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 June 30, 2002

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

                   For the transition period from ___ to ____
                         Commission File Number 0-31014

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



<TABLE>
     <S>                                  <C>

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

</TABLE>


          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
August 13, 2002 was 33,053,220.

<PAGE>

                               HEALTHEXTRAS, INC.

                          Second Quarter 2002 Form 10-Q

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
PART I   FINANCIAL INFORMATION

     Item 1. Financial Statements
<S>                                                                          <C>

         Consolidated Balance Sheets as of December 31, 2001 and
             June 30, 2002 (Unaudited).........................................1

         Consolidated Statements of Operations for the Three and Six Months
             Ended June 30, 2001 and 2002 (Unaudited)..........................2

         Consolidated Statements of Cash Flows for the Six Months Ended
              June 30, 2001 and 2002 (Unaudited)...............................3

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

     Item 2. Management's Discussion and Analysis of Financial Condition
               and Results of Operations......................................10

     Item 3. Quantitative and Qualitative Disclosures About
               Market Risk....................................................13

PART II  OTHER INFORMATION

SIGNATURES
</TABLE>
<PAGE>


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
----------------------------

                               HEALTHEXTRAS, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                            December 31,        June 30,
                                                            2001                2002
                                                          --------------    --------------
                                                                              (unaudited)
<S>                                                       <C>                <C>
ASSETS
Current assets:
  Cash and cash equivalents                               $   33,009,143    $   24,282,872
  Accounts receivable, net                                    22,410,968        21,410,331
  Deferred charges:
    Direct                                                     1,204,526         1,227,656
    Marketing and promotion                                      881,832         2,022,093
  Other current assets                                           653,627           907,406
                                                          --------------    --------------
      Total current assets                                    58,160,096        49,850,358
Fixed assets, net                                              5,056,235         4,916,844
Intangible assets, net                                         4,449,487         6,280,061
Goodwill                                                      17,566,866        20,758,074
Restricted cash                                                1,000,000         1,000,000
Other assets                                                   1,920,651         1,862,107
                                                          --------------    --------------
      Total assets                                        $   88,153,335    $   84,667,444
                                                          ==============    ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                        $   24,994,834    $   16,904,819
  Accrued expenses and other current liabilities               3,985,101         3,974,239
  Notes payable                                                8,883,069        11,168,000
  Deferred revenue                                             4,509,055         4,732,995
                                                          --------------    --------------
      Total liabilities                                       42,372,059        36,780,053
                                                          ==============    ==============

Minority interest                                                543,800                --

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, 31,868,012 and 32,278,120 shares
    issued and outstanding at December 31, 2001
    and June 30, 2002, respectively                              318,680           322,781
  Additional paid-in capital                                  69,747,302        70,224,154
  Deferred compensation                                         (107,665)          (49,219)
  Retained earnings (accumulated deficit)                    (24,720,841)      (22,610,325)
                                                          --------------    --------------
      Total stockholders' equity                              45,237,476        47,887,391
                                                          --------------    --------------
      Total liabilities and stockholders' equity          $   88,153,335    $   84,667,444
                                                          ==============    ==============
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                       1

<PAGE>

                               HEALTHEXTRAS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                  For the three months ended    For the three months ended
                                                          June 30,                        June 30,
                                                  --------------------------    ---------------------------
                                                     2001           2002            2001           2002
                                                  -----------    -----------    -----------    ------------
                                                          (unaudited)                     (unaudited)
<S>                                               <C>            <C>            <C>            <C>
Revenue                                           $22,054,784    $55,248,679    $43,826,221    $109,900,934
                                                  -----------    -----------    -----------    ------------

Expenses:
  Direct                                           16,912,036     44,658,926     32,338,779      89,317,012
  Selling, general and administrative               9,302,808      9,003,208     18,927,034      18,424,809
                                                  -----------    -----------    -----------    ------------
      Total operating expenses                     26,214,844     53,662,134     51,265,813     107,741,821
                                                  -----------    -----------    -----------    ------------

      Operating income (loss)                      (4,160,060)     1,586,545     (7,439,592)      2,159,113

Interest income (expense), net                        336,121        (59,738)       723,723          (3,606)
                                                  -----------    -----------    -----------    ------------

      Income (loss) before minority interest       (3,823,939)     1,526,807     (6,715,869)      2,155,507

Minority interest                                          --             --             --          44,992
                                                  -----------    -----------    -----------    ------------

      Net income (loss)                           $(3,823,939)   $ 1,526,807    $(6,715,869)   $  2,110,515
                                                  ===========    ===========    ===========    ============

Net income (loss) per share, basic                $     (0.13)   $      0.05    $     (0.23)   $       0.07
Net income (loss) per share, diluted              $     (0.13)   $      0.05    $     (0.23)   $       0.07

Weighted average shares of common stock, basic
  (in thousands)                                       29,182         32,291         29,150          32,160
Weighted average shares of common stock
  outstanding diluted (in thousands)                   29,182         32,501         29,150          32,280
</TABLE>


