<PAGE> 1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                       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 0-31014

                               HEALTHEXTRAS, INC.
             (Exact name of registrant as specified in its charter)

            DELAWARE                                  52-2181356
  (State or other jurisdiction of       (I.R.S. Employer Identification Number)
  incorporation or organization)

          2273 RESEARCH BOULEVARD, 2ND FLOOR, ROCKVILLE, MARYLAND 20850
               (Address of principal executive offices, zip code)

                                 (301) 548-2900
                (Registrant's phone number, including area code)

                                 Not Applicable
             -------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

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 last practicable date.

The number of shares of common stock,  par value $.01 per share,  outstanding on
May 10, 2001 was 29,186,157.



<PAGE> 2





                               HEALTHEXTRAS, INC.

                          FIRST QUARTER 2001 FORM 10-Q

                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----
PART I   FINANCIAL INFORMATION

     ITEM 1.     Financial Statements

         Balance Sheets as of December 31, 2000 and March 31, 2001
          (Unaudited)..........................................................1

         Statements of Operations and Comprehensive Loss for the Three
              Months Ended March 31, 2000 and 2001 (Unaudited).................2

         Statements of Cash Flows for the Three Months Ended
              March 31, 2000 and 2001 (Unaudited)..............................3

         Notes to Financial Statements.........................................4

     ITEM 2   Management's Discussion and Analysis of Financial Condition
                and Results of Operations......................................5

     ITEM 3   Quantitative and Qualitative Disclosures About Market Risk.......8

PART II       OTHER INFORMATION

SIGNATURES



<PAGE> 3
<TABLE>
<CAPTION>


PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                                      HEALTHEXTRAS, INC.
                                  CONSOLIDATED BALANCE SHEETS

                                                                December 31,        March 31,
                                                                    2000              2001
                                                               ----------------  ----------------
                                                                                   (unaudited)
<S>                                                               <C>               <C>
ASSETS
Current assets:
   Cash and cash equivalents                                      $ 28,921,312      $ 24,556,701
   Accounts receivable, net                                          3,799,270         5,297,538
   Deferred charges:
     Direct                                                          3,050,603         2,835,505
     Marketing and promotion                                           508,447         1,049,382
   Other current assets                                                731,061           732,496
                                                               ----------------  ----------------
       Total current assets                                         37,010,693        34,471,622
Fixed assets, net                                                    4,588,153         4,722,862
Goodwill, net                                                        9,120,104         8,966,393
Other assets                                                         1,325,156         1,273,786
                                                               ----------------  ----------------
       Total assets                                               $ 52,044,106      $ 49,434,663
                                                               ================  ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses                          $  7,555,031      $  7,795,423
   Purchase consideration due for IPM                                  956,075             6,722
   Other current liabilities                                            22,876            32,500
   Deferred revenue                                                  7,121,349         6,551,119
                                                               ----------------  ----------------
       Total current liabilities                                    15,655,331        14,385,763
                                                               ----------------  ----------------
   Long-term liabilities                                               150,211                 -
                                                               ----------------  ----------------
       Total liabilities                                            15,805,542        14,385,763
                                                               ----------------  ----------------
Stockholders' equity
   Preferred stock, $0.01 par value, 5,000,000 shares
     authorized, none issued                                                 -                 -
   Common stock, $0.01 par value, 100,000,000 shares
     authorized, 28,902,600 and 29,186,157 shares
     issued and outstanding at December 31, 2000
     and March 31, 2001, respectively                                  289,026           291,862
   Additional paid-in capital                                       54,149,068        55,819,274
   Retained earnings                                               (17,946,192)      (20,838,121)
   Deferred compensation                                              (253,338)         (224,115)
                                                               ----------------  ----------------
       Total stockholders' equity                                   36,238,564        35,048,900
                                                               ----------------  ----------------
       Total liabilities and stockholders' equity                 $ 52,044,106      $ 49,434,663
                                                               ================  ================
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                            1

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<TABLE>
<CAPTION>



                                                   HealthExtras, Inc.
                              Consolidated Statements of Operations and Comprehensive Loss


