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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year endedDecember 31, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 0-20882
 Standard Management Corporation
  Indiana
(State or other jurisdiction of 
incorporation or organization)
    
    35-1773567
(I.R.S. employer
identification no.)
 10689 North Pennsylvania Street, Indianapolis, Indiana 46280
(Address of principal executive offices)
    
    (317) 574-6200
(Telephone)
 Securities registered pursuant to Section 12(b) of the Act:
    
    None
 Securities registered pursuant to Section 12(g) of the Act:
    
    Common Stock, No Par Value
10.25% Trust Preferred Securities due 2031 of SMAN
Capital Trust I
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##### Table of Contents



Table of Contents
  
 PagePart IItem 1. Business of Standard Management
    
    
    2Item 1A. Risk Factors
    
    
    6Item 2. Properties
    
    
    12Item 3. Legal Proceedings
    
    
    12Item 4. Submission of Matters to a Vote of Security Holders Executive Officers and Directors of the Registrant
    
    
    12Part IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    14Item 6. Selected Financial Data
    
    
    15Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 8. Financial Statements and Supplementary Data
    
    
    28Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    28Item 9A. Controls and Procedures
    
    
    28Item 9B. Other Information
    
    
    28Part IIIItem 10.
Directors, Executive Officers and Corporate Governance
    
    
    29Item 11. Executive Compensation
    
    
    29Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    29Item 13.
Certain Relationships and Related Transactions, and Director
Independence
    
    
    29Item 14. Principal Accountant Fees and Services
    
    
    29Part IVItem 15. Exhibits and Financial Statement Schedule
    
    
    30EX-3.1 AMENDED AND RESTATED ARTICLES OF INCORPORATIONEX-21 LIST OF SUBSIDIARIES OF STANDARD MANAGEMENTEX-23 CONSENT OF BDO SEIDMAN, LLPEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32 SECTION 906 CERTIFICATION OF THE CEO & CFO




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Cautionary Notice Regarding Forward-Looking Statements
  
    
    Our having sufficient cash on hand, whether generated through operations or financings,
to meet our debt service and operating needs and continue our acquisition program.
    
    The ability of our management team to successfully operate a pharmacy business with
limited experience in that industry.
    
    Our ability to expand our pharmacy 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, and to achieve
anticipated levels of operational efficiencies and implement cost-saving initiatives.
    
    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.
    
    Customer response to new products, distribution channels and marketing initiatives.
    
    Increasing competition in the sale of our products.
  
 PART I
 As used in this report, unless the context otherwise clearly requires, the Company
we, our, us, and Standard Management refer to Standard Management Corporation and its
subsidiaries. All financial information contained in this report is presented in accordance with
generally accepted accounting principles unless otherwise specified. Our website is located at
www.sman.com, however, the information contained on the website is not to be considered
incorporated by reference herein.
 
 Item 1. Business of Standard Management
 Overview
  2




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History
    Our Business
     Customers
  The Industry
  3




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Our Growth/Acquisition Strategy
       Future Acquisitions
  4




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Regulatory Factors
  Medicare and Medicaid
     5




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Competitive Factors
  Employees
  Equity Investment
     
 Item 1A. Risk Factors
 In addition to the other information in this report and our other filings with the U. S.
Securities and Exchange Commission (SEC), the following risk factors should be carefully
considered in evaluating Standard Management and our businesses. The risks and uncertainties
described below are not the only ones we face. Additional risks and uncertainties, not presently
known to us or otherwise, may also impair our business operations or the trading of our common
stock. If any of the risks described below or such other risks actually occur, our business,
financial condition or results of operations could be materially and adversely affected.
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We have suffered substantial losses, and may suffer losses in the future
   
    
    our ability to identify and acquire appropriately priced and profitable businesses that
provide cash flow and synergies to our current business;
    
    our ability to execute a planned strategy that will provide for cash flow from
operations which will fund growth and service debt; and
    
    our ability to access reasonably priced capital that will provide long-term flexibility
for the Company.
 Unless we receive a significant cash infusion or significantly increase cash flow from operations,
we may not have sufficient cash to meet our cash requirements at some point during 2007 .
  Our independent auditors have expressed doubt regarding the Companys ability to continue as a
going concern.
  We will require additional financing, which may be difficult to obtain. Any such financing in the
form of debt will contain restrictive covenants and will require us to utilize cash to service it.
  7




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We are subject to various risks relating to our acquisition strategy.
  
    
    consolidation of financial functions and elimination of redundancies;
    
    achievement of purchasing efficiencies;
    
    hire company executives, as needed;
    
    the integration of key personnel; and
    
    maintenance and growth of existing business.
  Our profitability and ability to conduct business could be negatively impacted by a change in our
relationships with our largest institutional clients.
  We face considerable competition.
  We are subject to significant governmental regulation, and changes in such regulation could have a
substantial impact on our profitability.
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We are dependent on payment or reimbursement from government reimbursement programs, principally
Medicare and Medicaid, and the constant changes in the government reimbursement programs pose
substantial risk to our results of operations.
   If we or our client institutions fail to comply with Medicaid and Medicare reimbursement
regulations, our revenue could be reduced, we could be subject to penalties and we could lose our
eligibility to participate in these programs.
  If we fail to comply with licensure requirements, fraud and abuse laws, or other applicable laws,
we may need to curtail operations, and we could be subject to significant penalties.
  9




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Our failure to comply with federal or state health care privacy standards could subject us to civil
and criminal liability.
  We are also subject to other state and federal laws that govern the distribution of
pharmaceuticals, the enforcement of which could have a material and adverse effect on our
profitability.
  We are also subject to cost controls imposed by non-government reimbursement program payors and
pricing changes from our suppliers that could have a material and adverse effect on our
profitability.
  There are few barriers to entry in the institutional pharmacy market, and we may experience
unforeseen competition in our markets
  Future sales of common stock could depress the price of our common stock.
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The market price of our common stock is volatile.
  Our shares are not listed on an exchange which could impact your ability to sell your shares.
  You may experience dilution as a result of future issuances of shares of our common stock.
  11




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Item 2. Properties
  Our other properties include:
 
    
    approximately 21,000 square feet under a lease that expires in August 2010 in an
office and warehouse building located at 6210 N. Technology Center Drive,
Indianapolis, Indiana. As of March 2007, our lease obligation was reduced from
30,000 to 21,000 square feet;
    
    approximately 1,168 square feet under a lease that expires May 31, 2007 located
at 4422 Carver Woods Drive, Suite 125, Blue Ash, Ohio.
    
    approximately, 1,794 square feet under a lease that expires that expires January
25, 2008 located at 441 Donelson Pike Suite 395, Nashville, TN 37214.
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  For
    
    Against
    
    Abstain14,841,041
    
    
    832,592
    
    
    
    5,598
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Executive Officers and Directors of the Registrant
 Name
    
    Age
    
    PositionRonald D. Hunter
    
    
    55
    
    
    Chairman of the Board, President and Chief Executive OfficerMartial R. Knieser, M.D.
    
    
    65
    
    
    Executive Vice President, Corporate DevelopmentMark B.L. Long
    
    
    44
    
    
    Executive Vice President , Chief Operating OfficerDaniel K. Calvert
    
    
    53
    
    
    Executive Vice President, Chief Accounting OfficerDainforth (Dan) B. French, Jr.
    
