UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      DC 20549




**FORM
      10-K**





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





**For
      the fiscal year ended** **December
      31, 2007**




**** 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**


(Exact
      name of registrant as specified in its charter)


Indiana
              
              35-1773567(State
                  or other jurisdiction of
              
              (I.R.S.
                  employerincorporation
                  or organization)
              
              identification
                  no.)


10689
                  North Pennsylvania Street, Indianapolis, Indiana 46280
              
              (317)
                  574-6200(Address
                  of principal executive offices)
              
              (Telephone)





Securities
                registered pursuant to Section 12(b) of the Act:
            
            NoneSecurities
                registered pursuant to Section 12(g) of the Act:
            
            Common Stock, No Par Value10.25%
                Trust Preferred Securities due 2031 of SMANCapital
                Trust I





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes
      oNo x .





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.  Yes oNo x





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 x No
o





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





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer.” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




Large
                  accelerated filer  o
              Accelerated
                  filer oNon-accelerated
                  filer o(Do not check if
                  a smaller reporting company)
              Smaller
                  reporting company x


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


Yes oNo x




The
      aggregate market value of the voting common equity held by non-affiliates of
      the
      Registrant, based upon the closing sale price of the Registrant’s common stock
      as of June 30, 2007, as reported on the OTCBB, was approximately $3,082,305.
      Shares of common stock held by each executive officer and director and by each
      person who owns 5% or more of the outstanding common stock have been excluded
      in
      that such persons may be deemed to be affiliates. This determination of
      affiliate status is not necessarily a conclusive determination for other
      purposes.





As
      of
      April 23, 2008, the Registrant had 49,583,420 shares of common stock
      outstanding.









**Table
      of Contents**


**Page
                  #****Part
                  I**Item
                  1.
              
              Business
                  of Standard Management
              
              3Item
                1A.
              
              Risk
                  Factors
              
              8Item
                  1B.
              
              Unresolved
                  Staff Comments
              
              8Item
                  2.
              
              Properties
              
              8Item
                  3.
              
              Legal
                  Proceedings
              
              8Item
                  4.
              
              Submission
                  of Matters to a Vote of Security Holders
              
              8**Part
                  II**Item
                  5.
              
              Market
                  for Registrant’s Common Equity, Related Stockholder Matters
                  andIssuer
                  Purchases of Equity Securities
              
              9Item
                  6.
              
              Selected
                  Financial Dates
              
              10Item
                  7.
              
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              10Item
                  7A.
              
              Quantitative
                  and Qualitative Disclosures About Market Risk
              
              18Item
                  8.
              
              Financial
                  Statements and Supplementary Data
              
              18Item
                  9.
              
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              
              18Item
                  9A(T).
              
              Controls
                  and Procedures
              
              18Item
                  9B.
              
              Other
                  Information
              
              20**Part
                  III**Item
                  10.
              
              Directors
                  and Executive Officers of the Registrant
              
              20Item
                  11.
              
              Executive
                  Compensation
              
              23Item
                  12.
              
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters
              
              28Item
                  13.
              
              Certain
                  Relationships and Related Transactions
              
              29Item
                  14.
              
              Principal
                  Accountant Fees and Services
              
              30**Part
                  IV**Item
                  15.
              
              Exhibits
              
              31





2


**Cautionary
      Notice Regarding Forward-Looking Statements**





This
      Annual Report on Form 10-K 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 following:





·
            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.





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





·
            Our
                ability to acquire new businesses, 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.





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





·
            Increasing
                competition.





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.





**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**




Standard
      Management Corporation (the “Company”) is an Indianapolis-based healthcare
      management company which through strategic partnerships intends to provide
      homecare and pharmacy services focused on quality senior care and servicing
      chronically ill patients. Through a newly formed entity (“Newco”) and Universal
      Healthcare Company, LLC (“UHCC”), the Company plans to manage, lead and execute
      a consolidation strategy, targeting long-term care pharmacies and homecare
      providers.




3


We
      seek
      acquisitions operating in two business segments. 1) Pharmacy Services, provides
      distribution of pharmaceuticals, related pharmacy consulting and other ancillary
      services to Skilled Nursing Facilities, Assisted Living Facilities, retirement
      centers, independent living communities, and other healthcare settings. 2)
      Homecare Services, provides healthcare and supportive services to individuals
      in
      their home or in congregate care settings





**History**





The
      Company was incorporated in 1989 as a financial services business.





In
      June
      2005, in order to provide greater long-term value for our shareholders, we
      sold
      our financial services business, which we had operated since 1989, for a
      purchase price of approximately $80 million with net proceeds of approximately
      $52 million. As a result, we significantly reduced our debt levels and
      created capital for acquisitions in the healthcare field.





During
      2002-2005, we acquired various healthcare businesses. All have since been sold
      or discontinued to retire debt and provide working capital. Currently, the
      Company has no operating subsidiaries or businesses. See Notes 3 and 4 of our
      consolidated financial statements for further information. As
      a
      result, we are heavily dependent on raising additional capital in order to
      fund
      our planned acquisition strategy and to continue our operations. Accordingly,
      much of the current efforts of management are directed towards acquisitions
      and
      financing.





In
      March
      2007, a new investor acquired an approximately 53% ownership (since reduced
      to
      approximately 40%) in the Company and thereby became our largest single
      stockholder.





**Our
      Businesses**




Since
      early 2007, the Company has been planning to manage, lead and execute a
      consolidation strategy of acquiring long-term care pharmacies and homecare
      providers. The Company intends to consolidate homecare businesses under Newco
      and pharmacy businesses under UHCC.





*Newco*




The
      home
      healthcare services industry consists of five core products and service
      categories: 1) home nursing services, 2) hospice, 3) respiratory therapy, 4)
      infusion therapy, and 5) home medical equipment. Approximately 7.6 million
      individuals require care due to acute and chronic conditions, permanent
      disability or terminal illness, according to the National Association for Home
      Care and Hospice (“NAHC”).





Our
      targeted acquisition candidates focus on private duty homecare services. The
      Company intends to consolidate homecare companies under Newco which will provide
      care which helps clients  manage activities of daily
      living, prepare special diets and self-administrator medication
      without requiring constant attention of medical personnel. Providers of
      custodial care are not required to undergo medical training. The businesses
      will
      provide assistance with activities of daily living. We will provide staff
      specially equipped to assist with bathing, toweling, dressing, grooming,
      walking, shopping, errands, ambulating and prescribed exercises. Custodial
      services will also be provided. Our staff will assist in completing daily tasks
      such as laundry, light housekeeping, meal preparation, medication supervision
      and feeding. We also expect that our caregivers will provide our clients with
      companionship and friendship.





*UHCC*





Unlike
      hospitals, most long-term care facilities (such as skilled nursing or assisted
      living facilities) do not have on-site pharmacies to dispense prescription
      drugs, but depend instead on institutional pharmacies to provide the necessary
      pharmacy products and services and to play an integral role in monitoring
      patient medication. In addition to providing pharmaceuticals, institutional
      pharmacies provide consulting services, which include monitoring the control,
      distribution and administration of drugs within the long-term care facility
      and
      assisting in compliance with applicable regulations.





Institutional
      pharmacies will be the primary focus of UHCC’s business. We expect UHCC to
      operate pharmacies as regional hubs servicing a geographic subsection of the
      country. The regional facilities are planned to be supported by smaller
      pharmacies that extend the reach of the pharmacy’s products and services. UHCC
      is seeking to acquire existing pharmacies to serve as regional pharmacies in
      various areas of the United States.




4





We
      expect
      each of the regional pharmacies to employ a sales and business development
      staff
      whose primary responsibilities will be to maintain good working relationships
      with its existing client base and to secure new long-term care, assisted living
      or other institutional clients. In addition, the regional hubs will maintain
      their own consulting pharmacists on staff who will work closely in a clinical
      setting with the facilities to provide continuing in-service education and
      to
      answer the questions of staff members and patients on a regular basis. We intend
      that the high quality of our future services, responsiveness and flexibility
      to
      each facility and patients’ needs will help us develop long-term customer
      loyalty and attract new clients.





**Customers**




The
      Company will provide homecare and pharmacy services focused on quality senior
      care, servicing chronically ill patients.  Nursing
      homes remain the dominant and most recognizable component of the long-term
      care
      continuum. Our targeted pharmacies contract directly with nursing homes for
      pharmacy services and maintain current customers utilizing local
      representatives. While long-term care continues to diversify, recent industry
      outgrowth into assisted living and homecare has provided additional growth
      opportunities for our company. The Company will leverage nursing home and
      assisted living facility relationships to enhance the homecare referral customer
      base, which has historically grown through local network marketing.




**The
      Industry**





The
      principal market for our future institutional pharmacy and home care services
      is
      the senior care industry. Within this industry, the majority of customers reside
      in skilled nursing facilities, which are post-acute living environments
      providing personal, social and medical services to assist people who have
      physical or cognitive limits on their ability to live independently. Skilled
      nursing facilities furnish a level of care less acute than hospitals, but more
      than assisted living facilities and home care. The services provided in assisted
      living facilities and home care are largely dependent on custodial care givers.
      These services include non-medical care that helps individuals
      with his or her activities of daily living, preparation
      of special diets and self-administration of medication not requiring
      constant attention of medical personnel. The majority these services are paid
      for by Medicare and Medicaid, and each program has its own certification
      requirements.





Since
      the
      passage of the Balanced Budget Act of 1997, the long-term care industry has
      experienced significant change, including the bankruptcies of some of the
      largest publicly held nursing home chains and asset sales and restructurings
      by
      other nursing home operators. As a result of these and other changes, the
      long-term care industry has become more fragmented with the emergence of new
      operators and independent companies.





*Institutional
      Pharmacy Industry Overview.* Institutional
      pharmacies, such as we intend to be, purchase prescription and nonprescription
      pharmaceuticals and other medical supplies from wholesale distributors and
      manufacturers, and repackage and distribute these products to residents of
      skilled nursing facilities and other institutional healthcare settings. Unlike
      hospitals, most long-term care facilities do not have on-site pharmacies to
      dispense prescription drugs, but depend instead on institutional pharmacies
      to
      provide the necessary pharmacy products and services and to play an integral
      role in monitoring patient medication. In addition to providing pharmaceuticals,
      institutional pharmacies often provide pharmacy consulting services, which
      include monitoring the control, distribution and administration of drugs within
      the facility and assisting with regulatory compliance, therapeutic monitoring
      and drug utilization review. Medications are typically packaged in unit dose
      cards based on a 30 day supply.





The
      institutional pharmacy market has undergone consolidation since the early 1990's
      through mergers of existing competitors and divestitures of captive
      institutional pharmacies that had been owned and operated by healthcare
      facilities. The two largest institutional pharmacy operators,
      Omnicare, Inc. and PharMerica Corporation, provide services to healthcare
      facilities throughout the United States and Canada. PharMerica Corporation
      is
      the successor to the institutional pharmacy businesses formerly operated by
      AmerisourceBergen Corporation and Kindred Healthcare, Inc. The spin-off of
      these businesses to form PharMerica Corporation was completed on August 1,
      2007. Our management believes that the creation of this combined company
      demonstrates the trend toward consolidation in the institutional pharmacy
      business, which is likely to result in a growing number of larger competitors
      with greater financial, procurement, distribution and human resource
      capabilities as compared with us.




5




*The
      Home Care Industry Overview.* Custodial home care is defined as non-medical care that helps an individual
      with his or her activities of daily living, preparation
      of special diets and self-administration of medication not requiring
      constant attention of medical personnel. Providers of custodial care are not
      required to undergo medical training. One important aspect of the business
      is to
      provide assistance with activities of daily living. We will provide staff
      specially equipped to assist with bathing, toweling, dressing, grooming,
      walking, shopping, errands, ambulating and prescribed exercises. Also provided
      will be custodial services. We expect our staff to assist in completing daily
      tasks such as laundry, light housekeeping, meal preparation, medication
      supervision and feeding.




**Activities
      of daily living** refer
      to
      six activities (bathing, dressing, transferring, using the toilet room, eating,
      and walking) that reflect the patient's capacity for self-care. The patient's
      need for assistance with these activities is measured by the receipt of help
      from agency staff at the time of the survey (for current patients) or the last
      time service was provided prior to discharge (for discharges). Help that a
      patient may receive from persons that are not staff of the agency (for example,
      family members, friends, or individuals employed directly by the patient and
      not
      by the agency) is not included.




**Instrumental
      activities of daily living** refers
      to
      six daily tasks (light housework, preparing meals, taking medications, shopping
      for groceries or clothes, using the telephone, and bill paying) that enables
      the
      patient to live independently in the community. The patient's need for
      assistance with these activities is measured by customer surveys or prior
      services. Help that a patient may receive from persons who are not staff of
      the
      agency (for example, family members, friends, or individuals employed directly
      by the patient and not by the agency) will not be included in our
      services.




The
      first
      members of the “baby boom” generation are approaching retirement. As Americans
      age, healthcare costs continue to rise, the population in skilled nursing
      facilities and assisted living facilities increases and prescription drug
      utilization increases significantly. Medicare/Medicaid believes it can save
      50%
      of its expenses by keeping the client in the home.




**Competition**




The
      senior care service business is highly competitive, with numerous providers
      in
      every geographic area of the United States. We believe that we will compete
      on
      the basis of quality, price, terms and overall cost-effectiveness, as well
      as
      clinical expertise, technology and, increasingly, professional support and
      customer services. In the geographic regions we intend to serve, we expect
      to
      compete with local, regional and national companies. Several of these
      competitors have substantially greater financial and other resources available
      than us. The principal national competitors are Omnicare, Gentiva and
      Amedisys which compete within certain of the market areas we expect to serve.
      We
      expect to also compete with smaller regional and local competitors in every
      market in which we plan to operate.





**Regulatory
      Factors**





Our
      business segments are subject to extensive and often changing federal, state
      and
      local regulations. Pharmacies are required to be licensed and home care agencies
      must maintain the appropriate certifications in the states in which they are
      located to do business. While we continuously monitor the effects of regulatory
      activity on our operations and believe they currently have all necessary
      licenses and certifications, failure to obtain or renew any required regulatory
      approvals, licenses or certifications could adversely affect the continued
      operation of our business.





The
      long-term care facilities that we expect to contract for our services are also
      subject to federal, state and local regulations and are required to be licensed
      in the states in which they are located. The failure by these long-term care
      facilities to comply with these or future regulations or to obtain or renew
      any
      required licenses could result in our inability to provide pharmacy services
      to
      these facilities and their residents.





***Medicare
      and Medicaid*** .
      Our
      businesses have long operated under regulatory and cost containment pressures
      from state and federal legislation affecting Medicaid and Medicare. As is the
      case for long-term care pharmacy services we generally, received reimbursement
      from the Medicaid and Medicare programs, or directly from individual residents
      or their responsible parties. Regarding our targeted home care segment, payments
      are received primarily form Medicaid and private pay clients.




6





On
      December 8, 2004, President Bush signed into law the Medicare Prescription
      Drug Improvement and Modernization Act of 2004 (the “Act”), a comprehensive
      voluntary prescription drug benefit administered under Medicare Part D
      effective January 1, 2006. The new Act provided certain cost-sharing
      government subsidies for individuals who might otherwise qualify for drug
      coverage under Medicaid or similar government-funded aid programs.





The
      Medicaid programs in each of the states in which we plan to operate is may
      take
      actions or evaluate taking actions to control the rate of growth of Medicaid
      expenditures which may slow or reduce our reimbursement. Actions which may
      impact our business are:




·
            Redefining
                eligibility standards for Medicaid
                coverage


·
            Redefining
                coverage criteria for home and community based care
                services


·
            Slowing
                payments to providers by increasing the minimum time in which payments
                are
                made


·
            Limiting
                reimbursement rate increases


·
            Changing
                regulations under which providers must
                operate





We
      are
      subject to Medicare fraud and abuse and anti-self-referral laws which preclude,
      among other things, (a) persons from soliciting, offering, receiving or
      paying any remuneration in order to induce the referral of a patient for
      treatment or for inducing the ordering or purchasing of items or services that
      are in any way paid for by Medicare or Medicaid, and (b) physicians from
      making referrals to certain entities with which they have a financial
      relationship. The fraud and abuse laws and regulations are broad in scope and
      are subject to frequent modification and varied interpretation. Violation of
      these laws can result in loss of licensure, civil and criminal penalties and
      exclusion from Medicaid, Medicare and other federal healthcare
      programs.





Medicare
      and Medicaid providers and suppliers are subject to inquiries or audits to
      evaluate their compliance with requirements and standards set forth under these
      government-sponsored programs. These audits and inquiries, as well as our own
      internal compliance program, from time-to-time have identified overpayments
      and
      other billing errors resulting in repayment or self-reporting to the applicable
      agency. We believe that our billing practices materially comply with applicable
      state and federal requirements. However, the requirements may be interpreted
      in
      the future in a manner inconsistent with our interpretation and
      application.





Federal
      law and regulations contain a variety of requirements relating to the furnishing
      of prescription drugs under Medicaid. First, states are given authority, subject
      to certain standards, to limit or specify conditions for the coverage of
      particular drugs. Second, federal Medicaid law establishes standards affecting
      pharmacy practice. These standards include general requirements relating to
      patient counseling and drug utilization review and more specific standards
      for
      skilled nursing facilities and nursing facilities relating to drug regimen
      reviews for Medicaid patients in such facilities. Regulations clarify that,
      under federal law, a pharmacy is not required to meet the general requirements
      for drugs dispensed to nursing facilities residents if the nursing facilities
      complies with the drug regimen review standards. However, the regulations
      indicate that states may nevertheless require pharmacies to comply with the
      general requirements, regardless of whether the new drug satisfies the drug
      regimen review requirement, and the states in which we operate currently do
      require our pharmacies to comply with these general standards. Third, federal
      regulations impose certain requirements relating to reimbursement for
      prescription drugs furnished to Medicaid patients. Among other things,
      regulations establish “upper limits” on payment levels. Legislation passed by
      Congress in February 2006 changed the calculation of these so-called upper
      limits. In addition to requirements imposed by federal law, states have
      substantial discretion to determine administrative, coverage, eligibility and
      payment policies under their state Medicaid programs that may affect our
      operations.




**Future
      Acquisitions**





Our
      management pursues a strategy of seeking manageable growth within a defensible
      market niche. The industries we plan to serve are highly competitive and afford
      limited opportunities to implement proprietary products or processes.
      Nevertheless, we believe that we will be able to increase our business through
      a
      focus on shared risk partnerships and administrative corporate support services.
      As of April 2008, we have identified a number of both institutional pharmacy
      and
      homecare services we are interested in acquiring. However, our ability to
      consummate any acquisition is significantly dependent on us being able to obtain
      appropriately structured capital. Our growth strategy also is heavily dependent
      on our ability to identify appropriate strategic acquisition
      targets.





