**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





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





FOR
      THE
      QUARTERLY PERIOD ENDED June 30, 2008 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
            No.
                35-1773567(State
                or other jurisdiction
              of
                incorporation or organization)
            (I.R.S.
                Employer Identification No.)





10689
                N. Pennsylvania Street, Indianapolis, Indiana
            46280(Address
                of principal executive offices)
            (Zip
                Code)





(317)
      574-6200


(Registrant’s
      telephone number, including area code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days: Yes xNo 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
      definitions of “accelerated filer”, “large accelerated filer”, and “smaller
      reporting filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large
                  Accelerated Filer o
              
              Accelerated
                  Filer o
              
              Non-accelerated
                  Filer o
              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





As
      of
      August 10, 2008, the Registrant had 72,187,120 shares
      of
      Common Stock outstanding.








**STANDARD
      MANAGEMENT CORPORATION AND SUBSIDIARIES**







**INDEX**





**Page
                Number**Part
                I.
            FINANCIAL
                INFORMATION:Item
                1.
            Unaudited
                Financial StatementsConsolidated
                Balance Sheets —June
                30, 2008 and December 31, 2007
            3Consolidated
                Statements of Operations —For
                the Three and Six Months Ended June 30, 2008 and 2007
            4Consolidated
                Statements of Shareholders’ Deficit —For
                the Six Months Ended June 30, 2008
            5Consolidated
                Statements of Cash Flows —For
                the Six Months Ended June 30, 2008 and 2007
            6Notes
                to Consolidated Financial Statements
            7Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            16Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            19Item
                4T.
            Controls
                and Procedures
            19Part
                II.
            OTHER
                INFORMATION:Item
                1.
            Legal
              Proceedings
            20Item
                1A.
            Risk
                Factors
            20Item
                2.
            Unregistered
                Sale of Equity Securities and Use of Proceeds
            21Item
                3.
            Defaults
                Upon Senior Securities
            21Item
                6.
            Exhibits
            21SIGNATURES
            22


2


**STANDARD
      MANAGEMENT CORPORATION AND SUBSIDIARIES**







**PART
      I – FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS**





**CONSOLIDATED
      BALANCE SHEETS**


(unaudited,
      dollars in thousands)





**June 30,**
            
            December 31,**2008**
            
            2007**ASSETS**Current
                assets:Cash
                and cash equivalents
            
            **$**
            **-**
            
            $
            -Accounts
                receivable, net
            
            
            **72**
            
            
            5Prepaid
                and other current assets
            
            
            **5**
            
            
            127Assets
                of discontinued operations
            
            
            **311**
            
            
            2,036Total
                current assets
            
            
            **388**
            
            
            2,168Property
                and equipment, net
            
            
            **63**
            
            
            7,038Assets
                held for sale
            
            
            **175**
            
            
            918Deferred
                financing fees, net
            
            
            **711**
            
            
            731Officer
                note receivable
            
            
            **776**
            
            
            776Other
                noncurrent assets
            
            
            **247**
            
            
            229Total
                assets
            
            **$**
            **2,360**
            
            $
            11,860**LIABILITIES
                AND SHAREHOLDERS' DEFICIT**Current
                liabilities:Accounts
                payable
            
            **$**
            **1,782**
            
            $
            1,719Accrued
                interest
            
            
            **1,017**
            
            
            1,396Accrued
                other expenses
            
            
            **3,578**
            
            
            2,896Current
                portion of long-term debt
            
            
            **6,656**
            
            
            14,811Total
                current liabilities
            
            
            **13,033**
            
            
            20,822Long-term
                debt, less current portion
            
            
            **13,474**
            
            
            13,268Accrued
                interest on subordinated notes
            
            
            **2,757**
            
            
            2,204Common
                stock warrants
            
            
            **19**
            
            
            571Other
                long-term liabilities
            
            
            **410**
            
            
            573Total
                liabilities
            
            
            **29,693**
            
            
            37,438Minority
                interest in subsidiary
            
            
            **533**
            
            
            -Shareholders'
                deficit:Common
                stock, no par value, and additional paid in capital, 300,000,000
                shares
                and200,000,000
                shares authorized and 66,423,093 shares and 43,504,711 shares issuedin
                2008 and 2007, respectively
            
            
            **73,550**
            
            
            73,248Retained
                deficit
            
            
            **(90,764**
            **)**
            
            (88,227
            )Treasury
                stock, at cost, 2,840,173 shares
            
            
            **(10,829**
            **)**
            
            (10,829
            )Accumulated
                other comprehensive income
            
            
            **177**
            
            
            230Total
                shareholders' deficit
            
            
            **(27,866**
            **)**
            
            (25,578
            )Total
                liabilities and shareholders' deficit
            
            **$**
            **2,360**
            
            $
            11,860


3


**STANDARD
      MANAGEMENT CORPORATION AND SUBSIDIARIES**







**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


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





**Three Months Ended**
              **June 30**
            
            **Six Months Ended**
              **June 30****2008**
            
            2007
            
            **2008**
            
            2007Net
                revenues
            
            **$**
            **-**
            
            $
            -
            
            **$**
            **-**
            
            $
            -Cost
                of sales
            
            
            **-**
            
            
            -
            
            
            **-**
            
            
            -Gross
                profit
            
            
            **-**
            
            
            -
            
            
            **-**
            
            
            -General
                and administrative expenses
            
            
            **899**
            
            
            2,009
            
            
            **1,945**
            
            
            3,461Impacts
                related to value of warrants and derivatives
            
            
            **(2,949**
            **)**
            
            875
            
            
            **(829**
            **)**
            
            1,444Depreciation
                and amortization
            
            
            **43**
            
            
            189
            
            
            **101**
            
            
            229Loss
                on debt settlement
            
            
            **435**
            
            
            -
            
            
            **435**
            
            
            -Operating
                income (loss)
            