    
    40
    
    
    DirectorJames H. Steane II
    
    
    62
    
    
    Director
 Ronald D. Hunter :
 Martial R. Knieser, M.D.:
 Mark B.L. Long:
 Daniel K. Calvert:
 James H. Steane II :
 Dainforth B. French, Jr.:
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Part II
 
 Item 5. Market for Registrants Common Equity, and Related Stockholder Matters
  Common StockHigh
    
    LowQuarter ended March 31, 2006
    
    $
    1.75
    
    
    $
    0.70Quarter ended June 30, 2006
    
    
    1.15
    
    
    
    0.21Quarter ended September 30, 2006
    
    
    0.47
    
    
    
    0.21Quarter ended December 31, 2006
    
    
    0.25
    
    
    
    0.04Quarter ended March 31, 2005
    
    $
    4.93
    
    
    $
    2.70Quarter ended June 30, 2005
    
    
    3.19
    
    
    
    1.50Quarter ended September 30, 2005
    
    
    2.45
    
    
    
    1.79Quarter ended December 31, 2005
    
    
    2.25
    
    
    
    1.34
 Equity Compensation Plan Information
  Number ofsecuritiesNumber of
    
    
    
    
    
    remainingsecurities
    
    Weighted-
    
    available forto be issued
    
    average
    
    futureupon
    
    exercise
    
    issuanceexercise of
    
    price of
    
    under equityoutstanding
    
    outstanding
    
    compensationPlan Category
    
    options
    
    options
    
    plansEquity compensation plans approved by security holders:1992 Stock Option Plan
    
    
    563,000
    
    
    $
    5.03
    
    
    
    2002 Stock Incentive Plan
    
    
    812,000
    
    
    
    2.70
    
    
    
    1,152,558
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Item 6. Selected Financial Data
  Year Ended December 312006
    
    2005
    
    2004
    
    2003
    
    2002STATEMENT OF OPERATIONS DATA:Net revenues (b)
    
    $
    9,029
    
    
    $
    3,806
    
    
    $
    
    
    
    $
    
    
    
    $
    Cost of sales (b)
    
    
    6,399
    
    
    
    2,753
    
    
    
    
    
    
    
    
    
    
    
    Gross profit (b)
    
    
    2,630
    
    
    
    1,053
    
    
    
    
    
    
    
    
    
    
    
    Loss from continuing operations
    
    
    (7,721
    )
    
    
    (12,571
    )
    
    
    (14,060
    )
    
    
    (9,555
    )
    
    
    (10,585
    )Income (loss) from discontinued operations (a)
    
    
    (11,700
    )
    
    
    (41,693
    )
    
    
    3,192
    
    
    
    (916
    )
    
    
    9,456Net income (loss)
    
    
    (19,421
    )
    
    
    (54,264
    )
    
    
    (10,868
    )
    
    
    (10,471
    )
    
    
    (1,130
    )PER SHARE DATA:Loss from continuing operations,
    
    
    (0.60
    )
    
    
    (1.49
    )
    
    
    (1.76
    )
    
    
    (1.19
    )
    
    
    (1.39
    )Income (loss) from discontinued operations
    
    
    (0.92
    )
    
    
    (4.93
    )
    
    
    0.40
    
    
    
    (0.11
    )
    
    
    1.24Net loss
    
    
    (1.52
    )
    
    
    (6.42
    )
    
    
    (1.36
    )
    
    
    (1.30
    )
    
    
    (0.15
    )Weighted average common shares outstanding,
    
    
    12,779,164
    
    
    
    8,455,869
    
    
    
    7,973,029
    
    
    
    8,031,749
    
    
    
    7,623,690Common shares outstanding
    
    
    16,171,194
    
    
    
    9,095,208
    
    
    
    7,921,113
    
    
    
    8,114,196
    
    
    
    7,854,674BALANCE SHEET DATA (at year end):Cash and cash equivalents
    
    $
    565
    
    
    $
    1,709
    
    
    $
    1,080
    
    
    $
    1,270
    
    
    $
    3,275Assets of continuing operations
    
    
    17,545
    
    
    
    26,100
    
    
    
    17,277
    
    
    
    18,610
    
    
    
    21,054Assets of discontinued operations (a)
    
    
    948
    
    
    
    23,287
    
    
    
    1,930,468
    
    
    
    1,956,161
    
    
    
    1,694,702Total assets
    
    
    18,493
    
    
    
    49,387
    
    
    
    1,947,745
    
    
    
    1,974,771
    
    
    
    1,715,756Debt
    
    
    27,115
    
    
    
    39,309
    
    
    
    54,310
    
    
    
    49,046
    
    
    
    28,000Shareholders equity (deficit)
    
    
    (15,071
    )
    
    
    4,943
    
    
    
    60,032
    
    
    
    72,447
    
    
    
    87,734
 
 (a)
    
    During 2005, the company sold its financial services subsidiary. During 2006, the company sold or discontinued
several pharmacy businesses acquired during 2002  2005. See Management Discussion &Analysis for further description.(b)
    
    Precision was acquired in July 2005. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
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Discontinued Operations  Financial Services
    Pharmacy Business Acquisitions
     16




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Discontinued Operations  Pharmacy Services
       17




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Our Growth Strategy
      18




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Critical Accounting Policies
 Overview
   Revenue Recognition
    19




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Allowance for Doubtful Accounts
      20




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Goodwill and Intangible Assets
   Stock-Based Compensation
     21




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Conversion Features and Common Stock Warrants
  Income Taxes
    22




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Results of Operations for the three (3) years ended December 31, 2006:  Consolidated Statement of Operations
 Year Ended December 312006
    
    
    2005
    
    
    2004Net revenues
    
    $
    9,029
    
    
    $
    3,806
    
    
    $
    Cost of revenues
    
    
    6,399
    
    
    
    2,753
    
    
    
    Gross profit
    
    
    2,630
    
    
    
    1,053
    
    
    
    Selling, general and administrative expenses
    
    
    10,977
    
    
    
    9,749
    
    
    
    8,379Impacts related to value of warrants and derivitives
    
    
    71
    
    
    
    (272
    )
    
    
    Depreciation and amortization
    
    
    819
    
    
    
    923
    
    
    
    1,437Operating loss
    
    
    (9,237
    )
    
    
    (9,347
    )
    
    
    (9,816
    )Other income, net
    
    
    6,335
    
    
    
    1,078
    
    
    
    182Interest expense
    
    
    (4,819
    )
    
    
    (4,302
    )
    
    
    (4,426
    )Net loss from continuing operations before income
tax expense (benefit)
    
    
    (7,721
    )
    
    
    (12,571
    )
    
    
    14,060
    )Income tax expense (benefit)
    
    
    
    
    
    
    
    
    
    
    Net loss from continuing operations
    
    
    (7,721
    )
    
    
    (12,571
    )
    
    
    (14,060
    )Income
(loss) from discontinued operations, net of income taxes of $212,
$395, and $(627), respectively
    
    
    (11,700
    )
    
    
    (41,693
    )
    
    
    3,192Net loss
    
    $
    (19,421
    )
    
    $
    (54,264
    )
    
    $
    (10,868
    )
 General:
  Net revenues:
 
    
    During 2006, sales increased $5.2 million or 137%
from 2005 to $9.0 million, primarily due to
Precision being acquired at the end of July of
2005 and therefore having only five (5) months of
activity included in 2005.
 Gross profit:
 
    
    During 2006, gross profit increased $1.6 million
or 250% from 2005 to $2.6 million, primarily due
to Precision being acquired at the end of July of
2005, and, therefore, having only five (5) months
of activity included in 2005. Gross margin was
approximately 28% in both years.
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Selling, general and administrative expenses:
 
    
    During 2006, selling, general and administrative
expenses increased $1.2 million or 12.6% from 2005
to $11.0 million, primarily due to a $1.3 million
increase in Precision, it having been acquired at
the end of July 2005, and, therefore, having only
five (5) months of activity included in 2005.
Corporate expenses were up $.1 million or 1% from
2005. On June 30, 2006, the Company entered into
a Settlement Agreement and Mutual Release with
Paul B. (Pete) Pheffer, its former executive
officer and director, whereby Mr. Pheffer agreed
to accept three settlement payments totaling
$900,000 in full settlement of his claims against
the Company. This expense was offset by reductions
to Payroll ($.4), advertising ($.2), and other
miscellaneous expenses ($.2).
    
    During 2005, selling, general and administrative
expenses increased $1.3 million or 16.3% increase from 2004
to $9.7 million, due to the acquisition of
Precision ($.9 million) and a $0.4 million in professional
fees.
 Impacts related to value of warrants and derivatives:
  Depreciation and amortization:
 
    
    During 2006, depreciation and amortization decreased $.1 million from 2005 due to the sale of assets to Standard Life
in mid 2005.
    
    During 2005, depreciation decreased $.5 million from 2004 due to the sales of assets to Standard Life in mid 2005.
 Other income, net:
 
    
    During 2006, other income increased $5.3 million due primarily of the conversion of the Trust Preferred Stock.
In June 2006, the Company completed an exchange offer for a portion of the Trust Preferred Securities which
allowed all Trust Preferred Security holders to exchange their Trust Preferred Securities for six (6) shares of
common stock of Standard Management. The Company received tenders for 1,112,341 shares or 53.7% of outstanding Trust
Preferred Securities by the expiration date of the offer to exchange. On June 30, 2006, as a result of the 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. After the write off of a
pro rata portion of previously-unamortized deferred financing fees and the costs of the transaction, the Company
recorded a $9.2 million gain upon the exchange as a component of Other Income, net in June 2006.This 2006 gain was partially offset by a $2.8 million loss on the redemption of Series A
Preferred Stock and $1.3 million of expenses related to unsuccessful acquisitions and
financings.
    