                                                                                   For the three months ended
                                                                                            March 31,
                                                                                 -------------------------------
                                                                                     2000              2001
                                                                                 -------------     -------------
                                                                                           (unaudited)
<S>                                                                              <C>                <C>
Revenue                                                                          $ 5,253,244        $23,096,629
                                                                                 -------------     -------------

Direct expenses                                                                    2,680,342         16,751,935
Product development and marketing                                                  8,829,309          6,808,131
General and administrative                                                         1,620,997          2,816,094
                                                                                 -------------     -------------
        Total operating expenses                                                  13,130,648         26,376,160
                                                                                 -------------     -------------

        Operating loss                                                            (7,877,404)        (3,279,531)


Interest income                                                                      680,757            387,907
Other income (expense), net                                                          551,097               (305)
                                                                                 -------------     -------------

        Net loss                                                                  (6,645,550)        (2,891,929)
Reclassification adjustment for realized gains included in net loss
    during the period                                                               (132,669)                 -
                                                                                 -------------     -------------
        Comprehensive loss                                                       $(6,778,219)       $(2,891,929)
                                                                                 =============     =============
Basic and diluted net loss per share                                                 $ (0.24)           $ (0.10)

Weighted average shares of common stock outstanding
    (in thousands)                                                                    27,635             29,119


                  The accompanying notes are an integral part of these financial statements.
</TABLE>


                                                  2

<PAGE> 5
<TABLE>
<CAPTION>


                                           HealthExtras, Inc.
                                 Consolidated Statements of Cash Flows


                                                               For the three months ended
                                                                         March 31,
                                                              -------------------------------
                                                                  2000            2001
                                                              --------------   --------------
                                                                               (unaudited)
<S>                                                           <C>              <C>
Cash flows from operating activities:
   Net loss                                                   $ (6,645,550)    $ (2,891,929)
   Depreciation expense                                             61,046          371,109
   Gain on sale of marketable securities                          (551,734)               -
   Non-cash compensation expense and fees                           29,223        1,354,415
   Amortization of goodwill                                              -          153,710
   Changes in assets and liabilities:
     Accounts receivable                                           (11,410)      (1,498,267)
     Deferred charges                                             (546,238)        (325,837)
     Prepaid expenses and other assets                             (18,057)          49,935
     Accounts payable and accrued expenses                       1,592,559           99,805
     Deferred revenue                                            1,888,283         (570,230)
                                                              -------------    -------------
       Net cash used in operating activities                    (4,201,878)      (3,257,289)
                                                              -------------    -------------
Cash flows from investing activities:
   Capital expenditures                                           (227,106)        (505,818)
   Payment for purchase of IPM securities                                -         (601,504)
   Sale of marketable securities                                   425,250                -
                                                              -------------    -------------
       Net cash provided by (used in) investing activities         198,144       (1,107,322)
                                                              -------------    -------------
Net decrease in cash and cash equivalents                       (4,003,734)      (4,364,611)
Cash and cash equivalents at the beginning
  of period                                                     46,971,106       28,921,312
                                                              -------------    -------------
Cash and cash equivalents at the end of period                $ 42,967,372     $ 24,556,701
                                                              =============    =============
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       3
<PAGE> 6



                               HEALTHEXTRAS, INC.

                          NOTES OF FINANCIAL STATEMENTS
                                   (Unaudited)

1.       ORGANIZATION AND BASIS OF PRESENTATION

         HealthExtras,  Inc.  (the  "Company" or  "HealthExtras")  is a Delaware
corporation  organized on July 9, 1999 and the successor to certain  predecessor
companies (the  "Predecessor  Companies").  The Predecessor  Companies  include:
Sequel  Newco,  Inc.,  Sequel Newco Joint  Venture (the Joint  Venture),  Health
Extras Partnership ("HEP"), Sequel Newco, LLP ("SN LLP") and HealthExtras,  LLC.
The Company  commenced  business  operations with its health benefits program on
November  1, 1998;  however,  all  operating  revenues  were  deferred  and were
recognized in 1999 in order to coincide with the program member benefits.

