<PAGE>   1
================================================================================

                                  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 MARCH 30, 2001 or

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      FOR THE TRANSITION PERIOD FROM ______ TO ______

COMMISSION FILE NUMBER 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 - 12,314,910 shares outstanding as of
April 30, 2001



<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 nine months ended March 30,
2001 and March 31, 2000 for Chronimed Inc. ("Chronimed" or the "Company") (See
Note M). 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 fiscal 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 March 31, 2000, decrease revenue by
$979,000. For the quarter ended March 30, 2001, decrease revenue by $1.4
million. For the nine months ended March 31, 2000, decrease revenue by $2.7
million. For the nine months ended March 30, 2001, decrease revenue by $4.5
million.

     Bad Debt Expense--There was no restatement of bad debt expense for the
quarter or nine months ended March 31, 2000. For the quarter ended March 30,
2001, increase bad debt expense by $902,000. For the nine months ended March 30,
2001, increase bad debt expense by $2.5 million.

     Gain on Sale of Discontinued Operations--For the quarter and nine-months
ended March 30, 2001, increase the gain on sale of discontinued operations by
$938,000. There is no restatement effect during the fiscal year 2000.

     Net Income-- For the quarter ended March 31, 2000, decrease net income by
$598,000. For the quarter ended March 30, 2001, decrease net income by $436,000.
For the nine months ended March 31, 2000, decrease net income by $1.7 million.
For the nine months ended March 30, 2001, decrease net income by $3.3 million.

     Accounts Receivable--At June 30, 2000 reduce accounts receivable by $7.6
million. At March 31, 2001 reduce accounts receivable by $14.6 million.

     Income taxes receivable/payable--At June 30, 2000 increase income taxes
receivable by $1.1 million. At March 30, 2001 decrease income taxes payable by
$5.6 million.

     Deferred Tax Assets--At June 30, 2000 increase deferred tax assets by $1.8
million. At March 31, 2001 increase deferred tax assets by $1.1 million.

     The principal effects of the change on the accompanying financial
statements are presented in Note M 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

                                       1
<PAGE>   3
in its entirety each item of the Company's Form 10-Q for the quarterly periods
ended March 30, 2001, 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.





































                                       2
<PAGE>   4
                                      INDEX

                         CHRONIMED INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (as restated)

                  Consolidated Balance Sheets
                           March 30, 2001 (unaudited) and June 30, 2000

                  Consolidated Statements of Operations (unaudited) For the
                           three months ended March 30, 2001, and March 31,
                           2000; For the nine months ended March 30, 2001, and
                           March 31, 2000

                  Consolidated Statements of Cash Flows (unaudited) For the nine
                           months ended March 30, 2001, and March 31, 2000

                  Notes to Consolidated Financial Statements
                           March 30, 2001

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk


PART II.  OTHER INFORMATION

Items 1 - 5 required under Part II have been omitted since they are not
applicable or the answers are negative.

Item 6. Exhibits and Reports on Form 8-K

         a.)      Exhibits

                  10.1     Separation and Release Agreement effective January 5,
                           2001, between the Company and Maurice R. Taylor, II

                  10.2     Maurice R. Taylor, II, Promissory Note dated July 24,
                           2000

         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>
                                                                       MARCH 30,
                                                                          2001                JUNE 30,
                                                                      (UNAUDITED)               2000
                                                                 -------------------------------------------
                                                                     (As restated)           (As restated)
<S>                                                              <C>                      <C>
ASSETS
Current assets
  Cash and cash equivalents                                         $         9,662          $            -
  Available-for-sale securities                                               2,541                       -
  Accounts receivable (net of allowances of $13,169                          41,959                  39,762
      at March 30, 2001, and $8,459 at June 30, 2000)
  Income taxes receivable                                                         -                   1,901
  Inventory                                                                   6,661                   6,111
  Other current assets                                                        1,105                     848
  Deferred taxes                                                              2,363                   3,144
------------------------------------------------------------------------------------------------------------
    Total current assets                                                     64,291                  51,766

Property and equipment
  Property and equipment                                                     16,229                  14,889
  Allowance for depreciation                                                 (9,226)                 (8,338)
------------------------------------------------------------------------------------------------------------
                                                                              7,003                   6,551

Goodwill, net                                                                23,828                   9,031
Net assets of discontinued operations                                             -                  10,465
Deferred taxes                                                                  508                     508
Other assets                                                                    156                     109
------------------------------------------------------------------------------------------------------------
  Total assets                                                      $        95,786          $       78,430
============================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Accounts payable                                                  $        13,353          $       10,507
  Accrued expenses                                                            3,243                   2,366
  Income taxes payable                                                        3,215                       -
  Short-term debt                                                                 -                   2,500
------------------------------------------------------------------------------------------------------------
    Total current liabilities                                                19,811                  15,373

Shareholders' equity
  Preferred Stock                                                                 -                       -
  Common Stock, issued and outstanding shares--
    12,295 and 12,147, respectively                                             123                     121
  Additional paid-in capital                                                 54,687                  52,839
  Retained earnings                                                          23,451                   9,641
------------------------------------------------------------------------------------------------------------
                                                                             78,261                  62,601
  Accumulated other comprehensive income --
   Unrealized (loss) gain on available-for-sale securities                   (2,286)                    456
------------------------------------------------------------------------------------------------------------
    Total shareholders' equity                                               75,975                  63,057

------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                          $        95,786          $       78,430
============================================================================================================
</TABLE>

