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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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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 September 30, 2003



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



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HEALTHEXTRAS, INC.

(Exact name of registrant as specified in its charter)



|Delaware                                                      |  | 52-2181356                             
|------------------------------------------------------------- |  | ---------------------------------------
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. Employer Identification Number)



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)



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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 by check mark
whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes  x    No ̈



As of November 12, 2003 there were 32,549,615 shares outstanding of the Registrants $0.01 par value common stock.



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##### Table of Contents

HEALTHEXTRAS, INC.



Third Quarter 2003 Form 10-Q



TABLE OF CONTENTS



|           |  |                       |  |                                                                                                                   |  | Page
|---------- |  | --------------------- |  | ----------------------------------------------------------------------------------------------------------------- |  | ----
|PART I     |  | FINANCIAL INFORMATION |  |                                                                                                                  
|           |  |                       | 
|           |  | Item 1.               |  | Financial Statements                                                                                              |  |     
|           |  |                       | 
|           |  |                       |  | Consolidated Balance Sheets as of December 31, 2002 and September 30, 2003 (Unaudited)                            |  | 1   
|           |  |                       | 
|           |  |                       |  | Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2002 and 2003 (Unaudited) |  | 2   
|           |  |                       | 
|           |  |                       |  | Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2003 (Unaudited)           |  | 3   
|           |  |                       | 
|           |  |                       |  | Notes to Financial Statements                                                                                     |  | 4   
|           |  |                       | 
|           |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                             |  | 11  
|           |  |                       | 
|           |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                                                        |  | 16  
|           |  |                       | 
|           |  | Item 4.               |  | Controls and Procedures                                                                                           |  | 16  
|           |  |                      
|PART II    |  | OTHER INFORMATION     |  |                                                                                                                  
|           |  |                       | 
|           |  | Item 1.               |  | Legal Proceedings                                                                                                 |  | 16  
|           |  |                       | 
|           |  | Item 2.               |  | Changes in Securities and Use of Proceeds                                                                         |  | 16  
|           |  |                       | 
|           |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                   |  | 16  
|           |  |                       | 
|           |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                               |  | 17  
|           |  |                       | 
|           |  | Item 5.               |  | Other Information                                                                                                 |  | 17  
|           |  |                       | 
|           |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                                                  |  | 18  
|           | 
|SIGNATURES |  |                      



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##### Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements



HEALTHEXTRAS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)



|                                                                                                                                                                                |  | December 31,2002 |         |   | September 30,2003 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ----------------- | -
|ASSETS                                                                                                                                                                          |  |                  |         |   |                   |  
|Current assets:                                                                                                                                                                 |  |                  |         |   |                   |  
|Cash and cash equivalents                                                                                                                                                       |  | $                | 17,531  |   |                   | $
|Accounts receivable, net                                                                                                                                                        |  |                  | 37,800  |   |                   |  
|Income tax receivable                                                                                                                                                           |  |                  | 2,774   |   |                   |  
|Deferred income taxes                                                                                                                                                           |  |                  | 1,286   |   |                   |  
|Deferred charges                                                                                                                                                                |  |                  | 1,888   |   |                   |  
|Other current assets                                                                                                                                                            |  |                  | 1,282   |   |                   |  
|                                                                                                                                                                                |  |                  |         |   |                   |  
|Total current assets                                                                                                                                                            |  |                  | 62,561  |   |                   |  
|                                                                                                                                                                                |  |                 
|Fixed assets, net                                                                                                                                                               |  |                  | 4,056   |   |                   |  
|Deferred income taxes                                                                                                                                                           |  |                  | 3,759   |   |                   |  
|Intangible assets, net                                                                                                                                                          |  |                  | 14,186  |   |                   |  
|Goodwill                                                                                                                                                                        |  |                  | 33,538  |   |                   |  
|Other assets                                                                                                                                                                    |  |                  | 1,902   |   |                   |  
|                                                                                                                                                                                |  |                  |         |   |                   |  
|Total assets                                                                                                                                                                    |  | $                | 120,002 |   |                   | $
|                                                                                                                                                                                |  |                  |         |   |                   |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                            |  |                  |         |   |                   |  
|Current liabilities:                                                                                                                                                            |  |                  |         |   |                   |  
|Accounts payable                                                                                                                                                                |  | $                | 34,452  |   |                   | $
|Note payable                                                                                                                                                                    |  |                  | 1,056   |   |                   |  
|Accrued expenses and other current liabilities                                                                                                                                  |  |                  | 2,156   |   |                   |  
|Deferred revenue                                                                                                                                                                |  |                  | 4,813   |   |                   |  
|                                                                                                                                                                                |  |                  |         |   |                   |  
|Total current liabilities                                                                                                                                                       |  |                  | 42,477  |   |                   |  
|                                                                                                                                                                                |  |                 
|Deferred income taxes                                                                                                                                                           |  |                  |        |   |                   |  
|Note payable                                                                                                                                                                    |  |                  | 18,000  |   |                   |  
|                                                                                                                                                                                |  |                  |         |   |                   |  
|Total liabilities                                                                                                                                                               |  |                  | 60,477  |   |                   |  
|                                                                                                                                                                                |  |                  |         |   |                   |  
|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, 32,295,120 and 32,520,115 shares issued and outstanding at December
31, 2002 and September 30, 2003, respectively |  |                  | 323     |   |                   |  
|Additional paid-in capital                                                                                                                                                      |  |                  | 70,460  |   |                   |  
|Accumulated deficit                                                                                                                                                             |  |                  | (11,243 | ) |                   |  
|Deferred compensation                                                                                                                                                           |  |                  | (15     | ) |                   |  
|                                                                                                                                                                                |  |                  |         |   |                   |  
|Total stockholders equity                                                                                                                                                      |  |                  | 59,525  |   |                   |  
|                                                                                                                                                                                |  |                  |         |   |                   |  
|Total liabilities and stockholders equity                                                                                                                                      |  | $                | 120,002 |   |                   | $
|                                                                                                                                                                                |  |                  |         |   |                   |  



