SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]          ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE 
             ACT OF 1934

[ ]          TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES 
             EXCHANGE ACT OF 1934

                      For the year ended December 31, 1996

                         Commission file number 0-20594

                                COMPSCRIPT, INC.
                 ---------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

        FLORIDA                                            65-0506539
-------------------------------                     ------------------------
(State or Other Jurisdiction of                        (I.R.S. Employer
Incorporation or Organization)                         Identification No.)


                           1225 BROKEN SOUND PARKWAY
                           BOCA RATON, FLORIDA 33481
                -----------------------------------------------
               (Address of Principal Executive Offices)(Zip Code)

                                 (561) 994-8585
                     -------------------------------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Securities Exchange Act of
1934:

TITLE OF EACH CLASS                   NAME OF EACH EXCHANGE ON WHICH REGISTERED
-------------------------------------------------------------------------------
      NONE                                             NONE

Securities registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934:

                    COMMON STOCK, PAR VALUE $.0001 PER SHARE
                    ----------------------------------------
                                (Title of Class)



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Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 [ ]

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

State registrant's revenues for the year ended December 31, 1996:  $20,049,771

State the aggregate market value of the voting stock held by non-affiliates of
the registrant on March 31, 1997 computed by reference to the closing bid price
of the CompScript, Inc. Common Stock as reported by THE WALL STREET JOURNAL on
that date: ($8.125) $72,860,767

                      APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of the registrant's Common Stock, par value
$.01 per share (the "Common Stock"), as of March 31, 1997, was 13,627,063.

                      DOCUMENTS INCORPORATED BY REFERENCE
                      -----------------------------------

                                     None.



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                                     PART 1

                                  THE COMPANY

Item 1.  DESCRIPTION OF BUSINESS

COMPANY OVERVIEW

CompScript, Inc. (formerly Capital Brands, Inc.,) (the "Company" or
"Compscript") is a comprehensive provider of pharmacy management services
equipped to both lower costs and improve the quality of care to its customers.
CompScript offers a broad range of pharmacy, infusion therapy, consulting
services, mail order, and pharmacy benefit claim administration to managed care
networks, long-term and subacute care facilities, home health patients, and
recipients of managed care. CompScript's proprietary pharmacy management
capabilities combine sophisticated clinical tools with the latest technologies
in databases and drug profiles. CompScript's network of participating retail
pharmacies, along with its electronic on-line adjudication system and a mail
service dispensing facility, allow CompScript to offer a fully integrated
pharmacy benefit management program.

On April 26, 1996, CompScript, Inc. acquired approximately 93% of the
outstanding common stock of CompScript-Boca, Inc. (formerly CompScript, Inc.)
("CompScript-Boca"), a privately-held provider of pharmacy management services
by merger of the Company into CompScript-Boca in exchange for issuance of
7,394,982 shares of the Company's common stock. As a result of this transaction,
CompScript-Boca shareholders became the owners of approximately 80% of the
Company's then outstanding common stock and assumed 100% Control of the
Company's Board of Directors. Accordingly, the acquisition has been treated for
financial reporting purposes as a reverse acquisition. After completion of the
transaction, the Company became the owner of approximately 93% of the
outstanding common stock of CompScript-Boca and accordingly, recorded at the
time of the transaction a minority interest in the acquired subsidiary of
$222,628, representing approximately 7% of the net assets of the acquired
subsidiary on the date of acquisition.

Since May 1996, the Company has consummated four acquisitions of institutional
pharmacy providers located in Mobile, Alabama (May 1996), Miami, Florida
(January 1997), Metaire, Louisiana (February 1997) and Mentor, Ohio (March
1997). and one acquisition of a mail service dispensing pharmacy with its
principal operations in Cleveland, Ohio (August 1996). See Item 1 "Description
of Business Acquisition Strategy"

CompScript presently operates 7 institutional pharmacies that serve long-term
and subacute facilities in Florida, Alabama, Mississippi, Louisiana and Ohio.


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Capital Brands, Inc.'s ("Capital Brands") predecessor, Capital Acquisitions,
Inc. was incorporated in March 1988 as a Delaware corporation. Prior to
September, 1991, Capital Brands was principally engaged in organizational
activities, raising capital through a public offering and searching for and
investigating business opportunities. As a result of the share exchange with the
Company, Capital Brands, Inc. divested itself of its interest in all businesses
except for its ownership interest in QPQ Corporation. On July 26, 1996, the
Company sold its ownership interest in QPQ to the former Chairman of the Board
and Chief Executive Officer and President of Capital Brands in exchange for a
promissory note due in July 1997.

PRODUCTS AND SERVICES

INSTITUTIONAL PHARMACY. CompScript purchases, repackages and dispenses
prescription and non-prescription medication in accordance with physician orders
and delivers such prescriptions at least daily to the nursing facilities for
administration to individual patients by the facility's nursing staff.
CompScript typically services nursing homes within a 150-mile radius of its
pharmacy locations. CompScript maintains a 24-hour, on-call pharmacist service
365 days per year for emergency dispensing and delivery or for consultation with
the facility's staff or attending physician.

Compscript has established a joint commission on accreditation of health care
organizations ("JCAHO") in connection with the Company's long-term care
institutional pharmacy services. This accreditation was received in October
1996, for the Company's Boca Raton facility and the Company intends to attain
such accreditation for its other institutional pharmacy locations. The Company
believes this accreditation distinguishes the Company from many of its
competitors.

Upon receipt of a prescription, the relevant patient information is entered into
CompScript's computerized proprietary dispensing and billing systems. At that
time, the dispensing system will check the prescription for any potentially
adverse drug interactions or patient sensitivity. When required and/or
specifically requested by the physician or patient, branded drugs are dispensed;
generic drugs are substituted in accordance with applicable state and federal
laws and as requested by the physician or patient. The Company also provides
therapeutic interchange, with physician approval, in accordance with the
company's pharmaceutical care guidelines.

CompScript provides a "modified unit-dose" distribution system. Most of its
prescriptions are filled utilizing specialized unit-of-use packaging and
delivery systems. Maintenance medications are typically provided in 30-day
supplies utilizing either a box unit-dose system or unit-dose punch card system.
The unitdoses system, preferred over the bulk delivery systems employed by
retail pharmacies, improves control over drugs in the nursing facility and
improves patient compliance with drug therapy by increasing the accuracy and
timeliness of drug administration.

Integral to CompScript's drug distribution system is its proprietary
computerized medical records and documentation system. CompScript provides to
the facility computerized medication administration records and physician's
order sheets and treatment records for each patient. Data extracted from these
computerized records are also formulated into monthly management reports on
patient care and quality assurance. The computerized documentation system in
combination with the modified unit-dose drug delivery system results in greater
efficiency in nursing time, improved control, reduced drug waste in the facility
and lower error rates in both dispensing and administration. These benefits
improve drug efficacy and result in fewer drug-related failures and
hospitalizations.

CONSULTANT PHARMACIST SERVICES. Federal and state regulations mandate that
nursing facilities, in addition to providing a source of pharmaceuticals, retain
consultant pharmacist services to monitor and report on prescriptions drug
therapy in order to maintain and improve the quality of patient care. The
Omnibus Budget Reconciliation Act ("OBRA") implemented in 1990 seeks to further
upgrade and standardize care


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by setting forth more stringent standards relating to planning, monitoring and
reporting on the progress of prescription drug therapy as well as facility-wide
drug usage.

CompScript provides consultant pharmacist services which help clients comply
with such federal and state regulations applicable to nursing homes. Consultant
pharmacists work on a proprietary laptop program to offer institutions patient
specific clinical data. The services offered by CompScript's consultant
pharmacists include: (i) comprehensive, monthly drug regimen reviews for each
patient in the facility to assess the appropriateness and efficacy of drug
therapies, including a review of the patient's medical records, monitoring drug
reactions to other drugs or food, monitoring lab results and recommending
alternate therapies or discontinuing unnecessary drugs; (ii) participation on
the Pharmacy and Therapeutics, Quality Assurance and other committees of client
nursing facilities as well as periodic involvement in staff meetings; (iii)
monthly inspection of medication carts and storage rooms; (iv) monitoring and
monthly reporting on facility-wide drug usage and drug administration systems
and practices; (v) development and maintenance of pharmaceutical policy and
procedures manuals; and (vi) assistance to the nursing facility in complying
with state and federal regulations as they pertain to patient care.

Additionally, CompScript offers a specialized line of consulting services which
help nursing facilities to enhance care and reduce and contain costs as well as
to comply with state and federal regulations. Under this service line,
CompScript provides: (i) data required for OBRA and other regulatory purposes,
including reports on psychotropic drug usage (chemical restraints), antibiotic
usage (infection control) and other drug usage; (ii) Plan of Care programs which
assess each patient's state of health upon admission and monitor progress and
outcomes using data on drug usage as well as dietary, physical therapy and
social service inputs; (iii) counseling related to appropriate drug usage and
implementation of drug protocols; (iv) on-site educational seminars for the
nursing facility staff on topics such as drug information relating to clinical
indications, adverse drug reactions, drug protocols and special geriatric
considerations in drug therapy, and information and training on intravenous drug
therapy and updates on OBRA and other regulatory compliance issues; (v) mock
regulatory reviews for nursing staffs; and (vi) nurse consultant services and
consulting for dietary, social services and medical records.

ANCILLARY SERVICES. CompScript provides the following ancillary products and
services to nursing facilities:

Infusion Therapy Products and Services. With cost containment pressures in the
health care industry, nursing facilities are increasingly providing subacute
care as a means of treating moderately acute but stabilized patients more
cost-effectively than hospitals, provided that the nursing staff and pharmacy
are capable of supporting higher degrees of acuity. CompScript provides infusion
therapy support services for such residents in its client nursing facilities
and, to a lesser extent, hospice and home care patients. Infusion therapy
consists of the product (a nutrient, antibiotic, chemotherapy or other drugs in
solution) and the intravenous ("IV") administration of the product.

CompScript prepares the product to be administered using proper equipment in a
sterile environment and then delivers the product to the nursing home for
administration by the nursing staff. Proper administration of IV drug therapy
requires a highly trained nursing staff. CompScript's consultant pharmacists and
nurse consultants operate an education and certification program on IV therapy
to assure proper staff training and compliance with regulatory requirements in
client facilities offering an IV program.

By providing an infusion therapy program, CompScript enables its client nursing
facilities to admit and retain patients who otherwise would need to be cared for
in an acute-care facility. CompScript's proprietary computer system and
specialization in the subacute arena have been instrumental in new business
development and the reason over 65% of the facilities are considered subacute or
competent in IV therapy. The Company believes that by providing these high
acuity pharmacy services it has a competitive advantage


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over other pharmacy providers. The most common infusion therapies CompScript
provides in the nursing home environment are total parenteral nutrition,
antibiotic therapy, chemotherapy, pain management and hydration.

HOME INFUSION THERAPY SERVICES. CompScript has established a Joint Commission on
Accreditation of Healthcare Organization ("JCAHO") accredited home infusion
company to serve homebound patients. CompScript offers outcomes management with
an emphasis on diagnosis of level of severity, specialized management reporting,
and statewide coverage, which makes CompScript particularly attractive to
managed care companies. CompScript offers managed care companies a full
continuum of coverage for their clients, from hospitals to subacute units to
long-term care facilities to the patient's homes.

Infusion therapy services involve the administration of prescription drugs and
other products that are prescribed by a physician to a patient by catheter,
feeding tube or intravenously. The Company's managed care clients benefit from
outpatient infusion therapy services because the length of hospital stays can be
reduced. Rather than receiving infusion therapy in a hospital, the Company can
provide infusion therapy services to patients at home, in a physician's office
or in a free-standing center operated by a health maintenance organization
("HMO") or other entity. The Company provides antimicrobial, cardiovascular,
hematologic, nutritional, pain management, chemotherapeutic, hydration,
endocrine, respiratory and AIDS management treatments to patients.

PHARMACY BENEFIT MANAGEMENT SERVICES. The Company's pharmacy benefit management
("PBM") service is the systematic management of outpatient prescription drug
usage to foster high quality, cost-effective pharmaceutical care through the
application of managed care principles and development of information
technologies. PBM services consist of retail pharmacy network administration,
except in the Long-Term Care Pharmacy Network; formulary administration;
electronic point-of-sale claims processing, drug utilization review ("DUR");
mail pharmacy service; and benefit plan design consultation. Advanced PBM
services include the development of advanced formulary compliance and
therapeutic substitution programs; therapy management services such as prior
authorization, therapy guidelines, step therapy protocols, and disease
management interventions, and sophisticated management information reporting and
analytic services.

The Company contracts with retail pharmacies to provide prescription drugs to
members of the pharmacy benefit plans managed by the Company. These pharmacies
typically discount the price at which they will provide drugs to members in
return for designation as a network pharmacy. The Company manages a national
network that is responsive to various client needs related to cost containment
and convenience of access for members. The Company is a provider of PBM services
to the managed care industry, including several large U.S. HMOs.

LONG-TERM CARE PHARMACY NETWORK. In May of 1995, CompScript believes that it
formed the first of its kind, Long-Term Care Pharmacy Network. The network is
comprised of long-term care "closed-shop" institutional pharmacies. This network
is organized to provide full comprehensive services to the institutionalized
frail elderly population with the consistencies of one long-term care model
benefit. This network is being marketed to payers with both national and
regional interests as one pharmaceutical vendor for their long-term/chronic care
pharmaceutical care beneficiaries.

GROUP HEALTHCARE AND WORKERS' COMPENSATION NETWORKS. The Company uses on-line
electronic claims processing to provide effective pharmacy benefit management
services to its clients. All retail pharmacies in the Company's pharmacy network
communicate with the Company on-line and in real time to process


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prescription drug claims. When a member of a plan presents his or her
identification card at a network pharmacy, the network pharmacist sends the
specified claim data in an industry standard format to the Company which
processes the claim and responds to the pharmacy, typically within a few
seconds. The electronic processing of the claim involves confirming the member's
eligibility for benefits under the applicable health benefit plan and the
conditions to or limitations of coverage, such as the amount of copayments or
deductibles the member must pay; performing a concurrent DUR analysis and
alerting the pharmacist to possible drug interactions or other indications of
inappropriate prescription drug usage; updating the member's prescription drug
claim record; and, if the claim is accepted, confirming to the pharmacy that it
will receive payment for the drug dispensed.

The Company provides advanced PBM services to its clients which involve the
application of clinical expertise and sophisticated management information
systems to manage the pharmacy benefit. An important advanced PBM service
provided by the Company is the enhancement of formulary compliance. Formularies
are lists of drugs for which coverage is provided under the applicable plan;
they are widely used in managed health care plans and, increasingly, by other
healthcare risk managers. The Company administers a number of different
formularies for its clients that often identify preferred drugs whose use is
encouraged or required through various benefit design features. Historically,
many clients have selected a plan design which includes an open formulary in
which all drugs are covered by the plan and preferred drugs, if any, are merely
recommended. More advanced formularies consist of restricted formularies, in
which various financial or other disincentives exist to the selection of
non-preferred drugs, or closed formularies, in which benefits are available only
for drugs listed on the formulary. Formulary preferences can be encouraged by
restricting the formulary through plan design features such as tiered
copayments, which require the member to pay a higher amount for a nonpreferred
drug; through prescriber education programs, in which the Company or the managed
care client actively seek to educate the prescribers about the formulary
preferences; and through the Company's therapeutic substitution programs that
target certain high-cost therapy classes for concentrated formulary compliance
efforts.

The Company's electronic claims processing system also enables it to implement
sophisticated intervention programs to assist in managing prescription drug
utilization. The system can be used to alert the pharmacist to generic and
therapeutic substitution opportunities and formulary compliance issues, or to
administer prior authorization and therapy protocol programs at the time a claim
is submitted for processing. The Company's claims processing system also creates
a database of drug utilization information that can be accessed on a
retrospective basis to analyze utilization trends and prescribing patterns for
more intensive management of the drug benefit.