         The financial  statements for the three months ended March 31, 2000 and
2001 have not been  audited  but,  in the  opinion of  management,  include  all
adjustments  (consisting only of normal recurring accruals) necessary to present
fairly the  information  set forth  therein.  The results of operations  for the
three months ended March 31, 2001 are not necessarily  indicative of the results
to be  expected  for the full year or in the  future.  Certain  information  and
footnote  disclosures  normally  included in  financial  statements  prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted.  The year-end  balance  sheet data was derived  from audited  financial
statements,  but does not include  disclosures  required by  generally  accepted
accounting principles.  These condensed statements should be read in conjunction
with the Company's most recent Form 10-K as of December 31, 2000.

         On December 17,  1999,  in  connection  with the closing of the initial
public offering of 5,500,000  shares of the Company's common stock at a price of
$11.00 per share, HealthExtras, LLC was merged into the Company with the Company
being  the  surviving   entity  (the   "Reorganization")   and  the  members  of
HealthExtras,  LLC  received an  aggregate  22,100,000  shares of the  Company's
common stock in exchange for their member  interests.  The net proceeds received
by the Company from the initial public offering (net of underwriting commissions
and expenses of $5.6 million) were approximately $54.9 million.

2.       NET LOSS PER SHARE

         Basic net loss per  share is based on the  weighted  average  number of
shares outstanding during the period. Diluted net loss per share is based on the
weighted  average number of shares and dilutive common stock  equivalent  shares
outstanding  during the period.  Outstanding stock options to purchase 1,463,000
shares of common  stock,  at an exercise  price less than the  closing  price at
March 31, 2001,  were excluded from the net loss per share  calculation  because
they were antidilutive.

         In addition, during the quarter the Company recorded a non-cash expense
of  $1,325,000  related to common stock  warrants  ("Warrants")  estimated to be
issuable to a marketing  partner based on interim  performance  objectives.  The
Company  expects  750,000  Warrants with an exercise price of $5.21 will vest on
June  30,  2001.  The  Warrants  were  excluded  from  the net  loss  per  share
calculation because they were antidilutive.


                                       4

<PAGE> 7



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

      THIS FORM 10-Q CONTAINS  FORWARD-LOOKING  STATEMENTS WITHIN THE MEANING OF
SECTION 21E OF THE SECURITIES  EXCHANGE ACT OF 1934, AS AMENDED. WE UNDERTAKE NO
OBLIGATION TO REVISE ANY  FORWARD-LOOKING  STATEMENTS IN ORDER TO REFLECT EVENTS
OR  CIRCUMSTANCES  THAT  MAY  ARISE  AFTER  THE  DATE  OF  THIS  REPORT.   WHILE
FORWARD-LOOKING  STATEMENTS ARE SOMETIMES PRESENTED WITH NUMERICAL  SPECIFICITY,
THEY ARE  BASED ON  VARIOUS  ASSUMPTIONS  MADE BY  MANAGEMENT  REGARDING  FUTURE
CIRCUMSTANCES  OVER MANY OF WHICH WE HAVE LITTLE OR NO CONTROL.  FORWARD-LOOKING
STATEMENTS  MAY  BE  IDENTIFIED  BY  WORDS  INCLUDING  "ANTICIPATE,"  "BELIEVE,"
"ESTIMATE,"   "EXPECT"  AND  SIMILAR   EXPRESSIONS.   WE  CAUTION  READERS  THAT
FORWARD-LOOKING STATEMENTS,  INCLUDING WITHOUT LIMITATION, THOSE RELATING TO OUR
FUTURE BUSINESS PROSPECTS, REVENUES, WORKING CAPITAL, LIQUIDITY, AND INCOME, ARE
SUBJECT TO CERTAIN RISKS AND  UNCERTAINTIES  THAT WOULD CAUSE ACTUAL  RESULTS TO
DIFFER  MATERIALLY  FROM THOSE  INDICATED  IN THE FORWARD-  LOOKING  STATEMENTS.
FACTORS  THAT  COULD  CAUSE  ACTUAL  RESULTS  TO  DIFFER  FROM   FORWARD-LOOKING
STATEMENTS  INCLUDE  DIMINISHING  CONSUMER  DEMAND,  RISKS INVOLVING THE LOSS OF
MARKETING  PARTNERS,  RISKS INVOLVING THE LOSS OF OUR BENEFIT  PROVIDERS,  RISKS
RELATED  TO  REGULATION,  RISKS  RELATED  TO  ACQUISITIONS,   RISKS  RELATED  TO
COMPETITION  AND OTHER  RISKS AND  FACTORS  IDENTIFIED  FROM TIME TO TIME IN OUR
REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. PLEASE REFER TO THOSE
RISKS  IDENTIFIED  UNDER THE SECTIONS  "CERTAIN  FACTORS THAT MAY AFFECT  FUTURE
OPERATING RESULTS", "FACTORS RELATED TO REGULATION", AND "FACTORS RELATED TO THE
INTERNET AND ELECTRONIC  COMMERCE" IN THE COMPANY'S FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2000, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2,
2001 (FILE NO. 0-31014), WHICH ARE INCORPORATED HEREIN BY REFERENCE.) SHOULD ONE
OR MORE OF THESE  RISKS  OR  UNCERTAINTIES  MATERIALIZE,  OR  SHOULD  UNDERLYING
ASSUMPTIONS  PROVE  INCORRECT,  ACTUAL  RESULTS MAY VARY  MATERIALLY  FROM THOSE
ANTICIPATED, ESTIMATED OR PROJECTED.