See notes to consolidated financial statements


                                       4
<PAGE>   6
                                 CHRONIMED INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                    QUARTER ENDED                        NINE MONTHS ENDED
                                                       --------------------------------------  -------------------------------------
                                                             MARCH 30,           MARCH 31,          MARCH 30,           MARCH 31,
                                                               2001                2000               2001                2000
                                                       ------------------- ------------------  ------------------  -----------------
                                                           (As restated)      (As restated)      (As restated)      (As restated)
<S>                                                    <C>                 <C>                 <C>                 <C>
REVENUES
  Mail Order                                              $    39,422         $    29,386        $   113,891         $     88,369
  Retail                                                       38,569              27,231             96,038               75,731
------------------------------------------------------------------------------------------------------------------------------------
    Total Revenue                                              77,991              56,617            209,929              164,100
            Yr to Yr Growth                                      37.8%               28.5%              27.9%                36.3%
COSTS AND EXPENSES
  Cost of revenues                                             68,863              47,463            184,304              136,452
    Gross profit                                                9,128               9,154             25,625               27,648
             % of Revenue                                        11.7%               16.2%              12.2%                16.8%

  Selling and marketing                                           700               1,127              2,472                3,380
  General and administrative                                    7,818               6,997             22,118               21,735
  Bad debt expense                                              1,314                 607              3,416                2,439
  Other expense - Clinical Partners write-off                       0               5,500                  0                5,500
------------------------------------------------------------------------------------------------------------------------------------
    Total operating expenses                                    9,832              14,231             28,006               33,054
             % of Revenue                                        12.6%               25.1%              13.3%                20.1%

(LOSS) FROM OPERATIONS                                           (704)             (5,077)            (2,381)              (5,406)
             % of Revenue                                        -0.9%               -9.0%              -1.1%                -3.3%

  Interest income                                                 289                   8                472                   28
  Interest (expense)                                              (11)                (51)               (91)                (153)
  Other (expense)                                                (250)                  -               (238)                   -
------------------------------------------------------------------------------------------------------------------------------------

(LOSS) BEFORE INCOME TAXES                                       (676)             (5,120)            (2,238)              (5,531)
  Income tax benefit                                              265               1,996                810                2,156

(LOSS) FROM CONTINUING OPERATIONS                                (411)             (3,124)            (1,428)              (3,375)
             % of Revenue                                        -0.5%               -5.5%              -0.7%                -2.1%

DISCONTINUED OPERATIONS
(Loss) Income from Discontinued Operations, net of tax            (83)                635              1,462                1,718
Gain on sale of Discontinued Operations, net of tax            13,776                   -             13,776                    -
------------------------------------------------------------------------------------------------------------------------------------

NET INCOME (LOSS)                                         $    13,282         $    (2,489)       $    13,810             $ (1,657)
====================================================================================================================================
             % of Revenue                                        17.0%               -4.4%               6.6%                -1.0%


BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:
  (Loss) from Continuing Operations                             (0.03)              (0.26)             (0.12)               (0.28)
  Income/Gain from Discontinued Operations                       1.12                0.05               1.25                 0.14
------------------------------------------------------------------------------------------------------------------------------------
  Net Income (Loss) per share                             $      1.09         $     (0.21)       $      1.13              $ (0.14)
====================================================================================================================================

WEIGHTED AVERAGE SHARES OUTSTANDING--BASIC AND DILUTED         12,222              12,133             12,174               12,106

</TABLE>


See notes to consolidated financial statements.


                                       5
<PAGE>   7
                                 CHRONIMED INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                          NINE MONTHS ENDED
                                                                            ----------------------------------------------
                                                                               MARCH 30, 2001           MARCH 31, 2000
                                                                            ---------------------    ---------------------
                                                                               (As restated)            (As restated)
<S>                                                                         <C>                      <C>
OPERATING ACTIVITIES:
  Net income (loss)                                                                     $ 13,810                 $ (1,657)
  Less income/gain from discontinued operations                                           15,238                    1,718

    (Loss) from continuing operations                                                     (1,428)                  (3,375)

  Adjustments to reconcile income from continuing operations
    to net cash used in operating activities:
      Depreciation and amortization                                                        3,113                    3,229
      Deferred income taxes                                                                  781                        -
      Gain on sale of business                                                               (22)                       -
      Loss on sale of available-for-sale securities                                          260                        -
      Write-off of Clinical Partners contract management line                                  -                    5,500
      Changes in operating assets and liabilities:
        Accounts receivable                                                               (3,075)                  (8,397)
        Income taxes                                                                       5,116                   (3,457)
        Inventory                                                                             63                   (1,340)
        Accounts payable                                                                   2,846                   (1,435)
        Accrued expenses                                                                     730                      138
        Other assets                                                                        (521)                     656
--------------------------------------------------------------------------------------------------------------------------
      Net cash provided by (used in) operating activities                                  7,863                   (8,481)

INVESTING ACTIVITIES:
  Acquisitions                                                                           (17,194)                       -
  Proceeds from sale of Home Service Medical Business                                      2,734                        -
  Purchases of property and equipment                                                     (2,431)                  (1,002)
  Sale of available-for-sale securities                                                    4,413                        -
--------------------------------------------------------------------------------------------------------------------------
      Net cash (used in) investing activities                                            (12,478)                  (1,002)

FINANCING ACTIVITIES:
  Net proceeds from issuance of Common Stock                                                 913                      264
  Net (repayments) proceeds from borrowings                                               (2,500)                   4,200
--------------------------------------------------------------------------------------------------------------------------
      Net cash (used in) provided by financing activities                                 (1,587)                   4,464

CASH PROVIDED BY DISCONTINUED OPERATIONS                                                  15,864                    2,240
--------------------------------------------------------------------------------------------------------------------------

Increase (decrease) in cash and cash equivalents                                           9,662                   (2,779)
Cash and cash equivalents at beginning of period                                               -                    3,312
--------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of period                                               $ 9,662                    $ 533
==========================================================================================================================
</TABLE>


See notes to consolidated financial statements.