The accompanying notes
are an integral part of these financial statements



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HEALTHEXTRAS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



|                                                             |  | For the three months endedSeptember 30, |        | For the nine months endedSeptember 30,
|------------------------------------------------------------ |  | --------------------------------------- | ------ | --------------------------------------
|                                                             |  | 2002                                    |        | 2003                                  
|Revenue                                                      |  | $                                       | 63,907 |                                       
|                                                             |  |                                         |        |                                       
|Direct expenses                                              |  |                                         | 54,757 |                                       
|Selling, general and administrative expenses                 |  |                                         | 7,610  |                                       
|                                                             |  |                                         |        |                                       
|Total operating expenses                                     |  |                                         | 62,367 |                                       
|                                                             |  |                                         |        |                                       
|Operating income                                             |  |                                         | 1,540  |                                       
|                                                             |  |                                         |        |                                       
|Interest expense, net                                        |  |                                         | 23     |                                       
|                                                             |  |                                         |        |                                       
|Income before income taxes and minority interest             |  |                                         | 1,517  |                                       
|                                                             |  |                                         |        |                                       
|Minority interest                                            |  |                                         |       |                                       
|                                                             |  |                                         |        |                                       
|Income before income taxes                                   |  |                                         | 1,517  |                                       
|                                                             |  |                                         |        |                                       
|Provision for income taxes                                   |  |                                         |       |                                       
|                                                             |  |                                         |        |                                       
|Net income                                                   |  | $                                       | 1,517  |                                       
|                                                             |  |                                         |        |                                       
|                                                             |  |                                         |        |                                       
|Earnings per share, basic                                    |  | $                                       | 0.05   |                                       
|Earnings per share, diluted                                  |  | $                                       | 0.05   |                                       
|Weighted average shares of common stock outstanding, basic   |  |                                         | 32,291 |                                       
|Weighted average shares of common stock outstanding, diluted |  |                                         | 32,495 |                                       



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



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HEALTHEXTRAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                          |  | For the nine months endedSeptember 30, |        
|--------------------------------------------------------- |  | -------------------------------------- | -------
|                                                          |  | 2002                                   |        
|Cash flows from operating activities:                     |  |                                        |        
|Net income                                                |  | $                                      | 3,628  
|Depreciation expense                                      |  |                                        | 945    
|Income tax provision                                      |  |                                        |       
|Income tax refunds, net                                   |  |                                        |       
|Noncash charges (credits)                                 |  |                                        | (921   
|Loss on disposal of fixed assets                          |  |                                        | 116    
|Amortization of intangibles and other assets              |  |                                        | 328    
|Minority interest                                         |  |                                        | 45     
|Changes in assets and liabilities:                        |  |                                        |        
|Accounts receivable, net                                  |  |                                        | (3,667 
|Other assets                                              |  |                                        | (421   
|Deferred charges                                          |  |                                        | (450   
|Accounts payable, accrued expenses, and other liabilities |  |                                        | (4,053 
|Deferred revenue                                          |  |                                        | (607   
|                                                          |  |                                        |        
|Net cash (used in) provided by operating activities       |  |                                        | (5,057 
|                                                          |  |                                        |        
|Cash flows from investing activities:                     |  |                                        |        
|Capital expenditures                                      |  |                                        | (1,194 
|Deposits, restricted cash and other                       |  |                                        | 600    
|Purchase of intangible assets                             |  |                                        | (450   
|Business acquisitions and related payments                |  |                                        | (12,273
|                                                          |  |                                        |        
|Net cash used in investing activities                     |  |                                        | (13,317
|                                                          |  |                                        |        
|Cash flows from financing activities:                     |  |                                        |        
|Proceeds received from exercise of stock options          |  |                                        | 33     
|Borrowings (repayments) under line of credit, net         |  |                                        | 8,000  
|                                                          |  |                                        |        
|Net cash provided by (used in) financing activities       |  |                                        | 8,033  
|                                                          |  |                                        |        
|Net (decrease) increase in cash and cash equivalents      |  |                                        | (10,341
|Cash and cash equivalents at the beginning of period      |  |                                        | 33,009 
|                                                          |  |                                        |        
|Cash and cash equivalents at the end of period            |  | $                                      | 22,668 
|                                                          |  |                                        |        



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



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HEALTHEXTRAS, INC.



NOTES TO FINANCIAL STATEMENTS

(Unaudited)



|1. | Basis of Presentation
|-- | ---------------------



The accompanying consolidated financial statements have been prepared by HealthExtras, Inc. (the Company) pursuant to the rules and
regulations of the Securities and Exchange Commission (the SEC) for interim financial reporting. These consolidated financial statements are unaudited and, in the opinion of management, include all adjustments, consisting of normal
recurring adjustments and accruals, necessary for a fair presentation of the consolidated balance sheets, statements of operations and statements of cash flows for the periods presented. Operating results for the nine months ended September 30,
2003, are not necessarily indicative of the result that may be expected for the year ending December 31, 2003. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting
principles generally accepted in the United States have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and accompanying notes, included in the Companys Annual Report on Form 10-K for the year ended December 31, 2002, as filed with the SEC on March 31, 2003. Certain prior period amounts have been reclassified to conform to the current period
presentation.



|2. | Recent Accounting Pronouncements
|-- | --------------------------------



SFAS No. 148



In December 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No.
148, Accounting for Stock-Based Compensation  Transition and Disclosure, an amendment of FASB Statement No. 123, to provide alternative methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of FASB statement No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on reported results. The application of the transition provisions of SFAS No. 148 is effective for fiscal years ending after December 15, 2002. The Company has included the
proper disclosures in Note 3 of these Notes To Financial Statements.



