UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

For the fiscal year ended December 31, 2004

OR

COMMISSION FILE NUMBER: 005-50580

INTERSECTIONS INC.

(703) 488-6100
(Registrant’s telephone number including area code)

     Securities registered pursuant to Section 12(b) of the Act: None

     Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

     Indicate by check mark if the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No þ

     The aggregate market value of the common stock held by nonaffiliates of the registrant was approximately $245 million based on the last sales price quoted as of June 30, 2004, the last business day of the registrant’s most recently completed second fiscal quarter.

     Indicate the number of shares outstanding of the registrant’s common stock outstanding as of March 1, 2005: 17,345,329

DOCUMENTS INCORPORATED BY REFERENCE

     The information required by Part III of this report, to the extent not set forth herein, is incorporated herein by reference from Registrant’s definitive proxy statement for its 2005 annual meeting of stockholders.

INTERSECTIONS INC.

TABLE OF CONTENTS

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FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are subject to the safe harbor provisions of this legislation. We may, in some cases, use words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “will,” or “may,” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements.

Even though we believe our expectations regarding future events are based on reasonable assumptions, forward-looking statements are not guarantees of future performance. Important factors could cause actual results to differ materially from our expectations contained in our forward-looking statements. These factors include, but are not limited to, changes in:

•	our ability to maintain our relationships with the three credit reporting agencies and other data and analytics providers, and our various clients;
•	our ability to obtain new clients;
•	our ability to compete successfully with our competitors;
•	our ability to introduce new services with broad consumer appeal;
•	our ability to protect and maintain our computer and telephone infrastructure;
•	our ability to maintain the security of our data;
•	changes in federal and state laws and regulations;
•	our use of our cash and investments;
•	our cash needs;
•	implementation of our corporate strategy; and
•	our financial performance.

There are a number of important factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements. These important factors include those that we discuss under the caption “Risk Factors.” You should read these factors and other cautionary statements as being applicable to all related forward-looking statements wherever they appear. If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

ITEM 1. BUSINESS

Overview

We provide identity theft protection and credit management services primarily on a subscription basis to our subscribers. Our services principally are marketed to customers of our clients and branded and tailored to meet our clients’ specifications. Our clients are principally credit and charge card issuing financial institutions. Our subscribers purchase our services either directly from us or through arrangements with our clients.

Our services include daily, monthly or quarterly monitoring of our subscribers’ credit files at one or all three of the major credit reporting agencies, Equifax, Experian and TransUnion. We deliver our services through the Internet, telecommunications and mail to our subscribers in a user-friendly format. We also offer credit score analysis tools, credit education, an identity theft recovery unit, and identity theft cost coverage.

Our services enable our subscribers to:

•	Guard against identity theft and its detrimental effects by periodically monitoring their credit files at one or all three major credit reporting agencies for changes that may indicate identity theft. Based on such information, subscribers may take actions to prevent or mitigate identity theft and speak to our identity theft customer service specialists. Through a master policy issued by a third-party insurer, some of our subscribers receive coverage for the out-of-pocket costs of correcting a stolen identity.
•	Review their credit profiles in an easy to understand format, analyze their credit records and credit scores and keep informed of changes to their credit records on a daily, monthly or quarterly basis. Using our services, subscribers may verify the accuracy of and monitor changes to their credit records at the credit reporting agencies. Our services also help subscribers learn how their credit scores change with varying events and how to correct errors on their credit reports.

We provide our services to subscribers principally under the private label brands of our clients, including many of the nation’s largest financial institutions. We customize our services, branding and pricing to our clients’ specifications. We believe that our services enable our clients to increase customer loyalty, generate a recurring stream of commission and fee income and enhance other client offerings.

On May 5, 2004, we completed an initial public offering of 7,187,500 shares of common stock at an initial public offering price of $17.00 per share. We sold 3,000,000 shares and certain selling stockholders sold an additional 4,187,500 shares. The net proceeds to us from the initial public offering, after deducting underwriting discounts and commissions and expenses, were approximately $44.9 million. Upon completion of the initial public offering, a senior secured convertible note held by a subsidiary of Equifax and all outstanding preferred stock were converted into 8,988,894 shares of common stock, after giving effect to the 554.9338-for-one split of our common stock, which occurred immediately prior to the closing of the initial public offering.

Our website address is www.intersections.com. We make available on this website under “Investors,” free of charge, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, Forms 3, 4 and 5 filed via Edgar by our directors and executive officers and various other SEC filings, including amendments to these reports, as soon as reasonably practicable after we electronically file or furnish such reports to the SEC. We also make available on our website our Corporate Governance Guidelines and Principles, our Code of Business Conduct and Ethics and the charters of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. This information is also available by written request to Investor Relations at our executive office address listed below. The information on our website, or on the site of our third-party service provider, is not incorporated by reference into this report. Our website address is included here only as an inactive technical reference.

We were incorporated in Delaware in 1999. We conduct certain of our operations through wholly-owned subsidiaries, including CreditComm Services LLC, a Delaware limited liability company, which was originally formed in May 1996. Our principal executive offices are located at 14901 Bogle Drive, Chantilly, Virginia 20151 and our telephone number is (703) 488-6100.

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Our Services

We provide a flexible and diversified suite of identity theft protection and credit management services that are branded and tailored to meet the specifications of our clients. These services are marketed and delivered to customers of our clients on a subscription basis. Our services may be provided in different configurations containing one or more of the following features:

Our services are offered principally on a monthly subscription basis. Subscription fees are generally billed directly to the subscriber’s credit card monthly. The prices to subscribers of various configurations of our services range generally from $4.99 to $12.99 per month. Our monthly subscription model offers higher customer solicitation response rates and higher annualized prices than our annual subscription model.

A substantial number of our subscribers cancel their subscriptions each year. Because there is a cost to acquire a new subscriber by direct marketing, subscribers obtained through direct marketing contribute more to our operating results after they have been retained for at least one year. To improve retention, we have undertaken a number of measures. For example, we emphasize subscriber retention in our customer service and service delivery processes. In particular, we focus on frequent, high-quality and responsive subscriber contact to enhance subscriber loyalty. We have trained a number of customer service representatives to retain subscribers who express uncertainty about the benefits of our services or otherwise suggest they want to cancel their subscriptions.

Since our founding in 1996, we have continued to add new service features and be an innovator in the credit management and identity theft marketplace. We believe we were among the first to provide ongoing consumer services that include three credit bureau profiles, three credit bureau monthly monitoring, three credit bureau daily monitoring, identity theft cost coverage, credit score simulation, text and telephone notifications, and small business credit management services that combine business and personal credit information.

We continue to enhance our current services and offer creative marketing and service delivery solutions to achieve our clients’ objectives. Our new service development strategy follows two equally important paths:

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•	First, we have on-going initiatives to expand our current services to include new data sources, advanced tools and analytical capabilities, more timely notification of activities and more useable content.
•	Second, we have a strategy to modify or adapt our services to reach into new markets and build on our current infrastructure and distribution channels to acquire new subscribers. For example, we launched our first non-U.S. marketing initiative in Canada in April 2003, our French language service in Canada in September 2004, and our Hispanic market initiative in August 2004. In addition, we expect an increase in distribution of our services as enhancements to our clients’ own offerings, and we plan to introduce an expanded version of our small business service marketed to our clients’ small business customers on a private label basis.

