UNITED STATES
                       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 September 30, 2003 OR

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

                        For the transition period from to

                             Commission File Number

                        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 September 30, 2003, 8,024 shares of common stock, $1.00 par value, of the
registrant were outstanding.

Total number of pages 20.

<PAGE>

                        Pharmacy Buying Association, Inc.
                                 INDEX FORM 10-Q

                                                                        Page No.
                                                                        --------

Part I - FINANCIAL INFORMATION

       ITEM 1 - FINANCIAL STATEMENTS

           Consolidated Balance Sheets as of September 30, 2003
           (unaudited) and December 31, 2002                            2

           Consolidated Statements of Operations for the three and
           nine months ended September 30, 2003 and 2002 (unaudited)    3

           Consolidated Statements of Cash Flows for the nine
           months ended September 30, 2003 and 2002 (unaudited)         4

           Notes to Consolidated Financial Statements (unaudited)       5 - 7

       ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
       OF OPERATIONS AND FINANCIAL CONDITION                            8 - 12

       ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
       MARKET RISK                                                      13

       ITEM 4 - CONTROLS AND PROCEDURES                                 13

Part II - OTHER INFORMATION

       ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                        14 - 15

SIGNATURES                                                              16

CERTIFICATIONS                                                          17 - 20

<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.

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

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS

                                                                (Unaudited)
                                                               September 30,       December 31,
                                                                    2003               2002
                                                                    ----               ----
<S>                                                             <C>                <C>
Current assets:
   Accounts receivable                                          $  8,612,782       $  8,138,869
   Inventories                                                     6,783,163          8,185,885
   Prepaid expenses                                                   92,146            152,374
   Refundable income taxes                                            15,537
   Deferred income taxes                                              34,000
                                                                ------------       ------------
                  Total current assets                            15,537,628         16,477,128

Municipal bond                                                       500,000            500,000
Property and equipment                                               377,035            453,109
Goodwill                                                             229,144            229,144
Other assets                                                          17,890             17,890
                                                                ------------       ------------

                                                                $ 16,661,697       $ 17,677,271
                                                                ============       ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Checks written in excess of cash in bank                     $    513,814       $    321,386
   Bank line of credit                                                                3,000,000
   Accounts payable                                               10,312,523          7,083,642
   Accrued payroll                                                   138,082             81,978
   Deferred revenue                                                   77,624            282,200
   Income taxes payable                                                                 159,356
   Deferred income taxes                                                                101,000
                                                                ------------       ------------
                  Total current liabilities                       11,042,043         11,029,562
                                                                ------------       ------------

Deferred income taxes                                                  7,000              7,000
                                                                ------------       ------------

Commitments and contingencies

Stockholders' equity:
   Common stock, $1 par; authorized 30,000
    shares; issued 11,380                                             11,380             11,380
   Capital in excess of par value                                  1,468,255          1,468,255
   Retained earnings                                               6,080,906          5,363,178
                                                                ------------       ------------
                                                                   7,560,541          6,842,813
   Treasury stock at cost, 3,356 shares at September 30,
    2003 and 358 shares at December 31, 2002                      (1,947,887)          (202,104)
                                                                ------------       ------------
                                                                   5,612,654          6,640,709
                                                                ------------       ------------

                                                                $ 16,661,697       $ 17,677,271
                                                                ============       ============
</TABLE>

                See notes to consolidated financial statements.

<PAGE>

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

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                        Three months ended                      Nine months ended
                                                           September 30,                          September 30,
                                                           -------------                          -------------
                                                     2003                2002                2003               2002
                                                     ----                ----                ----               ----
<S>                                              <C>                <C>                 <C>                 <C>
Revenues:
   Distribution center (including revenues
    generated from businesses owned by
    members of the Board of Directors of
    $5,462,842 and $4,535,272 for the
    three months ended September 30, 2003
    and 2002, respectively, and $13,435,889
    and $12,881,128 for the nine months
    ended September 30, 2003 and 2002,
    respectively                                 $ 37,571,404       $  36,820,388       $ 111,927,959       $ 92,853,169

   Participation programs and fees                    542,982             275,749           2,124,436            653,879

   Third party                                         34,267              55,497              94,525             67,455
                                                 ------------       -------------       -------------       ------------
                                                   38,148,653          37,151,634         114,146,920         93,574,503
                                                 ------------       -------------       -------------       ------------
Cost of revenues:
   Distribution center                             36,344,299          34,859,189         107,624,312         86,865,034
   Participation programs and fees                    184,263             208,918             805,367            520,327
                                                 ------------       -------------       -------------       ------------
                                                   36,528,562          35,068,107         108,429,679         87,385,361
                                                 ------------       -------------       -------------       ------------