We
      anticipate that funding for our planned acquisitions will come from third party
      equity and debt contributions into Newco and UHCC. Accordingly, we expect our
      ownership in these subsidiaries to ultimately be determined by the capital
      structure of the acquisitions. Our plan also includes the signing of agreements
      with each business (which we have already done with UHCC) that will provide
      for
      Standard Management to be engaged as the manager of the businesses and earn
      management fees and other sources of compensation from the acquired businesses.




7





**Employees**





As
      of
      April 23, 2008, we had 17 employees, all in administrative roles and none
      represented by unions. We believe that our future success will depend, in part,
      on our ability to attract and retain experienced industry
      professionals.





**Item
      1A. Risk Factors**





Not
      applicable.





**Item
      1B. Unresolved Staff Comments**





None.





**Item
      2. Properties**





We
      currently own our home office building consisting of 56,000 square feet and
      located at 10689 North Pennsylvania Street, Indianapolis, Indiana. We occupy
      all
      of this building, except for approximately 22,000 square feet which is leased
      to
      Standard Life Insurance Company of Indiana, our previously owned financial
      services business, pursuant to a 5 year lease, as extended, with options to
      further extend to 2010. Our mortgage on the building is currently in default
      and
      we plan to release title to the building before June 30, 2008 to the lender
      as
      full satisfaction of our indebtedness to the lender. We intend to lease back
      adequate space in the building in which to operate our future
      businesses.




**Item
      3. Legal Proceedings**





During
      2007, the Company worked with the previous owners of its former Precision
      Healthcare subsidiary to meet its obligation under the purchase agreement with
      the previous owners to guarantee the value of the Company shares that comprised
      a portion of the Company’s purchase price for Precision. Pursuant to the
      purchase agreement, the Company exercised its option to issue additional stock
      to meet its obligations. The previous owners have filed suit in United Sates
      District Court for the Southern Region of Indiana, Indianapolis Division
      challenging the Company’s exercise of its option to issue stock. The case is
      ongoing.





**Item
      4. Submission of Matters to a Vote of Security Holders**





None





8





**Part
      II**





**Item
                5.**
            **Market
                for Registrant’s Common Equity, and Related Stockholder
                Matters******





Our
      common stock is listed on the OTC Bulletin Board and trades under the symbol
      SMAN. On April 23, 2008, we had 49,583,420 shares of common stock
      outstanding, which were held by approximately 350 holders of record. The
      following table sets forth, for the fiscal periods indicated, the high and
      low
      sales prices per share for our common stock on the NASDAQ National Market (until
      May 22, 2006) and on the OTC Bulletin Board (from May 23, 2006). The
      OTCBB prices reflect inter-dealer prices without retail mark-up, mark-down
      or
      commission and may not necessarily represent actual transactions.


**Common
                  Stock**High
              
              
              LowQuarter
                  ended March 31, 2007
              
              $
              .23
              
              $
              .04Quarter
                  ended June 30, 2007
              
              
              .20
              
              
              .07Quarter
                  ended September 30, 2007
              
              
              .19
              
              
              .09Quarter
                  ended December 31, 2007
              
              
              .12
              
              
              .02Quarter
                  ended March 31, 2006
              
              $
              1.75
              
              $
              .70Quarter
                  ended June 30, 2006
              
              
              1.15
              
              
              .21Quarter
                  ended September 30, 2006
              
              
              .47
              
              
              .21Quarter
                  ended December 31, 2006
              
              
              .25
              
              
              .04




***Equity
      Compensation Plan Information***





The
      following provides tabular disclosure of the number of securities that may
      be
      issued upon the exercise of outstanding options, the weighted average exercise
      price of outstanding options, and the number of securities remaining available
      for future issuance under our equity compensation plans as of December 31,
      2007.
      All of our equity compensation plans have been approved by our shareholders.


**Plan
                  Category**
              
              **Number
                  of securities to be issued upon exercise of outstanding
                  options**
              
              **Weighted-average
                  exercise price of outstanding options**
              
              **Number
                  of securities remaining available for future issuance under equity
                  compensation plans**Equity
                  compensation plans approved by security holders:1992
                  Stock Option Plan
              
              
              191,000
              
              $
              2.40
              
              
              -2002
                  Stock Incentive Plan
              
              
              721,500
              
              
              2.74
              
              
              1,728,194





(1)
      In
      addition to the above, in March 2007, a major shareholder granted options
      to three executives to acquire 3 million, 1 million and 1 million
      shares, respectively, of the Company’s common stock from him at an exercise
      price of $0.10 per share which expire in 2009.




9


**Item
      6. Selected financial Data**





Not
      applicable .





**Item
      7.**  **Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations**





The
      following discussion highlights the principal factors affecting the results
      of
      our operations and the significant changes in our balance sheet items on a
      consolidated basis for the periods listed, as well as liquidity and capital
      resources. This discussion should be read in conjunction with the accompanying
      Consolidated Financial Statements and related Notes.





This
      Management Discussion and Analysis of Financial Condition and Results of
      Operations include forward-looking statements. We have based these
      forward-looking statements on our current plans, expectations and beliefs about
      future events.





**Overview**





The
      Company is an Indianapolis-based healthcare management company which, through
      strategic partnerships, intends to provide homecare and pharmacy services
      focused on quality senior care and servicing chronically ill patients. Through
      Newco and UHCC, the Company, since early 2007, has been planning to manage,
      lead
      and execute a consolidation strategy, targeting long-term care pharmacies and
      homecare providers.





We
      have
      previously acquired and operated several pharmacies. As more fully described
      below, we have sold, closed, and transferred each of the pharmacy operations
      during 2006, 2007 and 2008. Accordingly, our financial statements reflect those
      businesses as discontinued operations. As a result of the discontinuance, as
      of
      April 2008, we have no substantive active revenue-producing
      operations.





We
      have
      incurred recurring significant losses, which have resulted in a shareholders’
deficit balance of approximately $25.6 million as of December 31, 2007, and
      have
      sold our businesses to provide working capital and to reduce debt. However,
      with
      no current revenue producing operations, we do not have adequate financing
      to
      meet our near-term cash requirements or to embark upon our strategic plans.
      In
      addition, as of December 31, 2007, we had a working capital deficit of
      approximately $18.7 million, of which $14.8 million is outstanding debt due
      or
      currently callable in 2008 - $8.2 million of which has since been or will be
      settled by relinquishing the related collateral assets. This aggregate situation
      raises substantial doubt about our 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.





Our
      plans
      include the acquisition of institutional pharmacies and home care businesses
      through UHCC and Newco. We expect to fund these acquisitions with proceeds
      from
      lenders and investors in these subsidiaries. Our ownership will be determined
      as
      investors provide necessary capital. Standard Management has already entered
      into an agreement with UHCC and plans to do so with Newco under which Standard
      Management will be engaged as an investor and manager of each of the acquired
      businesses and will thereby earn management fees and other sources of
      compensation from those businesses. We expect that this new investment and
      financial structure will provide adequate financial support to complete our
      development plans.





**Discontinued
      Operations - Pharmacy Services**





During
      2002 through 2005, we acquired several pharmacy operations, all of which have
      now been sold, discontinued or transferred as described below. Some of these
      acquired businesses include “Rainier”, “Holland”, “PCA”, “Long-term Rx”,
“RoyalMed”, “HomeMed” and “Precision”.





On
      August
      11, 2006, we sold certain rights, properties and assets of Rainier and Holland
      to Omnicare, Inc. (“Omnicare”). At the closing, Omnicare agreed to pay us an
      aggregate purchase price of up to $13.2 million and assumed certain liabilities
      of Rainier and Holland valued at $750,000. Of the purchase price, (1) $12.0
      million in cash was paid by Omnicare at the closing, (2) $700,000 was held
      back
      pending a potential post-closing adjustment to be measured against a specified
      historical value of the purchased net assets, and (3) up to $520,000 could
      have
      been earned based on a calculation defined in the sales agreement. We also
      agreed to grant Omnicare a three year right of first refusal for the purchase
      of
      any other of our pharmacy businesses. We recorded an original loss on the sale
      of $3.6 million, including our estimate of the eventual holdback payment to
      be
      received or paid and without consideration of the contingent purchase price
      of
      $520,000.




10





Concurrently
      with the sale of Rainier and Holland, on August 11, 2006, we entered into a
      Settlement Agreement with John Tac Hung Tran, Cynthia J. Wareing-Tran and The
      Jonathan Tran Irrevocable Trust (collectively, the “Trans”), who were the former
      owners of Rainier. The Settlement Agreement resolved all disputes among the
      parties with respect to, among other matters, a promissory note we granted
      to
      the Trans as part of the consideration for the acquisition, the amount of bonus
      and earn-out payments owed to Mr. Tran under the terms of his Employment
      Agreement with Rainier and certain leases entered into with the Trans as part
      of
      the acquisition. Under the settlement, we paid the Trans approximately $5.5
      million, of which approximately $1.5 million was for the repayment of the
      promissory note, $1.0 million for the disputed earn-out payments, $150,000
      for
      the disputed bonus payment, $2.5 million to redeem all 762,195 shares of common
      stock of we issued to the Trans as part of the acquisition at their guaranteed
      price, and $310,000 to redeem all of the shares purchased by the Trans and
      other
      associates of the Trans in May 2006 as part of our private placement at the
      acquisition price. The $1.150 million of earn-out and bonus payments are
      reflected as expenses of discontinued operations in the year ended December
      31,
      2006.




On
      July
      25, 2006, we sold the assets of PCA to Indiana Life Sciences (a company owned
      by
      one of our executive officers) for $1 and a commitment to purchase $100,000
      of
      our common stock through a private placement offering. That investment was
      made
      in July 2006. We recorded a loss on the sale of $428,000.




On
      October 20, 2006, we completed the sale of certain rights, properties and assets
      of Long Term Rx to Omnicare, Inc. The contract purchase price was for $5.1
      million. Of the purchase price, (1) $4.2 million in cash was paid by Omnicare
      at
      the closing, (2) $750,000 was held back pending a potential post-closing
      adjustment to be measured against a specified historical value of the purchased
      net assets, and (3) up to $225,000 could have been made based on a calculation
      defined in the sale agreement. We recorded an original gain on the sale of
      $.6
      million including our estimate of the eventual holdback payment to be received
      or paid and without consideration of the contingent purchase price of $225,000,
      and after an expense related to the buy out of a portion of the remaining lease
      for space we no longer needed at our operating facility in
      Indianapolis.




Based
      on
      ongoing correspondence regarding the final determination of the holdbacks for
      both Rainier and Long Term Rx, we have, as of December 31, 2006, reduced our
      holdback receivables from Omnicare to our best estimate of the ultimate
      settlement of these amounts. The related adjustment is included as an additional
      loss on the respective sales. The December 31, 2006 estimated receivable has
      yet
      to be settled or adjusted. Future adjustments based on continuing negotiations
      are not expected to be material.




In
      November 2006, we sold RoyalMed for $75,000, recognizing a loss on sale of
      $.2
      million.




Subject
      to our late 2006 decision to sell a portion of our 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, we
      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, we reduced a previously established lease reserve by $325,000. Remaining
      accounts payable and accrued lease payments as of December 31, 2007, will be
      paid in due course.




At
      February 6, 2008, we were in default on a note due to Mr. Sam Schmidt. Mr.
      Schmidt is one of our directors and our largest shareholder. The collateral
      under the note included a pledge of our stock in Precision and certain
      unimproved real estate located in Monroe County, Indiana. In order to ensure
      an
      orderly resolution of our obligation to Mr. Schmidt, on that date, we
      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 our 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, we ceded all voting rights in our stock of Precision to Mr. Schmidt.
      Due to this loss of control - even though we then continued to own 100% of
      Precision’s stock, we deconsolidated Precision and reflected our 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.




11




**Discontinued
      Operations - Other**





In
      addition to the discontinued pharmacy operations, we also, in late 2007,
      discontinued the ancillary insurance operations we retained after selling our
      Financial Services business in 2005. This business, called Premier Life, had
      been operated out of our Bermuda subsidiary, the shares of which were pledged
      as
      collateral under a note agreement. Similar to the Precision situation described
      above, we ceded all voting rights in these shares to the lender and accordingly,
      have deconsolidated this business and reflected it as an Investment in
      Unconsolidated Subsidiary, a component of Assets of Discontinued Operations,
      as
      of December 31, 2007. Ultimately, we expect to pass title to these shares to
      the
      lender to settle the related debt or sell the business, which consists of only
      a
      few life insurance policies and various investments held in support of those
      policy liabilities, and use the sales proceeds to settle the debt. Based on
      the
      carrying values of the investments (which are at fair value) and the estimated
      policy liabilities, we determined that the net carrying value of the business
      exceeded the likely ultimate debt, interest and fee obligation to this lender.





**Critical
      Accounting Policies**





***Overview***





Our
      consolidated financial statements are prepared in accordance with accounting
      principles generally accepted in the United States (“U.S. GAAP”). In connection
      with the preparation of these financial statements, management is required
      to
      make assumptions, estimates and judgments that affect the reported amounts
      of
      assets, liabilities, stockholders' equity, revenues and expenses, and the
      related disclosure of commitments and contingencies. On a regular basis, we
      evaluate the estimates used, including those related to bad debts, contractual
      allowances, inventory valuation, impairment of intangible assets, income taxes,
      stock-based compensation, legal contingencies and other operating allowances
      and
      accruals, many of which are now reflected as assets, liabilities and losses
      of
      our discontinued operations. Management bases its estimates on historical
      experience, current conditions and on various other assumptions that are
      believed to be reasonable at the time and under the current circumstances.
      Our
      significant accounting policies are summarized in Note 2 of the Notes to
      Consolidated Financial Statements.





In
      many
      cases, the accounting treatment of a particular transaction is specifically
      dictated by U.S. GAAP and does not require significant management judgment
      in
      its application. There are also areas in which management's judgment in
      selecting among available alternatives would not produce a materially different
      result. An accounting policy is considered to be critical if it is important
      to
      a company’s financial position and operating results, and requires significant
      judgment and estimates on the part of management in its application. Our
      critical accounting estimates and the related assumptions are evaluated
      periodically as conditions require revision. Application of the critical
      accounting policies requires management's significant judgments, often as the
      result of the need to make estimates of matters that are inherently and highly
      uncertain. If actual results were to differ materially from the judgments and
      estimates made, our reported financial position and/or operating results could
      be materially affected. Management continually reviews these estimates and
      assumptions to ensure that the financial statements are presented fairly and
      are
      materially correct. We believe the following critical accounting policies and
      estimates involve more significant judgments and estimates used in the
      preparation of the consolidated financial statements. Many of these policies
      relate solely to our now-discontinued operations; however, we expect them to
      apply again to our planned future operations.





***Revenue
      Recognition***





We
      recognized revenues when products or services were delivered or provided to
      the
      customer. We monitored our revenues and receivables and recorded the estimated
      net expected sales and receivable balances to properly account for anticipated
      reimbursed amounts. Accordingly, the total net sales and receivables reported
      in
      our financial statements were recorded at the amount ultimately expected to
      be
      received. Since a majority of our billing functions were computerized, enabling
      on-line adjudication (i.e., submitting charges to Medicaid, Medicare, or other
      third-party payers electronically, with simultaneous feedback of the amount
      to
      be paid) at the time of sale to record net revenues, exposure to estimating
      contractual allowance adjustments was limited primarily to unbilled and/or
      initially rejected claims (which oftentimes were eventually approved once
      additional information was provided to the payer). Accounts receivables and
      revenues were adjusted to actual as cash was received and claims were settled.




12





Patient
      co-payments were associated with certain state Medicaid programs, Medicare
      Part
      B and certain third party payers and were typically not collected at the time
      products were delivered or services were rendered, but were billed to the
      individual as part of our normal billing procedures. These co-payments were
      subject to our normal accounts receivable collections procedures.





A
      patient
      may have been dispensed prescribed medications (typically no more than a 2-3
      day
      supply) prior to insurance being verified in emergency situations, or for new
      facility admissions after hours or on weekends. Shortly thereafter, specific
      payer information was typically obtained to ensure that the proper payer is
      billed for reimbursement.





***Allowance
      for Doubtful Accounts***





Collection
      of accounts receivable from customers was our primary source of operating cash
      flow and was critical to our operating performance. We provided for accounts
      receivable that could become uncollectible by establishing an allowance to
      reduce the carrying value of such receivables to their estimated net realizable
      value. We utilized the “Aging Method” to evaluate the adequacy of our allowance
      for doubtful accounts. This method is based upon applying estimated standard
      allowance requirement percentages to each accounts receivable aging category
      for
      each type of payer. We developed estimated standard allowance requirement
      percentages by utilizing historical collection trends and our understanding
      of
      the nature and collectability of receivables in the various aging categories
      and
      the various payer types. The standard allowance percentages were developed
      by
      payer type as the accounts receivable from each payer type have unique
      characteristics. The allowance for doubtful accounts was determined utilizing
      the Aging Method described above while also considering accounts specifically
      identified as doubtful. Accounts receivable that our management specifically
      estimated to be doubtful, based upon the age of the receivables, the results
      of
      collection efforts, or other circumstances, were reserved for in the allowance
      for doubtful accounts until they were collected or written-off.





Management
      reviewed this allowance on an ongoing basis for appropriateness. Judgment was
      used to assess the collectability of account balances and the economic ability
      of customers to pay.





We
      have
      policies and procedures for collection of our accounts receivable. Our
      collection efforts generally included the mailing of statements, followed up
      when necessary with delinquency notices, personal and other contacts, in-house
      collections or outside collection agencies, and potentially litigation when
      accounts were considered material and unresponsive. When we became aware that
      a
      specific customer was potentially unable to meet part or all of its financial
      obligations, for example, as a result of bankruptcy or deterioration in the
      customer's operating results or financial position, we included the balance
      in
      our allowance for doubtful accounts requirements. When a balance was deemed
      uncollectible by management, collections agencies and/or outside legal counsel,
      the balance was manually written off against the allowance for doubtful
      accounts.





If
      economic conditions worsened, the payer mix shifted significantly, or our
      customers' reimbursement rates were adversely affected, impacting our customers'
      ability to pay, management may have had to adjust the allowance for doubtful
      accounts accordingly, and our accounts receivable collections, cash flows,
      financial position and results of operations could be affected.