On November 12, 2004, we completed the acquisition of American Background Information Services, Inc., a Virginia corporation. American Background provides businesses a variety of personnel risk management tools for the purpose of pre-employment background screening, including criminal background checks, driving records, employment verification and reference checks, drug testing and credit history checks. American Background has been in business since 1996, and provides services to a variety of businesses and industries such as manufacturing, healthcare, telecommunications and retail. American Background’s clients range from small private businesses to Fortune 500 companies. American Background is our wholly-owned subsidiary.

Our Clients

In 1997, we began teaming with leading credit and charge card issuers to provide our services to customers. These charge and credit card issuer clients currently account for the majority of our existing subscriber base. We believe our success in attracting and retaining these clients is attributable to the following:

•	Established reputation as a trusted provider: We believe we were the first company to offer a comprehensive reporting service to monitor all three major credit reporting agencies, and we strive to continue to offer an innovative and comprehensive range of services on and offline. We believe that we offer a high degree of security and confidentiality to our clients and their customers.
•	Client-branded services and customer loyalty: We have focused our efforts on developing client-branded services, which we believe enable our clients to differentiate themselves in their competitive landscape, reinforce their brands and enhance their customer loyalty. For charge and credit card issuers, managing cardholder “churn” has been particularly challenging over the past few years, and we believe our services, which are intended to enhance card issuers’ customer loyalty, help address this challenge. Our program materials, customer service representatives and marketing efforts are all focused on customization conforming to the clients’ requirements and, as a result, enhancing their brands and customer retention rates.
•	Flexible turnkey solutions: We strive to employ a flexible approach to each client arrangement, tailoring the service configurations and economic arrangements to meet the specific needs of each client.
•	Recurring revenue model: Our clients receive commissions or fees in connection with each customer who subscribes to our services, providing our clients with a recurring revenue stream.
•	Combination of online and offline customer communication and service delivery options: We provide online features and offer custom solutions to support our clients’ web-based marketing strategies. Combined with our extensive offline marketing and customer service capabilities, we believe we are capable of delivering comprehensive marketing options for our clients.

With certain of our financial institution clients, we have broadened our marketing efforts to access demand deposit accounts and mortgage accounts, selling at the point of personal contact in branches as well as through our historical marketing channels. We are also seeking to augment our client base by expanding relationships with select insurance companies, mortgage companies, utility companies, web and technology companies and other service providers with significant market presence and brand loyalty.

Our Client Arrangements

We or our clients market our services to our clients’ customers. This “client-endorsed” marketing approach capitalizes on the client’s brand equity with its customers. This marketing approach is employed through direct, indirect and shared marketing

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arrangements. These arrangements are distinguished from one another by the allocation between our clients and us of the economic risk and reward of the marketing campaigns. The general characteristics of each arrangement are described below, although the arrangements with particular clients may contain unique characteristics:

•	Direct marketing arrangement: Under direct marketing arrangements, we bear most of the new subscriber marketing costs and pay our client a commission for revenue derived from subscribers. These arrangements generally result in negative cash flow over the first several months after a program is launched due to the upfront nature of the marketing investments.
•	Indirect marketing arrangement: Under indirect marketing arrangements, our client bears the marketing expense and pays us a service fee or percentage of the revenue. Because the subscriber acquisition cost is borne by our client under these arrangements, our revenue per subscriber is typically lower than that under direct marketing arrangements. Indirect marketing arrangements generally provide positive cash flow earlier than direct arrangements and the ability to obtain subscribers and utilize marketing channels that the clients otherwise may not make available. In addition, we generally experience improved retention under these indirect marketing arrangements when subscribers enroll through clients’ inbound marketing channels.
•	Shared marketing arrangement: Under shared marketing arrangements, marketing expenses are shared by us and the client in various proportions, and we may pay a commission to or receive a service fee from the client. Revenue generally is split in proportion to the investment made by our client and us.

The classification of a client relationship as direct, indirect or shared is based on whether we or the client pay the marketing expenses. Our accounting policies for revenue recognition, however, are not based on the classification of a client arrangement as direct, indirect or shared. We look to the specific client arrangement to determine the appropriate revenue recognition policy, as discussed in detail in note 2 to our consolidated financial statements. Our typical contracts for direct marketing arrangements, and some indirect and shared marketing arrangements, provide that after termination of the contract we may continue to provide our services to existing subscribers under the same economic arrangements (but not necessarily on the same terms) as had existed with our clients before termination. Under some of our contracts, primarily those for indirect marketing arrangements, the client may upon termination require us to cease providing services to their customers under existing subscriptions. Clients under some contracts may also require us to cease providing services to their customers under existing subscriptions if the contract is terminated for material breach by us.

In all cases, a client may not deliver or use another provider to deliver similar services to subscribers without first obtaining the authorizations of the subscribers, in accordance with the requirements of the federal Fair Credit Reporting Act, to obtain their credit files from the consumer reporting agencies. To obtain our services, the subscriber provides its authorization directly to us. We believe that in all or almost all cases the authorization is not transferable.

Revenue from subscribers obtained through our largest clients in 2003 and 2004, as a percentage of our total revenue, was: American Express — 23% and 22%, Capital One (through our relationship with Equifax) — 20% and 24%, Citibank — 15% and 11%, Discover — 18% and 17%, and Equifax — 10% and 0%, respectively.

Our relationship with American Express Travel Related Services, or American Express, is a shared marketing arrangement under an agreement that expires on December 31, 2005, and may be renewed annually by American Express through December 31, 2008, or by mutual agreement after that date. If that agreement terminates for reasons other than breach by us or certain limited conditions, we have the right to provide our services to existing American Express subscribers for at least two years.

We had a direct marketing arrangement with Citibank (South Dakota), N.A., or Citibank, under an agreement that expired on December 31, 2002. This arrangement was replaced by a direct marketing arrangement under an agreement that remains in effect until terminated by either party upon 90 days’ prior notice. If that agreement terminates, we may provide our services to existing Citibank subscribers for at least three years. In December 2003, we also entered into an indirect marketing arrangement with Citibank under an agreement which may be terminated by either party on 90 days’ prior notice. As a result of the new indirect marketing arrangement, while total subscribers from Citibank has increased, total revenue has decreased and our revenue per subscriber from Citibank has decreased.

We historically marketed with Discover under a direct marketing arrangement. In March 2002, we initiated an indirect marketing arrangement with Discover and began to reduce the number of new subscribers obtained under the direct arrangement as we increased marketing under the indirect arrangement. As a result of the new arrangement, while total subscribers from Discover has increased, total revenue has decreased and our revenue per subscriber from Discover has decreased. The indirect marketing agreement with Discover may be terminated by either party upon six months’ prior notice.