Gross profit                                        1,620,091           2,083,527           5,717,241          6,189,142
General and administrative expenses                 1,501,169           1,347,481           4,503,001          3,956,661
                                                 ------------       -------------       -------------       ------------

Income from operations                                118,922             736,046           1,214,240          2,232,481
                                                 ------------       -------------       -------------       ------------

Other income (expense):
   Investment income                                    2,245               3,779               9,793             14,421
   Interest expense                                    (5,833)             (7,686)             (7,545)           (14,196)
   Gain on sale of property and equipment                                                                          4,786
                                                 ------------       -------------       -------------       ------------
                                                       (3,588)             (3,907)              2,248              5,011
                                                 ------------       -------------       -------------       ------------

Income before income taxes                            115,334             732,139           1,216,488          2,237,492
Income taxes                                           47,287             427,327             498,760            963,316
                                                 ------------       -------------       -------------       ------------

Net income                                       $     68,047       $     304,812       $     717,728       $  1,274,176
                                                 ============       =============       =============       ============

Earnings per common share:
   Income available to common
    stockholders                                 $     68,047       $     304,812       $     717,728       $  1,274,176
   Weighted average shares outstanding,
    basic and diluted                                   8,412              11,268               9,891             11,337
                                                 ------------       -------------       -------------       ------------

   Basic and diluted earnings per share          $       8.09       $       27.05       $       72.56       $     112.39
                                                 ============       =============       =============       ============
</TABLE>

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

<PAGE>

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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        Nine months ended September 30,
                                                                        -------------------------------
                                                                            2003              2002
                                                                            ----              ----
<S>                                                                     <C>               <C>
Cash flows from operating activities:
   Net income                                                           $   717,728       $ 1,274,176
   Adjustments to reconcile net income to net
    cash provided (used) by operating activities:
     Depreciation                                                           156,669           175,677
     Deferred income taxes                                                 (135,000)          (88,000)
     Gain on sale of property and equipment                                                    (4,786)
     Changes in operating assets and liabilities:
       Accounts receivable                                                 (473,913)       (2,231,503)
       Inventories                                                        1,402,722        (1,188,675)
       Prepaid expenses                                                      60,228            68,677
       Refundable income taxes                                              (15,537)
       Other assets                                                                           (22,314)
       Checks written in excess of cash                                     192,428
       Accounts payable                                                   3,228,881         2,262,736
       Accrued payroll                                                       56,104           (87,136)
       Deferred revenue                                                    (204,576)         (137,823)
       Income taxes payable                                                (159,356)         (143,299)
                                                                        -----------       -----------

                  Net cash provided (used) by operating activities        4,826,378          (122,270)
                                                                        -----------       -----------

Cash flows from investing activities:
   Purchase of property and equipment                                       (80,595)          (65,292)
   Proceeds from sale of property and equipment                                                10,300
                                                                        -----------       -----------

                  Net cash used by investing activities                     (80,595)          (54,992)
                                                                        -----------       -----------

Cash flows from financing activities:
   Repayment of bank line of credit                                      (3,000,000)
   Acquisition of common stock                                           (1,745,783)         (117,723)
   Principal payments on long-term debt                                                       (25,753)
                                                                        -----------       -----------

                  Net cash used by financing activities                  (4,745,783)         (143,476)
                                                                        -----------       -----------

Net decrease in cash                                                             --          (320,738)

Cash, beginning of period                                                        --           614,519
                                                                        -----------       -----------

Cash, end of period                                                     $        --       $   293,781
                                                                        ===========       ===========

Supplemental disclosures of cash flow information:
   Cash transactions during the period for:
     Interest paid                                                      $     7,545       $    14,196
                                                                        ===========       ===========

     Income taxes paid                                                  $   808,653       $ 1,194,615
                                                                        ===========       ===========
</TABLE>

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

<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-K 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.

2.    New accounting standards:

      In May 2003, the Financial Accounting Standards Board ("FASB") issued
      Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting
      for Certain Financial Instruments with Characteristics of both Liabilities
      and Equity." SFAS No. 150 clarifies the definition of a liability as
      currently defined in FASB Concepts Statement No. 6, "Elements of Financial
      Statements," as well as other planned revisions. This statement requires a
      financial instrument that embodies an obligation of an issuer to be
      classified as a liability. In addition, the statement establishes
      standards for the initial and subsequent measurement of these financial
      instruments and disclosure requirements. SFAS No. 150 is effective for
      financial instruments entered into or modified after May 31, 2003 and for
      all other matters, at the beginning of our second quarter 2004. We do not
      believe the adoption of this standard will have a material impact on our
      consolidated financial statements.

