferred Stock
|
10.7 | % | |||||
John Harrison
|
490,083 | (6) |
Common Stock
|
1.2 | % | ||||
1,250 |
Series A Preferred Stock
|
* | |||||||
James Rourke
|
130,000 | (16) |
Common Stock
|
* | |||||
L.J. Rowell
|
415,600 | (7) |
Common Stock
|
1.0 | % | ||||
Paul Soltoff
|
388,333 | (8) |
Common Stock
|
* | |||||
1,250 |
Series A Preferred Stock
|
* | |||||||
Sanford Rich
|
348,333 | (9) |
Common Stock
|
* | |||||
1,250 |
Series A Preferred Stock
|
* |
Name of Beneficial Owner
|
Number of Shares
Beneficially
Owned
|
Title of Class
|
Percent of
Shares
Beneficially
|
||||||
Frederick C. Tecce
|
116,074,925 | (10)(12) |
Common Stock
|
80.2 | % | ||||
1,250,000 | (3) |
Series A Preferred Stock
|
97.9 | % | |||||
797,378 | (3) |
Series B Preferred Stock
|
28.5 | % | |||||
Anthony R. Verdi
|
1,118,333 | (11) |
Common Stock
|
2.6 | % | ||||
1,250 |
Series A Preferred Stock
|
* | |||||||
Edmond Walters
|
171,633 |
Common Stock
|
* | ||||||
All directors and executive officers as a group (11 persons)
|
124,673,483 |
(1)(2)(4)(5)(5a)
(6) (7)(8)(9) (10)(11)(12) |
Common Stock
|
80.2 | % | ||||
1,256,250 | (3) |
Series A Preferred Stock
|
98.6 | % | |||||
797,378 | (3) |
Series B Preferred Stock
|
28.5 | % | |||||
Holders of More than Five Percent of Our Common Stock, Series A Convertible Preferred Stock and Series B Convertible Preferred Stock:
|
|||||||||
The Co-Investment Fund II, L. P.
|
115,894,925 | (12) |
Common Stock
|
80.0 | % | ||||
1,250,000 | (3) |
Series A Preferred Stock
|
97.9 | % | |||||
797,378 | (3) |
Series B Preferred Stock
|
28.5 | % | |||||
Independence Blue Cross
|
50,000,010 | (13) |
Common Stock
|
54.6 | % | ||||
1,666,667 |
Series B Preferred Stock
|
59.6 | % | ||||||
Azeez Investors, LLC
|
6,000,000 | (14) |
Common Stock
|
30.2 | % | ||||
200,000 |
Series B Preferred Stock
|
7.1 | % | ||||||
Scarpa Family Trust, 2005
|
4,000,020 | (15) |
Common Stock
|
12.6 | % | ||||
133,334 |
Series B Preferred Stock
|
4.8 | % | ||||||
Alvin H. Clemens
|
3,922,457 | (1) |
Common Stock
|
9.2 | % |
(1)
|
Includes 1,000,000 shares held by The Clemens-Beaver Creek Limited Partnership, of which Alvin H. Clemens is the general partner. Mr. Clemens disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. Also includes 100,000 shares held by Mr. Clemens’s minor children. Also includes 993,377 shares underlying warrants, all of which are exercisable within 60 days of March 25, 2011.
|
(2)
|
Includes 12,646,874 shares, which are beneficially owned by Co-Investment Trust II, L. P., designee of Cross Atlantic Capital Partners, Inc. Mr. Caldwell is a managing partner of Cross Atlantic Capital Partners, Inc. Mr. Caldwell is also a shareholder, director and officer of Co-Invest II Capital Partners, Inc., which is the general partner of Co-Invest Management II, L.P., which is the general partner of the Fund. Mr. Caldwell disclaims beneficial ownership of these securities, except to the extent of his pecuniary interest therein.
|
(3)
|
Represents securities owned by the Co-Investment Fund II, L. P., the designee of Cross Atlantic Capital Partners, Inc., of which Frederick C. Tecce is the managing director and of which Donald R. Caldwell is managing partner. Mr. Caldwell is also a shareholder, director and officer of Co-Invest II Capital Partners, Inc., which is the general partner of Co-Invest Management II, L.P., which is the general partner of the Fund. Mr. Tecce and Mr. Caldwell disclaim beneficial ownership of these securities, except to the extent of their pecuniary interest therein.
|
(4)
|
Includes 440,000 shares underlying warrants and 250,000 shares underlying options, all of which are exercisable within 60 days of March 25, 2011.
|
(5)
|
Includes 1,375,000 shares underlying options and 33,333 shares underlying warrants, which are exercisable within 60 days of March 25, 2011. Includes 3,000,000 shares underlying a warrant to purchase 150,000 shares of Series A preferred stock, which is exercisable within 60 days of March 25, 2011, which is also convertible, at the sole option of the holder, into twenty shares of our common stock per share of Series A preferred stock. Includes 25,000 shares underlying 1,250 shares of Series A preferred stock, which is convertible, at the sole option of the holder, into twenty shares of our common stock per share of Series A preferred stock. Excludes 1,125,000 shares underlying options, which are not exercisable within 60 days of March 25, 2011.
|
(5a)
|
Includes 150,000 shares underlying warrants, which are exercisable within 60 days of March 25, 2011.
|
(6)
|
Includes 250,000 shares underlying options and 70,083 shares underlying warrants, all of which are exercisable within 60 days of March 25, 2011. Includes 25,000 shares underlying 1,250 shares of Series A preferred stock, which is convertible, at the sole option of the holder, into twenty shares of our common stock per share of Series A preferred stock.
|
(7)
|
Includes 200,000 shares underlying options that are exercisable within 60 days of March 25, 2011.
