UNITED STATES
                    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

                 For the fiscal year ended June 30, 2001

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

       For the transition period from ____________ to _____________

                     Commission file number 000-15379

                        PARK PHARMACY CORPORATION
                   (formerly known as Power-Cell, Inc.)
              (Name of small business issuer in its charter)

                Colorado                          84-1029701
      (State or other jurisdiction      (I.R.S. Employer incorporation
             organization)                  or Identification No.)

                            10711 Preston Road
                                Suite 250
                            Dallas, TX  75230
                 (Address of principal executive offices)
                                (Zip Code)

                 Issuer's telephone number (972) 860-0200

      Securities registered under Section 12(b) of the Exchange Act:
                                   None

      Securities registered under Section 12(g) of the Exchange Act:
                     Common Stock, $0.0001 par value
                             (Title of Class)

     Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act 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. [X] Yes [ ] No

     Check if there is no 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. [ ]

     Issuer's revenues for its most recent fiscal year were  $43,117,977.

     The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant as of October 11, 2001 was
approximately $5,039,805 based on the average of the registrant's bid and
ask price on the OTC Bulletin Board. Shares held by non-affiliates were
determined using beneficial ownership rules adopted pursuant to Section 13
of the Exchange Act, and exclude stock owned by directors, officers and ten
percent stockholders, some of which may not be held to be affiliates upon
judicial determination.

     The number of shares outstanding of each of the issuer's classes of
common equity as of October 11, 2001 was 7,813,651.

     Transitional Small Business Disclosure Format (check one):
     Yes       No   X
         -----    ------


<PAGE>

DOCUMENTS INCORPORATED BY REFERENCE

     The information required by Part III of this Annual Report
on Form 10-KSB, to the extent not set forth herein, is
incorporated by reference from specified portions of Park
Pharmacy Corporation's definitive proxy statement for the 2001
Annual Meeting of Stockholders to be filed with the Securities
and Exchange Commission on or before October 29, 2001.


FORWARD-LOOKING STATEMENTS

     With the exception of historical information, the matters
discussed in this Annual Report on Form 10-KSB include "forward-
looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").  Forward-looking statements are statements
other than historical information or statements of current
condition.  Some forward-looking statements may be identified by
the use of the terms "expects," "will," "anticipates,"
"estimates," "believes," "plans" and words of similar meaning.
These forward-looking statements relate to our business plans,
programs, trends, results of future operations, funding of future
growth, acquisition plans and other matters.  In light of the
risks and uncertainties inherent in all projected matters, the
inclusion of forward-looking statements in this Form 10-KSB
should not be regarded as a representation by us or any other
person that our objectives or plans would be achieved or that
operating expectations will be realized.  Revenues and results of
operations are difficult to forecast and could differ materially
from those projected in forward-looking statements, such as
statements regarding our belief with respect to the sufficiency
of capital resources, our ability to complete and assimilate
acquisitions, and our ability to compete in our pharmacy and
physician services businesses.  Actual results could differ from
those projected in any forward-looking statements for, among
others, the following reasons:  (a) increased competition from
existing or new competitors; (b) changes in government regulation
of the pharmacy industry; (c) changes in the reimbursement costs
or policies of health insurance companies or federally-funded
insurance programs; (d) the failure of third-party payors,
including health insurance companies and federally funded
insurance programs, to make payments in accordance with the time
periods specified in their agreements with us; (e) our failure to
collect receivables from health insurance companies who may
experience financial hardships or failure as a result of
increases in the costs of providing health care services in
excess of the amount of revenue received by such insurance
companies under existing contractual commitments; (f) our failure
to manage our growth and integrate businesses acquired or to be
acquired; and (g) our failure to attract or retain key employees.
We do not undertake to update any forward-looking statements
contained herein.  For a more complete discussion of these
factors and others, please see "Certain Business Factors" in Item
1 of this report.  Readers are cautioned not to place undue
reliance on any forward-looking statements made herein, or
incorporated by reference into this Annual Report on Form 10-KSB
or in any document or statement referring to this Annual Report
on Form 10-KSB.

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                             PART I

Item 1.   BUSINESS

COMPANY OVERVIEW

Introduction

     General.  Our company, Park Pharmacy Corporation, is a
provider of high-end and technical pharmacy services in Texas and
the southwestern United States.  We are a holding company based
in Dallas, Texas, and our subsidiaries are engaged in retail
pharmacy, infusion pharmacy, institutional pharmacy, wholesale
pharmacy distribution and Internet pharmacy and physician
services.  Through Dougherty's Pharmacy ("Dougherty's") in North
Dallas, Raven's Pharmacy ("Raven's") in Oak Cliff, a Dallas
suburb, and four Medicine Man ("Medicine Man") pharmacies located
south of Houston, we offer traditional independent pharmacy
services, including prescriptions, over-the-counter drugs,
durable medical equipment, cosmetics, gifts and sundries.
Through Dougherty's Homecare Infusion ("DHI") in North Dallas,
Park Infusion Care ("Park Infusion") in Dallas and San Antonio,
and Total Health Care ("Total Health") in Arlington, Texas, we
supply enteral nutrition, total parenteral nutrition, antibiotic
therapy, chemotherapy and other infusion products and services to
home healthcare and hospice patients.  Dougherty's Homecare
Pharmacy ("Homecare") and Total Health are institutional
pharmacies fulfilling prescriptions for nursing homes and
assisted living facilities in North Texas.  Our subsidiary, Total
Pharmacy Supply ("TPS"), based in Arlington, Texas, is a national
wholesale supplier of non-drug products for independent drug
stores and grocery chains.  Rx-Pro.Com, a wholly owned
subsidiary, is a provider of pharmacy and related application
services via the Internet to physicians and pharmacies.

     We believe that a significant market exists for high-end,
technical pharmacy services such as compounded prescriptions,
intravenous infusion, injectables and pain management products
that are not typically offered by chain drug stores, grocery
pharmacies or mass merchandise pharmacies.  Specifically, we
believe that opportunities exist to acquire independent
pharmacies that provide these high-end services, but whose owners
face limited viable exit strategies.  As a result, we intend to
acquire highly profitable, independent pharmacies that either 1)
specialize in technical pharmacy operations such as infusion or
compounding, among others, 2) dominate their markets in niche
services such as hospice care, oncology or AIDS, among others, or
3) are geographically attractive and offer the opportunity to
implement additional lines of business such as infusion,
compounding, durable medical equipment, institutional pharmacy
and the like.  We also intend to expand the operations and market
presence of our Internet subsidiary, Rx-Pro.Com, Inc. through the
hiring of personnel across several disciplines and the
implementation of a regional marketing strategy to grow the
business.

     Our business address is 10711 Preston Road, Suite 250,
Dallas, Texas 75230 and our telephone number is (972) 860-0200.
Our Web sites are www.parkrxcorp.com, www.rx-pro.com,
www.hospicerx.com, www.doughertys.com, www.tps-online.com,
www.parkinfusion.com, www.thcrx.com and www.medmanrx.com.

     Background.  On March 9, 1999, the shareholders of Park
Pharmacy Corporation, a privately-held Texas corporation ("Park-
Texas"), entered into a stock purchase agreement with Power-Cell,
Inc., a publicly-held Colorado corporation that was incorporated
in 1986 but had been inactive since 1997, for the acquisition by
Power-Cell of all the issued and outstanding shares of capital
stock of Park-Texas in exchange for shares of a newly authorized
and designated series of preferred stock of Power-Cell.  Upon the
closing of the acquisition, which was approved by Power-Cell's
shareholders on October 12, 1999: 1) Park-Texas became a wholly-
owned subsidiary of Power-Cell, 2) Park-Texas' shareholders
gained voting control over 80% of the issued and outstanding
capital stock of Power-Cell, and 3) Park-Texas' designees
comprised five of the six members of the board of directors.
Immediately following the reverse acquisition, Power-Cell was
renamed to Park Pharmacy Corporation.

     Park-Texas undertook the reverse acquisition in order to
improve access to the capital markets and to use publicly traded
stock as currency in acquiring independent pharmacies.
Additionally, the public vehicle affords our current and future
shareholders greater liquidity than would otherwise be available
as a private company.

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<PAGE>


     Prior to October 19, 1999, we were a non-operating public
company.  From October 19, 1999 to December 31, 1999, we were
essentially a development-stage company with a plan of operation
to acquire independent pharmacies in Texas and the southern
United States.

     Since December of 1999, we have completed seven acquisitions
in the pharmacy business. In fiscal 2001, these businesses
generated, on a consolidated, unaudited, pro forma basis
(assuming that each business was owned at the beginning of the
fiscal year), annual revenue of approximately $59.5 million and
earnings before interest, taxes, depreciation and amortization
("EBITDA") of approximately $2.1 million.

Regulatory Environment

     Retail Pharmacy.  Our pharmacies and pharmacists must be
licensed by the appropriate state boards of pharmacy.  Our
pharmacies are also registered with the federal Drug Enforcement
Agency.  Additionally, our pharmacies must be approved by the
Centers for Medicare and Medicaid Services (formerly the Health
Care Financing Administration) as providers under Medicare and by
state governmental agencies responsible for Medicaid.  Because of
these licensing and registration requirements, we must comply
with various statutes, rules and regulations, which, if violated,
could result in a suspension or revocation of those licenses or
registrations.

     Participants in the healthcare industry are subject to
frequently changing, and often confusing, regulation at federal,
state and local levels.  Providers, payors, and plans are also
subject to a variety of laws and regulations that could affect
their business relationships with us.  Federal and state laws
regulating health insurance, health maintenance organizations and
similar organizations, as well as employee benefit plans, are not
uniform and cover a broad array of subjects, including
confidentiality, financial relationships with vendors, mandated
benefits, grievance and appeal procedures and others.  Some
federal and state so-called "fraud and abuse" laws may also limit
or prohibit some financial relationships with our healthcare
participants, including physician practices, hospitals and
laboratories.

     In recent years, an increasing number of legislative
proposals have been introduced or proposed in Congress and in
some state legislatures that would effect major changes in the
healthcare system, either nationally or at the state level.  We
cannot predict whether any federal or state healthcare reform
legislation will eventually be passed, or the impact of any
reform legislation on our financial position or results of
operations.  If implemented, healthcare reform could adversely
affect the pricing of prescription drugs or the amount of
reimbursement from governmental agencies and managed care payors,
and consequently have adverse effects on us.  However, to the
extent healthcare reform expands the number of persons receiving
healthcare benefits covering the purchase of prescription drugs,
it may also result in increased purchases of such drugs and could
thereby have a favorable impact on both our company and the
retail drug industry in general.  Nevertheless, there can be no
assurance that any future federal or state healthcare reform
legislation will not adversely affect our company or the retail
drugstore industry generally.

     The Internet.  The Internet and its associated technologies
are also subject to changing government regulation.  Many
existing laws and regulations, when enacted, did not anticipate
the methods of healthcare business-to-business commerce we are
developing through our Rx-Pro subsidiary.  Nonetheless, we
believe that these laws and regulations may affect the following
aspects of its services: patient medical record confidentiality
and disclosure; electronic transmission of patient-identifiable
information among healthcare participants; use of software to
diagnose, cure, treat, mitigate or prevent disease; relationships
and referral patterns among healthcare participants; and Internet-
related issues, including security, privacy, encryption, pricing,
content, intellectual property rights, contracting and selling
over the Internet, distribution, scope of professional licensure
and characteristics and quality of services.  In particular,
forthcoming federal regulations concerning "administrative
simplification" of healthcare data will require us to adopt
uniform formats and security measures concerning the information
it communicates on behalf of our physicians and pharmacies.
These and other regulations may entail significant costs,
although we anticipate our continuing development of our
technology platform to be compatible with the developing
standards.

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<PAGE>


     Over the past year, the U.S. House of Representatives
Committee on Commerce and the General Accounting Office have been
investigating online pharmacies and online prescribing.  We
believe that any regulations resulting from the investigations
will likely result in increased reporting and monitoring
requirements, which could increase our expenses.  Other
legislation and regulations currently being considered at the
federal and state level could affect our business, including
legislation or regulations relating to confidentiality of patient
records, electronic access and storage as well as the inclusion
of prescription drugs as a Medicare benefit.  In addition,
various state legislatures are considering new legislation
related to the regulation of nonresident pharmacies.  Compliance
with the new laws or regulations could increase our expenses.

     We are subject to extensive regulation relating to the
confidentiality and release of patient records.  Additional
legislation and regulations governing the distribution of medical
records exists or has been proposed at both the state and federal
level.  It may be expensive to implement security or other
measures designed to comply with any new legislation.  Moreover,
we may be restricted or prevented from delivering patient records
electronically.  This could have an adverse impact on our ability
to gain and retain Internet customers.

     Laws and regulations directly applicable to communications
or commerce over the Internet are becoming more prevalent.  A
recent session of the U.S. Congress resulted in Internet laws
regarding children's privacy, copyrights, taxation and the
transmission of sexually explicit material.  The European Union
has also enacted its own privacy regulations.  In particular,
many government agencies and consumers are focused on the privacy
and security of medical and pharmaceutical records.  The law of
the Internet, however, remains largely unsettled, even in areas
where there has been some legislative action.  It may take years
to determine whether and how existing laws such as those
governing privacy, libel and taxation apply to Internet
businesses such as ours.  The rapid growth and development of the
market for online commerce may prompt calls for more stringent
consumer protection laws, both in the United States and abroad,
that may impose additional burdens on companies conducting
business online and in particular companies that fill
prescriptions or maintain medical or pharmaceutical records.  The
adoption or modification of laws or regulations relating to the
Internet business could adversely affect our ability to attract
and serve Internet customers.

Current Operations

     Retail Pharmacy.  In December of 1999, we acquired
Dougherty's Pharmacy, Inc., which has been in operation for over
70 years and currently operates Dougherty's in North Dallas and
Raven's Pharmacy in Oak Cliff, a suburb of Dallas.  After our
acquisition of this company, the Dougherty's and Raven's
pharmacies were separated into distinct legal entities.  The Park
family has operated Dougherty's since 1945 and Raven's since
1991.  In May 2001, we acquired the assets and operations of four
retail stores located south of Houston that were previously owned
by Medicine Man, Inc.

     Dougherty's, Raven's and Medicine Man are full-service
pharmacies, offering a broad range of over-the-counter
medications, supplies and equipment, health and beauty aids,
cosmetics, gifts, greeting cards and other general merchandise.
We are unique relative to chain drug stores, grocery pharmacies
and mass merchandise pharmacies in providing technical products,
particularly compounded drugs and infusion products.  The
specialized nature of these products yields above average
pricing, and competition for these products is relatively
limited.

     Infusion Pharmacy.  Through Dougherty's Homecare Infusion, a
division of Dougherty's, Park Infusion and Total Health Care, we
have quickly developed a significant infusion presence in both
the North Texas region and the South Texas region.  DHI has been
operating in North Dallas since March 1997, and Park Infusion
Services was formed in July 2000 to facilitate our August 2000
acquisition of infusion pharmacies located in San Antonio, Texas
and Dallas, Texas.  A third infusion pharmacy acquired in the
August 2000 transaction and located in St. Petersburg, Florida
was subsequently divested by our company in April 2001.  Total
Health Care has been providing infusion pharmacy services as part
of its institutional pharmacy services since 1996.  DHI and Total
Health exclusively provide pharmacy services, while Park Infusion
operates alternative-site suites adjacent to its pharmacies in
order to manage more complex infusion procedures.  Our infusion
pharmacy services address a variety of medical conditions, such
as chronic blood disorders, chronic pain, massive infections and
cancer.  DHI's

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business is largely private insurance or private pay, while Park
Infusion conducts a significant amount of managed
care business and has well-established relationships with the
managed care community.  Total Health conducts the majority of
its business with patients residing in nursing homes and assisted
living facilities; accordingly, most of its business is either
third-party or private pay and, to a lesser extent, Medicaid.

