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 September 30, 2000
                                       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 1-15535

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


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


         2273  Research Boulevard, 2nd Floor, Rockville, Maryland 20850 (Address
               of principal executive offices, zip code)
                                 (301) 548-2900
                (Registrant's phone number, including area code)

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




Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes  X     No
                                   -------    ----------

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the last practicable date.

The number of shares of common stock,  par value $.01 per share,  outstanding on
November 10, 2000 was 28,002,600.


<PAGE>




                               HEALTHEXTRAS, INC.

                          Second Quarter 2000 Form 10-Q

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>


                                                                            Page
                                                                            ----
PART I   FINANCIAL INFORMATION

     ITEM 1.   Financial Statements
     <S>                                                                     <C>

         Balance Sheets as of December 31, 1999
         and September 30, 2000 Unaudited) ..................................  1

         Statements of Operations and Comprehensive
         Loss for the Three and Nine Months Ended
         September 30, 1999 and 2000 (Unaudited).............................  2

         Statements of Cash Flows for the Nine Months Ended
         September 30, 1999 and 2000 (Unaudited).............................  3

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

     ITEM 2    Management's Discussion and Analysis of Financial Condition
               and Results of Operations.....................................  6

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

PART II  OTHER INFORMATION

SIGNATURES
</TABLE>


PART I.  FINANCIAL INFORMATION
ITEM 1.   Financial Statements

                               HEALTHEXTRAS, INC.
                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                  December 31,    September 30,
                                                     1999             2000
                                                  ------------     -----------
                                                                   (Unaudited)
<S>                                              <C>            <C>
Current assets:
  Cash and cash equivalents                      $  46,971,106  $  36,161,760
  Marketable securities of a related party             664,984             --
  Accounts receivable                                   62,795        911,882
  Deferred charges:
    Direct                                           1,203,854        570,167
    Marketing and promotion                          2,316,491        951,500
  Other current assets                                 240,153        689,391
                                                 -------------  -------------
      Total current assets                          51,459,383     39,284,700
Fixed assets, net                                    1,904,847      2,841,583
Other assets                                           297,853        215,547
                                                 -------------  -------------
      Total assets                               $  53,662,083  $  42,341,830
                                                 =============  =============
Current liabilities:
  Accounts payable and accrued expenses          $   1,060,777  $   2,375,631
  Deferred revenue                                   5,237,210      7,459,840
                                                 -------------  -------------
      Total current liabilities                      6,297,987      9,835,471
                                                 -------------  -------------
      Total liabilities                              6,297,987      9,835,471
                                                 =============  =============

Commitments

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,  27,600,000 shares issued and
    outstanding at December 31, 1999
    and September 30, 2000                            276,000         276,000
Additional paid-in capital                         48,045,635      48,045,635
Accumulated deficit                                  (719,976)    (15,532,714)
Deferred compensation                                (370,232)       (282,562)
Accumulated other comprehensive income                132,669              --
                                                 ------------   -------------
    Total stockholders' equity                     47,364,096      32,506,359
                                                 ------------   -------------
    Total liabilities and stockholders' equity   $ 53,662,083   $  42,341,830
                                                 ============   =============
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                       1
<PAGE>

                                              HEALTHEXTRAS, INC.
                             STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                                               (UNAUDITED)
<TABLE>
<CAPTION>


                                                  Three months ended September 30,     Six months ended September 30,
                                                       1999             2000                1999           2000
                                                  -------------     ------------      ------------    ------------

<S>                                               <C>               <C>               <C>             <C>
Revenue                                           $  1,572,309      $ 10,783,770      $  2,593,547    $ 24,135,001
                                                  ------------      ------------      ------------    ------------

Direct expenses                                        875,055         5,698,061         1,616,270      12,684,003
Product development and marketing                    2,487,079         7,069,249         5,670,784      23,183,272
General and administrative                           1,088,921         1,921,801         1,845,923       5,290,798
                                                  ------------      ------------      ------------    ------------
    Total operating expenses                         4,451,055        14,689,111         9,132,977      41,158,073
                                                  ------------      ------------      ------------    ------------

    Operating loss                                  (2,878,746)       (3,905,341)       (6,539,430)    (17,023,072)

Interest income (expense), net                         (82,628)          492,767          (271,747)      1,699,094
Other income (expense), net                                 --           (14,528)             (300)        511,242
                                                  ------------      ------------      ------------    ------------

    Net loss                                        (2,961,374)       (3,427,102)       (6,811,477)    (14,812,736)

Unrealized holding gains (losses) on marketable
  securities arising during the period                (223,334)               --          (436,611)       (132,669)
                                                  ------------      ------------      ------------    ------------

