<PAGE>

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

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

                       -----------------------------------

                                    FORM 10-Q

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2004

[ ]   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 by checkmark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).                       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 - 12,824,940 shares outstanding as of
                                February 3, 2005

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

                                 CHRONIMED INC.

                          QUARTERLY REPORT ON FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 2004

                                      INDEX
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                      --------
<S>                                                                                   <C>
PART I - FINANCIAL INFORMATION

Item  1. Financial Statements

            Consolidated Balance Sheets - December 31, 2004 (unaudited) and July
            2, 2004                                                                         2

            Consolidated Statements of Income (unaudited) - Three and six months
            ended December 31, 2004, and December 26, 2003                                  3

            Consolidated Statements of Cash Flows (unaudited) - Six months ended
            December 31, 2004, and December 26, 2003                                        4

            Notes to Consolidated Financial Statements - December 31, 2004              5 - 9

Item  2. Management's Discussion and Analysis of Financial Condition and Results
         of Operations                                                                10 - 15

Item  3. Quantitative and Qualitative Disclosures About Market Risk                        15

Item  4. Controls and Procedures                                                           16

PART  II - OTHER INFORMATION

Item  1. Legal Proceedings                                                                 17

Items 2, 3, 4, and 5 have been omitted since all items are not applicable or the
      answers are negative.

Item  6. Exhibits                                                                          17

SIGNATURES                                                                                 18
</TABLE>

                                       1
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                                 CHRONIMED INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                                        2004          JULY 2,
                                                     (UNAUDITED)       2004
                                                     ------------    --------
<S>                                                  <C>             <C>
ASSETS

Current assets
    Cash and cash equivalents                        $   20,698      $ 16,624
    Short-term investments                                    -         1,507
    Accounts receivable (net of allowances
       of $7,075 and $6,321, respectively)               39,987        41,932
    Inventory                                            10,553        10,348
    Prepaid expenses                                      3,662         1,441
    Income taxes receivable                                 356           220
    Deferred taxes                                        2,250         2,913
                                                     ----------      --------
        Total current assets                             77,506        74,985

Property and equipment, net                               4,407         4,942

Goodwill                                                 34,480        34,480
Other assets, net                                           143           147
                                                     ----------      --------
    Total assets                                     $  116,536      $114,554
                                                     ----------      --------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
    Accounts payable                                 $   12,291      $ 12,486
    Accrued expenses                                      4,414         3,865
    Accrued bonus                                           885         1,654
                                                     ----------      --------
        Total current liabilities                        17,590        18,005

Deferred taxes                                            2,201         1,938

Shareholders' equity
    Preferred stock                                           -             -
    Common stock, issued and outstanding shares--
         12,824 and 12,823, respectively                    128           128
    Additional paid-in capital                           58,344        58,332
    Retained earnings                                    38,273        36,151
                                                     ----------      --------
        Total shareholders' equity                       96,745        94,611
                                                     ----------      --------
        Total liabilities and shareholders' equity   $  116,536      $114,554
                                                     ----------      --------
</TABLE>

See notes to consolidated financial statements

                                       2
<PAGE>

                                 CHRONIMED INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                       THREE MONTHS ENDED            SIX MONTHS ENDED
                                   --------------------------  --------------------------
                                   DECEMBER 31,  DECEMBER 26,  DECEMBER 31,  DECEMBER 26,
                                      2004          2003          2004           2003
                                   ------------------------------------------------------
<S>                                <C>           <C>           <C>           <C>
Revenue                            $  146,408    $  131,361    $  289,033    $  259,963

Cost of revenue                       130,649       115,764       257,667       229,191
                                   ----------    ----------    ----------    ----------
        Gross profit                   15,759        15,597        31,366        30,772

Operating expenses
    Selling and marketing               1,381         1,430         2,871         2,752
    General and administrative         10,683        11,016        21,269        21,719
    Merger related costs                1,195             -         2,091             -
    Bad debt                            1,015           920         2,056         1,854
                                   ----------    ----------    ----------    ----------
        Total operating expenses       14,274        13,366        28,287        26,325

Income from operations                  1,485         2,231         3,079         4,447

Interest income, net                      104            45           148            96
Other income                                -            75           251            75
                                   ----------    ----------    ----------    ----------

Income before income taxes              1,589         2,351         3,478         4,618
Income tax expense                       (619)         (890)       (1,356)       (1,154)
                                   ----------    ----------    ----------    ----------
Net income                         $      970    $    1,461    $    2,122    $    3,464
                                   ==========    ==========    ==========    ==========
Basic net income per share         $     0.08    $     0.12    $     0.17    $     0.27
Diluted net income per share       $     0.07    $     0.11    $     0.16    $     0.27
                                   ==========    ==========    ==========    ==========

Basic weighted-average shares          12,824        12,663        12,824        12,623
Diluted weighted-average shares        12,941        12,990        12,961        13,042
</TABLE>

See notes to consolidated financial statements

                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                   SIX MONTHS ENDED
                                                              ---------------------------
                                                              DECEMBER 31,   DECEMBER 26,
                                                                 2004            2003
                                                              --------------------------
<S>                                                           <C>            <C>
Operating activities
        Net income                                              $  2,122       $  3,464

    Adjustments to reconcile income to net cash
       (used in) provided by operating  activities:

            Depreciation and amortization                          1,177          1,135
            Deferred income taxes                                    926              -
            Changes in operating assets and liabilities:
                Accounts receivable                                1,945         (2,174)
                Income taxes                                        (136)          (772)
                Inventory                                           (205)        (3,515)
                Accounts payable                                    (195)        (1,628)
                Accrued expenses                                    (220)           133
                Other assets                                      (2,217)        (1,298)
                                                                --------       --------
       Net cash provided by (used in) operating activities         3,197         (4,655)