The Company is developing disease management programs to assist health plans in
managing the total health care costs associated with certain diseases, such as
diabetes and asthma, for which pharmaceutical therapy is a principal treatment
regimen. A disease management program may entail mailing information about the
disease to health plan members who have the disease. Additionally, the program
includes periodic reminders to encourage compliance with the therapy. High risk
or noncompliant members can be identified and contacted for individual
counseling, and physicians can be encouraged to follow the health plan's
specified therapy protocol for treating the disease. Disease management programs
that promote compliance with the drug regimen can both reduce complications from
the underlying disease and manage the severity of the disease so that more
expensive drugs or medical procedures can be avoided, thus helping to manage the
total health care cost of the disease.

MAIL SERVICE PHARMACY BENEFITS. The Company integrates its pharmacy network
benefits with its mail service pharmacy benefits provided to its clients. It
operates one mail service pharmacy in Florida that provides members with
convenient access to maintenance medications, and enables the Company and its
clients to control drug costs through purchasing efficiencies and other
economies of scale. In addition,


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through its mail service pharmacy, the Company is able to be directly involved
with the prescriber and member, and is generally able to achieve a higher level
of generic and therapeutic substitution than can be achieved through the retail
pharmacy network, which further reduces the client's costs.

On December 1, 1996, the Company entered into a Master Services Agreement for
administration of Pharmacy Gold, Inc.'s mail service prescription drug plan.
Pharmacy Gold, Inc. ("PGI"), is an affiliate of Blue Cross and Blue Shield of
Minnesota and provides pharmacy benefit management services throughout the
United States and its territories. Under the agreement, CompScript has agreed
that in the performance of its mail order pharmacy functions it will achieve
certain clinical, operational and service requirements including, but not
limited to, dispensing of pharmaceuticals in compliance with PGI's designated
drug formulary; achievement of certain agreed generic replacement efficiency;
assistance in developing educational enrollment materials for PGI and its
clients; filling prescriptions and mailing of such prescriptions to participants
in the plan within a designated number of days after request. The Agreement is
for a five year term expiring November 30, 2001. In order to continue the growth
and expansion of the Company's mail service operations, on January 9, 1997, the
Company entered into a Independent Consulting Agreement ("Consulting Agreement")
with Gerard Altieri, ("Altieri"), a former director of the Company, and Ronald
J. Reith ("Reith"), a former officer of the Company (the "Consultants"). The
Consultants will work with the Company on securing new mail order and related
business for the Company and also work with the Company in connection with its
Agreement with "PGI". The Consulting Agreement provides that for the one year
period through January, 1998 the Consultants shall receive a payment of $50,000
per month which payments shall be extended for an additional 12 month period if
gross revenues (less adjustments) attributable to all PGI business exceed
certain targeted amounts. The Consultants shall provide the Company with
reasonable detailed monthly reports of their activity including the status of
the PGI business and new business. The Consultants shall devote such time as
reasonably necessary to perform services under the Consulting Agreement,
including maintaining and developing the present and future PGI business. In
addition, the Consultants shall receive commissions on gross revenues earned by
the Company each and every year from a customer contract procured by the
Consultants.

ACQUISITION STRATEGY

The Company believes that through consolidation of other companies engaged in
the pharmacy management services it can provide a broad array of high quality
pharmacy and related services in a cost effective manner. Acquisition and
effective integration can result in efficiencies in service delivery,
management, marketing, information systems, administrative functions and
increases in purchasing leverage.

The Company targets acquisition candidates with strong management, a
demonstrated capacity for growth and opportunities to realize efficiencies
through consolidation and integration. The Company identifies acquisition
candidates with management who intend to continue to participate in the
operation of the business but believe that there are more substantial
opportunities in being involved in a larger, stronger organization. The Company
has historically issued equity in CompScript as the purchase price for an
acquired company in order to align the interests of the acquired company's
management with those of CompScript.

On May 31, 1996, in a transaction accounted for as a pooling of interests, the
Company acquired Delta Pharmacy Services, Inc., (Delta). In connection with the
transaction, the Company exchanged 666,350 shares of the Company's Common Stock
for all of the outstanding common stock of Delta. Delta is in the business of
supplying prescription pharmaceuticals, consulting and enteral and parental
therapies to long-term and alternate care providers in Alabama and Northern
Florida.


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On August 19, 1996, in a transaction accounted for as a pooling of interests,
the Company acquired SECURx, Inc., ("SECURx"). In connection with the
transaction, the Company exchanged 187,500 shares of the Company's Common Stock
for all of the outstanding common stock, of SECURx. SECURx is in the business of
selling and distributing prescription drugs through mail order distribution to
the general public through corporate sponsored benefit plans of employers
located in the Northeastern United States.

On January 10, 1997, in a transaction accounted for as a pooling of interests,
the Company acquired Medical Services Consortium, Inc. ("MSC"). In connection
with the transaction, the Company exchanged 1.4 million shares of the Company's
Common Stock for all of the outstanding common stock of MSC. MSC is in the
business of supplying prescription pharmaceuticals, consulting and enteral and
parental therapies to long-term and alternate care providers in South Florida.

On February 28, 1997, in a transaction accounted for as a pooling of interests,
the Company acquired Campo Medical Pharmacy, Inc. ("Campo"). In connection with
the transaction, the Company exchanged 375,000 shares of the Company's Common
Stock for all of the outstanding common stock of Campo. Campo is in the business
of supplying prescription pharmaceuticals, and consulting services to long-term
and alternate care providers in Louisiana.

On March 26, 1997, in a transaction accounted for as a pooling of interests, the
Company acquired Hytree Pharmacy, Inc. ("Hytree"). In connection with the
transaction, the Company exchanged 850,000 shares of the Company's Common Stock
for all of the outstanding common stock of Hytree. Hytree is in the business of
providing institutional pharmacy services, home care, distribution of durable
medical equipment and supplies in Ohio.

In connection with the Company's acquisition strategy, on October 1, 1996, the
Company entered into a five year Consulting and Acquisition Management
Agreement with Shulman & Associates Inc. ("Shulman"), pursuant to which Shulman
would assist CompScript in identifying, evaluating, structuring, negotiating,
and closing business acquisitions, including, but not limited to, asset
purchases, consolidations, mergers, joint ventures and strategic alliances. In
connection with such agreement, Shulman will receive a fee of 15,000 shares of
the Company's Common Stock if the "aggregate market value" (defined in such
agreement) of the acquisition transaction is up to $5,000,000, 30,000 shares if
the aggregate market value of the acquisition transaction is between $5,000,000,
but less than $10,000,000, and 45,000 shares of the aggregate market value if
the acquisition transaction is in excess of $10,000,000. In the event the
Company consummates a merger or consolidation involving itself or 50% or more of
its voting stock or a substantial portion of its assets is acquired in any one
transaction by way of tender or exchange offer, negotiated purchase or
otherwise, Shulman shall be paid a fee for 3% of the aggregate market value of
the business combination with a minimum of $1,000,000 and a maximum of
$3,000,000, provided, that if Shulman introduces the transaction to the Company
there shall be no maximum fee limitation.

SUPPLIERS

The Company's inventory in its pharmacies includes over 3,000 brand and generic
pharmaceuticals. If a pharmaceutical is not in its inventory, the Company can
generally obtain it from a supplier within one to two business days. The Company
purchases its pharmaceuticals primarily through wholesale distributors. Generic
pharmaceuticals are generally purchased directly from manufacturers or through
wholesale distributors. The Company believes that alternative sources of supply
for most generic and brand name pharmaceuticals are readily available.


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COMPETITION

The Long Term-Care industry is highly fragmented but experiencing significant
consolidation. There are a large number of small companies offering long-term
care pharmacy services. Most of these are smaller than the Company. By its
nature, the long-term care pharmacy business is highly regionalized and, within
a given geographic region of operations, highly competitive. In the geographic
regions it serves, CompScript competes with numerous local retail pharmacies,
local and regional institutional pharmacies and pharmacies owned by long-term
care facilities. CompScript competes in this market on the basis of quality,
cost-effectiveness and the increasingly comprehensive and specialized nature of
its services along with the clinical expertise, pharmaceutical technology and
professional support it offers. In its program of acquiring institutional
pharmacy providers, the Company competes with several other companies with
similar acquisition strategies, some of which have greater resources than the
Company. No individual customer or market group is critical to the total sales
of the Company's long-term care pharmacy business.

The Company believes that the primary competitive factors in each of its
businesses are price, quality of service and breadth of available services.
CompScript also believes that its larger competitors offer limited core pharmacy
management services that lack the depth and breadth of diversification offered
by the Company, and that most of the Company's smaller competitors offer even
more limited services with greater financial limitations. The Company considers
its principal competitive advantages to be independence from nursing home
owner/operators and drug manufacturers strong managed care knowledge and
experience which supports the development of advanced services, and its
commitment to providing flexible and distinctive service to its customers.

There are a large number of companies offering PBM services in the U.S. Most of
these companies are smaller than the Company and offer their services on a local
or regional basis. As a full service, national pharmacy benefit manager, the
Company competes with a number of larger, national companies, as well as
numerous insurance and Blue Cross/Blue Shield plans, certain HMOs and retail
drug chains which have their own pharmacy benefit management capabilities. Many
of these larger companies have greater financial and marketing resources than
the Company.

Consolidation is a critical factor in the pharmaceutical industry generally.
Horizontal and vertical merger and acquisition activity in the manufacturing
segment has been robust, with significant resultant movements in market share.
Competitors that are owned by nursing home owners/operators and manufacturers
may have pricing advantages that are unavailable to the Company and other
independent companies.

With respect to infusion therapy services, the Company competes with a number of
regional and large national companies.

GOVERNMENT REGULATION

LTC PHARMACY

Institutional pharmacies, as well as the long-term care facilities they serve,
are subject to extensive federal, state and local regulation. These regulations
cover required qualifications, day-to-day operations, reimbursement and the
documentation of activities. CompScript continuously monitors the effects of
regulatory activity on its operations.


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LICENSURE, CERTIFICATION AND REGULATION. States generally require that companies
operating a pharmacy within the state be licensed by the state board of
pharmacy. The Company currently has pharmacy licenses in each state in which it
operates a pharmacy. In addition, CompScript's pharmacies are registered with
the appropriate state and federal authorities pursuant to statutes governing the
regulation of controlled substances.

Client nursing facilities are also separately required to be licensed in the
states in which they operate and, if serving Medicare or Medicaid patients, must
be certified to be in compliance with applicable program participation
requirements. Client nursing facilities are also subject to the nursing home
reforms of the Omnibus Budget Reconciliation Act of 1987, which imposed strict
compliance standards relating to quality of care for nursing home operations,
including vastly increased documentation and reporting requirements. In
addition, pharmacists, nurses and other health care professionals who provide
services on the Company's behalf are, in most cases, required to obtain and
maintain professional licenses and are subject to state regulations regarding
professional standards of conduct.

MEDICARE AND MEDICAID. The nursing home pharmacy business has long operated
under regulatory and cost containment pressures from state and federal
legislation primarily affecting Medicaid and, to a lesser extent, Medicare.

As is the case for nursing home services generally, CompScript receives
reimbursement from the Medicaid programs, directly from individual residents
(private pay), and from other payors such as third-party insurers. The Company
believes that its reimbursement mix is in line with nursing home expenditures
nationally. For the year ended December 31, 1996, CompScript's payor mix was
approximately as follows: 38% private pay and nursing homes, 29% Medicaid, 27%
Medicare and 6% insurance and other private sources.

For those patients who are not covered by government-sponsored programs or
private insurance, CompScript generally directly bills the patient or the
patient's responsible party on a monthly basis. Depending upon local market
practices, CompScript may alternatively bill private patients through the
nursing facility. Pricing for private pay patients is based on prevailing
regional market rates or "usual and customary" charges.

The Medicaid program is a cooperative federal-state program designed to enable
states to provide medical assistance to aged, blind, or disabled individuals, or
members of families with dependent children whose income and resources are
insufficient to meet the costs of necessary medical services. State
participation in the Medicaid program is voluntary. To become eligible to
receive federal funds, a state must submit a Medicaid "state plan" to the
Secretary of the Department of Health and Human Services ("HHS") for approval.
The federal Medicaid statute specifies a variety of requirements which the state
plan must meet, including requirements relating to eligibility, coverage of
services, payment and administration.

Federal law and regulations contain a variety of requirements relating to the
furnishing of prescription drugs under Medicaid. States are given broad
authority, subject to certain standards, to limit or specify conditions to the
coverage of particular drugs. Federal Medicaid law establishes standards
affecting pharmacy practice. These standards include general requirements
relating to patient counseling and drug utilization review and more specific
requirements for nursing facilities relating to drug regiment reviews for
Medicaid patients in such facilities. Recent regulations clarify that, under
federal law, a pharmacy is not required to meet the general standards for drugs
dispensed to nursing facility residents if the nursing facility complies with
the drug regimen review requirements. However, the regulations indicate that
states may nevertheless require pharmacies to comply with the general standards,
regardless of whether the nursing


                                       11
<PAGE>



facility satisfies the drug regimen review requirement, and the states in which
the Company operates currently do require its pharmacies to comply therewith.

Federal regulations impose certain requirements relating to reimbursement for
prescription drugs furnished to Medicaid patients. In addition to requirements
imposed by federal law, states have substantial discretion to determine
administrative, coverage, eligibility and payment policies under their state
Medicaid programs which may affect the Company's operations. For example, some
states have enacted "freedom of choice" requirements which may prohibit a
nursing facility from requiring its residents to purchase pharmacy or other
ancillary medical services or supplies from particular providers that deal with
the nursing home. Such limitations may increase the competition which the
Company faces in providing services to nursing facility patients.

The Medicare program is a federally funded and administered health insurance
program for individuals age 65 and over or who are disabled. The Medicare
program consists of two parts: Part A, which covers, among other things,
inpatient hospital, skilled nursing facility, home health care and certain other
types of health care services; and Medicare Part B, which covers physicians'
services, outpatient services, and certain items and services provided by
medical suppliers. Medicare Part B also covers a limited number of specifically
designated prescription drugs. The Medicare program establishes certain
requirements for participation of providers and suppliers in the Medicare
program. Pharmacies are not subject to such certification requirements. Skilled
nursing facilities and suppliers of medical equipment and supplies, however, are
subject to specified standards. Failure to comply with these requirements and
standards may adversely affect an entity's ability to participate in the
Medicare program and receive reimbursement for services provided to Medicare
beneficiaries.

The Medicare and Medicaid programs are subject to statutory and regulatory
changes, retroactive and prospective rate adjustments, administrative rulings,
and freezes and funding reductions, all of which may adversely affect the
Company's business. There can be no assurance that payments for pharmaceutical
supplies and services under governmental reimbursement programs will continue to
be based on the current methodology or remain comparable to present levels. In
this regard, the Company may be subject to rate reductions as a result of
federal budgetary legislation related to the Medicare and Medicaid programs. In
addition, various state Medicaid programs periodically experience budgetary
shortfalls which may result in Medicaid payment delays to the Company. To date,
the Company has not experienced any material adverse effect due to any such
budgetary shortfall. In addition, the failure, even if inadvertent, of
CompScript and/or its client institutions to comply with applicable
reimbursement regulations could adversely affect CompScript's business.
Additionally, changes in such reimbursement programs or in regulations related
thereto, such as reductions in the allowable reimbursement levels, modifications
in the timing or processing of payments and other changes intended to limit or
decrease the growth of Medicaid and Medicare expenditures, could adversely
affect the Company's business.

REFERRAL RESTRICTIONS. The Company is subject to federal and state laws which
govern financial and other arrangements between health care providers. These
laws include the federal anti-kickback statute, which was originally enacted in
1977 and amended in 1987, and which prohibits, among other things, knowingly and
willfully soliciting, receiving, offering or paying any remuneration directly or
indirectly in return for or to induce the referral of an individual to a person
for the furnishing of any item or service for which payment may be made in whole
or in part under Medicare or Medicaid. Many states have enacted similar statutes
which are not necessarily limited to items and services for which payment is
made by Medicare or Medicaid. Violations of these laws may result in fines,
imprisonment, and exclusion from the Medicare and Medicaid programs or other
state-funded programs. Federal and state court decisions interpreting these
statutes are limited, but have generally construed the statutes to apply if "one
purpose" of remuneration is to induce referrals or other conduct within the
statute.