FIN No. 45



In November 2002, the FASB issued
FASB Interpretation (FIN) No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others, which elaborates on the disclosures to be made by the guarantor
in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of FIN No. 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the
guarantors fiscal year end. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. As of September 30, 2003, there is no impact on the Companys financial statements
as a result of the issuance of FIN No. 45.



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|3. | Stock-Based Compensation
|-- | ------------------------



At September 30, 2003, the Company has stock-based compensation plans for employees and directors. Stock-based compensation is accounted for using the
intrinsic-value-based method in accordance with the Accounting Principles Board Opinion (APB) 25, Accounting for Stock Issued to Employees, and related Interpretations. Stock-based compensation is reflected in net income for
those options granted under these plans that had an exercise price less than the market value of the underlying common stock on the issue date of the grant. The following table illustrates the effect on net income and earnings per share if the
Company had applied the fair value recognition provisions of SFAS 123, Accounting for Stock-Based Compensation, to stock-based employee compensation. Amounts are in thousands, except per share data.



|                                                                                                                                                                                                                                     |  | Three months ended September 30, |       | Nine months ended September 30,
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------- | ----- | -------------------------------
|                                                                                                                                                                                                                                     |  | 2002                             |       | 2003                           
|Net income, as reported                                                                                                                                                                                                              |  | $                                | 1,517 |                                
|Deduct: Total stock-based employee compensation expense determined under fair value method for all awards (net of related tax
effect for the three and nine month periods ended September 30, 2003 of $403 and $1,173, respectively) |  |                                  | 922   |                                
|                                                                                                                                                                                                                                     |  |                                  |       |                                
|Pro forma net income                                                                                                                                                                                                                 |  | $                                | 595   |                                
|                                                                                                                                                                                                                                     |  |                                  |       |                                
|                                                                                                                                                                                                                                     |  |                                  |       |                                
|Earnings per share:                                                                                                                                                                                                                  |  |                                  |       |                                
|Basic - as reported                                                                                                                                                                                                                  |  | $                                | 0.05  |                                
|Basic - pro forma                                                                                                                                                                                                                    |  | $                                | 0.02  |                                
|Diluted - as reported                                                                                                                                                                                                                |  | $                                | 0.05  |                                
|Diluted - pro forma                                                                                                                                                                                                                  |  | $                                | 0.02  |                                



The fair value for
these options was estimated at the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions for the three and nine months ended September 30, 2002 and 2003:



|                        |  | Three months endedSeptember 30, |  | Nine months endedSeptember 30,
|----------------------- |  | ------------------------------- |  | ------------------------------
|                        |  | 2002                            |  | 2003                          
|Expected term           |  | 5 years                         |  | 5 years                       
|Volatility factor       |  | 87.0%                           |  | 82.3%                         
|Risk free interest rate |  | 3.3 - 3.34%                     |  | 3.33%                         
|Dividend yield          |  |                                |  |                              
|Fair value              |  | $2.51                           |  | $5.93                         



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|4. | Business Combinations
|-- | ---------------------



Acquisition of Catalyst



During the first quarter of 2002, the Company purchased the outstanding 20% minority interest in Catalyst Rx and Catalyst Consultants
(Catalyst) for 319,033 shares of the Companys stock valued at $1.1 million and notes payable of $4.2 million. The stock was transferred to the seller on April 1, 2002, and $3.1 million was paid on the note in 2002, with the final
installment of $1.1 million paid on March 1, 2003.



Acquisition of PNNC



On December 1, 2002, the
Company acquired 100% of the common stock of Pharmacy Network National Corporation (PNNC). Total consideration for PNNC stock was $20.2 million. Total acquisition cost included transaction costs of approximately $1.4 million. Funding for
the $21.6 million cash transaction was derived from the Companys working capital and borrowings under the credit facility. The acquisition resulted in goodwill of approximately $10.6 million and intangible assets of $8.0 million.



The following table sets forth certain unaudited proforma financial data
assuming that the acquisition of 100% of Catalyst and PNNC had each been completed as of January 1, 2002, after giving effect to purchase accounting adjustments (in thousands, except per share data):



|                                 |  | Three months endedSeptember 30, |        | Nine months endedSeptember 30,
|-------------------------------- |  | ------------------------------- | ------ | ------------------------------
|                                 |  | 2002                            |        | 2003                          
|                                 |  | (proforma)                      |        | (actual)                      
|Revenue                          |  | $                               | 92,094 |                               
|Net income                       |  | $                               | 2,408  |                               
|Net income per share, basic      |  | $                               | 0.07   |                               
|Net income per share, diluted    |  | $                               | 0.07   |                               
|Weighted average shares, basic   |  |                                 | 32,301 |                               
|Weighted average shares, diluted |  |                                 | 32,505 |                               



The proforma results
of operations are not necessarily indicative of the results that would have occurred had the Company owned 100% of Catalyst and PNNC at January 1, 2002, nor are these results indicative of future operating results.



|5. | Goodwill
|-- | --------



The Company adopted SFAS No. 142, and discontinued the amortization of goodwill and indefinite-lived intangible assets effective January 1, 2002. The
Company completed its initial adoption impairment testing of goodwill and concluded that no impairment of goodwill exists. The Company performed a similar test as of December 31, 2002, and concluded that no impairment of goodwill exists. In the
first quarter of 2003, the Company increased goodwill by $128,000 due to additional acquisition costs incurred related to the PNNC acquisition. There have been no impairments or write-downs to goodwill in the three and nine month periods ended
September 30, 2003.