Investing activities

    Purchases of property and equipment                             (642)        (1,067)
    Sale (Purchase) of short-term investments                      1,507         (1,525)
    Acquisition of Accent Rx                                           -         (4,201)
                                                                --------       --------
        Net cash provided by (used in) investing activities          865         (6,793)

Financing activities

    Net proceeds from issuance of common stock                        12            840
                                                                --------       --------
        Net cash provided by financing activities                     12            840

Increase (decrease) in cash and cash equivalents                   4,074        (10,608)
Cash and cash equivalents at beginning of year                    16,624         22,854
                                                                --------       --------
Cash and cash equivalents at end of period                      $ 20,698       $ 12,246
                                                                --------       --------
</TABLE>

See notes to consolidated financial statements

                                       4
<PAGE>

                                 CHRONIMED INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.    SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

      Chronimed Inc. ("Chronimed"), a specialty pharmacy service provider,
distributes prescription drugs, coordinates customer benefits, and provides
specialized therapy management services for people with certain health
conditions, including HIV/AIDS, organ transplants, and other conditions treated
with biotech injectable medications. We work with patients, physicians and other
health care providers, pharmaceutical manufacturers, health plans and insurers,
and government agencies to improve clinical and economic outcomes. We distribute
prescription drugs nationally through our Chronimed mail service and StatScript
Pharmacy community-based pharmacies. Our patients typically have conditions that
are generally not being served by traditional pharmacies, require high-cost,
complex medications, and have complex reimbursement characteristics.

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 six months ended
December 31, 2004, are not necessarily indicative of the results that may be
expected for the fiscal year ending July 1, 2005. The balance sheet at July 2,
2004, 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. For further
information, refer to the consolidated financial statements and footnotes
thereto included in our Annual Report on Form 10-K for the fiscal year ended
July 2, 2004.

FISCAL YEAR

      We use 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. Fiscal 2005 will include 52 weeks with the year ending July 1, 2005.
Fiscal 2004 included 53 weeks (14 weeks in the fourth quarter) with the year
ending July 2, 2004.

REVENUE RECOGNITION

      Revenue is recognized at the time prescriptions are shipped to or picked
up by the patient. We participate in various third-party provider networks,
Medicare, and state Medicaid programs. Under a majority of these networks, the
amount to be paid for our products is determined (or "adjudicated") through
electronic connections with these networks at the time of sale. However, for
certain payors for which there is no electronic adjudication process available
at the time of sale, we bill a standard list price (versus a known contracted
price) and then simultaneously determine an appropriate estimate for expected
payor discount based on our reimbursement history for each payor class. This
reimbursement history is updated quarterly. Revenue is then reported net of the
estimated payor discounts and adjusted in future periods as final settlements
are determined.

STOCK-BASED COMPENSATION

      We have adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123 (Statement No. 123), "Accounting for Stock-Based
Compensation," as amended by Statement of Financial Accounting Standards No. 148
but apply Accounting Principles Board Opinion No. 25 (APB 25) and related
interpretations in accounting for our stock plans. Under APB 25, when the
exercise price of an employee stock option equals the market

                                       5
<PAGE>

price of the underlying stock on the date of grant, no compensation expense is
recognized. The following table illustrates the effect on net income and
earnings per share if we had applied the fair value recognition provisions of
Statement No. 123 to stock-based employee compensation.

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED             SIX MONTHS ENDED
                                           ---------------------------   --------------------------
(IN THOUSANDS,                             DECEMBER 31,   DECEMBER 26,   DECEMBER 31,  DECEMBER 26,
    EXCEPT PER SHARE DATA)                    2004           2003           2004           2003
----------------------------------------   ---------------------------   --------------------------
<S>                                        <C>            <C>            <C>           <C>
Net income - as reported                    $     970      $   1,461      $   2,122     $   3,464
Deduct pro forma stock-based
    employee compensation cost,
    net of related tax effects                   (433)          (428)          (878)         (795)
                                            ---------      ---------      ---------     ---------
Net income - pro forma                      $     537      $   1,033      $   1,244     $   2,669
                                            =========      =========      =========     =========

Earnings per share - basic as reported      $    0.08      $    0.12      $    0.17     $    0.27
Earnings per share - basic pro forma        $    0.04      $    0.08      $    0.10     $    0.21
Earnings per share - diluted as reported    $    0.07      $    0.11      $    0.16     $    0.27
Earnings per share - diluted pro forma      $    0.04      $    0.08      $    0.10     $    0.21
</TABLE>

ACCOUNTS RECEIVABLE ALLOWANCES

Allowance for Doubtful Accounts

      We determine an allowance for doubtful accounts amount based upon an
analysis of the aging of the accounts receivable and historical write-off
experience. Bad debt expense is recorded as an operating expense in our
Consolidated Statements of Income.

Allowance for Payor Discounts

      We determine an allowance for payor discounts based on an analysis of
historical payment experience. Payor discount allowances are recorded as offsets
to revenue in our Consolidated Statements of Income.

INVENTORIES

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

CASH AND CASH EQUIVALENTS

      We consider all investments with an original maturity of 90 days or less
when purchased to be cash equivalents. Cash equivalents are carried at cost,
which approximates fair market value, and consist principally of money market
accounts and securities of AAA-rated government agencies.

SHORT-TERM INVESTMENTS

      We classify our investments with maturities of over 90 days when purchased
as available-for-sale. These investments are stated at market value, with any
material unrealized gains or losses, net of tax, included as a component of
shareholders' equity until realized. Interest income is included as a component
of current earnings. As of December 31, 2004 we held no short-term investments.

