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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 March 31, 2007 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 0-20882
 Standard Management Corporation
  Indiana
    
    No. 35-1773567(State or other jurisdiction
    
    (I.R.S. Employer Identification No.)of incorporation or organization)10689 N. Pennsylvania Street, Indianapolis, Indiana
    
    46280(Address of principal executive offices)
    
    (Zip Code)
 
 þ o
  o o þ
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##### 



STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 INDEX
 Page NumberPart I. FINANCIAL INFORMATION:Item 1. Unaudited Financial StatementsConsolidated Balance Sheets  March 31, 2007 and December 31, 2006
    
    
    3Consolidated Statements of Operations  For the Three Months Ended March 31, 2007 and 2006
    
    
    4Consolidated Statements of Shareholders Deficit  For the Three Months Ended March 31, 2007 and 2006
    
    
    5Consolidated Statements of Cash Flows  For the Three Months Ended March 31, 2007 and 2006
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    18Part II. OTHER INFORMATION:Item 1A. Risk Factors
    
    
    20Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
    
    
    20Item 3. Defaults Upon Senior Securities
    
    
    20Item 6. Exhibits
    
    
    20SIGNATURES
    
    
    21EX-10.2 STOCK PURCHASE AGREEMENTEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CAOEX-32 SECTION 906 CERTIFICATION OF THE CEO & CAO
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 
 PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 CONSOLIDATED BALANCE SHEETS
 March 31
    
    
    December 312007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    403
    
    
    $
    565Accounts receivable, net
    
    
    928
    
    
    
    1,004Inventories
    
    
    787
    
    
    
    750Prepaid and other current assets
    
    
    464
    
    
    
    535Assets of discontinued operations
    
    
    317
    
    
    
    948Total current assets
    
    
    2,899
    
    
    
    3,802Property and equipment, net
    
    
    7,963
    
    
    
    8,037Assets held for sale
    
    
    927
    
    
    
    931Deferred financing fees, net
    
    
    1,442
    
    
    
    1,263Officer and other notes receivable, less current portion
    
    
    776
    
    
    
    776Intangible assets, net
    
    
    285
    
    
    
    304Goodwill
    
    
    2,078
    
    
    
    2,078Other noncurrent assets
    
    
    1,341
    
    
    
    1,302Total assets
    
    $
    17,711
    
    
    $
    18,493LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    1,567
    
    
    $
    1,720Accrued expenses
    
    
    2,876
    
    
    
    2,101Current portion of long-term debt
    
    
    6,049
    
    
    
    4,306Liabilities of discontinued operations
    
    
    1,031
    
    
    
    1,471Total current liabilities
    
    
    11,523
    
    
    
    9,598Long-term debt, less current portion
    
    
    20,147
    
    
    
    22,809Common stock warrants
    
    
    486
    
    
    
    87Other long-term liabilities
    
    
    1,073
    
    
    
    1,070Total liabilities
    
    
    33,229
    
    
    
    33,564Shareholders deficit:Common stock, no par value, and additional paid in capital, 200,000,000 shares
authorized and 40,861,367 shares and 19,011,367 shares issued
in 2007 and 2006, respectively
    
    
    73,223
    
    
    
    70,785Retained deficit
    
    
    (78,118
    )
    
    
    (75,214
    )Treasury stock, at cost, 2,840,173 shares
    
    
    (10,829
    )
    
    
    (10,829
    )Accumulated other comprehensive income
    
    
    206
    
    
    
    187Total shareholders deficit
    
    
    (15,518
    )
    
    
    (15,071
    )Total liabilities and shareholders deficit
    
    $
    17,711
    
    
    $
    18,493
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months EndedMarch 312007
    
    
    2006Net revenues
    
    $
    2,373
    
    
    $
    2,114Cost of sales
    
    
    1,686
    
    
    
    1,517Gross profit
    
    
    687
    
    
    
    597Selling, general and administrative expenses
    
    
    2,004
    
    
    
    2,843Impacts related to value of warrants and derivitives
    
    
    569
    
    
    
    (63
    )Depreciation and amortization
    
    
    64
    
    
    
    181Operating loss
    
    
    (1,950
    )
    
    
    (2,427
    )Other income, net
    
    
    101
    
    
    
    215Interest expense
    
    
    778
    
    
    
    981Loss from continuing operations before income taxes
    
    
    (2,627
    )
    