|
(8)
|
Includes 150,000 shares underlying options and 33,333 shares underlying warrants, all of which are exercisable within 60 days of March 25, 2011. Includes 25,000 shares underlying 1,250 shares of Series A preferred stock, which is convertible, at the sole option of the holder, into twenty shares of our common stock per share of Series A preferred stock.
|
(9)
|
Includes 200,000 shares underlying options and 33,333 shares underlying warrants that are exercisable within 60 days of March 25, 2011. Includes 25,000 shares underlying 1,250 shares of Series A preferred stock, which is convertible, at the sole option of the holder, into twenty shares of our common stock per share of Series A preferred stock.
|
(10)
|
Includes 50,000 shares underlying warrants that are exercisable within 60 days of March 25, 2011. Also includes 12,646,874 shares, which are beneficially owned by the Co-Investment Trust II, L. P., designee of Cross Atlantic Capital Partners, Inc. Mr. Tecce is a managing partner of Cross Atlantic Capital Partners, Inc. Mr. Tecce disclaims beneficial ownership of these securities, except to the extent of his pecuniary interest therein.
|
(11)
|
Includes 1,000,000 shares underlying options and 33,333 shares underlying warrants, all of which are exercisable within 60 days of March 25, 2011. Includes 25,000 shares underlying 1,250 shares of Series A preferred stock, which are convertible, at the sole option of the holder, into twenty shares of our common stock per share of Series A preferred stock.
|
(12)
|
Includes 62,300,491 shares underlying warrants that are exercisable within 60 days of March 25, 2011. Includes 25,000,000 shares underlying 1,250,000 shares of Series A preferred stock, which is convertible, at the sole option of the holder, into twenty shares of our common stock per share of Series A preferred stock. Includes 15,947,560 shares underlying 797,378 shares of Series B preferred stock, which are convertible, at the sole option of the holder, into twenty shares of our common stock per share of Series B preferred stock.
|
(13)
|
Includes 16,666,670 shares underlying shares underlying warrants, which are exercisable within 60 days of March 25, 2011. Includes 33,333,340 shares underlying 1,666,667 shares of Series B preferred stock, which are convertible, at the sole option of the holder, into twenty shares of our common stock per share of Series B preferred stock.
|
(14)
|
Includes 2,000,000 shares underlying shares underlying warrants, which are exercisable within 60 days of March 25, 2011. Includes 4,000,000 shares underlying 200,000 shares of Series B preferred stock, which are convertible, at the sole option of the holder, into twenty shares of our common stock per share of Series B preferred stock.
|
(15)
|
Includes 1,333,340 shares underlying shares underlying warrants, which are exercisable within 60 days of March 25, 2011. Includes 2,666,680 shares underlying 133,334 shares of Series B preferred stock, which are convertible, at the sole option of the holder, into twenty shares of our common stock per share of Series B preferred stock.
|
(16)
|
Includes 130,000 shares underlying options, which are exercisable within 60 days of March 25, 2011. Excludes 270,000 shares underlying options, which are not exercisable within 60 days of March 25, 2011.
|
Plan Category
|
Number of Securities
to be Issued upon
Exercise of
Outstanding Options,
Warrants,
Convertible
Preferred Stock and
Rights
|
Weighted-Average
Exercise Price of
Outstanding
Options, Warrants,
Convertible
Preferred Stock
and Rights
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in the first Column)
|
|||||||||
Equity compensation plans approved by security holders
|
181,884,924 | $ | 0.21 | 22,406,980 | ||||||||
Equity compensation plans not approved by security holders
|
0 | 0 | 0 | |||||||||
Total
|
181,884,924 | $ | 0.21 | 22,406,980 |
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
|
|
·
|
Effective with the March 26, 2010, expiration of a subscription rights offering Co-Investment Fund II, L.P., or Co-Investment, exercised 1,000 basic subscription rights for $1,000,000 and the Company issued to Co-Investment 250,000 shares of Series A Convertible Preferred Stock, par value $0.001 per share, or Series A Preferred Stock, and five-year warrants to purchase in aggregate 5,000,000 shares of its common stock, par value $0.001, or Common Stock, at an exercise price of $0.20 per share.
|
|
o
|
Co-Investment is the designee of Cross Atlantic Capital Partners, Inc. or Cross Atlantic, of which Frederick C. Tecce, one of our directors, is a managing partner and of which Donald Caldwell, also one of our directors and Chairman of our board of directors, is Chairman and Chief Executive Officer.
|
|
o
|
On January 14, 2010 the Company filed a prospectus for a rights offering on form S-1/A, which the Commission declared effective on January 22, 2010, to distribute to shareholders at no charge, one non-transferable subscription right for each 12,256 shares of our common stock and 613 shares of our Series A Preferred Stock owned as of January 1, 2010, the record date, either as a holder of record or, in the case of shares held of record by brokers, dealers, custodian banks or other nominees on shareholders’ behalf, as a beneficial owner of such shares. This rights offering was designed to give all of the holders of the Company’s common stock the opportunity to participate in an equity investment in the Company on the same economic terms as the Company’s 2009 private placement.
|
|
o
|
The basic subscription right entitled the holder to purchase one unit, or a Subscription Unit, at a subscription price of $1,000. A Subscription Unit consisted of 250 shares of Series A Preferred Stock and a five-year warrant to purchase 5,000 shares of Common Stock at an exercise price of $0.20 per share. In the event that a holder of a Subscription Unit purchased all of the basic Subscription Units available to the holder then pursuant to their basic subscription right, the holder had the option to choose to subscribe for a portion of any Subscription Units that were not purchased by all other holders of Subscription Units through the exercise of their basic subscription rights.
