UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB


(Mark one)
              X         Annual Report Pursuant to Section 13 or 15(d) of the
             ---        Securities Exchange Act of 1934
                        FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
                        Transition Report Pursuant to Section 13 or 15(d) of the
             ---        Securities Exchange Act of 1934

                         Commission File Number: 5-78407
                                                 -------

                                 RXBAZAAR, INC.
                 (Name of Small Business Issuer in its charter)

              Delaware                                   38-3506266
              --------                                   ----------
   (State or other jurisdiction of                    (I.R.S. Employer
    incorporation or organization)                   Identification No.)


                 1385 Kemper Meadow Drive, Cincinnati, OH 45240
               ---------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (781) 449-4962
                                               --------------

      Securities to be registered under Section 12(b) of the Exchange Act:
                                      None

      Securities to be registered under Section 12 (g) of the Exchange Act:
                     Common Stock, par value $.001 per share
                     ---------------------------------------
                                (Title of Class)

     Check whether the issuer (1) filed all reports required to be filed under
Section 13 or 15(d) of the Exchange Act during the past 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
    ---    ---

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X].

     Revenues for the fiscal year ended December 31, 2003: $48,994,018

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant computed by reference to the price at which the stock was sold,
or the average bid and ask prices of such stock as of March 1, 2004: $
6,754,848.

     The number of shares outstanding of Registrant's Common Stock, $ .001 par
value, outstanding on December 31, 2003: 6,166,530 shares.


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

                    Documents Incorporated by Reference: None
          Transitional Small Business Disclosure Format: Yes     No  X
                                                             ---    ---


<PAGE>


                                      INDEX


                                                                        Page No.
                                                                        --------

Facing Page

Table of Contents                                                            i

PART I
Item 1.    Description of Business                                           1
Item 2.    Description of Property                                           9
Item 3.    Legal Proceedings                                                 9
Item 4     Submission of Matters to a Vote of Security Holders               9

PART II
Item 5.    Market for Common Equity and Related Stockholder Matters          9
Item 6.    Management's Discussion and Analysis of Financial Condition
           or Plan of Operations                                            10
Item 7.    Financial Statements                                             19
Item 8.    Changes In and Disagreements with Accountants on Accounting
           and Financial Disclosure                                         20
Item 8A.   Controls and Procedures                                          20

PART III
Item 9.    Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16 (a) of the Exchange Act.              20
Item 10.   Executive Compensation                                           22
Item 11.   Security Ownership of Certain Beneficial Owners and Management
           and Related Stockholder Matters                                  26
Item 12.   Certain Relationships and Related Transactions                   28
Item 13.   Exhibits and Reports on Form 8-K                                 30
Item 14.   Principal Accountant Fees and Services                           34


SIGNATURES                                                                  35


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                                     PART I
                                     ------

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

     RxBazaar, Inc. ("we" or "RxBazaar") is a distributor of brand and generic
pharmaceutical and medical products, as well as other related products aimed at
our target market of independent pharmacies. We sell our products to
distributors, wholesalers, pharmacies and other customers and organizations
licensed to purchase pharmaceutical products. On February 23, 2001, we acquired
FPP Distribution, Inc. We conduct business in all fifty U.S. states as well as
Puerto Rico.

     We conduct our business not only through traditional distribution channels,
such as telemarketing through our call center, but also through the anonymous
on-line marketplace that we operate at our website, www.rxbazaar.com. We
developed and wrote the website internally, and completed development in April
2000. RxBazaar.com is aimed at creating an anonymous on-line marketplace for the
buying and selling of branded and generic pharmaceutical and medical products,
with the target buyers being independent pharmacies. We believe that we have
developed an innovative approach to this target market, based on the following
elements:

     o    We bring purchasing opportunities, both on- and off-line, closer to
          the local pharmacy. We enable independent pharmacies to access
          products at reduced costs that were previously unavailable to them.

     o    We enable drug manufacturers, distributors, wholesalers, pharmacists
          and others to buy and sell products on-line efficiently and on a
          confidential basis. We enable wholesalers to increase sales and manage
          inventory, expanding their channels of distribution beyond traditional
          boundaries, and we can also help our customers achieve improved
          margins by eliminating multiple intermediaries when we act as the
          single intermediary between, but not limited to, manufacturers, drug
          wholesalers and independent pharmacies.

     o    Because we allow multiple manufacturers, wholesalers and other
          qualified sellers to post products for sale on a confidential basis,
          we have the capacity to offer our customers a broad range of products.

     o    We sell inventory for our own account, which generally results in
          higher margins than we realize for our services as an intermediary.

     Our goal is to enable our target market of independent and small-chain
pharmacies access to the alternate source market for pharmaceutical products,
where such pharmacies may be able to obtain products at prices lower than those
available through traditional channels. We believe that until we introduced our
on-line marketplace, our target market of independent pharmacies had relatively
little access to discounts available to buyers in the alternate source market.

     History

     During our first six months after formation, we focused our efforts on
hiring key personnel, establishing relationships with customers and vendors, and
developing our technological and operational infrastructure. In April 2000, we
launched our www.rxbazaar.com website, and commenced sales. Our initial
operations were funded through loans from officers and directors and private
placements of common stock. We also arranged for FPP Distribution, Inc., then
known as Superior Pharmaceutical Company, to act as our fulfillment center for
all of our sales. FPP Distribution was a wholly-owned subsidiary of Able
Laboratories, Inc. ("Able"). In October 2000, we agreed to acquire FPP
Distribution from Able. We raised the necessary funds to acquire FPP
Distribution by selling Series A Preferred Stock to investors in a private
placement. We purchased FPP Distribution on February 23, 2001 for $4,000,000 in
cash and the assumption of $2,250,000 in subordinated debt. At the same time, we
entered into a $12,500,000 line of credit, secured by all of our assets.


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     Merger Transaction With SB Merger Corp.

     SB Merger Corp. was incorporated in Delaware on January 3, 2000. Other than
issuing shares to its stockholders, it did not engage in any operational
activities; rather, it was a "blank check" company the sole purpose of which was
to locate and consummate a merger or acquisition with a private entity. In May
2001, SB Merger completed an initial public offering of 125,000 shares of its
common stock at a price of $1.00 per share.

     SB Merger and its wholly-owned subsidiary entered into a merger agreement
with RxBazaar, Inc. on February 1, 2002, and completed the transaction on July
26, 2002. Because of our lack of sufficient working capital as of the date of
the merger agreement, the merger agreement required us to raise a minimum of $3
million in additional equity after January 1, 2002. This requirement was to
ensure that the surviving company would have a reasonable amount of working
capital after the merger. To meet this requirement, we sold $4,175,000 of Series
B Preferred Stock, for cash and in consideration of conversion of outstanding
notes payable and accrued expenses. In the merger, SB Merger issued or became
obligated to issue to the former holders of RxBazaar approximately:

     o    3,333,969 shares of Common Stock, 345,333 shares of Series A Preferred
          Stock and 2,087,500 shares of Series B Preferred Stock;

     o    obligated to issue up to 1,834,653 shares of Common Stock issuable
          upon exercise of outstanding options and warrants to purchase Common
          Stock; and

     o    obligated to issue up to 2,363,118 additional shares of Common Stock,
          if the merged company meets earnings targets in the first or second
          year after the merger as described in the merger agreement.

     In connection with the merger, SB Merger adopted the name "RxBazaar, Inc."
and all of the officers and directors of RxBazaar prior to the merger became
officers and directors of the newly-named RxBazaar, Inc.

     The business combination was a "reverse merger," so termed because
immediately after the merger, stockholders of the former RxBazaar held
approximately 93% of the outstanding shares of RxBazaar, Inc., formerly known as
SB Merger Corp. For that reason, except where specifically noted, the financial
and other information in this report is presented for the operations of the
former RxBazaar, Inc. since its inception in October 1999. Also, because the
merger was accounted for as an acquisition of SB Merger by RxBazaar and a
recapitalization of RxBazaar, our financial statements for periods ending after
the date of the merger consist of the historical financial statements of the
former RxBazaar, Inc.

DRUG DISTRIBUTION INDUSTRY

     Pharmaceutical Distribution in the U.S.

     We compete in a pharmaceutical distribution market of over $150 billion.
Many manufacturers of pharmaceuticals and related healthcare products utilize
wholesale distributors to deliver their products to the marketplace. We provide
both traditional and progressive distribution channels for these products.

     The Role of Independent Pharmacies

     According to a recent survey conducted by the National Community
Pharmacists Association, a trade group, independent pharmacies are in the midst
of an economic resurgence. In 2001 and 2002, as a whole, the approximately
24,000 independent pharmacies experienced record years in sales. Independent
pharmacies posted a 15% increase in sales for 2002, with $67 billion in total
sales, an average of $2.9 million per store. Approximately 89% of this revenue
was attributable to the sale of prescription drugs.

     Multi-Tiered Pricing

     A distinctive feature of the drug distribution industry is that
manufacturers charge different prices to different purchasers. Over the past 25
years, the pharmaceutical distribution industry has been characterized by an


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ever more complex set of pricing practices. These pricing practices are
primarily the result of the varying market power held by different purchasers
and because of government reimbursement programs. Drug manufacturers sell their
products to several classes of purchasers, including:

     o    federal health care agencies and entities;
     o    hospitals;
     o    nursing homes;
     o    drug store chains;
     o    health maintenance organizations;
     o    insurers and pharmacy benefit managers, companies that administer
          the prescription drug portion of a health benefit plan for
          insurers and managed care organizations; and
     o    wholesale distributors that sell to pharmacies and others.

     Because of this complex pricing system, a single drug product may be
available in the market at many different prices, depending on the category of
purchaser. The variables that affect the price for a particular class of
purchaser include:

     o    federal law entitling certain agencies and public entities to
          discounts;
     o    whether a purchaser or a group of purchasers can negotiate
          directly with the manufacturer;
     o    whether a purchaser can positively affect the manufacturer's
          revenue and market share.

     For example, certain federal agencies and governmental purchasers are
entitled to discounts as a matter of law. Also, drug manufacturers typically
offer lower prices to hospitals and health maintenance organizations, or to the
pharmacy benefit managers or group purchasing organizations acting on their
behalf, because those entities are able to negotiate directly with the
manufacturer and can increase the use of a manufacturer's product. Other
businesses, such as independent pharmacies, are not typically able to negotiate
significant discounts. Independent pharmacies do not negotiate directly with
manufacturers, and cannot control the drug prescribed by the physicians. Also,
the Medicaid reimbursement program, under which state Medicaid programs
reimburse beneficiaries for the cost of certain drugs, may act as an impediment
to manufacturers' offering discounts on certain drugs. Under the Medicaid
program, a manufacturer must offer a 15.1% discount in the form of a rebate to
the state Medicaid program, or must offer the Medicaid program the best price it
offers to other non-government purchasers. Therefore, manufacturers could be
reluctant to offer discounts on certain drugs to non-government purchasers such
as independent pharmacies.

     Another characteristic of the drug distribution business is that
manufacturers may enter directly into agreements with various customers at
different prices, and use a number of different distributors to fulfill orders
from the customers. To facilitate this process, the manufacturer may sell to the
distributor at a set wholesale price, and if the distributor then fills an order
from a customer that has negotiated a lower price from the manufacturer, the
distributor charges the manufacturer a credit, known in the industry as a
chargeback.

     The Alternate Source Market

     A purchaser that has obtained a drug product at a favorable price may,
instead of selling the product through to retail businesses or consumers, sell
the product back into the wholesale market. Then, another wholesaler or
distributor may buy the product and resell it to retail outlets. As a result, a
secondary, or alternate source, market for drug products has emerged. We believe
that the alternate source market is a significant opportunity for our business.

     In the alternate source market, certain pharmaceutical wholesalers and
distributors can acquire products at a discount and resell them to other
parties. We believe that independent pharmacies could benefit from improved
access to the alternate source market. We believe that until we introduced our
on-line marketplace, our target market of independent pharmacies had relatively
little direct access to these alternate source products or the associated
discounts.


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<PAGE>


     Our Solution

     We believe that traditional channels for the distribution of drugs, medical
supplies and equipment create limitations that prevent distributors and
independent pharmacies from achieving maximum efficiency. A few of the obstacles
to efficiency caused by prevalent practices in the current drug distribution
market include:

     o    limited selection available to independent pharmacies;
     o    limited access to alternate source products; and
     o    lack of convenience.

     Most independent pharmacists are responsible for purchasing, stocking, and
selling all the items in their stores. Traditional business practices may limit
pharmacists' and other purchasers' abilities to identify and take advantage of
savings opportunities, because the pharmacists do not have an efficient way to
find out about all of the products available from various distributors,
including alternate sources. We believe that, by integrated traditional and
on-line distribution products and services, we can solve this problem and enable
independent pharmacies and others in the business to overcome these limitations.
Through our on-line marketplace at www.rxbazaar.com, we:

     o    provide pharmacists an opportunity to browse through various
          deals offered by multiple sellers of the same products,
          potentially offering the pharmacists a wider selection and a
          better price than that which might be available through
          traditional wholesale distribution channels.
     o    allow buyers to view directly the products offered by sellers.
     o    are available twenty-four hours a day, seven days a week,
          allowing pharmacists the convenience of purchasing during
          off-peak hours.

     In addition to the www.rxbazaar.com on-line marketplace, we use our
traditional distribution business capabilities both to fulfill transactions
carried out on-line and to engage in telemarketing through our call center. We
believe that our solution effectively addresses existing market limitations and
can create an integrated distribution business consisting of both traditional
distribution activities and an on-line marketplace, combining to offer buyers
and sellers convenient access, competitive prices and full distribution support
for a wide variety of both prescription and generic drugs, medical supplies and
equipment. Our on-line marketplace enables buyers and sellers to connect on a
confidential basis and eliminates many of the intermediaries that inflate
prices.

PRODUCTS AND SERVICES

     We offer the following products and services:

     Traditional Distribution Services

     We acquired FPP Distribution, Inc. in February 2001. We conduct our
traditional pharmaceutical distributor business through FPP's established
distribution channels, including:

     o    direct sales, conducted by a staff of direct sales telemarketing
          employees who actively call and market to independent
          pharmacists, nursing homes and small regional chains; and
     o    corporate and government sales, marketing to group purchasing
          organizations, pharmacy chains and federal, state and local
          government agencies.

     Our traditional distribution services also play an integral part in
supporting our on-line marketplace. After an on-line buyer has selected a
product offered by a seller posting on the website, we purchase the product from
the seller, take delivery at our Cincinnati warehouse, and sell and ship it to
the buyer.

     On-Line Pharmaceutical Marketplace

     We created our pharmaceutical trading outlet at www.rxbazaar.com to build
on our traditional distribution business. Our goal is to bring market efficiency
to the local pharmacy and to link a variety of pharmaceutical buyers and sellers
in a confidential internet environment. Our on-line marketplace enables buyers
and sellers to post, on a confidential basis, products they wish to buy or sell.


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Because the website is capable of reaching a large national audience in an
efficient manner, it enables sellers, such as manufacturers, wholesalers and
distributors, to offer their products at significantly reduced prices. In
addition, a seller can post for quick movement its short-dated, overstocked and
bulk products that, in the past have been difficult to sell. We purchase the
product from the seller at a discount and sell the products to the buyer.

     Our on-line marketplace enables participants to buy and sell in an open
exchange that requires no up-front fees, no software installation and no
consulting services. A seller selling products through the site avoids incurring
expenses such as those relating to sales forces, distribution, chargebacks and
rebates, and can reduce or eliminate expenses caused by an inability to quickly
sell overstocked merchandise and inventory that is near its expiration date. The
buyer reaps the benefits of these savings through reduced prices. The buyer may
also post items it would like to acquire.

     If a customer notifies us that it wants to buy a product posted for sale on
the website, we:

     o    buy the product from the poster at a discount from the listed
          price;
     o    take delivery of the product at our warehouse; and
     o    sell and ship the product to the customer at the listed price.

     We may also elect to fill the order with inventory already in stock, at the
listed price, if we have the item in stock. In addition, we may charge suppliers
a monthly fee for posting products on the site.

     Our on-line marketplace is fully supported by a traditional
"brick-and-mortar" warehouse, a full staff of software engineers monitoring and
updating the site daily, and a telemarketing staff that is available 24 hours a
day by phone. Our operating controls are aimed at providing buyers and sellers
using our exchange with the assurance that they are dealing in merchandise that
has been handled properly with the assurance of complete product integrity.

     We operate on a short sales cycle with substantially no backlog.

     No customer accounted for more than 10% of our total revenues in 2002 or
2003. In 2003, 19% of our purchases were from one major supplier. We purchased a
wide variety of products from this supplier.

     Our primary marketing activities include:

     o    Participation in key industry trade shows where we exhibit and give
          demonstrations to existing and potential posters and customers;

     o    Utilization of our staff of 41 telesales representatives through which
          we conduct over 3,500 calls per day to prospective and current
          customers;

     o    Periodic faxes listing specially priced products and occasional
          incentives are sent to encourage a potential customer to place its
          first order; and

     o    Our website - a powerful marketing tool that provides up to date
          information on our products and services.

STRATEGY

     Since launching our on-line marketplace, we have been positioning RxBazaar
to be a national exchange for on-line pharmaceutical trading. We believe that
the key to growth is to become a recognized facilitator that creates value and
convenience for both buyers and sellers. Our strategy is to offer an integrated
set of distribution services, combining traditional wholesale pharmaceutical
distribution services with a unique web-based exchange that facilitates and
manages pharmaceutical trading transactions.


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     A key element of our strategy is to leverage our ability to cut through the
complexities of the pharmaceutical supply chain and pass savings that often are
not available to our customers. Specifically, we intend to generate savings by
reducing or eliminating the number of intermediaries and enabling independent
pharmacy customers to realize those savings. We are able to offer this to market
participants by providing an on-line marketplace where buyers and sellers can do
business efficiently and confidentially by selling to and buying from RxBazaar
as the single intermediary.

     In addition to serving as a conduit for buyers and sellers, we also intend
to use our on-line market to sell for our own account inventory that we obtain
at discounts through market intelligence and through our product acquisition
activities. We believe that these activities not only have the potential to
increase overall sales, but also can assist in drawing buyers and sellers to the
site by increasing the volume and product mix available. By selling products for
our own account, we can also generate significantly favorable gross margins
compared to our margins on carrying out transactions for others. However, we
currently lack the working capital necessary to carry out product acquisition to
the extent necessary to operate profitably.

     We intend to persuade leading wholesalers and distributors to become
regular posters on our on-line marketplace. By obtaining early participation
from key suppliers in the industry, we intend to become recognized as a useful
resource that buyers will return to regularly, offering both branded and generic
as well as alternate source merchandise at the lowest prices.

     Another important element in our strategy is to develop and leverage
proprietary technology that is superior to that of our competitors. In April
2000, we began developing our proprietary call center telemarketing management
software. We completed the project in March 2001.

COMPETITION

     The drug distribution business is highly competitive. In addition, we
expect the on-line marketplace feature of our business to be highly competitive
because the barriers to entry are relatively low.

     We will have no control over how successful our competitors will be. In
addition, our on-line competitors can duplicate many of the products or services
and much of the content that we offer, with little difficulty.

     We compete for our customers' purchasing dollars with:

     o    national, full-line wholesalers, such as McKesson Corporation,
          Cardinal Health, Inc. and AmerisourceBergen Corp.;
     o    smaller regional wholesalers, such as H.D. Smith Wholesale Drug
          Company and D&K Health Care Resources, Inc., which sell full
          lines of drug products in various regions of the U.S.; and
     o    smaller, specialty wholesalers that provide nation-wide coverage
          for various product categories.

