<PAGE>   1


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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     FOR THE QUARTERLY PERIOD ENDED DECEMBER 29, 2000

[ ]  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 0-19952
                       -------

                                 CHRONIMED INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           MINNESOTA                                           41-1515691
-------------------------------                          ---------------------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                          Identification Number)

                             10900 RED CIRCLE DRIVE
                           MINNETONKA, MINNESOTA 55343
                   ----------------------------------------
                   (Address of principal executive offices)
                                   (Zip Code)

        Registrant's telephone number, including area code (952) 979-3600
                                                           --------------

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

   Common Stock, $.01 par value - 12,195,504 shares outstanding as of
February 2, 2001


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<PAGE>   2


                                INTRODUCTORY NOTE

        The purpose of this Form 10-Q/A is to restate the quarterly condensed
consolidated financial statement for the quarter and six months ended December
29, 2000 and December 31, 1999 for Chronimed, Inc. ("Chronimed" or the
"Company") (See Note I). The Company issued press releases on June 14, 2001 and
June 21, 2001, which it filed as exhibits to Form 8-K dated the same dates,
relating to its intention to restate certain of its financial statements. The
Company is concurrently filing a Form 10-K for its fiscal year ended June 29,
2001 that includes restated financial statements for fiscal year 2000, and a
Form 10-Q/A for each of the quarterly periods ended September 29, 2000, December
29, 2000, and March 29, 2001.

    The matters relating to the restatement referenced in the 2001 Form 10-K
have a financial statement impact for the periods covered by this 10-Q/A as
follows:

    Revenue--For the quarter ended December 31, 1999, decrease revenue by
$914,000. For the quarter ended December 29, 2000, decrease revenue by $1.6
million. For the six months ended December 31, 1999, decrease revenue by $1.7
million. For the six months ended December 29, 2000, decrease by $3.2 million.

    Bad Debt Expense--For the quarter ended December 29, 2000, increase bad debt
expense by $603,000. For the six months ended December 29, 2000, increase bad
debt expense by $1.6 million. There was no restatement of bad debt expense in
the quarter and six months ended December 31, 1999.

    Net Income--For the quarter ended December 31, 1999, decrease net income by
$558,000. For the quarter ended December 29, 2000, decrease net income by $1.3
million. For the six months ended December 31, 1999, decrease net income by $1.1
million. For the six months ended December 29, 2000, decrease net income by $2.9
million.

    Accounts Receivable--At June 30, 2000 reduce accounts receivable by $7.6
million. At December 29, 2000 reduce accounts receivable by $12.3 million.

    Income taxes receivable/payable--At June 30, 2000 increase income taxes
receivable by $1.1 million. At December 29, 2000 reduce income taxes receivable
by $3.8 million.

    Deferred tax assets--At June 30, 2000 increase deferred tax assets by $1.8
million. At December 29, 2000 increase deferred tax assets by $1.1 million.

    The principal effects of the change on the accompanying financial statements
are presented in Note I to the Company's condensed consolidated financial
statements.

    For purposes of this Form 10-Q/A, and in accordance with rule 12b-15 under
the Securities and Exchange Act of 1934, as amended, the Company has amended and
restated in its entirety each item of the Company's Form 10-Q for the quarterly
periods ended December 29, 2000, which has been affected by the restatement.
This Form 10-Q/A does not reflect events occurring after the filing of the
original Form 10-Q, or modify or update those disclosures in any way, except as
required to reflect the effects of this restatement.



                                       1

<PAGE>   3




                                      INDEX

                         CHRONIMED INC. AND SUBSIDIARIES



PART I. FINANCIAL INFORMATION


Item 1. Financial Statements (as restated)

        Consolidated Balance Sheets
               December 29, 2000 (unaudited) and June 30, 2000

        Consolidated Statements of Income (unaudited)
               For the three months ended December 29, 2000, and December
               31, 1999; For the six months ended December 29, 2000, and
               December 31, 1999

        Consolidated Statements of Cash Flows (unaudited)
               For the six months ended December 29, 2000, and December 31, 1999

        Notes to Consolidated Financial Statements
               December 29, 2000


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations


Item 3. Quantitative and Qualitative Disclosures About Market Risk



                                       2

<PAGE>   4





                                INDEX (CONTINUED)

                         CHRONIMED INC. AND SUBSIDIARIES




PART II.  OTHER INFORMATION

Items 2, 3, and 5 required under Part II have been omitted since they are not
applicable or the answers are negative.

Item 1.  Legal Proceedings

Item 4  Submission of Matters to a Vote of Security Holders

Item 6.  Exhibits and Reports on Form 8-K

          a.)  Exhibits

                none

          b.)  Reports on Form 8-K



SIGNATURES




                                       3






<PAGE>   5



PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS


                                 CHRONIMED INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                         DECEMBER 29,
                                                            2000               JUNE 30,
                                                         (UNAUDITED)             2000
                                                        --------------       -------------
                                                        (As restated)        (As restated)
<S>                                                     <C>                  <C>
ASSETS
Current assets
  Accounts receivable (net of allowance of $11,944          $ 39,367            $ 39,762
      at December 29, 2000, and $8,459 at June 30, 2000)
  Income taxes receivable                                      4,667               1,901
  Inventory                                                    8,579               6,111
  Other current assets                                         1,626                 848
  Deferred taxes                                               2,363               3,144
                                                            --------            --------
    Total current assets                                      56,602              51,766

Property and equipment
  Property and equipment                                      14,821              14,889
  Allowance for depreciation                                  (8,231)             (8,338)
                                                            --------            --------
                                                               6,590               6,551

Goodwill, net                                                  8,508               9,031
Net assets of discontinued operations                         11,443              10,465
Deferred taxes                                                   508                 508
Other assets                                                     139                 109
                                                            --------            --------
  Total assets                                              $ 83,790            $ 78,430
                                                            ========            ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Accounts payable                                          $ 12,176            $ 10,507
  Accrued expenses                                             2,992               2,366
  Short-term debt                                              5,300               2,500
                                                            --------            --------
    Total current liabilities                                 20,468              15,373

Shareholders' equity
  Preferred Stock                                                 --                  --
  Common Stock, issued and outstanding shares--
    12,191 and 12,147, respectively                              122                 121
  Additional paid-in capital                                  53,144              52,839
  Retained earnings                                           10,169               9,641
                                                            --------            --------
                                                              63,435              62,601
  Accumulated other comprehensive income--
   Unrealized (loss) gain on available-for-sale securities      (113)                456
                                                            --------            --------
    Total shareholders' equity                                63,322              63,057

                                                            --------            --------
Total liabilities and shareholders' equity                  $ 83,790            $ 78,430
                                                            ========            ========
</TABLE>



See notes to consolidated financial statements



                                       4

<PAGE>   6


                                 CHRONIMED INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                     QUARTER ENDED                       SIX MONTHS ENDED
                                                            -------------------------------     ---------------------------------
                                                             DECEMBER 29,      DECEMBER 31,       DECEMBER 29,       DECEMBER 31,
                                                                 2000             1999                2000               1999
                                                            -------------     -------------      -------------      -------------
                                                            (As restated)     (As restated)      (As restated)      (As restated)
<S>                                                         <C>               <C>                <C>                <C>
REVENUES
  Mail Order                                                   $ 39,630          $ 32,150           $ 74,469           $ 58,983
  Retail                                                         29,464            25,282             57,469             48,500
                                                               --------          --------           --------           --------
    Total Revenue                                                69,094            57,432            131,938            107,483
          Yr to Yr Growth                                          20.3%             40.0%              22.8%              40.7%
COSTS AND EXPENSES
  Cost of revenues                                               60,745            47,026            115,441             88,989
    Gross profit                                                  8,349            10,406             16,497             18,494
           % of Revenue                                            12.1%             18.1%              12.5%              17.2%