                                       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 March
30, 2001 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 Diagnostic Products subsidiary, MEDgenesis Inc., 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 on January 5,
2001, the Company completed the sale of MEDgenesis to Medisys. Chronimed has
classified MEDgenesis as "discontinued operations" for financial reporting
purposes. As a result, all financial results concerning MEDgenesis, 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

Earnings per share are calculated in accordance with SFAS No. 128, "Earnings Per
Share." Potential common shares are included in the diluted net income (loss)
calculation when dilutive. Potential common shares consisting of common stock
issuable upon exercise of outstanding common stock options are computed using
the treasury stock method. The Company's net income (loss) per share calculation
for basic and diluted is based on the weighted common shares outstanding. There
are no reconciling items in the numerator or denominator of the Company's net
income (loss) per share calculation. Employee stock options have been excluded
from the net income (loss) per share calculation because their effect would be
anti-dilutive or immaterial.




                                       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 March 31, 2000. The table below presents information by reportable
segment.

<TABLE>
<CAPTION>
                                                                                               Retail              Total
                                                                          Mail Order        (As Restated)      (As restated)
                                                                        --------------     ---------------     --------------
<S>                                                                     <C>                <C>                 <C>
For the Quarter Ended 3/30/2001
       Revenue                                                                $39,422             $38,569            $77,991
       Income from Operations                                                     197                (974)              (777)
For the Quarter Ended 3/31/2000
       Revenue                                                                $29,386             $27,231            $56,617
       Income (Loss) from Operations                                             (245)             (5,119)            (5,364)
       Income (Loss) from Ops. - excluding Clinical Partners write-off           (245)                381                136

For the Nine Months Ended 3/30/2001
       Revenue                                                               $113,891             $96,038           $209,929
       Income (Loss) from Operations                                              361              (3,407)            (3,046)
For the Nine Months Ended 3/31/2000
       Revenue                                                                $88,369             $75,731           $164,100
       Income (Loss) from Operations                                               94              (4,758)            (4,664)
       Income from Ops. - excluding Clinical Partners write-off                    94                 742                836
</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>
                                                   Quarter Ended                            Nine Months Ended
                                       ---------------------------------------   ---------------------------------------
                                        March 30, 2001       March 31, 2000       March 30, 2001       March 31, 2000
                                        --------------       --------------       --------------       --------------
                                         (As restated)        (As restated)        (As restated)        (As restated)
                                         -------------        -------------        -------------        -------------
<S>                                    <C>                   <C>                 <C>                  <C>
Total Consolidated Revenue:                      $77,991              $56,617             $209,929             $164,100

INCOME FROM OPERATIONS
Total for reportable segments                       (777)              (5,364)              (3,046)              (4,664)
Unallocated amounts:
 -  Corporate G&A                                     73                  287                  665                 (742)
 -  Interest income                                  289                    8                  472                   28
 -  Interest (expense)                               (11)                 (51)                 (91)                (153)
 -  Other income (expense)                          (250)                   -                 (238)                   -

                                       ------------------   ------------------   ------------------   ------------------
Income before income taxes                         ($676)             ($5,120)             ($2,238)             ($5,531)
                                       ==================   ==================   ==================   ==================
</TABLE>



                                       9
<PAGE>   11
         Several changes in segment assets have occurred since June 30, 2000.
First, Chronimed sold 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. Second, the Company
acquired the retail operations of American Prescription Providers, Inc. ("APP")
on February 2, 2001. APP assets are included in the Retail Segment. Third, the
Company sold its MEDgenesis subsidiary on January 5, 2001. The net proceeds from
the sale not yet invested in the Mail and Retail segments as of March 30, 2001,
are recorded as a Corporate item in the table below. Net assets of discontinued
operations as of June 30, 2000, totaling $10.5 million are excluded from segment
assets as of June 30, 2000. The following table presents assets by reportable
segment.


<TABLE>
<CAPTION>
                                                   Retail                               Total
                               Mail Order       (As restated)      Corporate        (As restated)
                            ----------------  ----------------  ----------------   ----------------
<S>                         <C>               <C>               <C>                <C>
As of  3/30/2001
       Segment Assets          $     30,830      $     48,243      $    16,713        $    95,786

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 Diagnostic Products subsidiary, MEDgenesis Inc., while
continuing to pursue a spin-off of the business. On December 1, 2000, Chronimed
entered into an Asset Purchase Agreement with Medisys PLC of Woodbridge,
Suffolk, England and on January 5, 2001, the Company completed the sale of
MEDgenesis to Medisys. Chronimed has classified MEDgenesis as "discontinued
operations" for financial reporting purposes. As a result, all financial results
concerning MEDgenesis, 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.

         Chronimed received $39.975 million from the sale of its Diagnostic
Products subsidiary, MEDgenesis, to Medisys. The $39.975 million received
consisted of $30.475 million in cash and $9.500 million in Medisys common stock.
The sale price is subject to certain adjustments based on the closing date
balance sheet, such adjustments likely to be made and settled upon in



                                       10
<PAGE>   12
Chronimed's fiscal fourth quarter ending June 29, 2001. Refer to the Form 8-K
dated January 5, 2001, filed with the SEC, that reports the sale and provides
pro forma financial statements.