    Comprehensive loss                            $ (3,184,708)     $ (3,427,102)     $ (7,248,088)   $(14,945,405)
                                                  ============      ============      ============    ============

Basic and diluted net loss per share              $         --      $      (0.12)     $         --    $      (0.54)
Weighted average shares of common stock
  outstanding (in thousands)                                --            27,703                --          27,681

Pro forma basic and diluted net loss per share    $      (0.13)     $         --      $      (0.34)   $         --
Pro forma weighted average shares of common
stock outstanding (in thousands)                        23,116                --            19,817              --
</TABLE>

   The accompanying notes are an integral part of these financial statements
                                       2

<PAGE>
<TABLE>
<CAPTION>
>


                               HEALTHEXTRAS, INC.
                            STATEMENTS OF CASH FLOWS
                                  (Unaudited)


                                                 Nine months ended September 30,
                                                 -------------------------------
                                                        1999           2000
                                                   -------------   ------------
<S>                                                <C>             <C>
Cash flows from operating activities:
  Net loss                                         $ (6,811,477)   $(14,812,736)
  Depreciation expense                                     --
                                                                        306,697
  Gain on sale of marketable securities                    --
                                                                       (551,735)
  Other noncash items                                   258,987          87,670
  Changes in assets and liabilities:
    Accounts receivable                                    --
                                                                       (849,087)
    Deferred charges                                  1,039,839       1,998,678
    Prepaid expenses and other assets                      --
                                                                       (145,382)
    Accounts payable and accrued expenses                92,023
                                                                      1,314,854
    Contribution payable                               (100,000)           --
    Deferred revenue                                  1,828,202       2,222,630
                                                   ------------    ------------
      Net cash used in operating activities          (3,692,426)    (10,428,411)
                                                   ------------    ------------

Cash flows from investing activities:
  Maturity of certificate of deposit                    700,000              --
  Capital expenditures                                       --      (1,243,433)
  Sale of marketable securities                              --       1,084,050
  Other                                                      --        (221,552)
                                                    -----------    ------------
      Net cash provided by investing activities         700,000        (380,935)
                                                   ------------    ------------

Cash flows from financing activities:
  Capital contribution                                5,000,000              --
  Proceeds from line of credit                          650,000              --
  Offering expenses                                    (371,178)             --
                                                   ------------    ------------
      Net cash provided by financing activities       5,278,822              --
                                                   ------------    ------------
Net increase (decrease) in cash and cash
  equivalents                                         2,286,396     (10,809,346)

Cash and cash equivalents at the beginning
  of period                                             219,285      46,971,106
                                                   ------------    ------------
Cash and cash equivalents at the end of period     $  2,505,681    $ 36,161,760
                                                   ============    ============
</TABLE>

   The accompanying notes are an integral part of these financial statements
                                       3
<PAGE>

                               HEALTHEXTRAS, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

1.   ORGANIZATION AND BASIS OF PRESENTATION

     HealthExtras, Inc. (the "Company" or "HealthExtras") is a leading provider
of health and disability programs. Through its web site, employee benefit plans,
and other direct channels, HealthExtras offers individuals, small businesses and
employer groups customizable and affordable health and disability insurance. The
Company has strategic relationships with nationally recognized insurance
underwriters, and its marketing partners include the nation's largest financial
institutions, along with leading affinity groups, associations, and Internet
companies. Additionally, HealthExtras has a relationship with actor and advocate
Christopher Reeve to promote its programs.

     HealthExtras, is a Delaware corporation organized on July 9, 1999 and the
successor to certain predecessor companies including, from first to last: Sequel
Newco, Inc., Sequel Newco Joint Venture (the Joint Venture), Health Extras
Partnership ("HEP"), Sequel Newco, LLP ("SN LLP") and HealthExtras, LLC.

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

     The accompanying financial statements include the accounts of the Company
and the predecessor companies.

     The financial statements for the three and nine months ended September 30,
1999 and 2000 have not been audited but, in the opinion of management, include
all adjustments (consisting only of normal recurring accruals) necessary to
present fairly the information set forth therein. The results of operations for
the three and nine months ended September 30, 2000 are not necessarily
indicative of the results to be expected for the full year or in the future.
These financial statements should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.

                                       4
<PAGE>



                               HEALTHEXTRAS, INC.
                         NOTES TO FINANCIAL STATEMENTS
                                  (Unaudited)
2.   NET LOSS PER SHARE

     Basic net loss per share is based on the weighted average number of shares
outstanding during the period. Diluted net loss per share is based on the
weighted average number of shares and dilutive common stock equivalent shares
outstanding during the period. Stock options to purchase 3,922,500 shares of
common stock, at exercise prices ranging from $4.0625 to $13.20 were excluded
from the computation of diluted net loss per share at September 30, 2000 because
the exercise price of the stock options exceeded the average market price of the
common shares, and therefore, were antidilutive.

