##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended. . . . . . . . . . . . . . . . .September 30, 2002

OR

|      |  |                                                                                          
|----- |  | -----------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from. . . . . . . . . . . to. . . . . . . . . . .

Commission file number. . . . . . . . . . . . . . . . . . . . 0-13591

HEALTHAXIS INC.

(Exact name of registrant as specified in its charter)


|                                |  |                    
|------------------------------- |  | -------------------
|Pennsylvania                    |  | 23-2214195         
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)

5215 N. OConnor Blvd., 800 Central Tower, Irving, Texas 75039
(Address of principal executive offices)
(Zip Code)

Registrants telephone number, including area code: (972) 443-5000

Former name, former address and former fiscal year, if changed since last report: N/A

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [   ]

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date: 53,663,750 shares of common
stock, par value $.10, outstanding as of October 31, 2002.

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TABLE OF CONTENTS



|                                                 |                                                                                               |                                                 |  |  |  |  |  | 
|------------------------------------------------ | --------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                   
|                                                 | Item 1. Condensed Consolidated Financial Statements                                          
|                                                 |                                                                                               | Condensed Consolidated Balance Sheets          
|                                                 |                                                                                               | Condensed Consolidated Statements of Operations
|                                                 |                                                                                               | Condensed Consolidated Statements of Cash Flows
|                                                 |                                                                                               | Notes to Consolidated Financial Statements     
|                                                 | Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
|                                                 | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|PART II. OTHER INFORMATION                      
|                                                 | Item 1. Legal Proceedings.                                                                   
|                                                 | Item 2. Changes in Securities and Use of Proceeds.                                           
|                                                 | Item 3. Defaults Upon Senior Securities.                                                     
|                                                 | Item 4. Submission of Matters to a Vote of Security Holders.                                 
|                                                 | Item 5. Other Information.                                                                   
|                                                 | Item 6. Exhibits and Reports on Form 8-K.                                                    
|Signature                                       
|Exhibit Index                                   
|EX-99.1 Certification of Chief Executive Offier 
|EX-99.2 Certification of Chief Financial Officer



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##### Table of Contents



Healthaxis Inc.

Table of Contents

|                                                                                              |                                                      |  |      |   | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  | ---- | - | 
|                                                                                              |                                                      |  | Page
|                                                                                              |                                                      |  |     
|PART I Financial Information                                                                  |                                                      |  |      |  
|Item 1.
Condensed Consolidated Financial Statements                                           |                                                      |  |      |  
|Condensed Consolidated Balance Sheets                                                         |                                                      |  | 3    |  
|                                                                                              | Condensed Consolidated Statements of Operations      |  |      | 4 | 
|                                                                                              | Condensed Consolidated Statements of Cash Flows      |  |      | 5 | 
|                                                                                              | Notes to Condensed Consolidated Financial Statements |  |      | 6 | 
|Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations |                                                      |  | 16   |  
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                      |  | 30   |  
|Item 4. Controls and Procedures                                                               |                                                      |  | 30   |  
|PART II Other Information                                                                     |                                                      |  |      |  
|Item 1. Legal Proceedings                                                                     |                                                      |  | 31   |  
|Item 2. Changes in Securities and Use of Proceeds                                             |                                                      |  | 31   |  
|Item 3. Defaults in Senior Securities                                                         |                                                      |  | 31   |  
|Item 4. Submission of Matters to a Vote of Security Holders                                   |                                                      |  | 31   |  
|Item 5. Other Information                                                                     |                                                      |  | 31   |  
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                      |  | 32   |  
|Signature                                                                                     |                                                      |  | 33   |  
|Certifications                                                                                |                                                      |  | 34   |  
|Exhibit Index                                                                                 |                                                      |  | 36   |  

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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Condensed Consolidated Financial Statements




Healthaxis Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

(In thousands except share and per share data) (Unaudited)

|                                                                                                                       |                                                                       |                           |                                            |       |               |        |              |   |        |        | 
|---------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ------------------------- | ------------------------------------------ | ----- | ------------- | ------ | ------------ | - | ------ | ------ | 
|                                                                                                                       |                                                                       |                           |                                            |       | September 30, |        | December 31,
|                                                                                                                       |                                                                       |                           |                                            |       | 2002          |        | 2001        
|                                                                                                                       |                                                                       |                           |                                            |       |               |        |             
|Assets                                                                                                                 |                                                                       |                           |                                            |       |               |        |              |  
|Cash and cash equivalents                                                                                              |                                                                       | $                         | 12,633                                     |       |               | $      | 13,149       |  
|Accounts receivable, net of allowance for doubtful accounts of $121 and $50, respectively                              |                                                                       |                           | 2,963                                      |       |               |        | 2,594        |  
|Accounts receivable from affiliates                                                                                    |                                                                       |                           | 279                                        |       |               |        | 1,023        |  
|Prepaid expenses and other current assets                                                                              |                                                                       |                           | 765                                        |       |               |        | 412          |  
|Notes receivable                                                                                                       |                                                                       |                           | 79                                         |       |               |        | 119          |  
|Assets related to discontinued operations                                                                              |                                                                       |                           |                                           |       |               |        | 2,263        |  
|                                                                                                                       |                                                                       |                           |                                            |       |               |        |              |  
|                                                                                                                       |                                                                       | Total current assets      |                                            |       | 16,719        |        |              |   | 19,560 |       
|Property, equipment and software, less accumulated depreciation and
amortization of $11,567 and $10,311, respectively  |                                                                       |                           | 1,903                                      |       |               |        | 3,451        |  
|Capitalized software and contract start-up costs, less accumulated
amortization of $1,984 and $1,327, respectively     |                                                                       |                           | 2,566                                      |       |               |        | 2,525        |  
|Customer base, less accumulated amortization of $1,860 and $1,099, respectively                                        |                                                                       |                           | 2,354                                      |       |               |        | 3,115        |  
|Goodwill                                                                                                               |                                                                       |                           | 17,150                                     |       |               |        | 23,824       |  
|Notes receivable from employees                                                                                        |                                                                       |                           | 189                                        |       |               |        | 311          |  
|Notes receivable                                                                                                       |                                                                       |                           | 118                                        |       |               |        | 308          |  
|Investment in Digital Insurance, Inc.                                                                                  |                                                                       |                           |                                           |       |               |        | 227          |  
|Assets related to discontinued operations                                                                              |                                                                       |                           |                                           |       |               |        | 4,070        |  
|Other assets                                                                                                           |                                                                       |                           | 142                                        |       |               |        | 155          |  
|                                                                                                                       |                                                                       |                           |                                            |       |               |        |              |  
|                                                                                                                       |                                                                       |                           | Total assets                               |       | $             | 41,141 |              |   | $      | 57,546 | 
|                                                                                                                       |                                                                       |                           |                                            |       |               |        |              |  
|Liabilities and Stockholders Equity                                                                                   |                                                                       |                           |                                            |       |               |        |              |  
|Accounts payable                                                                                                       |                                                                       | $                         | 877                                        |       |               | $      | 1,146        |  
|Accrued liabilities                                                                                                    |                                                                       |                           | 1,191                                      |       |               |        | 2,920        |  
|Deferred revenues                                                                                                      |                                                                       |                           | 1,338                                      |       |               |        | 1,867        |  
|Obligations under capital leases                                                                                       |                                                                       |                           |                                           |       |               |        | 8            |  
|                                                                                                                       |                                                                       |                           |                                            |       |               |        |              |  
|                                                                                                                       |                                                                       | Total current liabilities |                                            |       | 3,406         |        |              |   | 5,941  |       
|Convertible debentures                                                                                                 |                                                                       |                           |                                           |       |               |        | 27,134       |  
|Post retirement and employment liabilities                                                                             |                                                                       |                           | 972                                        |       |               |        | 995          |  
|Other liabilities                                                                                                      |                                                                       |                           | 1,085                                      |       |               |        | 1,087        |  
|                                                                                                                       |                                                                       |                           |                                            |       |               |        |              |  
|                                                                                                                       |                                                                       |                           | Total liabilities                          |       |               | 5,463  |              |   |        | 35,157 | 
|Commitments and contingencies                                                                                          |                                                                       |                           |                                            |       |               |        |              |  
|Stockholders Equity:                                                                                                  |                                                                       |                           |                                            |       |               |        |              |  
|Preferred stock, par value $1.00: authorized 100,000,000 shares:                                                       |                                                                       |                           |                                            |       |               |        |              |  
|                                                                                                                       | Series A cumulative convertible, 23,500 shares issued and outstanding |                           |                                            | 6,426 |               |        |              |  |       
|Common stock, par value $.10: authorized 1,900,000,000 shares,
issued and outstanding 53,663,039 and 52,978,613 shares |                                                                       |                           | 5,366                                      |       |               |        | 5,298        |  
|Additional paid-in capital                                                                                             |                                                                       |                           | 440,786                                    |       |               |        | 433,386      |  
|Accumulated deficit                                                                                                    |                                                                       |                           | (416,870                                   | )     |               |        | (416,069     | )
|Unearned compensation                                                                                                  |                                                                       |                           | (30                                        | )     |               |        | (226         | )
|                                                                                                                       |                                                                       |                           |                                            |       |               |        |              |  
|                                                                                                                       |                                                                       |                           | Total stockholders equity                 |       |               | 35,678 |              |   |        | 22,389 | 
|                                                                                                                       |                                                                       |                           |                                            |       |               |        |              |  
|                                                                                                                       |                                                                       |                           | Total liabilities and stockholders equity |       | $             | 41,141 |              |   | $      | 57,546 | 
|                                                                                                                       |                                                                       |                           |                                            |       |               |        |              |  

See notes to consolidated financial statements.

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Healthaxis Inc. and Subsidiaries
Condensed Consolidated Statements of Operations

(In thousands, except share and per share data) (Unaudited)

|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |   |          |            |         | 
|------------------------------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------------------ | ------------------------------------------ | -------------- | ------ | -------------------------------- | ------ | ------------------------------- | ------ | ---------- | ------ | ---- | ------- | ---------- | -------- | - | -------- | ---------- | ------- | 
|                                                                                |                                                     |                                                        |                                            |                |        | Three Months Ended September 30, |        | Nine Months Ended September 30,
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                
|                                                                                |                                                     |                                                        |                                            |                |        | 2002                             |        | 2001                            |        | 2002       |        | 2001
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |     
|Revenues                                                                        |                                                     | $                                                      | 4,850                                      |                |        | $                                | 5,869  |                                 |        | $          | 14,730 |      |         | $          | 17,427   |  
|Expenses:                                                                       |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|                                                                                |                                                     |                                                        | Cost of revenues                           |                |        | 4,926                            |        |                                 |        | 5,453      |        |      |         | 16,373     |          |   |          | 19,281     |        
|                                                                                |                                                     |                                                        | Sales and marketing                        |                |        | 617                              |        |                                 |        | 320        |        |      |         | 1,626      |          |   |          | 2,893      |        
|                                                                                |                                                     |                                                        | General and administrative                 |                |        | 1,142                            |        |                                 |        | 1,192      |        |      |         | 2,745      |          |   |          | 11,386     |        
|                                                                                |                                                     |                                                        | Research and development                   |                |        | 78                               |        |                                 |        | 301        |        |      |         | 318        |          |   |          | 1,222      |        
|                                                                                |                                                     |                                                        | Restructuring and impairment charges       |                |        |                                 |        |                                 |        |           |        |      |         |           |          |   |          | 279,607    |        
|                                                                                |                                                     |                                                        | Loss on building                           |                |        |                                 |        |                                 |        |           |        |      |         |           |          |   |          | 1,665      |        
|                                                                                |                                                     |                                                        | Amortization of intangibles                |                |        | 323                              |        |                                 |        | 970        |        |      |         | 976        |          |   |          | 11,500     |        
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|                                                                                |                                                     |                                                        |                                            | Total expenses |        |                                  | 7,086  |                                 |        |            | 8,236  |      |         |            | 22,038   |   |          |            | 327,554 | 
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|                                                                                |                                                     |                                                        | Operating loss                             |                |        | (2,236                           | )      |                                 |        | (2,367     | )      |      |         | (7,308     | )        |   |          | (310,127   | )      
|                                                                                |                                                     |                                                        | Interest income and other income (expense) |                |        | 68                               |        |                                 |        | (1,472     | )      |      |         | 25         |          |   |          | (2,039     | )      
|                                                                                |                                                     |                                                        | Interest expense                           |                |        | (76                              | )      |                                 |        | (182       | )      |      |         | (439       | )        |   |          | (737       | )      
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|                                                                                |                                                     |                                                        | Loss before minority interest              |                |        | (2,244                           | )      |                                 |        | (4,021     | )      |      |         | (7,722     | )        |   |          | (312,903   | )      
|Minority interest in loss of subsidiary                                         |                                                     |                                                        |                                           |                |        |                                  |       |                                 |        |            |       |      |         |            | 3,080    |  
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|                                                                                |                                                     |                                                        | Loss from continuing operations            |                |        | (2,244                           | )      |                                 |        | (4,021     | )      |      |         | (7,722     | )        |   |          | (309,823   | )      
|Gain from discontinued operations                                               |                                                     |                                                        | 34                                         |                |        |                                  | 615    |                                 |        |            | 850    |      |         |            | 1,389    |  
|Loss on disposal of discontinued operations                                     |                                                     |                                                        |                                           |                |        |                                  |       |                                 |        |            | (3,564 | )    |         |            |         |  
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|Income (loss) on discontinued operations                                        |                                                     |                                                        | 34                                         |                |        |                                  | 615    |                                 |        |            | (2,714 | )    |         |            | 1,389    |  
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|                                                                                |                                                     | Net loss before extraordinary item                     |                                            |                | (2,210 | )                                |        |                                 | (3,406 | )          |        |      | (10,436 | )          |          |   | (308,434 | )         
|Gain on extinguishment of debt                                                  |                                                     |                                                        | 16,388                                     |                |        |                                  |       |                                 |        |            | 16,388 |      |         |            | 1,681    |  
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|                                                                                |                                                     | Net loss before cumulative effect of accounting
change |                                            |                | 14,178 |                                  |        |                                 | (3,406 | )          |        |      | 5,952   |            |          |   | (306,753 | )         
|Cumulative effect of accounting change                                          |                                                     |                                                        |                                           |                |        |                                  |       |                                 |        |            | (6,674 | )    |         |            |         |  
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|Net income (loss)                                                               |                                                     |                                                        | 14,178                                     |                |        |                                  | (3,406 | )                               |        |            | (722   | )    |         |            | (306,753 | )
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|                                                                                | Cumulative dividends on convertible preferred stock |                                                        |                                            | (79            | )      |                                  |        |                                |        |            |        | (79  | )       |            |          |  |         
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|Net income (loss) available to common shareholders                              |                                                     | $                                                      | 14,099                                     |                |        | $                                | (3,406 | )                               |        | $          | (801   | )    |         | $          | (306,753 | )
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|Loss per share of common stock (basic and diluted)
Continuing operations        |                                                     | $                                                      | (.04                                       | )              |        | $                                | (.07   | )                               |        | $          | (.14   | )    |         | $          | (6.30    | )
|                                                                                |                                                     | Discontinued operations                                |                                            |                |       |                                  |        |                                 | .01    |            |        |      | (.05    | )          |          |   | .03      |           
|                                                                                |                                                     | Extraordinary gain                                     |                                            |                | .30    |                                  |        |                                 |       |            |        |      | .30     |            |          |   | .04      |           
|                                                                                |                                                     | Cumulative effect of accounting change                 |                                            |                |       |                                  |        |                                 |       |            |        |      | (.12    | )          |          |   |         |           
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|                                                                                |                                                     | Net income (loss)                                      |                                            | $              | .26    |                                  |        | $                               | (.06   | )          |        | $    | (.01    | )          |          | $ | (6.23    | )         
|                                                                                |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|Weighted average common shares and equivalents
used in computing loss per share |                                                     |                                                        |                                            |                |        |                                  |        |                                 |        |            |        |      |         |            |          |  
|                                                                                |                                                     |                                                        | Basic and diluted                          |                |        | 53,658,000                       |        |                                 |        | 52,933,000 |        |      |         | 53,592,000 |          |   |          | 49,200,000 |        

