SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(MARK ONE)

|X|  QUARTERLY  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

                        PHARMACY BUYING ASSOCIATION, INC.
                        ---------------------------------
             (Exact name of registrant as specified in its charter)

                 MISSOURI                                      43-1482785
                 ---------                                     -----------
     (State or other jurisdiction of                        (I.R.S. Employer
      incorporation or organization)                       Identification No.)

1575 N. UNIVERSAL AVE., SUITE 100, KANSAS CITY, MISSOURI          64120
--------------------------------------------------------         -------
 (Address of principal executive offices)                      (Zip Code)

(816) 245-5700
--------------
Registrant's telephone number, including area code


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|_|


At July 19,  2002,  11,380  shares of common  stock,  $1.00  par  value,  of the
registrant were outstanding.


Total number of pages 17.

<PAGE>
                        PHARMACY BUYING ASSOCIATION, INC.
                                 INDEX FORM 10-Q

                                                                        Page No.

PART I - FINANCIAL INFORMATION                                             2

       ITEM 1 - FINANCIAL STATEMENTS                                       2

           Consolidated Balance Sheets as of June 30, 2002 (unaudited
           and December 31, 2001                                           2

           Consolidated Statements of Operations for the three and six
           months ended June 30, 2002 and 2001(unaudited)                  3

           Consolidated Statements of Cash Flows for the six
           months ended June 30, 2002 and 2001(unaudited)                  4

           Notes to Consolidated Financial Statements (unaudited)          6

       ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
       OF OPERATIONS AND FINANCIAL CONDITION                               9

       ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
       MARKET RISK                                                         13

PART II - OTHER INFORMATION                                                14

       ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                           14

SIGNATURES                                                                 16

CERTIFICATION                                                              17

                                       1
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>

                                                         (Unaudited)
                                                          June 30,        December 31,
                                                            2002              2001
                                                            ----              ----
Current assets:
<S>                                                  <C>                <C>
   Cash                                              $        150,010   $      614,519
   Accounts receivable                                      6,886,542        6,380,342
   Inventories                                              6,699,156        4,672,273
   Prepaid expenses                                           100,199          133,284
   Deferred income tax asset                                   13,000               --
                                                     ----------------   --------------
           Total current assets                            13,848,907       11,800,418

Property and equipment                                        515,797          597,722
Goodwill                                                      229,144          229,144
Other assets                                                   38,744           16,430
                                                     ----------------   --------------
                                                     $     14,632,592   $   12,643,714
                                                     ================   ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current portion of long-term debt                 $             --   $        7,417
   Accounts payable                                         7,960,876        6,196,385
   Accrued payroll                                            172,284          186,822
   Deferred revenue                                           113,233          201,600
   Income taxes payable                                        31,918          532,005
   Deferred income taxes                                           --           18,000
                                                     ----------------   --------------
           Total current liabilities                        8,278,311        7,142,229
                                                     ----------------   --------------

Long-term debt, less current portion                               --           18,336
                                                     ----------------   --------------
Deferred income taxes                                          94,000          182,000
                                                     ----------------   --------------

Commitments and contingencies

Stockholders' equity:
   Common stock, $1.00 par; authorized 30,000
    shares; issued 5,690 shares                                 5,690            5,690
   Capital in excess of par value                           1,468,255        1,468,255
   Retained earnings                                        4,796,568        3,827,204
                                                     ----------------   --------------
                                                            6,270,513        5,301,149
   Treasury stock                                              10,232               --
                                                     ----------------   --------------
                                                            6,260,281        5,301,149
                                                     ----------------   --------------
                                                     $     14,632,592   $   12,643,714
                                                     ================   ==============
</TABLE>
The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       2
<PAGE>
                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                  Three months ended                  Six months ended
                                                        June 30,                          June 30,
                                                        --------                          --------
                                                2002              2001             2002              2001
                                                ----              ----             ----              ----
Revenues:
<S>                                         <C>               <C>              <C>               <C>
   Distribution center(1)                   $ 31,538,631      $ 18,184,681     $  56,032,781     $  31,244,166
   Participation programs and fees               210,439           684,977           378,130         1,423,604
   Activity rebates and charges                1,938,752         1,141,021         3,676,916         2,258,129
   Third party                                    11,469            (2,395)           11,958              (811)
                                            ------------      ------------     -------------     -------------
                                              33,699,291        20,008,284        60,099,785        34,925,088
                                            ------------      ------------     -------------     -------------
Cost of revenues:
   Distribution center                        30,085,912        17,571,832        53,544,221        30,251,014
   Participation programs and fees               136,502           215,702           311,409           336,188
   Activity rebates                            1,164,687           444,790         2,138,540           831,681
                                            ------------      ------------     -------------     -------------
                                              31,387,101        18,232,324        55,994,170        31,418,883
                                            ------------      ------------     -------------     -------------

