~~Table~~SECURITIES AND ofEXCHANGE ~~Contents~~COMMISSION

~~SECURITIES AND EXCHANGE COMMISSION~~Washington, D.C. 20549

~~Washington, D.C. 20549~~FORM 10-Q

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	FOR THE QUARTERLY PERIOD ENDED March 31, 2008 or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		FOR THE QUARTERLY PERIOD ENDED March 31, 2005 or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-20882

~~Commission file number: 0-20882~~Standard Management Corporation

~~Standard~~(Exact name ~~Management~~of ~~Corporation~~ registrant as specified in its charter)

(Exact name of registrant as specified in its charter)

Indiana		No. 35-1773567
(State or other jurisdiction		(I.R.S. Employer Identification No.)
of incorporation or organization)

Indiana		No. 35-1773567
10689 N. Pennsylvania Street, Indianapolis, Indiana		46280
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
(Address of principal executive offices)		(Zip Code)
10689 N. Pennsylvania Street, Indianapolis, Indiana (Address of principal executive offices)		46280 (Zip Code)

(317) 574-6200

(Registrant’s telephone number, including area code)

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 x No o o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ~~(as~~or ~~defined~~a smaller reporting company. See definitions of “accelerated filer”, “large accelerated filer”, and “smaller reporting filer” in Rule 12b-2 of the Exchange Act. (Check one): ~~Yes o No þ~~

AsLarge Accelerated ofFiler ~~April 29,~~o Accelerated Filer ~~2005, the Registrant had 7,921,113 shares of Common Stock outstanding.~~o Non-accelerated Filer o Smaller Reporting Company x

~~STANDARD~~Indicate by ~~MANAGEMENT~~check ~~CORPORATION~~mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

~~INDEX~~Yes o No x

		Page Number
Part I.	FINANCIAL INFORMATION:
Item 1.	Unaudited Financial Statements
	Consolidated Balance Sheets —
	March 31, 2005 and December 31, 2004		3
	Consolidated Statements of Operations —
	For the Three Months Ended March 31, 2005 and 2004		4
	Consolidated Statements of Shareholders’ Equity —
	For the Three Months Ended March 31, 2005 and 2004		5
	Consolidated Statements of Cash Flows —
	For the Three Months Ended March 31, 2005 and 2004		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		24
Item 4.	Controls and Procedures		24
Part II.	OTHER INFORMATION:
Item 1.	Legal Proceedings		25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		25
Item 6.	Exhibits and Reports on Form 8-K		25
	SIGNATURES		27
EX-31.1 SECTION 302, CERTIFICATION OF THE CEO
EX-31.2 SECTION 302, CERTIFICATION OF THE CFO
EX-32 SECTION 906, CERTIFICATION OF THE CEO AND CFO

As of May 15, 2008, the Registrant had 51,865,920 shares of Common Stock outstanding.

2STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

~~Table of Contents~~INDEX

PART I – FINANCIAL INFORMATION

		Page Number

Part I.	FINANCIAL INFORMATION:

Item 1.	Unaudited Financial Statements

	Consolidated Balance Sheets —
	March 31, 2008 and December 31, 2007	3

	Consolidated Statements of Operations —
	For the Three Months Ended March 31, 2008 and 2007	4

	Consolidated Statements of Shareholders’ Deficit —
	For the Three Months Ended March 31, 2008	5

	Consolidated Statements of Cash Flows —
	For the Three Months Ended March 31, 2008 and 2007	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17

Item 4T.	Controls and Procedures	18

Part II.	OTHER INFORMATION:

Item 1A.	Risk Factors	19

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	20

Item 3.	Defaults Upon Senior Securities	20

Item 6.	Exhibits	20

	SIGNATURES	20

~~ITEM 1. FINANCIAL STATEMENTS~~2

STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

~~CONSOLIDATED~~PART I – ~~BALANCE~~FINANCIAL ~~SHEETS~~INFORMATION

~~(unaudited,~~ITEM 1. ~~dollars~~FINANCIAL ~~in thousands)~~STATEMENTS

	March 31			December 31
	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	439		$	1,121
Accounts receivable, net		1,477			1,109
Inventories		969			748
Prepaid and other current assets		836			1,009
Assets of discontinued operations		1,841,309			1,921,550
Total current assets		1,845,030			1,925,537
Property and equipment, net		10,916			11,299
Assets held for sale		738			738
Deferred financing fees, net		2,451			1,767
Officer and other notes receivable, less current portion		895			912
Investment in unconsolidated subsidiary		160			160
Intangible assets, net		1,209			1,312
Goodwill		3,725			3,725
Other noncurrent assets		2,295			2,295
Total assets	$	1,867,419		$	1,947,745
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,867		$	2,794
Accrued expenses		394			143
Current portion of long-term debt		3,100			3,297
Liabilities of discontinued operations		1,795,755			1,829,877
Total current liabilities		1,802,116			1,836,111
Long-term debt, less current portion		53,722			50,443
Other long-term liabilities		1,148			1,159
Total liabilities		1,856,986			1,887,713
Shareholders’ equity:
Common stock and additional paid in capital, no par value, 20,000,000 shares authorized, 9,446,191 shares outstanding in 2005 and 2004		64,873			64,369
Retained deficit		(39,989	)		(1,529	)
Treasury stock, at cost, 1,525,078 shares		(7,703	)		(7,703	)
Accumulated other comprehensive income from continuing operations		68			68
Accumulated other comprehensive income (loss) from discontinued operations		(6,816	)		4,827
Total shareholders’ equity		10,433			60,032
Total liabilities and shareholders’ equity	$	1,867,419		$	1,947,745

CONSOLIDATED BALANCE SHEETS

~~See~~(unaudited, dollars ~~accompanying~~in ~~notes to consolidated financial statements.~~ thousands)

	March 31			December 31
	2008			2007
ASSETS

Current assets:
Cash and cash equivalents	$	-		$	-
Accounts receivable, net		52			5
Prepaid and other current assets		41			127
Assets of discontinued operations		433			2,036
Total current assets		526			2,168

Property and equipment, net		7,012			7,038
Assets held for sale		180			918
Deferred financing fees, net		710			731
Officer note receivable		776			776
Other noncurrent assets		378			229
Total assets	$	9,582		$	11,860

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
Accounts payable	$	1,785		$	1,719
Accrued interest		1,441			1,396
Accrued other expenses		3,353			2,896
Current portion of long-term debt		12,250			14,811
Liabilities of discontinued operations		-			-
Total current liabilities		18,829			20,822

Long-term debt, less current portion		15,669			13,268
Accrued interest on subordinated notes		2,506			2,204
Common stock warrants		566			571
Other long-term liabilities		485			573
Total liabilities		38,055			37,438

Minority interest in subsidiary		385			-

Shareholders' deficit:

Common stock, no par value, and additional paid in capital, 200,000,000 shares authorized and 49,141,093 shares and 43,504,711 shares issued in 2008 and 2007, respectively		73,474			73,248
Retained deficit		(91,686	)		(88,227	)
Treasury stock, at cost, 2,840,173 shares		(10,829	)		(10,829	)
Accumulated other comprehensive income		183			230
Total shareholders' deficit		(28,858	)		(25,578	)
Total liabilities and shareholders' deficit	$	9,582		$	11,860

~~Table of Contents~~3

STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, dollars in thousands, except ~~share and~~ per share amounts)

	Three Months Ended
	March 31
	2005				2004
	2008			2007
Net revenues	$	~~2,253~~-		$	$-	~~1,699~~
Cost of sales		~~1,781~~-			-	~~1,201~~
Gross profit		~~472~~-			-	~~498~~
Selling, general and administrative expenses		4,023				2,867
General and administrative expenses		1,046			1,452
Depreciation and amortization		528				528
Impacts related to value of warrants and derivatives		2,120			569
Loss related to sale of business		—				964
Depreciation and amortization		58			40
Operating loss		(43,~~079~~224	)		(2,061	~~(3,861~~)	)
Interest expense		1,124				1,017
Other income, net		103			97
Loss before income taxes		(5,203	)			(4,878	)
Interest expense		(708	)		(770	)
Income tax expense (benefit)		—				—
Loss from continuing operations before income taxes		(3,829	)		(2,734	)
Net loss from continuing operations		(5,203	)			(4,878	)
Income tax expense (benefit)		-			-
Income (loss) from discontinued operations, net of income taxes of ($21) and $345, respectively		(33,257	)			3,111
Net loss from continuing operations		(3,829	)		(2,734	)
Net loss	$	(38,460	)		$	(1,767	)
Income (loss) from discontinued operations		370			(170	)
Loss per share — basic and diluted
Net loss	$	(3,459	)	$	(2,904	)
Loss from continuing operations	$	(0.66	)		$	(0.60	)
Loss per share - basic and diluted
Income (loss) from discontinued operations		(4.20	)			0.38
Loss from continuing operations	$	(0.09	)	$	(0.12	)
Net loss available to common shareholders’	$	(4.86	)		$	(0.22	)
Income (loss) from discontinued operations		0.01			(0.01	)
Weighted average shares outstanding		7,921,113				8,114,443
Net loss	$	(0.08	)	$	(0.13	)
Weighted average shares outstanding		44,647,619			21,662,861

See accompanying notes to consolidated financial statements.

~~Table~~STANDARD MANAGEMENT ofCORPORATION ~~Contents~~AND SUBSIDIARIES

~~STANDARD~~CONSOLIDATED STATEMENTS ~~MANAGEMENT~~OF ~~CORPORATION~~SHAREHOLDERS’ ~~AND SUBSIDIARIES~~ DEFICIT

~~CONSOLIDATED~~(unaudited, dollars ~~STATEMENTS~~in ~~OF SHAREHOLDERS’ EQUITY~~ thousands)

(unaudited, dollars in thousands)

	Total			Common stock and additional paid in capital		Retained deficit			Treasury stock			Accumulated other comprehensive income

Balance at January 1, 2008	$	(25,578	)	$	73,248	$	(88,227	)	$	(10,829	)	$	230

Comprehensive loss:
Net loss		(3,459	)		-		(3,459	)		-			-
Change in unrealized gain on securities		(47	)		-		-			-			(47	)
Comprehensive loss		(3,506	)

Sale of common stock		215			215		-			-
Conversion of debt and interest into shares		11			11		-			-			-
Balance at March 31, 2008	$	(28,858	)	$	73,474	$	(91,686	)	$	(10,829	)	$	183

				Common stock			Retained						Accumulated other
				and additional			earnings						comprehensive income
	Total			paid in capital			(deficit)			Treasury stock			(loss)
Balance at January 1, 2004	$	72,447		$	68,078		$	9,338		$	(7,671	)	$	2,702
Comprehensive income:
Net loss		(1,767	)		—			(1,767	)		—			—
Change in unrealized gain on securities, net of income tax provision of $6,725		13,440			—			—			—			13,440
Comprehensive income		11,673
Balance at March 31, 2004	$	84,120		$	68,078		$	7,571		$	(7,671	)	$	16,142
Balance at January 1, 2005	$	60,032		$	64,369		$	(1,529	)	$	(7,703	)	$	4,895
Comprehensive loss:
Net loss		(38,460	)		—			(38,460	)		—			—
Change in unrealized loss on securities, net of income tax benefits of $5,826		(11,643	)		—			—			—			(11,643	)
Comprehensive loss		(50,103	)
Issuance of warrants		518			518			—			—			—
Exercise of common stock options		(14	)		(14	)		—			—			—
Balance at March 31, 2005	$	10,433		$	64,873		$	(39,989	)	$	(7,703	)	$	(6,748	)

See accompanying notes to consolidated financial statements.

~~See accompanying notes to consolidated financial statements.~~ 5

5STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

~~Table~~CONSOLIDATED STATEMENTS ofOF ~~Contents~~CASH FLOWS

~~STANDARD~~(unaudited, dollars ~~MANAGEMENT~~in ~~CORPORATION AND SUBSIDIARIES~~ thousands)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31
	2008			2007

OPERATING ACTIVITIES:
Net loss	$	(3,459	)	$	(2,904	)
Net income (loss) from discontinued operations		370			(170	)
Net loss from continuing operations		(3,829	)		(2,734	)
Adjustments to reconcile net loss to net cash used in continuing operating activities:
Depreciation and amortization		26			42
Amortization of deferred financing costs and debt discount		91			163
Non-cash stock- based compensation expense		-			250
Impacts related to value of warrants and derivatives		2,120			569
Change in operating assets and liabilities:
Accounts receivable		(47	)		71
Prepaid and other current assets		86			67
Accounts payable		66			(670	)
Accrued expenses		1,101			747
Other		(94	)		2
Net cash used in operating activities of continuing operations		(480	)		(1,493	)

INVESTING ACTIVITIES:
Proceeds from sale of business		-			342
Change in other noncurrent assets, net		(149	)		(20	)
Net cash provided by (used in) investing activities of continuing operations..		(149	)		322

FINANCING ACTIVITIES:
Borrowings		50			218
Net cash provided from (to) discontinued operations.		(11	)		245
Proceeds from sale of stock		215			2,185
Minority investment in subsidiary		385			-
Deferred financing costs paid..		-			(295	)
Repayments of long-term debt		(10	)		(1,295	)
Net cash provided by financing activities of continuing operations		629			1,058


Net cash provided by (used in) operating activities of discontinued operations		(11	)		716
Net cash used in investing activities of discontinued operations		-			(26	)
Net cash provided by (used in) financing activities of discontinued operations		11			(245	)
Net increase in cash and cash equivalents of discontinued operations.....		-			445


Total increase in cash and cash equivalents.......		-			332
Net increase in cash and cash equivalents of discontinued operations		-			445
Net decrease in cash and cash equivalents of continuing operations..		-			(113	)

Cash and cash equivalents of continuing operations at beginning of period		-			222
Cash and cash equivalents of continuing operations at end of period	$	-		$	109

~~(unaudited,~~See accompanying ~~dollars~~notes into ~~thousands)~~consolidated financial statements.

	Three Months Ended
	March 31
	2005			2004
OPERATING ACTIVITIES:
Net loss	$	(38,460	)	$	(1,767	)
Net income (loss) from discontinued operations		(33,257	)		3,111
Net loss from continuing operations		(5,203	)		(4,878	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		528			528
Changes in assets and liabilities, excluding effects of business acquisitions:
Accounts receivable		(368	)		(511	)
Inventories		(221	)		(313	)
Prepaid and other current assets		173			(927	)
Accounts payable		73			(124	)
Accrued expenses		249			12
Net realized loss on sale of MCO		—			964
Other		103			359
Net cash used in operating activities of continuing operations		(4,666	)		(4,890	)
INVESTING ACTIVITIES:
Capital expenditures		(41	)		(144	)
Cash paid for health services acquisitions, net of cash acquired		—			(825	)
Change in other noncurrent assets, net		16			(351	)
Net cash used in investing activities of continuing operations		(25	)		(1,320	)
FINANCING ACTIVITIES:
Borrowings		4,750			3,300
Cash received from discontinued operations		1,364			4,224
Deferred financing costs paid		(775	)		(310	)
Repayments of long-term debt		(1,316	)		(45	)
Issuance of common stock		(14	)		(16	)
Net cash provided by financing activities of continuing operations		4,009			7,153
Net increase (decrease) in cash and cash equivalents of continuing operations		(682	)		943
Cash and cash equivalents at beginning of period		1,121			1,337
Cash and cash equivalents at end of period	$	439		$	2,280

~~See~~STANDARD MANAGEMENT ~~accompanying~~CORPORATION ~~notes~~AND ~~to consolidated financial statements.~~ SUBSIDIARIES

6NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~Table~~Note 1 – Basis of ~~Contents~~Presentation

~~STANDARD~~Standard Management ~~MANAGEMENT~~Corporation ~~CORPORATION~~(“Standard ~~AND~~Management”) ~~SUBSIDIARIES~~is an Indianapolis-based company that, through it’s subsidiaries (collectively, the “Company”), had provided and plans to again provide pharmaceutical products and services to the healthcare industry. The Company is seeking to acquire, through its subsidiaries, existing pharmacies and homecare providers to expand its business. Ultimately, the Company intends to manage a) regional and other institutional pharmacies to provide pharmaceuticals to long-term care and infusion therapy facilities through its Universal Healthcare Company (“UHCC”) subsidiary and b) healthcare and supportive services businesses to provide care to individuals in their homes through a newly formed entity (“Newco”).