            
            **1,572**
            
            
            (3,073
            )
            
            **(1,652**
            **)**
            
            (5,134
            )Other
                income, net
            
            
            **97**
            
            
            119
            
            
            **200**
            
            
            216Interest
                expense
            
            
            **(650**
            **)**
            
            (615
            )
            
            **(1,358**
            **)**
            
            (1,385
            )Income
                (loss) from continuing operations before income taxes
            
            
            **1,019**
            
            
            (3,569
            )
            
            **(2,810**
            **)**
            
            (6,303
            )Income
                tax expense (benefit)
            
            
            **-**
            
            
            -
            
            
            **-**
            
            
            -Net
                income (loss) from continuing operations
            
            
            **1,019**
            
            
            (3,569
            )
            
            **(2,810**
            **)**
            
            (6,303
            )Income
                (loss) from discontinued operations
            
            
            **(96**
            **)**
            
            382
            
            
            **273**
            
            
            212Net
                income (loss)
            
            **$**
            **923**
            
            $
            (3,187
            )
            **$**
            **(2,537**
            **)**
            $
            (6,091
            )Income
                (loss) per share - basicIncome
                (loss) from continuing operations
            
            **$**
            **0.02**
            
            $
            (0.09
            )
            **$**
            **(0.06**
            **)**
            $
            (0.19
            )Income
                (loss) from discontinued operations
            
            
            **-**
            
            
            0.01
            
            
            **0.01**
            
            
            0.01Net
                loss
            
            **$**
            **0.02**
            
            $
            (0.08
            )
            **$**
            **(0.05**
            **)**
            $
            (0.18
            )Weighted
                average shares outstanding
            
            
            52,318,365
            
            
            39,566,687
            
            
            48,482,992
            
            
            34,764,648Loss
                per share - dilutiveLoss
                from continuing operations
            
            **$**
            **(0.01**
            **)**
            $
            (0.09
            )
            **$**
            **(0.06**
            **)**
            $
            (0.19
            )Income
                (loss) from discontinued operations
            
            
            **-**
            
            
            0.01
            
            
            **0.01**
            
            
            0.01Net
                loss
            
            **$**
            **(0.01**
            **)**
            $
            (0.08
            )
            **$**
            **(0.05**
            **)**
            $
            (0.18
            )Weighted
                average shares outstanding
            
            
            178,563,371
            
            
            39,566,687
            
            
            48,482,992
            
            
            34,764,648




See
      accompanying notes to consolidated financial statements.


4


**STANDARD
      MANAGEMENT CORPORATION AND SUBSIDIARIES**







**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ DEFICIT**


(unaudited,
      dollars in thousands)





Total
            
            Common stock
              and additional
              paid in capital
            
            Retained eficit
            
            Treasury tock
            
            Accumulated other
              comprehensive incomeBalance
                at January 1, 2008
            
            $
            (25,578
            )
            $
            73,248
            
            $
            (88,227
            )
            $
            (10,829
            )
            $
            230Comprehensive
                loss:Net
                loss
            
            
            (2,537
            )
            
            -
            
            
            (2,537
            )
            
            -
            
            
            -Change
                in unrealized gain on securities
            
            
            (53
            )
            
            -
            
            
            -
            
            
            -
            
            
            (53
            )Comprehensive
                loss
            
            
            (2,590
            )Sale
                of common stock
            
            
            262
            
            
            262
            
            
            -
            
            
            -
            
            
            -Conversion
                of debt and interest into common shares
            
            
            40
            
            
            40
            
            
            -
            
            
            -
            
            
            -Balance
                at June 30, 2008
            
            $
            (27,866
            )
            $
            73,550
            
            $
            (90,764
            )
            $
            (10,829
            )
            $
            177




See
      accompanying notes to consolidated financial statements.


5


**STANDARD
      MANAGEMENT CORPORATION AND SUBSIDIARIES**







**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


(unaudited,
      dollars in thousands)




**Six Months Ended June 30,****2008**
            
            **2007****OPERATING
                ACTIVITIES:**Net
                loss
            
            **$**
            **(2,537**
            **)**
            $
            (6,091
            )Net
                income from discontinued operations
            
            
            **273**
            
            
            212Net
                loss from continuing operations
            
            
            **(2,810**
            **)**
            
            (6,303
            )Adjustments
                to reconcile net loss to net cash used in continuing operating activities:Depreciation
                and amortization
            
            
            **70**
            
            
            228Amortization
                of deferred financing costs and debt discount
            
            
            **147**
            
            
            205Non-cash
                stock- based compensation expense
            
            
            **-**
            
            
            250Impacts
                related to value of warrants and derivatives
            
            
            **(829**
            **)**
            
            1,444Loss
                on debt settlement
            
            
            **435**
            
            
            -Change
                in operating assets and liabilities:Accounts
                receivable
            