See notes to consolidated financial statements.

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Healthaxis Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands) (Unaudited)

|                                                  |                                                                             |                                                          |   |                                                 |         |                   |       |               |         |   |        |  
|------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------------------------- | - | ----------------------------------------------- | ------- | ----------------- | ----- | ------------- | ------- | - | ------ | -
|                                                  |                                                                             |                                                          |   |                                                 |         | Nine Months Ended
|                                                  |                                                                             |                                                          |   |                                                 |         |                  
|                                                  |                                                                             |                                                          |   |                                                 |         | September 30,     |       | September 30,
|                                                  |                                                                             |                                                          |   |                                                 |         | 2002              |       | 2001         
|                                                  |                                                                             |                                                          |   |                                                 |         |                   |       |              
|Cash flows from operating activities              |                                                                             |                                                          |   |                                                 |         |                   |       |              
|                                                  | Net loss                                                                    |                                                          | $ | (722                                            | )       |                   | $     | (306,753      | )      
|                                                  | Adjustments to reconcile net loss to net cash used in
operating activities: |                                                          |   |                                                 |         |                   |       |               |        
|                                                  |                                                                             | Loss on disposal of discontinued operations              |   |                                                 | 3,564   |                   |       |               |        |  
|                                                  |                                                                             | Cumulative effect of accounting change                   |   |                                                 | 6,674   |                   |       |               |        |  
|                                                  |                                                                             | Depreciation and amortization                            |   |                                                 | 3,677   |                   |       |               | 15,638  |  
|                                                  |                                                                             | Amortization of unearned compensation                    |   |                                                 | 103     |                   |       |               | 936     |  
|                                                  |                                                                             | Bad debt reserve                                         |   |                                                 | 71      |                   |       |               | 33      |  
|                                                  |                                                                             | Minority interest in loss of subsidiary                  |   |                                                 |        |                   |       |               | (3,080  | )
|                                                  |                                                                             | Gain on settlement of severance obligation               |   |                                                 | (1,345  | )                 |       |               |        |  
|                                                  |                                                                             | Gain on convertible debt restructuring                   |   |                                                 |        |                   |       |               | (1,681  | )
|                                                  |                                                                             | Gain on extinguishment of debt                           |   |                                                 | (16,388 | )                 |       |               |         |  
|                                                  |                                                                             | Stock option compensation                                |   |                                                 | 298     |                   |       |               | 5,485   |  
|                                                  |                                                                             | Loss on disposition of assets                            |   |                                                 | 15      |                   |       |               | 8       |  
|                                                  |                                                                             | Interest on convertible debt                             |   |                                                 | 57      |                   |       |               | 3       |  
|                                                  |                                                                             | Impairment or restructuring charges                      |   |                                                 | 942     |                   |       |               | 283,795 |  
|                                                  |                                                                             | Payments of interest and severance with common stock     |   |                                                 | 904     |                   |       |               | 352     |  
|                                                  |                                                                             | Change in:                                               |   |                                                 |         |                   |       |               |         |  
|                                                  |                                                                             |                                                          |   | Accounts receivable                             |         |                   | 2,567 |               |         |   | 2,519  |  
|                                                  |                                                                             |                                                          |   | Prepaid expense and other current assets        |         |                   | (353  | )             |         |   | 206    |  
|                                                  |                                                                             |                                                          |   | Other assets, current and deferred income taxes |         |                   | 12    |               |         |   | (37    | )
|                                                  |                                                                             |                                                          |   | Accounts payable and accrued liabilities        |         |                   | (939  | )             |         |   | (1,518 | )
|                                                  |                                                                             |                                                          |   | Deferred revenues                               |         |                   | (529  | )             |         |   | 1,689  |  
|                                                  |                                                                             |                                                          |   | Other                                           |         |                   | (25   | )             |         |   | 5      |  
|                                                  |                                                                             |                                                          |   |                                                 |         |                   |       |              
|                                                  | Net cash used in operating activities                                       |                                                          |   | (1,417                                          | )       |                   |       | (2,400        | )      
|                                                  |                                                                             |                                                          |   |                                                 |         |                   |       |              
|Cash flows from investing activities              |                                                                             |                                                          |   |                                                 |         |                   |       |              
|                                                  |                                                                             | Collection on notes receivable, net                      |   |                                                 | 352     |                   |       |               | 832     |  
|                                                  |                                                                             | Investment in capitalized software and contract start-up |   |                                                 | (1,374  | )                 |       |               | (2,272  | )
|                                                  |                                                                             | Payment of acquisition costs                             |   |                                                 |        |                   |       |               | (471    | )
|                                                  |                                                                             | Purchases of property, equipment and software, net       |   |                                                 | (216    | )                 |       |               | (762    | )
|                                                  |                                                                             | Other                                                    |   |                                                 |        |                   |       |               | 397     |  
|                                                  |                                                                             |                                                          |   |                                                 |         |                   |       |              
|                                                  | Net cash used in investing activities                                       |                                                          |   | (1,238                                          | )       |                   |       | (2,276        | )      
|                                                  |                                                                             |                                                          |   |                                                 |         |                   |       |              
|Cash flows from financing activities              |                                                                             |                                                          |   |                                                 |         |                   |       |              
|                                                  |                                                                             | Payments on capital leases                               |   |                                                 | (8      | )                 |       |               | (229    | )
|                                                  |                                                                             | Payment on convertible debentures                        |   |                                                 | (4,000  | )                 |       |               |        |  
|                                                  |                                                                             | Costs of issuing convertible preferred stock             |   |                                                 | (212    | )                 |       |               |        |  
|                                                  |                                                                             | Termination of UICI contract                             |   |                                                 | 6,359   |                   |       |               |        |  
|                                                  |                                                                             |                                                          |   |                                                 |         |                   |       |              
|                                                  | Net cash provided by (used in) financing activities                         |                                                          |   | 2,139                                           |         |                   |       | (229          | )      
|                                                  |                                                                             |                                                          |   |                                                 |         |                   |       |              
|                                                  | Decrease in cash and cash equivalents                                       |                                                          |   | (516                                            | )       |                   |       | (4,905        | )      
|                                                  | Cash and cash equivalents, beginning of period                              |                                                          |   | 13,149                                          |         |                   |       | 17,170        |        
|                                                  |                                                                             |                                                          |   |                                                 |         |                   |       |              
|                                                  | Cash and cash equivalents, end of period                                    |                                                          | $ | 12,633                                          |         |                   | $     | 12,265        |        
|                                                  |                                                                             |                                                          |   |                                                 |         |                   |       |              
|Supplemental disclosure of cash flow information: |                                                                             |                                                          |   |                                                 |         |                   |       |              
|                                                  | Interest paid                                                               |                                                          | $ | 69                                              |         |                   | $     | 370           |        
|                                                  |                                                                             |                                                          |   |                                                 |         |                   |       |              

See notes to consolidated financial statements.

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Healthaxis Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands except per share data)
September 30, 2002

Note A  Description of business and basis of presentation

Unaudited Financial Information

The unaudited condensed consolidated financial statements have been
prepared by Healthaxis Inc. and its subsidiaries (Healthaxis or the
Company), pursuant to the rules and regulations of the Securities and
Exchange Commission and reflect all adjustments consisting of normal recurring
entries, which, in the opinion of the Company, are necessary to present fairly
the results for the interim periods. The interim financial statements do not
include all disclosures provided in fiscal year end financial statements
prepared in accordance with accounting principles generally accepted in the
United States, although the Company believes that the accompanying disclosures
are adequate to make the information presented not misleading. Results of
operations for the three-month and nine-month periods ended September 30, 2002,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2002.

Generally accepted accounting principles require management to make
estimates and assumptions when preparing financial statements that affect:



| |  |  | The reported amounts of assets and liabilities at the date of the financial statements; and
| | - |  | -------------------------------------------------------------------------------------------
|
| |  |  | The reported amounts of revenues and expenses during the reporting period.                 

They also require management to make estimates and assumptions regarding
any contingent assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates.

These financial statements should be read in conjunction with the restated
financial statements for discontinued operations and notes thereto contained in
the Companys Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 30, 2002.

General

Healthaxis is a technology services firm committed to providing medical
claims and administration applications, web-enabled software solutions and
outsourced claims processing services for government and commercial benefit
administrators, health insurance companies and managed care organizations.
These solutions, which are comprised of software products and related services,
are provided either on a fully integrated or on an Application Service Provider
(ASP) basis.

Healthaxis is a Pennsylvania corporation organized in 1982. Healthaxis
common stock trades on the Nasdaq SmallCap Market under the symbol HAXS. The
operations of Healthaxis during 2001 were conducted primarily through its
subsidiary, Healthaxis.com, Inc. In the fourth quarter of 2001 the Company
reorganized and formed a new subsidiary, Healthaxis, Ltd., through which all
operations are now conducted. Unless otherwise indicated, or the context
otherwise requires, all references in this document to the Company or
Healthaxis include Healthaxis Inc. and all of its subsidiaries.

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Note B  Accounting Policies and Recent Accounting Pronouncements

Earnings Per Share

Basic earnings per share is computed only on the weighted average number
of common shares outstanding during the respective periods, and the dilutive
effect of stock options and warrants is excluded. Diluted earnings per share
is computed to show the dilutive effect, if any, of stock options and warrants
using the treasury stock method based on the average market price of the stock
during the respective periods. The effect of including the stock options,
warrants and shares issuable upon conversion of the Companys convertible
debentures and Series A Convertible Preferred Stock into the computation of
diluted earnings per share would be anti-dilutive generally due to the
Companys net loss from continuing operations. Accordingly, these items have
not been included in the computation.

Goodwill and Other Intangible Assets

Effective January 1, 2002, the Company adopted Statements of Financial
Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets,
which requires companies to stop amortizing goodwill and certain intangible
assets with an indefinite useful life. Instead, SFAS No. 142 requires that
goodwill and intangible assets deemed to have an indefinite useful life be
reviewed for impairment upon adoption of SFAS No. 142 (January 1, 2002),
annually thereafter and upon the occurrence of any event that indicates
potential impairments. The Company will perform its annual impairment review
during the fourth quarter of each year, commencing in the fourth quarter of
2002.

SFAS No. 142 prescribes a two-phase process for impairment testing of
goodwill. The first phase screens for potential impairment; while the second
phase (if necessary), measures the impairment. Goodwill is potentially
impaired if the net book value of a reporting unit exceeds its estimated fair
value. The Companys reporting units are generally consistent with the
operating segments underlying the segments identified in Note G  Segment
Reporting. This methodology differs from the Companys previous policy, as
permitted under accounting standards existing at that time, of using
undiscounted cash flows on an enterprise-wide basis to determine if goodwill is
recoverable.

Upon adoption of SFAS No. 142 and completion of the required transition
testing in the second quarter of 2002, the Company recorded as of January 1,
2002 a one-time, non-cash charge of $6,674 to reduce the carrying value of its
goodwill. Such charge is reflected as a cumulative effect of an accounting
change in the accompanying consolidated statement of operations. In calculating
the impairment charge, the fair value of the impaired reporting units
underlying the segments were estimated using a discounted cash flow methodology
(See Note F).

Long-Lived Assets

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be disposed of. The primary objectives of SFAS No. 144 are to develop one
accounting model based on the framework established in SFAS No. 121 for
long-lived assets to be disposed of by sale, and to address significant
implementation issues. The Company adopted SFAS No. 144 as of January 1, 2002.
There has been no significant impact resulting from the adoption of SFAS No.
144.

The Company records impairment losses on long-lived assets when events and
circumstances indicate that such assets might be impaired and the estimated
fair value of the asset is less than its recorded amount. Conditions that
would necessitate an impairment assessment included material adverse changes in
operations, significant adverse differences in actual results in comparison
with initial valuation forecasts prepared at the time of acquisition, a
decision to abandon acquired products, services or technologies, or other
significant adverse changes

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that would indicate the carrying amount of the recorded asset might not be
recoverable.