     Pro forma basic and diluted net loss per share and weighted average shares
outstanding reflect the formation of HealthExtras, Inc. and merger with
HealthExtras, LLC in exchange for Company common stock as if the merger was
effective January 1, 1999.

     Pro forma basic net loss per share is computed based on the weighted
average number of outstanding shares of common stock. Pro forma diluted net
loss per share adjusts the pro forma basic shares weighted average for the
potential dilution that could occur if stock options or warrants, if any, were
exercised. Pro forma diluted net loss per share is the same as pro forma basic
net loss per share because there were no dilutive securities outstanding during
the three and nine months ended September 30, 1999.

3.   SUBSEQUENT EVENTS

     On October 10, 2000, the Company entered into a reciprocal marketing
agreement with UnumProvident Corporation ("Unum"). Terms of the agreement
include a strategic investment of $6 million by Unum, consisting of 1,302,600
shares of newly issued HealthExtras common stock, in support of this marketing
opportunity. As part of the marketing agreement, Unum, a leading provider of
group and individual disability insurance, will eventually serve as the
exclusive underwriter for several of the HealthExtras products.

     On October 4, 2000, the Board adopted the 2000 HealthExtras Stock Option
Plan. The plan provides for the issuance of options for 1 million shares of
HealthExtras' common stock. Additionally, the board of directors adopted the
2000 HealthExtras' Board Member Stock Option Plan that provides for the issuance
of options for 200,000 shares of HealthExtras' common stock. Both of these
plans are subject to shareholder approval.

                                       5
 <PAGE>


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

     This Form 10-Q may contain 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
--------

     We expect to generate a significant portion of our revenue from the sale of
membership programs which include health and disability benefits. To date, we
have primarily focused on the distribution of our membership programs to bank
customers and building recognition of our program brand. Christopher Reeve is
featured prominently in our online, television and print marketing campaigns to
build brand awareness. Our intent is to effect a substantial portion of our
program distributions over the Internet.

     We believe our consumer research and marketing efforts have given us
valuable insight into the consumer perceptions and preferences regarding the
value and limitations of prevailing insurance products. Accordingly, we believe
that our programs are well positioned to address the needs of our targeted
market segments. As of September 30, 2000, more than 360,000 members had
enrolled in our programs.

     Revenue is generated by payments for program benefits. The primary
determinant of our revenue recognition is monthly program enrollment. In
general, revenue is recognized based on the number of members enrolled in each
reporting period multiplied by the applicable monthly fee for their specific
membership program. The revenue recognized includes the cost of the membership
benefits, which are supplied by others, including the insurance components.
Revenue from program payments received, and related direct expenses, are
deferred to the extent that they are applicable to future periods or to any
refund guarantee we offer. As of September 30, 2000, initial revenue was
deferred for approximately 83,000 program members.

     Direct expenses consist principally of compensation to distribution
partners, processing fees, and the cost of benefits provided to program members.
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 our related expense are determined
monthly, as are our remaining direct expenses. We have historically maintained a
prepaid expense balance with respect to the insurance features of its programs.
Where amounts are prepaid, direct expense is recognized based on the actual
membership levels in each program. The carrying value of our prepayment is
adjusted at the end of each quarter based on factors including enrollment levels
in each product, enrollment trends, and the remaining portion of the unexpired
prepayment period. In the event that coverage was purchased in advance, and
there were insufficient members to utilize the coverage, the value would expire
and be expensed without any related revenue.

                                       6
<PAGE>


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

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

THREE MONTHS ENDED SEPTEMBER 30, 2000 TO THREE MONTHS ENDED SEPTEMBER 30, 1999

     HealthExtras incurred an operating loss of $3.9 million for the three
months ended September 30, 2000, compared to an operating loss of $2.9 million
for the same period in 1999. Revenue of $10.8 million for the three months ended
September 30, 2000 consisted of program member payments earned during the
period. Cash collections from program subscriptions for the three months ended
September 30, 2000, totaled $11.1 million. Revenue and cash collections for the
three months ended September 30, 1999, were $1.6 million and $2.2 million,
respectively.