Gross profit                                   2,312,190         1,775,960         4,105,615         3,506,205
General and administrative expenses            1,246,894         1,090,019         2,609,180         2,155,592
                                            ------------      ------------     -------------     -------------
Income from operations                         1,065,296           685,941         1,496,435         1,350,613
                                            ------------      ------------     -------------     -------------
Other income (expense):
   Investment income                               6,678            15,076            10,642            38,027
   Interest expense                               (4,159)           (6,202)           (6,510)           (9,273)
   Gain on disposal of assets                      4,786                --             4,786                --
                                            ------------     -------------    --------------    --------------
                                                   7,305             8,874             8,918            28,754
                                            ------------     -------------    --------------    --------------

Income before income taxes                     1,072,601           694,815         1,505,353         1,379,367
Income taxes                                     363,422           232,780           535,989           451,280
                                            ------------      ------------     -------------     -------------
Net income                                  $    709,179      $    462,035     $     969,364     $     928,087
                                            ============      ============     =============     =============
Earnings per common share:
   Income available to common
    stockholders                            $    709,179      $    462,035     $     969,364     $     928,087
   Weighted average shares outstanding,
    basic and diluted                              5,683             5,690             5,683             5,690
                                            ------------      ------------     -------------     -------------
   Basic and diluted earnings per share     $     124.79      $      81.20     $      170.57     $      163.11
                                            ============      ============     =============     =============
</TABLE>
(1) Includes revenues generated from businesses owned by members of the Board of
Directors of $4,449,504  and $2,835,948 for the three months ended June 30, 2002
and 2001, respectively, and $8,345,856, and $4,724,746, respectively for the six
months ended June 30, 2002 and 2001, respectively.

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       3
<PAGE>
                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                           Six months ended June 30,
                                                               2002            2001
                                                               ----            ----
<S>                                                       <C>            <C>
Cash flows from operating activities:
   Net income                                             $   969,364    $   928,087
   Adjustments to reconcile net income to net
    cash used by operating activities:
     Depreciation                                             117,349        112,590
     Deferred income taxes                                   (119,000)            --
     Gain on sale of property and equipment                    (4,786)            --
     Changes in operating assets and liabilities:
       Accounts receivable                                   (506,200)    (1,841,643)
       Inventories                                         (2,026,883)      (670,141)

       Prepaid expenses                                        33,085         14,556
       Other assets                                           (22,314)          (380)

       Accounts payable                                     1,764,491        952,115
       Accrued payroll                                        (14,538)        12,223
       Income taxes payable                                  (500,087)      (728,786)
       Deferred revenue                                       (88,367)        (2,250)
                                                          -----------    -----------

                  Net cash used by operating activities      (397,886)    (1,223,629)
                                                          -----------    -----------

Cash flows from investing activities:
   Purchase of property and equipment                         (40,938)       (97,786)

   Proceeds from sale of property and equipment                10,300             --

   Investments in and advances to affiliate                        --        (90,000)
                                                          -----------    -----------

                  Net cash used by investing activities       (30,638)      (187,786)
                                                          -----------    -----------

Cash flows from financing activities:
   Acquisition of common stock                                (10,232)            --

   Offering costs                                                  --        (11,600)

   Principal payments on long-term debt                       (25,753)       (16,651)
                                                          -----------    -----------

                  Net cash used by financing activities       (35,985)       (28,251)
                                                          -----------    -----------
</TABLE>
                                   (continued)
                                       4
<PAGE>
                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                   (Unaudited)


                                                      Six months ended June 30,
                                                          2002          2001
                                                          ----          ----