                                       12
<PAGE>



Federal regulations establish "safe harbors," which give immunity from criminal
or civil penalties to parties in good faith compliance. While the failure to
satisfy all criteria for a safe harbor does not mean that an arrangement
violates the statute, it may subject the arrangement to review by the Office of
Inspector General ("OIG"), which is charged with administering the federal
anti-kickback statute. There are no procedures for obtaining binding
interpretations or advisory opinions from the OIG on the application of the
federal anti-kickback statute to an arrangement or its qualification for a safe
harbor upon which the Company can rely.

The OIG issues "Fraud Alerts" identifying certain questionable arrangements and
practices which it believes may implicate the federal anti-kickback statute. The
OIG has issued a Fraud Alert providing its views on certain joint venture and
contractual arrangements between health care providers. The OIG also issued a
Fraud Alert concerning prescription drug marketing practices that could
potentially violate the federal statute. Pharmaceutical marketing activities may
implicate the federal anti-kickback statute because drugs are often reimbursed
under the Medicaid program. According to the Fraud Alert, examples of practices
that may implicate the statute include certain arrangements under which
remuneration is made to pharmacists to recommend the use of a particular
pharmaceutical product.

In addition, a number of states have recently undertaken enforcement actions
against pharmaceutical manufacturers involving pharmaceutical marketing
programs, including programs containing incentives to pharmacists to dispense
one particular product rather than another. These enforcement actions arose
under state consumer protection laws which generally prohibit false advertising,
deceptive trade practices, and the like.

The Company believes its contractual arrangements with other health care
providers, its pharmaceutical suppliers and its pharmacy practices are in
compliance with these laws. There can be no assurance that such laws will not,
however, be interpreted in the future in a manner inconsistent with the
Company's interpretation and application.

HEALTH CARE REFORM AND FEDERAL BUDGET LEGISLATION. The Clinton administration
and members of Congress have proposed plans to reform the health care system.
Currently, Congress is considering such reforms in the context of federal budget
reconciliation legislation. This legislation could result in significant
reductions in payments to providers under the Medicare program and a complete
restructuring and reduced payments to providers under the Medicare program. With
respect to Medicare, proposals include establishment of a prospective payment
system for Skilled Nursing Facilities ("SNFs"); limits on payments to Medicare
SNFs for certain non-routine services, including, among others, prescription
drugs, diagnostic services, and physical therapy and other rehabilitative
services; requiring consolidated billing by a SNF for all Part A and B claims
for SNF residents; and other limits on reimbursement of costs for Medicare SNF
services. If enacted, there can be no assurance that such proposals could not
have a material effect on the business of CompScript. While budget negotiations
are continuing, the future of any reform proposals in Congress is unknown.

In addition, a number of states have enacted and are considering various health
care reforms, including reforms through Medicaid demonstration projects. Federal
law allows HHS to authorize waivers of federal Medicaid program requirements,
including requirements relating to coverage, free choice of providers and
payment for health care services, in connection with state demonstration
projects that promote Medicaid program objectives. HHS published procedures and
public notice requirements designed to open the waiver approval process to
public comment and to expedite processing. Legal actions have been initiated
challenging the waiver process and the authority of HHS to approve waivers for
broad-based Medicaid managed care programs. The federal budget legislation
restructuring the Medicaid program would effectively eliminate Medicaid managed
care demonstration projects.


                                       13
<PAGE>



Several state Medicaid programs have established mandatory statewide managed
care programs for Medicaid beneficiaries to control costs through negotiated or
capitated rates, as opposed to traditional cost-based reimbursement for Medicaid
services, and propose to use savings achieved through these programs to expand
coverage to those not previously eligible for Medicaid. HHS has approved waivers
for statewide managed care demonstration projects in several states, and are
pending for several other states. These demonstration projects generally exempt
institutionalized care, including nursing facility services, from the programs,
and the Company's operations have not been adversely affected with a managed
care demonstration project in effect. The Company is unable to predict what
impact, if any, future projects might have on the Company's operations. Because
there are currently various reform proposals under consideration at the federal
and state levels, it is uncertain at this time what health care reform
initiatives, if any, will be implemented, or whether there will be other changes
in the administration of governmental health care programs or interpretations or
governmental policies or other changes affecting the health care system. There
can be no assurance that future health care or budget legislation or other
changes will not have an adverse effect on the business of the Company.

Various aspects of the Company's businesses are governed by federal and state
laws and regulations. Since sanctions may be imposed for violations of these
laws, compliance is a significant operational requirement for the Company. The
Company believes that it is in substantial compliance with all existing legal
requirements material to the operation of its businesses.

PHARMACY BENEFITS MANAGEMENT REGULATION:

Certain federal and related state laws and regulations affect aspects of the
Company's pharmacy benefit management business. Among these are the following:

FDA REGULATION. The FDA generally has authority to regulate drug promotional
materials that are disseminated "by or on behalf of" a drug manufacturer. In
October 1995, the FDA held hearings to determine whether and to what extent the
activities of pharmacy benefit management companies should be subject to FDA
regulations. At this hearing, FDA officials expressed concern about the efforts
of pharmacy benefit managers (PBMs) that are owned by drug manufacturers to
engage in therapeutic switching programs and about the criteria used by such
PBMs that govern the inclusion and exclusion of particular drugs in formularies.
Various parties, including the Company, have submitted written comments to the
FDA regarding the basis for FDA regulation of PBM activities. It is the
Company's position that, while the FDA may have jurisdiction to regulate PBMs
that are owned by drug manufacturers, the prescription drug benefit programs
developed and implemented by independent PBMs do not constitute the distribution
of materials that promote particular drugs "on behalf of" any pharmaceutical
manufacturers, and therefore, these programs are not subject o FDA regulation.
The FDA has not published any proposed rules to date on the regulation of PBMs,
and there can be no assurance that the FDA will not seek to regulate certain
aspects of the Company's PBM.

ANTI-REMUNERATION LAWS. Medicare and Medicaid law prohibits, among other things,
an entity from paying or receiving, subject to certain exceptions and "safe
harbors," any remuneration to induce the referral of Medicare or Medicaid
beneficiaries or the purchase (or the arranging for or recommending of the
purchase) of items or service for which payment may be made under Medicare,
Medicaid, or other federally-funded state health care programs. Several states
also have similar laws which are not limited to services for which Medicare or
Medicaid payment may be made. State laws vary and have been infrequently
interpreted by courts or regulatory agencies. Sanctions for violating these
federal and state anti-remuneration laws may include imprisonment, criminal and
civil fines, and exclusion from participation in the Medicare and Medicaid
programs.


                                       14
<PAGE>



The federal statute has been interpreted broadly by courts, the OIG within the
HHS, and administrative bodies. Because of the federal statute's broad scope,
federal regulations establish certain "safe harbors" from liability. Safe
harbors exist for certain properly reported discounts received from vendors,
certain investment interests, and certain properly disclosed payments made by
vendors to group purchasing organizations. A practice that does not fall within
a safe harbor is not necessarily unlawful, but may be subject to scrutiny and
challenge. In the absence of an applicable exception or safe harbor, a violation
of the statute may occur even if only one purpose of a payment arrangement is to
induce patient referrals or purchases. Among the practices that have been
identified by the OIG as potentially improper under the statute are certain
"product conversion programs" in which benefits are given by drug manufacturers
to pharmacists or physicians for changing a prescription (or recommending or
requesting such a change) from one drug to another. Such laws have been cited as
a partial basis, along with state consumer protection laws discussed below, for
investigations and multi-state settlements relating to financial incentives
provided by drug manufacturers to retail pharmacies in connection with such
programs.

To the Company's knowledge, these anti-remuneration laws have not been applied
to prohibit PBMs from receiving discounts from drug manufacturers in connection
with drug purchasing and formulary management programs, to therapeutic
substitution programs conducted by independent PBMs, or to the contractual
relationships such as those the Company has with certain of its customers. The
Company believes that it is in substantial compliance with the legal
requirements imposed by such laws and regulations, and the Company believes that
there are material differences between drug-switching programs that have been
challenged under these laws and the programs offered by the Company to its
customers. However, there can be no assurance that the Company will not be
subject to scrutiny or challenge under such laws or regulations, or that any
such challenge would not have a material effect upon the Company.

ERISA REGULATIONS. The Employee Retirement Income Security Act of 1974 ("ERISA")
regulates certain aspects of employee pension and health benefit plans,
including self-funded corporate health plans with which the Company has
agreements to provide PBM services. The Company believes that the conduct of its
business is not subject to the fiduciary obligations of ERISA, but there can be
no assurance that the U.S. Department of Labor, which is the agency that
enforces ERISA, would not assert that the fiduciary obligations imposed by the
statute apply to certain aspects of the Company's operations.

Numerous state laws and regulations also affect aspects of the Company's
pharmacy benefit management business. Among these are the following:

CONSUMER PROTECTION LAWS. Most states have consumer protection laws that have
been the basis for investigations and multi-state settlements relating to
financial incentives provided by drug manufacturers to retail pharmacies in
connection with drug switching program features that have been viewed by
enforcement authorities as problematic in recent settlement agreements. However,
no assurance can be given that the Company will not be subject to scrutiny or
challenge under one or more of these laws.

NETWORK ACCESS LEGISLATION. A majority of states now have some form of
legislation affecting the ability of the Company to limit access to a pharmacy
provider network or from removing network providers. Such legislation may
require the Company or its client to admit any retail pharmacy willing to meet
the plan's price and other terms for network participation ("any willing
provider" legislation); or providing that a provider may not be removed from a
network except in compliance with certain procedures ("due process"
legislation). The Company has not been materially affected by these statutes
because it maintains a large network of over 46,000 retail pharmacies and will
admit any licensed pharmacy that meets the Company's credentialing criteria,
involving such matters as adequate insurance coverage, minimum hours of
operation, and the absence of disciplinary actions by the relevant state
agencies.


                                       15
<PAGE>



LEGISLATION IMPOSING PLAN DESIGN RESTRICTIONS. Some states have legislation that
prohibits the plan sponsor from implementing certain restrictive design
features. For example, some states provide that members of the plan may not be
required to use network providers, but must also be provided with benefits even
if they choose to use non-network providers ("freedom of choice" legislation).
Other states mandate coverage of certain benefits or conditions. Such
legislation does not generally apply to the Company, but it may apply to certain
of the Company's customers (HMOs and insurers). If such legislation were to
become widespread and broad in scope, it could have the effect of limiting the
economic benefits achievable through pharmacy benefit management.

LEGISLATION AFFECTING DRUG PRICES. Some states have adopted legislation
providing that a pharmacy participating in the state Medicaid program must give
the state the best price that the pharmacy makes available to any third party
plan ("most favored nation" legislation). Such legislation may adversely affect
the Company's ability to negotiate discounts in the future from network
pharmacies. Other states have enacted "unitary pricing' legislation, which
mandates that all wholesale purchasers of drugs within the state be given access
to the same discounts and incentives. Such legislation, if enacted in either
state, could adversely affect the Company's ability to negotiate discounts on
its prescription drugs to be dispensed by its mail service pharmacies.

MAIL PHARMACY REGULATION. The Company's mail service pharmacy is located in
Florida and the Company is licensed to do business as a pharmacy in that state.
Many of the states into which the Company delivers pharmaceuticals have laws and
regulations that require out-of-state mail service pharmacies to register with,
or be licensed by, the board of pharmacy or similar regulatory body in the
state. These states generally permit the mail service pharmacy to follow the
laws of the state within which the mail service pharmacy is located, although
one state also requires that the Company employ a pharmacist licensed in that
state. The Company has registered in every state in which, to the Company's
knowledge, such registration is required.

Other statutes and regulations impact the Company's mail service operations.
Federal statutes and regulations govern the labeling, packaging, advertising and
adulteration of prescription drugs and the dispensing of controlled substances.
The Federal Trade Commission requires mail order sellers of goods generally to
engage in truthful advertising, to stock a reasonable supply of the product to
be sold, to fill mail orders within thirty days, and to provide customers with
refunds when appropriate. The Company believes it is in compliance with all
requirements of the Federal Trade Commission.

REGULATION OF INFUSION THERAPY SERVICES. The Company's infusion therapy services
business is subject to many of the same or similar state laws and regulations
affecting the Company's pharmacy management business. In addition, some states
require that providers of infusion therapy services be licensed. The Company is
licensed as a home health agency , infusion pharmacy and pharmacy in Florida.
The Company is licensed as a pharmacy only, in Alabama. The Company believes
that it is in substantial compliance with such licensing requirements.

JCAHO, a non-profit, private organization, has established written standards for
health care organizations and home care services, including standards for
services provided by home infusion therapy companies. The Company's Florida
facility has received JCAHO accreditation. When accredited by JCAHO, the Company
can market infusion therapy services to Medicare and Medicaid programs. If the
Company expands its home infusion therapy services to other states or to
Medicaid programs, it may be required to comply with other applicable laws and
regulations.

FUTURE REGULATION. The Company is unable to predict accurately what additional
federal or state legislation or regulatory initiatives may be enacted in the
future relating to the businesses of the Company or the health


                                       16
<PAGE>



care industry in general, or what effect any such legislation or regulations
might have on the Company. There can be no assurance that federal or state
governments will not impose additional restrictions or adopt interpretations of
existing laws that could have a material adverse effect on the Company's
business or financial position.

SERVICEMARKS AND TRADEMARKS

The Company has registered the servicemark "CompScript" with the United States
Patent and Trademark Office. The Company's rights to this servicemark will
continue so long as the Company complies with the usage, renewal filing and
other legal requirements relating to the renewal of service marks. The Company
is in the process of applying for registration of several other trademarks and
servicemarks. If the Company is unable to obtain any additional registrations,
the Company believes there would be no material adverse effect on the Company.

INSURANCE

The dispensing of pharmaceutical products by the Company's pharmacies, and the
products and services provided in connection with the Company's infusion therapy
programs (including the associated nursing services) may subject the Company to
litigation and liability for damages. The Company believes that its insurance
protection is adequate for its present business operations, but there can be no
assurance that the Company will be able to maintain its professional and general
liability insurance coverage in the future or that such insurance coverage will
be available on acceptable terms or be adequate to cover any or all potential
product or professional liability claims. A successful product or professional
liability claim in excess of the Company's insurance coverage could have a
material adverse effect upon the Company.

EMPLOYEES

As of March 31, 1997, the Company and its subsidiaries employed a total of 332
employees.

PRODUCT AND MARKET DEVELOPMENT

CompScript's pharmacy business engages in a continuing program for the
development of new services and the marketing thereof. While new service and new
market development are important factors for the growth of this business,
CompScript does not expect that any new service or marketing effort, including
those in the developmental stage, will require the investment of a material
portion of CompScript's assets.

MATERIALS/SUPPLIES

CompScript purchases pharmaceuticals through a wholesale distributor with whom
it has a prime vendor contract and, on an increasing basis, under contracts
negotiated directly with pharmaceutical manufacturers. The Company also is a
member of industry buying groups which contract with manufacturers for
discounted prices. The Company has numerous sources of supply available to it
and has not experienced any difficulty in obtaining pharmaceuticals or other
products and supplies used in the conduct of its business.

INVENTORIES

CompScript's pharmacies maintain adequate on-site inventories of pharmaceuticals
and supplies to ensure prompt delivery service to its customers. Inventories on
hand are not considered to be high beyond industry standards. The Company's
primary wholesale distributor also maintains local warehousing in most major
geographic markets in which the Company operates.


                                       17
<PAGE>



ENVIRONMENTAL MATTERS

In operating its facilities, CompScript makes every effort to comply with
pollution control laws. No major difficulties have been encountered in effecting
compliance. No material capital expenditures for environmental control
facilities are expected. While CompScript cannot predict the effect which any
future legislation, regulations, or interpretations may have upon its
operations, it does not anticipate any changes that would have a material
adverse impact on its operations.

Item 2.  DESCRIPTION OF PROPERTIES

         The Company's principal offices, mail order pharmacy operations and
largest institutional pharmacy are located in leased facilities in Boca Raton,
Florida. The Company has leased 20,000 square feet under a lease which expires
in December 2002 and has an annual average rental of $147,000 plus common area
charges. The chart listed below sets forth the approximate square footage,
annual lease cost (exclusive of common area charges) and the lease termination
date for each institutional pharmacy maintained by the Company, exclusive of the
institutional pharmacy at the Company's principal offices.