     Many of our competitors and potential competitors have operated for a
longer period of time than we have, have greater financial resources, have
established marketing relationships with leading manufacturers and advertisers
and have a secured presence in distribution channels. Some of these companies
may also commence or expand their presence on the internet. Finally, we are
aware of other entrepreneurial companies that are developing and marketing
on-line products and services that compete directly with those that we offer.
Also, we may face a significant competitive challenge from alliances entered
into between and among our competitors and major pharmacy benefit managers,
major HMOs or chain drugstores, as well as from larger competitors created
through industry consolidation. These partnerships or consolidated entities
could pose a significant competitive challenge to us and their existence could
impede us in or prevent us from establishing relationships with the member
pharmacy benefit managers, HMOs or chain drugstores.

     Our competitive strategy is not to displace larger, more established
full-line distributors, but to offer our independent pharmacy customers an
opportunity to supplement their regular purchasing activities by obtaining
particular products at significant discounts.


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     We intend to compete on the following principal factors:

     o    acceptance of our business model as a confidential on-line
          marketplace using RxBazaar as the single intermediary;
     o    recognition of the RxBazaar brand;
     o    convenience, accessibility and ease of use for both sellers and
          buyers;
     o    the prices at which we can offer products to buyers;
     o    customer service; and
     o    reliability and speed of fulfillment for products ordered.

     We believe that we have the ability to address each of the factors on which
we intend to compete because of our combination of:

     o    an established traditional distribution business;
     o    our experience in purchasing;
     o    an innovative on-line exchange featuring confidential trading
          through a single intermediary; and
     o    substantial management expertise and industry experience.

     However, we can give no assurance that we will be able to successfully
compete. Intense competition in our industry could prevent us from achieving our
business objectives.

GOVERNMENT REGULATION

     Our business is subject to extensive federal, state and local regulation,
including:

     o    laws and regulations relating to the purchase and sale of
          prescription and over-the-counter drugs;
     o    federal, state and local licensing and registration regulations;
     o    provisions of the Prescription Drug Marketing Act and the rules
          thereunder; and
     o    provisions of the Controlled Substances Act and U.S. Drug
          Enforcement Agency regulations, as well as related state and
          local laws and regulations relating to the purchase, storage and
          dispensing of controlled substances, prescription drugs and
          certain over-the-counter drugs.

     These laws and regulations impose substantial registration, security,
record-keeping, reporting and other requirements.

     We handle controlled substances, such as narcotic and habit-forming drugs,
which require special storage and handling. We therefore must meet licensing
requirements of the U.S. Drug Enforcement Administration ("U.S. DEA"). We are
also required to maintain a wholesale distributor's license as well as a license
for controlled substances for the state of Ohio, where our physical operations
are located. Additionally, as a generic drug distributor, we must obtain
licenses as necessary from each state to which we ship products.

     Our business is subject to a wide range of federal and state laws and
regulations, including the Federal Food, Drug and Cosmetic Act, the Controlled
Substances Act, the Prescription Drug Marketing Act and the rules under each of
those laws, and state laws and regulations applicable to the distribution of
pharmaceutical products and controlled substances.

     The Federal Food, Drug and Cosmetic Act generally regulates such matters as
the handling, packaging, storage, and labeling of drugs and cosmetics. The
Prescription Drug Marketing Act, an amendment to the Federal Food, Drug and
Cosmetic Act, establishes requirements applicable to the wholesale distribution
of prescription drugs, including the requirement that wholesale drug
distributors be licensed in accordance with federally established guidelines on
storage, handling, and records maintenance by each state in which they conduct
business. In addition, because some of the drugs that we handle are regulated
under the Controlled Substances Act (for example, those containing narcotics
such as codeine or certain stimulant or depressant medications), we are also
subject to the applicable provisions of that law, including specific labeling,
packaging and recordkeeping requirements and the obligation to register with


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<PAGE>


the federal government as a distributor of controlled substances. Finally, we
are required to maintain licenses and permits for the distribution of
pharmaceutical products and controlled substances under the laws of each state
in which we operate.

     On December 3, 1999, the Food and Drug Administration (the "FDA") published
final rules implementing the Prescription Drug Marketing Act. The FDA originally
scheduled these final rules to become effective on December 4, 2000 but has
since stayed effectiveness of certain rules several times, so that the stayed
rules will not be in effect until December 1, 2006. Under the rules that have
been stayed, wholesale drug distributors must enter into a written agreement
with a drug manufacturer in order for the wholesale drug distributor to be
considered an authorized distributor for the manufacturer's products. We have
written agreements to purchase products with over 40 manufacturers. Those
wholesale drug distributors who are not considered authorized distributors must
provide their customers with a statement identifying all prior sales of the drug
starting with the original sale by the manufacturer. If these rules become
effective in their current form on December 1, 2006, then one effect is that we
may have to provide this information to buyers on our website. However, the
confidentiality between sellers and buyers is a feature that we promote to
attract sellers to use our on-line marketplace. Sellers on our website may be
less willing to use the website if it means that they will have to provide the
prior sale information to our buyers. Therefore, we could experience significant
disruption in the supply of products available on our on-line marketplace, which
could have a material adverse effect on our business. These rules may be further
amended by the FDA prior to final implementation, or Congress could enact an
amendment to the law that would alleviate this effect on us. We can give no
assurance that the rules as they are finally implemented will not materially and
adversely affect our business.

     State laws and regulations aimed at preventing abuses in the drug
distribution business could also affect our business, because increased
regulation could put additional burdens on legitimate wholesalers and retailers.
Recent regulations and enforcement actions, for example, have focused on
practices of businesses known as closed door pharmacies. A closed door pharmacy
is a pharmacy that dispenses drugs to patients of a nursing home or hospital,
but does not sell to the public. Closed door pharmacies are given discounts on
prescription drugs. One common fraudulent scheme involves operators who set up a
closed door pharmacy, and obtain drug products at the discounted prices
available to legitimate closed door pharmacies. Rather than supplying a nursing
home or other eligible entity, though, these operators resell their product into
the market at a significant mark-up. State laws and regulations are being
enacted to combat such practices. For example, the Nevada Board of Pharmacy has
voted to restrict pharmaceutical wholesalers from selling more than 10% of their
inventory to other wholesalers, and has imposed more stringent recordkeeping
requirements. Such a broad-based restriction, or other regulatory changes that
have the ancillary effect of limiting or constraining legitimate business
opportunities in the secondary market, could harm our business.

     We believe that we currently have all the regulatory approvals necessary to
conduct our business. However, we can give no assurance that we will be able to
maintain compliance with existing regulations or that laws or regulations
enacted in the future will not hinder or prevent us from conducting our
traditional and on-line business.

     We also require our customers and wholesalers to demonstrate that they meet
various licensing requirements. For example, we require any party that offers to
buy from or sell to us any product designated by the FDA as "prescription only"
to supply a copy of its current license from its local state board of pharmacy,
demonstrating that it meets the regulatory requirements for the sale or purchase
of pharmaceutical products. A party offering to buy or sell products regulated
under the Controlled Substances Act must send to us a copy of its current
Controlled Substance Registration Certificate issued by the U.S. DEA. We keep
copies of these licenses and certificates on file, and if a party's license or
certificate has expired, we will not buy from or sell to the party until we
receive a copy of the renewed licenses(s).

INTELLECTUAL PROPERTY

     Although the operation of traditional drug distribution businesses has not
historically been dependent on proprietary technology, we have developed
proprietary software for the management of our call center that we believe helps
us to increase the efficiency and effectiveness of our call center staff. We
have also developed proprietary software that automates certain business


                                       8
<PAGE>


functions, including the complex transactions associated with manufacturer
pricing strategies.

     We do not have any patents on our proprietary software and we depend on a
combination of copyright protection and trade secrets to maintain our
intellectual property.

EMPLOYEES

     As of December 31, 2003, we had 75 full-time employees, of whom 46 were
employed in sales, eight were employed in information technology and the rest
were employed in administrative and customer service positions.

     None of our employees are represented by labor organizations and we are not
aware of any activities seeking such organization. We consider our relations
with our employees to be good.

ITEM 2.  DESCRIPTION OF PROPERTY

     We maintain our principal executive offices at 1385 Kemper Meadow Drive,
Cincinnati, Ohio, under a lease expiring in March 2015. The premises consist of
approximately 37,300 square feet of office and warehouse space. The rent is
$35,000 per month.

     We also maintain an administrative office at 200 Highland Avenue, Suite
301, Needham, MA under an oral tenant-at-will arrangement with a related party.
See Item 12.

     Our website address is www.rxbazaar.com.

     We believe that our present facilities are adequate to meet our current
needs. If new or additional space is required, we believe that adequate
facilities are available at competitive prices in the respective areas.

ITEM 3.  LEGAL PROCEEDINGS

     We are involved in certain legal proceedings from time to time incidental
to our normal business activities. While the outcome of any such proceedings
cannot be accurately predicted, we do not believe that the ultimate resolution
of any existing matters should have a material adverse effect on our financial
position or results of operations.

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

     None.

                                     PART II
                                     -------

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock has been listed on the OTC Bulletin Board under the symbol
RXBZ since September 17, 2002. There is no active trading market for our common
stock at present and there has been no significant trading market to date. Until
September 17, 2002, no market quotations were entered for our common stock.
Between November 18 and December 31, 2002, the high and the low market
quotations were $2.00 and $.01, respectively. During 2003, the high and the low
market quotations were $4.00 and $0.25, respectively. We cannot guarantee that
an active trading market will ever develop or if a market does develop, that it
will continue.

     On December 31, 2003, based upon information from Continental Stock
Transfer & Trust Company, our transfer agent, there were approximately 268
holders of record of the common stock. Since a portion of the shares of common
stock is held in street or nominee name, it is believed that there may be a
significant number of additional beneficial owners of the common stock.


                                       9
<PAGE>


DIVIDENDS

     We have never declared or paid cash dividends on our common stock.
Furthermore, we presently intend to retain all earnings, if any, for use in our
business operations and accordingly, the board of directors does not anticipate
declaring any cash dividends in the foreseeable future. In addition, some of our
credit agreements impose certain restrictions on us in paying cash dividends on
our common stock.

TRANSFER AGENT

     The transfer agent and registrar for our common stock is Continental Stock
Transfer & Trust Company, New York, New York.

RECENT SALES OF UNREGISTERED SECURITIES

     On October 27, 2003, as part of our entry into a Management Services
Agreement with Steel City Pharmaceuticals LLC (see Item 12 of this Report), we
granted to Steel City warrants to purchase 150,000 shares of our common stock
exercisable at $2.00 per share for a period of five years and options to
purchase 1,600,000 shares of our common stock exercisable at $2.50 per share
during the term of the Services Agreement and for sixty days thereafter. See our
Report on Form 8-K for an event of October 27, 2003.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
         OPERATIONS

OVERVIEW

     We distribute brand and generic pharmaceutical and medical products,
through both our on-line market and through traditional distribution activities
such as:

     o    direct sales, conducted by a staff of direct sales telemarketing
          employees who actively call and market to independent pharmacists,
          nursing homes and small regional chains; and

     o    corporate and government sales, marketing to group purchasing
          organizations, pharmacy chains and federal, state and local government
          agencies.

     We launched our www.rxbazaar.com website, and commenced sales, in April
2000. Our initial operations were funded through loans from officers and
directors and private placements of common stock. We also arranged for FPP
Distribution, Inc., then known as Superior Pharmaceutical Company, to act as our
fulfillment center for all of our sales. FPP Distribution was a wholly-owned
subsidiary of Able Laboratories, Inc. In October 2000, we agreed to acquire FPP
Distribution from Able. We raised the necessary funds to acquire FPP
Distribution by selling Series A Preferred Stock to investors in a private
placement. We purchased FPP Distribution on February 23, 2001 for $4,000,000 in
cash and the assumption of $2,250,000 in subordinated debt. At the same time, we
entered into a $12,500,000 line of credit, secured by all of our assets. On
completion of the FPP Distribution acquisition, we lacked sufficient working
capital to operate our business.

     On February 1, 2002, RxB, Inc. ("RxB") (formerly known as RxBazaar, Inc.),
entered into an agreement to merge with a wholly-owned subsidiary of RxBazaar,
Inc. (formerly known as SB Merger Corp.). Because we lacked sufficient working
capital as of the date of the merger agreement, the merger agreement required us
to raise a minimum of $3 million in additional equity after January 1, 2002.
This requirement was to ensure that we would have a reasonable amount of working
capital after the merger. To meet this requirement, we sold $4,175,000 of Series
B Preferred Stock, for cash and in consideration of conversion of outstanding
notes payable and accrued expenses.

     On July 26, 2002, RxB completed its merger with a wholly-owned subsidiary
of SB Merger Corp. In the merger, SB Merger Corp. issued approximately 3,333,969
shares of common stock, 345,333 shares of Series A Preferred Stock and 2,087,500
shares of Series B Preferred Stock to RxB's stockholders. The surviving parent


                                       10
<PAGE>


company, now known as RxBazaar, Inc., is also obligated to issue up to 1,834,653
shares of common stock upon exercise of outstanding options and warrants to
purchase common stock that it assumed in the merger and it may become obligated
to issue up to 2,363,118 additional shares of common stock, if the surviving
company meets earnings targets for the four fiscal quarters ending March 31,
2004.

     Stockholders of RxB before the merger owned approximately 93% of our
outstanding shares immediately after the merger. After the merger, SB Merger
changed its name to RxBazaar, Inc. and RxBazaar, Inc. changed its name to RxB,
Inc. On September 30, 2002, RxB was merged into RxBazaar.

     The business combination was a "reverse merger," so termed because
immediately after the merger, stockholders of RxB held approximately 93% of the
outstanding shares of the surviving company. For that reason, the financial and
other information in this report is presented for the operations of RxB since
its inception in October 1999. Also, because the merger was accounted for as an
acquisition of SB Merger by RxB and a recapitalization of RxB, our financial
statements for periods ending after the date of the merger will consist of the
historical financial statements of the former RxBazaar, Inc.

CRITICAL ACCOUNTING POLICIES

     Our significant accounting policies are more fully described in Note 1 to
our consolidated financial statements included in this report. However, certain
of our accounting policies are particularly important to the portrayal of our
financial position and results of operations and require the application of
significant judgment by management; as a result, they are subject to an inherent
degree of uncertainty. In applying these policies, management makes estimates
and judgments that affect the reported amount of assets, liabilities, revenues
and expenses and related disclosures. Those estimates and judgments are based on
management's historical experience, the terms of existing agreements, our
observance of trends in the industry, information that we obtain from our
customers and outside sources, and on various other assumptions that management
believes to be reasonable and appropriate under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results
might differ from these estimates under different assumptions or conditions. Our
critical accounting policies include:

     Inventories. Inventories are stated at the lower of average cost or market,
with cost being determined on the first-in, first-out method. Cost of
inventories held for distribution is based on the purchase price net of vendor
discounts and other allowances. We establish reserves, when necessary, for
slow-moving and obsolete inventories based on our historical experience and
management's assessment of current product demand. We evaluate the adequacy of
these reserves quarterly.

     Revenue recognition and accounts receivable. We recognize revenue on
product sales when persuasive evidence of an arrangement exists, the price is
fixed and final, the product is shipped and there is a reasonable assurance of
collection of the sales proceeds. We obtain oral or written purchase
authorizations from our customers for a specified amount of product at a
specified price and consider delivery to have occurred at the time of shipment.
We recognize revenue upon shipment. We provide allowances for estimated
uncollectible accounts based on historical experience and current developments
with our customers.

     Information Technology Costs. Costs of developing internal-use software for
our website and call center are accounted for in accordance with Emerging Issues
Task Force Issue No. 00-2 and AICPA Statement of Position 98-1. We capitalize
costs only to the extent that they are realizable and amortize them over the
estimated life of the software. We have not capitalized any costs incurred in
connection with our development activities.

     Impairment of Long-Lived Assets. We continually evaluate whether events and
circumstances have occurred that indicate that the remaining estimated useful
life of long-lived assets may require revision or that the remaining net book
value may not be recoverable. When factors indicate that an asset may be
impaired, we use various methods to estimate the asset's future cash flows
expected to result from the use of the asset and its eventual disposition. If
the sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, we will recognize an impairment loss in the amount of the
excess of the carrying amount over the estimated fair value of the asset. We
will charge any impairment amount to operations.


                                       11
<PAGE>


RESULTS OF OPERATIONS

     The selected financial data set forth below has been derived from our
financial statements. The information set forth below should be read in
connection with the financial statements and notes thereto, as well as other
information contained in this report which could have a material adverse effect
on our financial condition and results of operations.

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                                            ---------------------------------------
                                                                2003                      2002
                                                            ------------              -------------
STATEMENT OF OPERATIONS DATA:
<S>                                                         <C>                        <C>
Sales, net..........................................        $48,994,018                $30,427,928
Cost of sales.......................................         45,801,854                 27,200,976
                                                            ------------              -------------
Gross profit........................................          3,192,164                  3,226,952
Operating expenses..................................          6,893,707                  7,423,111
                                                            ------------              -------------
Operating loss......................................         (3,701,543)                (4,196,159)
Other income (expense), net.........................         (1,011,250)                  (408,489)
                                                            ------------              -------------
Net loss............................................         (4,712,793)                (4,604,648)
Dividends on preferred stock........................                 --                    407,928
                                                            ------------              -------------
Net loss applicable to common  stock................        $(4,712,793)               $(5,012,576)
                                                            ============              =============
Net loss per share - basic..........................             $(0.76)                    $(1.21)
                                                            ============              =============
Weighted average number of shares
     outstanding ...................................          6,162,146                  4,133,568
                                                            ============              =============

                                                                            December 31,
                                                            ---------------------------------------
                                                                 2003                      2002
                                                            ------------              -------------
BALANCE SHEET DATA:
Current assets......................................         $9,105,964                 $8,338,432
Total assets........................................         10,480,183                 10,456,509
Current liabilities.................................         14,795,777                  9,394,705
Long-term debt......................................          1,381,591                  2,250,000
Total liabilities...................................         16,177,368                 11,644,705
Working capital (deficit)...........................         (5,689,813)                (1,056,273)
Stockholders' equity (deficit)......................         (5,697,185)                (1,188,196)

</TABLE>

     Events Affecting Revenues and Results of Operations

     Our revenues and results of operations have been significantly affected,
and are likely to continue to be affected, by a shortage of working capital. We
need working capital to buy inventory, since our business depends on having a
sufficient amount of enough different products to attract customers and generate
sales. As of December 31, 2003, we had 5,420 different products posted for sale
on our website, with a total listed sales value of approximately $257 million.
Management believes that the number of items posted for sale is an indication of
continued interest in our online marketplace among potential sellers, and makes
the site more attractive to buyers. The number of items posted for sale,
however, does not directly effect our financial condition or results of
operations. Unless we are able to attract additional buyers to our website,
increase sales and improve our gross profit margin, we will not be able to
operate profitably.

     At December 31, 2003 our auditors expressed doubt about our ability to
continue as a going concern. Management has been addressing this issue by
seeking arrangements to raise additional working capital through one or more
offerings of our debt or equity securities to strengthen our financial condition
and support our growth. If we are able to generate sufficient working capital by
selling our securities, then management hopes to conduct operations on a
profitable basis, and to generate additional working capital for operations.
However, we can give no assurance that we will be able to raise the necessary
capital to sustain our operations or operate profitably.


                                       12
<PAGE>


     Fiscal Year ended December 31, 2003 compared to Fiscal Year ended December
31, 2002

     Net sales for the fiscal year ended December 31, 2003 were $48,994,018,
compared to $30,427,928 for the fiscal year ended December 31, 2002. The
$18,566,090 or 61.0% increase is due to an improvement in our ability to
adequately stock our warehouse, our growing internet sales and greater
recognition in our marketplace. Our internet sales were $28,710,245 or 58.6% of
net sales for the fiscal year ended December 31, 2003 compared to $15,428,332 or
50.7% of net sales for the fiscal year ended December 31, 2002.