~~NOTES~~The Company TOhad ~~CONSOLIDATED~~previously ~~FINANCIAL~~operated ~~STATEMENTS~~several ~~(UNAUDITED)~~pharmacies. As more fully described in Note 2, the Company has sold, closed and transferred each of the pharmacy operations during 2006, 2007 and 2008. Accordingly, the Company has reflected those businesses as discontinued operations in the accompanying consolidated financial statements. As a result of the discontinuance, the Company, as of April 2008, has no substantive active revenue-producing operations. The Company, has reclassified certain amounts from the prior periods to conform to the 2008 presentation and to reflect its newly discontinued operations separately from its continuing operations. These reclassifications had no effect on net loss or shareholders’ deficit in those prior periods. All significant intercompany transactions and balances have been eliminated in consolidation.

~~Note~~The Company 1has –incurred ~~Basis~~recurring significant losses, which have resulted in a shareholders’ deficit balance of ~~Presentation~~approximately $28.8 million as of March 31, 2008, and has sold businesses to provide working capital and to reduce debt. However, with no current revenue producing operations, the Company does not have adequate financing to meet its near-term cash requirements or to embark upon its strategic plans. In addition, as of March 31, 2008, the Company had a working capital deficit of approximately $18.3 million, of which $12.3 million is outstanding debt due or currently callable in 2008 - $5.7 million of which has since been or will be settled by relinquishing the related collateral assets. This aggregate situation raises substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~Standard~~The Company’s ~~Management~~plans ~~Corporation~~include the acquisition of institutional pharmacies and ~~subsidiaries~~home care ~~(“we”,~~businesses ~~“our”,~~through ~~“us”,~~UHCC ~~“Standard~~and ~~Management”~~Newco. ~~or the~~The “Company~~”),~~ asexpects ofto ~~March 31,~~fund ~~2005,~~these acquisitions a)with ~~distributes~~proceeds ~~pharmaceutical~~from ~~products~~lenders and ~~services~~investors ~~through~~in these subsidiaries. ~~its~~ The Company’s ~~Health~~ownership ~~Services~~will ~~subsidiaries~~be ~~and~~determined b)as ~~develops,~~investors ~~markets~~provide ~~and/or~~necessary ~~administers~~capital. Standard ~~annuity~~Management has already entered into an agreement with UHCC and ~~life~~plans ~~insurance~~ to do ~~products~~so ~~through~~with ~~its~~Newco ~~Financial~~under ~~Services~~which ~~subsidiaries.~~Standard AsManagement ~~more~~will ~~fully~~be ~~described~~engaged inas ~~Note~~an 3investor – and ~~Discontinued~~manager ~~Operations,~~of each of the ~~Company~~acquired ~~has~~businesses ~~signed~~and awill ~~definitive~~thereby ~~agreement~~earn tomanagement fees ~~sell~~and aother ~~substantial portion~~sources of ~~its~~compensation ~~Financial~~from ~~Services~~those ~~business~~businesses. ~~and~~The ~~has~~Company expects ~~reflected~~that ~~the~~this ~~to-be-sold~~new ~~business~~investment ~~as discontinued~~and ~~operations~~financial instructure ~~the~~will ~~accompanying~~provide ~~consolidated~~ adequate financial ~~statements.~~support Asto acomplete ~~result~~its ofdevelopment plans. In the first quarter of ~~discontinuance~~ 2008, the Company ~~now~~raised ~~reports~~$385,000 ~~within~~of ainitial ~~single~~third ~~operating~~party ~~segment,~~contributions ~~which includes all of~~into ~~our~~ UHCC representing ~~previously~~less ~~separately~~than ~~reported~~2.8% ~~corporate~~ownership ~~services functions~~interest. ~~All~~An ~~significant~~additional ~~intercompany~~$22,500 of ~~transactions~~ contributions ~~and~~were ~~balances~~received ~~have~~in ~~been~~April ~~eliminated~~and inthrough ~~consolidation~~June 15, 2008.

~~The Health Services business, which was started by the Company~~ Included in ~~2002~~noncurrent ~~under~~other ~~its~~assets ~~U.S.~~are ~~Health Services Corporation subsidiary~~$283,000 ~~develops~~of ~~and~~deferred ~~distributes~~costs ~~retail~~related ~~and~~to ~~third party reimbursed~~potential ~~pharmaceutical~~ future ~~products~~debt and ~~services~~equity ~~through~~financings ~~direct-to-consumer~~and asacquisitions. ~~well~~Management ashas ~~institutional channels.~~reassessed ~~Our~~ each ~~primary~~possible ~~customer~~future ~~base~~transaction ~~consists~~as of ~~consumers~~March 31, ~~academic~~2008 ~~institutions,~~and ~~skilled~~continues ~~nursing~~to ~~facilities,~~believe ~~assisted~~ that ~~living~~such ~~facilities,~~transactions ~~home~~may ~~health care agencies and correctional and mental health facilities~~occur. ~~In addition~~However, ~~U.S.~~circumstances ~~Health~~can ~~Services~~change ~~acts as a wholesale distributor/repackager~~ and athe ~~pharmacy~~ Company ~~management~~may ~~solution~~have to ~~various~~ultimately ~~sectors~~write ofoff ~~the~~these ~~veterinary~~deferred ~~care~~costs ~~industry.~~if ~~The~~the ~~profitability~~related of transaction ~~U.S. Health Services~~ is ~~primarily~~not aconsummated. ~~function~~During of2007 ~~gross~~and ~~margin~~2006, ~~on sales (~~the ~~difference~~Company ~~between~~did expense ~~sales~~ $706,000 and ~~cost~~$1,325,000, respectively, of ~~goods~~such ~~sold)~~costs ~~and~~as ~~management~~part of ~~our~~other ~~operating expenses. As described more fully in~~income ~~Note~~ (expense) 4when –management ~~Health~~determined ~~Services~~that ~~Business~~the ~~Acquisitions,~~related wetransaction ~~expanded~~would ~~our Health Services operations through~~not ~~business acquisitions in 2004.~~ be consummated.

~~Our~~The Company’s unaudited, consolidated financial statements reflect normal recurring adjustments that are necessary to present fairly the Company’s financial position and results of operations on a basis consistent with that of ~~our~~the prior audited consolidated financial statements. As permitted by rules and regulations of the Securities and Exchange Commission (the “Commission”) applicable to quarterly reports on Form 10-Q, wethe ~~have~~Company has condensed or omitted certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). We have also reclassified certain amounts from the prior periods to conform to the 2004 presentation and to reflect our discontinued operations separately from our continuing operations. These reclassifications have no effect on net income or shareholders’ equity. Results for interim periods are not necessarily indicative of the results that may be expected for a full year. These interim financial statements should be read along with ~~our~~the audited consolidated financial statements included in ~~our~~the Company’s Form 10-K for the year ended December 31, ~~2004.~~ 2007.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. 7

~~Note~~STANDARD MANAGEMENT 2CORPORATION –AND ~~Summary of Significant Accounting Policies~~ SUBSIDIARIES

~~Revenue~~The preparation ~~Recognition~~of /financial ~~Contractual~~statements ~~Allowances~~in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

~~Revenues~~Basic net loss ~~are~~per ~~recognized~~common atshare ~~the~~is ~~time~~based ~~services~~upon orweighted ~~products~~average ~~are~~common ~~provided~~shares oroutstanding. Diluted ~~delivered~~net toloss per common share is based upon the weighted average number ~~customer~~ of common shares outstanding, including the dilutive effect, if any, of stock options, warrants and convertible securities. ~~Upon~~However, ~~delivery~~due to net losses in each of ~~products~~the orperiods ~~services~~presented, the Company has no ~~additional~~dilutive ~~performance obligation~~stock tooptions, ~~the~~warrants or convertible ~~customer~~securities. ~~The~~Common ~~Company~~stock ~~receives~~equivalents ~~payments~~outstanding ~~through~~as ~~reimbursement~~of ~~from~~March ~~Medicaid and~~31, ~~Medicare~~ 2008 ~~programs~~ and ~~directly~~2007 ~~from~~were ~~individual~~convertible ~~residents~~or ~~(private~~exercisable ~~pay)~~into 320,889,228 ~~private~~and ~~third-party~~24,900,573 ~~insurers~~ shares, ~~and long-term care facilities~~respectively.

~~The~~Note 2 - ~~Company~~Discontinued ~~records an estimated contractual allowance against non~~Operations -~~private~~ ~~pay~~Pharmacy revenues and accounts receivable. Accordingly, the net revenues and accounts receivable reported in the Company’s consolidated financial statements are recorded at the amount expected to be received. Contractual allowances are adjusted to actual as cash is received and claims are reconciled. The Company evaluates the following criteria in developing the estimated contractual allowance percentages each month: historical contractual allowance trends based on actual claims paid by third party payors; reviews of contractual allowance information reflecting current contract terms; consideration and analysis of changes in customer base, product mix, payor mix reimbursement levels or other issues that may impact contractual allowances. Services

7During 2002 through 2005, the Company acquired several pharmacy operations, all of which have now been sold, discontinued or transferred as described below. Two of these acquired businesses were “HomeMed” and “Precision”.

~~Table~~Subject to management’s late 2006 decision to sell a portion of ~~Contents~~the HomeMed pharmacy operations and to close the remaining HomeMed operations, such actions were completed in March 2007. A portion of the operations were sold to HomeMed, LLC, a non-related entity for a cash purchase price of $.5 million. All unsold assets were written down to their minimal estimated realizable value as of December 31, 2006. An aggregate $653,000 charge was recorded as a component of discontinued operations in 2006 with minimal additional write down in early 2007. Concurrently, the Company entered into a management services agreement with the buyer to provide accounting and other related services for two or more years. Related management services fees of $100,000 were paid in advance upon closing the sale. Pursuant to a negotiated termination of a HomeMed related lease in the second quarter of 2007, the Company reduced a previously established lease reserve by $325,000. Remaining accounts payable and accrued lease payments as of March 31, 2008, will be paid in due course.

~~STANDARD~~At February ~~MANAGEMENT~~6, ~~CORPORATION~~2008, ~~AND~~the ~~SUBSIDIARIES~~Company was in default on a note due to Mr. Sam Schmidt. Mr. Schmidt is a director of the Company and the Company’s largest shareholder. The collateral under the note included a pledge of Company stock in Precision and certain unimproved real estate located in Monroe County, Indiana. In order to ensure an orderly resolution of the Company’s obligation to Mr. Schmidt, on that date, the Company voluntarily agreed to deliver to Mr. Schmidt a deed in lieu of foreclosure of the mortgage on the Monroe County real estate and agreed to a strict foreclosure under the Indiana Uniform Commercial Code on the pledge of the Precision stock. Accordingly, Mr. Schmidt took title to those assets and the Company’s obligations to him, consisting of a $2,500,000 promissory note and related earned, but unpaid, interest of approximately $200,000, were settled (except for a $30,000 piece of the note). In November 2007, when Precision was assigned as collateral under this note, the Company ceded all voting rights in our stock of Precision to Mr. Schmidt. Due to this loss of control - even though the Company then continued to own 100% of Precision’s stock, the Company deconsolidated Precision and reflected the Company’s ownership as an Investment in Unconsolidated Subsidiaries. That investment is included as a component of Assets of Discontinued Operations as of December 31, 2007 and was reduced by a $550,000 impairment charge to reduce its carrying value, when combined with the carrying value of the Monroe real estate, down to the then-estimated carrying value of the debt and interest ultimately settled by its transfer to Mr. Schmidt. The collateral transfer occurred on May 22, 2008, at which point the Company’s obligation under the note was settled as planned at a $331,000 gain.

~~NOTES TO CONSOLIDATED FINANACIAL STATEMENTS (UNAUDITED) (cont.)~~ 8

~~Note~~STANDARD MANAGEMENT 2CORPORATION –AND ~~Summary of Significant Accounting Policies (continued)~~ SUBSIDIARIES

~~Cash~~The following ~~Equivalents~~tables summarize the financial position and operating results of the Company’s discontinued operations as of and for periods indicated (in thousands):

Short-term investments that have a maturity of ninety days or less at acquisition are considered cash equivalents. Investments in cash equivalents are carried at cost, which approximates fair value.

	As of
	March 31,		December 31,
	2008		2007

Current assets	$	80	$	128
Investment in unconsolidated subsidiaries		353		1,908
Net liabilities of discontinued operations	$	433	$	2,036

Allowance for Doubtful Accounts

	For the three months ended
	March 31,			March 31,
	2008			2007

Net revenues	$	-		$	2,550
Cost of sales		-			(1,817	)
Selling, general and administrative expenses		-			(791	)
Depreciation and amortization		-			(23	)
Other expense		(61	)		(49	)
Income of unconsolidated subsidiaries		431			-
Interest expense		-			(40	)
Net income (loss) from discontinued operations	$	370		$	(170	)

~~The Company utilizes the “Aging Method” to evaluate the adequacy of its allowance for doubtful~~Note ~~accounts.~~ 3 ~~This~~Discontinued ~~method~~Operations – is based upon applying estimated standard allowance requirement percentages to each accounts receivable aging category for each type of payor. The Company has developed estimated standard allowance requirement percentages by utilizing historical collection trends and its understanding of the nature and collectibility of receivables in the various aging categories and the various payors of the Company’s business. The standard allowance percentages are developed by payor type as the accounts receivable from each payor type have unique characteristics. The allowance for doubtful accounts is determined utilizing the Aging Method described above while also considering accounts specifically identified as doubtful. Accounts receivable that Company management specifically estimates to be doubtful, based upon the age of the receivables, the results of collection efforts, or other circumstances, are reserved for in the allowance for doubtful accounts until they are collected or written-off. Other

~~Management~~In addition ~~believes~~to the ~~assumptions~~discontinued ~~used~~pharmacy operations, we also, in late 2007, discontinued the ~~Aging~~ancillary ~~Method~~insurance ~~coupled~~operations ~~with~~we ~~continued~~retained after selling our ~~improvements~~ Financial Services business in ~~the~~2005. ~~Company’s~~This ~~collection~~business, ~~patterns~~called ~~suggest~~Premier Life, had been operated out of our Bermuda subsidiary, the ~~allowance~~shares ~~for~~of ~~doubtful~~which ~~accounts~~were ispledged ~~adequate~~ as collateral under a note agreement. ~~However,~~Similar ~~because~~to the ~~assumptions~~Precision ~~underlying~~situation ~~the~~described above, ~~Aging~~we ~~Method~~ceded ~~are~~all ~~based~~voting ~~upon~~rights ~~historical data~~in these shares to the lender and accordingly, have ~~there~~deconsolidated isthis abusiness ~~risk~~and ~~that~~reflected ~~the~~it ~~Company’s~~as ~~current~~an ~~assumptions~~Investment ~~are~~in Unconsolidated ~~not~~Subsidiary, ~~reflective~~a component of ~~future~~Assets of Discontinued Operations, ~~collection~~ as of ~~patterns.~~December ~~Changes~~31, in2007. ~~overall~~Ultimately, ~~collection~~we ~~patterns~~expect ~~can~~to bepass ~~caused~~title byto ~~market~~these ~~conditions~~shares to ~~and/or~~ the lender ~~budgetary~~to ~~constraints~~settle ofthe ~~government~~related ~~funded~~debt ~~programs~~or ~~such~~sell asthe ~~Medicare~~business, ~~and~~which ~~Medicaid.~~consists ~~Such~~of only ~~changes~~ a few ~~can~~life ~~adversely~~insurance ~~impact~~policies ~~the~~and ~~collectibility~~various investments held in support of ~~receivables~~those policy liabilities, ~~but~~and ~~may~~use ~~not~~the besales ~~addressed~~proceeds into asettle the debt. Based on ~~timely~~ the carrying ~~fashion~~values ~~when~~of ~~using~~the investments (which are at fair value) and the ~~aging~~estimated policy ~~method~~liabilities, ~~until~~we ~~updates~~determined tothat the ~~Company’s~~net ~~periodic~~carrying ~~historical~~value of the business ~~collection~~ exceeded ~~studies~~the ~~are~~likely ~~completed~~ultimate debt, interest and ~~implemented~~fee obligation to this lender.