                             SQUARE                           TERMINATION
LOCATION                    FOOTAGE          ANNUAL COST        DATE
--------                    -------          -----------      ------------

Mobile, Alabama               4,200           $  24,000        May 1997
Tampa, Florida                2,520              16,900        December 1999
Miami, Florida               17,000             121,000        December 2001
Metarie, Louisiana            4,400              45,600        July 2001
Jackson, Mississippi          2,831              23,300        December 1999
Mentor, Ohio                 20,000             120,000        August 2000

Item 3.  LEGAL PROCEEDINGS

         The Company is not a party to any material legal proceeding.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

         None.

Item 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's Common Stock, $.0001 par value, is traded on the NASDAQ
SmallCap Market under the symbol "CPRX." The following sets forth the range of
high and low closing bid prices for the Common Stock as reported on the NASDAQ
during each of the quarters presented. The quotations set forth below are
inter-dealer quotations, without retail mark-ups, mark-downs or commissions and
may not necessarily represent actual transactions. The quotations have been
adjusted for the Company's 1 to 8 reverse stock split on April 26, 1996.

                                                        High        Low
                                                       ------      ------
1994
First Quarter...................................       $30.00      $26.00
Second Quarter..................................        26.00       21.00
Third Quarter...................................        23.00       21.00
Fourth Quarter..................................        23.00       16.00


                                       18
<PAGE>



1995
First Quarter...................................        20.25       11.00
Second Quarter..................................        20.50        6.50
Third Quarter...................................         7.25        3.50
Fourth Quarter..................................         6.50        3.00

1996

First Quarter...................................         8.75        3.00
Second Quarter..................................         9.00        5.75
Third Quarter...................................         7.25        4.13
Fourth Quarter..................................        10.25        5.75

-----

         The Company believes that as of March 31, 1997, there were over 300
record holders of the Company's Common Stock. The Company believes that there
are in excess of 300 beneficial holders of the Company's Common Stock.

         The Company has not paid any cash dividends on its common stock and
currently intends to declare or pay cash dividends in the foreseeable future.
The Company presently intends to retain any earnings that may be generated to
provide funds for the operation of business.

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

GENERAL

         CompScript, Inc. (CompScript or the Company, f/k/a Capital Brands,
Inc.) is a comprehensive provider of pharmacy management services including
institutional pharmacy, infusion therapy, mail order and consultant pharmacist
services as well as pharmacy benefit claim administration to managed care
networks, long-term and subacute care facilities, home health patients and
recipients of managed care. The company is the successor to CompScript-Boca,
Inc. (Boca, f/k/a CompScript, Inc. which was f/k/a Aldencare, Inc.), which was
incorporated under the laws of the State of Florida on October 3, 1991.

On April 26, 1996, shareholders who previously owned approximately 93% of Boca
exchanged their shares of Boca's Common Stock for 7,394,982 common shares
(representing an 80% interest) of Capital Brands, Inc. (Capital), a
publicly-held company involved in the development of consumer-based businesses
in the Republic of Poland (the Acquisition). This exchange was structured as a
tax-free reorganization. The Acquisition was accounted for as a reverse
acquisition of Capital by Boca pursuant to which Boca was recapitalized to
include the assets and liabilities of Capital revalued to reflect the market
value of Capital's net tangible assets at the date of the Acquisition,
consisting of cash and marketable equity securities. The Company incurred
acquisition costs of approximately $1,889,000, all of which was charged to
additional paid-in capital. As Capital had no operations as of the Acquisition
date, no pro forma financial information is presented related to this
transaction. Effective July 5, 1996, Capital changed its name to CompScript,
Inc. The remaining 7% of Boca is accounted for as a minority interest in a
consolidated subsidiary on the Company's December 31, 1996 balance sheet.

RESULTS OF OPERATIONS

         On May 31, 1996, the Company issued 666,350 shares of its Common Stock
for all the outstanding common stock of Delta Pharmacy Services, Inc. (Delta).
The acquisition of Delta enhanced the Company's institutional pharmacy services
for long-term care into Alabama, Mississippi, and Northern Florida. On August
19, 1996, the Company issued 187,500 shares of its Common Stock for all the
outstanding stock of Securx, Inc. (Securx). The acquisition of Securx enabled
the Company to strengthen its 

                                       19

<PAGE>

overall pharmacy benefit management program and become a nationally recognized
full service on line adjudicated mail order dispensing pharmacy.

         These acquisitions were accounted for as pooling of interests and,
accordingly, the Company's consolidated financial statements have been restated
for all periods presented. (See note 1 to the Consolidated Financial
Statements.) In accordance with accounting rules for pooling of interests
transactions, charges to operating income for acquisition, related expenses of
approximately $875,000 were recorded during the year.

         The Company also incurred significant costs (which the Company believes
are nonrecurring) associated with the start up and reorganization of its mail
order pharmacy ("Mail Order") operations during 1996. As a result of the Company
incurring dual operating costs while moving the operations from Ohio to Florida;
installing an entirely new proprietary order entry, customer service, dispensing
and on-line adjudication software system; incurring ramp up costs in the area of
customer service and dispensing personnel to handle new contracts which began in
January of 1997, the Company incurred a loss of approximately $1,100,000 related
to Mail Order operations during the fourth quarter of 1996.

         The Company believes that as a result of the Mail Order operations
nonrecurring costs incurred during the fourth quarter of 1996, it has put into
place the infrastructure to support anticipated future growth associated with
further development of its Mail Order operations. While the results of the Mail
Order operations cannot be predicted and is dependent, in large part, on the
Company's success in implementing its marketing and business strategy,
management believes the additional personnel and increased administrative and
operational expenses will be partially offset by increased growth in the Mail
Order operations.

         During the year ended December 31, 1995, the Company recognized a
goodwill impairment charge of $3,636,362 with no associated tax benefit, related
to the Company's 1994 acquisition of CompScript, Inc., which became the Ohio
Division. (See Note 4 to the Consolidated Financial Statements.) The Ohio
Division was purchased to be the Company's entry into the workers' compensation,
pharmacy benefits management (PBM) line of business. During the year ended
December 31, 1995, the contracts attributed to 

                                       20

<PAGE>


the Ohio Division generated minimal revenue due in part to the nonexclusive
nature of the contracts. In addition, the inability of the Ohio Division to
convert existing relationships with prospective clients into new PBM contracts
or to secure new prospective clients contributed to significant operating losses
and negative cash flows relative to the Ohio Division in 1995.


                                       21


<PAGE>

         The following table presents the Company's results of operations
excluding the certain items previously discussed ("the Adjustments"):

                                                YEAR ENDED DECEMBER 31,

                                                   1995               1996
                                               -----------        ----------
                                                                            
Net loss, as reported                          ($3,848,645)      ($1,998,342)  
                                                                               
                                                                               
                                                                               
Merger costs--pooling of interests                     --            875,223   
                                                                               
Mail order pharmacy--nonrecurring costs                --          1,100,000   
                                                                               
Goodwill impairment charge                       3,636,362                --   
                                                                               
Tax effect [A]                                         --           (350,000)  
                                               -----------       -----------   
Net loss excluding the Adjustments             ($  212,283)      ($  373,119)  
                                               ===========       ===========   
                                                                               
Net loss per share:                                                            
                                                                               
Net loss per share, as reported                ($      .44)      ($      .20)  
                                                                               
Merger costs - pooling of interests                     --               .09   
                                                                               
Mail order pharmacy--nonrecurring costs                 --               .11   
                                                                               
Goodwill impairment charge                             .42                --   
                                                                               
Tax effect [A]                                          --        (      .04)  
                                               -----------        ----------   
Net loss per share, excluding the Adjustments  ($      .02)       ($     .04)  
                                               ===========        ==========   
                                                                

[A] Represents the tax effect relating to the Mail Order nonrecurring costs at
the Company's 1996 effective tax rate. No tax effect was computed relating to
the 1996 merger costs or the 1995 goodwill impairment charges as such charges
were recorded with no associated tax benefit.

                                       22

<PAGE>


Net loss for the year ended December 31, 1996, excluding the Adjustments was
$373,119 compared to net loss excluding the Adjustments of $212,283 in 1995.
Loss per share excluding the Adjustments was ($0.04) compared to ($0.02) in
1995. Net loss as reported was $1,998,342, or ($0.20) per share for the year
ended December 31, 1996, compared to a net loss of $3,848,645, or ($0.44) in
1995.

         Revenues for the year ended December 31, 1996 increased 28.8% to
$20,049,771 from $15,571,030 for the year ended December 31, 1995. The strong
increase in revenues is primarily attributed to the Company's steady internal
growth of its existing and acquired businesses resulting from marketing efforts
to new and existing clients and the integration of new and existing products and
services.

         Gross profits increased to $7,203,658 in 1996 from $6,786,722 in 1995,
an increase of $416,936 or 6.1%. Gross profit margins decreased to 35.9% in 1996
from 43.6% in 1995 primarily as a result of higher costs associated with the
Company's Mail Order operations during the fourth quarter (as previously
discussed) when compared to the Company's other operations. Gross profit as a
percentage of sales for all operations excluding Mail Order decreased slightly
to 48.0% in 1996 compared to 49.5% in 1995. This decrease is attributable to a
change in revenue mix during the fourth quarter of 1996 as a result of reduced
infusion revenues.

         Selling general and administration expenses as a percentage of revenues
for 1996 and 1995 were 39.8% and 42.8% respectively. This decrease is
attributable to the increase in revenues during 1996, as well as the continued
efforts to leverage corporate overhead over a larger revenue base. The Company
believes its acquisition strategy will enable it to continue to reduce these
expenses as a percentage of revenues in the future, as the Company believes it
has developed the infrastructure necessary to absorb additional acquisitions
without corresponding percentage increases in selling, general and
administrative expenses. During the year ended December 31, 1996, the Company
incurred additional general and administrative costs associated with increased
payroll costs from the addition of new executives, as well as increased legal
and professional fees relating to the Company's acquisitions along with costs
associated with becoming a public company during 1996.

                                       23

<PAGE>


         The Company's provision for doubtful accounts increased approximately
$500,000 in the year ended December 31, 1996, primarily due to a charge of
approximately $345,000 relating to the Company's Mail Order operations during
the fourth quarter of 1996. The balance of the increase was a result of
historical reserves based on increased revenue volume.

         Interest and other income decreased $41,957 to $29,462 during 1996,
compared to 1995, as interest on temporary cash investments fluctuated depending
upon the amount of excess cash available for investment.

         Interest expense for the year ended December 31, 1996 increased to
$113,759 from $96,115 during 1995, primarily due to higher levels of borrowings
outstanding.

                                       24

<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

         The Company has funded its operating requirements to date primarily
through operations, the private sale of equity securities (prior to the reverse
acquisition on April 26, 1996), and the exercise of options and warrants and
borrowings under its existing line of credit agreement. As of December 31, 1996,
the Company had cash and cash equivalents of $440,328, accounts receivable of
$2,227,477, working capital of $2,227,457, a current ratio of 1.70 to 1.00, and
available funds under its revolving credit facility of approximately $75,000.

         Net cash used in operating activities for the year ended 1996 was
$1,173,865 compared to net cash provided by operations during 1995 of $118,315.
The increase in cash used in operating activities of $1,292,180 during 1996 was
primarily attributable to the operating loss incurred during the year ended
December 31, 1996, along with increases in accounts receivable and inventory to
support the 28.8% increase in revenues at a greater rate than the corresponding
increase in accounts payable.

         Investing activities comprised mainly of the net purchase of property
and equipment of $589,170 related to the Company's additions to its Boca Raton
office and new mail order facility, along with new and enhanced management
information systems in its mail order and long-term care operations,
respectively. Total additions to property and equipment were $226,430 in 1995.
Investment activities also provided for $403,808 of net cash acquired in
connection with the reverse acquisition during 1996.

         Financing activities provided $1,483,790 in cash in 1996 compared to 
$153,521 in 1995 primarily as a result of $1,163,376 relating to the exercise of
options and warrants and net advances under the Company's credit line of
$469,946.

         The Company's future capital requirements for operations include
financing the growth of working capital items such as accounts receivable and
inventory, purchasing equipment and upgrading management information and
inventory control systems. Based upon the continuation of the Company's business
development, the Company believes that cash flow from operations, the exercise
of stock options (which is subject to market conditions) and borrowings under
its credit facility will provide sufficient cash to fund its 

                                       25

<PAGE>

operations and meet current obligations for the year ending December 31, 1997.
The Company is attempting to improve cash flows from operations and maintain
flexibility in financing both interim and long-term working capital requirements
by reducing inventory levels, as a result of the utilization of its inventory
control system which will improve the scheduling and timing of purchases. In the
event the Company dramatically expands its operations or makes acquisitions that
would require funds in addition to its existing liquid assets and cash flows, it
would have to seek additional debt or equity financing. There can be no
assurance that the Company could obtain such financing or that such financing
would be available on terms acceptable to the Company.

         On January 3, 1997, the Company amended its financing agreement with
its primary lender, to increase its revolving line of credit agreement to allow
for borrowings up to $5,000,000 from the $750,000 limit previously in effect.
The primary reason for the increase was to provide additional working capital
for operations and fund the Company's acquisition activity.

         The credit facility is collateralized by all of the Company's accounts
receivable, inventory, fixed assets and other assets, and consists of a term
loan due on April 30, 1998. Interest, which is paid monthly on the credit
facility, accrues at the lessor of the prime rate or the three-month London
Interbank Offered Rate, plus two hundred fifty (250) basis points (effective
rate 8.06% at March 31, 1997). The credit facility requires the Company to
maintain at all times, certain net worth, debt coverage and working capital
levels and restricts acquisitions and dispositions of property, and limits
additional borrowings from other lenders. At March 31, 1997, the Company had an
outstanding balance of $4,665,466 under the credit facility.

         In connection with the credit facility on January 3, 1997, the Company
also entered into a $500,000 promissory note with the same lender to fund the
company's office and Mail Order expansion, which was completed in the first
quarter of 1997. The principal sum of the promissory note shall be paid in
monthly installments of $8,333.33 plus interest at 9.0% for 60 months beginning
on February 1, 1997. Collateral and debt covenants are the same as those of the
Company's $5,000,000 revolving credit line facility.

                                       26

<PAGE>

         On March 19, 1997, the Company entered into an additional $750,000
promissory note with its existing lender, primarily for working capital
purposes. Such loan matures on July 26, 1997, and bears interest at prime. This
loan is cross collateralized with all other borrowings previously discussed. In
addition to the collateral previously discussed, this note is collateralized by
the 1,125,00 shares of Q.P.Q. Corporation common stock which also collateralizes
the $1,125,000 note receivable recorded on the Company's balance sheet at
December 31, 1996.

         Except for the historical information contained herein, the matters set
forth in this Form 10-KSB are forward looking and involve a number of risks and
uncertainties that could cause actual results to differ materially from these
statements and trends. Such factors include, but are not limited to: the effect
of changes in governmental regulation, reimbursement policies and federal and
state healthcare funding; the continued availability of suitable acquisition
candidates; significant changes to general economic conditions; strengthened
competition in the Company's geographic markets; the failure of the Company to
obtain or maintain required regulatory licenses and approvals or the loss of key
personnel.

                                       27

<PAGE>



Item 7.  FINANCIAL STATEMENTS

         See "Index to Financial Statements" for the financial statements
included in this Form 10-KSB.

Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         On June 12, 1996, Coopers & Lybrand was replaced by current Company
auditors Ernst & Young, LLP. During the two most recent fiscal years and interim
period subsequent to December 31, 1995, there have been no disagreements with
Coopers & Lybrand on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure or any reportable events.
The report of Coopers & Lybrand for the fiscal years ended December 31, 1995 and
December 31, 1994 did not contain an adverse opinion, disclaimer of opinion,
qualification, or modification as to uncertainty, audit scope or accounting
principles.