***Goodwill
      and Intangible Assets***





Many
      of
      our now sold, transferred or discontinued businesses were acquired with goodwill
      and other intangible assets. The recovery of goodwill was dependent on the
      fair
      value of the businesses to which it relates. Pursuant to Statement of Financial
      Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS
      142”), goodwill is subject to at least annual impairment tests based on the
      estimated fair value of the business units. There were numerous assumptions
      and
      estimates underlying the determination of the estimated fair value of these
      businesses. Our assessment of goodwill impairment required estimates including
      estimates of future cash flows. The estimates of future cash flows were based
      on
      assumptions and projections with respect to future revenues and expenses
      believed to be reasonable and supportable at the time the annual or special
      impairment analysis was performed. Further, they required management's
      subjective judgments and took into account assumptions about overall growth
      rates and increases in expenses. Changes in these estimates due to unforeseen
      events and circumstances could have caused our analysis to indicate that
      goodwill was impaired in subsequent periods, and could have resulted in the
      write-off of a portion or all of our goodwill, which could have been material
      to
      our financial position, results of operations or cash flows. Different valuation
      methods and assumptions could have produced significantly different results
      that
      could have affected the amount of any potential impairment charge that might
      have been required to be recognized. We used independent valuation firms to
      assist in determining the estimated fair market value of some of our now
      discontinued reporting units. If that estimated value was not sufficient to
      cover the recorded balance of goodwill, an impairment charge was recognized.
      Charges of $550,000 and $1,200,000 resulting from the impairment of goodwill
      were recorded in 2007 and 2006, respectively, as part of discontinued
      operations.




13





We
      amortized the cost of our other intangibles over the asset’s estimated useful
      life of three to seven years. Amortizable intangible assets were tested for
      impairment whenever events or circumstances indicated that the assets may not
      be
      fully realizable. The carrying value of the assets would then be compared to
      the
      undiscounted cash flows projected from the use of the assets and if impaired,
      written down to fair value based on either discounted cash flows or appraised
      values.





***Stock-Based
      Compensation***





Effective
      January 1, 2006, we adopted a new accounting policy that requires the fair
      value
      of stock options to be expensed over the vesting period. We continue to use
      a
      Black-Scholes option valuation model to determine fair value.





The Black-Scholes
      option valuation model was developed for use in estimating the fair value of
      traded options, which have no vesting restrictions and are fully transferable.
      In addition, option valuation models require the input of highly subjective
      assumptions including the expected stock price volatility. Because our stock
      options have characteristics significantly different from those of traded
      options, and because changes in the subjective input assumptions can materially
      affect the fair value estimate, in management’s opinion, the existing models do
      not necessarily provide a reliable single measure of the fair value of its
      stock
      options.





The
      valuation model requires the input of highly subjective assumptions including
      the expected volatility factor of the market price of our common stock (as
      determined by reviewing our historical public market closing prices, as adjusted
      when warranted, for the estimated impact of our significant change in operations
      over the last 5 years). Black-Scholes utilizes other assumptions related to
      the
      risk-free interest rate, the dividend yield (which is assumed to be zero, as
      we
      have not paid any cash dividends) and employee exercise behavior. The risk-free
      interest rate is derived from the U.S. Treasury yield curve in effect at the
      time of grant. The expected life of the grants is derived from historical
      factors.





***Conversion
      Features and Common Stock Warrants***





Certain
      provisions of the conversion features contained in our outstanding 2006 6%
      convertible notes required the Company to separate the value of certain
      derivatives from this debt and record such value as a separate liability, which
      must be marked-to-market each balance sheet date. Future period fair value
      adjustments to the derivatives could result in further gains or losses. To
      compute the estimated value of the derivatives, we used an outside appraisal
      which includes various assumptions, including those used in a Black-Sholes
      model. Additionally, these conversion features required that all outstanding
      common stock purchase warrants be fair valued using the Black-Scholes option
      valuation model, and recorded as a liability with corresponding reduction in
      additional paid-in capital. The liability must be marked-to-market each balance
      sheet date. Future period fair value adjustments to the warrant liability could
      result in further gains or losses.





***Income
      Taxes***





Our
      income tax expense includes deferred income tax expense arising from temporary
      differences between the financial reporting and tax basis of assets and
      liabilities and capital and net operating loss carry forwards. In assessing
      the
      realization of our deferred income tax assets, we consider whether it is more
      likely than not that the deferred income tax assets will be realized. The
      ultimate realization of our deferred income tax assets depends upon generating
      future taxable income during the periods in which our temporary differences
      become deductible and capital gains before our capital loss carry forwards
      expire. We evaluate the recoverability of our deferred income tax assets by
      assessing the need for a valuation allowance on a quarterly basis. If we
      determine that it is more likely than not that our deferred income tax assets
      will not be recovered, a valuation allowance will be established against some
      or
      all of our deferred income tax assets. This could have a significant effect
      on
      our future results of operations and financial position.




14





A
      $4.6
      million valuation allowance has been provided on our full net deferred income
      tax assets at December 31, 2007. We determined to record a full valuation
      allowance after considering the availability of taxable income in prior carry
      back years, tax planning strategies, and the likelihood of future taxable income
      exclusive of reversing temporary differences and carry forwards. If or when
      the
      Company becomes profitable, management may determine that all or a portion
      of
      this valuation allowance is not required and, if so, the Company will record
      benefits, which could be substantial, in the period such determinations are
      made.





We
      also
      believe that are capital and net operating losses as of December 31, 2007 are
      likely to be significantly limited pursuant to current income tax regulations
      regarding ownership changes occurring in March 2007.





**Results
      of Operations**




Year
                  Ended December 31**2007**
              
              
              2006Net
                  revenues
              
              **$**
              **-**
              
              $
              -Cost
                  of revenues
              
              
              **-**
              
              
              -Gross
                  profit
              
              
              **-**
              
              
              -General
                  and administrative expenses
              
              
              **5,970**
              
              
              8,674Impacts
                  related to value of warrants and derivitives
              
              
              **1,985**
              
              
              71Depreciation
                  and amortization
              
              
              **512**
              
              
              725Building
                  impairment
              
              
              **564**
              
              
              -Operating
                  loss
              
              
              **(9,031**
              **)**
              
              (9,470
              )Other
                  income (loss), net
              
              
              **(102**
              **)**
              
              6,280Interest
                  expense
              
              
              **(3,321**
              **)**
              
              (4,806
              )Net
                  loss from continuing operations before incometax
                  expense (benefit)
              
              
              **(12,454**
              **)**
              
              (7,996
              )Income
                  tax expense (benefit)
              
              
              **-**
              
              
              -Net
                  loss from continuing operations
              
              
              **(12,454**
              **)**
              
              (7,996
              )Loss
                  from discontinued operations
              
              
              **(559**
              **)**
              
              (11,425
              )Net
                  loss
              
              **$**
              **(13,013**
              **)**
              $
              (19,421
              )




***General:*** ****





As
      of
      December 31, 2007, we had sold, discontinued, transferred or planned to transfer
      each of our previous operations to provide working capital and to reduce debt.
      As such, our continuing operations currently include our corporate office
      functions and certain ancillary activities. All revenue-producing activities
      and
      related costs have been reflected as part of our discontinued
      operations.





***General
      and administrative expenses:***





General
      and administrative expenses decreased $2.7 million or 31.1% from $8.7 million
      in
      2006 to $6.0 million in 2007 primarily due to a $.8 million decrease in salary
      and benefits due to reduced corporate staffing in 2007, a $.9 million charge
      in
      2006 related to the settlement of an employee contract dispute, and other
      reductions of $1.0 million in 2007 due primarily to downsizing of the Company.
      We anticipate monthly general and administrative expenses of approximately
      $
      300,000 to $ 325,000 until such time as we launch our strategic
      plans.




15





***Impacts
      related to value of warrants and derivatives:***





As
      a
      result of certain terms of conversion features on debt issued in 2006 and 2007,
      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 2007 and 2006. 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 2006 and 2007, the initial recording of these derivative and
      warrant liabilities has created expense that more than offset the impact of
      changing values for both years.





***Depreciation
      and amortization:***





During
      2007, depreciation and amortization decreased $.2 million from 2006 due to
      assets becoming fully depreciated.





***Other
      income, net:***





In
      June
      2006, we 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. We 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, we issued 6,674,046 shares
      of
      our 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. After
      the write off of a pro rata portion of previously-unamortized deferred financing
      fees and the costs of the transaction, we recorded a $9.2 million gain upon
      the
      exchange as a component of Other Income, net in June 2006.





In
      addition to this gain, we realized a $.5 million gain on the sale of unused
      land
      adjacent to our corporate headquarters in 2006 as well as $.7 million of a
      combination of dividend income on Series A Preferred Stock securities we
      obtained in the sale of our insurance business in 2005, rental fees from a
      tenant in our building and other miscellaneous activities. These 2006 gains
      were
      partially offset by a $2.8 million loss on the redemption of those Series A
      Preferred Stock securities in June 2006 and $1.3 million of expenses related
      to
      unsuccessful acquisitions and financings.





In
      2007,
      the significantly reduced net other income relates to rental fees from a tenant
      in our building, proceeds from a previous investment, management fees, and
      other
      miscellaneous items offset by a $.7 million write off of acquisition fees.





***Interest
      expense:***





Interest
      expense decreased in 2007 by $1.5 million, or 31%, from 2006 due primarily
      to
      the June 2006 conversion of $11.1 million of Trust Preferred Securities into
      common stock offset by higher cost debt in 2007 due to certain default interest
      rates being charged and the fourth quarter 2006 issuance of $1.3 million of
      new
      convertible debt.





***Income
      tax provision:***





Provision
      for income taxes remained zero due to continued net losses in 2006 and 2007
      and
      a 100% valuation allowance against all resulting net deferred income tax
      assets.




***Discontinued
      Operations:***





In
      2006,
      the $11.4 million loss from discontinued operations was comprised of results
      for
      Precision ($.3 million gain), Long Term Rx ($.9 million gain), Rainier ($4.8
      million loss), PCA ($.5 million loss), HomeMed ($7.0 million loss), and
      Financial Services ($.3 million loss).




16





In
      2007,
      the $.6 million loss from discontinued operations was comprised of the results
      for Precision ($.6 million loss), HomeMed ($.1 million gain) and Premier Life
      ($.1 million loss).




***Liquidity
      and Capital Resources:***





Our
      independent auditors have expressed substantial doubt about our ability to
      continue as a going concern 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.





Our
      net
      cash used in operating activities of continuing operations during the year
      ended
      December 31, 2007 was $2.6 million compared to cash used of $10.7 million in
      the
      year ended December 31, 2006. The significant decrease on cash outflow is
      primarily due to a lower net loss in 2007 after adjusting for non-cash income
      statement items and the deferral of more interest payments in 2007.





Our
      net
      cash provided by investing activities of continuing operations during the year
      ended December 31, 2007 was $.5 million compared to cash provided of $18.4
      million in the year ended December 31, 2006 due primarily to $17.7 million
      of
      cash received in 2006 from business and assets sales versus $.5 million in
      2007.




Our
      net
      cash provided by financing activities of continuing operations during the year
      ended December 31, 2007 was $1.9 million compared to net cash used of $8.4
      million in the year ended December 31, 2006 primarily due to less cash advanced
      to our discontinued operations in 2006 and our purchasing shares in 2006
      whereas we sold shares in 2007.





As
      of
      December 31, 2007, we had no cash or cash equivalents and we are dependent
      on
      additional financing to maintain our business and to grow; however, we can
      provide no assurances that such financing will become available to us on terms
      that are favorable to us, or at all. However, through May 10, 2008, we have
      raised an additional $1 million from debt and equity financing. We continue
      to
      have discussions and negotiations with potential lenders and
      investors.





Our
      principal cash requirements are currently for operating our corporate functions
      and debt service obligations. We also require significant cash to adequately
      launch our strategic growth plans. Our recent primary sources of cash have
      been
      from certain of our now-discontinued operations, external borrowings and sales
      of equity securities. We expect to fund future growth through debt, equity,
      and
      seller financing into two of our subsidiaries under which we expect to acquire
      new healthcare businesses.





During
      2006 and 2007, we took the following actions in our efforts to maximize cash
      in-flows, reduce cash requirements, and generally provide adequate cash
      resources to meet our operating needs.





·
            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 SMAN Capital Trust I for up to five (5) years.
                We continue to make such deferrals. All unpaid distributions accrue
                interest at the rate of 10.25% annually until
                paid.





·
            In
                June 2006, we 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. We 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, we 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.





·
            In
                early 2006, we announced efforts to offer shares of its common stock
                for
                sale to accredited investors in a series of one or more private
                placements. Through December 31, 2006, we issued 1,491,340 shares
                of
                common stock along with warrants to acquire up to an additional 447,402
                shares of common stock (exclusive of certain issuances which we later
                reacquired at the same price) for $630,000.





17


·
            During
                the third and fourth quarter of 2006 and the first quarter of 2007,
                we
                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
                March 2007, we issued 20 million shares of our common stock to Mr.
                Sam
                Schmidt for $2.0 million, providing Mr. Schmidt with a 52.6% (since
                reduced to approximately 40%) interest in our Company. Proceeds were
                used
                primarily to pay off short term borrowings and other general corporate
                purposes.





·
            Management
                created Universal HealthCare Company, LLC (“UHCC”), through which it
                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
                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.





·
            Management
                intends to create Newco, through which it intends 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.





·
            We
                have deferred the payment of salaries (totaling $435,000 as of December
                31, 2007) for three executives.





Cash
      requirements for 2008 and beyond include substantial debt service costs as
      more
      fully described in Note 5 to our consolidated financial statements and include
      $14.8 million of debt due or callable due to default provisions in 2008. We
      have
      or intend to settle approximately $8.2 million of this current debt (and $.7
      million of related interest and fees) by transferring certain collateralized
      assets to the respective lenders, including our Precision subsidiary, our
      undeveloped land in Monroe County, Indiana, 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.





**Item
      7A. Quantitative and Qualitative Disclosures About Market
      Risk**





Not
      applicable.





**Item
      8.**  **Financial
      Statements and Supplementary Data**





The
      financial statements and supplementary data required with respect to this
      Item 8 are listed on page F-1 and included in a separate section of this
      report and are incorporated herein by reference.





**Item
      9.**  **Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure**





None.





**Item
      9A(T). Controls and Procedures**





**a)**
            ***Evaluation
                of Disclosure Controls and
                Procedures***





The
      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, 2007,
      the Company’s disclosure controls and procedures were not effective because of
      the material weaknesses identified as of such date described below.
      Notwithstanding the existence of the material weaknesses 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.




18





**b)**
            ***Management’s
                Report on Internal Control Over Financial
                Reporting***





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. Internal control over financial reporting
      is
      defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Exchange
      Act.
      Under the supervision and with the participation of our management, including
      our Chief Executive Officer and Principal Accounting Officer, we conducted
      an
      evaluation of the effectiveness of our internal control over financial reporting
      as of December 31, 2007, based on the framework in Internal Control-Integrated
      Framework issued by the Committee of Sponsoring Organizations of the Treadway
      Commission. Based on our evaluation under that framework, we have identified
      certain material weaknesses in our internal control over financial reporting.
       As a result, our management has concluded that our internal control over
      financial reporting was not effective as of December 31, 2007.





A
      material weakness is a deficiency, or combination of deficiencies, in internal
      control over financial reporting such that there is a reasonable possibility
      that a material misstatement of our annual or interim financial statements
      will
      not be prevented or detected on a timely basis.





Since
      mid-2006, the Company has been undergoing a major transition as it reorganizes
      and attempts to launch the strategic plans 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 in 2006, and significant cash restraints during the same
      time period, resulted in the Company not having, as of December 31, 2007, a
      sufficient complement of personnel to support the Chief Accounting Officer
      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. In addition, somewhat due to the significant attention
      required of our currently limited accounting and financial staff in our efforts
      to raise capital and identify appropriate acquisition targets, the Company
      was
      unable to timely finalize its accounting for 2007 and to fully control its
      financial statement closing process. These material weaknesses lead to delays
      and correction of previously-recorded amounts while finalizing the 2007
      financial statements included in this report. As a result, management has
      concluded that there was some 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
      2007.





Management
      consults with outside advisers, external SEC counsel and others regarding
      certain reporting issues and makes retroactive adjustments (prior to when
      external filings are completed) when warranted.





Management
      has discussed these material weaknesses and related corrective actions with
      the
      Audit Committee and our independent registered public accounting firm. Other
      than as described above, we are not aware of any other material weakness in
      our
      internal control over financial reporting. Because of its inherent limitations,
      internal control over financial reporting may not prevent or detect
      misstatements. Projections of any evaluation of effectiveness to future periods
      are subject to risk that controls may become inadequate because of changes
      in
      conditions, or that the degree of compliance with the policies or procedures
      may
      deteriorate.





This
      annual report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting.
      Management's report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the SEC that permit us to provide
      only management's report in this annual report.





***c)
      Management’s Response to Material Weaknesses***





Although
      we have not remediated the material weaknesses in our internal control over
      financial reporting as of December 31, 2007, 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:





·
            We
                will continue to focus on improving the skill sets of our accounting
                and
                finance function, through education and
                training;





19


·
            We
                will continue to consider the engagement of qualified professional
                consultants to assist us in cases where we do not have sufficient
                internal
                resources, with management reviewing both the inputs and outputs
                of the
                services;





·
            Upon
                the successful completion of a financing sufficient to support operations
                for at least two years, we will consider the hiring of additional
                accounting and finance staff with the commensurate industry knowledge,
                experience and training necessary to complement the current staff
                in the
                financial reporting functions; and





·
            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.





***d)
      Changes in Internal Control Over Financial Reporting***





There
      were no changes in our internal control over financial reporting (as defined
      in
      Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during
      the
      quarter ended December 31, 2007, that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting. However, as discussed above, we have identified material weaknesses
      in our internal control over financial reporting.





**Item
      9B. Other Information**





None.





**PART
      III**





**Item
      10. Directors, Executive Officers and Corporate Governance**





***Executive
      Officers and Directors***





**Name**
            
            **Age**
            
            **Position**Ronald
                D. Hunter
            
            57
            
            Chairman
                of the Board, President andChief
                Executive OfficerMartial
                R. Knieser, M.D.
            
            66
            
            Executive
                Vice President, Corporate DevelopmentMark
                B.L. Long
            
            45
            
            Executive
                Vice President , Chief Operating Officer, DirectorDaniel
                K Calvert
            
            54
            
            Executive
                Vice President, Chief Accounting OfficerDainforth
                (“Dan”) B. French, Jr.
            