The Company reviews its long-lived assets and certain intangible assets
for impairment on a quarterly basis or whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets held and used is generally measured by a
comparison of the carrying amount of an asset to undiscounted pre-tax future
net cash flows expected to be generated by that asset. An impairment loss is
recognized for the amount by which the carrying amount of the assets exceeds
the fair value of the assets estimated using discounted cash flows.

Disposal Activities

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities,
such as restructurings, involuntarily terminating employees and consolidating
facilities. SFAS No. 146 excludes from its scope exit and disposal activities
conducted in connection with a business combination and those activities to
which SFAS No. 143 and 144 are applicable. SFAS No. 146 is effective for exit
and disposal activities that are initiated after December 31, 2002. We do not
expect the adoption of this statement to have a material effect on our
consolidated financial position or results of operations.

Other

In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB
Statement No. 13, and Technical Corrections (Statement 145). For most
companies, Statement 145 will require gains and losses on extinguishments of
debt to be classified as income or loss from continuing operations rather than
as extraordinary items as previously required under Statement 4. Extraordinary
treatment will be required for certain extinguishments as provided in APB
Opinion No. 30. The FASB concluded the application of the criteria in Opinion
30 to debt extinguishment transactions would seldom, if ever, result in
extraordinary item classification of the gain or loss associated with the
extinguishment. One of the Boards objectives in rescinding Statement 4 was to
distinguish transactions that are part of a companys recurring operations from
those that are unusual or infrequent or that meet the criteria for
classification as extraordinary items. Upon adoption, any gain or loss on
extinguishment of debt previously classified as an extraordinary item in prior
periods presented that does not meet the criteria of Opinion 30 for such
classification should be reclassified to conform with the provisions of
Statement 145. The provisions of this Statement related to the rescission of
Statement 4 shall be applied in fiscal years beginning after May 15, 2002. In
addition to numerous technical corrections in various areas, Statement 145 also
amends Statement 13 to require certain modifications to capital leases be
treated as a sale-leaseback and modifies the accounting for sub-leases when the
original lessee remains a secondary obligor (or guarantor). The Company has not
completed the evaluation of the extraordinary gains from debt extinguishment to
determine whether the amounts would be reclassified upon adoption. Other than
potential reclassifications as discussed we do not expect the adoption of this
statement to have a material effect on our consolidated financial position or
results of operations.

Note C  Extinguishment of Convertible Debt

On July 31, 2002, Healthaxis closed a transaction in which the holders of
its 2% Convertible Debentures in the principal amount of $27,500 exchanged
their debentures for 23,500 shares of Series A Convertible Preferred Stock (the
Preferred Stock) and a cash payment of $4,000. The Preferred Stock has a par
value of $1.00 per share and a stated value of $1,000 per share. The Preferred
Stock is convertible into common stock at a price of $2.625 per share and
carries a dividend rate of 2% per annum, payable semi-annually on July 15 and
January 15 of each year, in cash or, in some circumstances, common stock. The
Preferred Stock contains, among other things, terms providing the holders a
preference in the payment of dividends, and also a liquidation preference at
least

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equal to the stocks stated value plus accrued but unpaid dividends, and
contains covenants and obligations to which the Company must adhere. The
holders of the Preferred Stock do not have general voting rights, although they
do have the right to vote separately as a class in certain circumstances. The
Company recorded the Preferred Stock as a component of equity at its estimated
fair value totaling $6,638, less transaction costs of $212. The determination
of fair value was based upon consideration of 1) the value of the indefinite
future dividend stream discounted at 25%, 2) the value of the conversion rights
determined by applying the Black-Scholes option pricing model using an expected
term of 10 years, expected volatility of 60%, a risk free interest rate of 5%,
and no expected dividends, and 3) a valuation of the preferential liquidation
rights and privileges.

The Company recorded a gain on extinguishment of debt totaling $16,388
related to the transaction for the difference between the carrying value of the
convertible debentures and the estimated fair value of the cash and preferred
stock exchanged. At December 31, 2001, the Company maintained significant net
operating loss carryforwards for tax purposes that far exceed the amount of the
gain related to this transaction. Management has also established a 100
percent reserve for the tax assets attributable to these carryforwards since
the realization of these assets are uncertain. As a result, no provision for
income taxes has been recorded during 2002 as any taxable income for the year
will be offset by loss carryforwards and the benefit of such assets have been
reserved to offset future tax liabilities.

Note D  Termination of UICI Technology Services Agreement

On June 11, 2002, the Company initiated and entered into an agreement with
UICI terminating the amended Information Technology Services Agreement (the
Agreement) between the two parties. The Agreement was originally entered
into on January 3, 2000 in conjunction with the merger of Healthaxis.com, Inc
and Insurdata Incorporated. Under the terms of the termination agreement, UICI
made a one-time cash payment to Healthaxis in the amount of $6,500 and tendered
500,000 shares of Healthaxis common stock back to the Company. In return,
approximately 165 Healthaxis employees that were previously dedicated to
providing services to UICI under the Agreement were transferred to and became
employees of UICI on June 15, 2002. Due to the related party nature of the
transaction, the Company has recorded the net proceeds, totaling $6,359, as a
contribution of capital from a significant shareholder.

Discontinued Operations

The Company has previously reported the revenues and expenses associated
with the Agreement as those from the UICI Outsourcing segment. As a result of
the termination of the Agreement, the Companys financial statements have been
prepared with the UICI Outsourcing segment results of operations presented as
discontinued operations. All historical financial statements presented have
been restated to conform to this presentation.

Impairment charges of $484 and $3,080 related to goodwill and customer
base, respectively, allocated to the UICI Outsourcing segment have been
recorded as a loss on disposal of discontinued operations.

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The operating results of the discontinued UICI Outsourcing segment are as
follows:

|                            |            |                |     |                    |     |                   |       |      |       |      |       |     |       |   |        |       |        | 
|--------------------------- | ---------- | -------------- | --- | ------------------ | --- | ----------------- | ----- | ---- | ----- | ---- | ----- | --- | ----- | - | ------ | ----- | ------ | 
|                            |            |                |     | Three Months Ended |     | Nine Months Ended
|                            |            |                |     | September 30,      |     | September 30,    
|                            |            |                |     |                    |     |                  
|                            |            |                |     | 2002               |     | 2001              |       | 2002 |       | 2001
|                            |            |                |     |                    |     |                   |       |      |       |     
|Revenue                     |            | $              | 134 |                    |     | $                 | 5,349 |      |       | $    | 8,212 |     |       | $ | 16,125 |      
|Cost of revenue             |            |                | 100 |                    |     |                   | 4,440 |      |       |      | 6,814 |     |       |   | 13,467 |      
|Amortization of intangibles |            |                |    |                    |     |                   | 294   |      |       |      | 548   |     |       |   | 1,269  |      
|                            |            |                |     |                    |     |                   |       |      |       |      |       |     |       |   |        |      
|                            |            | Total expenses |     |                    | 100 |                   |       |      | 4,734 |      |       |     | 7,362 |   |        |       | 14,736 | 
|                            |            |                |     |                    |     |                   |       |      |       |      |       |     |       |   |        |      
|                            | Net income |                | $   | 34                 |     |                   | $     | 615  |       |      | $     | 850 |       |   | $      | 1,389 |       
|                            |            |                |     |                    |     |                   |       |      |       |      |       |     |       |   |        |      

Note E  Related Party Transactions

At September 30, 2002, UICI owned approximately 45% of the Companys
outstanding common stock and owned warrants to purchase 222,396 shares of the
Companys common stock at prices ranging from $3.01 to $12.00 per share. At
September 30, 2002, UICI also owned 1,424 shares of the Companys Series A
convertible preferred stock that were convertible into 542,477 common shares.

UICI and its subsidiaries and affiliates (collectively UICI) have in the
past constituted, in the aggregate, Healthaxis largest customer. Services to
UICI are provided pursuant to various written agreements, the most significant
of which has been the Information Technology Services Agreement (the
Agreement). On June 11, 2002, the Company and UICI mutually agreed to an
early termination of the Agreement (See Note D). Healthaxis also provides
services from continuing operations to certain UICI subsidiaries and
affiliates, including the use of certain proprietary workflow and business
applications, as well as data capture services. The Companys revenues from
UICI for these services for the three months ended September 30, 2002 and 2001,
were $449 (9%) and $2,611 (44%), respectively, of the Companys revenues from
continuing operations. The Companys revenues from UICI for these services for
the nine months ended September 30, 2002 and 2001, were $1,694 (12%) and $6,568
(38%), respectively, of the Companys revenues from continuing operations. As
of September 30, 2002, Healthaxis had accounts receivable due from UICI and its
subsidiaries and affiliates totaling $279, which represented 9% of the
Companys total accounts receivable.

For the three and the nine months ended September 30, 2002, UICI and its
subsidiaries accounted for an aggregate of $583 (12%) and $9,906 (43%),
respectively, of Healthaxis total revenues for the period from both continuing
and discontinued operations.

In conjunction with the termination of the Agreement, the Company paid
$100 to a consulting firm, DiamondCluster International, Inc., affiliated with
one of the Companys directors. In addition, during the three months ended
March 31, 2002, the Company paid professional services fees in the amount of
$366 to the same consulting firm.

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Note F  Intangible Assets

Amortization of intangibles is comprised of the following:

|                                   |  |                    |     |                   |  |      |     |      |  |   |     |  |  |   |        | 
|---------------------------------- |  | ------------------ | --- | ----------------- |  | ---- | --- | ---- |  | - | --- |  |  | - | ------ | 
|                                   |  | Three Months Ended |     | Nine Months Ended
|                                   |  | September 30,      |     | September 30,    
|                                   |  |                    |     |                  
|                                   |  | 2002               |     | 2001              |  | 2002 |     | 2001
|                                   |  |                    |     |                   |  |      |     |     
|Amortization of goodwill           |  | $                  |    |                   |  | $    | 646 |      |  | $ |    |  |  | $ | 9,797  | 
|Amortization of customer base      |  |                    | 252 |                   |  |      | 253 |      |  |   | 761 |  |  |   | 922    | 
|Amortization of developed software |  |                    | 71  |                   |  |      | 71  |      |  |   | 215 |  |  |   | 781    | 
|                                   |  |                    |     |                   |  |      |     |      |  |   |     |  |  |   |        | 
|                                   |  | $                  | 323 |                   |  | $    | 970 |      |  | $ | 976 |  |  | $ | 11,500 | 
|                                   |  |                    |     |                   |  |      |     |      |  |   |     |  |  |   |        | 

The allocation of intangible assets following our adoption of SFAS No. 142 is
summarized in the following table:

|                                 |          |                      |   |                    |       |                   |   |          |       |              |   |        |       |  |   |       |       | 
|-------------------------------- | -------- | -------------------- | - | ------------------ | ----- | ----------------- | - | -------- | ----- | ------------ | - | ------ | ----- |  | - | ----- | ----- | 
|                                 |          |                      |   | September 30, 2002 |       | December 31, 2001
|                                 |          |                      |   |                    |       |                  
|                                 |          |                      |   | Gross              |       |                   |   |          |       | Gross        |   |        |       | 
|                                 |          |                      |   | Carrying           |       | Accumulated       |   | Carrying |       | Accumulated 
|                                 |          |                      |   | Amount             |       | Amortization      |   | Amount   |       | Amortization
|                                 |          |                      |   |                    |       |                   |   |          |       |             
|Intangibles no longer amortized: |          |                      |   |                    |       |                   |   |          |       |              |   |        |       |  |   |      
|                                 | Goodwill |                      | $ | 17,150             |       |                   | $ |         |       |              | $ | 25,357 |       |  | $ | 1,533 |      
|Amortizable intangibles:         |          |                      |   |                    |       |                   |   |          |       |              |   |        |       |  |   |      
|                                 |          | Customer base        |   |                    | 4,214 |                   |   |          | 1,860 |              |   |        | 4,214 |  |   |       | 1,099 | 
|                                 |          | Capitalized software |   |                    | 2,649 |                   |   |          | 1,214 |              |   |        | 2,493 |  |   |       | 862   | 

The estimated future annual amortization expense for customer base and
developed software is as follows:

|      |  |       |  |   |       |          |       |           |     |   |     | 
|----- |  | ----- |  | - | ----- | -------- | ----- | --------- | --- | - | --- | 
|      |  |       |  |   |       | Customer |       | Developed
|      |  |       |  |   |       | Base     |       | Software 
|      |  |       |  |   |       |          |       |          
|2002* |  |       |  |   |       | $        | 1,013 |           |     | $ | 288 | 
|2003  |  |       |  |   |       |          | 1,009 |           |     |   | 288 | 
|2004  |  |       |  |   |       |          | 1,009 |           |     |   | 22  | 
|2005  |  |       |  |   |       |          | 84    |           |     |   |    | 
|      |  |       |  |   |       |          |       |           |     |   |     | 
|      |  | Total |  | $ | 3,115 |          |       | $         | 598 |  
|      |  |       |  |   |       |          |       |           |     |   |     | 



---

|* |  | Includes the nine months ended September 30, 2002
|- |  | -------------------------------------------------

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Following is a presentation of the results of operations, adjusted to exclude
goodwill amortization:

|                                            |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |          |  
|------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | -------- | -
|                                            |  | Three Months Ended |        | Nine Months Ended
|                                            |  | September 30,      |        | September 30,    
|                                            |  |                    |        |                  
|                                            |  | 2002               |        | 2001              |  | 2002 |        | 2001
|                                            |  |                    |        |                   |  |      |        |     
|Reported net loss before
extraordinary item |  | $                  | (2,210 | )                 |  | $    | (3,406 | )    |  | $ | (10,436 | ) |  | $ | (308,434 | )
|                                            |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |          |  
|Reported net loss                           |  | $                  | 14,178 |                   |  | $    | (3,406 | )    |  | $ | (722    | ) |  | $ | (306,753 | )
|                                            |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |          |  
|Add back: amortization of goodwill          |  |                    |       |                   |  |      | 646    |      |  |   |        |   |  |   | 9,797    |  
|                                            |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |          |  
|Adjusted net loss before
extraordinary item |  | $                  | (2,210 | )                 |  | $    | (2,760 | )    |  | $ | (10,436 | ) |  | $ | (298,637 | )
|                                            |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |          |  
|Adjusted net loss                           |  | $                  | 14,178 |                   |  | $    | (2,760 | )    |  | $ | (722    | ) |  | $ | (296,956 | )
|                                            |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |          |  
|Basic earnings per share:                   |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |          |  
|Reported net loss before
extraordinary item |  | $                  | (0.04  | )                 |  | $    | (0.06  | )    |  | $ | (0.19   | ) |  | $ | (6.27    | )
|                                            |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |          |  
|Reported net loss per share                 |  | $                  | .26    |                   |  | $    | (0.06  | )    |  | $ | (0.01   | ) |  | $ | (6.23    | )
|                                            |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |          |  
|Add back: amortization of goodwill          |  |                    |       |                   |  |      | 0.01   |      |  |   |        |   |  |   | 0.20     |  
|                                            |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |          |  
|Adjusted net loss before
extraordinary item |  | $                  | (0.04  | )                 |  | $    | (0.05  | )    |  | $ | (0.19   | ) |  | $ | (6.07    | )
|                                            |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |          |  
|Adjusted net loss per share                 |  | $                  | .26    |                   |  | $    | (0.05  | )    |  | $ | (0.01   | ) |  | $ | (6.03    | )
|                                            |  |                    |        |                   |  |      |        |      |  |   |         |   |  |   |          |  

On January 1, 2002, the Company adopted SFAS No. 142 (See Note B). In the
second quarter of 2002, the Company completed a transitional goodwill
impairment test, which under SFAS No. 142 must be completed in the year of
adoption. This test resulted in an impairment charge totaling $6,674, related
to the Web Technologies operating segment. The impairment charge is shown as a
cumulative effect of an accounting change as of January 1, 2002.