                                       28

<PAGE>



                                    Part III

Item 9. DIRECTOR'S, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         The following table sets forth certain information concerning the
current directors and the executive officers of the Company:

           NAME               AGE                          TITLE
-------------------------------------------------------------------------------

Brian A. Kahan ...........    45      Chairman of the Board, Chief Executive
                                      Officer and President of the Company

John F. Chiste ...........    40      Chief Financial Officer

Robert Gardner ...........    41      Vice President and Director

Robert Edelheit ..........    57      Director

Paul H. Heimberg .........    46      Director

Malcolm Leonard ..........    54      Director


         BRIAN A. KAHAN has been a Chairman, Chief Executive Officer and
President of the Company since April 1996. In October 1991, Mr. Kahan founded
Aldencare and served as its Chief Executive Officer and became Chief Executive
Officer of CompScript when it merged with Aldencare in 1994. Mr. Kahan has a
B.S. in Pharmacy from the University of Maryland, School of Pharmacy. Mr. Kahan
is currently President of the American Society of Consultant Pharmacists and
serves on the LTC Commission for the State of Florida. Mr. Kahan is presently a
clinical instructor for the University of Florida and Nova Southeastern College
of Pharmacy and is a trustee for the Florida Pharmacy Foundation.

         JOHN F. CHISTE has served as the Chief Financial Officer of the Company
since January 1997. From 1992 to December 1996 Mr.Chiste served as Chief
Financial Officer, Treasurer and Secretary of Computer Integration Corp., a
publicly held reseller of micro-computer work stations and related products.
From 1983 to 1992 and 1978 to 1981 Mr. Chiste was employed by the accounting
firm of Ernst & Young, LLP. Mr. Chiste is a certified public accountant with an
accounting degree from Florida Atlantic University and is a member of the
American Institute of Certified Public Accountants.

         ROBERT J. GARDNER has been Vice President and Director of the Company
since August 1996. From July 1995 to August 1996 Mr. Gardner was group leader of
infusion therapy services for Olsten Kimberly Quality Care. From May 1994 to
July 1995 Mr. Gardner served as a healthcare consultant. From August 1992 to
April 1994 Mr. Gardner served as President of Abbey Pharmaceutical Services, a
nationwide provider of institutional and subacute pharmacy services, and, as
Western Area Vice President for Abbey Home Healthcare. From 1986 to 1992 Mr.
Gardner held a variety of positions with Pharmacy Corporation of America
including Vice President of Operations. Mr. Gardner has a Doctor of Pharmacy
Degree from the University of Pacific and a Master of Business Administration
from the University of Washington.

         ROBERT EDELHEIT has served as a Director of the Company since April
1996. Mr. Edelheit is President of United Group Programs, employee benefit sales
and consulting firm with offices in Boca Raton, Atlanta and Philadelphia. Mr.
Edelheit received his B.S. in Business from the State University of New York.
Mr. Edelheit is editor and publisher of the newsletter, SYNOPSIS, a fax digest
with an emphasis on

                                       29

<PAGE>



employee benefits.  Mr. Edelheit has been an Associate Professor at Florida 
Atlantic University in Boca Raton, Florida and speaks nationally on employee 
benefits.

         PAUL H. HEIMBERG has served as Director of the Company since April 
1996. Mr. Heimberg is a partner with the law firm of Heimberg & Lumer, in Boca
Raton, Florida since November 1995. Previously Mr. Heimberg was a partner with
the firm of Heimberg, Heimberg, Rader & Levenstein, P.A. from 1990 to 1995. Mr.
Heimberg received his B.A. from the University of Wisconsin and his J.D. from
Boston University Law School.

         MALCOLM LEONARD has served as a Director of the Company since April
1996. Mr. Leonard is a Certified Public Accountant and has been the managing
partner of Leonard & Danzinger, CPA's since 1975. Mr. Leonard is a member of the
American Institute of Certified Public Accountants and the Florida Institute of
Certified Public Accountants. Mr. Leonard received a B.S. from Farleigh
Dickinson University.

         The Company's officers are elected annually by the Company's Board of
Directors and serve at the discretion of the Company's Board of Directors. The
Company reimburses directors for their expenses in connection with their
activities as directors of the Company. Directors of the Company do not receive
additional compensation for their services as directors. Historically, the
Company has granted option to its Directors as compensation for services
granted.

Item 10.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table sets forth the aggregate compensation paid to Brian
A. Kahan (the "Named Executive Officer") by the Company. None of the other
executive officers of the Company, were paid a total annual salary and bonus for
the fiscal year ended December 31, 1996 which was $100,000 or more.
<TABLE>
<CAPTION>

                                                                             LONG-TERM
                                                ANNUAL COMPENSATION         COMPENSATION
                                                -------------------         ------------
                                                               OTHER          NUMBER OF
                                   FISCAL                     ANNUAL           OPTIONS        ALL OTHER
NAME AND PRINCIPAL POSITION         YEAR       SALARY      COMPENSATION        GRANTED       COMPENSATION
---------------------------        ------      ------      ------------       ---------      ------------

<S>                                 <C>       <C>           <C>                 <C>           <C>      
Brian A. Kahan,                     1996      $270,000          none            121,017       $5,075(1)
Chief Executive Officer             1995      $180,000       $52,000              None         4,393(1)
</TABLE>

(1)      Represents auto lease payments of $5,075 and $4,393 in 1996 and 1995 
         respectively.


         The Company entered into an agreement with Mr. Kahan, amended and
restated on August 19, 1996, which provides that he shall serve as Chief
Executive Officer and Chairman of the Board of Directors for an initial term of
five (5) years, which may be extended for up to three (3) additional one (1)
year terms. Mr. Kahan's annual salary for the first year shall be $300,000
subject to annual increases equal to the greater of the percentage increase in
the consumer price index or six percent (6%) of the executive's previous year's
base salary. Pursuant to the Employment Agreement, Mr. Kahan is required to
devote substantially all his business time and attention to the business and
affairs of the Company. Mr. Kahan is entitled to a bonus equal to ten percent
(10%) of the Company's pre-tax profits for each year of the Agreement. Mr. Kahan
was granted 121,017 options exercisable at $5.13 per share. Mr. Kahan is
entitled to certain fringe benefits including an automobile allowance and
reimbursements for charitable donations or contributions in an amount not to
exceed $25,000. No such donations or contributions were made during 1996. In the
event that Mr. Kahan's

                                       30

<PAGE>

employment is terminated by the Company other than for cause, he shall receive
either a lump sum equal to his total compensation and benefits for the remaining
balance of the term of the agreement, reduced to present value or such payments
on a monthly basis.

         The Company entered into an agreement with Mr. Gardner which provides
that Mr. Gardner will serve as Vice President for a two year term beginning June
19, 1996. Mr. Gardner's current annual salary is $150,000, subject to an
increase to $200,000 on January 1, 1998. Mr. Gardner is entitled to receive an
annual cash bonus equal to $15,000 per year, and an additional cash bonus of an
amount not less than $10,000 a year based upon an agreed upon formula. Mr.
Gardner was granted fully vested options to purchase 140,000 shares at a price
of $5.13 per share. Mr. Gardner is entitled to certain fringe benefits including
an automobile allowance. In the event that within twelve (12) months of any
change of control of the Company or attempted change of control of the Company
(as such terms are defined in the Employment Agreement), the Company terminates
the employment of Mr. Gardner under the Employment Agreement, for any reason, or
Mr. Gardner's employment is constructively terminated, then in any such event
Mr. Gardner shall be entitled to receive the balance of the consideration due
under the Employment Agreement.

The Company entered into an Agreement with Mr. Chiste which provides that Mr.
Chiste serve as the Company's Chief Financial Officer for a three-year period
beginning January 1, 1997. Mr. Chiste's annual salary is $120,000 and shall be
increased by 5% per year beginning January 1, 1998. Mr. Chiste is entitled to
receive a minimum bonus equal to 10% of his base salary per year, and
discretionary bonus election at the Company's Chief Executive Officer. Mr.
Chiste was granted fully vested options to purchase 80,000 shares at a price of
$5.13 per share. Mr. Chiste is entitled to certain fringe benefits including an
automobile allowance. If Mr. Chiste is terminated without cause, or any event
occurs which results in a change of control of the Company, the Company shall be
obligated to pay him his compensation from the date of termination, of his
employment agreement including any bonus compensation, plus continued
compensation for the remainder of the term of his employment agreement. If such
termination or change of control occurs after December 31, 1998, an additional
$200,000 within ten days of such action is also due.

OPTION SAR GRANTS IN LAST FISCAL YEAR

         The following table sets forth certain information concerning stock
options granted to the Named Executive Officer during the year ended December
31, 1996.
<TABLE>
<CAPTION>

                                              INDIVIDUAL GRANTS

                                                    PERCENT OF TOTAL
                        NUMBER OF SECURITIES        OPTIONS/SARS
                        UNDERLYING OPTIONS/SARS     GRANTED TO EMPLOYEES     EXERCISE OR      EXPIRATION
                        GRANTED                     IN FISCAL YEAR           BASE PRICE       DATE
                        -----------------------     --------------------     -----------      ----------

<S>                     <C>                                                  <C>  
Brian A. Kahan, CEO     121,017                           28.4%              $5.13             8/27/06
</TABLE>

AGGREGATED FISCAL YEAR ENDED OPTION VALUE TABLE

The following table sets forth certain information concerning unexercised stock
options held by the Named Executive officer as of December 31, 1996. No stock
options were exercised by the Named Executive Officer during the period ended
December 31, 1996. No stock appreciation rights were granted or are outstanding.


                                       31
<PAGE>

<TABLE>
<CAPTION>

                                          NUMBER OF UNEXERCISED OPTIONS         VALUE OF UNEXERCISED IN THE MONEY
                                            HELD AT DECEMBER 31, 1996            OPTIONS AT DECEMBER 31, 1996(1)
                                          -------------------------------       -----------------------------------
NAME                                      EXERCISABLE       UNEXERCISABLE       EXERCISABLE           UNEXERCISABLE
                                          -----------       -------------       -----------           -------------

<S>                                           <C>                <C>              <C>               <C>   <C>
Brian A. Kahan, CFO                           121,017            0                $453,209          $   - 0 -
</TABLE>

         (1) Dollar values are calculated based on the difference between the
option exercise price and $8.875, the closing price on December 31, 1996 as
reported by NASDAQ.

Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of March 31, 1997, information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person who is known by the Company to own beneficially more than 5% of its
Common Stock, (ii) each director and nominee for director, (iii) each executive
officer, and (iv) all directors and executive officers as a group:
<TABLE>
<CAPTION>

                                                    PERCENTAGE OF
                                               AMOUNT AND NATURE OF           OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER(1)       BENEFICIAL OWNERSHIP(2)       SHARES OWNED(2)
---------------------------------------       ----------------------        ---------------

<S>                                                <C>                          <C>  
Brian A. Kahan.........................            4,553,470 (3)                33.1%

F.B.W. Holdings........................            1,070,000 (4)                 7.9%

John F. Chiste.........................               80,000 (5)                  *

Robert J. Gardner......................              141,025 (6)                 1.0%

Malcolm Leonard........................               35,086 (7)                  *

Robert Edelheit........................              107,206 (8)                  *

Paul H. Heimberg.......................              239,749 (9)                 1.7%

All directors and executive officers
as a group (six persons)...............            5,156,536 (10)               36.5%
</TABLE>
----------------------------

*        Less than 1%.
(1)      Unless otherwise indicated, the address of each of the listed
         beneficial owners identified is 1225 Broken Sound Parkway, N.W., Suite
         A, Boca Raton, Florida 33451. Unless otherwise noted, the Company
         believes that all persons named in the table have sole voting and
         investment power with respect to all the shares of Common Stock
         beneficially owned by them.
(2)      A person is deemed to be the beneficial owner of securities that can be
         acquired by such person within 60 days from the date of this Proxy
         Statement upon the exercise of warrants or options. Each beneficial
         owner's percentage ownership is determined by assuming that warrants or
         options that are held by such person (but not those held by any other
         person) and that are exercisable within 60 days from the date of this
         Proxy Statement have been exercised.

                                       32
<PAGE>



(3)      Includes 4,307,453 shares of Common Stock held in AldenCare Limited
         Partnership, of which Mr. Kahan is the general partner and 125,000 held
         by Mr. Kahan's wife.. Includes options to purchase 121,017 shares
         exercisable at $5.13 per share. (4) Includes an option to purchase
         745,003 shares of Common Stock from a third party.
(5)      Includes options to purchase 80,000 shares exercisable at $5.13 per
         share.
(6)      Includes options to purchase 140,000 shares exercisable at $5.13 per
         share.
(7)      Includes 3,898 shares of Common Stock held by Mr. Leonard in a Joint
         Tenancy with a Right of Survivorship ("JTWROS") with his sister Corinne
         Leonard, 5,848 shares of Common Stock held by Mr. Leonard in a JTWROS
         with his daughter Jennifer Gottlieb and 5,848 shares of Common Stock
         held by Mr. Leonard in a JTWROS with his daughter Shari Leonard and
         options to purchase 19,492 shares exercisable at $5.13 per shares.
(8)      Includes options to purchase 58,476 shares exercisable at $5.13 per
         share.
(9)      Includes 3,898 shares of Common Stock held by Mr. Heimberg's wife,
         Denise Heimberg and options to purchase 77,967 shares exercisable at
         $5.13 per share.
(10)     See notes 3 and 5-9 above.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's outstanding Common Stock to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock. Such persons are required by SEC
regulation to furnish the Company with copies of all such reports they file.

         To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners have been
complied with except

------------------------------------------------------------------------------.

Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Leonard & Danzinger, an accounting firm, of which Malcolm Leonard, a
Director of the Company is a principal provided financial services to the
Company. In connection for such services, Mr. Leonard's firm received $12,000
during fiscal 1996.

         Robert Edelheit, a Director of the Company served as the agent in
connection with the Company's placement of certain of its employee insurance
programs. The transaction was an arms length transaction and the policies
entered into by the Company were no less favorable than could be obtained from
other third parties. Mr. Edelheit received an agent's commission from the
insuring company in connection with such policies. The Company paid no
consideration to Mr. Edelheit for his services.

See Item 1. Description of Business - Mail Service Pharmacy Benefits, for
discussion of a consulting agreement with a former officer and a director of the
Company.

                                       33
<PAGE>

<TABLE>
<CAPTION>

                                     PART IV

Item 13.  EXHIBITS AND REPORTS ON FORM 8-K.