|
|
o
|
Effective with the expiration of the subscription rights, which occurred on March 26, 2010, holders of subscription rights exercised in aggregate 1,061 basic subscription rights and 46 over-subscription rights for a total 1,107 Subscription Units, which included Co-Investment’s 1,000 Subscription Units. As a result of the exercise of 1,107 Subscription Units the Company received $1,107,000 in gross proceeds, and on March 26, 2010, issued in aggregate 276,750 shares of Series A Preferred Stock and five-year warrants to purchase in aggregate 5,535,000 shares of Common Stock at an exercise price of $0.20 per share. The Series A Preferred Stock has the same terms as the Series A Preferred Stock issued in 2009. The warrants also include full ratchet anti-dilution adjustment provisions for issuances of securities below $0.20 per share of Common Stock during the first two years following March 26, 2010, subject to customary exceptions.
|
|
o
|
Effective with the expiration of the rights offering all unexercised subscription rights expired.
|
|
·
|
On September 30, 2010, the Company entered into and completed a private placement with certain accredited investors, or the Investors, including Independence Blue Cross, a Pennsylvania hospital plan corporation, for an aggregate of 1,800,001 shares of Series B Convertible Preferred Stock, par value $0.001 per share, or Series B Preferred Stock, and warrants, or the September 2010 Warrants, to purchase 18,000,010 shares of its Common Stock, pursuant to the terms of a securities purchase agreement, or the 2010 Purchase Agreement. Independence Blue Cross purchased an aggregate of 1,666,667 shares of Series B Preferred Stock, and September 2010 Warrants to purchase 14,666,670 shares of its Common Stock.
|
|
o
|
Pursuant to the 2010 Purchase Agreement, the Company agreed to sell to the Investors 1,800,001 investment units, each, a 2010 Unit, in the 2010 Private Placement at a per 2010 Unit purchase price equal to $3.00. Each 2010 Unit sold in the 2010 Private Placement consisted of one share of Series B Preferred Stock and a September 2010 Warrant to purchase ten shares of Common Stock at an initial exercise price of $0.15 per share, subject to adjustment.
|
|
o
|
The Series B Preferred Stock is entitled to vote as a single class with the holders of the Company’s common and preferred stock, with each share of Series B Preferred Stock having the right to 20 votes. Upon the liquidation, sale or merger of the Company, each share of Series B Preferred Stock is entitled to receive an amount equal to the greater of (A) a liquidation preference equal to the Series B Preferred Stock original issue price, subject to certain customary adjustments, or (B) the amount such share of Series B Preferred Stock would receive if it participated
pari
passu
with the holders of common and preferred stock on an as-converted basis. Each share of Series B Preferred Stock becomes convertible into 20 shares of common stock , subject to adjustment and at the option of the holder of the Series B Preferred Stock. For so long as any shares of Series B Preferred Stock are outstanding, the vote or consent of the holders of at least two-thirds of the Series B Preferred Stock is required to approve (Y) any amendment to the Company’s certificate of incorporation or bylaws that would adversely alter the voting powers, preferences or special rights of the Series B Preferred Stock or (Z) any amendment to the Company’s certificate of incorporation to create any shares of capital stock that rank senior to the Series B Preferred Stock. In addition to the voting rights described above, for so long as 1,000,000 shares of Series B Preferred Stock are outstanding, the vote or consent of the holders of at least two-thirds of the shares of Series B Preferred Stock is required to effect or validate any merger, sale of substantially all of the assets of the Company or other fundamental transaction, unless such transaction, when consummated, will provide the holders of Series B Preferred Stock with an amount per share equal the Series B Preferred Stock original issue price in aggregate for all issued and outstanding Series B Preferred Stock.
|
|
o
|
Under the terms of the 2010 Purchase Agreement, and subject to the approval of the Company’s shareholders of an amendment to the Certificate of Incorporation of the Company to increase the number of shares of authorized Common Stock of the Company, the Company has agreed to sell an additional 200,000 Units to the Investors after September 30, 2010, on the same terms and conditions as described in the 2010 Purchase Agreement, or the Subsequent Closing.
|
|
§
|
The Company’s shareholders approved the amendment to the Certificate of Incorporation of the Company to increase the number of shares of authorized Common Stock of the Company on November 18, 2010.
|
|
§
|
The Subsequent Closing occurred on November 29, 2010, and the Company sold an additional 200,000 2010 Units to Independence Blue Cross pursuant to the 2010 Purchase Agreement. At the Subsequent Closing Independence Blue Cross purchased an aggregate of 200,000 shares of Series B Preferred Stock, and September 2010 Warrants to purchase 2,000,000 shares of its Common Stock.
|
|
o
|
The Company agreed, pursuant to the terms of the 2010 Purchase Agreement, that, except for the Follow-on Financing (as defined in the 2010 Purchase Agreement), for a period of 90 days after the effective date, or the Initial Standstill, of the 2010 Purchase Agreement, the Company shall not, subject to certain exceptions, offer, sell, grant any option to purchase, or otherwise dispose of any equity securities or equity equivalent securities, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, capital stock and other securities of the Company.
|
|
o
|
Also in connection with the 2010 Private Placement, the Company agreed to amend the warrants issued to Co-Investment in connection with the Company’s January 2009 private placement and the warrants issued to Co-Investment and other investors in the Company’s 2010 rights offering as a condition of Co-Investment’s consent to modify the terms of the Series A Preferred Stock. Pursuant to addendums and certificates of adjustment to the aforementioned warrants and addendums and certificates of adjustment to the aforementioned warrants, the expiration dates of the anti-dilution provisions of these warrants were extended to the expiration date of the anti-dilution provisions of the September 2010 Warrants.
|
|
·
|
An Equity Issuance occurred on September 30, 2010.