  Selling and marketing                                             667             1,059              1,772              2,253
  General and administrative                                      7,179             7,567             14,300             14,738
  Bad debt expense                                                1,027             1,128              2,102              1,832
                                                               --------          --------           --------           --------
    Total operating expenses                                      8,873             9,754             18,174             18,823
           % of Revenue                                            12.8%             17.0%              13.8%              17.5%

(LOSS) INCOME FROM OPERATIONS                                      (524)              652             (1,677)              (329)
           % of Revenue                                            -0.8%              1.1%              -1.3%              -0.3%

  Interest income                                                   133                20                183                 20
  Interest (expense)                                                (32)              (79)               (80)              (102)
  Other income (expense)                                             (9)               --                 12                 --
                                                               --------          --------           --------           --------

(LOSS) INCOME BEFORE INCOME TAXES                                  (432)              593             (1,562)              (411)
  Income tax (expense) benefit                                      119              (232)               545                160

(LOSS) INCOME FROM CONTINUING OPERATIONS                           (313)              361             (1,017)              (251)
           % of Revenue                                            -0.5%              0.6%              -0.8%              -0.2%

INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX                   1,081               647              1,545              1,083

NET INCOME                                                     $    768          $  1,008           $    528           $    832
                                                               ========          ========           ========           ========
           % of Revenue                                             1.1%              1.8%               0.4%               0.8%


BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:
  Income (Loss) from Continuing Operations                        (0.03)             0.03              (0.08)             (0.02)
  Income/Gain from Discontinued Operations                         0.09              0.05               0.12               0.09
                                                               --------          --------           --------           --------
  Net Income per share                                         $   0.06          $   0.08           $   0.04           $   0.07
                                                               ========          ========           ========           ========

WEIGHTED AVERAGE SHARES OUTSTANDING--BASIC                       12,155            12,095             12,151             12,093
WEIGHTED AVERAGE SHARES OUTSTANDING--DILUTED                     12,155            12,106             12,151             12,093
</TABLE>



See notes to consolidated financial statements



                                       5


<PAGE>   7


                                 CHRONIMED INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        SIX MONTHS ENDED
                                                                ---------------------------------
                                                                 DECEMBER 29,        DECEMBER 31,
                                                                     2000               1999
                                                                -------------       -------------
                                                                (As restated)       (As restated)
<S>                                                             <C>                 <C>
OPERATING ACTIVITIES
  Net income                                                      $    528            $    832
  Less income/gain from discontinued operations                      1,545               1,083

    (Loss) from continuing operations                               (1,017)               (251)

  Adjustments to reconcile income from continuing
    operations to net cash used in operating activities:
      Depreciation and amortization                                  1,751               2,151
      Deferred income taxes                                            781                 (44)
      Gain on sale of business                                         (22)                 --
      Changes in operating assets and liabilities:
        Accounts receivable                                         (1,344)             (8,825)
        Income taxes                                                (2,766)               (579)
        Inventory                                                   (2,900)             (1,465)
        Accounts payable                                             1,669               1,952
        Accrued expenses                                               512                (285)
        Other assets                                                (1,025)                (15)
                                                                  --------            --------
      Net cash (used in) operating activities                       (4,361)             (7,361)

INVESTING ACTIVITIES
  Acquisitions                                                        (170)                 --
  Proceeds from sale of Home Service Medical Business                2,734                  --
  Purchases of property and equipment                               (1,309)               (727)
                                                                  --------            --------
      Net cash provided by (used in) investing activities            1,255                (727)

FINANCING ACTIVITIES
  Net proceeds from issuance of Common Stock                           306                 249
  Net proceeds from borrowings                                       2,800               4,100
                                                                  --------            --------
      Net cash provided by financing activities                      3,106               4,349

CASH PROVIDED BY DISCONTINUED OPERATIONS                                --               2,040
                                                                  --------            --------

(Decrease) in cash and cash equivalents                                 --              (1,699)
Cash and cash equivalents at beginning of period                        --               3,312
                                                                  --------            --------

Cash and cash equivalents at end of period                        $     --            $  1,613
                                                                  ========            ========
</TABLE>



Supplemental disclosures of non-cash investing and financing activities:

     o    The Company received a $3.8 million note receivable from Express-Med,
          Inc. in the sale of the Home Service Medical business, to be paid
          unevenly over 42 months through March 1, 2004. The Company has
          recorded the note on its December 29, 2000, balance sheet, offset by
          the deferred gain of the same amount.



                                       6


<PAGE>   8



                                 CHRONIMED INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE A--BASIS OF PRESENTATION

       The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the quarter ended
December 29, 2000, are not necessarily indicative of the results that may be
expected for the year ending June 29, 2001. For further information, refer to
the financial statements and footnotes thereto for the year ended June 30, 2000.

       The balance sheet at June 30, 2000, has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

       The Company uses a four-week, four-week, five-week (4-4-5) quarterly
accounting cycle with the fiscal year ending on the Friday closest to June 30
and the fiscal quarters ending on the Friday closest to the last day of the
respective month.

        On October 10, 2000, Chronimed announced that it was engaged in
negotiations to sell its MEDgenesis subsidiary while continuing to pursue a
spin-off of the business. On December 1, 2000, Chronimed entered into an Asset
Purchase Agreement with Medisys PLC with the intent to sell its Diagnostic
Products subsidiary. The Company completed the sale of MEDgenesis, its
Diagnostic Products subsidiary, to Medisys PLC on January 5, 2001. Until the
date of the sale, Chronimed must classify MEDgenesis as "discontinued
operations" for financial reporting purposes. As a result, all financial results
concerning MEDgenesis Inc., other than those classified as discontinued
operations, have been removed from this Form 10-Q leaving only the continuing
operations of Chronimed Inc.

NOTE B--INVENTORIES

       Inventories consist primarily of goods held for resale and are carried at
the lower of cost or market determined under the average cost method.



                                       7


<PAGE>   9


NOTE C--PER SHARE DATA

     Basic net income per share is based on the weighted-average number of
shares of common stock outstanding during the year. Diluted net income per share
is based on the weighted-average number of shares of common stock and dilutive
common stock equivalents outstanding during the year. Common stock equivalents
consist of options outstanding to purchase shares of the Company's common stock.
The following table sets forth the computation of basic and diluted net income
per share.