    During 2005, other income increased $.9 million from 2004 to
$1.1 million primarily due to rental income and dividend
income received from Standard Life after its sale in June
2005. Additionally the increase is also attributable to
interest income earned from the net cash proceeds from the
sale of Standard Life.
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Interest expense:
 
    
    During 2006, interest expense increased $.5 million or 11%
from 2005 to $4.8 million primarily due to the cost of short
term borrowing during 2006 more than offsetting the impact of
paying off debt with proceeds from asset sales and converting
$11.1 million of 10.25% debt into common shares in June 2006.
    
    During 2005, interest expense decreased $0.1 million or 3%
from 2004 to $4.3 million, primarily due to the repayment of
our senior secured credit facility after the sale of Standard
Life in June 2005, offset partially by a full year of interest
in 2005 on $6.1 million of convertible debt issued in 2004 and
$4.8 million of convertible debt issued in March 2005.
 Income tax provision:
 
    
    Provision for income taxes remained zero due to continued net
losses in 2004, 2005 and 2006 and a 100% valuation allowance
against all resulting net deferred income tax assets.
 Discontinued Operations:
   Liquidity and Capital Resources:
     25




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
    
    In April 2006, we borrowed $2.8 million from one of our then
officers. We repaid this debt with proceeds from borrowings of
$2.8 million from a then director in July 2006. This debt was
repaid as well as an additional $1 million borrowed from and due
to this individual as financing fees at various times throughout
the second half of 2006 and the first quarter of 2007 with
proceeds generally from the sale of pharmacy operations and our
common stock.
    
    On March 8, 2006, we announced that we elected to defer
distributions, beginning March 31, 2006, on the 10.25% preferred
securities (the Trust Preferred Securities) of our subsidiary
SMAN Capital Trust I for up to two (2) years, with the ability to
defer up to five (5) years. All unpaid distributions will accrue
interest at the rate of 10.25% annually until paid.
    
    In June 2006 the Company completed an exchange offer for a portion
of the Trust Preferred Securities which allowed all Trust
Preferred Security holders to exchange their Trust Preferred
Securities for six (6) shares of common stock of Standard
Management. The Company received tenders for 1,112,341 shares or
53.7% of outstanding Trust Preferred Securities by the expiration
date of the offer to exchange. On June 30, 2006, as a result of
the 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. After the write off of a pro rata portion of
previously-unamortized deferred financing fees and the costs of
the transaction, the Company recorded a $9.2 million gain upon the
exchange as a component of Other Income, net in June 2006.
    
    In early 2006, the Company announced efforts to offer up to $15
million shares of its common stock for sale to accredited
investors in a series of one or more private placements. Through
December 31, 2006, the Company issued 1,491,340 shares of common
stock along with warrants to acquire up to an additional 447,402
shares of common stock (inclusive of certain issuances which we
later reacquired by the Company at the same price) for $630,000.
During the three months ended March 31, 2007, the Company sold an
additional 21,850,000 shares and warrants to acquire up to 55,500
shares for $2,185,000 under this same program.
    
    In May 2006, the Company sold unimproved real estate south of its
corporate headquarters in Indianapolis for $1.1 million to a then
director of the Company. Proceeds were mandatorily used to pay
down indebtedness that had been secured by the real estate. This
pay down resulted in almost no further scheduled maturity payments
of this indebtedness for the remainder of 2006.
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
    
    In June 2006, the Company received a net $1.0 million payment from
Capital Assurance upon the redemption of the 7% cumulative
preferred stock it had received from Capital Assurance as partial
consideration in the 2005 sale of its financial services business.
Concurrent with the redemption, Capital Assurance assumed all
outstanding litigation related to that business allowing the
Company to eliminate approximately $800,000 of
previously-established litigation reserves.
    
    During the third and fourth quarter of 2006 and the first quarter
of 2007, the Company sold substantially all of the pharmacy
operations it had acquired from 2002 through 2006. Aggregate
sales proceeds received as of March 31, 2007 of $16.2 million have
been used primarily to pay down short term borrowings and other
general corporate purposes.
    
    In August 2006, the Company settled various disputes with the
previous owners of one of its pharmacy operations resulting in the
payment by the Company of $5.5 million to reacquire Company shares
issued upon the acquisition and Company shares and debts issued to
parties affiliated with the previous owners in subsequent
transactions and settle earn out and bonus disputes. This payment
was funded from proceeds received in the concurrent sale by the
Company of these pharmacy operations.
    
    In March 2007, the Company issued 20 million shares of its common
stock to Mr. Sam Schmidt for $2.0 million, providing Mr. Schmidt
with a 52.6% interest in the Company. Proceeds were used
primarily to pay off short term borrowings and other general
corporate purposes.
    
    Management has created a new subsidiary, Universal HealthCare
Company, LLC (UHCC), through which it intends to attract
unrelated investors and lenders to fund future acquisitions of
pharmacy operations, including Precision from Standard Management.
Management expects that Standard Managements ultimate ownership
of UHCC will be approximately 24% as a result of future equity
financing by these investors. Standard Management is the Managing
Member of UHCC pursuant to a Management Agreement under which it
has substantial influence and control of the operations of the
acquired businesses. In return, Standard Management will 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.
    
    Management also continues to explore other sources of funding and
new business opportunities, which ,will enable the Company to
continue its operations and become profitable. However, the
Company can not provide any assurance that such funding or
business opportunities will be consummated.
  Future Acquisitions:
  27




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Contractual Obligations:
  Payment due by periodLess than 1
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    Year
    
    
    1-2 Years
    
    
    3-4 Years
    
    
    5 YearsDebt Obligations (1)
    
    $
    52,710
    
    
    $
    6,212
    
    
    $
    15,735
    
    
    $
    1,963
    
    
    $
    28,800Capital Lease Obligations
    
    
    95
    
    
    
    94
    
    
    
    1
    
    
    
    
    
    
    
    Operating Lease
Obligations
    
    
    1,215
    
    
    
    312
    
    
    
    617
    
    
    
    287
    
    
    
    Purchase Order
Obligations
    
    
    2,357
    
    
    
    2,357
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    56,377
    
    
    $
    8,975
    
    
    $
    16,353
    
    
    $
    2,250
    
    
    $
    28,800
 
 (1)
    
    Payments include principal and interest Equity Guarantee:
  
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 a)
    
    Evaluation of Disclosure Controls and ProceduresThe Company carried out, under 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 December
31, 2006, the Companys disclosure controls and procedures were not effective because of
the material weakness identified as of such date described below. Notwithstanding the
existence of the material weakness described below, management has concluded that the
consolidated financial statements in this Form 10-K fairly present, in all material
respects, the Companys financial position, results of operations and cash flows for the
periods and dates presented.b)
    
    Material Weakness in Internal Controls and ProceduresDuring the later part of 2006, the Company was in the final stages of a major transition in
business operations as described earlier in this report. One of the results of this
transition was the Company entering into substantial, non-routine accounting transactions
which required a higher level of accounting knowledge to complete. This situation, combined
with the loss of certain accounting personnel, including the Companys Chief Financial
Officer, during the same time period, resulted in the Company not having, as of December
31, 2006, a sufficient complement of personnel with the requisite level of accounting
knowledge, experience, and training in the application of U.S. generally accepted
accounting principles to properly analyze, review, monitor and record these more
complicated and certain other accounting transactions. This material weakness lead to
delays and correction of previously-recorded amounts while finalizing the 2006 financial
statements. As a result, we have concluded that there was more than a remote likelihood
that a material misstatement of the Companys annual financial statements may not have been
prevented or could have gone undetected as part of the financial statement closing process
for 2006.c)
    
    Companys Response to Material WeaknessThe Company hired its Principal Accounting Officer, Dan Calvert, late in 2006. As such, his
experience with the Company as of December 31, 2006 and the year end closing process was
limited. Mr. Calvert has over twenty five years of financial and accounting management
experience in both private and public companies combined with graduate study in finance and
accounting. The closing process itself has significantly increased his awareness of the
Companys historical and contemplated routine and non routine transactions. On April 17,
2007, the Company replaced its corporate controller. Mike Cleary has over ten years of
experience developing accounting staffs and systems in private and public companies. The
Company continues to emphasize the development and training of its accounting staff and its
commitment to make available accounting research tools necessary to assess complex
accounting issues in the future.
 
 Item 9B. Other Information
  28




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##### Table of Contents



PART III
 
 Item 10.
Directors, Executive Officers and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13.
Certain Relationships and Related Transactions, and Director
Independence
  
 Item 14. Principal Accountant Fees and Services
  29




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 Exhibit No.
    
