Washington, D. C. 20549

                                                                                                                                           Yes [ ] No [X ]

(In thousands)

2. Discontinued Operations

Prior to becoming an insurance holding company as a result of the acquisition of Independence American Holdings Corp. ("IAHC") on November 14, 2002, the Company was a holding company principally engaged in providing Internet services through the following discontinued operations, Intelligent Communications, Inc. ("Intellicom"), Aerzone Corporation ("Aerzone"), ISP Channel, Inc. ("ISP Channel"), and Micrographic Technology Corporation ("MTC"). The operating results of these discontinued operations have been segregated from continuing operations and are reported as a loss from discontinued operations on the condensed consolidated statements of operations. Although it is difficult to predict the final results, the loss on disposition from discontinued operations includes management's estimates of costs to wind down the business and costs to settle its outstanding liabilities. The actual results could differ materially from these estimates. The estimated loss on disposition reserv e of all discontinued operations is reflected in net liabilities associated with discontinued operations in the accompanying consolidated balance sheets.

Discontinued Operations of Intelligent Communications, Inc. ("Intellicom")

On March 29, 2002, the Company and its wholly-owned subsidiary, Intellicom, entered into an agreement to sell its operating business and certain assets to Loral Cyberstar, Inc. Following the sale of its operating business and certain assets to Loral Cyberstar, Inc., the Company's Board of Directors unanimously agreed to cease the operations of Intellicom on April 3, 2002. Due principally to the Company's guaranty of Intellicom's lease for its facility in Livermore, California, the Company recorded an additional loss of $157,000 for the three months ended December 31, 2002.

Discontinued Operations of Aerzone Corporation ("Aerzone")

On January 24, 2000, the Company founded Aerzone (formerly SoftNet Zone, Inc.) to provide high-speed Internet access to global business travelers. As part of the Aerzone business, the Company acquired Laptop Lane, on April 21, 2000. On December 19, 2000, the Company decided to discontinue the Aerzone business in light of significant long-term capital needs and the difficulty of securing the necessary financing because of the current state of the financial markets. The Company recorded a loss on disposition of Aerzone of $338,000 for the three months ended December 31, 2002 relating to the settlement of litigation during the quarter (see Note 6).

Discontinued Operations of ISP Channel, Inc. ("ISP Channel")

On December 7, 2000, the Company's Board of Directors approved a plan to discontinue providing cable-based Internet services through its ISP Channel subsidiary by December 31, 2000, because of (1) consolidation in the cable television industry made it difficult for ISP Channel to achieve the economies of scale necessary to provide such services profitably, and (2) the Company was no longer able to bear the costs of maintaining the ISP Channel.

Discontinued Operations of Micrographic Technology Corporation ("MTC")

As a result of an arbitration decision related to the sale of MTC to Global Information Distribution GmbH ("GID"), the Company recorded a $980,000 loss on disposition of MTC for the three months ended December 31, 2002 (see Note 6). The loss relates to the arbitration award plus related expenses. MTC was previously owned by the Company, and was sold to GID on September 30, 1999.

Loss on disposition of discontinued operations is as follows (in thousands):

Three Months Ended December 31,
				2002                                2001
Intellicom					$	157				$	-
Aerzone						338					-
ISP Channel						-					-
MTC							980					590
Net loss from Discontinued
	Operations				$		1,475			$		590

As of December 31, 2001, the only operating segment of the Company was Intellicom. Operating results for the discontinued operations of Intellicom are as follows (in thousands):

		Three Months Ended
			December 31,
			2001
Revenues	$		94
Loss before income taxes	$	928
Provision for income taxes			-
Net loss	$		928

Net liabilities associated with discontinued operations at December 31, 2002, and September 30, 2002, are as follows (in thousands):

						December 31,                    September 30,
					2002                                    2002
Current assets							$	2			$	2
Other assets								35				55
Total assets							$	37			$	57
Current liabilities:
Accounts payable							$	-			$	1
Estimated closure costs								3,906				3,610
Other accrued expenses								569				296
Total liabilities							$	4,475			$	3,907
	Intellicom							1,032				846
	Aerzone							1,740				1,765
	ISP Channel							350				314
	MTC							1,316				925
Net liabilities associated with discontinued
operations							$	4,438			$	3,850

3. Restructuring Charge

											Unrealized     Unrealized      Fair Market
									Cost                    Gain                Loss            Value
Fixed maturities:
	U.S. Government and agencies obligations							$		5,380		$	112	$	(15)	$	5,477
	Collateralized mortgage obligations and
			other asset backed securities							5,355			74		(8)		5,421
	Corporate securities									1,325			-		(70)		1,255
								$		12,060		$	186	$	(93)	$	12,153
Equity securities:
	Common stock							$		197		$	18	$	-	$	215
	Preferred stock									754			14		-		768
								$		951		$	32	$	-	$	983

5. Equity Investments

Legal Proceedings

On September 26, 2001, Lucent Technologies Inc. ("Lucent") brought an action in San Francisco Superior Court against American Independence Corp. and subsidiaries (the "Company"), alleging that the Company breached a contract by failing to purchase Lucent's shares in Freewire Networks, Inc. ("Freewire") and claiming damages of approximately $3.5 million, which may increase over time. On December 31, 2001, the San Francisco Superior Court issued an order to deny Lucent's application for writ of attachment, finding that Lucent had not shown a substantial probability that it will prevail on its claim. Trial submissions are set for April 25, 2003. The Company continues to believe that Lucent's claims are without merit and will contest these claims vigorously.

On October 30, 2001, GID commenced a demand for arbitration against the Company, alleging breach of contract and warranties relating to the sale of MTC to GID on September 30, 1999. On January 16, 2003, the arbitrator awarded GID $512,000 as the balance of uncollected accounts receivable as of August 31, 2002 net of specific reserves. GID's claims for interest, collection costs, related expenses and attorneys' fees were deferred pending further briefing. (See Note 2)

	Three Months Ended December 31,
			2002                            2001

Cash paid:
Interest	$	-			$	72
Income taxes		-				-
Non-cash investing and financing activities:
Increase in additional paid-in capital associated
with expensing of common stock options in
accordance with SFAS 123		570				-
Unrealized gain (loss) on short-term investments		22				(73)

9. Purchase Accounting

Assets:
Tangible assets	$ 31,461
Amortizable broker/TPA relationships intangible asset	1,900
Goodwill and intangible assets with indefinite lives	12,395
Net deferred tax asset	6,616
Liabilities	(16,617)
	$ 35,755

Of the total purchase price, $31,461,000 has been allocated to net tangible assets acquired and $1,900,000 has been allocated to amortizable intangible assets acquired. The depreciation and amortization related to the fair value adjustment to net tangible assets and the amortization related to the amortizable intangible assets are reflected in the consolidated statements of operations. The intangible asset will be written off over the next five years based on the respective discounted cash flows.

 

Three Months Ended December 31    ,
		2002			2001
Revenues:
Medical stop-loss	$	1,659			$	-
HMO reinsurance		486				-
Provider excess		282				-
Corporate		249				616
Net realized gains		12				6
	$	2,688			$	622
Operating income (loss) from continuing