The accompanying notes are an integral part of these financial statements

                                        2

<PAGE>

                               HEALTHEXTRAS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                     For the six months ended
                                                              June 30,
                                                   ----------------------------
                                                      2001              2002
                                                   ------------    ------------
                                                             (unaudited)
<S>                                                <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                $ (6,715,869)   $  2,110,515
  Depreciation expense                                  761,634         655,938
  Non-cash charges (credits)                          5,175,067        (950,070)
  Loss on disposal of fixed assets                           --         115,821
  Amortization of goodwill                              307,419              --
  Amortization of intangibles and other assets               --         194,139
  Minority interest                                          --          44,992
  Changes in assets and liabilities:
    Accounts receivable, net                         (2,637,563)      1,000,637
    Other assets                                          5,117        (419,949)
    Deferred charges                                   (162,674)     (1,163,391)
    Accounts payable and accrued expenses              (228,027)     (8,278,342)
    Deferred revenue                                   (792,133)        223,940
                                                   ------------    ------------
      Net cash used in operating activities          (4,287,029)     (6,465,770)
                                                   ------------    ------------

Cash flows from investing activities:
  Capital expenditures                                 (607,113)       (632,367)
  Return of deposit                                          --         600,000
  Purchase of intangible assets                              --        (300,000)
  Business acquisitions and related costs              (608,225)     (9,961,603)
                                                   ------------    ------------
      Net cash used in investing activities          (1,215,338)    (10,293,970)
                                                   ------------    ------------

Cash flows from financing activities:
  Proceeds received from exercise of stock options           --          33,469
  Proceeds from new common shares issued                121,800              --
  Proceeds from borrowings                                   --      12,500,000
  Repayment of borrowings                                    --      (4,500,000)
  Purchase of treasury stock                            (90,000)             --
                                                   ------------    ------------
      Net cash provided by financing activities          31,800       8,033,469
                                                   ------------    ------------

Net decrease in cash and cash equivalents            (5,470,567)     (8,726,271)

Cash and cash equivalents at the beginning
  of period                                          28,921,312      33,009,143
                                                   ------------    ------------
Cash and cash equivalents at the end of period     $ 23,450,745    $ 24,282,872
                                                   ============    ============
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                       3


<PAGE>



                               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,  operating results and cash flows for the periods  presented.  Operating
results for the six months ended June 30, 2002, are not  necessarily  indicative
of the result  that may be  expected  for the year  ending  December  31,  2002.
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, 2001, as filed with the SEC on March 29, 2002.  Certain
prior period  amounts have been  reclassified  to conform to the current  period
presentation.

2.       ACCOUNTING CHANGES


     EITF 01-9
     ---------

    Effective January 1, 2002, the Company adopted "Accounting for Consideration
Given by a Vendor to a Customer or a Reseller of the Vendor's Products",  ("EITF
01-9"),  which was issued in November 2001. The Company's  adoption of EITF 01-9
resulted in changing the way the Company  recognizes  the cost of  consideration
provided to a marketing partner under a warrant agreement.  Effective January 1,
2002,  the charge for this  consideration  is to be recorded  as a reduction  to
revenue from the marketing partner rather than as a charge to direct expense, as
reflected in prior  periods.  During the three and six month  periods ended June
30, 2001, the Company recorded non-cash direct expenses of $3.8 million and $5.1
million,  respectively,  related to the warrant  agreement.  To comply with EITF
01-9,  the $3.8 million and $5.1 million  non-cash  warrant  expenses  have been
reclassified as a reduction to revenue from the marketing  partner for the three
and six month periods ended June 30, 2001.

    During 2001,  the Company  also  recorded  $1.0  million in non-cash  direct
expense  related to common stock  warrants  expected to be issued to a marketing
partner  contingent on the  marketing  partner  exceeding a specific  annualized
revenue  threshold.  Due to the lower fair market value of the warrants at March
31, 2002,  the Company  recognized  a non-cash  credit of $477,000 in the period
ended March 31, 2002. In the second quarter of 2002, it was determined  that the
marketing  partner did not exceed the specific  annualized  revenue  thresholds;
thus,  the Company  reversed  the  remaining  charge of $531,000 for the warrant
agreement.  To comply with EITF 01-9, the $531,000  non-cash credit was recorded
as revenue in the period ended June 30,  2002,  for a total  non-cash  credit of
$1.0 million for the six months ended June 30, 2002.

                                       4
<PAGE>



     FAS 142
     -------

    In July 2001,  the  Financial  Accounting  Standards  Board  issued FAS 142,
"Goodwill  and Other  Intangible  Assets"  ("FAS 142").  FAS 142  addresses  the
accounting for goodwill and intangible assets  subsequent to their  acquisition.
FAS 142 provides  that  goodwill and  indefinite-lived  assets will no longer be
amortized and that these assets must be tested at least  annually for impairment
beginning in the year of adoption.  FAS 142 also provides that the  amortization
of intangible  assets with finite lives is not limited to 40 years.  The Company
adopted the  provisions  of FAS 142 effective  January 1, 2002.  The Company has
completed its impairment testing of goodwill and concluded that no impairment of
goodwill exists. The following table reflects  consolidated  results adjusted as
though the adoption of FAS 142 occurred as of January 1, 2001:

<TABLE>
<CAPTION>

                                                 Three Months Ended                    Six Months Ended
                                                         June                                  June
                                            -------------------------------   ------------------------------
                                                 2001               2002          2001               2002
                                            --------------    -------------   -------------    -------------
<S>                                         <C>               <C>             <C>              <C>
Net income (loss), as reported              $   (3,823,939)   $   1,526,807   $  (6,715,869)   $   2,110,515

Goodwill amortization                              153,711               --         307,419               --
                                            --------------    -------------   -------------    -------------

Net income (loss), as adjusted              $   (3,670,228)   $   1,526,807   $  (6,408,450)   $   2,110,515
                                            ==============    =============   =============    =============

Net income (loss) per share, basis, as
   reported                                 $        (0.13)   $        0.05   $       (0.23)   $        0.07

Goodwill amortization                                 0.01               --            0.01               --
                                            --------------    -------------   -------------    -------------

Net income (loss) per share basic, as
    adjusted                                 $       (0.12)   $        0.05   $       (0.22)   $        0.07
                                             =============    =============   =============    =============

Net income (loss) per share, diluted, as
   reported                                  $       (0.13)   $        0.05   $       (0.23)   $        0.07

Goodwill amortization                                 0.01               --            0.01               --
                                            --------------    -------------   -------------    -------------

Net income (loss) per share, diluted, as
   adjusted                                  $       (0.12)   $        0.05   $       (0.22)   $        0.07
                                            ==============    =============   =============    =============
</TABLE>


3.       ACQUISITION

    During the first quarter of 2002, the Company  purchased the outstanding 20%
minority interest in Catalyst,  Inc. 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. At the time of the minority interest  acquisition,  the Company
estimated  and recorded  $3.9 million of goodwill and $1.0 million of intangible
assets.  For  additional  information  concerning  the 2001  purchase of the 80%
ownership of Catalyst, refer to the Company's Annual Report on Form 10-K for the
year ended December 31, 2001, as filed with the SEC on March 29, 2002.

    During the second quarter of 2002,  the Company  finalized its allocation of
the  purchase  price  (including  the  acquisition  of the  remaining  minority
interest) of the  Catalyst  acquisition  resulting in the increase in intangible
assets and the decrease in goodwill of $700,000.  All intangible assets relating
to the Catalyst acquisition are being amortized over a twenty-year period.

                                       5

<PAGE>

    The  changes in the  carrying  amount of goodwill  for three  month  periods
ending March 31, 2002, and June 30, 2002, are as follows:
<TABLE>
         <S>                                                      <C>

         Balance as of January 1, 2002                            $   17,566,866

         Goodwill acquired during the three
              month period ended March 31, 2002                        3,891,208

         Reduction of Goodwill during
               the three month period ended June 30, 2002              (700,000)
                                                                  --------------

         Balance as of June 30, 2002                              $   20,758,074
                                                                  ==============
</TABLE>

         As of June 30, 2002, intangible assets consisted of the following:
<TABLE>
<CAPTION>
                                                        As of June 30, 2002
                                                        -------------------

                                                   Gross Earnings     Accumulated
                                                      Amount         Amortization
                                                  -------------      ------------

<S>                                               <C>                <C>
         Customer contracts and relationships     $   5,700,000      $   (167,999)
         Other PBM contracts                            795,200           (47,140)
                                                  ---------------    -------------
                                                  $     6,495,200    $   (215,139)
                                                  ===============    =============
</TABLE>

    Amortization  expense  for the three and six month  periods  ended  June 30,
2002, was approximately $85,000 and $151,000, respectively.

<TABLE>
<CAPTION>

    Estimated Amortization Expense
    ------------------------------

         For year ending December 31,     Amount

<S>               <C>                   <C>
                  2002                  $ 367,000
                  2003                    395,000
                  2004                    395,000
                  2005                    395,000
                  2006                    355,000
</TABLE>


    The following  table sets forth certain  unaudited  proforma  financial data
assuming that the  acquisition of 100% of Catalyst  occurred on January 1, 2001,
after giving effect to purchase accounting adjustments.

<TABLE>
<CAPTION>

                                         Three Months Ended            Six Months Ended
                                              June                           June
                                    ---------------------------   ----------------------------
                                         2001          2002           2001           2002
                                    ------------   ------------   ------------   -------------
                                      (proforma)     (actual)       (proforma)     (actual)

<S>                                 <C>            <C>            <C>            <C>
Revenue                             $ 38,069,451   $ 55,248,679   $ 75,855,555   $ 109,900,934


Net income                          $ (3,142,855)  $  1,526,807   $ (5,353,702) $    2,110,515


Net income per share, basic         $      (0.11)$         0.05   $      (0.18)   $       0.07


Net income per share, diluted       $      (0.11)$         0.05   $      (0.18)   $       0.07

Weighted average shares of common
    stock, basic (in thousands)
                                           29,868        32,291         29,836          32,160

Weighted average shares of common
    stock, diluted (in thousands)
                                           29,868        32,501         29,836          32,280
</TABLE>