    
    (3,193
    )Income tax expense (benefit)
    
    
    
    
    
    
    Net loss from continuing operations
    
    
    (2,627
    )
    
    
    (3,193
    )Loss from discontinued operations
    
    
    (277
    )
    
    
    (1,129
    )Net loss
    
    $
    (2,904
    )
    
    $
    (4,322
    )Loss per share  basic and dilutedLoss from continuing operations
    
    $
    (0.12
    )
    
    $
    (0.35
    )Loss from discontinued operations
    
    
    (0.01
    )
    
    
    (0.13
    )Net loss
    
    $
    (0.13
    )
    
    $
    (0.48
    )Weighted average shares outstanding
    
    
    21,662,861
    
    
    
    9,095,208
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS DEFICIT
 Common stockand additional
    
    
    
    
    
    
    
    
    
    
    Accumulated otherTotal
    
    
    paid in capital
    
    
    Retained deficit
    
    
    Treasury stock
    
    
    comprehensive incomeBalance at January 1, 2006
    
    $
    4,943
    
    
    $
    68,537
    
    
    $
    (55,793
    )
    
    $
    (7,901
    )
    
    $
    100Comprehensive loss:Net loss
    
    
    (4,259
    )
    
    
    
    
    
    
    (4,259
    )
    
    
    
    
    
    
    Change in unrealized loss on securities
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Comprehensive loss
    
    
    (4,251
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    18
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    Issuance of warrants for services
    
    
    70
    
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    Balance at March 31, 2006
    
    $
    780
    
    
    $
    68,625
    
    
    $
    (60,052
    )
    
    $
    (7,901
    )
    
    $
    108Balance at January 1, 2007
    
    $
    (15,071
    )
    
    $
    70,785
    
    
    $
    (75,214
    )
    
    $
    (10,829
    )
    
    $
    187Comprehensive loss:Net loss
    
    
    (2,904
    )
    
    
    
    
    
    
    (2,904
    )
    
    
    
    
    
    
    Change in unrealized gain on securities
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19Comprehensive loss
    
    
    (2,885
    )Sale of common stock
    
    
    2,185
    
    
    
    2,185
    
    
    
    
    
    
    
    
    
    
    
    Stock- based compensation expense
    
    
    250
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    Balance at March 31, 2007
    
    $
    (15,518
    )
    
    $
    73,223
    
    
    $
    (78,118
    )
    
    $
    (10,829
    )
    
    $
    206
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months Ended March 312007
    
    
    2006OPERATING ACTIVITIES:Net loss
    
    $
    (2,904
    )
    
    $
    (4,259
    )Net loss from discontinued operations
    
    
    (277
    )
    
    
    (1,129
    )Net loss from continuing operations
    
    
    (2,627
    )
    
    
    (3,130
    )Adjustments to reconcile net loss to net cash used in continuing operating activities:Depreciation and amortization
    
    
    64
    
    
    
    181Amortization of deferred financing costs and debt discount
    
    
    163
    
    
    
    134Non-cash stock- based compensation expense
    
    
    250
    
    
    
    18Provision for bad debts
    
    
    33
    
    
    
    212Impacts related to value of warrants and derivities
    
    
    569
    
    
    
    (63
    )Change in operating assets and liabilities:Accounts receivable
    
    
    43
    
    
    
    266Inventories
    
    
    (37
    )
    
    
    (80
    )Prepaid and other current assets
    
    
    71
    
    
    
    (19
    )Accounts payable
    
    
    (153
    )
    
    
    1,884Accrued expenses
    
    
    775
    
    
    
    590Other
    
    
    (14
    )
    
    
    (47
    )Net cash used in operating activities of continuing operations
    
    
    (863
    )
    
    
    (54
    )INVESTING ACTIVITIES:Capital expenditures
    
    
    (26
    )
    
    
    (104
    )Proceeds from sale of business
    
    
    342
    
    
    
    Change in other noncurrent assets, net
    
    
    
    
    
    
    17Net cash used in investing activities of continuing operations
    
    
    316
    
    
    
    (87
    )FINANCING ACTIVITIES:Borrowings
    
    
    218
    
    
    
    650Net cash provided to discontinued operations
    
    
    (428
    )
    
    
    (739
    )Proceeds from sale of stock
    
    
    2,185
    
    
    
    Deferred financing costs paid
    
    
    (295
    )
    
