SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                             -----------------------
                                 AMENDMENT NO. 1

                                       ON

                                   FORM 10-K/A

  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
                OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 2002.

                         Commission file number 1-10340

                        ALLOU HEALTH & BEAUTY CARE, INC.
             (Exact Name of Registrant as Specified in its Charter)

           DELAWARE                                               11-2953972
-------------------------------                              -------------------
(State or Other Jurisdiction of                              (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

50 EMJAY BOULEVARD, BRENTWOOD, NEW YORK                             11717
---------------------------------------                         -------------
(Address of Principal Executive Offices)                          (Zip Code)


                                 (631) 273-4000
               Registrant's Telephone Number, Including Area Code

           Securities registered pursuant to Section 12(b) of the Act:

                                                          Name of Each Exchange
      Title of Each Class                                 on Which Registered
      -------------------                               ------------------------
Class A Common Stock, par value                         American Stock Exchange
        $.001 per share

        Securities registered pursuant to Section 12(g) of the Act: None

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___.

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. X .

     The  aggregate  market value of the Class A Common Stock of the  registrant
held by non-affiliates of the registrant on July 25, 2002 was $27,795,605.  Such
aggregate  market value is computed by  reference to the closing  sales price of
the Class A Common  Stock on such date.  For purposes of this  calculation,  the
registrant  has excluded the Class B Common  Stock,  which is held  primarily by
affiliates and is not publicly-traded.

     As of the  close of  business  on July 25,  2002,  there  were  outstanding
6,136,476 shares of the  registrant's  Class A Common Stock and 1,200,000 shares
of the registrant's Class B Common Stock.

================================================================================

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

Cautionary Statement...........................................................1

                                     PART I

Item 1.   Business.............................................................2

                                     PART II

Item 6.   Selected Financial Data..............................................8

Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...........................................10

Signature ....................................................................17


                                      -i-

<PAGE>

     UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES TO "WE," "US," "OUR,"
"ALLOU" OR THE  "COMPANY"  INCLUDE  ALLOU  HEALTH & BEAUTY  CARE,  INC.  AND OUR
SUBSIDIARIES.

                              CAUTIONARY STATEMENT

     CAUTIONARY  STATEMENT FOR PURPOSES OF THE "SAFE  HARBOR"  PROVISIONS OF THE
PRIVATE  SECURITIES  LITIGATION REFORM ACT OF 1995:  Certain  statements in this
report, in particular "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation" and "Item 1. Business" are "forward  looking
statements"  within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements,  which may
include  words such as "expect,"  "believe,  "anticipate,"  "estimate,"  "plan,"
"project,"  "strategy"  and "intend,"  involve  certain known and unknown risks,
uncertainties  and other factors that may cause the  statements to be materially
different from actual future results.  These factors include,  among others: the
competitive  environment  in  the  consumer  health  and  beauty  aids  products
industries;  the availability of financing to fund the anticipated growth of our
business; changes in consumer preferences and demographics;  and the integration
of any acquired business and operations.




                                      -1-
<PAGE>


                                     PART I

ITEM 1.   BUSINESS.

GENERAL

     We   distribute   consumer   personal   care   products  and   prescription
pharmaceuticals  on a national basis. We also manufacture  upscale hair and skin
care products for sale under private labels. Our consumer personal care products
distribution  business includes prestige brand name designer  fragrances,  brand
name health and beauty aids products and non-perishable packaged food items. Our
prescription  pharmaceuticals distribution business includes both brand name and
generic pharmaceutical products.

     We distribute  approximately  22,000 SKUs of branded  consumer  products to
approximately  4,200  independent  retailers,  and to  over  140  national  mass
merchandisers including Sears Roebuck & Co., Wal-Mart, J.C. Penney, Target, CVS,
and Walgreens. We believe that products distributed by us are sold in a total of
over 15,000 retail stores. In the three fiscal years since the fiscal year ended
March 31, 1999, our revenues have grown by  approximately  69% through  internal
growth and strategic  acquisitions,  which have enabled us to expand our product
offerings,  enter into new geographic markets,  add new customers and cross-sell
existing and new product lines to our diversified customer base.

DISTRIBUTION OF PRODUCTS

     Distribution of Consumer Personal Care Products.

     In our consumer personal care products distribution business, we distribute
three principal categories of products:

     o    fragrances;

     o    name brand health and beauty aids and health and beauty aids under our
          Allou brand; and

     o    non-perishable food items.

     In  addition,  we  manufacture  and  distribute  upscale hair and skin care
products.

     We distribute approximately 7,000 brands of prestige designer fragrances of
many large  manufacturers  which include Ralph Lauren,  Calvin Klein and Chanel.
See "Manufacturers and Suppliers".  We distribute approximately 8,000 brand name
health and beauty aids  products  by such  manufacturers  as Colgate  Palmolive,
Clairol,  Procter & Gamble,  Johnson & Johnson and Gillette.  See "Manufacturers
and Suppliers". We also distribute nail polish, toothpaste,  petroleum jelly and
other health and beauty aids products  manufactured by others and sold under our
Allou brand label.

     We sell  non-perishable  packaged  food  items,  which we  purchase  almost
exclusively  at discount  prices from major food  companies.  This  product line
requires little  additional  operating costs to us because these items generally
are pre-sold and drop-shipped directly to our customers from the vendors.

     Some of the fragrance and cosmetic brands that we distribute are:

         o  Polo                               o  Revlon
         o  Eternity                           o  Maybelline
         o  Hugo                               o  Lancome




                                      -2-
<PAGE>


     Some of the fragrance and cosmetic products that we distribute are:

         o  Perfume                            o  Eyeshadow
         o  Cologne                            o  Lipstick
         o  Nail Polish                        o  Mascara

     Some of the health and beauty aids brands that we distribute are:

         o  Pantene Pro-V shampoo              o  Colgate toothpaste
         o  Johnson's Baby Lotion              o  Rave hairspray
         o  Gillette Mach 3 razors             o  Vaseline Intensive Care lotion

     Some of the health and beauty aids products that we distribute are:

         o  Antacids                           o  Oral Antiseptics and Sprays
         o  Baby Care                          o  Deodorants
         o  Cough and ColdRemedies             o  Shampoos

     Distribution of consumer personal care products accounted for approximately
77% of our  revenues  during the fiscal  year ended March 31,  2000,  57% of our
revenues for the fiscal year ended March 31, 2001 and 59% of our revenues during
the fiscal year ended March 31, 2002.