$s and Shares in Thousands

<TABLE>
<CAPTION>
                                                 QUARTER ENDED               SIX MONTHS ENDED
                                          ---------------------------  ----------------------------
                                          DECEMBER 29,   DECEMBER 31,   DECEMBER 29,   DECEMBER 31,
                                              2000           1999           2000          1999
                                          ------------  -------------  -------------  -------------
                                         (As restated)  (As restated)  (As restated)  (As restated)
<S>                                      <C>            <C>            <C>            <C>
Numerator for basic and diluted net
   income per share - net income (loss)
         Continuing operations              $  (313)       $   361       $ (1,017)       $  (251)
         Discontinued operations              1,081            647          1,545          1,083
                                            -------        -------       --------        -------
         Net Income                         $   768        $ 1,008       $    528        $   832
                                            =======        =======       ========        =======

Denominator for basic net income
    per share--weighted-average shares       12,155         12,095         12,151         12,093
Effect of dilutive securities:
    Employee stock options                                      11                            --
                                            -------        -------       --------        -------
Denominator for diluted net income
    per share--weighted-average shares
    and assumed conversions                  12,155         12,106         12,151         12,093
                                            =======        =======       ========        =======

Basic net income (loss) per share:
       Continuing operations                $ (0.03)       $  0.03       $  (0.08)       $ (0.02)
       Discontinued operations                 0.09           0.05           0.12           0.09
                                            -------        -------       --------        -------
       Basic net income (loss) per share    $  0.06        $  0.08       $   0.04        $  0.07
                                            =======        =======       ========        =======

Diluted net income (loss) per share:
       Continuing operations                $ (0.03)       $  0.03       $  (0.08)       $ (0.02)
       Discontinued operations                 0.09           0.05           0.12           0.09
                                            -------        -------       --------        -------
       Diluted net income  (loss) per share $  0.06        $  0.08       $   0.04        $  0.07
                                            =======        =======       ========        =======
</TABLE>




     Options to purchase 1,677,216 and 2,009,966 shares of common stock at
various prices were outstanding as of the second quarter ended December 29,
2000, and year-to-date, respectively, and were excluded from the above
computation of diluted net income per share. The exercise prices of these
options were greater than the average market price of the common shares and,
therefore, the effect would be antidilutive.



                                       8



<PAGE>   10


NOTE D--BUSINESS SEGMENT INFORMATION

     The Company has two reportable segments. The Mail Order segment includes
the results of the Company's Injectables, Organ Transplant, and Home Service
Medical businesses. The Home Service Medical business was sold to Express-Med,
Inc. on September 1, 2000. The Retail segment includes the Company's HIV/AIDS
StatScript Pharmacy, as well as the Clinical Partners' Strategic Services line
and the Clinical Partners' case management line which was written off in the
quarter ended December 31, 1999. The table below presents information by
reportable segment.


<TABLE>
<CAPTION>
                                               Mail Order           Retail               Total
                                               ----------          ----------          ----------
<S>                                            <C>                 <C>                 <C>
For the Quarter Ended 12/29/2000
            Revenues                            $ 39,630            $ 29,464            $ 69,094
            Income (Loss) from Operations       $    720            $ (1,339)           $   (619)
For the Quarter Ended 12/31/1999
            Revenues                            $ 32,150            $ 25,282            $ 57,432
            Income from Operations              $    499            $    534            $  1,033


For the Six Months Ended 12/29/2000
            Revenues                            $ 74,469            $ 57,469            $131,938
            Income (Loss) from Operations       $    164            $ (2,433)           $ (2,269)
For the Six Months Ended 12/31/1999
            Revenues                            $ 58,983            $ 48,500            $107,483
            Income from Operations              $    339            $    361            $    700
</TABLE>




        The difference between segment totals and the Company's consolidated
totals consists of over/under allocated corporate general and administrative
expenses and other non-operating items, both of which are not allocated to the
segments. The following table is a reconciliation of reportable segment income
to the Company's consolidated totals.



<TABLE>
<CAPTION>
                                     Second Quarter Ended                   Six Months Ended
                                  ---------------------------          ---------------------------
                                  Dec 29, 2000   Dec 31, 1999          Dec 29, 2000   Dec 31, 1999
                                  -----------    ------------          ------------   ------------
<S>                               <C>            <C>                   <C>            <C>
Total Consolidated Revenue:         $ 69,094        $ 57,432             $ 131,938      $ 107,483
Income from Operations:
Total for reportable segments       $   (619)       $  1,033             $  (2,269)     $     700
Unallocated amounts:
 -  Corporate G&A                         95            (381)                  592         (1,029)
 -  Interest income                      133              20                   183             20
 -  Interest (expense)                   (32)            (79)                  (80)          (102)
 -  Other income (expense)                (9)             --                    12             --

                                    --------        --------             ---------      ---------
Income before income taxes          $   (432)       $    593             $  (1,562)     $    (411)
                                    ========        ========             =========      =========
</TABLE>



                                       9


<PAGE>   11


        A change in segment assets occurred since June 30, 2000 with the sale of
the Home Service Medical business to Express-Med, Inc. on September 1, 2000. The
approximate net book value of the Home Service Medical business was $3.0 million
as of June 30, 2000. The assets of the Home Service Medical business are
included in the Mail Order segment. The following table presents assets by
reportable segment.

<TABLE>
<CAPTION>
                                          Mail Order    Retail     Corporate     Total
                                          ----------    -------    ---------    -------
<S>                                       <C>           <C>        <C>          <C>
As of  12/29/2000
            Segment Assets                  $35,814     $28,191      $8,342     $72,347
As of 6/30/2000
            Segment Assets                  $33,575     $27,818      $6,572     $67,965
</TABLE>


NOTE E--DISCONTINUED OPERATIONS

        On October 10, 2000, Chronimed announced that it was engaged in
negotiations to sell its MEDgenesis subsidiary while continuing to pursue a
spin-off of the business. On December 1, 2000, Chronimed entered into an Asset
Purchase Agreement with Medisys PLC with the intent to sell its Diagnostic
Products subsidiary. The Company completed the sale of MEDgenesis, its
Diagnostic Products subsidiary, to Medisys PLC on January 5, 2001. Until the
date of the sale, Chronimed must classify MEDgenesis as "discontinued
operations" for financial reporting purposes. As a result, all financial results
concerning MEDgenesis Inc., other than those classified as discontinued
operations, have been removed from this Form 10-Q leaving only the continuing
operations of Chronimed Inc.

        On September 1, 2000, MEDgenesis paid a license transfer fee of $475,000
to Hypoguard Limited, a UK-based medical device company, which is a subsidiary
of Medisys PLC. The license transfer fee allowed MEDgenesis to continue selling
certain diabetes strips upon completion of its proposed spin off or sale based
on technology developed by Hypoguard Limited. The license transfer fee has been
included in the results of discontinued operations. The license transfer fee was
paid in consideration of Hypoguard's consent to Chronimed's assignment of a
technology license to MEDgenesis in connection with the establishment of
MEDgenesis as a wholly-owned subsidiary of Chronimed.

        The discontinued operations represented by MEDgenesis contributed net
income after tax of $1.1 million or nine cents per share in the second quarter
and $1.5 million or twelve cents per share for the six months ended December 29,
2000. This compares to net income after tax of $647,000 or five cents per share
in last year's second quarter and $1.1 million or nine cents per share for the
six months ended December 31, 1999. Revenue for MEDgenesis was $9.8 million, up
12 percent from last year's second quarter of $8.8 million. Revenue for the six
months ended December 29, 2000 was $18.9 million, up 12 percent from $16.8
million for the six months ended December 31, 1999.