The following shows the restated results of operations for the three months
ended March 31, 2002:

|                                               |  |   |            |  
|---------------------------------------------- |  | - | ---------- | -
|Net loss, as reported                          |  | $ | (1,001     | )
|Cumulative effect adjustment                   |  |   | (6,674     | )
|                                               |  |   |            |  
|Net loss, as restated                          |  | $ | (7,675     | )
|                                               |  |   |            |  
|Loss per share, as reported (base and diluted) |  | $ | (.02       | )
|Cumulative effect adjustment                   |  |   | (.12       | )
|                                               |  |   |            |  
|Loss per share, as restated                    |  | $ | (.14       | )
|                                               |  |   |            |  
|Weighted average common shares                 |  |   | 53,483,000 |  

At June 30, 2002, in connection with the termination of the Agreement with
UICI, the Company recorded impairment charges related to goodwill and customer
base in the amounts of $484 and $3,080, respectively. The amounts are shown as
a loss on the disposal of discontinued operations. The goodwill impairment
charge results from a write off of the entire amount of goodwill allocated to
the Outsourcing segment as determined under the

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new rules for goodwill accounting. Likewise, the amount of the customer base
impairment charge was based upon a complete write-off of the portion of the
assets carrying value originally based upon the estimated future cash flows
from the Agreement with UICI.

The changes in the carrying amount of goodwill for the nine months ended
September 30, 2002, are as follows:

|                                                                        |  |              |      |            |  |               |        |          |  |              |        |  |  |   |     |  |  |   |        |  
|----------------------------------------------------------------------- |  | ------------ | ---- | ---------- |  | ------------- | ------ | -------- |  | ------------ | ------ |  |  | - | --- |  |  | - | ------ | -
|                                                                        |  |              |      |            |  |               |        |          |  | Benefit      |        |  |  |   |     |  |  |  
|                                                                        |  | Discontinued |      | Web        |  | Administrator |        | Imaging  |  | Consolidated
|                                                                        |  | Operations   |      | Technology |  | Solutions     |        | Services |  | Total       
|                                                                        |  |              |      |            |  |               |        |          |  |             
|Balance at January 1, 2002                                              |  | $            | 484  |            |  | $             | 12,771 |          |  | $            | 10,240 |  |  | $ | 813 |  |  | $ | 24,308 |  
|Cumulative effect adjustment                                            |  |              |     |            |  |               | (6,674 | )        |  |              |       |  |  |   |    |  |  |   | (6,674 | )
|                                                                        |  |              |      |            |  |               |        |          |  |              |        |  |  |   |     |  |  |   |        |  
|Adjusted balance at January 1, 2002                                     |  |              | 484  |            |  |               | 6,097  |          |  |              | 10,240 |  |  |   | 813 |  |  |   | 17,634 |  
|Goodwill impairment included in
loss on disposal of Outsourcing
segment |  |              | (484 | )          |  |               |       |          |  |              |       |  |  |   |    |  |  |   | (484   | )
|                                                                        |  |              |      |            |  |               |        |          |  |              |        |  |  |   |     |  |  |   |        |  
|Balance at September 30, 2002                                           |  | $            |     |            |  | $             | 6,097  |          |  | $            | 10,240 |  |  | $ | 813 |  |  | $ | 17,150 |  
|                                                                        |  |              |      |            |  |               |        |          |  |              |        |  |  |   |     |  |  |   |        |  

Note G  Segment Reporting

In May of 2001, the Company implemented a restructuring plan which, among
other things, created separate business units, each with accountability for
operations beginning July 1, 2001. Each business unit is deemed to be a
reporting segment. Assets are not allocated to business units for internal
reporting purposes and are, therefore, not included in the segment information
below.

The Companys operating segments are:



| |  |  | Web Technology Group  provides web-enabled connectivity platforms
and solutions for self service (brokers, employers, employees, members,
and providers), large group enrollment and small group enrollment,
sale/distribution and post-sale administration of group and individual
insurance policies including health, life and dental insurance, and
solutions for enabling compliance with HIPAA.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Benefit Administrator Solutions Group (formerly Application Solutions
Group)  provides web-enabled systems for enrollment, administration and
processing of health insurance claims on an ASP basis.                                                                                                                                                                                                 
|
| |  |  | Imaging Services Group  provides electronic data capture, imaging,
storage and retrieval of health insurance claims, attachments and other
correspondence.                                                                                                                                                                                                                                           

Each business segment generally sells its products and services to the
same constituent users, generally located in the United States, namely
healthcare payers, which include insurance companies, third-party and first-
party administrators, brokers / intermediaries, Blue Cross/Blue Shield plans
and self-insured employers, including state governments.

All revenue is specifically associated with a separate business unit and,
therefore, there are no reconciling items. Earnings before interest, income
tax, depreciation and amortization (EBITDA) is the primary liquidity
measurement used by management to make decisions regarding the segments.
However, EBITDA is not a measure defined in generally accepted accounting
principles (GAAP) and should not be construed as an alternative to operating
income as determined in accordance with GAAP. EBITDA does not consider
depreciation and amortization of software and equipment which could be
significant with increased capital expenditures. Management does not consider
these expenses significant for purposes of evaluating separate business unit
liquidity. EBITDA, as defined by the Company, also excludes restructuring and
impairment, severance and non-

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cash stock based compensation charges (EBITDA As Defined). Management
uses the EBITDA As Defined measurement to monitor basic cash flow generated and
used in the Companys core operating activities, and to monitor the effects of
changes made by management in the Companys operations across different time
periods. This factor alone is insufficient to measure all of the Companys
operating characteristics and is used in conjunction with GAAP operating income
to measure total operating performance. EBITDA As Defined may not be
comparable to similarly titled measures reported by other companies. Corporate
overhead includes executive management, accounting, legal and human resources,
and other expenses including consulting services. Operating income does not
include any cost allocations for corporate overhead.

|                                      |  |            |        |               |  |          |       |           |  |              |        |   |  |   |          |   |  |   |          |  
|------------------------------------- |  | ---------- | ------ | ------------- |  | -------- | ----- | --------- |  | ------------ | ------ | - |  | - | -------- | - |  | - | -------- | -
|                                      |  |            |        |               |  | Benefit  |       |           |  |              |        |   |  |   |          |   |  |  
|                                      |  | Web        |        | Administrator |  | Imaging  |       | Corporate |  | Consolidated
|                                      |  | Technology |        | Solutions     |  | Services |       | Overhead  |  | Total       
|                                      |  |            |        |               |  |          |       |           |  |             
|Three Months Ended September 30, 2002 |  |            |        |               |  |          |       |           |  |              |        |   |  |   |          |   |  |   |          |  
|Revenue                               |  | $          | 899    |               |  | $        | 2,962 |           |  | $            | 989    |   |  | $ |         |   |  | $ | 4,850    |  
|EBITDA As Defined                     |  |            | (515   | )             |  |          | 717   |           |  |              | (219   | ) |  |   | (1,161   | ) |  |   | (1,178   | )
|Depreciation and amortization         |  |            | 223    |               |  |          | 185   |           |  |              | 187    |   |  |   | 376      |   |  |   | 971      |  
|Operating income (loss)               |  |            | (738   | )             |  |          | 532   |           |  |              | (406   | ) |  |   | (1,624   | ) |  |   | (2,236   | )
|Three Months Ended September 30, 2001 |  |            |        |               |  |          |       |           |  |              |        |   |  |   |          |   |  |   |          |  
|Revenue                               |  | $          | 1,642  |               |  | $        | 3,069 |           |  | $            | 1,158  |   |  | $ |         |   |  | $ | 5,869    |  
|EBITDA As Defined                     |  |            | (141   | )             |  |          | 830   |           |  |              | (53    | ) |  |   | (1,204   | ) |  |   | (568     | )
|Depreciation and amortization         |  |            | 189    |               |  |          | 270   |           |  |              | 193    |   |  |   | 1,047    |   |  |   | 1,699    |  
|Operating income (loss)               |  |            | (328   | )             |  |          | 560   |           |  |              | (246   | ) |  |   | (2,353   | ) |  |   | (2,367   | )
|Nine Months Ended September 30, 2002  |  |            |        |               |  |          |       |           |  |              |        |   |  |   |          |   |  |   |          |  
|Revenue                               |  | $          | 2,480  |               |  | $        | 9,139 |           |  | $            | 3,111  |   |  | $ |         |   |  | $ | 14,730   |  
|EBITDA As Defined                     |  |            | (1,795 | )             |  |          | 2,196 |           |  |              | (743   | ) |  |   | (4,066   | ) |  |   | (4,408   | )
|Depreciation and amortization         |  |            | 840    |               |  |          | 557   |           |  |              | 583    |   |  |   | 1,149    |   |  |   | 3,129    |  
|Operating income (loss)               |  |            | (3,228 | )             |  |          | 1,516 |           |  |              | (1,326 | ) |  |   | (4,270   | ) |  |   | (7,308   | )
|Nine Months Ended September 30, 2001  |  |            |        |               |  |          |       |           |  |              |        |   |  |   |          |   |  |   |          |  
|Revenue                               |  | $          | 4,377  |               |  | $        | 9,235 |           |  | $            | 3,815  |   |  | $ |         |   |  | $ | 17,427   |  
|EBITDA As Defined                     |  |            | (2,430 | )             |  |          | 949   |           |  |              | (101   | ) |  |   | (4,655   | ) |  |   | (6,237   | )
|Depreciation and amortization         |  |            | 681    |               |  |          | 967   |           |  |              | 575    |   |  |   | 11,793   |   |  |   | 14,016   |  
|Operating income (loss)               |  |            | (3,111 | )             |  |          | (18   | )         |  |              | (675   | ) |  |   | (306,323 | ) |  |   | (310,127 | )

The Companys core products are sold through the Benefit Administrator
Solutions Group and the Web Technology Group, and most of the Companys current
research and development efforts are concentrated in these areas. The Benefit
Administrator Solutions Group is a mature business with over 20 years history
and client base. The Web Technology Group is a relatively new business, built
to take advantage of the Companys internet expertise and the healthcare
industrys movement to web-enabled legacy systems. The Imaging Services Group
serves as an entry point for new clients, through cost savings, and introduces
cross-selling opportunities for other Company products.

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Note H  Employee Termination Agreement

On August 15, 2000, Alvin H. Clemens, the Companys then Chairman, and
Healthaxis entered into an agreement terminating Mr. Clemens employment
contract. The termination agreement became effective upon the consummation of
the merger of Healthaxis.com with a wholly-owned subsidiary of the Company (the
HAXS Merger) in January 2001. Under the terms of the termination agreement,
Mr. Clemens was to receive aggregate payments totaling $2,125 paid in quarterly
installments over five years beginning in the first quarter of 2001. The
Company, at its option, could make the quarterly payments in shares of
Healthaxis common stock not to exceed a total of 500,000 shares.

On March 6, 2002, the Company and Mr. Clemens entered into an agreement
pursuant to which Mr. Clemens agreed to accept 358,332 shares of the Companys
common stock in full payment and satisfaction of the remainder of the severance
obligation. The Company recorded a gain in the first quarter of 2002 totaling
$1,345 related to the settlement of this liability, which was based upon the
difference between the carrying amount of the liability and the fair value of
the common stock issued to Mr. Clemens.

Note I  Impairment of Investment on Digital Insurance

In June 2002, the Company determined that an other than temporary decline
in the value of Healthaxis investment in Digital Insurance, Inc. common stock
had occurred. An impairment charge in the amount of $227, the remainder of the
carrying value, has been included as a component of interest income and other
income (expense).

Note J  Capitalized Software Impairment Charge

Management periodically reviews the book value of assets held for
indications of impairment. At June 30, 2002, management determined that the
value of certain developed software was impaired. This determination was based
upon an analysis of estimated future cash flows in connection with a decision
by management to divert marketing efforts away from the software product. An
impairment charge of $592, for the remaining carrying value of the asset, has
been included in costs of revenue.

Note K  Subsequent Event

On November 12, 2002, Healthaxis began a cost reduction initiative
designed to more closely align expenses with revenues and enhance the Companys
operating performance. The cost reduction initiative consists of both a
reduction in the Companys labor force and an across-the-board reduction in
salary levels, as well as planned reductions in certain operating and overhead
expenses. The reduction in labor force is scheduled to be effective in
mid-November and the Company expects to record severance expenses related to
the terminated employees in the fourth quarter of 2002.