     Distribution of Prescription Pharmaceuticals.

     We purchase approximately 4,000 branded  pharmaceuticals from manufacturers
such as Pfizer,  Eli Lilly,  Merck and Glaxo. We also  distribute  3,000 generic
prescription pharmaceutical products which are purchased from manufacturers such
as Schein Pharmaceuticals,  Inc., Barre National, Inc., and Sidmak Laboratories,
Inc.

     During fiscal 1994, we acquired the capital stock of M. Sobol,  Inc., which
is a  manufacturers'  distributor of branded  prescription  pharmaceuticals.  M.
Sobol,  Inc. was founded in 1928 and currently  distributes  pharmaceuticals  to
approximately 700 independent pharmacies in the Northeast.

     During  fiscal 2000,  we acquired  the assets of  Tri-State  Pharmaceutical
Consultants,   Corp.   a   national   distributor   of   branded   and   generic
pharmaceuticals.  Tri-State  was  founded  in  1995  and  currently  distributes
pharmaceuticals  to  national  chains such as Rite Aid and  wholesalers  such as
McKesson.

     Distribution  of  prescription   pharmaceutical   products   accounted  for
approximately  21% of our revenues  during the fiscal year ended March 31, 2000,
42% of our  revenues  during the fiscal year ended March 31, 2001 and 40% of our
revenues during the fiscal year ended March 31, 2002.

     Manufacturing and Distribution of Hair and Skin Care Products.

     During fiscal 1996, we purchased selected assets of Russ Kalvin,  Inc. This
acquisition has enabled us to manufacture and distribute  salon quality hair and
skin care products to national mass  merchandisers  and  independent  retailers.
Since  1998,  we have  manufactured  private  label  upscale  hair and skin care
products for J.C.  Penney,  Bath and Body Works,  Sears  Roebuck & Co. and other
specialty retailers. In addition, we manufacture a proprietary line of hair care
and skin care  products  which we market under the Russ Kalvin  generic  brands.
This  business  generates  substantially  higher gross  profit  margins than our
distribution business.




                                      -3-
<PAGE>


     Manufacture and  distribution of hair and skin care products  accounted for
approximately 2% of our revenues during the fiscal year ended March 31, 2000, 1%
of our  revenues  during the  fiscal  year  ended  March 31,  2001 and 1% of our
revenues during the fiscal year ended March 31, 2002.  Revenues from prior years
were not material.

MANUFACTURERS AND SUPPLIERS

     The products we distribute  are  manufactured  and supplied by  independent
foreign and domestic  companies.  Many of these  companies also  manufacture and
supply health and beauty aids products, fragrances and cosmetics for many of our
competitors.  We purchase  approximately 8,000 brand name health and beauty aids
products  from such  manufacturers  as Procter & Gamble,  Johnson & Johnson  and
Gillette.  We also purchase  approximately 7,000 fragrance and cosmetic products
directly from  manufacturers such as Coty and Revlon and from secondary sources.
We  purchase  approximately  4,000  branded  pharmaceuticals  and 3,000  generic
prescription  pharmaceuticals  from  manufacturers  such as  Pfizer,  Eli Lilly,
Schein   Pharmaceuticals,   and  Barre  National.   Additionally,   we  purchase
non-perishable  packaged food items from  manufacturers  such as General  Mills,
General  Foods and  Nabisco.  We  contract  with  manufacturers  to produce  the
products  which carry our Allou name brand and we  manufacture  our  proprietary
line of Russ  Kalvin  generic  brand  hair and skin care  products  through  our
wholly-owned subsidiary, Allou Personal Care Corp.

     We  typically  purchase  health and beauty  aids and  pharmaceuticals  from
manufacturers  on open  accounts  which are  payable in 30 days and may  receive
discounts of up to 2% for early  payments.  As is customary in the industry,  we
prepay certain suppliers for products that we purchase at deep discounts.  These
types of purchases are  opportunistic and highly dependent upon availability and
price.  If the products for which we have prepaid and ordered are not shipped to
us, there could be an adverse  effect on our  operations.  To date,  we have not
suffered any such adverse effect.  In addition,  we may return health and beauty
aids and prescription  pharmaceutical  products to our suppliers for full credit
if the products are damaged, their shelf life has expired, or they are otherwise
not saleable.

     Manufacturers of prestige  fragrances have  historically  restricted direct
sales of their  products in the United States  primarily to prestige  department
stores  and  specialty   stores.  As  a  result,   mass-market   retailers  have
traditionally  obtained prestige products from secondary sources.  Historically,
the secondary sources available to the mass market have been limited to:

     o    direct  distributors  like us which  receive  products  directly  from
          fragrance manufacturers, and

     o    distributors of prestige products  manufactured by, or distributed to,
          foreign  sources for foreign  distribution,  which are diverted to the
          United States.

     Under existing court decisions, there are variations in the extent to which
trademark  laws,  copyright  laws  and  customs  regulations  may  restrict  the
importation  of  trademarked  or  copyright  fragrance  products  through  those
distributors  who divert  prestige  products  to the United  States  without the
consent of the trademark or copyright owner. As is customary in the industry, we
purchase a substantial portion of our fragrance products from secondary sources.
In  addition,  from time to time,  we may take  advantage  of  favorable  buying
opportunities  and purchase  limited  amounts of health and beauty aids products
from secondary sources.  There can be no assurance that these sources of product
will be  available  in the future or that we may not become the subject of legal
action arising from our buying  activities  with respect to these  products.  To
date, we have not been the subject of any such legal action.

     We have had  long-term  relationships  with  most of our  suppliers.  As is
customary in our industry, we have not entered into written agreements with most
of our suppliers.  However, we believe that our




                                      -4-
<PAGE>


relationships  with  our  suppliers  are  good.  We  have  not  experienced  any
interruptions in the supply of products that have resulted in a material adverse
effect on our operations.

MARKETING AND SALES

     Sales are made by our  in-house  sales staff  consisting  of  telemarketing
professionals. We pay our in-house sales persons a base salary plus a commission
based on  sales  and  gross  margins.  Sales  are  also  made by  sales  account
representatives who make on-site visits to our customers.