         The following shows the calculation of the reported gain from the sales
transaction, as restated (see Note M):

<TABLE>
<CAPTION>
(in thousands)
<S>                                                   <C>
Purchase price proceeds                                $    39,975
Less estimated transaction and other related costs          (4,484)
Less estimated net book value of assets                    (11,585)
                                                      -------------
Estimated gain before income taxes                          23,906
Less estimated income taxes                                (10,130)
                                                      -------------

Estimated gain                                         $    13,776
                                                      =============
</TABLE>



         The following shows the estimated transaction costs:

<TABLE>
<CAPTION>
(in thousands)
<S>                                                  <C>
Contract assignment costs                              $ (1,000)
Miscellaneous acquisition costs                          (1,320)
Severance (see Note I of Notes to
    Consolidated Statements)                             (2,164)
                                                      ----------

Estimated transaction and other related costs          $ (4,484)
                                                      ==========
</TABLE>

         Chronimed presented Income from Discontinued Operations separately from
the gain on the sale of Discontinued Operations on the income statement. In
total, the Discontinued Operations contributed net income after tax of $13.7
million, or $1.12 per share in the third quarter of fiscal 2001. For the nine
months ended March 30, 2001, gain on the sale contributed $13.8 million and
income from operations contributed $1.5 million net of tax. Net income after tax
totaled $15.2 million, or $1.25 per share. In last year's third quarter net
income after tax was $635,000, or five cents per share and for the nine months
ended March 31, 2000, net income after tax was $1.7 million, or fourteen cents
per share.

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%.




                                       11
<PAGE>   13
         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. Based on the terms of the HSM Asset Purchase Agreement, Express-Med,
Inc. will pay quarterly installments of accrued interest and periodic $1 million
installments of principal. Quarterly interest payments began March 1, 2001, and
the periodic installments of principal will begin September 1, 2002. Principal
payments will be paid 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 entire
outstanding balance of principal and interest becomes due on March 1, 2004. The
Company recorded the $3.8 million deferred gain on the balance sheet as a
deduction to notes receivable, netting to zero and therefore not reflected on
the face of the balance sheet.

         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 collectable. Express-Med made its first interest
payment on March 1, 2001. Chronimed believes that Express-Med, Inc. will be able
to continue funding the interest payments and therefore, the Company will accrue
the interest receivable monthly as earned.

NOTE G--SIGNIFICANT CONCENTRATIONS

         Within the Mail Order segment, Chronimed has contracted with a single
payor who contributed 34% of the Company's revenue in the third quarter of
fiscal 2001 and 35% for the nine months ended March 30, 2001. This compares to
27% in the third quarter of fiscal 2000 and 26% for the nine months ended March
31, 2000.

NOTE H--ACQUISITION

         On February 2, 2001, Chronimed acquired four retail pharmacies from
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 of the
four pharmacies, including inventory, furniture, equipment, leasehold
improvements and intangible assets. The Company used the cash proceeds of its
January 5, 2001, MEDgenesis sale to fund the APP pharmacy acquisition.















                                       12
<PAGE>   14
NOTE I--RELATED PARTY TRANSACTIONS

         On July 24, 2000, MEDgenesis loaned Maurice R. Taylor, II, $624,900 to
retire indebtedness he had with US Bank, Minneapolis, Minnesota. Mr. Taylor was
Chronimed's Chairman and Chief Executive Officer up to June 30, 2000, at which
time he resigned from the Board. He continued employment with Chronimed's
Diagnostic Products business, MEDgenesis, which had become a separate
wholly-owned subsidiary of Chronimed, and had elected its own Board of
Directors, with Mr. Taylor as Chairman. The MEDgenesis Board then approved
retiring Mr. Taylor's indebtedness to US Bank. Mr. Taylor's payment to US Bank
extinguished Chronimed's guaranty of that indebtedness. MEDgenesis received a
promissory note, pledge agreement, and residential mortgage from Mr. Taylor to
secure repayment of the loan.

         When Chronimed sold the MEDgenesis assets to Medisys, Medisys did not
acquire the Taylor promissory note, pledge agreement, or mortgage. Accordingly,
these commitments remain assets of Chronimed.

         The Taylor promissory note evidences principal indebtedness of
$624,900, accrues market-based interest, and requires quarterly payments of
interest plus $25,000 in principal. The note comes due on December 31, 2001. Mr.
Taylor is current in his note payments, and the Company believes the note to be
collectable.

         On January 5, 2001, related to Mr. Taylor's Employment Agreement,
Chronimed entered into a Separation Agreement with Mr. Taylor related to Mr.
Taylor's departure from MEDgenesis. As per the terms of the Employment
Agreement, the Company made a payment to Mr. Taylor of $1.226 million. The
Separation Agreement also created an immediate vesting of all of Mr. Taylor's
outstanding stock options and extended his period to exercise options to January
5, 2002. The Separation Agreement also allows for office space access and health
care insurance for Mr. Taylor for twelve months, or until he finds employment,
whichever comes first.

         The modification to the option terms created a new measurement date
requiring Chronimed to record compensation expense for the difference between
the option price at grant date and the share price on January 5, 2001. Mr.
Taylor had 369,800 options granted below the $11.56 January 5, 2001, share
price. This modification resulted in a $938,000 non-cash charge to compensation
expense. Both the $1.226 million severance payment and the $938,000 non-cash
charge were netted against the gain on the sale of MEDgenesis.