                                       6
<PAGE>

4.       DEFERRED CHARGES

    On April 1, 2002,  the Company  issued common stock  warrants to Health Care
Horizons,  Inc. d/b/a Cimarron Heath Plan  ("Cimarron")  that gives Cimarron the
right to purchase  250,000  shares of the  Company's  common stock for $5.22 per
share.  The warrants are  exercisable at any time after the grant date, with the
condition  that the Company must be the exclusive  provider of Pharmacy  Benefit
Management ("PBM") services to Cimarron on the date of the exercise. The term of
the PBM contract is from July 1, 2002, to June 30, 2009. In accordance with EITF
96-18  "Accounting for Equity Instrument that Are Issued to Other Than Employees
for  Acquiring  or  in  Conjunction  With  Selling,   Goods  or  Services,"  the
measurement  date was determined to be the grant date,  April 1, 2002.  Using an
equity-pricing  model,  the value of the 250,000  warrants  was  estimated to be
$400,000 and was recorded as a deferred  charge at April 1, 2002.  This deferred
charge will be recognized  over the life of the  seven-year  contract  beginning
July 2002, on a straight line basis.

5.       NOTES PAYABLE

    On January 22, 2002, the Company  arranged a line of credit for $5.0 million
to support the working  capital  requirements  of the Company's  acquisition  of
Catalyst  Inc. and  Catalyst  Consultants  ("Catalyst").  The line of credit was
collateralized  by a certificate of deposit with an approximate  balance of $5.6
million  held by the  lending  financial  institution.  Under  the  terms of the
agreement,  all outstanding principal and accrued interest were to be paid on or
before July 22,  2002.  The note bore a rate of 4.59% per annum,  which was paid
monthly.  The Company  repaid the  outstanding  principal of $4.5 million  April
2002.

    In March 2002, the Company arranged an $8 million revolving credit facility.
Borrowings on the credit facility are collateralized by substantially all of the
Company's  trade  receivables.  The credit  agreement  contains  affirmative and
negative   covenants  related  to  indebtedness,   capital   expenditures,   and
consolidated net worth.

    The facility bears interest at LIBOR plus 2.25%. The effective interest rate
at June 30, 2002, was 5.06%.  Interest is payable in arrears on the fifth day of
each month.  Interest  expense for the three month and six month  periods  ended
June 30, 2002 was $82,800.  The  outstanding  balance on the credit  facility at
June 30, 2002,  was $8.0 million.  All principal and accrued  interest is due to
the bank on May 31,  2003,  however,  the  facility  must be fully repaid for at
least 30 consecutive days prior to the expiration date.

6.       CONSOLIDATION EXPENSES

    In accordance with EITF 94-3,  "Liability  Recognition for Certain  Employee
Termination  Benefits and the Costs to Exit an Activity," the Company recognized
a non-recurring charge of approximately $672,000 in the three month period ended
March 31, 2002 associated  with the  consolidation  of its  Birmingham,  Alabama
operations.  The charge primarily  consisted of a write-down of fixed assets and
inventory,  severance  payments,  and the balance due on the office.  A total of
$559,000 has been paid or written off by the Company, and the remaining $113,000
is  recorded  in accrued  liabilities.  The  liabilities  will be paid  within a
twelve-month  period beginning March 31, 2002. The facility was closed effective
February 28, 2002 and the  operations  were  consolidated  within the  Company's
Rockville, MD and Las Vegas, NV offices.

7.       SEGMENT REPORTING

    The Company operates in two market segments as a provider of PBM services to
plan sponsors and as a provider of  supplemental  health programs and disability
to individuals. The following table represents financial data by segment for the
three months and six months ended June 30, 2002, and June 30, 2001.

                                       7


<PAGE>


For the three months ended June 30, 2002:

<TABLE>
<CAPTION>
                                            Supplemental
                                              Health &
                                PBM          Disability           Total
                          -------------    -------------    --------------

<S>                       <C>              <C>              <C>
Revenue                   $  37,572,648    $  17,676,031    $   55,248,679
Operating expenses           36,405,222       17,256,912        53,662,134
Net income                    1,190,714          336,092         1,526,807
Total assets                 53,956,939       30,710,505        84,667,444
Accounts receivable          19,745,173        1,665,158        21,410,331
Accounts payable             16,739,209          165,610        16,904,819
</TABLE>

For the three months ended June 30, 2001:

<TABLE>
<CAPTION>

                                            Supplemental
                                              Health &
                                PBM          Disability           Total
                          -------------    -------------    --------------
<S>                       <C>              <C>              <C>
Revenue                   $ 7,658,676      $   14,396,108   $   22,054,784
Operating expenses          7,717,115          18,497,729       26,214,844
Net loss                      (43,250)         (3,780,689)      (3,823,939)
Total assets                4,783,747          44,122,973       48,906,720
</TABLE>

For the six months ended June 30, 2002:

<TABLE>
<CAPTION>

                                            Supplemental
                                              Health &
                                PBM          Disability           Total
                          -------------    -------------    --------------
<S>                       <C>              <C>              <C>
Revenue                   $  72,085,598    $   37,815,336   $  109,900,934
Operating expenses           70,512,918        37,228,903      107,741,821
Net income                    1,615,294           495,221        2,110,515

</TABLE>

For the six months ended June 30, 2001:
<TABLE>
<CAPTION>

                                            Supplemental
                                              Health &
                                PBM          Disability           Total
                          -------------    -------------    --------------
<S>                       <C>              <C>              <C>
Revenue                   $  15,320,336    $   28,505,885   $   43,826,221
Operating expenses           15,482,239        35,783,574       51,265,813
Net loss                      (128,215)       (6,587,654)       (6,715,869)
Total assets                  4,783,747        44,122,973       48,906,720

</TABLE>

                                       8
<PAGE>


8.       NET INCOME (LOSS) PER SHARE

    Basic income (loss) per common share is computed using the weighted  average
number of common shares outstanding during the period. Diluted income per common
share is computed using the combination of dilutive common share equivalents and
the weighted average number of common shares outstanding during the period.