     Operating expenses for the three months ended September 30, 2000 totaled
$14.7 million compared to $4.5 million for the same period in 1999. Direct
expenses for the three months ended September 30, 2000 were $5.7 million, or 39%
of total operating expenses, reflecting the cost of the benefits included in our
programs and compensation payable to our distribution partners. Direct expenses
for the three months ended September 30, 1999 were $875,000, representing 20% of
total operating expenses. We incurred approximately $7.1 million, or 48% of
total operating expenses, in product development and marketing costs for the
three months ended September 30, 2000. These costs included $87,000 for the
creative development of promotional and sales materials, including television,
radio, and print advertisements, $793,000 for media production, including
television, radio, print and Internet advertising, $4.8 million in media
distribution expenses, $250,000 in product endorsement costs, and $265,000 in
market research and ongoing product development. Product development and
marketing costs for the three months ended September 30, 1999 were approximately
$2.5 million, or 56% of total operating expenses, including $1.8 million in
creative costs for print advertisements, $417,000 for media production,
including print and Internet advertising, $203,000 in product endorsement, and
approximately $87,000 in market research and product development. General and
administrative expenses for the three months ended September 30, 2000 were $1.9
million, or 13% of total operating expenses, including $1.0 million in
compensation and benefits, $95,000 in other personnel costs, $34,000 in
telephone and software expenses, $117,000 in professional fees, $132,000 in
facilities expenses, and $183,000 in depreciation and amortization charges.
General and administrative expenses for the same period in 1999 were
approximately $1.1 million, or 24% of total operating expenses, including
$571,000 in compensation and benefits and $62,000 in professional fees. All
increases in expenses were generally attributable to higher levels of operating
activities and growth in personnel.

     Interest income of $493,000 for the three months ended September 30, 2000
reflects the investment of the net proceeds received upon the closing of our
initial public offering in December 1999.

                                       7
<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 2000 TO NINE MONTHS ENDED SEPTEMBER 30, 1999

     HealthExtras incurred an operating loss of $17.0 million for the nine
months ended September 30, 2000, compared to an operating loss of $6.5 million
for the same period in 1999. Revenue of $24.1 million for the nine months ended
September 30, 2000 consisted of program member payments earned during the
period. Cash collections from program subscriptions for the nine months ended
September 30, 2000, totaled $26.4 million. Revenue and cash collections for the
nine months ended September 30, 1999, were $2.6 million and $4.4 million,
respectively.

     Operating expenses for the nine months ended September 30, 2000 totaled
$41.2 million compared to $9.1 million for the same period in 1999. Direct
expenses for the nine months ended September 30, 2000 were $12.7 million, or 31%
of total operating expenses, reflecting the cost of the benefits included in our
programs and compensation payable to our distribution partners. Direct expenses
for the nine months ended September 30, 1999 were $1.6 million, representing 18%
of total operating expenses. We incurred approximately $23.2 million, or 56% of
total operating expenses, in product development and marketing costs for the
nine months ended September 30, 2000. These costs included $1.1 million for the
creative development of promotional and sales materials, including television,
radio, and print advertisements, $4.5 million for media production, including
television, radio, print and Internet advertising, $14.2 million in media
distribution expenses, $807,000 in product endorsement costs, and $530,000 in
market research and ongoing product development. Product development and
marketing costs for the nine months ended September 30, 1999 were approximately
$5.7 million, or 62% of total operating expenses, including $3.3 million in
creative costs, $1.2 million for media production, including print and Internet
advertising, $758,000 in product endorsement, and approximately $380,000 in
market research and product development. General and administrative expenses for
the nine months ended September 30, 2000 were $5.3 million, or 13% of total
operating expenses, including $3.0 million in compensation and benefits,
$346,000 in other personnel costs, $161,000 in telephone and software expenses,
$249,000 in professional fees, $263,000 in facilities expenses, and $307,000 in
depreciation and amortization charges. General and administrative expenses for
the same period in 1999 were approximately $1.8 million, or 20% of total
operating expenses, including $949,000 in compensation and benefits, $189,000 in
professional fees. All increases in expenses were generally attributable to
higher levels of operating activities and growth in personnel.

     Interest income of $1.7 million for the nine months ended September 30,
2000 reflects the investment of the net proceeds received upon the closing of
our initial public offering in December 1999.

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

     Prior to our initial public offering, our operations were funded primarily
through capital investments, advances from our Chairman of the Board, and
borrowings under a line of credit. In December 1999, we completed the sale to
the public of 5,500,000 shares of the Company's common stock and received
proceeds (net of underwriting commissions and expenses of $5.6 million) of
approximately $54.9 million. As of September 30, 2000, we had $36.2 million in
cash and cash equivalents, $29.4 million in working capital and no debt. As
discussed in Note 3 to the financial statements, subsequent to September 30,
2000, UnumProvident Corporation invested $6 million in exchange for 1.3 million
shares of newly issued shares of our common stock.