      A.    EXHIBITS:

                  EXHIBIT                        DESCRIPTION
                  -------                        -----------
<S>                                  <C>    
                     3.1            CompScript's Articles of Incorporation (1)
                     3.2            Amendments to CompScript's Articles of Incorporation dated
                                    April 24, 1996, and July 3, 1996 (3.2)(10)
                     3.3            CompScript's Bylaws(1)
                     4.1            Form of CompScript's Common Stock Certificate (2)
                    10.1            CompScript 1996 Stock Option Plan (4)
                    10.2            Share Exchange Agreement, dated February 29, 1996, among
                                    Capital Brands, CompScript, Inc. and certain shareholders of
                                    CompScript, Inc. (10.1)(5)
                    10.3            Employment Agreement dated August 19, 1996 between
                                    CompScript and Brian A. Kahan (10.3)(10)
                    10.4            Stock Purchase Agreement dated May 31, 1996 between
                                    CompScript and the Shareholders of Delta Pharmacy Services,
                                    Inc.(10.1)(6)
                    10.5            Stock Purchase Agreement dated August 19, 1996 between
                                    CompScript and the Shareholders of SecurX, Inc.(10.1)(7)
                    10.6            Stock Purchase Agreement dated January 10, 1997 between
                                    CompScript and the Shareholders of Medical Services
                                    Consortium, Inc. (8)
                    10.8            Employment Agreement dated June 19, 1996 between
                                    CompScript and Robert J. Gardner*
                    10.9            Employment Agreement dated October 14, 1996 between
                                    CompScript and John Chiste*
                    10.10           Revolving Loan Agreement dated January 3, 1997 between
                                    CompScript and SunTrust Bank South Florida N.A.*
                    10.11           Independent Consulting Agreement dated January 9, 1997
                                    between Compscript, Gerard Altieri, Ronald J. Reith and
                                    Comprehensive Formulary Management*
                    10.12           Management Consulting Agreement dated October, 1996
                                    between Compscript and Shulman & Associates, Inc.(4.1)(9)
                    10.13           Merger Agreement dated March 26, 1997 between
                                    Compscript, Compscript Acquisition Subsidiary, Hytree
                                    Pharmacy, Inc. and the shareholders of Hytree Pharmacy, Inc.
                                    (10.1)(11)
                    10.16           Letter on change in certifying of accountants (12)
                    22.1            CompScript's Subsidiaries*
                    27              Financial Data Schedule*

</TABLE>

                                       34
<PAGE>


_______________________

         (1)      Incorporated by reference to the exhibit of the same number 
                  filed with CompScript's Form 8-B dated September 2, 1994.
         (2)      Incorporated by reference to the exhibit of the same number
                  filed with CompScript's Form 10- KSB for the year ended
                  December 31, 1994.
         (4)      Incorporated by reference to Appendix B of CompScript's Proxy 
                  Statement for the year ended December 31, 1995.
         (5)      Incorporated by reference to the exhibit of the number
                  indicated filed with CompScript's Form 8-K dated March 14,
                  1996.
         (6)      Incorporated by reference to the exhibit of the number
                  indicated filed with CompScript's 8-K dated June 14, 1996.
         (7)      Incorporated by reference to the exhibit of the number
                  indicated filed with CompScript's 8-K dated August 30, 1996.
         (8)      Incorporated by reference to the exhibit of the number
                  indicated filed with CompScript's 8-K dated January 10, 1997.
         (9)      Incorporated by reference to the exhibit of the number
                  indicated filed with CompScript's Registration Statement Form
                  S-8 dated December 24, 1996.
         (10)     Incorporated by reference to the exhibit of the number
                  indicated filed with CompScript's Transition Report on 10-K
                  for the transition period from September 30, 1995 to December
                  31, 1995.
         (11)     Incorporated by reference to the exhibit of the number
                  indicated filed with Compscript's 8-K dated March 26, 1997.
         (12)     Incorporated by reference to CompScript's 8-K/A dated 
                  June 24, 1996. 

 *   Filed herewith.

         B.       REPORTS ON FORM 8-K:

                  None


                                       35
<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                        COMPSCRIPT, INC.

DATE:  April 15, 1997   By: /s/ BRIAN A. KAHAN
                        -------------------------------------------------------
                        Brian A. Kahan, Chairman of the Board, Chief Executive
                        Officer [Principal Executive Officer]

DATE:  April 15, 1997   By: /s/ JOHN F. CHISTE
                        -------------------------------------------------------
                        John F. Chiste, Chief Financial Officer
                        [Principal Financial and Accounting Officer]

         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated:

DATE:  April 15, 1997                      By: /s/ BRIAN A. KAHAN
                                                ---------------
                                                Brian A. Kahan, Director

DATE:  April 15, 1997                      By: /s/ ROBERT J. GARDNER
                                                ------------------
                                                Robert J. Gardner, Director

DATE:  April 15, 1997                      By: /s/ PAUL H. HEIMBERG
                                                -------------------
                                                Paul H. Heimberg, Director

DATE:  April 15, 1997                      By: /s/ ROBERT EDELHEIT
                                                ----------------
                                                Robert Edelheit, Director

DATE:  April 15, 1997                      By: /s/ MALCOLM LEONARD
                                                ----------------
                                                Malcolm Leonard, Director


                                       36
<PAGE>


Form 10-KSB-Item 7

List of Financial Statements

The following consolidated financial statements of CompScript, Inc. and 
   Subsidiaries are included in Item 7:

Consolidated Balance Sheets--December 31, 1996 and Supplemental December 31, 
   1996 (Unaudited)

Consolidated Statements of Operations--Years ended December 31, 1995 (As
   Restated) and 1996 and Supplemental year ended December 31, 1996 (Unaudited)

Consolidated Statements of Shareholders' Equity--Years ended December 31, 
   1995 and 1996

Consolidated Statements of Cash Flows--Years ended December 31, 1995 (As 
   Restated) and 1996

Notes to Consolidated Financial Statements--December 31, 1996


<PAGE>



               Report of Independent Certified Public Accountants

The Board of Directors
  and Shareholders
CompScript, Inc.

We have audited the consolidated balance sheet of CompScript, Inc. and
Subsidiaries as of December 31, 1996, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the two years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
CompScript, Inc. and Subsidiaries at December 31, 1996, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.

March 31, 1997
West Palm Beach, Florida

                                      F-1
<PAGE>
<TABLE>
<CAPTION>


                        COMPSCRIPT, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                                                                      SUPPLEMENTAL
                                                                                    DECEMBER 31, 1996 
                                                             DECEMBER 31, 1996         (SEE NOTE 1)
                                                             -----------------      -----------------
ASSETS                                                                                 (UNAUDITED)

<S>                                                             <C>                    <C>
Current assets:
   Cash and cash equivalents                                  $   440,328             $  857,740
   Accounts receivable, net of allowances of $431,646                      
    and $634,848 historical and supplemental, respectively      2,179,749              6,369,720        
   Inventory                                                    1,091,264              2,467,639
   Note receivable                                              1,125,000              1,150,788
   Income taxes receivable                                        525,623                267,812
   Prepaid and other receivables                                   65,353                112,487
                                                              -----------             ----------
Total current assets                                            5,427,317             11,226,186

Property and equipment, net                                     1,438,369              2,231,495

Other assets:
   Costs in excess of net assets acquired, less accumulated
     amortization of $61,359                                      143,171                143,171
   Other                                                          602,982                854,222
                                                              -----------            -----------
Total other assets                                                746,153                997,393
                                                              -----------            -----------
Total assets                                                   $7,611,839            $14,455,074
                                                              ===========            ===========

LIABILITIES AND SHAREHOLDERS' EQUITY 
Current liabilities:
   Accounts payable                                            $1,296,317            $ 3,502,436
   Accrued salaries and benefits                                  188,110                762,405
   Accrued expenses                                               598,379                850,382
   Accrued pharmaceuticals dispensed by third parties             164,935                164,935
   Line of credit                                                 674,693                674,693
   Notes payable to shareholder                                   227,600                843,737
   Current portion of notes payable                                13,466                197,734
   Current portion of capital lease obligations                    36,360                 84,064
                                                              -----------            -----------
Total current liabilities                                       3,199,860              7,080,386

Long-term debt:
   Notes payable                                                   12,225              1,841,538
   Capital lease obligations                                       20,356                 56,360
                                                              -----------            -----------
Total long-term debt                                               32,581              1,897,898
                                                              -----------            -----------
Total liabilities                                               3,232,441              8,978,284

Minority interest                                                 222,628                222,628

Shareholders' equity:
   Common stock, $.0001 par value--50,000,000 shares
     authorized 10,908,132 and
     13,533,132 shares issued and outstanding
     historical and supplemental, respectively                      1,091                  1,353
   Additional paid-in capital                                   8,855,393              8,908,583
   Accumulated deficit                                         (4,699,714)            (3,655,774)
                                                              -----------            -----------
Total shareholders' equity                                      4,156,770              5,254,162
                                                              -----------            -----------
Total liabilities and shareholders' equity                     $7,611,839            $14,455,074
                                                              ===========            ===========
</TABLE>

SEE ACCOMPANYING NOTES.

                                      F-2

<PAGE>
<TABLE>
<CAPTION>


                        COMPSCRIPT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                                       SUPPLEMENTAL 
                                                                          YEAR ENDED                    YEAR ENDED 
                                                                          DECEMBER 31                  DECEMBER 31
                                                                     1995             1996                 1996
                                                                                                       (SEE NOTE 1)
                                                               --------------------------------------------------- 
                                                                 (AS RESTATED)                          (UNAUDITED)
                                                                  SEE NOTE 2
<S>                                                                <C>               <C>               <C>   
Sales                                                              $15,571,030       $20,049,771       $42,716,356
Cost of sales                                                        8,784,308        12,846,113        25,656,536
                                                                   ----------------------------------------------- 
Gross profit                                                         6,786,722         7,203,658        17,059,820

Selling, general and administrative expenses                         6,671,694         7,984,824        15,953,914
Provision for doubtful accounts                                        153,708           657,656           931,941
Merger costs                                                                 -           875,223           934,223
Goodwill impairment charge                                           3,636,362                 -                 -
                                                                   ----------------------------------------------- 
Total operating expenses                                            10,461,764         9,517,703        17,820,078
                                                                   ----------------------------------------------- 
Operating loss                                                      (3,675,042)       (2,314,045)         (760,258)

Other:
   Interest and other income                                            71,419            29,462            58,331
   Interest expense                                                    (96,115)         (113,759)         (359,298)
                                                                   ----------------------------------------------- 
Loss before provision for income taxes                              (3,699,738)       (2,398,342)       (1,061,225)
Income tax provision (benefit)                                         148,907          (400,000)           (4,633)
                                                                   ----------------------------------------------- 
Net loss                                                           $(3,848,645)      $(1,998,342)      $(1,056,592)
                                                                   =============================================== 

Net loss per share                                                 $     (0.44)      $     (0.20)      $     (0.08)
                                                                   =============================================== 

Weighted average shares outstanding                                  8,714,469         9,841,648        12,466,648
                                                                   =============================================== 

Pro forma data (unaudited):
   

Historical loss before provision for income taxes                  $(3,699,738)      $(2,398,342)

   Pro forma tax (benefit) expense                                      96,259          (350,000)
                                                                  --------------------------------
Pro forma net loss                                                 $(3,795,997)      $(2,048,344)
                                                                  ================================

Pro forma loss per share                                           $     (0.44)      $     (0.21)
                                                                  ================================

</TABLE>
                                       F-3

SEE ACCOMPANYING NOTES.


<PAGE>
<TABLE>
<CAPTION>

                        COMPSCRIPT, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                                                                                                      
                                                                                                                                    
                                                                                               
                                                                                                  RETAINED   
                                                             COMMON STOCK           ADDITIONAL    EARNINGS       TOTAL             
                                                        -----------------------      PAID-IN    (ACCUMULATED  SHAREHOLDERS'
                                                        SHARES      AMOUNT           CAPITAL      DEFICIT)      EQUITY
                                                        ------------------------------------------------------------------    
<S>                                                      <C>        <C>          <C>           <C>             <C>   
Balance at January 1, 1995                               2,210,770  $5,499,171   $    9,982    $    883,273    $6,392,426
   Common shares issued upon inception of 
    SECURx, Inc.                                            48,097           5       74,995               -        75,000
   Net loss                                                      -           -            -      (3,848,645)   (3,848,645)
                                                        -----------------------------------------------------------------     
Balance at December 31, 1995                             2,258,867   5,499,176       84,977      (2,965,372)    2,618,781
   Reverse acquisition of Capital Brands, Inc.:
     Acquisition of Capital Brands, Inc.'s 
       common shares, net of acquisition
       costs of $1,888,807                               1,806,750         181      261,012               -       261,193
     Issuance of Capital Brands, Inc. Common 
       Stock to CompScript-Boca, Inc.
       shareholders                                      7,394,982         739    5,498,414               -     5,499,153
     Receipt of CompScript-Boca, Inc. Common 
       Stock and recording of minority
       interest in CompScript-Boca, Inc.                (2,039,840) (5,499,153)    (384,941)        162,313    (5,721,781)
   Common shares issued to Delta and SECURx
     reflect recapitalization of CompScript-Boca, 
     Inc. as a result of the
     reverse acquisition of Capital Brands, Inc.           634,823          63          (63)              -             -
   Transfer of acquired entity's (Delta's) accumulated 
     deficit to additional paid-in
     capital upon conversion from an S to a 
     C corporation                                               -           -     (101,687)        101,687             -
   Exercise of warrants                                    102,550          10      538,366               -       538,376
   Exercise of stock options                               625,000          62      624,938               -       625,000
   Fair market value of stock options issued 
     to nonemployees                                             -           -    1,411,250               -     1,411,250
   Common shares issued to consultants                     125,000          13      923,127               -       923,140
   Net loss                                                      -           -            -      (1,998,342)   (1,998,342)
                                                        =================================================================      
Balance at December 31, 1996                            10,908,132  $    1,091   $8,855,393     $(4,699,714)   $4,156,770
                                                        =================================================================    
</TABLE>

                                       F-4
<PAGE>
<TABLE>
<CAPTION>




                        COMPSCRIPT, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                      YEAR ENDED DECEMBER 31
                                                                                      1995              1996
                                                                                    -----------------------------   
                                                                                     (AS RESTATED
                                                                                      SEE NOTE 2)
<S>                                                                                  <C>              <C>   
OPERATING ACTIVITIES
Net loss                                                                             $(3,848,645)     $(1,998,342)
Adjustments to reconcile net loss to net cash provided (used) by operating
   activities:
     Depreciation and amortization of leasehold improvements                             277,661          309,035
     Gain on sale of property and equipment                                               (2,270)               -
     Amortization                                                                        219,037           43,815
     Noncash merger costs                                                                      -          739,492
     Goodwill impairment charge                                                        3,636,362                -
     Provision for doubtful accounts                                                     153,708          657,656
     Changes in operating assets and liabilities:
       Accounts receivable                                                              (412,441)        (670,401)
       Inventory                                                                        (333,574)        (318,656)
       Income tax refund receivable                                                            -         (525,623)
       Prepaid and other receivables                                                     (43,562)          49,295
       Other assets                                                                      (21,901)         (20,281)
       Accounts payable and accrued expenses                                             357,573          661,085
       Payable to affiliated entities                                                    136,367         (100,940)
                                                                                    -----------------------------   
Net cash provided (used) by operating activities                                         118,315       (1,173,865)

INVESTING ACTIVITIES
Purchase of property and equipment                                                      (226,430)        (660,386)
Proceeds from sale of equipment                                                                -           71,216
Acquisition, net of cash acquired                                                       (115,000)         403,808
                                                                                    -----------------------------    
Net cash used in investing activities                                                   (341,430)        (185,362)

FINANCING ACTIVITIES
Exercise of options and warrants                                                               -        1,163,376
Proceeds from sale of common stock                                                        75,000                -
Proceeds from lines of credit                                                            129,717          800,000
Repayment of lines of credit                                                            (148,895)        (330,054)
Proceeds from notes payable to shareholder                                               228,600           50,000
Repayments of notes payable to shareholder                                                     -         (103,800)
Proceeds from notes payable                                                               10,207                -
Repayment of notes and leases payable                                                   (113,608)         (95,732)
Payment of deferred acquisition costs                                                    (27,500)               -
                                                                                    -----------------------------    
Net cash provided by financing activities                                                153,521        1,483,790
                                                                                    -----------------------------   
Net (decrease) increase in cash and cash equivalents                                     (69,594)         124,563
Cash and cash equivalents at beginning of year                                           385,359          315,765
                                                                                    -----------------------------     
Cash and cash equivalents at end of year                                            $    315,765     $    440,328
                                                                                    =============================   
</TABLE>
                                       F-5

<PAGE>
<TABLE>
<CAPTION>


                        COMPSCRIPT, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                                                                      YEAR ENDED DECEMBER 31
                                                                                      1995              1996
                                                                                ------------------------------
                                                                                  (AS RESTATED
                                                                                    SEE NOTE 2)
<S>                                                                             <C>              <C>   
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes                                                      $     272,444     $    115,838
                                                                                ==============================

Cash paid for interest                                                          $      54,499     $     68,506
                                                                                ==============================

SCHEDULE OF NONCASH INVESTING ACTIVITIES
Stock options issued in exchange for prepaid consulting fees                    $          -      $    302,285
                                                                                ==============================

Fixed assets acquired pursuant to capital lease obligations and notes payable

                                                                                $      54,550     $     19,671
                                                                                ==============================

</TABLE>


SEE ACCOMPANYING NOTES.

                                      F-6
<PAGE>


                        CompScript, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 1996

1. THE COMPANY

CompScript, Inc. (CompScript or the Company, f/k/a Capital Brands, Inc.) is a
comprehensive provider of pharmacy management services including institutional
pharmacy, infusion therapy, mail order and consultant pharmacist services as
well as pharmacy benefit claim administration to managed care networks,
long-term and subacute care facilities, home health patients and recipients of
managed care. The Company is the successor to CompScript-Boca, Inc. (Boca, f/k/a
CompScript, Inc. which was f/k/a Aldencare, Inc.), which was incorporated under
the laws of the State of Florida on October 3, 1991.