     We publish a monthly  health  and beauty  aids  catalogue  and a  quarterly
fragrance  catalogue   containing  order  forms,   product   descriptions,   the
manufacturer's  suggested retail price and net cost per unit or per dozen. These
catalogues are mailed to each of our active customers.  They also help serve the
advertising  needs of the  manufacturers  who provide us with  rebates that have
historically  paid for the full cost of  preparing,  printing  and  mailing  the
catalogues.  In addition to the catalogues,  we frequently  supply our customers
with flyers  advising them of items that are being sold at a discount.  The sale
of fragrances  nationally to independent  stores is handled  exclusively by mail
order through the catalogues.

OPERATIONS

     We  maintain a facility in  Brentwood,  New York of  approximately  157,000
square  feet that  includes  warehouse  space  and our sales and  administrative
offices.  The warehouse  typically contains,  on a blended basis,  inventory for
approximately four months of distribution to customers. We maintain these levels
of inventory in order to provide our customers with the  convenience of one stop
shopping  privileges.  We use a computerized  data base system which enables our
management to monitor sales,  purchases and inventory status.  Historically,  we
have not experienced problems with product shelf lives, because most products we
sell are not  perishable.  Those products that are  perishable  generally can be
returned to the  manufacturer  if they are not sold by the  expiration  date. We
also lease a facility in Saugus,  California of approximately 52,800 square feet
and a facility in Miami,  Florida of approximately 10,000 square feet. See "Item
2. Properties".

     We contract with local  carriers and  independent  trucking  agents to make
deliveries to our  customers.  A customer order will generally be shipped within
48 hours from the time it is placed.

     Work in the  warehouse is cyclical and workers are trained in several tasks
so that they can be rotated to fill the jobs where they are most needed.

     We have  positioned  ourselves to market and  manufacture  quality hair and
skin care products to major retailers such as J.C. Penney,  Bath and Body Works,
Sears Roebuck, & Co. and other specialty retailers.  In addition, we have 52,800
square feet of leased space in Saugus,  California  which is used to manufacture
and  distribute  upscale  private  label hair and skin care  products  for major
retailers.

MANAGEMENT INFORMATION AND CONTROL SYSTEM

     We  use  a  proprietary,   computerized  database  management  system  that
collects,  integrates  and analyzes data  concerning  sales,  order  processing,
shipping,  purchases,  receiving,  inventories and financial  reporting.  At any
given time,  we are able to determine  the quantity of each item in inventory by
brand,  style,  cost,  list price and other  characteristics.  The  computerized
system enables us to better manage our inventories. It keeps a running inventory
of goods on hand for each item we  distribute.  When the  inventory  of any item
drops  to a  certain  pre-set  level,  a  purchase  order  for a set  number  of
additional units of the item is automatically  written and, after being reviewed
by management, is sent directly to the manufacturer.




                                      -5-
<PAGE>


     Our system also provides our  telemarketing  professionals  with  immediate
product  availability  and gross margin  information  on-screen  when  receiving
customer  orders.  This system allows us to provide our customers with real-time
inventory and pricing information and to ship orders within 48 hours of receipt,
which allows our customers to better manage their inventory.

     We have engaged J.D. Edwards & Company, a software technology provider,  to
upgrade our EDP systems.  The implementation of this technology will provide the
technological infrastructure required to meet our goals for future growth.

COMPETITION

     The distribution of consumer personal care products and the distribution of
prescription  pharmaceutical products are both extremely competitive businesses.
Among others,  our  competitors  include  pharmaceutical  wholesalers  who carry
consumer personal care products as an accommodation for their customers. Many of
these  wholesalers  have  greater  financial  and  other  resources  than we do.
However, to our knowledge,  there is no significant  competitor that distributes
to its customers the  assortment of consumer  personal care products  (including
fragrances,  cosmetics and health and beauty aids  products) that we distribute.
We  believe  that we  compete  on the  basis  of price  and on the  basis of the
services we provide to our  customers,  which  include  quick  delivery  and low
minimum  order  requirements.  In order to maintain our  margins,  we compete to
obtain  our  fragrances   and  cosmetics  at  the  best  possible   prices  from
manufacturers  and importers  who also supply  competing  distributors  and sell
directly to retailers.

     In addition,  we face intensive  competition  with respect to marketing our
own brand of Allou health and beauty aids  products and the Russ Kalvin  generic
brand of hair and skin care  products.  We compete  with major health and beauty
aids   companies,   as  well  as  hair  and  skin   care   companies   who  have
well-established  product lines,  spend large sums for advertising and marketing
and have far greater  financial and other  resources than we do. We also compete
with these  companies  for shelf space and product  placement in various  retail
outlets.

EMPLOYEES

     As of March 31, 2002, we employed  approximately 300 persons on a full time
basis, including 5 in executive positions, 13 in purchasing, 51 in marketing and
sales, 89 in  administration  and accounting and 142 in warehouse and receiving.
Some of our sales  personnel are partially  paid on a commission  basis.  During
peak selling seasons we also employ part-time personnel.

     We are a party to a collective  bargaining  agreement expiring December 14,
2003 with the National Organization of Industrial Trade Unions that covers 85 of
our  warehouse  and  receiving  employees.  We have  not  experienced  any  work
stoppages. We believe our relations with our employees are satisfactory.

TRADENAMES AND TRADEMARKS

     We use the  unregistered  tradename  for our brand "Allou Brand" on generic
products  that we  distribute.  With  the  introduction  of  additional  generic
products,  we may adopt other  unregistered  tradenames and  trademarks.  During
fiscal  1996,  we acquired the patents,  trademarks  and all other  intellectual
property of Russ Kalvin, Inc. We believe that no single trademark,  tradename or
servicemark is material to our business as a whole.




                                      -6-
<PAGE>


GOVERNMENT REGULATION

     The United  States Food,  Drug and Cosmetic Act and the Fair  Packaging and
Labeling  Act  regulate  the purity  and  packaging  of health  and beauty  aids
products and fragrances and cosmetic products. Similar statutes are in effect in
various  states.  Manufacturers  and  distributors  of health  and  beauty  aids
products are also subject to the  jurisdiction  of the Federal Trade  Commission
with respect to matters such as advertising  content and other trade  practices.
To our knowledge,  we only distribute  products  produced by  manufacturers  who
comply with these  regulations  and who  periodically  submit their  products to
independent laboratories for testing.  However, the failure by our manufacturers
or suppliers to comply with applicable  government  regulations  could result in
product  recalls  that  could  adversely  affect  our  relationships   with  our
customers. In addition, the extent of potentially adverse government regulations
which might arise from future  legislation  or  administrative  action cannot be
predicted.