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In November 2001, we entered into a master services agreement with Equifax under which we provide various services. The master agreement continues until November 26, 2006 and automatically renews for successive two-year terms unless either party terminates the agreement upon 12 months’ prior notice. Even if the master agreement is not terminated, however, either party may terminate the receipt of particular services from the other party on 60 days’ prior notice.

Prior to January 1, 2005, we provided our identity theft protection and credit management services under the master agreement with Equifax to customers of Capital One Bank, or Capital One, which marketed those services to consumers under an agreement between Capital One and Equifax. On September 1, 2004, we entered into a marketing and services agreement with Capital One under which, effective January 1, 2005, our services are marketed by Capital One to its customers. The services marketed to Capital One customers under this new agreement will be substantially all of the services previously marketed through the master agreement between us and Equifax, in addition to other services. Through our agreement with Equifax, however, we continue to provide our services to the customers of Capital One who enrolled for the services prior to January 1, 2005.

Under the master agreement with Equifax, we were providing to customers of Equifax a one-time, non-subscription report with data from Equifax, Experian and TransUnion for delivery online. Equifax Consumer Services terminated our provision of that service effective October 16, 2003, when it began to provide those services directly to consumers. The revenue for this report was one-time transactional revenue. As a result, in 2004 we did not have revenue from sales of that report, which was $15.2 million, or 10% of our revenue, in 2003. The contribution to our operating income from these sales was significantly lower as a percentage of revenue than that of our subscription business. We continue to provide Equifax customers with credit monitoring services delivered offline. The revenue for such services constituted less than 1% of our revenue in both 2003 and 2004.

Operations

Our operations platform, which consists principally of customer service, information processing and technology, is designed to provide our subscribers with a suite of services. Our services are tailored to meet our clients’ requirements for branding and presentation, service levels, accuracy and security.

Customer Service

We have designed our customer service to achieve customer satisfaction by responding quickly to subscriber requests with value-added responses and solutions. In addition, we work to gain customer satisfaction through our policy of selective recruiting, hiring, training, retaining and management of in-house customer service representatives who are focused exclusively on identity theft protection and credit management services. Prior to working with subscribers, service representatives are required to complete a training program that focuses on the fundamentals of the credit industry, regulation, credit reporting and our products and services, followed by a closely monitored on-the-job training program with assigned mentors and call simulations. Service representatives then continue to be monitored and receive feedback based on the standards of our quality assurance program. In addition to call quality, we are bound by client-driven metrics specified by our service level agreements.

We maintain in-house customer care centers in Chantilly, Virginia, and in Rio Rancho, New Mexico, where our facility opened in December, 2003. We have the capability to house 390 representatives and required support personnel. We have expansion plans that may be deployed to increase capacity. Additionally, we utilize the services of an outsourced strategic vendor with capacity for additional customer service representatives trained to handle billing inquiries, subscription questions and account retention.

Information Processing

Our in-house information processing capabilities are designed to provide prompt, high quality and cost-effective delivery of subscribers’ personal data on a private label basis. Proprietary software creates consumer friendly presentation, tracks delivery at the page level and stores the consolidated credit data for member servicing. For the purpose of ensuring accuracy and security of subscribers’ personal data, credit reports are electronically inspected upon receipt and again before final delivery. Operational auditing of fulfillment events is also conducted regularly.

To augment the capabilities of our original fulfillment center in Chantilly, Virginia, we opened a second processing center in Manassas, Virginia, in November 2003. This second center provides additional capacity to handle projected growth, provide contingency backup and efficiently respond to volume spikes.

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We also make our services available to most subscribers via the Internet. Upon enrollment, each subscriber is provided a personal identification number that enables immediate activation and access to the service online. We deliver these services through client-branded web sites and our own branded web sites.

Information Technology

We continue to make significant investments in technology to enable continued growth in our subscriber base. This also allows us to provide flexible solutions for our subscribers and clients with a secure and reliable platform to build on. Our customer resource management platform, which is the basis for our service delivery, integrates certain industry and application specific software. Since inception, we have contracted a portion of our credit data processing to Digital Matrix Systems, Inc. A portion of our web development is contracted to nVault Inc.

We employ a range of information technology solutions, physical controls, procedures and processes to safeguard the security of data, and regularly evaluate those solutions against the latest available technology and security literature. We use respected third parties to review and test our security, we continue to be audited by our clients, and we have obtained a TruSecure Corporation Web Certification.

We have undertaken several projects for the purpose of ensuring that the infrastructure expands with client and subscriber needs. We have a redundant backup location in the Dallas, Texas area for the back office operations, and a second online data center in the Virginia area to supplement our hosted data center in Canada. At the application level, the applications are fully multi-threaded and multi-tiered. Our back office and online environments are designed with high volume processing in mind and are constructed to optimize performance.

We are working with a major technology consultant to re-architect our most critical software platforms on a proven .Net architecture with the purpose of increasing the flexibility and scalability of our existing and new product offerings.

Data and Analytics Providers

Under our agreements with Equifax, Experian and TransUnion, we purchase data for use in providing our services to consumers. The Experian and TransUnion contracts may be terminated by them on 30 days and 60 days notice, respectively. The Equifax contract continues until November 26, 2006 and automatically renews for successive two-year terms unless either party terminates the agreement upon 12-months’ prior notice. Each of these credit reporting agencies is a competitor of ours in providing credit information directly to consumers.

We have entered into contracts with several additional providers of data and analytics for use in our planned identity theft protection services, including new data sources, advanced tools and analytical capabilities, more timely notification of activities and more useable content. We expect those third party data and analytics sources to be of increasing significance to our business in the future to the extent we are successful in marketing our new services.

Our recently acquired subsidiary, American Background, relies on multiple sources of data. Those data sources include commercial providers of public record data, credit reporting agencies, state and local government agencies, and data collectors in various locations.

Competition

The consumer credit information services industry is competitive. There are a number of divisions or subsidiaries of large, well-capitalized firms with strong brand names that operate in the industry. We compete with these firms to provide our clients’ customers with identity theft protection and credit monitoring services. We compete for these clients on the basis of our reputation in the market, ability to offer client-branded solutions, flexible service configurations, high quality standards and price.

We believe that our principal competitors include: Equifax; Experian and its subsidiary, Consumerinfo.com; TransUnion and its subsidiary, Truelink; MyFICO.com, a division of Fair Isaac Corporation; The First American Corporation, and its subsidiary CREDCO; and PrivacyGuard, a division of Trilegiant Corporation (an affiliate of Cendant Corporation). We believe that these competitors primarily market their services directly to the consumer through the Web, except for Trilegiant and CREDCO, which we believe primarily market offline and compete with us for financial institution clients. We believe that certain of our

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competitors, including Equifax, Experian and TransUnion, are and will continue to make efforts to compete with us in marketing offline and providing branded solutions for financial institution clients.

Government Regulation

Our business is subject to a variety of laws and regulations, some of which are summarized below. Should we fail to comply with these laws or regulations, we could be subject to a variety of criminal and civil enforcement actions, lawsuits and sanctions, any of which could have a material adverse effect on our company. Changes in these laws or regulations, or new laws or regulations, could affect our business.