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

Forward-Looking Statements

All statements other than statements of historical fact contained in this
report, including statements in this Managements Discussion and Analysis of
Results of Operations and Financial Condition concerning the Companys
financial position and liquidity, results of operations, prospects for future
growth, and other matters are forward-looking statements. These statements may
be identified with words such as anticipate, believe, plan, estimate,
expect, intend, should, could, goal, target, designed, on
track, comfortable with, optimistic and other similar expressions, and
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. 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 the risks and uncertainties
identified in Healthaxis documents filed with, or furnished to, the Securities
and Exchange Commission, including without limitation those identified under
the caption Risk Factors in the Companys Form S-3/A filed with the
Securities and Exchange Commission on October 15, 2002. Readers are cautioned
not to place undue reliance on forward-looking statements.

Overview

Healthaxis is a technology services firm committed to providing medical
claims and administration applications, web-enabled software solutions and
outsourced claims processing services for government and commercial benefit
administrators, health insurance companies and managed care organizations.
These solutions, which are comprised of software products and related services,
are provided either on a fully integrated or on an Application Service Provider
(ASP) basis. Healthaxis believes that its solutions enable a client to
reduce their administrative costs, grow their revenue, and improve
profitability.

Revenue Model:Healthaxis derives revenue from a number of sources as
described below for each of our strategic business units.

Benefit Administrator Solutions Group revenue is derived from transaction
fees and from providing professional services. The transaction revenue is a
combination of a per-employee-per-month (PEPM) fee for the use of our
proprietary applications and a per document fee for the printing and mailing of
system output (benefit checks, EOBs and letters). The transaction revenue is
based on an ASP model, where Healthaxis hosts the hardware and software and
performs some print and mail services on behalf of clients. Professional
services revenue is generated from direct billing for our staff time. These
billings are generally derived from converting a clients existing system,
client training and tailoring custom solutions for a client. Professional
services generally are billed on a flat rate per hour. In some cases, a
project may be done for a fixed price. For fixed price projects, revenue is
recognized on the percentage completion basis. Depending upon the nature and
expected profitability of certain projects, professional service fees and
associated costs may be deferred and recognized over the life of the
transaction-based contract.

Web Technology Group revenue is derived from licensing of our proprietary
software products and providing professional services. The licensing revenue
is a combination of per-member-per-month (PMPM) fees and fixed price license
fees. The fixed price license fees historically have been recognized over a
period of time, due to contract terms (such as a right of return). In the
future, we may enter into one-time license fee agreements, which fees would be
recognized upon the delivery of the product. Professional service revenue is
generated from direct billing for our staff time. These billings generally are
associated with implementation and integration of our software product into our
clients legacy system. Professional services may be billed on a flat rate per
hour, or a project may be undertaken for a fixed price. Revenue on fixed price
projects is recognized on the percentage completion basis.

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Imaging Group revenue is generally transaction based. Fees for mail
handling, scanning and converting insurance claims from paper to electronic
format, and image storage and retrieval are priced on a per-document or a
per-image basis. Such revenue is recognized in the month the services are
performed. Contracts generally include an up-front payment intended to recover
the start-up costs incurred in setting up a new client. Such fees are
generally deferred and recognized over the life of the transaction-based
contract.

Restructuring Plan:In May 2001, the Company implemented a restructuring
plan as further described in Note 6 to the Consolidated Financial Statements
included in our Form 8-K filed with the Securities and Exchange Commission on
August 30, 2002. In connection with its restructuring and reorganization, the
Company accrued or recorded restructuring charges of $279.6 million in the
second quarter of 2001. Those costs are generally related to impairment of
long-lived assets and goodwill, and severance costs for terminated employees.

Recent Developments

Termination of the Information Technology Services Agreement with UICI:
On June 11, 2002, Healthaxis, at its initiative, entered into an agreement with
UICI terminating the Information Technology Services Agreement (the
Agreement) between the two parties. The transaction closed on June 17, 2002.
Under the terms of the termination agreement, UICI made a one-time cash payment
to Healthaxis in the amount of $6.5 million and tendered 500,000 shares of
Healthaxis common stock back to the Company. In return, approximately 165
Healthaxis employees that were previously dedicated to providing services to
UICI under the Agreement have been transferred to and are now employed by UICI.
Approximately 13 previously dedicated employees have been terminated by the
Company and did not transfer to UICI in the transaction. As a result, all
expenses directly associated with the transferred or terminated employees will
no longer be incurred by Healthaxis. Under the terms of the Agreement,
Healthaxis was entitled to receive revenues from UICI equaling the sum of the
costs allocable under the Agreement plus ten percent of such costs.

Prior to the termination of the Agreement, UICI and its subsidiaries and
affiliates constituted, in aggregate, Healthaxis largest customer. UICI is
also the Companys largest common shareholder. At September 30, 2002, UICI
owned approximately 45% of the Companys outstanding common stock and owns
warrants to purchase 222,396 shares of the Companys common stock at prices
ranging from $3.01 to $12.00 per share. At September 30, 2002, UICI also owned
1,424 shares of the Companys Series A convertible preferred stock that were
convertible into 542,477 common shares.

Healthaxis requested the early termination of the Agreement for the following
reasons:



| |  |  | Healthaxis business strategy is focused on benefit administrator
solutions, web connectivity capabilities and imaging and data capture
services, and not on information technology outsourcing services. The
Agreement was an information technology outsourcing arrangement and
required significant management attention. The time required of
management to administer the contract distracted time from the effective
administration of the Companys long-term business strategy.                                                                 
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | UICI had previously publicly stated that it did not intend to renew
the Agreement when it expires in December 2005. UICI expected that
payments to Healthaxis under the Agreement were likely to decline over
the remaining term of the agreement as it replaced Healthaxis employees
with its own employees. Healthaxis revenues derived from the Agreement
had already declined from $21.4 million in 2000 to $20.7 million in
2001, and from $5.2 million in the first quarter of 2001 to $4.5 million
in the first quarter of 2002 (a 14% decline).

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| |  |  | Terminating the Agreement removed the future uncertainty associated
with the levels of revenues and earnings to be derived from the
Agreement, which were in decline. The Termination Agreement provided
for the payment of $6.5 million in cash immediately. Management of
Healthaxis estimated that the financial benefit to be received under the
Termination Agreement was equal to or greater than the amount the
Company could have reasonably expected to have received from
continuation of the Agreement and was, therefore, attractive.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Healthaxis has accounted for the transaction as a disposition of a line of
business. Due to the related party nature of the transaction, the Company has
recorded the proceeds, totaling approximately $6.4 million net of transaction
costs, as a contribution of capital from a significant shareholder. The
transaction resulted in a write-down of certain intangible assets, namely
customer base and goodwill, in the aggregate amount of approximately $3.6
million. This amount was recorded as a loss on disposal of discontinued
operations in the Companys Condensed Consolidated Statement of Operations in
the second quarter of 2002. The results of operations of the disposed segment
are now reported as a gain from discontinued operations on the Companys
Condensed Consolidated Statement of Operations for the appropriate periods.
The Company had previously reported the activities under the Agreement as a
separate operating segment (Outsourcing).

All historical revenues and expenses related to the termination of the
Agreement are reported as a gain from discontinued operations in the Companys
Condensed Consolidated Statement of Operations attached hereto, for all periods
reported. The termination of the Agreement resulted in the loss of
substantially all of the business of UICI, our largest customer, and the
Company believes that it is unlikely that it will be able to replace this
business in the near-term. The near-term impact of the termination of the
Agreement on the Companys operations, cash flow and liquidity is described
under the caption Liquidity and Capital Resources below.

As a result of the loss of substantially all of UICIs business, the
business of a number of the Companys other clients now represents a more
significant component of the Companys continuing operations. For the nine
months ended September 30, 2002, the Companys four largest customers accounted
for 59% of revenues. One of these clients, American Administrative Group, Inc.
(AAG), is currently operating under a temporary arrangement while the Company
and AAG continue to negotiate a definitive agreement. There can be no
assurance that a definitive agreement will be reached with AAG.

NASDAQ Listing:On April 12, 2002 Healthaxis received notification from
the Nasdaq Stock Market that, for a period of 30 consecutive trading days,
Healthaxis common stock has closed below the minimum $1.00 per share price
that is required for continued inclusion on the Nasdaq National Market. The
Company subsequently applied for and received approval for the listing of its
common stock on the Nasdaq SmallCap Market.

The listing of Healthaxis common stock was transferred from the Nasdaq
National Market to the Nasdaq SmallCap Market on July 16, 2002, where it will
continue to trade under the symbol HAXS. The continued listing of Healthaxis
common stock on the Nasdaq SmallCap Market will be subject to the Companys
continuing qualification with the Nasdaq SmallCap Market listing requirements,
including the requirement that the Healthaxis common stock obtain a price of
$1.00 per share for ten consecutive days on or before April 17, 2003.

Digital Insurance: As of March 31, 2002, the Company carried its 2.5%
interest in Digital Insurance at a value of $227,000 based upon Digitals last
equity funding. In July 2002, Digital completed another equity funding which
further diluted the Companys holdings to 0.4%. Healthaxis management has now
concluded that there is no measurable value in its investment in Digital, and
that this is other than a temporary condition. Accordingly, Healthaxis
recorded an impairment charge in the second quarter 2002 for the entire
$227,000 and now has no carrying value for its investment in Digital.

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Extinguishment of Convertible Debt:On July 31, 2002, Healthaxis completed
a transaction in which the holders of its 2% Convertible Debentures in the
principal amount of $27.5 million exchanged their debentures for 23,500 shares
of Series A Convertible Preferred Stock (the Preferred Stock) and a cash
payment of $4.0 million. The Preferred Stock has a par value of $1.00 per
share and a stated value of $1,000 per share. The Preferred Stock is
convertible into common stock at a price of $2.625 per share and carries a
dividend rate of 2% per annum, payable semi-annually on July 15 and January 15
of each year, in cash or, in some circumstances, common stock. The Preferred
Stock contains, among other things, terms providing the holders a preference in
the payment of dividends, a liquidation preference at least equal to the
stocks stated value plus accrued but unpaid dividends, a redemption of the
shares of Preferred Stock in situations within the control of the Company, and
contains covenants and obligations to which the Company must adhere. The
holders of the Preferred Stock do not have general voting rights, although they
do have the right to vote separately as a class in certain circumstances.

In 1999, the Company issued the 2% Convertible Debentures in the amount of
$27.5 million, described above. These debentures, as amended, were due in full
on September 14, 2005 and could be converted into common stock at a conversion
price of $9.00 per share at the option of the holder. Interest was paid
semi-annually on January 1 and July 1 of each year and, at the Companys
option, could be paid in cash or in stock. During the nine months ended
September 30, 2002, the Company recorded $319,000 in interest expense related
to the Convertible Debentures, which was paid via the issuance of 452,680
shares of the Companys common stock in July 2002. These debentures were
extinguished on July 31, 2002 as described above.

The Company recorded a third quarter gain on extinguishment of the
convertible debt of $16.4 million related to the transaction for the difference
between the carrying value of the convertible debentures and the estimated fair
value of the cash and preferred stock exchanged. The Preferred Stock is
reported as permanent equity with a value of $6.4 million on the Companys
balance sheet. The combined effects of the gain and recording of the Preferred
Stock increased shareholder equity by approximately $22.8 million.

Management of Healthaxis believes that this transaction will benefit the
Company by eliminating all of the Companys long-term debt for an amount
significantly less than the face value of the debentures. Management also
believes that the existence of the long-term debt was a negative factor in the
minds of existing customers, potential customers, and shareholders in terms of
the Companys financial stability. However, management also considered factors
mitigating against issuing the Preferred Stock and paying cash in exchange for
the convertible debentures. These factors included, for example, the need to
pay $4.0 million in cash to effect the exchange. Had the Company not entered
into the exchange, it would have had additional liquidity for its ongoing
operations. The convertible debentures did not mature until September 2005,
and therefore did not represent an immediate use of liquidity. It is also
possible that the Company could have negotiated a different transaction at a
later date, or it could have repaid the convertible debentures in full when due
through the issuance of other financial securities. On balance, after
consideration of all the factors, management concluded that the existence of
the convertible debentures was such a negative factor in the minds of the
Companys existing customers, potential customers and shareholders, that this
factor outweighed the other factors considered and that the Company should take
immediate action.

November 2002 Cost Reduction Initiative:On November 12, 2002, Healthaxis
began a cost reduction initiative designed to more closely align expenses with
revenues and enhance the Companys operating performance. The cost reduction
initiative consists of both a reduction in the Companys labor force and an
across-the-board reduction in salary levels, as well as planned reductions in
certain operating and overhead expenses. The reduction in labor force is
scheduled to be effective in mid-November and the Company expects to record
severance expenses related to the terminated employees in the 4th quarter. The
reduction in salary levels is expected to be effective January 1, 2003. In
total, the cost reduction initiative is designed to save in excess of $5
million in expenses in 2003, however there can be no assurances that the
implementation of this initiative will result in the full amount of expected
savings.

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Management believes that the cost reduction initiative serves not only the
Companys financial goals, but is also consistent with its strategic business
goals. Healthaxis has spent significant resources in the past two years
developing certain products and functionality. That development effort is now
substantially complete and the level of human resources necessary to sustain
the effort is no longer required. The Company will now focus on selling these
capabilities to new customers, as well as using them to strengthen
relationships with existing customers. In addition, the Company has, in
recent periods, sharpened its focus on more specific target markets with more
specific product offerings, the effect of which has been to reduce its human
resource requirements. Hence, management believes that its reduced labor force
will be able to effectively serve its existing customer base, while also
focusing on new market opportunities.

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Results of Operations

The Company focuses its cost containment initiatives on operating cash
expenses. Operating depreciation / amortization, stock based compensation,
amortization of intangible assets, restructuring charge and loss on building
are all non-cash expenses.