     Some of the products that we manufacture contain alcohol and certain active
ingredients  that are  regulated by the Bureau of Alcohol,  Tobacco and Firearms
and the Food and Drug Administration.  We have obtained the appropriate licenses
from these agencies in order to comply with all applicable regulations.



                                      -7-
<PAGE>


                                    PART II


ITEM 6.   SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>

                                                      Years Ended March 31,

                                     2002           2001            2000          1999(1)         1998(1)
                                   --------       --------       --------        --------        --------
<S>                                <C>            <C>            <C>             <C>             <C>
Revenues                           $564,151       $548,147       $421,047        $334,175        $301,092
Costs of revenues                   500,890        482,590        367,964         289,637         262,237
                                   --------       --------       --------        --------        --------
Gross profit                         63,261         65,557         53,083          44,538          38,855
Warehouse and delivery expense       12,918         15,121         12,307          10,279           9,288
Selling, general and
 administrative expense              23,066         21,946         18,520          14,707          13,264
                                   --------       --------       --------        --------        --------
Income from operations               27,277         28,490         22,256          19,552          16,303
Interest and other                   16,370         24,444         10,874           9,647           8,470
                                   --------       --------       --------        --------        --------
Income before income taxes           10,907          4,046         11,382           9,905           7,833
                                   --------       --------       --------        --------        --------
Discontinued operations, net
 of income taxes                          -              -          7,916          (4,599)           (576)
                                   --------       --------       --------        --------        --------
Net income                         $  6,590       $  2,458       $ 14,959        $  1,348        $  4,280
                                   ========       ========       ========        ========        ========
Net income per common share
Basic:
Operations                         $    .95       $    .36       $   1.05        $    .98        $    .84
Discontinued operations                   -              -           1.17            (.76)           (.10)
                                   --------       --------       --------        --------        --------
                                   $    .95       $    .36       $   2.22        $    .22        $    .74
                                   ========       ========       ========        ========        ========
Diluted:
Operations                         $    .91       $    .34       $    .97        $    .87        $    .81
Discontinued Operations                   -              -           1.08            (.67)           (.09)
                                   --------       --------       --------        --------        --------
                                   $    .91       $    .34       $   2.05        $    .20        $    .72
                                   ========       ========       ========        ========        ========

</TABLE>

<TABLE>
<CAPTION>

BALANCE SHEET DATA:
                                                               As of March 31,
                                       2002          2001           2000           1999             1998
                                   --------       --------       --------        --------        --------
<S>                                <C>            <C>            <C>             <C>             <C>
Cash                               $  1,246       $     264      $      51       $    400        $     47
Working capital                      90,091          83,412         64,725         52,192          43,959
Total assets                        324,941         291,764        259,219        219,907         178,384
Total long-term liabilities          19,801          17,697          1,640            724           1,354
Total liabilities                   237,421         212,789        183,062        159,571         125,771
Stockholders' equity                 87,520          78,975         76,157         60,336          52,613

</TABLE>

--------------------
(1)  As a result of our sale of our majority interest in The Fragrance Counter
     Inc., the statements of income for the prior years have been restated to
     segregate the net results of continued and discontinued operations.




                                      -8-
<PAGE>


                        SELECTED QUARTERLY FINANCIAL DATA
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                       First              Second              Third             Fourth
                                       Quarter            Quarter            Quarter            Quarter               Total
                                       -------            -------            -------            -------               -----
Year ended
March 31, 2002
--------------

<S>                               <C>                <C>                 <C>               <C>                 <C>
Revenues                          $110,230,491       $148,981,900        $163,306,563      $141,632,306        $564,151,260
Net income (loss)                 $    274,425       $  2,235,751        $  1,991,522      $  2,087,960        $  6,589,658
                                  ============       ============        ============      ============        ============
Earnings per common share
 - basic
   Basic                                 $ .04              $ .32               $ .29             $ .29               $ .94
                                         -----              -----               -----             -----               -----

Earnings per common share
 - diluted
   Diluted                               $ .04              $ .32               $ .28             $ .24               $ .88
                                         -----              -----               -----             -----               -----

------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>

Year ended
March 31, 2001
--------------

<S>                               <C>                <C>                 <C>               <C>                 <C>
Revenues                          $134,664,654       $132,250,479        $140,652,706      $140,579,114        $548,146,953
Net income (loss)                 $  2,088,762       $  1,805,248        $  1,110,741      $ (2,546,384)       $  2,458,367
                                  ============       ============        ============      ============        ============
Earnings per common
 share - basic
 Basic                                   $ .31              $ .27               $ .16            $ (.38)              $ .36
                                         -----              -----               -----            -------              -----
Earnings per common
 share - diluted
 Diluted                                 $ .29              $ .24               $ .16            $ (.35)              $ .34
                                         -----              -----               -----            -------              -----

</TABLE>

     Earnings  per  common  share  are  computed  independently  for each of the
quarters  presented.  Therefore,  the  sum of the  quarterly  per  common  share
information may not equal the annual earnings per common share.




                                      -9-
<PAGE>


ITEM 7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

     We   distribute   consumer   personal   care   products  and   prescription
pharmaceuticals  on a national basis. We also manufacture  upscale hair and skin
care products for sale under private labels. Our consumer personal care products
distribution  business includes prestige brand name designer  fragrances,  brand
name health and beauty aids products and non-perishable packaged food items. Our
prescription  pharmaceuticals distribution business includes both brand name and
generic pharmaceutical products. In the three fiscal years since the fiscal year
ended March 31,  1999,  our  revenues  have grown by  approximately  69% through
internal growth and strategic acquisitions,  which have enabled us to expand our
product  offerings,  enter into new  geographic  markets,  add new customers and
cross-sell existing and new product lines to our diversified customer base.