                                       6
<PAGE>

PER SHARE DATA

      Net income per share is calculated in accordance with Financial Accounting
Standards Board Statement No. 128, "Earnings per Share." Potential common shares
are included in the diluted net income per share 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.
Our basic net income per share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
net income per share is computed by dividing net income by the weighted average
number of common shares outstanding during the period, increased to include
dilutive potential common shares issuable upon the exercise of stock options
that were outstanding during the period. The table below is a reconciliation of
the numerator and denominator in the basic and diluted net income per share
calculation.

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED             SIX MONTHS ENDED
                                       ---------------------------   --------------------------
(IN THOUSANDS,                         DECEMBER 31,   DECEMBER 26,   DECEMBER 31,  DECEMBER 26,
    EXCEPT PER SHARE DATA)                2004           2003           2004           2003
------------------------------------   ---------------------------   --------------------------
<S>                                    <C>            <C>            <C>           <C>
Numerator

    Net income                           $   970        $ 1,461        $ 2,122       $ 3,464

Denominator
    Denominator for basic net
        income per share - weighted
       average shares outstanding         12,824         12,663         12,824        12,623
    Effect of dilutive stock options         117            327            137           419
                                         -------        -------        -------       -------
    Denominator for diluted net
        income per share - weighted
       average shares outstanding         12,941         12,990         12,961        13,042
                                         -------        -------        -------       -------

Basic net income per share               $  0.08        $  0.12        $  0.17       $  0.27
Diluted net income per share             $  0.07        $  0.11        $  0.16       $  0.27
</TABLE>

      Employee stock options of 1,556,274 and 1,545,024 for the second quarter
and six months ended December 31, 2004, respectively, have been excluded from
the diluted net income per share calculation because their effect would be
antidilutive. For the second quarter and six months ended December 26, 2003,
employee options of 1,112,021 and 1,009,185, respectively, have been excluded
from the diluted net income per share calculation because their effect would be
antidilutive.

NEW ACCOUNTING PRONOUNCEMENTS

      In December 2004, the FASB issued Statement 123R, "Share-Based Payment,"
to be effective for interim or annual periods beginning after June 15, 2005;
thereby becoming effective for Chronimed in the first quarter of fiscal 2006.
Statement 123R requires all share-based payments to employees, including grants
of employee stock options, to be recognized as an operating expense in the
income statement. The cost is recognized over the requisite service period based
on fair values measured on grant dates. The new standard may be adopted using
either the modified prospective transition method or the modified retrospective
method. We are currently evaluating our share-based employee compensation
programs, the potential impact of this statement on our consolidated financial
position and results of operations, and the alternative adoption methods.

2.    SIGNIFICANT CONCENTRATIONS

      Payor reimbursements from Aetna, Inc., a single large contracted
payor, represented approximately 21% of our revenue in the second quarter of
fiscal 2005 and 19% in the second quarter of fiscal 2004. In fiscal 2004, Aetna
announced that its contracted specialty pharmacy business, which is currently
served by three providers, of which one is Chronimed, would be consolidated into
a new joint venture, named Aetna Specialty Pharmacy, with another provider.

                                       7
<PAGE>

Aetna indicated that this new business will begin in 2005 and that it expected
to transition the business fully into Aetna Specialty Pharmacy by the calendar
third quarter of 2005. In November 2004, Aetna notified Chronimed that its
specialty pharmacy distribution contract would terminate on February 28, 2005.
No other private payor or single government agency represented more than 10% of
our revenues.

      Our one-year contract with Roche Laboratories Inc. to be the exclusive
U.S. distributor of Fuzeon(R) during the initial twelve month progressive
distribution phase expired in April 2004. Fuzeon sales represented 7.3% and 7.8%
of our revenue in the second quarter of fiscal 2005 and for the six months ended
December 31, 2004, or $10.8 million and $22.8, million respectively. Although
Fuzeon is now available through retail and specialty pharmacies, Chronimed
continues to be a distributor for Fuzeon and is the exclusive distributor for
Fuzeon patients receiving their medications through Roche's Patient Assistance
Program.

      We signed a three-year wholesaler agreement with Cardinal Health, a large
national distributor, for the majority of our pharmaceutical purchases effective
August 2003 in our fiscal 2004. We used McKesson Corporation, another large
national distributor, for the majority of our pharmaceutical purchases until
August 2003. Cardinal Health made up 90% of our inventory purchases in the
second quarter of fiscal 2005, and Cardinal Health and McKesson together made up
77% of our inventory purchases for the second quarter of fiscal 2004. Following
the expiration of our one-year contract with Roche Laboratories Inc., we began
purchasing Fuzeon from Cardinal Health rather than from Roche, which increased
our purchasing concentration with Cardinal Health. In the event that we are
unable to purchase pharmaceuticals through Cardinal Health, we believe we would
be able to purchase the same inventory through other national pharmaceutical
distributors, although the terms and conditions could be less favorable to
Chronimed.

      Our primary concentration of credit risk is third party payor accounts
receivable, which consist of amounts owed by various governmental agencies and
insurance companies. We manage our receivables by regularly reviewing accounts
and contracts and by providing appropriate allowances for uncollectible amounts.
No private payor or single government agency represented more than 10% of our
accounts receivable balances. Concentration of credit risk relating to accounts
receivable is limited to some extent by the diversity and number of patients and
payors and the geographic dispersion of our operations.

3     COMPREHENSIVE INCOME

      Net income equaled comprehensive income for the respective periods.