Credit Reporting Laws

Our services involve the use of consumer credit reports governed by the federal Fair Credit Reporting Act. The Fair Credit Reporting Act establishes a set of requirements that “consumer reporting agencies” must follow in conducting their business. A “consumer reporting agency” generally means any person who for monetary fees regularly engages in assembling consumer credit information for the purpose of furnishing consumer reports to third parties. Each of the major credit reporting agencies is a “consumer reporting agency” under the Fair Credit Reporting Act. While we are not a “consumer reporting agency” within the meaning of the Fair Credit Reporting Act, certain provisions of the Fair Credit Reporting Act apply to users of consumer reports and others, such as ourselves. In addition, we are required by our contracts with Equifax, Experian and TransUnion, to comply with certain requirements of the Fair Credit Reporting Act. Some states have adopted laws and regulations governing the use of consumer credit information. Many of those laws are similar in effect to the Fair Credit Reporting Act, although some state laws have different provisions.

Laws in several states, including Colorado, Georgia, Illinois, Maine, Maryland, Massachusetts, New Jersey and Vermont, require consumer reporting agencies to provide each consumer one credit report per year (or two credit reports, in the case of Georgia) upon request without charge. On December 4, 2003, the President signed into law certain amendments of the Fair Credit Reporting Act. Among other things, these amendments provide consumers the ability to receive one free consumer credit report per year from each major consumer credit reporting agency, and require each major consumer credit reporting agency to provide the consumer a credit score along with his or her credit report for a reasonable fee as determined by the Federal Trade Commission. We are not required to comply with these requirements because we are not a consumer reporting agency. These laws do apply to the three major credit reporting agencies from which we purchase data for our services. The rights of consumers to obtain free annual credit reports from consumer reporting agencies, and credit scores for a fee could cause consumers to perceive that the value of our services is reduced or replaced by those free credit reports, which could have a material adverse effect on our business.

The major credit reporting agencies that are obligated to provide free credit reports are required to establish a centralized source through which consumers may request their free credit reports. The Federal Trade Commission has promulgated rules which allow the credit reporting agencies to advertise their paid products on the centralized source. The Federal Trade Commission’s rules restrict the manner of such advertising, and also prohibit the credit reporting agencies from using for marketing purposes the consumer information gathered through the centralized source. Nevertheless, advertising by the credit reporting agencies through the centralized source may compete with the marketing of our services.

Privacy and Data Protection

Generally, the Gramm-Leach-Bliley Act governs information about consumers received or obtained by “financial institutions.” The Gramm-Leach-Bliley Act, together with implementing regulations adopted by the Federal Trade Commission and other federal agencies, require, among other things, that financial institutions issue privacy policies to consumer customers and comply with various restrictions on use and disclosure of “nonpublic personal information.” The Gramm-Leach-Bliley Act and implementing regulations also restrict the use and disclosure of nonpublic personal information by non-financial institutions that receive such information from financial institutions. Some of our business, including use of nonpublic personal information we receive in connection with our services, is subject to the Gramm-Leach-Bliley Act and implementing regulations.

In addition, some states have or may adopt laws applicable to the privacy of consumer information and data security for such information, including laws that require notification of consumers in the event of unauthorized access to private information.

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Various states, as well as the federal government, may adopt such laws and other laws and regulations that may impede or increase the costs of the use of private consumer information in our business.

Marketing Laws and Regulations

The Federal Trade Commission and virtually all state attorneys general have authority to prevent marketing activities that constitute unfair or deceptive acts or practices. Certain forms of marketing are subject to more specific laws and regulations. Telemarketing of our services is subject to federal and state telemarketing regulation. Federal statutes and regulations adopted by the Federal Trade Commission and Federal Communications Commission impose various restrictions on the conduct of telemarketing. The Federal Trade Commission also has enacted the national Do Not Call Registry, which enables consumers to elect to prohibit telemarketers from calling them. We may not be able to reach potential subscribers because they are placed on the national Do Not Call Registry. Many states have adopted, and others are considering adopting, statutes or regulations that specifically affect telemarketing activities. Although we do not control the telemarketing firms that we engage to market our programs, in some cases we are responsible for compliance with these federal and state laws and regulations.

Federal and state legislatures are considering or have enacted various laws governing email communications. While most of these laws concern unauthorized emails known as “spam,” and thus do not apply to our activities, they may affect our use of email to market to or communicate with subscribers or potential subscribers.

Canadian Laws

Various Canadian federal and provincial laws govern our services in Canada, including provincial credit reporting laws similar in scope to the Fair Credit Reporting Act in the United States and privacy laws. Many of these laws vary by province.

Intellectual Property

We consider certain of our processes, systems, methodologies, databases, tangible and intangible materials and software and trademarks to be proprietary. We rely on a combination of trade secret, patent, copyright, trademark and other laws, license agreements and nondisclosure, noncompetition and other contractual provisions and technical measures to protect our proprietary and intellectual property rights. Various tools available for use on our website utilize software under license from several third parties. We do not believe that these software licenses are material to our business, and believe that they may be replaced on similar terms with software licensed from other third parties or developed by us or on our behalf, including by vendors currently under contract with us. When we market our services in client-branded programs, we rely on licenses from our clients to use their trademarks.

Employees

As of December 31, 2004, we had 581 full-time employees and 15 part-time employees, including our subsidiary American Background. Our future performance depends significantly on the continued service of our key personnel. None of our employees are covered by collective bargaining arrangements. We believe our employee relations are good.

Risk Factors

We believe the following risk factors, as well as the other information contained in this Annual Report on Form 10-K, are material to an understanding of our company. Any of the following risks as well as other risks and uncertainties discussed in this Annual Report on Form 10-K could have a material adverse effect on our business, financial condition, results of operations or prospects and cause the value of our stock to decline. Additional risks and uncertainties that we are unaware of, or that are currently deemed immaterial, also may become important factors that affect us.

Risks Related to Our Business

We must replace the subscribers we lose in the ordinary course of business and if we fail to do so our revenue and subscriber base will decline.

A substantial number of our subscribers cancel their subscriptions each year. Cancellations may occur due to numerous factors, including:

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•	changing subscriber preferences;
•	competitive price pressures;
•	general economic conditions;
•	subscriber dissatisfaction;
•	cancellation of subscribers due to credit card declines; and
•	credit or charge card holder turnover.

The number of cancellations within the first 90 days as a percentage of new subscribers was 33.8% in 2002, 29.0% in 2003, and 24.3% in 2004. We analyze subscriber cancellations during the first 90 days because we believe this time period affords the subscriber the opportunity to evaluate the service. The number of cancellations after the first 90 days, as a percentage of the number of subscribers at the beginning of the year plus the net of new subscribers and cancellations within the first 90 days, was 26.6% in 2002, 28.6% in 2003, and 29.7% in 2004. The increase in the percentage of cancellations after 90 days from 2002 to 2003 is related to the launch of a new indirect marketing arrangement in the third quarter of 2002. Under the new arrangement, subscribers tended to remain in the program for a longer period than most of our subscribers. As a result, we experienced a decrease in the percentage of cancellations within 90 days and a slightly higher increase in the percentage of cancellations after 90 days. The increase in the percentage of cancellations after 90 days from 2003 to 2004 is related to the decision in the third quarter of 2004 to cancel approximately 106,000 subscribers who had not provided sufficient information to allow them to receive the full benefits of the service. As a result, the percentage of cancellations under this indirect marketing arrangement was lower than our overall cancellation percentage during the first 90 days but was slightly higher than our overall cancellation percentage after 90 days. Despite this increase, the total number of cancellations during the year as a percentage of the beginning of the year subscribers plus new subscribers was 43.4% in 2002, 40.9% in 2003, and 38.5% in 2004. Conversely, our retention rates, calculated by taking the sum of the beginning of the year subscribers plus new subscribers less cancellations during the year and dividing that amount by the beginning of the year subscribers plus new subscribers, increased from 56.6% in 2002 to 59.1% in 2003 to 61.5% in 2004.