At least annually, the Company updates it historical collection studies in order to evaluate the propriety of the assumptions underlying the Aging Method. Any changes to the underlying assumptions or impact of adverse events are implemented immediately. Changes to these assumptions can have a material impact on the Company’s bad debt expense, which is reported in the consolidated statements of operations as a component of selling, general and administrative expenses. 9

~~Inventories~~STANDARD MANAGEMENT ~~and~~CORPORATION ~~Cost~~AND ~~of Revenues~~ SUBSIDIARIES

~~Inventories, consisting of pharmaceuticals, medical supplies and equipment, are stated at the~~Note ~~lower~~ 4 – ~~of cost or market. Cost is determined primarily on the first-in, first-out (“FIFO”) method.~~ Indebtedness

~~Counts of inventories on hand are performed at least on a quarterly basis. Because the~~The Company’s ~~does~~long-term ~~not~~debt ~~utilize~~was aas ~~perpetual~~follows ~~inventory~~(dollars ~~system,~~in cost of goods sold, a component of cost of revenues, is estimated using the latest acquisition cost and adjusted to actual by recording the results of the quarterly count of actual physical inventories. thousands):

There are no significant obsolescence allowances recorded since the Company writes off all expired inventories and the Company has the ability to return a majority of its inventory before expiration.

	Interest Rate (1)			March 31 2008		December 31 2007

Mortgages payable.		11.75	%	$	5,644	$	5,644
Promissory notes		12.43	%		1,149		1,009
7% convertible notes		7.00	%		3,200		3,300
10% notes		10.00	%		30		2,500
6% notes		6.00	%		250		250
Laurus convertible notes		9.25	%		2,401		2,401
Subordinated debentures		10.25	%		9,577		9,577
2006 10% convertible notes		10.00	%		1,279		1,282
2007 10% convertible notes		10.00	%		250		250
2008 10% convertible notes		10.00	%		92		-
Accrued interest on subordinated debentures					2,506		2,204
Derivatives embedded in 10% convertible notes					5,611		3,409
Capital lease obligations					-		2
Total indebtedness					31,989		31,828
Less debt discount on convertible notes					1,564		1,545
Less accrued interest on subordinated debentures					2,506		2,204
Less current portion					12,250		14,811
Total long-term debt, less current portion				$	15,669	$	13,268

~~Cost~~(1) ofWeighted ~~revenues~~average ~~include~~rate ~~the~~at ~~net~~March ~~product~~31, ~~costs of pharmaceuticals sold and direct charges attributable to providing revenue-generating services~~2008.

~~Deferred~~Mortgages payable ~~Financing~~primarily ~~Costs~~represents a promissory note in the amount of $5.5 million which the Company settled along with $724,000 of accrued interest and fees on May 22, 2008 by transferring title to the Company’s corporate headquarters building to the lender. The Company then leased back space in the building from which it will conduct its business. As the carrying value of the building was in excess of the amounts ultimately settled with its transfer to the lender, the Company recorded a $.6 million impairment charge in December 2007.

~~Financing~~The Company ~~costs~~has various unsecured promissory notes primarily related to the acquisitions of various healthcare companies all of which are ~~deferred~~due ~~and~~or ~~amortized~~callable due onto defaults in 2008. Additionally, the Company had a ~~straight-line~~2006 ~~basis~~$1.5 million note at 10.25% interest due to its then primary vendor, which ~~approximates~~was fully paid off in early 2007. Also, on August 17, 2007, the Company issued to an individual a ~~effective~~ $200,000 note at a rate of interest ~~method,~~of ~~over~~12% secured by the ~~terms~~stock of Premier Life, a wholly owned subsidiary of the ~~related~~Company, ~~debt~~which was due, but not paid, on September 28, 2007. As described in Note 3, the Company intends to ultimately settle this obligation by tendering the shares of Premier Life to the lender or selling that business in order to fund the payment of this obligation.

8On February 10, 2004, the Company issued $3.3 million of 7% unsecured convertible notes due in full in July, 2009. The notes are convertible into shares of the Company’s common stock at a price equal to $4.20 per share at any time at the holder’s option subject to certain conditions. These notes are in default due to late interest payments.

~~Table~~On November 30, 2004, the Company issued $2.75 million of ~~Contents~~6% mandatory unsecured convertible notes due in full in 2008. The notes were convertible into shares of the Company’s common stock at a price equal to an adjusted $3.28 per share at any time at the holder’s option subject to certain conditions. In March 2007, $2.5 million of these notes were exchanged for a like amount of demand notes at an interest rate of 6% (adjusted to 10% in June 2007 as $1 million of principal was not repaid by then in conjunction with the equity financing described in Note 7). The remaining $250,000 is due in May 2008. The conversion feature was eliminated on the full $2.75 million of debt. As described in Note 2, the Company, in February 2008, settled all but $30,000 of this $2.5 million note and related accrued interest by transferring ownership of its Precision subsidiary to the lender.

~~STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES~~ 10

~~NOTES~~STANDARD MANAGEMENT TOCORPORATION ~~CONSOLIDATED~~AND ~~FINANACIAL STATEMENTS (UNAUDITED) (cont.)~~ SUBSIDIARIES

~~Note~~On March 21, 2005, the Company issued $4.75 million of Laurus convertible notes. Principal payments are due in monthly installments through March 2008 and bear interest at the prime rate plus 2% –with ~~Summary~~a floor of ~~Significant~~7.25%, ~~Accounting~~unless ~~Policies~~such ~~(continued)~~rate is reduced in the event that the trading price of the Company’s common stock increase above certain levels. Also, the Company may pay interest and principal in shares of its common stock instead of cash under certain circumstances. As of March 31, 2008, the Company had an outstanding loan principal balance with Laurus of $2.4 million which is all classified as current due to defaults caused by late principal and interest payments. These notes are convertible into shares of the Company’s common stock at any time at the holder’s option at a rate of $3.28 per share, subject to certain conditions. As with the 2004 7% and 6% convertible notes, because the Company’s common shares were trading at less than the effective conversion price upon issuance of the notes, no value was assigned to the conversion feature. The notes were issued with a detachable warrant that allows the holder to purchase 532,511 shares of common stock at an original exercise price of $3.90 per share, which was reduced to $0.01 per share as part of a 2006 settlement negotiated between the holder and the Company in response to late principal and interest payments.

~~Assets~~On August 9, ~~Held~~2001, ~~For~~SMAN ~~Sale~~Capital Trust I (the “Trust”) completed a public offering of $20.7 million of its 10.25% preferred securities, which mature on August 9, 2031 (“Trust Preferred Securities”). The Trust, in turn, loaned the offering proceeds to the Company as subordinated debentures with terms similar to the Trust Preferred Securities. Since all income and cash flows into the Trust benefit the preferred securities holders rather than Standard Management, the Trust is not consolidated with Standard Management. On June 30, 2006, as a result of an exchange offer, the Company issued 6,674,046 shares of its common stock valued at $1.8 million in exchange for $11.1 million of the Trust Preferred Securities and $.6 million of related deferred interest, which in turn, reduced the outstanding balance of the subordinated debentures and accrued interest by like amounts.

~~Assets~~On March 8, ~~held~~2006, the Company announced its intention to defer distributions on the Trust Preferred Securities. The deferral, which began with the distribution date scheduled for ~~sale~~March ~~represent~~31, ~~investment~~2006, ~~property~~is ~~and~~expected ~~improvements~~to ~~carried~~continue for up to five years. All unpaid distributions will accrue interest at the ~~lower~~rate of 10.25% per annum until ~~cost~~ paid orby ~~fair~~the ~~value~~Company. Deferred distributions as of March 31, 2008 and December 31, 2007 were $ 2,506,000 and $2,204,000, respectively.

~~Other~~On September 8, ~~noncurrent~~2006, ~~assets~~the Company entered into a new debt agreement to issue an aggregate principal amount of $2.0 million of new 6% Convertible Notes due 2009 to four investors in a private placement. Notes in the principal amount of $700,000 were issued on September 8, 2006 and an additional $600,000 in notes was issued on October 4, 2006 in conjunction with the Company’s filing of a registration statement called for in the debt agreement to register the shares issuable upon conversion of the notes and exercise of the warrants described below. The last $700,000 of notes has yet to be issued pending effectiveness of the registration statement called for in the debt agreement. The notes mature on September 8 and October 4, 2009, respectively, and have a stated interest rate of 6% per annum prior to maturity and 15% per annum after maturity or when in default, until paid. However, no interest is due for any month in which the intraday trading price of the Company’s common stock is greater than $0.25 for each trading day of the month - which did not occur since issuance. The Company may redeem the notes at any time for 130% of the outstanding principal amount until the maturity date, under certain conditions and may redeem stated portions of the notes after any monthly period in which the Company’s stock price is consistently below a certain threshold The notes are convertible at any time into shares of the Company’s common stock based on a floating conversion price based on the trading price of its common stock. The notes are secured by certain personal property of the Company. In July 2007, the Company issued warrants to the lenders to purchase 8 million shares with an exercise price of $0.17 per share for a term of 7 years as compensation for not getting the shares underlying the notes and warrants registered on a timely basis. The Company utilized the Black-Scholes method to value these warrants at $0.13 each, thereby recording an expense in June 2007 of $1,040,000. Also, in October 2007, as further compensation for the same reason, the Company amended the conversion rate formula to be based on 40% of the applicable common stock price rather than the previous 55% basis. This additional compensation was measured as the incremental value of the conversion provisions immediately before and after the modification. That incremental value is included in the "Impacts related to value of warrants and derivatives" balance in the fourth quarter of 2007 statement of operations.

Other non current assets primarily represent fixed maturity securities and equity investments in support of the insurance policy liabilities as well as other fixed maturity securities and assets to be purchased from Standard Life in the proposed sale of Standard Life. 11

~~Other~~STANDARD MANAGEMENT ~~long-term~~CORPORATION ~~liabilities~~ AND SUBSIDIARIES

~~Other~~The conversion ~~long-term~~provisions ~~liabilities~~and ~~primarily~~the ~~represent~~various ~~insurance~~call ~~policy~~and ~~liabilities~~other ~~not~~provisions that are based on the Company’s common stock price which are included in the agreements related to the ~~proposed~~above ~~sale~~debt represent financial instruments that must be accounted for as derivatives and the value of ~~Standard~~which ~~Life~~must be reflected as separate Company liabilities. Based on valuations performed by independent parties, the Company determined that the original aggregate value of these various instruments was $840,000 and $720,000 for the September 2006 and October 2006 traunches, respectively. These values, along with the value assigned to the warrants issued with the September 2007 traunch as described below, are also recorded as debt discount related to this debt. To the extent that the debt discount would have been in excess of the cash proceeds from the issuance of the debt, such excess was immediately expensed (and aggregated $948,000) and both traunches of debt were originally recorded with 100% discounts. Such discounts are being amortized over the term of the related debt under the effective interest rate method.

~~Note~~In the September 2006 traunch of the same private placement transaction, the Company issued to the lenders, warrants to purchase an aggregate of 3,000,000 –shares of the ~~Discontinued~~Company’s ~~Operations~~common –stock. ~~Financial~~The ~~Services~~warrants were immediately exercisable at a price of $0.60 per share, expire seven years from the date of issue and contain provisions that allow for a reduction of the exercise price under certain conditions. These warrants have been valued at $688,000 as of their issuance date.

~~Substantially~~Additionally, due ~~all~~to ofthe ~~our~~nature ~~Financial~~of ~~Services~~the ~~business~~related ~~was~~conversion ~~operated~~feature ~~through~~of ~~our~~these ~~wholly~~2006 ~~owned~~6% convertible ~~subsidiary~~ notes, ~~Standard~~all ~~Life Insurance Company~~ of ~~Indiana~~the ~~(“Standard Life”) and its subsidiary, Dixie National Life Insurance~~ Company’s ~~(“Dixie~~previously-outstanding ~~Life”).~~warrants ~~Our~~that ~~primary~~had ~~insurance products include deferred~~been ~~annuities,~~ classified ~~single~~as ~~premium~~equity ~~immediate~~instruments ~~annuities~~were ~~and~~required ~~equity-indexed~~to ~~annuities.~~be ~~The~~reclassified ~~profitability~~as ofliabilities ~~this~~ at ~~business~~their isestimated ~~primarily~~values aas ~~function~~ of ~~net investment spread (~~the ~~difference~~date ~~between~~of the ~~investment~~ ~~income~~note ~~earned~~issuance. onThat ~~our investments less the interest we credit to our policyholders),~~estimated ~~persistency~~ value of ~~our~~$264,000 inwas ~~force~~reclassified ~~business,~~out ~~mortality~~of ~~experience~~equity ~~and~~into ~~management~~a oflong-term ~~our operating expenses~~liability.

~~As previously disclosed, the board and management of the~~ The Company ~~considered~~also aissued ~~variety of strategic alternatives~~ to ~~provide~~these ~~the~~same ~~Company~~lenders ~~with~~unrelated ~~adequate~~unsecured ~~financing~~notes toin ~~pursue its growth~~October ~~strategies~~ 2007 for ~~the~~$250,000 ~~health~~due ~~services~~October ~~business~~2010 itwith ~~embarked~~an oninterest inrate ~~2002~~of 8% and ~~maximize long-term~~conversion ~~shareholder~~ features ~~value.~~identical ~~After~~to ~~considering~~those ~~various~~described ~~options,~~above. ~~management~~Additionally, inthis ~~early~~new ~~2005~~$250,000 debt ~~committed~~issuance toincluded the ~~sale~~ issuance of ~~Standard~~warrants ~~Life,~~to ~~including~~purchase ~~Dixie~~an ~~Life.~~aggregate ~~On February 9~~of 15, ~~2005~~000,000 ~~Standard~~shares ~~Management~~of ~~entered into a definitive Stock and Asset Purchase Agreement (~~the ~~“Agreement”)~~Company’s ~~with~~common ~~Capital Assurance Corporation (“Capital Assurance”)~~stock. The ~~Agreement~~warrants ~~provides~~were ~~for the sale to Capital Assurance of (i)~~immediately ~~100%~~ exercisable ofat ~~the~~a ~~capital~~price ~~stock~~ of ~~Standard~~$0.008 ~~Life~~per share, ~~and~~expire ~~(ii)~~seven ~~$27 million aggregate~~years ~~principal~~from ~~amount~~the date of issue ~~surplus~~and ~~debentures~~contain ~~issued~~provisions bythat ~~Standard~~allow ~~Life~~for ina ~~favor~~reduction of ~~Standard~~the ~~Management.~~exercise ~~The Agreement~~price ~~represents~~ under ~~the~~certain ~~definitive~~conditions. ~~terms~~These ~~for~~warrants ~~the~~have ~~transactions~~been ~~contemplated~~valued byat ~~the~~$1,261,000 ~~previously reported letter~~as of their ~~intent~~issuance ~~between~~date ~~the~~and ~~parties.~~are ~~Standard~~reflected ~~Management~~as ~~expects~~separate ~~the~~long-term ~~transaction~~liabilities ~~to close in the second quarter~~ of ~~2005.~~ the Company.

~~The~~On January ~~purchase~~31, ~~price~~2008, ~~under~~ the ~~Agreement~~Company isexchanged $~~79.5 million~~92,334 ~~subject to adjustment as described below, which will be payable as follows: (i) $5 million~~ of aaccrued ~~new~~interest ~~class~~on ~~of 7% cumulative~~the ~~exchangeable preferred stock of Capital Assurance, (ii) assumption by Capital Assurance of~~ above ~~approximately~~ convertible ~~$21 million~~debt ininto ~~intercompany~~debt ~~obligations~~with ~~of Standard Management to Standard Life and (iii)~~ the ~~balance~~same ofprovisions ~~the~~as ~~purchase~~contained ~~price~~ in ~~cash. The cash portion of the purchase price will be~~that ~~adjusted,~~ convertible ~~post-closing,~~debt. ~~based~~This onexchange ~~certain~~included ~~changes in the business of Standard Life occurring between October 1~~$302,000 ~~2004 and the closing~~ of ~~the~~additional ~~transaction, including adjustments for, among other things,~~conversion ~~statutory gains from operations of Standard Life, credit related capital gains and losses,~~ value ~~including~~ resulting ~~impairment~~in ~~losses,~~an ~~principal~~immediate ~~payments~~expense onof the surplus debentures and capital expenditures by Standard Life. Management currently estimates that based on anticipated adjustments, the post-closing, as adjusted purchase price expected to be paid will be approximately $~~83 million~~210,000.