|
|
·
|
The Company and Co-Investment agreed in the event that the Company does not have a sufficient number of authorized shares of its equity securities to issue to Co-Investment the Company and Co-Investment will jointly cooperate with one another in obtaining the necessary shareholder approval to increase the number of authorized shares of the Company’s equity securities and the effective date of the issuance and repayment will be the date of the Company’s shareholder approval.
|
|
·
|
The Company’s shareholders approved the amendment to the Certificate of Incorporation of the Company to increase the number of shares of authorized Common Stock of the Company on November 18, 2010, which provided the Company with a sufficient number of authorized shares of its equity securities to issue to Co-Investment to allow the Company to repay to Co-Investment the loan balance plus accrued interest in the form of the Company’s equity securities at the conversion price and terms identical to Equity Issuance.
|
|
·
|
On December 22, 2010, the Company entered into and completed a note conversion, or the Note Conversion, with Co-Investment, in which as consideration for the repayment of the Note and accrued interest in the amount in aggregate of $2,392,136 the Company issued an aggregate of 797,378 shares of its Series B Preferred Stock, warrants to purchase 7,973,780 shares of its Common Stock and $2.40 in cash, as full repayment of all outstanding principal and accrued interest under the Loan Agreement and Note pursuant to the terms of the Conversion Agreement.
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
2010 Fees
|
2009 Fees
|
|||||||
Audit Fees(1)
|
$ | 82,500 | $ | 87,000 | ||||
Audit-Related Fees(2)
|
- | 11,500 | ||||||
Tax Fees(3)
|
- | 9,500 | ||||||
All Other Fees
|
- | - | ||||||
Total Fees
|
$ | 82,500 | $ | 108,000 |
|
(1)
|
Audit fees for the fiscal years ended December 31, 2010 and 2009 were for professional services rendered for the audits and interim quarterly reviews of our consolidated financial statements and services that are normally provided in connection with statutory and regulatory filings or engagements.
|
|
(2)
|
Audit-related fees for the fiscal years ended December 31, 2010 and 2009 were for professional services rendered for the audit of the Company’s 401(k) plan.
|
|
(3)
|
Tax fees were for tax compliance, tax advice and tax planning.
|
ITEM 15.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
Exhibit
Number
|
Description
|
|
2.1
|
Agreement and Plan of Merger, dated November 23, 2005, among Darwin Resources Corp., Health Benefits Direct Corporation, and HBDC II, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
|
|
2.2
|
Agreement and Plan of Merger, dated as of September 21, 2007, by and among the Company, HBDC Acquisition, LLC, System Consulting Associates, Inc. and the shareholders of System Consulting Associates, Inc. party thereto (incorporated by reference from Exhibit 2.1 to the Company’s Current Report on From 8-K, filed with the Commission on September 26, 2007).
|
|
3.1
|
Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 22, 2005).
|
|
3.2
|
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 3, 2007).
|
|
3.3
|
Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
|
|
3.4
|
Certificate of Merger of HBDC II, Inc. with and into Health Benefits Direct Corporation (incorporated by reference to Exhibit 3.4 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
|
|
3.5
|
Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.5 to the Registrant’s Registration Statement on Form SB-2, filed with the Commission on February 1, 2008).
|
|
3.6
|
Certificate of Designation with respect to shares of Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on January 21, 2009).
|
|
3.7
|
Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.7 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 31, 2009.
|
|
3.8
|
Certificate of Designation with respect to shares of Series B Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on October 1, 2010).
|
Exhibit
Number
|
Description
|
|
3.9
|
Certificate of Amendment to Certificate of Designation with respect to shares of Series B Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 23, 2010).
|
|
3.10**
|
Certificate of Amendment to Certificate of Incorporation filed November 18, 2010
|
|
3.11**
|
Certificate of Amendment to Certificate of Incorporation filed on November 24, 2010
|
|
4.1
|
Form of Common Stock Purchase Warrant Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
|
|
4.2
|
Warrant to Purchase Common Stock issued to Alvin H. Clemens (incorporated by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, filed with the Commission on March 31, 2006).
|
|
4.3
|
Securities Purchase Agreement, dated March 30, 2007, by and between Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 30, 2007).
|
|
4.4
|
Registration Rights Agreement, dated March 30, 2007, by and between Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 30, 2007).
|
|
4.5
|
Form of Warrant (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 30, 2007).
|
|
4.6
|
Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 30, 2007).
|
|
4.7
|
Registration Rights Agreement, dated October 1, 2007, by and between Health Benefits Direct Corporation and Computer Command and Control Company (incorporated by reference from Exhibit 4.1 to the Company’s Current Report on From 8-K, filed with the Commission on October 4, 2007).
|
|
4.8
|
Registration Rights Agreement, dated October 1, 2007, by and among Health Benefits Direct Corporation and Robert J. Oakes, Jeff Brocco, Tim Savery and Lisa Roetz (incorporated by reference from Exhibit 4.2 to the Company’s Current Report on From 8-K, filed with the Commission on October 4, 2007).
|
|
4.9
|
Securities Purchase Agreement, dated March 31, 2008, by and between Health Benefits Direct Corporation and the Investor party thereto (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 31, 2008).
|
|
4.10
|
Securities Purchase Agreement, dated March 31, 2008, by and between Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference from Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 31, 2008).
|
|
4.11
|
Form of Warrant (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 31, 2008).
|
|
4.12
|
Form of Registration Rights Agreement, dated March 31, 2008, by and among Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference from Exhibit 4.4 to the Company’s Current Report on From 8-K, filed with the Commission on March 31, 2008).
|
Exhibit
Number
|
Description
|
|
4.13
|
Form of Registration Rights Agreement, dated March 31, 2008, by and among Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference from Exhibit 4.3 to the Company’s Current Report on From 8-K, filed with the Commission on March 31, 2008).