      In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
      on Derivative Instruments and Hedging Activities." SFAS No. 149 amends
      SFAS No. 133 for decisions made as part of the FASB's Derivatives
      Implementation Group process, other FASB projects dealing with financial
      instruments, and in connection with implementation issues raised in
      relation to the application of the definition of a derivative. This
      statement is generally effective for contracts entered into or modified
      after September 30, 2003 and for hedging relationships designated after
      September 30, 2003. We do not believe the adoption of this standard will
      have a material impact on our consolidated financial statements.

<PAGE>

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (Unaudited)

2.    New accounting standards (continued):

      In January 2003, the Emerging Issues Task Force finalized Issue No. 02-16,
      "Accounting by a Customer (Including a Reseller) for Certain Consideration
      Received from a Vendor". This issue requires that cash consideration
      received by a customer from a vendor be recorded as a reduction of cost of
      sales within a company's results of operations, excluding payments
      received when a customer sells products and services to the vendor as well
      as reimbursement of costs incurred by the customer in selling the vendor's
      product. This issue also requires rebates or refunds provided to a
      customer as the result of achieving certain purchase levels or other
      defined measures to be recorded as a reduction of cost of sales. If the
      rebate or refund is probable and reasonably estimable, it can be allocated
      over the time period in which it is earned. The adoption of this statement
      did not have a material effect on the Company's financial position or
      results of operations.

      In January 2003, the FASB issued Interpretation ("FIN") No. 46,
      "Consolidation of Variable Interest Entities." This interpretation
      clarifies the application of Accounting Research Bulletin No. 51,
      "Consolidated Financial Statements," in determining whether a reporting
      entity should consolidate certain legal entities, including partnerships,
      limited liability companies, or trusts, among others, collectively defined
      as variable interest entities ("VIEs"). This interpretation applies to
      VIEs created or obtained after January 31, 2003, and as of July 1, 2003,
      to VIEs in which an enterprise holds a variable interest that it acquired
      before February 1, 2003. We do not believe that this standard will have a
      material impact on our consolidated financial statements.

      In December 2002, the FASB issued SFAS No. 148, "Accounting for
      Stock-Based Compensation-Transition and Disclosure." This statement amends
      SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
      alternative methods of transition for a voluntary change to the fair value
      based method of accounting for stock-based employee compensation. In
      addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123
      to require prominent disclosures in both annual and interim financial
      statements about the method of accounting for stock-based employee
      compensation and the effect of the method used on reported results. We do
      not believe the adoption of this standard will have a material impact on
      our consolidated financial statements. This statement is effective for
      fiscal years ending after December 31, 2002.

3.    Accounts receivable:

                                          September 30,      December 31,
                                               2003              2002
                                               ----              ----

      Membership                           $ 1,347,624       $ 1,531,471
      Distribution center                    7,456,775         6,801,398
                                           -----------       -----------
                                             8,804,399         8,332,869
      Allowance for doubtful accounts         (191,617)         (194,000)
                                           -----------       -----------

                                           $ 8,612,782       $ 8,138,869
                                           ===========       ===========

<PAGE>

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (Unaudited)

4.   Property and equipment:

                                          September 30,       December 31,
                                               2003               2002
                                               ----               ----

      Furniture and fixtures               $   359,903        $   298,809
      Equipment                                730,570            713,516
      Software                                 402,809            400,362
                                           -----------        -----------
                                             1,493,282          1,412,687
      Accumulated depreciation              (1,116,247)          (959,578)
                                           -----------        -----------

                                           $   377,035        $   453,109
                                           ===========        ===========

      Depreciation expense, included in general and administrative expenses, was
      $156,669 and $175,677 for the nine-month periods ended September 30, 2003
      and 2002, respectively.

5.    Reclassification:

      Certain amounts previously reported have been reclassified to conform to
      the current period's presentation.

<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 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, 2002 and for the second quarter ended June 30, 2003 also contained
therein.

Overview

We derive revenues from the following three sources:

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

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 are collected from the plan sponsors 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. We receive rebates from
pharmaceutical manufacturers based on member purchases of the manufacturer's
product from our distribution center. We also receive rebates and fees from
other vendors and manufacturers through various company programs. These rebates
and fees are typically paid to us on either a quarterly or monthly basis and are
shown net of corresponding rebates paid to members based on patronage.

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.

General and Administrative Expenses. General and administrative expenses are
typical 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 nine months ending September 30, 2003 and 2002.