On April 26, 1996, shareholders who previously owned approximately 93% of Boca
exchanged their shares of Boca's Common Stock for 7,394,982 common shares
(representing an 80% interest) of Capital Brands, Inc. (Capital), a
publicly-held company involved in the development of consumer-based businesses
in the Republic of Poland (the Acquisition). This exchange was structured as a
tax-free reorganization. The Acquisition was accounted for as a reverse purchase
of Capital by Boca pursuant to which Boca was recapitalized to include the
assets and liabilities of Capital revalued to reflect the market value of
Capital's net tangible assets at the date of the Acquisition, consisting of cash
and marketable equity securities. The Company incurred acquisition costs of
approximately $1,888,807, all of which was charged to additional paid-in
capital. As Capital had no operations as of the Acquisition date, no pro forma
financial information is presented. On July 5, 1996, Capital changed its name to
CompScript, Inc. The remaining 7% of Boca is accounted for as a minority
interest in a consolidated subsidiary on the Company's December 31, 1996
consolidated balance sheet.

On May 31, 1996, in a transaction accounted for as a pooling-of-interests, the
Company acquired Delta Pharmacy Services, Inc. (Delta). As a result, the
accompanying consolidated financial statements include the accounts and results
of operations of Delta for all periods presented. In connection with the
transaction, the Company exchanged 666,350 shares of the Company's Common Stock
for all of the outstanding common stock of Delta. Delta is in the business of
supplying prescription pharmaceuticals, consulting services and enteral and
parental therapies to long-term and alternate care providers in Alabama and
Northern Florida.

On August 19, 1996, in a transaction accounted for as a pooling-of-interests,
the Company acquired SECURx, Inc. (SECURx). As a result, the accompanying
financial statements include the accounts and results of operations of SECURx
for all periods presented. In connection with the transaction, the Company
exchanged 187,500 shares of the Company's Common Stock for all of the
outstanding common stock of SECURx. SECURx is in the business of selling and

                                      F-7
<PAGE>


                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

1. THE COMPANY (CONTINUED)

distributing prescription drugs to the general public through corporate
sponsored benefit plans of employers located in the northeastern United States.

The following unaudited pro forma summary presents the consolidated results of
operations as if the pooling-of-interest transactions with Delta and SECURx had
occurred on January 1, 1995. The pro forma financial information does not
purport to be indicative of the results of operations that would have occurred
had the transactions taken place at the beginning of the periods presented or of
future results of operations.
<TABLE>
<CAPTION>


                                            COMPSCRIPT            DELTA                SECURX          CONSOLIDATED
                                        ---------------------------------------------------------------------------
<S>                                       <C>              <C>                   <C>                  <C>
YEAR ENDED DECEMBER 31, 1995
Total sales                               $10,940,526      $2,163,253             $2,467,251           $15,571,030
                                        ===========================================================================

Net loss                                  $(3,686,619)     $  (26,607)            $ (135,419)          $(3,848,645)
                                        ===========================================================================

YEAR ENDED DECEMBER 31, 1996
Total sales                               $15,469,263      $1,173,945 (1)         $3,406,563  (2)      $20,049,771
                                        ===========================================================================

Net (loss) income                         $(1,937,123)     $  165,479 (1)         $ (226,698) (2)      $(1,998,342)
                                        ===========================================================================
</TABLE>

(1)   Represents results of operations for Delta from January 1, 1996 to the 
      date of its acquisition.

(2)   Represents results of operations for SECURx from January 1, 1996 to the 
      date of its acquisition.

On January 10, 1997, in a transaction accounted for as a pooling-of-interests,
the Company acquired Medical Services Consortium, Inc. (MSC). In connection with
the transaction, the Company exchanged 1.4 million shares of the Company's
Common Stock for all of the outstanding common stock of MSC. MSC is in the
business of supplying prescription pharmaceuticals, consulting services and
enteral and parental therapies to long-term and alternate care providers in
South Florida.

On February 28, 1997, in a transaction accounted for as a pooling-of-interests,
the Company acquired Campo Medical Pharmacy, Inc. (Campo). In connection with
the transaction, the Company exchanged 375,000 shares of the Company's Common
Stock for all of the outstanding common stock of Campo. Campo is in the business
of supplying prescription pharmaceuticals and consulting services to long-term
and alternate care providers in Louisiana.

                                      F-8
<PAGE>


                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


1. THE COMPANY (CONTINUED)

On March 26, 1997, in a transaction accounted for as a pooling-of-interests, the
Company acquired Hytree Pharmacy, Inc. (Hytree). In connection with the
transaction, the Company exchanged 850,000 shares of the Company's Common Stock
for all of the outstanding common stock of Hytree. Hytree is in the business of
supplying prescription pharmaceuticals, respiratory and consulting services to
long-term and alternate care providers along with home care and sales and
rentals of durable medical equipment and supplies within the Ohio market.
Hytree's fiscal year end is March 31.

The unaudited supplemental balance sheet and statement of operations as of and
for the year ended December 31, 1996 and the following unaudited pro forma
summary presents the consolidated financial position and results of operations,
respectively, as if the pooling-of-interest transactions with MSC, Campo and
Hytree had occurred on December 31, 1996. The supplemental and pro forma
financial information does not purport to be indicative of the financial
position and results of operations that would have occurred had the transactions
taken place on December 31, 1996 or of future results of operations.
<TABLE>
<CAPTION>


                                         COMPSCRIPT         MSC           CAMPO         HYTREE (1)     CONSOLIDATED
                                        -------------------------------------------------------------------------------
<S>                                       <C>              <C>           <C>             <C>             <C>   
YEAR ENDED DECEMBER 31, 1995

Total sales                               $15,571,030      $6,558,177    $2,723,028      $10,004,455      $34,856,690
                                        ===============================================================================

Net (loss) income                         $(3,848,645)     $($542,494)   $   54,595      $    93,009      $(4,243,535)
                                        ===============================================================================
                                                      

Loss per share                            $     (0.44)                                                    $     (0.37)
                                        ==============                                                    ============ 

YEAR ENDED DECEMBER 31, 1996

Total sales                               $20,049,771      $8,577,551    $3,181,263      $10,907,771      $42,716,356
                                        ===============================================================================

Net (loss) income                        $ (1,998,342)     $  477,874    $  100,975      $   362,901      $(1,056,592)
                                        ===============================================================================

Loss per share                           $      (0.20)                                                    $     (0.08)
                                        ================                                                  =============
</TABLE>

(1)  Pro forma results for Hytree for the year ended December 31, 1995 represent
     Hytree's actual results for the year ended March 31, 1996, as Hytree's year
     end was March 31. Hytree's pro forma results for the year ended December
     31, 1996 have been restated to conform to the Company's year end.

                                       F-9

<PAGE>


                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR

Effective June 29, 1996, the Company elected to change its year end from
September 30 to December 31. The Company's historical consolidated financial
statements have been restated to conform with this change in year end.

BASIS OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries and Boca, of which the Company owns
approximately 92%. All significant intercompany balances and transactions have
been eliminated.

CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of
three months or less, when acquired, to be cash equivalents.

CONCENTRATION OF CREDIT RISK

The Company's customers are primarily long-term and alternate care providers in
Florida and Alabama and corporate sponsored benefit plans of employers in the
Northeastern United States. The Company directly bills its customers or
third-party payers, which are primarily Medicaid and private insurers. Credit is
extended based on an evaluation of the customer's financial condition, and
collateral is not required. Credit losses are provided for in the financial
statements and consistently have been within management's expectations.

INVENTORY

Inventory is stated at the lower of cost or market. Cost is determined by the
first-in, first-out method, and market represents the lower of replacement cost
or estimated net realizable value.

                                       F-10
<PAGE>


                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets.
Furniture and equipment and vehicles are depreciated over a five to seven year
period. Leasehold improvements and assets under capital lease are amortized over
the useful lives of the underlying assets or the term of the lease, whichever is
shorter. Expenditures for maintenance and repairs are charged to expense as
incurred.

COSTS IN EXCESS OF NET ASSETS ACQUIRED

In July 1995, SECURx recorded approximately $205,000 of costs in excess of net
assets acquired in connection with the acquisition of substantially all of the
assets and liabilities of a predecessor company of the same name. Costs in
excess of net assets acquired are amortized on a straight-line basis over five
years.

The Company periodically evaluates the recovery of the carrying amount of costs
in excess of net assets acquired by determining if any impairment indicators are
present. These indicators include duplication of resources resulting from
acquisitions, income derived from businesses acquired, the estimated
undiscounted cash flows of the entity over the remaining amortization period and
other factors.

REVENUE RECOGNITION

Revenue and the related cost of sales are recognized when services are provided
or products are delivered.

STOCK BASED COMPENSATION

The Company has elected to follow Accounting Principles Board Opinion (APB) No.
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related Interpretations in
accounting for its employee stock options because the alternative fair value
accounting provided for under Financial Accounting Standards Board (FASB)
Statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires the use of
option valuation models that were not developed for use in valuing employee
stock options. No compensation expense is typically recognized under APB No. 25,
as the exercise price of the Company's employee stock options generally equals
or exceeds the market price of the underlying stock on the date of grant.

                                       F-11
<PAGE>


                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company accounts for equity awards issued to nonemployee consultants,
attorneys and other vendors at fair market value based on the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable on the date of grant. The fair value of
equity instruments issued to a nonemployee is measured as of the date that the
parties come to a mutual understanding of the terms of the arrangement and agree
to a binding contract.

ADVERTISING COSTS

The Company expenses advertising costs as incurred. Advertising expense totaled
approximately $33,909 and  $37,042 in 1995 and 1996, respectively.

INCOME TAXES

The Company accounts for income taxes in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. Under this method, deferred income taxes at the end
of each period are determined based on the differences between the financial
statement and tax basis of assets and liabilities using the enacted tax rates
for the years in which the taxes are expected to be paid or recovered.

The Company files a consolidated income tax return with its majority-owned
subsidiaries which includes the taxable income or loss of each subsidiary from
its acquisition date through the end of the Company's tax year. Each entity is
required to file a separate income tax return prior to becoming a member of the
Company's consolidated income tax return. Prior to its acquisition by the
Company on May 31, 1996, Delta was taxed under the provisions of Subchapter S of
the Internal Revenue Code (IRC). Concurrent with the acquisition of Delta, Delta
converted to C corporation status with respect to federal income taxes and, for
those states that recognize such tax election, state income taxes. As a result,
the accompanying consolidated financial statements include no provision
(benefit) for income taxes related to Delta's income (loss) prior to its
acquisition by the Company. Accordingly, the consolidated statements of
operations for the years ended December 31, 1995 and 1996 include pro forma
adjustments (unaudited) for income tax expense which would have been recorded
had Delta been a taxable corporation and had the Company been able to file a
consolidated income tax return with Delta and SECURx based on the tax laws in
effect during the years presented.

                                       F-12
<PAGE>


                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NET LOSS PER SHARE

Net loss per share is calculated using the weighted average number of common
shares outstanding as the effect of the Company's outstanding Common Stock
equivalents was antidilutive for all periods presented. Weighted average common
shares outstanding reflect the exchange ratio of 3.898373 shares of the
Company's Common Stock for each share of Boca's Common Stock outstanding prior
to the Acquisition for all periods presented.

Pro forma net loss per share (unaudited) reflects the pro forma income tax
adjustments described above. There is no difference between historical and pro
forma weighted average shares.

LONG-LIVED ASSETS

FASB No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF, requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amounts. The Company adopted FASB No.
121 during 1996 and, based on current circumstances, does not believe that any
impairment indicators are present relative to its long-lived assets.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.

                                      F-13
<PAGE>


                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1996 consists of the following:

         Furniture and equipment                           $1,677,864
         Vehicles                                             146,052
         Leasehold improvements                               218,707
         Assets under capital leases                          295,880
                                                           ---------- 
                                                            2,338,503

         Less accumulated depreciation                       (900,134)

                                                           ---------- 
                                                           $1,438,369
                                                           ========== 

4. GOODWILL IMPAIRMENT

At December 31, 1995, the Company recognized a goodwill impairment charge of
approximately $3.6 million, with no associated tax benefit, related to
Aldencare, Inc.'s 1994 acquisition of substantially all of the assets of
CompScript, Inc., which became the Company's Ohio Division. The Ohio Division
was purchased to be the Company's entry into the workers' compensation, pharmacy
benefits management (PBM) line of business. During the year ended December 31,
1995, the contracts attributed to the Ohio Division generated minimal revenue
due in part to the nonexclusive nature of the contracts. In addition, the
inability of the Ohio Division to convert existing relationships with
prospective clients into new PBM contracts or to secure new prospective clients
contributed to significant operating losses and negative cash flows relative to
the Ohio Division. Based on the poor financial results and the failure to obtain
new contracts, the Company believed that the PBM business acquired with the Ohio
Division would not generate positive cash flows in the foreseeable future and
the strategy to implement this line of business within the Ohio Division would
no longer be a priority of the Company. Therefore, the Company wrote off the
unamortized carrying value of the goodwill of approximately $3.6 million on
December 31, 1995.

5. LINE OF CREDIT

In May 1995, the Company entered into a line-of-credit agreement which permits
borrowings up to $750,000. The line of credit is due upon demand and is secured
by substantially all of the assets of the Company. Interest is payable monthly
at prime plus .25% (8.50% at December 31, 1996) with a .25% fee on the unused
portion of the line.

Approximately $675,000 is outstanding at December 31, 1996.

                                      F-14

<PAGE>


                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


5. LINE OF CREDIT (CONTINUED)

On January 3, 1997, the Company amended its financing agreement with its primary
lender to increase its revolving line-of-credit agreement to allow for
borrowings up to $5 million from the $750,000 previously in effect (the New
Credit Facility). The primary reason for the increase was to provide additional
working capital for operations and fund the Company's acquisition activity.
Through March 31, 1997, the Company borrowed approximately $4.7 million under
the New Credit Facility.

The New Credit Facility is collateralized by all of the Company's accounts
receivable, inventory, fixed assets and other assets, and consists of a term
loan due on April 30, 1998. Interest, which is paid monthly on the credit
facility, accrues at the lessor of the prime rate or the three-month London
Interbank Offered Rate, plus 250 basis points. The credit facility requires the
Company to maintain at all times, certain net worth, debt coverage and working
capital levels, and restricts acquisitions and dispositions of property and
limits additional borrowings from other lendors.

In connection with the New Credit Facility, on January 3, 1997, the Company also
entered into a $500,000 promissory note with the same lendor, the proceeds of
which were used to fund the Company's office and mail order space expansion,
which was completed in the first quarter of 1997. The principle sum of the
promissory note shall be paid in monthly installments of approximately $8,333
plus interest at 9.0% for 60 months beginning on February 1, 1997. Collateral
and debt covenants are the same as those of the New Credit Facility.

On March 19, 1997, the Company entered into an additional $750,000 promissory
note with its existing lender, primarily for working capital purposes. Such loan
matures on July 26, 1997 and bears interest at prime. This loan is cross
collateralized with all other borrowings previously discussed. In addition to
the collateral previously discussed, this note is collateralized by the
$1,125,000 note receivable recorded on the Company's consolidated balance sheet
at December 31, 1996 and the collateral underlying the note receivable
consisting of marketable equity securities.

6. NOTES PAYABLE AND NOTES PAYABLE TO SHAREHOLDER

The Company has entered into various notes payable to financing companies
bearing interest at rates ranging from 6% to 10% and expiring at various dates
through 1999. The notes payable arose in connection with the purchase of certain
vehicles and are collateralized by vehicles with an aggregate carrying value of
approximately $58,500.

                                     F-15
<PAGE>


                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


6. NOTES PAYABLE AND NOTES PAYABLE TO SHAREHOLDER (CONTINUED)

The notes payable to shareholder are due upon demand, bear interest at 10% and
are collateralized by the receivables, inventories and equipment of SECURx, the
aggregate carrying value of which exceeds the outstanding aggregate balance of
the notes payable to shareholder at December 31, 1996.