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|6. | Intangible assets
|-- | -----------------



As of September 30, 2003, intangible assets consisted of the following (in thousands):



|                            |  |   |        |   | Amortization Period
|--------------------------- |  | - | ------ | - | -------------------
|Catalyst customer contracts |  | $ | 5,700  |   |                    
|PNNC customer contracts     |  |   | 8,000  |   |                    
|Other PBM contracts         |  |   | 945    |   |                    
|                            |  |   |        |   |                    
|Total intangible assets     |  |   | 14,645 |   |                    
|Accumulated amortization    |  |   | (1,071 | ) |                    
|                            |  |   |        |   |                    
|Total                       |  | $ | 13,574 |   |                    
|                            |  |   |        |   |                    



Catalyst and PNNC
customer contracts represent the estimated fair value of customer contracts held by Catalyst and PNNC at the dates of acquisition. This estimated fair value and the weighted average useful-lives are based on income-method valuation calculations,
performed by an independent consulting firm.



The estimated
aggregate amortization expense of intangible assets through 2007 is as follows (in thousands):



|2003  |  | $ | 816  
|----- |  | - | -----
|2004  |  |   | 816  
|2005  |  |   | 816  
|2006  |  |   | 816  
|2007  |  |   | 776  
|      |  |   |      
|Total |  | $ | 4,040
|      |  |   |      



Amortization expense
for the three month periods ended September 30, 2003 and 2002 was approximately $204,000 and $107,000, respectively. Amortization expense for the nine month periods ended September 30, 2003 and 2002 was approximately $612,000 and $276,000,
respectively.



|7. | Credit Facility
|-- | ---------------



In December 2002, the Company arranged an $18.0 million revolving credit facility with a commercial bank; the term of which was extended through May 2005
in June 2003. Borrowings on the credit facility were collateralized by substantially all of the Companys trade receivables. The credit facility contains affirmative and negative covenants related to indebtedness, other liabilities and
consolidated net worth. The facility bears interest at LIBOR plus 2.75%. The effective rate at September 30, 2003, was 3.87%. Interest is payable in arrears on the fifth day of each month. The outstanding balance on the credit facility at September
30, 2003 was $12.0 million. All principal and accrued interest is due on May 31, 2005. Interest expense related to notes payable for the three and nine-month periods ended September 30, 2003 were approximately $123,000 and $468,000, respectively.



|8. | Segment Reporting
|-- | -----------------



The Company operates in two business segments, pharmacy benefit management (PBM) and supplemental benefits. The following tables represent
financial data by segment for the three and nine-month periods ended September 30, 2003, and September 30, 2002.



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For the three months ended September 30, 2003 (amounts in thousands):



|                                                                                                                                                                                                         |  | PBM |         | Supplemental Benefits |   | Total 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- | ------- | --------------------- | - | ------
|Revenue                                                                                                                                                                                                  |  | $   | 81,755  |                       | $ | 13,248
|Segment operating expenses                                                                                                                                                                               |  |     | 78,105  |                       |   | 10,701
|Segment operating income                                                                                                                                                                                 |  |     | 3,650   |                       |   | 2,547 
|Total assets                                                                                                                                                                                             |  |     | 114,243 |                       |   | 15,284
|Accounts receivable, net                                                                                                                                                                                 |  |     | 44,662  |                       |   | 273   
|Accounts payable                                                                                                                                                                                         |  |     | 42,333  |                       |   | 1,068 
|                                                                                                                                                                                                        
|Operating expenses of the segments exclude $1.5 million in corporate overhead that was not allocated by management in assessing segment
performance for the three month period ended September 30, 2003.
|                                                                                                                                                                                                        
|For the three months ended September 30, 2002 (amounts in thousands):                                                                                                                                   
|                                                                                                                                                                                                         |  |     |        
|                                                                                                                                                                                                         |  | PBM |         | Supplemental Benefits |   | Total 
|Revenue                                                                                                                                                                                                  |  | $   | 48,837  |                       | $ | 15,070
|Segment operating expenses                                                                                                                                                                               |  |     | 46,391  |                       |   | 15,060
|Segment operating income                                                                                                                                                                                 |  |     | 2,446   |                       |   | 10    
|Total assets                                                                                                                                                                                             |  |     | 78,986  |                       |   | 8,311 
|Accounts receivable, net                                                                                                                                                                                 |  |     | 24,206  |                       |   | 1,872 
|Accounts payable                                                                                                                                                                                         |  |     | 21,676  |                       |   | 531   



Operating expenses of
the segments exclude $915,000 in corporate overhead that was not allocated by management in assessing segment performance for the three month period ended September 30, 2002.



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For the nine months ended September 30, 2003 (amounts in thousands):



|                                                                                                                                                                                                        |  | PBM |         | Supplemental Benefits |   | Total 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- | ------- | --------------------- | - | ------
|Revenue                                                                                                                                                                                                 |  | $   | 240,699 |                       | $ | 40,154
|Segment operating expenses                                                                                                                                                                              |  |     | 231,849 |                       |   | 32,881
|Segment operating income                                                                                                                                                                                |  |     | 8,850   |                       |   | 7,273 
|                                                                                                                                                                                                       
|Operating expenses of the segments exclude $4.5 million in corporate overhead that was not allocated by management in assessing segment
performance for the nine-month period ended September 30, 2002.
|                                                                                                                                                                                                       
|For the nine months ended September 30, 2002 (amounts in thousands):                                                                                                                                   
|                                                                                                                                                                                                        |  |     |        
|                                                                                                                                                                                                        |  | PBM |         | Supplemental Benefits |   | Total 
|Revenue                                                                                                                                                                                                 |  | $   | 120,922 |                       | $ | 52,886
|Segment operating expenses                                                                                                                                                                              |  |     | 116,534 |                       |   | 50,848
|Segment operating income                                                                                                                                                                                |  |     | 4,388   |                       |   | 2,038 