         For the three and six month  periods  ended June 30, 2001,  the diluted
net loss per  share was  equal to basic  net loss per  share  since the  Company
operated at a loss position. For the three month period ended June 30, 2002, the
dilutive effect (210,000 shares  determined  using the treasury stock method) of
stock  options to purchase  671,000  shares of common  stock was included in the
computation  of diluted  earnings per common share  because the option  exercise
price was less than the average  market  price of the common  shares  during the
three month period. The dilutive effect of 3.9 million  outstanding common stock
options and warrants for the period ended June 30, 2002,  has been excluded from
the  computation  of  diluted  net  income  per  share  as the  effect  would be
antidilutive.

         For the six month  period  ended June 30,  2002,  the  dilutive  effect
(209,000 shares  determined using the treasury stock method) of stock options to
purchase  601,000  shares of common  stock was  included in the  computation  of
diluted  earnings per common share because the option  exercise  prices was less
than the average  market price of the common shares during the six month period.
The dilutive effect of 3.9 million outstanding common stock options and warrants
for the six  month  period  ended  June 30,  2002,  has been  excluded  from the
computation   of  dilutive   net  income  per  share  as  the  effect  would  be
antidilutive.


                                       9
<PAGE>



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 (see "Certain Factors
That May Affect Future Operating Results or Stock Prices") within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking
statements  may  be  identified  by  words  including  "anticipate",  "believe",
"estimate",  "expect" and similar expressions.  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  diversified  provider  of  pharmacy,   health  and
disability benefits. The Company currently provides benefits to over 1.5 million
members and the Company's  clients  include  managed care  organizations,  large
employer  groups,   unions  and  government  agencies,  as  well  as  individual
customers. The acquisitions of International Pharmacy Management,  Inc. ("IPM"),
now operating as  HealthExtrasRx,  and Catalyst have created a strong foundation
for the PBM  business of the  Company.  The PBM  segment is the largest  revenue
generating  segment and the Company  expects the PBM  business to be the primary
source of growth and profit potential in the years ahead.

    PHARMACY BENEFIT MANAGEMENT

         Our primary PBM services consist of the automated online  processing of
prescription claims on behalf of our employer and managed care customers. When a
member of one of our customer  accounts  presents a prescription  or health plan
identification  card to a retail pharmacist in our network,  our system provides
the  pharmacist  with  accesses  to online  information  regarding  eligibility,
patient history,  health plan formulary listings, and contractual  reimbursement
rates.  The  member  generally  pays a co-pay  to the  retail  pharmacy  and the
pharmacist  fills  the  prescription.  On behalf of our  customer  accounts,  we
electronically  aggregate  pharmacy benefit claims,  which include  prescription
costs plus our claims processing fees, for consolidated  billing and payment. We
receive payments from customer accounts and remit the amounts owed to the retail
pharmacies pursuant to our negotiated rates and retain the difference, including
claims processing fees.

         We  have  established  a  nationwide  network  of  over  50,000  retail
pharmacies.  In general,  self-insured  employers and managed care organizations
contract with us to benefit from our negotiated  retail pharmacy  network rates,
participate in certain rebate arrangements with manufacturers based on formulary
design and to access the other care enhancement  protocols in our system.  Under
these  contracts,  we have  an  independent  obligation  to pay  network  retail
pharmacies  for the drugs  dispensed  and  accordingly  have  assumed  that risk
independent  of our customers.  Pharmacy  benefit claim payments from our health
plan sponsors are recorded as revenues,  and  prescription  costs paid to retail
pharmacies are recorded in direct expenses.  Member payments are not recorded as
revenue.

    SUPPLEMENTAL HEALTH AND DISABILITY PROGRAMS

         The Company's  secondary  segment,  supplemental  health and disability
programs,  generates revenue from the sale of membership  programs which provide
disability  insurance benefits.  We focus on the distribution of our programs to
customers of our financial institution  partners.  Christopher Reeve is featured
prominently in our marketing campaigns for these programs.

         Revenue is generated by payments for program benefits and payments from
certain business  partners.  In general,  program revenue is recognized based on
the  number of members  enrolled  in each  reporting  period  multiplied  by the
applicable  fee collected  from the member or paid by the marketing  partner for
their  specific   membership   program.   The  program  revenue   recognized  by
HealthExtras includes the cost of the membership benefits, which are supplied by
others,  including the  insurance  components.  Payments from business  partners
related  to new  member  enrollments  are  recorded  as revenue to the extent of
related  direct  expenses,  which to date have  exceeded  payments from business
partners.