            
            **(67**
            **)**
            
            76Prepaid
                and other current assets
            
            
            **122**
            
            
            493Accounts
                payable
            
            
            **187**
            
            
            (524
            )Accrued
                expenses
            
            
            **2,059**
            
            
            1,959Other
            
            
            **(181**
            **)**
            
            (18
            )Net
                cash used in operating activities of continuing operations
            
            
            **(867**
            **)**
            
            (2,190
            )**INVESTING
                ACTIVITIES:**Proceeds
                from sale of business
            
            
            **-**
            
            
            428Change
                in other noncurrent assets, net
            
            
            **(267**
            **)**
            
            (318
            )Net
                cash provided by (used in) investing activities of continuing
                operations
            
            
            **(267**
            **)**
            
            110**FINANCING
                ACTIVITIES:**Borrowings
            
            
            **180**
            
            
            321Net
                cash provided from (to) discontinued operations
            
            
            **257**
            
            
            1,159Proceeds
                from sale of stock
            
            
            **262**
            
            
            2,185Minority
                investment in subsidiary
            
            
            **533**
            
            
            -Deferred
                financing costs paid
            
            
            **-**
            
            
            (295
            )Repayments
                of long-term debt
            
            
            **(98**
            **)**
            
            (1,375
            )Net
                cash provided by financing activities of continuing operations
            
            
            **1,134**
            
            
            1,995Net
                cash provided by (used in) operating activities of discontinued operations
            
            
            **(257**
            **)**
            
            1,027Net
                cash used in investing activities of discontinued operations
            
            
            **-**
            
            
            (26
            )Net
                cash provided by (used in) financing activities of discontinued operations
            
            
            **257**
            
            
            (1,159
            )Net
                increase in cash and cash equivalents of discontinued
                operations
            
            
            **-**
            
            
            (158
            )Total
                increase in cash and cash equivalents
            
            
            **-**
            
            
            (243
            )Net
                increase in cash and cash equivalents of discontinued operations
            
            
            **-**
            
            
            (158
            )Net
                decrease in cash and cash equivalents of continuing
                operations
            
            
            **-**
            
            
            (85
            )Cash
                and cash equivalents of continuing operations at beginning of period
            
            
            **-**
            
            
            222Cash
                and cash equivalents of continuing operations at end of period
            
            **$**
            **-**
            
            $
            137




See
      accompanying notes to consolidated financial statements.


6


**STANDARD
      MANAGEMENT CORPORATION AND SUBSIDIARIES**







**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**




**Note
      1 – Basis of Presentation**




Standard
      Management Corporation (“Standard Management”) is an Indianapolis-based company
      that, through its 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 subsidiary Universal
      Healthcare Company (‘UHCC”), established companies servicing the senior-care
      market. Ultimately, the Company, will manage acquisitions focused in two
      senior-care market segments: Home Care (staffing); and Institutional Pharmacy
      (long-term care).





The
      Company expects to fund these acquisitions with proceeds from lenders and
      investors in UHCC. The Company’s ownership will be determined as investors
      provide necessary capital. Standard Management has already entered into an
      agreement with UHCC 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 investment and financial structure will provide
      adequate financial support to complete its development plans. In the first
      half
      of 2008, the Company raised $533,000 of initial third party subscriptions into
      UHCC.





Included
      in noncurrent other assets are $248,000 of deferred costs related to potential
      future debt and equity financings and acquisitions. Management has reassessed
      each possible future transaction as of June 30, 2008 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.





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





The
      Company has incurred recurring significant losses, which have resulted in a
      shareholders’ deficit balance of approximately $27.9 million as of June 30,
      2008, and has sold businesses to provide working capital and to reduce debt.
      However, with no current revenue producing operations, the Company does not
      have
      adequate financing to meet its near-term cash requirements or to embark upon
      its
      strategic plans. In addition, as of June 30, 2008, the Company had a working
      capital deficit of approximately $12.9 million, of which $6.7 million is
      outstanding debt due currently or within the next 12 months. 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 unaudited consolidated financial statements reflect normal recurring
      adjustments that are necessary to present fairly the Company’s financial
      position and results of operations on a basis consistent with that of the prior
      audited consolidated financial statements. As permitted by rules and regulations
      of the Securities and Exchange Commission (the “Commission”) applicable to
      quarterly reports on Form 10-Q, the Company has condensed or omitted certain
      information and disclosures normally included in financial statements prepared
      in accordance with accounting principles generally accepted in the United States
      (“GAAP”). Results for interim periods are not necessarily indicative of the
      results that may be expected for a full year. These interim financial statements
      should be read along with the audited consolidated financial statements included
      in the Company’s Form 10-K for the year ended December 31, 2007.





