<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

|X|      Quarterly  report  pursuant  to Section  13 or 15(d) of the  Securities
         Exchange Act of 1934.

         For the quarterly period ended October 31, 2003; or

|_|      Transition  report  pursuant  to Section 13 or 15(d) of the  Securities
         Exchange Act of 1934.

         For the transition period from ___________ to ____________.

                        Commission file number: 000-26326

                     PROFESSIONAL VETERINARY PRODUCTS, LTD.
             (Exact name of registrant as specified in its charter)


               Nebraska                   5047                  37-1119387
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation or organization)  Classification Code Number)  Identification No.)


                            10077 South 134th Street
                              Omaha, Nebraska 68138
                                 (402) 331-4440
   (Address and telephone number of registrant's principal executive offices)


         Indicate  by check  mark  whether  the  registrant:  (1) has  filed all
reports  required  to be filed by  Section  13 or  15(d) of the  Securities  and
Exchange Act of 1934 during the proceeding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.

         Yes      |X|      No       |_|


         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.

         CLASS                           OUTSTANDING AT NOVEMBER 30, 2003
         -----                           --------------------------------
         Common Stock, $1.00 par value                 1,863


<PAGE>





                     PROFESSIONAL VETERINARY PRODUCTS, LTD.
                         INDEX TO 10-Q FOR THE QUARTERLY
                          PERIOD ENDED OCTOBER 31, 2003

<TABLE>
<CAPTION>
PART I:  FINANCIAL INFORMATION                                                  PAGE

<S>           <C>                                                                <C>
         ITEM 1.   FINANCIAL STATEMENTS

                   Independent Accountant's Report                                1

                   Consolidated Balance Sheets as of October 31, 2003
                   and July 31, 2003                                              2

                   Consolidated Statements of Income for the three months
                   ended October 31, 2003 and 2002                                3

                   Consolidated Statements of Cash Flow for the three months
                   ended October 31, 2003 and 2002                                4

                   Notes to Financial Statements                                  5

         ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                   FINANCIAL CONDITION AND RESULTS OF OPERATION                   9

         ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES
                   ABOUT MARKET RISK                                             18

         ITEM 4:   DISCLOSURE CONTROLS AND PROCEDURES                            19

PART II: OTHER INFORMATION

         ITEM 1.   LEGAL PROCEEDINGS                                             20

         ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS                     20

         ITEM 3.   DEFAULTS UPON SENIOR SECURITIES                               20

         ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                   HOLDERS                                                       20

         ITEM 5.   OTHER INFORMATION                                             20

         ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                              21


         SIGNATURES                                                              21

</TABLE>


<PAGE>


ITEM 1:           FINANCIAL STATEMENTS


To the Board of Directors and Stockholders
Professional Veterinary Products, Ltd.
Omaha, NE


                         INDEPENDENT ACCOUNTANT'S REPORT


         We  have  reviewed  the  accompanying  consolidated  balance  sheet  of
Professional Veterinary Products, Ltd. (a Nebraska Corporation) and subsidiaries
as of October 31, 2003, and the related  statements of  consolidated  income for
the three month  periods  ended  October 31, 2003 and 2002 and the  consolidated
statements  of cash flows for the three month periods ended October 31, 2003 and
2002. We conducted our review in accordance  with  standards  established by the
American Institute of Certified Public Accountants.  All information included in
these  financial   statements  is  the   representation  of  the  management  of
Professional Veterinary Products, Ltd.

         A review of  interim  financial  information  consists  principally  of
inquiries of Company  personnel and analytical  procedures  applied to financial
data.  It is  substantially  less in  scope  than an audit  in  accordance  with
generally accepted auditing standards,  the objective of which is the expression
of an opinion regarding the financial statements taken as a whole.  Accordingly,
we do not express such an opinion.

         Based on our  review,  we are not aware of any  material  modifications
that should be made to the accompanying  financial  statements in order for them
to be in conformity with generally accepted accounting principles.

         The July 31, 2003 balance sheet included in these financial  statements
was  audited by us.  Our audit  report  dated  October  15,  2003  expressed  an
unqualified opinion on that balance sheet.


/s/ Quick & McFarlin, P.C.

Quick & McFarlin, P.C.
Omaha, Nebraska
December 8, 2003

                                       1
<PAGE>


             PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
              AS OF OCTOBER 31, 2003 (UNAUDITED) AND JULY 31, 2003
                        (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>

                                                                                        OCTOBER 31,            JULY 31,
                                                                                           2003                 2003
                                                                                     ------------------   ------------------
<S>                                                                                  <C>                  <C>
                                             ASSETS
 CURRENT ASSETS:
     Cash                                                                            $           1,916    $           4,346
     Accounts receivable, trade - net of allowance for doubtful
       accounts $813 and $760, respectively                                                     32,417               22,718
     Accounts receivable, related parties                                                        3,645                4,133
     Inventory                                                                                  43,761               38,817
     Deferred tax asset                                                                            311                  264
     Other current assets                                                                          378                  489
                                                                                     ------------------   ------------------
          Total current assets                                                                  82,428               70,767
                                                                                     ------------------   ------------------
 NET PROPERTY AND EQUIPMENT                                                                     10,038               10,298
                                                                                     ------------------   ------------------

 OTHER ASSETS:
     Intangible assets - net of accumulated amortization $11 and $10, respectively                  14                   15
     Intangible retirement asset                                                                 1,230                1,334
     Investment in unconsolidated affiliates                                                     1,583                1,583
     Cash value life insurance                                                                     507                  295
     Other assets                                                                                  197                   31
                                                                                     ------------------   ------------------
          Total other assets                                                                     3,531                3,258
                                                                                     ------------------   ------------------
 TOTAL ASSETS                                                                        $          95,997    $          84,323
                                                                                     ==================   ==================

                          LIABILITIES AND STOCKHOLDERS' EQUITY
 CURRENT LIABILITIES:
     Notes payable, bank                                                             $           6,447    $           9,765
     Current portion of long-term debt and capital lease obligation                              1,386                1,363
     Accounts payable, trade                                                                    60,428               46,154
     Accounts payable, related parties                                                           2,307                1,022
     Other current liabilities                                                                   3,898                4,897
                                                                                     ------------------   ------------------
          Total current liabilities                                                             74,466               63,201
                                                                                     ------------------   ------------------

 LONG-TERM LIABILITIES:
     Long-term debt and capital lease obligation, less current portion                           7,620                7,972
     Accrued retirement benefits, less current portion                                           1,230                1,334
     Deferred  tax liability                                                                       255                  253
     Shares subject to mandatory redemption, $1 par value; issued and
       outstanding 678 shares and 0 shares, respectively                                         1,981                    -
                                                                                     ------------------   ------------------
          Total long-term liabilities                                                           11,086                9,559
                                                                                     ------------------   ------------------
 TOTAL LIABILITIES                                                                              85,552               72,760
                                                                                     ------------------   ------------------

 STOCKHOLDERS' EQUITY:
     Common stock, $1 par value; authorized 30,000 shares; issued and
       outstanding 1,179 shares and 1,845 shares, respectively                                       1                    2
     Paid-in capital                                                                             3,448                5,344
     Retained earnings                                                                           6,996                6,217
                                                                                     ------------------   ------------------
          Total stockholders' equity                                                            10,445               11,563
                                                                                     ------------------   ------------------
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $          95,997    $          84,323
                                                                                     ==================   ==================
</TABLE>

         See notes to the condensed, consolidated financial statements.

                                        2

<PAGE>


             PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
               THREE MONTH PERIODS ENDED OCTOBER 31, 2003 AND 2002
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                                                  OCTOBER 31,         OCTOBER 31,
                                                                      2003                2002
                                                                 ----------------    ----------------
<S>                                                                        <C>                 <C>
 NET SALES AND OTHER REVENUE
      (including net revenue from related parties of
      $8,284 and $5,620, respectively)                           $        88,442     $        75,236

 COST OF SALES
      (including purchases from related parties of
      $5,177 and $4,118, respectively)                                    79,818              68,513
                                                                 ----------------    ----------------

 Gross profit                                                              8,624               6,723

 OPERATING, GENERAL, AND
      ADMINISTRATIVE EXPENSES                                              7,314               6,422
                                                                 ----------------    ----------------

 Operating income                                                          1,310                 301
                                                                 ----------------    ----------------

 OTHER INCOME (EXPENSE)
      Interest income                                                        143                 128
      Interest expense                                                      (205)               (240)
                                                                 ----------------    ----------------

         Other expense - net                                                 (62)               (112)
                                                                 ----------------    ----------------

 Income before taxes                                                       1,248                 189

 Income tax expense                                                          470                  75
                                                                 ----------------    ----------------

 Net income                                                      $           778     $           114
                                                                 ================    ================

 Net earnings per share of
      common stock                                               $        662.00     $         69.66
                                                                 ================    ================

 Weighted average common
      shares outstanding                                                   1,176               1,641
                                                                 ================    ================
</TABLE>

         See notes to the condensed, consolidated financial statements.