         Direct expenses consist principally of the cost of benefits provided to
program members, business partner compensation, and transaction processing fees.
Direct expenses are a function of the level of membership  during the period and

                                       10
<PAGE>


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  HealthExtras  without any
related revenue. HealthExtras believes that current enrollment trends will allow
the minimum future commitments at June 30, 2002, to be fully utilized by current
enrollment levels.


         The  preparation  of financial  statements in  conformity  with general
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  reported  amount of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. For more information about the Company's  accounting  policies
and  estimates,  refer to "Critical  Accounting  Policies and  Estimates" in the
Company's  Annual  Report on Form 10-K for the year ended  December 31, 2001, as
filed with the SEC on March 29, 2002.

RESULTS OF OPERATIONS
---------------------

THREE MONTHS ENDED JUNE 30, 2002, COMPARED TO THREE MONTHS ENDED JUNE 30, 2001

         REVENUE.  Revenue from  operations  for the second  quarter of 2002 was
$55.2  million,  compared to $22.1 million for the second  quarter of 2001.  The
pharmacy benefit management  services segment revenue  contributed $30.0 million
of  the  revenue  increase,  while  revenue  for  the  supplemental  health  and
disability  segment increased by $3.3 million.  Total revenue in the three month
period  increased  391%  and 23% in the  pharmacy  benefit  management  services
segment and the supplemental  health and disability segment,  respectively.  The
PBM  increase  was  principally  due to  the  Catalyst  acquisition.  Due to the
Company's  adoption  of EITF 01-9,  previously  reported  revenue for the second
quarter of 2001 has been  reduced by $3.8 million in the  comparative  financial
statements.  For more information about the adoption of EITF 01-9, see Note 2 of
the Notes to the Consolidated Financial Statements.

         DIRECT EXPENSES.  Direct expenses for the period ended June 30, 2002 of
$44.7  million  consisted of $34.9 million in direct costs  associated  with the
pharmacy benefit  management  services segment and $9.8 million  attributable to
benefit costs and  compensation to our  distribution  partners for  supplemental
health and disability products. Direct expenses for the same period in 2001 were
$16.9  million,  consisting  of  approximately  $9.9  million  and $7.0  million
attributable to the pharmacy benefit management services and supplemental health
and disability  segments,  respectively.  The PBM increase is principally due to
the Catalyst acquisition. The direct expenses of $44.7 million and $16.9 million
for the three month period ended June 30, 2002,  and June 30, 2001,  represented
83% and 65% of operating expenses for the respective periods.

         SELLING,    GENERAL   AND   ADMINISTRATIVE.    Selling,   general   and
administrative  expenses for the three month period ended June 30, 2002, totaled
$9.0 million or 17% of total operating  expenses,  $1.5 million of which related
to the  Company's  pharmacy  benefit  management  services  segment,  while  the
remaining $7.5 million related to the management of the supplemental  health and
disability   segment.   These  expenses   included  $1.1  million  for  creative
development,  product  endorsements and market research,  $4.3 million in direct
marketing,  $1.7 million in compensation and benefits,  $849,000 in professional
fees,  insurance  and taxes,  $376,000  in  facility  costs,  $196,000 in travel
expenses and $426,000 in depreciation and amortization.

         Selling,  general and  administrative  expenses  for the same period in
2001  were  approximately  $9.3  million  or 35% of  total  operating  expenses,
$639,000 of which related to the Company's pharmacy benefit management  services
segment,  while $8.6 million related to the  supplemental  health and disability
segment.  These  expenses  include  $684,000 for creative  development,  product
endorsements and market research, $6.0 million in direct marketing, $1.4 million
in  compensation  and benefits,  $285,000 in  professional  fees,  insurance and
taxes, $234,000 in facility costs, $158,000 in travel expenses,  and $544,000 in
depreciation and amortization.

         The  decrease in  deprecation  and  amortization  expense is  primarily
attributable  to the Company ceasing  amortization of goodwill,  pursuant to the
adoption of FAS 142.  For more  information  about the  adoption of FAS 142, see
Note 2 of the Notes to the Consolidated Financial Statements.

                                       11
<PAGE>


         INTEREST INCOME (EXPENSE),  NET. Interest income (expense), net for the
second quarter 2002 was ($59,700), compared to $336,100 in the second quarter of
2001,  a  decrease  of  $396,000  principally  attributable  to  lower  invested
balances, interest rates, and interest on the borrowings initiated in 2002.

         NET INCOME  (LOSS).  Net income for the second quarter of 2002 was $1.5
million  compared to a $3.8 million net loss for the second  quarter of 2001, an
increase of $5.3 million. As a percentage of revenue,  net income increased from
(17)% to 3%.

SIX MONTHS ENDED JUNE 30, 2002, COMPARED TO SIX MONTHS ENDED JUNE 30, 2001

         REVENUE.  Revenue from  operations  for the six month period ended June
30, 2002, was $109.9 million, compared to $43.8 million for the six month period
ended June 30, 2001. The pharmacy  benefit  management  services segment revenue
contributed  $56.9  million  of the  revenue  increase,  while  revenue  for the
supplemental  health and  disability  segment  increased by $9.3 million.  Total
revenue in the six month period  increased 606% and 12% in the pharmacy  benefit
management  services segment and the supplemental health and disability segment,
respectively.  The PBM increase was principally due to the Catalyst acquisition.
Due to the Company's  adoption of EITF 01-9,  revenue for the second  quarter of
2001 has been reduced by $5.1 million in the comparative  financial  statements.
For more information about the adoption of EITF 01-9, see Note 2 of the Notes to
the Consolidated Financial Statements.