|
|
4.14
|
Board Representation Agreement, dated March 31, 2008, between Health Benefits Direct Corporation and The Co-Investment Fund II, L.P. (incorporated by reference from Exhibit 4.5 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 31, 2008).
|
|
4.15
|
Securities Purchase Agreement, dated January 14, 2009, by and between Health Benefits Direct Corporation and the Co-Investment Fund II, L.P. (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the Commission on January 21, 2009).
|
|
4.16
|
Registration Rights Agreement, dated January 14, 2009, by and between Health Benefits Direct Corporation and the Co-Investment Fund II, L.P. (incorporated by reference from Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the Commission on January 21, 2009).
|
|
4.17
|
Preferred Warrant (incorporated by reference from Exhibit 4.3 to the Registrant’s Current Report on Form 8-K, filed with the Commission on January 21, 2009).
|
|
4.18
|
Form of Subscription Rights Certificate (incorporated by reference from Exhibit 4.18 to the Registrant’s Registration Statement on Form S-1, filed with the Commission on December 31, 2009).
|
|
4.19
|
Form of Warrant (incorporated by reference from Exhibit 4.19 to the Registrant’s Registration Statement on Form S-1, filed with the Commission on December 31, 2009).
|
|
4.20
|
Securities Purchase Agreement, dated September 30, 2010, by and among Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the Commission on October 1, 2010).
|
|
4.21
|
Registration Rights Agreement, dated September 30, 2010, by and among Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference from Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the Commission on October 1, 2010).
|
|
4.22
|
Form of Warrant (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K, filed with the Commission on October 1, 2010).
|
|
4.23
|
Board Representation Agreement, dated September 30, 2010, by and between Health Benefits Direct Corporation and Independence Blue Cross (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the Commission on October 1, 2010).
|
|
4.24
|
Form of Addendum and Certificate of Adjustment to Warrant (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed with the Commission on October 1, 2010).
|
|
4.25
|
Form of Addendum and Certificate of Adjustment to Warrant (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed with the Commission on October 1, 2010).
|
|
4.26
|
Note Conversion Agreement, dated December 22, 2010, by and between InsPro Technologies Corporation and The Co-Investment Fund II, L.P. (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the Commission on December 23, 2010).
|
|
4.27
|
Registration Rights Agreement, dated December 22, 2010, by and between InsPro Technologies Corporation and The Co-Investment Fund II, L.P. (incorporated by reference from Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the Commission on December 23, 2010).
|
Exhibit
Number
|
Description
|
|
4.28
|
Form of Warrant (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K, filed with the Commission on December 23, 2010).
|
|
10.1
|
Health Benefits Direct Corporation Compensation Plan for Directors (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 20, 2006).
|
|
10.2
|
Lease Agreement, dated February 9, 2004, between Case Holding Co. and Platinum Partners, LLC (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
|
|
10.3
|
Lease between Health Benefits Direct Corporation and FG2200, LLC, effective March 15, 2006 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 6, 2006).
|
|
10.4
|
Employment Agreement, dated November 18, 2005, between Health Benefits Direct Corporation and Charles A. Eissa (incorporated by reference to Exhibit 10.14 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
|
|
10.5
|
Amendment 2008-1 to Employment Agreement, dated March 31, 2008, between Health Benefits Direct Corporation and Charles A. Eissa (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 31, 2008).
|
|
10.6
|
Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on January 17, 2006).
|
|
10.7
|
Securities Contribution Agreement, dated September 9, 2005, among Health Benefits Direct Corporation, Marlin Capital Partners I, LLC, Scott Frohman, Charles A. Eissa, Platinum Partners II LLC and Dana Boskoff (incorporated by reference to Exhibit 10.22 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
|
|
10.8
|
Employment Agreement, dated April 3, 2006, between HBDC II, Inc. and Ivan M. Spinner (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on April 6, 2006).
|
|
10.9
|
Health Benefits Direct Corporation 2008 Equity Compensation Plan (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on March 31, 2008).
|
|
10.10
|
Health Benefits Direct Corporation 2008 Equity Compensation Plan Form of Nonqualified Stock Option Grant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on March 28, 2008).
|
|
10.11
|
Sublease, dated March 7, 2006, between Health Benefits Direct Corporation and World Travel Partners I, LLC Form of Nonqualified Stock Option Grant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on May 19, 2006).
|
|
10.12
|
First Amendment to Sublease, dated April 18, 2006, between Health Benefits Direct Corporation ad World Travel Partners I, LLC (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on May 19, 2006).
|
|
10.13
|
Letter Agreement, dated April 18, 2006, among World Travel Partners I, LLC, Health Benefits Direct Corporation, and 1120 Avenue of the Americas, LLC (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on May 19, 2006).
|
Exhibit
Number
|
Description
|
|
10.14
|
Software and Services Agreement, dated May 31, 2006, among Health Benefits Direct Corporation, Insurint Corporation, and Realtime Solutions Group, L.L.C. (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on June 2, 2006).
|
|
10.15
|
Lease, dated July 7, 2006, between Health Benefits Direct Corporation and Radnor Properties-SDC, L.P. (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on July 10, 2006).
|
|
10.16
|
Separation Agreement, dated December 7, 2006, between Health Benefits Direct Corporation and Scott Frohman (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on December 11, 2006).
|
|
10.17
|
Amendment No. 1 to Option, dated as of February 15, 2007, delivered by Health Benefits Direct Corporation to Daniel Brauser (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on February 16, 2007).
|
|
10.18
|
Consent and Lock-Up Agreement, dated April 5, 2007, between Health Benefits Direct Corporation and Scott Frohman (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on April 6, 2007).