9The aggregate value of all outstanding warrants and the derivative instruments described above are required to be marked-to-market value each balance sheet date. That revaluation through December 31, 2006 aggregated to $667,000 of income. This income, combined with the $948,000 of expense above and $210,000 of income related to valuation changes for certain warrants already classified as liabilities prior to September 2006, aggregate to $71,000 of expense related to warrants and derivatives for the year ended December 31, 2006. During 2007, value changes, along with the $1,040,000 expenses described above and the impact related to the issuance of the $250,000 note (including the modification to prior conversion provisions), netted to a $1,985,000 expense ($569,000 through March 31, 2007). Further value changes through March 31, 2008 and the $210,000 of expenses related to the interest/note exchange.amounted to $2,120,000.

~~Table~~During 2007, $24,000 of ~~Contents~~debt and related unpaid interest was converted into 402,619 shares of common stock of the Company. During the first quarter of 2008, $3,505 of debt and related unpaid interest was converted into 550,000 shares of common stock of the Company. Upon conversion, the related liabilities, net of the related debt discount and including conversion feature value, were reclassified to additional paid-in capital.

~~STANDARD~~The above convertible ~~MANAGEMENT~~debt ~~CORPORATION~~was ~~AND~~in ~~SUBSIDIARIES~~technical default as of December 31, 2007 due at least to not having the shares underlying the debt and the warrants registered as required. An event of default, pursuant to the related debt agreements, allows the lenders to a) charge interest at the default rate, b) charge penalties for each day that registration is not achieved up to a certain date, c) call the debt immediately and d) require payment, in cash or shares, of a formula amount based largely on the highest price of the Company's common stock during the default period. The impact to the Company's financial statements if these default provisions were applicable would be substantial, predominately non-cash expenses related to the increase in derivative value pursuant to the 'highest price' formula. However, on May 15, 2008, the lenders waived all defaults under these notes and related agreements. As compensation for such waiver, all of the notes, effective January 1, 2008, started bearing a stated interest at 10% per annum.

~~NOTES~~Of the $15.7 TOmillion ~~CONSOLIDATED~~of ~~FINANACIAL~~debt ~~STATEMENTS~~classified as non-current as of March 31, 2008, $5.6 million represents the value of embedded derivatives, a negative $1.1 million represents unamortized debt discount and $11.2 million is debt principal. This principal is due as scheduled in 2009 (~~UNAUDITED~~$1.3 million), 2010 (~~cont~~$.3 million) and 2031 ($9.6 million).

~~Note 3 – Discontinued Operations – Financial Services (continued)~~ 12

~~Standard Management and Capital Assurance have made customary representations, warranties and~~STANDARD ~~covenants~~ MANAGEMENT inCORPORATION ~~the~~AND Agreement, including, among others, covenants by Standard Management (i) to conduct the business of Standard Life in the ordinary course and maintain necessary permits and insurance policies during the interim period between the execution of the Agreement and closing, (ii) to not engage in certain types of transactions during such period, (iii) to cause a meeting of the shareholders of Standard Management to be held to approve the Agreement and the transactions contemplated thereby, (iv) to not solicit proposals relating to an alternative sale or business combination transaction and (v) subject to certain exceptions, not to enter into discussions concerning or provide confidential information in connection with proposals for alternative sale or business combination transactions. In addition, Standard Management has agreed to purchase certain assets from Standard Life at closing for approximately $6 million. SUBSIDIARIES

~~Consummation of the transactions contemplated by the Agreement is subject to customary~~Note ~~conditions, including (i)~~ 5 ~~approval~~– ~~of the shareholders of Standard Management~~Warrants, ~~(ii) absence~~Common ofShares ~~any law or order prohibiting the closing, (iii) approval of the Indiana Department of Insurance,~~ and ~~(iv) expiration~~ orTreasury termination of the Hart-Scott-Rodino waiting period. In addition, each party’s obligation to consummate the transactions contemplated by the Agreement is subject to certain customary conditions, including (i) with certain exceptions, the accuracy of the representations and warranties of the other party and (ii) material compliance of the other party with its covenants. Shares

Standard Management also agreed to undertake a solicitation of consents of the preferred security holders of SMAN Capital Trust I, a wholly owned subsidiary of Standard Management (the “Trust”) to an amendment to the indenture governing such securities at an estimated cost of approximately $1 million to fund incentive payments in connection with obtaining such consents. If adopted, the amendment would provide us additional financing flexibility by allowing us to enter into certain business transactions, such as the sale of substantially all of our assets, without the acquirer of such assets being required to assume our responsibilities under the indenture. In the event the requisite consents to amend the indenture are not received, Standard Management has the right to require Capital Assurance to assume Standard Management’s obligations under the indenture. If this event were to occur, Standard Management would receive less net cash proceeds from the sale of Standard Life by the net face amount outstanding of the trust preferred securities. Warrants

~~Standard~~Historically, the ~~Management~~Company ~~agreed~~has toissued ~~indemnify~~warrants ~~Capital~~to ~~Assurance~~purchase ~~and~~common ~~Standard~~stock ~~Life~~(a) ~~for~~as ~~any~~a ~~losses~~component ~~arising~~ of the ~~from~~purchase ~~breaches~~price of ~~any~~pharmacy ~~representation~~acquisitions, ~~warranty~~(b) orin ~~covenant~~connection with the issuance of ~~Standard~~convertible ~~Management~~debt ~~made~~and ~~in the~~(c) ~~Agreement~~for equity and ~~for~~capital ~~all~~marketing ~~pending~~related ~~litigation~~services. As ofdescribed ~~Standard~~in ~~Life~~Note ~~subject~~4, toall of the ~~applicable~~Company ~~survival periods,~~warrants ifwere ~~such~~revalued ~~losses~~and ~~exceed~~classified as ~~$500,000~~liabilities in conjunction with the ~~aggregate.~~issuance Ifof ~~such~~the ~~indemnification~~2006 ~~threshold~~6% isconvertible ~~exceeded,~~ notes. ~~Standard~~The ~~Management~~fair ~~would~~value beof ~~responsible~~each ~~for~~warrant ~~paying~~granted ~~$250,000~~is ~~plus~~estimated at the ~~amount~~date of ~~such loss~~grant in using ~~excess~~the ofBlack-Scholes ~~$500,000,~~option-pricing upmodel towith aassumptions ~~maximum~~similar ~~amount~~to ~~equal~~those used to revalue the ~~purchase~~warrants ~~price~~at ~~for~~year ~~losses~~end. ~~related~~Assumptions used to ~~the~~value these ~~breach~~ warrants as of ~~certain~~March ~~representations and warranties~~31, ~~and~~2008 upinclude todividend ayield ~~maximum~~of ~~amount equal to 50~~0.0%, ofexpected ~~the~~lives ~~purchase~~ of 2.0 to 6.5 ~~price~~years, ~~for~~expected ~~breaches~~volatility of ~~certain~~150% ~~other~~and ~~specified~~risk-free ~~representations~~interest ~~and~~rates ~~warranties~~of 2.56% to 2.67%.

The ~~Agreement provides termination rights for both Standard Management and Capital Assurance,~~ ~~and~~ following ~~further~~is ~~provides that, upon termination of the Agreement under specified circumstances, Standard Management may be required to pay Capital Assurance~~ a ~~termination~~summary ~~fee ranging from $1.6 million to $3.2 million, depending on the circumstance leading to the termination, plus reimbursement~~ of upoutstanding ~~to $2 million of expenses incurred by Capital Assurance in connection with the transaction since November 21, 2004.~~ warrants:

If the proposed sale is consummated, we estimate that, for federal income tax purposes, we will recognize a capital loss on the sale of approximately $22 million, equal to the difference between our adjusted tax basis in Standard Life and the amount realized from the proposed sale. We may recognize a tax benefit in future periods from this capital loss provided that we recognize capital gains within five years. In addition, for accounting purposes, we have recorded a $35 million impairment charge in the first quarter of 2005 related to the expected sale of Standard Life, which is equal to the difference between the expected net book value of the assets sold on the sale date and the purchase price expected to be paid by Capital Assurance in the proposed transaction, plus transaction related expenses.

Warrants Outstanding

Exercise

March 31,

December 31,

Issue Date

Expiration Date

Price

2008

2007

October 2007

October 2014

0.08

16,500,000

September 2007

September 2009

0.17

20,000

July 2007

July 2014

0.17

8,000,000

October 2006

October 2011

0.36

20,000

September 2006

September 2013

0.60

3,000,000

August 2006

August 2011

0.36

176,715

July 2006

July 2011

0.36

41,096

June 2006

June 2011

0.36

20,548

May 2006

May 2011

0.36

61,646

May 2006

May 2011

0.73

100,000

February 2006

May 2011

0.88

200,000

March 2005

March 2010

3.28

175,000

March 2005

March 2010

0.01

(a)

532,511

March 2005

March 2010

3.90

30,619

28,878,135

10 (a) Pursuant to a 2006 amendment to the Laurus convertible notes agreement under which these warrants were originally issued, the exercise price was reduced from $3.90 per share to $0.01 per share which resulted in additional debt discount of $0.2 million.

~~Table of Contents~~13

STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

~~NOTES~~Changes in TOShares ~~CONSOLIDATED~~of ~~FINANACIAL~~Common ~~STATEMENTS~~Stock ~~(UNAUDITED)~~and ~~(cont.)~~ Treasury Stock

~~Note~~The following 3table –represents ~~Discontinued~~changes ~~Operations~~in –the ~~Financial~~number ~~Services~~of ~~(continued)~~common and treasury shares .

Standard Management has filed with the Securities and Exchange Commission (“SEC”) and delivered to shareholders of record as of April 4, 2005 definitive proxy materials relating to (i) the special meeting of shareholders to be held for the purpose of approving the Agreement and the transactions contemplated thereby and (ii) the solicitation of consents from holders of trust preferred securities of SMAN Capital Trust I to an amendment to the Indenture relating to such securities. Standard Management has set May 18, 2005 as the date for a special meeting of shareholders to vote on the approval of the proposed sale.

	Three Months Ended March 31,
	2008		2007
Common Stock:
Balance, beginning of period		43,504,711		19,011,367
Issuance to settle stock price guarantee		5,086,382		-
Trust preferred exchange		-		-
Private placement issuances		-		21,850,000
Debt and interest conversions		550,000		-
Balance, end of period		49,141,093		40,861,367

Treasury Stock:
Balance, beginning of period		2,840,173		2,840,173
Treasury stock acquired		-		-
Treasury shares issued		-		-
Balance, end of period		2,840,173		2,840,173

~~Use~~During the first quarter of ~~Cash~~2008, ~~Proceeds.~~the ~~Based~~Company onissued ~~management’s~~5,086,382 ~~expectations~~shares ~~regarding~~of ~~the~~common ~~anticipated~~in ~~adjustment~~ stock inaccording ~~the~~to ~~purchase~~stock price, ~~and~~guarantee ~~assuming~~provisions aof ~~final,~~the ~~post-adjustment~~Purchase ~~purchase~~Agreement of Precision ~~price~~and ofissued ~~$83 million~~550,000 weshares ~~expect~~for ~~the~~exchange ~~net~~on ~~cash~~convertible ~~proceeds~~notes. ~~from~~The Company ~~the~~received ~~sale~~$215,000 ~~before~~for ~~deducting~~subscriptions ~~transaction~~of ~~related fees and expenses~~10,750,000 toshares beStandard Management ~~approximately~~common ~~$57 million.~~stock Wewhich ~~intend~~are expected to ~~use~~be ~~such~~issued ~~cash~~by ~~proceeds~~July ~~as follows:~~15, 2008.

•During 2007, ~~approximately~~the ~~$17.7~~Company ~~million~~issued ~~for~~an ~~the~~additional ~~repayment~~1,850,000 inshares ~~full~~ of acommon ~~bank~~stock ~~line~~at a price of ~~credit; • approximately~~ $6.10 ~~million~~per share to ~~purchase~~four ~~certain~~outside ~~assets~~investors. ~~from~~While ~~Standard~~not ~~Life~~specifically required, ~~at closing pursuant to~~ the ~~Agreement;~~Company •issued ~~approximately~~an ~~$4.3~~additional ~~million for professional fees (investment bankers~~2, ~~attorneys~~133,318 ~~accountants)~~shares ~~and~~of ~~miscellaneous~~its ~~other~~common ~~expenses~~stock to ~~(filing~~certain ~~fees,~~shareholders ~~printing~~who ~~and~~had ~~mailing~~previously ~~proxy~~acquired ~~materials,~~the ~~prepayment~~shares ~~penalties,~~at ~~severance payments, etc~~$.);30 •per share in ~~approximately~~2006 ~~$1 million~~ to ~~fund~~effectively ~~incentive~~reprice ~~payments~~those inissuances ~~connection~~to ~~with obtaining~~ the ~~consent of the trust preferred holders; •~~ $.510 ~~million~~per toshare ~~reduce~~price used in the ~~principal~~2007 ~~amount~~issuances. ~~outstanding~~Also ~~under~~in ~~the~~2007 ~~mortgage~~and on2006, ~~our~~the ~~corporate~~Company ~~headquarters~~issued ~~(paid March 21~~107,407 ~~2005);~~ shares and •133,122 ~~the~~shares, ~~remaining~~respectively, ~~approximately $27.5 million as working capital~~ to ~~support~~previous ~~and~~owners ~~expand~~of ~~our~~acquired ~~health~~businesses under ~~services~~the ~~business,~~terms ~~including~~of ~~through~~their ~~selected~~respective ~~strategic~~purchase ~~acquisitions~~agreements.

In ~~addition~~ March 2007, weMr. ~~anticipate~~Sam ~~that~~Schmidt ~~Standard~~of ~~Life~~Las Vegas, ~~after~~Nevada ~~the~~and ~~sale,~~certain ~~will~~investors ~~continue~~related to Mr. Schmidt ~~lease~~completed ~~space from~~the uspurchase atof ~~our~~20,000,000 ~~corporate~~shares ~~headquarters~~of ~~for~~Standard Management stock at ~~least~~a ~~three~~purchase ~~years~~price ~~for~~of $~~480,000~~.10 per ~~year~~share. WeUpon ~~also anticipate~~completion ~~receiving $350,000~~ of ~~annual~~the ~~dividends~~transaction, Mr. Schmidt ~~under~~beneficially ~~the~~owned ~~$5 million~~approximately 52.6% of ~~newly~~the ~~issued~~Company’s 7%outstanding ~~cumulative~~ common ~~exchangeable~~shares ~~preferred~~(since ~~stock~~reduced ~~we expect~~ to ~~receive~~38%). asThe ~~partial~~Company ~~consideration~~used inthe ~~our~~proceeds of the sale of ~~Standard~~its ~~Life~~shares to Mr. Schmidt for debt reduction and general corporate purposes.

11In March 2007, Mr. Schmidt granted options to purchase 3,000,000 of the Company’s common shares purchased by the investor group to Mr. Ronald Hunter, 1,000,000 common shares to Dr. Mark B.L. Long and 1,000,000 common shares to Dr. Martial R. Knieser, M.D. The exercise price of the options is $0.20 per share, and the options have a term of two years. Each of Mr. Hunter, Dr. Long, and Dr. Knieser is an officer of the Company. Accordingly, for accounting purposes the Company treated these options as if the options had been granted by the Company. The Company valued the options granted to Mr. Hunter, Dr. Long, and Dr. Knieser at $.05 per share using the Black-Scholes option-pricing model resulting in a $250,000 charge being recorded as a general and administrative expense in March, 2007.

~~Table~~During the first quarter of ~~Contents~~2008, the Company received $385,000 of subscriptions for 77,000 shares of UHCC stock valued at $5 per share from various unrelated third parties. These shares, along with further subscriptions received after quarter end, are expected to be issued by July 15, 2008 and the offering is expected to remain open until August 30, 2008. Proceeds received under the subscription agreements have been reflected as a minority interest liability in the accompanying consolidated balance sheet as of March 31, 2008.