                                       10

<PAGE>   12


NOTE F--SALE OF HOME SERVICE MEDICAL BUSINESS

        Chronimed sold its Home Service Medical ("HSM") subsidiary on September
1, 2000, to Express-Med, Inc. of New Albany, Ohio for $6.5 million. HSM is a
direct to consumer, mail-order catalog business that contributed $14.9 million
in revenue to Chronimed's total results for the fiscal year ended June 30, 2000.
The Company received $2.7 million in cash ($3.0 million at close less a $300,000
working capital adjustment paid to the buyer on December 1, 2000) and a $3.8
million subordinated note maturing in 42 months and bearing an annual interest
rate of 11%.

        Chronimed deferred the $3.8 million gain on the sale of HSM in
accordance with the SEC Staff Accounting Bulletin No. 81, "Gain Recognition on
the Sale of a Business or Operating Assets to a Highly Leveraged Entity." The
gain will be deferred until principal payments under the promissory note are
received. Principal payments on the note are due as follows: $1.0 million on
September 1, 2002; $1.0 million on September 1, 2003; and $1.8 million on March
1, 2004. The Company recorded the $3.8 million deferred gain on the balance
sheet as a deduction to notes receivable.

        Based on the terms of the HSM asset purchase agreement, Express-Med,
Inc. will pay quarterly installments of accrued interest beginning March 1,
2001, and annual $1 million installments of principal beginning September 1,
2002. The entire outstanding balance of principal and interest becomes due on
March 1, 2004. Given that there is no guarantee that Express-Med will be able to
repay the note and the long-term nature of the note, as stated above, Chronimed
will defer recognition of the gain on its income statement until the cash is
collected or deemed to be fully collectible. Chronimed believes that
Express-Med, Inc. will be able to fund the interest payments and therefore, the
Company will accrue the interest receivable monthly as earned.

NOTE G--SIGNIFICANT CONCENTRATIONS

        Within the Mail Order segment, a major payor with whom Chronimed has a
contract (represented as two major payors that merged into one during calendar
year 1999) represented 39% of the Company's revenue in the second quarter of
fiscal 2001 and 36% for the six months ended December 29, 2000. This compares to
26% in the second quarter of fiscal 2000 and 25% for the six months ended
December 31, 1999.

NOTE H--SUBSEQUENT EVENTS

        On January 5, 2001, Chronimed completed the sale of its Diagnostic
Products subsidiary, MEDgenesis, to Medisys PLC of Woodbridge, Suffolk, England
for $39.975 million. The $39.975 million received from the sale was comprised of
$30.475 million in cash and $9.500 million in Medisys PLC common stock. The sale
price is subject to certain adjustments based on the closing date balance sheet
under the provision of the Asset Purchase Agreement. Refer to the Form 8-K filed
with the SEC, dated January 5, 2001, that reports the sale and provides pro
forma financial statements.


                                       11

<PAGE>   13



        On February 2, 2001, Chronimed acquired the retail operations of
American Prescription Providers, Inc. ("APP"), a provider of specialty
pharmaceutical products for people with chronic conditions such as HIV/AIDS and
organ transplant. Chronimed paid cash for substantially all of the assets,
excluding accounts receivable. A Form 8-K will be filed with the SEC on or
before February 17, 2001.

NOTE I--RESTATEMENT

The Company's financial statements for the fiscal year ended June 30, 2000 and
for the first three quarters of the fiscal year ended June 29, 2001 have been
restated. The restatement reflects a reduction in revenues, an increase in bad
debt expense, and an increase in allowance for doubtful accounts. These
adjustments are limited to the Company's Retail segment. The changes to the
financial statements resulting from the restatement are described below.

CONTINUING OPERATIONS

    REVENUE

    In the fourth quarter of fiscal 2001, management determined that software
    system and process errors in its Retail segment resulted in the
    overstatement of revenue. Following the implementation of new software
    systems in early fiscal 2000, certain transactions that had been canceled or
    rejected at the pharmacy level were transferred from the pharmacy operating
    system, without adjustment, to the Retail revenue accounting system,
    effectively resulting in a duplicate revenue entry. As a result, revenue was
    overstated in the Company's accounting records. The overstatement of revenue
    caused by these errors totaled $3,390,000 in fiscal 2000 ($827,000,
    $914,000, $979,000 and $670,000 for the first, second, third and fourth
    quarters, respectively) and $2,595,000 in fiscal 2001 ($815,000, $1,030,000
    and $750,000 for the first, second and third quarters, respectively). The
    Company has taken steps to correct its systems and processes to prevent
    duplicate revenue entries.

    In addition, management identified a large uncontracted payor in the
    Company's Retail segment that began paying claims in fiscal 2001 using a
    significantly lower rate schedule than the payor had previously used. As a
    result, the Company's traditional methods of estimating the revenue
    allowance for payor discounts did not accurately account for the significant
    reduction in reimbursement. The resulting overstatement of revenue in the
    first three fiscal quarters of fiscal 2001 totaled $1,918,000 ($760,000,
    $556,000 and $602,000 for the first, second and third quarters,
    respectively). The Company has taken to improve its methods for determining
    the revenue allowance for payor discounts.

    BAD DEBT EXPENSE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

    During fiscal 2001, management learned that personnel at the Company's
    Retail segment had fallen behind in posting cash receipts to customer
    accounts receivable records and were preparing aging reports that contained
    significant inaccuracies, which prevented timely and accurate monitoring of
    accounts receivable. Management determined that these inaccurate aging
    reports they had relied upon to estimate the allowance for doubtful accounts
    receivable at



                                       12

<PAGE>   14



    June 30, 2000 and the first three quarters of fiscal 2001 had caused them to
    underestimate the amount of the allowance at those dates. As a result,
    management has reassessed its estimate for doubtful accounts receivable and
    increased the allowance at June 30, 2000 and at the end of each of the first
    three quarters of fiscal 2001. The allowance for doubtful accounts and
    related bad debt expense was increased by $4,200,000 at June 30, 2000, and
    $989,000, $603,000 and $902,000 at the end of each of the first, second and
    third quarters, respectively, of fiscal 2001. The Company has taken steps to
    ensure the accuracy of the information on which it will base future
    estimates of doubtful accounts.

As a result, the fiscal 2000 financial statements, the 2000 and 2001 quarterly
results of operations, and related disclosures included in this Quarterly Report
have been restated to reflect the restatement of revenue, bad debt expense, and
accounts receivable. The effect of restatement on the quarters and six-month
periods ended December 29, 2000 and December 31, 1999 is shown in the table
below:

<TABLE>
<CAPTION>
                                                             QUARTER ENDED                      SIX MONTHS ENDED
                                                     ------------------------------      -------------------------------
                                                     DECEMBER 29,      DECEMBER 31,      DECEMBER 29,      DECEMBER 31,
                                                        2000               1999              2000              1999
                                                     ------------      ------------      ------------      ------------
<S>                                                  <C>               <C>               <C>               <C>
 Net income from continuing operations,                $ 1,022            $  919           $  1,883           $   811
  as previously reported
 Impact of restatement for:
 Revenue overstatement                                    (967)             (558)            (1,928)           (1,062)
 Allowance for doubtful accounts                          (368)               --               (972)               --
                                                       -------            ------           --------           -------
 Net (loss) income from continuing operations,
  as restated                                          $  (313)           $  361           $ (1,017)          $  (251)
                                                       =======            ======           ========           =======
</TABLE>