Net decrease in cash                                    (464,509)    (1,439,666)

Cash, beginning of period                                614,519      1,738,818
                                                     -----------    -----------

Cash, end of period                                  $   150,010    $   299,152
                                                     ===========    ===========

Supplemental disclosures of cash flow information:
  Cash transactions during the period for:
     Interest paid                                   $     6,510    $     9,273
                                                     ===========    ===========

     Income taxes paid                               $ 1,155,076    $ 1,146,066
                                                     ===========    ===========

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       5
<PAGE>
                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   BASIS OF PRESENTATION:

     The  accompanying  interim  financial  statements  have  been  prepared  in
     accordance  with the rules and  regulations  of the Securities and Exchange
     Commission  for interim  reporting and do not include  certain  disclosures
     required by accounting  principles  generally accepted in the United States
     of America.  Accordingly, the statements should be read in conjunction with
     the  Pharmacy  Buying  Association,  Inc.,  d/b/a  TrueCare  Pharmacy  (the
     Company)  financial  statements and notes thereto included in the Company's
     Annual Report and Form 10 filed with the Securities and Exchange Commission
     under File No. 000-49785.  Accounting  policies utilized in the preparation
     of financial  information herein presented are the same as set forth in our
     annual financial  statements.  Certain disclosures and information normally
     included in financial  statements  have been  condensed or omitted.  In the
     opinion  of the  management  of the  Company,  these  financial  statements
     contain all adjustments  (consisting only of normal recurring  adjustments)
     necessary  for a fair  presentation  of the interim  financial  statements.
     Interim results of operations are not necessarily indicative of the results
     of operations for the full year.

     Certain  reclassifications  have been made to the June 30,  2001  unaudited
     interim financial statements to be consistent with the presentation at June
     30, 2002. These  reclassifications  had no impact on net income or retained
     earnings.

2.   NEW ACCOUNTING STANDARDS:

     Property and equipment:

       In  August  2001,  the FASB  issued  SFAS  No.  144,  Accounting  for the
       Impairment or Disposal of Long-Lived  Assets.  SFAS No. 144 requires that
       long-lived  assets be measured  at the lower of  carrying  amount or fair
       value for  long-lived  assets to be held and used or fair value less cost
       to sell for  long-lived  assets to be disposed  of,  whether  reported in
       continuing operations or in discontinued operations.  The standard became
       effective for the Company's  fiscal year  beginning  January 1, 2002. The
       adoption of this standard did not have a material effect on the Company's
       financial position or results of operations.

                                       6
<PAGE>
                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (Unaudited)


2.   NEW ACCOUNTING STANDARDS (CONTINUED):

     Goodwill:

       In June 2001, the Financial  Accounting  Standards  Board issued SFAS No.
       141,  Business  Combinations,  and  SFAS  No.  142,  Goodwill  and  Other
       Intangibles.  SFAS No. 141 requires the purchase method of accounting for
       business  combinations  initiated after June 30, 2001, for which the date
       of   acquisition   is   July   1,   2001   or   later,   eliminates   the
       pooling-of-interests    method,   and   identifies   criteria   for   the
       establishment  of identifiable  intangible  assets separate from goodwill
       resulting from a business combination. SFAS No. 142 requires companies to
       cease amortizing goodwill.  SFAS No. 142 also establishes a new method of
       testing goodwill and other  intangibles for impairment on an annual basis
       or on an interim  basis if an event occurs or  circumstances  change that
       would reduce the fair value of a reporting unit below its carrying value.
       The standard  became  effective for the Company's  fiscal year  beginning
       January 1, 2002. The adoption of these  standards did not have a material
       effect on the Company's financial position or results of operations.