4     INCOME TAXES

      Our income tax rate was 39.0% for the three and six months ended December
31, 2004. Our income tax rate was 37.9% and 25.0% for the three and six months
ended December 26, 2003, respectively. The income tax rate for the six months
ended December 26, 2003 was impacted by the reversal of $0.6 million of
previously provided income tax expense because the tax contingencies were
resolved. Without this reduction, our income tax rate would have been 37.9% for
the three and six months ended December 26, 2003. We expect our combined fiscal
2005 Federal and State tax rate to approximate 39% due to expanded business in
higher-taxed states.

5.    ACQUISITION OF ACCENT RX

      On December 9, 2003, we purchased certain assets of Accent Rx for $4.2
million in cash. Accent Rx was a specialty mail service pharmacy focusing
primarily on the distribution of pharmaceutical products to individuals living
with HIV/AIDS and post-organ transplants. Accent Rx has been integrated into our
existing mail service operations. We paid cash for customer prescription records
and allocated the $4.2 million purchase price as goodwill.

      Beginning December 10, 2003, customers of Accent Rx were served through
Chronimed's mail service operations, resulting in approximately $3.0 million in
revenue during the quarter ended December 31, 2004.

      The following unaudited pro forma combined financial information is in
accordance with Statement of Financial Accounting Standards No. 141, "Business
Combinations," and is based on the respective historical financial

                                       8
<PAGE>

results of Chronimed and Accent Rx, Inc. as though the business combination had
been completed as of the beginning of the periods presented.

<TABLE>
<CAPTION>
(IN THOUSANDS,                 THREE MONTHS ENDED   SIX MONTHS ENDED
    EXCEPT PER SHARE DATA)      DECEMBER 26, 2003   DECEMBER 26, 2003
-----------------------------  ------------------   -----------------
<S>                            <C>                  <C>
Revenue                             $134,829            $268,801
Income from operations                 1,689               3,505
Net income                             1,157               2,572

Earnings per share - basic          $   0.09            $   0.20
Earnings per share - diluted        $   0.09            $   0.20
</TABLE>

6.    PROPOSED MERGER

      On August 9, 2004, we announced that the boards of directors of Chronimed
Inc. and MIM Corporation (Nasdaq: MIMS) had unanimously approved a strategic
merger and that the companies had signed a definitive merger agreement. On
January 4, 2005, the companies agreed to an amendment to the original agreement.
It is expected that the combined company, which will be named BioScrip Inc.,
will have broad disease coverage, focused therapy management, expansive national
retail and mail distribution capabilities and a solid PBM platform. Based on
financial results reported by each company for the twelve month periods ended
June 30, and July 2, 2004, respectively, the two companies generated combined
revenues of approximately $1.1 billion and pretax income of $20.9 million. Upon
consummation of the merger, each Chronimed shareholder will receive 1.12 MIM
shares for each Chronimed share held. MIM expects to issue approximately 14.4
million shares to Chronimed shareholders in the merger. Following the merger,
Chronimed shareholders will own approximately 40% of the new company and MIM
shareholders will own approximately 60%. The transaction is structured as a
tax-free reorganization for both companies and Chronimed's shareholders. The
closing of the merger is subject to approval of both companies' shareholders and
is expected to occur in March 2005.

                                       9
<PAGE>

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

RESULTS OF OPERATION

      The following management's discussion and analysis of financial condition
and results of operations ("MD&A") should be read in conjunction with the MD&A
included in our Annual Report on Form 10-K for the fiscal year ended July 2,
2004.

      The following table represents income and expense items as a percentage of
revenue.

INCOME AND EXPENSE ITEMS AS A PERCENTAGE OF REVENUE

<TABLE>
<CAPTION>
                                     THREE MONTHS ENDED              SIX MONTHS ENDED
                                 ---------------------------   ----------------------------
                                 DECEMBER 31,   DECEMBER 26,   DECEMBER 31,   DECEMBER 26,
FISCAL YEAR                         2004            2003           2004           2003
----------------------------     ---------------------------   ----------------------------
<S>                              <C>            <C>            <C>            <C>
Revenue                             100.0%         100.0%         100.0%          100.0%
Cost of revenue                      89.2           88.1           89.1            88.2
                                    -----          -----          -----           -----
Gross profit                         10.8           11.9           10.9            11.8
Operating expenses
    Selling and marketing             1.0            1.1            1.0             1.1
    General and administrative        7.3            8.4            7.4             8.3
    Merger related costs              0.8                           0.7
    Bad debt                          0.7            0.7            0.7             0.7
                                    -----          -----          -----           -----
Total operating expenses              9.8           10.2            9.8            10.1
Income from operations                1.0            1.7            1.1             1.7
Interest income, net                  0.1              -              -               -
Other income                            -            0.1            0.1               -
Income tax expense                   (0.4)          (0.7)          (0.5)           (0.4)
                                    -----          -----          -----           -----
Net income                            0.7%           1.1%           0.7%            1.3%
                                    -----          -----          -----           -----
</TABLE>

Revenue

      Revenue increased $15.0 million, or 11.5%, from $131.4 million in the
second quarter of fiscal 2004 to $146.4 million in the second quarter of fiscal
2005. For the six months ended December 31, 2004, revenue increased $29.0
million, or 11.2%, to $289.0 million from $260.0 million for the same period
last year.

      The increase in revenue for the quarter was due primarily to two factors.
First, the December 2003 acquisition of Accent Rx, a specialty mail service
pharmacy focusing primarily on HIV/AIDS and post-organ transplant disease
states, contributed an estimated $2.0 million and $5.0 million in revenue
growth during the second quarter of fiscal 2005 and six months ended December
31, 2004, respectively. Second, the number of patients served in the second
quarter of fiscal 2005 and six months ended December 31, 2004, particularly
patients with HIV, organ transplants, rheumatoid arthritis, and multiple
sclerosis, increased by approximately 14.6% and 13.5%, respectively, compared to
the same periods last year.