As a result of the foregoing accounting adjustments, the Company's fiscal 2000
and 2001 condensed consolidated financial statements have been restated from the
amounts previously reported. The principal effects of these adjustments on the
accompanying financial statements are set forth below:



                                       13



<PAGE>   15


STATEMENTS OF INCOME - RESTATEMENTS

<TABLE>
<CAPTION>
                                                          QUARTER ENDED                            QUARTER ENDED
                                                        DECEMBER 29, 2000                         DECEMBER 31, 1999
                                                ---------------------------------         ---------------------------------
                                                 AS PREVIOUSLY                            AS PREVIOUSLY
                                                    REPORTED          AS RESTATED            REPORTED           AS RESTATED
                                                 -------------        -----------         -------------         -----------
<S>                                              <C>                  <C>                 <C>                   <C>
Revenue                                              $ 70,680           $ 69,094              $ 58,346           $ 57,432
Gross profit                                            9,935              8,349                11,320             10,406
Income (loss) before income taxes                       1,757               (432)                1,507                593
Income tax (expense) benefit                             (735)               119                  (588)              (232)
Net income (loss) from continuing                    $  1,022           $   (313)             $    919           $    361
 operations
Net income                                           $  2,103           $    768              $  1,566           $  1,008

Basic and diluted earnings per share
Net income (loss) from continuing operations         $   0.08           $  (0.03)             $   0.08           $   0.03
Net income                                           $   0.17           $   0.06              $   0.13           $   0.08

</TABLE>


<TABLE>
<CAPTION>
                                                          SIX MONTHS ENDED                        SIX MONTHS ENDED
                                                          DECEMBER 29, 2000                       DECEMBER 31, 1999
                                                 --------------------------------         ---------------------------------
                                                 AS PREVIOUSLY                            AS PREVIOUSLY
                                                    REPORTED          AS RESTATED            REPORTED           AS RESTATED
                                                 -------------        -----------         -------------         -----------
<S>                                              <C>                  <C>                 <C>                   <C>
Revenue                                              $135,099           $131,938              $109,224           $107,483
Gross profit                                           19,658             16,497                20,235             18,494
Income (loss) before income taxes                       3,191             (1,562)                1,330               (411)
Income tax (expense) benefit                           (1,308)               545                  (519)               160
Net income (loss) from continuing operations         $  1,883           $ (1,017)             $    811           $   (251)
Net income (loss)                                    $  3,428           $    528              $  1,894           $    832

Basic and diluted earnings per share
Net income (loss) from continuing operations         $   0.15           $  (0.08)             $   0.07           $  (0.02)
Net income                                           $   0.28           $   0.04              $   0.16           $   0.07
</TABLE>



BALANCE SHEETS - RESTATEMENTS

<TABLE>
<CAPTION>
                                                      AS OF DECEMBER 29, 2000                    AS OF JUNE 30, 2000
                                                ---------------------------------        ----------------------------------
                                                 AS PREVIOUSLY                            AS PREVIOUSLY
                                                    REPORTED          AS RESTATED            REPORTED           AS RESTATED
                                                 -------------        -----------         -------------         -----------
<S>                                              <C>                  <C>                 <C>                   <C>
Accounts receivable, net                             $ 51,711           $ 39,367              $ 47,352           $ 39,762
Income taxes receivable                                   906              4,667                   774              1,901
Deferred tax assets                                     1,819              2,871                 1,819              3,652
Total assets                                           91,321             83,790                83,060             78,430
Retained earnings                                      17,700             10,169                14,271              9,641
Total shareholders' equity                             70,853             63,322                67,687             63,057
</TABLE>



                                       14


<PAGE>   16


PART I.  FINANCIAL INFORMATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

        Chronimed Inc. ("Chronimed" or the "Company") is a disease-focused
company excelling in specialty pharmacy distribution for people with chronic
health conditions. The Company distributes pharmaceuticals and provides
specialized patient management services nationwide for people with long-term
chronic conditions such as organ transplants, HIV/AIDS, and diseases treated
with biotech injectable medications. Chronimed works directly with patients,
providers, insurance companies, health maintenance organizations, preferred
provider organizations, government agencies and other third party payors
("payors") to improve clinical and cost-of-care outcomes. The Company was
founded in 1985 as a Minnesota corporation and has been publicly traded on
Nasdaq since 1992.

        The Company distributes its pharmaceuticals and ancillary products by
mail and through its StatScript retail pharmacy chain. The patient populations
for which the Company's services are most effective include persons who:

     o    Have illnesses that generally occur in less than one percent of the
          nation's population;

     o    Require high-cost, complex medications, the majority of which must be
          taken for the rest of the patient's life and are not always available
          through traditional retail pharmacies;

     o    Require treatment by healthcare specialists; and

     o    Require a significant amount of self-management and ongoing education
          (where patient compliance is critical for improving clinical and
          financial outcomes).

        By focusing on select chronic conditions, the Company is able to improve
the quality of care for those people affected by these uncommon diseases. In
addition, the expertise Chronimed has developed makes it a valuable partner for
institutions, foundations and healthcare providers working with patients
afflicted with these chronic conditions. Chronimed also believes the payors that
pay a large portion of related healthcare costs do business with Chronimed as a
result of the Company's ability to improve care while minimizing overall
expenditures. Finally, Chronimed has spent many years establishing relationships
with the developers and manufacturers of prescription drugs and other products
needed to manage chronic conditions. The Company currently works directly with
all of these constituents in a concerted effort to improve clinical and
cost-of-care outcomes - and enhance the quality of life for the chronically ill.

        Chronimed provides patients with a convenient, competitively priced
source of prescription drugs, counseling support, and a variety of educational
materials to help patients achieve maximum control over their chronic
conditions. Often, the greater the effort a patient makes to stabilize or
control his or her disease, the lower the incidence of complications and the
better the patient's quality of life. The Company believes that by educating
patients and increasing patient compliance, as well as provider support and
intervention, clinical outcomes can be improved, and long-term costs of care
reduced.


                                       15


<PAGE>   17



        Chronimed obtains patients primarily through referrals from healthcare
providers, direct patient contacts, and contracts with insurers and managed care
organizations. According to Medical Economics (April 10, 2000), an estimated 90%
of privately insured workers in the United States were enrolled in some type of
managed care program during 1999, up from 52% in 1993.

        The specialty pharmacy industry was developed principally in response to
the demand from employers and payors for more effective control of patient care
and cost increases in certain unusual chronic illnesses. As employers attempt to
control their escalating healthcare costs, they seek out providers who have
adopted various specialized managed care techniques. The increasing majority of
patient referrals come from contracts with payors and the government as a result
of the increased role of managed care and the Company's experience in managing
specific patient groups.

        The Company has also developed relationships with treatment centers,
foundations and medical associations that specialize in the treatment or support
of patients with chronic conditions. These relationships provide the Company
with access to a large number of individuals with chronic conditions and to the
healthcare specialists treating these conditions.

        Chronimed believes that its business model is well suited to support
developers and manufacturers of pharmaceutical products who are targeting small
or hard-to-identify patient populations. Chronimed provides these companies with
assistance in the rapid introduction of their products, a cost-effective means
for distributing these medications to specific patient populations, and a method
for monitoring product use and compliance.