3.   ACCOUNTS RECEIVABLE:

                                                 June 30,       June 30,
                                                   2002           2001
                                                   ----           ----

      Membership                               $   802,156    $   619,724
      Distribution center                        6,355,670      4,185,241
      Program and third-party administration         4,131          4,925
                                               -----------    -----------
                                                 7,161,957      4,809,890
      Allowance for doubtful accounts             (275,415)       (59,742)
                                               -----------    -----------

                                               $ 6,886,542    $ 4,750,148
                                               ===========    ===========


      Allowance for doubtful accounts:
        Balance at beginning of period         $   194,000    $    43,632
        Charges to costs and expenses               81,415           (591)
        Bad debts written off                           --         16,701
                                               -----------    -----------

        Balance at end of period               $   275,415    $    59,742
                                               ===========    ===========

                                       7
<PAGE>
                PHARMACY BUYING ASSOCIATION, INC. AND SUBSIDIARY
                             D/B/A TRUECARE PHARMACY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (Unaudited)


4.   PROPERTY AND EQUIPMENT:
                                             June 30,            June 30,
                                               2002                2001
                                               ----                ----

     Furniture and fixtures               $      287,555     $    223,871
     Equipment                                   677,851          559,086
     Software                                    386,001          293,149
                                         ---------------     ------------
                                               1,351,407        1,076,106
     Accumulated depreciation                   (835,610)        (649,704)
                                         ---------------     ------------

                                          $      515,797     $    426,402
                                          ==============     ============

     Depreciation expense,  included in general and administrative expenses, was
     $117,349  and $112,590  for the six month  periods  ended June 30, 2002 and
     2001, respectively.

5.   SUBSEQUENT EVENT:

     On  July  16,  2002,  the  Company   declared  a  100%  stock  dividend  to
     shareholders of record at the close of business on July 19, 2002. The stock
     dividend was paid on August 1, 2002.

                                       8

<PAGE>

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

The following  discussion  of our financial  condition and results of operations
should be read in  conjunction  with the financial  statements and notes thereto
included in elsewhere in this filing.

This  discussion and analysis  should be read in conjunction  with  management's
discussion  and analysis  included in the  Company's  Form 10 for the year ended
December 31, 2001 and for the first quarter ended March 31, 2002 also  contained
therein.

OVERVIEW

We derive revenues from the following four sources:

DISTRIBUTION  CENTER.  We sell  pharmaceutical-related  products  to our members
through our own distribution facility located in Riverside, Missouri.

ACTIVITY   REBATES  AND  CHARGES.   We  receive   rebates  from   pharmaceutical
manufacturers  based on member purchases of the manufacturer's  product from our
distribution  center.  In  addition,  each of our  wholesaler-partner  contracts
provides that the wholesaler-partner will pay us a rebate based on a percentage,
which varies by wholesaler-partner, of the dollar value of products purchased by
our members from the  wholesaler-partner.  We also receive rebates and fees from
other vendors and manufacturers  through various company  programs,  such as our
cash card and drug formularies.  These rebates and fees are typically paid to us
on either a quarterly or monthly basis.

PARTICIPATION  PROGRAMS AND FEES. Our members pay us a monthly membership fee in
accordance with our membership agreement. In addition, we receive administration
fees from manufacturers and wholesaler-partners for maintenance and facilitation
of contracts  with us and with our  members.  Our vendors and members also pay a
fee to attend our annual conference each summer.

THIRD  PARTY  REVENUES.  Revenues  from our third  party  segment,  shown net of
expenses for all reporting  periods,  are generated  from claims costs of goods,
claims  processing  fees per paid  claim  charged to plan  sponsors,  and rebate
administration fees. A major portion of the revenue includes the claims costs of
goods that is collected from the plan sponsor in order to pay the  participating
network provider.  After payout of claims and expenses,  there is usually little
or no net income generated from this revenue.

Our expenses are categorized as follows:

DISTRIBUTION  CENTER.   Operating  expenses  associated  with  distribution  are
primarily composed of direct cost of goods sold.

ACTIVITY REBATES.  Rebates are composed of monies paid to members on a quarterly
basis for  purchases  through  the  distribution  center,  purchases  made under
contract with wholesaler-partners, cash card claims, and rebates attributable to
fluctuations in the market share of certain pharmaceuticals.

PARTICIPATION  PROGRAM  AND FEES.  Program  costs  and  expenses  are  primarily
composed of expenses  associated with the programs and services that we offer to
our members,  including the costs of developing and marketing those services. In
addition, costs associated with our annual shareholders conference are included.

                                       9
<PAGE>

GENERAL AND ADMINISTRATIVE  EXPENSES.  General and  administrative  expenses are
typical, non-operating expenses primarily composed of such items as salaries and
wages,   insurance,   freight  and  postage,  office  rent,  travel,  and  other
miscellaneous expenses.