            41
            
            DirectorJames
                H. Steane II
            
            63
            
            DirectorSam
                Schmidt
            
            43
            
            DirectorDennis
                King
            
            61
            
            Director





***Ronald
      D. Hunter*** **:**  Mr.
      Hunter has been our Chairman of the Board, Chief Executive Officer and Director
      since our formation in June 1989. He served as Chairman of the Board and Chief
      Executive Officer of our former financial services subsidiary, Standard Life
      Insurance Company of Indiana, from December 1987 until its sale in June 2005.
      From June 1989 until 2002, Mr. Hunter also served as our President. In June
      2005, he was reappointed President of Standard Management. Mr. Hunter was
      Chairman and Chief Executive Officer of our International Operations, Standard
      Management International S.A. from 1993 until its sale in 2002. Previously,
      Mr.
      Hunter held several management and sales positions in the life insurance
      industry with a number of companies. Mr. Hunter has been widely recognized
      for
      his vision and leadership qualities, earning him the distinction of being a
      finalist four times for the Ernst & Young Entrepreneur of the Year award and
      becoming a winner in 2004 in the financial services category. He has also become
      well-known as the author of the book, Vision Questing: Turning Dreams into
      Realities.




20





***Martial
      R. Knieser, M.D.:***  Dr.
      Knieser has served as Executive Vice-President of Corporate Development since
      January 2004 and served as a director of Standard Management from 1990 until
      August 2005. He was Director of Laboratories of Community Hospital, Indianapolis
      from 1978 to 1991 and was Medical Director of Stat Laboratory Services from
      1989
      to 1999. Dr. Knieser also served as Medical Director of Standard Life Insurance
      Company from December 1987 until its sale in June 2005. Dr. Knieser served
      as
      Director of Laboratories of St. Vincent Mercy Hospital, Elwood, Indiana until
      January 2005.





***Mark
      B.L. Long:*** ** Mr.
      Long
      our Executive
      Vice President, Chief Operating Officer has been with the Company since July
      2004. In such
      capacity, Mr. Long leads and directs the operational activities of our pharmacy
      operations. Mr. Long is a pharmacist and experienced in the pharmaceutical
      distribution and healthcare industries. Before joining the Company, Mr. Long
      was
      the Regional Vice President of Operations for PharMerica, a leading national
      provider of pharmaceuticals to long-term care and infusion therapy patients.
      Mr.
      Long received his degrees in Pharmacy and Business Administration from Temple
      University and LaSalle University, respectively. Mr. Long was appointed a
      director of the Company in March 2008.





***Daniel
      K Calvert:*** Mr.
      Calvert is Executive Vice President, Chief Accounting Officer. Mr. Calvert’s
      responsibilities include securities and public reporting, managing and design
      of
      subsidiary financial reporting and chairman of the internal audit committee.
      Mr.
      Calvert brings to the company over 25 years of financial, strategic, and
      operational management experience in diversified national and international
      companies.





***Dainforth
      B. French, Jr.:*** Mr.
      French has been a director since October 2004. Mr. French has served as
      President of Leonard Capital Markets, an investment banking firm in Grosse
      Pointe, Michigan, since October 2004. From 2000 to 2004, he served as Managing
      Director of Donnelly Penman & Partners, an investment banking firm in Grosse
      Pointe, Michigan. Mr. French received his B.A. degree from Georgetown University
      and obtained his M.B.A. degree from the University of Detroit.





***James
      H. Steane II*** **:**  Mr.
      Steane has been a director since 2002. In 1999 Mr. Steane retired from Fleet
      Bank after 29 years in corporate banking, where he held a number of positions,
      including Senior Vice President and Senior Lending Officer in the Insurance
      and
      Mutual Fund Group. Mr. Steane is also the past President of Junior Achievement
      of Hartford, Connecticut and the American School for the Deaf. Mr. Steane
      received his MBA degree from Adelphi University.





***Sam
      Schmidt:*** Mr.
      Schmidt has been a director since 2007. After completing an MBA in International
      Finance at Pepperdine University, Sam worked as a hospital administrator in
      Southern California for two years. Following that, he purchased an
      automotive parts business, again in Southern California, and began his
      "self-employed" career.  That industry then led to a
      position with Copart, Inc., assisting in opening salvage auto auctions
      throughout the southwest United States.  Sam's passion for
      open-wheel racing then took hold and he competed in multiple racing series
      over the next eight years while advancing his real estate and business holdings
      in California and Nevada.  Unfortunately, he was paralyzed from the neck
      down in January, 2000, testing for an upcoming event.  Upon returning home
      from a six-month hospital stay, Sam has slowly returned to
      the business world and currently owns Sam Schmidt Motorsports, the most
      successful team in the Indy Racing League's Indy Pro Series.  He is also
      quite active in the spinal cord research industry as founder of the Sam Schmidt
      Paralysis Foundation, a non-profit 501(c)3 organization.





**Dennis
      King** :
      Mr.
      King has been a director since 2007. Mr. King was born and raised in Burbank
      California. He attended Brigham Young University, earning honors and an
      accounting degree in 1971. He went to work for Arthur Anderson and Co. for
      five
      years, at which time he joined a partnership in a local C.P.A. firm in Burbank.
      He is now the managing partner of that firm; King, King, Alleman and Jensen.
      Mr.
      King is a member of the Executive Board of GMN Enterprise International, a
      global accounting network.  He is also a member of the American Institute
      of Certified Public Accountants and the California Society of Certified Public
      Accountants. Mr. King has served for eighteen years as a member of the Board
      of
      Trustees of the William S Hart Union High School District which has over 23,000
      junior and senior high school students.  He has served for four years as
      president of that board.




21




***Corporate
      Governance Matters***





Section
      16(a) of the Securities Exchange Act of 1934 requires our executive officers
      and
      directors, and persons who own more than ten percent (10%) of our common stock
      (“Reporting Persons”), to file reports of ownership and changes in ownership
      with the Securities and Exchange Commission. Reporting Persons are required
      by
      the Securities and Exchange Commission regulations to furnish us with copies
      of
      all Section 16(a) reports they file. Based solely on our review of the copies
      of
      such forms received by us and written representations from certain Reporting
      Persons, we believe that during fiscal year 2007 our Reporting Persons complied
      with all filing requirements applicable to them. ****




We
      have
      adopted a Code of Business Ethics and Conduct, which is applicable to all
      directors, officers and employees of the Company, including the principal
      executive officer, the principal financial officer and the principal accounting
      officer. We have also adopted a separate Code of Ethics for Senior Financial
      Officers, which is applicable to the Chief Executive Officer, Chief Financial
      Officer, Treasurer and other designated financial employees. The complete text
      of both Codes is available on our website at www.sman.com under Investor
      Relations. We intend to post any amendments to or waivers from the Code of
      Business Ethics and Conduct and Code of Ethics for Senior Financial Officers
      at
      the same location on our website.




The
      members of the Audit Committee of our Board of Directors are James H. Steane
      II
      (chair) and Dainforth B. French, Jr. Our Board has determined that the members
      of the Audit Committee are all independent as contemplated by the listing
      standards of Nasdaq as currently in effect and satisfy the Nasdaq Marketplace
      Rules relating to financial literacy and experience (although we are no longer
      subject to the rules of Nasdaq). Our Board of Directors has further determined
      that Mr. Steane satisfies the criteria for being an “audit committee financial
      expert” as such term is defined in Item 407(d)(5) of Regulation S-K promulgated
      by the SEC.




22




**Item
      11. Executive Compensation**





***Compensation
      Tables***




The
      following table sets forth the compensation awarded to, earned by, or paid
      to
      the chief executive officer, each person who served as chief accounting officer,
      the two most highly compensated executive officers other than the chief
      executive officer and the chief accounting officer receiving total compensation
      in excess of $100,000, and one other person who served as an executive officer
      (collectively, the “Named Executive Officers”) during the fiscal years ended
      December 31, 2007 and 2006.


**All
                      Other**
                    **Compensation
                      (3)**
              
              **Total****Name
                  and Principal Position**
              
              
              **Year**
              
              
              **Salary
                  ($**)****
              
              
              **Bonus
                  ($**)****
              
              
              **($**)****
              
              
              **($**)****Ronald
                  D. Hunter, Chairman of
              
              
              2007
              
              
              566,120
              
              
              -
              
              
              79,318
              
              
              645,438the
                  Board, Chief Executive
              
              
              2006
              
              
              566,120
              
              
              -
              
              
              101,112
              
              
              667,232Officer
                  and President (2)Daniel
                  K Calvert, Executive
              
              
              2007
              
              
              110,000
              
              
              -
              
              
              -
              
              
              110,000Vice
                  President and Chief
              
              
              2006
              
              
              23,269
              
              
              -
              
              
              -
              
              
              23,269Accounting
                  Officer (1)Martial
                  R. Knieser, Executive
              
              
              2007
              
              
              350,000
              
              
              -
              
              
              -
              
              
              350,000Vice
                  President, Corporate
              
              
              2006
              
              
              350,000
              
              
              
              
              
              998
              
              
              350,998Development
                  (2)Mark
                  B.L. Long, Executive
              
              
              2007
              
              
              210,000
              
              
              50,000
              
              
              7,108
              
              
              267,108Vice
                  President, Chief Operating
              
              
              2006
              
              
              201,874
              
              
              50,000
              
              
              -
              
              
              251,874Officer
                  (2)




(1)
              Mr.
                  Calvert became Executive Vice President and Chief Accounting Officer
                  of
                  the Company on October 9, 2006.
  (2)
              Salary
                    payments of $435,000 as of December 31, 2007 have been deferred
                    due to
                    cash constraints.
  (3)
              The
                  following table sets forth the items comprising “All Other Compensation”
                  for each named executive
                  officer.


Name
              
              
              **Year**
              
              **Imputed**
                  **Interest
                    on**
                  **Loan****1**
              
              **Insurance**
                  **Premiums**
              
              **Company**
                  **Contributions**
                  **to
                    Retirement**
                  **401(k)
                    Plans**
                  **($)**
              
              **Severance**
                  **Payments/**
                  **Accruals**
              
              **Consulting**
                  **Fees**
              
              **Total
                    ($)**Ronald
                  D. Hunter
              
              
              2007
              
              
              30,089
              
              
              35,294
              
              
              13,935
              
              
              -
              
              
              -
              
              
              79,3182006
              
              
              38,077
              
              
              43,003
              
              
              20,032
              
              
              -
              
              
              -
              
              
              101,112Daniel
                  K Calvert
              
              
              2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Martial
                  R. Knieser
              
              
              2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -2006
              
              
              
              
              
              998
              
              
              -
              
              
              -
              
              
              -
              
              
              998Mark
                  B. L. Long
              
              
              2007
              
              
              -
              
              
              -
              
              
              7,108
              
              
              -
              
              
              -
              
              
              7,1082006
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -




23




Represents
      imputed interest on an interest free loan made by the Company to Mr. Hunter
      in
      1997. The loan is “grandfathered” under the Sarbanes-Oxley Act of
      2002.




The
      Company did not grant any options or other equity awards in 2007. In March
      2007,
      a major shareholder did  grant
      options to Mr. Hunter, Dr. Knieser and Mr. Long to acquire 3 million, 1 million
      and 1 million shares, respectively, of  the
      Company’s common stock from him at an exercise price of $0.20 per share which
      expire in 2009.




**Employment
      Agreements**




We
      have
      employment agreements with each of Mr. Hunter, Dr. Knieser and Mr. Long. These
      employment agreements terminate as follows:




·
            Mr.
                Hunter’s employment agreement runs for a five-year period terminating on
                January 1, 2009, and automatically renews annually for successive
                five-year periods on January 1 of each year, unless either party
                elects
                not to renew in accordance with the terms of the agreement.




·
            Dr.
                Knieser’s employment agreement terminates on June 1, 2008 and shall renew
                automatically for one year periods, unless either party elects not
                to
                renew in accordance with the terms of the
                agreement.




·
            The
                employment agreement for Mr. Long terminates on July 1, 2008 and
                renews
                automatically for one year periods, unless either party elects not
                to
                renew in accordance with the terms of the agreement.




If
      Mr.
      Hunter’s employment is terminated, for a period of two years thereafter, he may
      not:




·
            Within
                Indiana, render any services as an agent, independent contractor,
                consultant or otherwise become employed in the business of selling
                or
                providing products or services sold by us or our subsidiaries.




·
            Within
                Indiana, in any manner compete with us or with any of our
                subsidiaries.


·
            Solicit
                or attempt to convert to other entities providing similar products
                or
                services provided by us, and our customers or any of our
                subsidiaries.





If
      Dr.
      Knieser’s employment is terminated, for a period of two years thereafter, he
      shall not:





·
            Engage
                in any business which of the type so engaged in by our U.S. Health
                Services subsidiary or any of its subsidiaries, within the geographical
                area that he has been performing services for U.S. Health Services.




Following
      a termination of Mr. Hunter’s employment with us, in the event of a
      change-in-control, Mr. Hunter would be entitled to receive a lump-sum payment
      equal to five times the sum of his then-current base salary, and the average
      amount of the bonuses paid to him for the five preceding fiscal years. Mr.
      Hunter would also be entitled to receive a lump-sum payment equal to the amount
      determined by multiplying the number of shares of common stock subject to
      unexercised stock options previously granted by us and held by Mr. Hunter on
      the
      date of termination, whether or not such options are then exercisable, by the
      greater of (1) the highest sales price of the common stock during the preceding
      six-month period, and (2) the highest price paid to the holders of our common
      stock whereby the change in control takes place.




Following
      a termination of Dr. Knieser’s or Mr. Long’s employment with us in the event of
      a change-in-control, Dr. Knieser or Mr. Long would be entitled to receive a
      lump
      sum payment equal to 2.99 times his then-current base salary, plus the average
      amount of bonuses paid to him for the three preceding fiscal years.




We
      are or
      may be obligated to pay a bonus to the executive officers as follows: Mr. Hunter
      receives a bonus equal to 3% of our annual earnings, before interest and
      taxes.  Dr.
      Knieser and Mr. Long each may receive a bonus for his performance at the
      discretion of the Chairman of the Board and upon approval of the Compensation
      Committee.




**Outstanding
      Equity Awards**




The
      following table sets forth information regarding outstanding equity awards
      held
      by the Named Executive Officers as of December 31, 2007, the end of our last
      fiscal year.




24





**OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END TABLE**


**Option
                  Awards****Number
                  of**
                **Securities**
                **Underlying**
                **Unexercised**
                **Options**
                **(#)**
              
              **Number
                  of**
                **Securities**
                **Underlying**
                **Unexercised**
                **Options**
                **(#)**
              
              **Equity**
                **Incentive**
                **Plan Awards:**
                **Number
                  of**
                **Securities**
                **Underlying**
                **Unexercised**
                **Unearned**
                **Options**
                **(#)**
              
              **Option**
                **Exercise**
                **Price****($)**
              
              **Option**
                **Expiration**
                **Date****Name**
              
              **Exercisable**
              
              **Unexercisable**Ronald
                  D. Hunter
              
              
              183,000
              
              
              -
              
              
              
              
              
              2.05
              
              
              8/17/2015250,000
              
              
              -
              
              
              -
              
              
              3.20
              
              
              4/22/2013180,000
              
              
              -
              
              
              -
              
              
              2.15
              
              
              6/10/2009(1)
              
              
              3,000,000
              
              
              -
              
              
              -
              
              
              .20
              
              
              3/20/2009Daniel
                  K Calvert
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Mark
                  B. L. Long
              
              
              13,000
              
              
              -
              
              
              -
              
              
              2.05
              
              
              8/17/201525,000
              
              
              -
              
              
              -
              
              
              3.60
              
              
              7/01/2014(1)
              
              
              1,000,000
              
              
              -
              
              
              -
              
              
              .20
              
              
              3/20/2009Martial
                  R. Knieser
              
              
              10,000
              
              
              -
              
              
              -
              
              
              2.05
              
              
              8/17/2015100,000
              
              
              -
              
              
              -
              
              
              3.70
              
              
              6/01/20141,500
              
              
              -
              
              
              -
              
              
              7.61
              
              
              6/06/20121,500
              
              
              -
              
              
              -
              
              
              5.49
              
              
              6/19/2011500
              
              
              -
              
              
              -
              
              
              7.38
              
              
              6/08/2010500
              
              
              -
              
              
              -
              
              
              4.13
              
              
              6/07/2010500
              
              
              -
              
              
              -
              
              
              6.06
              
              
              6/10/2009(1)
              
              
              1,000,000
              
              
              -
              
              
              -
              
              
              .20
              
              
              3/20/2009





(1)
      In
      March 2007, a major shareholder granted options to Mr. Hunter, Dr. Knieser
      and
      Mr. Long to acquire 3 million, 1 million and 1 million shares, respectively,
      of
      the Company’s common stock from him at an exercise price of $0.20 per share
      which expire in 2009.




**Potential
      Payments upon Termination or Change in Control**





The
      employment agreements we have entered into with Mr. Hunter, Dr. Knieser and
      Mr.
      Long provide for certain payments and benefits to the named executive officer
      in
      the event that executive officer is terminated by the Company under certain
      circumstances, including following a change in control of the Company. We have
      set forth below, for each named executive officer, a description of the payments
      they would have received had the events described below occurred on December
      31,
      2007,the last day of our most recently completed fiscal year.





*Ronald
      D. Hunter* .
      If Mr.
      Hunter had been terminated due to permanent and total disability or terminated
      his employment for good reason, he would have been entitled to receive a lump
      sum payment of $3,550,538 and forgiveness of an interest-free loan having an
      outstanding principal balance of $775,500.




25





If
      the
      Company had terminated Mr. Hunter without cause or Mr. Hunter terminated his
      employment for good reason within five years following a change in control
      of
      the Company, Mr. Hunter would have been entitled to receive a lump sum payment
      of $3,550,538 and forgiveness of an interest-free loan having an outstanding
      principal balance of $775,500. He also would have been entitled to continued
      health and welfare benefits for five years having a present value of
      approximately $66,540, and a tax gross up payment equal to approximately
      $1,882,533.





*Martial
      R. Knieser* .
      If Dr.
      Knieser had been terminated without cause, he would have been entitled to the
      salary due for the remainder of his employment term, payable in installments
      in
      accordance with the Company’s payroll practices, a total of $175,000. He also
      would have been titled to continued health and welfare benefits for the balance
      of the agreement term, having a present value of approximately
      $4,675.





If
      Dr.
      Knieser had terminated his employment after the Company relocated its principal
      office outside Hamilton County, Indiana, or his employment is terminated without
      cause within six months following a change in control, he would have been
      entitled to a lump sum payment of $1,046,500.