Operating depreciation / amortization is the systematic charge to expense
for tangible fixed assets used in the operation of the business. Stock based
compensation is the result of (a) stock options that were granted at an
exercise price below the market price of the Companys common stock in 2000 and
are charged to expense as vested; (b) options that were re-priced in 2000 and
are accounted for as variable options with a mark-to-market expense charge to
the extent the Companys stock price exceeds $2.49; and (c) charges from the
vesting of an Insurdata option plan that was assumed as part of the Companys
merger with Insurdata Incorporated (the Insurdata Merger). Amortization of
intangibles is the systematic expensing of customer base, developed software
and, in 2001, goodwill. The restructuring charge relates to certain charges
associated with the Companys adoption of a restructuring plan implemented in
May 2001, and the loss on building relates to the writedown of a Pennsylvania
building and property that has since been sold. The following tables are
presented in such a manner that these significant non-cash expenses are
distinguishable from cash expenses.

Three months ended September 30, 2002 compared to three months ended September
30, 2001.

|                   |                             |                          |   |                                                       |       |               |   |              |     |       |   |         |    |      |       |       |       |  |     |     |     |  
|------------------ | --------------------------- | ------------------------ | - | ----------------------------------------------------- | ----- | ------------- | - | ------------ | --- | ----- | - | ------- | -- | ---- | ----- | ----- | ----- |  | --- | --- | --- | -
|                   |                             |                          |   | Three Months Ended, September 30, 2002 (in thousands)
|                   |                             |                          |   |                                                      
|                   |                             |                          |   | Cash                                                  |       |               |   |              |     | Stock |   |         |    |      |       |       |       | 
|                   |                             |                          |   | Operating                                             |       | Depreciation/ |   | Based        |     |       |   |         |    | % of
|                   |                             |                          |   | Costs                                                 |       | Amortization  |   | Compensation |     | Total |   | Revenue
|                   |                             |                          |   |                                                       |       |               |   |              |     |       |   |        
|Revenues           |                             |                          |   |                                                       |       |               |   |              |     |       |   |         |    | $    | 4,850 |       |       |  | 100 | %  
|                   |                             |                          |   |                                                       |       |               |   |              |     |       |   |         |    |      |       |       |       |  |     |    
|Operating Expenses |                             |                          |   |                                                       |       |               |   |              |     |       |   |         |    |      |       |       |       |  |     |    
|                   | Cost of revenue             |                          | $ | 4,298                                                 |       |               | $ | 588          |     |       | $ | 40      |    |      |       | 4,926 |       |  |     | 102 | %  
|                   | Sales and marketing         |                          |   | 583                                                   |       |               |   | 12           |     |       |   | 22      |    |      |       | 617   |       |  |     | 13  | %  
|                   | General and administrative  |                          |   | 1,086                                                 |       |               |   | 31           |     |       |   | 25      |    |      |       | 1,142 |       |  |     | 24  | %  
|                   | Research and development    |                          |   | 61                                                    |       |               |   | 17           |     |       |   |        |    |      |       | 78    |       |  |     | 2   | %  
|                   |                             |                          |   |                                                       |       |               |   |              |     |       |   |         |    |      |       |       |       |  |     |    
|                   |                             | Subtotal                 |   | $                                                     | 6,028 |               |   | $            | 648 |       |   | $       | 87 |      |       |       | 6,763 |  |     |     | 139 | %
|                   |                             |                          |   |                                                       |       |               |   |              |     |       |   |         |    |      |       |       |       |  |     |    
|                   | Restructuring charge        |                          |   |                                                       |       |               |   |              |     |       |   |         |    |      |       |      |       |  |     |     |    
|                   | Loss on building            |                          |   |                                                       |       |               |   |              |     |       |   |         |    |      |       |      |       |  |     |     |    
|                   | Amortization of intangibles |                          |   |                                                       |       |               |   |              |     |       |   |         |    |      |       | 323   |       |  |     |     |    
|                   |                             |                          |   |                                                       |       |               |   |              |     |       |   |         |    |      |       |       |       |  |     |    
|                   |                             | Total operating expenses |   |                                                       |       |               |   |              |     |       |   |         |    |      |       | $     | 7,086 |  |     |     | 146 | %
|                   |                             |                          |   |                                                       |       |               |   |              |     |       |   |         |    |      |       |       |       |  |     |    

|                   |                             |                          |   |                                                       |       |              |   |              |     |       |   |         |     |      |       |       |       |  |     |    |     |  
|------------------ | --------------------------- | ------------------------ | - | ----------------------------------------------------- | ----- | ------------ | - | ------------ | --- | ----- | - | ------- | --- | ---- | ----- | ----- | ----- |  | --- | -- | --- | -
|                   |                             |                          |   | Three Months Ended, September 30, 2001 (in thousands)
|                   |                             |                          |   |                                                      
|                   |                             |                          |   | Cash                                                  |       |              |   |              |     | Stock |   |         |     |      |       |       |       | 
|                   |                             |                          |   | Operating                                             |       | Deprecation/ |   | Based        |     |       |   |         |     | % of
|                   |                             |                          |   | Costs                                                 |       | Amortization |   | Compensation |     | Total |   | Revenue
|                   |                             |                          |   |                                                       |       |              |   |              |     |       |   |        
|Revenues           |                             |                          |   |                                                       |       |              |   |              |     |       |   |         |     | $    | 5,869 |       |       |  | 100 | % 
|                   |                             |                          |   |                                                       |       |              |   |              |     |       |   |         |     |      |       |       |       |  |     |   
|Operating Expenses |                             |                          |   |                                                       |       |              |   |              |     |       |   |         |     |      |       |       |       |  |     |   
|                   | Cost of revenue             |                          | $ | 4,722                                                 |       |              | $ | 650          |     |       | $ | 81      |     |      |       | 5,453 |       |  |     | 93 | %  
|                   | Sales and marketing         |                          |   | 271                                                   |       |              |   | 12           |     |       |   | 37      |     |      |       | 320   |       |  |     | 5  | %  
|                   | General and administrative  |                          |   | 1,106                                                 |       |              |   | 43           |     |       |   | 43      |     |      |       | 1,192 |       |  |     | 20 | %  
|                   | Research and development    |                          |   | 268                                                   |       |              |   | 24           |     |       |   | 9       |     |      |       | 301   |       |  |     | 5  | %  
|                   |                             |                          |   |                                                       |       |              |   |              |     |       |   |         |     |      |       |       |       |  |     |   
|                   |                             | Subtotal                 |   | $                                                     | 6,367 |              |   | $            | 729 |       |   | $       | 170 |      |       |       | 7,266 |  |     |    | 124 | %
|                   |                             |                          |   |                                                       |       |              |   |              |     |       |   |         |     |      |       |       |       |  |     |   
|                   | Restructuring charge        |                          |   |                                                       |       |              |   |              |     |       |   |         |     |      |       |      |       |  |     |    |    
|                   | Loss on building            |                          |   |                                                       |       |              |   |              |     |       |   |         |     |      |       |      |       |  |     |    |    
|                   | Amortization of intangibles |                          |   |                                                       |       |              |   |              |     |       |   |         |     |      |       | 970   |       |  |     | 17 | %  
|                   |                             |                          |   |                                                       |       |              |   |              |     |       |   |         |     |      |       |       |       |  |     |   
|                   |                             | Total operating expenses |   |                                                       |       |              |   |              |     |       |   |         |     |      |       | $     | 8,236 |  |     |    | 140 | %
|                   |                             |                          |   |                                                       |       |              |   |              |     |       |   |         |     |      |       |       |       |  |     |   

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Revenuesdecreased 17% from $5.9 million for the three months ended
September 30, 2001 to $4.9 million for the same period in 2002. The decrease
was primarily the result of reductions in the amounts received from Digital
Insurance and UICI (unrelated to the Information Technology Services Agreement)
in the Web Technology Group, with slight decreases in revenue also being
recorded in the Benefits Administrator Solutions Group and the Imaging Services
Group. The decrease in revenue from Digital Insurance totaled $155,000 and was
a result of the May 2001 Amended Asset Purchase and Amended Software Licensing
and Consulting agreements. These amended agreements served to reduce the
amount of license fees and professional services fees received from Digital
Insurance in subsequent periods. The decrease in revenue from UICI was
approximately $1.0 million. Revenue under this agreement was amortized into
revenue over a contractual warranty period that expired on March 31, 2002.
Subsequent to that date only a small amount of maintenance revenue remains.
Revenue of $396,000 from a new customer of the Web Technology Group in the
third quarter of 2002 was largely offset by the loss of a significant Imaging
Services Group customer in late 2001 ($113,000 reduction).

Cost of revenuesincludes all expenses directly associated with the
production of revenue, and consists primarily of salaries and related benefits,
rent, amortization and depreciation, system expenses such as maintenance and
repair, as well as other related consumables. These costs decreased 10% from
$5.5 million for the three months ended September 30, 2001 to $4.9 million for
the same period in 2002. During 2002, we capitalized more personnel costs
associated with software development and contract start-up than we did during
the same period in 2001. During the three months ended September 30, 2002, we
capitalized $365,000 related to the development of our new Web Self-Service
products (Broker, Member, Employer, and Enroll). During the same period, we
also capitalized $162,000 in contract costs related to the implementation of
new Web Self-Service and Insur-Claim customers. This increased capitalization
caused employee personnel expense to decrease. Without this capitalization,
personnel expense would have remained about the same as 2001. The decrease in
cost of revenues relates entirely to this decrease in personnel expense. Cost
of revenue as a percentage of revenue increased from 93% in the 2001 period to
102% in the 2002 period. Most of the Companys operating costs consist of
salaried wages. Although revenue decreased for the three months ended
September 30, 2002, personnel costs did not decrease proportionately.

Sales and marketing expensesconsist of employee salaries and related
benefits, as well as promotional costs such as direct mail campaigns, trade
shows and media advertising. These expenses increased from $320,000 for the
three months ended September 30, 2001 to $617,000 for the same period in 2002.
The increase was due to increased personnel in the direct sales force.

General and administrative expensesinclude executive management,
accounting, legal, consulting services and human resources compensation and
related benefits, as well as expenditures for applicable overhead costs. These
expenses decreased $50,000 (4%) from the three months ended September 30, 2001
compared the same period in 2002. A reduction of stock based compensation and
depreciation accounted for $30,000 of the change which was due to the fact that
certain Founders Plan options which were included in stock based compensation
expense during 2001 became fully vested in April 2002.

Research and development expensesprimarily consist of the salary and
related benefits of personnel engaged directly in the development of new
products and the enhancement of existing products, prior to the establishment
of technological feasibility. These expenses decreased 74% from $301,000 for
the three months ended September 30, 2001 to $78,000 for the same period in
2002. The decrease was due to a reduction of Advanced Technology Division
staff, and the redeployment of staff from this division to operating divisions
in order to focus on near term revenue opportunities.

Amortization of intangibleexpensesincludes the amortization of developed
software, customer base and goodwill. These expenses decreased from $970,000
for the three months ended September 30, 2001 to $323,000

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for the same period in 2002. Most of the decrease was due to the fact
that goodwill is no longer being amortized, effective January 1, 2002, in
accordance with new accounting guidelines.

Interest income and other income (expense)increased from a loss of ($1.5)
million in the three months ended September 30, 2001 to a gain of $68,000 in
the same period in 2002. The change was due to a write down of our investment
in Digital Insurance of $1.6 million which was recorded in the 2001 period.
There was no such charge in 2002.

Interest expenseis derived mostly from the Companys convertible
debentures. This expense decreased from $182,000 for the three months ended
September 30, 2001 to $76,000 for the same period in 2002. The reduction is
due to the extinguishment of these debentures in July 2002 as described under
the caption  Recent Developments  Extinguishment of Convertible Debt above.

Gain from discontinued operationsrelates to the operations of the
disposed UICI Outsourcing business segment. This segment was effectively
disposed of on June 17, 2002 as further described in  Recent Developments  Termination of the Information Technology Outsourcing Agreement with UICI
above. The $615,000 gain for the three months ended September 30, 2001
reflects the net revenues and expenses under that agreement during the period.
The $34,000 gain for the comparable period in 2002 reflects only a final
adjustment to the agreement that was terminated in the previous quarter.

Gain on extinguishment of debtof $16.4 million was recorded in the three
months ended September 30, 2002. This gain was the result of the elimination
of the Companys convertible debentures, as further described under the caption
 Recent Developments  Extinguishment of Convertible Debt above. There was
no such gain in the comparable period in 2001.