Operating expenses of
the segments exclude $2.7 million in corporate overhead that was not allocated by management in assessing segment performance for the nine month period ended September 30, 2003.



|9. | Provision for income taxes
|-- | --------------------------



In the three and nine month periods ended September 30, 2003, the Company recorded a provision for income taxes of approximately $1.8 million and $4.4
million, respectively. The effective rate of the tax provision is 38.6%. For the three and nine month periods ended September 30, 2002, the Company recorded no provision for income taxes, as the Company maintained a full valuation allowance against
the Companys deferred tax assets due to the uncertainty as to their ultimate realization.



|10. | Net income per share
|--- | --------------------



Basic earnings per common share excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted earnings per common share reflect the potential dilution that could occur if options and warrants to issue common stock were exercised.



9



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##### Table of Contents

The following is a reconciliation of the number of shares used in the basic and diluted earnings per share computations
(amounts in thousands, except per share data):



|                                                    |  | Three months ended September 30, |        | Nine months ended September 30,
|--------------------------------------------------- |  | -------------------------------- | ------ | -------------------------------
|                                                    |  | 2002                             |        | 2003                           
|Net income                                          |  | $                                | 1,517  |                                
|                                                    |  |                                  |        |                                
|Calculation of shares:                              |  |                                  |        |                                
|Weighted average common shares outstanding, basic   |  |                                  | 32,291 |                                
|Dilutive effect of stock options and warrants       |  |                                  | 204    |                                
|                                                    |  |                                  |        |                                
|Weighted average common shares outstanding, diluted |  |                                  | 32,495 |                                
|                                                    |  |                                  |        |                                
|Net income per common share, basic                  |  | $                                | 0.05   |                                
|                                                    |  |                                  |        |                                
|Net income per common share, diluted                |  | $                                | 0.05   |                                
|                                                    |  |                                  |        |                                



The following options were not
included in the computation of diluted earnings per share because the options exercise prices were greater than the average market price of the common shares:



|                                                                       |  | Three months ended September 30, |  | Nine months ended September 30,
|---------------------------------------------------------------------- |  | -------------------------------- |  | -------------------------------
|                                                                       |  | 2002                             |  | 2003                           
|Options and warrants to purchase shares of common stock (in thousands) |  | 5,338                            |  | 10                             



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##### Table of Contents

|ITEM 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- |  | -------------------------------------------------------------------------------------



The following discussion should be read in conjunction with the interim consolidated financial statements presented in
Item 1. Certain statements contained herein may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve a number of risks and uncertainties.
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. Readers are urged to carefully review and consider the various disclosures made in this
report and in our other filings with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business.



OVERVIEW



HealthExtras is a provider of PBM services and supplemental benefits. Our clients include managed-care organizations, self-insured employers, third party
administrators, as well as individual customers. The PBM segment now generates the significant majority of our revenues and is expected to be the primary source of growth and profit potential in the future. The acquisitions of Catalyst and PNNC have
contributed significantly to the growth of our PBM business.



PHARMACY BENEFIT MANAGEMENT



We have
established a nationwide network of over 53,000 retail pharmacies. In general, clients contract with us to access our negotiated retail pharmacy network rates, participate in certain arrangements with manufacturers based on formulary design and
benefit from the other care enhancement protocols in our system. Our primary PBM services consist of the automated online processing of prescription claims on behalf of our clients. When a member of one of our clients presents a prescription or
health plan identification card to a retail pharmacist in our network, our system provides the pharmacist with access to online information regarding eligibility, patient history, health plan formulary listings, and contractual reimbursement rates.
The member generally pays a co-payment to the retail pharmacy and the pharmacist fills the prescription. We electronically aggregate pharmacy benefit claims, which include prescription costs plus our claims processing fees for consolidated billing
and payment. We receive payments from clients, make payments of amounts owed to the retail pharmacies pursuant to our negotiated rates and retain the difference, including claims processing fees.



Pharmacy benefit claim payments from our clients are recorded as revenues,
and prescription costs to be paid to pharmacies are recorded as direct expenses. Under our network contracts, we have an independent obligation to pay pharmacies for the drugs dispensed and accordingly, have assumed that risk independent of our
clients. When we administer pharmacy reimbursement contracts and do not assume a credit risk, we record only our administrative or processing fees as revenue. Rebates earned under arrangements with manufacturers are recorded as a reduction of direct
expenses. The portion of manufacturer rebates due to clients is recorded as a reduction of revenue.



Member co-payments are not recorded as revenue. Under our pharmacy agreements, the pharmacy is solely obligated to collect the co-payments from the
members. Under our client contracts, we do not assume liability for member co-payments in pharmacy transactions. As such, we do not include member co-payments to pharmacies in revenue or operating expenses.



Because we understand that the SEC is reviewing the accounting treatment of
co-payments by PBM companies, we are providing certain supplemental information in the tables below. This information may also assist investors in comparing PBMs with differing accounting policies related to co-payments. If the SEC should ultimately
decide that co-payments should be included in reported PBM revenues and operating expenses, it would result in an increase in reported PBM revenue and operating expenses for the third quarters of 2003 and 2002 of approximately $35.2 million and
$17.8 million, respectively, and in an increase in reported PBM revenue and operating expenses for the nine month periods ended September 30, 2003 and 2002 of approximately $102.8 million and $51.4 million. Our operating and net income, consolidated
balance sheets and statements of cash flows would not be affected.