|
|
10.19
|
Agreement to Transfer Partnership Interests, dated October 1, 2007, by and among HBDC Acquisition, LLC and the former partners of BileniaTech, L.P. (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on From 8-K, filed with the Commission on October 4, 2007).
|
|
10.20
|
Amended and Restated Employment Agreement, dated November 27, 2007, between Health Benefits Direct Corporation and Alvin H. Clemens (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 3, 2007).
|
|
10.21
|
Amended and Restated Employment Agreement, dated November 27, 2007, between Health Benefits Direct Corporation and Anthony R. Verdi (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 3, 2007).
|
|
10.22
|
Amendment 2008-1 to Amended and Restated Employment Agreement, dated March 31, 2008, between Health Benefits Direct Corporation and Anthony R. Verdi (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 31, 2008).
|
|
10.23
|
Client Transition Agreement, between Health Benefits Direct Corporation, HBDC II, Inc. and eHealthInsurance Services, Inc. (incorporated by reference to Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 31, 2009).
|
|
10.24
|
Loan Agreement, dated December 22, 2009, by and among Health Benefits Direct Corporation, Insurance Specialist Group, Inc., HBDC II, Inc., Insurint Corporation, Platinum Partners, LLC, InsPro Technologies, LLC and The Co-Investment Fund II, L.P. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 29, 2009).
|
|
10.25
|
Secured Promissory Note, dated December 22, 2009, by and among Health Benefits Direct Corporation, Insurance Specialist Group, Inc., HBDC II, Inc., Insurint Corporation, Platinum Partners, LLC, InsPro Technologies, LLC and The Co-Investment Fund II, L.P. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 29, 2009).
|
Exhibit
Number
|
Description
|
|
10.26
|
First Amendment to Loan Documents, dated June 15, 2010, by and among Health Benefits Direct Corporation, Insurance Specialist Group, Inc., HBDC II, Inc., Insurint Corporation, Platinum Partners, LLC, InsPro Technologies, LLC and The Co-Investment Fund II, L.P. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on June 17, 2010).
|
|
10.27**
|
Health Benefits Direct Corporation 2010 Equity Compensation Plan
|
|
14
|
Amended and Restated Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 4, 2008).
|
|
21**
|
Subsidiaries of Health Benefits Direct Corporation.
|
|
23.1**
|
Consent of Sherb & Co., LLP.
|
|
31.1**
|
Section 302 Certification of Principal Executive Officer.
|
|
31.2**
|
Section 302 Certification of Principal Financial Officer.
|
|
32.1**
|
Section 906 Certification of Principal Executive Officer and Principal Financial Officer.
|
INSPRO TECHNOLOGIES CORPORATION
|
||
By:
|
/s/ Anthony R. Verdi
|
|
Anthony R. Verdi
|
||
Principal Executive Officer, Chief Financial
|
||
Officer and Chief Operating Officer
|
Chief Financial Officer, Chief Operating
|
March 31, 2011
|
|||
/s/ ANTHONY R. VERDI
|
Officer and Director | |||
(Principal Executive Officer, Principal
|
||||
Anthony R. Verdi
|
Financial and Accounting Officer) | |||
/s/ DONALD R. CALDWELL
|
Chairman
|
March 30, 2011
|
||
Donald R. Caldwell
|
||||
/s/ WARREN V. MUSSER
|
Director
|
March 25, 2011
|
||
Warren V. Musser
|
||||
/s/ JOHN HARRISON
|
Director
|
March 25, 2011
|
||
John Harrison
|
||||
/s/ ROBERT J. OAKES
|
Director
|
March 28, 2011
|
||
Robert J. Oakes
|
||||
/s/ PAUL SOLTOFF
|
Director
|
March 28, 2011
|
||
Paul Soltoff
|
||||
/s/ SANFORD RICH
|
Director
|
March 30, 2011
|
||
Sanford Rich
|
||||
/s/ L. J. ROWELL
|
Director
|
March 25, 2011
|
||
L.J. Rowell
|
||||
/s/ FREDERICK C. TECCE
|
Director
|
March 30, 2011
|
||
Frederick C. Tecce
|
||||
/s/ EDMOND WALTERS
|
Director
|
March 28, 2011
|
||
Edmond Walters
|
Exhibit
Number
|
Description
|
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2.1
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Agreement and Plan of Merger, dated November 23, 2005, among Darwin Resources Corp., Health Benefits Direct Corporation, and HBDC II, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
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2.2
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Agreement and Plan of Merger, dated as of September 21, 2007, by and among the Company, HBDC Acquisition, LLC, System Consulting Associates, Inc. and the shareholders of System Consulting Associates, Inc. party thereto (incorporated by reference from Exhibit 2.1 to the Company’s Current Report on From 8-K, filed with the Commission on September 26, 2007).
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3.1
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Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 22, 2005).
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3.2
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Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 3, 2007).
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3.3
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Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
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3.4
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Certificate of Merger of HBDC II, Inc. with and into Health Benefits Direct Corporation (incorporated by reference to Exhibit 3.4 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
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3.5
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Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.5 to the Registrant’s Registration Statement on Form SB-2, filed with the Commission on February 1, 2008).
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3.6
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Certificate of Designation with respect to shares of Series A Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on January 21, 2009).
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3.7
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Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.7 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 31, 2009.
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3.8
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Certificate of Designation with respect to shares of Series B Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on October 1, 2010).
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3.9
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Certificate of Amendment to Certificate of Designation with respect to shares of Series B Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 23, 2010).
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3.10**
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Certificate of Amendment to Certificate of Incorporation filed November 18, 2010
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3.11**
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Certificate of Amendment to Certificate of Incorporation filed on November 24, 2010
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Exhibit
Number
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Description
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4.1
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Form of Common Stock Purchase Warrant Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
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4.2
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Warrant to Purchase Common Stock issued to Alvin H. Clemens (incorporated by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, filed with the Commission on March 31, 2006).