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Nine months ended September 30, 2002 compared to Nine months ended
September 30, 2001.

|                   |                             |                          |   |                                                      |        |               |   |              |       |       |   |         |     |      |        |        |        |  |     |     |     |  
|------------------ | --------------------------- | ------------------------ | - | ---------------------------------------------------- | ------ | ------------- | - | ------------ | ----- | ----- | - | ------- | --- | ---- | ------ | ------ | ------ |  | --- | --- | --- | -
|                   |                             |                          |   | Nine Months Ended, September 30, 2002 (in thousands)
|                   |                             |                          |   |                                                     
|                   |                             |                          |   | Cash                                                 |        |               |   |              |       | Stock |   |         |     |      |        |        |        | 
|                   |                             |                          |   | Operating                                            |        | Depreciation/ |   | Based        |       |       |   |         |     | % of
|                   |                             |                          |   | Costs                                                |        | Amortization  |   | Compensation |       | Total |   | Revenue
|                   |                             |                          |   |                                                      |        |               |   |              |       |       |   |        
|Revenues           |                             |                          |   |                                                      |        |               |   |              |       |       |   |         |     | $    | 14,730 |        |        |  | 100 | %  
|                   |                             |                          |   |                                                      |        |               |   |              |       |       |   |         |     |      |        |        |        |  |     |    
|Operating Expenses |                             |                          |   |                                                      |        |               |   |              |       |       |   |         |     |      |        |        |        |  |     |    
|                   | Cost of revenue             |                          | $ | 14,227                                               |        |               | $ | 1,983        |       |       | $ | 163     |     |      |        | 16,373 |        |  |     | 111 | %  
|                   | Sales and marketing         |                          |   | 1,503                                                |        |               |   | 35           |       |       |   | 88      |     |      |        | 1,626  |        |  |     | 11  | %  
|                   | General and administrative  |                          |   | 2,490                                                |        |               |   | 97           |       |       |   | 158     |     |      |        | 2,745  |        |  |     | 19  | %  
|                   | Research and development    |                          |   | 288                                                  |        |               |   | 38           |       |       |   | (8      | )   |      |        | 318    |        |  |     | 2   | %  
|                   |                             |                          |   |                                                      |        |               |   |              |       |       |   |         |     |      |        |        |        |  |     |    
|                   |                             | Subtotal                 |   | $                                                    | 18,508 |               |   | $            | 2,153 |       |   | $       | 401 |      |        |        | 21,062 |  |     |     | 143 | %
|                   |                             |                          |   |                                                      |        |               |   |              |       |       |   |         |     |      |        |        |        |  |     |    
|                   | Restructuring charge        |                          |   |                                                      |        |               |   |              |       |       |   |         |     |      |        |       |        |  |     |     |    
|                   | Loss on building            |                          |   |                                                      |        |               |   |              |       |       |   |         |     |      |        |       |        |  |     |     |    
|                   | Amortization of intangibles |                          |   |                                                      |        |               |   |              |       |       |   |         |     |      |        | 976    |        |  |     | 7   | %  
|                   |                             |                          |   |                                                      |        |               |   |              |       |       |   |         |     |      |        |        |        |  |     |    
|                   |                             | Total operating expenses |   |                                                      |        |               |   |              |       |       |   |         |     |      |        | $      | 22,036 |  |     |     | 150 | %
|                   |                             |                          |   |                                                      |        |               |   |              |       |       |   |         |     |      |        |        |        |  |     |    

|                   |                             |                          |   |                                                      |        |              |   |              |       |       |   |         |       |      |        |         |         |  |     |       |       |  
|------------------ | --------------------------- | ------------------------ | - | ---------------------------------------------------- | ------ | ------------ | - | ------------ | ----- | ----- | - | ------- | ----- | ---- | ------ | ------- | ------- |  | --- | ----- | ----- | -
|                   |                             |                          |   | Nine Months Ended, September 30, 2001 (in thousands)
|                   |                             |                          |   |                                                     
|                   |                             |                          |   | Cash                                                 |        |              |   |              |       | Stock |   |         |       |      |        |         |         | 
|                   |                             |                          |   | Operating                                            |        | Deprecation/ |   | Based        |       |       |   |         |       | % of
|                   |                             |                          |   | Costs                                                |        | Amortization |   | Compensation |       | Total |   | Revenue
|                   |                             |                          |   |                                                      |        |              |   |              |       |       |   |        
|Revenues           |                             |                          |   |                                                      |        |              |   |              |       |       |   |         |       | $    | 17,427 |         |         |  | 100 | %    
|                   |                             |                          |   |                                                      |        |              |   |              |       |       |   |         |       |      |        |         |         |  |     |      
|Operating Expenses |                             |                          |   |                                                      |        |              |   |              |       |       |   |         |       |      |        |         |         |  |     |      
|                   | Cost of revenue             |                          | $ | 16,361                                               |        |              | $ | 2,209        |       |       | $ | 711     |       |      |        | 19,281  |         |  |     | 111   | %    
|                   | Sales and marketing         |                          |   | 1,754                                                |        |              |   | 31           |       |       |   | 1,108   |       |      |        | 2,893   |         |  |     | 17    | %    
|                   | General and administrative  |                          |   | 6,631                                                |        |              |   | 184          |       |       |   | 4,571   |       |      |        | 11,386  |         |  |     | 65    | %    
|                   | Research and development    |                          |   | 1,101                                                |        |              |   | 92           |       |       |   | 29      |       |      |        | 1,222   |         |  |     | 7     | %    
|                   |                             |                          |   |                                                      |        |              |   |              |       |       |   |         |       |      |        |         |         |  |     |      
|                   |                             | Subtotal                 |   | $                                                    | 25,847 |              |   | $            | 2,516 |       |   | $       | 6,419 |      |        |         | 34,782  |  |     |       | 200   | %
|                   |                             |                          |   |                                                      |        |              |   |              |       |       |   |         |       |      |        |         |         |  |     |      
|                   | Restructuring charge        |                          |   |                                                      |        |              |   |              |       |       |   |         |       |      |        | 279,607 |         |  |     | 1,604 | %    
|                   | Loss on building            |                          |   |                                                      |        |              |   |              |       |       |   |         |       |      |        | 1,665   |         |  |     | 10    | %    
|                   | Amortization of intangibles |                          |   |                                                      |        |              |   |              |       |       |   |         |       |      |        | 11,500  |         |  |     | 66    | %    
|                   |                             |                          |   |                                                      |        |              |   |              |       |       |   |         |       |      |        |         |         |  |     |      
|                   |                             | Total operating expenses |   |                                                      |        |              |   |              |       |       |   |         |       |      |        | $       | 327,554 |  |     |       | 1,880 | %
|                   |                             |                          |   |                                                      |        |              |   |              |       |       |   |         |       |      |        |         |         |  |     |      

Revenuesdecreased 15% from $17.4 million for the nine months ended
September 30, 2001 to $14.7 million for the same period in 2002. Revenues from
UICI (unrelated to the Information Technology Services Agreement) accounted for
$1.1 million of the decline and a reduction in revenue from Digital Insurance
accounted for $1.6 million. Revenue from three new customers in 2002 of
$722,000 plus net growth of several existing customers of $610,000 were largely
offset by the loss of three customers totaling $1.2 million in the Imaging
Services Group ($1.1 million) and Web Technologies Group ($119,000).

Cost of revenuesdecreased 15% from $19.3 million for the nine months
ended September 30, 2001 to $16.4 million for the same period in 2002 despite a
software impairment charge of $592,000 and a hardware write-off of $123,000 in
the 2002 period. Cost of revenue as a percentage of revenue was 111% for both
periods. A reduction of stock based compensation accounted for $548,000 of the
decrease. Most of the stock based compensation cost in 2001 relates to the
re-measurement of options exchanged in the HAXS Merger completed in January
2001. A reduction of amortization and depreciation accounted for an additional
$226,000 and is the result of a cutback in capital expenditures following the
May 2001 restructuring. The remainder of the decrease was due

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primarily to a reduction in personnel and subcontractor expenses, which
resulted from a reduced labor force subsequent to the restructuring plan
implemented in May 2001 as described above.

Sales and marketing expensesdecreased 44% from $2.9 million for the nine
months ended September 30, 2001 to $1.6 million for the same period in 2002.
Approximately $1.0 million of the decrease was due to a reduction of stock
based compensation resulting from the re-measurement of options exchanged in
the 2001 HAXS Merger.

General and administrative expenseswere approximately $11.4 million for
the nine months ended September 30, 2001 compared to $2.7 million for the same
period in 2002, reflecting a decrease of 76%. Stock based compensation of
approximately $4.6 million was included in the 2001 period as compared to
$158,000 in the 2002 period, due primarily to the re-measurement of options
exchanged in the HAXS merger. Severance expenses totaling $2.2 million are
included in the 2001 period, as compared to a credit of $1.3 million in 2002,
primarily related to Mr. Clemens severance agreement and settlement as
described in Note H to the Companys Condensed Consolidated Financial
Statements included in this report. After adjustment for these items, expenses
have decreased approximately $700,000 as a result of the reduction of
management and corporate staff and reduced depreciation.

Research and development expensesdecreased 74% from $1.2 million for the
nine months ended September 30, 2001 to $318,000 for the same period in 2002.
The decrease was due to a reduction of Advanced Technology Division staff, and
the redeployment of staff from this division to operating divisions in order to
focus on near-term revenue opportunities.

Restructuring and Impairment Chargeswere approximately $279.6 million
during the nine months ended September 30, 2001. These charges were recorded
pursuant to the Companys adoption of an internal restructuring plan
implemented in May 2001. Approximately $277.5 million of this charge was
attributable to the write-down of goodwill. The remainder is to record other
costs of the restructuring including severance payments for terminated
employees and the reduction of other long lived assets, primarily resulting
from the decision to cease the development and marketing of certain products.
See   Overview  Restructuring Plan above. There were no such charges during
the comparable period in 2002.

Loss on buildingof $1.7 million in the nine months ended September 30,
2001 represents the write-down of our building and property in Pennsylvania,
which has now been sold. There were no such charges during the comparable
period in 2002.

Amortization of intangible expensesdecreased from $11.5 million for the
nine months ended September 30, 2001 to $976,000 for the same period in 2002.
The decrease was due to the fact that goodwill is no longer being amortized,
effective January 1, 2002, in accordance with new accounting guidelines as
described in Recent Accounting Pronouncements below.

Interest income and other income (expense)increased from a ($2.0) million
expense in the nine months ended September 30, 2001 to income of $25,000 in the
same period in 2002. The increase was due to a write off of the investment in
Digital Insurance of $3.0 million in 2001 as compared to $227,000 in 2002,
offset primarily by a decline in interest income of $480,000 from 2001 to 2002.
The increased interest income in 2001 was due to customer financings and
larger balances on loans due from employees.

Interest expensedecreased 40% from $737,000 in the nine months ended
September 30, 2001 to $439,000 in the same period in 2002. The decrease is due
to the reduction in amortization of the discount on the convertible debentures,
which was revalued on January 26, 2001 in connection with the restructuring of
this debt, and the extinguishment of this debt in July 2002.

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Minority interest in loss of subsidiarywas $3.1 million for the nine
months ended September 30, 2001 compared to none for the same period in 2002.
The minority interest was recorded for approximately one month (until the HAXS
Merger) in 2001. Subsequent to the HAXS Merger, the Company owned 100% of the
Healthaxis.com subsidiary and, therefore, no subsequent minority interest was
recorded.

Gain from discontinued operationsrelates to the operations of the
disposed UICI Outsourcing segment. The gain was $1.4 million for the nine
months ended September 30, 2001 compared to $850,000 for the same period in
2002. The reduction was due to declining revenue from UICI from 2001 and
cancellation of the Information Technology Services Agreement with UICI,
effective June 11, 2002.

Loss on disposal of discontinued operationsof $3.6 million in 2002
includes the impairment of goodwill and customer base attributable to the
disposal of the Outsourcing segment. There were no similar charges in 2001.

Gain on extinguishment of debtof $1.7 million was recorded as an
extraordinary gain in the nine months ended September 30, 2001 as the result of
restructuring the convertible debentures in January 2001. A gain of $16.4
million was recorded in the comparable period in 2002 as the result of the
extinguishment of these debentures in July 2002, as further described under the
caption  Recent Developments  Extinguishment of Convertible Debt above.

Cumulative effect of accounting changeof $6.7 million was recorded as a
result of the Companys adoption SFAS No. 142 Goodwill and Other Intangible
Assets. In the second quarter of 2002, the Company completed a transitional
goodwill impairment test, which resulted in an impairment charge of $6.7
million related to the Web Technologies operating segment. The impairment
charge is shown as a cumulative effect of an accounting change as of January 1,
2002. No such charge was recorded in the comparable period in 2001.

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Liquidity and Capital Resources

General.A major objective of Healthaxis is to maintain sufficient
liquidity to fund growth and meet all cash requirements with cash and
short-term equivalents on hand plus funds generated from operating cash flow.
Our cash balances since January 2001 for selected dates were as follows:

|                   |   |              
|------------------ | - | -------------
|December 31, 2001  | - | $17.2 million
|March 31, 2001     | - | $12.0 million
|June 30, 2001      | - | $12.2 million
|September 30, 2001 | - | $12.3 million
|December 31, 2001  | - | $13.1 million
|March 31, 2002     | - | $12.6 million
|June 30, 2002      | - | $18.7 million
|September 30, 2002 | - | $12.6 million

In the second quarter of 2001, Healthaxis received a $2.0 million lump sum
payment from Digital Insurance. In the fourth quarter of 2001, Healthaxis sold
its building in Pennsylvania for a net cash amount of $2.6 million with an
additional $180,000 due upon final tax filings. In the second quarter of 2002,
Healthaxis received a net lump sum payment of $6.4 million from UICI, related
to the early termination of the Information Technology Services Agreement with
UICI. In the third quarter of 2002, Healthaxis paid $4.0 million cash, along
with other consideration, for the early extinguishment of its convertible
debentures.

With the Companys net receipt of $6.4 million cash from UICI in the
second quarter of 2002, the Company was able to convert a declining and
uncertain revenue stream into current cash. Because the Companys revenue from
the agreement with UICI was based upon the Companys cost (including certain
fixed overhead) plus 10%, the future impact on cash flows will be a reduction
of cash generated from operations. The impact on cash generated from
operations for the nine months ended September 30, 2002 would have been
approximately $3.7 million had the transaction occurred on December 31, 2001.
The impact to both cash and operations is greater than 10% of the revenue lost
due to the fact that certain of the Companys fixed overhead costs were
includable under the cost plus 10% arrangement, but were not eliminated as a
result of the termination. There can be no assurances of the impact of the
termination of the UICI Agreement on the Companys future cash generated or
used in operations, or in the Companys results of operations.

On July 31, 2002, the Company closed a transaction in which the holders of
its 2% Convertible Debentures in the principal amount of $27.5 million
exchanged their debentures for shares of Series A Convertible Preferred Stock
and a cash payment of $4.0 million. The debentures would have matured in full
in September 2005. By completing this transaction, the Company was able to
extinguish all of its long-term debt. This transaction is further described
under the caption  Extinguishment of Convertible Debt above.