11



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##### Table of Contents

The following tables illustrate the effects on the reported PBM revenue and operating expenses (see Note
8 to these Notes To Financial Statements) if the Company had included member co-payments (in thousands):



|                                |  | Three months endedSeptember 30,  |        | Nine months endedSeptember 30, 
|------------------------------- |  | -------------------------------- | ------ | -------------------------------
|                                |  | 2002                             |        | 2003                           
|Reported PBM revenue            |  | $                                | 48,837 |                                
|Member co-payments              |  |                                  | 17,808 |                                
|                                |  |                                  |        |                                
|Total                           |  | $                                | 66,645 |                                
|                                |  |                                  |        |                                
|                                |  |                                  |        |                                
|                                |  | Three months ended September 30, |        | Nine months ended September 30,
|                                |  | 2002                             |        | 2003                           
|Reported PBM operating expenses |  | $                                | 46,391 |                                
|Member co-payments              |  |                                  | 17,808 |                                
|                                |  |                                  |        |                                
|Total                           |  | $                                | 64,199 |                                
|                                |  |                                  |        |                                



SUPPLEMENTAL
BENEFITS PROGRAMS



Our supplemental benefits segment
generates revenue from the sale of membership programs which provide insurance and other benefits. The Company has distribution agreements with many of the nations largest financial institutions (the distributors), along with
leading affinity groups and associations. Additionally, HealthExtras has a relationship with actor and advocate Christopher Reeve to promote these benefits programs.



Revenue is generated by payments for program benefits and payments from certain distributors. In general, program revenue is
recognized based on the number of members enrolled in each reporting period multiplied by the applicable fee collected from a member or paid by the distributor for the specific membership program. The program revenue recognized by HealthExtras
includes the cost of the membership benefits supplied by others, including the insurance components. Payments from the distributors related to new member enrollments were recorded as revenue to the extent of the related direct expenses through
September 30, 2002. These payments by distributors were discontinued at that time under restructured marketing agreements.



Direct expenses consist principally of the cost of benefits provided to program members, distributors compensation, and transaction processing fees.
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.



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. HealthExtras has committed to minimum premium volumes with respect to the insurance features of its
programs supplied by others. In the event that there were insufficient members to utilize the minimum premium commitment, the differential would be expensed by us without any related revenue. We believes that current enrollment trends will allow the
minimum future commitments at September 30, 2003, to be fully utilized by current enrollment levels.



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##### Table of Contents

Results of Operations



Three Months Ended September 30, 2003, Compared to Three Months Ended September 30, 2002



Revenue. Revenue from operations for the third quarter of 2003 was $95.0 million, consisting of $81.8 million in
revenue from the PBM segment and $13.2 million in revenue from the supplemental benefits segment. PBM segment revenue increased by $32.9 million, including $28.1 million from PNNC, while the supplemental benefits segment revenue decreased by $1.8
million. Revenue for the third quarter of 2002 was $63.9 million, consisting of approximately $48.8 million and $15.1 million attributable to the PBM and the supplemental benefits segments, respectively.



Direct Expenses. Direct expenses for the three months ended September
30, 2003 were $83.9 million consisting of $74.1 million in direct expenses from the PBM segment and $9.8 million in direct expenses from the supplemental benefits segment. PBM segment direct expenses increased by $28.9 million, including $24.8
million from PNNC, while the supplemental benefits segment direct expenses increased by approximately $200,000. Direct expenses for the third quarter of 2002 were $54.8 million consisting of approximately $45.2 million and $9.6 million attributable
to the PBM and supplemental benefits segments, respectively. The direct expenses of $83.9 million and $54.8 million for the three month periods ended September 30, 2003, and September 30, 2002, represented 92.9% and 87.8% of operating expenses for
the respective periods.



Selling,General and
Administrative. Selling, general and administrative expenses for the three month period ended September 30 2003, totaled $6.4 million or 7.1% of operating expenses, of which $3.0 million was related to the PBM services segment, $1.9 million of
which was related to the supplemental benefits segment, while the remaining $1.5 million related to corporate overhead. These expenses include approximately $421,000 for creative development, product endorsement and market research, $2.7 million in
compensation and benefits, $1.2 million in commissions, other professional services, insurance and taxes, $764,000 in other expenses, $475,000 in facility costs, $286,000 in travel expenses and $584,000 in depreciation and amortization. We had no
direct marketing expense in the third quarter of 2003, as direct marketing expenses are now paid by the distributor.



Selling, general and administrative expenses for the three month period ended September 30, 2002 were approximately $7.6 million or 12.2% of total
operating expenses, $1.2 million of which related to the PBM services segment, $5.5 million of which related to the supplemental benefits segment, while the remaining $915,000 related to corporate overhead. These expenses included approximately
$848,000 million for creative development, product endorsements and market research, $2.7 million in direct marketing, $2.0 million in compensation and benefits, $450,000 in commissions, other professional services, insurance and taxes, $654,000 in
other expenses, $366,000 in facility costs, $244,000 in travel expenses, and $396,000 in depreciation and amortization.



Interest Expense, Net. Interest expense, net for the third quarter 2003 was approximately $98,000, compared to approximately $23,000 of interest
expense net for the three month period ended September 30, 2002. This was principally due to increased borrowings under the line of credit commencing in the fourth quarter 2002. Interest expense on borrowings for the third quarter of 2003 was
approximately $123,000.