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4.3
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Securities Purchase Agreement, dated March 30, 2007, by and between Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 30, 2007).
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4.4
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Registration Rights Agreement, dated March 30, 2007, by and between Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 30, 2007).
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4.5
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Form of Warrant (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 30, 2007).
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4.6
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Form of Placement Agent Warrant (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 30, 2007).
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4.7
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Registration Rights Agreement, dated October 1, 2007, by and between Health Benefits Direct Corporation and Computer Command and Control Company (incorporated by reference from Exhibit 4.1 to the Company’s Current Report on From 8-K, filed with the Commission on October 4, 2007).
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4.8
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Registration Rights Agreement, dated October 1, 2007, by and among Health Benefits Direct Corporation and Robert J. Oakes, Jeff Brocco, Tim Savery and Lisa Roetz (incorporated by reference from Exhibit 4.2 to the Company’s Current Report on From 8-K, filed with the Commission on October 4, 2007).
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4.9
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Securities Purchase Agreement, dated March 31, 2008, by and between Health Benefits Direct Corporation and the Investor party thereto (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 31, 2008).
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4.10
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Securities Purchase Agreement, dated March 31, 2008, by and between Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference from Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 31, 2008).
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4.11
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Form of Warrant (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 31, 2008).
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4.12
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Form of Registration Rights Agreement, dated March 31, 2008, by and among Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference from Exhibit 4.4 to the Company’s Current Report on From 8-K, filed with the Commission on March 31, 2008).
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Exhibit
Number
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Description
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4.13
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Form of Registration Rights Agreement, dated March 31, 2008, by and among Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference from Exhibit 4.3 to the Company’s Current Report on From 8-K, filed with the Commission on March 31, 2008).
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4.14
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Board Representation Agreement, dated March 31, 2008, between Health Benefits Direct Corporation and The Co-Investment Fund II, L.P. (incorporated by reference from Exhibit 4.5 to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 31, 2008).
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4.15
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Securities Purchase Agreement, dated January 14, 2009, by and between Health Benefits Direct Corporation and the Co-Investment Fund II, L.P. (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the Commission on January 21, 2009).
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4.16
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Registration Rights Agreement, dated January 14, 2009, by and between Health Benefits Direct Corporation and the Co-Investment Fund II, L.P. (incorporated by reference from Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the Commission on January 21, 2009).
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4.17
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Preferred Warrant (incorporated by reference from Exhibit 4.3 to the Registrant’s Current Report on Form 8-K, filed with the Commission on January 21, 2009).
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4.18
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Form of Subscription Rights Certificate (incorporated by reference from Exhibit 4.18 to the Registrant’s Registration Statement on Form S-1, filed with the Commission on December 31, 2009).
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4.19
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Form of Warrant (incorporated by reference from Exhibit 4.19 to the Registrant’s Registration Statement on Form S-1, filed with the Commission on December 31, 2009).
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4.20
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Securities Purchase Agreement, dated September 30, 2010, by and among Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the Commission on October 1, 2010).
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4.21
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Registration Rights Agreement, dated September 30, 2010, by and among Health Benefits Direct Corporation and the Investors party thereto (incorporated by reference from Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the Commission on October 1, 2010).
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4.22
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Form of Warrant (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K, filed with the Commission on October 1, 2010).
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4.23
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Board Representation Agreement, dated September 30, 2010, by and between Health Benefits Direct Corporation and Independence Blue Cross (incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the Commission on October 1, 2010).
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4.24
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Form of Addendum and Certificate of Adjustment to Warrant (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed with the Commission on October 1, 2010).
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Exhibit
Number
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Description
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4.25
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Form of Addendum and Certificate of Adjustment to Warrant (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed with the Commission on October 1, 2010).
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4.26
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Note Conversion Agreement, dated December 22, 2010, by and between InsPro Technologies Corporation and The Co-Investment Fund II, L.P. (incorporated by reference from Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the Commission on December 23, 2010).
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4.27
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Registration Rights Agreement, dated December 22, 2010, by and between InsPro Technologies Corporation and The Co-Investment Fund II, L.P. (incorporated by reference from Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the Commission on December 23, 2010).
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4.28
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Form of Warrant (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K, filed with the Commission on December 23, 2010).
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10.1
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Health Benefits Direct Corporation Compensation Plan for Directors (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 20, 2006).
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10.2
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Lease Agreement, dated February 9, 2004, between Case Holding Co. and Platinum Partners, LLC (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
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10.3
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Lease between Health Benefits Direct Corporation and FG2200, LLC, effective March 15, 2006 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 6, 2006).
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10.4
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Employment Agreement, dated November 18, 2005, between Health Benefits Direct Corporation and Charles A. Eissa (incorporated by reference to Exhibit 10.14 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
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10.5
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Amendment 2008-1 to Employment Agreement, dated March 31, 2008, between Health Benefits Direct Corporation and Charles A. Eissa (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 31, 2008).
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10.6
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Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on January 17, 2006).
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10.7
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Securities Contribution Agreement, dated September 9, 2005, among Health Benefits Direct Corporation, Marlin Capital Partners I, LLC, Scott Frohman, Charles A. Eissa, Platinum Partners II LLC and Dana Boskoff (incorporated by reference to Exhibit 10.22 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 30, 2005).
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10.8
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Employment Agreement, dated April 3, 2006, between HBDC II, Inc. and Ivan M. Spinner (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on April 6, 2006).
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10.9
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Health Benefits Direct Corporation 2008 Equity Compensation Plan (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on March 31, 2008).