~~STANDARD~~On October ~~MANAGEMENT~~16, ~~CORPORATION~~2006, ~~AND~~the ~~SUBSIDIARIES~~Company increased it authorized common shares to 200,000,000 from 60,000,000 and in April, 2008 increased this level again to 300,000,000. Authorized preferred shares of 1,000,000 have not been designated or issued.

~~NOTES~~Pursuant to TOprovisions ~~CONSOLIDATED~~included ~~FINANCIAL~~in ~~STATEMENTS~~the ~~(UNAUDITED)~~Company’s ~~(cont~~2005 acquisition of Precision, the Company guaranteed the value of 304,878 shares at $3.)28 per share of the Company’s common stock used as consideration in that acquisition as of the second anniversary, which occurred on July 28, 2007. Based on the July 28, 2007 stock price, the Company, in the first quarter of 2008, issued 5,086,382 shares of its common stock to the prior owners of Precision. However, the prior owners have initiated legal proceedings to compel issuance of cash instead. In addition, pursuant to provisions included in the Company’s 2005 acquisition of Long Term Rx, the Company guaranteed the value of 182,183 shares at $3.28 per share of the Company’s common stock used as consideration in that acquisition as of the second anniversary, which occurred on July 28, 2007. Based on the July 28, 2007 stock price, that guarantee requires the Company to issue $465,000 of cash or an equivalent number of its shares (3,880,000) to the prior owner of Long Term Rx.

~~Note 3 — Discontinued Operations — Financial Services (continued)~~ 14

~~The following tables summarize the financial position and operating results of our~~STANDARD ~~discontinued~~ MANAGEMENT ~~operations~~CORPORATION asAND ~~of and for quarters ended on the dates indicated (in thousands):~~ SUBSIDIARIES

~~Standard Life~~ITEM ~~Unaudited~~ 2. ~~Condensed~~MANAGEMENT'S ~~Consolidated~~DISCUSSION ~~Balance~~AND ~~Sheet~~ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	March 31		December 31,
	2005		2004
Assets:
Total investments	$	1,635,917	$	1,686,396
Deferred policy acquisition costs and present value of future profits		181,203		174,172
Other assets		24,189		60,982
Assets of discontinued operations	$	1,841,309	$	1,921,550
Liabilities:
Insurance policy liabilities	$	1,790,990	$	1,824,736
Accounts payable and accrued expenses		4,765		5,141
Liabilities of discontinued operations	$	1,795,755	$	1,829,877

Comparison of the Three Months Ended March 31, 2008 and March 31, 2007:

~~Standard~~The following ~~Life~~discussion highlights the material factors affecting our results ~~Unaudited~~ of operations ~~Condensed~~and ~~Consolidated~~the ~~Income~~significant ~~Statement~~changes in balance sheet items. Notes to the consolidated financial statements included in this report and the notes to the consolidated financial statements included in our Form 10-K for the year ended December 31, 2007, should be read in conjunction with this Form 10-Q.

	March 31			March 31,
	2005			2004
Revenues	$	26,362		$	29,698
Benefits, claims, interest credited and amortization		18,756			23,743
Operating and other expenses		5,884			2,499
Impairment charge		35,000			—
Income tax expense (benefit)		(21	)		345
Income (loss) from discontinued operations	$	(33,257	)	$	3,111

Continuing Operations:

~~Note 4 — Health Services Business Acquisitions~~ General

~~During 2003, the Company acquired the business assets~~ As of ~~MyDoc.com for $645,000 paid in the~~ ~~form~~ March ~~of cash of $145~~31,~~000~~ ~~and~~2008 ~~a seller note of $500~~,~~000.~~ ~~Additionally,~~ we ~~acquired~~had ~~the~~sold, ~~stock of Medical Care & Outcomes~~discontinued, ~~LLC~~or ~~(“MCO”)~~transferred ineach ~~2003 with $4 million~~ of our ~~common~~previous operations ~~stock.~~to Weprovide ~~later~~working ~~sold MCO~~capital ~~back~~and to ~~the~~reduce ~~original~~debt. ~~owners~~As ~~(other~~such, ~~than~~our continuing aoperations 5%currently ~~interest~~include ~~valued~~our atcorporate ~~$160,000)~~office infunctions ~~April 2004. We~~and ~~recognized~~ certain aancillary ~~loss~~activities. onAll ~~the~~revenue-producing ~~sale~~activities and related ~~severance~~ costs ~~for a prior owner/employee of $964,000.~~ ~~This~~ have ~~divestiture~~been ~~resulted~~reflected inas ~~the~~part ~~return~~ of our ~~common~~discontinued ~~stock and therefore a decrease to equity in April 2004 of $4 million~~operations.

~~Effective February 6, 2004, our newly-formed subsidiary, Apothecary Solutions Corporation~~General ~~(“Apothecary Solutions”), acquired certain assets of Alliance Center, Inc. Apothecary Solutions is an institutional pharmacy. The purchase price was $3.7 million~~ and ~~was~~administrative ~~paid in the form of cash of $0.8 million and the assumption of $2.9 million of debt and a seller note.~~ expenses

12General and administrative expenses for the first quarter of 2008 decreased by $.4 million or 28% to $1.0 million compared to the first quarter of 2007, primarily due to a $.4 million decrease in employee expenses including $.2 million in non cash compensation incurred in 2007.

~~Table~~Impacts related to value of ~~Contents~~warrants and derivatives

~~STANDARD~~As a result ~~MANAGEMENT~~of ~~CORPORATION~~certain ~~AND~~terms ~~SUBSIDIARIES~~of conversion features on debt issued in 2006, 2007, and 2008, certain derivatives embedded in that debt and all outstanding warrants to acquire stock have been reflected as liabilities of the Company, which require mark to market adjustments each balance sheet date. The original recording of these liabilities upon issuance of the related securities and the changes in market value, predominantly related to changes in our common stock price, combine to result in these net expenses for 2008 and 2007. Generally, a decrease in our stock price results in the value of the derivatives and warrants to decrease, thereby resulting in income. While our stock price has generally declined during 2007 and 2008, the initial recording of these derivative and warrant liabilities has created expense that more than offset the impact of changing values for both years.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (cont.)~~Depreciation and amortization

~~Note~~Depreciation and 4amortization —remained ~~Health~~relatively ~~Services~~unchanged. ~~Business Acquisitions (continued)~~

~~Had the Apothecary acquisition and MCO divestiture been consummated on January 1, 2004, pro~~Other ~~forma results of operations for the quarter ended March 31, 2004 would have been as follows:~~ income

Net revenues	$	2,229
Gross profits		648
Operating loss		(3,896	)
Net loss from continuing operations		(3,896	)
Net loss per share from continuing operations	$	(0.49	)

Other income for the first quarters of 2008 and 2007 of $.1 million is primarily rental income from leasing space at the Company’s corporate headquarters.

~~The pro forma information does not purport to be indicative of the results that actually would~~Interest ~~have been obtained if the transaction had occurred at an earlier date and is not intended to be a projection of future results or trends.~~ expense

~~Effective~~Interest expense ~~May 13,~~for ~~2004,~~ the ~~Company~~first ~~acquired~~quarter ~~the business assets~~ of ~~RoyalMed,~~2008 ~~LLC~~decreased ~~for~~by ~~50,000 shares of our common stock~~$.1 ~~The~~million ~~purchase~~or ~~price~~8 ~~included~~% ~~contingent~~to ~~consideration,~~$.7 million ~~based~~compared onto ~~a targeted~~the ~~closing~~first ~~sales~~quarter ~~price~~ of ~~our~~2007, ~~common~~primarily ~~stock~~due onto the ~~anniversary~~February 2008 ~~date~~retirement of ~~the~~debt ~~acquisition~~related ~~over~~ to the ~~two~~Precision ~~years following closing. The contingent consideration has been recognized as additional~~Healthcare ~~paid in capital~~ transaction.

~~Note~~Federal income 5tax ~~— Stock Option Plan~~ expense

~~Statement of Financial Accounting Standards No. 123, as amended by SFAS No. 148, allows~~Provision ~~companies to either expense the estimated fair value of stock options or to continue the earlier practice of accounting~~ for ~~stock~~federal ~~options at intrinsic value and disclose the pro forma effects on net~~ income ~~and~~tax ~~earnings~~remained ~~per~~zero ~~share~~due ~~had the fair value of the options been expensed. We have elected~~ to ~~continue~~a ~~our~~100% ~~practice~~valuation ofallowance ~~recognizing~~on ~~compensation expense using~~ the ~~intrinsic value based method~~ of net ~~accounting~~losses ~~and~~in ~~to provide~~ the ~~required~~first ~~pro~~quarters ~~forma information. The compensation cost based on fair value at the grant date, which is consistent with the provisions~~ of ~~SFAS~~2008 ~~No. 123, as amended by SFAS No. 148, would result in pro forma net loss~~ and ~~pro forma loss per share of the following for the three months ended March 31 (in thousands, except per share amounts):~~ 2007.

	Three Months Ended March 31
	2005			2004
Reported net loss from continuing operations	$	(5,203	)	$	(4,878	)
Less: Total stock-based employee compensation expense determined under fair value based method for all grants		(41	)		(85	)
Pro forma net loss from continuing operations	$	(5,244	)	$	(4,963	)
Loss per share from continuing operations:
Basic and diluted — as reported	$	(0.66	)	$	(0.60	)
Basic and diluted — pro forma	$	(0.66	)	$	(0.61	)

13STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

~~Table of Contents~~Discontinued Operations:

~~STANDARD~~Loss from ~~MANAGEMENT~~Discontinued ~~CORPORATION AND SUBSIDIARIES~~ Operations:

~~NOTES~~Net income TOfrom ~~CONSOLIDATED~~discontinued ~~FINANCIAL~~operations ~~STATEMENTS~~for ~~(UNAUDITED)~~the ~~(cont~~first quarter of 2008 of $.)4 million was due primarily to a gain recorded upon the transfer of the our Precision operations to settle outstanding obligations. The first quarter of 2007 results include the costs of a cessation of operations of a base of business during 2007.

~~Note~~Liquidity and 6Capital ~~— Indebtedness~~ Resources;

Our independent ~~long-term~~auditors ~~debt~~have ~~was~~expressed substantial doubt about our ability to continue as ~~follows~~a ~~(dollars~~going inconcern ~~thousands):~~based on our recurring losses, the transfer, sale or discontinuance of all of our operating businesses to provide working capital and reduce debt, and because we do not currently have adequate financing to meet all of our near-term requirements.

		March 31		December 31
	Interest Rate(1)	2005		2004
Mortgages payable	7.32%	$	6,072	$	6,607
Senior secured credit facility	5.84%		18,000		18,500
Promissory notes	2.96%		1,601		1,883
6% convertible notes	6.00%		2,750		2,750
7% convertible notes	7.00%		3,300		3,300
Other convertible notes	7.73%		4,750		—
Subordinated debentures			20,700		20,700
Total indebtedness			57,173		53,740
Less debt discount on other convertible notes			351		—
Less current portion			3,100		3,297
Total long-term debt, less current portion		$	53,722	$	50,443

Our net cash used in operating activities of continuing operations during the quarter ended March 31, 2008 was $.5 million compared to cash used of $1.5 million in the period ended March 31, 2007. The significant decrease on cash outflow is primarily due to a lower net loss in 2008 after adjusting for non-cash income statement items and the deferral of more interest payments in 2008.

Our net cash provided by (1used in) ~~Current~~investing ~~weighted~~activities ~~average~~of ~~rate~~continuing asoperations during the quarter ended March 31, 2008 was $.2 million used compared to cash provided of $.3 million in the period ended March 31, ~~2005~~2007 due primarily to deferred acquisition costs in 2008 and proceeds from the sale of a business in 2007.

AOur net cash ~~$500,000~~provided ~~prepayment~~by financing activities of ~~principal~~continuing onoperations ~~our~~during ~~mortgage~~the quarter ~~payable~~ended March 31, 2008 was ~~made~~$.6 million compared to of $1.1 million in the period ended March ~~2005~~ ~~related~~31, 2007 primarily due to the minority investment in 2008 and the ~~proposed~~proceeds from the sale of ~~Standard~~stock ~~Life~~in 2007.

~~The~~As of March ~~senior~~31, ~~secured~~2008, ~~credit~~we ~~facility~~had ~~includes~~no acash ~~revolving~~or ~~loan~~cash equivalents and ~~term~~we ~~loan~~are ~~portion~~dependent ~~and is~~on ~~expected~~ additional financing to bemaintain ~~terminated~~our business and ~~fully~~to ~~paid~~grow; ~~off~~however, ~~upon~~we ~~the~~can provide ~~sale~~no ofassurances ~~Standard~~that ~~Life.~~such ~~Absent~~financing ~~the~~will ~~sale,~~become ~~the credit~~available ~~facility~~to isus ~~scheduled~~on terms that are favorable to ~~terminate~~us, inor ~~November 2008~~at all. AsHowever, ofthrough ~~March 31~~June 10, ~~2005~~2008, ~~the~~we ~~Company was~~have in raised ~~violation~~an ofadditional ~~two~~$1.1 ~~financial~~million ~~covenants~~from (debt ~~leverage~~ and ~~intercompany~~equity ~~debt) under our senior secured credit facility~~financing. We ~~have obtained waivers of the covenants~~continue ~~through the earlier of: (i) the~~ to ~~sale~~ have ofdiscussions ~~Standard~~and ~~Life~~negotiations orwith ~~(ii)~~potential ~~September 30,~~lenders ~~2005.~~and investors.

OnOur principal ~~February 10,~~cash ~~2004,~~requirements weare ~~issued~~currently ~~$3.3 million~~for ofoperating our 7%corporate ~~unsecured~~functions and ~~convertible~~debt ~~notes~~service ~~due 2009~~obligations. ~~The~~ ~~notes~~We ~~are~~also ~~convertible~~require atsignificant acash ~~price~~to ~~equal~~adequately launch toour $4strategic growth plans.20 ~~per~~Our ~~share~~recent atprimary ~~any~~sources ~~time~~of atcash ~~the~~have been from ~~holder’s~~certain ~~option~~of our now-discontinued operations, external borrowings and sales ~~subject~~ of equity securities. We expect to ~~certain~~fund ~~conditions.~~future growth through debt, equity, and seller financing into two of our subsidiaries under which we expect to acquire new healthcare businesses.

OnDuring 2007 ~~November 30,~~and ~~2004,~~the wefirst ~~issued~~quarter ~~$2.75 million~~ of ~~our 6% mandatory unsecured convertible notes due~~ 2008., ~~The~~we ~~notes~~took ~~are~~the ~~convertible~~following ~~into~~actions ~~shares~~in of our ~~common stock at a price equal~~ efforts to ~~an adjusted~~maximize ~~$3.28~~cash ~~per~~in-flows, ~~share~~reduce atcash ~~any~~requirements, ~~time~~and atgenerally ~~the~~provide adequate ~~holder’s~~resources ~~option~~to ~~subject~~meet toour ~~certain~~operating ~~conditions~~needs.

On· ~~March 21,~~By ~~2005,~~the wefirst ~~issued~~quarter ~~$4.75 million~~ of ~~our other convertible notes. Principal payments are due in monthly installments beginning September 2005 through March~~ 2008, ~~and~~we ~~bear interest~~sold ator ~~the~~transferred ~~prime~~substantially ~~rate~~all ~~plus 2% with a floor~~ of ~~7.25%, unless such rate is reduced in~~ the ~~event that~~pharmacy ~~the~~operations ~~trading price of our common stock increase above certain levels. Also,~~ we ~~may~~had ~~pay interest~~acquired ~~and~~from ~~principal~~2002 inthrough ~~shares of our common stock instead of cash under certain circumstances~~2006. ~~The~~ ~~notes~~Aggregate ~~were~~sales ~~issued~~have ~~with~~been aused ~~detachable~~primarily ~~warrant that allows the holder~~ to ~~purchase~~pay ~~532,511~~down ~~shares of~~short ~~our~~term ~~common~~borrowings ~~stock at an exercise price of $3.90 per share. This warrant was valued at $351,000~~ and isother ~~reflected~~general ascorporate ~~a discount on the issuance of the convertible debt and will be amortized into interest expense over the term of the notes~~purposes. The warrant expires, if unexercised, in March 2010. These notes are convertible at any time at the holder’s option at a rate of $3.28 per share, subject to certain conditions. Because our common shares were trading at less than effective conversion price upon issuance of the notes, no value was assigned to the conversion feature.