     Cost of sales for the fiscal year ended December 31, 2003 was $45,801,854
or 93.5% of net sales, compared to $27,200,976 or 89.4% of net sales for the
2002 fiscal year. The decrease in the gross profit margin is a result of the
sale of brand pharmaceuticals in fiscal 2003 which have a much lower gross
profit margin than generic pharmaceuticals. The sale of brand pharmaceuticals
has significantly increased activity on our website and makes the site more
attractive to buyers and sellers. In addition to drawing buyers and sellers to
our Internet site, brand pharmaceuticals often support the sale of generic
pharmaceuticals which support higher margins. Our margins are affected by our
ability to buy pharmaceutical products at favorable prices and the mix of
product sales between brand and generic pharmaceuticals.

     Sales and marketing expenses for the 2003 fiscal year were $1,658,597 or
3.4% of sales, compared to $1,549,204 or 5.1% of sales for the 2002 fiscal year.
These expenses include the salaries and commissions of our telemarketing staff,
advertising and trade show expenses. Increased salaries and commissions of
$81,412 were primarily responsible for the overall increase of $109,393.

     Information technology expenses were $656,925 for the 2003 fiscal year
compared to $784,787 for the 2002 fiscal year. These expenses include the
salaries of information technology staff and other technology costs. The
$127,862 decrease in expenses is primarily due to a decrease of $71,958 in
salaries due to a reduction in staff.

     General and administrative expenses for the 2003 fiscal year were
$4,578,185 compared to $5,089,120 for the 2002 fiscal year. The $510,935
decrease is primarily due to a $305,850 decrease in consulting expense and a
$161,114 decrease in legal fees. Consulting expenses declined as a result of the
termination of certain agreements and legal fees were higher in 2002 due to the
July 26, 2002 merger and related transactions.

     Other expenses for the 2003 fiscal year were $1,011,250 compared to
$408,489 for the 2002 fiscal year. Interest and financing expenses increased to
$1,276,832 for the 2003 fiscal year compared to $818,373 for the 2002 fiscal
year. The $458,459 increase in interest expense is primarily due to interest and
financing costs of $430,121 related to our new inventory financing agreement
with Steel City Pharmaceuticals, LLC. Miscellaneous income decreased to $265,582
for the 2003 fiscal year compared to $409,884 for the 2002 fiscal year. The
decrease in miscellaneous income is partially due to information technology
consulting fees of $254,726 earned in the current period compared to $306,864
earned in 2002 for services provided to Able Laboratories.

     We incurred a net loss for the 2003 fiscal year of $4,712,793 compared to a
net loss of $4,604,648 for the 2002 fiscal year. Net loss applicable to common
stock for the 2003 fiscal year was $4,712,793 or $0.76 per share compared to
$5,012,576 or $1.21 per share for the 2002 fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have funded our working capital requirements primarily
through the sale of common and preferred stock, borrowings against our
asset-based line of credit, borrowings under the Steel City agreement, and
borrowings from accredited investors. At December 31, 2003, we had a working
capital deficit of $5,689,813, compared to a working capital deficit of
$1,056,273 at December 31, 2002. The $4,633,540 decrease in working capital from
December 31, 2002 to December 31, 2003 is primarily due to the net loss of
$4,712,793 and the reclassification of our $2,250,000 in subordinated notes
payable to current liabilities being partially offset by noncash expenses and
our new long-term unsecured convertible notes. At December 31, 2003, we had a
stockholders' deficit of $5,697,185 compared to a stockholders' deficit of
$1,188,196 at December 31, 2002. During the 2003 fiscal year we raised
$1,395,000 through the sale of unsecured convertible notes. During the 2002


                                       13
<PAGE>


fiscal year, we raised $4,175,000 through the sale of preferred stock, including
the conversion of $1,100,000 of debt and accrued expenses into preferred stock.

     On October 27, 2003, we entered into a management services agreement with
Steel City Pharmaceuticals LLC, where they agreed to maintain at least
$4,000,000 in capital to be used by us for inventory purchases. We entered into
this agreement as a result of our inability to obtain third-party financing on
satisfactory terms. We agreed to repay Steel City its purchase price for the
inventory plus the greater of (i) 30% of the gross profit on our resale of such
inventory or (ii) a 20% annual percentage return for the period that their
capital is used by us. Repayment to Steel City is due on the earlier of thirty
days after sale of the inventory or forty-five days after payment by Steel City
for the inventory. At December 31, 2003, we were not in compliance with the
repayment terms of the Steel City agreement. We also agreed to pay Steel City a
commitment fee of $50,000 per month during the term of the agreement. Commitment
fees are subject to adjustment to the extent that the aggregate sum paid by us
under the agreement would exceed $1,200,000 on an annualized basis. Steel City
has been granted a second lien on our accounts receivable subject to an
inter-creditor agreement with our asset-based lender and retains legal title to
the inventory until we resell it. We record a liability for all inventory
purchased by Steel City due to our unconditional obligation to purchase such
inventory. The agreement is for a term ending on August 31, 2006, subject to
earlier termination either by Steel City at any time or by us at any time after
one year or earlier if Steel City rejects more than 20% of the purchase
opportunities during the first six months of the agreement. Some of the members
of Steel City also serve as our officers and directors, see Item 12 of this
report.

     In September 2002, we issued 239,841 shares of common stock to Able
Laboratories in payment of $479,682 in accrued dividends on our Series A
Preferred Stock. We agreed to issue Able additional shares of common stock if
Able receives less than $479,682 in proceeds from the sale of these shares and
Able agreed to return any unsold shares after Able receives proceeds totaling
$479,682. As a result of the indeterminate number of shares to be issued, we
recorded the issuance of the 239,841 shares at their par value of $240 and have
a remaining dividend payable of $479,442 as of December 31, 2003. The dividend
payable liability will be reduced and additional paid-in capital will be
increased based on proceeds from sales of dividend shares received by Able. Able
has waived its right to future dividends on the Series A Preferred Stock. In
addition, we issued 92,964 shares of common stock in payment of $185,928 of
accrued dividends on our Series B Preferred Stock on September 30, 2002. The
Series B Preferred Stock was converted to common stock on September 30, 2002. As
a result of Able's waiving its rights to future dividends on the Series A
Preferred Stock and the conversion of the Series B Preferred Stock into common
stock, we have no obligation to pay cash dividends on preferred stock.

     A summary of our outstanding contractual obligations at December 31, 2003
is as follows:

<TABLE>
<CAPTION>
                                                               Payment Due by Period
                              ------------------------------------------------------------------------------------
Contractual Obligations            Total             2004            2005-2006       2007-2008        After 2008
-----------------------       ---------------   --------------    -------------     -----------      -------------
<S>                           <C>               <C>               <C>               <C>              <C>
Debt Obligations              $  12,918,555     $  11,536,964     $  1,381,591      $       --       $         --
Operating Leases                  5,885,296          658,072         1,267,224         960,000          3,000,000
                              ---------------   --------------    -------------     -----------      -------------
         Total                $  18,803,851     $  12,195,036     $  2,648,815      $  960,000       $  3,000,000
                              ===============   ==============    =============     ===========      =============
</TABLE>

     Based on our operating plans, management believes that as of March 15,
2004, our borrowing ability under our asset-based line of credit and the Steel
City agreement should be sufficient to fund our working capital needs for the
next two months. Our asset-based lender notified us on November 6, 2003 that it
will not renew the credit agreement on February 24, 2004. On February 27, 2004,
our asset-based lender agreed to extend the credit agreement to May 31, 2004
subject to certain modifications. See Note 17 to the Consolidated Financial
Statements. We are currently seeking to raise additional capital through the
private placement of debt or equity securities to a limited group of qualified
investors. We also plan to continue to seek additional financing to replace our
asset-based lender, pay off our subordinated notes and improve our overall
financial condition. However, we can give no assurance that we will be able to
obtain any such financing on satisfactory terms, and if we are successful in
obtaining financing it might be highly dilutive to current stockholders. Our
failure to obtain additional financing on satisfactory terms could require us to
curtail our operations and could have a potential adverse impact on our results
of operations.


                                       14
<PAGE>


RECENT ACCOUNTING PRONOUNCEMENTS

     In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity." This statement establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability. Many of
those instruments were previously classified as equity. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of this statement did not have any
impact on our financial position or results of operations.

     Other recent accounting pronouncements, FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities," which addresses when a company
should include in its financial statements the assets, liabilities and
activities of another entity and SFAS No. 149,"Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," which amends and clarifies the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities, did not have any impact
on our consolidated financial position, results of operations or cash flows.

FORWARD LOOKING STATEMENTS

     We are including the following cautionary statement in this Annual Report
on Form 10-KSB to make applicable and take advantage of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 for any
forward-looking statements made by, or on behalf of, RxBazaar. Forward-looking
statements include statements concerning plans, objectives, goals, strategies,
future events or performance and underlying assumptions and other statements
which are other than statements of historical facts. Certain statements
contained herein are forward-looking statements and accordingly involve risks
and uncertainties which could cause actual results or outcomes to differ
materially from those expressed in the forward-looking statements. Our
expectations, beliefs and projections are expressed in good faith and are
believed by us to have a reasonable basis, including without limitation,
management's examination of historical operating trends, data contained in our
records and other data available from third parties, but there can be no
assurance that management's expectation, beliefs or projections will result or
be achieved or accomplished. We disclaim any obligation to update any
forward-looking statements to reflect events or circumstances after the date
hereof.

RISK FACTORS

IF WE DO NOT OBTAIN A SUBSTANTIAL AMOUNT OF ADDITIONAL FINANCING, WE MAY NOT BE
ABLE TO FUND EXISTING AND FUTURE OPERATIONS.

     We require substantial additional financing in order to fund our operations
and to carry out our business plan. We can give no assurance, however, that we
will be able to obtain such financing or that such financing will be available
on satisfactory terms. To raise additional financing, we have pursued various
possible financing options. During fiscal 2003, our fund raising was just
$1,395,000 in unsecured convertible notes. In addition, we entered into a
management services arrangement with an entity that agreed to maintain at least
$4 million in capital to be used by us for inventory purchases. One
officer-director and two of our directors are affiliated with this entity. Our
asset-based lending agreement was to expire in February 2004, and was extended
only to May 31, 2004. Future financing transactions, if we are able to complete
any, could result in substantial dilution to existing stockholders. If we are
unable to obtain additional financing we may have to curtail or suspend
operations.

WE CONTINUE TO LOSE MONEY ON OUR OPERATIONS.

     We are not profitable. In the year ended December 31, 2003 we incurred a
net loss of $4.7 million, and as of December 31, 2003, we had a stockholders'
deficit of $5.7 million. We anticipate future losses and negative cash flow to
continue for the foreseeable future, even though monthly sales have recently
increased. Because of our history of operating losses and working capital
deficit, our independent auditors have expressed doubt as to our ability to
continue as a going concern.


                                       15
<PAGE>


     We can give no assurance that we will be able to operate profitably or
produce a positive cash flow. In general, our ability to become profitable
depends on our ability to generate and sustain substantially higher revenues
while maintaining reasonable expense levels. If we were to achieve
profitability, we cannot give any assurance that we would be able to sustain or
increase profitability on a quarterly or annual basis in the future.

ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK WILL RESULT IN SUBSTANTIAL
ADDITIONAL DILUTION.

     Our board of directors is authorized to issue up to 75,000,000 shares of
our common stock. At December 31, 2003, we had outstanding 6,166,530 shares of
common stock, and had reserved up to 8,583,350 shares of common stock for
issuance upon conversion or exercise of notes, warrants, options and contingent
merger shares. Issuance of the above shares, or of additional shares of common
stock that we may issue in future transactions, could cause substantial dilution
in the ownership percentage of our current common stockholders.

BECAUSE THERE HAS BEEN NO ACTIVE PUBLIC TRADING MARKET FOR OUR STOCK, INVESTORS
MAY NOT BE ABLE TO SELL THEIR SHARES OR ACHIEVE LIQUIDITY IN THEIR INVESTMENT.

     There has not been an active trading market for our securities. If a
regular trading market for our common stock does not develop then holders may
not be able to sell their shares. If an active trading market for our securities
were to develop, we could give no assurance that such a market could be
sustained. Any market for our securities that may develop could be a limited
one. In any event, if our securities traded at a low price, many brokerage firms
may choose not to engage in market making activities or effect transactions in
our securities. Purchasers of our securities may have difficulties in reselling
them and many banks may not grant loans using our securities as collateral.

OUR PREFERRED STOCK HAS RIGHTS SUPERIOR TO THOSE OF OUR COMMON STOCK, AND FUTURE
ISSUANCES OF PREFERRED STOCK COULD FURTHER DILUTE EXISTING HOLDERS' INTERESTS
AND IMPEDE OR DELAY A TAKEOVER ATTEMPT.

     We have outstanding 345,333 shares of Series A Preferred Stock. These
shares are entitled to preferential treatment upon liquidation, as well as other
advantages over our common stock. Also, our amended and restated certificate of
incorporation authorizes our board of directors to designate and to issue,
without stockholder approval, series of preferred stock with voting, conversion
and other rights and preferences that could differentially and adversely affect
the voting power or other rights of the holders of our common stock. The board
of directors could issue preferred stock that adversely affects the rights of
holders of common stock by, among other things, establishing preferential
dividends, liquidation rights or voting power. The issuance of preferred stock
or rights to purchase preferred stock could also be used to discourage an
unsolicited acquisition proposal. Although we have no present intention to issue
additional shares of preferred stock, the issuance of such shares might render
more difficult, and therefore discourage, an unsolicited takeover proposal such
as a tender offer, a proxy contest or, an attempt to remove incumbent
management, even if such actions would be in the best interest of our
stockholders.

WE HAVE A LIMITED OPERATING HISTORY; THEREFORE, WE MAY NOT BE ABLE TO ACCURATELY
FORECAST FUTURE RESULTS AND OPERATING LOSSES IN FUTURE PERIODS COULD BE GREATER
THAN EXPECTED.

     Before acquiring FPP Distribution in February 2001, our activities
consisted primarily of developing and creating recognition for the RxBazaar.com
website. We commenced sales activities in April 2000. As a result, it is
difficult to accurately forecast our revenues and we lack meaningful historical
financial data upon which to base planned operating expenses. Our revenues and
operating results are difficult to forecast in particular because:

     o    we lack working capital sufficient to obtain a steady and
          sufficient supply of products to sell;
     o    we operate on a short sales cycle with substantially no backlog;
     o    while we have achieved some sales increases, we have not been
          able to predict accurately the rate of growth; and
     o    we have no long-term supply contracts.


                                       16
<PAGE>


IF WE FAIL TO ESTABLISH THE RXBAZAAR BRAND OR TO ATTRACT REPEAT CUSTOMERS, WE
MAY NOT BE ABLE TO INCREASE OUR REVENUES SUFFICIENTLY TO FUND OUR OPERATIONS.

     We believe that we must develop and strengthen the RxBazaar brand,
particularly because of the early stage of our development and the highly
competitive nature of our business. The development of the RxBazaar brand
depends largely on the success of our marketing efforts and our ability to
provide consistent, high quality customer experiences. We cannot be certain that
we will be able to afford to conduct brand promotion activities sufficient to
build awareness, or that such activities, if any, will be successful or will
result in increased revenues.

INTENSE COMPETITION IN THE DRUG DISTRIBUTION MARKET MAY PREVENT US FROM
GENERATING MARGINS OR ACHIEVING MARKET SHARE NECESSARY FOR US TO OPERATE
PROFITABLY.

     We do business in a market that is highly competitive, and we expect
competition in the drug distribution market to intensify in the future.
Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any of which could harm our net revenue and
results of operations. We compete or will potentially compete with a variety of
companies, many of which have significantly greater financial, technical,
marketing and other resources. Our competitors include:

     o    on-line businesses that sell prescription drugs;
     o    national wholesalers; and
     o    national and regional distributors.

     Many of our competitors and potential competitors have operated for a
longer period of time than we have, have greater financial resources, have
established marketing relationships with leading manufacturers and advertisers
and have a secured presence in distribution channels. Some of these companies
may also commence or expand their presence on the internet. Finally, we are
aware of other similar entrepreneurial companies that are focusing significant
resources on developing and marketing products and services that will compete
directly with those we offer.

     We may face a significant competitive challenge from alliances entered into
between and among our competitors and major pharmacy benefit managers, major
HMOs or chain drugstores, as well as from larger competitors created through
industry consolidation. The combined resources of these partnerships or
consolidated entities could pose a significant competitive challenge to us, and
their existence could impede us in or prevent us from establishing relationships
with the member pharmacy benefit managers, HMOs or chain drugstores.

OUR OBLIGATION TO COMPLY WITH EXTENSIVE GOVERNMENT REGULATION OF OUR BUSINESS IS
EXPENSIVE, AND OUR FAILURE TO DO SO COULD RESULT IN SIGNIFICANT LIABILITY.

     We are subject to regulation under various state and federal laws,
including the Federal Food, Drug and Cosmetic Act, the Prescription Drug
Marketing Act, the Controlled Substances Act, and state laws and regulations
applicable to the distribution of pharmaceutical products and controlled
substances. We must maintain licenses in every territory in which we intend to
conduct business. Although we believe that we presently have all of the needed
licenses and governmental authorizations necessary to conduct our current
business, we can give no assurance:

     o    that we will obtain or maintain the necessary licenses and regulatory
          authorizations from the U.S. Drug Enforcement Agency and state
          regulators;
     o    that the process to obtain such authorizations will not take too long
          or cost too much; or
     o    that we will have sufficient funds to obtain such authorizations.

     If we fail to maintain needed licenses and authorizations, then we might
have to curtail or suspend our operations. In addition, changes to the law, such
as broader regulation of drug prices across different classes of purchasers,
could harm our business.


                                       17
<PAGE>


IF WE INCURRED A MATERIAL LIABILITY FOR WHICH WE ARE NOT ADEQUATELY INSURED, WE
MIGHT BE RENDERED INSOLVENT.

     Our business of selling drug products for human use is inherently risky. We
face the risk of liability resulting from claims made directly by consumers or
by buyers or sellers using our on-line marketplace. We currently have property,
general liability and product liability insurance in amounts that management
believes to be adequate, but we can give no assurance that such insurance will
remain available at a reasonable cost or that any insurance policy would offer
coverage sufficient to meet any liability arising as a result of a claim. We can
give no assurance that we will be able to obtain or maintain adequate insurance
on reasonable terms or that, if obtained, such insurance will be sufficient to
protect us against such potential liability or at a reasonable cost. The
obligation to pay any substantial liability claim could render us insolvent and
could force us to curtail or suspend operations.

BECAUSE WE DO NOT HAVE LONG-TERM PURCHASE AGREEMENTS, WE MUST INCREASE BOTH OUR
CUSTOMER BASE AND OUR SALES TO EXISTING CUSTOMERS IN ORDER TO OPERATE
PROFITABLY.

     None of our customers has any long-term obligation to continue to purchase
our products or services, and any customer could reduce or cease ordering our
products or services. We believe that we must increase our customer base and
increase our orders from new and existing customers in order to earn a profit.

IF WE LOSE THE SERVICES OF C. ROBERT CUSICK, OUR CHIEF EXECUTIVE OFFICER, OR OUR
OTHER EXECUTIVE OFFICERS, THEN WE MIGHT NOT BE ABLE TO CONTINUE OUR BUSINESS IN
ACCORDANCE WITH OUR CURRENT PLANS.

     Our success depends significantly on the skills, experience and efforts of
our chief executive officer, C. Robert Cusick, and our other executive officers
and key personnel. Many of these individuals would be difficult to replace. Mr.
Cusick and the management of RxBazaar have developed, and are engaged in
carrying out, our strategic business plan. The loss of the services of Mr.
Cusick or any other key person could seriously harm our ability to effect our
strategy.

WE MAY BE UNABLE TO DEVELOP OR PROTECT PROPRIETARY TECHNOLOGY SUFFICIENT TO GIVE
US A COMPETITIVE ADVANTAGE IN THE DRUG DISTRIBUTION BUSINESS.

     Although the operation of traditional drug distribution businesses has not
historically been dependent on proprietary technology, we have developed
proprietary software for the management of our call center that we believe helps
us to increase the efficiency and effectiveness of our call center staff.