OVERVIEW

         A  significant  portion of our  revenue is  generated  from the sale of
membership  programs that primarily provide disability  benefits.  While product
development   has  been   ongoing  for  the  past   several   years,   we  began
revenue-generating  activities  in January  1999.  Prior to that time, we were a
development stage  enterprise,  which designed and test marketed various benefit
combinations.  To date, we have  primarily  focused on the  distribution  of our
membership programs to our business partners' customers and building recognition
of our program brand.  Christopher Reeve is featured  prominently in our online,
television,  and  print  marketing  campaigns  to  build  brand  awareness.  Our
objective is to affect a growing portion of our program  distributions  over the
Internet.

         We believe our consumer  research and  marketing  efforts have given us
valuable  insight into the consumer  perceptions and  preferences  regarding the
value and limitations of prevailing insurance products.  Accordingly, we believe
that our  programs  are well  positioned  to address  the needs of our  targeted
market segments. As of March 31, 2001, more than 550,000 members had enrolled in
our programs.

         In addition to providing  supplemental health and disability  benefits,
we also provide  pharmacy  benefit  management  services  through our subsidiary
HealthExtrasRx  (formerly known as  International  Pharmacy  Management,  Inc.),
which we acquired on November  1, 2000.  Thus, the March 2001 quarterly  results
include  the  results of  operations  from  those  pharmacy  benefit  management
services.  Information  regarding the  contribution  of those  pharmacy  benefit
management services is shown under the Segment Reporting section below.


                                       5

<PAGE> 8


         Revenue is  generated  by payments  for program  benefits.  The primary
determinant of HealthExtras'  revenue recognition is monthly program enrollment.
In general,  revenue is  recognized  based on the number of members  enrolled in
each  reporting  period  multiplied  by the  applicable  monthly  fee for  their
specific membership program. The revenue recognized by HealthExtras includes the
cost of the  membership  benefits,  which are supplied by others,  including the
insurance components. Revenue from program payments received, and related direct
expenses,  are deferred to the extent that they are applicable to future periods
or to any refund  guarantee we offer. As of March 31, 2001,  initial revenue was
deferred for approximately 100,000 program members. HealthExtrasRx revenues from
sales of prescription  drugs by pharmacies in the company's  nationwide  network
and  related  claims   processing  fees  are  recognized  when  the  claims  are
adjudicated.  Pharmacy  claims are  adjudicated at the  point-of-sale  using the
company's  on-line  claims  processing  system.   When   HealthExtrasRx  has  an
independent  obligation  to pay its  network  pharmacy  providers,  the  company
includes payments from plan sponsors for these benefits as revenues and payments
to its  pharmacy  providers  as direct  expense.  Rebate  revenues  earned under
arrangements with  manufacturers are recognized as they are earned in accordance
with contractual  agreements.  Certain of these revenues are based on estimates,
which are subject to final settlement with the contracted  party.  Revenues from
the dispensing of  pharmaceuticals  from the company's mail service pharmacy are
recognized when each prescription is shipped.