~~Additional~~· ~~warrants~~In ~~were~~March ~~issued~~2007, towe ~~advisors~~issued in20 ~~the~~million ~~above transaction that allows the holders to purchase 50,000~~ shares ~~and 30,619 shares~~ of our common stock atto anMr. ~~exercise~~Sam ~~price~~Schmidt offor $32.280 ~~and $3.90 per share~~million, ~~respectively~~providing Mr. ~~These~~Schmidt ~~warrants~~with ~~were~~a ~~valued~~52.6% at(since ~~$62,000~~reduced ~~and~~to ~~are~~approximately ~~reflected~~38%) ~~as additional~~interest ~~deferred~~in ~~financing~~our ~~costs~~Company. onProceeds ~~the~~were ~~issuance~~used ofprimarily ~~the~~to ~~convertible~~pay ~~debt~~off ~~and~~short ~~will~~term beborrowings ~~amortized into~~and ~~interest~~other ~~expense~~general ~~over~~corporate ~~the term of the notes~~purposes.

14 · Management, through Universal HealthCare Company, LLC (“UHCC”), intends to attract unrelated investors and lenders to fund future acquisitions of pharmacy operations. Standard Management is the Managing Member of UHCC pursuant to a Management Agreement under which it plans to have substantial influence and control of the operations of the acquired

~~Table~~· businesses. In return, Standard Management expects to receive guaranteed and performance based fees from UHCC. These fees are expected to provide Standard Management with the funding necessary to support its operations as a management company. Funds of ~~Contents~~$.4 million have been raised through mid June 2008.

~~STANDARD~~· ~~MANAGEMENT~~Management ~~CORPORATION~~intends ~~AND~~to ~~SUBSIDIARIES~~ create Newco, a company formed to attract investors and lenders to fund future acquisitions of home care operations. Standard Management expects to operate Newco pursuant to an Agreement under which it has substantial influence and control of the operations of the acquired businesses. In return, Standard Management expects to receive guaranteed and performance based fees from Newco. These fees are expected to provide Standard Management with the funding necessary to support its operations as a management company.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (cont.)~~ 16

~~Note~~STANDARD MANAGEMENT 6CORPORATION —AND ~~Indebtedness (continued)~~ SUBSIDIARIES

~~The~~· ~~subordinated~~We ~~debentures~~have ~~are~~deferred ~~due to~~ the ~~Trust~~payment ~~and~~of ~~are~~salaries ~~due~~(totaling ~~in August 2031. The Trust~~$701,000 ~~in turn,~~as ~~owes $20.7 million~~ of ~~10.25%~~March preferred securities to certain investors under terms that are similar the terms of the debentures. Since all income and cash flows into the Trust benefit the preferred securities holders rather than Standard Management31, ~~the~~2008) ~~Trust~~for isthree ~~not consolidated with Standard Management~~executives.

~~Interest~~Cash requirements ~~paid~~ for the ~~three~~rest ~~months~~of ~~ended~~2008 ~~March 31,~~and ~~2005~~beyond include substantial debt service costs as more fully described in Note 4 to our consolidated financial statements and ~~2004~~include ~~was~~$12.3 million of debt due or callable due to default provisions in 2008. We have or intend to settle approximately $15.1 7 million of this current debt (and $1.0 5 million of related interest and fees) by transferring certain collateralized assets to the respective lenders, ~~respectively.~~including our corporate building and our Premier Life subsidiary (or its net assets) While we are attempting to find additional sources of capital, we can not make any assurances as to what funding will become available to meet our other debt service requirements or to operate our Company.

~~Note~~Contractual Obligations: During the 7first —quarter ~~Shareholders’~~of ~~Equity~~2008, there were no significant changes in our reported payments due under contractual obligations at December 31, 2007.

~~Historically~~Cautionary we Notice ~~have~~Regarding ~~issued~~Forward-Looking warrants to purchase common stock (i) as a component of the purchase price of health services acquisitions (ii) in connection with the issuance of convertible debt, and (iii) as an inducement to our independent agents for annuity sales. During the first quarter 2005, we had 287,000 warrants expire unexercised. In addition, during the first quarter 2005 we issued (i) 125,000 warrants recorded as a charge of $105,000 (ii) 532,511 warrants recorded as debt discount of $351,000, and (iii) 80,619 warrants recorded as deferred financing fees of $62,000. The following table represents outstanding warrants to purchase common stock: Statements

				Warrants Outstanding
		Exercise		March 31		December 31
Issue Date	Expiration	Price		2005		2004
January 2002	January 2005	$	6.02		—		287,000
June 2002	June 2005		7.61		89,500		89,500
October 2002	October 2007		4.92		10,000		10,000
March 2005	March 2010		3.28		175,000		—
March 2005	March 2010		3.90		563,130		—
					837,630		386,500

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Exchange Act of 1934. All statements, trend analyses, and other information contained in this Annual Report on Form 10-K relative to markets for our products, trends in our operations or financial results, as well as other statements including words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” and other similar expressions, constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements relating to our business strategy and prospects, our acquisition strategy, including potential acquisitions discussed under “Future Acquisitions,” the operation and performance of acquired businesses post-acquisition, future financing plans, sources and availability of capital, governmental regulations and their effect on us and our competition. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from those contemplated by the forward-looking statements. Such factors include, but are not limited to the Risk Factors set forth under Item 1A in the Company’s 2006 Form 10-K, as well as:

15 · Our having sufficient cash on hand, whether generated through future operations or financings, to meet our current and future debt service and operating needs and to launch and continue our acquisition program.

~~Table~~· The ability of ~~Contents~~our management team to successfully operate home healthcare services and institutional pharmacy businesses as a development stage company in health care.

~~STANDARD~~· ~~MANAGEMENT~~Our ~~CORPORATION~~ability ~~AND~~to ~~SUBSIDIARIES~~ acquire new businesses, including our ability to identify suitable acquisition candidates, acquire them at favorable prices and successfully integrate them into our business.

~~ITEM~~· 2.General ~~MANAGEMENT’S~~economic ~~DISCUSSION~~conditions ~~AND~~and ~~ANALYSIS~~other OFfactors, ~~FINANCIAL~~including ~~CONDITION~~prevailing ~~AND~~interest ~~RESULTS~~rate OFlevels, ~~OPERATIONS~~and stock market performance, which may affect our ability to obtain additional capital when needed and on favorable terms.

~~Recent~~· ~~Developments~~ Customer response to our planned new services, distribution channels and marketing initiatives.

~~Our~~· ~~Discontinued~~Increasing Operations — Financial Services consists of revenues earned and expenses incurred from our insurance operations, principally conducted by our subsidiary Standard Life Insurance Company of Indiana (“Standard Life”) and its subsidiary, Dixie National Life Insurance Company (“Dixie Life”)competition. Our primary insurance products include deferred annuities, single premium immediate annuities and equity-indexed annuities. The profitability of this segment is primarily a function of net investment spread (the difference between the investment income earned on our investments less the interest we credit to our policyholders), persistency of our in force business, mortality experience and management of our operating expenses.

AsWe caution ~~previously~~you ~~disclosed~~that, ~~the~~while board and management of the Company considered a variety of strategic alternatives to provide the Company with adequate financing to pursue its growth strategies for the health services business it embarked on in 2002 and maximize longforward-~~term shareholder~~looking ~~value.~~statements ~~After~~reflect ~~considering~~our ~~various~~good ~~options~~faith beliefs, ~~management,~~these instatements ~~early~~are ~~2005,~~not ~~committed~~guarantees ~~to the sale~~ of ~~Standard~~future ~~Life, including Dixie Life~~performance. OnIn ~~February 9~~addition, ~~2005, Standard Management entered into~~ a we ~~definitive~~disclaim ~~Stock~~any ~~and~~obligation ~~Asset~~to ~~Purchase~~publicly ~~Agreement~~update ~~(the~~or ~~“Agreement”)~~revise ~~with~~any ~~Capital Assurance~~forward-looking ~~Corporation~~ statement, ~~(“Capital~~whether ~~Assurance”).~~as ~~The~~a ~~Agreement~~result ~~provides for the sale to Capital Assurance~~ of ~~(i) 100%~~new ~~of the capital stock of Standard Life~~information, ~~and~~future ~~(ii)~~events ~~$27 million~~or ~~aggregate principal amount of~~otherwise, ~~surplus~~ except ~~debentures~~as ~~issued~~required by ~~Standard Life in favor of Standard Management~~law. The Agreement represents the definitive terms for the transactions contemplated by the previously reported letter of intent between the parties. Standard Management expects the transaction to close in the second quarter of 2005.

~~The purchase price under the Agreement is $79.5 million, subject to adjustment as described~~ITEM below, which will be payable as follows: (i) $5 million of a new class of 7% cumulative exchangeable preferred stock of Capital Assurance, (ii) assumption by Capital Assurance of approximately $21 million in intercompany obligations of Standard Management to Standard Life and (iii) the balance of the purchase price in cash 3. ~~The cash portion of the purchase price will be~~ ~~adjusted,~~ QUANTITATIVE ~~post-closing,~~AND ~~based~~QUALITATIVE onDISCLOSURES ~~certain~~ABOUT ~~changes~~MARKET in the business of Standard Life occurring between October 1, 2004 and the closing of the transaction, including adjustments for, among other things, statutory gains from operations of Standard Life, credit related capital gains and losses, including impairment losses, principal payments on the surplus debentures and capital expenditures by Standard Life. Management currently estimates that based on anticipated adjustments, the post-closing, as adjusted purchase price expected to be paid will be approximately $83 million. RISK

~~Standard Management and Capital Assurance have made customary representations, warranties and~~Not covenants in the Agreement, including, among others, covenants by Standard Management (i) to conduct the business of Standard Life in the ordinary course and maintain necessary permits and insurance policies during the interim period between the execution of the Agreement and closing, (ii) to not engage in certain types of transactions during such period, (iii) to cause a meeting of the shareholders of Standard Management to be held to approve the Agreement and the transactions contemplated thereby, (iv) to not solicit proposals relating to an alternative sale or business combination transaction and (v) subject to certain exceptions, not to enter into discussions concerning or provide confidential information in connection with proposals for alternative sale or business combination transactions applicable. ~~In addition, Standard Management has agreed to purchase certain assets from Standard Life at closing for approximately $6 million.~~

Consummation of the transactions contemplated by the Agreement is subject to customary conditions, including (i) approval of the shareholders of Standard Management, (ii) absence of any law or order prohibiting the closing, (iii) approval of the Indiana Department of Insurance, and (iv) expiration or termination of the Hart-Scott-Rodino waiting period. In addition, each party’s obligation to consummate the transactions contemplated by the Agreement is subject to certain customary conditions, including (i) with certain exceptions, the accuracy of the representations and warranties of the other party and (ii) material compliance of the other party with its covenants. 17

~~Standard Management also agreed to undertake a solicitation of consents of the preferred~~STANDARD ~~security~~ MANAGEMENT ~~holders~~CORPORATION ofAND SMAN Capital Trust I, a wholly owned subsidiary of Standard Management (the “Trust”) to an amendment to the indenture governing such securities at an estimated cost of approximately $1 million to fund incentive payments in connection with obtaining such consents. If adopted, the amendment would provide us additional financing flexibility by allowing us to enter into certain business transactions, such as the sale of substantially all of our assets, without the acquirer of such assets being required to assume our responsibilities under the indenture. In the event the requisite consents to amend the indenture are not received, Standard SUBSIDIARIES

16ITEM 4T. CONTROLS AND PROCEDURES

~~Table~~a) Evaluation of ~~Contents~~Disclosure Controls and Procedures

~~STANDARD~~The Company ~~MANAGEMENT~~carried ~~CORPORATION~~out, ~~AND~~under ~~SUBSIDIARIES~~the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Principal Accounting Officer, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d-15(e) under the Securities Exchange Act of 1934, as amended). Based on their evaluation, the Company’s Chief Executive Officer and its Principal Accounting Officer concluded that, as of March 31, 2008, the Company’s disclosure controls and procedures were not effective because of the material weaknesses identified as of December 31, 2007, described below. Notwithstanding the existence of the material weaknesses described below, management has concluded that the consolidated financial statements in this Form 10-Q fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods and dates presented.

~~Management~~b) ~~has the right to require Capital Assurance to assume Standard~~ Management’s ~~obligations~~Report ~~under~~on ~~the~~Internal ~~indenture.~~Control IfOver ~~this~~Financial ~~event were~~Reporting toat ~~occur~~December 31, ~~Standard Management would receive less net cash proceeds from the sale of Standard Life by the net face amount outstanding of the trust preferred securities.~~ 2007

~~Standard~~Our management ~~Management~~is ~~agreed~~responsible tofor ~~indemnify~~establishing ~~Capital~~and ~~Assurance~~maintaining ~~and~~adequate ~~Standard~~internal control ~~Life~~over ~~for~~financial ~~any~~reporting. ~~losses arising~~Internal ~~from~~control ~~breaches~~over offinancial ~~any~~reporting is defined ~~representation,~~in ~~warranty~~Rule or13a-15(f) ~~covenant~~and ofRule ~~Standard~~15d-15(f) ~~Management~~promulgated ~~made~~under inthe Exchange Act. Under the ~~Agreement~~supervision and ~~for~~with ~~all~~the ~~pending~~participation ~~litigation~~ of ~~Standard~~our ~~Life~~management, ~~subject~~including our toChief ~~the~~Executive ~~applicable~~Officer ~~survival periods,~~and ifPrincipal ~~such~~Accounting ~~losses~~Officer, ~~exceed~~we ~~$500,000~~conducted an evaluation inof the ~~aggregate.~~effectiveness Ifof ~~such~~our ~~indemnification~~internal ~~threshold~~control isover financial reporting ~~exceeded~~ as of December 31, ~~Standard~~2007, ~~Management~~based ~~would~~on bethe ~~responsible~~framework ~~for~~in ~~paying~~Internal ~~$250,000~~Control-Integrated Framework ~~plus~~issued by the ~~amount~~Committee of ~~such~~Sponsoring ~~loss in~~Organizations ~~excess~~ of ~~$500,000,~~the upTreadway Commission. toBased aon ~~maximum~~our ~~amount~~evaluation ~~equal~~under tothat ~~the~~framework, ~~purchase~~we ~~price~~have ~~for~~identified certain ~~losses~~material ~~related~~weaknesses toin ~~the breach~~our ofinternal ~~certain~~control ~~representations~~over ~~and~~financial ~~warranties,~~reporting. As ~~and~~a upresult, toour amanagement ~~maximum~~has ~~amount~~concluded ~~equal~~that toour ~~50%~~internal ofcontrol ~~the~~over ~~purchase~~ financial ~~price~~reporting ~~for~~was ~~breaches~~not ofeffective ~~certain~~as ~~other~~of ~~specified~~December ~~representations~~31, ~~and warranties~~2007.

~~The~~A material ~~Agreement~~weakness ~~provides~~is ~~termination~~a ~~rights for both Standard Management and Capital Assurance~~deficiency, ~~and~~ ~~further~~or ~~provides~~combination ~~that, upon termination~~ of ~~the~~deficiencies, ~~Agreement~~in ~~under specified circumstances,~~internal ~~Standard~~ control ~~Management~~over ~~may~~financial bereporting ~~required~~such tothat ~~pay~~there ~~Capital~~is ~~Assurance~~ a ~~termination~~reasonable ~~fee ranging from $1.6~~possibility ~~million~~ that toa ~~$3.2 million,~~material ~~depending~~misstatement onof ~~the~~our ~~circumstance~~annual ~~leading~~or tointerim ~~the~~financial ~~termination, plus~~statements ~~reimbursement~~ will not ofbe upprevented toor ~~$2 million~~detected ofon ~~expenses~~a ~~incurred~~timely ~~by Capital Assurance in connection with the transaction since November 21, 2004~~basis.