    Description of Document3.1
    
    Amended and Restated Articles of Incorporation, as amended effective November 13, 2006;3.2
    
    Amended and Restated Bylaws as amended (incorporated by reference to Registration Statement
on Form S-1 (Registration No. 33-53370) as filed with the Commission on January 27, 1993 and
to Exhibit 3 of Quarterly Report on Form 10-Q for the quarter ended September 30, 1994);4.1
    
    Certificate of Trust of SMAN Capital Trust I (incorporated by reference to Registration
Statement on Form S-1 (Registration No. 333-60886);4.2
    
    Trust Agreement of SMAN Capital Trust I (incorporated by reference to Registration Statement
on Form S-1 (Registration No. 333-60886);4.3
    
    Form of Amended and Restated Trust Agreement of SMAN Capital Trust I among Standard
Management, Bankers Trust Company and Bankers Trust (Delaware) (incorporated by reference to
Registration Statement on Form S-1 (Registration No. 333-60886);4.4
    
    Form of Preferred Securities Certificates (incorporated by reference to Registration
Statement on Form S-1 (Registration No. 333-60886));4.5
    
    Form of Junior Subordinated Indenture between Standard Management and Bankers Trust Company
(incorporated by reference to Registration Statement on Form S-1 (Registration No. 333-60886);4.6
    
    Form of Junior Subordinated Debenture (incorporated by reference to Registration Statement on
Form S-1 (Registration No. 333-60886);4.7
    
    Form of Preferred Securities Guarantee Agreement between Standard Management and Bankers
Trust Company (incorporated by reference to Registration Statement on Form S-1 (Registration
No. 333-60886));4.8
    
    Indenture dated November 30, 2005 by and between Standard Management and U.S. Bank National
Association (includes the form 6% Convertible Note due 2008) (incorporated by reference to the
Current Report on Form 8-K date of report November 30, 2005);4.9
    
    Supplemental Indenture dated June 7, 2005 by and between Standard Management and Deutsche
Bank Trust Company Americas (incorporated by reference to the Current Report on Form 8-K filed
on June 13, 2005);4.10
    
    Form of 6% Callable Secured Convertible Note issued by the Company to the Selling
Shareholders (incorporated by reference to the Registration Statement on Form S-1 filed
September 27, 2006 (Registration No. 333-137609));4.11
    
    Form of Stock Purchase Warrant issued by the Company to the Selling Shareholders
(incorporated by reference to the Registration Statement on Form S-1 filed September 27, 2006
(Registration No. 333-13769));10.1
    
    Employment Agreement by and between Standard Management and Ronald D. Hunter dated and
effective January 1, 2004 (incorporated by reference to Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004);10.2
    
    Standard Management Amended and Restated 1992 Stock Option Plan (incorporated by reference to
Registration Statement on Form S-4 (Registration No. 333-35447) as filed with the Commission
on September 11, 1997;
 30




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##### Table of Contents



Exhibit No.
    
    Description of Document10.3
    
    Lease by and between Standard Life and Standard Management, dated June 8, 2005 (incorporated
by reference to Annual Report on Form 10-K for the year ended December 31, 2005);10.4
    
    Promissory Note from Ronald D. Hunter to Standard Management in the amount of $775,500
executed October 28, 1997 (incorporated by reference to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997);10.5
    
    Promissory Note for $6.9 million between Standard Management and Republic Bank dated December
28, 2001 (incorporated by reference to Annual Report on Form 10-K for the year ended December
31, 2001);10.6
    
    Standard Management Corporation 2002 Stock Incentive Plan (incorporated by reference to
Standard Managements Registration Statement on Form S-8 (Registration No. 333-101359));10.7
    
    Deferred Compensation Plan of Standard Management dated and effective December 31, 2001
(incorporated by reference to Annual Report on Form 10-K for the year ended December 31,
2001);10.8
    
    Employment Agreement by and between Standard Management and Dr. Martial R. Knieser, dated and
effective June 1, 2005 (incorporated by reference to Annual Report on Form 10-K for the year
ended December 31, 2005);10.9
    
    Securities Purchase Agreement, dated March 21, 2005, between Standard Management 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);10.10
    
    Registration Rights Agreement, dated March 21, 2005, between Standard Management 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);10.11
    
    Agreement and Plan of Merger, dated July 22, 2005, among Standard Management, Rainier
Acquisition Corporation, Rainer Home Health Care Pharmacy, Inc., John T.H. Tran, Cynthia J.
Wareing-Tran and The Jonathan Tran Irrevocable Trust u/a/d August 23, 2004, (incorporated by
reference to Current Report on Form 8-K filed on July 27, 2005);10.12
    
    Agreement and Plan of Merger, dated July 28, 2005, among Standard Management, Precision
Health Care Acquisition Corporation, Precision Healthcare, Inc., Jose A. Trespalacios, as
Voting Trustee, Teresa Fox-Morgan, Robert R. Buehler, Krista K. Trespalacios, and Jose A.
Trespalacios, in his individual capacity (incorporated by reference to Current Report on Form
8-K filed on August 3, 2005);10.13
    
    Agreement and Plan of Merger, dated July 29, 2005, among Standard Management, Long Term RX
Acquisition Company, Long Term RX, Inc., The Craig W. Trobaugh Revocable Trust, dated
September 7, 2000, The Lorenda K. Trobaugh Revocable Trust, dated September 7, 2000, Craig W.
Trobaugh, and Lorenda K. Trobaugh (incorporated by reference to Current Report on Form 8-K
filed on August 3, 2005);10.14
    
    Amendment to Employment Agreement dated August 25, 2005 between Standard Management and
Ronald D. Hunter (incorporated by reference to Current Report on Form 8-K field on August 26,
2005);10.15
    
    Employment Agreement dated July 1, 2005 between Standard Management and Mark B.L. Long
(incorporated by reference to Annual Report on Form 10-K for the year ended December 31,
2005);10.16
    
    Prime Vendor Agreement by and between Standard Management Corporation and Amerisource Bergen
Drug Corporation dated March 8, 2006 (incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended March 31, 2006);10.17
    
    Amendment to Prime Vendor Agreement by and between Standard Management Corporation and
Amerisource Bergen Drug Corporation dated March 24, 2006 (incorporated by reference to
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006);10.18
    
    Promissory Note dated February 23, 2006 between Standard Management Corporation and Sam and
Sheila Schmidt, including amendment thereto dated May 12, 2006 (incorporated by reference to
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006);
 31




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##### Table of Contents



Exhibit No.
    
    Description of Document10.19
    
    Omnibus Amendment and Waiver by and between Standard Management Corporation and Laurus
Master Fund, Ltd., dated May 23, 2006 (incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended June 30, 2006);10.20
    
    Secured Promissory Note dated July 27, 2006 in favor of Michael G. Browning (incorporated by
reference to Quarterly Report on Form 10-Q for the quarter ended June 30, 2006);10.21
    
    Guaranty by and among Rainer Home Health Care Pharmacy, Inc., Precision Healthcare, Inc.,
Long Term RX, Inc., Home Med Channel, Inc., Holland Drug Store, Inc., and Michael G. Browning
dated July 27, 2006 (incorporated by reference to Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006);10.22
    
    Pledge Agreement by and between Rainer Home Health Care Pharmacy, Inc., and Michael G.
Browning dated July 27, 2006 (incorporated by reference to Quarterly Report on Form 10-Q for
the quarter ended June 30, 2006);10.23
    
    Pledge Agreement by and between U.S. Health Services Corporation and Michael G. Browning
dated July 27, 2006 (incorporated by reference to Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006);10.24
    
    Security Agreement by and among Rainier Home Health Care Pharmacy, Inc., Precision
Healthcare, Inc., Long Term RX, Inc., Home Med Channel, Inc., Holland Drug Store, Inc., and
Michael G. Browning dated July 27, 2006 (incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended June 30, 2006);10.25
    
    Asset Purchase Agreement by and among Standard Management Corporation, Rainier Home Health
Care Pharmacy, Inc., Holland Compounding Pharmacy, Inc., Holland Drug Store, Inc., and
Omnicare, Inc. dated July 28, 2006 (incorporated by reference to Quarterly Report on Form 10-Q
for the quarter ended June 30, 2006);10.26
    
    Redemption Agreement, dated as of June 29,, 2006, by and between Standard Management
Corporation and Capital Assurance Corporation (incorporated by reference to the Companys
Current Report on Form 8-K dated July 6, 2006);10.27
    
    Settlement Agreement and Mutual Release, dated June 30, 2006, by and between Standard
Management Corporation and Paul B. (Pete) Pheffer (incorporated by reference to the Companys
Current Report on Form 8-K dated July 6, 2006);10.28
    
    Securities Purchase Agreement dated September 8, 2006 among the Company and AJW Partners,
LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC and New Millennium Capital Partners II,
LLC (incorporated by reference to Registration Statement on Form S-1 filed September 27, 2006
(Registration No. 333-137609))10.29
    
    Security Agreement dated September 8, 2006, among the Company and AJW Partners, LLC, AJW
Offshore, Ltd., AJW Qualified Partners, LLC, and New Millenium Capital Partners II, LLC
(incorporated by reference to the Registration Statement on Form S-1 filed September 27, 2006
(Registration No. 333-137609));10.30
    
    Registration Rights Agreement dated September 8, 2006, among the Company and AJW Partners,
LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC, and New Millenium Capital Partners II,
LLC (incorporated by reference to the Registration Statement on Form S-1 filed September 22,
2006 (Registration No. 333-137609));21
    
    List of Subsidiaries of Standard Management.23
    
    Consent of BDO Seidman, LLP.31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2003.
 32




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##### Table of Contents



Exhibit No.
    