      Our patient populations are concentrated among three disease areas
including HIV/AIDS, organ transplants, and other complex conditions treated with
biotech injectable medications. The table below shows revenue by disease state
for the three and six months ended December 31, 2004 and December 26, 2003, as a
percentage of total revenue.

                                       10
<PAGE>

<TABLE>
<CAPTION>
                            THREE MONTHS ENDED              SIX MONTHS ENDED
                        ---------------------------   ----------------------------
                        DECEMBER 31,   DECEMBER 26,   DECEMBER 31,   DECEMBER 26,
(% OF TOTAL REVENUE)       2004            2003           2004           2003
---------------------   ---------------------------   ----------------------------
<S>                     <C>            <C>            <C>            <C>
HIV/AIDS                     52%            54%           52%             53%
Transplant                   18%            18%           18%             18%
Other disease states         30%            28%           30%             29%
                            ---            ---           ---             ---
Total                       100%           100%          100%            100%
                            ===            ===           ===             ===
</TABLE>

      Our disease mix stayed relatively constant in the second quarter of fiscal
2005 compared to the year ago quarter. HIV patient revenue in the second quarter
grew $5.3 million, or 7.5%, from the same period in fiscal 2004. One of the key
reasons we continue to generate growth in HIV revenue is our willingness to work
with the various state Medicaid and AIDS Drug Assistance Programs to bring the
medications to patients. These tightly-funded payors require a complex process
of benefit determination and billing that many pharmacy providers do not handle.
HIV revenue growth slowed when our one-year exclusive contract with Roche
Laboratories Inc. ended April 26, 2004, and Roche expanded their Fuzeon
distribution network. Fuzeon revenue declined, from our third quarter fiscal
2004 high of approximately $18 million, by $1 million in the fourth quarter of
fiscal 2004, by $5 million in the first quarter of fiscal 2005 and by another $1
million in the second quarter of fiscal 2005. Our Fuzeon revenue was
approximately $10.8 million, or 7.3% of revenue, in our second quarter of fiscal
2005, which was significantly lower than the same period last year. Transplant
patient revenue grew $2.0 million, or 8.4%, from the same period in fiscal 2004
despite the January 2004 reduction in Medicare reimbursement. The remainder of
our patient revenue for the second quarter of fiscal 2005 grew $7.7 million, or
21.1%. Rheumatoid arthritis and multiple sclerosis revenue for the second
quarter of fiscal 2005 grew a combined 50%, due to focused sales efforts, offset
by a decrease in hepatitis C and Aetna oncology. For the six months ended
December 31, 2004, our HIV patient revenue grew approximately $14.5 million, or
10.6%, from the same period in fiscal 2004. Transplant patient revenue grew
approximately $3.8 million, or 7.9%. The remainder of our patient revenue grew
approximately $10.7 million, or 14.3%, primarily from the above mentioned
rheumatoid arthritis and multiple sclerosis patients.

      Our business consists of four major payor categories including Aetna,
Medicaid and other state programs, Medicare, and all other payors. The table
below shows revenue by payor for the three and six months ended December 31,
2004, and December 26, 2003, as a percentage of total revenue.

<TABLE>
<CAPTION>
                                        THREE MONTHS ENDED              SIX MONTHS ENDED
                                    ---------------------------   ---------------------------
                                    DECEMBER 31,   DECEMBER 26,   DECEMBER 31,   DECEMBER 26,
(% OF TOTAL REVENUE)                   2004            2003           2004           2003
                                    ---------------------------   ---------------------------
<S>                                 <C>            <C>            <C>            <C>
---------------------------------   ---------------------------   ---------------------------
Aetna                                   21%            19%            21%            21%
Medicaid and other state programs       36%            34%            36%            33%
Medicare                                 7%             7%             7%             7%
All other payors                        36%            40%            36%            39%
                                       ---            ---            ---            ---
Total                                  100%           100%           100%           100%
                                       ===            ===            ===            ===
</TABLE>

      Aetna revenue in the second quarter of fiscal 2005 grew $5.7 million, or
22.3%, from the same period last year, and $7.9 million or 14.6% for the six
months ended December 31, 2004. This increase reflects the increase in the
number of Aetna patients served. In fiscal 2004, Aetna announced that its
contracted specialty pharmacy business, which is currently served by three
providers, of which one is Chronimed, would be consolidated into a new joint
venture, named Aetna Specialty Pharmacy, with another provider. Except for
Aetna, no other private payor accounted for 10% or more of our revenues in the
three and six months ended December 31, 2004, and December 26, 2003. Revenue
from Medicaid and other state programs grew $7.8 million, or 17.6%, in the
second quarter of fiscal 2005 compared to the same period in fiscal 2004, and
$15.9 million, or 18.2% for the six months ended December 31, 2004 compared to
the prior year period. In the second quarter of fiscal 2005, revenue from
Medicare, the federal program which covers many organ transplant recipients,
grew $0.4 million, or 4.3% compared to the same period last year, and $0.5
million, or 2.5% for the six months ended December 31, 2004 compared to the
prior year period. All other payor revenue grew $1.0 million, or 2.0% in the
second quarter of fiscal 2005 compared to

                                       11
<PAGE>

the same period last year, and $4.8 million, or 4.8% for the six months ended
December 31, 2004 compared to the prior year period.

      We distribute our products through 31 distribution facilities. This
includes our mail service facilities and our nationwide StatScript Pharmacy
chain. The table below shows revenue by distribution channel for the three and
six months ended December 31, 2004 and December 26, 2003 as a percentage of
total revenue.