During the quarter ended September 30, 2002, Healthaxis reported a use of
cash from operations totaling $1.6 million. We expect our current cash
reserves and the cash generated by future operations to be sufficient to fund
operations for at least the next 12 months. Funding operations on a
longer-term basis will depend upon the Companys ability to continue
controlling costs, maintaining its existing customer relationships, and
generating new revenues. The Companys operating cost structure is
predominantly personnel and human resource related.
The Companys November
2002 cost reduction initiative, which consists of a reduction in the
Companys labor force, an across-the-board reduction in salary
levels, and planned reductions in certain operating and overhead
expenses,
reflects managements continuing drive to control costs. While the cost
reduction initiative will result in a 2002 fourth quarter charge due to
severance expenses related to terminated employees, the cost reduction
initiative is designed to save significant expenses in 2003. With regard to
maintaining cash flow from current customers, the Company is dependent on a
small number of clients to generate a significant amount of the annual and
quarterly revenues. For the nine month period ended September 30, 2002, our
four largest

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customers accounted for 59% of revenues from continuing operations. Further,
one of these clients, American Administrative Group, Inc. (AAG), is currently
operating under a temporary arrangement while we and AAG continue to negotiate
a definitive agreement. While we expect that a definitive agreement will be
executed by the end of 2002, there can be no assurance that a definitive
agreement will be reached with AAG. The loss of one or more of our key
customers could have a material negative impact on our operating cash flow. We
believe that the relationships with our customers are positive. Our plans for
generating new revenues are based upon using the Companys direct sales force
in combination with strategic partners to pursue new sales opportunities. The
direct sales force is specifically targeting third party administrators, small
to medium size insurance payers and managed care organizations, health and
welfare plans (i.e. union organizations) and state and federal governments as
the principal markets. We believe that Healthaxis offers competitive, and
competitively priced, products and services in all of these markets. However,
there can be no assurances that we will be successful in achieving the goal of
revenue growth. If we are unsuccessful in decreasing our costs or increasing
revenue, then external funds may become necessary to support the Companys
business operations. There can be no assurance that under then-current
conditions such funds would be available or, if available, would not
significantly dilute shareholders interests or returns.

Cash used in operating activitiesfor the nine months ended September 30,
2002 was $1.4 as compared to cash used of $2.4 million for the same period in
2001. The net change was primarily the result of the savings realized from the
restructuring plan implemented in May 2001, and a one-time acceleration of cash
collections from trade receivables related to the termination of the
Information Technology Services Agreement with UICI. Healthaxis generated cash
flow from the UICI Agreement of $3.7 million in the first nine months of 2002.
With the termination of the Agreement, such cash flow will not be available to
the Company in future operations and will increase its dependence upon current
cash reserves until the operating cash flow can be replaced from new sources.

Cash used in investing activitiesfor the nine months ended September 30,
2002 was $1.2 million as compared to $2.3 million for the comparable period in
2001. The reduced cash expenditure was primarily the result of reductions in
expenditures for capitalized software and contract costs totaling $898,000.

Cash provided by financing activitiesfor the nine months ended September
30, 2002 was $2.1 million as compared to cash used of $229,000 for the
comparable period in 2001. The increase was due to the one time payment of
$6.4 million, net of transaction costs, received from UICI as a result of the
termination of the Agreement described further under Recent Developments  Termination of the Information Technology Services Agreement with UICI above,
offset by $4.0 million paid to the convertible debenture holders as described
further under  Extinguishment of Convertible Debt above.

Obligations: Healthaxis 2% convertible debentures in the principal
amount of $27.5 million were extinguished in July 2002 as described under
 Extinguishment of Convertible Debt above. The Company now has no long-term
debt outstanding.

Healthaxis has certain capital and operating lease commitments over the
next five years. These leases are primarily for office space and data
processing equipment. The Company has no other significant cash commitments,
other than the day to day operations of the business. Some of the Healthaxis
applications will require modification in order to achieve or maintain
compliance with HIPAA. The Company does not anticipate these expenditures to
be significant, and expects to be able to pass through some of the costs to its
clients.

Recently Adopted Accounting Pronouncements

Goodwill and Other Intangible Assets

Effective January 1, 2002, the Company adopted Statements of Financial
Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets,
which requires companies to stop amortizing goodwill and

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certain intangible assets with an indefinite useful life. Instead, SFAS
No. 142 requires that goodwill and intangible assets deemed to have an
indefinite useful life be reviewed for impairment upon adoption of SFAS No. 142
(January 1, 2002), annually thereafter and upon the occurrence of any event
that indicates potential impairments. The Company will perform its annual
impairment review during the fourth quarter of each year, commencing in the
fourth quarter of 2002.

SFAS No. 142 prescribes a two-phase process for impairment testing of
goodwill. The first phase screens for impairment, while the second phase (if
necessary) measures the impairment. Goodwill impairment is deemed to exist if
the net book value of a reporting unit exceeds its estimated fair value. The
Companys reporting units are generally consistent with the operating segments
underlying the segments identified in Note F to the Condensed Consolidated
Financial Statements attached hereto. This methodology differs from the
Companys previous policy, as permitted under accounting standards existing at
that time, of using undiscounted cash flows on an enterprise-wide basis to
determine if goodwill is recoverable.

Upon adoption of SFAS No. 142 and completion of the required transition
testing in the second quarter of 2002, the Company recorded as of January 1,
2002 a one-time, non-cash charge of $6,674 to reduce the carrying value of its
goodwill. Such charge is reflected as a cumulative effect of an accounting
change in the accompanying Condensed Consolidated Statement of Operations. In
calculating the impairment charge, the fair value of the impaired reporting
units underlying the segments were estimated using a discounted cash flow
methodology.

Long-Lived Assets

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be disposed of. The primary objectives of SFAS No. 144 is to develop one
accounting model based on the framework established in SFAS No. 121 for
long-lived assets to be disposed of by sale, and to address significant
implementation issues. The Company adopted SFAS No. 144 as of January 1, 2002.
There has been no significant impact resulting from the adoption of SFAS No.
144.

Disposal Activities

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities,
such as restructurings, involuntarily terminating employees and consolidating
facilities. SFAS No. 146 excludes from its scope exit and disposal activities
conducted in connection with a business combination and those activities to
which SFAS No. 143 and 144 are applicable. SFAS No. 146 is effective for exit
and disposal activities that are initiated after December 31, 2002. We do not
expect the adoption of this statement to have a material effect on our
consolidated financial position or results of operations.

Other

In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB
Statement No. 13, and Technical Corrections (Statement 145). For most
companies, Statement 145 will require gains and losses on extinguishments of
debt to be classified as income or loss from continuing operations rather than
as extraordinary items as previously required under Statement 4. Extraordinary
treatment will be required for certain extinguishments as provided in APB
Opinion No. 30. The FASB concluded the application of the criteria in Opinion
30 to debt extinguishment transactions would seldom, if ever, result in
extraordinary item classification of the gain or loss associated with the
extinguishment. One of the Boards objectives in rescinding Statement 4 was to
distinguish transactions that are part of a companys recurring operations from
those that are unusual or infrequent or that meet the criteria for
classification as extraordinary items. Upon adoption, any gain or loss on
extinguishment of debt previously classified as an extraordinary item in prior
periods presented that does not meet the criteria of Opinion 30 for such

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classification should be reclassified to conform with the provisions of
Statement 145. The provisions of this Statement related to the rescission of
Statement 4 shall be applied in fiscal years beginning after May 15, 2002. In
addition to numerous technical corrections in various areas, Statement 145 also
amends Statement 13 to require certain modifications to capital leases be
treated as a sale-leaseback and modifies the accounting for sub-leases when the
original lessee remains a secondary obligor (or guarantor). The Company has not
completed the evaluation of the extraordinary gains from debt extinguishment to
determine whether the amounts would be reclassified upon adoption. Other than
potential reclassifications as discussed we do not expect the adoption of this
statement to have a material effect on our consolidated financial position or
results of operations.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

Exposure to market risk for changes in interest rates relate primarily to
short-term investments. The Company does not use derivative financial
instruments. The primary objective of its investment activities is to preserve
principal while maximizing yields without significantly increasing risk. Due to
the nature of the Companys investments, it believes that there is no material
risk exposure.

The Companys cash equivalents and other investment instruments are exposed to
financial market risk due to fluctuation in interest rates, which may affect
our interest income. These instruments are not entered into for trading
purposes. Healthaxis does not expect its interest income to be significantly
affected by a sudden change in market interest rates.

Item 4. Controls and Procedures

Within the 90 days prior to the filing date of this quarterly report, the
Company carried out an evaluation, under the supervision and with the
participation of the Company management, including the Companys Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Companys disclosure controls and procedures
pursuant to Securities Exchange Act rule 13a-14. Based on that evaluation, the
Chief Executive Officer and the Chief Financial Officer have concluded that
these disclosure controls and procedures are effective. There were no
significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of our evaluation.

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PART II. OTHER INFORMATION




Item 1. Legal Proceedings.

The Company is involved in litigation arising in the ordinary course of
its business. Management is of the opinion that no currently pending
litigation will have a material adverse effect on the Companys results of
operations or financial position.




Item 2. Changes in Securities and Use of Proceeds.

On July 31, 2002 we filed a Certificate of Designation with the
Pennsylvania Secretary of State designating 23,500 shares of Series A
Convertible Preferred Stock. On that date, we issued 23,500 shares of Preferred
Stock, with a stated value of $23.5 million, and made a $4.0 million cash
payment, to the holders of $27.5 million of our 2% convertible debentures in
order to cancel such debentures. The Preferred Stock is convertible into
shares of our common stock at an initial conversion price of $2.625, which
conversion price is subject to adjustment in certain circumstances. The
creation and issuance of the Preferred Stock could have a material impact upon
the rights of the holders of our registered securities because, as more fully
described in the definitive documents filed with the Securities and Exchange
Commission (SEC) as exhibits to this Quarterly Report on Form 10-Q, the
Preferred Stock is senior to our common stock and holders of our Preferred
Stock are entitled to (i) receive preferential, cumulative dividends at a rate
of 2% per annum, payable semi-annually in cash or shares of our common stock,
(ii) receive a liquidation preference equal to the greater of the stated value
of the Preferred Stock plus an amount equal to all accrued but unpaid
dividends, or a pro rata distribution of the assets of the Company available
for distribution to all of its stockholders, and (iii) redemption of their
shares of Preferred Stock in situations which are within the control of the
Company.

The Preferred Stock generally does not have any voting rights. However, the
holders of Preferred Stock have the right to vote separately as a class in a
number of circumstances specified in the Certificate of Designation, when we
propose to take certain actions, including without limitation paying dividends
on shares of common stock and entering into any transaction to sell or
otherwise dispose of all or substantially all of our assets, or entering into
some reorganizations, mergers, consolidations or similar transactions, or
reclassifications, recapitalizations or other changes to our capital stock.
Finally, the Company is obligated to register for resale the shares of common
stock issuable to the holders of the shares of Preferred Stock, the sale of
such shares of common stock or the possibility of such a sale could adversely
affect the market price of our common stock.




Item 3. Defaults Upon Senior Securities.

Not applicable




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

None




Item 5. Other Information.

On November 12, 2002, Healthaxis began a cost reduction initiative
designed to more closely align expenses with revenues and enhance the Companys
operating performance. The cost reduction initiative consists of both a
reduction in the Companys labor force and an across-the-board reduction in
salary levels, as well as planned reductions in certain operating and overhead
expenses. The reduction in labor force is scheduled to be effective in
mid-November and the Company expects to record severance expenses related to
the terminated

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employees in the 4th quarter. The reduction in salary levels is expected to be
effective January 1, 2003. In total, the cost reduction initiative is designed
to save in excess of $5 million in expenses in 2003, however there can be no
assurances that the implementation of this initiative will result in the full
amount of expected savings.

Management believes that the cost reduction initiative serves not only the
Companys financial goals, but is also consistent with its strategic business
goals. Healthaxis has spent significant resources in the past two years
developing certain products and functionality. That development effort is now
substantially complete and the level of human resources necessary to sustain
the effort is no longer required. The Company will now focus on selling these
capabilities to new customers, as well as using them to strengthen
relationships with existing customers. In addition, the Company has, in
recent periods, sharpened its focus on more specific target markets with more
specific product offerings, the effect of which has been to reduce its human
resource requirements. Hence, management believes that its reduced labor force
will be able to effectively serve its existing customer base, while also
focusing on new market opportunities.




Item 6. Exhibits and Reports on Form 8-K.



| | (a) |  | Exhibits:
| | --- |  | ---------



| | (99.1) |  | Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 filed herewith.
| | ------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (99.2) |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed
herewith.



| | (b) |  | Reports on Form 8-K:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The Company filed a Current Report on Form 8-K on July 2, 2002
in which it disclosed, under Items 5 and 7(b), that the Company
and UICI, a significant shareholder, had mutually agreed to an
early termination of Healthaxis Information Technology
Services Agreement with UICI, and also provided proforma
financial statements providing certain financial information
pertaining to such termination.                                                                                              
|
| |     |  | The Company filed a Current Report on Form 8-K on August 1,
2002 in which it disclosed, under Item 5, that the Company had
closed an agreement with the holders of its Convertible
Debentures to exchange the debentures for a combination of cash
and preferred stock.                                                                                                                                                                                                                                  
|
| |     |  | The Company filed a Current Report on Form 8-K on August 30,
2002 in which it disclosed, under Item 5, that the Company had
restated its financial statements for the years ended December
31, 2001 and 2000 to reflect the early termination of the
Information Technology Services Agreement with UICI as
discontinued operations in order to comply with the required
adoption of Statement of Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-Lived
Assets.

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Signature

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.

|                        |  |                                                                                    
|----------------------- |  | -----------------------------------------------------------------------------------
|                        |  | Healthaxis Inc.                                                                    
|                        |  |                                                                                    
|                        |  |                                                                                    
|Date: November 13, 2002 |  | By: /s/ John Carradine                                                             
|                        |  |                                                                                    
|                        |  | John Carradine, Chief Financial Officer
(Principal Financial Officer) and
Treasurer

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I, James W. McLane, Chief Executive Officer of Healthaxis Inc., certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Healthaxis Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

|                  |  |                                         | 
|----------------- |  | --------------------------------------- | 
|November 13, 2002 |  |                                         | 
|                  |  | By: /s/ James W. McLane                 | 
|                  |  |                                         | 
|                  |  | James W. McLane
Chief Executive Officer | 

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I, John Carradine, Chief Financial Officer of Healthaxis Inc., certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Healthaxis Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

|                  |  |                                        | 
|----------------- |  | -------------------------------------- | 
|November 13, 2002 |  |                                        | 
|                  |  | By: /s/ John Carradine                 | 
|                  |  |                                        | 
|                  |  | John Carradine
Chief Financial Officer | 

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Exhibit Index

(99.1) Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 filed herewith.

(99.2) Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 filed herewith.

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