*Mark
      B. L. Long* .
      If Mr.
      Long had been terminated without cause, he would have been entitled to the
      salary due for the remainder of his employment term, payable in installments
      in
      accordance with the Company’s payroll practices, a total of $285,000. He also
      would have been titled to continued health and welfare benefits for the balance
      of the agreement term, having a present value of approximately
      $9,833.





If
      Mr.
      Long had terminated his employment after the Company relocated its principal
      office outside Hamilton County, Indiana, or his employment is terminated without
      cause within six months following a change in control, he would have been
      entitled to a lump sum payment of $964,275.





*Change
      in Control* .
      A
“change in control” of the Company occurs if:





·
            any
                individual, entity or group becomes the beneficial owner of 15% or
                more of
                the voting power of the Company’s outstanding
                shares;


·
            the
                current members of the Board of Directors of the Company (or persons
                approved by at least a majority of the current directors) cease to
                constitute at least a majority of the board;


·
            the
                Company is a party to a merger or other reorganization that results
                in
                less than 60% of the outstanding shares or voting power of the surviving
                corporation being held by persons who were not our shareholders
                immediately prior to the merger;


·
            our
                Board of Directors approves a liquidation or dissolution of the Company
                or
                a sale or other disposition of at least 15% of our
                assets.





*Cause* .
      With
      respect to Mr. Hunter, “cause” generally means:




·
            the
                persistent failure or refusal by the executive to comply with his
                employment agreement;


·
            any
                act of fraud or dishonesty resulting in gain to the executive at
                the
                Company’s expense;  ·
            any
                felony conviction; or  ·
            the
                persistent unexcused absence of the executive from his employment.




With
      respect to Dr. Knieser and Mr. Long, “cause” also includes:




·
            any
                felony indictment;  ·
            substance
                abuse; and  ·
            breach
                of his employment agreement.




*Good
      Reason* .
      With
      respect to Mr. Hunter, “Good Reason” means:




·
            any
                change in the duties or responsibilities of the executive that is
                not a
                promotion;  ·
            assignment
                of duties inconsistent with the executive’s
                status;  ·
            removal
                of executive from any positions held by
                him;  ·
            any
                breach by the Company of the executive’s employment
                agreement;




26




·
            with
                respect to a change in control, executive is no longer able to exercise
                the authority exercised immediately before the change in
                control;


·
            the
                Company’s principal executive offices are moved outside Hamilton County,
                Indiana, or the counties contiguous to Hamilton
                County;


·
            with
                respect to any change in control, any substantial increase in required
                travel;
                the
                  failure by the Company to continue to provide substantially similar
                  benefits under health and welfare plans;




·
            with
                respect to a change in control, the failure of the Company to obtain
                the
                agreement of any successor to perform all of the Company’s obligations
                under his employment agreement; or




·
            any
                request by the Company that the executive participate in an unlawful
                act.




In
      calculating the amounts shown above for each named executive, we have made
      the
      following assumptions:





*Excise
      Tax Gross Up* .
      We have
      assumed a combined 40% rate of federal and state income taxes and Medicare
      tax,
      and a 20% excise tax under Section 4999 of the Internal Revenue Code.





*Health
      and Welfare Benefits* .
      We have
      assumed our current cost of health benefits will increase by 15% per year,
      and
      our current cost of life insurance will increase at a rate of 10% per year.
      We
      assumed a discount rate of 7% to calculate the present value of the
      benefits.





*Option
      Payments* .
      Because
      all of our outstanding options have exercise prices greater than the fair market
      value of our shares at December 31, 2007, we have assumed that options that
      the
      Company is required to redeem in certain circumstances, including a change
      in
      control, have a value of zero.





**Compensation
      of Directors**





Each
      of
      our non-employee directors receives an annual retainer of $22,500, and $1,000
      per board or committee meeting. Each non-employee director may also be awarded
      stock options, the number of which is determined each year by the Board of
      Directors.





In
      the
      table set forth below, we have set forth information regarding the compensation
      received by each of our directors who is not an officer or employee of the
      Company, for the year ended December 31, 2007.




**DIRECTOR
      COMPENSATION TABLE**





**Name**
            
            **Fees**
              **Earned**
              **($)**
            
            **Option Awards****1**
              **($)**
            
            **All
                Other**
              **Compensation****2**
              **($)**
            
            **Total**
              **($)**James
                H. Steane II
            
            
            26,400
            
            
            -
            
            
            6,600
            
            
            33,000Dainforth
                B. French, Jr.
            
            
            32,000
            
            
            -
            
            
            -
            
            
            32,000Sam
                Schmidt
            
            
            26,500
            
            
            -
            
            
            -
            
            
            26,500Dennis
                King
            
            
            26,500
            
            
            -
            
            
            -
            
            
            26,500





1 As
      of
      December 31, 2006, Mr. Steane and Mr. French held the options to purchase shares
      set forth in the table below, all of which were exercisable:


**Name**
              
              **Number
                  of Securities Underlying Unexecrcised Options**
                **(#)**
              
              **Option
                  Exercise Price**
                **($)**
              
              **Option
                  Expiration Date**James
                  H. Steane II
              
              
              500
                25,000
              
              
              3.93
                2.05
              
              
              11/6/2012
                8/17/2015Dainforth
                  B. French, Jr.
              
              
              25,000
              
              
              2.05
              
              
              8/17/2015




2
      Re presents
      Mr. Steane’s contributions to Company’s deferred compensation
      program.




27




**Item
      12. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.**





The
      following table sets forth certain information as of April 23, 2008 with respect
      to ownership of our outstanding common stock by:





·
            all
                persons known to us to own more than 5% of the outstanding shares
                of our
                common stock;


·
            each
                of our directors;


·
            the
                executive officers named in the executive compensation tables in
                this
                Report;and


·
            all
                of our executive officers and directors as a
                group.




Number
                  ofName
              
              Shares
                  Owned (1)
              
              PercentRonald
                  D. Hunter (2)
              
              
              4,366,168
              
              
              8.8Daniel
                  K. Calvert
              
              
              0
              
              
              *Martial
                  R. Knieser (3)
              
              
              2,899,966
              
              
              5.8Mark
                  B.L. Long (4)
              
              
              1,056,590
              
              
              2.1Dainforth
                  B. French, Jr. (5)
              
              
              86,400
              
              
              *James
                  H. Steane II (6)
              
              
              28,500
              
              
              *Sam
                  Schmidt (7)
              
              
              20,000,000
              
              
              40.3Dennis
                  King
              
              
              0
              
              
              *All
                  current directors and executive officers as a group
              
              
              23,437,624
              
              
              47.3(8
                  Persons)*
                  Represents less than one percent.




28




(1)
            The
                information set forth in this table with respect to our common stock
                ownership reflects “beneficial ownership” as determined in accordance with
                Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
                “Beneficial ownership” includes shares for which an individual, directly
                or indirectly, has or shares voting or investment power or both and
                also
                includes options which are exercisable within sixty days of the date
                hereof. The percentages are based upon 49,583,420 shares outstanding
                as of
                April 30, 2008. The percentages for each of those parties who hold
                options
                exercisable within 60 days of April 23, 2008 are based upon the sum
                of
                49,583,420 shares plus the number of unissued shares subject to such
                options held by each such party, as indicated in the following
                notes.


(2)
            Includes
                7,445 shares beneficially owned by Mr. Hunter’s spouse/child, as to
                which Mr. Hunter disclaims beneficial ownership, and 496,184 shares
                beneficially controlled as Trustee by Mr. Hunter’s pursuant to the
                Standard Management 401(k) Plan. Also includes 613,000 unissued shares
                subject to options exercisable within 60 days of April 23, 2008, and
                3,000,000 shares subject to an option to purchase outstanding shares
                from
                Sam Schmidt.


(3)
            Includes
                114,500 unissued shares subject to options exercisable within 60
                days of
                April 23, 2008, and 1,000,000 shares subject to an option to purchase
                outstanding shares from Sam Schmidt.


(4)
            Includes
                38,000 shares subject to options exercisable within 60 days of April
                23,
                2008, and 1,000,000 shares subject to an option to purchase outstanding
                shares from Sam Schmidt.


(5)
            Includes
                10,000 shares held by Mr. French’s family, as to which Mr. French
                disclaims beneficial ownership. Also includes 25,000 shares subject
                to
                options exercisable within 60 days of April 23,
                2008.


(6)
            Includes
                25,500 shares subject to options exercisable within 60 days of April
                23,
                2008.


(7)
            In
                March 2007, Mr. Sam Schmidt and certain investors related to Mr.
                Schmidt
                completed the purchase of 20,000,000 shares of stock at a purchase
                price
                of $.10 per share. Mr. Schmidt’s address is 2202 Chatsworth Court,
                Henderson, Nevada 89074. Includes an aggregate of 5,000,000 shares
                with
                respect to which Mr. Schmidt has granted options to Mr. Hunter, Dr.
                Knieser and Mr. Long.





**Item
      13.**  **Certain Relationships and Related Transactions, and Director
      Independence**





In
      October 1997, the Company made an interest-free loan to Mr. Hunter, Chairman,
      President and Chief Executive Officer, in the amount of $775,500.  The loan
      is repayable within 10 days of Mr. Hunter’s voluntary termination or resignation
      as our Chairman and Chief Executive Officer.  In the event of a termination
      of Mr. Hunter’s employment following a change in control, the loan is deemed to
      be forgiven.  As of December 31, 2007, all $775,500 remained outstanding
      under this loan. Pursuant to the Sarbanes- Oxley Act of 2002, the terms of
      this
      loan may not be amended.





In
      the
      fourth quarter of 2007, Mr. Hunter and Dr. Knieser advanced the Company $220,000
      on a non-interest, on demand basis for working capital
      requirements.




**Director
      Independence**





Our
      Board
      of Directors has determined that three of our six directors, Mssrs. Steane,
      French and King, are independent directors as defined in the listing standards
      of Nasdaq as currently in effect and satisfy the Nasdaq Marketplace Rules
      relating to financial literacy and experience (although we are no longer subject
      to the rules of Nasdaq). ****




29





**Item
      14. Principal Accountant Fees and Services**




The
      following table sets forth the fees paid to the Company’s independent registered
      public accounting firm, BDO Seidman, LLP:


2007
              
              2006Audit
                  fees
              
              **$**
              203,930
              
              $
              369,980Audit-related
                  fees
              
              
              21,635
              
              
              15,625Tax
                  fees
              
              
              __
              
              
              1,500All
                  other fees
              
              
              —
              
              
              —






***Audit
      Fees*** ** are
      fees
      for professional services rendered by our independent registered public
      accountants for the audit of our annual financial statements, review of our
      quarterly financial statements and services related to our filings of various
      proxy and registration statements.




***Audit-Related
      Fees*** ** are
      fees
      for professional services rendered by our independent registered public
      accountants for auditing of our employee benefit plan.




**** ***Tax
      Fees*** would be
      fees for professional services rendered by our independent registered public
      accountants for tax compliance, tax advice and tax planning. Services performed
      in this category would include the review of our federal income tax returns.




***All
      Other Fees*** would be
      fees for professional services not included in the first three categories.




Each
      of
      the above services was approved by our Audit Committee. Each engagement of
      the
      independent registered public accounting firm to perform audit or non-audit
      services must be approved in advance by our Audit Committee or by its Chairman
      pursuant to delegated authority.





30





**PART
      IV**




**Item
      15.**  **Exhibits
      and Financial Statement Schedules**




Exhibit
                No.
            
            ***Description
                of Document***3.1
            
            Amended
                and Restated Articles of Incorporation, as amended effective April
                21 2008
                (incorporated by reference to Exhibit 3.2 to the Company’s Current Report
                on Form 8-k filed April 25, 2008);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;10.3
            
            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);




31




Exhibit
              No.
            
            ***Description
                of Document***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
            
            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);10.12
            
            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);10.13
            
            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);10.14
            
            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);10.15
            
            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);10.16
            
            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);10.17
            
            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))10.18
            
            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));10.19
            
            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));10.20
            
            Letter
                Agreeement between the Company and Sam Schmidt dated February 20,
                2007
                (incorporated by reference to Exhibit 99.1 to the Company’s Current Report
                on Form 8-K filed March 1, 2007.10.21
            
            Stock
                and Real Estate Purchase Agreement among Sam Schmidt, the Company,
                U. S.
                Health Services Corporation, and Standard Development, LLC (incorporated
                by reference to Exhibit 2 to the Company’s Current Report on Form 8-K
                filed November 20, 2007).10.22
            
            Agreement
                to Terminate Stock and Real Estate Purchase Agreement, dated February
                6,
                2008, among Sam Schmidt, Standard Management Corporation, U.S. Health
                Services Corporation and Standard Develepment, LLC. Incorporated
                by
                reference to Exhibit 99.1 to Form 8-K filed February 8,
                2008;




32




Exhibit
              No.
            
            ***Description
                of Document***10.23
            
            Agreement
                (re: Deed in lieu of foreclosure), dated February 6, 2008, among
                Sam
                Schmidt, Standard Management Corporation, and Standard Development,
                LLC.
                Incorporated by reference to Exhibit 99.2 to Form 8-K filed February
                8,
                2008;10.24
            
            Agreement
                for Secured to Accept Collateral in Partial Satisfaction of Obligations,
                dated February 6, 2008, among Sam Schmidt, Standard Management
                Corporation, U.S. Health Services Corporation, and Standard Development,
                LLC. Incorporated by reference to Exhibit 99.3 to Form 8-K filed
                February
                8, 2008.


21
            
            List
                  of Subsidiaries of Standard Management.


31.1
            
            Certification
                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2003. 31.2
            
            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





**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) 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.




Date: May 15, 2008STANDARD
              MANAGEMENT CORPORATION/s/
                Ronald D. HunterRonald
              D. Hunter
              Director,
                Chairman, Chief Executive Officer and
                President




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below on March 30, 2006 by the following persons on behalf of the
      Registrant and in the capacities indicated.





KNOW
      ALL
      MEN BY THESE PRESENTS, that each person whose signature appears below
      constitutes and appoints Ronald D. Hunter and Phil McCool and each of them
      (with
      full power of each of them to act alone), his attorneys-in-fact and agents,
      with
      full power of substitution, for him and in his name, place and stead in any
      and
      all capacities, to sign any and all amendments to this Annual Report on Form
      10-K or any other instruments he deems necessary or appropriate, and to file
      the
      same, with all exhibits thereto and other documents in connection therewith,
      with the Securities and Exchange Commission, granting unto said
      attorneys-in-fact and agents, full power and authority to do and perform each
      and every act and thing requisite and necessary to be done as fully to all
      intents and purposes as he might or could do in person, hereby ratifying and
      confirming all that said attorneys-in-fact and agents or any of them may
      lawfully do or cause to be done by virtue thereof.




/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


/s/
              Sam
              SchmidtSam
              Schmidt
            
            Director


/s/
              Dennis
              King.Dennis
              King.
            
            Director


/s/
              Mark
              B.L.LongMark
              B.L.Long
            
            Director,
              Executive Vice President and Chief Operating
              Officer





34




ANNUAL
      REPORT ON FORM 10-K




ITEM
      8,
      ITEM 14(a)(1) AND (2),(c) AND (d)





FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA





LIST
      OF
      FINANCIAL STATEMENTS





and





FINANCIAL
      STATEMENT SCHEDULES





CERTAIN
      EXHIBITS





FINANCIAL
      STATEMENT SCHEDULES





Year
      Ended December 31, 2007





STANDARD
      MANAGEMENT CORPORATION





INDIANAPOLIS,
      INDIANA




F-1




**STANDARD
      MANAGEMENT CORPORATION AND SUBSIDIARIES**


**INDEX
      TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**AND
      FINANCIAL STATEMENT SCHEDULES**


**Page****Audited
                  Consolidated Financial Statements**Report
                  of Independent Registered Public Accounting Firm
              F-3Consolidated
                  Balance Sheets as of December 31, 2007 and 2006
              F-4Consolidated
                  Statements of Operations for the Years Ended December 31, 2007
                  and
                  2006
              F-5Consolidated
                  Statements of Shareholders' Deficit for the Years Ended December
                  31, 2007
                  and 2006
              F-6Consolidated
                  Statements of Cash Flows for the Years Ended December 31, 2007
                  and
                  2006
              F-7Notes
                  to Consolidated Financial Statements
              F-8




**Financial
      Statement Schedules**





All
      schedules for which provision is made in the applicable accounting regulations
      of the SEC are not required under the related instructions or are inapplicable
      and therefore have been omitted.




F-2


**Report
      of Independent Registered Public Accounting Firm**




Shareholders
      and Board of Directors


Standard
      Management Corporation


Indianapolis,
      Indiana





We
      have
      audited the accompanying consolidated balance sheets of Standard Management
      Corporation and subsidiaries (the “Company”) as of December 31, 2007 and 2006,
      and the related consolidated statements of operations, shareholders’ deficit,
      and cash flows for the years then ended. These financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audits included consideration of internal control
      over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements and schedule, assessing the accounting principles
      used
      and significant estimates made by management as well as evaluating the overall
      financial statement and schedule presentation. We believe that our audits
      provide a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Standard
      Management Corporation and subsidiaries as of December 31, 2007 and 2006, and
      the consolidated results of their operations and cash flows for the years then
      ended, in conformity with the accounting principles generally accepted in the
      United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As described in Note 1 to the
      consolidated financial statements, the Company has suffered recurring losses,
      has a working capital deficit, has transferred, sold or discontinued all
      operating businesses to provide working capital and reduce debt, and does not
      currently have any operating sources of cash flow or adequate financing to
      meet
      its near-term requirements. These matters raise substantial doubt about the
      Company’s ability to continue as a going concern. Management’s plans in regard
      to these matters are also described in Note 1. These consolidated financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.





As
      described in Note 2 to the consolidated financial statements, effective January
      1, 2006, the Company adopted the fair value method of accounting provisions
      of
      Statement of Financial Accounting Standards No. 123 (revised), “Share Based
      Payment.”