     Distribution of consumer personal care products accounted for approximately
77% of our  revenues  during the fiscal  year ended March 31,  2000,  57% of our
revenues for the fiscal year ended March 31, 2001 and 59% of our revenues during
the  fiscal   year  ended  March  31,   2002.   Distribution   of   prescription
pharmaceutical  products  accounted for approximately 21% of our revenues during
the fiscal year ended March 31, 2000, 42% of our revenues during the fiscal year
ended March 31, 2001 and 40% of our revenues  during the fiscal year ended March
31, 2002.  Manufacture and distribution of hair and skin care products accounted
for  approximately  2% of our  revenues  during the fiscal  year ended March 31,
2000,  1% of our revenues  during the fiscal year ended March 31, 2001 and 1% of
our revenues during the fiscal year ended March 31, 2002.

     Our operating  results for fiscal years 2002,  2001 and 2000 expressed as a
percentage of sales were as follows:

<TABLE>
<CAPTION>

                                                           FISCAL YEAR ENDED MARCH 31

                                                   2002              2001              2000
                                                   ----              ----              ----
<S>                                               <C>               <C>               <C>
   Net sales                                      100.0%            100.0%            100.0%
   Costs of goods sold                             88.8              88.0              87.4
                                                  -----             -----             -----
   Gross profit                                    11.2              12.0              12.6
   Warehouse & delivery expenses                    2.3               2.8               2.9
   Selling, general and administrative expenses     4.0               4.0               4.4
                                                  -----             -----             -----
   Operating income                                 4.9               5.2               5.3
   Net interest expense                             2.9               3.4               2.6
   Provision for losses on asset impairments        -                 1.0               -
                                                  -----             -----             -----
   Total other expense, net                         2.9               4.5               2.6
   Income before income tax                         2.0               0.7               2.7
   Income tax provision                             0.8               0.3               1.0
   Gain from discontinued operations                -                 -                 1.9
                                                  -----             -----             -----
   Net income                                       1.2%              0.4%              3.6%

</TABLE>


                                      -10-
<PAGE>


FISCAL 2002 COMPARED TO FISCAL 2001

     Revenues. Our sales are composed almost entirely of sales of prestige brand
name  designer   fragrances,   brand  name  health  and  beauty  aids  products,
prescription  pharmaceuticals,  non-perishables packaged food items, and upscale
hair and skin care  products.  Revenues for the fiscal year ended March 31, 2002
increased $16.0 million to $564.1 million,  representing a 3.0% gain as compared
to revenues of $548.1  million  for the fiscal year ended March 31,  2001.  This
increase resulted from increased revenues from most segments of our business, as
described below.  Distribution of prescription  pharmaceutical  products for the
fiscal year ended March 31,  2002,  however,  decreased  $5.2  million to $223.3
million.  The increased demand for our products  resulted from increases in same
store  sales.  We made no  acquisitions  during the fiscal  year ended March 31,
2002.

     Contributions  to the  increase in  revenues  during this period by product
segment are as follows.  Sales of brand name  health and beauty  aids,  prestige
designer fragrances and non-perishable  food products,  increased 6.7% in fiscal
2002  compared to fiscal 2001,  due to  increases in same store sales.  Sales of
prescription  pharmaceuticals  decreased  2.3% in fiscal  2002 when  compared to
fiscal 2001.  This  decrease in revenues is due to decreases  in  purchasing  of
pharmaceutical  products  during the first half of fiscal 2002,  which  resulted
from  financing  reductions  in the  earlier  part  of the  year  in our  former
revolving  credit facility with a consortium of banks led by Fleet Capital Corp.
This  financing  reduction  was  required  by our  former  lenders  in  order to
accommodate our request for an extension to the former revolving credit facility
which  expired on May 7, 2001.  We closed a new $200  million  revolving  credit
facility  on  September  4, 2002  with a  consortium  of banks  led by  Congress
Financial  Corporation and Citibank,  N.A. This new credit facility permitted us
to  resume  our  normal  level of  pharmaceutical  purchases,  which in turn has
alleviated  the  shortfall of related  sales in this  period.  Sales of products
manufactured by us  ("Manufacturing  Sales")  increased 2.8% in fiscal 2002 when
compared to fiscal 2001. Manufacturing Sales are not material.

     Gross  Profit.  Gross  profit for the fiscal  year ended March 31, 2002 was
$63.3 million  representing  a $2.3 million  decrease over gross profit of $65.6
million for the fiscal year ended March 31, 2001.  This decrease in gross profit
is due in part to promotional sales of pharmaceutical products that were subject
to expire within six months. We determined that it was economically favorable to
discount  these  products  rather  than to wait for the  expiration  date before
returning the expired products to the  manufacturers.  Also,  certain  customers
requested  that  their  orders be shipped at their own cost.  We  typically  pay
freight  charges  and add the charge to the  customer  invoice.  The  request by
certain  customers to directly pay their freight  charges  caused a reduction in
the selling price for these products by the amount of the freight charges.  This
reduction   in  selling   price  caused  a  reduction  in  gross  profit  and  a
corresponding  reduction in warehouse and delivery  expenses,  with no effect on
net income.  Additionally,  sales of  pharmaceutical  products have historically
lower gross profit margins than health and beauty aids, fragrances or cosmetics.
Thus, as pharmaceutical  products become a greater  percentage of our sales, the
impact of such sales will result in lower blended gross profit margins. Sales of
prescription  pharmaceuticals,  however,  decreased  2.3% in  fiscal  2002  when
compared to fiscal 2001.

     Warehouse,   Delivery,   Selling,   General  and  Administrative  Expenses.
Warehouse, delivery, selling, general and administrative expenses for the fiscal
year ended  March 31, 2002  decreased  $1.1  million to $36  million  from $37.1
million in the prior year. This reduction resulted from a $2.2 million reduction
in warehouse and delivery  expenses,  from $15.1 million in fiscal 2001 to $12.9
million in fiscal 2002,  partially offset by a $1.1 million increase in selling,
general and administrative expenses.  Warehouse,  delivery, selling, general and
administrative  expenses  decreased as a percentage  of revenues to 6.3% for the
fiscal  year  ended  March 31,  2002 from 6.8% in the prior  fiscal  year.  This
decrease as a percentage of revenues is due to in part to reduced  freight costs
and improved  efficiencies in warehouse  operations and reduced costs associated
with an outside bonded warehouse.