RESULTS OF OPERATION

The following  discussion is based on our  historical  results of operations for
the six months ending June 30, 2002 and 2001.

COMPARISON OF SIX MONTHS ENDING JUNE 30, 2002 AND 2001

REVENUES

Total Revenues. Total revenues for the six months ending June 30, 2002 increased
to $60.1 million from $34.9 million over the same period  revenues in 2001.  The
increase of $25.2 million is  attributable  to a  corresponding  increase in the
amount of sales through the distribution center.

Distribution.  Revenue  from  distribution  grew  from  $31.4  million  to $56.0
million,  representing  a 79% increase over the same period in 2001. An increase
in product offering  combined with a rising usage of the distribution  center by
member pharmacies led to the increase in distribution sales.

Activity Rebates and Charges. Revenues due to rebates and charges grew from $2.3
million for the six months  ending  June 30,  2001 to $3.7  million for the same
period in 2002.  The 63% growth in rebate revenue is directly  correspondent  to
increases  in  purchases   through  the   distribution   center,   reflected  in
distribution sales, and to contract purchases from our wholesaler-partners.

Participation  Programs  and Fees.  For the six  months  ending  June 30,  2002,
revenues from  participation  programs and fees  decreased by $1.05 million from
the corresponding  period in 2001. A continued changing and restructuring of our
programs  following the Legend  acquisition  precipitated  this  decrease.  Also
contributing  to the  decrease  was the  gradual  termination  of some  programs
offered by Legend,  such as a self-funded  health,  dental, and vision insurance
program.

Third  Party.  Revenues  from  third  party  operations,  which are shown net of
expenses,  increased by approximately $12,000 for the six months ending June 30,
2002 from the same period in 2001. The increase arose  primarily from a decrease
in expenses in third party programs.

COST OF REVENUES

Distribution  Center.  Costs of  goods  sold  through  the  distribution  center
increased  from $30.3  million for the six months  ending June 30, 2001 to $53.5
million in 2002.  The 77% increase is directly  attributable  to the increase in
sales through the distribution center.

Activity  Rebates.  Rebates increased from $0.83 million in the first six months
of 2001 to $2.1 million in the  corresponding  period of 2002. The 156% increase
in rebates stems from an increase in purchases  through our distribution  center
and the  corresponding  rebates.  In addition,  slightly more aggressive  rebate
incentives offered to our pharmacies resulted in higher rebate expense.

Participation Programs and Fees. Expenses associated with our programs decreased
by $25,000 for the six months  ending June 30, 2002  compared to the same period
in 2001.  The  marginal  decrease in expenses  was a result of a decrease in the
costs of providing these programs to our membership.

                                       10
<PAGE>

GENERAL AND  ADMINISTRATIVE.  General and administrative  expenses rose by $0.45
million for the six months  ending June 30, 2002  compared to the same period in
2001. The increase of 21% from $2.2 million to $2.6 million is attributable to a
normal increase in expenses  associated with an increase in revenues,  including
an increase in warehouse costs,  information  technology costs, and salaries and
wages.

INCOME FROM  OPERATIONS.  Net income from operations  increased by $0.15 million
from $1.35  million for the six months  ending June 30, 2001 to $1.5 million for
the same period in 2002. This 11% increase is attributable to an increase in the
revenue streams of the company.

INCOME  TAXES.  Income tax  expense  for the six  months  ending  June 30,  2002
increased to $0.53 million from $0.45  million for the same period in 2001.  The
$80,000  increase  follows  directly from an increase in our taxable  income and
higher profitability.

COMPARISON OF THREE MONTHS ENDING JUNE 30, 2002 AND 2001

REVENUES

Total  Revenues.  2nd Quarter 2002 saw total revenues  increase to $33.7 million
from $20.0 million over the same period  revenues in 2001. The increase of $13.7
million  is  attributable  to a  corresponding  increase  in the amount of sales
through the distribution center.

Distribution.  For 2nd Quarter  2002,  revenues grew from $31.4 million to $18.2
million,  representing  a 73% increase over the same period in 2001. An increase
in product offering  combined with a rising usage of the distribution  center by
member pharmacies led to the increase in distribution sales.