NOTE J--SALE OF SECURITIES

         The Company received $9.5 million in Medisys PLC securities, as partial
consideration from the sale of MEDgenesis to Medisys. Chronimed sold 2,351,612
shares, or about 49% of the 4,780,636 shares received for $4.4 million in cash,
which resulted in a $250,000 loss in third quarter of fiscal 2001. This loss has
been included in the Other Expense line in the Consolidated Statements of
Income. Chronimed owned 2,429,024 shares as of March 30, 2001, with a basis of
$4.8 million. The market value as of March 30, 2001, was $2.5 million. The
Company recorded a $2.3 million unrealized loss as a component of shareholders'
equity on the balance sheet.




                                       13
<PAGE>   15

NOTE K--COMPREHENSIVE INCOME

         Comprehensive income at March 30, 2001, for the quarter ended was $12.0
million and for the nine months ended was $12.1 million.

NOTE L--SUBSEQUENT EVENTS

         On April 20, 2001, Chronimed acquired The Transplant Pharmacy(R)
business from SangStat Medical Corporation. The Transplant Pharmacy(R) provides
mail order distribution of transplant drugs and related patient management
services. Chronimed paid cash for substantially all of The Transplant
Pharmacy(R) assets, excluding inventory and accounts receivable.

         On April 27, 2001, Chronimed acquired Los Feliz Drugs, Inc. d/b/a Oaks
Pharmacy, a California-based corporation. The Oaks Pharmacy provides specialty
pharmaceutical products for people with HIV/AIDS and other chronic conditions.
Chronimed paid cash for substantially all of the assets, excluding accounts
receivable.

NOTE M--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 restatement also
reflects an increase to the gain reported in the Company's results from
discontinued operations from the sale of MEDgenesis in the third quarter of
fiscal 2001. 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



                                       14
<PAGE>   16

     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 steps to correct its systems
     and processes and 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 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 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.

DISCONTINUED OPERATIONS

     GAIN ON SALE OF MEDGENESIS

     The financial statements for the third quarter of fiscal year 2001 have
     also been restated to reflect a correction in the computation of the gain
     on sale of MEDgenesis in January 2001. The restated gain was $13.8 million
     rather than $12.8 million as previously reported by the Company. In the
     original determination of the gain, the net book value of MEDgenesis'
     assets was overstated because certain liabilities had not been properly
     assigned to MEDgenesis, which resulted in the gain on sale reflected in
     Discontinued Operations being understated by $1.0 million.

The principal effects of these adjustments for the quarters and nine-month
periods ended March 31, 2000 and March 30, 2001 are set forth below.


                                       15
<PAGE>   17

<TABLE>
<CAPTION>
                                                                                 QUARTER ENDED                 NINE MONTHS ENDED
                                                                          --------------------------       -------------------------
                                                                          MARCH 30,        MARCH 31,       MARCH 30,       MARCH 31,
                                                                            2001             2000            2001            2000
                                                                          ---------        --------        ---------       -------
<S>                                                                       <C>              <C>             <C>             <C>
 Net income (loss) from continuing operations, as
previously reported                                                       $    963         $(2,526)        $  2,846        $(1,715)
 Impact of restatement for:
    Revenue Overstatement                                                     (825)           (598)          (2,753)        (1,660)
    Allowance for Doubtful Accounts                                           (549)           --             (1,521)          --
------------------------------------------------------------------------------------------------------------------------------------
 Net income (loss) from continuing operations,                                (411)         (3,124)          (1,428)        (3,375)
as restated
Net income/gain from discontinued operations,                               12,755             635           14,300          1,718
net of tax as previously reported

 Impact of restatement for:
    Gain on sale correction                                                    938            --                938           --
------------------------------------------------------------------------------------------------------------------------------------
Net income/gain from discontinued operations,                               13,693             635           15,238          1,718
net of tax, as restated
------------------------------------------------------------------------------------------------------------------------------------

Net Income                                                                $ 13,282         $(2,489)        $ 13,810        $(1,657)
====================================================================================================================================
</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:

STATEMENTS OF OPERATIONS - RESTATEMENTS

<TABLE>
<CAPTION>
                                                                    QUARTER ENDED                           QUARTER ENDED
                                                                    MARCH 30, 2001                          MARCH 31, 2000
                                                           ---------------------------------       ---------------------------------
                                                           AS PREVIOUSLY                           AS PREVIOUSLY
                                                              REPORTED           AS RESTATED          REPORTED           AS RESTATED
                                                           -------------        ------------       -------------         -----------
<S>                                                        <C>                  <C>                <C>                   <C>
Revenue                                                       $ 79,343            $ 77,991            $ 57,596            $ 56,617
Gross profit                                                    10,480               9,128              10,133               9,154
Income (loss) before income taxes                                1,578                (676)             (4,141)             (5,120)
Income tax (expense) benefit                                      (615)                265               1,615               1,996
Net income (loss) from continuing                             $    963            $   (411)           $ (2,526)           $ (3,124)
 operations
Net income (loss)                                             $ 13,718            $ 13,282            $ (1,891)           $ (2,489)
Net income (loss) per share from continuing operations
    Basic                                                     $   0.08            $  (0.03)           $  (0.21)           $  (0.26)
    Diluted                                                   $   0.08            $  (0.03)           $  (0.21)           $  (0.26)
Net income (loss) per share
    Basic                                                     $   1.12            $   1.09            $  (0.16)           $  (0.21)
    Diluted                                                   $   1.08            $   1.09            $  (0.16)           $  (0.21)