    Description of Document31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2003.32
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2003.
 33




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##### Table of Contents



SIGNATURES
   STANDARD MANAGEMENT CORPORATION/s/ Ronald D. HunterRonald D. HunterDirector, Chairman, Chief Executive Officer and President   /s/ Ronald D. HunterRonald D. Hunter
    
    Director, Chairman, Chief Executive Officer and President
(Principal Executive Officer)/s/ Daniel K. CalvertDaniel K. Calvert
    
    Chief Accounting Officer
(Principal Financial Officer and Principal Accounting Officer)/s/ James H. Steane IIJames H. Steane II
    
    Director/s/ Dainforth B. French, Jr.Dainforth B. French, Jr.
    
    Director
 34




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##### Table of Contents



F-1




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##### Table of Contents



STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
 PageAudited Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    F-3Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    
    F-4Consolidated Statements of Operations for the Years Ended
December 31, 2006, 2005 and 2004
    
    
    F-5Consolidated Statements of Shareholders Equity (Deficit) for the Years Ended
December 31, 2006, 2005 and 2004
    
    
    F-6Consolidated Statements of Cash Flows for the Years Ended
December 31, 2006, 2005 and 2004
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8Financial Statement SchedulesThe following consolidated financial statement schedule is included in this report and should be read in
conjunction with the Audited Consolidated Financial Statements.Schedule IV  Reinsurance for the year ended December 31, 2004
    
    
    S-1Schedules not listed above have been omitted because they are not applicable or are not required,
or because the required information is included in the Audited Consolidated Financial Statements or related
Notes.
 F-2




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Report of Independent Registered Public Accounting Firm
 
        
 F-3




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##### Table of Contents



STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
  December 312006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    565
    
    
    $
    1,709Accounts receivable, net of allowances of $85 and $138, respectively
    
    
    1,004
    
    
    
    1,540Inventories
    
    
    750
    
    
    
    317Prepaid and other current assets
    
    
    535
    
    
    
    617Assets of discontinued operations
    
    
    948
    
    
    
    23,287Total current assets
    
    
    3,802
    
    
    
    27,470Property and equipment, net
    
    
    8,037
    
    
    
    8,554Assets held for sale
    
    
    931
    
    
    
    1,506Deferred financing fees, net
    
    
    1,263
    
    
    
    2,009Officer and other notes receivable, less current portion
    
    
    776
    
    
    
    842Investments in unconsolidated entities
    
    
    
    
    
    
    5,160Intangible assets, net
    
    
    304
    
    
    
    380Goodwill
    
    
    2,078
    
    
    
    2,078Other noncurrent assets
    
    
    1,302
    
    
    
    1,388Total assets
    
    $
    18,493
    
    
    $
    49,387LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    1,720
    
    
    $
    455Accrued expenses
    
    
    2,101
    
    
    
    1,429Current
portion of long-term debt
    
    
    4,306
    
    
    
    2,533Liabilities of discontinued operations
    
    
    1,471
    
    
    
    2,156Total current liabilities
    
    
    9,598
    
    
    
    6,573Long-term debt, less current portion
    
    
    22,809
    
    
    
    36,776Common stock warrants
    
    
    87
    
    
    
    80Other
long-term liabilities
    
    
    1,070
    
    
    
    1,015Total liabilities
    
    
    33,564
    
    
    
    44,444Shareholders equity (deficit):Common stock, no par value, and additional paid in capital, 200,000,000 shares
and 40,000,000 shares authorized, 19,011,367 shares and 10,712,859 shares
issued in 2006 and 2005, respectively
    
    
    70,785
    
    
    
    68,537Retained deficit
    
    
    (75,214
    )
    
    
    (55,793
    )Treasury stock, at cost, 2,840,173 shares and 1,617,651 shares
in 2006 and 2005, respectively
    
    
    (10,829
    )
    
    
    (7,901
    )Accumulated
other comprehensive income from continuing operations
    
    
    187
    
    
    
    100Total shareholders equity (deficit)
    
    
    (15,071
    )
    
    
    4,943Total liabilities and shareholders equity (deficit)
    
    $
    18,493
    
    
    $
    49,387
  F-4




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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 )
 Year Ended December 312006
    
    
    2005
    
    
    2004Net revenues
    
    $
    9,029
    
    
    $
    3,806
    
    
    $
    Cost of revenues
    
    
    6,399
    
    
    
    2,753
    
    
    
    Gross profit
    
    
    2,630
    
    
    
    1,053
    
    
    
    Selling, general and administrative expenses
    
    
    10,977
    
    
    
    9,749
    
    
    
    8,379Impacts related to value of warrants and derivatives
    
    
    71
    
    
    
    (272
    )
    
    
    Depreciation and amortization
    
    
    819
    
    
    
    923
    
    
    
    1,437Operating loss
    
    
    (9,237
    )
    
    
    (9,347
    )
    
    
    (9,816
    )Other income, net
    
    
    6,335
    
    
    
    1,078
    
    
    
    182Interest expense
    
    
    (4,819)
    
    
    
    (4,302)
    
    
    
    (4,426)Net loss from continuing operations before income
tax expense (benefit)
    
    
    (7,721
    )
    
    
    (12,571
    )
    
    
    (14,060
    )Income tax expense (benefit)
    
    
    
    
    
    
    
    
    
    
    Net loss from continuing operations
    
    
    (7,721
    )
    
    
    (12,571
    )
    
    
    (14,060
    )Income (loss) from discontinued operations, net of income
taxes of $212, $395 and ($627), respectively
    
    
    (11,700
    )
    
    
    (41,693
    )
    
    
    3,192Net loss
    
    $
    (19,421
    )
    
    $
    (54,264
    )
    
    $
    (10,868
    )Loss per share  basic and dilutedLoss from continuing operations
    
    $
    (0.60
    )
    
    $
    (1.49
    )
    
    $
    (1.76
    )Income (loss) from discontinued operations
    
    
    (0.92
    )
    
    
    (4.93
    )
    
    
    0.40Net loss
    
    $
    (1.52
    )
    
    $
    (6.42
    )
    
    $
    (1.36
    )Weighted average shares outstanding
    
    
    12,779,164
    
    
    
    8,455,869
    
    
    
    7,973,029
  F-5




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##### Table of Contents



STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT)
  Common stock
    
    
    Retained
    
    
    
    
    
    
    Accumulated otherand Additional
    
    
    earnings
    
    
    
    
    
    
    comprehensiveTotal
    
    
    Paid in Capital
    
    
    (deficit)
    
    
    Treasury stock
    
    
    incomeBalance at December 31, 2003
    
    
    72,447
    
    
    $
    68,077
    
    
    $
    9,339
    
    
    $
    (7,671
    )
    
    $
    2,702Comprehensive loss:Net loss
    
    
    (10,868
    )
    
    
    
    
    
    
    (10,868
    )
    
    
    
    
    
    
    Change in unrealized loss on securities, net taxes
of $1,130
    
    
    2,193
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,193Comprehensive loss
    
    
    (8,675
    )Purchase of treasury stock
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    Issuance of common stock in business acquisitions
    
    
    293
    
    
    
    293
    
    
    
    
    
    
    
    
    
    
    
    Exercise of common stock options
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Sale of MCO
    
    
    (4,000
    )
    
    
    (4,000
    )
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2004
    
    
    60,032
    
    
    