Activity Rebates and Charges. Revenues due to rebates and charges grew from $1.1
million in the 2nd Quarter of 2001 to $1.9 million in the 2nd Quarter 2002.  The
73% growth in rebate revenue is directly correspondent to increases in purchases
through  the  distribution  center,  reflected  in  distribution  sales,  and to
contract purchases from our wholesaler-partners.

Participation   Programs  and  Fees.   For  2nd  Quarter  2002,   revenues  from
participation   programs  and  fees   decreased   by  $0.47   million  from  the
corresponding  period in 2001.  An ongoing  changing  and  restructuring  of our
programs following the Legend  acquisition has precipitated this decrease.  Also
contributing  to the  decrease  is the  phase-out  of some  programs  offered by
Legend, such as a self-funded health, dental, and vision insurance program.

Third  Party.  Revenues  from  third  party  operations,  which are shown net of
expenses,  increased by  approximately  $14,000 from the 2nd Quarter 2001 to the
2nd Quarter 2002. The increase  arises  primarily from a decrease in expenses in
third party programs.

COST OF REVENUES

Distribution  Center.  Costs of  goods  sold  through  the  distribution  center
increased  from $17.6 million in the 2nd Quarter of 2001 to $30.1 million in the
2nd Quarter of 2002. The 71% increase is directly  attributable  to the increase
in sales through the distribution center.

                                       11
<PAGE>

Activity  Rebates.  Rebates  increased  from $0.44 million in the 2nd Quarter of
2001 to $1.2 million in the  corresponding  period of 2002. The 162% increase in
rebates stems from an increase in purchases through our distribution center.

Participation Programs and Fees. Expenses associated with our programs decreased
by $79,000 in the 2nd Quarter of 2002  compared to the 2nd Quarter of 2001.  The
18% decrease in expenses is a result of efficiencies  gained in the providing of
these programs.

GENERAL AND ADMINISTRATIVE.  General and administrative  expenses rose from $1.1
million in the 2nd  Quarter of 2001 to $1.2  million in the 2nd Quarter of 2002.
The increase of 14% is attributable to a normal increase in expenses  associated
with an increase in revenues and operations,  including an increase in warehouse
costs, information technology costs, and salaries and wages.

INCOME FROM  OPERATIONS.  Net income from  operations  increase by $0.38 million
from 2nd Quarter 2001 to 2nd Quarter 2002.  This 55% increase is attributable to
an increase in distribution sales and other profit centers.

INCOME  TAXES.  2nd Quarter 2002 Income tax expense  increased by $0.13  million
compared to 2nd Quarter  2001.  The  increase  is  directly  attributable  to an
increase in taxable income of  approximately  $0.38 million for the  comparative
periods.

LIQUIDITY AND CAPITAL RESOURCES

Our capital  requirements  relate  primarily to working  capital for  day-to-day
operations,  including  general  and  administrative  expenses,  maintenance  of
product inventory levels to fulfill our operating  commitment to our members and
membership  rebates.  Historically,  we have financed our cash requirements from
three primary  sources:  on-going  operations,  sales of our common  stock,  and
borrowings under our line of credit.

For the six months ending June 30, 2002:

     *    Net cash  provided  by  (used  by)  operations  was  ($0.40  million),
               compared  to  ($1.22  million)  for  the  same  period  in  2001,
               primarily due to a substantial increase in inventories, partially
               offset  by an  increase  in  accounts  payable.  An  increase  in
               accounts  receivable and income taxes also contributed to the net
               consumption of cash by operations.

     *    Net cash (used by) investing  activities  was  ($31,000),  compared to
               ($0.19   million)   in  the  same   period  in  2001,   primarily
               attributable to the purchase of property and equipment.

     *    Net cash provided by (used by)  financing  activities  was  ($36,000),
               compared to ($28,000) for the same period in 2001, primarily as a
               result of payments on long-term  debt and the  termination of our
               common stock offering at the end of 2000.