                                        3

<PAGE>



             PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               THREE MONTH PERIODS ENDED OCTOBER 31, 2003 AND 2002
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                     OCTOBER 31,        OCTOBER 31,
                                                                                        2003                2002
                                                                                   ----------------    ---------------
<S>                                                                                          <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                      $           778     $          114
                                                                                   ----------------    ---------------
   Adjustments to reconcile net income to net cash from operating activities:
       Depreciation and amortization                                                           264                357
         (Increase) decrease in:
           Receivables                                                                      (9,211)           (11,440)
           Inventories                                                                      (4,944)            (8,667)
           Deferred tax asset                                                                  (47)                 -
           Other current assets                                                                111                 (3)
           Cash value life insurance                                                          (212)                 -
         Increase (decrease) in:
           Accounts payable                                                                 15,559              6,257
           Other current liabilities                                                          (999)              (460)
           Deferred tax liability                                                                2                  3
                                                                                   ----------------    ---------------
             Total adjustments                                                                 523            (13,953)
                                                                                   ----------------    ---------------

             Net cash provided (consumed) by operating activities                            1,301            (13,839)
                                                                                   ----------------    ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                                           (2)              (946)
   Deposits on property and equipment                                                         (166)              (119)
                                                                                   ----------------    ---------------

             Net cash consumed by investing activities                                        (168)            (1,065)
                                                                                   ----------------    ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net short-term borrowing (repayment)                                                     (3,318)             8,124
   Bank overdraft                                                                                -              5,245
   Payments of long-term debt                                                                 (301)              (117)
   Payments of capital lease obligation                                                        (28)                 -
   Net payments for redemptions of shares subject to mandatory redemption                      (11)                 -
   Net proceeds from issuance of common stock                                                   95                421
                                                                                   ----------------    ---------------

             Net cash provided (consumed) by financing activities                           (3,563)            13,673
                                                                                   ----------------    ---------------

Net decrease in cash                                                                        (2,430)            (1,231)
Cash at beginning of period                                                                  4,346              1,324
                                                                                   ----------------    ---------------
Cash at end of period                                                              $         1,916     $           93
                                                                                   ================    ===============

Supplemental disclosure of cash flow information:
   Interest paid                                                                   $           224     $          217
                                                                                   ================    ===============
   Income taxes paid                                                               $         1,462     $          341
                                                                                   ================    ===============
</TABLE>
         See notes to the condensed, consolidated financial statements.

                                        4

<PAGE>


             PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
              NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
                                OCTOBER 31, 2003
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)




NOTE 1 - BASIS OF PRESENTATION:

       The  accompanying   condensed,   consolidated   financial  statements  of
Professional Veterinary Products,  Ltd., and its wholly-owned  subsidiaries (the
Company) have been prepared in accordance with accounting  principles  generally
accepted  in  the  United  States  for  interim  financial  information  and  in
accordance  with the rules and  regulations of the United States  Securities and
Exchange  Commission  (the  SEC).  Accordingly,  these  condensed,  consolidated
financial  statements  do  not  include  all of the  information  and  footnotes
required by accounting  principles  generally  accepted in the United States for
complete financial statements.

       The information  contained in the financial statements is unaudited.  The
statements reflect all normal and recurring adjustments which, in the opinion of
management,  are necessary  for a fair  statement of the results for the interim
periods presented.  All significant  intercompany accounts and transactions have
been eliminated.

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

       These  condensed,  consolidated  financial  statements  should be read in
conjunction  with the  Company's  consolidated  financial  statements  and notes
thereto  included in the Company's Annual Report on Form 10-K for the year ended
July 31,  2003 filed  with the SEC.  The  Company  follows  the same  accounting
policies in  preparation  of interim  financial  statements.  These policies are
presented in Note 2 to the Consolidated  Financial  Statements  included on Form
10-K referred to above.

       The  results  of  operations  and cash flows for the three  months  ended
October 31, 2003 are not  necessarily  indicative  of the results to be expected
for the fiscal year ending July 31, 2004 or any other  period.  Certain  amounts
from prior  periods have been  reclassified  to conform to the current  period's
presentation.

NOTE 2 - ACCOUNTING CHANGES:

       In May 2003,  the  Financial  Accounting  Standards  Board (FASB)  issued
Statement of  Financial  Accounting  Standard  (SFAS) No. 150,  "Accounting  for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity".  SFAS No.  150  establishes  standards  for issuer  classification  and
measurement  of  certain  financial  instruments  with  characteristics  of both
liabilities and equity.  Instruments  that fall within the scope of SFAS No. 150
must be  classified  as a  liability.  SFAS No. 150 is effective  for  financial
instruments  entered  into or modified  after May 31,  2003,  and  otherwise  is
effective for the beginning of the first interim period beginning after June 15,
2003,  except for  mandatory  redeemable  financial  instruments  of  non-public
entities.  Management  adopted  SFAS No. 150 in the first  quarter of the fiscal
year ending July 31, 2004. The Company's shares of common stock issued to single
member  limited  liability  companies  and sole  proprietorships  are subject to
mandatory  redemption  upon death of the  shareholder.  They are  required to be
presented  as  liabilities  under  the  provision  of SFAS No.  150  within  the
long-term liability section on the Consolidated  Balance Sheets. The adoption of
SFAS No.  150 did not  have a  material  impact  on the  Company's  consolidated
results of  operations.  However,  the  adoption  of SFAS No. 150 did impact the
Company's  consolidated  presentation  of financial  position.  Shares issued to
single member limited liability companies

                                       5
<PAGE>

             PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
              NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
                                OCTOBER 31, 2003
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE 2 - ACCOUNTING CHANGES (CONTINUED):

and sole proprietorships are mandatorily  redeemable upon death of the holder at
the price the shareholder  paid for the share.  Single member limited  liability
companies  and sole  proprietorships  comprised  678 shares at October 31, 2003.
These shares,  including  associated  additional  paid-in capital net of amounts
receivable,  were reclassified to long-term  liabilities in the amount of $1,981
(see Note 5).

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS:

       In  January   2003,   FASB   issued   FASB   Interpretation   Number  46,
"Consolidation of Variable Interest  Entities," (FIN 46). This interpretation of
Accounting  Research  Bulletin  No.  51,  "Consolidated  Financial  Statements,"
addresses  consolidation by business  enterprises of variable interest entities.
Under  current  practice,  two  enterprises  generally  have  been  included  in
consolidated  financial  statements  because one  enterprise  controls the other
through voting interests. FIN 46 defines the concept of "variable interests" and
requires existing  unconsolidated  variable interest entities to be consolidated
by their primary beneficiaries if the entities do not effectively disperse risks
among the parties involved.  This interpretation applies immediately to variable
interest entities created after January 31, 2003. Initially, FIN 46 was to apply
in the first fiscal year or interim  period  beginning  after June 15, 2003,  to
variable interest entities in which an enterprise holds a variable interest that
it acquired  before  February 1, 2003. At its October 8, 2003 meeting,  the FASB
agreed to defer the  effective  date of FIN 46 for  variable  interests  held by
public  companies in all entities that were acquired  prior to February 1, 2003.
The deferral will require that public  companies  adopt the provisions of FIN 46
at the end of periods ending after December 15, 2003. The  interpretation may be
applied prospectively with a cumulative-effect adjustment as of the beginning of
the first  year  restated.  We intend  to adopt FIN 46 as of our  second  fiscal
quarter ended  January 31, 2004,  and we do not expect the adoption of FIN 46 to
impact our financial position, cash flows, or results of operation.