    64,369
    
    
    
    (1,529
    )
    
    
    (7,703
    )
    
    
    4,895Comprehensive loss:Net loss
    
    
    (54,264
    )
    
    
    
    
    
    
    (54,264
    )
    
    
    
    
    
    
    Change in unrealized gain or securities, net taxes
of $1,130
    
    
    (4,795
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,795
    )Comprehensive loss
    
    
    (59,059
    )Adjustment due to stock price contingency
    
    
    (84
    )
    
    
    (84
    )
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (198
    )
    
    
    
    
    
    
    
    
    
    
    (198
    )
    
    
    Issuance of common stock in business acquisitions
    
    
    4,100
    
    
    
    4,100
    
    
    
    
    
    
    
    
    
    
    
    Exercise of common stock options
    
    
    (14
    )
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    Issuance of warrants for services
    
    
    166
    
    
    
    166
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2005
    
    
    4,943
    
    
    
    68,537
    
    
    
    (55,793
    )
    
    
    (7,901
    )
    
    
    100Comprehensive loss:Net loss
    
    
    (19,421
    )
    
    
    
    
    
    
    (19,421
    )
    
    
    
    
    
    
    Change in unrealized gain on securities
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87Comprehensive loss
    
    
    (19,334
    )Stock-based compensation expense
    
    
    38
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (2,928
    )
    
    
    
    
    
    
    
    
    
    
    (2,928
    )
    
    
    Exchange  Trust Preferred
    
    
    1,802
    
    
    
    1,802
    
    
    
    
    
    
    
    
    
    
    
    Sale of common stock and warrants, net of issuance cost
    
    
    439
    
    
    
    439
    
    
    
    
    
    
    
    
    
    
    
    Reclassification of warrants to liabilities
    
    
    (128
    )
    
    
    (128
    )
    
    
    
    
    
    
    
    
    
    
    Issuance of warrants for services
    
    
    97
    
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2006
    
    $
    (15,071
    )
    
    $
    70,785
    
    
    $
    (75,214
    )
    
    $
    (10,829
    )
    
    $
    187
  F-6




---



##### Table of Contents



STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
  Year Ended December 312006
    
    
    2005
    
    
    2004OPERATING ACTIVITIES:Net loss
    
    $
    (19,421
    )
    
    $
    (54,264
    )
    
    $
    (10,868
    )Net income
(loss) from discontinued operations
    
    
    (11,700
    )
    
    
    (41,693
    )
    
    
    3,192Net loss from continuing operations
    
    
    (7,721
    )
    
    
    (12,571
    )
    
    
    (14,060
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    657
    
    
    
    923
    
    
    
    1,437Amortization of deferred financing costs and debt discount
    
    
    785
    
    
    
    540
    
    
    
    Gain on Trust Preferred exchange
    
    
    (9,199
    )
    
    
    
    
    
    
    Non-cash stock compensation expense
    
    
    37
    
    
    
    
    
    
    
    Provision for bad debts
    
    
    63
    
    
    
    69
    
    
    
    Impact related to value of warrants and derivitives
    
    
    71
    
    
    
    
    
    
    
    Loss related to sale of a business
    
    
    
    
    
    
    
    
    
    
    Net loss related to asset dispositions
    
    
    2,307
    
    
    
    
    
    
    
    309Change in operating assets and liabilities, net of effect of business acquisitions
and dispositions:Accounts receivable
    
    
    457
    
    
    
    (788
    )
    
    
    823Inventories
    
    
    (433
    )
    
    
    37
    
    
    
    Prepaid and other current assets
    
    
    152
    
    
    
    1,904
    
    
    
    (354
    )Accounts payable
    
    
    1,265
    
    
    
    (423
    )
    
    
    Accrued expenses
    
    
    382
    
    
    
    (832
    )
    
    
    (109
    )Other
    
    
    206
    
    
    
    (377
    )
    
    
    (7
    )Net cash used in operating activities of continuing operations
    
    
    (10,971
    )
    
    
    (11,518
    )
    
    
    (11,961
    )INVESTING ACTIVITIES:Capital expenditures
    
    
    (51
    )
    
    
    (114
    )
    
    
    (623
    )Receipt (refund) of proceeds from sale of Standard Life
    
    
    (300
    )
    
    
    47,214
    
    
    
    Proceeds from sale of assets
    
    
    1,083
    
    
    
    155
    
    
    
    Redemption of preferred stock
    
    
    1,500Cash paid for pharmacy acquisitions, net of cash acquired
    
    
    
    
    
    
    (11,173
    )
    
    
    (469
    )Cash received for sale of businesses
    
    
    16,164
    
    
    
    
    
    
    
    (800
    )Change in other noncurrent assets, net
    
    
    66
    
    
    
    825
    
    
    
    90Net cash provided by (used in) investing activities of continuing operations
    
    
    18,462
    
    
    
    36,907
    
    
    
    (1,802
    )FINANCING ACTIVITIES:New borrowings
    
    
    10,609
    
    
    
    4,750
    
    
    
    6,050Net cash received from (provided to) discontinued operations
    
    
    (4,293
    )
    
    
    (7,749
    )
    
    
    9,218Purchase of common stock for treasury
    
    
    (2,928
    )
    
    
    (198
    )
    
    
    (32
    )Proceeds from sale of stock and warrants, net of issuance costs
    
    
    439
    
    
    
    (14
    )
    
    
    (1
    )Deferred financing costs paid
    
    
    (351
    )
    
    
    (474
    )
    
    
    (395
    )Repayments of long-term debt
    
    
    (12,111
    )
    
    
    (21,076
    )
    
    
    (1,268
    )Net cash provided by (used in) financing activities of continuing operations
    
    
    (8,635
    )
    
    
    (24,761
    )
    
    
    13,572Net cash provided by (used in) operating activities of discontinued operations
    
    
    (6,297
    )
    
    
    11,885
    
    
    
    64,456Net cash provided by (used in) investing activities of discontinued operations
    
    
    (62
    )
    
    
    24,956
    
    
    
    (2,308
    )Net cash provided by (used in) financing activities of discontinued operations
    
    
    4,293
    
    
    
    (44,717
    )
    
    
    (69,967
    )Net decrease in cash and cash equivalents of discontinued operations
    
    
    (2,066
    )
    
    
    (7,876
    )
    
    
    (7,819
    )Total decrease in cash and cash equivalents
    
    
    (3,210
    )
    
    
    (7,248
    )
    
    
    (8,010
    )Net decrease in cash and cash equivalents of discontinued operations
    
    
    (2,066
    )
    
    
    (7,876
    )
    
    
    (7,819
    )Net increase (decrease) in cash and cash equivalents of continuing operations
    
    
    (1,144
    )
    
    
    628
    
    
    
    (191
    )Cash and cash equivalents of continuing operations at beginning of year
    
    
    1,709
    
    
    
    1,081
    
    
    
    1,272Cash and cash equivalents of continuing operations at end of year
    
    $
    565
    
    
    $
    1,709
    
    
    $
    1,081
 F-7




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##### Table of Contents



STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2006
 Note 1  Basis of Presentation
      F-8




---



##### Table of Contents



Note 2  Summary of Significant Accounting Policies
 Revenue Recognition / Contractual Allowances
   Cash Equivalents
  Allowance for Doubtful Accounts
    Concentration of Credit Risk
  F-9




---



##### Table of Contents



Inventories and Cost of Revenues
     Property and Equipment and Intangible Assets
   Assets Held For Sale
  F-10




---



##### Table of Contents



Deferred Financing Costs
  Other Non-current Asset and Liabilities
  Legal fees
  Income Taxes
   Net Loss Per Common Share
  F-11




---



##### Table of Contents



Stock Option Plans
 Share-Based Payment Accounting for Stock Based Compensation
  2005
    
    
    2004Reported net loss from continuing operations
    
    $
    (12,571
    )
    
    $
    (15,046
    )Less: Total stock-based employee compensation
expense determined under fair value based
method for all grants
    
    
    919
    
    
    
    165Pro forma net loss from continuing operations
    
    $
    (13,490
    )
    
    $
    (15,211
    )Loss per share from continuing operations:Basic and diluted  as reported
    
    $
    (1.49
    )
    
    $
    (1.89
    )Basic and diluted  pro forma
    
    $
    (1.60
    )
    
    $
    (1.91
    )
  2005
    
    
2004Risk-free interest rates
    

    4.1%
    
    

    3.1%Volatility factors
    

    0.44
    
    

0.44Weighted average expected life
    
    5 years
    
    
    5 yearsDividend yield
    

    0.0%
    
    