     We do not have any patents on our proprietary software and we depend on a
combination of copyright protection and trade secrets to maintain our
intellectual property. The steps we have taken to protect our technology may
prove to be inadequate.

     We could also face third party claims that we have infringed the third
party's intellectual property rights. Any claim of infringement by a third party
could cause us to incur substantial costs defending against the claim, even if
the claim is invalid, and could distract management from carrying on our
business. We might seek to license intellectual property from such a third party
or to develop non-infringing technology, but we might not be able to do so in a
timely manner or on commercially reasonable terms. Furthermore, a party making
such a claim could secure a judgment that requires us to pay substantial
damages. A judgment could also include an injunction or other court order that
could prevent us from offering our products and services.

REPEATED OR SUSTAINED FAILURES OF INTERNET INFRASTRUCTURE ELEMENTS OUTSIDE OUR
CONTROL, OR THE PERCEPTION THAT THEY COULD OCCUR, COULD PREVENT BUYERS AND
SELLERS FROM USING OUR ON-LINE MARKETPLACE.

     The internet global computer network has been characterized by, and is
expected to continue to experience, significant growth in the number of users
and amount of traffic. The success of our on-line drug distribution marketplace
depends upon the development and maintenance of internet infrastructure to cope
with this increased number of users and traffic. This requires a reliable
network backbone with the necessary speed, data capacity and security, and the
timely development of complementary products, including high-speed access
products and services, for providing widely available, reliable internet access
and services. However, we cannot control or affect the rate of development or


                                       18
<PAGE>


maintenance of internet infrastructure, or rate at which access providers will
make high speed internet access available. Our inability to scale our systems
may result in unanticipated system disruptions, slower response times,
degradation in levels of customer service, impaired quality and speed of order
fulfillment, or delays in reporting accurate financial information.

     A significant risk to on-line commerce and communications is the secure
transmission of confidential information over public networks. Our failure to
prevent security breaches, or the perception by potential users that use of the
service entails significant security risks, could harm our business. It is
likely that a significant number of buyers will authorize us to bill their
credit card accounts directly for payments made to us. We intend to rely on
encryption and authentication technology licensed from third parties to provide
the security and authentication technology to effect secure transmission of
confidential information, including customer credit card numbers. However,
advances in computer capabilities, new discoveries in the field of cryptography,
or other developments may result in a compromise or breach of the technology we
use to protect customer transaction data. Any such compromise of our security
could harm our reputation and, therefore, our business. We may need to expend
significant resources to protect against security breaches or to address
problems caused by breaches. We may not be adequately insured against losses
caused by security breaches. Our business depends in part on our ability to
offer a convenient on-line marketplace to buy and sell pharmaceutical products.
If we cannot do so because of internet factors outside our control, then
customers may not use the service.

ITEM 7.  FINANCIAL STATEMENTS

                                                                      PAGE
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                           NUMBER
------------------------------------------                           ------

Independent Auditors' Report                                          F-1

Consolidated Balance Sheets as of December 31, 2003 and 2002          F-2

Consolidated Statements of Loss for the years ended                   F-3
December 31, 2003 and 2002

Consolidated  Statements of Stockholders'  Equity (Deficit)           F-4
for years ended December 31, 2003 and 2002

Consolidated Statements of Cash Flows for the years                   F-5
ended December 31, 2003 and 2002

Notes to Consolidated Financial Statements                            F-6


                                       19
<PAGE>


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
RxBazaar, Inc.
Cincinnati, Ohio

We have audited the accompanying consolidated balance sheets of RxBazaar, Inc.
and subsidiary as of December 31, 2003 and 2002, and the related consolidated
statements of loss, changes in stockholders' equity (deficit) and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of RxBazaar, Inc. and
subsidiary as of December 31, 2003 and 2002, and the consolidated results of
their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred losses from
operations resulting in a working capital deficiency and a stockholders' deficit
at December 31, 2003. These circumstances raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.


/s/  Wolf & Company, P.C.

Boston, Massachusetts
February 10, 2004, except for Note 17
  as to which the date is February 27, 2004


                                      F-1
<PAGE>


<TABLE>
<CAPTION>
                          RXBAZAAR, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

                                                                                   December 31,
                                                                        ---------------------------------
                                            ASSETS                           2003                2002
                                                                        ---------------   ---------------
<S>                                                                     <C>                <C>
Current assets:
    Cash and cash equivalents                                           $      25,231      $     480,228
    Accounts receivable - less allowance for doubtful accounts of
    $302,333 and $394,996                                                   5,748,970          3,922,853
    Inventory                                                               3,239,711          3,776,323
    Prepaid expenses and other current assets                                  92,052            159,028
                                                                        ---------------   ---------------
         Total current assets                                               9,105,964          8,338,432
                                                                        ---------------   ---------------
Property and equipment, at cost:
    Computer hardware and software                                            746,438            722,172
    Furniture, fixtures and equipment                                         280,850            280,850
    Leasehold improvements                                                     35,170             28,713
                                                                        ---------------   ---------------
                                                                            1,062,458          1,031,735
    Less accumulated depreciation and amortization                           (664,329)          (458,632)
                                                                        ---------------   ---------------
         Net property and equipment                                           398,129            573,103
                                                                        ---------------   ---------------

Other assets:
    Deferred financing costs, net                                              40,464            185,148
    Customer lists, net of accumulated amortization of $1,201,900
    and $777,700                                                              919,083          1,343,283
    Deposits                                                                   16,543             16,543
                                                                        ---------------   ---------------
         Total other assets                                                   976,090          1,544,974
                                                                        ---------------   ---------------
                                                                         $ 10,480,183      $  10,456,509
                                                                        ===============   ===============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
    Notes payable                                                        $ 11,536,964     $    3,781,416
    Accounts payable                                                        1,978,105          4,502,798
    Accrued expenses and other current liabilities                            801,266            631,049
    Preferred dividends payable                                               479,442            479,442
                                                                        ---------------   ---------------
         Total current liabilities                                         14,795,777          9,394,705
Long-term debt                                                              1,381,591          2,250,000
                                                                        ---------------   ---------------
         Total liabilities                                                 16,177,368         11,644,705
                                                                        ---------------   ---------------
Stockholders' equity (deficit):
    Preferred stock, at liquidation value, $.001 par value,
       10,000,000 shares authorized:
       Series A, 345,333 shares issued
                                                                            3,700,000          3,700,000
    Common stock, $.001 par value, 75,000,000 shares authorized,
       6,166,530 and 6,160,280 shares issued                                    6,167              6,160
    Additional paid-in capital                                             10,389,475         10,222,966
    Accumulated deficit                                                   (19,779,024)       (15,066,231)
    Unearned stock-based compensation                                         (13,803)           (51,091)
                                                                        ---------------   ---------------
         Total stockholders' equity (deficit)                              (5,697,185)        (1,188,196)
                                                                        ---------------   ---------------
                                                                        $  10,480,183     $   10,456,509
                                                                        ===============   ===============


              See independent auditors' report and accompanying notes to consolidated financial statements.
</TABLE>


                                      F-2
<PAGE>


<TABLE>
<CAPTION>
                          RXBAZAAR, INC. AND SUBSIDIARY
                         CONSOLIDATED STATEMENTS OF LOSS

                                                         Years Ended December 31,
                                                       ---------------------------------
                                                            2003               2002
                                                       ---------------   ---------------
<S>                                                    <C>               <C>
  Sales, net                                           $  48,994,018     $   30,427,928
  Cost of sales                                           45,801,854         27,200,976
                                                       ---------------   ---------------
         Gross profit                                      3,192,164          3,226,952
                                                       ---------------   ---------------

  Operating expenses:
     Sales and marketing                                   1,658,597          1,549,204
     Information technology                                  656,925            784,787
     General and administrative                            4,578,185          5,089,120
                                                       ---------------   ---------------
         Total operating expenses                          6,893,707          7,423,111
                                                       ---------------   ---------------
         Operating loss                                   (3,701,543)        (4,196,159)
                                                       ---------------   ---------------

  Other income (expense):
     Interest and financing expense                       (1,276,832)          (818,373)
     Miscellaneous income (expense), net                     265,582            409,884
                                                       ---------------   ---------------
         Other income (expense), net                      (1,011,250)          (408,489)
                                                       ---------------   ---------------
         Net loss                                         (4,712,793)        (4,604,648)

  Dividends on preferred stock                                   --             407,928
                                                       ---------------   ---------------
         Net loss applicable to common stock           $  (4,712,793)    $   (5,012,576)
                                                       ==============    ===============

  Net loss per share - basic                           $       (0.76)    $        (1.21)
                                                       ==============    ===============

  Weighted average shares outstanding                      6,162,146          4,133,568
                                                       ==============    ===============


See independent auditors' report and accompanying notes to consolidated financial statements.
</TABLE>


                                      F-3
<PAGE>


<TABLE>
<CAPTION>
                          RXBAZAAR, INC. AND SUBSIDIARY
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                     YEARS ENDED DECEMBER 31, 2003 AND 2002

                                                       Common Stock        Additional                    Unearned
                                      Preferred     -------------------     Paid-in       Accumulated  Stock-based
                                        Stock         Shares    Amount      Capital         Deficit    Compensation       Total
                                    ------------    ---------- --------- -------------  -------------- -------------  ------------
<S>                                <C>             <C>        <C>       <C>            <C>             <C>           <C>
Balance, December 31, 2001          $  3,700,000    3,333,969  $  3,334  $  5,886,529   $ (10,053,655)  $   (96,394)  $   (560,186)
Sale of preferred stock                4,175,000           --        --      (160,500)             --            --      4,014,500
Conversion of preferred stock         (4,175,000)   2,087,500     2,087     4,172,913              --            --             --
Conversion of preferred dividends             --      332,805       333       185,835              --            --        186,168
Common stock issued in merger                 --      406,006       406           (45)             --            --            361
Stock options and warrants issued             --           --        --       146,250              --            --        146,250
Amortization of unearned                      --           --        --            --              --        37,287         37,287
 compensation
Forfeiture of unearned                        --           --        --        (8,016)             --         8,016             --
 compensation
Preferred dividends accrued                   --           --        --            --        (407,928)           --       (407,928)
Net loss                                      --           --        --            --      (4,604,648)           -      (4,604,648)
                                    ------------    ---------- --------- -------------  -------------- -------------  ------------
Balance, December 31, 2002             3,700,000    6,160,280     6,160    10,222,966     (15,066,231)      (51,091)    (1,188,196)
Stock issued for services                     --        6,250         7        12,493              --            --         12,500
Stock options and warrants                    --           --        --       154,016              --            --        154,016
 issued
Amortization of unearned                      --           --        --            --              --        37,288         37,288
 compensation
Net loss                                      --           --        --            --      (4,712,793)           --     (4,712,793)
                                    ------------    ---------- --------- -------------  -------------- -------------  ------------
Balance, December 31, 2003          $  3,700,000    6,166,530   $ 6,167  $ 10,389,475   $ (19,779,024)  $   (13,803)  $ (5,697,185)
                                    ============    ========== ========= =============  ============== =============  ============


              See independent auditors' report and accompanying notes to consolidated financial statements.
</TABLE>


                                      F-4
<PAGE>

<TABLE>
<CAPTION>
                          RXBAZAAR, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                  Years Ended December 31,
                                                                                ---------------------------------
                                                                                    2003               2002
                                                                                ---------------   ---------------
<S>                                                                             <C>                <C>
  Cash flows from operating activities:
    Net loss                                                                    $  (4,712,793)     $  (4,604,648)
    Adjustments to reconcile net loss to net cash used for
      operating activities:
      Depreciation and amortization                                                   780,702            897,853
      Amortization of unearned compensation                                            37,288             37,287
      Stock, options and warrants issued for services and financing                   146,986             82,500
      (Increase) decrease in operating assets:
         Accounts receivable                                                       (1,826,117)        (2,271,457)
         Inventory                                                                    536,612            118,171
         Prepaid expenses and other current assets                                     66,976             (3,052)
      Increase (decrease) in operating liabilities:
         Accounts payable                                                          (2,524,693)         1,664,541
         Accrued expenses and other current liabilities                               170,217           (166,618)
                                                                                ---------------   ---------------
              Net cash used for operating activities                               (7,324,822)        (4,245,423)
                                                                                ---------------   ---------------

  Cash flows from investing activities:
      Purchase of property and equipment                                              (30,723)           (75,026)
      Decrease (increase) in deposits                                                      --             13,840
                                                                                ---------------   ---------------
              Net cash used for investing activities                                  (30,723)           (61,186)
                                                                                ---------------   ---------------

  Cash flows from financing activities:
      Net change in line of credit                                                    755,836          1,355,136
      Net change in inventory financing agreement                                   4,749,712                 --
      Proceeds from notes payable and warrants                                      1,395,000            375,000
      Payments on notes payable                                                            --            (35,000)
      Proceeds from sale of stock                                                          --          2,914,500
      Net proceeds from merger                                                             --                361
                                                                                ---------------   ---------------
              Net cash provided by financing activities                             6,900,548          4,609,997
                                                                                ---------------   ---------------

  Net change in cash and cash equivalents                                            (454,997)           303,388
  Cash and cash equivalents at beginning of year                                      480,228            176,840
                                                                                ---------------   ---------------
  Cash and cash equivalents at end of year                                      $      25,231      $     480,228
                                                                                ===============   ===============
  Supplemental cash flow information:
      Interest paid                                                             $     764,178      $     619,410
      Preferred dividends accrued                                                          --            407,928
      Common stock issued for accrued dividends                                            --            186,168
      Preferred stock issued for debt and accrued expenses                                 --          1,100,000
  Additional cash flow information is included in Notes 5, 7 and 8.


              See independent auditors' report and accompanying notes to consolidated financial statements.
</TABLE>


                                      F-5
<PAGE>


                          RXBAZAAR, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BUSINESS AND BASIS OF PRESENTATION

     RxBazaar, Inc. ("RxBazaar"), formerly known as SB Merger Corp., was
     incorporated in the State of Delaware on January 3, 2000. On July 26, 2002,
     we completed our merger with RxB, Inc. ("RxB") and the historical financial
     statements of RxB became the historical financial statements of the
     combined entity (see Note 3). RxB, formerly known as RxBazaar, Inc., was
     incorporated on October 25, 1999 in the State of Delaware. On September 30,
     2002, RxB was merged into RxBazaar. We distribute brand and generic
     pharmaceuticals and other medical supplies through our wholly-owned
     subsidiary, FPP Distribution, Inc. ("FPP"). All significant intercompany
     balances and transactions have been eliminated in consolidation.

     REVERSE STOCK SPLIT AND MERGER RATIO

     On January 31, 2002, RxB's stockholders approved a 1-for-5 reverse stock
     split of the common shares. On July 26, 2002, in connection with the merger
     agreement with RxBazaar, RxB's stockholders approved a merger ratio in
     which 0.7 shares of RxBazaar common stock were issued for each share of
     RxB's common stock. All common stock information presented herein has been
     retroactively adjusted to reflect the 1-for-5 reverse stock split and the
     0.7-for-1 merger ratio. (See Note 3.)

     USE OF ESTIMATES

     In preparing consolidated financial statements in conformity with
     accounting principles generally accepted in the United States of America,
     management is required to make estimates and assumptions that affect the
     reported amounts of assets and liabilities as of the balance sheet date and
     reported amounts of revenues and expenses during the reporting period. Such
     estimates relate primarily to the carrying values of accounts receivable
     and inventory, the estimated lives of property and equipment, the value of
     intangible assets, the valuation reserve on deferred taxes and the value of
     equity instruments issued. Actual results could differ from those
     estimates.

     CASH AND CASH EQUIVALENTS

     Cash equivalents include interest-bearing deposits with original maturities
     of three months or less.

     ACCOUNTS RECEIVABLE

     We have historically provided financial terms to customers in connection
     with sales of our products. Financial terms, for credit-approved customers,
     are generally on a net 15-45 day basis. Management periodically reviews
     customer account activity in order to assess the adequacy of allowances for
     doubtful accounts. Factors considered include economic conditions and each
     customer's payment history and credit worthiness. Adjustments, if any, are
     made to allowance balances following the completion of these reviews to
     reflect management's best estimates of potential losses.

     INVENTORY

     Inventory consists primarily of finished goods held for distribution.
     Inventory is valued at the lower of average cost or market on a first-in
     first-out (FIFO) method. Cost of inventories held for distribution is based
     on the purchase price net of vendor discounts and other allowances, if any.


                        See independent auditors' report.


                                      F-6
<PAGE>


                          RXBAZAAR, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost. Depreciation expense is provided
     over the estimated useful lives of the assets using the straight-line
     method. Leasehold improvements are amortized on the straight-line method
     over the shorter of the estimated useful life of the assets or the life of
     the related lease term.

     Depreciation and amortization for 2003 and 2002 was $205,697 and $210,312,
     respectively. Estimated useful lives are as follows:

        Computer hardware and software                  2 - 5 years
        Furniture, fixtures and equipment               5 - 7 years
        Leasehold improvements                          5 - 10 years

     INFORMATION TECHNOLOGY COSTS

     Costs of developing internal-use software for our website and call center
     are accounted for in accordance with Emerging Issues Task Force Issue No.
     00-2 and AICPA Statement of Position 98-1. Costs are capitalized only to
     the extent that they are realizable and are amortized over the estimated
     life of the software. No development costs were incurred in 2003 and costs
     incurred in connection with these development activities were not
     capitalized during 2002.

     DEFERRED COSTS

     Deferred financing costs represent fees paid in connection with obtaining
     an asset-based line of credit and the assumption of the senior subordinated
     debt in connection with the acquisition of FPP (see Note 4). These costs
     are being amortized over the terms of the loans. Amortization expense for
     2003 and 2002 was $144,684 and $144,684, respectively.

     CUSTOMER LISTS

     A portion of the purchase price for FPP was allocated to customer lists
     (see Note 4). Customer lists are being amortized over an estimated life of
     five years. Amortization expense for 2003 and 2002 was $424,200 and
     $424,200, respectively. Amortization expense is expected to be $424,200 for
     2004, $424,200 for 2005 and $70,683 for 2006.

     IMPAIRMENT OF LONG-LIVED ASSETS

     We continually evaluate whether events and circumstances have occurred that
     indicate that the remaining estimated useful life of long-lived assets may
     require revision or that the remaining net book value may not be
     recoverable. When factors indicate that an asset may be impaired, we use
     various methods to estimate the future cash flows expected to result from
     the use of the asset and its eventual disposition. If the sum of the
     expected future undiscounted cash flows is less than the carrying amount of
     the asset, an impairment loss is recognized based on the excess of the
     carrying amount over the estimated fair value of the asset. Any impairment
     amount is charged to operations.

     REVENUE RECOGNITION

     Revenues from product sales are recognized in accordance with the
     Securities and Exchange Commission's Staff Accounting Bulletin No. 101.
     Under SAB 101, revenue is recognized when products are shipped, persuasive
     evidence of an arrangement exists, the selling price is fixed and
     collectibility is reasonably assured. Shipping and handling fees billed to
     customers are recognized in net sales. Shipping and handling costs are
     included in cost of sales.


                        See independent auditors' report.


                                      F-7
<PAGE>


                          RXBAZAAR, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     ADVERTISING COSTS

     Advertising costs are charged to expense when incurred. Advertising expense
     amounted to approximately $9,000 and $11,000 in 2003 and 2002,
     respectively.

     INCOME TAXES

     Deferred tax assets and liabilities are recorded for temporary differences
     between the financial statement and tax bases of assets and liabilities
     using the currently enacted income tax rates expected to be in effect when
     the taxes are actually paid or recovered. A deferred tax asset is also
     recorded for net operating loss, capital loss and tax credit carryforwards
     to the extent their realization is more likely than not. The deferred tax
     expense, if any, for the period represents the change in the deferred tax
     asset or liability from the beginning to the end of the period.