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




7


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


Basic
      net
      loss per common share is based upon weighted average common shares outstanding.
      Diluted net loss per common share is based upon the weighted average number
      of
      common shares outstanding, including the dilutive effect, if any, of stock
      options, warrants and convertible securities. In
      periods with net losses, there are no dilutive common stock equivalents. 
While the holders of certain convertible debt and warrants are entitled to
      receive almost 4 billion shares pursuant to the conversion and exercise prices
      as of June 30, 2008, the holders have limited the Company to a share reserve
      of
      125 million shares as of that date.  As such, for the three months ended
      June 30, 2008, the dilutive loss per share computation included only those
      125
      million additional shares as being dilutive along with the reversal of the
      income (loss) derived from the interest expense and change in the values of
      the
      conversion features and warrants related to those 125 million shares.  As
      such, when combined with other dilutive securities and their related net income
      (loss) impacts, the diluted loss per share computations added 126,245,006
      dilutive shares and $2,036,000 of net income reversal resulting in a diluted
      loss per share for that period of $0.01.  Other common stock equivalents
      outstanding as of June 30, 2008 and 2007 were convertible or exercisable into
      3,867,182,716 and 33,432,926 shares, respectively .




**Note
      2 - 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 partially described
      below. Two of these acquired businesses were “HomeMed” and “Precision”.





Subject
      to management’s late 2006 decision to sell a portion of the HomeMed pharmacy
      operations and to close the remaining HomeMed operations, such actions were
      completed in March 2007. A portion of the operations were sold to HomeMed,
      LLC,
      a non-related entity for a cash purchase price of $.5 million. All unsold assets
      were written down to their minimal estimated realizable value as of December
      31,
      2006. An aggregate $653,000 charge was recorded as a component of discontinued
      operations in 2006 with minimal additional write down in early 2007.
      Concurrently, the Company entered into a management services agreement with
      the
      buyer to provide accounting and other related services for two or more years.
      Related management services fees of $100,000 were paid in advance upon closing
      the sale. Pursuant to a negotiated termination of a HomeMed related lease in
      the
      second quarter of 2007, the Company reduced a previously established lease
      reserve by $325,000. Remaining accounts payable and accrued lease payments
      as of
      June 30, 2008, 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 a director of the Company and the Company’s largest shareholder.
      The collateral under the note included a pledge of Company stock in Precision
      and certain unimproved real estate located in Monroe County, Indiana. In order
      to ensure an orderly resolution of the Company’s obligation to Mr. Schmidt, on
      that date, the Company  voluntarily
      agreed to deliver to Mr. Schmidt a deed in lieu of foreclosure of the mortgage
      on the Monroe County real estate and agreed to a strict foreclosure under the
      Indiana Uniform Commercial Code on the pledge of the Precision stock.
      Accordingly, Mr. Schmidt took title to those assets and the Company’s
      obligations to him, consisting of a $2,500,000 promissory note and related
      earned, but unpaid, interest of approximately $200,000, were settled (except
      for
      a $30,000 piece of the note). In November 2007, when Precision was assigned
      as
      collateral under this note, the Company  ceded
      all
      voting rights in 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 the Company’s ownership as an Investment in
      Unconsolidated Subsidiaries. That investment is included as a component of
      Assets of Discontinued Operations as of December 31, 2007 and was reduced by
      a
      $550,000 impairment charge to reduce its carrying value, when combined with
      the
      carrying value of the Monroe real estate, down to the then-estimated carrying
      value of the debt and interest ultimately settled by its transfer to Mr.
      Schmidt. The collateral transfer occurred on February 6, 2008, at which point
      the Company’s obligation under the note was settled as planned at a $331,000
      gain.




8


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


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





**As of**June 30,
            
            December 31,2008
            
            2007Current
                assets
            
            $
            62
            
            $
            128Investment
                in unconsolidated subsidiaries
            
            
            249
            
            
            1,908Net
                liabilities of discontinued operations
            
            $
            311
            
            $
            2,036





**For the three months ended**
            
            **For the six months ended**June 30,
            
            June 30,
            
            June 30,
            
            June 30,2008
            
            2007
            
            2008
            
            2007Net
                revenues
            
            $
            -
            
            $
            2,045
            
            $
            -
            
            $
            4,595Cost
                of sales
            
            
            -
            
            
            (1,467
            )
            
            -
            
            
            (3,284
            )Selling,
                general and administrative expenses
            
            
            -
            
            
            (197
            )
            
            -
            
            
            (988
            )Depreciation
                and amortization
            
            
            -
            
            
            (25
            )
            
            -
            
            
            (48
            )Other
                expense
            
            
            (1
            )
            
            26
            
            
            (63
            )
            
            (23
            )Income
                of unconsolidated subsidiaries
            
            
            (95
            )
            
            -
            
            
            336
            
            
            -Interest
                expense
            
            
            -
            
            
            -
            
            
            -
            
            
            (40
            )Net
                income (loss) from discontinued operations
            
            $
            (96
            )
            $
            382
            
            $
            273
            
            $
            212





**Note
      3 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,
      is
      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, have deconsolidated this business and reflected it
      as an
      Investment in Unconsolidated Subsidiary, a component of Assets of Discontinued
      Operations, as of June 30, 2008 and 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.