      In April 2003,  the FASB issued SFAS 149  "Amendment  of Statement  133 on
Derivative  Instruments  and  Hedging  Activities".  SFAS  149  amends  SFAS 133
"Accounting for Derivative Instruments and Hedging Activities",  to require more
consistent  reporting of contracts as either derivatives or hybrid  instruments.
SFAS 149 is effective  for  contracts  entered  into or modified  after June 30,
2003.  We adopted SFAS 149  beginning in the first quarter of fiscal 2004 and it
did not have a material impact on our financial position,  cash flows or results
of operations.

NOTE 4 - EARNINGS PER SHARE:

       SFAS No. 128, "Earnings per Share" promulgates  accounting  standards for
the computation  and manner of presentation of the Company's  earnings per share
data.  Under SFAS No. 128, the Company is required to present  basic and diluted
earnings per share.  Basic earnings per share is computed by dividing net income
available to common stockholders by the weighted-average number of common shares
outstanding   for  the  period.   In   accordance   with  SFAS  No.   150,   the
weighted-average  number of common  shares  outstanding  for the period does not
include the shares subject to mandatory  redemption.  Diluted earnings per share
reflect the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted  into common stock.  There are
no  securities  that are  convertible  to common stock that would cause  further
dilution. The weighted average number of common shares outstanding was 1,176 and
1,641 at October 31, 2003 and 2002, respectively.

                                       6
<PAGE>
             PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
              NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
                                OCTOBER 31, 2003
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 5 - COMMON STOCK:

         The Company is authorized to issue 30,000 shares of common stock with a
par value of $1. Issued and outstanding  shares amounted to 1,857 at October 31,
2003 and 1,544 at July 31, 2003. Holders of common stock are entitled to: a) one
vote for each share held on matters  submitted to a vote of  stockholders,  b) a
ratable  share of  dividends  declared  and c) in the  event of  liquidation  or
dissolution,  a ratable share of monies after liabilities.  Shareholders are not
permitted to dispose of their stock  except by a sale back to the  Company.  The
shareholder  must give the Company  written  notice of the proposed sale and the
Company must redeem for cash the share of stock within  ninety days of receiving
such notice,  at the price the  shareholder  paid for the share.  Shares held by
single  member  limited  liability   companies  and  sole   proprietorships  are
mandatorily  redeemable  upon death of the  holder at the price the  shareholder
paid for the  share.  The  amount to be paid upon  death of these  holders as of
October 31, 2003 was $1,981.  An analysis of common stock and shares  subject to
mandatory redemption for the three months ended October 31, 2003 is as follows:

<TABLE>
<CAPTION>

                                                                         Shares Subject to
                                             Common Stock               Mandatory Redemption
                                                (Equity)              (Long-term Liabilities)          Total
                                          --------------------------------------------------------------------
<S>                     <C> <C>                         <C>                          <C>                   <C>
Number of Shares - July 31, 2003                        1,845                           -               1,845
Recognition of liability per FASB 150                    (674)                        674                   -
Issuance of common stock                                   17                           8                  25
Redemption of common stock                                 (9)                         (4)                (13)
                                                   -----------             ---------------         -----------
Number of Shares - July 31, 2003                        1,179                         678               1,857
                                                   ===========             ===============         ===========

                                                                         Shares Subject to
                                                                        Mandatory Redemption
                                             APIC (Equity)              (Long-term Liabilities)          Total
                                          --------------------------------------------------------------------
Additional paid-in capital-July 31, 2003           $    5,344              $            -          $    5,344
Recognition of liability FASB 150                      (1,991)                      1,991                   -
Issuance of common stock                                   51                          24                  75
Redemption of common stock                                (27)                        (12)                (39)
Change in amounts receivable                               71                         (22)                 49
                                                   -----------             ---------------         -----------
Additional paid-in capital- October 31, 2003       $    3,448              $        1,981          $    5,429
                                                   ===========             ===============         ===========
</TABLE>


NOTE 6 - SEGMENT INFORMATION:

       The  Company  has  three  reportable  segments:  Wholesale  Distribution,
Logistics  Services,  and Direct Customer Services.  The Wholesale  Distribution
segment is a wholesaler of  pharmaceuticals  and other veterinary related items.
This segment  distributes  products primarily to Company  shareholders,  who are
licensed veterinarians or business entities comprised of licensed veterinarians.
The Logistics  Services  segment  provides  logistics and  distribution  service
operations for vendors of animal health products.  The Logistic Services segment
serves its customers by  consolidating,  packaging and delivering  animal health
products closer to the final destination, resulting in reduced freight costs and
improved  delivery  performance.  The Direct Customer  Services  segment is as a
supplier of animal  health  products to the producer or consumer.  Animal health
products are shipped to locations closer to the final destination. The segment's
trucking operations transport the products directly to the producer or consumer.

                                       7
<PAGE>
             PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
              NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
                                OCTOBER 31, 2003
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 6 - SEGMENT INFORMATION (CONTINUED):

       The accounting  policies of the segments are the same as those  described
in the summary of significant  accounting  policies as detailed in the Company's
consolidated  financial  statements and footnotes thereto included in the Annual
Report on form 10-K for the year ended July 31,  2003,  filed with the SEC.  The
Company  evaluates  performance  based on profit or loss from operations  before
income taxes.

       The Company's reportable segments are strategic business units that serve
different  types of  customers  in the  animal  health  industry.  The  separate
financial  information  of each  segment is  presented  consistent  with the way
results  are  regularly  evaluated  by the  chief  operating  decision  maker in
deciding how to allocate resources and in assessing performance.

       The  following  table  summarizes  the  Company's  operations by business
segment:

<TABLE>
<CAPTION>
                                                                               Direct
                                             Wholesale        Logistics       Customer                          Consolidated
                                           Distribution       Services        Services       Eliminations          Total
                                          ---------------  --------------- --------------- ----------------- ------------------
<S>                                       <C>               <C>              <C>            <C>                <C>
Three months ended October 31, 2003
    Net sales and other revenue           $     88,515      $     114        $   10,239     $   (10,426)       $      88,442
    Cost of sales                               81,069            112             8,990         (10,353)              79,818
    Operating, general and
     administrative expenses                     6,127              -             1,187               -                7,314
    Operating income                             1,319              2                63             (74)               1,310
    Income before taxes                          1,248              2                72             (74)               1,248

Three months ended October 31, 2002
    Net sales and other revenue                 74,673          1,113             6,177          (6,727)              75,236
    Cost of sales                               68,757          1,080             5,295          (6,619)              68,513
    Operating, general and
     administrative expenses                     5,615              -               807               -                6,422
    Operating income                               301             33                74            (107)                 301
    Income before taxes                            189             33                74            (107)                 189

</TABLE>



NOTE 7 - RECLASSIFICATIONS:

       Certain  reclassifications  have been made to the prior  year  condensed,
consolidated  financial  statements to conform to the current year presentation.
Such  reclassifications  had no impact on results of operation or  shareholders'
equity.


                                       8

<PAGE>


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

FORWARD-LOOKING STATEMENTS

         The Company and its  representatives may from time to time make written
or oral  forward-looking  statements,  including statements made in this report,
that represent the Company's  expectations or beliefs  concerning future events,
including statements regarding future sales, future profits and other results of
operations,  the  continuation  of historical  trends,  the  sufficiency of cash
balances and cash  generated  from  operating and financing  activities  for the
Company's  future  liquidity and capital  resource needs, and the effects of any
regulatory changes. Such statements are "forward-looking  statements" within the
meaning of the Private  Securities  Litigation  Reform Act of 1995.  The Company
cautions  you that any  forward-looking  statements  made by The Company in this
report,  in other reports filed by the Company with the  Securities and Exchange
Commission  or in other  announcements  by the Company are  qualified by certain
risks and other  important  factors  that could cause  actual  results to differ
materially from those in the forward-looking  statements. Such risks and factors
include, but are not limited to, the risk factors set forth in the section below
entitled "Business Trends and Risk Factors That May Affect Future Performance".