    
    Repayments of long-term debt
    
    
    (1,295
    )
    
    
    (665
    )Net cash provided by (used in) financing activities of continuing operations
    
    
    385
    
    
    
    (754
    )Net cash used in operating activities of discontinued operations
    
    
    (548
    )
    
    
    (467
    )Net cash provided by (used in) investing activities of discontinued operations
    
    
    
    
    
    
    (3
    )Net cash provided by financing activities of discontinued operations
    
    
    428
    
    
    
    739Net (decrease) increase in cash and cash equivalents of discontinued operations
    
    
    (120
    )
    
    
    269Total decrease in cash and cash equivalents
    
    
    (282
    )
    
    
    (626
    )Net decrease in cash and cash equivalents of discontinued operations
    
    
    (120
    )
    
    
    269Net decrease in cash and cash equivalents of continuing operations
    
    
    (162
    )
    
    
    (895
    )Cash and cash equivalents of continuing operations at beginning of period
    
    
    565
    
    
    
    1,709Cash and cash equivalents of continuing operations at end of period
    
    $
    403
    
    
    $
    814
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note 1  Basis of Presentation
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Note 2  Pharmacy Acquisitions
     Note 3  Discontinued Operations  Pharmacy Services
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
  March 31,
    
    
    December 31,2007
    
    
    2006Current assets
    
    $
    118
    
    
    $
    425Property & equipment net
    
    
    199
    
    
    
    523Intangible assets net
    
    
    
    
    
    
    Current liabilities
    
    
    (1,031
    )
    
    
    (1,471
    )Net liabilities of discontinued operations
    
    $
    (714
    )
    
    $
    (523
    )
 March 31,
    
    
    March 31,2007
    
    
    2006Net revenues
    
    $
    178
    
    
    $
    11,870Cost of sales
    
    
    (131
    )
    
    
    (8,506
    )Selling, general and administrative expenses
    
    
    (238
    )
    
    
    (4,069
    )Depreciation and amortization
    
    
    
    
    
    
    (418
    )Impairment charge and loss on sale
    
    
    (53
    )
    
    
    Other income
    
    
    
    
    
    
    5Interest expense
    
    
    (33
    )
    
    
    (11
    )Net loss from discontinued operations
    
    $
    (277
    )
    
    $
    (1,129
    )
 Note 4  New Accounting Policy
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 Note 5  Indebtedness
  Interest
    
    
    March 31
    
    
    December 31Rate(1)
    
    
    2007
    
    
    2006Mortgages payable
    
    
    7.20
    %
    
    $
    5,648
    
    
    $
    5,701Promissory notes
    
    
    4.40
    %
    
    
    788
    
    
    
    1,7957% convertible notes
    
    
    7.00
    %
    
    
    3,300
    
    
    
    3,3008% notes
    
    
    8.00
    %
    
    
    2,750
    
    
    
    2,750Laurus convertible notes
    
    
    10.25
    %
    
    
    2,401
    
    
    
    2,401Subordinated debentures
    
    
    10.25
    %
    
    
    9,577
    
    
    
    9,5772006 6% convertible notes
    
    
    6.00
    %
    
    
    1,300
    
    
    
    1,300Derivatives embedded in 2006 notes
    
    
    
    
    
    
    1,851
    
    
    
    1,685Capital lease obligations
    
    
    
    
    
    
    60
    
    
    
    77Total indebtedness
    
    
    
    
    
    
    27,675
    
    
    
    28,586Less debt discount on convertible notes
    
    
    
    
    
    
    1,479
    
    
    
    1,471Less current portion
    
    
    
    
    
    
    6,049
    
    
    
    4,306Total long-term debt, less current portion
    
    
    
    
    
    $
    20,147
    
    
    $
    22,809
 
 (1)
    
    Current weighted average rate at March 31, 2007.      11




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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
     Note 6  Equity Transactions
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Comparison of the Three Months Ended March 31, 2007 and March 31, 2006:
  Continuing Operations:
 Net revenues
 
    
    Sales for the first quarter of 2007 increased $.3 million or 12%
to $2.4 million compared to the first quarter of 2006 due to
increased volume.
 Gross profit
 
    
    Gross profit for the first quarter of 2007 increased by $.2
million or 15% to $.7 million compared to the first quarter of
2006, primarily due the increased sales volume.
 Selling, general and administrative expenses
 