Failure to obtain new subscribers, producing subscription revenue, net of marketing and commissions associated with subscription revenue, equivalent to the subscription revenue, net of marketing and commissions associated with subscription revenue, from the canceling subscribers, would result in a reduction in our subscription revenue, net of marketing and commissions associated with subscription revenue, and potentially reduce the number of our subscribers. Because of the large number of subscribers we need to replace each year, there can be no assurance that we can successfully replace them.

We historically have depended upon a few clients to derive a significant portion of our revenue, and the loss of any of these clients could have a material adverse effect on our growth strategy and prospects.

Revenue from subscribers obtained through our largest clients in 2003 and 2004, as a percentage of our total revenue, was: American Express — 23% and 22%, Capital One (through our relationship with Equifax) — 20% and 24%, Citibank — 15% and 11%, Discover — 18% and 17%, and Equifax — 10% and 0%, respectively. Substantially all of the revenue from Equifax (not including the revenue from Capital One) was comprised of revenue from a one-time, non-subscription report we provided to customers of Equifax, for which Equifax terminated our services effective October 16, 2003. There can be no assurance that one or more of these key clients or other clients will not terminate their relationship with us. The termination or non-renewal of a key client relationship could have a material adverse effect on our future revenue from existing services of which such client’s customers are subscribers and on our ability to further market new or existing services through such client.

If one or more of our agreements with clients were to be terminated or expire, or one or more of our clients were to reduce the marketing of our services, we would lose access to prospective subscribers and could lose sources of revenue.

Many of our key client relationships are governed by agreements that may be terminated without cause by our clients upon notice of as few as 60 days without penalty. Under many of these agreements, our clients may cease or reduce their marketing of our services. If one or more of our agreements with clients were to be terminated or expire, or one or more of our clients were to reduce the marketing of our services, we would lose access to prospective subscribers.

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Our typical contracts provide that after termination of the contract we may continue to provide our services to existing subscribers under the same economic arrangements that existed before termination. Under certain of our agreements, however, the clients may require us to cease providing services under existing subscriptions after time periods ranging from 90 days to three years after termination of the contract. Clients under certain contracts also may require us to cease providing services to their customers under existing subscriptions if the contract is terminated for material breach by us. If one or more of these clients were to terminate our agreements with them, and require us to cease providing our services to subscribers, then we would lose significant sources of revenue.

We are substantially dependent upon our consumer identity theft protection and credit management services for a significant portion of our revenue, and market demand for these services could decrease.

Substantially all of our revenue historically has been derived from consumer identity theft protection and credit management services. We expect to remain dependent on revenue from these services for the foreseeable future. Any significant downturn in the demand for these services would materially decrease our revenue.

If we lose our ability to purchase data from any of the three major credit reporting agencies, each of which is a competitor of ours, demand for our services could decrease.

We rely on the three major credit reporting agencies, Equifax, Experian and TransUnion, to provide us with essential data for our consumer identity theft protection and credit management services. The Equifax agreement continues until November 26, 2006 and automatically renews for successive two-year terms unless either party terminates the agreement upon twelve-months’ prior notice. Our agreements with Experian and TransUnion may be terminated by them on 30 days and 60 days notice, respectively. Each of the three major credit reporting agencies owns its consumer credit data and is a competitor of ours in providing credit information directly to consumers, and may decide that it is in their competitive interests to stop supplying data to us. Any interruption, deterioration or termination of our relationship with one or more of the three credit reporting agencies would be disruptive to our business and could cause us to lose subscribers.

If we experience system failures or interruptions in our telecommunications or information technology infrastructure, our revenue could decrease and our reputation could be harmed.

Our operations depend upon our ability to protect our telecommunications and information technology systems against damage or system interruptions from natural disasters, technical failures and other events beyond our control. We receive credit data electronically, and this delivery method is susceptible to damage, delay or inaccuracy. A significant portion of our business involves telephonic customer service as well as mailings, both of which depend upon the data generated from our computer systems. Unanticipated problems with our telecommunications and information technology systems may result in a significant system outage or data loss, which could interrupt our operations. Our infrastructure may also be vulnerable to computer viruses, hackers or other disruptions entering our systems from the credit reporting agencies, our clients and subscribers or other authorized or unauthorized sources. Our business could be materially adversely affected if there is any damage to our telecommunications and information technology systems, failure of communication links or other loss that causes interruption in, or damage to, our operations.

We and our clients outsource telemarketing to third parties who may take actions that lead to negative publicity and consumer dissatisfaction.

We and our clients solicit some of our subscribers through outbound telemarketing that we outsource to third-party contractors. In outbound telemarketing, the third-party contractors make the initial contact with potential subscribers. We attempt to control the level and quality of the services provided by these third parties through a combination of contractual provisions, monitoring, on-site visits and records audits. In arrangements where we bear the marketing cost, which represented 33% of new subscribers acquired in 2004, approximately 79% of new subscribers were obtained through outbound telemarketing by our vendors. In arrangements where the clients bear the marketing cost, which represented 67% of new subscribers acquired in 2004, approximately 22% of new subscribers were obtained through outbound telemarketing by outsourced vendors. Any quality problems could result in negative publicity and customer dissatisfaction, which could cause us to lose clients and subscribers and decrease our revenue.

We may lose subscribers and significant revenue if our existing services become obsolete, or if we fail to introduce new services with broad consumer appeal or fail to do so in a timely or cost-effective manner.

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Our growth depends upon developing and successfully introducing new services that generate client and consumer interest, including new data sources, advanced tools and analytical capabilities, more timely notification of activities and more useable content. We have made or may make significant investments in these new services, including development costs and prepayment of royalties and fees to third party providers. Our failure to introduce these services or to develop new services, or the introduction or announcement of new services by competitors, could render our existing services noncompetitive or obsolete. Although we have a limited history of developing and introducing services outside the areas of identity theft protection and consumer credit management, we are currently developing or introducing new services in the area of small business credit information and fraud detection. There can be no assurance that we will be successful in developing or introducing these or any other new services. Our failure to develop, introduce or expand our services could harm our business and prospects.

We may not be able to develop and maintain relationships with third party data and analytics providers on which we will be substantially dependent for our planned new services, and failures by those third parties could harm our business and prospects.