         Direct expenses  consist  principally of marketing and processing fees,
the cost of benefits  provided to program  members,  and direct costs associated
with HealthExtrasRx pharmacy benefit management operations.  Direct expenses are
a function of the level of membership  during the period and the specific set of
program features  selected by members.  The coverage  obligations of our benefit
suppliers and the related expense are determined  monthly,  as are the remaining
direct  expenses.  HealthExtras  frequently  maintains a prepaid expense balance
with respect to the features of its programs  supplied by others.  Where amounts
are prepaid,  direct expense is recognized based on the actual membership levels
in each program.  These prepaid  amounts were $604,000 and $680,000 at March 31,
2000 and March 31, 2001,  respectively.  The carrying value of the prepayment is
adjusted at the end of each quarter based on factors including enrollment levels
in each product,  enrollment  trends, and the remaining portion of the unexpired
prepayment  period.  In the event that a period of  coverage  was  purchased  in
advance, and there were insufficient members to utilize the coverage,  the value
would  expire and be expensed  by  HealthExtras  without  any  related  revenue.
HealthExtras  believes that current  enrollment trends will allow the balance at
March 31, 2001 to be fully utilized prior to expiration.

         Our limited  history  makes it  difficult  to evaluate our business and
prospects.  We have incurred  substantial  operating losses since our inception,
and we intend to incur ongoing marketing and brand development expenses over the
next several  years.  It is possible that our operating  losses will continue in
the near term.  There can be no assurance that we will maintain or grow revenues
or achieve profitability in the future.


                                       6

<PAGE> 9


RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2001 TO THREE MONTHS ENDED MARCH 31, 2000

     HealthExtras  incurred  an  operating  loss of $3.3  million  for the three
months ended March 31, 2001,  compared to an operating  loss of $7.9 million for
the same period in 2000. Revenue of $23.1 million for the period ended March 31,
2001  consisted of program  member  payments  earned during the period and sales
revenue generated by HealthExtrasRx  pharmacy benefit management services.  Cash
collections from program  subscriptions  and  HealthExtrasRx  operations for the
three months  ended March 31,  2001,  totaled  $22.5  million.  Revenue and cash
collections  for the three months  ended March 31,  2000,  were $5.3 million and
$7.1 million, respectively.

     Operating  expenses for the three months ended March 31, 2001 totaled $26.4
million  compared to $13.1 million for the same period in 2000.  Direct expenses
for the three  months ended March 31, 2001 were $16.8  million,  or 63% of total
operating  expenses,  reflecting  the  cost  of  the  benefits  included  in our
programs,  marketing and other fees payable to our  distribution  partners,  and
direct costs associated with HealthExtrasRx operations.  Direct expenses for the
three months ended March 31, 2000 were $2.7 million,  representing  20% of total
operating expenses. The significant increase in direct expenses is primarily due
to the large  increase in our  membership  base,  the  incremental  direct costs
associated  with  HealthExtrasRx  operations,  and a  non-cash  charge  of $1.33
million for warrants we expect to be issuable to one of our marketing  partners.
HealthExtras  incurred  approximately  $6.8 million,  or 26% of total  operating
expenses,  in product development and marketing costs for the three months ended
March 31, 2001.  These costs included $1.2 million for creative  development and
product endorsements, $5.0 million in direct marketing expenses, and $600,000 in
market  research  and  ongoing  product  development.  Product  development  and
marketing  costs for the three  months  ended March 31, 2000 were  approximately
$8.8 million, or 67% of total operating expenses, including $940,000 in creative
costs and product endorsements,  $6.9 million in direct marketing expenses,  and
approximately $194,000 in market research and product development.  The decrease
is product  development and marketing  expenses is consistent with the reduction
in telemarketing and television  advertising  during the quarter ended March 31,
2001. General and  administrative  expenses for the three months ended March 31,
2001 were $2.8  million,  or 11% of total  operating  expenses,  including  $1.3
million  in  compensation  and  benefits,  $43,000  in  telephone  and  software
expenses,  $295,000  in  professional  fees,  $142,000 in travel  expenses,  and
$525,000 in depreciation and amortization.  General and administrative  expenses
for the same period in 2000 were  approximately  $1.6  million,  or 12% of total
operating expenses, including $775,000 in compensation and benefits, $135,000 in
other personnel  costs,  $83,000 in telephone and software  expense,  $58,000 in
professional  fees,  and $33,000 in travel  expenses.  All increases in expenses
were generally  attributable to higher levels of operating activities.