     Institutional Pharmacy.  Total Health Care and Dougherty's
Homecare Pharmacy, another division of Dougherty's, provide
pharmacy services to nursing homes and assisted living
facilities.  These pharmacies purchase and dispense, in custom
dose packs, prescription and non-prescription medication in
accordance with physician orders and deliver such prescriptions
to the nursing facility for administration to individual
residents by the facility's nursing staff.  Total Health and
Homecare typically service nursing homes within a 75-mile radius
of their respective pharmacy locations.  Total Health maintains
24-hour, on-call pharmacists, 365 days per year, for emergency
dispensing and delivery or for consultation with the facility's
staff or the resident's attending physician.

     Wholesale Pharmacy Supply.  In March of 2000, we acquired
Total Pharmacy Supply, Inc. ("TPS") based in Arlington, Texas.
TPS is a wholesale distributor of a variety of non-drug products
utilized by pharmacies.  These products include prescription
packaging and containers, dispensing supplies and equipment,
labels and forms, medication carts and canes, among many other
products.  TPS was formed in 1989 and maintains a customer base
of approximately 3,000 pharmacies, grocery stores, healthcare
distributors, healthcare institutions and other pharmacy
providers.

     Internet Pharmacy and Patient Charting.  In December of
1999, we also acquired Rx-Pro.Com, Inc., a provider of Internet-
based communications technology and information solutions for
healthcare providers, including physicians and pharmacies.  Rx-
Pro offers professional-to-professional ("P-to-P") and
professional-to-business ("P-to-B") services that connect
physicians to pharmacies and other healthcare participants.
Through Rx-Pro's application service platform, prescriptions are
automatically processed through end-to-end integration between
the physician, the insurance company, the pharmacy and the
patient.  As a subset of our pharmacy system, Rx-Pro has
developed expertise in disease state management, through which we
contract with disease state management organizations and offer a
customized, tailored approach to pharmacy services through one
central point of contact.  Rx-Pro is also developing
functionality for physicians to manage day-to-day clinical and
administrative activities in a paperless, online environment,
regardless of location.


PRODUCTS AND SERVICES

Retail Pharmacy

     Prescriptions.  Prescription medications are our primary
focus.  Dougherty's, Raven's and Medicine Man inventory both
concurrently prescribed drugs as well as a substantial variety of
pharmaceuticals that are not typically carried by chain drug
stores, grocery pharmacies and mass merchandise pharmacies.  Our
ability to provide a full array of prescription medications has
positioned us as a reliable provider of a wide range of
prescription drugs that physicians and customers have come to
trust.

     In addition to prescription drugs, we carry a full line of
over-the-counter medications, along with nutriceutical (vitamin)
supplements.  As with our prescription drugs, our customers rely
on Dougherty's, Raven's and Medicine Man for our deep product
offerings.

     Compounding.  We provide custom formulating of prescription
medications.  This process, which is technical and highly
customized, creates higher prescription margins and fills a
special need in the marketplace.  Some of these products include
antibiotic creams, suppositories, topical ointments and various
other compounds used in pain management, wound care, veterinary
(pet) care and other conditions.

     Durable Medical Equipment ("DME").  We offer for sale and
lease, certain products that consist of patient room equipment
(such as hospital beds, patient lifts and commodes), ambulatory
aids (such as walkers and canes), bathroom safety items, wound
care, ostomy and therapeutic compression products.  Our broad
range of products

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provides patients who require either infusion or home healthcare
services access to needed DME through a single source.

     Non-pharmaceutical Merchandise.  We also offer a wide
variety of other nationally advertised and private label non-
prescription merchandise including health and beauty care,
cosmetics, gifts, greeting cards, and other general merchandise.
In addition, we offer a broad assortment of popular national
brand over-the-counter drugs and other products related to dental
care, foot care, vitamins and nutritional supplements, feminine
hygiene, family planning and baby care.  We provide a helpful
environment that enables consumers to obtain product information
from professional pharmacists and knowledgeable staff, and to
benefit from other special features such as free home delivery,
charge accounts and fax and copy machines for customer
convenience.

Infusion Pharmacy

     Infusion therapy involves the intravenous, intramuscular or
subcutaneous administration of nutrients, antibiotics or other
medications to patients in their homes usually as a continuation
of treatment initiated in the hospital. Through DHI, Park
Infusion and Total Health, we offer both traditional forms of
medication delivery such as the "hanging bag", along with newer
methods such as portable pumps that administer medication in
periodic, measured doses, and injectables that utilize "bulbs" to
allow patients to administer drugs themselves through previously
installed intravenous nodes.

     Historically, infusion therapy was confined to the hospital
environment.  However, with the development of portable
technology and the expanded training and certification standards
for registered infusion nurses, infusion procedures can be safely
and effectively performed in the home setting, physician office
and ambulatory infusion suite.  As an example, chemotherapy was
once administered primarily in the hospital setting but can now
be administered by the patient at home via a bulb.  As a result
of such changes, infusion patients now enjoy greater freedom to
maintain daily activities.

     At the same time that technology and nurse credentialling
have improved, payors have encouraged the trend toward
alternative-site and home infusion in order to reduce costs.  The
growing healthcare management practices of discouraging hospital
treatment and discharging patients from hospitals earlier prior
to complete recovery have shifted more treatment responsibility
to the infusion pharmacist.  Because patients are often more
acute, infusion formulating and dosing is more complex, and
infusion pharmacists must be skilled in addressing such
complexities.  Infusion therapy now plays a greater role in
patient recovery outside the hospital.

     Our infusion products and services, provided through DHI,
Park Infusion and Total Health, are generally categorized as
follows:

     Antibiotic Therapy.  The infusion of antibiotic medications
to treat various infections and diseases, such as bacterial
arthritis, endocarditis, cellulitis, cystic fibrosis, fungal
infections, Lyme disease, osteomyolitis, urinary tract infections
and wound infections.

     Total Parenteral Nutrition ("TPN").  The infusion of
balanced dietary nutrients, vitamins and electrolytes to patients
unable to absorb nutrients through the digestive tract due to
various gastrointestinal conditions.  Conditions often treated
with TPN include cancer, Chron's disease, HIV, cystic fibrosis
and various nutritional disorders.

     Pain Management.  The continuous or intermittent infusion of
parenteral analgesics to patients experiencing severe, chronic
pain, with conditions related to cancer, intractable pain,
arthritis, chronic back or bone pain and AIDS.

     Chemotherapy.  The infusion of oncolytic agents used in the
treatment of various forms of cancer.  Adjunct therapies often
accompany chemotherapy, such as treatment for nausea, compromised
blood factors, malnutrition and pain.

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     Enteral Nutrition.  The administration of dietary nutrients
through a feeding tube directly into the digestive tract to
patients unable to eat or drink normally.  Conditions treated
with enteral nutrition include esophageal reconstruction or
cancer and traumatic injury to the gastrointestinal system.

     Hydration Therapy.  The infusion of fluids to patients who
have disease states that deplete the normal balance of fluids
and/or electrolytes.  Hydration therapy is usually a short-term
treatment ranging from one to three days.

     While DHI, Park Infusion and Total Health provide all of
these products, a significant proportion of the business is
concentrated in antibiotic therapy, TPN, pain management and
chemotherapy.

Institutional Pharmacy

     Through Total Health and Dougherty's Homecare, a division of
Dougherty's, we provide prescriptions and other home healthcare
products and services to patients residing in facilities such as
extended care facilities, nursing homes, home hospices and
assisted living centers.  Our patients typically cover a variety
of health conditions, and some of the products and services
offered by Total Health and Homecare include treatment in disease
state management and pharmacy consulting.  Prescription
medications that are sold to these facilities are purchased by us
at contracted prices that are usually lower than normal retail
pharmacy.

     Upon receipt of a prescription, the relevant resident
information is entered into the pharmacy's computerized
dispensing and billing systems.  At that time, the dispensing
system checks the prescription for any potentially adverse drug
interactions or resident 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 resident.  We also provide therapeutic interchange,
with physician approval, in accordance with the company's
pharmaceutical care guidelines.

     Through Total Health and Homecare, we provide a "unit dose"
distribution system. Most of our 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 unit dose system, preferred over the bulk delivery
systems employed by retail pharmacies, improves control over
drugs in the nursing facility and improves resident compliance
with drug therapy by increasing the accuracy and timeliness of
drug administration.

     Our institutional drug distribution system is integral to
our computerized medical records and documentation system.  Our
pharmacies provide the facility with computerized medication
administration records and physician's order sheets, along with
treatment records for each resident.  Data extracted from these
computerized records are also formulated into monthly management
reports on resident care and quality assurance.  The computerized
documentation system, in combination with the 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
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 prescription drug
therapy in order to maintain and improve the quality of resident
care.  The Omnibus Budget Reconciliation Act ("OBRA") implemented
in 1990 seeks to further upgrade and standardize care 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. Total Health and Homecare
provide consultant pharmacist services that help clients comply
with such federal and state regulations applicable to nursing
homes.  The services offered by our consultant pharmacists
include: (i) conducting comprehensive, monthly drug regimen
reviews for each resident in the facility to assess the
appropriateness and efficacy of drug therapies, which includes
reviewing the resident's medical records, monitoring drug
reactions to other drugs or food, monitoring lab results and
recommending alternate therapies or discontinuing unnecessary
drugs; (ii) participating on the Pharmacy and Therapeutics,

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Quality Assurance and other committees of client nursing
facilities as well as staff meetings; (iii) monitoring and
monthly reporting on facility-wide drug usage; (iv) developing
and maintaining pharmaceutical policy and procedures manuals; and
(v) assisting the nursing facility in complying with state and
federal regulations as they pertain to patient care.

Wholesale Pharmacy Supply

     Our subsidiary, Total Pharmacy Supply, Inc., is a national
distributor of non-drug supplies that are essential to the
operation of a pharmacy, such as prescription bottles, caps,
labels, paper bags, medication cards, forms and prescription
pads, dosing aids and pill containers, lab coats, shock-absorbing
floor mats, walking canes and merchandising displays.  TPS
inventories a substantial array of products and is a one-stop
source of non-drug supplies to the pharmacy industry.

     TPS has approximately 3,000 customers, which include
independent drug stores, grocery pharmacies and other healthcare
institutions.  For a number of customers, TPS provides custom,
private label products tailored to the customer's specific needs.
TPS provides a high level of service in delivering its products
in a timely manner.

Internet Pharmacy and Patient Charting

     Our subsidiary, Rx-Pro, has developed an Internet-based
software system that is designed to assist physicians, pharmacies
and other healthcare participants with providing effective and
efficient healthcare on a daily basis.  Rx-Pro designed the
system to address known, recurring problems in the healthcare
delivery process.

     Rx-Pro's system essentially moves much of the physician's
office onto the Internet through a secure, private network,
allowing physicians and office staff to verify patient insurance
coverage, issue prescriptions, manage and track referral
authorizations, maintain patient records, send and receive lab
reports and images, and communicate via secure e-mail with other
healthcare professionals, patients and suppliers.  The Rx-Pro
system creates a virtual medical office that is accessible by all
healthcare professionals.

     Rx-Pro's prescription fulfillment system utilizes the
Internet to streamline the prescription process, improve
physician efficiency and increase customer satisfaction.  The Rx-
Pro system provides a streamlined delivery process for
prescription drugs to provide "clean scripts" to the healthcare
industry.  At the heart of this system is a protected-access
software system through which medication can be ordered by the
physician and approved on a real-time basis, while building and
maintaining patient care information and charts.  Prescriptions
are pre-scanned for clinical conflicts and insurance coverage
before being electronically transmitted directly from the
physician's office to the patient's pharmacy of choice via the Rx-
Pro Internet server.  The physician is prompted to address any
conflicts prior to transmitting the prescription.  Once the
pharmacy receives the "clean", legible prescription, it can be
quickly dispensed and delivered to the patient with no changes or
callbacks to either the physician or insurance company.  Through
this system, we are able to dispense prescriptions nationally.
For a higher degree of care, Rx-Pro has established an affiliate
network of 50 preferred pharmacies that deliver to the home on a
same-day basis prescription medication over broad geographical
areas in Texas and the Southwest with one central control point.

     Rx-Pro also contracts with disease state management
organizations for pharmacy services.  The primary benefit is
providing the organization with a high level of service,
designing and implementing customized pharmacy services that
address the specific needs of the different disease states such
as hospice care, heart disease, diabetes, asthma and cystic
fibrosis.  The service offerings include comprehensive care
plans, ongoing monitoring and evaluation, and caregiver support
resources and information.


                                9

<PAGE>


CUSTOMERS

     We serve a variety of customers through our operations,
ranging from individuals to physician practices to hospices to
other independent pharmacies and healthcare institutions.  With
all of our subsidiaries, we attempt to manage customer
concentration to protect ourselves from the potential loss of any
one customer.

     The customer base of Dougherty's, Raven's and Medicine Man
is diversified among a significant number of individuals who are
covered by a wide variety of payors, including insurance
companies, health maintenance organizations, Medicare, Medicaid
and others.  The loss of any one customer, or the refusal of any
payor to conduct business with our stores, would not have a
material adverse impact to the operations or financial results of
our stores.

     The customer base of DHI and Park Infusion is also generally
comprised of individuals who are covered by a variety of payors.
Although infusion pharmacies generally deal with a smaller number
of individuals than our retail stores, we maintain sufficient
diversification as to avoid a customer concentration. The loss of
any one customer, or the refusal of any payor to conduct business
with either DHI or Park Infusion, would not have a material
adverse impact to the operations or financial results of our
infusion pharmacies.

     Total Health and Homecare conduct business with a limited
number of nursing homes, and although we believe that the
divisions' current customer relationships are good, the loss of
any one customer could have a potentially significant impact on
the results of Total Health and would clearly have a significant
impact on the results of Homecare.  With respect to our
consolidated results of operations and financial position,
however, such a loss would not be material.

     TPS maintains an active customer base of over 3,000
accounts.  Within those accounts are certain national grocery
store chains with a significant number of individual stores doing
business with TPS.  Corporate headquarters for these customers
does not dictate which non-drug supplier is to be used; rather,
each store is permitted to order product from its approved vendor
of choice.  While the potential loss of one grocery store
location would not be material to TPS' operations, we do face the
risk that a chain may elect to direct its business elsewhere,
which would materially impact TPS' operations and financial
results, as well as the operations and financial results of our
company as a whole.  We have enjoyed well-established, long-term
relationships with our grocery customers and do not believe any
of those relationships to be currently at risk.


SALES AND MARKETING

     The ultimate customer of our pharmacy products and services
is generally an individual requiring prescription and related
services and products.  To attract these customers, we must
market our products and services both to the individual and to a
broader group that influences the pharmacy decision, such as
physicians, outpatient clinics, discharge planners, hospices and
other disease state management organizations.

     In general, success in the pharmacy industry is primarily
based on price, service quality, convenience, product quality and
product availability.  Dougherty's, Raven's and Medicine Man have
historically gained a loyal following through quality of service,
with well-trained and attentive staffs; convenience, through
drive-through windows and home delivery; and product
availability, carrying a wide range of merchandise.  With respect
to more complex pharmacy products like compounding and infusion,
sales are primarily based on relationships, reputation, technical
competence, product availability and product quality.  Our
infusion pharmacies have gained excellent reputations over time
with high quality service, broad product offerings and technical
capability.  These characteristics have resulted in long
histories of stable operations with growing revenues and profits
for our operating companies.

     As part of our strategic plan, we will provide outside sales
personnel and sales training on an ongoing basis in such areas as
generics, private label merchandise, over-the-counter medications
and homeopathic medicine.  We will also provide literature in the
stores, invoice stuffers, coupons in account statements and
direct mail letters from its pharmacists for customer awareness.
Finally, we have developed, and will continue to develop,

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<PAGE>


customer awareness programs for the management of disease states
such as diabetes, asthma, hypertension, ostomy and kidney health.