<TABLE>
<CAPTION>
                                        THREE MONTHS ENDED              SIX MONTHS ENDED
                                    ---------------------------   ---------------------------
                                    DECEMBER 31,   DECEMBER 26,   DECEMBER 31,   DECEMBER 26,
(% OF TOTAL REVENUE)                   2004            2003           2004           2003
--------------------                ---------------------------   ---------------------------
<S>                                 <C>            <C>            <C>            <C>
                                    ---------------------------   ---------------------------
Retail                                  61%            56%             61%           56%
Mail Service                            39%            44%             39%           44%
                                       ---            ---             ---           ---
Total                                  100%           100%            100%          100%
                                       ===            ===             ===           ===
</TABLE>

      Our StatScript retail pharmacy revenue, in the second quarter of fiscal
2005, grew $14.4 million, or 19.5%, compared to the same period in fiscal 2004.
For the six months ended December 31, 2004, retail pharmacy revenue increased
$30.0 million, or 20.6% compared to the year ago period. Our retail pharmacies
predominantly serve HIV/AIDS patients and organ transplant recipients. Our mail
service revenue, in the second quarter of fiscal 2005, increased $0.5 million,
or 0.9%, compared to the same period in fiscal 2004. For the six months ended
December 31, 2004, mail service revenue decreased $1.1 million, or 1.0%. These
changes in revenue are primarily due to the increase from Aetna patients during
the current quarter, offset by the reduction in oncology from Aetna and the
migration of transplant patients to the StatScript retail channel.

Cost of Revenue and Gross Profit

      Total gross profit dollars increased $0.2 million, or 1.3%, from $15.6
million in the second quarter of fiscal 2004 to $15.8 million in the second
quarter of fiscal 2005 driven by the 11.5% increase in revenue and mitigated by
reimbursement price pressures. Second quarter gross margins as a percentage of
revenue decreased from 11.9% in fiscal year 2004 to 10.8% in fiscal year 2005.
For the six months ended December 31, 2004, gross profit dollars increased $0.6
million, or 1.9% compared to the year ago period, resulting in a 10.9% gross
margin percentage. This expected decline in gross margin percentage was due
primarily to reductions in the reimbursement rates from Medicare, Florida and
California Medicaid, and Aetna as further described below.

      Effective January 2004, the Medicare Prescription Drug Improvement and
Modernization Act reduced reimbursement for transplant medications provided to
patients covered under Medicare Part B. This Act reduced reimbursement
approximately 10% during 2004 on all Medicare-covered transplant medications.
The quarterly impact of this reduction on revenue, gross margin, and operating
income was approximately $1.0 million. Effective January 2005, a new Medicare
supply fee and drug pricing methodology will partially offset this reduction in
reimbursement.

      In the first quarter of fiscal 2005, we experienced reductions in
reimbursement from Florida Medicaid effective July 2004 and from California
Medicaid effective September 2004 as a result of state budget pressures.
Effective September 2004, Aetna, our largest payor, lowered its reimbursement
rate on several key drugs. The estimated impact of these first quarter
reimbursement reductions on the three and six months ended December 31, 2004 was
$1.2 million and $1.8 million in revenue, gross margin, and operating income,
respectively.

Operating Expenses

      Our operating expenses include selling and marketing, general and
administrative (G&A), and bad debt expenses. Our G&A expenses include both
corporate G&A expenses (corporate management, information systems, accounting,
and human resources) and direct G&A expenses (division management, customer
service, billing, and pharmacy fulfillment).

                                       12
<PAGE>

Selling and Marketing Expenses

      Our selling and marketing expenses decreased slightly in the second
quarter of fiscal 2005 to $1.4 million, and as a percentage of revenue of 1.0%
from 1.1% in the second quarter of fiscal 2004. For the six months ended
December 31, 2004, our selling and marketing expenses increased $0.1 million, or
4.3% to $2.9 million from $2.8 million for the same period last year. As a
percentage of revenue, selling and marketing expenses declined to 1.0% for the
six months ended December 31, 2004 from 1.1% for the same period last year.

General and Administrative Expenses

      Our general and administrative expenses decreased $0.3 million, or 3.0%,
from $11.0 million in the second quarter of fiscal 2004 to $10.7 million in the
second quarter of fiscal 2005. General and administrative costs decreased as a
percentage of revenue from 8.4% to 7.3% for the second quarters of fiscal 2004
and 2005, respectively. This was primarily the result of year ago consulting
fees incurred in preparation for compliance with Section 404 of the
Sarbanes-Oxley Act; a $0.2 million charge for a legal settlement reserve; and
the leveraging of certain fixed general and administrative expenses over
increasing revenue volume. For the six months ended December 31, 2004, our
general and administrative expenses decreased $0.4 million, or 2.1%, to $21.3
million from $21.7 million for the same period a year ago. As a percentage of
revenue, general and administrative expenses decreased to 7.4% for the six
months ended December 31, 2004 from 8.4% for the same period last year.

Merger Related Costs

      We had $1.2 million in merger-related costs, primarily investment banking
and legal fees, in the second quarter of fiscal 2005. For the six months ended
December 31, 2004, merger related costs totaled $2.1 million. We expect
additional merger expenses through the March 2005 expected closing of the deal.
We also expect to incur merger-related restructuring and transition charges in
our third quarter of fiscal 2005 and beyond as we integrate the operations of
Chronimed and MIM.

Bad Debt

      Our bad debt expense increased $0.1 million from $0.9 million in the
second quarter of fiscal 2004 to $1.0 million in the second quarter of fiscal
2005. For the six months ended December 31, 2004, bad debt expense increased
$0.2 million, to $2.1 million from $1.9 million for the same period a year ago.
Bad debt expense as a percentage of revenue for the three and six months ended
December 31, 2004 was consistent with the average bad debt expense of 0.7% of
revenue for fiscal 2004.