RESULTS OF OPERATIONS

         The  following  discussion  is  based  on  the  historical  results  of
operations  for the three month  periods  ended October 31, 2003 and October 31,
2002

SUMMARY CONSOLIDATED RESULTS OF OPERATIONS TABLE

<TABLE>
<CAPTION>
         ------------------------------------ ---------------------------------------------------------------
                                                              THREE MONTHS ENDED OCTOBER 31,
                                                                      (IN THOUSANDS)
         ------------------------------------ ---------------------------------------------------------------
                                                         2003                            2002
                                                         ----                            ----
<S>                                               <C>                         <C>
              Net sales and other revenue         $     88,442                $         75,236
              Cost of sales                             79,818                          68,513
              Gross profit                               8,624                           6,723
              Operating, general and
              administrative expenses                    7,314                           6,422
              Operating income                           1,310                             301
              Interest expense, net                        (62)                           (112)
              Other income (expense)                         -                               -
              Income before taxes                        1,248                             189
              Income tax expense                           470                              75
              Net income                                   778                             114
         ------------------------------------ ---------------------------- ----------------------------------
</TABLE>

THREE  MONTHS ENDED  OCTOBER 31, 2003 AS COMPARED TO THREE MONTHS ENDED  OCTOBER
31, 2002

         Net sales and other  revenue  increased  $13.2 million to $88.4 million
compared to $75.2 million for the same period the previous  year. The 18% growth
was principally  attributable  to increased sales to existing  customers of $2.7
million and to new customers of $10.5 million.

         Gross profit  increased  $1.9 million to $8.6 million  compared to $6.7
million for the same  period the  previous  year.  This  increase  is  primarily
attributable  to the increase in net sales and other revenue.  Gross profit as a
percentage of net sales and other revenue was 9.8% compared to 8.9% for the same
period the previous year.

         Operating,  general and administrative expenses increased $892 thousand
to $7.3 million  compared to $6.4 million for the same period the previous year.
This increase is primarily attributable to support the increase in net sales and
other revenue. These expenses as a percentage of net sales and other revenue was
8.3% compared to 8.5% for the same period the previous year.

                                       9
<PAGE>

         Operating  income increased $1 million to $1.3 million compared to $301
thousand  for the same period the  previous  year.  This  increase is  primarily
attributable to the increase in gross profit of $1.9 million which was partially
offset by the increase in operating, general and administrative expenses of $892
thousand.  The  Company's  other  income  (expense)  decreased  to $62  thousand
(expense)  from the $112  thousand  (expense)  for the same period the  previous
year.  Interest  expense  decreased  from $240  thousand to $205  thousand.  The
decrease is principally related to a lower average balance on the revolving line
of credit.

OPERATING SEGMENTS

         The  Company has three  reportable  segments:  Wholesale  Distribution,
Logistics  Services,  and Direct Customer Services.  The Wholesale  Distribution
segment is a wholesaler of  pharmaceuticals  and other veterinary related items.
This segment  distributes  products primarily to Company  shareholders,  who are
licensed veterinarians or business entities comprised of licensed veterinarians.

         The Logistics  Services  segment  provides  logistics and  distribution
service operations for vendors of animal health products.  The Logistic Services
segment serves its customers by  consolidating,  packaging and delivering animal
health  products closer to the final  destination,  resulting in reduced freight
costs and improved delivery performance.

         The Direct  Customer  Services  segment is a supplier of animal  health
products to the  producer or  consumer.  Animal  health  products are shipped to
locations closer to the final  destination.  The segment's  trucking  operations
transport the products directly to the producer or consumer.

         The Company's  reportable  segments are strategic  business  units that
serve different types of customers in the animal health  industry.  The separate
financial  information  of each  segment is  presented  consistent  with the way
results  are  regularly  evaluated  by the  chief  operating  decision  maker in
deciding how to allocate resources and in assessing performance. Previously, the
Company  disclosed one reportable  segment.  The following table  summarizes the
Company's operations by business segment:

<TABLE>
<CAPTION>
------------------------------------------------- --------------------------------------------------------------------
                                                                     THREE MONTHS ENDED OCTOBER 31
                                                                            (IN THOUSANDS)
                                                  --------------------------------------------------------------------
                                                                 2003                              2002
                                                                 ----                              ----
<S>                                                      <C>                                 <C>
NET SALES
    Wholesale Distribution                               $      88,515                       $     74,673
    Logistics Services                                             114                              1,113
    Direct Customer Services                                    10,239                              6,177
    Eliminations                                               (10,426)                            (6,727)
                                                         -------------                       ------------
CONSOLIDATED TOTAL                                              88,442                             75,236

COST OF SALES
    Wholesale Distribution                                      81,069                            68,757
    Logistics Services                                              112                             1,080
    Direct Customer Services                                     8,990                              5,295
    Eliminations                                               (10,353)                           (6,619)
                                                         -------------                       ------------
CONSOLIDATED TOTAL                                              79,818                            68,513

OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
    Wholesale Distribution                                       6,127                             5,615
    Logistics Services                                               0                                 0
    Direct Customer Services                                     1,187                               807
    Eliminations                                                     0                                 0
                                                         -------------                       ------------
CONSOLIDATED TOTAL                                              7,314                              6,422
------------------------------------------------- ----------------------------------- --------------------------------
</TABLE>

Wholesale Distribution

         Net sales and other revenue for the  three-month  period ending October
31, 2003  increased by 18.5% or $13.8  million.  Net sales and other revenue for
the three month period ending October 31, 2003 totaled $88.5 million compared to
$74.7 million for the same three month period in the prior fiscal year.

                                       10
<PAGE>

         Gross profit increased by $1.5 million to $7.4 million compared to $5.9
million  for the same three  month  period in fiscal  2002.  This  increase  was
primarily due to the increase in revenue.  Gross profit as a percentage of total
revenue was 8.4% for the three month period ending  October 31, 2003 compared to
7.9% for the same three month period in fiscal 2002.

         Operating,  general  and  administrative  expenses  increased  by  $512
thousand to $6.1 million for three-month period ending October 31, 2003 compared
to $5.6 million for the  previous  year.  This  increase  was  primarily  due to
support the  increase in revenue.  Such  operating,  general and  administrative
expenses as a percentage  of total  revenue for the  three-month  period  ending
October 31, 2003 was 7.9%  compared  to 7.5% for the three  month  period  ended
October 31, 2002.

           Operating  income  increased  by $1 million to $1.3  million  for the
three-month  period  ending  October 31, 2003  compared to $301 thousand for the
previous year. This increase is primarily  attributable to the increase in gross
profit.

Logistics Services

         Net sales and other revenue for the  three-month  period ending October
31,  2003  decreased  by $1  million.  Net  sales  and  other  revenue  for  the
three-month  period ending  October 31, 2003 totaled $114  thousand  compared to
$1.1 million for the same period in the previous fiscal year.

         Gross  profit  decreased  by $31  thousand  to $2  thousand  during the
three-month period ending October 31, 2003 compared to $33 thousand for the same
period  during the previous  fiscal year.  Gross profit as a percentage of total
revenue was 1.8% for the three-month  period ending October 31, 2003 compared to
3.0% for the three month period ended October 31, 2002.

         Operating,  general and administrative  expenses did not change for the
three-month  period ending October 31, 2003 compared to the previous year.  Such
operating,  general and administrative expenses as a percentage of total revenue
for the  three-month  period ending  October 31, 2003 was less than 0.1% and was
also less than 0.1% during the same three month period during fiscal 2002.

         Operating  income  decreased  by $31  thousand to $2  thousand  for the
three-month period ending October 31, 2003 compared to $33 thousand for the same
period the  previous  year.  This  decrease  is  primarily  attributable  to the
decrease in gross profit.

Direct Customer Services

         Net sales and other revenue for the  three-month  period ending October
31, 2003  increased by 65.8% or $4 million.  Net sales and other revenue for the
three-month  period ending  October 31, 2003 totaled  $10.2 million  compared to
$6.2 million for the same period the previous year.

         Gross  profit  increased  by  $367  thousand  to  $1.2  million  in the
three-month  period  ending  October 31, 2003  compared to $882 thousand for the
same period the previous  fiscal year.  This  increase was  primarily due to the
increase in revenue. Gross profit as a percentage of total revenue was 12.2% for
the  three-month  period ending October 31, 2003 compared to 14.3% for the three
month period ended October 31, 2002.

         Operating,  general  and  administrative  expenses  increased  by  $380
thousand to $1.2  million for the  three-month  period  ending  October 31, 2003
compared to $807 thousand for the same period  previous year.  This increase was
primarily due to support the increase in revenue.  Such  operating,  general and
administrative  expenses as a percentage  of total  revenue for the  three-month
period ending  October 31, 2003 was 11.6%  compared to 13.1% for the three month
period ended October 31, 2002.