/s/
      BDO
      Seidman, LLP





Chicago,
      Illinois


May
      14,
      2008




F-3


**STANDARD
      MANAGEMENT CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


(dollars
      in thousands)


December
                  31**2007**
              
              2006**ASSETS**Current
                  assets:Cash
                  and cash equivalents
              
              **$**
              **-**
              
              $
              222Other
                  receivables
              
              
              **5**
              
              
              78Prepaid
                  and other current assets
              
              
              **127**
              
              
              512Assets
                  of discontinued operations (Notes 3 and 4)
              
              
              **2,036**
              
              
              6,617Total
                  current assets
              
              
              **2,168**
              
              
              7,429Property
                  and equipment, net (Note 9)
              
              
              **7,038**
              
              
              7,975Assets
                  held for sale
              
              
              **918**
              
              
              931Deferred
                  financing fees, net
              
              
              **731**
              
              
              1,263Officer
                  notes receivable (Note 10)
              
              
              **776**
              
              
              776Other
                  noncurrent assets
              
              
              **229**
              
              
              119Total
                  assets
              
              **$**
              **11,860**
              
              $
              18,493**LIABILITIES
                  AND SHAREHOLDERS' DEFICIT**Current
                  liabilities:Accounts
                  payable
              
              **$**
              **1,719**
              
              $
              1,441Accrued
                  interest
              
              
              **1,396**
              
              
              488Accrued
                  other expenses
              
              
              **2,896**
              
              
              553Current
                  portion of long-term debt (Note 5)
              
              
              **14,811**
              
              
              4,300Liabilities
                  of discontinued operations (Notes 3 and 4)
              
              
              **-**
              
              
              2,904Total
                  current liabilities
              
              
              **20,822**
              
              
              9,686Long-term
                  debt, less current portion (Note 5)
              
              
              **13,268**
              
              
              22,809Accrued
                  interest on subordinated notes (Note 5)
              
              
              **2,204**
              
              
              982Common
                  stock warrants (Note 7)
              
              
              **571**
              
              
              87Other
                  long-term liabilities
              
              
              **573**
              
              
              -Total
                  liabilities
              
              
              **37,438**
              
              
              33,564Shareholders'
                  deficit:Common
                  stock, no par value, and additional paid in capital, 200,000,000
                  sharesauthorized,
                  43,504,711 shares and 21,851,540 sharesissued
                  in 2007 and 2006, respectively (Note 7)
              
              
              **73,248**
              
              
              70,785Retained
                  deficit
              
              
              **(88,227**
              **)**
              
              (75,214
              )Treasury
                  stock, at cost, 2,840,173 shares
              
              
              **(10,829**
              **)**
              
              (10,829
              )Accumulated
                  other comprehensive income from continuing operations
              
              
              **230**
              
              
              187Total
                  shareholders' deficit
              
              
              **(25,578**
              **)**
              
              (15,071
              )Total
                  liabilities and shareholders' deficit
              
              **$**
              **11,860**
              
              $
              18,493


See
        accompanying notes to consolidated financial statements.
  F-4




**STANDARD
      MANAGEMENT CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


(dollars
      in thousands, except per share amounts **)**


Year
                  Ended December 31**2007**
              
              2006Net
                  revenues
              
              **$**
              **-**
              
              $
              -Cost
                  of revenues
              
              
              **-**
              
              
              -Gross
                  profit
              
              
              **-**
              
              
              -General
                  and administrative expenses
              
              
              **5,970**
              
              
              8,674Impacts
                  related to value of warrants and derivatives (Note 5)
              
              
              **1,985**
              
              
              71Depreciation
                  and amortization
              
              
              **512**
              
              
              725Building
                  impairment charges (Note 9)
              
              
              **564**
              
              
              -Operating
                  loss
              
              
              **(9,031**
              **)**
              
              **(9,470**
              **)**Other
                  income (loss), net
              
              
              **(102**
              **)**
              
              6,280Interest
                  expense
              
              
              **(3,321**
              **)**
              
              (4,806
              )Net
                  loss from continuing operations before income tax expense
                  (benefit)
              
              
              **(12,454**
              **)**
              
              (7,996
              )Income
                  tax expense (benefit)
              
              
              **-**
              
              
              -Net
                  loss from continuing operations (Notes 3 and 4)
              
              
              **(12,454**
              **)**
              
              (7,996
              )Loss
                  from discontinued operations
              
              
              **(559**
              **)**
              
              (11,425
              )Net
                  loss
              
              **$**
              **(13,013**
              **)**
              $
              (19,421
              )Loss
                  per share - basic and dilutedLoss
                  from continuing operations
              
              **$**
              **(0.35**
              **)**
              $
              (0.63
              )Loss
                  from discontinued operations
              
              **$**
              **(0.02**
              **)**
              
              (0.89
              )Net
                  loss
              
              **$**
              **(0.37**
              **)**
              $
              (1.52
              )Weighted
                  average shares outstanding
              
              
              **35,615,031**
              
              
              12,779,164


See
        accompanying notes to consolidated financial statements.
  F-5
  **STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF SHAREHOLDERS' DEFICIT**
 (dollars
        in thousands)


Total
              
              Common
                    stock
                  and
                    Additional
                  Paid
                    in Capital
              
              Retained
                  earnings
                  (deficit)
              
              Treasury
                  stock
              
              Accumulated
                    other
                  comprehensive
                  incomeBalance
                  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
              )
              
              187Comprehensive
                  loss:Net
                  loss
              
              
              **(13,013**
              **)**
              
              **-**
              
              
              **(13,013**
              **)**
              
              **-**
              
              
              **-**Change
                  in unrealized gain on securities
              
              
              **43**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **43**Comprehensive
                  loss
              
              
              **(12,970**
              **)**Stock-based
                  compensation expense
              
              
              **250**
              
              
              **250**
              
              
              **-**
              
              
              **-**
              
              
              **-**Sale
                  of common stock and warrants, net of issuance cost
              
              
              **2,209**
              
              
              **2,209**
              
              
              **-**
              
              
              **-**
              
              
              **-**Other
              
              
              **4**
              
              
              **4**
              
              
              **-**
              
              
              **-**
              
              
              **-**Balance
                  at December 31, 2007
              
              **$**
              **(25,578**
              **)**
              **$**
              **73,248**
              
              **$**
              **(88,227**
              **)**
              **$**
              **(10,829**
              **)**
              **$**
              **230**


See
        accompanying notes to consolidated financial statements.
  F-6
 **STANDARD
            MANAGEMENT CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
            STATEMENTS OF CASH FLOWS**
 (dollars
            in thousands)
  Year
                      Ended December 31**2007**
                  
                  2006**OPERATING
                      ACTIVITIES:**Net
                      loss
                  
                  **$**
                  **(13,013**
                  **)**
                  $
                  (19,421
                  )Net
                      loss from discontinued operations
                  
                  
                  **(559**
                  **)**
                  
                  (11,425
                  )Net
                      loss from continuing operations
                  
                  
                  **(12,454**
                  **)**
                  
                  (7,996
                  )Adjustments
                      to reconcile net loss to net cash used in operating
                      activities:Depreciation
                      and amortization
                  
                  
                  **512**
                  
                  
                  725Building
                      impairment
                  
                  
                  **564**
                  
                  
                  -Amortization
                      of deferred financing costs and debt discount
                  
                  
                  **1,023**
                  
                  
                  785Gain
                      on Trust Preferred exchange
                  
                  
                  **-**
                  
                  
                  (9,199
                  )Non-cash
                      stock compensation expense
                  
                  
                  **250**
                  
                  
                  37Impact
                      related to value of warrants and derivitives
                  
                  
                  **1,985**
                  
                  
                  (37
                  )Net
                      loss related to asset dispositions
                  
                  
                  **-**
                  
                  
                  2,307Change
                      in operating assets and liabilities, net of effect of business
                      dispositionsAccounts
                      receivable
                  
                  
                  **73**
                  
                  
                  (94
                  )Inventories
                  
                  
                  **463**
                  
                  
                  -Prepaid
                      and other current assets
                  
                  
                  **385**
                  
                  
                  701Accounts
                      payable
                  
                  
                  **278**
                  
                  
                  1,441Accrued interest
                      and expenses
                  
                  
                  **4,349**
                  
                  
                  283Other
                  
                  
                  **(3**
                  **)**
                  
                  369Net
                      cash used in operating activities of continuing operations
                  
                  
                  **(2,575**
                  **)**
                  
                  (10,678
                  )**INVESTING
                      ACTIVITIES:**Capital
                      expenditures
                  
                  
                  **-**
                  
                  
                  (30
                  )Refund
                      of proceeds from sale of Standard Life
                  
                  
                  **-**
                  
                  
                  (300
                  )Proceeds
                      from sale of assets
                  
                  
                  **-**
                  
                  
                  1,083Redemption
                      of preferred stock
                  
                  
                  **-**
                  
                  
                  1,500Cash
                      paid for pharmacy acquisitions, net of cash acquired
                  
                  
                  **-**
                  
                  
                  -Cash
                      received for sale of businesses
                  
                  
                  **476**
                  
                  
                  16,164Change
                      in other noncurrent assets, net
                  
                  
                  **-**
                  
                  
                  -Net
                      cash provided by (used in) investing activities of continuing
                      operations
                  
                  
                  **476**
                  
                  
                  18,417**FINANCING
                      ACTIVITIES:**New
                      borrowings
                  
                  
                  **1,069**
                  
                  
                  10,609Net
                      cash received from (provided to) discontinued operations
                  
                  
                  **685**
                  
                  
                  (4,027
                  )Purchase
                      of common stock for treasury
                  
                  
                  **-**
                  
                  
                  (2,928
                  )Proceeds
                      from sale of stock and warrants, net of issuance costs
                  
                  
                  **2,209**
                  
                  
                  439Deferred
                      financing costs paid
                  
                  
                  **(335**
                  **)**
                  
                  (351
                  )Repayments
                      of long-term debt
                  
                  
                  **(1,751**
                  **)**
                  
                  (12,111
                  )Net
                      cash provided by (used in) financing activities of continuing
                      operations
                  
                  
                  **1,877**
                  
                  
                  (8,369
                  )Net
                      cash provided by (used in) operating activities of discontinued
                      operations
                  
                  
                  **(559**
                  **)**
                  
                  1,499Net
                      cash provided by (used in) investing activities of discontinued
                      operations
                  
                  
                  **(26**
                  **)**
                  
                  (51
                  )Net
                      cash provided by (used in) financing activities of discontinued
                      operations
                  
                  
                  **685**
                  
                  
                  (4,027
                  )Net
                      decrease in cash and cash equivalents of discontinued
                      operations
                  
                  
                  **100**
                  
                  
                  (2,580
                  )Total
                      increase (decrease) in cash and cash equivalents
                  
                  
                  **(122**
                  **)**
                  
                  (3,211
                  )Net
                      increase (decrease) in cash and cash equivalents of discontinued
                      operations
                  
                  
                  **100**
                  
                  
                  (2,580
                  )Net
                      increase (decrease) in cash and cash equivalents of continuing
                      operations
                  
                  
                  **(222**
                  **)**
                  
                  (631
                  )Cash
                      and cash equivalents of continuing operations at beginning
                      of
                      year
                  
                  
                  **222**
                  
                  
                  853Cash
                      and cash equivalents of continuing operations at end of
                      year
                  
                  **$**
                  **-**
                  
                  $
                  222


See
        accompanying notes to consolidated financial statements.


F-7




**STANDARD
      MANAGEMENT CORPORATION AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007**





**Note
      1 - Basis of Presentation**





Standard
      Management Corporation (“Standard Management”) 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 and
      b)
      healthcare and supportive services businesses to provide care to individuals
      in
      their homes .





The
      Company had previously operated several pharmacies and an insurance business.
      The insurance business was sold in 2005 and, as more fully described in Note
      3,
      the Company has sold, closed and transferred (or intends to transfer) 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 2007 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.





The
      Company has incurred recurring significant losses, which have resulted in a
      shareholders’ deficit balance of approximately $25.6 million as of December 31,
      2007, 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 December 31, 2007, the Company had a working
      capital deficit of approximately $18.7 million, of which $14.8 million is
      outstanding debt due or currently callable in 2008 - $8.2 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.





The
      Company’s plans include the acquisition of institutional pharmacies and home
      care businesses through UHCC and Newco. The Company expects to fund these
      acquisitions with proceeds from lenders and investors in these subsidiaries.
      The
      Company’s ownership will be determined as investors provide necessary capital.
      Standard Management has already entered into an agreement with UHCC and plans
      to
      do so with Newco under which Standard Management will be engaged as an investor
      and manager of each of the acquired businesses and will thereby earn management
      fees and other sources of compensation from those businesses. The Company
      expects that this new investment and financial structure will provide adequate
      financial support to complete its development plans.





Included
      in noncurrent other assets are $133,000 of deferred costs related to potential
      future debt and equity financings and acquisitions. Management has reassessed
      each possible future transaction as of December 31, 2007 and continues to
      believe that such transactions may occur. However, circumstances can change
      and
      the Company may have to ultimately write off these deferred costs if the related
      transaction is not consummated. During 2007 and 2006, the Company did expense
      $706,000 and $1,325,000, respectively, of such costs as part of other income
      (expense) when management determined that the related transaction would not
      be
      consummated.





F-8




**Note
      2 - Summary of Significant Accounting Policies**





***Cash
      Equivalents***




Short-term
      investments that have a maturity of 90 days or less at acquisition are
      considered cash equivalents. Investments in cash equivalents are carried at
      cost, which approximates fair value.





***Concentration
      of Credit Risk***




Financial
      instruments that potentially subject the Company to credit risk consist
      principally of interest-bearing cash and cash equivalents and accounts
      receivable when such instruments are included in continuing
      operations.





The
      Company is exposed to credit risk in the event of default by the financial
      institutions or issuers of cash and cash equivalents to the extent recorded
      on
      the balance sheet. At any given point in time, the Company may have cash on
      deposit with financial institutions, and cash invested in high quality
      short-term money market funds and U.S. government-backed repurchase agreements,
      generally having original maturities of three months or less, in order to
      minimize its credit risk.





***Property
      and Equipment***




Property
      and equipment is stated at cost, less accumulated depreciation. Depreciation
      is
      provided using the straight-line method in amounts considered sufficient to
      amortize the cost of the assets to operations over their estimated service
      lives
      or lease terms which range from three to ten years for equipment and leasehold
      improvements and 40 years for our headquarters building which represents our
      most significant asset in this category.





Long-lived
      assets or groups of assets are tested for recoverability whenever events or
      changes in circumstances indicate that the Company may not be able to recover
      the asset’s carrying amount. When events or changes in circumstances dictate an
      impairment review of a long-lived asset or group, the Company will evaluate
      recoverability and determine whether the undiscounted cash flows expected to
      result from the use and eventual disposition of that asset or group cover the
      carrying value at the evaluation date. If the undiscounted cash flows are not
      sufficient to cover the carrying value, the Company will measure any impairment
      loss as the excess of the carrying amount of the long-lived asset or group
      over
      its fair value (generally determined by a discounted cash flows model or
      independent appraisals).





***Assets
      Held For Sale***




Assets
      held for sale represent investment properties and improvements carried at the
      lower of cost or fair value.





***Deferred
      Financing Costs***




Financing
      costs are deferred and amortized on a straight-line basis when it approximates
      the effective interest method or otherwise, on the effective interest rate
      method, over the terms of the related debt.





***Legal
      fees***




Upon
      identification of litigation matters against the Company that are likely to
      result in significant defense costs, the Company, based on discussions with
      internal and external counsels, estimates and provides for the expected defense
      costs.





***Income
      Taxes***




Income
      tax assets and liabilities are recognized for the estimated future tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective tax
      basis and for estimated tax credit carry forwards. Deferred income tax assets
      and liabilities are measured using enacted income tax rates in effect for the
      year in which those temporary differences are expected to be recovered or
      settled. The effect on deferred income tax assets and liabilities of a change
      in
      income tax rates is recognized in income in the period in which the change
      is
      enacted. A
      valuation reserve is recognized based on the evidence available, if it is more
      likely than not that some portion or the entire deferred income tax asset will
      not be realized.





The
      Company files a consolidated return for federal income tax
      purposes.





F-9




**Note
      2 - Summary of Significant Accounting Policies (continued)**





***Net
      Loss Per Common Share***




Basic
      earnings (loss) per share are computed based on the weighted-average number
      of
      shares of common stock outstanding during the period. Diluted earnings (loss)
      per share are calculated in a similar manner consistent with basic earnings
      (loss) per share but also include the dilutive effect of the assumed exercise
      of
      stock options and warrants under the treasury stock method as well as the effect
      of convertible notes using the if converted method. As the Company reported
      losses for each period presented herein, no common stock equivalents were
      considered in the related computation of diluted loss per share. Common stock
      equivalents outstanding as of December 31, 2007, and 2006 were convertible
      or
      exercisable into 246,095,792 and 55,371,942 shares, respectively.





***Stock
      Option Plans*** ******




Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      (“SFAS”) No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”), applying
      the modified prospective method. Prior to the adoption of SFAS 123(R), the
      Company applied the provisions of SFAS No. 123, Accounting for Stock Based
      Compensation (“SFAS 123”), as amended, allowing companies to either expense the
      estimated fair value of stock options or to continue the earlier practice of
      accounting for stock options at intrinsic value and disclose the pro forma
      effects on net income and earnings per share had the fair value of the options
      been expensed. Upon adoption of SFAS 123(R) and applying the modified
      prospective method, SFAS(R) applies to new awards and to awards that were
      outstanding as of December 31, 2005 that are subsequently vested, modified,
      repurchased or cancelled. Compensation expense recognized during the year ended
      December 31, 2006 includes the portion vesting during the period for all
      share-based awards granted prior to, but not yet vested as of December 31,
      2005,
      based on the grant date fair value estimated in accordance with SFAS 123. There
      were no new awards granted during the years ended December 2007 and 2006, other
      than a March 2007 award issued to certain executives of the Company by a major
      shareholder. Stock compensation expense of $250,000 and $38,000 was recognized
      during the years ended December 31, 2007 and 2006, respectively, on the
      shareholder grant, and on existing stock option awards. As a result of the
      Company’s decision to adopt the modified prospective method, prior period
      results have not been restated. There are no unvested awards outstanding as
      of
      December 31, 2007.





In
      addition, the Company does not estimate any forfeitures as it expects future
      forfeitures to be minimal.





SFAS
      123
      (R) also requires the benefits of tax deductions in excess of recognized
      compensation costs to be reported as cash flows for financing activities rather
      than as cash flows from operations. The Company has had no net income impact
      related to stock compensation expense or exercising of stock options primarily
      due to the Company maintaining a full valuation allowance against its net
      deferred income tax assets.





***Use
      of Estimates***




The
      preparation of financial statements in conformity with generally accepted
      accounting practices 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.





***Fair
      Value of Financial Instruments***




The
      carrying value of all financial instruments such as accounts and notes
      receivable, accounts payable and accrued expenses are reasonable estimates
      of
      their fair value because of the short maturity of these items. See Note 5 for
      estimates of the fair value of the Company’s debt instruments. Warrants and
      certain derivative instruments embedded in convertible debt agreements are
      carried as liabilities at their fair values.