Our planned new consumer services are substantially dependent on third party data and analytics providers. Our failure to develop and maintain these third party relationships could harm our ability to provide those services. Failure of those third party providers to perform under our agreements with them, or to provide effective and competent services, could cause us to have liability to others or otherwise harm our business and prospects.

We expect that our revenue, expenses and operating results may be subject to significant fluctuations, which could contribute to wide fluctuations in period-to-period performance and could have a material adverse effect on the price of our stock.

These fluctuations may be attributable to a number of factors, many of which are beyond our control, including:

•	the timing and rate of subscription cancellations and additions;
•	our ability to introduce new services on a timely basis;
•	the introduction of competing services by our competitors;
•	market acceptance of our services;
•	the demand for consumer subscription services generally;
•	the ability of third parties to market and support our services;
•	the timing of our clients’ marketing of our services; and
•	general economic conditions.

Any one or a combination of these factors could contribute to wide fluctuations in period-to-period performance and have an adverse effect on our stock price.

We cannot give assurances of our future profitability.

We incurred significant operating losses from our inception in 1996 through 2001. As of December 31, 2004, we had an accumulated deficit of approximately $4.5 million. We historically incurred and will continue to incur significant marketing costs and commissions to grow our business, which affected our profitability in prior periods and will continue to affect our profitability in future periods. Although our revenue, net of marketing and commissions, has grown in recent periods, our growth rates may not be sustainable or indicative of future operating results. Although we became profitable in the second quarter of 2002, we cannot assure you that we will remain profitable.

We may be unable to meet our future capital requirements to grow our business, which could adversely impact our financial condition and growth strategy.

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We may need to raise additional funds in the future in order to operate and expand our business. There can be no assurance that additional funds will be available on terms favorable to us, or at all. Our inability to obtain additional financing could have a material adverse effect on our financial condition.

We may raise additional funds in the future, which could cause dilution to our existing stockholders or adversely affect their voting or other rights.

We may seek additional funding in the future through public or private financings and the terms of these financings may adversely affect the holdings or the rights of our stockholders. If we raise funds by selling more stock, our existing stockholders will be diluted, and we may grant future investors rights superior to those of the common stock. If additional funds are raised by issuing debt, we may be subject to covenants limiting our operations. As a result, our stock price may decline.

If we are not able to hire and retain qualified personnel, our ability to grow and maintain our business could be adversely affected.

Our success depends on the continued services of our key senior management and our marketing, customer service and technology personnel. If one or more of these individuals were unable or unwilling to continue in their present positions, our business could be materially adversely affected. In addition, we do not maintain key person life insurance on our senior management other than Michael R. Stanfield, our chairman and chief executive officer. We also believe that our future success will depend, in part, on our ability to attract, retain and motivate skilled managerial, marketing and other personnel. We may not be able to attract, assimilate or retain highly qualified employees in the future, which could result in increased labor costs and operating expenses and diminished customer service, any of which would have a material adverse effect on our results of operations and ability to grow and maintain our business.

Risks Related to Our Industry

Our failure to protect private data could damage our reputation and cause us to expend capital and resources to protect against future security breaches or other unauthorized access.

Our services are based upon the collection, distribution and protection of sensitive private data. Unauthorized users might access that data or human error might cause the wrongful dissemination of that data. If we experience a security breach or other unauthorized access to information, the integrity of our services may be affected. We have incurred and may incur in the future significant costs to protect against the threat of a security breach or other unauthorized access to information or to alleviate problems caused by a breach or other unauthorized access. Moreover, any public perception that we have engaged in the unauthorized release of, or have failed to adequately protect, private information could adversely affect our ability to attract and retain clients and subscribers and could subject us to legal claims from clients or subscribers. We cannot make assurances that we would prevail in such litigation. In addition, unauthorized third parties might alter information in our databases, which would adversely affect both our ability to market our services and the credibility of our information.

We are subject to government regulation and increasing public scrutiny, which could impede our ability to market and provide our services and have a material adverse effect on our business.

Our consumer identity theft protection and credit management services involve the use of consumer credit reports governed by the federal Fair Credit Reporting Act and similar state laws and regulations governing the use of consumer credit information. Our services involve the use of nonpublic personal information that may be subject to the federal Gramm-Leach-Bliley Act and state laws and regulations governing consumer privacy. Telemarketing of our services is subject to federal and state telemarketing regulation. These laws and regulations are subject to revision. We cannot predict the impact of legislative or regulatory changes on our business.

For example, the Federal Trade Commission has enacted the national Do Not Call Registry, which enables consumers to elect to prohibit telemarketers from calling them. We may not be able to reach potential subscribers because they are placed on the national Do Not Call Registry.

In addition, some states have or may adopt laws applicable to the privacy of consumer information and data security for such information, including laws that require notification of consumers in the event of unauthorized access to private information. Various states, as well as the federal government, may adopt such laws or other laws and regulations that may impede or increase the costs of the use of private consumer information in our business.

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Further, the business of American Background depends on information about individuals from private and public sources. Increased statutory and regulatory restrictions on access to or use of such information could impede, or increase the costs of, American Background’s business. Such restrictions also could impede the ability of third party data and analytics providers to provide us data for use in our new consumer services.

We commenced marketing our services in Canada in 2003. Various Canadian federal and provincial laws govern our services, including provincial credit reporting laws similar in scope to the Fair Credit Reporting Act in the United States and privacy laws. These laws vary by province and are subject to changes that may affect our business. Laws and regulations regarding access to or use of credit information, or other information about individuals, could impede or increase the costs of our efforts to provide our services in Canada.

We also may market and provide our services in other countries. The laws in other countries and jurisdictions, including the United Kingdom and European Economic Area, may impose restrictions that could impede or increase the costs of our efforts to market and provide our services in those countries and jurisdictions.

Although we do not believe that we are engaging in, and do not plan to engage in, activities prohibited by laws or regulations governing our activities, any allegation or finding that we are violating such laws or regulations could harm our business. Furthermore, the media often publicizes perceived non-compliance with consumer protection regulations and violations of fair dealing with consumers. If we received this kind of publicity or became associated with other entities receiving negative publicity, our reputation, client and subscriber relationships, and consumer acceptance and subscriber loyalty could be materially adversely affected.

Laws requiring the free issuance of credit reports by credit reporting agencies could impede our ability to obtain new subscribers or maintain existing subscribers and could have a material adverse effect on our revenue.

On December 4, 2003, the President signed into law certain amendments to the federal Fair Credit Reporting Act. Among other things, these amendments provide consumers the ability to receive one free consumer credit report per year from each major consumer credit reporting agency and require each major consumer credit reporting agency to provide the consumer a credit score along with his or her credit report for a reasonable fee as determined by the Federal Trade Commission. In addition, laws in several states, including Colorado, Georgia, Illinois, Maine, Maryland, Massachusetts, New Jersey and Vermont, require credit reporting agencies to provide each consumer one credit report (or two credit reports, in the case of Georgia) per year upon request without charge. We are not required to comply with these requirements because we are not a “consumer reporting agency” or “credit reporting agency.” A “consumer reporting agency” or “credit reporting agency” generally means any person who for monetary fees regularly engages in assembling consumer credit information for the purpose of furnishing consumer reports to third parties. Our services do not provide consumer credit information to third parties. These laws do apply to the three major credit reporting agencies from which we purchase data for our services. The rights of consumers to obtain free annual credit reports from these credit reporting agencies and credit scores for a fee could cause consumers to believe that the value of our services is reduced or replaced by those free credit reports, which would adversely impact the marketability of our services and could have a material adverse effect on our revenue, results of operations and business.