We have a $3  million  line of  credit  (the  "Credit  Agreement")  with Bank of
America,  N.A.  that  expires  on June 30,  2003.  Borrowings  under the  Credit
Agreement bear interest at the lender's  prime rate,  which was 4.75% as of June
30, 2002. The Credit Agreement imposes certain requirements on us, including the
maintenance of a minimum tangible net worth. We accessed our line of credit from
time  to time  during  the  first  six  months  of  2002,  but no  amounts  were
outstanding  under the  Credit  Agreement  as of June 30,  2002.  We  anticipate
renegotiating  a new line of credit  with the same  institution  sometime in the
third quarter.

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<PAGE>

Cash and cash  equivalents  as of June 30, 2002 were down by $0.46  million from
the beginning of the year to $0.15 million. This is also lower than the cash and
cash  equivalents  balance for the six months  ending June 30,  2001,  which was
$0.30 million. We believe that our cash equivalents as of June 30, 2002, amounts
available  under the Credit  Agreement,  amounts  raised through the sale of our
common stock and operating cash flows will be sufficient to meet our anticipated
capital expenditure requirements at least through the next 12 months. Currently,
our  anticipated  capital   expenditures  are  composed  of  ongoing  day-to-day
operations, including normal general and administrative expenses, maintenance of
adequate  inventory  levels to satisfy our product  orders and income taxes.  If
sales  through  our  distribution  center  continue  to  grow,  we will be using
significant  portions  of our  capital  going  forward  to support  our  product
inventory  levels.  Except as set forth above,  we do not  currently  anticipate
incurring any expenses or capital  expenditures  outside the ordinary  course of
business.

Because we are registering our common stock under the Securities Exchange Act of
1934, our ability to issue  additional  shares is more limited  because  certain
securities  exemptions  previously  relied on by us are not available to issuers
registered under the Exchange Act. Accordingly,  any further issuances of common
stock may require  registration under the Securities Act of 1933, making it more
costly and time consuming to issue shares.  To the extent we are unable to renew
our existing Credit Agreement or obtain a new bank line of credit or raise funds
through the sale of common  stock,  our  ability to  increase  or  maintain  our
current  level  of  operations,  including  product  inventory  levels,  may  be
diminished.  In  addition,  we may not be able to obtain  additional  capital in
adequate  amounts or  acceptable  terms to meet  demands of our  business in the
future.  This would  have an  adverse  effect on our  operations  and  financial
condition.

FORWARD LOOKING STATEMENTS

This  report  contains   forward  looking   statements   based  on  our  current
expectations  and  assumptions  regarding our business and our industry.  Actual
results  may differ  materially  from those  described  in the  forward  looking
statements  and will be  affected  by a  variety  of known  and  unknown  risks,
uncertainties and other factors.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are exposed to market risks primarily from changes in U.S. interest rates. We
do not engage in financial transactions for trading or speculative purposes.

The interest payable on our Credit Agreement is based on variable interest rates
and is  therefore  affected  by changes in market  interest  rates.  While as of
December 31, 2001, no amounts were outstanding  under the Credit  Agreement,  to
the  extent  interest  rates  rise when we do  borrow  money  under  the  Credit
Agreement, our interest expense will increase.

                                       13
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a)  Exhibits

         The  following  exhibits  are  filed  as part of this  report.  Exhibit
         numbers  refer to the  paragraph  numbers  under Item 601 of Regulation
         S-K:

               2.1.  Agreement and Plan of Reorganization  among the registrant,
               Texas Pharmacy Co-op, Inc. and Pharmacy Consolidation Corp. dated
               November  3,  2000   (incorporated   by   reference  to  Form  10
               Registration  Statement  filed April 30, 2002 with the Securities
               and Exchange  Commission  by Pharmacy  Buying  Association,  Inc.
               (Commission File No. 000-49785)).

               3.1. Articles of Incorporation of the registrant (incorporated by
               reference to Form 10 Registration  Statement filed April 30, 2002
               with the  Securities and Exchange  Commission by Pharmacy  Buying
               Association, Inc. (Commission File No. 000-49785)).

               3.2.  Amendment to Articles of  Incorporation  of the  registrant
               (incorporated  by  reference  to Form 10  Registration  Statement
               filed April 30, 2002 with the Securities and Exchange  Commission
               by  Pharmacy  Buying  Association,   Inc.  (Commission  File  No.
               000-49785)).