                                      -11-
<PAGE>


     Interest  Expense.  Interest  expense as a  percentage  of revenues for the
fiscal year ended March 31, 2002 decreased to 2.9% from 3.4% for the same period
in the prior year.  This decrease was due to a decrease in interest rates offset
by both the accretion of the discount to the  subordinated  debt, and the change
in the fair  market  value of the  warrants,  which are being  valued  using the
Black-Scholes  Pricing Model.  Included in interest  expense for the fiscal year
ended March 31, 2002 was $179,075,  which represented the change in the value of
these warrants. As of March 31, 2002, the fair market value for our warrants was
$4,539,000.

     Net  Income.  Our net  income  for the fiscal  year  ended  March 31,  2002
increased $4.1 million to $6.6 million, or 168%, as compared to $2.5 million for
the fiscal year ended March 31, 2001. This increase in net income is due in part
to a decrease in operating  expenses,  a reduction  in interest  expense and the
absence of a loss on interest in internet  investments  which last year  totaled
$5.6 million.

FISCAL 2001 COMPARED TO FISCAL 2000

     Revenues.  Revenues  for the fiscal  year ended  March 31,  2001  increased
$127.1  million to $548.1  million,  representing  a 30.2% gain as  compared  to
revenues  of $421.0  million  for the fiscal  year ended  March 31,  2000.  This
increase  resulted from a blended  increase in revenues from the segments of our
business,  as described below.  The increased  demand for our products  resulted
from increases in same store sales.

     Contributions to the increase in revenues during this period by segment are
as  follows.  Sales of brand  name  health and beauty  aids,  prestige  designer
fragrances  and  non-perishable  food  products,  decreased  4.3% in fiscal 2001
compared  to  fiscal  2000,  due to  decreases  in same  store  sales.  Sales of
prescription  pharmaceuticals  increased  160% in fiscal  2001 when  compared to
fiscal 2000.  This increase is largely due to increased sales resulting from our
acquisition  of  Tri-State  Pharmaceutical  Consultants  Corporation  which  was
consummated  during the fourth quarter of fiscal year 2000. This acquisition has
enabled  the  company  to  become  a  national   distributor   of   prescription
pharmaceuticals  thereby  expanding our customer base resulting in a substantial
increase in sales.

     Cost of Goods Sold.  Cost of goods sold for the fiscal year ended March 31,
2001  increased as a  percentage  of revenues to 88.0% from 87.4% for the fiscal
year ended March 31,  2000.  This  increase  in the cost of goods sold  resulted
primarily from decreased  profit margins  associated  with the  distribution  of
pharmaceutical products.

     Warehouse,   Delivery,   Selling,   General  and  Administrative  Expenses.
Warehouse, Delivery, Selling, General and Administrative expenses for the fiscal
year ended March 31, 2001 increased  $6.2 million to $37.0  million,  or 6.8% of
sales,  as compared to expenses of $30.8 million or 7.3% of sales for the fiscal
year ended March 31, 2000. This increase was largely due to marketing,  delivery
and warehouse  expenses  associated  with our  wholly-owned  pharmaceutical  and
manufacturing subsidiaries.

     Interest Expense. Interest expense for the fiscal year ended March 31, 2001
increased  $7.9 million to $18.8 million,  or 3.4% as a percentage of sales,  as
compared to $10.9 million, or 2.6% as a percentage of sales, for the fiscal year
ended March 31, 2000. This increase was due to increased  borrowings at a higher
rate and non-cash interest from the warrant discount  accretion of approximately
$600,000.

     Net  Income.  Our net  income  for the fiscal  year  ended  March 31,  2001
decreased  $12.5  million to $2.5 million or 83.6% as compared to $14.9  million
for the fiscal year ended March 31, 2000.  This decrease in net income  resulted
in part from the fact that the prior  period  included  a gain of  approximately
$7.9  million,  or $1.08 per diluted  share,  on the sale of our interest in our
Internet  subsidiary during the first quarter of fiscal 2000, and also from loss
during the fiscal year ended March 31, 2001 on our Internet investments totaling
$5,642,678 which management determined had become permanently impaired, thus


                                      -12-
<PAGE>


electing to recognize a loss on the investment during this period. This loss was
included in our financial  statements  with the other  expenses set forth in the
line item "Interest and other." In addition,  an increase in interest expense of
approximately 72% contributed to these decreased earnings. Net income for fiscal
2001  was  $2,458,367,   or  34  cents  per  diluted  share,  when  compared  to
$14,959,185, or $2.05 per diluted share, for the same period a year earlier.

LIQUIDITY AND CAPITAL RESOURCES

     Our working  capital  increased $6.61 million to $90.0 million at March 31,
2002 from $83.4  million at March 31,  2001,  primarily  due to an  increase  in
accounts receivable and inventories.  In addition,  included in this increase in
working capital was an increase in our cash and cash  equivalents  from $263,774
at March 31, 2001 to $1,245,521 at March 31, 2002.

     Our capital requirements relate primarily to the purchase of inventory, the
carrying of customer  accounts  receivable,  the investment in capital equipment
and the acquisition of businesses.  During the fiscal year ended March 31, 2002,
our accounts receivable increased by 28.1%, or $24.0 million, from $85.6 million
to $109.6  million;  our  inventories  increased by 5.1%, or $9.1 million,  from
$176.4 million to $185.5  million;  and our property and equipment  increased by
94%,  or  $5.3  million,  from  $5.7  million  to  $11.0  million.  We  made  no
acquisitions  of  businesses  during  the fiscal  year  ending  March 31,  2002.
However,  we believe  that  there are  significant  opportunities  to add to our
distribution  businesses through acquisitions,  particularly in the prescription
pharmaceutical  distribution  industry.  We  will  seek to  identify  attractive
acquisition candidates that we believe will complement our current business.

     We meet our working capital  requirements  from internally  generated funds
and from a $200  million  line of  credit  with a  consortium  of  banks  led by
Congress Financial  Corporation and Citibank,  N.A. entered into on September 4,
2001 and which expires on September 4, 2004. The purpose of this credit facility
is to finance our accounts  receivable and  inventory.  As at March 31, 2002, we
had $191,285,333  outstanding  under our line of credit.  The credit facility is
secured by a  security  interest  in most of our  assets.  Interest  on the loan
balance is payable at .25% per annum  above the prime  rate,  or 2.75% per annum
above the Eurodollar rate, at our option. The effective rate of interest charged
to us at March 31, 2002 was 4.6%. We utilize cash  generated  from  operation to
reduce  short-term  borrowings which in turn acts to increase loan  availability
consistent with our financing agreement.