The Federal Trade Commission has promulgated rules which allow the credit reporting agencies that are required to provide free credit reports to advertise their paid products on the centralized source through which consumers request their free credit reports. The Federal Trade Commission’s rules restrict the manner of such advertising, and also prohibit the credit reporting agencies from using for marketing purposes the information gathered through the centralized source. Nevertheless, advertising by the credit reporting agencies through the centralized source may compete with the marketing of our services.

A significant downturn in the charge or credit card industry or a trend in that industry to reduce or eliminate marketing programs could harm our business.

We depend upon clients in the charge and credit card industry. Services marketed through our charge and credit card issuer clients have accounted for substantially all of our revenue. Therefore, a significant downturn in the charge and credit card industry could harm our business. The reduction or elimination of marketing programs within our charge and credit card issuer clients could materially adversely affect our ability to acquire new subscribers and to expand the range of services offered to current subscribers.

Competition could reduce our market share or decrease our revenue.

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Several of our competitors offer services that are similar to, or that directly compete with, our services. Competition for new subscribers is also intense. Even after developing a client relationship, we compete within the client organization with other services for appropriately targeted customers because client organizations typically have only limited capacity to market third-party services like ours. Many of our competitors have greater financial and other resources than we do. We compete directly with the credit reporting agencies that control the credit file data that we use to provide our services. We believe that the major credit reporting agencies currently market and deliver their services primarily online and generally do not provide client branded services that meet our clients’ specifications and needs. We have no assurance, however, that the major credit reporting agencies will not expand their marketing channels or strategies or develop capabilities competitive with ours, which, if successful, could have a material adverse effect on our business, results of operations and financial condition. There also can be no assurance that our current or future competitors will not provide services comparable or superior to those provided by us, or at lower prices, adapt more quickly to evolving industry trends or changing market requirements, increase their emphasis on services similar to ours, enter the market in which we operate or introduce competing services. Any of these factors could reduce our market share or decrease our revenue.

If we are unable to enforce or defend our ownership and use of our intellectual property, our competitive position and operating results could be harmed.

The success of our business depends in part on the intellectual property involved in our processes, systems, methodologies, materials and software. We rely on a combination of trade secret, patent, copyright, trademark and other laws, license agreements and nondisclosure, noncompetition and other contractual provisions and technical measures to protect our intellectual property rights. However, current law may not provide for adequate protection of our intellectual property. In addition, legal standards relating to the validity, enforceability and scope of protection of proprietary rights are uncertain and evolving, and we cannot assure you of the future viability or value of any of our proprietary rights. Our business could be harmed if we are not able to protect our intellectual property. The same would be true if a court found that our services infringe another party’s intellectual property rights. Any intellectual property lawsuits in which we are involved, either as a plaintiff or as a defendant, could cost us a significant amount of time and money and detract management’s attention from operating our business. In addition, if we do not prevail on any intellectual property claims, this could result in a change to our processes, systems, methodologies, materials and software and could reduce our profitability.

We may not be able to consummate future acquisitions or joint ventures or successfully integrate these into our business.

We recently completed the acquisition of American Background. In addition, we continually consider and evaluate businesses, joint ventures, technologies, products, services or assets that complement our business. A principal component of our strategy going forward is to selectively acquire complementary assets in order to increase cash flow and earnings. Our ability to do so will be dependent upon a number of factors, including our ability to identify acceptable acquisition candidates, consummate acquisitions on favorable terms, successfully integrate acquired assets and obtain financing to support our growth, and many other factors beyond our control. We may not be successful in implementing our acquisition strategy and, even if implemented, such strategy may not improve our operating results. In addition, the financing of future acquisitions may require us to incur indebtedness, which could limit our financial flexibility.

In connection with acquisitions, we may experience unforeseen operating difficulties as we integrate the acquired assets into our existing operations. These difficulties may require significant management attention and financial resources that would otherwise be available for the ongoing development or expansion of existing operations. Any acquisition by us involves risks, including:

•	unexpected losses of key employees, customers and suppliers of the acquired operations;
•	difficulties in integrating the financial, technological and management standards, processes, procedures and controls of the acquired businesses with those of our existing operations;
•	challenges in managing the increased scope, geographic diversity and complexity of our operations; and
•	mitigating contingent or assumed liabilities.

Risks Related to the Common Stock

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Our stock price fluctuates and an active public market for our common stock may not continue, which may cause our stock price to decline in value and could impair liquidity.

The market price of our common stock may fluctuate significantly in response to period-to-period fluctuations in our revenue, expenses and operating results and other factors which are beyond our control. The stock market in general has recently experienced extreme price and volume fluctuations that often have been unrelated or disproportionate to the operating performance of listed companies. These broad market fluctuations could result in extreme fluctuations in the price of our common stock, which could cause a decline in the value of our shares.

A large number of shares of our common stock may be sold in the market, which could cause the market price of our common stock to decline.

Our sale, or the sale or resale by our stockholders, of shares of our common stock, or the perception that such sales may occur, could cause the market price of the common stock to decline. We have 17,345,329 shares of common stock outstanding as of March 1, 2005. Of these shares, approximately 8,000,000 shares are freely transferable without restriction except for any shares held by our “affiliates” as defined in Rule 144 of the Securities Act. The remaining shares of common stock are “restricted securities” and eligible for public sale when registered or when they qualify for an exemption from registration under the Securities Act. The holders of substantially all of these “restricted securities” as well as 360,013 shares issuable upon the exercise of warrants have the right under specified circumstances to require us to register their shares for resale to the public or to participate in a registration of shares by us.

Insiders have substantial control over us and could delay or prevent a change in corporate control, which may harm the market price of our common stock.

Our directors, executive officers and principal stockholders, together with their affiliates, beneficially own, in the aggregate, approximately 51% of our outstanding common stock. These stockholders may have interests that conflict with other stockholders and, if acting together, may have the ability to determine the outcome of matters submitted to our stockholders for approval, including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders, acting together, may have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership may harm the market price of our common stock by:

•	delaying, deferring or preventing a change in control of our company;
•	impeding a merger, consolidation, takeover or other business combination involving our company; or
•	discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company.

Provisions in our certificate of incorporation and bylaws and under Delaware law could prevent or delay transactions that stockholders may favor.

We are incorporated in Delaware. Our certificate of incorporation and bylaws, as well as Delaware corporate law, contain provisions that could delay or prevent a change of control or changes in our management that a stockholder might consider favorable, including a provision which authorizes our board of directors to issue preferred stock with such voting rights, dividend rates, liquidation, redemption, conversion and other rights as our board of directors may fix without further stockholder action. If a change in control or change in management is delayed or prevented, the market price of our common stock could decline.