0.0%
  Risk-free interest rate
 Volatility factors
 Expected life
 Dividend
yield
 F-12




---



##### Table of Contents



Use of Estimates
  Fair Value of Financial Instruments
  NOTE 3  DISCONTINUED OPERATIONS  FINANCIAL SERVICES
    F-13




---



##### Table of Contents



Standard Life
Condensed Consolidated Balance Sheets
 December 31
    
    
    December 312005
    
    
    2004Assets:Total investments
    
    $
    
    
    
    $
    1,686,396Deferred policy acquisition costs and present value of future profits
    
    
    
    
    
    
    174,172Other assets
    
    
    
    
    
    
    60,837Assets of discontinued operations
    
    $
    
    
    
    $
    1,921,405Liabilities:Insurance policy liabilities
    
    $
    
    
    
    $
    1,824,736Accounts payable and accrued expenses
    
    
    1,069
    
    
    
    4,570Liabilities of discontinued operations
    
    $
    1,069
    
    
    $
    1,829,306
 Standard Life
Condensed Consolidated Statements of Operations
 For the Year EndedDecember2005
    
    
    2004Revenues
    
    $
    40,796
    
    
    $
    111,586Benefits, claims, interest credited and amortization
    
    
    33,307
    
    
    
    91,789Operating and other expenses
    
    
    4,652
    
    
    
    9,658Impairment charge and loss on sale
    
    
    36,606
    
    
    
    Income tax expense (benefit)
    
    
    212
    
    
    
    395Income (loss) from discontinued operations
    
    $
    (33,981
    )
    
    $
    9,744
 F-14




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##### Table of Contents



Note 4  Pharmacy Business Acquisitions
      Note 5  Discontinued Operations  Pharmacy Services
  F-15




---



##### Table of Contents



F-16




---



##### Table of Contents



December 31,
    
    
    December 31,2006
    
    
    2005Current assets
    
    $
    397
    
    
    $
    9,300Property and equipment, net
    
    
    523
    
    
    
    2,395Intangible assets, net
    
    
    
    
    
    
    13,212Current liabilities
    
    
    (1,443
    )
    
    
    (2,707
    )Net assets of discontinued operations
    
    $
    (523
    )
    
    $
    22,200
 Year ended December 31,2006
    
    
    2005
    
    
    2004Net revenues
    
    $
    29,110
    
    
    $
    25,117
    
    
    $
    7,120Cost of sales
    
    
    20,987
    
    
    
    17,981
    
    
    
    5,822Selling, general and administrative expenses
    
    
    10,551
    
    
    
    10,659
    
    
    
    5,137Depreciation and amortization
    
    
    1,380
    
    
    
    1,289
    
    
    
    1,678Impairment charge and loss on sale
    
    
    7,422
    
    
    
    2,820
    
    
    
    964Interest expense
    
    
    170
    
    
    
    80
    
    
    
    71Net loss from discontinued operations
    
    $
    (11,400
    )
    
    $
    (7,712
    )
    
    $
    (6,552
    )
 F-17




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##### Table of Contents



Note 6  Indebtedness
  Interest
    
    
    December 31
    
    
    December 31Rate(1)
    
    
    2006
    
    
    2005Mortgages payable
    
    
    7.20
    %
    
    $
    5,701
    
    
    $
    5,905Promissory notes
    
    
    11.07
    %
    
    
    1,795
    
    
    
    2,3557% convertible notes
    
    
    7.00
    %
    
    
    3,300
    
    
    
    3,3006% convertible notes
    
    
    6.00
    %
    
    
    2,750
    
    
    
    2,750Laurus convertible notes
    
    
    10.25
    %
    
    
    2,401
    
    
    
    4,275Subordinated debentures
    
    
    10.25
    %
    
    
    9,577
    
    
    
    20,7002006 6% convertible notes
    
    
    6.00
    %
    
    
    1,300
    
    
    
    Derivities embedded in 2006 notes
    
    
    
    
    
    
    1,685
    
    
    
    Capital lease obligations
    
    
    
    
    
    
    77
    
    
    
    287Total indebtedness
    
    
    
    
    
    
    28,586
    
    
    
    39,572Less debt discount on convertible notes
    
    
    
    
    
    
    1,471
    
    
    
    263Less current portion
    
    
    
    
    
    
    4,306
    
    
    
    2,533Total long-term debt, less current portion
    
    
    
    
    
    $
    22,809
    
    
    $
    36,776
 
 (1)
    
    Current weighted average rate at December 31, 2006.     F-18




---



##### Table of Contents



F-19




---



##### Table of Contents



F-20




---



##### Table of Contents



2006
    
    
    2005Fair
    
    
    Carrying
    
    
    Fair
    
    
    CarryingValue
    
    
    Amount
    
    
    Value
    
    
    AmountMortgages payable
    
    $
    6,386
    
    
    $
    5,701
    
    
    $
    6,615
    
    
    $
    5,905Promissory notes
    
    
    1,484
    
    
    
    1,795
    
    
    
    1,946
    
    
    
    2,3552004 6% convertible notes
    
    
    2,750
    
    
    
    2,750
    
    
    
    2,750
    
    
    
    2,7502004 7% convertible notes
    
    
    3,002
    
    
    
    3,300
    
    
    
    3,002
    
    
    
    3,300Laurus convertiblenotes
    
    
    2,225
    
    
    
    2,401
    
    
    
    3,962
    
    
    
    4,275Subordinated debentures
    
    
    575
    
    
    
    9,577
    
    
    
    12,213
    
    
    
    20,7002006 6% convertible notes
    
    
    1,300
    
    
    
    1,300
    
    
    
    
    
    
    
    Derivative embedded in notes
    
    
    1,685
    
    
    
    1,685
    
    
    
    
    
    
    
    Capital lease obligations
    
    
    77
    
    
    
    77
    
    
    
    239
    
    
    
    287Total indebtedness
    
    $
    19,484
    
    
    $
    28,586
    
    
    $
    30,727
    
    
    $
    39,572
 Note 7  Accounts Receivable Allowance
  2006
    
    
    2005Beginning balance
    
    $
    138
    
    
    $
    Amounts charged to cost and expenses
    
    
    63
    
    
    
    Acquisitions
    
    
    
    
    
    
    245Write-offs, net of recoveries
    
    
    (116
    )
    
    
    (107
    )Ending balance
    
    $
    85
    
    
    $
    138
 Note 8  Income Taxes
   F-21




---



##### Table of Contents



2006
    
    
    2005
    
    
    2004Federal income tax expense at statutory rate (34%)
    
    $
    (2,560
    )
    
    $
    (4,274
    )
    
    $
    (4,780
    )Increase in valuation allowance and other
    
    
    2,560
    
    
    
    4,274
    
    
    
    4,780Federal
income tax expense and other (benefit)
    
    $
    
    
    
    $
    
    
    
    $
    Effective tax rate
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
  2006
    
    
    2005Deferred income tax assets:Net operating loss (NOL) carryforwards
    
    $
    20,410
    
    
    $
    13,872Capital loss carryforwards
    
    
    7,480
    
    
    
    7,480Other, net
    
    
    140
    
    
    
    140Gross deferred income tax assets
    
    
    28,030
    
    
    
    21,492Valuation allowance for deferred income tax assets
    
    
    27,946
    
    
    
    21,365Deferred income tax assets, net of valuation allowance
    
    
    84
    
    
    
    127Deferred income tax liabilities:Unrealized gain on securities available for sale
    
    
    (62
    )
    
    
    (34
    )Other
    
    
    (22
    )
    
    
    (93
    )Total deferred income tax liabilities
    
    
    (84
    )
    
    
    (127
    )Net deferred income tax asset
    
    $
    
    
    
    $
    
 Note 9  Shareholders Equity (Deficit)
 Warrants
  F-22




---



##### Table of Contents



Exercise
    
    Warrants OutstandingIssue Date
    
    Expiration Date
    
    Price
    
    2006
    
    2005
    
    2004October 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
    
    
    
    175,000
    
    
    
    March 2005
    
    March 2010
    
    
    0.01
    (a)
    
    
    532,511
    
    
    
    532,511
    
    
    
    March 2005
    
    March 2010
    
    
    3.90
    
    
    
    30,619
    
    
    
    30,619
    
    
    
    October 2002
    
    October 2007
    
    
    4.92
    
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000June 2002
    
    June 2005
    
    
    7.61
    
    
    
    
    
    
    
    
    
    
    
    89,500January 2002
    
    January 2005
    
    
    6.02
    
    
    