     The financing  agreement contains various covenants that limit or restrict,
among  other  things,   subject  to  certain   exceptions,   the  incurrence  of
indebtedness,  the creation of liens, transactions with affiliates,  investments
and acquisitions, mergers, consolidations, dissolutions, asset sales, dividends,
redemptions and certain other  transactions and business  activities.  Financial
performance  covenants  include  minimum net worth,  EBITDA,  and current  ratio
requirements.  At March  31,  2002,  we were in  compliance  with all  financial
performance  covenants.  Substantially  all of our  borrowings  under the credit
facility bear interest at floating rates. Therefore, our financial condition and
results of operations will be affected by changes in prevailing interest rates.

     We believe that, based on anticipated levels of operations,  cash flow from
operations, together with other available sources of funds, including additional
borrowings under our credit facility,  will be adequate for at least the next 12
months  to fund  our debt  service,  capital  expenditure  and  working  capital
requirements.  However,  in  order  to  consummate  acquisitions  of  additional
businesses,  it will be necessary for us to obtain additional financing,  and we
cannot be certain adequate additional financing will be available to us for this
purpose on satisfactory terms.

     During the quarter ended  September 30 of fiscal year 2000 we issued to RFE
Investment Partners, an institutional investor, $15,000,000 principal amount 12%
Senior  Subordinated  notes  due 2005 and seven  year  warrants  exercisable  to
purchase 1,700,000 shares of our Class A common stock at


                                      -13-
<PAGE>


$4.50 per share.  The  warrants are subject to a future  contingent  put option;
under  certain  circumstances  as defined the  investor has the right to put the
warrants to us after year five at a price of $8.00 per warrant.

     As noted above,  our accounts  receivable  increased to  $109,655,884 as at
March 31, 2002 from $85,579,734,  as at March 31, 2001, representing an increase
of 28.1%. The increase in accounts  receivable is due to increased sales and the
fact that  customers  who had been paying us on an average of 55 days during the
fiscal year  ending  March 31, 2001 have been paying us on an average of 71 days
during the fiscal year ended March 31,  2002.  We believe this change is largely
due to economic conditions. In addition, our cash and cash equivalents increased
from  $263,774  at  March  31,  2001 to  $1,245,521  at March  31,  2002 and our
inventories  increased by  approximately  $9.1 million,  or 5.1%, for the fiscal
year ended March 31, 2002 compared to the fiscal year ended March 31, 2001. This
increase in inventory is in anticipation of increased sales during fiscal 2003.

     Operations  for the fiscal year ended March 31,  2002,  excluding  non-cash
charges for items such as depreciation and amortization,  deferred income taxes,
and asset impairment, provided cash of $8.9 million. Other changes in assets and
liabilities  resulting from operating activities for the fiscal year ended March
31, 2002 used cash of $26.5  million,  resulting  in net cash used in  operating
activities of $17.4 million.  Investing activities,  which principally consisted
of acquisitions of property,  plant and equipment,  resulted in a use of cash of
$3.7 million for the fiscal year ended March 31, 2002. For the fiscal year ended
March 31, 2002, financing activities provided cash of $22.1 million, principally
consisting of increased borrowing and issuance of common stock from the exercise
of stock options.

CRITICAL ACCOUNTING POLICIES

     This  management  discussion  and  analysis  is based  on our  consolidated
financial  statements  which are  prepared  using  certain  critical  accounting
policies  that require  management  to make  judgments  and  estimates  that are
subject  to  varying  degrees  of  uncertainty.  While  we  believe  that  these
accounting policies, and management's  judgments and estimates,  are reasonable,
actual  future events can and often do result in outcomes that can be materially
different from management's current judgments and estimates. We believe that the
accounting  policies and related matters  described in the paragraphs  below are
those that depend most heavily on management's judgments and estimates.

     Reserves  for  Uncollectible  Accounts.  At March 31,  2002,  our  accounts
receivable  balance was $109.6 million.  Our accounting policy is to reserve for
the accounts receivable of specific customers based on our assessment of certain
customers' financial condition. We make these assessments using our knowledge of
the  industry  and our  past  experiences.  This  policy  is  based  on our past
collection  experience.  During the fiscal  year ended  March 31,  2002 we added
approximately $960,000 to our reserve for uncollectible  accounts,  bringing the
total of that reserve to  approximately  $2.3 million at March 31, 2002.  We did
not write off any receivables during the fiscal year ended March 31, 2002.

     Inventory Obsolescence  Estimates.  We take physical inventories in each of
our  significant  warehouse  locations  at or near the end of each fiscal  year.
Inventories  at the balance  sheet  dates are valued  using the lower of average
cost (with  average cost  determined  using the first-in,  first-out  method) or
market reduced by estimated inventory obsolescence losses for the period between
the last  physical  inventory and the balance  sheet date.  These  estimates are
based on an inventory  analysis of the movement and expiration dates of specific
inventory  items.  In  addition,  we may  return  health  and  beauty  aids  and
prescription  pharmaceutical  products to our  suppliers  for full credit if the
products are damaged,  their shelf life has expired,  or they are  otherwise not
saleable.

     Inventories.    Inventories   are   principally   purchased   rather   than
manufactured.  They are  stated at the lower of cost or  market  value.  Cost is
principally determined by the first-in,  first-out method. We record adjustments
to the value of  inventory  based upon  forecasted  sales  projections,  and the
physical condition (e.g., age and quality) of the inventories. These adjustments
are estimates, which could vary


                                      -14-
<PAGE>

significantly,  either  favorably or  unfavorably,  from actual  requirements if
future economic conditions,  customer inventory levels or competitive conditions
differ from our expectations.

     Property, Plant and Equipment. Property, plant and equipment is recorded at
cost and is  depreciated  on  straight-line  and  accelerated  methods  over the
estimated  useful  lives  of  such  assets.  Changes  in  circumstances  such as
technological  advances  or changes in our  capital  strategy  can result in the
actual  useful  lives  differing  from our  estimates.  In those  cases where we
determine  that the  useful  life of  property,  plant and  equipment  should be
shortened,  we would  depreciate  the net book  value in excess  of the  salvage
value,  over its revised remaining useful life thereby  increasing  depreciation
expense.  Factors  such as changes in the planned use of fixtures or software or
closing of facilities could result in shortened useful lives.