    
    Selling, general and administrative expenses for the first
quarter of 2007 decreased by $.8 million or 28% to $2.0
million compared to the first quarter of 2006, primarily
due to a $.4 million decrease in professional fees, a $.1 million decrease
in compensation expense (a $.3 million decrease in salaries
partially offset by a $.2 million increase in stock option
expense), a $.2 million general corporate overhead
decrease, and $.1 million in decreased operating expenses
at Precision Healthcare.
 Depreciation and amortization
 
    
    Depreciation and amortization was $.1 million and $.2
million in the first quarters of 2007 and 2006,
respectively. The decrease was due to the sale of
furniture and equipment.
 Other income
 
    
    Other income for the first quarter of 2007 of $.1 million
is rental income from leasing space at the Companys
corporate headquarters. Other income for the first quarter
of 2006 of $.2 million is primarily due to the dividends
received from preferred stock the Company owned through
2006, as well as rental income from leasing space at the
Companys corporate headquarters.
 Interest expense
 
    
    Interest expense for the first quarter of 2007 decreased
by $.2 million or 16 % to $.8 million compared to the
first quarter of 2006, primarily due to the exchange of
certain debt into equity in June 2006.
 Federal income tax expense
 
    
    Provision for federal income tax remained zero due to a
100% valuation allowance on the net losses in the first
quarters of 2007 and 2006.
 Discontinued Operations:
 Loss from Discontinued Operations:
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 
    
    Net loss from discontinued operations for the first quarter of 2007 was $.3 million
compared to net loss of $1.1 million for the first quarter of 2006. The reduction was
primarily due to the cessation of operations of a base of business during 2006.
 Liquidity and Capital Resources
         
    
    In April 2006, we borrowed $2.8 million from one of our then
officers. We repaid this debt with proceeds from borrowings of
$2.8 million from a then director in July 2006. This debt was
repaid as well as an additional $1 million borrowed from and due
to this individual as financing fees at various times throughout
the second half of 2006 and the first quarter of 2007 with
proceeds generally from the sale of pharmacy operations and our
common stock.
 
    
    On March 8, 2006, we announced that we elected to defer
distributions, beginning March 31, 2006, on the 10.25% preferred
securities (the Trust Preferred Securities) of our subsidiary
SMAN Capital Trust I for up to two (2) years, with the ability to
defer up to five (5) years. All unpaid distributions will accrue
interest at the rate of 10.25% annually until paid.
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 
    
    In June 2006 the Company completed an exchange offer for a portion
of the Trust Preferred Securities which allowed all Trust
Preferred Security holders to exchange their Trust Preferred
Securities for six (6) shares of common stock of Standard
Management. The Company received tenders for 1,112,341 shares or
53.7% of outstanding Trust Preferred Securities by the expiration
date of the offer to exchange. On June 30, 2006, as a result of
the exchange offer, the Company issued 6,674,046 shares of its
common stock valued at $1.8 million in exchange for $11.1 million
of the Trust Preferred Securities and $.6 million of related
deferred interest, which in turn, reduced the outstanding balance
of the subordinated debentures and accrued interest by like
amounts. After the write off of a pro rata portion of
previously-unamortized deferred financing fees and the costs of
the transaction, the Company recorded a $9.2 million gain upon the
exchange as a component of Other Income, net in June 2006.
 
    
    In early 2006, the Company announced efforts to offer up to $15
million shares of its common stock for sale to accredited
investors in a series of one or more private placements. Through
December 31, 2006, the Company issued 1,491,340 shares of common
stock along with warrants to acquire up to an additional 447,402
shares of common stock (exclusive of certain issuances which were
later reacquired by the Company at the same price) for $630,000.
 
    
    During the third and fourth quarter of 2006 and the first quarter
of 2007, the Company sold substantially all of the pharmacy
operations it had acquired from 2002 through 2006. Aggregate
sales proceeds received as of March 31, 2007 of $16.2 million have
been used primarily to pay down short term borrowings and other
general corporate purposes.
 
    
    In March 2007, the Company issued 20 million shares of its common
stock to Mr. Sam Schmidt for $2.0 million, providing Mr. Schmidt
with a 55.3% interest in the Company. An additional 1,850,000
shares were sold to four outside investors at $.10 per share.
Proceeds were used primarily to pay off short term borrowings and
other general corporate purposes.
 