     STOCK-BASED COMPENSATION

     Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
     for Stock-Based Compensation," encourages all entities to adopt a fair
     value based method of accounting for employee stock compensation plans,
     whereby compensation cost is measured at the grant date based on the value
     of the award and is recognized over the service period, which is usually
     the vesting period. However, it also allows an entity to continue to
     measure compensation cost for those plans using the intrinsic value based
     method of accounting prescribed by Accounting Principles Board Opinion No.
     25, "Accounting for Stock Issued to Employees," whereby compensation cost
     is the excess, if any, of the quoted market price of the stock at the grant
     date (or other measurement date) over the amount an employee must pay to
     acquire the stock. Stock options issued under our stock option plans
     generally have no intrinsic value at the grant date, and under Opinion No.
     25 no compensation cost is recognized for them. We do not plan to adopt the
     fair value accounting model for stock-based employee compensation under
     SFAS No. 123.

     We apply Opinion No. 25 and related interpretations in accounting for stock
     options issued to employees and directors as more fully described in Notes
     9 and 10. Had compensation cost for our stock options issued to employees
     and directors been determined based on the fair value at the grant dates
     consistent with SFAS No. 123, our net loss and net loss per share would
     have been adjusted to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                  Years Ended December 31,
                                               ------------------------------
                                                   2003             2002
                                               --------------   --------------
<S>                                            <C>              <C>
Net loss-- as reported                         $  (4,712,793)   $  (4,604,648)
Add stock-based employee
compensation
    under APB No. 25                                  37,288           37,287
Deduct stock-based employee compensation
   under SFAS No. 123                               (146,631)        (145,549)
                                               --------------   --------------
Pro forma net loss                             $  (4,822,136)   $  (4,712,910)
                                               ==============   ==============

Basic net loss per share - as reported         $       (0.76)   $       (1.21)
                                               ==============   ==============

Basic net loss per share - pro forma           $       (0.78)   $       (1.24)
                                               ==============   ==============
</TABLE>


     COMPREHENSIVE INCOME

     Accounting principles generally require that recognized revenue, expenses,
     gains and losses be included in net income. Certain statements, however,
     require entities to report specific changes in assets and liabilities, such
     as unrealized gains and losses on available-for-sale securities, as a
     separate component of the equity section of the balance sheet. Such items,
     along with net income, are components of comprehensive income. There were
     no items of other comprehensive income during 2003 or 2002.


                        See independent auditors' report.


                                      F-8
<PAGE>


                          RXBAZAAR, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     NET LOSS PER SHARE

     Basic loss per share represents loss applicable to common stock divided by
     the weighted average number of common shares outstanding during the period.
     Diluted loss per share reflects additional common shares that would have
     been outstanding if potential dilutive common shares had been issued, as
     well as any adjustment to income that would result from the assumed
     conversion. Potential common shares that may be issued by us relate to
     outstanding stock options and warrants (determined using the treasury stock
     method), preferred stock and convertible debt. The assumed conversion of
     outstanding dilutive stock options, warrants and preferred stock would
     increase the shares outstanding but would not require an adjustment to net
     loss as a result of the conversion. For all periods presented, options,
     warrants, preferred stock and convertible debt, were anti-dilutive and
     excluded from the net loss per share computation.

     RECENT ACCOUNTING PRONOUNCEMENTS

     In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS
     No. 150, "Accounting for Certain Financial Instruments with Characteristics
     of both Liabilities and Equity." This statement establishes standards for
     how an issuer classifies and measures certain financial instruments with
     characteristics of both liabilities and equity. It requires that an issuer
     classify a financial instrument that is within its scope as a liability.
     Many of those instruments were previously classified as equity. SFAS No.
     150 is effective for financial instruments entered into or modified after
     May 31, 2003, and otherwise is effective at the beginning of the first
     interim period beginning after June 15, 2003. The adoption of this
     statement did not have any impact on our financial position or results of
     operations.

     Other recent accounting pronouncements, FASB Interpretation No. 46,
     "Consolidation of Variable Interest Entities," which addresses when a
     company should include in its financial statements the assets, liabilities
     and activities of another entity and SFAS No. 149, "Amendment of Statement
     133 on Derivative Instruments and Hedging Activities," which amends and
     clarifies the accounting for derivative instruments, including certain
     derivative instruments embedded in other contracts, and for hedging
     activities, did not have any impact on our consolidated financial position,
     results of operations or cash flows.

2.   NEED FOR ADDITIONAL CAPITAL

     We have incurred losses accumulating $19,779,024 through December 31, 2003,
     and have a working capital deficiency of $5,689,813 and a stockholders'
     deficit of $5,697,185 at December 31, 2003. Additionally, our asset-based
     lender notified us on November 6, 2003, that it will not renew the credit
     agreement on February 24, 2004. See Note 17. These conditions raise
     substantial doubt about our ability to continue as a going concern. Our
     continued existence is dependent on our ability to achieve profitable
     operations and raise additional financing. Management plans to resolve the
     doubt by raising capital through a private offering and anticipates the
     proceeds from the offering should provide sufficient capital resources to
     sustain operations. Management also plans to increase sales and improve the
     gross profit margin while controlling costs. As a result, management
     believes that no adjustments or reclassifications of recorded assets and
     liabilities is necessary at this time.

3.   MERGER AGREEMENT

     In the July 26, 2002 merger, RxB's stockholders received 3,333,969 shares
     of common stock, 345,333 shares of Series A Preferred Stock and 2,087,500
     shares of Series B Preferred Stock of RxBazaar. We also became obligated to
     issue up to 1,834,653 shares of common stock upon exercise of outstanding
     options and warrants to purchase common stock.

     Holders of RxB's common stock, options, warrants and Series A Preferred
     Stock may become eligible to receive up to 2,363,118 additional shares of
     common stock, if our consolidated income before taxes is equal to or
     greater than $3,225,000 for the four fiscal quarters ending March 31, 2004.
     Target figures will be increased by $0.10 for every additional gross dollar
     of equity investment above $3,000,000 raised after the date of the merger
     agreement.


                        See independent auditors' report.


                                      F-9
<PAGE>


                          RXBAZAAR, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     Stockholders of RxBazaar before the merger owned 406,006 shares of common
     stock or approximately 7% of our outstanding shares. For accounting
     purposes, the transaction described above is considered, in substance, a
     capital transaction rather than a business combination. It is equivalent to
     the issuance of common stock by RxB for the net assets of RxBazaar,
     accompanied by a recapitalization. This accounting treatment is identical
     to that resulting from an acquisition, except that no goodwill or other
     intangible asset was recorded. The historical financial statements of RxB,
     Inc. are the historical financial statements of the combined entity.

4.   ACQUISITION OF FPP DISTRIBUTION, INC.

     On February 23, 2001, pursuant to an agreement with Able Laboratories, Inc.
     ("Able"), RxB acquired FPP. RxB made a cash payment of $4,000,000 to Able
     and also assumed Able's existing 13.5% senior subordinated debt in the
     amount of $2,250,000. Able remained liable for the subordinated debt as a
     guarantor. On June 14, 2002, Able purchased the senior subordinated debt
     eliminating Able's guaranty and making Able the holder of the debt.

     The acquisition has been accounted for as a purchase and the results of
     operations of FPP have been included in our consolidated financial
     statements since the date of acquisition. The excess of the purchase price
     over the net assets acquired plus costs incurred in connection with the
     merger aggregated $2,120,983. Accordingly, we allocated $2,120,983 of the
     purchase price to customer lists which are being amortized over five years.

5.   NOTES PAYABLE

     Notes payable consist of the following:

<TABLE>
<CAPTION>
                                                         December 31,
                                                 ---------------------------
                                                      2003          2002
                                                 ------------  -------------
<S>                                              <C>           <C>
 Notes payable, officers and directors           $    40,000   $    40,000
 Line-of-credit                                    4,497,252     3,741,416
 Inventory financing agreement                     4,749,712            --
 Subordinated notes payable                        2,250,000     2,250,000
 Unsecured convertible notes                       1,381,591            --
                                                 ------------  ------------
         Total                                    12,918,555     6,031,416

 Less current portion                             11,536,964     3,781,416
                                                 ------------  -------------

         Long-term debt                          $ 1,381,59    $ 2,250,000
                                                 ============  =============
</TABLE>

     NOTES PAYABLE, OFFICERS AND DIRECTORS

     In March 2000, we borrowed $250,000 from our officers and directors under
     10% unsecured promissory notes. The remaining balance of the notes are
     currently due on demand. Interest expense for 2003 and 2002 was $4,000 and
     $9,225, respectively. Accrued interest of $6,101 and $2,101 was included in
     accrued expenses and other current liabilities at December 31, 2003 and
     2002, respectively. In April and May 2002, $150,000 in notes were converted
     into Series B Preferred Stock.

     NOTES PAYABLE, COMPUTER EQUIPMENT

     On February 5, 2001, we entered into an equipment financing agreement with
     a corporation which employed one of our directors as an officer. Under the
     agreement we received $250,000 and granted a security interest in certain
     computer equipment. During 2001, we paid $25,000 against the principal
     balance. On February 5, 2002, we paid $25,000 on this obligation and the
     lender agreed to release their claims to the computer equipment. We settled


                        See independent auditors' report.


                                      F-10
<PAGE>


                          RXBAZAAR, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     the balance due by issuing $200,000 of Series B Preferred Stock in April
     2002 and payment of the interest in July 2002. Interest expense for 2002
     was $1,262.

     LINE-OF-CREDIT

     On February 23, 2001, we entered into an asset-based line-of-credit
     agreement with a lender for $12,500,000 secured by a lien on substantially
     all assets. Borrowings under the line are based on eligible accounts
     receivable and inventory and have been classified as a current liability.
     The line bears interest at the default rate of prime plus 3% (7.0% at
     December 31, 2003) and matures on February 23, 2004. At December 31, 2003
     and 2002, we were current with our payments on the line but in default of
     certain loan covenants. Our lender notified us on November 6, 2003 that it
     will not renew the credit agreement on February 24, 2004. Interest expense
     for 2003 and 2002 was $228,275 and $192,674, respectively. See Note 17.

     INVENTORY FINANCING AGREEMENT

     On October 27, 2003, we entered into a management services agreement with
     Steel City Pharmaceuticals LLC, where they agreed to maintain at least
     $4,000,000 in capital to be used by us for inventory purchases. We agreed
     to repay Steel City its purchase price for the inventory plus the greater
     of (i) 30% of the gross profit on our resale of such inventory or (ii) a
     20% annual percentage return for the period that their capital is used by
     us. Repayment to Steel City is due on the earlier of thirty days after sale
     of the inventory or forty-five days after payment by Steel City for the
     inventory. We also agreed to pay Steel City a commitment fee of $50,000 per
     month during the term of the agreement. Commitment fees are subject to
     adjustment to the extent that the aggregate sum paid by us under the
     agreement would exceed $1,200,000 on an annualized basis. Steel City
     retains legal title to the inventory until we resell it and has been
     granted a second lien on our accounts receivable subject to an
     inter-creditor agreement with our asset-based lender and Able. We record a
     liability for all inventory purchased by Steel City due to our
     unconditional obligation to purchase such inventory. The agreement is for a
     term ending on August 31, 2006, subject to earlier termination either by
     Steel City at any time or by us at any time after one year or earlier if
     Steel City rejects more than 20% of the purchase opportunities during the
     first six months of the agreement.

     The members of Steel City include C. Robert Cusick, the Chairman of the
     Board and a director of RxBazaar, and separate trusts established by two
     other directors of RxBazaar. Their aggregate capital contribution to Steel
     City was $1,000,000, plus Mr. Cusick is a co-guarantor of a $1,000,000 line
     of credit obtained by Steel City. Mr. Cusick has subsequently advanced
     additional funds to Steel City aggregating $400,000 as of January 31, 2004.
     The sole managing-member of Steel City is an equity investor who has been a
     debt investor in RxBazaar.

     As additional consideration for the agreement, we granted Steel City (i)
     warrants to purchase 150,000 shares of our common stock at $2.00 per share
     exercisable for five years and (ii) options to purchase up to 1,600,000
     shares of our common stock at $2.50 per share expiring 60 days after
     termination of the agreement. The warrants were distributed to the members
     of Steel City. The warrants and options were valued at $131,000 and charged
     to financing expense.

     Interest expense for 2003 was $299,121 and accrued interest of $184,660 was
     included in accrued expenses and other current liabilities at December 31,
     2003. At December 31, 2003, we were not in compliance with the repayment
     terms of the agreement.

     SUBORDINATED NOTES PAYABLE

     On February 23, 2001, in connection with the acquisition of FPP, we assumed
     senior subordinated notes payable totaling $2,250,000 and bearing interest
     at 13.5% per annum payable monthly. The notes mature on June 17, 2004. The
     notes payable are secured by a third lien on accounts receivable and a
     second lien on substantially all other assets, were guaranteed by Able
     Laboratories, Inc. and are subject to an inter-creditor agreement with our
     asset-based lender and Steel City. On June 14, 2002, Able purchased the
     debt. Able has the option to convert the debt into our common stock at


                        See independent auditors' report.


                                      F-11
<PAGE>

                          RXBAZAAR, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     the current market value of the common stock. Able has agreed that it will
     not convert the notes if such conversion would result in Able owning more
     than 4.9% of our common stock. We are current with our payments on these
     notes but are in default of certain loan covenants. We are prohibited from
     making any principal payments on the notes without the approval of the
     asset-based lender and Able has subordinated its rights with respect to
     defaults to the asset-based lender pursuant to the terms of the
     inter-creditor agreement. Management intends to refinance this debt with
     long-term financing. Interest expense for both 2003 and 2002 amounted to
     $303,750. Accrued interest of $6,578 was included in accrued expenses and
     other current liabilities at December 31, 2003.

     UNSECURED CONVERTIBLE NOTES

     In April 2003, we commenced an offering of units at a purchase price per
     unit of $100,000. Each unit consists of a $100,000 10% unsecured
     convertible promissory note due the earlier of (i) April 2005 or (ii) 90
     days after we raise $6 million in a separate offering, and a warrant to
     purchase 10,000 shares of common stock at $2.75 per share exercisable
     through April 2008. The note is convertible to common stock at $2.50 per
     share. We received $1,395,000 in gross proceeds, including $200,000 from
     two of our directors, and issued warrants to the investors to purchase
     139,500 shares. Proceeds of $19,530 were allocated to the warrants based on
     their estimated fair value and credited to additional paid-in capital. This
     amount is reflected as a discount against the notes and will be amortized
     to interest expense over the life of the notes. We also issued warrants to
     purchase 11,950 shares of common stock, on the same terms as the unit
     warrants, for placement services valued at $1,673 and paid legal fees and
     commissions of $95,600. We expensed these costs. Interest expense and
     amortization expense for 2003 was $83,616 and $6,121, respectively. Accrued
     interest of $11,625 was included in accrued expenses and other current
     liabilities at December 31, 2003.

     BRIDGE NOTES PAYABLE

     In December 2001, we commenced an offering of units, each unit consisting
     of a $100,000 10% unsecured convertible promissory note and a five year
     warrant to purchase 14,000 shares of common stock at $0.71 per share. The
     purchase price per unit was $100,000. As of December 31, 2001, gross
     proceeds from this offering were $325,000. Proceeds of $55,250 were
     allocated to the warrants based on their estimated fair value and credited
     to additional paid-in capital. This amount was reflected as a discount
     against the notes payable and amortized to interest expense over the life
     of the notes. In January 2002, we received an additional $375,000 in gross
     proceeds from this offering. Proceeds of $63,750 were allocated to the
     warrants and credited to additional paid-in capital. In April and May 2002,
     all $700,000 of these notes were converted into Series B Preferred Stock.
     Interest expense and amortization expense for 2002 was $21,202 and
     $118,657, respectively.

6.   COMMITMENTS

     LEASE AGREEMENTS

     We lease office and warehouse space under operating leases expiring April
     2006 and March 2015. The leases require us to pay for utilities, repairs
     and maintenance. Rent expense for 2003 and 2002 was $663,082 and $628,583,
     respectively. Minimum future lease payments at December 31, 2003 for both
     locations were $658,072 for 2004, $706,668 for 2005, $560,556 for 2006,
     $480,000 for 2007, $480,000 for 2008 and $3,000,000 thereafter.

     On January 26, 2004, we vacated our data center and call center office
     space and do not intend to make any future payments because of alleged
     breaches by our landlord. We relocated all of our personnel and moved all
     of our property into our other facility. On February 10, 2004, we received
     a response from the landlord disputing the existence of a default and our
     ability to terminate the lease as a remedy. The landlord has listed the
     property for lease. Minimum future lease payments at December 31, 2003 for
     the vacated data center and call center office space were $238,072 for
     2004, $241,668 for 2005 and $80,556 for 2006.


                        See independent auditors' report.


                                      F-12
<PAGE>


                          RXBAZAAR, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     EMPLOYMENT AGREEMENTS

     We have employment agreements with certain of our officers that provide for
     minimum annual salaries, reimbursement of business related expenses and
     participation in other employee benefit programs. The agreements also
     include confidentiality, non-disclosure, severance, automatic renewal and
     non-competition provisions. Salary levels are subject to periodic review by
     the Board of Directors.

7 .  PREFERRED STOCK

     SERIES A

     On July 26, 2002, Able received 345,333 shares of Series A in the merger.
     (See Note 3). Each share of Series A is convertible to one share of common
     stock and had a stated dividend of 8%. In September 2002, we issued 239,841
     shares of common stock to Able in payment of $479,682 in accrued dividends.
     Able is entitled to receive additional shares of common stock, if Able
     receives less than $479,682 in proceeds on the sale of the 239,841 dividend
     shares. After Able receives $479,682 in proceeds from the sale of dividend
     shares, any unsold dividend shares will be returned to us. As a result of
     the indeterminate number of shares to be issued, we recorded the issuance
     of the 239,841 shares at their par value of $240 in September 2002 and have
     a remaining dividend payable of $479,442 as of December 31, 2003. The
     dividend payable liability will be reduced and additional paid-in capital
     will be increased based on proceeds from sales of dividend shares received
     by Able. Able has waived its right to future dividends on the Series A in
     exchange for our agreeing to register for resale the dividend shares,
     238,000 shares of common stock held by Able and the common stock issuable
     on conversion of the Series A. We filed a registration statement for these
     shares which was declared effective on September 30, 2002. Able has also
     agreed that it will not convert any convertible securities, if such
     conversion would result in Able owning more than 4.9% of our issued and
     outstanding common stock.

     SERIES B

     In March 2002, we commenced an offering of our Series B at $2.00 per share.
     We received gross proceeds of $4,175,000 in 2002. Each share of Series B is
     convertible to one share of common stock and has a stated dividend of 10%.
     The gross proceeds include conversion of $1,050,000 of notes payable and
     $50,000 of accrued expenses. Commissions and expenses in connection with
     the placement were approximately $160,500. On July 26, 2002, the holders of
     the Series B received 2,087,500 shares of Series B in the merger. (See Note
     3). On September 30, 2002, the Series B was converted into 2,087,500 shares
     of common stock and we issued 92,964 shares of common stock in payment of
     $185,928 of accrued dividends. The 2,180,464 shares of common stock were
     registered for resale on September 30, 2002.

8.   COMMON STOCK

     We have a right of first refusal agreement with our founders, which gives
     us the right to reacquire any shares of common stock which the founder
     decides to sell. In addition, under restricted stock purchase agreements,
     if certain founders cease their employment with us then we have the right
     to reacquire the unvested shares, as defined in the stock purchase
     agreement, at the founder's original purchase price per share. As of
     December 31, 2003, there were 5,250 unvested shares of common stock.

     In September 2003, we issued 6,250 shares of common stock valued at $12,500
     and a warrant to purchase 6,250 shares of common stock at $2.00 per share
     exercisable through April 2007 valued at $1,813. The securities were issued
     for financial services rendered and we expensed these costs.

9.   STOCK OPTION PLAN

     We have adopted two stockholder approved stock option plans and reserved
     1,990,000 shares of common stock for issuance to employees, directors and
     consultants. Under the plans, the Board of Directors may grant stock
     options and restricted stock and determine the terms of the grant. No
     restricted stock was granted during 2003 or 2002. The following table
     summarizes the activity of options granted under the plans:


                        See independent auditors' report.