    
    
    
    
    
    
    
    
    287,0004,368,135
    
    
    
    748,130
    
    
    
    386,500
  Changes in Shares of Common Stock and Treasury Stock
  2006
    
    
    2005
    
    
    2004Common Stock:Balance, beginning of year
    
    
    10,712,859
    
    
    
    9,446,191
    
    
    
    9,629,274Issuance for business acquisitions
    
    
    133,122
    
    
    
    1,266,668
    
    
    
    16,667Trust preferred exchange
    
    
    6,674,046
    
    
    
    
    
    
    
    Private placement issuances
    
    
    1,491,340
    
    
    
    
    
    
    
    MCO acquisition (recision
    
    
    
    
    
    
    
    
    
    
    (200,000
    )Stock option and warrant exercises
    
    
    
    
    
    
    
    
    
    
    250Balance, end of year
    
    
    19,011,367
    
    
    
    10,712,859
    
    
    
    9,446,191Treasury Stock:Balance, beginning of year
    
    
    (1,617,651
    )
    
    
    (1,525,078
    )
    
    
    (1,515,078
    )Treasury stock acquired
    
    
    (35,671
    )
    
    
    (92,573
    )
    
    
    (10,000
    )Trans Settlement
    
    
    (1,186,851
    )
    
    
    
    
    
    
    Balance, end of year
    
    
    (2,840,173
    )
    
    
    (1,617,651
    )
    
    
    (1,525,078
    )
   F-23




---



##### Table of Contents



Unrealized Gain on Securities
  Note 10  Stock Option Plans
   2006
    
    
    2005
    
    
    2004Weighted-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    Weighted-
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Exercise Price
    
    
    Shares
    
    
    PriceOptions outstanding, beginning of year
    
    
    2,222,180
    
    
    $
    4.44
    
    
    
    2,490,125
    
    
    $
    5.28
    
    
    
    2,804,054
    
    
    $
    5.58Exercised
    
    
    
    
    
    
    
    
    
    
    (21,300
    )
    
    
    3.34
    
    
    
    (8,000
    )
    
    
    3.25Granted
    
    
    
    
    
    
    
    
    
    
    471,000
    
    
    
    2.09
    
    
    
    203,000
    
    
    
    3.72Expired or forfeited
    
    
    (847,180
    )
    
    
    5.72
    
    
    
    (717,645
    )
    
    
    4.84
    
    
    
    (508,929
    )
    
    
    6.39Options outstanding, end of year
    
    
    1,375,000
    
    
    $
    3.66
    
    
    
    2,222,180
    
    
    $
    4.44
    
    
    
    2,490,125
    
    
    $
    5.28Options exercisable, end of year
    
    
    1,374,000
    
    
    $
    3.66
    
    
    
    2,093,013
    
    
    $
    4.54
    
    
    
    2,182,125
    
    
    $
    5.54Weighted-average fair value of options
granted during the year
    
    
    N/A
    
    
    
    
    
    
    $
    0.92
    
    
    
    
    
    
    $
    1.58
 F-24




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##### Table of Contents



Options Outstanding
    
    Options ExercisableWeighted-Average
    
    
    
    
    
    
    
    
    
    Weighted-Range of
    
    
    
    
    
    Remaining
    
    Weighted-
    
    
    
    
    
    AverageExercise
    

    Number

    
    Contractural
    
    Average
    
    Number
    
    ExercisePrices
    
    Outstanding
    
    Life (years)
    
    Exercise Price
    
    Exercisable
    
    Price$2.05-3.20
    
    
    856,000
    
    
    
    5.87
    
    
    $
    2.43
    
    
    
    856,000
    
    
    $
    2.433.21-6.25
    
    
    218,000
    
    
    
    4.73
    
    
    
    4.51
    
    
    
    217,000
    
    
    
    4.526.25-7.61
    
    
    301,000
    
    
    
    0.90
    
    
    
    6.52
    
    
    
    301,000
    
    
    
    6.521,375,000
    
    
    
    
    
    
    
    
    
    
    
    1,374,000
   Note 11  Long Lived Assets
  2006
    
    
    2005Land
    
    $
    582
    
    
    $
    582Building and improvements
    
    
    9,007
    
    
    
    8,982Furniture and fixtures
    
    
    1,379
    
    
    
    1,379Computer equipment and software
    
    
    352
    
    
    
    308Machinery and equipment.
    
    
    125
    
    
    
    151Property and equipment, gross
    
    
    11,445
    
    
    
    11,402Accumulated depreciation
    
    
    (3,408
    )
    
    
    (2,848
    )Property and equipment, net
    
    $
    8,037
    
    
    $
    8,554
  F-25




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##### Table of Contents



2006
    
    
    2005Customer lists
    
    $
    280
    
    
    $
    280Trademarks
    
    
    50
    
    
    
    50Non-compete agreements
    
    
    82
    
    
    
    82Accumulated amortization
    
    
    (108
    )
    
    
    (32
    )Intangible assets, net
    
    $
    304
    
    
    $
    380
  Note 12  Related Party Transactions
  Note 13  Commitments and Contingencies
 Lease Commitments
   2007
    
    $
    3122008
    
    
    3192009
    
    
    2982010
    
    
    2482011
    
    
    38Total minimum lease payments
    
    $
    1,215
 Note 14  Sale of Real Estate
  Note 15  Litigation
  F-26




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##### Table of Contents



Note 16  Laurus Amendment
     Note 17  Quarterly Financial Data (un-audited) (in thousands, except per share amounts)
  2006 QuartersFirst
    
    Second
    
    Third
    
    FourthNet revenues
    
    $
    2,114
    
    
    $
    2,239
    
    
    $
    2,189
    
    
    $
    2,487Gross profit
    
    
    598
    
    
    
    752
    
    
    
    641
    
    
    
    639Net income (loss) from continuing operations
    
    
    (3,123
    )
    
    
    1,745
    
    
    
    (4,074
    )
    
    
    (2,269
    )Net income (loss)
    
    
    (4,259
    )
    
    
    592
    
    
    
    (11,393
    )
    
    
    (4,361
    )Loss per share data:Net income (loss) from continuing operations
    
    
    (0.34
    )
    
    
    0.18
    
    
    
    (0.25
    )
    
    
    (0.14
    )Net income (loss)
    
    
    (0.47
    )
    
    
    0.06
    
    
    
    (0.70
    )
    
    
    (0.27
    )
 2005 QuartersFirst
    
    Second
    
    Third
    
    FourthNet revenues
    
    $
    
    
    
    $
    
    
    
    $
    1,519
    
    
    $
    2,287Gross profit
    
    
    
    
    
    
    
    
    
    
    383
    
    
    
    670Net loss from continuing operations
    
    
    (4,010
    )
    
    
    (3,092
    )
    
    
    (2,997
    )
    
    
    (2,472
    )Net loss
    
    
    (38,460
    )
    
    
    (5,363
    )
    
    
    (3,882
    )
    
    
    (6,559
    )Loss per share dateNet loss from continuing operations
    
    
    (0.51
    )
    
    
    (0.40
    )
    
    
    (0.36
    )
    
    
    (0.29
    )Net loss
    
    
    (4.82
    )
    
    
    (0.68
    )
    
    
    (0.47
    )
    
    
    (0.78
    )
 F-27




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Note 18  Subsequent Events
      F-28




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##### Table of Contents



Schedule IV  Reinsurance *
 STANDARD
MANAGEMENT CORPORATION
 Year
Ended December 31, 2004
 PercentageAssumed From
    
    
    
    
    
    
    of AmountGross
    
    
    Ceded to Other
    
    
    Other
    
    
    
    
    
    
    Assumed toAmount
    
    
    Companies
    
    
    Companies
    
    
    Net Amount
    
    
    Net AmountYear Ended December 31, 2004Life insurance in force
    
    $
    1,024,685
    
    
    $
    490,209
    
    
    $
    61,735
    
    
    $
    596,211
    
    
    
    10.35
    %Premiums:Life insurance and annuities
    
    $
    8,193
    
    
    $
    2,414
    
    
    $
    578
    
    
    $
    6,357Accident and health insurance
    
    
    10
    
    
    
    8
    
    
    
    
    
    
    
    2Supplementary contract and other funds
on deposit
    
    
    1,565
    
    
    
    
    
    
    
    
    
    
    
    1,565Total premiums
    
    $
    9,768
    
    
    $
    2,422
    
    
    $
    578
    
    
    $
    7,924
 
 * All life insurance was reclassified into discontinued operations upon the sale of Standard Life in 2005.
 S-1