         DIRECT  EXPENSES.  Direct  expenses for the six month period ended June
30, 2002 of $89.3 million  consisted of $67.1 million in direct costs associated
with  the  pharmacy  benefit  management  services  segment  and  $22.2  million
attributable to benefit costs and compensation to our distribution  partners for
supplemental health and disability products. Direct expenses for the same period
in 2001 were $32.3 million,  consisting of approximately $14.2 million and $18.1
million   attributable  to  the  pharmacy   benefit   management   services  and
supplemental health and disability segments,  respectively.  The PBM increase is
principally  due to the  Catalyst  acquisition.  The  direct  expenses  of $89.3
million and $32.3 million for the six month periods ended June 30, 2002 and June
30,  2001,  represented  83% and 63% of operating  expenses  for the  respective
periods.

         SELLING,    GENERAL   AND   ADMINISTRATIVE.    Selling,   general   and
administrative  expenses for the six month period ended June 2002, totaled $18.4
million or 17% of total operating expenses, $3.4 million of which was related to
the Company's pharmacy benefit management services segment,  while the remaining
$15.0 million  related to the management of  supplemental  health and disability
segment.  These expenses include $2.5 million for creative development,  product
endorsement and market research, $8.4 million in direct marketing,  $3.8 million
in compensation and benefits,  $1.8 million in professional fees,  insurance and
taxes,  $757,000 in facility costs,  $319,000 in travel expenses and $850,000 in
depreciation and amortization.

         Selling,  general and  administrative  expenses  for the same period in
2001, were approximately $18.9 million or 37% of total operating expenses,  $1.3
million of which related to the Company's pharmacy benefit  management  services
segment,  while $17.6 million related to the supplemental  health and disability
segment. These expenses included $2.4 million for creative development,  product
endorsements,  market research, $11.0 million in direct marketing,  $2.7 million
in  compensation  and benefits,  $580,000 in  professional  fees,  insurance and
taxes,  $470,000 in facility costs, $327,000 in travel expenses and $1.1 million
in depreciation and amortization.

         The  decrease in  deprecation  and  amortization  expense is  primarily
attributable  to the Company ceasing  amortization of goodwill,  pursuant to the
adoption of FAS 142.  For more  information  about the  adoption of FAS 142, see
Note 2 of the Notes to the Consolidated Financial Statements.

         INTEREST INCOME (EXPENSE),  NET.  Interest income expense,  net for six
months  ended June 30,  2002 was  ($3,600)  compared  to  $724,000 in the second
quarter of 2001,  a decrease  of $727,000 or 100%  principally  attributable  to
lower  invested  balances,  interests  rates,  and  interest  on the  borrowings
initiated in 2002.

         MINORITY  INTEREST.  Minority  interest  for the six month period ended
June 30, 2002, was approximately $45,000; there was no minority interest at June
30, 2001.  This charge  represents  the net income  attributable  due to the 20%
minority  interest  holder of Catalyst  for the months of January  and  February
2002. As the Company purchased the remaining minority interest on March 1, 2002,
no additional minority interest charge for Catalyst will appear on the Company's
financial statements.

         NET INCOME,  (LOSS). Net income for the six month period ended June 30,
2002 was $2.1  million  compared  to $6.7  million  net loss for the  comparable
period in of 2001, an increase of $8.8 million. As a percentage of revenue,  net
income increased from (15)% to 2%.

                                       12
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

         Cash and cash  equivalents  at June 30,  2002,  totaled  $24.3  million
compared to $33.0  million at December 31, 2001.  During the first six months of
2002, the Company received $8.0 million in cash from financing activities,  paid
$10 million for business  acquisitions  and related costs, and used $6.9 million
of the  borrowed  funds  and  $1.4  million  of the  Company's  cash  to  reduce
outstanding  payables and accrued  expenses in order to negotiate more favorable
rates with specific vendors.

         CASH USED IN OPERATING, ACTIVITIES. Cash used for operating activities
during the first six months of 2002 was $6.5 million compared to the cash used
for operating activities of $4.3 million during the first six months of 2001.
The variance is due to a large reduction in accounts payable, accrued expenses,
and an increase in deferred charges.

         CASH USED IN INVESTING  ACTIVITIES.  Cash used in investing  activities
for the first six months of 2002 was $10.3 million  compared to $1.2 million for
the first six  months of 2001.  The  increase  is  primarily  attributed  to the
payments of $8.9 million in January  2002,  and $1.1  million in April 2002,  to
satisfy the Catalyst acquisition promissory notes.

         CASH FROM FINANCING  ACTIVITIES.  Cash provided by financing activities
for the first six months of 2002 was $8.0  million  compared  to $31,800 for the
first six months of 2001. In January 2002, the Company arranged a line of credit
for $5.0 million to support the working  capital  requirements  of the Company's
acquisition of Catalyst.  The Company repaid the  outstanding  principal of $4.5
million in April 2002.  In March 31,  2002,  the Company  also  arranged an $8.0
million revolving credit facility.  The amount was fully drawn at June 2002. All
principal and accrued interest is due to the bank on May 31, 2003.