                                      F-13
<PAGE>


                          RXBAZAAR, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                                      ---------------------------------------------------------------
                                                                  2003                              2002
                                                      ------------------------------   ------------------------------
                                                                        Weighted                          Weighted
                                                                         Average                           Average
                                                        Shares       Exercise Price       Shares       Exercise Price
                                                      -----------  -----------------    -----------    --------------
<S>                                                      <C>         <C>                  <C>            <C>
       Outstanding at beginning of year                  402,150     $     4.83           134,750        $  10.99
       Granted                                                --           --             278,950            1.79
       Exercised                                              --           --                  --            --
       Forfeited                                          (1,960)          4.98           (11,550)           3.23
                                                      -----------                      -----------
         Outstanding at end of year                      400,190     $     4.83           402,150        $   4.83
                                                      ===========                      ===========

       Exercisable at end of year                        272,781     $     5.09           181,209        $   5.03
                                                      ===========                      ===========

       Reserved for future grants at end of year       1,584,192                        1,582,232
       Weighted-average fair value of options         ===========                      ===========
          granted during the year                                    $       --                          $   0.26
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes option-pricing model with the following weighted average
     assumptions used for grants:

<TABLE>
<CAPTION>
                                             Years Ended December 31,
                                        ----------------------------------
                                            2003               2002
                                        ------------       -----------
<S>                                          <C>              <C>
        Dividend yield                       --                 0.0%
        Risk-free interest rate              --                 4.0%
        Expected volatility                  --                 0.0%
        Expected lives                       --               4 years
</TABLE>

     A summary of options outstanding at December 31, 2003, is as follows:

<TABLE>
<CAPTION>
                                                           December 31, 2003
                               -------------------------------------------------------------------------
                                           Options Outstanding                    Options Exercisable
                               ------------------------------------------   ----------------------------
                                                Weighted        Weighted                      Weighted
                                                 Average        Average                        Average
                                                Remaining       Exercise        Number        Exercise
Exercise Price                    Number          Life           Price        Exercisable       Price
--------------                  ----------     -----------     ----------     -----------    ---------
<S>                              <C>             <C>             <C>           <C>           <C>
$0.36                             21,980         6.4 years       $ 0.36         19,233       $  0.36
$1.79                            270,690         8.1               1.79        173,709          1.79
$7.14                              3,500         6.4               7.14          3,063          7.14
$10.71                            20,020         7.2              10.71         13,776         10.71
$14.29                            84,000         6.8              14.29         63,000         14.29
                                ----------                                    -----------
Outstanding at end of year       400,190         7.7 years       $ 4.83        272,781       $  5.09
                                ==========                                    ===========
</TABLE>

     In connection with 47,320 options granted at approximately $0.36 per share
     in 2000, we recorded unearned stock-based compensation of $321,100 based on
     a fair market value of $7.14 per share at the time of the grants. We are
     amortizing the unearned stock-based compensation over the vesting period of


                        See independent auditors' report.


                                      F-14
<PAGE>


                          RXBAZAAR, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     the options. Amortization expense for 2003 and 2002 was $37,288 and
     $37,287, respectively. In addition, unearned compensation of $8,016 was
     forfeited on resignation by certain employees during 2002.

     In connection with 115,500 options granted in 2002 to consultants for
     services rendered, the Company valued these options at $82,500 and charged
     this amount to expense.

10.  COMMON STOCK WARRANTS AND NON-PLAN OPTIONS

     On January 9, 2002, the Board of Directors granted non-plan stock options
     to purchase 238,000 shares of common stock at approximately $1.79 per share
     to two directors. The options become exercisable over two years from the
     date of the grant and expire on January 9, 2009. The weighted average fair
     value of the options on the date of grant was approximately $0.14 per
     share.

     A summary of the activity for common stock warrants and non-plan options,
     including warrants and options issued in connection with debt and equity
     placements, is as follows:

<TABLE>
<CAPTION>
                                                       Years Ended December 31,
                                    ---------------------------------------------------------------
                                                2003                              2002
                                    -----------------------------     -----------------------------
                                                      Weighted                          Weighted
                                                       Average                           Average
                                      Shares       Exercise Price       Shares       Exercise Price
                                    -----------    --------------     -----------    --------------
<S>                                  <C>              <C>              <C>              <C>
Outstanding at beginning of year     1,424,817        $   5.26         1,134,317        $   6.19
Granted                              1,907,700            2.48           290,500            1.59
Exercised                                   --             --                 --             --
Expired/canceled                            --             --                 --             --
                                    -----------                       -----------

Outstanding at end of year           3,332,517        $   3.67         1,424,817        $   5.26
                                    ===========                       ===========
</TABLE>

     A summary of common stock warrants and non-plan options outstanding at
     December 31, 2003, is as follows:

<TABLE>
<CAPTION>
                                               Weighted
                                                Average
                          Outstanding          Remaining         Number
Exercise Price               Shares              Life          Exercisable
--------------            -----------          ---------       -----------
<S>                        <C>                  <C>            <C>
$0.71                         98,000            3.1 years         98,000
$1.79                        971,180            3.3              852,180
$2.00                        156,250            4.8              156,250
$2.50                      1,600,000            2.8            1,600,000
$2.75                        151,450            4.3              151,450
$14.29                       187,637            2.2              187,637
$17.86                       168,000            1.8              168,000
                           ---------                           ---------

    Total                  3,332,517            3.0 years      3,213,517
                           =========                           =========
</TABLE>


                        See independent auditors' report.


                                      F-15
<PAGE>


                          RXBAZAAR, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


11.  COMMON STOCK RESERVED

     We have reserved shares of common stock at December 31, 2003 as follows:

<TABLE>
<S>                                                     <C>
          Convertible preferred stock                     345,333
          Stock option plans                            1,984,382
          Warrants                                      1,116,517
          Non-plan options                              2,216,000
          Contingent merger shares                      2,363,118
          Unsecured convertible notes                     558,000
                                                       -----------
          Total                                         8,583,350
                                                       ===========
</TABLE>

     We may also be required to issue common stock on the conversion of our
     subordinated notes payable, if the holders elect to exercise their
     conversion rights (see Note 5) and may be required to issue additional
     common stock in satisfaction of our Series A Preferred Stock dividend
     agreement (see Note 7).

12.  MAJOR CUSTOMERS AND SUPPLIERS

     There were no major customers accounting for 10% or more in net sales for
     2003 or 2002. In 2003, one major supplier accounted for 19% of our total
     purchases. In 2002, four major suppliers accounted for 18%, 15%, 13% and
     10% of our total purchases.

13.  RELATED PARTY TRANSACTIONS

     ABLE LABORATORIES, INC.

     During 2003 and 2002, we recognized other income of $254,726 and $306,864,
     respectively, for information technology consulting services provided to
     Able.

     CONSULTING SERVICES

     The Chairman of the Board provides consulting services to us. Consulting
     expense for 2003 and 2002 amounted to $144,000 and $152,000, respectively.
     At December 31, 2003 and 2002, we had accounts payable to the Chairman
     amounting to $106,000 and $132,570 respectively.

     A corporation owned by one of our stockholders also provided consulting
     services. Consulting expense for 2002 amounted to $114,583.

     One of our officers provides consulting services to us. Consulting fees for
     2003 and 2002 were $90,000 and $68,247, respectively. At December 31, 2003
     and 2002, we had accrued expenses of $114,247 and $96,247 respectively, to
     this officer.

14.  INCOME TAXES

     There was no provision for income taxes for 2003 and 2002 due to our net
     operating losses. The difference between the statutory Federal income tax
     rate of 34% and our effective tax rate is primarily due to net operating
     losses incurred by us and the valuation reserve against our deferred tax
     asset.


                        See independent auditors' report.


                                      F-16
<PAGE>


                          RXBAZAAR, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     The components of the net deferred tax asset at December 31, 2003 and 2002
     are as follows:

<TABLE>
<CAPTION>
                                                 2003             2002
                                            -------------    -------------
<S>                                          <C>              <C>
          Deferred tax asset:
               Federal                       $ 6,035,000      $ 4,720,000
               State                           1,515,000        1,180,000
                                            -------------    -------------
                                               7,550,000        5,900,000
          Valuation reserve                   (7,550,000)      (5,900,000)
                                            -------------    -------------
          Net deferred tax asset             $        --      $        --
                                            =============    =============
</TABLE>

     The following differences give rise to deferred income taxes at December
     31, 2003 and 2002.

<TABLE>
<CAPTION>
                                                 2003             2002
                                            -------------    -------------
<S>                                          <C>              <C>
          Net operating loss carryforward    $ 7,280,000      $ 5,500,000
          Other                                  270,000          400,000
                                            -------------    -------------
                                               7,550,000        5,900,000
          Valuation reserve                   (7,550,000)      (5,900,000)
                                            -------------    -------------
          Net deferred tax asset             $        --      $        --
                                            =============    =============
</TABLE>

     The increases in the valuation reserve are due to our net operating losses.

     As of December 31, 2003, we have federal and state net operating loss
     carryforwards of approximately $17,140,000. Federal and state net operating
     loss carryforwards expire in varying amounts beginning in 2015 and 2005,
     respectively.

     Use of net operating loss carryforwards is subject to annual limitations
     based on ownership changes in our common stock as defined by the Internal
     Revenue Code.

15.  EMPLOYEE BENEFIT PLAN

     We have a Section 401(k) Profit Sharing Plan (the "401(k) Plan") for all
     employees. Employees who have attained the age of 21 may elect to reduce
     their current compensation, subject to certain limitations, and have that
     amount contributed to the 401(k) Plan. We match 25% of employee
     contributions not to exceed 6% of employee compensation, subject to certain
     limitations. Employee contributions to the 401(k) Plan are fully vested at
     all times and our contributions become vested over a period of five years.
     In 2003 and 2002, we made matching contributions of $13,331 and $12,046,
     respectively.

16.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     At December 31, 2003 and 2002, our financial instruments consist of notes
     payable (see Note 5). The carrying values of notes payable approximate
     their fair values as these instruments bear interest at market rates.

17.  SUBSEQUENT EVENTS

     On February 27, 2004, our asset-based lender agreed to extend the maturity
     of our line-of-credit to May 31, 2004. Under the terms of the extension the
     maximum loan has been decreased to $6,000,000 with borrowings against
     inventory capped at $1,750,000 and an interest rate of prime plus 4%. The
     lender charged us an accommodation fee of $25,000 for the extension.


                        See independent auditors' report.


                                      F-17
<PAGE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None.

ITEM 8A. CONTROLS AND PROCEDURES

     We have disclosure controls and procedures (as defined in Rules 13a-14(c)
and 15d-14(c) of the Securities Exchange Act of 1934) to ensure that material
information relating to us and our consolidated subsidiary is recorded,
processed, summarized and reported within the time periods specified by the
SEC's rules and forms, particularly during the period in which this annual
report has been prepared.

     Our principal executive officer and principal financial officer have
reviewed and evaluated our disclosure controls and procedures within 90 days
prior to the filing date of this report. Based on such evaluation, our principal
executive officer and principal financial officer have concluded that our
disclosure controls and procedures are effective at ensuring that material
information is recorded, processed, summarized and reported on a timely and
accurate basis in our filings with the SEC. Since such evaluation there have not
been any significant changes in our internal controls, or in other factors that
could significantly affect these controls.

                                    PART III
                                    --------

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

     Our directors and executive officers as of January 31, 2004 were:

<TABLE>
<CAPTION>
NAME                            AGE   POSITIONS HELD
------------------------------  ---   -------------------------------------------------

<S>                             <C>   <C>
C. Robert Cusick..............  57    Chief Executive Officer and Chairman of the Board
Catherine M. Frost............  43    Vice President, Corporate Development
Richard S. O'Hara.............  43    Vice President, Business Development
Vanett Marshall...............  46    Vice President, Sales and Purchasing
Bruce Warwick.................  47    Secretary and Treasurer
Anand Adya....................  35    Vice President, Chief Technology Officer
Robert Cawthorn...............  68    Director(1)(2)
Handel Evans..................  69    Director(1)(2)
Shikhar Ghosh.................  47    Director(1)(2)
<FN>
---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
</FN>
</TABLE>

     The principal occupations and brief summary of the background of each
Director and executive officer of RxBazaar during the past five years is as
follows:

     C. Robert Cusick is a co-founder of RxBazaar and has served as the Chairman
of the Board of Directors and Chief Executive Officer since October 2000. Mr.
Cusick served as the Chairman of the Board of Able Laboratories, Inc., a generic
drug manufacturing and distributing company, from February 1999 to March 2002,
and was Able's Chief Executive Officer from February 1999 until October 2001. He
served as the Chief Executive Officer of International Murex Technology
Corporation, a worldwide manufacturer and distributor of diagnostic tests, from
November 1997 until June 1998, when Murex was acquired by Abbott Laboratories.
Prior to joining Murex, Mr. Cusick was Vice President of San Francisco 49ers,
Ltd. where he was responsible for commercial development and non-football


                                       20
<PAGE>


related players' activities. Mr. Cusick is a Certified Public Accountant with
over 30 years of diversified experience in finance, real estate, medical and
professional sports sectors.

     Catherine M. Frost has served as a part-time consultant to RxBazaar since
2000 and has served as the Vice President of Corporate Development since March
2001. In June 1998, she began consulting for Able Laboratories, Inc. and from
June 2001 to May 2002 she served as Vice President of Investor Relations. Ms.
Frost has for over fifteen years provided management and corporate development
consulting for companies in a variety of industries. From October 1987 until
June 1998, Ms. Frost served as Vice President and Special Assistant to the Chief
Executive Officer and President at International Murex Technology Corporation.
Ms. Frost studied finance and public affairs at the University of Southern
California and computer science at California State University, Fullerton.

     Richard S. O'Hara, Jr., has served as our Vice President, Business
Development, since June 2001. He has over 18 years experience in healthcare
sales and distribution, with the last 8 years focused on pharmaceutical sales
and distribution. At the beginning of his career, he spent ten years at
Becton-Dickinson, the premier sales organization in healthcare, in a variety of
positions including sales representative to Regional Sales Manager with
responsibilities that including hiring and training sales reps in the lucrative
New England and New York Region, and National Account Manager with special
emphasis on large drug store chains including Walgreens, Target, Kmart and
Rite-Aid. He subsequently held National Account Manager positions with Eon Labs,
Mova Laboratories and Rosemont Pharmaceuticals with varying responsibilities
that covered generic and branded pharmaceuticals and large wholesalers, drug
store chains and nursing home providers. Mr. O'Hara holds a Bachelor's degree
from Ohio Wesleyan University and an MBA from Northeastern University.

     Vanett Marshall has served as our Vice President of Sales and Purchasing
since February 2001 and as Vice President of Purchasing and Merchandising of FPP
Distribution since May 1997. From July 1995 until May 1997, she served as
National Sales Manager of FPP Distribution. She has over seventeen years
experience in the generic pharmaceutical industry, including experience in
sales, management and procurement.

     Bruce Warwick has served as our Secretary and Controller since May 2000 and
as Treasurer since March 2001. Mr. Warwick is a Certified Public Accountant with
20 years of experience in public accounting and six years of financial
management in private industry. From 1988 until May 2000, Mr. Warwick was
employed at Wolf & Company, P.C., a large regional public accounting and
business consulting firm, most recently as a principal. Mr. Warwick is a
graduate of Bentley College with a Bachelor of Science in Accounting and a
Master of Science in Taxation. He is licensed as a Certified Public Accountant
in Massachusetts and is a member of the American Institute of Certified Public
Accountants and the Massachusetts Society of Certified Public Accountants.

     Anand Adya has served as our Vice-President of Information Technology and
Chief Technology Officer since March 2000. From January 1998 until January 2000,
Mr. Adya was a senior manager at Andersen Consulting, and from January 1996
until December 1997, he was a principal consultant at Price Waterhouse, LLP.
Mr. Adya was responsible for designing and developing CRM technology solutions,
data warehousing, sales force automation, and internet and client/server
development projects. Mr. Adya holds a Masters of Business Administration from
Indian Institute of Management Lucknow, India and a Bachelor of Science in
Mechanical Engineering from Walchand College of Engineering, Sangli India.

     Robert E. Cawthorn has served as a director since June 2001. From February
1997 until June 2001, he served as a managing director at DLJ Merchant Banking.
He retired as chief executive officer of Rhone-Poulenc Rorer Inc. in May 1995
and as chairman in May 1996, after nearly four decades in the pharmaceutical,
biotechnology and animal health industries. Mr. Cawthorn is a director of
Charles River Laboratories International, Inc. and Chairman of Actelion Ltd. Mr.
Cawthorn is a graduate of Cambridge University, England.

     Handel E. Evans has served as a director since June 2001. Since December
1999, Mr. Evans has served as the Chairman of Equity Growth Research Ltd., a
company providing financial services principally to health care companies in
Europe. Mr. Evans has 40 years' experience in the pharmaceutical industry and
was the founder and former Executive Chairman of Pharmaceutical Marketing
Services Inc. and Walsh International Inc., companies providing marketing
services to the pharmaceutical industry. Prior to 1988, Mr. Evans was a
co-founder and senior executive of IMS International Inc., the leading
information supplier to the industry. Mr. Evans is a director of Allergan Inc.,
Cambridge Laboratories, Inc., and previously of SmithKline Beecham.


                                       21
<PAGE>


     Shikhar Ghosh is a co-founder of RxBazaar and has served as a director
since January 2000. Since 1998 he has served as the Chief Executive Officer of
Verilytics, Inc. Mr. Ghosh was a founder of Open Market, Inc., where he served
as Chairman of the Board from December 1995 to December 2000, and as President
and Chief Executive Officer from December 1995 to December 2000. Mr. Ghosh is
also a director of Fairmarket, Inc., a publicly-traded company. Mr. Ghosh
graduated with a Master of Business Administration from Harvard Business School
and holds an undergraduate degree from the University of Bombay, India.

COMMITTEES OF THE BOARD OF DIRECTORS

     The board of directors currently has two standing committees: Audit and
Compensation. The Audit Committee is responsible for overseeing all of our
financial functions, including matters relating to the appointment and
activities of our auditors, audit plans and procedures, various accounting and
financial reporting issues and changes in accounting policies, and reviewing the
results and scope of the audit and other services provided by our independent
public accountants. In addition, the Audit Committee reviews the independence of
the independent public accountants and makes annual recommendations to the Board
of Directors for the appointment of independent public accountants for the
ensuing year. In November 2002, the Board of Directors and the Audit Committee
approved and adopted an amended Audit Committee Charter.

     The Compensation Committee is responsible for determining the compensation
of our executive officers and also administrates the stock option plans.
Presently, each of our outside directors serves as a member of the Audit
Committee and the Compensation Committee.

     The Board of Directors met three times in fiscal 2003. All of the Directors
attended at least 75% of the meetings.

DIRECTORS' COMPENSATION

     We do not pay directors any cash compensation for their services as members
of the board of directors or any committee of the board, however, this issue of
director compensation is under consideration. We reimburse directors for
out-of-pocket expenses incurred in attending board and committee meetings.

     We have granted stock options to our non-employee directors in
consideration of their service on the board. On June 5, 2001, we granted each of
Handel Evans and Robert Cawthorn a stock option to purchase 175,000 shares of
common stock. These options have an exercise price of approximately $1.79 per
share, and became exercisable in full on December 31, 2001. In January 2002, we
granted each of Handel Evans and Robert Cawthorn a stock option to purchase
119,000 shares of common stock. These options have an exercise price of
approximately $1.79 per share. The options will become exercisable in equal
annual installments on the first and second anniversaries of the date of grant.

     The Compensation Committee reviews and recommends to the Board of Directors
the compensation and benefits of all our officers, reviews general policy
matters relating to compensation and benefits of our employees and administers
our Stock Option Plans.