Provision For Income Taxes.
Through the third quarter of 2002, we maintained a full valuation allowance against the deferred tax assets due to the uncertainty as to their ultimate realization. Due to the recording of the full valuation allowance, no provision for income taxes
was recorded in the third quarter of 2002. As we released our valuation allowance in the fourth quarter of 2002, we used an effective tax rate of 38.6% to record a provision for income taxes of $1.8 million in the third quarter of 2003. See Note 9
to these Notes To Financial Statements for further information.



Net Income. Net income for the three month period ended September 30, 2003 was $2.8 million compared to $1.5 million for the three month period ended September 30, 2002. The $2.8 million net income for the third quarter of 2003
included a $1.8 million provision for income taxes as discussed above. As a percentage of revenue, pre-tax net income increased from 2.4% to 4.8%.



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##### Table of Contents

Nine Months Ended September 30, 2003, Compared to Nine Months Ended September 30, 2002



Revenue. Revenue from operations for the nine months ended September
30, 2003 was $280.9 million, consisting of $240.7 million in revenue from the PBM segment and $40.2 million in revenue from the supplemental benefits segment. PBM segment revenue increased by $119.8 million, including $81.2 million from PNNC, while
the supplemental benefits segment revenue decreased by $12.7 million. Revenue for the first nine months of 2002 was $173.8 million consisting of approximately $120.9 million and $52.9 million attributable to the PBM and the supplemental benefits
segments, respectively.



Direct Expenses. Direct
expenses for the nine months ended September 30, 2003 were $250.2 million, consisting of $220.3 million in direct expenses from the PBM segment and $29.9 million in direct expenses from the supplemental benefits segment. PBM segment direct expenses
increased by $108.1 million, including $74.2 million from PNNC, while the supplemental benefits segment direct expenses decreased by $1.9 million. Direct expenses for the first nine months of 2002 were $144.1 million consisting of approximately
$112.2 million and $31.8 million attributable to the PBM and supplemental benefits segments, respectively. The direct expenses of $250.2 million and $144.1 million for the nine month periods ended September 30, 2003, and September 30, 2002,
represented 92.9% and 84.7% of operating expenses for the respective periods.



Selling,General and Administrative. Selling, general and administrative expenses for the nine month period ended September 30, 2003, totaled $19.0 million or 7.1% of operating expenses, $10.5 million of
which was related to the PBM services segment, $4.0 million of which was related to the management of the supplemental benefits segment, while the remaining $4.5 million related to corporate overhead. These expenses include approximately $1.3
million for creative development, product endorsement and market research, $7.9 million in compensation and benefits, $3.7 million in commissions, other professional services, insurance and taxes, $2.2 million in other expenses, $1.3 million in
facility costs, $830,000 in travel expenses and $1.8 million in depreciation and amortization. We had no direct marketing expense in the third quarter of 2003, as direct marketing expenses are now paid by the distributor.



Selling, general and administrative expenses for the nine month period ended
September 30, 2002 were approximately $26.0 million or 15.3% of total operating expenses, $4.2 million of which was related to the Companys PBM services segment, $19.1 million of which related to the management of the supplemental benefits
segment, while the remaining $2.7 related to corporate overhead. These expenses included approximately $3.2 million for creative development, product endorsements and market research, $11.1 million in direct marketing, $5.8 million in compensation
and benefits, $1.1 million in commission, other professional fees, insurance and taxes, $2.0 million in other expenses, $1.0 million in facility costs, $596,000 in travel expenses, and $1.2 million in depreciation and amortization. .



Interest Expense, Net. Interest expense, net for the nine month period
ended September 30, 2003 was approximately $362,000, compared to approximately $26,000 of interest expense, net for the nine month period ended September 30, 2002. This was principally due to increased borrowings under the line of credit commencing
in the fourth quarter 2002. Interest expense on borrowings for the nine month period ended September 30, 2003 was approximately $468,000.



Provision For Income Taxes. Through the third quarter of 2002, we maintained a full valuation allowance against our deferred tax assets due to the
uncertainty as to their ultimate realization. Due to the recording of the full valuation allowance, no provision for income taxes was recorded for nine months ended September 30, 2002. As we released our valuation allowance in the fourth quarter of
2002, we used an effective tax rate of 38.6%, to record a provision for income taxes of $4.4 million in the first nine months of 2003. See Note 9 to these Notes To Financial Statements for further information.



Minority Interest. There was no minority interest charge for the nine
month period ended September 30, 2003, while we recorded a minority interest charge of approximately $45,000 for the nine month period ended September 30, 2002. The $45,000 charge represents the net income attributable to the 20% minority interest
in Catalyst for the months of January and February 2002, as we purchased the remaining minority interest on March 1, 2002.



14



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##### Table of Contents

Net Income. Net income for the nine month period ended September 30, 2003, was $6.9 million
compared to $3.6 million for the nine month period ended September 30, 2002. The $6.9 net income for the nine months ended September 30, 2003 included a $4.4 million provision for income taxes as discussed above. As a percentage of revenue, pre-tax
net income increased from 2.1% to 4.0%.



Liquidity and Capital Resources



Cash and cash equivalents at September 30, 2003, totaled
$28.2 million compared to $22.7 million at September 30, 2002. During the nine month period ended September 30, 2003, we generated $17.6 million in cash from operating activities, paid approximately $223,000 in cash for capital expenditures, repaid
approximately $1.1 million in cash to satisfy the Catalyst acquisition promissory note and repaid $6.0 million in cash on the revolving credit facility.



Net Cash (Used in) Provided By Operating Activities. Our overall operating activities generated $17.6 million of net cash from operations during
the first nine months of 2003, a $22.6 million increase from the $5.0 million of net cash utilized in the nine month period ended September 30, 2002. The increase is primarily due to a $7.6 million increase in income before income taxes, an increase
in the amounts due under rebate agreements, and the timing of payments to vendors included in accounts payable, offset somewhat by the timing of payments from clients included in accounts receivable.