OPERATIONS AND MERCHANDISING

     In general, our retail store hours are tailored to match the
preferences and purchasing habits of the local community.
Dougherty's, for example, is located in the heart of a
substantial residential community and maintains store hours from
8:00 AM until 9:00 PM Monday through Saturday and 10:00 AM to
7:00 PM on Sunday.  Alternatively, Raven's is located in a
central business district and maintains store hours from 9:00 AM
until 7:00 PM Monday through Friday and 9:00AM to 5:00 PM on
Saturday.

     Each of Dougherty's, Raven's and Medicine Man employ full
staffs of pharmacists and pharmacy technicians in order to
provide a high level of customer consultation and service.  Each
store department also maintains staff that specializes in their
respective product offerings, in order to provide a helpful
environment for the customer.

     We work diligently to merchandise our products in a manner
that is convenient for the customer and facilitates the free flow
of traffic.  At both Dougherty's and Medicine Man, for example,
product aisles are aligned in a front-to-back fashion to provide
ease of access to the prescription counter.

     To ensure adequate product availability, we have
consolidated our vendor relationships to ensure continuous flow
of product along with optimal pricing. We utilize one primary
vendor for a majority of our drug and related purchases, and that
vendor delivers products to the retail stores twice per day.


INTELLECTUAL PROPERTY

     In general, we do not believe that our intellectual property
is material to the success of Dougherty's, Raven's, TPS, DHI,
Park Infusion, Total Health, Medicine Man or Homecare.  For Rx-
Pro, however, intellectual property is material, and we rely upon
a combination of trade secret, copyright and trademark laws,
license agreements, confidentiality procedures, employee
nondisclosure agreements and technical measures to maintain the
secrecy of Rx-Pro's intellectual property.  Rx-Pro's technology
is not patented.

     The possibility exists that Rx-Pro could be subject to
intellectual property infringement claims as the company expands
its product and service offerings and as the number of
competitors increases.  Defending against these claims, even if
not meritorious, could be expensive and divert management's
attention from operating the company.  If Rx-Pro becomes liable
to third parties for infringing upon their intellectual property
rights, it could be required to pay a substantial damage award
and be forced to develop non-infringing technology, obtain a
license or cease using the applications that contain the
infringing technology or content.  Rx-Pro may be unable to
develop non-infringing technology or content or obtain a license
on commercially reasonable terms, or at all.

     Rx-Pro also relies on certain technologies that are licensed
from third parties to perform key functions.  These third party
licenses are an essential element of Rx-Pro's business as an
application services provider.  These third party licenses may
not be available to us on commercially reasonable terms in the
future. The loss of or inability to maintain any of these
licenses could delay the introduction of software enhancements
and other features until equivalent technology can be licensed or
developed.  Any such delay could materially adversely affect Rx-
Pro's ability to attract and retain customers.


TECHNOLOGY

     Historically, the pharmacy industry has conducted its
operations manually and without the aid of technology.  However,
recent technology developments have enabled pharmacies to improve
their operations.

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<PAGE>


These improvements have been primarily adopted by large-scale
pharmacies, and we have not utilized leading-edge technology to
any significant extent within our pharmacy operations.

     Over the course of the next two to three years, and subject
to the execution of our acquisition strategy, we plan to improve
productivity, accuracy and profitability and increase customer
service and satisfaction by utilizing technology that will, in
turn, allow our pharmacists to spend more time with customers.
Examples of such technology may include automated drug dispensing
systems and wireless communication systems.

     Our Rx-Pro.Com subsidiary operates as an application service
provider that employs technology from Sybase, Inc. to provide a
scaleable Internet platform.  The platform includes secure Web
servers, database servers and transaction servers that provide
access to our proprietary databases and care plans. Our Rx-Pro
system also employs various wireless LAN and wireless WAN
networks to provide true mobility to healthcare professionals and
access to critical healthcare data.

     Rx-Pro is currently utilizing wireless devices from Compaq,
Palm, Inc. and Sharp.  Functionality is currently being developed
to extent Rx-Pro's system to personal digital assistants and
other handheld computers from various other manufacturers.


ACQUISITIONS

     To take advantage of existing market opportunities and
execute our strategy, from time to time we will enter discussions
with independent pharmacies and related companies regarding
potential acquisitions.  As a fundamental principle, we are
committed to acquiring well-performing pharmacies that are
geographically desirable, offer technical pharmacy and related
services or are otherwise market leaders.  Strong management is a
key consideration for us in reviewing acquisition candidates,
because the independent pharmacy business is a local business
frequently dependent on personal relationships.  In addition, we
target owner/pharmacists who are interested in remaining involved
with us for the foreseeable future.

     In evaluating a pharmacy for potential acquisition, we
consider 1) historical financial statements and tax returns, 2)
operational data, 3) management and employee information, 4)
material contracts, including customer and vendor contracts, 5)
financing arrangements, 6) corporate organizational information,
7) regulatory information and 8) litigation history.  To assess
the reasonableness of the purchase price offered by a seller in
connection with a particular acquisition, we also consider the
availability and terms of owner financing, including the rate of
return and payback period.

     In structuring our acquisitions, we emphasize continuity of
management in order to preserve the underlying business franchise
following the acquisition.  This strategy typically involves the
continued involvement of the seller, who is usually a pharmacist,
along with the other pharmacists employed by the operation.  We
typically enter into employment agreements with acquired
pharmacists, including owner pharmacists, for periods ranging
from five to seven years.  Compensation for non-owner pharmacists
may consist of a combination of cash and stock options to promote
employment longevity and continuing focus on business process
improvement and increasing profitability.

     Once we acquire a business, we seek to implement our
business model by focusing on complex products, improving
fundamental business processes and increasing individual store
profitability.  Where opportunities exist to implement new
services, such as infusion therapy or durable medical equipment,
we may introduce such services, leveraging the expertise of
particular stores across other owned operations.  While we have
had recent success imposing our business model on pharmacy
operations, we believe our strategy will also allow us to improve
and grow our other business operations.  We intend to institute
cost-control programs, continue and improve employee training,
negotiate increases in vendor rebates, maintain a high level of
customer service and convenience, increase sales in each
department and maintain competitive pricing.  In addition to
prescription drugs and services, we expect our pharmacies to
offer a broad range of over-the-counter medications, home
healthcare services, health and beauty care, cosmetics, gifts,
greeting cards, convenience foods, cameras, photo supplies and

                               12

<PAGE>


processing services, and other general merchandise. Some of our
pharmacies may incorporate special features such as drive-through
windows and free home delivery for customer convenience, faxing,
copying, and package delivery services.

     Since the completion of the reverse acquisition in October
1999, we have completed seven acquisitions, including Rx-Pro.Com,
Inc. in December 1999; Dougherty's Pharmacy, Inc. in December
1999; Total Pharmacy Supply, Inc. in March 2000; three infusion
pharmacies in San Antonio, Texas; Dallas, Texas and St.
Petersburg, Florida in August 2000; Total Health Care in November
2000; the Dallas office assets and business of Compass
Healthcare, Inc. in March 2001; and Medicine Man in May 2001.  In
April 2001, we sold the St. Petersburg pharmacy in April 2001
that we had acquired in August 2000.

Rx-Pro.Com, Inc.

     On December 21, 1999, we acquired all of the issued and
outstanding stock of Rx-Pro.Com, Inc., a Texas corporation.  The
acquisition was structured as a merger pursuant to which Rx-Pro
was merged with and into one of our wholly-owned subsidiaries,
Park Pharmacy Corporation, a Texas corporation.  Park-Texas was
the surviving company in the merger and continued to be one of
our wholly owned subsidiaries.  Park-Texas changed its name to Rx-
Pro.Com, Inc. in the merger.  Rx-Pro's shareholders, which
included Mr. Joe B. Park, received an aggregate of 97,500 shares
of Series A Preferred Stock in the merger.  Mr. Park serves on
our Board of Directors and as our Chairman.  Mr. Park also is our
controlling shareholder.

Dougherty's Pharmacy, Inc.

     On December 30, 1999, we acquired all of the issued and
outstanding stock of Dougherty's Pharmacy, Inc., a privately held
Texas corporation owned by the Park family.  The acquisition was
closed pursuant to the terms of a Share Exchange Agreement
between our company and The Park Family Limited Partnership, a
Texas limited partnership and the sole shareholder of
Dougherty's.  In the acquisition, the partnership received an
aggregate of 45,000 shares of our Series A Preferred Stock in
exchange for all of the issued and outstanding shares of
Dougherty's.  As a result of the transaction, Dougherty's became
one of our wholly owned subsidiaries.

     Mr. Joe B. Park and Mr. Jay H. Park own approximately 55%
and 45%, respectively, of the equity interests of The Park Family
Limited Partnership.  Mr. Joe B. Park serves as one of our
directors and as our Chairman of the Board.  Mr. Joe B. Park is
also our controlling shareholder. Messrs. Joe B. Park and Jay H.
Park are brothers.

Total Pharmacy Supply, Inc.

     Effective April 1, 2000, we acquired all of the shares of
Total Pharmacy Supply, Inc.  In the acquisition, TPS was merged
with one of our newly formed subsidiaries and became a wholly
owned subsidiary of our company. All of the issued and
outstanding shares of common stock of Total owned by Mr. Carl S.
Moses and Ms. Cynthia A. Moses were exchanged for an aggregate of
41,515 shares of our Series A Preferred Stock.  Of the total
shares received, we initially held back 4,151 shares for
satisfaction of any indemnification claims by us against Total
and the Moses pursuant to the terms of the merger agreement.  The
holdback period related to those shares has since expired without
any claims being sought by us; accordingly, we have released
those shares to the Moses.   Mr. Moses and Ms. Moses are husband
and wife.

Amedisys Alternate-Site Infusion Therapy Services, Inc. and PRN,
  Inc.

     On August 10, 2000, we acquired certain infusion pharmacy
businesses from subsidiaries of Amedisys, Inc., a publicly held
Delaware corporation.  The acquisition was effected by one of our
subsidiaries, Park Infusion Services, LP, which purchased
operating businesses from Amedisys Alternate-Site Infusion
Therapy Services Inc., and PRN, Inc., subsidiaries of Amedisys,
Inc., effective August 1, 2000.

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<PAGE>


     In the transaction, Park Infusion acquired the ongoing
operations of three infusion pharmacies located in San Antonio,
Texas; Dallas, Texas; and St. Petersburg, Florida for cash
consideration of $1,750,000.  The sellers retained all cash and
accounts receivable, and Park Infusion acquired all inventory,
furniture, fixtures, equipment and other tangible and intangible
assets.  All employees previously employed by the sellers were
hired by Park Infusion, and the newly acquired pharmacies now
operate under the name Park Infusion Services.

     Effective April 1, 2001, we divested the assets and
operations of our St. Petersburg location for cash consideration
of $900,000 and a contingent payment of $380,000 to be received
post closing.  We are in the process of determining the amount of
any contingent payment to be made as a result of this sale.  In
the sale transaction, we retained the accounts receivable and
cash of the pharmacy and sold all other assets.

Total Health Care

     On November 10, 2000, we acquired the assets of MJN
Enterprises, Inc. d/b/a Total Health Care Pharmacy, an
institutional pharmacy located in Arlington, Texas owned by
Michael J. Nault.  We formed a new subsidiary, MJN Acquisition
Corporation, to effect the purchase, and immediately following
the transaction MJN Acquisition Corporation was renamed MJN
Enterprises, Inc.  We acquired the company for cash consideration
of $1,150,000 and 1,450,000 shares of our common stock; we also
assumed current and long-term liabilities.

Medicine Man

     On May 31, 2001, we acquired out of bankruptcy the business
operations of Medicine Man, Inc., a company operating four retail
pharmacies located south of Houston, Texas in the communities of
Alvin, Angleton, Dickinson and Santa Fe.  The pharmacies, each in
operation since the 1960s, provide traditional retail and over-
the-counter services and represent our initial presence in the
Houston area.  Consideration for the acquisition was
approximately $1,779,000, of $1,129,000 was provided by us, and
$650,000 was provided by funds contained in deposit accounts
acquired from the bankruptcy estate.  The acquisition
consideration was used to discharge pre-petition liabilities of
the estate, and we received a "fresh start" with respect to the
acquired operations.

     The assets of Medicine Man, Inc. were acquired in a newly
formed limited partnership, Park-Medicine Man, LP, that is
directly and indirectly controlled by us.  All employees
previously employed by Medicine Man, Inc. were hired by Park-
Medicine Man, LP.  The partnership will continue to conduct the
business of the former Medicine Man, Inc., and the stores will
continue to operate under the trade name Medicine Man.


COMPETITION

     The retail pharmacy business is highly competitive.
Additionally, the online pharmacy market is new, rapidly
evolving, and also intensely competitive.  Our competitors can be
divided into several groups: (i) independent pharmacies, (ii)
chain pharmacies, such as Walgreen's and Eckerd, (iii) mass
merchandise retailers, such as Wal Mart, Kmart and Target, (iv)
supermarkets, such as Albertson's and Kroger, (v) warehouse
clubs, such as Sam's, (vi) online retailers of pharmaceutical and
other health related products, such as Drugstore.Com and Express
Scripts, (vii) mail order pharmacies, (viii) prescription benefit
managers, and (ix) hospice pharmacy service providers, such as
Hospice Pharmacia. Many of our competitors have, or have
announced their intention to have, the capability to accept
orders for products online.

     We believe that we will compete primarily on the basis of:
(i) customer service and satisfaction, (ii) product selection and
variety, (iii) store location and convenience, (iv) Web site
performance and accessibility, (v) reliability and speed of order
shipment, and (vi) price.  We believe that our strengths in terms
of competing with other retail pharmacy companies will result
from the business connections and experience of our management
team, along with our ability to offer a wider variety of
prescription medicine and health related products than most other
retail pharmacies.

                               14


<PAGE>

     We believe that many of our competitors have longer
operating histories, larger customer or user bases, greater name
recognition, and significantly greater financial, marketing and
other resources.  Some of our competitors may be able to secure
products from vendors on more favorable terms, fulfill customer
orders more efficiently and adopt more aggressive pricing than we
can.  Furthermore, many of our competitors can devote
substantially more resources to their Web sites and systems
development.


EMPLOYEES

     As of July 31, 2001, we employed a total of 231 employees,
of whom 52 were employed by Dougherty's (including DHI and
Homecare), 50 by Medicine Man, 48 by Park Infusion, 23 by Total
Health, 22 by Raven's, 16 by TPS, 6 by Rx-Pro and 14 by our
corporate office.  None of our employees is represented by a
labor union, and we have never experienced a work stoppage.  We
believe our relationship with our employees to be good.


CERTAIN BUSINESS FACTORS

We depend on acquisitions for growth

     We anticipate that a significant portion of our revenue and
profit growth will depend on our ability to complete and
assimilate acquired businesses.  Our ability to acquire
independent pharmacies will depend on a number of factors, such
as the availability of attractive target companies, the
availability of financing, and market factors that may limit our
ability to use our stock for acquisitions.  In addition, we
compete for acquisition candidates with buyers who have greater
resources and may be able to offer more consideration to
acquisition candidates.  If we are unable to acquire suitable
businesses, our ability to expand our operations and execute our
business strategy will be adversely affected.

We must integrate our acquired businesses

     We have grown this past year through acquisitions and plan
to continue acquiring businesses in the future.  Our success is
dependent, in part, upon our ability to assimilate acquired
businesses, transition customer and vendor contracts, standardize
financial and accounting systems, and integrate and retain
management and employees of acquired businesses.  If we are
unable to assimilate these acquired businesses, our business
operations and results of operations will be materially and
adversely affected.

We are dependent on our ability to attract and retain key
management and technical personnel

     Our success depends to a significant extent on our ability
to attract and retain key personnel.  In particular, we are
dependent on our senior management team and personnel with
experience in the pharmacy industry and in consolidating
businesses.  To date, industry growth, along with a lengthening
of pharmacy schooling, have created a tight labor market for
pharmacists and pharmacy technicians.  We expect competition for
pharmacists and technicians to continue to intensify.  Although
we believe that we will compete for personnel by offering
competitive cash and equity compensation and flexible work
schedules, we cannot be certain that we will be able to attract
or retain key employees.  If we are unable to continue to hire
pharmacists and pharmacy technicians as we grow our business, our
business operations will be materially and adversely affected.