9


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


**Note** **4 –
      Indebtedness**





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





Interest
              Rate (1)
            
            **June 30**
              **2008**
            
            **December 31**
              **2007**Mortgages
                payable
            
            
            5.75
            %
            **$**
            **198**
            
            **$**
            **5,644**Promissory
                notes
            
            
            12.93
            %
            
            **1,191**
            
            
            **1,009**7%
                convertible notes
            
            
            7.00
            %
            
            **3,200**
            
            
            **3,300**10%
                notes
            
            
            10.00
            %
            
            **30**
            
            
            **2,500**6%
                notes
            
            
            6.00
            %
            
            **250**
            
            
            **250**Laurus
                convertible notes
            
            
            9.25
            %
            
            **2,401**
            
            
            **2,401**Subordinated
                debentures
            
            
            10.25
            %
            
            **9,577**
            
            
            **9,577**2006
                10% convertible notes
            
            
            10.00
            %
            
            **1,263**
            
            
            **1,282**2007
                10% convertible notes
            
            
            10.00
            %
            
            **250**
            
            
            **250**2008
                10% convertible notes
            
            
            10.00
            %
            
            **92**
            
            
            **-**Accrued
                interest on subordinated debentures
            
            
            
            
            
            **2,757**
            
            
            **2,204**Derivatives
                embedded in 10% convertible notes
            
            
            
            
            
            **3,188**
            
            
            **3,409**Capital
                lease obligations
            
            
            
            
            
            **-**
            
            
            **2**Total
                indebtedness
            
            
            
            
            
            **24,397**
            
            
            **31,828**Less
                debt discount on convertible notes
            
            
            
            
            
            **1,510**
            
            
            **1,545**Less
                accrued interest on subordinated debentures
            
            
            **2,757**
            
            
            **2,204**Less
                current portion
            
            
            
            
            
            **6,656**
            
            
            **14,811**Total
                long-term debt, less current portion
            
            
            
            
            **$**
            **13,474**
            
            **$**
            **13,268**





(1)
      Weighted average rate at June 30, 2008.





The
      reduction in mortgages payable primarily represents a promissory note in the
      amount of $5.5 million which the Company settled along with $724,000 of accrued
      interest and fees on May 22, 2008 by transferring title to the Company’s
      corporate headquarters real estate and building to the lender. The Company
      continues to occupy space in the building from which it will conduct its
      business. As the carrying value of the real estate and building was in excess
      of
      the amounts ultimately settled with its transfer to the lender, the Company
      recorded a $.6 million impairment charge in December 2007 and a $.4 million
      charge in May 2008.





The
      Company has various secured and unsecured promissory notes related to the
      acquisitions of various healthcare companies or to occasional borrowings from
      other individuals 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 3, the Company intends to ultimately settle this obligation by tendering
      the shares of Premier Life to the lender or selling that business in order
      to
      fund the payment of this obligation. The Company has since borrowed an
      additional $205,000 from this lender under similar terms of which $75,000 was
      repaid.





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




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 5). The remaining $250,000 was due in May 2008. The conversion feature
      was
      eliminated on the full $2.75 million of debt. As described in Note 2, the
      Company, in February 2008, settled all but $30,000 of this $2.5 million note
      and
      related accrued interest by transferring ownership of its Precision subsidiary
      to the lender.




10


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


On
      March
      21, 2005, the Company issued $4.75 million of Laurus convertible notes.
      Principal payments were 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
      June 30, 2008, the Company had an outstanding loan principal balance with Laurus
      of $2.4 million which is all classified as current. 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 June 30, 2006, as a result of an
      exchange offer, the Company issued 6,674,046 shares of its common stock valued
      at $1.8 million in exchange for $11.1 million of the Trust Preferred Securities
      and $.6 million of related deferred interest, which in turn, reduced the
      outstanding balance of the subordinated debentures and accrued interest by
      like
      amounts.





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 June 30, 2008 and December
      31,
      2007 were $2,757,000 and $2,204,000, respectively.




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





11


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


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.





On
      January 31, 2008, the Company exchanged $92,334 of accrued interest on the
      above
      convertible debt into debt with the same provisions as contained in that
      convertible debt. This exchange included $302,000 of additional conversion
      value
      resulting in an immediate expense of $210,000.





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 ($1,444,000 through
      June 30, 2007). Further value changes through June 30, 2008 and the $210,000
      of
      expenses related to the interest/note exchange amounted to a $829,000 gain.




During
      2007, $24,000 of debt and related unpaid interest was converted into 402,619
      shares of common stock of the Company. During the first half of 2008, $20,000
      of
      debt and related unpaid interest was converted into 17,832,000 shares of common
      stock of the Company. Upon conversion, the related liabilities, net of the
      related debt discount and including conversion feature value, were reclassified
      to additional paid-in capital.




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,
      would have allowed the lenders to a) charge interest at the default rate,
      b) charge penalties for each day that registration is not achieved up to a
      certain date, c) call the debt immediately and d) require payment, in cash
      or shares, of a formula amount based largely on the highest price of the
      Company's common stock during the default period.  The impact to the
      Company's financial statements if these default provisions were applicable
      would be substantial, predominately non-cash expenses related to the increase
      in
      derivative value pursuant to the 'highest price' formula.  However, on May
      15, 2008, the lenders waived all defaults under these notes and related
      agreements.  As compensation for such waiver, all of the notes, effective
      January 1, 2008, started bearing a  stated interest at 10% per annum. That
      waiver continues to be in effect.





Of
      the
      $13.5 million of debt classified as non-current as of June 30, 2008, $3.2
      million represents the value of embedded derivatives, a negative $.9 million
      represents unamortized debt discount and $11.2 million is debt principal. 
This principal is due as scheduled in 2009 ($1.3 million), 2010 ($.3 million)
      and 2031 ($9.6 million).