    
    Management has created a new subsidiary, Universal HealthCare
Company, LLC (UHCC), through which it intends to attract
unrelated investors and lenders to fund future acquisitions of
pharmacy operations, including Precision from Standard Management.
Management expects that Standard Managements ultimate ownership
of UHCC will be approximately 24% as a result of future equity
financing by these investors. Standard Management is the Managing
Member of UHCC pursuant to a Management Agreement under which it
has substantial influence and control of the operations of the
acquired businesses. In return, Standard Management will receive
guaranteed and performance based fees from UHCC. These fees are
expected to provide Standard Management with the funding necessary
to support its operations as a management company.
 
    
    Management also continues to explore other sources of funding and
new business opportunities, which will enable the Company to
continue its operations and become profitable. However, the
Company can not provide any assurance that such funding or
business opportunities will be consummated.
  Future Acquisitions:
 Contractual Obligations :
 Cautionary Notice Regarding Forward-Looking Statements
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
  
    
    Our having sufficient cash on hand, whether generated through operations or financings,
to meet our debt service and operating needs and continue our acquisition program.
    
    The ability of our management team to successfully operate a pharmacy business with
limited experience in that industry.
    
    Our ability to expand our pharmacy business both organically and through acquisitions,
including our ability to identify suitable acquisition candidates, acquire them at
favorable prices and successfully integrate them into our business, and to achieve
anticipated levels of operational efficiencies and implement cost-saving initiatives.
    
    General economic conditions and other factors, including prevailing interest rate
levels, and stock market performance, which may affect our ability to obtain additional
capital when needed and on favorable terms.
    
    Customer response to new products, distribution channels and marketing initiatives.
    
    Increasing competition in the sale of our products.
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 a)
    
    Evaluation of Disclosure Controls and ProceduresThe Company carried out, under the supervision and with the participation of the Companys
management, including the Companys Chief Executive Officer and Principal Accounting
Officer, an evaluation of the effectiveness of the design and operation of the Companys
disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d-15(e) under the
Securities Exchange Act of 1934, as amended). Based on their evaluation, the Companys
Chief Executive Officer and its Principal Accounting Officer concluded that, as of March 31,
2007, the Companys disclosure controls and procedures were not effective because of the
material weakness identified as of such date as described below. Notwithstanding the
existence of the material weakness described below, management has concluded that the
consolidated financial statements in this Form 10-Q fairly present, in all material
respects, the Companys financial position, results of operations and cash flows for the
periods and dates presented.
 b)
    
    Material Weakness in Internal Controls and ProceduresDuring the later part of 2006, the Company was in the final stages of a major transition in
business operations as described earlier in this report. One of the results of this
transition was the Company entering into substantial, non-routine accounting transactions
which required a higher level of accounting knowledge to complete This situation, combined
with the loss of certain accounting personnel, during the same time period, resulted in the
Company not having, during the later part of 2006
and the first quarter of 2007, a sufficient complement of personnel with the requisite
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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 level
of accounting knowledge, experience, and training in the application of U.S. generally
accepted accounting principles to properly analyze, review, monitor and record these more
complicated and certain other accounting transactions. As a result, we have concluded that
there was more than a remote likelihood that a material misstatement of the Companys annual
financial statements may not have been prevented or could have gone undetected as part of
the financial statement closing process for the period ended March 31, 2007.c)
    
    Companys Response to Material WeaknessThe Company hired its Principal Accounting Officer, Dan Calvert, late in 2006. Mr. Calvert
has over twenty five years of financial and accounting management experience in both private
and public companies combined with graduate study in finance and accounting. The 2006 year
end closing process itself has significantly increased his awareness of the Companys
historical and contemplated routine and non routine transactions. On April 17, 2007, the
Company replaced its corporate controller. Mike Cleary has over ten years of experience
developing accounting staffs and systems in private and public companies. The Company
continues to emphasize the development and training of its accounting staff and its
commitment to make available accounting research tools necessary to assess complex
accounting issues in the future.
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##### Table of Contents



STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 
 PART II. OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
 We reported a material weakness in our internal control over financial reporting, and if we
are unable to improve our internal controls, our financial results
may not be reported accurately.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
  
 ITEM 6. EXHIBITS
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##### Table of Contents



STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES
 
 
 SIGNATURES
   STANDARD MANAGEMENT CORPORATION
(Registrant)By: /s/ Ronald D. Hunter

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