         Operating  income  decreased  by $11  thousand to $63  thousand for the
three-month period ending October 31, 2003 compared to $74 thousand for the same
period previous year.

                                       11
<PAGE>


SEASONALITY IN OPERATING RESULTS

         The  Company's  quarterly  sales  and  operating  results  have  varied
significantly  in the past  and will  likely  continue  to do so in the  future.
Historically, the Company's sales are seasonal with peak sales in the spring and
fall. The cyclical nature is directly tied to the significant amount of business
the  Company  does in the  livestock  sector.  Product  use cycles are  directly
related to certain medical  procedures  performed by  veterinarians on livestock
during the spring and fall.

         In the last few years  the  Company  has been  selling  more  companion
animal related products. These products tend to have a different seasonal nature
which  minimally  overlaps the livestock  business  cycles.  The net result is a
reduction  of the  cyclical  seasonal  nature of the  business.  Minimizing  the
cyclical  nature  of the  Company's  business  has  allowed  for more  efficient
utilization of all resources.

LIQUIDITY AND CAPITAL RESOURCES

         The Company expends capital primarily to fund day-to-day operations and
expand those  operations to  accommodate  sales growth.  It is necessary for the
Company to expend  necessary funds to maintain  significant  inventory levels in
order to fulfill its commitment to its customers. However between March 2002 and
June  2003,  the  Company   expended   significant   funds  on  various  capital
expenditures.  On March 15,  2002,  the Company  signed a lease  agreement  with
Kinsley  Equities II Limited  Partnership  for 70,000  square feet of  warehouse
space in York,  Pennsylvania.  The initial term of the lease is five years.  The
Company  uses  this   facility  to  ship  products  to  its  customers  in  that
geographical  area of the United States.  In June 2003, the Company exercised an
option to lease additional  17,500 square feet of space in the York facility for
a total of 87,500 square feet of leased space in York, Pennsylvania.

         In October 2002, the Company purchased 10 acres of land adjacent to the
current  corporate  facility in Omaha,  Nebraska for  approximately  $808,000 in
order to provide the Company  with land  available  for future  expansion of its
Omaha facility. In addition to the purchase of the additional 10 acres in Omaha,
Nebraska,  the Company made  significant  capital  investments  in equipment and
furniture,  including  the  purchase  of office  furniture,  computer  software,
warehouse and computer equipment. The Company purchased some of the equipment in
February 2003 by using a capital lease in the amount of $343,075,  with interest
at 4.58% and monthly payments of $10,218 through February 2006.

         Historically,  the Company has financed its cash requirements primarily
from  short term bank  borrowings  and cash from  operations.  At the end of the
three month period ended  October 31, 2003,  there were no  additional  material
commitments for capital expenditures.

         In May 2003,  the Company and U.S.  Bank  mutually  agreed to amend and
restate the Company's  Revolving  Credit Agreement with U.S. Bank dated December
1, 2001 in its entirety and to establish a revolving line of credit facility and
a term loan facility and to add the  Company's  subsidiaries,  ProConn,  LLC and
Exact  Logistics,  LLC as borrowers.  As part of this amendment and restatement,
the Company,  ProConn,  Exact Logistics and US. Bank entered into an Amended and
Restated Loan Agreement dated May 12, 2003 and the Company converted  $4,000,000
of the Company's then current  obligations  under the original  Revolving Credit
Agreement into a term loan. The Company,  ProConn, Exact Logistics and U.S. Bank
entered  into a Term  Promissory  Note  dated  May  12,  2003 in the  amount  of
$4,000,000  which  accrues  interest  at a fixed  rate of 5.77% per  annum.  The
Company,  ProConn and Exact  Logistics are jointly and severally  liable for the
obligations  under the Term  Promissory  Note. The Term  Promissory Note matures
June 1, 2008.  The payment terms for the Term  Promissory  Note provide that the
Company make interest  payments of $614.11 per day from May 12, 2003 through May
31, 2003. Thereafter,  the Term Promissory Note is payable in 59 installments of
principal  and interest in the amount of  $76,904.14  which are payable  monthly
through May 1, 2008. As of June 1, 2008, all unpaid  principal and interest will
be due.  The Company may not prepay the Term  Promissory  Note without the prior
written  consent of U.S.  Bank and the payment of a prepayment  fee based on the
net present  value of the amount of principal  to be prepaid.  As of October 31,
2003, the Company had $3,781,317 outstanding on the Term Promissory Note.

                                       12
<PAGE>


         Under the Amended and Restated Loan Agreement, U.S. Bank agreed to loan
the  Company  up to  $17,500,000  through a  revolving  line of credit  which is
evidenced  by a Revolving  Promissory  Note dated May 12,  2003 for  $17,500,000
between  U.S.  Bank,  the  Company,  ProConn and Exact  Logistics.  The Company,
ProConn and Exact Logistics are jointly and severally liable for the obligations
under the Revolving Promissory Note. The Revolving Promissory Note matures on an
annual  basis,  but is renewable  by its terms  annually on December 1st of each
year. The maximum amount which can be borrowed  thereunder is  $17,500,000.  The
actual principal amount outstanding varies as the Company borrows and repays its
obligations  throughout the term of the loan.  Advances made under the Revolving
Promissory  Note  accrue  interest  at a variable  rate  equal to the U.S.  Bank
reference rate plus 2.70% (the LIBOR Rate). As of October 31, 2003, the variable
interest rate at which the Revolving  Promissory Note accrued interest was 3.82%
and the Company had $6,446,681 outstanding thereunder.

         Both the Term  Promissory  Note and the Revolving  Promissory  Note are
secured by a first and second  mortgage held by US Bank on the  Company's  Omaha
facility  as well as a  first  security  interest  on all  accounts  receivable,
inventory, chattel paper, equipment,  instruments,  investment property, deposit
accounts,  documents,  letter of credit rights,  fixtures, all personal property
and general  intangibles.  The Amended and  Restated  Loan  Agreement  imposes a
number  of  conditions  which  must be met by the  Company,  ProConn  and  Exact
Logistics on an on-going  basis prior to the U.S.  Bank's  disbursement  of loan
funds  under  the  Revolving  Promissory  Note,  including,  without  limitation
providing the Bank with annual audited financial  statements and monthly interim
financial  statements.  Failure to comply with these conditions will result in a
default under the Amended and Restated Loan Agreement, Revolving Promissory Note
and Term  Promissory  Note which permits U.S. Bank to accelerate  the payment of
the outstanding principal and accrued interest under both notes.

         As in previous years, the Company's  capital  expenditures were made to
finance  day-to-day  operations and to expand its operations to accommodate  the
growth in the number of customers and corresponding  growth in sales.  Inventory
needs and expenses associated  therewith continue to grow. Capital  requirements
have been funded primarily from short-term bank borrowings and cash derived from
its operations.

         OPERATING  ACTIVITIES.  Net cash  consumed by operating  activities  of
$13.8 million for period ending October 31, 2002 was primarily  attributable  to
an increase of $11.4 million in  receivables  and an increase of $8.7 million in
inventories.  These were  partially  offset by an  increase  of $6.3  million in
accounts payable.  Net cash provided by operating activities of $1.3 million for
period  ending  October 31, 2003 was  primarily  attributable  to an increase of
$15.6 million in accounts payable. These were partially offset by an increase of
$9.2 million in receivables and an increase of $4.9 million in inventories.

         INVESTING ACTIVITIES. Net cash consumed by investing activities of $1.1
million for period  ending  October 31, 2002 was primarily  attributable  to the
purchase of 10 acres of land  adjoining the current  corporate  headquarters  in
Omaha,  Nebraska for $808 thousand plus investments in equipment,  including the
purchase of office,  warehouse  and  computer  equipment.  Net cash  consumed by
investing  activities of $168  thousand for period  ending  October 31, 2003 was
primarily attributable to investments in equipment and furniture,  including the
purchase  of  office  furniture,   computer  software,  warehouse  and  computer
equipment.