     Long Lived Assets. Statement of Financial Accounting Standards ("SFAS") No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to be Disposed Of," requires  management  judgments  regarding the future
operating and disposition plans for marginally  performing assets, and estimates
of expected realizable values for assets to be sold. The application of SFAS 121
has significantly affected the amount and timing of charges to operating results
in recent years.

     Goodwill.  Goodwill is reviewed  by the  Company  for  impairment  whenever
events or changes in circumstances indicate that the carrying amount of any such
asset may not be  recoverable.  The  estimate of cash flow is based upon,  among
other things,  certain assumptions about expected future operating  performance.
Our estimates of undiscounted cash flow may differ from actual cash flow due to,
among other things,  technological changes, economic conditions,  changes to our
business  model  or  changes  in our  operating  performance.  If the sum of the
undiscounted  cash flows is less than the carrying  value, we would recognize an
impairment loss,  measured as the amount by which the carrying value exceeds the
fair value of the asset.

     Income  Taxes.  Our  effective tax rate and the tax bases of our assets and
liabilities  reflect our best  estimate of the  ultimate  outcome of tax audits.
Valuation  allowances are established  where expected future taxable income does
not support the realization of the deferred tax assets.  Considerable management
judgment is also necessary in estimating future taxable income. Assumptions used
in these estimates are consistent with internal forecasts.

     Valuation  of  Contingent   Put  Warrants.   The  contingent  put  warrants
associated  with the  subordinated  debt are being  valued on a quarterly  basis
using the Black Scholes  Pricing  Model.  This model is subject to change in our
stock price, as well as the potential that the warrants will become exercisable,
due to market conditions, and the change in risk free interest rates.

FACTORS THAT COULD IMPACT OUR FINANCIAL CONDITION

     Substantial defaults in payment or a material reduction in purchases of our
products by large  customers  could have a  significant  negative  impact on our
financial condition and results of operations and liquidity.  In recent years, a
significant  portion of our  revenue  growth  has been with a limited  number of
large customers.  During the year ended March 31, 2002, sales to our ten largest
customers accounted for approximately 47% of our total revenues. Any defaults in
payment or a material  reduction in purchases  from us by these large  customers
could have a significant negative impact on our financial condition,  results of
operations and liquidity.

     Our business  could be hindered if we are unable to complete and  integrate
acquisitions successfully. An element of our strategy is to identify, pursue and
consummate   acquisitions   that  either  expand  or  complement  our  business.
Integration of acquisitions involves a number of risks,  including the diversion
of management's attention to the assimilation of the operations of businesses we
have acquired; difficulties in the integration of operations and systems and the
realization of potential operating




                                      -15-
<PAGE>


synergies;  the  assimilation  and  retention  of the  personnel of the acquired
companies; challenges in retaining the customers of the combined businesses; and
potential adverse effects on operating results. If we are unable to successfully
complete and integrate  strategic  acquisitions in a timely manner, our business
and our growth strategies could be negatively affected.

     We will require additional  financing to complete  acquisitions.  If we are
not able to secure additional  financing on terms we consider  acceptable to us,
we will  not be able to  execute  on our  business  and  growth  strategies.  In
addition,  if we experience  rapid growth,  we may require  additional  funds to
expand our  operations  or enlarge  our  organization  through  acquisitions  of
complementary businesses.

INFLATION AND SEASONALITY

     Inflation has not had any  significant  adverse effects on our business and
we do not believe it will have any  significant  effect on our future  business.
Our  fragrance  business is seasonal,  with greater  sales during the  Christmas
season than in other seasons. Our other product lines are not seasonal.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In July 2001, FASB issued statements of Financial  Accounting Standards No.
141,  Business  Combinations  ("SFAS  141"),  and No.  142,  Goodwill  and Other
Intangible  Assets  ("SFAS  142").  SFAS 141 requires all business  combinations
initiated  after June 30, 2001 to be accounted  for using the  purchase  method.
Under SFAS 142,  goodwill and  intangible  assets with  indefinite  lives are no
longer  amortized  but are reviewed  annually (or more  frequently if impairment
indicators  arise) for  impairment.  Separable  intangible  assets  that are not
deemed to have indefinite  lives will continue to be amortized over their useful
lives (but with maximum life). The amortization  provisions of SFAS 142 apply to
goodwill and intangible  assets  acquired  after June 30, 2001.  With respect to
goodwill and intangible  assets  acquired prior to July 1, 2001, we are required
to adopt SFAS 142 effective  April 1, 2002. We have determined that the adoption
of the provisions of SFAS 142 will not have a material  effect on our results of
operations and financial position,  other than the potential  discontinuation of
certain amortization expenses.

     In June  2001,  the  FASB  issued  SFAS  No.  143,  "Accounting  for  Asset
Retirement  Obligations."  This  statement  addresses  financial  and  reporting
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement  costs. It applies to legal  obligations  associated
with  the  retirement  of  long-lived   assets  that  result  from  acquisition,
construction,  development  and/or the normal  operation of a long-lived  asset,
except for certain  obligations  of lessees.  This  statement is  effective  for
financial  statements  issued for fiscal years beginning after June 15, 2002. We
believe  adoption of SFAS 143 will not have a material  effect on our  financial
position or results of operations.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment or Disposal of Long-lived Assets". This statement addresses financial
accounting  and reporting for the  impairment of disposal of long-lived  assets.
SFAS No.  144  will be  effective  for  financial  statements  of  fiscal  years
beginning  after  December 15, 2001.  We expect to adopt this  statement for the
fiscal year ending March 31,  2003,  and do not  anticipate  that it will have a
material impact on our consolidated financial results.




                                      -16-
<PAGE>


                                    SIGNATURE

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

                            ALLOU HEALTH & BEAUTY CARE, INC.

                            By: /s/ David Shamilzadeh
                                ------------------------------------------------
                                Name:  David Shamilzadeh
                                Title: President, Principal Financial Officer,
                                       Principal Accounting Officer and Director

Dated:   July 31, 2002


                                      -17-