COMPLIANCE WITH SECTION 16(a)

     Based solely on its review of copies of Forms 3 and 4 received by it or
representations from certain reporting persons, we believe that, during the
fiscal year ended December 31, 2003, there was compliance with Section 16 (a)
filing requirements applicable to our officers, directors and 10% stockholders.

ITEM 10. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

     The following table sets forth certain information concerning the
compensation for services rendered in all capacities for the fiscal years ended
December 31, 2003, 2002 and 2001 of our chief executive officer and the four


                                       22
<PAGE>


most highly compensated executive officers other than the chief executive
officer, who are referred to in this section as the "named executive officers."

     Other than as described in the table below, we did not pay any executive
officer any compensation, including incidental personal benefits, in excess of
10% of such executive officer's salary.

<TABLE>
<CAPTION>
                                                                                                 LONG-TERM
                                                                                                COMPENSATION
                                                          ANNUAL COMPENSATION                      AWARDS
                                                ----------------------------------------     ------------------
                                                                            OTHER ANNUAL         SECURITIES
NAME AND PRINCIPAL POSITION     FISCAL YEAR     SALARY         BONUS        COMPENSATION     UNDERLYING OPTIONS
---------------------------     -----------     ------         -----        ------------     ------------------
<S>                             <C>            <C>           <C>          <C>                <C>

C. Robert Cusick                   2003        $    --             --     $144,000(1)(2)               --
    Chief Executive Officer        2002             --             --      152,000(1)(2)               --
    and Chairman of the Board      2001             --             --      168,000(1)(2)               --

James W. Stahly(3)                 2003        175,000       $     --         7,285(4)                 --
    President and Chief            2002        181,731         22,500         6,778(4)             42,000
    Operating Officer              2001        175,000         37,500         3,889(4)                 --

Anand Adya                         2003        150,000             --            --                    --
    Vice President, Chief          2002        148,010             --            --                28,000
    Technology Officer             2001        142,894             --            --                    --

Bruce Warwick                      2003        140,000             --            --                    --
    Treasurer and Secretary        2002        135,288             --            --                28,000
                                   2001        136,634             --            --                    --

Richard O'Hara                     2003        101,344             --            --                    --
    Vice President,                2002        100,519         75,000            --                10,500
    Business Development           2001         48,228(5)          --            --                    --

Vanett Marshall                    2003         82,922         43,890            --                    --
    Vice President,                2002         81,634         24,000            --                10,500
    Sales and Purchasing           2001         73,275             --            --                 4,900

-------------------
<FN>
(1)  Mr. Cusick's services as Chief Executive Officer and Chairman are currently
     provided pursuant to a consulting arrangement.

(2)  In 2001, we paid Mr. Cusick $56,000 and accrued an additional $112,000 in
     consulting fees. In 2002, we paid Mr. Cusick $152,000 in consulting fees
     plus $30,000 that had been accrued in prior years. In 2003, we paid Mr.
     Cusick $144,000 in consulting fees plus $24,000 that had been accrued in
     prior years.

(3)  Mr. Stahly resigned his position as an executive officer in January 2004.

(4)  Consists of expenses related to an automobile provided for Mr. Stahly's
     use.

(5)  Mr. O'Hara became an executive officer in June 2001.
</FN>
</TABLE>

EMPLOYMENT AGREEMENTS

     James Stahly. On October 23, 2000, we entered into an employment agreement
with Mr. Stahly, with an initial term of four years subject to annual extensions
thereafter. Mr. Stahly resigned in January 2004. Under this employment
agreement, Mr. Stahly served as our president at an annual base salary of
$175,000. In addition, Mr. Stahly participated in our employee fringe benefit
plans or programs generally available to employees of comparable status and
position. Mr. Stahly was eligible to receive an annual performance bonus
targeted at $75,000 based upon certain objectives to be agreed upon by the board
of directors and Mr. Stahly. He was also granted options to purchase 84,000
shares of common stock, which vest over four years. Mr. Stahly was entitled to


                                       23
<PAGE>


terminate his employment at any time upon at least 30 days' written notice to
us. In the event we terminated Mr. Stahly without cause, we would have offered
him a six-month consulting agreement with a compensation package comparable to
the package he received pursuant to his employment agreement and the number of
options equal to that which was to vest at the next scheduled vesting date,
would vest. Upon termination of Mr. Stahly's employment due to his death or
disability, options to purchase an additional 5,250 shares of common stock would
vest. Under his employment agreement, he is subject to restrictive covenants,
including confidentiality provisions. Also, during his employment and for a
period of 12 months after termination of employment, Mr. Stahly is subject to a
non-competition provision.

     Bruce Warwick. On May 15, 2000, we entered into an employment agreement
with Mr. Warwick in substantially the same form as that described for Mr.
Stahly. Mr. Warwick serves as the controller, treasurer and secretary at a base
annual salary of $140,000. He was also granted an option to purchase 21,000
shares of common stock, which vests over four years.

     Anand Adya. On April 3, 2000, RxBazaar entered into an employment agreement
with Anand Adya in substantially the same form as that described for Mr. Stahly.
Mr. Adya serves as the chief technology officer and vice president at an annual
base salary of $150,000.

OPTION GRANTS

     There were no options granted to the named executive officers during the
fiscal year ended December 31, 2003.

OPTION EXERCISES AND FISCAL YEAR-END VALUES

     The following table sets forth certain information regarding exercisable
and unexercisable stock options held as of December 31, 2003 by each of the
named executive officers. The value of unexercised in-the-money options has been
calculated by determining the difference between the exercise price per share
payable upon exercise of such options and $1.50, the amount that the directors
have selected to use to represent the fair market value of one share of common
stock for the purpose of the table. No stock options were exercised by named
executive officers during 2003.

<TABLE>
<CAPTION>
                            FISCAL YEAR-END OPTION VALUES

                                   NUMBER OF SECURITIES              VALUE OF UNEXERCISED
                                  UNDERLYING UNEXERCISED             IN-THE-MONEY OPTIONS
                              OPTIONS AT FISCAL YEAR-END (#)        AT FISCAL YEAR-END ($)
                              ------------------------------     -----------------------------
NAME                           EXERCISABLE     UNEXERCISABLE     EXERCISABLE     UNEXERCISABLE
-------------------------     ------------     -------------     -----------     -------------
<S>                           <C>              <C>               <C>             <C>
C. Robert Cusick.........               -                -                 -                 -
James W. Stahly..........          78,750           47,250       $         0     $           0
Anand Adya...............          10,500           17,500       $         0     $           0
Bruce Warwick............          28,875           20,125       $    21,003     $       3,000
Richard O'Hara...........           3,938            6,562       $         0     $           0
Vanett Marshall..........           7,307            8,093       $         0     $           0
</TABLE>

STOCK OPTION PLANS

     Summary of the 2000 Stock Option/Restricted Stock Plan

     The following summary of the 2000 Stock Option/Restricted Stock Plan is
qualified in its entirety by reference to the 2000 plan.


                                       24
<PAGE>


     The 2000 plan authorizes: (i) the grant of options to purchase common stock
intended to qualify as incentive stock options, as defined in Section 422 of the
Internal Revenue Code, and (ii) the grant of non-statutory stock options. The
exercise price of incentive stock options granted under the 2000 plan must be at
least equal to the fair market value of the common stock on the date of grant.
The exercise price of incentive options granted to an optionee who owns stock
possessing more than 10% of the voting power of the outstanding capital stock
must equal at least 110% of the fair market value of the common stock on the
date of grant.

     The 2000 plan is administered by the Compensation Committee. The committee
selects the individuals to whom options are granted and determines the option
exercise price and other terms of each award, subject to the provisions of the
2000 plan. Incentive options may be granted under the 2000 plan to employees,
including officers and directors who are also employees, of RxBazaar or any of
our subsidiaries. All of our employees are eligible to participate in the 2000
plan. Non-statutory options may be granted under the 2000 plan to employees,
officers, individuals providing services to us and directors, whether or not
they are employees. Neither incentive options nor non-statutory options granted
under the 2000 plan may be repriced, whether by the reduction of their
respective exercise prices or by their cancellation and replacement.

     No options may extend for more than ten years from the date of grant (five
years in the case of an optionee who owns stock possessing more than 10% of the
total combined voting power of all classes of stock of RxBazaar or any
subsidiary). The aggregate fair market value (determined at the time of grant)
of shares issuable pursuant to incentive options which first become exercisable
by an employee or officer in any calendar year may not exceed $100,000.

     Options are non-transferable except by will or by the laws of descent or
distribution and are exercisable, during the optionee's lifetime, only by the
optionee. Options generally may not be exercised after: (i) termination of the
optionee's employment by us for cause, (ii) thirty days after termination of the
optionee's employment by us without cause or by the optionee voluntarily, (iii)
ninety days following the optionee's retirement in good standing by reason of
age or disability under the then established rules of the company, and (iv) one
year following an optionee's death if the optionee's death occurs prior to
termination of the optionee's employment.

     Payment of the exercise price of the shares subject to the option may be
made with: (i) certified or bank check for an amount equal to the option price
for such shares, (ii) with the consent of the committee, delivery of such
documentation as the committee and the broker, if applicable, will require to
effect an exercise of the option and delivery to us of the sale or loan proceeds
required to pay the option price, (iii) with the consent of the committee, such
other consideration which is acceptable to the committee and has a fair market
value equal to the option price of such shares, or (iv) with the consent of the
committee, a combination of the foregoing.

     Summary of the 2002 Stock Incentive Plan

     The following summary of the 2002 Stock Incentive Plan is qualified in its
entirety by reference to the 2002 plan.

     The 2002 plan authorizes: (i) the grant of options to purchase common stock
intended to qualify as incentive stock options, as defined in Section 422 of the
Internal Revenue Code, (ii) the grant of non-statutory stock options; and (iii)
the grant of restricted stock awards entitling the recipient to acquire, for a
purchase price determined by the board, shares of Common Stock subject to such
restrictions and conditions as the board may determine at the time of grant,
including continued employment and/or achievement of pre-established performance
goals and objectives. The exercise price of incentive stock options granted
under the 2002 plan must be at least equal to the fair market value of the
common stock on the date of grant. The exercise price of incentive options
granted to an optionee who owns stock possessing more than 10% of the voting
power of the outstanding capital stock must equal at least 110% of the fair
market value of the common stock on the date of grant.

     The 2002 plan is administered by the Compensation Committee. The Committee
selects the individuals to whom options are granted and determines the option
exercise price and other terms of each award, subject to the provisions of the
2002 plan. Incentive options may be granted under the 2002 plan to employees,
including officers and directors who are also employees, of RxBazaar or any of
our subsidiaries. All of our employees are eligible to participate in the 2002


                                       25
<PAGE>


plan. Non-statutory options may be granted under the 2002 plan to employees,
officers, individuals providing services to the company and directors, whether
or not they are employees.

     No options may extend for more than ten years from the date of grant (five
years in the case of an optionee who owns stock possessing more than 10% of the
total combined voting power of all classes of stock of RxBazaar or any
subsidiary). The aggregate fair market value (determined at the time of grant)
of shares issuable pursuant to incentive options which first become exercisable
by an employee or officer in any calendar year may not exceed $100,000.

     Options are non-transferable except by will or by the laws of descent or
distribution and are exercisable, during the optionee's lifetime, only by the
optionee. Options generally may not be exercised after: (i) termination of the
optionee's employment for cause, (ii) thirty days after termination of the
optionee's employment without cause or by the optionee voluntarily, and (iii)
one year following an optionee's death if the optionee's death occurs prior to
termination of the optionee's employment. Additionally, a non-statutory option
shall be subject to all of the foregoing provisions, and may also be exercised
so long as the optionee maintains a relationship with the company as a director,
consultant or adviser, unless the option agreement provides otherwise.

     Payment of the exercise price for the shares subject to an option under the
2002 plan may be made by delivery of cash or a check to the order of the company
in an amount equal to the exercise price of such option, or, to the extent
provided in the applicable option agreement, (i) by delivery to the company of
shares of common stock of the company already owned by the optionee for a period
of six months and having a fair market value equal in amount to the exercise
price of the options being exercised, (ii) a personal recourse note issued by
the optionee to the company in a principal amount equal to such aggregate
exercise price and with such other terms, including interest rate and maturity,
as the company may determine in its discretion, (iii) by any other means which
the board of directors determines are consistent with the purpose of the plan
and with applicable laws and regulations or (iv) by any combination of such
methods of payment. Restricted stock agreements may provide for the payment of
any purchase price in any manner approved by the board of directors at the time
it authorizes the grant.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The members of our Compensation Committee are Robert Cawthorn, Handel Evans
and Shikhar Ghosh, none of whom is an executive officer or employee of the
Company or its subsidiaries.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

(a) and (b) Security Ownership.

     The following table sets forth, as of January 31, 2004, certain information
regarding the beneficial ownership of the Common Stock by (i) each person who is
known us to own beneficially more than five percent of the outstanding Common
Stock, (ii) each director and executive officer of the Company, and (iii) all
directors and executive officers as a group:

<TABLE>
<CAPTION>
              OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                                                   SHARES BENEFICIALLY OWNED(1)
                                                   ----------------------------
NAME/ADDRESS OF BENEFICIAL OWNER*                     NUMBER             PERCENT
---------------------------------                  ------------          -------
<S>                                                <C>                    <C>
Able Laboratories, Inc. .......................    2,116,174(2)           27.11%
   6 Hollywood Court
   South Plainfield, NJ  07080
Steel City Pharmaceuticals LLC.................    1,600,000(3)           20.60%
   c/o Charles J. Koelsch
   28328 Hidden Lake Drive
   Bonita Springs, FL  34134


                                       26
<PAGE>


<CAPTION>
                                                   SHARES BENEFICIALLY OWNED(1)
                                                   ----------------------------
NAME/ADDRESS OF BENEFICIAL OWNER*                     NUMBER             PERCENT
---------------------------------                  ------------          -------
<S>                                                <C>                    <C>
C. Robert Cusick ..............................      992,592(4)           15.33%

Catherine M. Frost.............................      118,857(5)           1.91%

Anand Adya.....................................      104,782(6)           1.69%

Bruce Warwick .................................       46,778(7)             **

Robert Cawthorn ...............................      636,846(8)            9.6%

Handel Evans ..................................      669,000(9)           9.99%

Shikhar Ghosh .................................      690,892(10)          11.20%

Vanett Marshall................................        8,925(11)            **

Richard S. O'Hara..............................         5,250(12)           **

All directors and officers of RxBazaar
   as a group (nine persons)...................    3,273,922(13)          43.01%

-------------------
<FN>
*    Unless indicated, the address is c/o RxBazaar, Inc., 1385 Kemper Meadow
     Drive, Cincinnati, Ohio 45240.

**   Indicates less than 1%.

(1)  As of January 31, 2004, based on 6,166,530 shares of Common Stock issued
     and outstanding. Beneficial ownership is determined in accordance with the
     rules of the Securities and Exchange Commission and generally includes
     voting or investment power with respect to securities. Except as indicated,
     each person possesses sole voting and investment power with respect to all
     of the shares of Common Stock owned by such person, subject to community
     property laws where applicable. In computing the number of shares
     beneficially owned by a person and the percentage ownership of that person,
     shares of Common Stock subject to options and convertible securities, such
     as the Series A Preferred Stock, held by that person that are currently
     exercisable, or become exercisable within 60 days of January 31, 2004, are
     deemed outstanding. Such shares, however, are not deemed outstanding for
     the purpose of computing the percentage ownership of any other person. The
     information as to each person has been furnished by such person.

(2)  Includes (i) 345,333 shares underlying conversion of Series A Preferred
     Stock, (ii) 239,841 shares issued in payment of accrued dividends on the
     Series A Preferred Stock, (iii) 168,000 shares under exercisable warrants
     and (iv) 1,125,000 shares estimated to be issuable upon conversion of
     $2,250,000 of notes held by Able. Able has the right to convert the notes
     into shares of Common Stock at the then-current market value of the Common
     Stock. Able has entered into an agreement under which it may not convert or
     exercise any preferred stock or other right to obtain shares of Common
     Stock unless immediately after such exercise or conversion it held 4.9% or
     less of all issued and outstanding Common Stock.

(3)  Includes 1,600,000 shares under exercisable options.

(4)  Includes (i) 43,667 shares under exercisable warrants and (ii) indirect
     beneficial ownership of 266,667 options held by Steel City Pharmaceuticals
     LLC.

(5)  Includes 66,500 shares under exercisable options.

(6)  Includes (i) 14,000 shares under exercisable options and (ii) 6,782 shares
     underlying exercisable options held by Mr. Adya's spouse, as to which
     shares he disclaims beneficial ownership.

(7)  Includes 33,688 shares under exercisable options.

(8)  Includes (i) 304,000 shares under exercisable options, (ii) 20,000 shares
     underlying exercisable warrants, (iii) 40,000 shares issuable on conversion
     of $100,000 of notes and (iv) indirect beneficial ownership of 106,667
     options held by Steel City Pharmaceuticals LLC.


                                       27
<PAGE>


(9)  Includes (i) 140,000 shares held by the Dragon Trust, which Evans is the
     beneficiary of, (ii) 304,000 shares under exercisable options, (iii) 25,000
     shares underlying exercisable warrants, (iv) 40,000 shares issuable on
     conversion of $100,000 of notes and (v) indirect beneficial ownership of
     160,000 options held by Steel City Pharmaceuticals LLC.

(10) Includes (i) 420,000 shares held jointly by Shikhar Ghosh and his spouse
     and (ii) 140,000 shares held by Shikhar Ghosh Irrevocable Trust.

(11) Includes 8,925 shares under exercisable options.

(12) Includes 5,250 shares under exercisable options.

(13) Includes 1,365,146 shares underlying exercisable options and warrants,
     including beneficial ownership of options held by Steel City
     Pharmaceuticals LLC, and 80,000 shares underlying convertible notes.
</FN>
</TABLE>

(c)  Changes in Control

     None

(d)  Securities authorized for issuance under equity compensation plans.

<TABLE>
<CAPTION>
                                               (a)                      (b)                              (c)
                                    Number of securities to be   Weighted average           Number of securities remaining
                                     issued upon exercise of     exercise price of           available for future issuance
                                       outstanding options,    outstanding options,         under equity compensation plans
           Plan category               warrants and rights      warrants and rights   (excluding securities reflected in column (a))

Equity compensation plans
approved by security
<S>     <C>                         <C>                        <C>                    <C>
holders (1)                                  400,190                   $4.83                          1,584,192

Equity compensation plans not
approved by security
holders (2)                                  616,000                    1.79                             -0-
                                             -------                                                   ------
Total                                       1,016,190                  $2.99                          1,584,192
                                            =========                                                 =========
<FN>
(1)  Includes the 2000 Stock Option/Restricted Stock Plan and 2002 Stock
     Incentive Plan.

(2)  Includes grants by the Board of Directors of non-plan options to directors.
</FN>
</TABLE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIPS WITH ABLE LABORATORIES

     Various relationships exist between us and Able Laboratories, Inc. As of
December 31, 2003, Able owned 477,841 shares, or approximately 7.7%, of our
outstanding common stock, and also owned all 345,333 outstanding shares of the
Series A Preferred Stock, convertible into 345,333 shares of common stock. Able
also holds a warrant to purchase an additional 168,000 shares of our common
stock at a price of approximately $17.86 per share.

     The Series A Preferred Stock paid a dividend provided that certain
conditions must be satisfied, pursuant to our Financing and Security Agreement
with our senior lender. On September 10, 2002, we issued 239,841 shares of
common stock to Able in payment of $479,682 in accrued dividends on our Series A
Preferred Stock. We agreed to issue Able additional shares of common stock if
Able receives less than $479,682 in proceeds from the sale of these shares and
Able agreed to return any unsold shares after Able receives proceeds totaling
$479,682. Able has waived their right to any future dividends.

     C. Robert Cusick, our chief executive officer and a director, was a
director of Able from February 1999 until March 2002 and, until October 2001,
was the chief executive officer of Able. Dhananjay G. Wadekar, a director of
RxBazaar until February 2002, is also the president, chief executive officer,
and a director of Able.