         FINANCING  ACTIVITIES.  Net cash  provided by financing  activities  of
$13.7 million for period ending October 31, 2002 was primarily  attributable  to
net loan proceeds of $8.1 million.  Net cash consumed by financing activities of
$3.6 million for period ending  October 31, 2003 was primarily  attributable  to
net loan payments of $3.3 million.

OFF-BALANCE SHEET ARRANGEMENTS

         At October 31,  2003,  the Company did not have any  off-balance  sheet
arrangements.

RELATED PARTY TRANSACTIONS

         In the normal  course of business the Company  sells to its  affiliate,
board of directors and key employees under normal terms and conditions. See Note
2 to the Company's  consolidated financial statements and notes thereto included
in the  Company's  Annual  Report on Form 10-K for the year ended July 31,  2003
filed with the SEC.

                                       13
<PAGE>

CRITICAL ACCOUNTING POLICIES

         The  Securities  and Exchange  Commission  ("SEC" or the  "Commission")
recently issued disclosure guidance for "critical accounting policies".  The SEC
defines  "critical  accounting  policies" as those that require  application  of
management's most difficult,  subjective or complex judgments, often as a result
of the need to make  estimates  about the effect of matters that are  inherently
uncertain and may change in subsequent periods.

         The Company's  significant  accounting policies are described in Note 2
to the Company's consolidated financial statements and notes thereto included in
the Company's  Annual Report on Form 10-K for the year ended July 31, 2003 filed
with  the  SEC.  Not  all  of  these  significant  accounting  policies  require
management  to make  difficult,  subjective  or complex  judgments or estimates.
However,  management  of the Company is required to make certain  estimates  and
assumptions  during the  preparation  of  consolidated  financial  statements in
accordance with accounting principles generally accepted in the United States of
America.  These estimates and  assumptions  impact the reported amount of assets
and liabilities  and disclosures of contingent  assets and liabilities as of the
date of the  consolidated  financial  statements.  Estimates and assumptions are
reviewed  periodically  and the effects of revisions are reflected in the period
they are  determined  to be  necessary.  Actual  results could differ from those
estimates.  Following are some of the  Company's  critical  accounting  policies
impacted by judgments, assumptions and estimates.

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 affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  amounts could differ from those
estimates.

REVENUE RECOGNITION

         The Company  derives its revenue  primarily  from the sale of products,
consignment sales and agency  agreements.  Revenues are recognized as product is
shipped and related  services are  performed in accordance  with all  applicable
revenue recognition  criteria.  For these transactions,  the Company applies the
provisions of SEC Staff Accounting Bulletin No. 101, "Revenue  Recognition." The
Company recognizes revenue when there is persuasive  evidence of an arrangement,
title and risk of loss have passed,  delivery  has  occurred or the  contractual
obligations are met, the sales price is fixed or determinable  and collection of
the related receivable is reasonably assured.

INVENTORIES

         Inventories consist substantially of finished goods held for resale and
are  valued at the  lower of cost or  market,  not in  excess of net  realizable
value. Cost is determined primarily by the weighted average cost method.

MAJOR CUSTOMER, MAJOR SUPPLIERS AND CREDIT CONCENTRATIONS

         Other financial  instruments,  which potentially subject the Company to
concentrations of credit risk, are trade accounts receivable and trade payables.
One customer comprised a significant individual receivable consisting of 9.4% of
the  Company's  receivables  at October  31,  2003.  One  customer  comprised  a
significant   individual   receivable   consisting  of  9.6%  of  the  Company's
receivables at October 31, 2002. One vendor comprised 30.4% of all purchases for
the three month period ended October 31, 2003.

                                       14
<PAGE>

INCOME TAXES

         The Company  provides  for income  taxes using the asset and  liability
method under which deferred income taxes are recognized for the estimated future
tax effects attributable to temporary differences and carry-forwards that result
from events that have been recognized either in the financial  statements or the
income tax returns, but not both. The measurement of current and deferred income
tax  liabilities  and assets is based on provisions  of enacted laws.  Valuation
allowances are recognized if, based on the weight of available  evidence,  it is
more likely than not that some  portion of the  deferred  tax assets will not be
realized.

GOODWILL AND OTHER INTANGIBLE ASSETS

         Annually,   the  Company  subjects  goodwill  and  other   identifiable
intangible  assets with  indefinite  lives to an impairment  test, in accordance
with  accounting  procedures  generally  accepted  in the United  States.  Other
intangible assets continue to be amortized over their useful lives

         Other  identifiable  intangible assets consist of the Company trademark
and loan origination fees.  Trademarks have an indefinite life and therefore are
not amortized.  Loan  origination  fees  constitute  the Company's  identifiable
intangible asset subject to  amortization.  Amortization of the loan origination
fees is computed  on a  straight-line  basis over the term of the related  note.
Amortization  expense  is  included  in  interest  expense  on the  Consolidated
Statements of Income.

NEW ACCOUNTING PRONOUNCEMENTS

       In May 2003,  the  Financial  Accounting  Standards  Board (FASB)  issued
Statement of  Financial  Accounting  Standard  (SFAS) No. 150,  "Accounting  for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity".  SFAS No.  150  establishes  standards  for issuer  classification  and
measurement  of  certain  financial  instruments  with  characteristics  of both
liabilities and equity.  Instruments  that fall within the scope of SFAS No. 150
must be  classified  as a  liability.  SFAS No. 150 is effective  for  financial
instruments  entered  into or modified  after May 31,  2003,  and  otherwise  is
effective for the beginning of the first interim period beginning after June 15,
2003,  except for  mandatory  redeemable  financial  instruments  of  non-public
entities.  Management  adopted  SFAS No. 150 in the first  quarter of the fiscal
year ending July 31, 2004. The Company's shares of common stock issued to single
member  limited  liability  companies  and sole  proprietorships  are subject to
mandatory  redemption  upon death of the  shareholder.  They are  required to be
presented  as  liabilities  under  the  provision  of SFAS No.  150  within  the
long-term liability section on the Consolidated  Balance Sheets. The adoption of
SFAS No.  150 did not  have a  material  impact  on the  Company's  consolidated
results of  operations.  However,  the  adoption  of SFAS No. 150 did impact the
Company's  consolidated  presentation  of financial  position.  Shares issued to
single  member  limited  liability   companies  and  sole   proprietorships  are
mandatorily  redeemable  upon death of the  holder at the price the  shareholder
paid  for  the  share.  Single  member  limited  liability  companies  and  sole
proprietorships  comprised  678  shares  at  October  31,  2003.  These  shares,
including associated additional paid-in capital net of amounts receivable,  were
reclassified to long-term liabilities in the amount of $1,981,000 (see Note 5 to
the Condensed, Consolidated Financial Statements).

RECENT ACCOUNTING PRONOUNCEMENTS

       In  January   2003,   FASB   issued   FASB   Interpretation   Number  46,
"Consolidation of Variable Interest  Entities," (FIN 46). This interpretation of
Accounting  Research  Bulletin  No.  51,  "Consolidated  Financial  Statements,"
addresses  consolidation by business  enterprises of variable interest entities.
Under  current  practice,  two  enterprises  generally  have  been  included  in
consolidated  financial  statements  because one  enterprise  controls the other
through voting interests. FIN 46 defines the concept of "variable interests" and
requires existing  unconsolidated  variable interest entities to be consolidated
by their primary beneficiaries if the entities do not effectively disperse risks
among the parties involved.  This interpretation applies immediately to variable
interest entities created after January 31, 2003. Initially, FIN 46 was to apply
in the first fiscal year or interim  period  beginning  after June 15, 2003,  to
variable interest entities in which an enterprise holds a variable interest that
it acquired  before  February 1, 2003. At its October 8, 2003 meeting,  the FASB
agreed to defer the  effective  date of FIN 46 for  variable  interests  held by
public  companies in all entities that were acquired  prior to February 1, 2003.
The deferral will require that public  companies  adopt the provisions of FIN 46
at the end of periods ending after December 15, 2003. The  interpretation may be
applied prospectively with a cumulative-effect adjustment as of the beginning of
the first  year  restated.  We intend  to adopt FIN 46 as of our  second  fiscal
quarter ended  January 31, 2004,  and we do not expect the adoption of FIN 46 to
impact our financial position, cash flows, or results of operation.