The
      following policies primarily relate to our discontinued operations and are
      expected to be followed for our future operations.





***Revenue
      Recognition / Contractual Allowances***




Revenues
      were recognized at the time services or products were provided or delivered
      to
      the customer. Upon delivery of products or services, the Company had no
      additional performance obligations to the customer. The Company received
      payments through reimbursement from private third-party insurers, long-term
      care
      facilities, and Medicaid and Medicare programs and directly from individual
      residents (private pay).





F-10




**Note
      2 - Summary of Significant Accounting Policies (continued)**





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





***Allowance
      for Doubtful Accounts***




The
      Company utilized the “Aging Method” to evaluate the adequacy of its allowance
      for doubtful accounts. This method is based upon applying estimated standard
      allowance requirement percentages to each accounts receivable aging category
      for
      each type of payer. The Company had developed estimated standard allowance
      requirement percentages by utilizing historical collection trends and its
      understanding of the nature and collectability of receivables in the various
      aging categories and the various payers of the Company’s business. The standard
      allowance percentages were developed by payer type as the accounts receivable
      from each payer type had unique characteristics. The allowance for doubtful
      accounts was determined utilizing the Aging Method described above while also
      considering accounts specifically identified as doubtful. Accounts receivable
      that Company management specifically estimated to be doubtful, based upon the
      age of the receivables, the results of collection efforts, or other
      circumstances, were reserved for in the allowance for doubtful accounts until
      they were collected or written-off.





Management
      believes the assumptions used in the Aging Method suggested the allowance for
      doubtful accounts was adequate. However, because the assumptions underlying
      the
      Aging Method were based upon historical data, there was a risk that the
      Company’s current assumptions were not reflective of future collection patterns.
      Changes in overall collection patterns can be caused by market conditions and/or
      budgetary constraints of government funded programs such as Medicare and
      Medicaid. Such changes can adversely impact the collectability of receivables,
      but might not have been addressed in a timely fashion when using the Aging
      Method, until updates to the Company’s periodic historical collection studies
      were completed and implemented.





At
      least
      annually, the Company updated its 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 were
      implemented immediately. Changes to these assumptions could have had a material
      impact on the Company’s bad debt expense.





***Inventories
      and Cost of Revenues***




Inventories,
      consisting of pharmaceuticals, medical supplies and equipment, were stated
      at
      the lower of cost or market. Cost was determined primarily on the first-in,
      first-out method.





Counts
      of
      inventories on hand were performed at least on a quarterly basis. Because the
      Company did not utilize a perpetual inventory system on a significant percentage
      of its inventory, cost of goods sold, a component of cost of revenues, was
      estimated using the latest acquisition cost and adjusted to actual by recording
      the results of the quarterly count of actual physical inventories.





Recorded
      obsolescence allowances were not significant since the Company wrote off all
      expired inventories and the Company had the ability to return a majority of
      its
      inventory before expiration.





Cost
      of
      revenue included the net product costs of pharmaceuticals sold and direct
      charges attributable to providing revenue-generating services.





***Intangible
      Assets***




Intangible
      assets were all amortized over their estimated useful lives of seven **** years
      for
      customer lists, seven years for trademarks and three years for non-compete
      agreements.





F-11





***Other
      Non-current Asset and Liabilities***




Other
      non-current assets primarily represented fixed maturity securities and equity
      investments in support of insurance policy liabilities the Company continued
      to
      retain after the sale of its Financial Services operations in 2005. Gross
      unrealized gains and losses were not material. Changes in the fair value of
      these available for sale securities, other than impairments deemed to be other
      than temporary, were reported as other comprehensive income (loss).





**Note
      3 - Discontinued Operations - Pharmacy Services**





During
      2002 through 2005, the Company acquired several pharmacy operations, all of
      which have now been sold, discontinued or transferred as described below. Some
      of these acquired businesses include “Rainier”, “Holland”, “PCA”, “Long-term
      Rx”, “Royal Med”, “HomeMed” and “Precision”.





On
      August
      11, 2006, the Company sold certain rights, properties and assets of Rainier
      and
      Holland to Omnicare, Inc. (“Omnicare”). At the closing, Omnicare agreed to pay
      the Company an aggregate purchase price of up to $13.2 million and assumed
      certain liabilities of Rainier and Holland valued at $750,000. Of the purchase
      price, (1) $12.0 million in cash was paid by Omnicare at the closing, (2)
      $700,000 was held back pending a potential post-closing adjustment to be
      measured against a specified historical value of the purchased net assets ,
      and
      (3) up to $520,000 could have been earned based on a calculation defined in
      the
      sales agreement.. The Company also agreed to grant Omnicare a three year right
      of first refusal for the purchase of any other pharmacy businesses of the
      Company. The Company recorded an original loss on the sale of $3.6 million,
      including its estimate of the eventual holdback payment to be received or paid
      and without consideration of the contingent purchase price of
      $520,000.





Concurrently
      with the sale of Rainier and Holland, on August 11, 2006, the Company entered
      into a Settlement Agreement with John Tac Hung Tran, Cynthia J. Wareing-Tran
      and
      The Jonathan Tran Irrevocable Trust (collectively, the “Trans”), who were the
      former owners of Rainier. The Settlement Agreement resolved all disputes among
      the parties with respect to, among other matters, a promissory note granted
      by
      the Company to the Trans as part of the consideration for the acquisition,
      the
      amount of bonus and earn-out payments owed to Mr. Tran under the terms of his
      Employment Agreement with Rainier and certain leases entered into with the
      Trans
      as part of the acquisition. Under the settlement, the Company has paid the
      Trans
      approximately $5.5 million, of which approximately $1.5 million was for the
      repayment of the promissory note, $1.0 million for the disputed earn-out
      payments, $150,000 for the disputed bonus payment, $2.5 million to redeem all
      762,195 shares of common stock of the Company issued to the Trans as part of
      the
      acquisition at their guaranteed price, and $310,000 to redeem all of the shares
      purchased by the Trans and other associates of the Trans in May 2006 as part
      of
      the Company’s private placement at the acquisition price. In exchange for this
      payment, the Company received a full and absolute release of any and all claims
      and liens made by the Trans against the Company. The Company also agreed to
      release the Trans from any and all claims it had against them pertaining to
      these matters. Finally, the Company agreed to dismiss with prejudice all
      litigation currently pending pertaining to these matters. The $1.150 million
      of
      earn-out and bonus payments are reflected as expenses of discontinued operations
      in the year ended December 31, 2006.




On
      July
      25, 2006, the Company sold the assets of PCA to Indiana Life Sciences (a company
      owned by one of the Company’s executive officers) for $1 and a commitment to
      purchase $100,000 of the Company’s common stock through a private placement
      offering. That investment was made in July 2006. The Company recorded a loss
      on
      the sale of $428,000.




On
      October 20, 2006, the Company completed the sale of certain rights, properties
      and assets of Long Term Rx to Omnicare, Inc. The contract purchase price was
      for
      $5.1 million. Of the purchase price, (1) $4.2 million in cash was paid by
      Omnicare at the closing, (2) $750,000 was held back pending a potential
      post-closing adjustment to be measured against a specified historical value
      of
      the purchased net assets, and (3) up to $225,000 could have been made based
      on a
      calculation defined in the sale agreement. The Company recorded an original
      gain
      on the sale of $.6 million including its estimate of the eventual holdback
      payment to be received or paid and without consideration of the contingent
      purchase price of $225,000, and after an expense related to the buy out of
      a
      portion of the remaining lease for space no longer needed at the Company’s
      operating facility in Indianapolis.




F-12




**Note
      3 - Discontinued Operations - Pharmacy Services**





Based
      on
      ongoing correspondence regarding the final determination of the holdbacks for
      both Rainier and Long Term Rx, the Company has, as of December 31, 2006, reduced
      their holdback receivables from Omnicare to management’s best estimate of the
      ultimate settlement of these amounts. The related adjustment is included as
      an
      additional loss on the respective sales. The December 31, 2006 estimated
      receivable has yet to be settled or adjusted. Future adjustments based on
      continuing negotiations are not expected to be material.




In
      November 2006, the Company sold RoyalMed for $75,000, recognizing a loss on
      sale
      of $.2 million.




Subject
      to management’s decision in late 2006 to sell a portion of the Company’s 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 writedown 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
      December 31, 2007, will be paid in due course.




At
      February 6, 2008, the Company was in default on a note due to Mr. Sam Schmidt.
      Mr. Schmidt is one of the Company’s directors and is its largest shareholder.
      The collateral under the note included a pledge of the Company’s 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 its 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 its
      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.





F-13




The
      following tables summarize the financial position and operating results of
      our
      discontinued pharmacy operations as of and for the years ended on the dates
      indicated (in thousands):


2007
              
              2006Current
                  assets
              
              $
              128
              
              $
              2,151Investment
                  in unconsolidated subsidiary
              
              
              1,556
              
              
              -Property
                  and equipment, net
              
              
              -
              
              
              585Intangible
                  assets, net
              
              
              -
              
              
              2,382Current
                  liabilities
              
              
              -
              
              
              1,821Net
                  assets of discontinued operations
              
              $
              1,684
              
              $
              6,939Year
                  ended December 31,2007
              
              2006Net
                  revenues
              
              $
              7,681
              
              $
              38,139Cost
                  of sales
              
              
              5,674
              
              
              27,386Selling,
                  general and administrative expenses
              
              
              2,141
              
              
              12,776Depreciation
                  and amortization
              
              
              86
              
              
              1,473Impairment
                  charges and (gain) loss on sale
              
              
              79
              
              
              7,422Loss
                  of unconsolidated subsidiary
              
              
              33
              
              
              -Interest
                  expense
              
              
              120
              
              
              184Net
                  loss from discontinued operations
              
              $
              (452
              )
              $
              (11,102
              )




**Note
      4 - Discontinued Operations - Other**





In
      addition to the discontinued pharmacy operations, the Company also, in late
      2007, discontinued the ancillary insurance operations it retained after selling
      its Financial Services business in 2005. This business, called Premier Life,
      had
      been operated out of the Company’s Bermuda subsidiary, the shares of which were
      pledged as collateral under a note agreement. Similar to the Precision situation
      described above, the Company ceded all voting rights in these shares to the
      lender and accordingly, has deconsolidated this business and reflected it as
      an
      Investment in Unconsolidated Subsidiary, a component of Assets of Discontinued
      Operations, as of December 31, 2007. Ultimately, the Company expects to pass
      title to these shares to the lender to settle the related debt or sell the
      business, which consists of only a few life insurance policies and various
      investments held in support of those policy liabilities, and use the sales
      proceeds to settle the debt. Based on the carrying values of the investments
      (which are at fair value) and the estimated policy liabilities, the Company
      determined that the net carrying value of the business exceeded the likely
      ultimate debt, interest and fee obligation to this lender.





The
      carrying value of this business’ assets and liabilities was $1.4 million and
      $1.1. million, respectively, as of December 31, 2007 and $1.5 million and $1.1
      million, respectively, as of December 31, 2006. Net income (loss) from this
      business was ($.1 million) and breakeven for 2007 and 2006,
      respectively.





The
      2006
      net loss from discontinued operations also includes a $300,000 loss related
      to a
      settlement regarding the sale of the Company’s Financial Services operations in
      2005.





F-14




**Note** **5
      - Indebtedness**





The
      Company’s long-term debt was as follows (dollars in thousands):


Interest
                Rate
                  (1)
              
              **December
                  31**
                **2007**
              
              December
                  31
                2006Mortgages
                  payable
              
              
              11.75
              %
              **$**
              **5,644**
              
              $
              5,701Promissory
                  notes
              
              
              13.93
              %
              
              **1,009**
              
              
              1,7957%
                  convertible notes
              
              
              7.00
              %
              
              **3,300**
              
              
              3,3006%
                  convertible notes
              
              
              6.00
              %
              
              **-**
              
              
              2,75010%
                  notes
              
              
              10.00
              %
              
              **2,500**
              
              
              -6%
                  notes
              
              
              6.00
              %
              
              **250**
              
              
              -Laurus
                  convertible notes
              
              
              9.25
              %
              
              **2,401**
              
              
              2,401Subordinated
                  debentures
              
              
              10.25
              %
              
              **9,577**
              
              
              9,5772006
                  6% convertible notes
              
              
              6.00
              %
              
              **1,282**
              
              
              1,3002007
                  8% convertible notes
              
              
              8.00
              %
              
              **250**
              
              
              -Accrued
                  interest subordinated debentures
              
              
              
              
              
              **2,204**
              
              
              982Derivities
                  embedded in 2007 and 2006 notes
              
              
              
              
              
              **3,409**
              
              
              1,685Capital
                  lease obligations
              
              
              
              
              
              **2**
              
              
              77Total
                  indebtedness
              
              
              
              
              
              **31,828**
              
              
              29,568Less
                  debt discount on convertible notes
              
              
              
              
              
              **1,545**
              
              
              1,477Less
                  accrued interest subordinated debentures
              
              
              
              
              
              **2,204**
              
              
              982Less
                  current portion
              
              
              
              
              
              **14,811**
              
              
              4,300Total
                  long-term debt, less current portion
              
              
              
              
              **$**
              **13,268**
              
              $
              22,809(1)
                  Weighted average interest rate


Mortgages
      payable primarily represents a promissory note in the amount of $5.5 million
      due
      June 30, 2008, secured by the Company’s corporate headquarters building. Due to
      a continuing default caused by late monthly principal and interest payments,
      the
      Company has essentially promised to transfer ownership of the building to the
      lender in full satisfaction of the outstanding principal and interest due.
      This
      transfer is expected to occur in late May 2008. The Company expects to then
      lease 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 to be settled with
      its transfer to the lender, the Company recorded a $.6 million impairment charge
      in December 2007.





The
      Company has various unsecured promissory notes primarily related to the
      acquisitions of various healthcare companies all of which are due or callable
      due to defaults in 2008. Additionally, the Company had a 2006 $1.5 million
      note
      at 10.25% interest due to its then primary vendor, which was fully paid off
      in
      early 2007.


Also,
      on
      August 17, 2007, the Company issued to an individual a $200,000 note at a rate
      of interest of 12% secured by the stock of Premier Life, a wholly owned
      subsidiary of the Company, which was due, but not paid, on September 28, 2007.
      As described in Note 4, 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.





On
      February 10, 2004, the Company issued $3.3 million of 7% unsecured convertible
      notes due in full in 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.




On
      November 30, 2004, the Company issued $2.75 million of 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 3, the
      Company, in February 2008, settled this $2.5 million note and related accrued
      interest by transferring ownership of its Precision subsidiary to the lender.




F-15




**Note
      5 Indebtedness (continued)**




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 a floor of 7.25%, unless such 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
      December 31, 2007, 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.





On
      August
      9, 2001, SMAN 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
      March
      8, 2006, the Company announced its intention to defer distributions on the
      Trust
      Preferred Securities. The deferral, which began with the distribution date
      scheduled for March 31, 2006, is expected to continue for up to five years.
      All
      unpaid distributions will accrue interest at the rate of 10.25% per annum until
      paid by the Company. Deferred distributions as of December 31, 2007 and 2006
      were $2,204,000 and $982,000, respectively.





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 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.




On
      April
      13, 2006, the Company entered into a senior loan agreement with one of the
      officers of a recently acquired company for $2.8 million at an interest rate
      of
      8.25% per annum due April 13, 2008. Additionally, the Company issued warrants
      exercisable for 100,000 shares of the Company’s common stock. Such warrants are
      exercisable for seventy three cents ($0.73) per share. This note was paid in
      full in July 2006.





On
      July
      27, 2006, the Company entered into a senior loan in favor of an individual,
      who,
      until the issuance, was a member of the Company’s board of directors, in the
      principal amount of $2.8 million at an interest rate of 12.0% per annum due
      no
      later than September 15, 2006. The proceeds from this note were used to retire
      the $2.8 million senior loan issued on April 13, 2006. On August 11, 2006,
      the
      Company repaid the sum of $3.1 million, including all but $500,000 of the senior
      note and facility fees of $750,000.  A second senior loan of $500,000 with
      similar terms was made on September 28, 2006. Both senior notes were paid,
      along
      with an additional $200,000 of tender and facility fees, in late October 2006.
      From October 2006 through December 31, 2006, an additional $715,000 of similar
      notes at interest rates of 12% were issued to this same lender and paid along
      with $143,000 of facility fees (expensed in 2006) in early 2007. The outstanding
      balance of these notes as of December 31, 2006 are included in promissory notes
      in the above table. These notes are now paid in full.





On
      September 8, 2006, 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 2007
      statement of operations.


F-16





**Note
      5 Indebtedness (continued)**





The
      conversion provisions and the various call and other provisions that are based
      on the Company’s common stock price which are included in the agreements related
      to the above debt represent financial instruments that must be accounted for
      as
      derivatives and the value of which 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.




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 Company’s common stock. The 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.




Additionally,
      due to the nature of the related conversion feature of these 2006 6% convertible
      notes, all of the Company’s previously-outstanding warrants that had been
      classified as equity instruments were required to be reclassified as liabilities
      at their estimated values as of the date of the note issuance. That estimated
      value of $264,000 was reclassified out of equity into a long-term liability.




The
      Company also issued to these same lenders unrelated unsecured notes in October
      2007 for $250,000 due October 2010 with an interest rate of 8% and conversion
      features identical to those described above. Additionally,
      this new $250,000 debt issuance included the issuance of warrants to purchase
      an
      aggregate of 15,000,000 shares of the Company’s common stock. The warrants were
      immediately exercisable at a price of $0.008 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
      $1,261,000 as of their issuance date and are reflected as separate long-term
      liabilities of the Company.





The
      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.




F-17




**Note
      5 Indebtedness (continued)**




During
      2007, $24,000 of debt and related unpaid interest was converted into 402,619
      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.




The
      above
      convertible debt was in 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
      February 1, 2008, will bear stated interest at 10% per annum.




Of
      the
      $13.3 million of debt classified as non-current as of December 31,
      2007, $3.4 million represents the value of embedded derivatives, a negative
      $1.2 million represents unamortized debt discount and $11.1 million is debt
      principal.  This principal is due as scheduled in 2009 ($1.3 million), 2010
      ($.2 million) and 2031 ($9.6 million).




Interest paid
      for
      the years ended December 31, 2007, and 2006, was $.7 million and $4.9 million,
      respectively.




The
      fair
      values of debt instruments shown below are estimated using discounted cash
      flow
      analyses and interest rates currently being offered for similar loans to
      borrower with similar credit ratings at December 31 (dollars in
      thousands).