We are subject to changes in government regulations

     Pharmacists and pharmacies are subject to a variety of state
and federal regulations, such as regulations relating to the
approval process for prescription drugs and reimbursement
policies of government and private plans.  Because prescription
drug sales represent a significant portion of our revenues and
profits, changes in the governmental regulations affecting
approval processes or reimbursement policies for prescription
drugs could adversely affect our business.

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<PAGE>


We are subject to changes in reimbursement cost policies

     We sell a growing percentage of our prescription drugs to
customers who are controlled by third-party payment programs,
such as Medicare, Medicaid, private insurance, managed-care plans
and pharmacy benefit managers.  Although contracts with third-
party payors may increase the volume of prescription drug sales
and gross revenues, third-party payors typically negotiate lower
prescription prices than other payors.  Accordingly, gross profit
margins on sales of prescription drugs have been decreasing and
are expected to continue to decline in future periods.  The
amounts we receive from government programs and private third-
party payors are dependent upon the specific benefits included
under the program or the patient's insurance program.  Any
substantial delays in reimbursement or significant reductions in
the coverage or payment rates of third-party payors would have a
material adverse effect on our liquidity, revenues and
profitability.

We are subject to cash flow disruptions as a result of insurance
companies failing to pay amounts owed to us in a timely manner

     Our growth potential and financial condition will be
materially and adversely affected if the current trend in the
insurance industry to fail in making timely payments of amounts
owed to third-party providers like us continues or increases.
Although several states, including Texas, have enacted or
proposed legislation to require "prompt" payment by insurance
companies, we continue to experience delays in receiving payments
from health insurance companies and federally funded insurance
programs in accordance with written agreements.  If this trend
continues or increases, our business and financial operations
will be adversely affected.

Because the accounts receivable from some of our payors is
increasing, we face credit risks associated with operating in the
health insurance industry

     In recent years, the cost for delivery of health care
services has continued to increase.  This rate of increase may
exceed the ability or willingness of participants in health
insurance programs to absorb the full amount of these cost
increases.  In addition, the delivery costs for health care
services have recently increased throughout the year, while most
health insurance plans provide for fixed payment amounts
throughout the year.  To the extent insurance companies fail to
properly estimate continuing increases in health care costs, the
ability of these companies to continue making payments to third-
party providers such as our company may be adversely affected and
could result in our inability to collect our accounts receivable.

We face increasing competition in our industry

     The retail and infusion pharmacy businesses are highly
competitive.  We compete with national, regional and local retail
pharmacy chains, other independent retail pharmacies, discount
retail pharmacies, supermarkets, mass merchandise and other
retail stores, and mail order and Internet operations.  Our
infusion operations also compete with other large providers of
infusion services, such as national infusion therapy companies,
infusion divisions of national health care companies, and
regional and local providers, many of which may be more
established in a particular market.  The same is true of our
institutional pharmacy operations, where we compete directly with
regional and national institutional pharmacy companies.  Some of
our competitors have financial resources that are substantially
greater than ours, and we cannot be certain that we will able to
continue to successfully compete in the future.  For an
additional description of our competition, please see the
discussion in Item 1 - Business - Competition.

We have a controlling shareholder

     Joe B. Park, our chairman, owns approximately 65% percent
of our voting power as of June 30, 2001 through a family limited
partnership. As a result, he has the ability to elect all of our
directors and to control the vote on matters such as mergers,
consolidations, sales of substantially all of our assets, or
transactions that could result in our company ceasing to be
publicly held.

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<PAGE>


Our common stock trades infrequently and our stock price may be
volatile

     We cannot ensure that an active trading market for our
common stock exists or will exist in the future. Even if the
trading market for our common stock exists, the price at which
the shares of common stock trade is likely to be subject to
significant volatility.  The market for our common stock may be
influenced by many factors, including the depth and liquidity of
the market for our common stock, investor perceptions of us, and
general economic and similar conditions.

Our common stock is subject to the "penny stock" rules

     Our common stock currently trades on the OTC Bulletin Board.
Therefore, we cannot provide any assurances that a liquid trading
market will exist at the time any investor desires to dispose of
any shares of our common stock.  In addition, our common stock is
subject to the so-called "penny stock" rules that impose
additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and
accredited investors (generally defined as an investor with a net
worth in excess of $1 million or annual income exceeding $200,000
or $300,000 together with a spouse).  For transactions covered by
the penny stock rules, a broker-dealer must make a suitability
determination for the purchaser and must have received the
purchaser's written consent to the transaction prior to sale.
Consequently, both the ability of a broker-seller to sell our
common stock and the ability of holders of our common stock to
sell their securities in the secondary market may be adversely
affected.  The Securities and Exchange Commission has adopted
regulations that define a "penny stock" to be an equity security
that has a market price of less than $5.00 per share, subject to
certain exceptions.  For any transaction involving a penny stock,
unless exempt, the rules require the delivery, prior to the
transaction, of a disclosure schedule relating to the penny stock
market.  The broker-dealer must disclose the commissions payable
to both the broker-dealer and the registered representative,
current quotations for the securities and, if the broker-dealer
is to sell the securities as a market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control
over the market.  Finally, monthly statements must be sent
disclosing recent price information for the penny stock held in
the account and information on the limited market in penny
stocks.  As a result of the additional suitability requirements
and disclosure requirements imposed by the "penny stock" rules,
an investor may find it more difficult to dispose of our common
stock.

We do not anticipate paying any dividends

     We do not plan to pay any dividends in the near future, and
plan to invest available cash in acquiring new businesses and
growing existing businesses.  In addition, our senior credit
facility prohibits the payment of any dividends.

Item 2.   PROPERTY

     We operate multiple locations under lease agreements with
multiple landlords that are subject to different terms and
conditions and expire at various times.  In general, we prefer to
lease retail and office space, as opposed to owning property, to
preserve available capital for investment in our pharmacy
operations.  However, we may from time to time evaluate the
opportunity to either build or acquire an existing facility in
situations that we believe would be beneficial.  Although we
believe that our inability to renew any one of our leases,
particularly those of Dougherty's and Raven's, would result in a
loss of goodwill associated with the location and could
materially impact our operating results for a limited period of
time, we expect to be able to negotiate leases on acceptable
terms in the future.

     We maintain our corporate offices in a North Dallas office
building on Preston Road, near our Dougherty's pharmacy.  We
lease 4,474 square feet of space under a lease that expires in
May 2006.

     Dougherty's operates the retail pharmacy, DHI and Homecare
in a single-story retail shopping center located on Preston Road
in North Dallas.  Dougherty's has operated at that location since
March of 1967.  The pharmacy currently leases 11,685 square feet
under an agreement that expires in January 2004.  Given the
longevity of Dougherty's operations at the Preston location, the
pharmacy has gained a certain degree of customer

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<PAGE>


familiarity and loyalty over time, as customers have come to
associate Dougherty's with its current location.  While there can
be no assurance that lease rates in the future will remain
economically attractive at its current location, we believe that
we will continue to be able to negotiate lease terms reasonably
acceptable to us, due in part to a continuing competitive local
real estate market and Dougherty's operating history, reputation
and creditworthiness.

     Raven's leases a stand-alone, two-story facility in the
central business district of Oak Cliff, south of downtown Dallas.
The pharmacy operates 2,587 square feet of space under a lease
that expires in January 2002.  As with Dougherty's, Raven's has a
well-established operating history and reputation at that
location, and although there can be no assurance that we will be
able to negotiate acceptable lease terms in the future, we
believe that Raven's will be able to operate in its current
location for the foreseeable future.

     Total Pharmacy Supply operates 12,000 square feet of office
and warehouse space in a single-story commercial office park in
Arlington, Texas near U.S. Interstate 30 and State Highway 360.
From this location, under a lease that expires in March of 2002,
TPS maintains its executive offices and inventory of saleable
goods.  We believe that, in the event TPS is unable to negotiate
acceptable lease terms, we would be able to secure replacement
office and warehouse space at acceptable terms without
substantial disruption in operating results.

     Park Infusion Services operates two locations in San
Antonio, Texas and Dallas, Texas.  The San Antonio location
operates in 4,226 square feet of office space located within the
primary medical district of San Antonio under a lease that
expires in October of 2004.  The Dallas location operates in
3,400 square feet of office space near downtown Dallas under a
lease that expires January 2004.  We do not believe that the
failure to successfully renegotiate any of its leases would
materially impact our operations or operating results.

     Total Health conducts its business in a closed-door facility
within a single-story, multi-tenant commercial office building in
Arlington, Texas near U.S. Interstate 30 and State Highway 360.
The company leases 5,163 square feet of space under a lease that
expires on September 30, 2004.

     Medicine Man operates four stores located south of Houston,
Texas in the communities of Alvin, Angleton, Dickinson and Santa
Fe.  Each store is a stand-alone location and is subject to its
own lease.  Angleton operates in a 1,400 square foot building
under a three-year lease that expires in January of 2003.  The
stores in Alvin, Dickinson and Santa Fe are 4,500, 1,900 and
4,500 square feet, respectively, and each is subject to a lease
that commenced on June 1, 2001 and expires on May 31, 2006.
These three locations are owned by a partnership whose partners
were the former principals of the business we acquired.  All of
the four locations have long operating histories in their
communities and have maintained their current locations for some
time.


Item 3.   LEGAL PROCEEDINGS

     We are not a party to, nor are any of our properties the
subject of, any pending legal proceeding other than routine
matters incidental to our business.


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

     During the fourth quarter of fiscal 2001, the we did
not submit any matters to a vote of our security
holders.

                               18
<PAGE>

                             PART II

Item 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS

MARKET FOR COMMON STOCK

     We have only one class of outstanding shares, common stock,
$.0001 par value, that is traded on the OTC Bulletin Board.  Each
share ranks equally as to dividends, voting rights, participation
in assets on winding-up and in all other respects.  No shares
have been or will be issued subject to call or assessment.  There
are no preemptive rights, provisions for redemption or purpose
for either cancellation or surrender or provisions for sinking or
purchase funds.  We also have authorized 250,000,000 shares of
preferred stock, $.001 par value, 5,000,000 of which have been
designated as Series A Preferred Stock, of which 2,816,871 shares
were issued and outstanding as of October 11, 2001.  Each share of
Series A Preferred Stock is entitled to ten votes per share and
to vote with the common shareholders, may be converted into ten
shares of common stock at any time after June 30, 2001, and is
entitled to receive a liquidation preference of $10 per share.
The Company's Common Stock is currently traded on the OTC
Bulletin Board under the symbol "PPRX.OB".


MARKET PRICES OF OUR COMMON STOCK

     The following table sets forth for the fiscal periods
indicated the high and low closing sales price per share of our
Common Stock as reported on the OTC Bulletin Board.  The market
quotations presented reflect inter- dealer prices, without retail
mark-up, mark-down or commissions and may not necessarily reflect
actual transactions.

COMMON STOCK
CLOSING PRICES
                                HIGH      LOW
FISCAL 2000
     First Quarter              $3.188    $1.000
     Second Quarter             $3.000    $1.625
     Third Quarter              $4.063    $2.063
     Fourth Quarter             $2.938    $1.625
FISCAL 2001
     First Quarter              $2.000    $1.000
     Second Quarter             $1.375    $0.813
     Third Quarter              $1.125    $0.750
     Fourth Quarter             $1.000    $0.550
FISCAL 2002
     First Quarter              $0.750    $0.600


     The closing price for the Company Common Stock on October
11, 2001 as reported on the OTC Bulletin Board was $0.60.


STOCKHOLDERS

     As of October 11, 2001, there were 824 holders of record of
the common stock according to the records maintained by our
transfer agent.  As of October 11, 2001, we had approximately
1,500 stockholders, including beneficial owners holding shares in
street or nominee names.

                               19

<PAGE>

DIVIDENDS

     Park did not pay any dividends on the common stock during
our two most recent fiscal years, and we do not intend to pay any
dividends in the foreseeable future. Furthermore, we cannot
declare or pay any dividends without the prior written consent of
Bank of Texas, N.A., our senior lender, until we fulfill all of
our obligations and payments under our agreement with the Bank.


Item 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

     With the exception of historical information, the matters
discussed in this Annual Report on Form 10-KSB include "forward-
looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").  Forward-looking statements are statements
other than historical information or statements of current
condition.  Some forward-looking statements may be identified by
the use of the terms "expects," "will," "anticipates,"
"estimates," "believes," "plans" and words of similar meaning.
These forward-looking statements relate to our business plans,
programs, trends, results of future operations, funding of future
growth, acquisition plans and other matters.  In light of the
risks and uncertainties inherent in all projected matters, the
inclusion of forward-looking statements in this Form 10-KSB
should not be regarded as a representation by us or any other
person that our objectives or plans would be achieved or that
operating expectations will be realized.  Revenues and results of
operations are difficult to forecast and could differ materially
from those projected in forward-looking statements, such as
statements regarding our belief with respect to the sufficiency
of capital resources, our ability to complete and assimilate
acquisitions, and our ability to compete in our pharmacy and
physician services businesses.  Actual results could differ from
those projected in any forward-looking statements for, among
others, the following reasons:  (a) increased competition from
existing or new competitors, (b) changes in government regulation
of the pharmacy industry, (c) changes in the reimbursement costs
or policies of health insurance companies or federally-funded
insurance programs, (d) the failure of health insurance companies
and federally funded insurance programs to make payments in
accordance with the time periods specified in their agreements
with third-party providers like us, (e) our failure to collect
receivables from health insurance companies who may experience
financial hardships or failure as a result of increases in the
costs of providing health care services in excess of the amount
of revenue received by insurance companies under existing
contractual commitments, (f) our failure to manage our growth and
integrate businesses acquired or to be acquired, and (g) our
failure to attract or retain key employees.  We do not undertake
to update any forward-looking statements contained herein.   For
a more complete discussion of these factors and others, please
see "Certain Business Factors" in Item 1 of this Report.  Readers
are cautioned not to place undue reliance on any forward-looking
statements made herein.


RESULTS OF OPERATIONS

     Prior to October 19, 1999, we were a non-operating public
company.  From October 19, 1999 to December 31, 1999, we were a
development-stage company with a plan of operation to acquire
independent pharmacies in Texas and the southern United States.
As a result, we had no operations in the fiscal year ended
June 30, 1999 and therefore it is not meaningful to compare our
results of operation for the fiscal year ended June 30, 2000 to
our results of operation in fiscal 1999.

Twelve Months ended June 30, 2001 and 2000

     Revenues.  For the twelve months ended June 30, 2001,
revenue increased 276% to $43,117,977, compared to $11,477,179
from the same period in 2000.  Our increase in revenue was
primarily attributable to (i) our acquisitions during fiscal 2001
and (ii) the inclusion a full year of the operating results of
entities acquired in fiscal 2000.  Prior to the completion of our
first two acquisitions in December 1999, we were considered in

                               20

<PAGE>


development stage.  Accordingly, in the twelve-month period ended
June 30, 2000, our operating results reflected revenues that were
generated only from January 1, 2000 to June 30, 2000 by our
Dougherty's, Raven's and Rx-Pro.Com operations.  Prior to January
1, 2000, we did not generate any revenue and incurred operating
losses.

     Gross Profit.  Gross profit (revenues minus cost of goods
sold) for fiscal 2001 was $16,848,141, representing an increase
of 321% over $4,003,604 in the prior period.  The increase was
due largely to increases in revenue associated with our
acquisitions.  Overall revenue growth accounted almost
exclusively for the increase in gross profit, although our gross
margin also increased from 34.9% in the earlier period to 39.1%
in the current period.  The improvement in gross margin was due
principally to a shift in the overall composition of revenue
toward higher-margin business as a result of our acquisitions in
fiscal 2001, specifically, our purchases of three infusion
pharmacies in August 2000 and an institutional pharmacy in
November 2000.  In the future, our gross margin may fluctuate
depending on the nature and size of our acquisitions, along with
changes in the composition of our business.  Accordingly, there
can be no assurance that gross margin will remain at the level
experienced during the twelve months ended June 30, 2001.