</TABLE>



                                       16
<PAGE>   18


STATEMENTS OF OPERATIONS - RESTATEMENTS

<TABLE>
<CAPTION>
                                                                    NINE MONTHS ENDED                      NINE MONTHS ENDED
                                                                      MARCH 30, 2001                        MARCH 31, 2000
                                                           ---------------------------------       ---------------------------------
                                                           AS PREVIOUSLY                           AS PREVIOUSLY
                                                              REPORTED           AS RESTATED          REPORTED           AS RESTATED
                                                           -------------        ------------       -------------         -----------
<S>                                                        <C>                  <C>                <C>                   <C>
Revenue                                                      $ 214,442           $ 209,929          $ 166,820             $ 164,100
Gross profit                                                    30,138              25,625             30,368                27,648
Income (loss) before income taxes                                4,769              (2,238)            (2,811)               (5,531)
Income tax (expense) benefit                                    (1,923)                810              1,096                 2,156
Net income (loss) from continuing operations                 $   2,846           $  (1,428)         $  (1,715)            $  (3,375)
Net income (loss)                                            $  17,146           $  13,810          $       3             $  (1,657)
Net income (loss) per share from
 continuing operations
    Basic                                                    $    0.23           $   (0.12)         $   (0.14)            $   (0.28)
    Diluted                                                  $    0.23           $   (0.12)         $   (0.14)            $   (0.28)
Net income (loss) per share
    Basic                                                    $    1.41           $    1.13          $    0.00             $   (0.14)
    Diluted                                                  $    1.39           $    1.13          $    0.00             $   (0.14)
</TABLE>

BALANCE SHEETS - RESTATEMENTS

<TABLE>
<CAPTION>
                                                                 AS OF MARCH 30, 2001                    AS OF JUNE 30, 2000
                                                           ---------------------------------       ---------------------------------
                                                           AS PREVIOUSLY                           AS PREVIOUSLY
                                                              REPORTED           AS RESTATED          REPORTED           AS RESTATED
                                                           -------------        ------------       -------------         -----------
<S>                                                        <C>                  <C>                <C>                   <C>
Accounts receivable, net                                     $   56,556           $ 41,959           $ 47,352             $ 39,762
Total assets                                                    109,331             95,786             83,060               78,430
Retained earnings                                                31,417             23,451             14,271                9,641
Total shareholders' equity                                       83,941             75,975             67,687               63,057
</TABLE>




                                       17
<PAGE>   19


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 (Nasdaq:
CHMD) since 1992.

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

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

     -   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;

     -   Require treatment by healthcare specialists; and

     -   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.



                                       18
<PAGE>   20


         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 providing support and
intervention, clinical outcomes can be improved, and long-term costs of care
reduced.

         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.

         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 M to the financial statements.

DISCONTINUED OPERATIONS

         On October 10, 2000, Chronimed announced that it was engaged in
negotiations to sell its Diagnostics Products business 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 Products business had been operated by Chronimed as a
wholly-owned subsidiary, MEDgenesis Inc., since July 1, 2000. Chronimed has
classified MEDgenesis as "discontinued operations" for financial reporting
purposes.

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,



                                       19
<PAGE>   21

also included Home Service Medical ("HSM"). (Chronimed sold the HSM 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 March 31, 2000.

      Total revenue increased 38%, from $56.6 million to $78.0 million, for the
third quarter ended March 31, 2000, and March 30, 2001, respectively. For the
nine months ended March 31, 2000, and March 30, 2001, total revenue increased
28% from $164.1 million to $209.9 million. The contribution each segment made to
total revenue is discussed below.

      Mail Order segment revenue grew $10.0 million and 34% over last year's
third quarter, from $29.4 million to $39.4 million. Year to date revenue grew
$25.5 million from $88.4 million to $113.9 million for the nine months ended
March 31, 2000, and March 30, 2001, 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 HSM business during the first quarter of fiscal year 2001.
HSM revenue was $2.5 million for the third quarter ended March 31, 2000, with no
HSM revenue for the third quarter ended March 30, 2001. Revenue from the HSM
business decreased $9.0 million from $11.2 million to $2.2 million for the nine
months ended March 31, 2000, and March 30, 2001, respectively.

      Retail segment revenue grew $11.3 million and 42% over last year's third
quarter, from $27.2 million to $38.6 million. Year to date revenue grew $20.3
million and 27% from $75.7 million to $96.0 million for the nine months ended
March 31, 2000, and March 30, 2001, respectively. The StatScript retail
operations grew $12.0 million and 45% in revenue over last year's third quarter.
The StatScript Pharmacy grew $21.9 million and 30% in revenue in the nine months
ended March 30, 2001, compared to the first nine months of fiscal 2000. The
February 2001 APP acquisition contributed approximately $5.0 million of the
$12.0 million in revenue growth in the third quarter of fiscal 2001. In
addition, existing stores contributed $7.0 million in revenue growth, with most
of this growth coming from stores opened 24 months or longer. For the nine
months ended March 30, 2001, the APP acquisition contributed approximately $5.0
million in revenue growth, with the remaining stores contributing approximately
$17 million (most of this growth comes from stored opened 24 months or longer).
StatScript's growth was partially offset by a $700,000 decline over last year's
third quarter revenue due to the fiscal 2000 exit from the Clinical Partners
case management line. Revenue from Clinical Partners business decreased $1.6
million in the nine months ended March 30, 2001, compared to the same period in
the prior year.