     Interest  income of  $388,000  for the three  months  ended  March 31, 2001
reflects  primarily the investment of the net proceeds received upon the closing
of the Company's  initial public offering in December 1999.  Interest income for
the three months  ending March 31, 2000 totaled  $681,000.  Other income for the
three  months  ended March 31, 2000  consists  primarily  of a gain of $552,000,
realized on the sale of marketable securities.

LIQUIDITY AND CAPITAL RESOURCES

         In December  1999,  we  completed  the sale to the public of  5,500,000
shares of the Company's common stock and received  proceeds (net of underwriting
commissions and expenses of $5.6 million) of approximately  $54.9 million. As of
March 31, 2001, we had $24.6 million in cash and cash equivalents, $20.1 million
in working capital and no debt.

         The primary commitment of our capital resources is to fund expenditures
relating to  marketing  and brand  development  we intend to incur over the next
several years and to fund the operating  losses that may occur in the near term.
We also will continue to selectively evaluate acquisition opportunities.

         We currently anticipate our available cash resources will be sufficient
to meet our planned working capital, capital expenditures and business expansion
requirements.  However,  there  can be no  assurance  that we will  not  require
additional capital.  Even if such funds are not required, we may seek additional
equity or debt  financing.  We cannot  assure  you that such  financing  will be
available on acceptable  terms,  if at all, or that such  financing  will not be
dilutive to our stockholders.



                                       7


<PAGE> 10



SEGMENT REPORTING

     The Company  operates in two market  segments as a provider of supplemental
health and disability  benefit  programs,  and as a provider of pharmacy benefit
management  services.  The following table details financial data by segment for
the three months ended March 31, 2001.

--------------------------------------------------------------------------------
                     Supplemental Health      Pharmacy Benefit
                          and Disability   Management Services           Total
--------------------------------------------------------------------------------
Revenue                     $15,434,970            $7,661,659       $23,096,629
--------------------------------------------------------------------------------
Operating expenses           18,611,037             7,765,123        26,376,160
--------------------------------------------------------------------------------
Net loss                     (2,806,964)              (84,965)       (2,891,929)
--------------------------------------------------------------------------------
Total assets                 44,934,219             4,500,444        49,434,663
--------------------------------------------------------------------------------

INTEREST RATE AND EQUITY PRICE SENSITIVITY

         We are subject to interest rate risk on our short-term  investments and
equity price risk in our marketable  securities.  We have  determined that a 10%
move in the current weighted average interest rate of our short-term investments
and/or  a 10%  move in the  weighted  average  market  price  of our  marketable
securities would not have a material effect in our financial  position,  results
of operations and cash flows in the next year.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         (INCLUDED IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION  AND  RESULTS OF OPERATIONS)




                                        8

<PAGE> 11



PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         In the ordinary  close of business,  the Company may become  subject to
legal proceedings and claims.  The Company is not aware of any legal proceedings
or claims which,  in the opinion of management,  will have a material  effect on
the financial condition or results of operations of the Company.

ITEM 2.  CHANGES IN SECURITIES

         The Company  received net proceeds of $54.9  million,  after  deducting
underwriting discounts and offering expenses,  from its sale of 5,500,000 shares
of common stock on December 17, 1999. Of the approximately  $28.9 million of net
proceeds  remaining as of December 31, 2000, the Company used approximately $4.4
million in its operations  during the quarter ended March 31, 2001 and considers
that the  remainder  has been applied as part of its working  capital to support
its general business activities.

         In  connection   with  the   acquisition  of   International   Pharmacy
Management,  Inc. the Company issued an aggregate of 77,300 shares of its common
stock to nine officers and  employees of  International  Pharmacy  Management in
consideration  of their  surrender of options to purchase shares of common stock
of the acquired company. The shares of Company stock issued were valued at $4.50
per  share,  the  closing  price  of the  stock  on the  effective  date  of the
agreement.   The  Company  relied  upon  the  exemption  from  the  registration
requirements of the Securities Act of 1933 provided by Section 4(2) of the Act.