At December 31, 1996, annual payments on notes payable, including notes payable
to shareholder are as follows:

         1997                                       $241,066
         1998                                          9,045
         1999                                          3,180
                                                    --------
                                                    $253,291
                                                    ========

7. CAPITAL LEASES

The Company leases certain equipment under long-term capital leases. Future
obligations are as follows:

         Year ending December 31,
            1997                                    $42,744
            1998                                     19,758
            1999                                      1,752
                                                   -------- 
                                                     64,254
         Less amounts representing interest          (7,538)
                                                   -------- 
                                                    $56,716
                                                   ======== 

8.    MINORITY INTEREST

On October 3, 1996, Boca issued an additional 27,000 shares of its Common Stock
to a shareholder of the Company, increasing the minority interest's aggregate
ownership interest in Boca to approximately 8%.

The Company intends to exchange the shares of Boca's Common Stock held by the
minority interest for the Company's Common Stock during 1997 at the same
exchange ratio used in the Acquisition. The minority interest's share of Boca's
1996 results of operations is not significant.

                                      F-16
<PAGE>


                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


9. SHAREHOLDERS' EQUITY

EQUITY INSTRUMENTS ISSUED TO NONEMPLOYEES

During 1996, the Company granted 625,000 stock options at an exercise price of
$1 per share to certain consultants, 100,000 stock options at $6 per share to an
investment banking firm and 75,000 stock options at an exercise price of $6 and
9,000 shares of Common Stock to a law firm as consideration for services
rendered in connection with the Acquisition. The stock options were fully vested
on the date of grant. Included in the costs of the Acquisition, all of which
were charged against additional paid-in capital attributed to the Acquisition,
is an aggregate $1,292,000 related to the issuance of these equity instruments.
The consultants exercised the 625,000 stock options prior to December 31, 1996.
Subsequent to December 31, 1996, the 75,000 stock options referred to above were
exercised. The remaining 100,000 stock options will expire on April 1, 1999.

During 1996, the Company issued 90,000 shares of Common Stock to certain
consultants and 11,000 shares of Common Stock to a law firm as consideration for
services rendered in connection with the Company's acquisitions of Delta, SECURx
and MSC. The Company recorded an aggregate $740,000 related to the issuance of
these common shares, all of which is included in merger costs on the
consolidated statement of operations.

On May 1, 1996, the Company granted 200,000 stock options (100,000 options at an
exercise price of $8 and 100,000 options an exercise price of $10) to an
investment banking firm as consideration for a two-year consulting agreement
commencing on December 31, 1996. The stock options were fully vested on the date
of grant. In connection with the stock options granted, the Company recorded a
prepaid consulting fee of $144,000 as of December 31, 1996. This amount is
included in other assets on the December 31, 1996 consolidated balance sheet.

On July 2, 1996, the Company granted 75,000 stock options exerciseable at $7 per
share to a public relations firm in connection with a two-year contract. The
stock options were fully vested on the date of grant. In addition, the Company
agreed to issue an additional 75,000 options on July 2, 1997 and pay $30,000 per
year in connection with this contract. In connection with the stock options
granted, the Company recorded a prepaid expense of $20,000 at December 31, 1996.
The stock options expire five years from their respective dates of grant.

                                       F-17
<PAGE>

                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

9. SHAREHOLDERS' EQUITY (CONTINUED)

On December 27, 1996, the Company issued 15,000 of its common shares to certain
consultants as consideration for consulting services rendered in connection with
the Company obtaining a five-year agreement to provide mail order pharmacy
services to an insurer. The Company recorded a prepaid expense of approximately
$138,000 for these fees, which is included in other assets on the December 31,
1996 consolidated balance sheet, and intends to amortize these costs over the
life of the agreement.

COMMON STOCK WARRANTS

During 1996, the Company issued 102,550 common shares in connection with the
exercise of the Company's Class A and Class B warrants at a weighted average
exercise price of $5.25. On December 31, 1996, the remaining 96,950 outstanding
warrants expired unexercised.

STOCK OPTION PLANS

In October 1994, Boca adopted a stock option plan (the Boca Plan). The Boca Plan
provides for the granting of both incentive stock options and nonqualified stock
options for the purchase of up to 200,000 shares of Boca's Common Stock. Under
the Boca Plan, incentive stock options were granted on October 1, 1994 to
purchase 19,100 shares of Boca's Common Stock for a period of eight years from
October 1996 at an exercise price of $10 per share (the Boca Options). All of
the outstanding Boca Options were rescinded during 1996. The Company does not
intend to grant any additional stock options under the Boca Plan.

In May 1996, the Company adopted a stock option plan (the 1996 Plan). The 1996
Plan provides for the granting of both incentive stock options and nonqualified
stock options for the purchase of up to 900,000 shares of the Company's Common
Stock. The exercise price and vesting schedule of each stock option is
determined by the Compensation Committee of the Company. Stock options granted
under the 1996 Plan expire after ten years from the date of grant.

                                      F-18
<PAGE>

                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)



9. SHAREHOLDERS' EQUITY (CONTINUED)

In October 1995, the FASB issued FASB No. 123, which provides an alternative to
APB No. 25. FASB No. 123 allows for a fair value based method of accounting for
stock options. However, for companies that continue to account for stock-based
compensation arrangements under APB No. 25, such as the Company, FASB No. 123
requires disclosure of the pro forma effect on net loss and loss per share of
its fair value based accounting for those arrangements. The fair value for these
options was estimated at the date of grant using the Black-Scholes option
pricing model with the following weighted-average assumptions for 1996: risk
free interest rate of 6.49%, dividend yield of 0%, volatility factor of the
expected market price of the Company's Common Stock of .47 and a
weighted-average expected life of the options of 4.09 years. As of December 31,
1996, the weighted average remaining contractual life of all options outstanding
was 9.7 years.

The following unaudited pro forma summary presents the Company's net income and
earnings per share as if the estimated fair value of the options were amortized
to expense over the options' vesting period. FASB No. 123 does not apply to
stock option grants prior to the year ended December 31, 1995 and no stock
options were granted in fiscal 1995, therefore, FASB No. 123 has no pro forma
effect on the 1995 net loss and net loss per share as reported in the
consolidated statement of operations.

                                                   YEAR ENDED 1996
                                       ----------------------------------
                                                            Supplemental
                                                            (SEE NOTE 1)

      Pro forma net loss                $(3,718,803)        $(2,777,053)
                                       ==================================
                                                      

      Pro forma net loss per share      $     (0.38)   $          (0.22)
                                       ============== ===================

The pro forma effect of compensation expense from stock option awards on pro
forma net income reflects the vesting of 1996 option awards in 1996, in
accordance with FASB No. 123. Because pro forma compensation expense associated
with a stock option award is recognized over the vesting period, the initial
impact of applying FASB No. 123 may not be indicative of pro forma compensation
expense in future years, when the effect of multiple awards will be reflected in
pro forma net income.

                                       F-19
<PAGE>

                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


9. SHAREHOLDERS' EQUITY (CONTINUED)

A summary of the Company's stock option activity and related information for the
year ended December 31, 1996 relative to the Company's employee/director and
nonemployee stock options is as follows:
<TABLE>
<CAPTION>


                                                  EMPLOYEE/DIRECTOR STOCK              NONEMPLOYEE STOCK 
                                                          OPTIONS                           OPTIONS
                                               -------------------------------- --------------------------------
                                                                  WEIGHTED                           WEIGHTED
                                               OPTIONS FOR         AVERAGE        OPTIONS FOR         AVERAGE
                                                  SHARES       EXERCISE PRICE        SHARES       EXERCISE PRICE
                                               --------------- ---------------- ----------------- --------------
<S>                                               <C>              <C>              <C>               <C>    
Outstanding at December 31, 1995                         -         $     -                   -        $     -
Granted                                            882,500            5.17           1,075,000           3.72
Exercised                                                -               -             625,000           1.00
Forfeited                                                -               -                   -              -
                                                 ---------                          ----------   
Outstanding at December 31, 1996                   882,500            5.17             450,000           7.50
                                                 =========                          ==========   

Exercisable at end of year                         800,867                             450,000
                                                 =========                          ==========   

Weighted-average fair value of options
granted during the year                              $2.23                               $1.31
                                                 =========                          ==========   
</TABLE>

The exercise prices of the employee/director stock options granted during 1996
were greater than the Company's stock prices on the dates of grant.

                                      F-20
<PAGE>

                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


9. SHAREHOLDERS' EQUITY (CONTINUED)

Options outstanding and exercisable at December 31, 1996 are as follows:
<TABLE>
<CAPTION>


                                                        OPTIONS OUTSTANDING                       OPTIONS EXERCISABLE
                                            ----------------------------------------------- -----------------------------
                                                               WEIGHTED
                                                               AVERAGE         WEIGHTED                          WEIGHTED
                                                              REMAINING         AVERAGE                          AVERAGE
                                              OPTIONS      CONTRACTUAL LIFE    EXERCISE         OPTIONS          EXERCISE 
         RANGE OF OPTION PRICES             OUTSTANDING                          PRICE        EXERCISABLE         PRICE
-----------------------------------------   -------------- ----------------- -------------- ----------------- -----------
<S>                   <C>                       <C>           <C>                 <C>            <C>            <C>
Employees             $  5.13--$6.08             882,500      9.7 years           $  5.17         800,867       $  5.13
                                                ========                                         ========    

Nonemployees          $  6.00--$8.00             275,000      2.9 years           $  7.00         275,000       $  7.00
                      $        10.00             100,000      2.3 years           $ 10.00         100,000       $ 10.00
                      $         6.00              75,000      Unlimited           $  6.00          75,000       $  6.00
                                                                                                 --------    
                                                ========  
                                                 450,000                                          450,000
                                                ========                                         ========     


At December 31, 1996, there are 17,500 options available for grant under the
1996 Plan.

COMMON STOCK

The following shares of Common Stock have been reserved for future issuance as
of December 31, 1996:
<S>                                                                                           <C>    
          Upon the closing of the acquisition of MSC                                          1,400,000
          Upon the conversion of the minority interest                                          662,341
          Upon the exercise of stock options outstanding or available for
            grant                                                                             1,350,000

                                                                                             ==========   
                                                                                              3,412,341
                                                                                             ==========   

</TABLE>

                                      F-21
<PAGE>

                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


10. FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

CASH AND CASH EQUIVALENTS: The carrying amount reported in the consolidated
balance sheet for cash and cash equivalents approximates its fair value.

NOTE RECEIVABLE: The fair value of the Company's note receivable is estimated
using discounted cash flow analysis, based on discount rates at which similar
notes would be made under current conditions, commensurate with the credit and
interest rate risks involved.

LINE OF CREDIT, NOTES PAYABLE, AND NOTES PAYABLE TO SHAREHOLDERS: The fair
values of the Company's line of credit, notes payable and notes payable to
shareholders are estimated using discounted cash flow analysis, based on the
Company's current incremental borrowing rates for similar types of borrowing
arrangements.

The carrying and fair values of the Company's financial instruments at December
31, 1996 approximate their carrying values.

11. INCOME TAXES

The components of the income tax provision (benefit) are as follows:


                                                       YEAR ENDED DECEMBER 31,
                                                             1995 1996
                                                  ------------------------------
         Current:
            Federal                                $ 95,408        $(400,000)
            State                                    16,010                -
                                                  ------------------------------
                                                    111,418         (400,000)

         Deferred                                    37,489                -
                                                  ==============================
         Total                                     $148,907        $(400,000)
                                                  ==============================

                                      F-22

<PAGE>
                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


11. INCOME TAXES (CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred income taxes are as follows:

                                            
                                                       DECEMBER 31,
                                                  1995             1996
                                                -------------------------
Deferred tax assets:
   Net operating loss carryforwards              $46,564        $  46,564
   Tax credits                                         -           25,377
   Allowance for uncollectible accounts           26,095          162,428
   Costs in excess of net assets acquired          5,131           15,393
                                               --------------------------
                                                  77,790          249,762
Less valuation allowance                         (77,790)        (249,762)
                                               ==========================
Net deferred tax assets                        $       -        $       -
                                               ==========================

FASB No. 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that a $249,762 valuation allowance is necessary at December 31,
1996. At December 31, 1996, the Company has available net operating loss
carryforwards of $123,741 which expire in 2010. In addition, the Company had tax
credits of $25,377 that have no expiration date.

                                      F-23
<PAGE>
                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


11. INCOME TAXES (CONTINUED)

The differences between the provision for income taxes and the amount which
results from applying the federal and state statutory tax rates to income before
income taxes are as follows:
<TABLE>
<CAPTION>


                                                                               YEAR ENDED DECEMBER 31
                                                                               1995              1996
                                                                           ---------------------------    
<S>      <C>                                                               <C>               <C>    
         Income tax benefit at statutory rate                              $(1,257,911)      $(815,436)
         State income tax benefit, net                                        (134,300)        (87,060)
         Merger costs, not deductible for tax purposes                               -         329,345
         Taxes on Delta's loss incurred (income earned) prior to
            revocation of Subchapter S election                                 10,012         (62,270)
         Goodwill amortization not deductible for tax purposes                  74,300               -
         Goodwill impairment charge not deductible for tax purposes          1,368,363               -
         Meals and entertainment not deductible for tax purposes                 6,443           7,133
         Officer's life insurance premiums not deductible for tax
            purposes                                                             4,210           4,210
         Reduction in net operating loss carryback benefit                           -          52,105
         Change in valuation allowance                                          77,790         171,973
                                                                          ----------------------------    
                                                                          $    148,907       $(400,000)
                                                                          ============================    
</TABLE>

12. LEASE COMMITMENTS

The Company has various operating leases, primarily relating to branch offices
and warehouse facilities. The leases have various renewal options and escalation
clauses and often require the Company to make additional payments for
maintenance costs. Total rent expense for the years ended December 31, 1995 and
1996 amounted to $132,739 and $181,229, respectively.

                                      F-24
<PAGE>

                        CompScript, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


12. LEASE COMMITMENTS (CONTINUED)

Approximate future minimum annual rentals under noncancelable operating leases
with initial or remaining terms in excess of one year are:

         1997                                       $   198,197
         1998                                           214,314
         1999                                           204,628
         2000                                           158,017
         2001                                           151,644
         Thereafter                                     165,528
                                                    -----------
                                                     $1,092,328
                                                    ===========

13. PROFIT SHARING PLAN

In 1993, the Company established a profit sharing savings plan (the Plan) that
covers substantially all of its employees and that qualifies as a cash or
deferred arrangement under Section 401(k) of the IRC. Under the Plan,
participating employees may defer up to 20% of their pre-tax salary before
reduction, but not more than approximately $9,500 per plan year. The Company may
make matching or other contributions to the Plan. There were no Company
contributions to the Plan for the fiscal years ended December 31, 1995 and 1996.

14. SUBSEQUENT EVENT

On January 9, 1997, the Company entered into a five-year agreement with two
shareholders (each of which has less than a 5% beneficial ownership interest in
the Company) of the Company pursuant to which the shareholders will assist the
Company with the maintenance of existing pharmacy benefits management contracts
as well as secure new contracts for the Company. The Company agreed to pay the
shareholders $50,000 per month for the first year of the contract, as well as
commission ranging from 1/2% to 1% of net revenues generated by new contacts
obtained by the shareholders. The Company may cancel the contract at the end of
the first year if the shareholders have not met certain performance criteria.
  
                                     F-25

<PAGE>



                               INDEX TO EXHIBITS


EXHIBIT
NUMBERS              DESCRIPTION
-------              -----------

10.8     Employment Agreement dated June 19, 1996 between CompScript and Robert
         J. Gardner

10.9     Employment Agreement dated October 14, 1996 between CompScript and John
         Chiste

10.10    Revolving Loan Agreement dated January 3, 1997 between CompScript and
         SunTrust Bank South Florida N.A.

10.11    Independent Consulting Agreement dated January 9, 1997 between
         Compscript, Gerard Altieri, Ronald J. Reith and Comprehensive Formulary
         Management

22.1     CompScript's Subsidiaries*

27       Financial Data Schedule*