                                       8
<PAGE>

     We anticipate our available cash resources will be sufficient to meet our
presently anticipated working capital, capital expenditures, and business
expansion requirements for approximately the next 24 months. There can be no
assurance that we will not require additional capital prior to the expiration of
that 24-month period. Even if such funds are not required, we may seek
additional equity or debt financing. We cannot assure you that such financing
will be available on acceptable terms, if at all, or that such financing will
not be dilutive to our stockholders.

RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------

     In June 1998, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." We will be required to adopt SFAS No. 133 for the
quarter ending March 31, 2001. Because we do not currently hold any derivative
financial instruments and do not expect to engage in hedging activities,
adoption of SFAS No. 133 is expected to have no material impact on our financial
condition or results of operations.

INTEREST RATE AND EQUITY PRICE SENSITIVITY
------------------------------------------

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


CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS OR STOCK PRICES
------------------------------------------------------------------------

FACTORS RELATED TO OUR BUSINESS

BECAUSE WE HAVE A LIMITED OPERATING HISTORY, OUR BUSINESS PROSPECTS ARE SUBJECT
TO A GREAT DEAL OF UNCERTAINTY
-------------------------------------------------------------------------------

     While our product development efforts have been ongoing for the past three
years, we began revenue-generating activities in January 1999. This limited
history of operating our business means that our business prospects remain
subject to a great deal of uncertainty and risks.

WE HAVE NOT BEEN PROFITABLE AND MAY NOT BECOME PROFITABLE IN THE FUTURE
-----------------------------------------------------------------------

     We have incurred operating losses since our inception. Because we plan to
continue to significantly increase our operating expenses in an attempt to
increase our member base, we will need to generate significantly higher revenues
to achieve profitability. Even if we achieve profitability, we may not be able
to maintain profitability in the future. In addition, as our business model
evolves, we expect to introduce a number of new products and services that may
or may not be profitable for us.

                                       9
<PAGE>



OUR FUTURE PROFITABILITY IS DEPENDENT, TO A SIGNIFICANT EXTENT, UPON
INCREASED CONSUMER DEMAND FOR ADDITIONAL PRODUCTS, WHICH WE ARE IN THE PROCESS
OF DEVELOPING OR MAY DEVELOP IN THE FUTURE
------------------------------------------------------------------------------+

     Most of our revenue currently is derived from members purchasing membership
programs, which include disability benefits. We believe our future profitability
is dependent upon achieving substantial increases in sales of our programs,
including those providing excess health insurance coverage and other benefits we
are developing or may develop in the future. To the extent these products
include insurance features, they generally will require regulatory approvals. If
we do not achieve these increased sales, we may never achieve profitability.

IF THE SALE OF OUR MEMBERSHIP PROGRAMS OVER THE INTERNET DOES NOT ACHIEVE
WIDESPREAD CONSUMER ACCEPTANCE, WE MAY NEVER ACHIEVE PROFITABILITY
-------------------------------------------------------------------------

     To date, we primarily have promoted our membership programs through
mailings to credit card or other customers of banks. However, we intend to
significantly increase the distribution of our programs over the Internet. Thus,
our future profitability is dependent in large part on our ability to achieve
widespread consumer acceptance of purchasing our programs over the Internet. The
development of an online market for programs, such as those we offer, has only
recently begun, is rapidly evolving and likely will be characterized by an
increasing number of market entrants. Therefore, there is significant
uncertainty with respect to the viability and growth potential of this market

     There can be no assurance that an online market for our programs will
develop or that consumers will significantly increase their use of the Internet
for obtaining the types of products and services included in the programs that
we sell. If an online market for these products fails to develop, or develops
more slowly than we expect, or if our programs do not achieve widespread market
acceptance, the prospects for our achieving profitable operations will be
significantly reduced.

IF WE LOSE ONE OR MORE OF OUR MARKETING RELATIONSHIPS, OUR ACCESS TO
POTENTIAL CUSTOMERS WOULD DECLINE AND SALES AND REVENUES WOULD SUFFER
---------------------------------------------------------------------

     A substantial majority of all of our programs sold to date have been
through mailings sent by banks to their credit card and other customers. If we
lose one or more of our marketing relationships with credit card issuers and are
unable to replace those relationships with other marketing outlets, our access
to potential customers would decline and sales and revenues would suffer.