NetCash Used In Investing Activities. Net cash used in
investing activities for the nine months ended September 30, 2003, was $1.3 million compared to $13.3 million for the nine months ended September 30, 2002. The decrease is due to a reduction in capital expenditures and repayments due on the
promissory note regarding the Catalyst acquisition in 2002. As of March 1, 2003, the promissory note on the Catalyst acquisition was satisfied.



Net Cash Provided by (Used In) Financing Activities. Net cash used in financing activities for the first nine months of 2003 was $5.6 million
compared to cash provided by financing activities of $8.0 million in the first nine months of 2002. In 2003, we made payments totaling $6.0 million on our outstanding line of credit; while in the first nine months of 2002, we had net borrowings of
$8.0 million.



We anticipate continuing to generate positive
operating cash flow, which combined with available cash resources, should be sufficient to meet our planned working capital, capital expenditures and operating expenses. 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 be assured that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders.



15



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##### Table of Contents

|ITEM 3. |  | Quantitative and Qualitative Disclosures About Market Risk
|------- |  | ----------------------------------------------------------

| | (Included | in Managements Discussion and Analysis of Financial Condition and Results of Operations)
| | --------- | -----------------------------------------------------------------------------------------



|ITEM 4. |  | Controls and Procedures
|------- |  | -----------------------



General Statement of Responsibility.The management of the Company is responsible for the preparation, integrity and objectivity of the
Consolidated Financial Statements and the other information included in this report. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and accordingly include
certain amounts that represent managements best estimates and judgments. Actual amounts could differ from those estimates. Management maintains internal control systems to assist it in fulfilling its responsibility for financial reporting.
These systems include business, accounting and reporting policies and procedures, selection of personnel, and segregation of duties. While no system can ensure elimination of all errors and irregularities, the Companys systems, which are
reviewed and modified in response to changing conditions, have been designed to provide reasonable assurance that assets are safeguarded, policies and procedures are followed, transactions are properly executed and reported and appropriate
disclosures are made. The concept of reasonable assurance is based on the recognition that there are limitations in all systems of internal controls and that the costs of such systems should not exceed their benefits.



Evaluation of Disclosure Controls and Procedures. As of September 30,
2003, the Company evaluated the effectiveness of the design and operations of its disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based upon the
evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in ensuring that information required to be disclosed in the Companys
periodic filings under the Exchange Act is accumulated and communicated to such officers to allow timely decisions regarding required disclosures. There was no change in the Companys internal control over financial reporting during the third
quarter of 2003 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



PART II. OTHER INFORMATION



|Item 1. |  | Legal Proceedings
|------- |  | -----------------



In the ordinary course 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 and Use of Proceeds
|------ |  | -----------------------------------------



None



|Item 3. |  | Defaults Upon Senior Securities
|------- |  | -------------------------------



None



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##### Table of Contents

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



The annual meeting of the stockholders for the Company was held on June 3, 2003. The following matters were submitted to a vote of the stockholders:



1. The following individuals were elected to the Board of Directors for a three-year term
with the indicated votes.



|                  |  | FOR        |  | WITHHELD 
|----------------- |  | ---------- |  | ---------
|Thomas L. Blair   |  | 28,853,676 |  | 1,437,484
|Steven B. Epstein |  | 30,120,226 |  | 170,934  
|Carey G. Jury     |  | 30,227,726 |  | 63,434   
|Dale B. Wolf      |  | 30,099,875 |  | 191,285  



|                                                                                                                                          |  | FOR        |  | AGAINST |  | ABSTAIN |  | BROKERNON-VOTES 
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- |  | ------- |  | ------- |  | ----------------
|2. The approval of the 2003 Equity Incentive Plan                                                                                         |  | 29,310,535 |  | 977,074 |  | 3,550   |  | 1               
|                                                                                                                                          |  |            |  |         |  |         |  |                 
|                                                                                                                                          |  | FOR        |  | AGAINST |  | ABSTAIN |  | BROKER NON-VOTES
|3. The ratification of PricewaterhouseCoopers LLP as independent accountants for the Company for the fiscal year ending December
31, 2003 |  | 30,234,590 |  | 54,870  |  | 1,700   |  |                



|Item  5. |  | Other Information
|-------- |  | -----------------



None



17



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##### Table of Contents

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



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



|Exhibit No. |  | Description                                                                                                  
|----------- |  | -------------------------------------------------------------------------------------------------------------
|            | 
|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.(1)                                                          
|            | 
|4.2         |  | Form of Stockholders Agreement(1)                                                                           
|            | 
|11.1        |  | Computation of Per Share Earnings (Incorporated by reference in Part I, hereto)                              
|            | 
|31.0        |  | Certifications pursuant to Rule 13a-14(a)/15d-14(a)                                                          
|            | 
|32.0        |  | Certifications pursuant to 18 U.S.C. Section 1350, as Added By Section 906 of the Sarbanes Oxley Act of 2002.

---

|(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. | Reports on Form 8-K
|-- | -------------------



On July 30, 2003 the Company furnished a Current Report on Form 8-K announcing the Companys financial results for the quarter ended June 30, 2003.



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##### Table of Contents

SIGNATURES



Pursuant to the
requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                        |  |  |  | HealthExtras, Inc.
|----------------------- |  |  |  | ------------------
|                        |  |  | 
|Date: November 13, 2003 |  |  |  | By:               
|                        |  |  |  |                   



|                        |  |  | 
|----------------------- |  |  | 
|Date: November 13, 2003 |  |  | 
|                        |  |  | 





19