                                       15
<PAGE>

         In April 2003,  the FASB issued SFAS 149 "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities".  SFAS  149  amends  SFAS 133
"Accounting for Derivative Instruments and Hedging Activities",  to require more
consistent  reporting of contracts as either derivatives or hybrid  instruments.
SFAS 149 is effective  for  contracts  entered  into or modified  after June 30,
2003.  We adopted SFAS 149  beginning in the first quarter of fiscal 2004 and it
did not have a material impact on our financial position,  cash flows or results
of operations

BUSINESS TRENDS AND RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

         The risks and uncertainties  described below are not the only risks and
uncertainties  the  Company  faces.   Additional  risks  and  uncertainties  not
presently known to the Company or that are currently deemed  immaterial may also
impair its business  operations.  If any of the following  risks actually occur,
the Company's business, financial condition or results of operations may suffer.

FLUCTUATION OF FUTURE RESULTS DUE TO FACTORS OUTSIDE OF MANAGEMENT'S CONTROL

         The Company's quarterly  operating results may significantly  fluctuate
and you should not rely on them as an  indication  of its  future  results.  The
Company's future revenues and results of operations may significantly  fluctuate
due to a  combination  of  factors,  many of which are  outside of  management's
control. The most important of these factors include:

         o        seasonality;

         o        the  impact of  economic  factors on the  national  veterinary
                  practices;

         o        the timing and effectiveness of marketing programs;

         o        the timing of the introduction of new products and services;

         o        the timing and effectiveness of capital expenditures;

         o        competition.

The Company may be unable to reduce operating  expenses quickly enough to offset
any  unexpected  revenue  shortfall.  If the Company has a shortfall  in revenue
without a corresponding reduction to its expenses, operating results may suffer.
The Company's operating results for any particular quarter may not be indicative
of  future  operating  results.  You  should  not  rely  on   quarter-to-quarter
comparisons  of results of operations  as an indication of the Company's  future
performance.

FAILURE TO MANAGE GROWTH COULD IMPAIR BUSINESS

         The  Company's  business  has grown  rapidly.  The  Company's  revenues
increased  from $63.5  million in fiscal  1995 to $299  million in fiscal  2003.
During that same period the Company has significantly expanded its operations in
the United  States.  The number of  employees  increased  by  approximately  205
individuals during this period.

         It is difficult to manage this rapid growth, and future success depends
on the Company's ability to implement and/or maintain:


         o        Sales and marketing programs

         o        Customer support programs

         o        Current product and service lines

         o        Technological support which equals or exceeds our competitors

         o        Recruitment and training of new personnel

         o        Operational and financial control systems

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<PAGE>

         The Company's  ability to successfully  offer products and services and
implement its business plan in a rapidly  evolving  market requires an effective
planning and management  process.  Management expects that the Company will need
to continue to improve its financial and managerial controls,  reporting systems
and procedures and to expand the training of its work force.

         If the Company is not able to manage the rapid growth,  there is a risk
its  customer  service  quality  could  deteriorate,  which  may in turn lead to
decreased  sales.  This could impact  shareholders  in two ways - the ability to
obtain products from the Company could be negatively  affected and the Company's
profits could decrease.

LOSS OF KEY PERSONNEL COULD HURT BUSINESS

         The Company's  future  success  depends to a significant  extent on the
skills, experience and efforts of Company President and Chief Executive Officer,
Dr. Lionel Reilly, and key members of his staff. The loss of any or all of these
individuals could damage business.  The Company has purchased two life insurance
policies  on  the  life  of Dr.  Reilly.  Both  policies  are  flexible  premium
adjustable life insurance policies for $500,000.  The Company is the beneficiary
of one of the policies and the Lionel  Reilly  Trust is the  beneficiary  of the
other policy.

         In addition,  the Company's  products and services are  specialized  in
nature.  In general  only  highly  qualified  and trained  individuals  have the
necessary  skills to market our  products  and  provide  Company  services.  The
Company faces intense  competition  for the hiring of these  professionals.  Any
failure on the Company's part to hire,  train and retain a sufficient  number of
qualified  professionals  would damage business.  The Company does not generally
enter into  employment  agreements  requiring  these  employees  to  continue in
employment for any period of time.

THE COMPANY RELIES ON STRATEGIC RELATIONSHIPS TO GENERATE REVENUE

         To be  successful,  the Company must  establish and maintain  strategic
relationships  with leaders in the manufacturing  industry.  This is critical to
its success because management  believes that these relationships will enable us
to (1)  extend  the reach of the  Company's  distribution  and  services  to the
various  participants  in  the  veterinary  industry;   (2)  obtain  specialized
expertise; and (3) generate revenue.

         Entering into strategic  relationships  is complicated  because some of
the Company's current and future  manufacturers are potential strategic partners
and  these  manufacturers  may  decide  to  compete  with us in the  future.  In
addition,  the  Company  may not be able to  establish  relationships  with  key
participants  in the  veterinary  distribution  industry  if it has  established
relationships  with competitors of these key participants.  Consequently,  it is
important  that the  Company  is  perceived  as  independent  of any  particular
customer or partner.

         Most of the Company's  agreements with  manufacturers run for one year.
The Company may not be able to renew its existing agreements on favorable terms,
or at all.  If the Company  loses the right to  distribute  products  under such
agreements,  the Company may lose access to certain of its  products  and lose a
competitive   advantage.   Potential   competitors   could  sell  products  from
manufacturers  that it fails to  continue  with and erode the  Company's  market
share.

PERFORMANCE OR SECURITY PROBLEMS WITH SYSTEMS COULD DAMAGE BUSINESS

         The Company's customer satisfaction and its business could be harmed if
the Company or its suppliers  experience any system delays,  failures or loss of
data. The Company currently process all of its customer transactions and data at
its  facilities  in Omaha,  Nebraska.  Although the Company has  safeguards  for
emergencies,  including, without limitation,  sophisticated back-up systems, the
occurrence of a major  catastrophic  event or other system  failure at either of
its  distribution  facilities  could  interrupt data processing or result in the
loss of stored data. Only some of the Company's  systems are fully redundant and
although the Company  carries  business  interruption  insurance,  it may not be
sufficient  to  compensate  us for  losses  that may occur as a result of system
failures.

                                       17
<PAGE>

THE COMPANY FACES SIGNIFICANT COMPETITION

         The  market  for   veterinary   distribution   services  is   intensely
competitive, rapidly evolving and subject to rapid technological change. Some of
the Company's  competitors have comparable product lines,  technical  experience
and financial  resources.  These organizations may be better known and have more
customers  than us. The  Company may be unable to compete  successfully  against
these organizations.

         Many of the Company's  competitors  have  distribution  strategies that
directly compete with us. The Company has many competitors including:

         o        Walco International, Inc.

         o        Lextron Animal Health, Inc.

         o        J. A. Webster, Inc. d/b/a Webster Veterinary Supply

         o        The Butler Company

         o        MWI Veterinary Supply Co.

         In addition,  management expects that companies and others specializing
in the veterinary products industry will offer competitive products. Some of the
Company's large  manufacturers/suppliers may also compete with us through direct
marketing and sales of their products. Increased competition could result in:


         o        price reductions, decreased revenue and lower profit margins;

         o        loss of market share; and

         o        increased marketing expenditures.

These and other  competitive  factors could  materially and adversely affect the
Company's results of operations.

CHANGES IN THE VETERINARY DISTRIBUTION INDUSTRY COULD ADVERSELY AFFECT BUSINESS

         The veterinary  distribution industry is subject to changing political,
economic and regulatory  influences.  Both state and federal government agencies
regulate the  distribution  of certain animal health products and the Company is
subject to regulation,  either  directly or indirectly,  by the US Department of
Agriculture,  the Food and Drug  Administration  (FDA) and the Drug  Enforcement
Administration  (DEA).  To the  extent  the  political  party in power  changes,
whether in the executive or  legislative  branch,  the  regulatory  stance these
agencies take could change. The Company's suppliers are subject to regulation by
the Department of Agriculture,  the FDA and the Environmental Protection Agency,
and material  changes to the applicable  regulations  could affect the suppliers
ability  to  manufacture  certain  products  which  could  adversely  impact the
Company's product supply. In addition, some of the Company's customers may rely,
in part, on farm and agricultural  subsidy  programs.  Changes in the regulatory
positions that impact the  availability  of funding for such programs could have
an adverse impact on the Company's  customers'  financial  positions which could
lead to decreased sales.