IfSince mid-2006, the ~~proposed~~Company ~~sale~~has isbeen ~~consummated,~~undergoing wea ~~estimate~~major ~~that,~~transition ~~for~~as ~~federal~~it ~~income~~attempts to launch ~~tax~~the ~~purposes,~~strategic ~~we will~~plans ~~recognize~~described aearlier ~~capital~~in ~~loss~~this onreport. ~~the~~One ~~sale~~of the results of ~~approximately~~this ~~$22 million~~transition was the Company entering into substantial, ~~equal~~non-routine accounting totransactions ~~the~~which ~~difference~~required a higher level of accounting knowledge ~~between~~ to complete. ~~our~~This ~~adjusted~~situation, ~~tax~~combined ~~basis~~with insignificant ~~Standard~~cash ~~Life~~restraints ~~and~~during the same time period, resulted in the ~~amount~~Company not having, as of March 31, 2008, ~~realized~~ a sufficient ~~from~~complement of personnel to support the ~~proposed~~Chief ~~sale.~~Accounting WeOfficer ~~may~~ with the ~~recognize~~requisite alevel ~~tax~~of ~~benefit~~accounting inknowledge, ~~future~~experience, ~~periods~~and ~~from~~training ~~this~~in ~~capital~~the application ~~loss~~of ~~provided~~U.S. ~~that~~generally weaccepted ~~recognize~~accounting principles to properly ~~capital~~ analyze, ~~gains~~review, ~~within~~monitor ~~five~~and ~~years~~record these more complicated and certain other accounting transactions. In addition, ~~for~~somewhat due to the significant attention required of our currently limited accounting ~~purposes,~~and wefinancial ~~have~~staff ~~recorded~~in aour ~~$35~~efforts ~~million~~ to ~~impairment~~raise ~~charge~~capital inand ~~the~~identify ~~first~~appropriate ~~quarter~~acquisition oftargets, ~~2005~~the ~~related~~Company was unable to ~~the~~timely ~~expected~~finalize ~~sale~~its ofaccounting ~~Standard~~for 2007 and to fully control its ~~Life,~~ financial ~~which~~statement isclosing ~~equal~~process. These material weaknesses lead to delays in finalizing the ~~difference~~2008 ~~between~~financial ~~the~~statements ~~expected~~included ~~net~~in ~~book~~this ~~value~~report. ofAs ~~the~~a ~~assets~~result, management ~~sold~~has onconcluded that there was some likelihood that a material misstatement of the ~~sale~~Company’s ~~date~~annual ~~and~~financial ~~the~~statements ~~purchase~~may ~~price~~not ~~expected~~have tobeen prevented beor ~~paid~~could byhave ~~Capital~~gone ~~Assurance~~undetected inas part of the ~~proposed~~financial statement ~~transaction,~~ closing ~~plus~~process ~~transaction~~for ~~related~~March ~~expenses~~31, 2008.

~~Standard~~ Management consults ~~has filed~~ with ~~the~~outside ~~SEC and delivered to shareholders of record as of April 4~~advisers, ~~2005~~external ~~definitive~~SEC ~~proxy~~counsel ~~materials~~and ~~relating~~others ~~to (i) the special meeting of shareholders to be held~~regarding ~~for~~ certain ~~the~~reporting ~~purpose~~issues ~~of approving the Agreement~~ and ~~the~~makes ~~transactions~~retroactive ~~contemplated~~adjustments ~~thereby and~~ (~~ii) the solicitation~~prior ~~of consents from holders of trust preferred securities of SMAN Capital Trust I~~ to anwhen ~~amendment~~ external tofilings ~~the~~are ~~Indenture~~completed) ~~relating~~when ~~to such securities~~warranted. ~~Standard Management has set May 18, 2005 as the date for a special meeting of shareholders to vote on the approval of the proposed sale.~~

~~Use~~Management has ofdiscussed ~~Cash~~these ~~Proceeds.~~material ~~Based~~weaknesses onand ~~management’s~~related ~~expectations~~corrective ~~regarding~~actions with the ~~anticipated~~ ~~adjustment~~ Audit inCommittee ~~the~~and ~~purchase~~our ~~price,~~independent ~~and~~registered ~~assuming~~public aaccounting ~~final~~firm. Other than as described above, ~~post-adjustment~~we ~~purchase~~are ~~price~~not aware of ~~$83~~any other material weakness in ~~million,~~ our internal wecontrol ~~expect~~over ~~the~~financial ~~net~~reporting. ~~cash~~Because ~~proceeds~~of ~~from~~its ~~the~~inherent ~~sale~~limitations, internal ~~before~~control ~~deducting~~over ~~transaction~~financial ~~related~~reporting ~~fees~~may not prevent or detect ~~and~~ misstatements. ~~expenses,~~Projections toof beany ~~approximately~~evaluation ~~$57 million.~~of Weeffectiveness ~~intend~~to future periods are subject to ~~use~~risk ~~such~~that ~~cash~~controls ~~proceeds~~may asbecome ~~follows:~~inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

• approximately $17.7 million for the repayment in full of a bank line of credit; • approximately $6 million to purchase certain assets from Standard Life at closing pursuant to the Agreement; • approximately $4.3 million for professional fees (investment bankers, attorneys, accountantsc) Management’s ~~and~~Response ~~miscellaneous other expenses (filing fees, printing and mailing proxy materials, prepayment penalties, severance payments, etc.); • approximately $1 million~~ to ~~fund~~Material incentive payments in connection with obtaining the consent of the trust preferred holders; • $.5 million to reduce the principal amount outstanding under the mortgage on our corporate headquarters (paid March 21, 2005); and • the remaining approximately $27.5 million as working capital to support and expand our health services business, including through selected strategic acquisitions.Weaknesses

In addition, we anticipate that Standard Life, after the sale, will continue to lease space from us at our corporate headquarters for at least three years for $480,000 per year. We also anticipate receiving $350,000 of annual dividends under the $5 million of newly issued 7% cumulative exchangeable preferred stock we expect to receive as partial consideration in our sale of Standard Life. 18

17STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

~~Table~~Although we have not remediated the material weaknesses in our internal control over financial reporting as of ~~Contents~~March 31, 2008, we have made and will continue to make, improvements to our policies, procedures, systems and staffing who have significant roles in internal controls to address the identified internal control deficiencies. Consequently, management has initiated the following remediation steps to address the material weaknesses described above:

~~STANDARD~~• ~~MANAGEMENT~~We ~~CORPORATION~~will ~~AND~~continue ~~SUBSIDIARIES~~ to focus on improving the skill sets of our accounting and finance function, through education and training;

~~Comparison~~• ofWe will continue to consider the ~~Three~~engagement ~~Month~~of ~~Periods~~qualified ~~Ended~~professional ~~March 31~~consultants to assist us in cases where we do not have sufficient internal resources, ~~2005~~with management reviewing both the inputs and ~~March 31,~~outputs ~~2004:~~ of the services;

~~The~~• ~~following~~Upon ~~discussion highlights~~ the ~~material~~successful ~~factors~~completion ~~affecting~~of ~~the~~financing ~~results~~sufficient ofto support operations ~~and~~ ~~the~~for ~~significant~~at ~~changes~~least intwo ~~balance~~years, ~~sheet~~we ~~items.~~will ~~Notes~~consider to the ~~consolidated~~hiring ~~financial~~of ~~statements included~~additional inaccounting ~~this report~~ and ~~the~~finance ~~notes~~staff towith the ~~consolidated~~commensurate ~~financial~~industry ~~statements~~knowledge, ~~included~~experience inand ~~our~~training ~~Form 10-K~~necessary ~~for~~to complement the ~~year~~current ~~ended~~staff ~~December 31, 2004, should be read~~ in ~~conjunction~~the ~~with~~financial ~~this~~reporting ~~Form~~functions; ~~10-Q.~~ and

~~Continuing~~• ~~Operations:~~ We will further develop our financial statement closing and reporting practices to include additional levels of checks and balances in our procedures and timely review.

~~Net revenues~~d) Changes in Internal Control Over Financial Reporting

•There were ~~Sales~~no ~~for~~changes ~~the~~in ~~first~~our ~~quarter~~internal ofcontrol ~~2005~~over ~~increased~~financial ~~$.6~~reporting ~~million~~(as ordefined in Rules ~~33%~~13a-15(f) toand ~~$2.3~~15d-15(f) ~~million~~under ~~compared~~the toExchange ~~the~~Act) ~~first~~that occurred during the quarter ofended ~~2004~~March 31, ~~primarily~~2008, ~~related~~that tohave ~~the~~materially ~~acquisition~~affected, ofor ~~Apothecary~~are ~~Solutions.~~reasonably likely ~~Additionally~~to materially affect, ~~the~~our ~~growth~~internal incontrol ~~our~~over ~~veterinary~~financial ~~line~~reporting. However, ofas ~~business~~discussed ~~positively~~above, ~~impacted~~we have identified material weaknesses in our internal ~~sales~~control over financial reporting.

~~Cost~~PART II. ofOTHER ~~sales~~ INFORMATION

~~• Cost of sales for the first quarter of 2005 increased by $~~ITEM 1A.6 ~~million~~RISK ~~or 48% to $1.8 million compared to the first quarter of 2004, primarily related to the sales growth in our veterinary products which carry lower margins.~~FACTORS

~~Gross profit~~The risk factors included in our Annual Report on Form 10-K for fiscal year ended December 31, 2007 have not materially changed.

• Gross profit for the first quarter of 2005 decreased to 21% from 29% in the first quarter of 2004, primarily a result of increased sales in veterinary sales that carry lower margins than other sources of revenues.19

~~Selling,~~STANDARD MANAGEMENT ~~general~~CORPORATION ~~and~~AND ~~administrative~~ SUBSIDIARIES

~~• Selling, general and administrative expenses for the first quarter of 2005 increased by $1.~~ITEM 2 ~~million or 40%~~. UNREGISTERED ~~The~~SALES ~~increase~~OF isEQUITY ~~primarily~~SECURITIES ~~related~~AND toUSE expenses related to the sale of Standard Life for legal, professional and other fees of $.8 million, increases in the continued marketing and selling efforts in the Health Services area of $.3 million and due to the acquisition of Apothecary Solutions of $.1 million.OF PROCEEDS

~~Depreciation~~During the ~~and~~first ~~amortization~~quarter of 2008, the Company received $215,000 for subscriptions of Standard Management common stock. Also during the period, UHCC received subscriptions for $385,000. Subscription agreements with both Standard Management and UHCC were with only accredited investors. Subscription agreements with UHCC were pursuant to a private offering memorandum dated January 9, 2008.

~~• Depreciation and amortization remained unchanged at $~~ITEM 3.5 ~~million~~DEFAULTS inUPON ~~the~~SENIOR ~~first quarter of 2005 and 2004.~~SECURITIES

~~Loss~~The Company ~~related~~is toin ~~sale~~default of ~~business~~the Laurus Note for principal and interest owed for 2007, and the $3,200,000 convertible note for the interest owed for 2007.

•ITEM 6. ~~Loss~~EXHIBITS ~~related to sale of business for the first quarter of 2004 represents the loss on the sale of MCO.~~

~~Interest expense~~(a) Exhibits

~~• Interest expense for the first quarter of 2005 increased by $~~31.1 ~~million~~Certification orof ~~10%~~Chief toExecutive ~~$1.1~~Officer ~~million~~pursuant ~~compared~~ to ~~the~~Section ~~first~~302 ~~quarter~~ of ~~2004, primarily due to~~ the ~~issuance~~Sarbanes-Oxley ofAct ~~$6 million~~ of ~~convertible debt during 2004~~2002.

~~Federal~~31.2 ~~income~~Certification ~~tax~~of ~~benefit~~ Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

•32 ~~Provision~~Certification ~~for~~pursuant ~~federal~~to ~~income~~18 ~~tax~~U.S.C. ~~remained~~Section ~~zero~~1350, ~~due~~as toadopted apursuant ~~100%~~to ~~valuation~~Section ~~allowance~~906 onof the ~~net~~Sarbanes-Oxley ~~losses~~Act ~~in the first quarter~~ of ~~2005 and 2004~~2002.

18 SIGNATURES

~~Table~~Pursuant to the requirements of ~~Contents~~the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~STANDARD~~Dated June ~~MANAGEMENT~~20, ~~CORPORATION AND SUBSIDIARIES~~ 2008

~~Discontinued~~STANDARD ~~Operations~~MANAGEMENT CORPORATION (Registrant) By: /s/ Ronald D. Hunter Ronald D. Hunter Chairman, Chief Executive Officer and President (Principal Executive Officer) By: /s/ Daniel K Calvert Daniel K Calvert Chief Accounting Officer (Principal Financial and Accounting Officer)

General: Our former Financial Services segment has been reclassified as discontinued operations during 2005 due to management’s decision in early 2005 to sell Standard Life. The former Financial Services segment consists of revenues earned and expenses incurred from our insurance operations. Our primary products include deferred annuities, equity-indexed annuities and single premium immediate annuities. The profitability of this segment is primarily a function of net investment spread (the difference between the investment income earned on our investments less the interest we credit to our policyholders), persistency of the in force business, mortality experience and management of our operating expenses. 20

Income (loss) from Discontinuing Operations:

• Net loss for the current quarter was $33.3 million compared to net income of $3.1 million for the 2004 quarter. The current quarter was primarily impacted by an impairment charge of $35 million in the first quarter of 2005 related to the expected sale of Standard Life, which is equal to the difference between the expected net book value of the assets sold on the sale date and the purchase price expected to be paid by Capital Assurance in the proposed transaction, plus transaction related expenses. Additionally, the current quarter was impacted by a decline in net realized gains of $.9 million net of income taxes, a decrease in net spread income and policy income of $.4 million net of income taxes and net of amortization and unfavorable mortality of $.1 million.

STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

Liquidity and Capital Resources

Liquidity of Standard Management (Parent Company)

We are a holding company whose capital requirements are met through payments received from our subsidiaries. These payments have historically included 1) surplus debenture interest, 2) dividends, 3) management fees, 4) equipment rental fees, 5) lease income and 6) allocation of income taxes, all of which have been subject to restrictions under applicable insurance laws and are used to pay our operating expenses and meet our debt service obligations. Historically, the vast majority of our dividend income, management fee income, rental fee income and lease income have come from Standard Life, which accounted for approximately 94% of our consolidated revenues in 2004. If the proposed sale of Standard Life is consummated, we will no longer have this source of funds and will rely primarily on our health services operations. In addition, we will no longer receive interest on the Surplus Debentures (as defined below), which we intend to sell to Capital Assurance along with the stock of Standard Life. However, if the sale of Standard Life is consummated, we will receive a substantial amount of cash proceeds as described below.

Additionally, we have borrowed significant amounts from Standard Life to finance the operations of our Health Services business. As of March 31, 2005, the aggregate amount of such borrowings was approximately $20.5 million. As part of the purchase price for Standard Life, Capital Assurance would assume this indebtedness. These internal sources of liquidity are supplemented by external sources such as revolving credit agreements and long-term debt and equity financing in the capital markets. We currently have $18 million outstanding with our senior secured credit facility with a bank. There is currently no availability under this facility. If the proposed sale of Standard Life is consummated, we intend to repay this facility in full.

Potential Cash Available for 2005

Historically, from a parent company perspective, available cash from our existing working capital and from the sources described above would be anticipated to be sufficient to fund our cash requirements for the following year. However, while we expect that such sources will be sufficient to fund our operations until the completion of our pending sale of Standard Life, we expect to have available approximately $27.5 million of net cash proceeds from that sale to fund our subsequent operations and our growth strategies for our U.S. Health Services business. Should the cash proceeds from the sale of Standard Life be substantially reduced from our current expectation (as may be the case as described in the following paragraph), we will need to obtain additional sources of funds in order to grow our health services business in accordance with our current plan. There can be no assurances that such funding will be available under terms and conditions that are favorable to use, if at all.

In conjunction with our efforts to sell Standard Life, Standard Management also agreed to undertake a solicitation of consents of the preferred security holders of the Trust to an amendment to the indenture governing such securities at an estimated cost of approximately $1 million to fund incentive payments in connection with obtaining such consents. If adopted, the amendment would provide us additional financing flexibility by allowing us to enter into certain business transactions, such as the sale of substantially all of our assets, without the acquirer of such assets being required to assume our responsibilities under the indenture. In the event the requisite consents to amend the indenture are not received, Standard Management has the right to require Capital Assurance to assume Standard Management’s obligations under the indenture. If this event were to occur, the cash proceeds to be received by us in the sale would be reduced by the approximately $20.7 million aggregate liquidation amount of trust preferred securities outstanding, which would reduce the net amount of cash expected to be available to us to operate and expand our health services business from approximately $27.5 million to approximately $7 million. Such an event would make it more likely that we would have to secure additional debt or equity financing to carry out our business plan, and there can be no assurance that we could obtain such financing on acceptable terms or at all.