RESTATEMENT

        The Company's financial statements for the fiscal year ended June 30,
2000 and for the first three quarters of the fiscal year ended June 29, 2001
have been restated. The restatement reflects a reduction in revenues, an
increase in bad debt expense, and an increase in allowance for doubtful
accounts. These adjustments are limited to the Company's Retail segment. See
Note I to the Company's condensed consolidated financial statements.


DISCONTINUED OPERATIONS

        On October 10, 2000 Chronimed announced that it was engaged in
negotiations to sell its MEDgenesis subsidiary while continuing to pursue a
spin-off of the business. On December 1, 2000, Chronimed entered into an Asset
Purchase Agreement with Medisys PLC and completed the sale on January 5, 2001.
The Diagnostic Business had been operated by Chronimed's wholly-owned
subsidiary, MEDgenesis Inc., since July 1, 2000. Until the date of sale, January
5, 2001, Chronimed must classify MEDgenesis as "discontinued operations" for
financial reporting purposes.



                                       16


<PAGE>   18


CONTINUING OPERATIONS

REVENUES

        Chronimed is comprised of two operating segments, Mail Order and Retail,
reflecting the business and how it is managed and resourced. The Mail Order
segment currently includes the Biotech Injectables program and Organ Transplant
Pharmacy, and prior to September 1, 2000, also included Home Service Medical
(HSM). (Chronimed sold the Home Service Medical business on September 1, 2000.
See Note F of Notes to Consolidated Statements). The Retail segment includes the
Company's HIV/AIDS StatScript Pharmacy, as well as the Clinical Partners'
Strategic Services line and the Clinical Partners' case management line which
was written off in the quarter ended December 31, 1999.

     Total revenue increased 20%, from $57.4 million to $69.1 million, for the
second quarter ended December 31, 1999, and December 29, 2000, respectively. For
the six months ended December 31, 1999, and December 29, 2000, total revenue
increased 23% from $107.5 million to $131.9 million. The contribution each
segment made to total revenue is discussed below.

     Mail Order segment revenue grew $7.5 million and 23% over last year's
second quarter, from $32.2 million to $39.6 million. Year to date revenue grew
$15.5 million and 26% from $59.0 million to $74.5 million for the six months
ended December 31, 1999, and December 29, 2000, respectively. The growth was
primarily from the addition of new patients from the Biotech Injectables
contract with Aetna that became effective July 15, 2000. The Mail Order growth
was partially offset by the sale of the Home Service Medical business during the
first quarter of fiscal year 2001. HSM revenue was $5.3 million for the second
quarter ended December 31, 1999, with no HSM revenue for the second quarter
ended December 29, 2000. Revenue from the HSM business decreased $6.6 million
from $8.8 million to $2.2 million for the six months ended December 31, 1999,
and December 29, 2000, respectively.

     Retail segment revenue grew $4.2 million and 17% over last year's second
quarter, from $25.3 million to $29.5 million. Year to date revenue grew $9.0
million from $48.5 million to $57.5 million for the six months ended December
31, 1999, and December 29, 2000, respectively. The StatScript retail operations
grew $4.8 million and 19% in revenue over last year's second quarter. The
StatScript Pharmacy grew $9.9 million and 21% in revenue in the six months ended
December 29, 2000, compared to the first six months of fiscal 2000 despite last
year's slowdown in store openings. The slowed store growth was due to the
Company's fiscal 2000 focus on exploring strategic alternatives. Existing stores
contributed 74% of the revenue growth for the six months ended December 29,
2001, compared to 38% of the growth for the six months ended December 31, 1999.
New stores contributed 25% of the revenue growth for the six months ended
December 29, 2000, compared to 62% of the growth for the six months ended
December 31, 1999. StatScript's growth was partially offset by a $600,000
decline over last year's second quarter revenue due to the fiscal 2000 exit from
the Clinical Partners case management line. Revenue from Clinical Partners
business decreased $900,000 in the six months ended December 29, 2000, compared
to the same period in the prior year.



                                       17

<PAGE>   19


     The Company expects revenue for the year to be approximately $285 million.
This would represent 35 percent revenue growth in fiscal 2001 against an
adjusted fiscal 2000 revenue stream of $211 million (both years having been
adjusted for the September 2000 sale of the Home Service Medical business). The
Company's ability to maintain and add contracts and acquire new patients in its
Mail Order business is important to this projection. The Company's expectation
to open four or more retail pharmacies this year, including the addition of the
American Prescription Providers, Inc. retail pharmacy business just acquired on
February 2, 2001, resulting in at least 36 pharmacies by fiscal 2001 year-end,
is also important to this projection. The Company believes that its supplier
inputs and pharmacy fulfillment rates are stable and sustainable but may be
subject to unforeseen shortfalls. The Company cautions readers that this and
other paragraphs in the Management's Discussion section include "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 and that actual results may differ materially from projections. Readers
should review the Outlook section in this Form 10-Q for further information.

GROSS PROFIT

     Gross profit dollars for the second quarter decreased $2.1 million or 20%,
from $10.4 million last year to $8.3 million this year. Year to date gross
profit dollars decreased $2.0 million or 11%, from $18.5 million last year to
$16.5 million this year. The sale of the HSM business reduced margin dollars
$1.6 million in the second quarter ended December 29, 2000, and $2.2 million for
the six months ended December 29, 2000, compared to the same periods in the
prior year. The additional $500,000 decrease in gross profit dollars in the
second quarter was primarily the result of significant reimbursement pressure in
the StatScript retail segment. The additional $200,000 increase in gross profit
dollars in the six-month period was due to increased margin dollars in the Mail
Order business resulting from higher revenues.

     Second quarter gross profit percentage decreased from 18.1% last year to
12.1% this year. Year to date gross profit percentage decreased from 17.2% to
12.5% for the six months ended December 31, 1999, and December 29, 2000,
respectively. Approximately 1.2 percentage points of the gross profit decline
was due to the sale of HSM and its higher gross profit percentage relative to
the rest of the business. The remaining decrease in gross profit percentage was
due to reduced margins in both the Mail Order and Retail businesses. The Company
is experiencing ongoing pressure from payors, including HMOs, insurance
companies, and the government, to provide products and services at lower
reimbursement rates. The Company expects continued margin pressure in both the
Mail Order and Retail businesses. In the Retail business in particular, the
Company has noticed a recent decline in reimbursement rates from a few
significant indemnity payors that has resulted in decreased gross margins.



                                       18

<PAGE>   20



SELLING AND MARKETING EXPENSES

     Overall selling and marketing expenses in the second quarter were down
approximately $390,000 and 37% compared to last year's second quarter, on
revenue growth of 20%. Year to date selling and marketing expenses were down
$480,000 and 21% compared to last year's first six months on overall revenue
growth of 23%. As a percentage of revenue, selling and marketing expenses
dropped from 1.8% in last year's second quarter to 1.0% in this year's second
quarter. The percentage dropped from 2.1% in last year's first six months to
1.3% in this year's first six months. Selling and marketing expenses decreased
as a result of the Home Service Medical sale in the first quarter of fiscal year
2001 and the discontinuance of the Clinical Partners contract/case management
line in the third quarter of fiscal 2000. The decrease totaled $500,000 for the
fiscal 2001 second quarter compared to last year's second quarter, and $700,000
for the six months ended December 29, 2000, compared to the same period in the
prior year. This decrease was partially offset by expanded selling efforts in
the Mail Order segment of approximately $100,000 in second quarter and $175,000
for the six months ended December 29, 2000, compared to the same periods in the
prior year.