Interest Income

      Interest income, net of interest expense, remained relatively constant at
$0.1 million in the second quarters of fiscal 2005 and 2004. Interest income
resulted from current cash balances. We had no short-term borrowing costs on our
line of credit in the three and six-month periods ended December 31, 2004 and
December 26, 2003, respectively.

Other Income

      There was no other income in the second quarter of fiscal 2005. Other
income for the six months ended December 31, 2004 was $0.3 million. For the
three and six months ended December 26, 2003, we recorded approximately $0.1
million. All other income recorded was payments on a fully reserved note
receivable.

Income Taxes

      Our income tax rate was 39.0% for the three and six months ended December
31, 2004. Our income tax rate was 37.9% and 25.0% for the three and six months
ended December 26, 2003, respectively. The income tax rate for the six months
ended December 26, 2003 was impacted by the reversal of $0.6 million of
previously provided

                                       13
<PAGE>

income tax expense because the tax contingencies were resolved. We expect our
Federal and State tax rate to approximate 39% through June 2005.

LIQUIDITY AND CAPITAL RESOURCES

      As of December 31, 2004, we had $59.9 million of working capital, compared
to $57.0 million as of July 2, 2004. During the six-month period ended December
31, 2004, we generated $3.2 million of cash from operating activities. Our
accounts receivable decreased $1.9 million due to the timing of the collection
of receivable balances and an increase in reserves. We continue to experience a
delay in receiving a $2.1 million payment from the District of Columbia
Department of Mental Health. The receivable arose from sales during the period
from November 2002 to February 2003. We expect to receive full payment on this
receivable. Average days sales outstanding (DSO) of our accounts receivable was
27 days at December 31, 2004, a one-day improvement from July 2, 2004. Inventory
increased $0.2 million to support our business growth. The average days
inventory on hand was 8 days both at July 2, 2004, and December 31, 2004.
Accounts payable decreased $0.2 million due primarily to the payment timing to
our pharmaceutical wholesaler. Accrued expenses decreased $0.2 million due
primarily to our fiscal year end bonus payments to employees. Other assets
increased $2.2 million due mostly to an increase in prepaid expenses arising
from a special Minnesota health care tax, the majority of which will be refunded
in our third quarter of fiscal 2005.

      We generated approximately $0.9 million of cash from investing activities
during the six-month period ended December 31, 2004 consisting of $1.5 million
in proceeds from the sale of short-term investments offset by $0.6 million in
purchases of leasehold improvements, furniture, equipment, and computer hardware
and software.

      We had no outstanding borrowings as of December 31, 2004 and July 2, 2004.
Shareholders' equity as of December 31, 2004 and July 2, 2004 was $96.7 million
and $94.6 million, respectively. Net tangible assets, as of December 31, 2004
and July 2, 2004, were $62.3 million and $60.1 million, respectively. As of
December 31, 2004, we had a secured line of credit totaling $30 million. The
borrowing base on the line of credit is a calculated amount based on our
inventory and non-government accounts receivable balances. We had no borrowings
under our line of credit during the second quarter of fiscal 2005. We are in
compliance with the covenants of the line of credit as of December 31, 2004.
Under the terms of the agreement, the debt is secured by receivables and
inventory and bears interest at the Eurodollar rate plus an applicable margin
depending on our covenant calculation (approximately 4.45% at December 31,
2004). The line of credit expires in April 2006.

      We believe that our cash and cash equivalents, short-term investments,
line of credit, and cash provided by operating activities should allow us to
meet foreseeable cash requirements and provide the flexibility to fund future
working capital growth. We would need to seek additional debt or equity
financing beyond our current $30 million line of credit to fund any major
business acquisitions. We expect our capital project requirements to be
approximately $2 million in fiscal 2005.

      Our future contractual commitments consist entirely of payments due under
operating leases. See Note 4, Notes to Consolidated Financial Statements,
included in our Annual Report on Form 10-K for the fiscal year ended July 2,
2004.

IMPACT OF INFLATION

      Changes in prices charged by biopharmaceutical manufacturers and
wholesalers for the drugs we dispense, along with increasing labor costs,
freight and supply costs and other overhead expenses, affect our cost of revenue
and general and administrative expenses. Historically, we have been able to pass
a portion of the effect of such increases to the payor and patient pursuant to
automatic price adjustments made under our payor contracts. As a result, changes
due to inflation have not had significant adverse effects on our operations.

                                       14
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

      In December 2004, the FASB issued Statement 123R, "Share-Based Payment,"
to be effective for interim or annual periods beginning after June 15, 2005;
thereby becoming effective for Chronimed in the first quarter of fiscal 2006.
Statement 123R requires all share-based payments to employees, including grants
of employee stock options, to be recognized as an operating expense in the
income statement. The cost is recognized over the requisite service period based
on fair values measured on grant dates. The new standard may be adopted using
either the modified prospective transition method or the modified retrospective
method. We are currently evaluating our share-based employee compensation
programs, the potential impact of this statement on our consolidated financial
position and results of operations, and the alternative adoption methods.