While we fully anticipate the sale of Standard Life to be consummated and for such sale to provide significant net cash proceeds to the Company, the following paragraphs assume that such sale does not occur in order to describe our liquidity circumstances in that event (as well as our circumstances up through the date of sale).

Surplus Debenture Interest. We loaned $27.0 million to Standard Life pursuant to unsecured surplus debenture agreements (“Surplus Debentures”), which require Standard Life to make quarterly interest payments at a variable corporate base rate plus 2% per annum, and annual principal payments of $1.0 million per year beginning in 2007 and concluding in 2033. The interest and principal payments are subject to quarterly approval by the Indiana Department of Insurance, depending upon

STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

satisfaction of certain financial tests relating to levels of Standard Life’s capital and surplus and general approval of the Commissioner of the Indiana Department of Insurance (“Commissioner”). For the quarters ended March 31, 2005, December 31, 2004 and September 31, 2004 the Commissioner had not yet approved our request of $1.4 million in aggregate interest payments. Assuming the approvals are granted and the March 31, 2005 interest rate of 7.5% continues, we expect to receive interest income of $2.0 million from the Surplus Debentures in 2005, assuming a full year ownership of Standard Life.

Dividends paid from Standard Life are limited by laws applicable to insurance companies. As an Indiana domiciled insurance company, Standard Life may pay a dividend or distribution from its surplus profits, without the prior approval of the Commissioner, if the dividend or distribution, together with all other dividends and distributions paid within the preceding 12 months, does not exceed the greater of i) net gain from operations or ii) 10% of surplus, in each case as shown in its preceding annual statutory financial statements. In 2004 and 2003, there were no dividends received from our subsidiaries. In 2005, we could receive dividends of $1.1 million from Standard Life, without regulatory approval and an additional $5.6 million with regulatory approval. However, we do not expect to receive dividends from our subsidiaries in 2005.

Management Fees. Pursuant to a management services agreement, Standard Life paid us $ 3.6 million during 2004 and 2003 for certain management services related to the production of business, investment of assets and evaluation of acquisitions. In addition, Dixie Life paid Standard Life $.9 million and $.7 million in 2004 and 2003, respectively, for certain management services provided. Both of these agreements provide that they may be modified or terminated by the applicable Departments of Insurance in the event of financial hardship of Standard Life or Dixie Life. In 2005, we expect to receive management fees of $3.6 million from Standard Life, assuming a full year ownership of Standard Life.

Equipment Rental Fees. In 2004, we received $1.1 million from Standard Life for the use of our equipment and we expect to receive the same amount in 2005, assuming a full year ownership of Standard Life.

Lease Income. Effective January 1, 2002, we entered into a lease agreement with Standard Life whereby Standard Life leases approximately 43,000 square feet of our corporate headquarters in Indianapolis. During 2004, we received approximately $.8 million in lease income from Standard Life and we expect to receive the same amount in 2005, assuming a full year ownership of Standard Life. Also associated with this lease, Standard Life is responsible for its share of building maintenance expenses. During 2004, we received $.3 million in maintenance expenses. We expect to receive $.3 million in maintenance expense in 2005, assuming a full year ownership of Standard Life.

Anticipated Sale of Standard Life. Based on management’s expectations regarding the estimated adjusted purchase price for Standard Life, and assuming a final, post-adjustment purchase price of $83 million, we expect the net cash proceeds from the sale, before deducting transaction related fees and expenses, to be approximately $57 million. We intend to use such cash proceeds as follows:

• approximately $17.7 million for the repayment in full of a bank line of credit; • approximately $6 million to purchase certain assets from Standard Life at closing pursuant to the Agreement; • approximately $4.3 million for professional fees (investment bankers, attorneys, accountants) and miscellaneous other expenses (filing fees, printing and mailing proxy materials, prepayment penalties, severance payments, etc.); • approximately $1 million to fund incentive payments in connection with obtaining the consent of the trust preferred holders; • $.5 million to reduce the principal amount outstanding under the mortgage on our corporate headquarters (paid March 21, 2005); and • the remaining approximately $27.5 million as working capital to support and expand our health services business, including through selected strategic acquisitions.

In addition, we anticipate that Standard Life, after the sale, will continue to lease space from us at our corporate headquarters for at least three years for $480,000 per year. We also anticipate receiving $350,000 of annual dividends under the $5 million of newly issued 7% perpetual -cumulative exchangeable preferred stock we expect to receive as partial consideration in our sale of Standard Life.

STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

Estimated Cash Required in 2005

The Company has estimated required interest payments of $3.1 million and estimated required principal payments of $2.9 million for the remainder of 2005 related to our mortgages payable, promissory notes, notes payable and subordinated debentures.

As of March 31, 2005, the Company was in violation of two financial covenants (debt leverage and intercompany debt) under our senior secured credit facility. The balance of this indebtedness on March 31, 2005 was $18 million. We have obtained waivers of the covenants through the earlier of: i) the sale of Standard Life or ii) September 30, 2005.

Cash Flows

Our net cash used in operating activities during the first quarter of 2005 was $4.7 million compared to cash used in operating activities of $4.9 million in the first quarter of 2004. The net cash used in operating activities is mainly attributable to expenses associated with the continued development of U. S. Health Service’s operating platform, as well as interest expense and salary expense at the holding company level.

Our net cash used in investing activities during the first quarter of 2005 was $0 compared to cash used in investing activities of $1.3 million in the first quarter of 2004.

Our net cash inflow from financing activities during the first quarter of 2005 was $4.0 million compared to net cash inflow from financing activities of $7.1 million in the first quarter of 2004. The net cash inflow is mainly attributable to increased borrowings under our new convertible notes and due to borrowings and cash received from our discontinued operations partially offset by repayments on our long-term debt.

Contractual Obligations: During the first quarter of 2005, there were no significant changes in our reported payments due under contractual obligations at December 31, 2004.

Off-Balance Sheet Arrangements: We have no off-balance sheet arrangements.

Liquidity of Discontinued Operation — Financial Services

The principal capital requirements of Standard Life are its 1) contractual obligations to policyholders, 2) surplus debenture interest, dividends, management fees and rental fees to Standard Management and 3) operating expenses. The primary source of funding for these obligations has been cash flow from premium income, net investment income, investment sales and maturities and sales of annuity products. These sources of liquidity for Standard Life exceed scheduled uses. Liquidity is also affected by unscheduled benefit payments including death benefits, policy withdrawals and surrenders. The amount of withdrawals and surrenders is affected by a variety of factors such as renewal interest crediting rates, interest rates for competing products, general economic conditions, Standard Life’s A.M. Best rating and events in the industry that affect policyholders’ confidence. In July 2004, Standard Life received a rating from A.M. Best of (“B”), or “fair” with a stable outlook, a one-category reduction from its previous rating of (“B+”), or “very good”.

The policies and annuities issued by Standard Life contain provisions that allow certain policyholders to withdraw or surrender their policies under defined circumstances. These policies and annuities generally contain provisions, which apply penalties or otherwise restrict the ability of policyholders to make such withdrawals or surrenders. Standard Life closely monitors the surrender and policy loan activity of its insurance products and manages the composition of its investment portfolios, including liquidity, to ensure it has sufficient cash resources in light of such activity.

STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

Changes in interest rates may affect our incidence of policy surrenders and other withdrawals. In addition to the potential effect on liquidity, unanticipated withdrawals in a changing interest rate environment could adversely affect our earnings if we were required to sell investments at reduced values to meet liquidity demands. We manage our asset and liability portfolios in order to minimize the adverse earnings effect of changing market interest rates. We seek assets that have duration characteristics similar to the liabilities that they support. We also prepare cash flow projections and perform cash flow tests under various market interest rate scenarios to assist in evaluating liquidity needs and adequacy. Our insurance subsidiaries currently expect available liquidity sources and future cash flows to be adequate to meet the demand for funds.

Statutory surplus is computed according to rules prescribed by the NAIC as modified by the Indiana Department of Insurance, or the states in which our insurance subsidiaries do business. Statutory accounting rules are different from GAAP and are intended to reflect a more conservative perspective. With respect to new business, statutory accounting practices require that: 1) acquisition costs (primarily commissions and policy issue costs) and 2) reserves for future guaranteed principal payments and interest in excess of statutory rates, be expensed in the year the new business is written. These items cause a reduction in statutory surplus or surplus strain in the year written for many insurance products. We design our products to minimize such first-year losses, and in 2005 none of our products caused a statutory loss in the year written. Absent the sale of Standard Life, our long-term growth goals contemplate continued growth in our insurance businesses. To achieve these growth goals, our insurance subsidiaries will need to increase statutory surplus. Additional statutory surplus may be secured through various sources such as internally generated statutory earnings, infusions with funds generated through our debt or equity offerings, or mergers with other life insurance companies. If additional capital is not available from one or more of these sources, we believe that we could reduce surplus strain through the use of reinsurance or through reduced writing of new business.

We believe that the operational cash flow of Standard Life will be sufficient to meet our anticipated needs for 2005. As of March 31, 2005, Standard Life had statutory capital and surplus for regulatory purposes of $68 million. Net cash outflow from operations on a statutory basis of Standard Life, after payment of benefits and operating expenses, was $29.4 million during the first three months of 2005. The decrease is primarily due to a decline in annuity premium deposits and an increase in surrenders. If the need arises for cash, which is not readily available, additional liquidity could be obtained from the sale of invested assets.

Liquidity of Health Services

The principal capital requirements of our Health Services segment are its 1) cost of goods sold, 2) operating expenses, and 3) future acquisitions. The primary source of funding for these obligations has been 1) cash flow from pharmaceutical sales, 2) internal borrowings from Standard Management and external borrowings, and 3) capital contributions from Standard Management. The capital requirements of our Health Services segment have significantly exceeded revenues from pharmaceutical sales.

We believe that the operational cash flow of our Health Services segment will not be sufficient to meet our anticipated operational needs for 2005. Therefore, this segment is expected to continue to fund its cash needs through the proceeds of the sale of Standard Life, external borrowings and capital contributions from Standard Management. See “Liquidity of Standard Management (Parent Company) — Potential Cash Available for 2005” above.

Forward-looking Statements

All statements, trend analyses, and other information contained in this quarterly report on Form 10-Q or any document incorporated by reference herein relative to markets for our products and trends in our operations or financial results, as well as other statements including words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” and other similar expressions, constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements relating to our ability to consummate the sale of Standard Life, our ability to pay interest on the debentures that support distributions made on the trust preferred securities (and of the Trust to make the corresponding distributions on the preferred securities) following a sale of Standard Life, the prospects of our company after a sale of Standard Life when operating only in the health services business. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from those contemplated by the forward-looking statements. Such factors include, but are not limited to:

STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

• Our ability to satisfy the contractual conditions necessary to consummate the sale of Standard Life. • The ability of our management team to successfully operate a health services business with the limited experience in that industry. • Our ability to expand our health services business both organically and through acquisitions, including our ability to identify suitable acquisition candidates, acquire them at favorable prices and successfully integrate them into our business. • General economic conditions and other factors, including prevailing interest rate levels, and stock market performance, which may affect our ability to obtain additional capital when needed and on favorable terms. • Our ability to achieve anticipated levels of operational efficiencies at recently acquired companies, as well as through other cost-saving initiatives. • Customer response to new products, distribution channels and marketing initiatives. • Increasing competition in the sale of our products. • The risk factors or uncertainties listed from time to time in our Annual Report on Form 10-K for the year ended December 31, 2004 and any document incorporated by reference herein.

This Quarterly Report on Form 10-Q also contains forward-looking statements specifically relating to our insurance business. If the proposed sale of Standard life is not consummated and we continue to operate in the financial services sector, the following additional factors may cause actual results to differ from those contemplated by the forward-looking statement:

• Mortality, morbidity and other factors which may affect the profitability of our insurance products. • Regulatory changes or actions, including those relating to regulation of financial services affecting bank sales and underwriting of insurance products, regulation of the sale, underwriting, and pricing of insurance products. • Changes in the federal income tax laws and regulation which may affect the relative tax advantages of some of our products.

We caution you that, while forward-looking statements reflect our good faith beliefs, these statements are not guarantees of future performance. In addition, we disclaim any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risks and the way they are managed are summarized in our discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2004. There have been no material changes in 2005 to these risks or the management of these risks.

ITEM 4. CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-4c under the Securities Exchange Act of 1934) as of March 31, 2005 (the “Evaluation Date”). They have concluded that, as of the Evaluation Date, our disclosure controls and procedures were adequate and effective. There were no significant changes in our internal controls or in other factors that could significantly affect disclosure controls and procedures subsequent to the Evaluation Date.

STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various legal proceedings in the normal course of business. In most cases, these proceedings involve claims under insurance policies or other contracts. The outcome of these legal proceedings are not expected to have a material adverse effect on the consolidated financial position, liquidity, or future results of our operations based on our current understanding of the relevant facts and law.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On March 21, 2005, Standard Management issued a $4.75 million Secured Convertible Term Note due on or before March 21, 2008 (the “Note”). A summary of the material terms of the Securities Purchase Agreement, the Note, the warrant attached to the Note (the “Warrant”) and the registration rights agreement is described in the Company’s Current Report on Form 8-K filed on March 25, 2005. Additional warrants were issued to advisors in the above transaction that allows the holders to purchase 175,000 shares of our common stock at an exercise price of $3.28 per share and 30,619 shares of our common stock at an exercise price of $3.90 per share.

On November 30, 2004, we issued $2.75 million of our 6% mandatory unsecured convertible notes due 2008. The notes are convertible at a price equal to $3.28 per share at any time at the holder’s option subject to certain conditions. The issuance and sale of the notes were made in reliance on the exemption from registration provided in Regulation D, Rule 506 under Section 4(2) of the Securities Act as a transaction by an issuer not involving a public offering. The notes were acquired by two accredited investors for investment with no view toward the resale or distribution thereof.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

	2.1	Stock and Asset Purchase Agreement, dated February 9, 2005, by and between Standard Management Corporation and Capital Assurance Corporation (incorporated by reference to Current Report on Form 8-K filed on February 14, 2005).
	4.1	Securities Purchase Agreement, dated March 21, 2005, between Standard Management Corporation and Laurus Master Fund, Ltd., including the form of Secured Convertible Term Note and Warrant (incorporated by reference to Current Report on Form 8-K filed on March 25, 2005).
	4.2	Registration Rights Agreement, dated March 21, 2005, between Standard Management Corporation and Laurus Master Fund, Ltd. (incorporated by reference to Current Report on Form 8-K filed on March 25, 2005).
	31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

On March 25, 2005 we filed a report on Form 8-K with the Commission related to issuance of a $4.75 million Secured Convertible Term Note due on or before March 21, 2008.

On March 25, 2005 we filed a report on Form 8-K with the Commission related to the release of our financial results for the fourth quarter 2004.

On February 14, 2005 we filed a report on Form 8-K with the Commission related to a signed definitive agreement to sell our life insurance subsidiary Standard Life Insurance Company of Indiana.

On February 3, 2005 we filed a report on Form 8-K with the Commission related to the resignation of Robert J. Salyers, a non-management director of Standard Management Corporation.

STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

On January 21, 2005 we filed a report on Form 8-K with the Commission related to the termination of the Stock Purchase Agreement dated August 13, 2004 whereby it was to acquire all of the outstanding capital stock of iCare Medical Supply, Inc.

On January 20, 2005 we filed a report on Form 8-K with the Commission related to the termination of the Merger Agreement whereby we were to acquire all of the outstanding capital stock of SVS Vision Holding Company.

STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated : May 16, 2005		STANDARD MANAGEMENT CORPORATION
		(Registrant)
		By: /s/ Ronald D. Hunter
		Ronald D. Hunter
		Chairman of the Board and
		Chief Executive Officer
		(Principal Executive Officer)
		By: /s/ Michael B. Edwards
		Michael B. Edwards
		Vice President and Corporate Controller
		(Chief Accounting Officer)

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