         These factors affect the Company's  purchasing  practices and operation
of its business.  Some of the Company's  competitors are consolidating to create
integrated delivery systems with greater market presence.  These competitors may
try  to  use  their  market  power  to  negotiate  price   reductions  with  the
manufacturers.  If the Company were forced to reduce its prices,  the  Company's
operating  results  would  suffer.  As  the  veterinary   distribution  industry
consolidates, competition for customers will become more intense.

ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to market risks  primarily  from changes in U.S.
interest  rates.  The  Company  does not engage in  financial  transactions  for
trading or speculative purposes.

                                       18
<PAGE>


         The interest payable on the Company's revolving line of credit is based
on  variable  interest  rates and is  therefore  affected  by  changes in market
interest  rates.  If interest  rates on variable rate debt rose 0.38  percentage
points (a 10% change from the interest rate as of October 31, 2003), assuming no
change  in  the  Company's   outstanding   balance  under  the  line  of  credit
(approximately  $6.4 million as of October 31, 2003),  the Company's  annualized
income before taxes and cash flows from  operating  activities  would decline by
approximately $24 thousand.

         In May 2003,  the Company and U.S.  Bank  mutually  agreed to amend and
restate the Company's  Revolving  Credit Agreement with U.S. Bank dated December
1, 2001 in its entirety and to establish a revolving line of credit facility and
a term loan facility and to add the  Company's  subsidiaries,  ProConn,  LLC and
Exact  Logistics,  LLC as borrowers.  As part of this amendment and restatement,
the Company,  ProConn,  Exact Logistics and US. Bank entered into an Amended and
Restated Loan Agreement dated May 12, 2003 and the Company converted  $4,000,000
of the Company's then current  obligations  under the original  Revolving Credit
Agreement into a term loan. The Company,  ProConn, Exact Logistics and U.S. Bank
entered  into a Term  Promissory  Note  dated  May  12,  2003 in the  amount  of
$4,000,000  which  accrues  interest  at a fixed  rate of 5.77% per  annum.  The
Company,  ProConn and Exact  Logistics are jointly and severally  liable for the
obligations  under the Term  Promissory  Note. The Term  Promissory Note matures
June 1, 2008.  The payment terms for the Term  Promissory  Note provide that the
Company make interest payments of $614 per day from May 12, 2003 through May 31,
2003.  Thereafter,  the Term  Promissory  Note is payable in 59  installments of
principal  and  interest  in the amount of  $76,904  which are  payable  monthly
through May 1, 2008. As of June 1, 2008, all unpaid  principal and interest will
be due.  The Company may not prepay the Term  Promissory  Note without the prior
written  consent of U.S.  Bank and the payment of a prepayment  fee based on the
net present  value of the amount of principal  to be prepaid.  As of October 31,
2003, the Company had $3,781,317 outstanding on the Term Promissory Note.

         Under the Amended and Restated Loan Agreement, U.S. Bank agreed to loan
the  Company  up to  $17,500,000  through a  revolving  line of credit  which is
evidenced  by a Revolving  Promissory  Note dated May 12,  2003 for  $17,500,000
between  U.S.  Bank,  the  Company,  ProConn and Exact  Logistics.  The Company,
ProConn and Exact Logistics are jointly and severally liable for the obligations
under the Revolving Promissory Note. The Revolving Promissory Note matures on an
annual  basis,  but is renewable  by its terms  annually on December 1st of each
year. The maximum amount which can be borrowed  thereunder is  $17,500,000.  The
actual principal amount outstanding varies as the Company borrows and repays its
obligations  throughout the term of the loan.  Advances made under the Revolving
Promissory  Note  accrue  interest  at a variable  rate  equal to the U.S.  Bank
reference rate (the LIBOR Rate) plus 2.70%. As of October 31, 2003, the variable
interest rate at which the Revolving  Promissory Note accrued interest was 3.82%
and the Company had $6,446,681 outstanding thereunder.

         Both the Term  Promissory  Note and the Revolving  Promissory  Note are
secured by a first and second  mortgage held by U.S. Bank on the Company's Omaha
facility  as well as a  first  security  interest  on all  accounts  receivable,
inventory, chattel paper, equipment,  instruments,  investment property, deposit
accounts,  documents,  letter of credit rights,  fixtures, all personal property
and general intangibles.

         In December  1999,  U.S. Bank loaned the Company  $1,400,000 to finance
the  Company's  purchase of warehouse  equipment  and office  furniture  used to
furnish the Omaha  facility.  The loan is evidenced  by a Promissory  Note dated
December 15, 1999.  The note matures  January 1, 2005 and accrues  interest at a
fixed rate of 8.66% per annum The payment terms provide that the Company pay the
loan in 60 monthly  payments of $29,032.29.  As of October 31, 2003, the Company
had $410,011 outstanding under this note.

ITEM 4:  DISCLOSURE CONTROLS AND PROCEDURES

         (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES:  An evaluation of
the  Company's  disclosure  controls  and  procedures  (as  defined  in  Section
13(a)-14(c)  of the Securities  Exchange Act of 1934 (the  "Exchange  Act")) was
carried  out  under  the  supervision  and with the  participation  of our Chief
Executive Officer and Chief Financial Officer within the 90-day period preceding
the filing date of this quarterly report.  Our Chief Executive Officer and Chief
Financial  Officer  concluded  that our  disclosure  controls and  procedures as
currently in effect are effective in ensuring that the  information  required to

                                       19
<PAGE>

be  disclosed by us in the reports that we file or submit under the Exchange Act
is (i) accumulated and communicated to Company  management  (including the Chief
Executive  Officer and Chief  Financial  Officer) in a timely  manner,  and (ii)
recorded,  processed,  summarized and reported within the time periods specified
in the Security and Exchange Commission's rules and forms.

         (b) CHANGES IN INTERNAL  CONTROLS:  In the  quarter  ended  October 31,
2003,  the  Company  did not  make  any  significant  changes  in,  nor take any
corrective actions regarding,  its internal controls or other factors that could
significantly affect these controls.


                                     PART II
                                OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS

         The Company has not been  informed of any legal matters that would have
a material  adverse effect on its financial  condition,  results of operation or
cash flow.

ITEM 2:  CHANGES IN SECURITIES AND USE OF PROCEEDS

         (d) Use of Proceeds:

                  On October 19, 1999 the registration  statement  (Registration
No.  333-86629)  for the  initial  public  offering of our common  stock  became
effective.  The Company  registered 500 shares of common stock with an aggregate
offering  price  of  $1,500,000  pursuant  to this  registration  statement.  On
November 8, 2001, the Company filed another registration statement (Registration
No.  333-72962)  for the public  offering of an additional  500 shares of common
stock, in addition to the 114 shares  previously  registered under  Registration
No. 333-86629 that remain unsold. The Company's current combined offering is for
614  shares  of common  stock for an  aggregate  offering  price of  $1,842,000.
Through  October  31,  2003,  363  shares of common  stock have been sold for an
aggregate offering price of $1,089,000.

         The amount of expenses  incurred in  connection  with the  issuance and
distribution of our common stock increased by approximately $91,000 to $217,792,
including  the  additional  SEC  registration  fee,  Blue  Sky  filing  fees and
expenses,  printing expenses,  legal fees, and miscellaneous  expenses.  None of
these expenses represented a direct or indirect payment to directors,  officers,
persons owning 10% or more of any class of our common stock.

         The net  offering  proceeds to the Company  after  deducting  the total
expenses are $871,208 as of October 31, 2003.


ITEM 3:  DEFAULTS UPON SENIOR SECURITIES

         None.

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

ITEM 5:  OTHER INFORMATION

         None.


                                       20
<PAGE>


ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K

         (a) EXHIBITS REQUIRED TO BE FILED BY ITEM 601 OF REGULATION S-K

                  31       Certifications required by Rule 13a-15(e) and
                           15d-15(e).
                  32       Section 1350 Certifications.

         (b) REPORTS ON FORM 8-K

                  The  Company  filed no current  reports on Form 8-K during the
quarter ended October 31, 2003.

                                   SIGNATURES

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



Date:    December 10, 2003          /S/ DR. LIONEL L. REILLY
                                    --------------------------------------------
                                        Dr. Lionel L. Reilly, President and
                                        Chief Executive Officer


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