         On March 8, 2001,  the Company issued 206,667 shares of common stock to
certain members of management  under the terms of the previously  disclosed 1999
stock grant plan.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES (Not Applicable)

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (Not Applicable)

ITEM 5.  OTHER INFORMATION  (None)



                                        9


<PAGE> 12



ITEM 6.  EXHIBITS AND REPORTS ON FORMS 8-K

1.  The following exhibits are filed as part of this report unless noted
    otherwise:

     Exhibit No.                                Description
     -----------                                -----------
     2.1           Form of Reorganization Agreement by and among HealthExtras,
                   Inc., HealthExtras, LLC and Capital Z Healthcare Holding
                   Corp (1)
     3.1(a)        Certificate of Incorporation of HealthExtras, Inc (1)
     3.1(b)        Form of Amended and Restated Certificate of Incorporation (1)
     3.2           Bylaws of HealthExtras, Inc. (1)
     4.1           Specimen Stock Certificate of HealthExtras, Inc.
     4.2           Form of Stockholders' Agreement (1)
     10.1          Form of Employment Agreement between HealthExtras, Inc. and
                   David T. Blair (1)
     10.2          Form of Employment Agreement between HealthExtras, Inc. and
                   certain Executive Officers (1)
     10.3          Program Administrator's Agreement by and between HealthExtras
                   LLC and Reliance National Insurance Company (1)
     10.4          Agreement between United Payors & United Providers, Inc. and
                   HealthExtras, Inc. (3)
     10.5          Agreement by and between United Payors & United Providers,
                   Inc. and HealthExtras, LLC. re: network access (1)
     10.6          Agreement by and between Cambria Productions, Inc. f/s/o
                   Christopher Reeve and HealthExtras, Inc. (1) (2)
     10.7          Indemnification Agreement (1)
     10.8          Sublease Agreement by and between United Payors & United
                   Providers, Inc. and HealthExtras, Inc. (3)
     10.9          Form of HealthExtras, Inc. 1999 Stock Option Plan (1)
     10.10         Form of Registration Rights Agreement (1)
     10.11         Securities Purchase Agreement by and among HealthExtras, Inc.
                   as the Purchaser, and TD Javelin Capital Fund, L.P., Meriken
                   Nominees, LTD, et. al, as the Sellers (4)
     10.12         Form HealthExtras, Inc. 2000 Stock Option Plan (5)
     10.13         Form HealthExtras, Inc. 2000 Directors' Stock Option Plan (5)
     10.14         Warrant Agreement by and among HealthExtras, Inc. and J.C.
                   Penney Life Insurance Company (5)
     10.15         Amended Agreement by and between Cambria Productions, Inc.
                   f/s/o Christopher Reeve and HealthExtras, Inc. (5)

----------------------

(1)  Incorporated herein by reference into this document from the Exhibits to
     the Form S-1 Registration Statement, as amended, Registration No.
     333-83761, initially filed on July 26, 1999.
(2)  Confidential treatment requested for portion of agreement pursuant to
     Section 406 of Regulation C. promulgated under the Securities Act of 1933,
     as amended.
(3)  Incorporated herein by reference into this document from the Exhibits to
     the Form 10-K for the year ended December 31, 1999.
(4)  Incorporated herein by reference into this document from the Exhibits to
     the Form 8-K initially filed on November 21, 2000.
(5)  Incorporated herein by reference into this document from the Exhibits to
     the Form 10-K for the year ended Deember 31, 2000.

2.   Reports on Form 8-K

         None



                                       10

<PAGE> 13


                                   SIGNATURES

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


                                               HealthExtras, Inc.




Date:  May 11, 2001                    By:  /s/ David T. Blair
                                            ------------------------------------
                                            David T. Blair
                                            Chief Executive Officer and Director


Date:  May 11, 2001                    By:  /s/ Michael P. Donovan
                                            ------------------------------------
                                            Michael P. Donovan
                                            Chief Financial Officer and
                                            Chief Accounting Officer