      The Company expects revenue for the year to be approximately $294 to $297
million. This would represent 40 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 payor contracts, obtain new patients
through selling efforts, and open new retail pharmacies is 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



                                       20
<PAGE>   22

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 third quarter were flat from year to year, at
$9.1 million. Year to date gross profit dollars decreased $2.0 million, or 7%,
from $27.6 million last year to $25.6 million this year. The sale of the HSM
business reduced margin dollars $600,000 in the three months ended March 30,
2001, and $2.8 million for the nine months ended March 30, 2001, compared to the
same periods in the prior year. This decrease was offset by increased margin
dollars resulting from higher revenues in the Injectables, Transplant, and
StatScript businesses.

      Third quarter gross profit percentage decreased from 16.2% last year to
11.7% this year. Year to date gross profit percentage decreased from 16.8% to
12.2% for the nine months ended March 31, 2000, and March 30, 2001,
respectively. The gross profit decline was partially due to the sale of HSM and
its higher gross profit percentages relative to the rest of the business. The
decrease in gross profit percentage was primarily due to pricing pressure and
thus reduced margins in both the Mail Order and Retail businesses. The margin
decline was substantial in the Retail business where the Company more recently
experienced significantly reduced reimbursement rates from several
non-contracted payors. Pressure from payors, including HMOs, insurance
companies, and the government, to provide products and services at lower
reimbursement rates is ongoing. The Company expects continued margin pressure in
both the Mail Order and Retail businesses.

SELLING AND MARKETING EXPENSES

      Overall selling and marketing expenses in the third quarter were down
approximately $430,000 and 38% compared to last year's third quarter, on revenue
growth of 38%. Year to date selling and marketing expenses were down $910,000
and 27% compared to last year's first nine months on overall revenue growth of
28%. As a percentage of revenue, selling and marketing expenses dropped from
2.0% in last year's third quarter to 0.9% in this year's third quarter. The
percentage dropped from 2.1% in last year's first nine months to 1.2% in this
year's first nine 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 case management line in the third
quarter of fiscal 2000. The decrease totaled $500,000 for the fiscal 2001 third
quarter compared to last year's third quarter, and $1.2 million for the nine
months ended March 30, 2001, compared to the same period in the prior year. This
decrease was partially offset by expanded selling efforts in the Mail Order and
Retail segments in fiscal 2001 compared to fiscal 2000.

GENERAL AND ADMINISTRATIVE AND BAD DEBT EXPENSES

      Combined general and administrative (G&A) and bad debt expenses for the
third quarter totaled $9.1 million, up from $7.6 million last year. As a
percentage of revenue, combined G&A and Bad debt expenses decreased from 13.4%
last year to 11.7% this year. Year to date expenses increased $1.4 million from
$24.2 million to $25.5 million for the nine months ended March 31, 2000, and
March 30, 2001, respectively. As a percentage of revenue, year to date expenses
decreased from 14.7% last year to 12.2% this year. Combined G&A and bad debt
expenses increased for several reasons. First, Chronimed incurred $49,000 of
costs related to the Company's



                                       21
<PAGE>   23

pursuit of strategic alternatives in the third quarter of fiscal 2000 and
$931,000 for the nine months ended March 31, 2000. The Company incurred no such
related costs for the nine months ended March 30, 2001. 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.

      Second, G&A costs within the Clinical Partners case management and
strategic services lines in the Retail segment were down approximately $700,000
in third quarter of fiscal 2001 and down $1.8 million for the nine months ended
March 30, 2001, compared to the same periods last year. The Clinical Partners
case management line was written off and shut down in the third quarter of
fiscal 2000. The $5.5 million write off in fiscal 2000 is reported as other
expense on the income statement.

      Third, the Home Service Medical ("HSM") business within the Mail Order
segment incurred $350,000 less in G&A expenses during this year's third quarter
compared to the same period last year. Year to date HSM G&A expenses were down
$800,000 for the nine months ended March 30, 2001, compared to the nine months
ended March 31, 2000. Due to its September 1, 2000, sale the HSM business
operated as a business unit of Chronimed only two of nine months for the nine
months ended March 30, 2001.

      Fourth, partially offsetting the above decrease in spending, bad debt
expense increased in each of the respective periods. Bad debt expense for the
third quarter ended March 30, 2001, totaled $1.3 million or 1.7% of revenue,
compared to $607,000, or 1.1% of revenue, in the third quarter of fiscal year
2000. For the nine months ended March 30, 2001, bad debt expense totaled $3.4
million or 1.6% of revenue, compared to $2.4 million, or 1.5% of revenue, for
the nine months ended March 31, 2000. These expenses were primarily the result
of the Company's restatement (see Note M) and the related assessment of the
Company's allowance for doubtful accounts in the Retail segment.

      Also offsetting some of the year over year decreases, absolute dollars
spent on segment G&A in the nine months ended March 30, 2001, 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 is up 38% and 28% in the respective
quarter and nine-month periods, including StatScript pharmacy operations,
customer service, billing and fulfillment.

INTEREST INCOME AND INTEREST EXPENSE

      Net interest income increased to $278,000 in the third quarter of fiscal
2001. In the third quarter of fiscal 2000, net interest expense totaled $43,000.
Net interest income increased from net interest expense of $125,000 in last
year's first nine months to net interest income of $381,000 in this year's first
nine months. Interest income increased in the third quarter of fiscal 2001 and
year to date compared to the prior year primarily as a result of the interest
coming from the $30.475 million cash received in the sale of the Company's
MEDgenesis subsidiary in January 2001. As of March 30, 2001, a portion of the
cash proceeds had been utilized to fund the acquisition of APP and to fund
continuing operations. The Company also received a $3.8 million note receivable,
accruing



                                       22
<PAGE>   24

11% interest, from the sale of the Home Service Medical business in the first
quarter of fiscal 2001 thus increasing interest income over fiscal 2000 by
approximately $100,000 per quarter.