               3.3.  Second  Amended  and  Restated  Bylaws  of  the  registrant
               (incorporated  by  reference  to Form 10  Registration  Statement
               filed April 30, 2002 with the Securities and Exchange  Commission
               by  Pharmacy  Buying  Association,   Inc.  (Commission  File  No.
               000-49785)).

               4.1.   Specimen  Common  Stock   Certificate  of  the  registrant
               (incorporated  by  reference  to Form 10  Registration  Statement
               filed April 30, 2002 with the Securities and Exchange  Commission
               by  Pharmacy  Buying  Association,   Inc.  (Commission  File  No.
               000-49785)).

               4.2.  Article VIII of the Second  Amended and Restated  Bylaws of
               the  registrant,  which  defines  the  rights of  holders  of the
               securities being registered (included in Exhibit 3.3 above).

               10.1.  Employment Agreement between the registrant and Nick Smock
               dated  November  29, 2000  (incorporated  by reference to Form 10
               Registration  Statement  filed April 30, 2002 with the Securities
               and Exchange  Commission  by Pharmacy  Buying  Association,  Inc.
               (Commission File No. 000-49785)).

               10.2. Net Lease dated May 18, 2001 between the registrant and Bob
               Campbell  d/b/a Shady  Properties  (incorporated  by reference to
               Form 10  Registration  Statement  filed  April 30,  2002 with the
               Securities   and   Exchange   Commission   by   Pharmacy   Buying
               Association, Inc. (Commission File No. 000-49785)).

               10.3.  Lease  Agreement dated July 7, 1999 between the registrant
               and Enterprise Properties,  L.L.C.  (incorporated by reference to
               Form 10  Registration  Statement  filed  April 30,  2002 with the
               Securities   and   Exchange   Commission   by   Pharmacy   Buying
               Association, Inc. (Commission File No. 000-49785)).

                                       14
<PAGE>

               10.4.  First  Amendment  to Lease  dated  April 4,  2000  between
               registrant and Enterprise  Properties,  L.L.C.  (incorporated  by
               reference to Form 10 Registration  Statement filed April 30, 2002
               with the  Securities and Exchange  Commission by Pharmacy  Buying
               Association, Inc. (Commission File No. 000-49785)).

               10.5.  Improved  Property  Commercial  Lease dated August 1, 2000
               between   Texas   Pharmacy   Co-op,   Inc.  and  Carl  A.  Parker
               (incorporated  by  reference  to Form 10  Registration  Statement
               filed April 30, 2002 with the Securities and Exchange  Commission
               by  Pharmacy  Buying  Association,   Inc.  (Commission  File  No.
               000-49785)).

               15.1. Letter from House Park & Dobratz,  P.C. regarding unaudited
               interim financial information.

         (b)  Reports on Form 8-K

               The  Company did not file a report on Form 8-K during the quarter
               for which this report is filed.

                                       15
<PAGE>
                                   SIGNATURES

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



                                      PHARMACY BUYING ASSOCIATION, INC.


Date:  August 14, 2002                By:   /s/  Nick Smock
                                          --------------------------------------
                                          Nick Smock, President, Chief Executive
                                          Officer and Chief Financial Officer

                                       16

<PAGE>
                                  CERTIFICATION
                       PURSUANT TO 18 U.S.C. SECTION 1350

      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In  connection  with the  accompanying  Quarterly  Report on Form 10-Q (the
"Report") of Pharmacy Buying  Association,  Inc. (the "Company") for the quarter
ended June 30, 2002, I, Nick Smock,  Chief Executive Officer and Chief Financial
Officer of the Company,  hereby  certify  pursuant to 18 U.S.C.  Section 1350 as
adopted  pursuant  to  Section  906 of the  Sarbanes-Oxley  Act of  2002,  to my
knowledge, that:

     (1) the Report fully  complies  with the  requirements  of section 13(a) or
     15(d) of the Securities Exchange Act of 1934; and

     (2)  the  information  contained  in the  Report  fairly  presents,  in all
     material respects, the financial condition and results of operations of the
     Company.


Date:  August 14, 2002            By:   /s/  Nick Smock
                                      ----------------------------------------
                                        Nick Smock, President, Chief Executive
                                        Officer and Chief Financial Officer

                                        Pharmacy Buying Association, Inc.

                                       17