**2007**
              
              **2006****Fair**
              
              **Carrying**
              
              Fair
              
              Carrying**Value**
              
              **Amount**
              
              Value
              
              AmountMortgages
                  payable
              
              **$**
              **5,644**
              
              **$**
              **5,644**
              
              **$**
              **6,386**
              
              **$**
              **5,701**Promissory
                  notes
              
              
              **1,009**
              
              
              **1,009**
              
              
              **1,484**
              
              
              **1,795**2004
                  6% convertible notes
              
              
              **-**
              
              
              **-**
              
              
              **2,750**
              
              
              **2,750**10%
                  notes
              
              
              **2,500**
              
              
              **2,500**
              
              
              **-**
              
              
              **-**6%
                  notes
              
              
              **250**
              
              
              **250**
              
              
              **-**
              
              
              **-**2004
                  7% convertible notes
              
              
              **3,053**
              
              
              **3,300**
              
              
              **3,002**
              
              
              **3,300**Laurus
                  convertible notes
              
              
              **2,401**
              
              
              **2,401**
              
              
              **2,225**
              
              
              **2,401**Subordinated
                  debentures
              
              
              **144**
              
              
              **9,577**
              
              
              **575**
              
              
              **9,577**2006
                  6% convertible notes
              
              
              **1,141**
              
              
              **1,282**
              
              
              **1,300**
              
              
              **1,300**2007
                  8% convertible note
              
              
              **250**
              
              
              **250**
              
              
              **-**
              
              
              **-**Accrued
                  interest subordinated debentures
              
              
              **2,204**
              
              
              **2,204**
              
              
              **982**
              
              
              **982**Derivative
                  embedded in notes
              
              
              **1,833**
              
              
              **1,833**
              
              
              **1,685**
              
              
              **1,685**Capital
                  lease obligations
              
              
              **2**
              
              
              **2**
              
              
              **77**
              
              
              **77**Total
                  indebtedness
              
              **$**
              **20,431**
              
              **$**
              **30,252**
              
              **$**
              **20,466**
              
              **$**
              **29,568**


**Note
      6 - Income Taxes**





The
      components of the Company’s income tax expense or benefit applicable to pre-tax
      losses from continuing operations were zero for the years ended December 31,
      2007 and 2006 due to taxable losses in each such year and a 100% valuation
      allowance against all resulting net deferred income tax assets. The Company
      determined to carry a full valuation allowance after considering the
      availability of taxable income in prior carry back years, tax planning
      strategies, and the likelihood of future taxable income exclusive of reversing
      temporary differences and carry forwards. If or when the Company becomes
      profitable, management may determine that all or a portion of this valuation
      allowance is not required and, if so, the Company will record benefits, which
      could be substantial, in the period such determinations are made.




F-18





As
      of
      December 31, 2007, the Company had consolidated net operating loss carry
      forwards of approximately $ 6.1 million for tax return purposes, which expire
      in
      2027. As a result of the Company’s issuance of common stock in March 2007 and
      resulting changes in ownership, the Company effectively lost the ability to
      use
      of the loss carry-forwards accumulated prior to March 2007. The December 31,
      2007 carry forwards represent losses accumulated since the March 2007 change
      in
      control.




The
      effective income tax rate on pre-tax loss from continuing operations differs
      from the statutory corporate federal income tax rate as follows for the years
      ended December 31 (in thousands):


**2007**
              
              2006Federal
                  income tax expense at statutory rate (34%)
              
              **$**
              **(4,234**
              **)**
              $
              (2,719
              )State
                  income tax expense, net of federal benefit
              
              
              **(328**
              **)**
              
              (211
              )Increase
                  in valuation allowance
              
              
              **4,562**
              
              
              2,930Federal
                  income tax expense (benefit)
              
              **$**
              **-**
              
              $
              -Effective
                  tax rate
              
              
              **0**
              **%**
              
              0
              %





Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts used for tax return purposes and tax loss carryforwards. Temporary
      differences included in the Company’s deferred income tax assets (liabilities)
      are as follows at December 31 (in thousands):


Deferred
                  income tax assets:Net
                  operating loss ("NOL") carryforwards
              
              **$**
              **2,316**
              
              $
              22,800Capital
                  loss carryforwards
              
              
              **-**
              
              
              8,360Other,
                  principally deferred interest
              
              
              **2,441**
              
              
              400Gross
                  deferred income tax assets
              
              
              **4,757**
              
              
              31,560Valuation
                  allowance for deferred income tax assets
              
              
              **4,757**
              
              
              31,560****
              
              **$**
              **-**
              
              $
              -





In
      July
      2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
      No. 48 regarding “Accounting for Uncertainty in Income Taxes,” an interpretation
      of FASB No. 109 (“FIN 48”), which defines the threshold for recognizing the
      benefits of tax-return positions in the financial statements as
“more-likely-than-not” to be sustained by the taxing authorities. The Company
      has reviewed its tax positions for open tax years 2004 and later and the
      adoption of FIN 48 on January 1, 2007 did not result in establishing a
      contingent tax liability reserve nor a corresponding charge to retained
      earnings. Also, no such uncertainties were identified during 2007. The Company
      has substantial tax benefits derived from its operating loss carryforwards
      but
      has provided 100% valuation allowances against them due to uncertainties
      associated with the realization of those tax benefits.





The
      recognition and measurement of certain tax benefits includes estimates and
      judgment by management and inherently includes subjectivity. Changes in
      estimates may create volativity in the Company’s effective tax rate in future
      periods from obtaining new information about particular tax positions that
      may
      cause management to change its estimates. If the Company would establish a
      contingent tax liability reserve, interest and penalties related to uncertain
      tax positions would be classified in general and administrative
      expenses.





**Note
      7** *-* **Warrants,
      Common Shares and Treasury Shares**





***Warrants***





Historically,
      the Company has issued warrants to purchase common stock (a) as a component
      of
      the purchase price of pharmacy acquisitions, (b) in connection with the issuance
      of convertible debt and (c) for equity and capital marketing related services.
      During 2006, 447,402 warrants were issued as part of units acquired in private
      placement investments, 200,000 warrants were issued and recorded as a prepaid
      of
      $70,000, 100,000 warrants were issued and recorded as a charge of $27,000 and
      3
      million warrants were issued with convertible debt. During 2007, 8 million
      warrants were issued as a penalty for not registering shares pursuant to
      registration rights related to a convertible debt offering, an additional 15
      million warrants were issued with convertible debt and 1.5 million warrants
      valued at $120,000 were issued to Envision Capital in connection with prior
      fundraising activities. As described in Note 5, all of the Company warrants
      were
      revalued and classified as liabilities in conjunction with the issuance of
      the
      2006 6% convertible notes. The fair value of each warrant granted is estimated
      at the date of grant using the Black-Scholes option-pricing model with
      assumptions similar to those used to revalue the warrants at year end.
      Assumptions used to value these warrants as of December 31, 2007 include
      dividend yield of 0.0%, expected lives of **** 2.3
      to
      6.8 years, expected volatility of 150% and risk-free interest rates of 3.05
      to
      3.70%. Assumptions used to value these warrants as of December 31, 2006 include
      dividend yield of 0.0%, expected lives of .8 to 6.9 years, expected volatility
      of 80% and risk-free interest rates of 4.64% and 4.70%.




F-19





The
      following is a summary of outstanding warrants:


**Exercise**
              
              **Warrants
                  Outstanding****Issue
                  Date**
              
              **Expiration
                  Date**
              
              **Price**
              
              **2007**
              
              2006October
                  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**
              
              20,000September
                  2006
              
              September
                  2013
              
              0.60
              
              **3,000,000**
              
              3,000,000August
                  2006
              
              August
                  2011
              
              0.36
              
              **176,715**
              
              176,715July
                  2006
              
              July
                  2011
              
              0.36
              
              **41,096**
              
              41,096June
                  2006
              
              June
                  2011
              
              0.36
              
              **20,548**
              
              20,548May
                  2006
              
              May
                  2011
              
              0.36
              
              **61,646**
              
              61,646May
                  2006
              
              May
                  2011
              
              0.73
              
              **100,000**
              
              100,000February
                  2006
              
              May
                  2011
              
              0.88
              
              **200,000**
              
              200,000March
                  2005
              
              March
                  2010
              
              3.28
              
              **175,000**
              
              175,000March
                  2005
              
              March
                  2010
              
              0.01
              (a)
              **532,511**
              
              532,511March
                  2005
              
              March
                  2010
              
              3.90
              
              **30,619**
              
              30,619October
                  2002
              
              October
                  2007
              
              4.92
              
              **-**
              
              10,000**28,878,135**
              
              4,368,135




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





***Changes
      in Shares of Common Stock and Treasury Stock***





The
      following table represents changes in the number of common and treasury shares
      as of December 31:


**2007**
              
              2006Common
                  Stock:Balance,
                  beginning of year
              
              
              **19,011,367**
              
              
              10,712,859Issuance
                  related to business acquisitions
              
              
              **107,407**
              
              
              133,122Trust
                  preferred exchange
              
              
              **-**
              
              
              6,674,046Private
                  placement issuances
              
              
              **23,983,318**
              
              
              1,491,340Debt
                  and interest conversions
              
              
              **402,619**
              
              
              -Balance,
                  end of year
              
              
              **43,504,711**
              
              
              19,011,367Treasury
                  Stock:Balance,
                  beginning of year
              
              
              **(2,840,173**
              **)**
              
              (1,617,651
              )Treasury
                  stock acquired
              
              
              **-**
              
              
              (35,671
              )Trans
                  Settlement
              
              
              **-**
              
              
              (1,186,851
              )Balance,
                  end of year
              
              
              **(2,840,173**
              **)**
              
              (2,840,173
              )




During
      2006, the Company issued 1,491,340 shares of common stock at an average price
      of
      $0.42 per share pursuant to a private placement offering along with warrants
      to
      acquire 447,402 shares of common stock for aggregate gross proceeds of $630,000.
      During 2007, the Company issued an additional 1,850,000 shares of common stock
      at a price of $.10 per share to four outside investors. While not specifically
      required, the Company issued an additional 2,133,318 shares of its common stock
      to certain shareholders who had previously acquired the shares at $.30 per
      share
      in 2006 to effectively reprice those issuances to the $.10 per share price
      used
      in the 2007 issuances. Also in 2007 and 2006, the Company issued 107,407 shares
      and 133,122 shares, respectively, to previous owners of acquired businesses
      under the terms of their respective purchase agreements.




F-20





In
      March
      2007, Mr. Sam Schmidt of Las Vegas, Nevada and certain investors related to
      Mr.
      Schmidt completed the purchase of 20,000,000 shares of Standard Management
      stock
      at a purchase price of $.10 per share. Upon completion of the transaction,
      Mr.
      Schmidt beneficially own ed
      approximately 52.6% of the Company’s outstanding common shares (since reduced to
      40%). The Company used the proceeds of the sale of its shares to Mr. Schmidt
      for
      debt reduction and general corporate purposes.





In
      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.





During
      the second quarter of 2006, the Company repurchased 35,671 shares of its common
      stock for $117,000 related to a share repurchase agreement with certain
      shareholders from one of its July
      2005 acquisitions. During the third quarter of 2006 and in conjunction with
      the
      Trans settlement described in Note 3 - Discontinued Operations - Pharmacy
      Services, the Company repurchased 1,186,851 shares of its common stock for
      $2.8
      million.




On
      October 16, 2006, the 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.





At
      December 31, 2007, the Company was authorized to purchase an additional 471,756
      shares under the Company’s treasury stock repurchase program.





Pursuant
      to provisions included in the Company’s 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, that guarantee requires the Company to issue $963,000 of cash
      or an
      equivalent number of its shares (7,825,000) to the prior owners of Precision.
      The Company has tried to issue the shares; 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
      8** *-* **Stock Option Plans**





Effective
      June 12, 2002, the Company adopted the 2002 Stock Incentive Plan (the “Plan”)
      which authorized the granting of options to employees, directors and consultants
      of the Company to purchase up to 990,000 shares of its common stock at a price
      not less than its market value on the date the option is granted. The number
      of
      shares of stock available for issuance pursuant to the Plan is automatically
      increased on the first trading day of each calendar year beginning January
      1,
      2004, by an amount equal to 3% of the shares of stock outstanding on the trading
      day immediately proceeding January 1. Additionally, as of January 1, 2007,
      the
      Plan’s available shares increased by an additional 485,136 shares. As of
      December 31, 2007, there were 1,728,194 shares of common stock available for
      grant under the Plan. Options may not be granted under the Plan on a date that
      is more than ten years from the date of its adoption. The options may become
      exercisable immediately or over a period of time. Any shares subject to an
      option that for any reason expires or is terminated unexercised may again be
      subject to an option under the Plan. The Plan also permits granting of stock
      appreciation rights and restricted stock awards. In
      addition to the Plan, the 1992 Stock Option Plan has 191,000 options outstanding
      with similar terms. No additional shares remain available for future issuance
      under the 1992 Stock Option Plan.





F-21




A
      summary
      of the Company’s stock option activity and related information for the years
      ended December 31 is as follows: ****


**2007**
              
              2006**Shares**
              
              **Weighted-Average
                  Exercise Price**
              
              Shares
              
              Weighted-Average
                  Exercise PriceOptions
                  outstanding, beginning of year
              
              
              **1,375,000**
              
              **$**
              **3.66**
              
              
              2,222,180
              
              $
              4.44Exercised
              
              
              **-**
              
              
              **-**
              
              
              -
              
              
              -Granted
              
              
              **-**
              
              
              **-**
              
              
              -
              
              
              -Expired
                  or forfeited
              
              
              **(462,500**
              **)**
              
              **5.62**
              
              
              (847,180
              )
              
              5.72Options
                  outstanding, end of year
              
              
              **912,500**
              
              **$**
              **2.67**
              
              
              1,375,000
              
              $
              3.66Options
                  exercisable, end of year
              
              
              **912,500**
              
              **$**
              **2.67**
              
              
              1,374,000
              
              $
              3.66Weighted-average
                  fair value of optionsgranted
                  during the year
              
              
              **N/A**
              
              
              
              
              
              **N/A**





Information
      with respect to stock options outstanding at December 31, 2007, is as
      follows:


**Options
                  Outstanding**
              
              **Options
                  Exercisable****Range
                  of Exercise Prices**
              
              **Number
                  Outstanding**
              
              **Weighted-Average
                  Remaining Contractural Life (years)**
              
              **Weighted-Average
                  Exercise Price**
              
              **Number
                  Exercisable**
              
              **Weighted-Average
                  Exercise Price**$2.05-3.20
              
              
              776,000
              
              
              5.48
              
              $
              2.45
              
              
              776,000
              
              $
              2.453.21-6.25
              
              
              130,500
              
              
              6.37
              
              
              3.74
              
              
              130,500
              
              
              3.746.25-7.61
              
              
              6,000
              
              
              3.50
              
              
              7.55
              
              
              6,000
              
              
              7.55912,500
              
              
              
              
              
              
              
              
              912,500





The
      aggregate intrinsic value of stock options (measured as the excess, if any,
      of
      the market value of the Company’s common shares at the end of the year over the
      exercise price of the stock options) of stock options outstanding and
      exercisable as of December 31, 2007 is $0.





As
      of
      December 31, 2007, there is no future compensation expense related to
      outstanding stock options.





**Note
      9** *-* **Long Lived Assets**





A
      summary
      of property and equipment as of December 31 is as follows (in
      thousands):


**2007**
              
              2006Land
              
              **$**
              **582**
              
              $
              582Building
                  and improvements
              
              
              **8,418**
              
              
              8,981Furniture
                  and fixtures
              
              
              **1,379**
              
              
              1,379Computer
                  equipment and software
              
              
              **346**
              
              
              346Machinery
                  and equipment
              
              
              **81**
              
              
              81Property
                  and equipment, gross
              
              
              **10,806**
              
              
              11,369Accumulated
                  depreciation
              
              
              **(3,768**
              **)**
              
              (3,394
              )Property
                  and equipment, net
              
              **$**
              **7,038**
              
              $
              7,975
 F-22





As
      described previously, the Company’s most significant remaining asset from
      continuing operations is its corporate headquarters building with a net book
      value of $6.2 million as of December 31, 2007, including the impact of a
      December 2007 impairment charge of $.6 million. The impairment resulted from
      the
      Company’s intention to transfer the building to the mortgage lender in May 2008
      in full satisfaction of obligations due to that lender which aggregate less
      than
      the previous carrying value of the building.





In
      May
      2006, the Company sold 4.52 acres of unimproved real estate south of its
      corporate headquarters on Indianapolis, Indiana. The gross selling price of
      $1.1
      million in net cash received from the sale was immediately transferred to a
      lender as repayment of outstanding principal on a convertible loan. The
      resulting gain of $.5 million was recorded as a component of other income,
      net.





As
      partial consideration for the purchase of the Company’s Financial Services
      operations in 2005, the Buyer issued $5.0 million of its 7% Preferred Stock
      to
      the Company. In 2006, this long lived asset was redeemed by the Buyer for $1.5
      million. The Buyer also relieved the Company of future indemnification
      obligations the Company had originally retained as part of the sale. This
      transaction resulted in the recognition of a $2.8 million gain which is included
      in Other income, net in the 2006 statement of operations.





**Note
      10** *-* **Related Party Transactions**





In
      1997,
      the Company made an interest-free loan to one of its officers. The principal
      balance of the loan was $775,500 at December 31, 2007 and 2006. Repayment is
      due
      within 10 days of voluntary termination or resignation as an officer. In the
      event of a termination of the officer’s employment following a change in
      control, the loan is deemed to be forgiven.





In
      the
      fourth quarter of 2007, two executives advanced the Company $220,000 on a
      non-interest, on demand basis for working capital requirements.




**Note
      11** *-* **Commitments and Contingencies**





***Lease
      Commitments***





Rent
      expense for 2007 and 2006 was immaterial and future required minimum rental
      payments under operating leases as of December 31, 2007 are not
      material.




***Litigation***





As
      described in Note 7, the Company is currently defending a matter related to
      the
      settlement of a stock price guarantee related to a 2005
      acquisition.





In
      2006,
      the Company settled a dispute with a former executive regarding his termination
      which resulted in a $900,000 charge included in general and administrative
      expenses.





The
      Company is occasionally involved in other litigation matters related to its
      former operations and other activities. When these matters arise, management
      defends itself vigorously and, as of December 31, 2007, does not expect
      settlement of any such matters to have a material impact on the Company’s
      financial position or results of operations.





As
      of
      December 31, 2007, the Company is obligated to three executive officers for
      $439,000 of payroll-related costs that were deferred, but appropriately
      expensed, due to cash flow constraints.





F-23