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Exhibit
Number
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Description
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10.10
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Health Benefits Direct Corporation 2008 Equity Compensation Plan Form of Nonqualified Stock Option Grant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on March 28, 2008).
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10.11
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Sublease, dated March 7, 2006, between Health Benefits Direct Corporation and World Travel Partners I, LLC Form of Nonqualified Stock Option Grant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on May 19, 2006).
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10.12
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First Amendment to Sublease, dated April 18, 2006, between Health Benefits Direct Corporation ad World Travel Partners I, LLC (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on May 19, 2006).
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10.13
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Letter Agreement, dated April 18, 2006, among World Travel Partners I, LLC, Health Benefits Direct Corporation, and 1120 Avenue of the Americas, LLC (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on May 19, 2006).
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10.14
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Software and Services Agreement, dated May 31, 2006, among Health Benefits Direct Corporation, Insurint Corporation, and Realtime Solutions Group, L.L.C. (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on June 2, 2006).
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10.15
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Lease, dated July 7, 2006, between Health Benefits Direct Corporation and Radnor Properties-SDC, L.P. (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on July 10, 2006).
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10.16
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Separation Agreement, dated December 7, 2006, between Health Benefits Direct Corporation and Scott Frohman (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on December 11, 2006).
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10.17
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Amendment No. 1 to Option, dated as of February 15, 2007, delivered by Health Benefits Direct Corporation to Daniel Brauser (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on February 16, 2007).
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10.18
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Consent and Lock-Up Agreement, dated April 5, 2007, between Health Benefits Direct Corporation and Scott Frohman (incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Commission on April 6, 2007).
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10.19
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Agreement to Transfer Partnership Interests, dated October 1, 2007, by and among HBDC Acquisition, LLC and the former partners of BileniaTech, L.P. (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on From 8-K, filed with the Commission on October 4, 2007).
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10.20
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Amended and Restated Employment Agreement, dated November 27, 2007, between Health Benefits Direct Corporation and Alvin H. Clemens (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 3, 2007).
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10.21
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Amended and Restated Employment Agreement, dated November 27, 2007, between Health Benefits Direct Corporation and Anthony R. Verdi (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 3, 2007).
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Exhibit
Number
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Description
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10.22
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Amendment 2008-1 to Amended and Restated Employment Agreement, dated March 31, 2008, between Health Benefits Direct Corporation and Anthony R. Verdi (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the Commission on March 31, 2008).
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10.23
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Client Transition Agreement, between Health Benefits Direct Corporation, HBDC II, Inc. and eHealthInsurance Services, Inc. (incorporated by reference to Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 31, 2009).
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10.24
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Loan Agreement, dated December 22, 2009, by and among Health Benefits Direct Corporation, Insurance Specialist Group, Inc., HBDC II, Inc., Insurint Corporation, Platinum Partners, LLC, InsPro Technologies, LLC and The Co-Investment Fund II, L.P. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 29, 2009).
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10.25
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Secured Promissory Note, dated December 22, 2009, by and among Health Benefits Direct Corporation, Insurance Specialist Group, Inc., HBDC II, Inc., Insurint Corporation, Platinum Partners, LLC, InsPro Technologies, LLC and The Co-Investment Fund II, L.P. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on December 29, 2009).
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10.26
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First Amendment to Loan Documents, dated June 15, 2010, by and among Health Benefits Direct Corporation, Insurance Specialist Group, Inc., HBDC II, Inc., Insurint Corporation, Platinum Partners, LLC, InsPro Technologies, LLC and The Co-Investment Fund II, L.P. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on June 17, 2010).
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10.27**
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Health Benefits Direct Corporation 2010 Equity Compensation Plan
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14
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Amended and Restated Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 4, 2008).
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21**
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Subsidiaries of Health Benefits Direct Corporation.
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23.1**
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Consent of Sherb & Co., LLP.
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31.1**
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Section 302 Certification of Principal Executive Officer.
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31.2**
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Section 302 Certification of Principal Financial Officer.
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32.1**
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Section 906 Certification of Principal Executive Officer and Principal Financial Officer.
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1.
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Three Hundred million (300,000,000) shares of Common Stock, par value $0.001 per share (the “Common Stock”); and
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2.
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Twenty million (20,000,000) shares of Preferred Stock, par value of $0.001 per share (the “Preferred Stock”).”
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HEALTH BENEFITS DIRECT CORPORATION
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By:
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Name: Anthony R. Verdi
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Title: Chief Financial Officer, Chief Operating Officer
and Acting Principal Executive Officer
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HEALTH BENEFITS DIRECT CORPORATION
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By:
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Name: Anthony R. Verdi
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Title: Chief Financial Officer, Chief Operating Officer
and Acting Principal Executive Officer
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Subsidiary
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Ownership
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Jurisdiction
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Insurance Specialist Group
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100% owned by Registrant
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Florida
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HBDC II, Inc.
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100% owned by Registrant
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Delaware
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HBDC Sub, Inc Corporation
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100% owned by Registrant
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Delaware
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Platinum Partners, LLC
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100% owned by HBDC II, Inc.
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Florida
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InsPro Technologies, LLC
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100% owned by Registrant
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Delaware
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Boca Raton, Florida
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/s/ Sherb & Co., LLP
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March 31, 2011
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Certified Public Accountants
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/s/ Anthony R. Verdi
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Anthony R. Verdi
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Principal Executive Officer, Chief Financial Officer and Chief Operating Officer
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/s/ Anthony R. Verdi
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Anthony R. Verdi
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Principal Executive Officer, Chief Financial Officer and Chief Operating Officer
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/s/ Anthony R. Verdi
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Anthony R. Verdi
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Principal Executive Officer, Chief Financial Officer and Chief Operating Officer
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