<PAGE>

Comparison of Nine Months ending September 30, 2003 and 2002

Revenues

Total Revenues. Total revenues for the nine months ending September 30, 2003
increased to $114.1 million from $93.6 million over the same period revenues in
2002. The increase of $20.5 million is directly attributable to a corresponding
increase in the amount of sales through the distribution center.

Distribution. Revenue from distribution grew from $92.9 million to $111.9
million, representing a 20% increase over the same period in 2002. An increase
in product offering combined with a rising usage of the distribution center by
member pharmacies led to the increase in distribution sales.

Participation Programs and Fees. For the nine months ending September 30, 2003,
revenues from participation programs and fees increased by $1.47 million from
the corresponding period in 2002. The change is mainly a change in presentation
and reclassification of certain that do not affect overall financial results.

Third Party. Revenues from third party operations, which are shown net of
expenses, increased by approximately $27,000 for the nine months ending
September 30, 2003 from the same period in 2002. The increase arose from a
renewed effort in the Managed Care market.

Cost of Revenues

Distribution Center. Costs of goods sold through the distribution center
increased from $86.9 million for the nine months ending September 30, 2002 to
$107.6 million in 2003. The 24% increase is directly attributable to the
increase in sales through the distribution center.

Participation Programs and Fees. Expenses associated with our programs increased
for the nine months ending September 30, 2003 compared to the same period in
2002. The change in expenses was mainly attributable to expenses associated with
the development of our Today's Care disease-state management program and
abnormally high expenses associated with legislative affairs initiatives.

General and Administrative. General and administrative expenses rose by $0.54
million for the nine months ending September 30, 2003 compared to the same
period in 2002. The increase of 14% from $3.95 million to $4.50 million is
attributable to a normal increase in expenses associated with an increase in
revenues, including an increase in warehouse costs, salaries and wages, and
other employee-related expenses. Various legal expenses also contributed to the
increase.

Income from Operations. Net income from operations decreased by $1.02 million
from $2.23 million for the nine months ending September 30, 2002 to $1.2 million
for the same period in 2003. This 84% decrease is attributable to a decrease in
the administration fees and rebates normally received pursuant to the loss of an
endorsed wholesaler-partner. Also contributing to the decrease was an increase
in general and administrative expenses and additional revenues coming from lower
margin sources, such as distribution sales.

Income Taxes. Income tax expense for the nine months ending September 30, 2003
decreased from $0.963 million to $0.499 million for the same period in 2002. The
$460,000 decrease follows directly from a decrease in our taxable income and
lower profitability.

<PAGE>

Comparison of Three Months ending September 30, 2003 and 2002

Revenues

Total Revenues. 3rd Quarter 2003 saw total revenues increase to $38.1 million
from $37.2 million over the same period revenues in 2002. The increase is
attributable to a corresponding increase in the amount of sales through the
distribution center.

Distribution. For 3rd Quarter 2003, revenues grew to $37.6 million from $36.8
million in the 3rd Quarter 2002, representing a 2% increase. An increase in
product offering combined with a rising usage of the distribution center by
member pharmacies led to the minor increase in distribution sales.

Participation Programs and Fees. For 3rd Quarter 2003, revenues from
participation programs and fees increased by a modest $0.267 million from the
corresponding period in 2002. The increase was mainly due to enhancements that
have been brought about by a basic restructuring of programs and fee structures.

Third Party. Revenues from third party operations, which are shown net of
expenses, decreased by approximately $21,000 from the 3rd Quarter 2002 to the
3rd Quarter 2003. The decrease arises from normal minor fluctuations in the
costs of providing 3rd party services.

Cost of Revenues

Distribution Center. Costs of goods sold through the distribution center
increased from $34.859 million in the 3rd Quarter of 2002 to $36.3 million in
the 3rd Quarter of 2003. The increase is directly attributable to the increase
in sales through the distribution center.

Participation Programs and Fees. Expenses associated with our programs decreased
by $25,000 in the 3rd Quarter of 2003 compared to the 3rd Quarter of 2002. The
decrease was mainly due to efficiencies brought about by enhancements and a
basic restructuring of programs and fee structures.

General and Administrative. General and administrative expenses increased
slightly from $1.3 million in the 3rd Quarter of 2002 to $1.5 million in the 3rd
Quarter of 2003. The expenses held relatively steady compared to the nine months
ending September 30, 2003, due to a general cost cutting strategy that was
enacted in the 2nd Quarter of 2003 and started to be realized in the 3rd
Quarter.

Income from Operations. Income from operations decreased by $0.617 million from
3rd Quarter 2002 to 3rd Quarter 2003. This 84% decrease is attributable to a
decrease in the administration fees and rebates normally received pursuant to
the loss of an endorsed wholesaler-partner. Also contributing to the decrease
was an increase in general and administrative expenses and additional revenues
coming from lower margin sources, such as distribution sales.