12


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


**Note
      5 – 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.
      As described in Note 4, 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 June 30, 2008 include dividend yield of 0.0%, expected lives
      of
      1.75 to 6.25 years, expected volatility of 150% and risk-free interest rates
      of
      2.57% to 2.91%.





The
      following is a summary of outstanding warrants:





**Warrants
                Outstanding****Exercise**
            
            **June 30,**
            
            **December 31,****Issue
                Date**
            
            **Expiration
                Date**
            
            **Price**
            
            **2008**
            
            **2007**October
                2007
            
            
            October
                2014
            
            
            0.08
            
            
            **16,500,000**
            
            
            **16,500,000**September
                2007
            
            
            September 2009
            
            
            0.17
            
            
            **20,000**
            
            
            **20,000**July
                2007
            
            
            July 2014
            
            
            0.17
            
            
            **8,000,000**
            
            
            **8,000,000**October
                2006
            
            
            October 2011
            
            
            0.36
            
            
            **20,000**
            
            
            **20,000**September
                2006
            
            
            September 2013
            
            
            0.60
            
            
            **3,000,000**
            
            
            **3,000,000**August
                2006
            
            
            August
                2011
            
            
            0.36
            
            
            **176,715**
            
            
            **176,715**July
                2006
            
            
            July
                2011
            
            
            0.36
            
            
            **41,096**
            
            
            **41,096**June
                2006
            
            
            June
                2011
            
            
            0.36
            
            
            **20,548**
            
            
            **20,548**May
                2006
            
            
            May
                2011
            
            
            0.36
            
            
            **61,646**
            
            
            **61,646**May
                2006
            
            
            May
                2011
            
            
            0.73
            
            
            **100,000**
            
            
            **100,000**February
                2006
            
            
            May
                2011
            
            
            0.88
            
            
            **200,000**
            
            
            **200,000**March
                2005
            
            
            March
                2010
            
            
            3.28
            
            
            **175,000**
            
            
            **175,000**March
                2005
            
            
            March
                2010
            
            
            0.01
            (a)
            
            **532,511**
            
            
            **532,511**March
                2005
            
            
            March
                2010
            
            
            3.90
            
            
            **30,619**
            
            
            **30,619****28,878,135**
            
            
            **28,878,135**





(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.





13


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


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





The
      following table represents changes in the number of common and treasury
      shares.





**Six
                Months Ended June 30,****2008**
            
            2007Common
                Stock:Balance,
                beginning of period
            
            
            **43,504,711**
            
            
            19,011,367Issuance
                to settle stock price guarantee
            
            
            **5,086,382**
            
            
            2,240,725Private
                placement issuances
            
            
            **-**
            
            
            21,850,000Debt
                and interest conversions
            
            
            **17,832,000**
            
            
            -Balance,
                end of period
            
            
            **66,423,093**
            
            
            43,102,092Treasury
                Stock:Balance,
                beginning of period
            
            
            **2,840,173**
            
            
            2,840,173Treasury
                stock acquired
            
            
            **-**
            
            
            -Treasury
                shares issued
            
            
            **-**
            
            
            -Balance,
                end of period
            
            
            **2,840,173**
            
            
            2,840,173





During
      the first six months of 2008, the Company issued 5,086,382 shares of common
      in
      stock according to stock price guarantee provisions of the Purchase Agreement
      of
      Precision and issued 17,832,000 shares for exchange on convertible notes. The
      Company received $262,500 for subscriptions of 13,125,000 shares Standard
      Management common stock which are expected to be issued by November 30,
      2008.





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.





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 owned approximately 52.6% of the Company’s outstanding
      common shares (since reduced to 38%). 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 first half of 2008, the Company received $532,500 of subscriptions for
      106,500 shares of UHCC stock valued at $5 per share from various unrelated
      third
      parties. These shares are expected to be issued by November 30, 2008 and the
      offering is expected to remain open until November 30, 2008. Proceeds received
      under the subscription agreements have been reflected as a minority interest
      liability in the accompanying consolidated balance sheet as of June 30, 2008.





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.





On
      April
      1, 2008, the Company issued 430,000 options at a conversion price of $.10 per
      share with a ten year term to staff employees of the Company. The valuation
      of
      these options using the using the Black-Scholes option-pricing model resulted
      in
      an immaterial expense.




14


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


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




15


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF
      OPERATIONS**





**Overview**





*The
      following discussion and analysis should be read in conjunction with the
      Consolidated Financial Statements in the Form 10-K for the year ended December
      31, 2007 and the other financial data appearing elsewhere in this Form
      10-Q.*





This
      Quarterly Report on Form 10-Q contains “forward-looking statements” within the
      meaning of Section 27A of the Securities Exchange Act of 1934. All statements,
      trend analysis, and other information contained in this Report relative to
      markets for our products, trends in our operations or financial results, as
      well
      as other statements including words such as “anticipate,” “believe,” “plan,”
“estimate,” “expect,” “intend,” and other similar expressions, constitute
      forward-looking statements under the Private Securities Litigation Reform Act
      of
      1995. Forward-looking statements include, without limitation, statements
      relating to our business strategy and prospects, our acquisition strategy,
      including potential acquisitions discussed under “Future Acquisitions,” the
      operation and performance of acquired businesses post-acquisition, future
      financing plans, sources and availability of capital, governmental regulations
      and their effect on us and our competition. These forward-looking statements
      are
      subject to known and unknown risks, uncertainties and other factors which may
      cause actual results to be materially different from those contemplated by
      the
      forward-looking statements. Such factors include, but are not limited to the
      Risk Factors set forth under Item 1A in our 2007 Annual Report, as well as:





·
            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.