     Selling, General and Administrative Expenses and
Compensation Expenses.  SG&A and compensation expenses were
$15,787,679 for the twelve-month period ended June 30, 2001,
representing an increase of 345% from $3,549,541 for the prior
year's period.  In general, expenses rose as companies were
acquired in the intervening period.  In fiscal 2001, SG&A and
compensation expenses were 36.6% of total revenue, compared to
30.9% in the earlier period.  The increase in these expenses
relative to revenue was the result of several factors, including
(i) the acquisition of companies with higher operating expense
ratios than our same-store operations, (ii) the hiring of
executive and accounting staff at the home office, and (iii) the
addition of pharmacy staff at same-store operations in order to
accommodate the significant year-over-year increase in business.
We believe that the proportion of corporate overhead expense to
total revenue will decline in upcoming periods.  In the future,
to the extent that we are successful in completing acquisitions,
we expect SG&A and compensation expense margins will fluctuate,
as acquired businesses are assimilated into our company.  As such,
there can be no assurance comparisons of these expenses from period
to period will be entirely meaningful or that we will be able to
maintain SG&A and compensation expenses in the same proportion to
revenue as was experienced in the twelve-month period ended June
30, 2001.

     EBITDA.  Our EBITDA, or earnings before interest expense,
income taxes, depreciation and amortization, increased 202% to
$1,369,198 for the twelve months ended June 30, 2001, compared to
$454,063 a year earlier. EBITDA margin for fiscal 2001 was 3.2%
compared to 4.0% in the previous period.

     Depreciation, Amortization and Interest Expense.
Depreciation and amortization expenses were $401,265 for the
twelve months ended June 30, 2001, compared to $85,938 for the
prior year's period, representing an increase of 367%.  The
increase resulted from our acquisitions and reflects the
amortization of goodwill created through those transactions,
along with depreciation of acquired fixed assets.  Interest
expense for the current period was $492,620, compared to $78,554
in the previous year.  This significant increase is a result of
our higher average outstanding loan balances in the current
period relative to the preceding year.  At June 30, 2001, we had
outstanding bank loans totaling $8.3 million, compared to $2.2
million at June 30, 2000.  In undertaking acquisitions over the
past twelve months, we utilized committed bank loans to finance
portions of those transactions.

     In June 2001, the Financial Accounting Standards Board
issued SFAS No. 142, Goodwill and Other Intangible Assets, which
establishes new accounting and reporting standards for acquired
goodwill and intangible assets after a business combination is
completed.  Under the provisions of SFAS 142, we will no longer
amortize goodwill beginning July 1, 2001.  Instead, goodwill will
be reviewed periodically for impairment and written down when
found to be impaired.  Our goodwill amortization in fiscal year
2001 was approximately $251,000.

                               21

<PAGE>


     Net Income.  Net income for the twelve months ended June 30,
2001 was $256,080, up 5% from $242,874 a year ago.  The combined
effects from acquisitions of increased revenues and improved
gross margin were largely offset by increased operating expenses,
including those related to our acquisitions, our increased
pharmacy and home office staffing and interest expense.


LIQUIDITY AND CAPITAL RESOURCES

     We have funded the cash portion of our acquisitions, along
with our growth in revenues and working capital requirements
primarily through bank financings and the sale of our St.
Petersburg, Florida infusion business.  As of June 30, 2001, we
had borrowed $8.3 million under our credit facility with Bank of
Texas, N.A.  As of October 10, 2001 borrowings under that facility
have been reduced to $7.0 million. The borrowing capacity under
the Bank of Texas credit facility is based upon a multiple of our
pro forma EBITDA over a trailing 12-month period.  Therefore, our
borrowing capacity under the credit facility fluctuates.  Amounts
advanced under the credit facility for acquisitions are repayable
in installments of interest only over a six-month period, and
thereafter the amount of an acquisition advance is amortized over
a 60-month period.  As of October 10, 2001, approximately $3.9
million of our borrowings under the credit facility have been for
acquisition purposes, and we are currently making payments of
principal and interest on the consolidated acquisition note issued
under the credit facility on June 12, 2001. Although we anticipate
the cash flow from our acquired businesses to support the payment
obligations on the acquisition note, we cannot give any assurances
in this regard.

     The net cash provided by financing activities in fiscal 2001
was approximately $5.8 million.  We anticipate utlizing additional
cash resources for acquisitions in the next 12 months.
The cash necessary to fund these acquisitions will depend, in
part, upon our ability to use our common stock as consideration
for a portion of the acquisitions and available cash flow.  We
will seek to extend our credit facility with Bank of Texas, N.A.,
in December of 2001 to provide us with continued liquidity for
acquisitions and working capital, and we also expect to utilize
proceeds from the liquidation of certain extended accounts
receivable to fund working capital requirements.  To the extent
we are unable to complete acquisitions at attractive prices with
acceptable terms and conditions, our need for additional bank
financing will be significantly reduced.

     Over the past year, several of our operating divisions have
experienced significant growth, which has necessitated additional
cash investment to support working capital requirements.
Specifically, accounts receivable and inventory have each grown
as revenue has grown, and this investment has been met through
operating cash flow and bank borrowings.  We believe that these
operating divisions will continue to experience strong growth,
resulting in a continuing investment in working capital.  The
ultimate amount of financing needed to fund increased receivables
and inventory will depend on a number of factors, including
revenue growth and the relative amount of receivables outstanding
and inventory on hand at any time.  To the extent that we are
able to improve either the timeliness of our cash collections on
receivables or the efficiency of our inventory management, our
requirements for additional working capital will be generally
reduced.  Alternatively, this need will generally increase if we
are unable to maintain working capital assets at their current
relative levels.

     During the next twelve months, we expect to require
additional capital to support ongoing development efforts and
commercial roll-out activities at our Rx-Pro subsidiary.  We
estimate that this subsidiary will require from $2 million to $5
million to carry out its strategic objectives over that period.
Over the near term, we will evaluate various strategies with
respect to raising capital for Rx-Pro, with a view toward
maximizing proceeds and minimizing interest costs and/or equity
dilution.

     In order to execute our strategic plan this next year, we
expect that outside capital will be required.  To date, our
external financing needs have been met through our bank financing
arrangements.  Our current bank facility expires in December
2001.  Although we hope to renew our bank agreement on terms
consistent with those we have enjoyed up to the present, there
can be no assurance that we will be able to renew our bank
financing on equivalent terms, if at all.  Over the past nine
months, as the economy has demonstrated signs of softening,
commercial banks have grown significantly more conservative in
their lending practices.  Given the dramatic

                               22



<PAGE>


change in the overall credit environment and economy, we are not
able to predict the terms, if any, under which the bank would
renew our loans in December.  If we are able to increase the
credit available to us, we plan to use the proceeds to pursue our
acquisition strategy and fund our working capital requirements.
On the other hand, if our lender requires us to convert our
existing loan balance to term loans, interest and principal
payments would commence and continue for a period ranging between
four to five years, reducing the likelihood that we would be able
to execute our acquisition strategy over the next 12-18 months.
Additionally, we would be required to carefully manage growth in
order to minimize the expected increased investment in working
capital.  If the Bank of Texas does not extend our credit
facility, we would seek other financing to support our working
capital requirements.  We cannot provide any assurance that
alternative financing would be available on commercially
reasonable terms, if at all.


Item 7.   FINANCIAL STATEMENTS

     The financial statements required by this Item are set forth
beginning on page F-1 hereof.


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

     Not applicable.


                               23
<PAGE>

                            PART III

     Certain information required by Park III is incorporated by
reference in this report from the definitive proxy statement (the
"Proxy Statement") for the Company's 2001 Annual Meeting of
Stockholders to be filed with the Commission within one hundred
twenty (120) days following the end of the fiscal year covered by
this report.


Item 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
          PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     The information required by this Item is incorporated by
reference from the Proxy Statement.


Item 10.  EXECUTIVE COMPENSATION

     The information required by this Item is incorporated by
reference from the Proxy Statement.


Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

     The information required by this Item is incorporated by
reference from the Proxy Statement.


Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is incorporated by
reference from the Proxy Statement.


                               24
<PAGE>

Item 13.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits.

     The following exhibits are filed as a part of, or
incorporated by reference into, this Annual Report on Form 10-
KSB:

2.1    Stock Purchase Agreement dated as of March 9, 1999 (filed
       as Annex "A" to the Registrant's Definitive Proxy
       Statement filed on September 7, 1999, and incorporated
       herein by reference)
2.2    Agreement and Plan of Merger dated as of December 9, 1999
       (filed as Exhibit 10.1 to the Registrant's Form 8-K on
       January 5, 2000, and incorporated herein by reference)
2.3    Share Exchange Agreement dated as of December 30, 1999
       (filed as Exhibit 10.1 to the Registrant's Form 8-K on
       January 14, 2000, and incorporated herein by reference)
2.4    Agreement and Plan of Merger dated as of  March 31, 2000
       (filed as Exhibit 2.1 to the Registrant's Form 8-K on
       April 14, 2000, and incorporated herein by reference)
2.5    Bill of Sale and Asset Purchase Agreement dated as of
       August 10, 2000 but effective August 1, 2000 by and among
       Park Infusion Services, LP and Amedisys, Inc. and certain
       of its subsidiaries (filed as Exhibit 2.1 to the
       Registrant's Current Report on Form 8-K dated August 10,
       2000 and filed August 25, 2000, and incorporated herein by
       reference)
2.6    Agreement and Plan of Merger dated November 10, 2000 by
       and among the Registrant, MJN Acquisition Corp., MJN
       Enterprises, Inc. and Michael J. Nault (filed as Exhibit
       2.1 to Registrant's  Form 8-K dated November 10, 2000 and
       filed on November 13, 2000, and incorporated herein by
       reference)
2.7    Asset Purchase Agreement dated as of April 10, 2000 among
       Park Infusion Services, L.P., Option Care Enterprises,
       Inc. and Option Care, Inc. (filed as Exhibit 2.1 to
       Registrant's  Form 8-K dated as of April 10, 2001, and
       incorporated herein by reference)
2.8    Order Approving Debtor's Sale of Asset pursuant to 11
       U.S.C.  363 free and clear of all liens, claims and
       encumbrances and other interests with regard to Registrant's
       acquisition of assets from Medicine Man, Inc. (filed as
       Exhibit 2.1 to Registrant's  Form 8-K dated June 1, 2001
       and filed on June 14, 2001, and incorporated herein by
       reference)
3.1    Articles of Incorporation (filed as Exhibit 3.1 to the
       Registration Form 10-KSB for the fiscal year ended
       June 30, 2000, and incorporated herein by reference)
3.2    Articles of Amendment to the Articles of Incorporation
       (filed as Exhibit 3.1.2 to the Registrant's Amendment No.
       1 to Form 10-KSB for fiscal year ended June 30, 1998, and
       incorporated by reference herein)
3.3    Articles of Amendment and Statement of Designation of
       Series A Preferred Stock (filed as Annex "B" to the
       Registrant's Definitive Proxy Statement filed on September
       7, 1999, and incorporated herein by reference)
3.4    Amended and Restated Bylaws of Park Pharmacy Corporation
       (filed as Exhibit 3.1 to Registrant's Form 10-KSB for
       the fiscal year ended June 30, 2000, and incorporated
       herein by reference)
4.1    Park Pharmacy Corporation 2000 Stock Incentive Plan (filed
       as Exhibit F to Registrant's  Definitive Proxy Statement
       filed on December 13, 2000, and incorporated herein by
       reference)
10.1*  Loan Agreement dated as of June 8, 2001, by and among Park
       Pharmacy Corporation, Dougherty's Pharmacy, Inc., Raven's
       Pharmacy, Inc., Total Pharmacy Supply, Inc., Rx-Pro.Com,
       Inc., Park Infusion Services, LP, MJN Enterprises, Inc.,
       and Park-Medicine Man, LP, as borrowers, and Bank of
       Texas, N.A., as lender
10.2   Form of Executive Employment Agreement (filed as Exhibit
       3.1 to Registrant's Form 10-KSB for the fiscal year
       ended June 30, 2000, and incorporated herein by reference)
                               25
<PAGE>



21.1*  Subsidiaries of the Registrant

     (b)  Reports on Form 8-K.

     Current Report on Form 8-K dated April 10, 2001 and filed on
April 25, 2001 in connection with the Company's disposition of
its St. Petersburg office.

     Current Report on Form 8-K dated June 1, 2001 and filed on
June 14, 2001 in connection with the Company's acquisition of
four pharmacies from Medicine Man, Inc.



* Filed herewith

                               26
<PAGE>

                           SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act,
the Registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on October 15, 2001.


                                PARK PHARMACY CORPORATION,
                                a Colorado corporation


                                By:  /s/ Thomas R. Baker
                                --------------------------------
                                Name: Thomas R. Baker
                                Title:  President and
                                         Chief Executive Officer


     In accordance with the Exchange Act, this report has been
signed on the 15th day of October, 2001, by the following persons
on behalf of the Registrant and in the capacities indicated.

Signature                 Title                     Date

/s/ Joe B. Park
------------------------  Chairman of the Board of  October 15, 2001
Joe B. Park               Directors

/s/ Richard M. Allen
------------------------  Chief Infusion Director   October 15, 2001
Richard M.Allen           and Director

/s/ Thomas R. Baker       President, Chief          October 15, 2001
                          Executive Officer
------------------------  and Director (Principal
Thomas R. Baker           Executive Officer)


/s/ William D. Breedlove  Director                  October 15, 2001
------------------------
William D. Breedlove


/s/ Jon J. Gergen         Director                  October 15, 2001
------------------------
Jon J. Gergen


/s/ James W. Moncrief
------------------------  Executive Vice President  October 15, 2001
James W. Moncrief         and Director

/s/ Gwendolyn L. Park
------------------------  Secretary, Treasurer and  October 15, 2001
Gwendolyn L. Park         Director

                               27

<PAGE>



                Index to Financial Statements


Independent Auditor's Report                           F-1

Consolidated Balance Sheet at June 30, 2001            F-2

Consolidated Income Statements for the years
  ended June 30, 2001 and 2000                         F-3

Consolidated Statements of Stockholders' Equity for
 the years ended June 30, 2001 and 2000			 F-4

Consolidated Statements of Cash Flows for the fiscal
 years ended June 30, 2001 and 2000				 F-5

Notes to Consolidated Financial Statements             F-7


                            28

<PAGE>

                    INDEPENDENT AUDITOR'S REPORT



Board of Directors and Stockholders
Park Pharmacy Corporation
Dallas, Texas


We have audited the accompanying consolidated balance sheet of Park
Pharmacy Corporation as of June 30, 2001 and the related
consolidated statements of income, stockholders' equity and cash
flows for the years ended June 30, 2001 and 2000.  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 auditing standards
generally accepted in the United States of America.  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 financial statements referred to above present
fairly, in all material respects, the financial position of Park
Pharmacy Corporation as of June 30, 2001, and the results of its
operations and its cash flows for the years ended June 30, 2001 and
2000 in conformity with accounting principles generally accepted in
the United States of America.