INCOME TAXES

      The Company's income tax rate was approximately 39% for the third quarter
ended March 30, 2001, and 36% for fiscal 2001 year to date. The Company expects
a tax rate of approximately 39% to continue through fiscal 2001 year-end.

LIQUIDITY AND CAPITAL RESOURCES

      Net cash provided by operating activities was $7.9 million for the nine
months ended March 30, 2001. Receivables increased by $3.1 million, net of the
sale of HSM assets, due to revenue growth and the timing of collections.
Inventory increased only slightly, $60,000, despite the significant revenue
growth during the year. Days on hand inventory was at eleven days at June 30,
2000, and at eight days at March 30, 2001. Accounts payable and accrued expenses
increased $3.6 million and other assets decreased $521,000 due to timing of
payments. Depreciation and amortization totaled $3.1 million for the nine months
ended March 30, 2001.

      Net cash used in investing activities was $12.5 million for the nine
months ended March 30, 2001. Cash used in investing activities primarily
consisted of $17.2 million for acquisitions and $2.4 million for capital
expenditures primarily for leasehold improvements for StatScript pharmacies and
information systems. The Company received $2.7 million in proceeds from the sale
of the Home Service Medical business in the first quarter of fiscal 2001. The
Company also received $4.4 million cash from the sale of the Medisys PLC
available-for-sale securities in the third quarter of fiscal 2001.

      Net cash used in financing activities totaled $1.6 million for the nine
months ended March 30, 2001. The Company used $2.5 million cash to repay
short-term borrowing on the line of credit and received $913,000 cash from the
issuance of common stock under employee stock option and purchase programs.

      The Company received $39.975 million from its sale of MEDgenesis to
Medisys PLC, consisting of $30.475 million in cash and $9.5 million in Medisys
common stock. The net cash provided by MEDgenesis operations and its sale for
the nine months ended March 30, 2001, totaled $15.9 million. This amount has
been reported as net cash provided by "discontinued operations" and has been
excluded from the $6.2 million net cash used in operating, investing, and
financing activities of continuing operations for the nine months ended March
30, 2001.

      As of March 30, 2001, Chronimed had working capital of $44.5 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 Chronimed has a contract with the payor. The
Company purchases inventory primarily from a large wholesaler, and less
substantially from specific manufacturers. The Company's inventory requirements
could increase if its purchasing mix were to shift more to direct



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purchases from manufacturers. 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.

      At the end of the third quarter fiscal year 2001 the Company had $12.2
million in cash and marketable securities. Since that time, the Company has paid
cash for the SangStat transplant acquisition and the OAKS HIV/AIDS pharmacy
acquisition (See Note L) and is funding the working capital buildup of these
acquisitions and the APP acquisition. In addition, the Company will pay the
taxes on the MEDgenesis gain in the fourth quarter of fiscal 2001. These growth
activities will consume the Company's cash balance and require utilization of
the Company's line of credit. The Company expects to continue to fund its growth
through its senior debt capacity that includes a $15 million line of credit, its
investment in Medisys stock with a market value of $2.5 million as of March 30,
2001, and its working capital. Shareholder's equity was $76.0 million at the end
of this year's third 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 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



                                       24
<PAGE>   26

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.

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 materially include, but are not limited to, the following:
changes in economic conditions; general competitive factors; reimbursement
pressures impacting 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; gains or
losses on the sale of available-for-sale securities; customer retention;
performance of acquired businesses; 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, 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 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, had been included in net assets of discontinued
operations. The Cell Robotics securities were not included in the sale of
MEDgenesis and the Company wrote off the securities against the gain on the sale
for a total of $57,000.

         Investments as of March 31, 2001, consisted of equity securities of
Medisys PLC, a UK company. The Company's exposure to risk consists of a decline
in the market value of its investments in available for sale securities
primarily through changes in equity price and to a lesser degree, foreign
currency exchange rates. Chronimed owned 2,429,024 shares as of March 30, 2001,
with a basis of $4.8 million. The market value as of March 30, 2001, was $2.5
million. If the Company had sold the securities on March 30, 2001, the Company
would have recorded a $2.3 million loss on the sale, which would have been
recorded as Other Expense on the Consolidated Statements of Income.




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<PAGE>   27


PART II.   OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

         a.)  Exhibits

              The following exhibits were filed with the Company's third quarter
              Form 10-Q filed on May 14, 2001, and are incorporated by reference
              to that filing:

               10.1 Separation and Release Agreement Effective January 5, 2001,
                    between the Company and Maurice R. Taylor, II

               10.2 Maurice R. Taylor, II, Promissory Note dated July 24, 2000

         b.)   Reports on Form 8-K

                    The Company filed the following reports on Form 8-K during
                    the third quarter ended March 30, 2001:

                    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.

                  Form 8-K dated February 2, 2001  Item 5.  Other Events
                           The Form 8-K reported the acquisition of four retail
                           pharmacies of American Prescription Providers, Inc.

Note: Items 1 - 5 required under Part II have been omitted since they are not
applicable or the answers are negative.





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<PAGE>   28


                                   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