**Background**





Standard
      Management Corporation (the “Company,” “we,” “us,” or “our”) is an
      Indianapolis-based healthcare management company which through strategic
      partnerships intends to provide homecare and pharmaceutical 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.





We
      seek
      acquisitions operating in two business segments; i) Pharmacy Services, which
      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 and ii) Homecare Services, which provides healthcare and supportive
      services to individuals in their home or in congregate care
      settings.





**Comparison
      of the Three and Six Months Ended June 30, 2008 and June 30,
      2007:**





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





16


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


***Continuing
      Operations*** **:**





*General*





As
      of
      June 30, 2008, we sold, discontinued, or transferred 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 for the quarter ended June 30, 2008 decreased by
      $1.1 million or 55% to $.9 million compared to the quarter ended June 30, 2007,
      primarily due to a $.6 million decrease in professional fees, $.3 million
      decrease in employee expense, and $.2 million decrease in miscellaneous other
      expenses.





General
      and administrative expenses for the six months ended June 30, 2008 decreased
      by
      $1.5 million or 44% to $1.9 million compared to the six months ended June 30,
      2007, primarily due to a $.5 million decrease in employee expenses including
      $.2
      million in non cash compensation incurred in 2007, $.8 million reduction in
      professional fees, and $.2 million decrease in miscellaneous other
      expenses.





*Impacts
      related to value of warrants and derivatives*





As
      a
      result of certain terms of conversion features on debt issued in 2006, 2007,
      and
      2008, certain derivatives embedded in that debt and all outstanding warrants
      to
      acquire stock have been reflected as liabilities, which require mark to market
      adjustments each balance sheet date. The original recording of these liabilities
      upon issuance of the related securities and the changes in market value,
      predominantly related to changes in our common stock price, combine to result
      in
      these net expenses for 2008 and 2007. Generally, a decrease in our stock price
      results in the value of the derivatives and warrants decreasing, thereby
      resulting in income. While our stock price has generally declined during 2008
      and 2007, the initial recording of these derivative and warrant liabilities
      has
      created expense that more than offset the impact of changing values for all
      periods presented except for the three months ended June 30, 2008.





*Depreciation
      and amortization*





Depreciation
      and amortization decreased by $.1 million for the three and the six months
      ended
      June 30, 2008, primarily due to the transfer of our corporate headquarters.





*Other
      income, net*





Other
      income for the quarters ended both June 30, 2008 and 2007 was $.1 million which
      was primarily due to rental income from leasing space at our corporate
      headquarters.




Other
      income for the first halves of 2008 and 2007 were $.2 million which was
      primarily due to rental income from leasing space at the Company’s corporate
      headquarters.





*Interest
      expense*





Interest
      expense for the quarter ended June 30, 2008 remained relatively constant
      compared to the quarter ended June 30, 2007.





17


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


Interest
      expense for the first half of 2008 remained relatively constant compared to
      the
      first half of 2007.





*Federal
      income tax expense*





There
      are
      no federal income tax expenses due to a 100% valuation allowance on the net
      losses incurred during those periods.





***Discontinued
      Operations:***





*Income
      (Loss) from Discontinued Operations:*





Net
      income (loss) from discontinued operations for the quarter ended June 30, 2008
      was ($.1 million) related to Premier Life. The comparable 2007 results of $.4
      million relate to both Premier Life and Precision.





Net
      income from discontinued operations for the first half of 2008 of $.3 million
      was due primarily to a gain recorded upon the transfer of our Precision
      operations to settle outstanding obligations. The comparable 2007 results of
      $.2
      million loss relate to Premier Life, Precision, and Home Med.





***Liquidity
      and Capital Resources;***





Our
      independent auditors have expressed substantial doubt about our ability to
      continue as a going concern, due to 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 six months
      ended June 30, 2008 was $.9 million compared to cash used of $2.2 million in
      the
      six months ended June 30, 2007. The significant decrease in cash outflow is
      primarily due to a lower net loss in 2008 after adjusting for non-cash income
      statement items and reduced accounts payable payments in 2008.





Our
      net
      cash used for investment activities of continuing operations during the six
      months ended June 30, 2008 was $.3 million used compared to cash provided of
      $.1
      million in the six months ended June 30, 2007 due primarily to deferred
      transaction costs in 2008 and 2007 and proceeds from the sale of a business
      in
      2007.




Our
      net
      cash provided by financing activities of continuing operations during the six
      months ended June 30, 2008 was $1.1 million compared to $2.0 million in the
      six
      months ended June 30, 2007 primarily due to the minority investment in 2008
      and
      the proceeds from the sale of stock and from discontinued operations in
      2007.





As
      of
      June 30, 2008, 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, from January 1 through August
      10,
      2008, we have raised a total of $1.3 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
      2007 and the first half of 2008, we took the following actions in our efforts
      to
      maximize cash in-flows, reduce cash requirements, and generally provide adequate
      resources to meet our operating needs.