/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP

Dallas, Texas
September 28, 2001


                                 F-1

<PAGE>

                     	PARK PHARMACY CORPORATION

				CONSOLIDATED BALANCE SHEET

                            June 30, 2001

                               ASSETS
                               ------


CURRENT ASSETS:
Cash and cash equivalents                                 $ 1,611,923
Trade accounts receivable, net of $1,439,000 allowance
 for doubtful accounts                                      9,454,640
Inventories                                                 4,033,007
Deferred income taxes                                         433,250
Prepaid expenses and other                                    190,753
                                                          -----------
Total current assets                                       15,723,573

PROPERTY AND EQUIPMENT, net                                 1,216,624

SOFTWARE COSTS                                              2,459,524
GOODWILL, net of $266,600 accumulated amortization          4,876,941
OTHER ASSETS                                                  167,590
                                                          -----------
          Total assets                                    $24,444,252
                                                          ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY
                ------------------------------------

CURRENT LIABILITIES:
 Accounts payable                                         $ 5,893,019
 Accrued liabilities                                        1,020,019
 Income taxes payable                                         499,208
 Current portion of long-term debt                            840,810
 Revolving line of credit and notes payable                 4,154,490
                                                          -----------
          Total current liabilities                        12,407,546

DEFERRED INCOME TAXES                                         101,494

LONG-TERM DEBT, net of current portion                      3,342,022

FAIR VALUE OF NET ASSETS ACQUIRED IN EXCESS OF COST           399,742

COMMITMENTS AND CONTINGENCY (Notes 9 and 12)

STOCKHOLDERS' EQUITY:
Preferred stock; $.001 par value; 250,000,000 shares
 authorized; 3,024,581 shares issued and outstanding
 (liquidation preference of $10.00 per share)                   3,025
Common stock; $.0001 par value; 750,000,000 shares
 authorized;5,719,551 shares issued and outstanding               572
 Additional paid-in capital                                 7,942,054
 Retained earnings                                            389,083
 Deferred compensation                                       (141,286)
                                                          -----------
          Total stockholders' equity                        8,193,448
                                                          -----------

          Total liabilities and stockholders' equity      $24,444,252
                                                          ===========

 See accompanying notes to these consolidated financial statements.

                                 F-2
<PAGE>

<TABLE>
<CAPTION>
                            PARK PHARMACY CORPORATION

                         CONSOLIDATED INCOME STATEMENTS


                                                              Year Ended June 30,
                                                        ------------------------------
                                                             2001             2000
                                                        --------------    ------------
<S>                                                     <C>               <C>
REVENUES:
 Product sales and other, net                              $42,944,136      $11,354,039
 Online sales, net                                             173,841          123,140
                                                           -----------      -----------
         Total revenues                                     43,117,977       11,477,179

OPERATING EXPENSES:
 Cost of goods sold                                         26,269,836        7,473,575
 Salaries, wages and related taxes                           8,573,035        2,093,793
 Selling, general and administrative expenses                7,214,644        1,455,748
 Depreciation and amortization                                 401,265           85,938
                                                           -----------      -----------
         Total operating expenses                           42,458,780       11,109,054
                                                           -----------      -----------

         Income from operations                                659,197          368,125

OTHER INCOME (EXPENSE):
 Gain on sale of business                                      210,348                -
 Settlement proceeds                                            92,675                -
 Other income                                                    5,713                -
 Interest expense, net                                        (492,620)         (78,554)
 Financing expenses                                            (66,610)         (15,067)
                                                           -----------      -----------
         Total other income (expense)                         (250,494)         (93,621)
                                                           -----------      -----------

         Income before income taxes                            408,703          274,504

INCOME TAX EXPENSE                                             152,623           31,630
                                                           -----------      -----------

NET INCOME                                                     256,080          242,874
                                                           ===========      ===========

NET INCOME PER COMMON SHARE - basic and diluted            $       .01      $       .01
                                                           ===========      ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic                                                       35,512,759       31,543,214
                                                           ===========      ===========
Diluted                                                     35,593,482       31,543,214
                                                           ===========      ===========

</TABLE>
       See accompanying notes to these consolidated financial statements.


                                       F-3
<PAGE>

<TABLE>
<CAPTION>

                            PARK PHARMACY CORPORATION

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                   For the Years Ended June 30, 2001 and 2000

                                                                                                               Total
                             Preferred Stock        Common Stock       Additional   Retained    Deferred    Stockholders'
                           -------------------  ---------------------   Paid-in     Earnings    Deferred       Equity
                             Shares     Amount    Shares      Amount    Capital    (Deficit)  Compensation    (Deficit)
                           ----------  --------  ----------   --------  ---------  ----------  ------------  ------------
<S>                        <C>        <C>       <C>          <C>        <C>        <C>         <C>           <C>
BALANCES, June 30, 1999             -   $     -   7,600,000    $   760   $     240  $ (109,871) $         -    $ (108,871)

Issuance of Series A
 preferred stock in
 connection with reverse
 acquisition                2,840,566    2,840  (3,180,449)     (318)       (2,522)          -            -             -

Issuance of Series A
 preferred stock in
 connection with
businesses  acquired          184,015       185           -         -    5,872,353           -            -     5,872,538

Deferred compensation in
 connection with
restricted  stock awards,
net of  forfeitures                 -         -      89,000         9      193,721           -     (193,730)            -

Amortization of deferred
 compensation                       -         -           -         -            -           -       32,430        32,430

Net income                          -         -           -         -            -     242,874            -       242,874
                            ---------    ------  ----------    ------   ----------   ---------   ----------    ----------
                                    -         -                    --            -

BALANCES, June 30, 2000     3,024,581     3,025   4,508,551       451    6,063,792     133,003     (161,300)    6,038,971

Issuance of common stock
 in  connection with
 business  acquired (net of
 260,000  shares held back)         -         -   1,190,000       119    1,744,391          -             -     1,744,510

Deferred compensation in
 connection with
 restricted  stock awards,
 net of  forfeitures                -         -      21,000         2        7,871          -        (7,873)            -

Deferred compensation in
 connection with stock options      -         -           -         -      126,000          -      (126,000)            -

Amortization of deferred
 compensation                       -         -           -         -            -          -       153,887       153,887

Net income                          -         -           -         -            -    256,080             -       256,080
                            ---------    ------  ----------    ------   ----------  ---------   -----------    ----------

BALANCES, June 30, 2001     3,024,581    $3,025   5,719,551    $  572   $7,942,054  $ 389,083   $  (141,286)   $8,193,448
                            =========    ======  ==========    ======   ==========  =========   ===========    ==========
</TABLE>

       See accompanying notes to these consolidated financial statements.

                                       F-4

<PAGE>

               		 PARK PHARMACY CORPORATION

			CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                   Year Ended June 30,
                                                -----------------------
                                                    2001          2000
                                                ------------   ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                       $256,080      $242,874
Adjustments to reconcile net income to net
 cash provided by (used in) operating
 activities:
   Depreciation and amortization                   401,265        85,938
   Amortization of debt issuance costs              66,620        15,067
   Amortization of deferred compensation           153,887        32,430
   Gain on sale of business                       (210,348)            -
   Deferred income taxes                          (327,046)       (4,770)
Changes in operating assets and liabilities,
net of effect of businesses   acquired:
   Trade accounts receivable                    (4,975,241)     (500,256)
   Inventories                                    (652,750)      (26,735)
   Prepaid expenses and other                      (96,434)      (25,994)
   Other assets                                     17,414       (36,685)
   Trade accounts payable                        3,177,093      (111,763)
   Accrued liabilities                             606,983        39,770
   Taxes payable                                   400,808      (203,100)
                                              ------------     ---------
          Net cash used in operating
            activities                          (1,181,669)     (493,224)

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property and equipment              (302,491)      (96,021)
 Increase in software costs                       (237,159)     (109,357)
 Consideration paid for businesses acquired     (4,187,000)             -
 Payments in connection with business
   acquisitions and disposition                   (399,657)     (182,837)
 Proceeds from sale of business                    900,000             -
 Cash in acquired businesses                       283,292       540,874
                                              ------------     ---------
          Net cash (used in) provided by
             investing activities               (3,943,015)       152,659

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from issuances of notes payable
   and long-term debt                            9,508,677     2,808,227
 Repayments of notes payable and long-term
   debt                                         (3,679,945)   (1,337,423)
 Deferred financing costs                          (28,071)     (195,293)
                                              ------------     ---------
          Net cash provided by financing
            activities                           5,800,661     1,275,511
                                              ------------     ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS          675,977       934,946

CASH AND CASH EQUIVALENTS, beginning of year       935,946         1,000
                                              ------------     ---------

CASH AND CASH EQUIVALENTS, end of year        $  1,611,923     $ 935,946
                                              ============     =========


 See accompanying notes to these consolidated financial statements.

                                 F-5

<PAGE>

          CONSOLIDATED STATEMENTS OF CASH FLOWS, continued


                                                    Year Ended June 30,
                                                 -----------------------
                                                    2001         2000
                                                 ----------   ----------
SUPPLEMENTAL CASH FLOW INFORMATION:
 Cash paid for:
  Interest                                       $  433,100   $   78,500
                                                 ==========   ==========
  Income taxes                                   $   78,800   $  160,000
                                                 ==========   ==========

NON-CASH INVESTING AND FINANCING
  TRANSACTIONS:
Business acquired through issuance of common
 stock                                           $1,744,510   $        -
Businesses acquired through issuances of Series
 A Preferred Stock                               $        -   $5,872,538
Liability accrued in connection with sale of
 business                                        $   70,000   $        -
Long-term debt issued in connection with
 vehicle purchase                                $   35,357   $        -
Deferred compensation in connection with
 restricted stock awards, net of forfeitures     $    7,873   $  193,730
Deferred compensation in connection with stock
 options                                         $  126,000   $        -

 See accompanying notes to these consolidated financial statements.

                                 F-6
<PAGE>

                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Nature of Operations
-------------------------

  Park Pharmacy Corporation (the "Company"), a Colorado
  corporation, is primarily engaged in the sale of prescription and
  over-the-counter medications, healthcare products and related
  services.  The Company sells its products and services to a
  variety of customers including individuals, hospices, assisted-
  living facilities and other institutional healthcare providers.
  The Company is also involved in the wholesale distribution of
  pharmacy-related products and supplies, which are sold primarily
  to independent pharmacies and national retail chains.

2.   Summary of Significant Accounting Policies
-----------------------------------------------

  (a) - Organization and Basis of Presentation
  On October 19, 1999, Power-Cell, Inc. ("Power-Cell"), a Colorado
  corporation, acquired all of the issued and outstanding common
  stock of Park Pharmacy Corporation ("Park-TX"), a Texas
  corporation, in a transaction that was accounted for as an
  acquisition of Power-Cell's net assets and a reorganization under
  Power-Cell's capital structure ("reverse acquisition").  In
  connection with the reverse acquisition, the stockholders of Park-
  TX were issued 2,567,816 shares of newly designated Series A
  Preferred Stock.  In addition, two Power-Cell stockholders were
  issued 200,000 shares of Series A Preferred Stock in exchange for
  their common stock, and 72,750 shares of the Series A Preferred
  Stock were issued in satisfaction of outstanding Power-Cell
  liabilities.  The Series A Preferred Stock (See Note 10) includes
  voting rights on all matters with the common stock.  Following
  the reverse acquisition, the former stockholders of Park-TX held
  approximately 78% of the Company's voting power.  Following the
  reverse acquisition, Power-Cell changed its name to Park Pharmacy
  Corporation.

  (b) - Principles of Consolidation
  The accompanying consolidated financial statements include the
  accounts of the Company and its wholly-owned subsidiaries.
  Significant intercompany balances and transactions have been
  eliminated in consolidation.

  (c) - Use of Estimates
  The preparation of financial statements in conformity with
  accounting principles generally accepted in the United States of
  America requires management to make estimates and assumptions
  that effect the amounts reported in the financial statements and
  accompanying notes.  Actual results could differ from those
  estimates and those differences could be material.  Significant
  estimates made by the Company include the carrying amounts and
  economic lives of software costs and goodwill and the net
  realizable value of third-party receivables.

  (d) - Financial Instruments
  The carrying amounts of cash and cash equivalents, accounts
  receivable, accounts payable and accrued liabilities approximate
  fair value due to the short-term maturities of these items.  The
  carrying amounts of the Company's bank borrowings approximate
  fair value because the interest rate changes with market interest
  rates and the borrowings are similar to other credit arrangements
  currently available to the Company.

  (e) - Cash and Cash Equivalents
  The Company considers short-term highly liquid investments with
  maturities of three months or less to be cash equivalents.

                                 F-7

<PAGE>

                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  (f) - Revenue Recognition
     (i)  Product sales and other revenue are reported at the estimated
     net realizable amounts expected to be received from individuals,
     third-party payers, institutional healthcare providers and others.
     The Company recognizes revenue from the sale of pharmaceutical
     products and retail merchandise as transactions occur and product is
     delivered to the customer.  Revenue from healthcare services is
     recognized at the time services are provided.  Revenue from
     wholesale product sales is recognized at the time of shipment.

     A portion of the Company's revenue is derived from governmental
     assistance programs, such as Medicare and Medicaid.
     Governmental programs pay for healthcare costs based on fee
     schedules and rates that are determined by the related
     governmental agency.  Medicare and Medicaid combined accounted
     for approximately 13% and 11% of product sales and other
     revenue for the years ended June 30, 2001 and 2000,
     respectively.

     (ii) The Company acts as an agent for the sale of certain
     pharmaceutical products on its web sites.  A member pharmacy, and
     not the Company, is responsible for the fulfillment of customer
     purchases, and the Company does not have risks and rewards as
     principal in online sales transactions.  Online sales revenue
     consists primarily of processing fees representing the amount billed
     to a customer, less the amount paid to a supplier.  The net revenue
     from online sales is recognized as transactions occur.  The Company,
     however, records the gross amounts of receivables and payables
     related to these transactions because the Company assumes credit
     risk for the amount billed to the customer and is responsible for
     paying the member pharmacy.

  (g) - Inventory
  Inventory consists principally of finished goods held for resale,
  valued at the lower of cost, using the first-in, first-out
  method, or market.

  (h) - Property and Equipment
  Property and equipment is stated at cost less accumulated
  depreciation. Depreciation is computed using the straight-line
  method over the estimated useful lives, generally five to seven
  years, of the underlying assets.  Leasehold improvements are
  depreciated over the expected terms of the underlying leases.
  Depreciation expense for the years ended June 30, 2001 and 2000
  was approximately $150,200 and $57,900, respectively.  The costs
  of repairs and maintenance are expensed as incurred.

  (i) - Software Costs
  The Company accounts for costs incurred in connection with
  developing or obtaining computer software in accordance with the
  provisions of Statement of Position No. 98-1 ("SOP 98-1"),
  Accounting for the Costs of Computer Software Developed or
  Obtained for Internal Use.  The Company capitalizes certain
  direct costs, including payroll and payroll-related costs for
  employees who are directly associated with and who devote time to
  the software project, once the capitalization criteria of SOP 98-
  1 are met.  All other costs are expensed as incurred.  After all
  substantial testing is completed and software is available for
  general release, software costs are amortized as described below.
  During the years ended June 30, 2001 and 2000, the Company
  capitalized approximately $237,100 and $2,269,200, respectively,
  related to the development of an Internet-based pharmaceutical
  care information system, including $2,113,000 upon the
  acquisition of Rx-Pro.Com, Inc. (See Note 3.)

                                 F-8

  <PAGE>


                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



  Software costs are amortized on a straight-line basis over the
  estimated economic life of five years.  As of June 30, 2001, the
  Company's pharmaceutical care information system was not
  available for general release to customers, and as a result,
  amortization expense has not been recognized.

  (j) - Goodwill
  Goodwill represents excess of cost over the fair value of net
  assets of acquired businesses and is amortized on a straight-line
  basis over estimated lives of five to 20 years.  Amortization
  expense in connection with goodwill was approximately $251,100
  and $28,100 for the years ended June 30, 2001 and 2000,
  respectively.

  In the event the fair value of net assets acquired exceeds the
  cost of an acquired business, excess over cost ("negative
  goodwill") is allocated to reduce proportionately the estimated
  fair values assigned to non-current assets.  If the allocation
  reduces the fair value of non-current assets to zero, the
  remainder of the excess over cost is recorded as a deferred
  credit and amortized to earnings on a straight-line basis over
  estimated lives not to exceed twenty years.  Amortization of
  negative goodwill for the year ended June 30, 2001 was
  immaterial.  (Also see Note 2(q).)