         By managing accounts  receivable to conform more closely to our payment
obligations  to  suppliers,  the  Company  should be able to  generate  positive
operating  cash flow  which  combined  with  available  cash  resources  will be
sufficient  to meet  our  planned  working  capital,  capital  expenditures  and
business expense 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 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.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         (Included in Management's Discussion and Analysis of Financial
          Condition and Results of Operations)

                                       13
<PAGE>



PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
-------  -----------------

    The Company is not aware of any material  pending legal  proceedings,  other
than ordinary routine litigation  incidental to its business.  In addition,  the
Company is not aware of any routine legal  proceedings  which, in the opinion of
management, will have a material affect on the financial condition or results of
operations of the Company.


ITEM 2   CHANGES IN SECURITIES
------   ---------------------

    In connection with the execution of a Pharmaceutical Services Agreement, the
Company  issued a total of 250,000  common stock  warrants on April 1, 2002. The
Company  relied upon the exemption  from the  registration  requirements  of the
Securities  Act  of  1933  provided  by  Section  4 (2)  of the  Act.  For  more
information  about the Company issued common stock  warrants,  see Note 4 of the
Notes to the Consolidated Financial Statements.



ITEM 3.  DEFAULTS UPON SENIOR SECURITIES  (Not Applicable)
-------  -------------------------------

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------  ----------------------------------------------------

    The annual meeting of the  stockholders  for the company was held on June 4,
2002. 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.

<TABLE>
<CAPTION>

                                                  For          Against      Abstain
                                                ----------     --------     -------
<S>                                             <C>             <C>
              David T. Blair................    30,363,330      525,650       None
              Frederick H. Graefe...........    30,561,507      327,473       None
              Thomas J. Graf................    30,561,507      327,473       None
</TABLE>

    2. The appointment of PricewatersCoopers  LLP as independent auditors of the
       Company  was  ratified  by a count  of  30,726,194  affirmative  votes,
       151,386 negative votes, and 11,400 abstentions.

    There were no broker  non-votes  reported with respect to any of the matters
subject to shareholder vote.


ITEM 5.  OTHER INFORMATION
-------  -----------------

    The Company has submitted, via correspondence to the Securities and Exchange
Commission,  the certifications  required by Section 906 of the recently enacted
Sarbans Oxley Act.

                                       14


<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORMS 8-K
-------  ---------------------------------
1.       The following exhibits are filed as part of this report unless noted
         otherwise:
<TABLE>
<CAPTION>


     Exhibit No.                                          Description
     -----------------------------------------------------------------
<S> <C>
    2.1    Form of Reorganization Agreement by and among HealthExtras, Inc.,
           HealthExtras, LLC and Capital Z Healthcare Holding Corp (1)
    2.2    CatalystRx, Inc. Securities Purchase Agreement Dated as of November
           14, 2001 by and among HealthExtras, Inc. as the Purchaser, Catalyst
           Rx, Inc. and Kevin C. Hooks as the Seller (2)
    2.3    Catalyst Consultants, Inc. Securities Purchase Agreement Dated as of
           November 14, 2001 by and among HealthExtras, Inc. as the purchaser,
           Catalyst Consultants, Inc. and Kevin C. Hooks as the Seller (2)
    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    Reserved
   10.4    Reserved
   10.5    Reserved
   10.6    Agreement by and between Cambria Productions, Inc. f/s/o Christopher
           Reeve and HealthExtras, Inc. (1) (3)
   10.7    Indemnification Agreement (1)
   10.8    Sublease Agreement by and between United Payors & United Providers,
           Inc. and HealthExtras, Inc.
   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., (4)
   10.12   Form of HealthExtras, Inc. 2000 Stock Option Plan
   10.13   Form of HealthExtras, Inc. 2000 Directors' Stock Option Plan
   10.14   Warrant Agreement by and among HealthExtras, Inc. and J.C. Penney
           Life Insurance Company
   10.15   Amended Agreement by and between Cambria Productions, Inc. f/s/o
           Christopher Reeve and HealthExtras, Inc.
   21.1    Subsidiaries of Registrant
</TABLE>

------------------
(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)      Incorporated  herein  by  reference  into  this  document  from  the
         Exhibits to the Form 8-K  initially  filed on November  29,  2001.
(3)      Confidential  treatment  requested for portion of agreement pursuant to
         Section 406 of Regulation C.  promulgated  under the  Securities Act of
         1933,  as  amended.
(4)      Incorporated  herein by  reference  into this document from the
         Exhibits to the Form 8-K initially  filed on November
         21, 2000.

2.       Reports on Form 8-K
         None

                                       15
<PAGE>



          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:  August 14, 2002           By:  /s/ David T. Blair
                                   -------------------------------------
                                   David T. Blair
                                   Chief Executive Officer and Director


Date:  August 14, 2002           By:  /s/ Michael P. Donovan
                                   -------------------------------------
                                   Michael P. Donovan
                                   Chief Financial Officer and
                                   Chief Accounting Officer

                                       16