·
            By
                the first quarter of 2008, we sold or transferred substantially all
                of the
                pharmacy operations we had acquired from 2002 through 2006. Aggregate
                sales proceeds have been used primarily to pay down short term borrowings
                and other general corporate
                purposes.




18


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


·
            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 38%) interest in our Company. Proceeds were
                used
                primarily to pay off short term borrowings and other general corporate
                purposes.





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





·
            We
                have deferred the payment of salaries (totaling $1,036,000 as of
                June 30,
                2008) for three executives.





Cash
      requirements for the rest of 2008 and beyond include substantial debt service
      costs as more fully described in Note 4 to our consolidated financial statements
      and include $7.1 million of debt due or callable due to default provisions
      within one year. 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.





*Contractual
      Obligations* *:* During
      the first six months of 2008, there were no significant changes in our reported
      payments due under contractual obligations at December 31, 2007.





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





Not
      applicable.





**ITEM
      4T.**  **CONTROLS
      AND PROCEDURES**




Evaluation
      of Disclosure Controls and Procedures





We
      carried out, under the supervision and with the participation of the our
      management, including our Chief Executive Officer and Principal Accounting
      Officer, an evaluation of the effectiveness of the design and operation of
      our
      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, our Chief Executive Officer and its Principal Accounting
      Officer concluded that, as of June 30, 2008, our disclosure controls and
      procedures were not effective because of the material weaknesses identified
      as
      of December 31, 2007, described below. Notwithstanding the existence of the
      material weaknesses described below, management has concluded that the
      consolidated financial statements in this Form 10-Q fairly present, in all
      material respects, our financial position, results of operations and cash flows
      for the periods and dates presented.





a)
            Management’s
                Report on Internal Control Over Financial Reporting at December 31,
                2007





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.




19


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


Since
      mid-2006, we have been undergoing a major transition as we attempt 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 significant cash restraints during the same time
      period, resulted in us having, as of June 30, 2008, a insufficient complement
      of
      personnel to support the Chief Accounting Officer with the requisite level
      of
      accounting knowledge, experience, and training necessary to properly analyze,
      review, monitor and record these more complicated and certain other accounting
      transactions. In addition, the significant attention required of our currently
      limited accounting and financial staff and our efforts to raise capital and
      identify appropriate acquisition targets, we were unable to timely finalize
      and
      close our 2007 financial statements These material weaknesses led to delays
      in
      finalizing the 2008 financial statements included in this report. As a result,
      management has concluded that there is some likelihood that a material
      misstatement of our annual financial statements may not have been prevented
      or
      could have gone undetected as part of the financial statement closing process
      for June 30, 2008.




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.





c)
      Management’s Response to Material Weaknesses





Although
      we have not remediated the material weaknesses in our internal control over
      financial reporting as of June 30, 2008, we have made and will continue to
      make,
      improvements to our policies, procedures, systems and staffing to address the
      identified internal control deficiencies. Consequently, management has initiated
      the following remedial 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;





•
            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 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
      have been no significant changes in our internal controls over financial
      reporting during the quarter ended June 30, 2008 that have altered our
      conclusion as to the ineffectiveness of such controls.





**PART
      II. OTHER INFORMATION**




**ITEM
        1. LEGAL PROCEEDINGS**
  There
          has
          been no significant changes in legal proceedings during the quarter ended
          June
          30, 2008.
  **ITEM
      1A. RISK FACTORS**




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





20


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


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





During
      the first half of 2008, the Company received $262,500 for subscriptions of
      Standard Management common stock representing 13,125,000 shares.





During
      the six months ended June 30, 2008, the Company received $532,500 of
      subscriptions for 106,500 shares of UHCC common stock, valued at $5 per share,
      in a private offering. The shares are expected to be issued by November 30,
      2008
      and the offering is expected to remain open until November 30, 2008.





The
      Company claimed an exemption from the registration requirements of the
      Securities Act of 1933, as amended (the “Act”) for the private placement of
      these securities pursuant to Section 4(2) of the Act and/or Rule 506 of
      Regulation D promulgated thereunder since, among other things, the transaction
      did not involve a public offering, the Investor was an “accredited investor”
and/or qualified institutional buyers, the Investor had access to information
      about the Company and its investment, the Investor took the securities for
      investment and not resale, and we took appropriate measures to restrict the
      transfer of the securities.




**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**




The
      Company is in default of the Laurus Note for principal and interest owed for
      2007, and the $3,200,000 convertible note for the interest owed for
      2007.




**ITEM
      6. EXHIBITS**





(a)
      Exhibits


31.1
              Certification
                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.31.2
              Certification
                  of Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.32
              Certification
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of
                  2002.




21


**STANDARD
        MANAGEMENT CORPORATION AND SUBSIDIARIES**


**SIGNATURES**





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




Dated
      August 19, 2008





STANDARD
                MANAGEMENT CORPORATION(Registrant)By:
                /s/ Ronald D. HunterRonald
                D. HunterChairman,
                Chief Executive Officer and President(Principal
                Executive Officer)By:
                /s/ Daniel K CalvertDaniel
                K CalvertChief
                Accounting Officer(Principal
                Financial and Accounting
                Officer)


22