Delaware law also prohibits a corporation from engaging in a business combination with any holder of 15% or more of its capital stock until the holder has held the stock for three years unless, among other possibilities, the board of directors approves the transaction. This provision may prevent changes in our management or corporate structure. Also, under applicable Delaware law, our board of directors is permitted to and may adopt additional anti-takeover measures in the future.

ITEM 2. PROPERTIES

We lease our headquarters and other facilities in Chantilly, Virginia. The combined facilities are approximately 69,197 square feet and our leases expire in 2007 and 2009. In addition, we lease a customer service facility in Rio Rancho, New Mexico, which is approximately 28,000 square feet, and we lease an information processing facility in Manassas, Virginia, which is

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approximately 8,185 square feet. The lease on our Rio Rancho, New Mexico facility is due to expire in 2013, and the lease on our Manassas, Virginia facility is due to expire in 2008. We believe that our facilities will support our future business requirements or that we will be able to lease additional space, if needed, on reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

The Company is not presently involved in any material litigation other than routine litigation arising in the ordinary course of business and that is either expected to be covered by liability insurance or to have no material impact on the Company’s financial position and results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

None

Executive Officers of the Registrant

Our executive officers are as follows:

Michael R. Stanfield co-founded CreditComm, the predecessor to Intersections, in May 1996 and has been Chairman, Chief Executive Officer and a Director since that time. Mr. Stanfield joined Loeb Partners Corporation, an affiliate of Loeb Holding Corporation, in November 1993 and served as a Managing Director at the time of his resignation in August 1999. Mr. Stanfield has been involved in management information services and direct marketing through investments and management since 1982, and has served as a director of CCC Information Services Inc. and BWIA West Indies Airways. Prior to beginning his operational career, Mr. Stanfield was an investment banker with Loeb, Rhoades & Co. and Wertheim & Co. He holds a B.B.A. in Business Administration from Emory University and an M.B.A. from Columbia University.

Kenneth D. Schwarz served as our Chief Financial Officer from May 1999 until February 2005. He was appointed President, Consumer and Small Business Solutions in January 2005. From November 2002 to October 2003, Mr. Schwarz served as our Chief Operating Officer. Prior to joining Intersections, from August 1996 to May 1999, Mr. Schwarz served as Senior Vice President, Finance of WinStar Communications. Mr. Schwarz previously held positions with Cable & Wireless, Unitel Communications and MCI Communications, and is a C.P.A. who worked with Touche Ross from 1976 to 1981. He holds a B.S. and an M.B.A. from Indiana University.

Charles P. Garner has served as our Executive Vice President — Strategic Initiatives since February 2004, and was appointed Chief Marketing Officer as of July 2004. Prior to that, Mr. Garner had served on our board of directors since January 2003. He was a Senior Vice President of Nextel Communications, Inc. from January 2002 until December 2003, focusing on the consumer business segments. Prior to joining Nextel, from May 2000 until December 2001, Mr. Garner served as Chief Executive Officer of The Motley Fool, Inc. From June 1970 until April 2000, Mr. Garner served in various positions at Coca-Cola Company, most recently as President, Southeast and West Asia Division. He holds a B.S. from Tulane University and an M.B.A. from the University of South Carolina.

Debra R. Hoopes served as our Senior Vice President of Corporate Development and Investor Relations from June 2004 until February 2005, when she was appointed Chief Financial Officer. Ms. Hoopes previously served as Chief Financial Officer for Compel Holdings from April 2003 to June 2004 and as Chief Financial Officer of CityNet Telecommunications from April 2000 to September 2002. Ms. Hoopes previously held positions with Winstar Communications, Cable & Wireless and MCI Communications. She is a C.P.A. and holds a B.S. from Virginia Tech and an M.B.A. from George Washington University.

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Neal B. Dittersdorf served as our Senior Vice President and General Counsel from February 2003 until June 2004, when he was appointed Chief Legal Officer. From January 2002 to January 2003, Mr. Dittersdorf was of counsel at the law firm of Venable, Baetjer, Howard & Civiletti LLP. He was employed by Credit Management Solutions, Inc. from July 1997 to June 2001, where he served as Deputy General Counsel and then General Counsel. He previously founded information and technology law practices at two national law firms, and was a Trial Attorney with the U.S. Department of Justice, Civil Division. He holds a B.A. from Brandeis University and a J.D. from the New York University School of Law.

George (Chip) K. Tsantes was hired as Intersections’ Chief Technology Officer in January of 2005. Prior to joining Intersections, Mr. Tsantes was a Partner in Accenture’s Capital Markets Group, part of the global firm’s Financial Services practice and a member of its FSI Technology leadership. He was an employee or Partner with Accenture from August 1986 to January 2005. He holds a B.A from Virginia Wesleyan College and an M.B.A. from Old Dominion University.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock. Intersections Inc.’s common stock began trading on the Nasdaq National Market on April 30, 2004 under the symbol “INTX”. Before that date, no public market for its common stock existed. As of March 1, 2005, Intersections Inc.’s common stock was held by approximately 18 stockholders of record and an estimated 1,237 additional stockholders whose shares were held for them in street name or nominee accounts. Set forth below are the high and low closing sale prices per share of our common stock as reported on the Nasdaq Composite Tape.

We never have paid or declared any cash dividends on our common stock and have no plans to do so in the foreseeable future. We currently intend to retain future earnings, if any, to finance the growth and development of our business. Future dividends, if any, will depend on, among other things, our results of operations, capital requirements and such other factors as our board of directors may, in its discretion, consider relevant.

Use of Proceeds. The Company’s Registration Statement on Form S-1 (File No. 333-111194) for the sale of its common stock in an initial public offering was declared effective by the Securities and Exchange Commission on April 29, 2004. The Company offered and sold 3,000,000 shares of its common stock, and certain selling stockholders offered and sold an additional 4,187,500 shares. The offering was completed with all shares of common stock having been sold on May 5, 2004 at an initial price of $17.00 per share. The net proceeds to us from the initial public offering, after deducting underwriting discounts and commissions and expenses, were approximately $44.9 million. The completion of this stock offering resulted in the conversion of a senior secured convertible note and all outstanding preferred stock into 8,988,894 shares of common stock, after giving effect to the 554.9338-for-one stock split of our common stock, which occurred immediately prior to the closing.

Of the $51.0 million in gross proceeds raised by us in the offering:

1. approximately $3.57 million was paid to the underwriters in connection with underwriting discounts and commissions;

2. approximately $2.5 million was paid or accrued by us in connection with offering fees and expenses;

3. approximately $20.2 million was paid or accrued by us in connection with our acquisition in November 2004 of American Background Information Services, Inc., including approximately $1.4 million to retire American Background’s outstanding bank debt; and

4. the balance has been retained by us for general corporate purposes and is invested in short-term, interest-bearing, U.S. Treasury securities.

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ITEM 6. SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share data)

This section presents our historical financial data. The selected consolidated financial data is qualified by reference to and should be read carefully in conjunction with the consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of this report. The selected consolidated financial data in this section is not intended to replace the financial statements.

The selected consolidated statement of operations data for the years ended