GENERAL AND ADMINISTRATIVE AND BAD DEBT EXPENSES

     Combined general and administrative (G&A) and bad debt expenses for the
second quarter totaled $8.2 million, down $500,000 from $8.7 million last year.
As a percentage of revenue, combined G&A and bad debt expenses decreased from
15.1% last year to 11.9% this year. Year to date expenses were down $200,000
from $16.6 million to $16.4 million for the six months ended December 31, 1999,
and December 29, 2000, respectively. As a percentage of revenue, year to date
G&A expenses decreased from 15.4% last year to 12.4% this year. Combined G&A and
bad debt expenses decreased for several reasons. First, Chronimed incurred
$470,000 of costs related to the Company's pursuit of strategic alternatives in
the second quarter of fiscal 2000 and $880,000 for the six months ended December
31, 1999. The Company incurred no such related costs for the six months ended
December 29, 2000. When Chronimed announced its intention to spin off its
Diagnostic Products business in the third quarter of fiscal 2000, it also
announced the discontinuance of its exploration of strategic alternatives with
an investment banker. Second, G&A costs decreased approximately $400,000 within
the Clinical Partners case management and strategic services lines in the Retail
segment in last year's second quarter and decreased $1.1 million for the six
months ended December 31, 2000. The Clinical Partners case management line was
written off and shut down in the third quarter of fiscal 2000. Third, the Home
Service Medical ("HSM") business within the Mail Order segment incurred $350,000
less in G&A expenses during this year's second quarter compared to the same
period last year. Year to date HSM G&A expenses were down $450,000 for the six
months ended December 29, 2000, compared to the six months ended December 31,
1999. Due to its sale September 1, 2000, the HSM business operated as a business
unit of Chronimed only two of the six months for the six months ended December
29, 2000. Fourth, bad debt expense did not change materially year over year. Bad
debt expense for the second quarter ended December 29, 2000, totaled $1.0
million or 1.5% of revenue, compared to $1.1 million, or 2.0% of revenue, in the
second quarter of fiscal year 2000. For the six months ended December 29, 2000,
bad debt expense totaled $2.1 million, or 1.6% of revenue, compared to $1.8
million, or 1.7% of revenue, for the six months ended December 31, 1999. These
higher than expected levels of bad debt expense in both years were primarily
the result of the Company's restatement (see Note I) and the related assessment
of the Company's allowance for doubtful accounts in the Retail segment.


                                       19


<PAGE>   21


     Offsetting the above noted net decrease in spending, absolute dollars spent
on segment G&A in the second quarter and six months ended December 29, 2000,
increased over last year both in the Mail Order segment and in the StatScript
business of the Retail segment. This increase is due to an increase in variable
expenses that have grown directly with revenue which was up 20% and 23% in the
respective second quarter and six-month period, including StatScript pharmacy
operations, customer service, billing and fulfillment.

INTEREST INCOME AND INTEREST EXPENSE

     Net interest income increased to $101,000 in the second quarter of fiscal
2001 with $133,000 of interest income and $32,000 of interest expense. In the
second quarter of fiscal 2000, net interest expense totaled $59,000 with $20,000
interest income and $79,000 of interest expense. Net interest income increased
from net interest expense of $82,000 in last year's first six months to net
interest income of $103,000 in this year's first six months. Interest income
increased in the second quarter and year to date fiscal 2001 compared to the
prior year primarily as a result of the interest from the $3.8 million note
receivable from the sale of the Home Service Medical business in the first
quarter of fiscal 2001.

INCOME TAXES

     The Company's income tax rate was approximately 28% for the second quarter
ended December 29, 2000, and 38% in the first quarter ended September 29, 2000,
resulting in a fiscal 2001 year to date rate of 35%. The income tax rate for the
same periods last year was 39%.

                                       20

<PAGE>   22



LIQUIDITY AND CAPITAL RESOURCES

     Net cash used in operating activities was $4.4 million for the six months
ended December 29, 2000. Receivables increased by $1.3 million, net of the sale
of HSM assets, due primarily to revenue growth. Inventory increased $2.9 million
due to revenue growth and the timing of large wholesaler purchases. Days on hand
inventory was at eleven days at June 30, 2000, and at ten days at December 29,
2000. Accounts payable and accrued expenses increased $2.2 million and other
assets increased $1.0 million due to timing of payments. Depreciation and
amortization totaled $1.8 million for the six months ended December 29, 2000.

     Net cash generated by investing activities was $1.3 million for the six
months ended December 29, 2000. The Company received $2.7 million in proceeds
from the sale of the Home Service Medical business in the first quarter of
fiscal 2001. Cash used in investing activities consisted of $170,000 for a small
pharmacy acquisition and $1.3 million for capital expenditures primarily for
leasehold improvements for StatScript pharmacies and information systems.

     Net cash provided by financing activities totaled $3.1 million for the six
months ended December 29, 2000. Financing activities provided cash in the amount
of $2.8 million from short-term borrowing on the line of credit and $300,000
from the issuance of common stock under employee stock option and purchase
programs.

     As of December 29, 2000 Chronimed had working capital of $36.1 million
compared to $36.4 million as of June 30, 2000. The Company expects working
capital requirements for accounts receivable and inventory to increase as
revenues increase. The Company's accounts receivable are generally with payors
for which the collection periods vary depending on the practices of the
individual payor and whether or not Chronimed has a contract with the payor. The
Company's inventory is purchased primarily from a large wholesaler, as well as
from specific manufacturers. Should the Company's purchasing mix shift more to
direct purchases from manufacturers, its inventory requirements could increase.
However, the Company believes that any increase in its inventory requirements
from manufacturers would likely be offset by extended payment terms, resulting
in a neutral to positive impact on cash flow.



                                       21

<PAGE>   23


     The Company sold its MEDgenesis subsidiary to Medisys PLC on January 5,
2001. The $39.975 million received from the sale consisted of $30.475 million in
cash and $9.5 million in Medisys common stock. The Company is in the process of
converting the stock to cash through regular sales with potential investment
gain or loss on the sale. The Company expects to ultimately net approximately
$25 million in after-tax proceeds from the sale of MEDgenesis. The Company plans
to use the proceeds to support its high-growth revenue plans, including working
capital expansion and potential acquisitions, including the just-announced
February 2, 2001, purchase of American Prescription Providers, Inc. retail
specialty pharmacies (see Note H). The Company has a discretionary line of
credit of $15 million and has no long-term debt. Shareholder's equity was $63.3
million at the end of this year's second quarter and $63.1 million at fiscal
2000 year-end.

GOVERNMENT REGULATION

        The Company's business is subject to substantial governmental regulation
including laws governing the dispensing of prescription drugs and laws
prohibiting the payment of remuneration for patient referrals. Because sanctions
may be imposed for violations of these laws, compliance is a significant
operational requirement for the Company. Management believes the Company is in
substantial compliance with all existing statutes and regulations materially
affecting the conduct of its business.