IF WE ARE NOT ABLE TO ACHIEVE A HIGH LEVEL OF BRAND RECOGNITION AND
CONSUMER DEMAND FOR OUR PROGRAMS, WE WILL NOT ACHIEVE THE LEVEL OF REVENUES WE
NEED TO BE PROFITABLE
------------------------------------------------------------------------------

     There are a growing number of websites that offer consumers access to
information regarding insurance coverage alternatives and product pricing. Our
programs may be considered to compete with these and other distribution channels
for insurance products. We believe that broader recognition of the HealthExtras
brand and increased consumer demand for our programs are essential to our future
success. To attempt to achieve that recognition and demand, we intend to
continue to pursue an aggressive brand-enhancement strategy consisting of our
traditional print advertising, as well as national radio and television
advertising, online marketing and promotional efforts. This effort will require
significantly greater expenditures than we have been able to make to date. If
these expenditures do not result in a sufficient increase in revenues, we will
not achieve profitability.

                                       10
<PAGE>


THE LOSS OF OUR RELATIONSHIP WITH CHRISTOPHER REEVE TO PROMOTE OUR PROGRAMS
COULD SIGNIFICANTLY IMPAIR OUR BRAND RECOGNITION AND, THUS, OUR ABILITY TO SELL
OUR PROGRAMS
--------------------------------------------------------------------------------

     The loss of the Christopher Reeve identification with our programs, upon
termination of our contract or otherwise, could significantly reduce our ability
to sell our programs.

IF WE LOSE OUR RELATIONSHIPS WITH OUR BENEFIT PROVIDERS, WE COULD HAVE
DIFFICULTY MEETING DEMAND FOR THE PRODUCTS AND SERVICES INCLUDED IN THE PROGRAMS
WE SELL

     We are dependent on the providers of benefits included in our programs.
These benefits are provided pursuant to arrangements with Chubb & Son and others
that may be terminated on relatively short notice. If we lose these
relationships and are unable to replace them quickly and cost effectively, we
would not be able to satisfy consumer demand for our programs.

WE MAY EXPERIENCE SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY RESULTS OF
OPERATIONS WHICH WILL MAKE IT DIFFICULT FOR INVESTORS TO MAKE RELIABLE
PERIOD-TO-PERIOD COMPARISONS AND MAY CONTRIBUTE TO VOLATILITY IN OUR STOCK PRICE
--------------------------------------------------------------------------------

     Our quarterly expenses have fluctuated significantly in the past, and we
expect our quarterly revenues and expenses to continue to fluctuate
significantly in the future. The causes for fluctuations could include, among
other factors:

     *    changes in acceptance levels for our benefit program by consumers;

     *    our levels of marketing expenditures;

     *    renewal rate experience for our benefit programs;

     *    the initiation of new or increased distribution methods, services and
          products by our competitors;

     *    price competition by insurance companies in their sale of insurance
          products; and

     *    the level of Internet use to purchase insurance or similar type
          products.

     We believe that quarter-to-quarter comparisons of our operating results are
not necessarily meaningful and not good indicators of our future performance.
Due to the above-mentioned and other factors, it is possible that in one or more
future quarters our operating results will fall below the expectations of
securities analysts and investors. If this happens, the trading price of our
common stock would likely decrease.

IF WE DO NOT MANAGE OUR GROWTH EFFECTIVELY, WE WILL NOT BE ABLE TO OPERATE
PROFITABLY
-------------------------------------------------------------------------------

     We only began offering our programs in November 1998, and we have been
expanding our operations rapidly. Our growth strategy, if successful, will
result in further expansion. We can achieve profitable operation, however, only
if we are able to manage our growth effectively. Our growth in operations has
placed significant demands on our management and other resources, which is
likely to continue. Under these conditions, it is important for us to retain our
existing management and to attract, hire and retain additional highly skilled
and motivated officers, managers and employees and improve existing systems
and/or implement new systems.

     We may not be successful in managing or expanding our operations or
maintaining adequate management, financial and operating systems and controls.

                                       11
<PAGE>


IF THE PROVIDERS OF THE BENEFITS INCLUDED IN OUR PROGRAMS FAIL TO PROVIDE
THOSE BENEFITS, WE COULD BECOME SUBJECT TO LIABILITY CLAIMS BY OUR PROGRAM
MEMBERS
------------------------------------------------------------------------------

     We arrange for the provision by others of the benefits included in our
member programs. If the firms with which we have contracted to provide those
benefits fail to provide them as required, or are negligent or otherwise
culpable in providing them, we could become involved in any resulting claim or
litigation.