  (k) - Impairment of Long-Lived Assets
  The Company evaluates long-lived assets, including goodwill, for
  impairment whenever events and changes in circumstances indicate
  that the carrying amount of such an asset may not be recoverable.
  The Company assesses the recoverability of long-lived assets by
  determining whether an asset's carrying value will be recovered
  through undiscounted expected future cash flows.  If the total of
  the future cash flows is less than the carrying amount of the
  asset, the Company recognizes an impairment loss based on the
  excess of the carrying amount over the estimated fair value of
  the asset.  As of June 30, 2001, the Company believes no
  impairment of the carrying values of its long-lived assets is
  required.

  (l) - Deferred Financing Costs
  Costs incurred in connection with the issuance of new debt
  instruments are deferred and included in other assets.  Such
  costs are amortized by the effective yield method over the term
  of the related debt obligation.

  (m) - Advertising Costs
  Advertising costs are expensed as incurred.  Total advertising
  expenses were approximately $156,700 and $65,700 in fiscal years
  2001 and 2000, respectively.

  (n) - Income Taxes
  The Company accounts for income taxes using the liability method
  whereby deferred tax assets and liabilities are determined based
  on the difference between the financial statement and tax basis
  of assets and liabilities using enacted tax rates and laws which
  will be in effect for the year in which the differences are
  expected to reverse.  Valuation allowances are established when
  necessary to reduce deferred tax assets to amounts expected to be
  realized.

  (o) - Per Share Data
  Basic earnings per common share is computed using the weighted
  average number of common shares outstanding during the period.
  Diluted earnings per common share is computed using the weighted
  average number of common and common stock equivalent shares
  outstanding during the period.  Common stock equivalent shares
  are excluded from the computation if their effect is
  antidilutive.  See Note 11 regarding restrictions on conversion
  of preferred shares.

                                 F-9

  <PAGE>


                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


  (p) - Stock-Based Compensation
  The Company applies Statement of Financial Accounting Standards
  No. 123 ("SFAS 123"), Accounting for Stock-Based Compensation,
  which establishes financial accounting and reporting standards
  for stock-based employee compensation plans.  The provisions of
  SFAS 123 allow companies to continue to follow the intrinsic-
  value method prescribed by Accounting Principles Board Opinion
  No. 25 ("APB 25"), Accounting for Stock Issued to Employees, and
  requires disclosure of the pro forma effects on net income and
  earnings per share had the fair value of the employee stock
  options granted been expensed as prescribed by SFAS No. 123.  The
  Company has elected to continue to use APB 25 and related
  interpretations in accounting for its employee stock options.
  For awards that generate compensation expense as defined under
  APB 25, the Company recognizes the expense over the vesting
  period of the award.  (See Note 10.)

  (q) - Recently Issued Accounting Pronouncements
  In June 2001 the Financial Accounting Standards Board ("FASB")
  issued SFAS No. 141 ("SFAS 141"), Business Combinations.  This
  statement supersedes APB No. 16, Business Combinations and
  requires use of the purchase method of accounting for all
  business combinations initiated after June 30, 2001, thereby
  eliminating use of the pooling-of-interest method.  SFAS 141 also
  requires that the excess of fair value of the acquired net assets
  over cost ("negative goodwill") be recognized as an extraordinary
  gain.  The Company will adopt SFAS 141 on July 1, 2001 and record
  the effect of a change in accounting principle during the first
  quarter of fiscal 2002 resulting from negative goodwill that
  arose from the acquisition of Medicine Man, Inc.  (See Note 3.)

  Also in June 2001, the FASB issued SFAS No. 142 ("SFAS 142"),
  Goodwill and Other Intangible Assets, which establishes new
  accounting and reporting standards for acquired goodwill and
  intangible assets, after a business combination is completed.
  Under the provisions of SFAS 142, goodwill will no longer be
  amortized.  Instead, goodwill will be reviewed periodically for
  impairment and written down when found to be impaired.  Companies
  with a fiscal year beginning after March 15, 2001, for which
  first quarter financial statements have not been issued, may
  adopt this statement at the beginning of that fiscal year.  Under
  the provisions of SFAS 142, the Company will cease its
  amortization of goodwill effective July 1, 2001.

  (r) - Reclassifications
  Certain reclassifications have been made to conform the prior
  year financial statements to the June 30, 2001 presentation.

3.   Business Combinations
--------------------------

  Business combinations have been accounted for using the purchase
  method of accounting.  The results of operations of the acquired
  businesses have been included in the consolidated financial
  statements from their respective dates of acquisition.  Net
  assets of the businesses acquired are recorded at their estimated
  fair value at the date of acquisition, except for Dougherty's
  Pharmacy, Inc. which was recorded at historical cost.  The excess
  of the purchase price over the fair value of tangible and
  identifiable intangible net assets acquired is included in
  goodwill in the accompanying consolidated balance sheet.

                                F-10

  <PAGE>

                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


  Year Ended June 30, 2000


  Rx-Pro.Com, Inc.
  Effective January 1, 2000, the Company acquired all the
  outstanding common stock of Rx-Pro.Com, Inc. ("Rx-Pro") in
  exchange for 97,500 shares of the Company's Series A Preferred
  Stock with an estimated fair value, based on the quoted market
  price of underlying Company common stock, of $2,154,750.  The
  Company also incurred related acquisition costs of approximately
  $32,400.  The purchase price was allocated to the net assets
  acquired based on their estimated fair values.  The fair value of
  software costs applicable to an Internet-based pharmaceutical
  care information system of approximately $2,113,000 was
  determined based on a valuation prepared by an independent third
  party.  The Company recognized goodwill of approximately
  $213,600, which is being amortized over a period of five years.
  Rx-Pro provides Internet-based pharmacy services through two web
  sites and currently derives its revenues from the filling and
  management of prescriptions.  One of the former owners of Rx-Pro
  is also a director and significant stockholder of the Company.

  Dougherty's Pharmacy, Inc.
  Effective January 1, 2000, the Company acquired all the
  outstanding common stock of Dougherty's Pharmacy, Inc.
  ("Dougherty's") in exchange for 45,000 shares of the Company's
  Series A Preferred Stock.  Dougherty's net assets acquired were
  recorded at their historical cost bases due to common control
  between Dougherty's and the Company.  Dougherty's operates two
  retail pharmacies located in Dallas, Texas.

  Total Pharmacy Supply, Inc.
  Effective April 1, 2000, the Company acquired all the outstanding
  common stock of Total Pharmacy Supply, Inc. ("Total Pharmacy") in
  exchange for 41,515 shares of the Company's Series A Preferred
  Stock  (subject to a hold-back of 4,151 shares for satisfaction
  of potential indemnification claims against the former owners of
  Total Pharmacy) with an estimated fair value, based on the quoted
  market price of underlying Company common stock, of approximately
  $935,000.  The Company also incurred approximately $180,300 in
  related acquisition costs.  The purchase price was allocated to
  the net assets acquired based on their estimated fair values.
  The Company recognized goodwill of approximately $1,131,000,
  which is being amortized over a period of twenty years.  Total
  Pharmacy is a wholesale distributor of pharmacy-related products
  and supplies.

  Year Ended June 30, 2001

  Park Infusion Services, L.P.
  Effective August 1, 2000, the Company acquired the ongoing
  operations of three infusion therapy pharmacies ("Park Infusion")
  from subsidiaries of Amedisys, Inc.  In the transaction, the
  Company acquired all tangible and intangible assets, except for
  cash and accounts receivable, for cash consideration of
  $1,750,000.  The Company also incurred approximately $163,000 in
  related acquisition costs.  The Company recognized goodwill of
  approximately $1,593,300, which is being amortized over a twenty-
  year period.  Park Infusion operates alternate-site treatment
  locations in Dallas and San Antonio, Texas, and until April 1,
  2001, St. Petersburg, Florida.  (See Note 4.)

  MJN Enterprises, Inc.
  Effective November 11, 2000, the Company acquired all the
  outstanding common stock of MJN Enterprises, Inc., d/b/a Total
  Health Care ("Total Health Care").  In connection with this
  acquisition, the Company paid cash consideration of $1,150,000
  and agreed to issue 1,450,000 shares of the Company's common
  stock with an estimated fair value, based on the quoted market
  price of the stock, of approximately $1,744,500.  The shares were
  subject to a hold-back of 260,000 shares for satisfaction of

                                F-11

   <PAGE>


                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


  potential indemnification claims against the former owner of
  Total Health Care.  The Company also incurred related acquisition
  costs of approximately $44,500.  The Company recognized goodwill
  of approximately $2,529,600, which is being amortized over a
  twenty-year period.  Total Health Care operates an institutional
  pharmacy located in Arlington, Texas.

  Compass Healthcare
  Effective March 1, 2001, the Company acquired the Dallas office
  operations and assets, primarily inventory, of Compass Healthcare
  ("Compass") for cash consideration of approximately $158,000.
  The Company recognized goodwill of approximately $128,000, which
  is being amortized over a twenty-year period.  Compass is a
  retail pharmacy operation located at Medical City Hospital of
  Dallas which deals exclusively in the sale of therapeutic
  compression garments and supplies.  In July 2001, Compass
  operations were moved to the Dougherty's Pharmacy location.

  Park - Medicine Man, L.P.
  Effective June 1, 2001, the Company acquired the operations of
  Medicine Man, Inc. ("Medicine Man"), a debtor in possession in
  Case No. 00-80112-G3-11 filed in the United States Bankruptcy
  Court for the Southern District of Texas, Galveston Division, for
  cash consideration of approximately $1,129,000 and incurred
  approximately $89,800 in related acquisition costs.  The Company
  recognized negative goodwill (see Note 2(j)) of approximately
  $399,700.  The acquired business operations of Medicine Man
  consist of four retail pharmacies located near Houston, Texas.

  The following unaudited pro forma summary presents consolidated
  results of operations for the Company as if these acquisitions
  had occurred at the beginning of the fiscal year ended June 30,
  2000.  The pro forma information does not include the operating
  results of Compass because the effect of this acquisition was not
  significant to the Company's consolidated financial statements.

                                          Year Ended June 30,
                                       -------------------------
                                           2001          2000
                                       ------------  ------------

   Revenues, net                        $58,078,000   $48,226,000
                                        ===========   ===========

   Net income                           $   422,000   $   961,000
                                        ===========   ===========

   Net income per common share -
     basic and diluted                  $       .01   $       .03
                                        ===========   ===========

  The pro forma results include adjustments for the amortization of
  goodwill and acquired intangible assets, financing expenses, and
  related tax effects.  The unaudited pro forma results are not
  necessarily indicative of the actual results that would have been
  attained had the acquisitions occurred on the indicated date, nor
  are they necessarily indicative of future consolidated results of
  the Company.

4.   Disposition
----------------

  Effective April 1, 2001, the Company sold the operations and
  certain assets of Park Infusion's St. Petersburg, Florida
  location to Option Care Enterprises, Inc. ("Option Care") for
  initial cash consideration of $900,000.  Additional consideration
  up to $380,000 may be due from Option Care in October 2001.  The
  Company also incurred approximately $71,300 in costs related to
  the sale.  Under the Asset Purchase Agreement dated April 10,
  2001, the sale price is subject to reduction based upon the
  Company's ability to

                                F-12


   <PAGE>
                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


  collect 95 percent of the revenues billed by this location for
  the period from August 1, 2000 to February 28, 2001.  If the
  Company does not collect at least 95 percent of those billed
  revenues, the sale price is to be reduced $2.50 for each dollar
  of uncollected cash in excess of five percent.  Any purchase
  price adjustment will be offset first against the additional
  consideration, and if the adjustment exceeds the additional
  consideration, the Company must refund a portion of the initial
  cash consideration equal to such excess.  Based on a preliminary
  assessment, the Company has recorded a liability in the amount of
  $70,000 as of June 30, 2001 for an amount of initial cash
  consideration to be refunded to Option Care.  As of June 30,
  2001, the Company has recognized a gain of $210,348 from the sale
  of this business.  When the Company determines the final amount
  of collections, any adjustment to the gain will be recognized at
  that time.

5.   Property and Equipment
---------------------------

  Property and equipment at June 30, 2001 consisted of the
following:

   Furniture, fixtures and equipment         $ 1,127,972
   Computer equipment                            468,905
   Leasehold improvements                        771,150
   Vehicles                                      260,507
                                             -----------
                                               2,628,534
        Less accumulated depreciation and    (1,411,910)
         amortization                        -----------
                                             $ 1,216,624
                                             ===========

6.   Accrued Liabilities
------------------------

  Accrued liabilities at June 30, 2001 consisted of the following:

   Accrued payroll and related costs          $  709,090
   Other accrued liabilities                     310,929
							    ----------
                                              $1,020,019
							    ==========

7.   Debt
---------

  Short-term-borrowings at June 30, 2001 consisted of the
  following:

  Revolving line of credit - interest
   payable monthly; due December 31, 2001
   (a)                                       $2,850,790

  Term note- monthly principal payments of
   $150,000, plus interest; due December
   1, 2001 (a)                                  900,000

  Note payable -additional borrowing under
   revolving line of credit; without
   defined terms (a)                            403,700
                                             ----------
                                             $4,154,490
                                             ==========

                                F-13
   <PAGE>

                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


  Long-term debt at June 30, 2001 consisted of the following:

  Acquisition note - monthly principal
    payments of $69,153, plus interest;
    matures June 12, 2006 (a)                   $4,149,210

  Other - monthly principal and interest
    payments of $1,129; 9% interest rate;
    matures April 15, 2004;
    collateralized by an automobile                 33,622
                                                ----------
                                                 4,182,832
   Less current portion                           (840,810)
                                                ----------
                                                $3,342,022
                                                ==========

  (a)  Interest at prime (6.75% at June 30, 2001) and collateralized
     by substantially all the assets of the Company.

  Credit Facility
  On June 8, 2001, the Company entered into a Loan Agreement (the
  "Credit Facility") with Bank of Texas, N.A. (the "Bank").  The
  Credit Facility, which replaced the Company's previous borrowing
  arrangement with the Bank dated August 10, 2000, consists of a
  $7,000,000 revolving line of credit note (the "Revolver"), and a
  $900,000 term loan.  The Credit Facility also provides for
  acquisition financing from amounts available under the Revolver.
  Borrowings for a given acquisition are permitted to revolve for
  180 days, at which time the Company must execute a five-year term
  loan ("Acquisition Note") for any unpaid principal outstanding.
  Amounts drawn for Acquisition Notes are repayable monthly and
  reduce dollar-for-dollar the maximum amount available to the
  Company under the Revolver.  On June 12, 2001, the Company
  executed an Acquisition Note in the amount of $4,129,210,
  representing the refinancing of existing acquisition borrowings
  drawn under the Company's previous borrowing arrangement with the
  Bank.  The Credit Facility bears interest at the prime rate and
  is collateralized by substantially all the assets of the Company.

  The Credit Facility is subject to an asset-related borrowing base
  and requires the Company to maintain certain financial covenants
  including current ratio, debt to collateral ratio and debt
  service and funded senior debt coverage limitations, as defined.
  The Company was not in compliance with certain of these debt
  covenant requirements at June 30, 2001, but received waivers from
  the bank.

  The Credit Facility also contains non-financial covenants, that
  among other things, limit the Company's ability to incur
  additional liens and indebtedness, acquire or dispose of assets,
  merge or consolidate with other entities, make distributions or
  pay dividends to its stockholders, purchase or redeem its capital
  stock and change senior management.

  Maturities of Long-Term Debt
  Aggregate maturities of the Company's long-term debt obligations
  at June 30, 2000 were as follows:

         Year ended June 30,
         -------------------
         2002                     $  840,810
         2003                        841,838
         2004                        840,500
         2005                        829,842
         2006                        829,842
                                  ----------
                                  $4,182,832
                                  ==========


                                F-14

    <PAGE>

                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





8.   Income Taxes
-----------------

  Deferred income taxes reflect the net tax effects of temporary
  differences between the carrying amounts of assets and
  liabilities for financial reporting purposes and the amounts used
  for income tax purposes.