        Political, economic and regulatory influences are subjecting the
healthcare industry and prescription drug providers in the United States to
fundamental change. A variety of new approaches have been proposed, including
mandated basic healthcare benefits, controls on healthcare spending through
limitations on the growth of private health insurance premiums and Medicare and
Medicaid spending, and the creation of large purchasing groups. In addition,
some of the states in which the Company operates have adopted or are considering
various healthcare reform proposals. The Company anticipates that Congress and
state legislatures will continue to review and assess alternative healthcare
delivery systems and payment methods and that public debate of these issues will
likely continue in the future.

SEASONALITY

        The Company has experienced a significant seasonal pattern in its
operating results. Historically, the Company has had higher revenues in its
second fiscal quarter (ending December) than in its third fiscal quarter (ending
March). The Company believes the seasonality of its revenues and earnings comes
from the acceleration of purchases of prescription drugs and related medical
products by individuals with non-contracted indemnity insurance prior to the
beginning of a new calendar year (which is generally when payors impose new
deductible calculations). As the overall business grows, the Company expects the
seasonal pattern will soften and that third quarter revenues will be the same as
or higher than second quarter revenues. In addition, the sale of the Home
Service Medical business on September 1, 2000, will diminish the effects of
seasonality in the Mail Order segment due to HSM's high degree of seasonality.
In fiscal 2000, Home Service Medical's revenue was $3.4 million in the first
quarter, increased 55% to $5.3 million in the second quarter, and decreased 54%
to $2.4 million in the third quarter.


                                       22

<PAGE>   24



OUTLOOK

        Information contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations", other than historical or current
facts, should be considered forward looking statements as defined in the Private
Securities Litigation Reform Act of 1995. These statements reflect management's
current views of future events and financial performance that involve a number
of risks and uncertainties. Chronimed undertakes no obligation to update any
such statements to reflect later developments. Factors that could cause actual
results to differ include, but are not limited to, the following: changes in
economic conditions; general competitive factors; pressures on gross profit
margins in both the Mail Order and Retail segments; the Company's ability to
execute its sales and marketing plans; changes in the status of managed care
contracts, particularly but not limited to Aetna U.S. Healthcare; changes in
ownership; material litigation; and the risks described from time to time in the
Company's public reports filed with the SEC. Please see Exhibit 99 filed with
the Company's Form 10-K on September 27, 2000 for additional circumstances that
could cause actual results to differ from forecasts. Investors are specifically
referred to such cautionary statements for discussion of factors that could
affect the Company's operations and forward-looking statements contained herein.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Investments as of June 30, 2000 and December 29, 2000, consisted of
equity securities of Cell Robotics International, Inc., with whom the Company
had a distribution and development agreement for the Lasette laser lancing
device. The Company considers any net unrealized gain or loss on these
investments to be temporary and reflects such gains or losses as a component of
shareholders' equity. The Cell Robotics securities became the property of
MEDgenesis Inc. effective July 1, 2000, in association with the establishment of
MEDgenesis as a wholly-owned subsidiary of Chronimed and, accordingly, are
included in net assets of discontinued operations.


                                       23

<PAGE>   25


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

        The Company is not involved in any reportable litigation. On December 8,
2000, the Company entered an agreement settling a patent infringement action
involving Bayer Corporation and the Company's discontinued operation,
MEDgenesis, Inc. The United States District Court, District of Minnesota,
entered an order approving the settlement and dismissing the action on December
26, 2000.

Item 4:  Submission of Matters to a Vote of Security Holders.

        Three matters were submitted to a vote at the Annual Meeting of
Shareholders held November 14, 2000, and reconvened December 8, 2000. The voting
results on the three matters considered at the meeting are stated below.

Matter 1: Election of Directors

        The director nominees described in the Company's Proxy Statement were
elected as follows:

<TABLE>
<CAPTION>
                                                                  For                  Withhold
                                                               ----------              --------
        <S>                                                    <C>                     <C>
        John Howell Bullion  Class III, three year term        10,316,857               845,905
        David R. Hubers      Class III, three year term        10,390,357               772,405
</TABLE>

        The term for director John H. Flittie expires at the 2001 Annual Meeting
of shareholders. The terms for directors Henry F. Blissenbach and Charles V.
Owens, Jr. expire at the Annual Meeting of shareholders to be held in 2002.

        Stuart A. Samuels and Thomas F. Heaney were appointed to the Board of
Directors by election of the sitting directors effective November 13, 2000, to
fill vacancies. The term for director Stuart A. Samuels expires at the 2001
Annual Meeting of shareholders. The term for Thomas F. Heaney expires at the
Annual Meeting of shareholders to be held in 2002.

Matter 2: Appointment of Independent Auditors

        The appointment of Ernst & Young LLP as Independent Auditors for the
2001 fiscal year was ratified as follows:

<TABLE>
<CAPTION>
               For           Against        Abstain       Broker Non-vote
            ----------       -------        -------       ---------------
            <S>              <C>            <C>           <C>
            10,857,068       246,464         59,240              0
</TABLE>


                                       24

<PAGE>   26



Matter 3: Approval of the Chronimed Inc. 2001 Stock Incentive Plan

        The 2001 Stock Incentive Plan deems available 760,296 un-issued shares
authorized under existing plans and designates 1,000,000 newly authorized shares
for grant issuance. The Chronimed Inc. 2001 Stock Incentive Plan was approved as
follows:

<TABLE>
<CAPTION>
               For           Against        Abstain       Broker Non-vote
            ---------       ---------       -------       ---------------
            <S>             <C>             <C>           <C>
            4,103,861       2,430,386        36,906          4,591,609
</TABLE>

Item 6.  Exhibits and Reports on Form 8-K

          a.)  Exhibits

               none

          b.)  Reports on Form 8-K

               The Company filed the following reports on Form 8-K during the
               second quarter ended December 29, 2000 and in the third quarter
               to the date of this report:

               Form 8-K dated November 14, 2000  Item 5.  Other Events
                      The Form 8-K provided historical income statements for
                      Chronimed's Home Service Medical Business. Chronimed sold
                      the Home Service Medical Business in the first quarter of
                      fiscal year 2001. The sale was not a material divestiture
                      requiring financial statement disclosure.

               Form 8-K dated December 18, 2000  Item 5.  Other Events
                      The Form 8-K reported that Chronimed had entered into an
                      Asset Purchase Agreement on December 1, 2000, with Medisys
                      PLC with the intent to sell the assets of its Diagnostic
                      Products subsidiary, MEDgenesis.

               Form 8-K dated January 5, 2001 Item 2. Acquisition or
                      Disposition of Assets The Form 8-K reported the completed
                      sale of Chronimed's Diagnostic Products subsidiary,
                      MEDgenesis, to Medisys PLC, and provided proforma
                      financial statements.

Note: Items 2, 3, and 5 required under Part II have been omitted since they are
not applicable or the answers are negative.


                                       25


<PAGE>   27







                                   SIGNATURES


Pursuant to the requirements 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.



                                      CHRONIMED INC.
                                      (REGISTRANT)

October 11, 2001                      By /s/ Henry F. Blissenbach
----------------                         ---------------------------------------
      Date                               Henry F. Blissenbach
                                         Chief Executive Officer and
                                         Chairman of the Board of Directors


October 11, 2001                         /s/ Gregory H. Keane
----------------                         ---------------------------------------
      Date                               Gregory H. Keane
                                         Vice President, Chief Financial Officer





                                       26