FACTORS RELATED TO REGULATIONS

IF WE FAIL TO COMPLY WITH ALL OF THE VARIOUS AND COMPLEX LAWS AND
REGULATIONS GOVERNING OUR BUSINESS, WE COULD BE SUBJECT TO FINES, ADDITIONAL
LICENSING REQUIREMENTS OR THE INABILITY TO MARKET IN PARTICULAR JURISDICTIONS
-----------------------------------------------------------------------------

Complex laws, rules and regulations of each of the 50 states and the
District of Columbia pertaining to insurance impose strict and substantial
requirements on insurance coverage sold to consumers and businesses. Compliance
with these laws, rules and regulations can be arduous and imposes significant
costs. The underwriter of the insurance benefits included in HealthExtras
programs is responsible for obtaining and maintaining regulatory approvals for
those benefits. If the appropriate regulatory approvals for the insurance
benefits included in our programs are not maintained, we would have to stop
including those benefits. An independent licensed insurance agency is
responsible for the solicitation of insurance benefits involved in HealthExtras
programs. Each jurisdiction's insurance regulator typically has the power, among
other things, to:

     * administer and enforce the laws and promulgate rules and regulations
       applicable to insurance, including the quotation of insurance premiums;

     * approve policy forms and regulate premium rates;

     * regulate how, by which personnel and under what circumstances, an
       insurance premium can be quoted and published; and

     * regulate the solicitation of insurance and license insurance companies,
       agents and brokers who solicit insurance.

     State insurance laws and regulations are complex and broad in scope and are
subject to periodic modification as well as differing interpretations. There can
be no assurance that insurance regulatory authorities in one or more states will
not determine that the nature of our business requires us to be licensed under
applicable insurance laws. A determination to that effect or that we or our
business partners are not in compliance with applicable regulations could result
in fines, additional licensing requirements or inability to market our programs
in particular jurisdictions. Such penalties could significantly increase our
general operating expenses and harm our business. In addition, even if the
allegations in any regulatory or legal action against us turn out to be false,
negative publicity relating to any such allegation could result in a loss of
consumer confidence and significant damage to our brand. We believe that because
many consumers and insurance companies are not yet comfortable with the concept
of purchasing insurance online, the publicity relating to any such regulatory or
legal issues could significantly reduce sales of our programs.

                                       12
<PAGE>



REGULATION OF THE SALE OF INSURANCE OVER THE INTERNET AND OF ELECTRONIC
COMMERCE GENERALLY IS UNSETTLED, AND FUTURE LAWS, REGULATIONS AND
INTERPRETATIONS COULD HINDER OUR ABILITY TO OFFER PROGRAMS OVER THE INTERNET
----------------------------------------------------------------------------

     The distribution of our programs including an insurance component over the
Internet subjects us to additional risk as most insurance laws and regulations
have not been modified to clarify or amend their application to Internet
transactions. Currently, many state insurance regulators and legislators are
exploring the need for specific regulation of insurance sales over the Internet.
Such regulation could dampen the growth of the Internet as a means of providing
insurance services. Moreover, the application of laws governing general commerce
on the Internet remains largely unsettled, even in areas where there has been
some legislative action. It may take years to determine whether and how existing
laws such as those governing insurance, intellectual property, privacy and
taxation apply to the Internet. In addition, the growth and development of the
market for electronic commerce may prompt calls for more stringent consumer
protection laws and regulations that may impose additional burdens on companies
conducting business over the Internet. Any new laws or regulations or new
interpretations of existing laws or regulations relating to the Internet could
hinder our ability to offer programs over the Internet.

WE COULD BE SUBJECT TO LEGAL LIABILITY BASED UPON THE INFORMATION ON OUR
WEBSITE
------------------------------------------------------------------------------

     Our members may rely upon the information published on our website
regarding insurance coverage, exclusions, limitations and ratings, and the other
benefits included in our programs. To the extent that the information we provide
is not accurate, we could be liable for damages. These types of claims could be
time-consuming and expensive to defend, divert management's attention, and could
cause consumers to lose confidence in our service. As a result, these types of
claims, whether or not successful, could harm our business.

FACTORS RELATED TO THE INTERNET AND ELECTRONIC COMMERCE

IF WE EXPERIENCE FAILURES OF, OR CAPACITY CONSTRAINTS IN, OUR SYSTEMS OR
THE SYSTEMS OF THIRD PARTIES ON WHICH WE RELY, SALES OF OUR PROGRAMS LIKELY
WOULD BE REDUCED AND OUR REPUTATION COULD BE DAMAGED
---------------------------------------------------------------------------

     We use both internally developed and third party systems to operate the
Internet aspects of our business. If the number of users of our service
increases substantially, we will need to significantly expand and upgrade our
technology, transaction processing systems and network infrastructure. We do not
know whether we will be able to accurately project the rate or timing of any
increases, or expand and upgrade our systems and infrastructure to accommodate
any increases in a timely manner. Our ability to facilitate transactions
successfully and provide high quality customer service also depends on the
efficient and uninterrupted operation of our computer and communications
hardware systems. Our service has experienced periodic system interruptions, and
it is likely that these interruptions will continue to occur from time to time.
Additionally, our systems and operations are vulnerable to damage or
interruption from human error, natural disasters, power loss, telecommunication
failures, break-ins, sabotage, computer viruses, acts of vandalism and similar
events. We may not carry sufficient business interruption insurance to
compensate for losses that could occur. Any system failure that causes an
interruption in service or decreases the responsiveness of our service would
impair our revenue-generating capabilities, and could damage our reputation and
our brand name.