FORWARD-LOOKING STATEMENTS

      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. These factors include, but are not limited to, the
following: our ability to maintain satisfactory on-going arrangements with
biopharmaceutical manufacturers and wholesalers, and their ability to satisfy
our volume, pricing, and product requirements; decrease in demand for drugs we
handle; changes in Medicare or Medicaid reimbursement, rules and regulations;
loss of relationships with, and/or significant reductions in reimbursements
from, payors (including Aetna or other material contracts); the commencement of
legal proceedings against us and our Board of Directors; failure of our
shareholders to approve the merger; negative cost containment trends or
financial difficulties by our payors; changes in or unknown violations of
various federal, state, and local regulations; costs and other effects of legal
or administrative proceedings; the adoption of new or changes to existing
accounting policies and practices and the application of such policies and
practices; the amount and rate of growth in our selling, general and
administrative expenses and the impact of unusual items resulting from our
ongoing evaluation of our business strategies, asset valuations and
organizational structures; the impairment of a significant amount of our
goodwill or intangible assets; the effects of and changes in, trade, monetary
and fiscal policies, laws and regulations, and other activities of government
agencies; changes in social and economic conditions; changes in interest rates;
increased competition; our reliance on a single shipping provider to handle our
mail deliveries; our ability to obtain competitive financing to fund operations
and growth; loss or retirement of key executives; continuing qualifications to
list our securities on the Nasdaq National Market; developments in medical
research affecting the treatment or cure of conditions for which we distribute
medications; the ability of management and accounting controls to assure
accurate and timely recognition of revenue and earnings; computer system,
software, or hardware failures or malfunctions; and adverse publicity, news
coverage, and reporting by independent analysts. These and other risks and
uncertainties are discussed in further detail in the cautionary statement filed
as Exhibit 99.1 as part of Chronimed's Annual Report on Form 10-K for the fiscal
year ended July 2, 2004 filed with the Securities and Exchange Commission.

ITEM  3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      We are exposed to interest rate risk primarily through our borrowing
activities under our line of credit discussed in Item 2 of this report. Our
short-term borrowings would bear interest at variable rates based on the
Eurodollar rate plus an applicable margin depending on our covenant calculation.
A 10% increase in interest rates would not have a significant effect on our
interest expense based on the fact that we have had no borrowings to date in
fiscal 2005. Interest rate risk on investments is not currently present. Foreign
currency exchange rate risk, commodity price risk, or other market risks (e.g.
equity price) are not present. We do not use financial instruments for trading
or other speculative purposes and are not a party to any leveraged financial
instruments.

                                       15
<PAGE>

ITEM  4. CONTROLS AND PROCEDURES

      Our management, including the Chief Executive Officer and Chief Financial
Officer, have conducted an evaluation of the effectiveness of disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) as of the end of the period covered by this report. Based on such
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, our disclosure controls and
procedures are effective.

      There have not been any changes in our internal controls over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during our most recent quarter that have materially affected, or
are reasonably likely to materially affect, our internal controls over financial
reporting.

                                       16
<PAGE>

                           PART II. OTHER INFORMATION

ITEM  1. LEGAL PROCEEDINGS

      On August 16, 2004, Robert Unger filed a lawsuit in Hennepin County
District Court in Minneapolis, Minnesota against Chronimed and its board of
directors (Mr. Blissenbach, Mr. Cusick, Mr. Heaney, Mr. Holubiak, Mr. Hubers,
Ms. Larson, Mr. Owens and Mr. Samuels) relating to the proposed merger of
Chronimed and MIM Corporation. On December 10, 2004, an amended complaint was
served on Chronimed and the individual defendants that added The Abernathy
Group, Growth Trust as a plaintiff and MIM as a defendant. In the amended
complaint, the plaintiffs allege, among other things, that Mr. Unger and The
Abernathy Group, Growth Trust are stockholders of Chronimed, and that the
Chronimed board of directors breached fiduciary duties owed to the Chronimed
stockholders in structuring the terms of the merger in a manner that provides
benefits to the Chronimed board of directors that are not available to the
Chronimed stockholders. The plaintiffs also allege that because Mr. Blissenbach
will be the chief executive officer of the merged entity and that the directors
will receive benefits as a result of the accelerated vesting of certain stock
options as a result of the merger, the Chronimed board of directors had a
conflict of interest when it approved the merger agreement. Chronimed and the
Chronimed board of directors filed motions to dismiss on January 10, 2005. MIM
has not yet responded to the amended complaint. Discovery requests have been
served on Chronimed, the individual defendants and third parties, including the
financial advisors to MIM and Chronimed. Chronimed and the individual defendants
responded to the discovery requests in late November and December 2004.

      In the amended complaint, the plaintiffs seek the following relief:

            -     declaring that the action is properly maintainable, and should
                  be certified, as a class action;

            -     declaring that the merger agreement was entered into in breach
                  of defendants' fiduciary duties and is therefore unlawful and
                  unenforceable;

            -     enjoining the consummation of the merger unless and until
                  Chronimed adopts and implements a procedure or process to
                  obtain the highest possible price for stockholders;

            -     directing defendants to exercise their fiduciary duties to
                  obtain a transaction that is in the best interests of
                  Chronimed's stockholders;

            -     rescinding, to the extent already implemented, the merger;

            -     imposing a constructive trust, in favor of plaintiff, upon
                  benefits allegedly received by defendants as a result of their
                  alleged conduct;

            -     awarding costs and disbursements, including attorneys' and
                  experts' fees; and

            -     granting such other and further relief as the court deems
                  appropriate.

      While there is no assurance that Chronimed will prevail, Chronimed
believes that the action is without merit and intends to vigorously defend
against it.

<TABLE>
<CAPTION>
ITEM  6.    EXHIBITS
<S>         <C>
31.1     Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).

31.2     Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).

32.1     Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002 (Chief Executive Officer).

32.2     Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
</TABLE>

                                       17
<PAGE>

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.

Dated:  February 7, 2005            By  /s/ HENRY F. BLISSENBACH
                                        ----------------------------------
                                        Henry F. Blissenbach
                                        Chief Executive Officer and
                                        Chairman of the Board of Directors

Dated:  February 7, 2005                /s/ GREGORY H. KEANE
                                        ----------------------------------
                                        Gregory H. Keane
                                        Vice President, Chief Financial
                                        Officer and Treasurer
                                        (Principal Financial and Accounting
                                        Officer)

                                       18