       The significant components of the Company's
         deferred tax assets and liabilities at June
         30, 2001 were as follows:

       Deferred tax assets:
        Allowance for bad debts                         $359,300
        Inventory costs capitalized                       29,483
        Accrued vacation                                  44,466
        Deferred compensation                             73,606
        Net operating loss carryforwards                  98,170
                                                       ---------
                 Total deferred tax assets               605,025
                                                       ---------
       Deferred tax liabilities:
        Property and equipment, differences in
           depreciation methods                         (120,074)
        Software costs, differences in
           capitalization methods                       (146,026)
        Other                                             (7,169)
                                                       ---------
                 Total deferred tax liabilities         (273,269)
                                                       ---------
                 Net deferred tax asset                $ 331,756
                                                       =========

  Income tax expense consisted of the following:
                                              Year Ended June 30,
                                            -----------------------
                                               2001          2000
                                            ----------     ---------
     Current tax expense:
       Federal                               $  358,219    $       -
       State                                    121,450       36,400
                                             ----------    ---------
                 Total current                  479,669       36,400
                                             ----------    ---------

     Deferred tax (benefit) expense:
       Federal                                 (293,480)      (5,780)
       State                                    (33,566)       1,010
                                             ----------    ---------
                 Total deferred                (327,046)      (4,770)
                                             ----------    ---------
                 Income tax expense          $  152,623    $  31,630
                                             ==========    =========

  The differences between income tax expense at the federal
  statutory rate and the Company's effective tax rate were as
  follows:
                                                Year Ended June 30,
                                                -------------------
                                                  2001       2000
                                                --------   --------
     Federal statutory rate                          34%        34%
     State taxes                                     20%        13%
     Non-deductible goodwill amortization            15%         4%
     Net operating loss carryforwards                (23)%     (46%)
     Other                                            (9)%       7%
                                                --------   --------
     Effective tax rate                              37%        12%
                                                ========   ========

                                F-15

   <PAGE>

                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




  At June 30, 2001, the Company had available net operating loss
  ("NOL") carryforwards of approximately $1,265,000, which may be
  used to reduce future taxable income and begin to expire in 2002
  through 2019. NOLs related to businesses acquired of
  approximately $1,165,000 are subject to certain annual
  limitations.

9.   Commitments and Contingencies
----------------------------------

  Leases
  The Company's pharmacy, wholesale distribution and corporate
  office facilities and certain pharmacy equipment are leased under
  non-cancelable operating lease agreements.  Certain leases
  contain renewal options and provide that the Company pay taxes,
  insurance, maintenance and other operating expenses.  Total rent
  expense for operating leases was approximately $725,000 and
  $225,000 for the years ended June 30, 2001 and 2000,
  respectively.

  Future minimum lease payments under non-cancelable operating
  leases are as follows:

         Year ended June 30,
         -------------------
         2002                      $  821,000
         2003                         778,000
         2004                         588,000
         2005                         389,000
         2006                         309,000
                                   ----------
                                   $2,885,000
                                   ==========

  Employment Agreements
  Employment agreements have been executed with certain officers
  and key employees of the Company.  These agreements provide for
  annual base salaries with terms of two to five years expiring at
  various dates through March 2005.

  Future minimum payments under these agreements are as follows:

         Year ended June 30,
         -------------------
         2002                         $543,750
         2003                          418,750
         2004                          325,000
         2005                          163,750
                                    ----------
                                    $1,451,250
                                    ==========

  Software Licensing Agreement
  The Company has entered into a licensing agreement with a party
  involved in the initial development of the Company's Internet-
  based pharmaceutical care information system.  Under the
  agreement, the Company has been granted the rights to various
  copyrighted databases and related software libraries.  The
  agreement also includes rights to sublicense the software to the
  Company's customers.  The agreement requires the Company pay an
  annual licensing fee of $5,000 and per user royalty fees as
  specified under the agreement.  The Company may terminate its
  obligation as provided for in the agreement.

                                F-16

   <PAGE>

                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




  Litigation
  The Company is subject to claims and legal actions which may
  arise in the ordinary course of business.  The Company is not
  aware of any litigation either pending or filed that may have a
  material impact on its financial position or results of
  operations.

10.  Stockholders' Equity
-------------------------

  Preferred Stock
  The Company has authorized 250,000,000 shares of preferred stock,
  which may be issued in series with rights and preferences as
  designated by the Company's board of directors.

  Series A Preferred Stock
  In connection with the acquisitions described in Notes 2 and 3,
  the Company issued 3,024,581 shares of Series A Preferred Stock.
  Each share of Series A Preferred Stock is convertible into ten
  shares of the Company's common stock.  The conversion into common
  stock is restricted as described in Note 11.  The Series A
  Preferred Stock does not carry a dividend, and includes a
  preference in the event of involuntary liquidation in the amount
  of $10 per share.

  Restricted Stock Awards
  The Company awarded 21,000 and 89,000 shares of restricted common
  stock to certain employees in May 2001 and March 2000,
  respectively.  These shares are nontransferable and subject to
  forfeiture in the event employment is terminated within an
  eighteen-month vesting period.  The estimated fair value of
  shares awarded in fiscal years 2001 and 2000 of $14,000 and
  $200,000, respectively, was recorded as deferred compensation.
  Compensation expense is amortized over the vesting period.
  During fiscal year 2001, the Company recognized related
  compensation expense of $126,887 and a total of 4,000 shares were
  forfeited.  During fiscal year 2000, the Company recognized
  related compensation expense of $32,430, and a total of 3,000
  shares were forfeited.

  Stock Option Plan
  Effective September 19, 2000, the Company's Board of Directors
  and the stockholders adopted the Company's 2000 Stock Option Plan
  (the "Plan"), whereby the Company may grant incentive or non-
  qualified stock options to purchase up to 8,659,465 shares of the
  Company's common stock, with a maximum number of incentive
  options limited to 4,000,000 shares.

  Under the Plan, incentive stock options may be granted to
  employees of the Company.  Non-qualified stock options may be
  granted to employees, consultants or directors of the Company.
  Terms and conditions of the Company's stock options, including
  exercise price and the period in which the options are
  exercisable, generally are at the discretion of the Board of
  Directors, except that all options are exercisable for a period
  of no more than ten years.

  Most options granted during fiscal 2001 vest over a three to four
  year period from date of grant and will expire, if unexercised,
  twelve months following the final vesting date.  195,000 options
  vested immediately.

                                F-17
    <PAGE>


                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


  A summary of the stock options transactions is as follows:
                                                Weighted
                                                Average
                                    Number of   Exercise
                                    Options     Price
                                   ----------   ---------

        Balance, June 30, 2000              -  $       -
         Granted                    5,836,832  $     .75
         Exercised                          -  $       -
         Canceled or expired                -  $       -
                                    ---------  ---------

        Balance, June 30, 2001      5,836,832  $     .75
                                    =========  =========

  The following table summarizes information about options
  outstanding as of June 30, 2001:

           Options Outstanding           Options Exercisable
    ---------------------------------  -----------------------
                   Weighted
                   Average   Weighted                 Weighted
                  Remaining   Average                 Average
       Number        Life    Exercise     Number      Exercise
    Outstanding    (Years)     Price   Exercisable     Price
    ------------  ---------  --------  ------------  ---------

       5,836,832       3.9   $    .75    1,617,222   $     .75
       =========       ===   ========    =========   =========

  The weighted average fair value at the date of grant of options
  granted under the Plan for the year ended June 30, 2001 were as
  follows:

        Options with exercise price less than
          market price                         $   .48
                                               =======
        Options with exercise price equal to
          market price                         $   .39
                                               =======

  Stock-Based Compensation and Pro Forma Disclosures
  The Company applies APB 25 and related interpretations in
  accounting for employee stock options, which requires
  compensation expense be recognized for grants of stock options
  when the quoted market price of the Company's common stock on the
  grant dates exceeds an option's exercise prices.  In fiscal year
  2001, the Company recorded deferred compensation of $126,000
  related to the granting of stock options.  Compensation expense
  is amortized over the vesting period.  Compensation expense of
  $27,000 was recorded during fiscal 2001 for such grants.

  Under SFAS 123, employee stock options are valued at the date of
  grant using the Black-Scholes option pricing model, and are
  amortized to expense over the options' vesting period.  Had
  compensation expense been determined based on the fair value at
  the grant dates of these options pursuant to the employee
  compensation provisions of SFAS 123, the Company's net income and
  income per share would have been as follows:
                                        2001
                                      --------
             Net income:
              as reported             $256,080
                                      ========
              pro forma               $ 99,127
                                      ========

                                F-18

    <PAGE>

                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                        2001
                                      --------
             Net income per share:
              as reported - basic
               and diluted            $    .01
                                      ========
              pro forma - basic
              and diluted             $      -
                                      ========

  The fair value of stock options granted during fiscal 2001 was
  estimated on the date of grant using the Black-Scholes option
  pricing model with the following weighted average assumptions:

                                        2001
                                      --------
             Volatility                   94 %
             Interest rate              3.88 %
             Dividend yield                - %
             Expected life             2 years

11.  Earnings Per Share
-----------------------

  Included in the weighted average shares computation are
  30,245,810 equivalent shares representing 3,024,581 shares of
  Series A Preferred Stock that include conversion restrictions.
  Of these shares, 2,263,700 (representing 22,637,000 equivalent
  shares) can only be converted ratably over a twenty-year period
  beginning in 2002.

  The following table sets forth the computation of basic and
  diluted earnings per share:

                                             Year Ended June 30,
                                           ----------------------
                                             2001        2000
                                           ----------  ----------
   Numerator:
     Net income                            $  256,080  $  242,874
                                           ==========  ==========

   Denominator:
  Weighted average common shares:
   Common shares outstanding                5,266,949   3,112,503
   Common share equivalents of Series A    30,245,810  28,430,711
   preferred stock                         ----------  ----------
Basic weighted average common shares       35,512,759  31,543,214

  Effect of dilutive securities:
      Employee stock options                   80,723           -
                                           ----------  ----------

 Dilutive weighted average common shares
                                           35,593,482  31,543,214
                                           ==========  ==========

 Basic earnings per share                  $      .01  $      .01
                                           ==========  ==========

 Diluted earnings per share                $      .01  $      .01
                                           ==========  ==========

  On August 1, 2001, the Company granted 1,243,000 non-qualified
  stock options under the Plan.  These stock options were issued
  with an exercise price of $0.73, which equaled the current market
  price of the Company's common stock on the date of grant, and are
  exercisable over four to five years.  These options would have
  impacted the computed number of dilutive weighted average common
  shares had they been granted prior to June 30, 2001.

                                F-19


  <PAGE>
                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.  Employee Benefit Plans
---------------------------

  Through its subsidiaries, the Company maintained two defined
  contribution plans that collectively benefited most full-time
  employees of the Company and provided for employer matching
  contributions ranging from 3% to 6% of annual compensation.
  Prior to June 30, 2001, these plans were terminated and the
  Company adopted a new retirement savings plan (the "Plan")
  effective July 2, 2001.  Under the Plan, the Company matches 25%
  of every dollar contributed by employees, up to a maximum of 4%
  of the employee's annual compensation.  Combined matching
  contributions for the plans were approximately $42,200 and
  $10,400 in fiscal years 2001 and 2000, respectively.

13.  Concentrations of Credit Risk
----------------------------------

  Accounts receivable consists primarily of amounts receivable from
  third-party payment providers (insurance companies and
  governmental agencies) under various medical reimbursement
  programs.  Certain third-party receivables are recorded at
  estimated net realizable amounts.  Amounts that may be received
  under medical reimbursement programs are affected by changes in
  payment criteria and are subject to legislative actions.
  Accounts receivable from Medicare and Medicaid combined were
  approximately 17% of total accounts receivable at June 30, 2001,
  and accounts receivable from one insurance company was
  approximately 10% of total accounts receivable at June 30, 2001.
  Concentrations of credit risk associated with individual customer
  accounts receivable are considered minimal due to the Company's
  diverse customer base.

  The Company does not generally require collateral in connection
  with credit sales to its customers.  Management periodically
  evaluates the creditworthiness of the Company's customers and
  believes the allowance for doubtful accounts is adequate.

  No single customer or third-party payor accounted for more than
  10% of the Company's consolidated revenue during the year ended
  June 30, 2001.  During fiscal 2000, sales derived from Medicaid
  accounted for approximately 10% of consolidated revenue.

14.  Business Segment Information
---------------------------------

  The Company applies Statement of Financial Accounting Standards
  No. 131, Disclosures about Segments of an Enterprise and Related
  Information, which establishes standards for reporting
  information about operating segments in financial statements.
  The Company's business segments are comprised of retail and
  institutional pharmacy operations ("Pharmacy"); infusion pharmacy
  products and services ("Infusion"); Internet pharmacy web sites
  ("Online Services"); and wholesale distribution of pharmacy
  supplies ("Non-Drug").

  Through its pharmacy operations, the Company offers prescription
  and over-the-counter medications, durable medical products and
  other general merchandise, primarily to communities in and around
  the cities of Dallas/Fort Worth and Houston, Texas.  Through
  pharmacies located in Dallas and San Antonio, Texas, the Company
  provides infusion medications, products and services to home
  healthcare and hospice patients throughout North Texas and the
  San Antonio metropolitan area.  Non-drug products represent the
  wholesale distribution of pharmacy supplies and related accessory
  items sold to independent pharmacies, national retail chains and
  hospitals.  The Company also provides online pharmacy services
  through Internet web sites primarily used by hospice care
  facilities located in the Dallas/Fort Worth, Texas metropolitan
  area.

                                F-20

<PAGE>

                      PARK PHARMACY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




  Management evaluates the performance of its operating segments
  based on segment earnings, which is defined as income before
  income taxes, interest and financing expense, depreciation and
  amortization.

  Summarized segment information is as follows:
                                            Year Ended June 30,
                                         -------------------------
                                            2001          2000
                                         ------------  -----------
    Segment Revenues:
      Pharmacy                            $27,488,700  $10,497,700
      Infusion                             11,820,300            -
      Non-drug                              3,635,200      856,300
      Online services                         173,800      123,100
                                          -----------  -----------
          Total segment revenues          $43,118,000  $11,477,100
                                          ===========  ===========

    Segment Earnings (Loss):
      Pharmacy                            $ 1,036,800  $   920,000
      Infusion                              2,459,700            -
      Non-drug                                165,100       82,600
      Online services                        (168,000)    (128,200)
                                          -----------   ----------
          Total segment earnings            3,493,600      874,400
                                          -----------   ----------

    Corporate expenses                     (2,124,400)    (420,400)
    Interest and financing expense,          (559,200)     (93,600)
    net
    Depreciation and amortization            (401,300)     (85,900)
                                          -----------   ----------

    Income before income taxes            $   408,700   $  274,500
                                          ===========   ==========

    Segment Depreciation and
      Amortization:
      Pharmacy                            $   165,400   $   41,600
      Infusion                                 94,800            -
      Non-drug                                 74,600       19,200
      Online services                          45,600       17,400
                                          -----------   ----------
          Total segment depreciation
            and amortization                  380,400       78,200
                                          -----------   ----------

    Corporate                                  20,900        7,700
                                          -----------   ----------
          Total depreciation and          $   401,300   $   85,900
            amortization                  ===========   ==========

    Segment Assets:
      Pharmacy                            $ 7,761,600
      Infusion                              6,207,300
      Non-drug                                832,100
      Online services                       3,214,800
                                          -----------
          Total segment assets             18,015,800
                                          -----------

    Corporate                               1,551,500
 Goodwill resulting from business           4,876,900
    acquisitions, net                     -----------
          Total assets                    $24,444,200
                                          ===========


                                F-21