                                       13



<PAGE>

IF WE ARE UNABLE TO SAFEGUARD THE SECURITY AND PRIVACY OF OUR PROGRAM
MEMBERS' INFORMATION, OUR REPUTATION WOULD BE DAMAGED AND WE COULD BE SUBJECT TO
LITIGATION AND LIABILITY

     A significant barrier to electronic commerce and online communications has
been the need for secure transmission of confidential information over the
Internet. Our ability to secure the transmission of confidential information
over the Internet is essential in maintaining consumer confidence in our
service. In addition, because we handle confidential and sensitive information
about our program members, any security breaches would damage our reputation and
could expose us to litigation and liability. We cannot guarantee that our
systems will prevent security breaches.

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

PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

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

                                       14
<PAGE>


ITEM 2   CHANGES IN SECURITIES

     On December 14, 1999, the Company's Registration Statement on Form S-1
(File No. 333-83761) was declared effective by the Securities and Exchange
Commission. Pursuant to the Registration Statement, 5,500,000 shares of the
Company's Common Stock, $0.01 par value, were offered and sold at an offering
price of $11.00 per share. The offering was completed on December 17, 1999. The
managing underwriters of the offering were Warburg Dillon Read LLC, PaineWebber
Incorporated, Prudential Securities Incorporated and SG Cowen Securities
Corporation. Refer to Item 5 for information regarding outstanding securities
issued to the UnumProvident Corporation.

     The net proceeds to the Company from the sale of the 5,500,000 shares of
common stock were approximately $54.9 million after deducting underwriting
discounts and offering expenses of approximately $4.2 million and $1.4 million,
respectively. As of September 30, 2000, we had used approximately $18.7
million of the net proceeds. Of this amount, approximately $2.9 million was used
to repay borrowings under a line of credit and approximately $2.3 million was
used to repay a non-interest bearing loan from the Chairman of the Board of the
Company. The remainder was used to fund operating activities, in particular
those relating to the Company's sales and marketing efforts. The amount of the
net proceeds not used as of September 30, 2000 has been invested in short-term,
investment grade, and interest bearing securities.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES (NOT APPLICABLE)

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

ITEM 5.  OTHER INFORMATION

      On October 10, 2000, the Company entered into a reciprocal marketing
agreement with UnumProvident Corporation ("Unum"). Terms of the agreement
include a strategic investment of $6 million by Unum, consisting of 1,302,600
shares of newly issued HealthExtras common stock, in support of this marketing
opportunity. As part of the marketing agreement, Unum, a leading provider of
group and individual disability insurance, will eventually serve as the
exclusive underwriter for several of the HealthExtras products. In
connection with such sale, the Company relied upon the exemption from the
registration requirements of the Securities Act of 1933 afforded by Section 4(2)
of that Act.

                                       15
<PAGE>


     On October 4, 2000, the Board adopted the 2000 HealthExtras Stock Option
Plan. The plan provides for the issuance of options for 1 million shares of
HealthExtras' common stock. Additionally, the board of directors adopted the
2000 HealthExtras' Board Member Stock Option Plan that provides for the issuance
of options for 200,000 shares of HealthExtras' common stock. Both of these
plans are subject to shareholder approval.

Paul H. Warren and Julian A.L. Allen have resigned from the Board of Directors.


                                       16


<PAGE>



ITEM 6.  EXHIBITS AND REPORTS ON FORMS 8-K

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

Exhibit No.                                     Description
-----------       -------------------------------------------------------------
     27.1         Financial Data Schedule (filed herewith)
     99.1         IPM Press Release

2.   REPORTS ON FORM 8-K

         None

                                   SIGNATURES

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


Date: November 14, 2000          By:  /s/ Thomas L. Blair
                                      -------------------
                                      Thomas L. Blair
                                      Chairman of The Board


Date:  November 14, 2000         By:  /s/ David T. Blair
                                      ------------------
                                      David T. Blair
                                      Chief Executive Officer and Director


Date:  November 14, 2000         By:  /s/ Michael P. Donovan
                                      ----------------------
                                      Michael P. Donovan
                                      Chief Financial Officer and
                                      Chief Accounting Officer

                                       17

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