                                       28
<PAGE>


     On February 23, 2001, pursuant to an agreement between RxBazaar and Able,
we acquired FPP Distribution from Able in a cash merger. We paid Able
$4,000,000, and assumed Able's existing 13.5% senior subordinated debt in the
amount of $2,250,000. Able remained liable as a guarantor of the subordinated
debt. On June 14, 2002, Able purchased the subordinated debt. Able has the
option to convert such debt, in whole or in part, into shares of our common
stock. Further, RxBazaar agreed to register for resale any shares of its common
stock issued upon conversion of the subordinated debt. Able has entered into an
agreement under which it may not convert or exercise any preferred stock or
other right to obtain shares of common stock unless immediately after such
exercise or conversion it held less than 4.9% of all issued and outstanding
common stock.

     Subsequent to our acquisition of FPP, Able continued to sell products to us
through FPP. In 2003 and 2002, we purchased approximately $495,000 and $951,000,
respectively, of products from Able. As of December 31, 2003, we had accounts
payable of approximately $119,000 to Able.

     We sublease an office, including utilities, in Needham, MA from Able on an
oral at-will no rent basis and our Treasurer provides certain services to Able
on a part-time basis. During 2003 and 2002, we recognized other income of
$254,726 and $306,864, respectively, for information technology consulting
services provided to Able.

TRANSACTIONS WITH DIRECTORS AND OFFICERS

     We were party to a Services Agreement dated February 5, 2001 with
Verilytics, Inc. for website hosting services and the purchase of certain
equipment. Shikhar Ghosh, a stockholder and director, was a director and the
chief executive officer of Verilytics, Inc. The Services Agreement was
terminated in March 2001 by mutual agreement of the parties. In April 2002, we
agreed to settle the balance due under the original agreement by issuing
$200,000 of Series B Preferred Stock and paying the balance of $45,379 in cash
on closing of the Series B Preferred Stock placement.

     We are party to a Liquidation Assistance Agreement dated February 23, 2001
with C. Robert Cusick, James W. Stahly, FPP Distribution, and The CIT
Group/Business Credit, Inc., FPP Distribution's senior lender. If CIT declares
an event of default under the Financing and Security Agreement and thereafter
commences a liquidation process, each of Messrs. Cusick and Stahly agree to
assist in the liquidation so long as we continue to pay them their standard
compensation.

     On June 5, 2001, we granted non-plan stock options to purchase a total of
1,260,000 shares of Common Stock at approximately $1.79 per share to four new
directors. On November 30, 2001, options to purchase 910,000 shares of Common
Stock were cancelled in connection with the resignation of two of these
directors. We subsequently issued 28,000 options to one of the resigning
directors.

     On November 8, 2001, James Stahly purchased units at approximately $1.79
per unit for gross proceeds to us of $50,000. Each unit consisted of one share
of common stock and one warrant to purchase one share of common stock at
approximately $1.79 per share.

     On January 9, 2002, the board of directors authorized the grant of options
to purchase 119,000 shares of Common Stock to each of Handel Evans and Robert
Cawthorn at approximately $1.79 per share.

     On April 11, 2002, Robert Cawthorn, C. Robert Cusick, Shikhar Ghosh,
Catherine Frost and Bruce Warwick purchased an aggregate of 337,500 shares of
Series B Preferred Stock for cash and conversion of outstanding debt at $2.00
per share.

     In April 2003, Handel Evans and Robert Cawthorn each purchased a $100,000
10% unsecured convertible promissory note and a warrant to purchase 10,000
shares of common stock at $2.75 per share.

     On October 27, 2003, we entered into a management services agreement with
Steel City Pharmaceuticals LLC, where they agreed to maintain at least
$4,000,000 in capital to be used by us for inventory purchases. We agreed to
repay Steel City its purchase price for the inventory plus the greater of (i)
30% of the gross profit on our resale of such inventory or (ii) a 20% annual
percentage return for the period that their capital is used by us. Repayment to


                                       29
<PAGE>


Steel City is due on the earlier of thirty days after sale of the inventory or
forty-five days after payment by Steel City for the inventory. We also agreed to
pay Steel City a commitment fee of $50,000 per month during the term of the
agreement. Commitment fees are subject to adjustment to the extent that the
aggregate sum paid by us under the agreement would exceed $1,200,000 on an
annualized basis. Steel City retains legal title to the inventory until we
resell it and has been granted a second lien on our accounts receivable subject
to an inter-creditor agreement with our asset-based lender and Able. We record a
liability for all inventory purchased by Steel City due to our unconditional
obligation to purchase such inventory. The agreement is for a term ending on
August 31, 2006, subject to earlier termination either by Steel City at any time
or by us at any time after one year or earlier if Steel City rejects more than
20% of the purchase opportunities during the first six months of the agreement.

     The members of Steel City include C. Robert Cusick, the Chairman of the
Board and a director of RxBazaar, and separate trusts established by two other
directors of RxBazaar. Their aggregate capital contribution to Steel City was
$1,000,000, plus Mr. Cusick is a co-guarantor of a $1,000,000 line of credit
obtained by Steel City. Mr. Cusick has subsequently advanced additional funds to
Steel City aggregating $400,000 as of January 31, 2004. The sole managing-member
of Steel City is an equity investor and has been a debt investor in RxBazaar.

     As additional consideration for the agreement, we granted Steel City (i)
warrants to purchase 150,000 shares of our common stock at $2.00 per share
exercisable for five years and (ii) options to purchase up to 1,600,000 shares
of our common stock at $2.50 per share expiring 60 days after termination of the
agreement. The warrants were distributed to the members of Steel City. The
warrants and options were valued at $131,000 and charged to financing expense.

     Interest expense for 2003 was $299,121 and accrued interest of $184,660 was
included in accrued expenses and other current liabilities at December 31, 2003.
At December 31, 2003, we were not in compliance with the repayment terms of the
agreement.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits, including those incorporated by reference.

Exhibit No.    Description
-----------    -----------

3.1            Amended and Restated Certificate of Incorporation, filed with the
               Delaware Secretary of State on April 11, 2002 (filed as Exhibit
               3.1 to Post-Effective Amendment No. 1 to Registration Statement
               on Form SB-2/A, File No. 333-39044 (the "2002 Form SB-2"), filed
               with the Securities and Exchange Commission on April 15, 2002,
               and incorporated herein by reference).

3.2            Certificate of Amendment of Certificate of Incorporation, filed
               with the Delaware Secretary of State on July 26, 2002 (filed as
               Exhibit 3.2 to Current Report on Form 8-K filed with the
               Securities and Exchange Commission on August 9, 2002 (the "August
               Form 8-K, and incorporated herein by reference).

3.3            Certificate of Designations, Preferences and Rights of Series A
               Convertible Preferred Stock (filed as Exhibit 3.3 to the August
               2002 Form 8-K filed, and incorporated herein by reference).

3.4            Certificate of Designations, Preferences and Rights of Series B
               Convertible Preferred Stock (filed as Exhibit 3.4 to the August
               2002 Form 8-K, and incorporated herein by reference).

3.5            Amended and Restated Bylaws (filed as Exhibit 3.2 to the 2002
               Form SB-2, and incorporated herein by reference).


                                       30
<PAGE>


10.1           Agreement and Plan of Merger among RxBazaar, RxBazaar.com
               Acquisition Corp., Superior Pharmaceutical Company and DynaGen,
               Inc. dated October 20, 2000 (filed as Exhibit 10.1 to the 2002
               Form SB-2, and incorporated herein by reference).

10.2           First Amended and Restated Secured Promissory Note issued by
               RxBazaar and issued to FINOVA Mezzanine Capital Inc. in the
               amount of $1,500,000 dated February 23, 2001 (filed as
               Exhibit10.2 to the 2002 Form SB-2, and incorporated herein by
               reference).

10.3           First Amended and Restated Secured Promissory Note issued by
               RxBazaar and issued to Argosy Investment Partners, L.P. in the
               amount of $750,000 dated February 23, 2001 (filed as Exhibit 10.3
               to the 2002 Form SB-2, and incorporated herein by reference).

10.4           Revolving Loan Promissory Note issued by Superior Pharmaceutical
               Company and issued to The CIT Group/Business Credit, Inc. the
               amount of $12,500,000 dated February 23, 2001 (filed as Exhibit
               10.4 to the 2002 Form SB-2, and incorporated herein by
               reference).

10.5           Form of 10% unsecured promissory note issued by RxBazaar on
               January 15, 2002 (filed as Exhibit 10.5 to the 2002 Form SB-2,
               and incorporated herein by reference).

10.6           Warrant to purchase 1,200,000 shares of common stock of RxBazaar
               at $2.50 per share issued to Able Laboratories, Inc. dated
               September 29, 2000 (filed as Exhibit 10.6 to the 2002 Form SB-2,
               and incorporated herein by reference).

10.7           Form of warrant to purchase shares of common stock of RxBazaar at
               $2.00 per share dated February 23, 2001 (filed as Exhibit 10.7 to
               the 2002 Form SB-2, and incorporated herein by reference).

10.8           Form of warrant to purchase shares of common stock of RxBazaar at
               $.25 per share issued November 8, 2001 (filed as Exhibit 10.8 to
               the 2002 Form SB-2, and incorporated herein by reference).

10.9           Form of warrant to purchase shares of common stock of RxBazaar at
               $.10 per share issued January 15, 2002 (filed as Exhibit 10.9 to
               the 2002 Form SB-2, and incorporated herein by reference).

10.12          Form of Right of First Refusal Agreement between RxBazaar and the
               parties listed thereto dated October 25, 1999 (filed as Exhibit
               10.12 to the 2002 Form SB-2, and incorporated herein by
               reference).

10.13          Form of Stock Purchase Agreement to purchase shares of common
               stock of RxBazaar at $1.00 per share (filed as Exhibit 10.13 to
               the 2002 Form SB-2, and incorporated herein by reference).

10.14          Form of Stock Purchase Agreement to purchase shares of common
               stock of RxBazaar at $2.00 per share (filed as Exhibit 10.14 to
               the 2002 Form SB-2, and incorporated herein by reference).

10.15          Securities Purchase Agreement between RxBazaar and Kenilworth LLC
               and The Endeavor Capital Investment Fund S.A. dated February 15,
               2002, to purchase 3,133,333 shares of Series A Convertible
               Preferred Stock of RxBazaar (filed as Exhibit 10.15 to the 2002
               Form SB-2, and incorporated herein by reference).


                                       31
<PAGE>


10.16          Form of Securities Purchase Agreement to purchase units at $1.50
               per unit, each unit consisting of one share of common stock and a
               warrant to purchase an additional share of common stock dated
               February 2001 (filed as Exhibit 10.16 to the 2002 Form SB-2, and
               incorporated herein by reference).

10.17          Form of Subscription Agreement between RxBazaar and the
               signatories thereto to purchase units, each unit consisting of
               one share of common stock and one common stock purchase warrant
               at $.25 per unit, dated November 8, 2001 (filed as Exhibit 10.17
               to the 2002 Form SB-2, and incorporated herein by reference).

10.18          Form of Subscription Agreement between RxBazaar and the
               signatories thereto to purchase units, each unit consisting of a
               10% $100,000 unsecured convertible promissory note and warrant to
               purchase an additional 100,000 shares of common stock dated
               January 15, 2002 (filed as Exhibit 10.18 to the 2002 Form SB-2,
               and incorporated herein by reference).

10.19          Subscription Agreement between RxBazaar and RxSupply Chain
               Partners, LLC dated June 13, 2001 to purchase 2,000,000 shares of
               Common Stock of RxBazaar (filed as Exhibit 10.19 to the 2002 Form
               SB-2, and incorporated herein by reference).

10.20          RxBazaar Series B Preferred Stock Subscription Agreement and
               Investment Letter dated February 2002 (filed as Exhibit 10.20 to
               the 2002 Form SB-2, and incorporated herein by reference).

10.21          Employment Agreement between RxBazaar and Anand Adya dated April
               3, 2000 (filed as Exhibit 10.21 to the 2002 Form SB-2, and
               incorporated herein by reference).

10.22          Employment Agreement between RxBazaar and Bruce Warwick dated
               May 15, 2000 (filed as Exhibit 10.22 to the 2002 Form SB-2, and
               incorporated herein by reference).

10.23          Employment Agreement between RxBazaar and James Stahly dated
               October 23, 2000 (filed as Exhibit 10.23 to the 2002 Form SB-2,
               and incorporated herein by reference).

10.24          Form of Employee Non-Disclosure Agreement and Intellectual
               Property Assignment Agreement (filed as Exhibit 10.24 to the 2002
               Form SB-2, and incorporated herein by reference).

10.25          2000 Stock Option/Restricted Stock Plan (filed as Exhibit 10.25
               to the 2002 Form SB-2, and incorporated herein by reference).

10.26          2002 Stock Incentive Plan (filed as Exhibit 10.26 to the 2002
               Form SB-2, and incorporated herein by reference).

10.27          Commercial Lease Agreement between SPC Properties Limited and
               Superior Pharmaceutical Company (filed as Exhibit 10.27 to the
               2002 Form SB-2, and incorporated herein by reference).

10.28          Lease Agreement between Scott F. Orton, John H. Thigpen, III and
               RxBazaar dated April 25, 2001 (filed as Exhibit 10.28 to the 2002
               Form SB-2, and incorporated herein by reference).

10.29          Financing and Security Agreement among The CIT Group/Business
               Credit, Inc., Superior Pharmaceutical Company and RxBazaar dated
               February 23, 2001 (filed as Exhibit 10.29 to the 2002 Form SB-2,
               and incorporated herein by reference).


                                       32
<PAGE>


10.30          RxBazaar Guaranty pursuant to Financing and Security Agreement
               among The CIT Group/Business Credit, Inc., Superior
               Pharmaceutical Company and RxBazaar dated February 23, 2001
               (filed as Exhibit 10.30 to the 2002 Form SB-2, and incorporated
               herein by reference).

10.31          Pledge Agreement between RxBazaar and The CIT Group/Business
               Credit, Inc. dated February 23, 2001 (filed as Exhibit 10.31 to
               the 2002 Form SB-2, and incorporated herein by reference).

10.32          Form of Liquidation Assistance Agreement among each of Wadekar,
               Stahly, Cusick, and Superior Pharmaceutical Company, RxBazaar,
               and The CIT Group/Business Credit, Inc. dated February 23, 2001
               (filed as Exhibit 10.32 to the 2002 Form SB-2, and incorporated
               herein by reference).

10.33          First Amended and Restated Loan Agreement between DynaGen, Inc.,
               RxBazaar, Superior Pharmaceutical Company, Argosy Investment
               Partners, L.P. and FINOVA Mezzanine Capital Inc. dated
               February 23, 2001 (filed as Exhibit 10.33 to the 2002 Form SB-2,
               and incorporated herein by reference).

10.34          Security Agreement between RxBazaar and FINOVA Mezzanine Capital
               Inc. dated February 23, 2001 (filed as Exhibit 10.34 to the 2002
               Form SB-2, and incorporated herein by reference).

10.35          Pledge and Security Agreement between RxBazaar and FINOVA
               Mezzanine Capital Inc. dated February 23, 2001 (filed as Exhibit
               10.35 to the 2002 Form SB-2, and incorporated herein by
               reference).

10.36          Assignment and Assumption Agreement among DynaGen, Inc., Able
               Laboratories, Inc. and Superior Pharmaceutical Company dated
               February 23, 2001 (filed as Exhibit 10.36 to the 2002 Form SB-2,
               and incorporated herein by reference).

10.37          Guaranty and Pledge Agreement dated February 15, 2001 between
               DynaGen, Inc. RxBazaar, Kenilworth LLC, Infusion Capital
               Investment corp. and Ocean Marketing Corp. (filed as
               Exhibit 10.37 to the 2002 Form SB-2, and incorporated herein by
               reference)

10.38          Agreement with Able Laboratories, Inc. dated September 9, 2002
               (filed as Exhibit 10.38 to the 2002 Form SB-2, and incorporated
               herein by reference).

10.39          Management Services Agreement, dated October 27, 2003, between
               the Company and Steel City Pharmaceuticals LLC ("SCP") (filed as
               Exhibit 10.1 to Registrant's Form 8-K for an event of October 27,
               2003, and incorporated herein by reference)

10.40          Common Stock Purchase Warrant, dated October 27, 2003, issued to
               SCP (filed as Exhibit 10.2 to Registrant's Form 8-K for an event
               of October 27, 2003, and incorporated herein by reference)

10.41          Common Stock Option Agreement, dated October 27, 2003 (filed as
               Exhibit 10.3 to Registrant's Form 8-K for an event of October 27,
               2003, and incorporated herein by reference)


                                       33
<PAGE>


10.42          Intercreditor Agreement, dated October 27, 2003, among Able
               Laboratories, Inc., SCP and The CIT Group/Business Credit, Inc.,
               acknowledged by the Company and FPP Distribution, Inc. (filed as
               Exhibit 10.4 to Registrant's Form 8-K for an event of October 27,
               2003 and incorporated herein by reference)

21*            List of Company's subsidiaries.

31.1*          Rule 13a-15(a)/15d-15(a) Certification of C. Robert Cusick,
               Chairman and Chief Executive Officer

31.2*          Rule 13a-15(a)/15d-15(a) Certification of Bruce C. Warwick,
               Treasurer

32*            Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
               of 2002.
-------------------
 * Filed herewith

(b)  Reports on Form 8-K:

     Report for an event of October 27, 2003 to report in Item 5 the entry into
the Steel City Pharmaceuticals LLC agreement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     For each of the past two fiscal years the fees to our independent
accountants for services they rendered to us were as follows:

<TABLE>
<CAPTION>
                                                2003                  2002
                                                ----                  ----
<S>                                           <C>                  <C>
Audit Fees                                    $ 60,000             $  53,840
Quarterly Reviews                               16,950                14,250
Audit-Related Fees                               1,800                19,500
Tax Fees                                        14,400                 8,450
All Other Fees                                       -                     -
</TABLE>

     The audit-related fees for 2002 were for services related to the 2002
merger with SB Merger and to Securities Act registration statements we had filed
related to the merger and prior capital raising transactions, and for 2003 these
fees were for assisting possible placement agents in connection with their due
diligence procedures.

     The tax fees relate to the preparation of our 2002 and 2001 federal and
state tax returns, including the preparation of additional returns associated
with the 2002 merger and property tax returns.

     The Audit Committee had approved the services of the independent
accountants.


                                       34
<PAGE>


                                   SIGNATURES
                                   ----------

Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 24 day of March
2004.

RXBAZAAR, INC.

By:  /s/ C. Robert Cusick
     ------------------------------------
     C. Robert Cusick
     Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934 this report
has been signed by the following persons in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
SIGNATURE                                                      TITLE                               DATE
---------                                                      -----                               ----
<S>                                             <C>                                           <C>
/s/ C. Robert Cusick                            Chairman of the Board and Chief               March 24, 2004
----------------------------------------        Executive Officer
C. Robert Cusick                                (Principal Executive Officer)

/s/ Bruce C. Warwick                            Treasurer                                     March 24, 2004
----------------------------------------        (Principal Financial and Accounting
Bruce C. Warwick                                Officer)

/s/ Robert Cawthorn                             Director                                      March 24, 2004
----------------------------------------
Robert Cawthorn

/s/ Handel Evans                                Director                                      March 24, 2004
----------------------------------------
Handel Evans

/s/ Shikhar Ghosh                               Director                                      March 24, 2004
----------------------------------------
Shikhar Ghosh
</TABLE>


                                       35
<PAGE>


                                  EXHIBIT INDEX

EXHIBIT
-------

21       Subsidiaries of the Registrant

31.1     Rule 13a-15(a)/15d-15(a) Certification of C. Robert Cusick, Chairman
         and Chief Executive Officer

31.2     Rule 13a-15(a)/15d-15(a) Certification of Bruce C. Warwick, Treasurer.

32.1     Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
         2002.

32.2     Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
         2002.


                                       36