Income Taxes. 3rd Quarter 2003 income tax expense decreased by $0.380 million
compared to 3rd Quarter 2002. The decrease is directly attributable to a
decrease in taxable income of approximately $0.617 million for the comparative
periods.

Liquidity and Capital Resources

Despite a lackluster financial performance in the 3rd Quarter of 2003, our
liquidity and capital resources remain solid. 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, which are paid
quarterly. Historically, we have financed our cash requirements

<PAGE>

from three primary sources: on-going operations, sales of our common stock, and
borrowings under our line of credit.

For the nine months ending September 30, 2003:

      o     Net cash provided by (used by) operations was $4.82 million,
            compared to ($0.122 million) for the same period in 2002. The
            increase in 2003 was primarily due to a sizeable decrease in newly
            financed inventories, partially offset by an increase in accounts
            receivable. A substantial increase in accounts payable provided the
            bulk of positive cash flow for the year as more beneficial terms
            were negotiated with several vendors. The decrease for the first
            nine months of 2002 was attributable to significant increases in
            accounts receivable and inventories. A net inflow of cash from
            decreasing accounts receivable through incentives plans offset a
            large portion of the outflow. We anticipate that these trends will
            continue until distribution sales resume their historical trends in
            the 1st Quarter of 2004.

      o     Net cash (used by) investing activities was ($80,000), compared to
            ($55,000) in the same period in 2002, primarily attributable to the
            purchase of property and equipment and a minor office expansion.

      o     Net cash provided by (used by) financing activities was ($4.74
            million), compared to ($143,000) for the same period in 2002. The
            usage of cash was primarily for the purchase of common stock. Also
            contributing to the usage of cash was the repayment of our line of
            credit with the bank. We are not expecting the selling of new shares
            of stock in the near future, and will continue to repurchase stock
            as it becomes available.

We have a $5 million line of credit with an additional $2 million seasonal
extension that runs from November 1st to February 1st of the following year (the
"Credit Agreement") with Bank of America, N.A. that expires on June 30, 2004.
Borrowings under the Credit Agreement bear interest at the lender's prime rate,
which was 4.50% as of September 30, 2003. 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 nine months of
2003, but no amounts were outstanding under the Credit Agreement as of September
30, 2003. We anticipate that the bank will continue to renew our line of credit.

Cash and cash equivalents as of September 30, 2003 were down by $0.29 million
from the beginning of the year to $0. This is also lower than the cash and cash
equivalents balance as of September 30, 2001, which was $0.45 million. We
believe that our cash equivalents as of September 30, 2003, municipal bonds held
in reserve accounts, amounts available under the Credit Agreement, and operating
cash flows will be sufficient to meet our anticipated capital expenditure
requirements and operating expenses at least through the next 12 months.
Currently, our anticipated 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, repurchase of common
stock as it becomes available, 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 the product inventory levels required for
the higher sales volume. 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 registered 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

<PAGE>

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 the 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.

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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
September 30, 2003, 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.

ITEM 4. CONTROLS AND PROCEDURES.

(a)   Evaluation of Disclosure Controls and Procedures

            The term "disclosure controls and procedures" is defined in Rules
      13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934 (Exchange
      Act). These rules refer to the controls and other procedures of a company
      that are designed to ensure that information required to be disclosed by a
      company in the reports that it files under the Exchange Act is recorded,
      processed, summarized and reported within required time periods. Our Chief
      Executive Officer and our Chief Financial Officer have evaluated the
      effectiveness of our disclosure controls and procedures as of a date
      within 90 days before the filing of this quarterly report (the Evaluation
      Date), and they have concluded that, as of the Evaluation Date, such
      controls and procedures were effective at ensuring that required
      information will be disclosed on a timely basis in our reports filed under
      the Exchange Act.

(b)   Changes in Internal Controls

            We maintain a system of internal accounting controls that are
      designed to provide reasonable assurance that our books and records
      accurately reflect our transactions and that our established policies and
      procedures are followed. For the quarter ended September 30, 2002, there
      were no significant changes to our internal controls or in other factors
      that could significantly affect our internal controls.

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                           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.

            1. Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by
            the Chief Executive Officer.

            2. Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by
            the Chief Financial Officer.

      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)).

<PAGE>

            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)).

            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)).

      (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.

<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: November 15, 2003             By: /s/ Donald E. Raby II
                                        ------------------------------------
                                        Donald E. Raby II, CPA, Vice President,
                                        Chief Financial Officer