This Quarterly Report on Form 10-Q contains statements which constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Forward looking information includes statements concerning pharmacy sales trends, the sale of discontinued operations and demographic trends; as well as those that include or are preceded by the words "expects," "estimates," "believes," "plans," "anticipates," or similar language.

Forward looking statements may involve risks and uncertainties, known or unknown to us that could cause results to differ materially from management's expectations as projected in such forward-looking statements. These risks and uncertainties are discussed in Item 1A in our most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the "SEC").

You should not place undue reliance upon forward looking statements. Unless otherwise required by applicable securities laws, we assume no obligation to update our forward-looking statements to reflect subsequent events or circumstances.

Overview

We operate a chain of pharmacies and provide pharmacy management services to various not-for-profit entities. While the long-term outlook for prescription utilization is strong due in part to the aging population and the continued development of innovative drugs that improve the quality of life and control health care costs, the pharmacy industry is highly competitive. The majority of our business is conducted pursuant to contracts with pharmacy benefit management companies and the Commonwealth of Massachusetts Medicaid Department. Each applies consistent downward pressure on our margins. The current recessionary economic environment has not significantly adversely affected the number of prescriptions dispensed at our pharmacies, as our business is generally recession resistant. We continue to target market niches not occupied by our larger competitors.

Recent Developments

In March 2009, we began operating at the Dimock Community Health Center in Roxbury, Massachusetts, increasing our number of locations with 340B affiliations to 14 and our total pharmacy locations to 25.

In December 2008, we sold the inventory and prescription lists of our Topsfield, Massachusetts, store ("Topsfield") to CVS Pharmacy LLC ("CVS"). A gain of $500,000 was recognized on the sale.

In October 2008, we entered into a contract with the East Boston Neighborhood Health Center to assume management of the Health Center's pharmacy already in operation. The pharmacy immediately became our highest volume location in terms of prescriptions dispensed. As of December 31, 2008, we had successfully integrated the pharmacy dispensing software platform, the robotic dispensing unit, the work-flow software, and the point of purchase software. While the process was taxing on operational resources, we believe the changes were necessary in order to maximize the long-term profit potential of the pharmacy.

In September 2008, we sold certain assets and liabilities of ADCO Surgical Supply, Inc. ("ADCO"). A loss was recognized from discontinued operations of $17,667 and loss on disposal of certain assets and liabilities of $48,118 was recognized on the sale. In connection with the sale, we recorded a note receivable of $50,000. We and the buyer are currently in dispute over certain assets and liabilities that were included in the ADCO sale, and the note receivable has not been paid. As of March 31, 2009, we are unable to determine the final outcome of this dispute, but it may result in an additional loss on the disposal of discontinued operations.

In July 2008, we coordinated the relocation of the pharmacy that we manage for the Boston Health Care for the Homeless Program ("BHCHP") from the Barbara McInnis House to BHCHP's new, state of the art location within the Jean Yawkey Center across from Boston Medical Center. At the new pharmacy, we began dispensing patient prescriptions for patients visiting the new walk-in clinic in addition to dispensing prescriptions for the program's respite patients.

In July 2008, we opened a pharmacy in Dorchester, Massachusetts, as a mirror operation to our Peabody, Massachusetts, location to manage dispensing for a different geographical area. Significant "location insensitive" business was transferred from our other Dorchester pharmacy to gain efficiencies in the dispensing process. The new pharmacy increased dispensing capacity for the rapidly growing assisted living and adherence packaging market segment.

Results of Operations

The following discussion provides information with respect to our results of operations, liquidity, and capital resources on a comparative basis for the three and nine months ended March 31, 2009 and 2008. The following discussion should be read in conjunction with our consolidated financial statements and selected notes thereto for the three and nine months ended March 31, 2009 and 2008, included herein, and our audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended June 30, 2008, as filed with the SEC.

Net Revenues. The following table sets forth for the periods indicated pharmacy and dispensing fees revenues:

                                     For the three months March 31,                                For the nine months ended March 31,
                                                                  Change                                                          Change
                           2009             2008              $              %             2009             2008              $              %
Pharmacy               $ 17,072,020     $ 16,469,728     $   602,292           3.7 %   $ 51,237,155     $ 48,395,230     $ 2,841,925           5.9 %
Dispensing fees           1,527,465          825,380         702,085          85.1 %      3,973,607        2,323,140       1,650,467          71.0 %
Total                  $ 18,599,485     $ 17,295,108     $ 1,304,377           7.5 %   $ 55,210,762     $ 50,718,370     $ 4,492,392           8.9 %

Net revenues increased $1.3 million or 7.5% to $18.6 million and $4.5 million or 8.9% to $55.2 million for the three and nine months ended March 31, 2009, respectively, as compared to $17.3 million and $50.7 million for the three and nine months ended March 31, 2008, respectively. The main reason for the increase in revenues was due to the addition of five new locations in April, July, and October 2008 and March 2009. We operated 25 locations as of March 31, 2009, compared to 23 locations in the prior year.

Net revenues decreased at stores open more than one year for the three and nine months ended March 31, 2009, due to our decision to transfer accounts with approximately $1.7 million and $5.2 million in net revenues for the three and nine months ended March 31, 2009, respectively, to two of the newly opened pharmacies. The transfer was done to group certain specialized accounts together in order to achieve efficiencies in the dispensing process. If the effect of the business transfer is taken into account, comparable revenue increased approximately 5% and 8%, respectively, for the three and nine months ended March 31, 2009.

The total number of prescriptions dispensed increased 21% for the nine months ended March 31, 2009. The number of prescriptions dispensed did not correlate to a commensurate growth in revenue due to an increased number of generic medications as a percentage of total number of prescriptions dispensed. Generic medications typically have a lower selling price than brand name medications. We recognize revenue both from the sale of prescription medications and other products as well as through dispensing fee revenue derived through the dispensing of prescriptions with inventory owned by Federally Qualified Health Centers ("FQHCs") pursuant to pharmacy management services contracts entered into between us and various FQHCs.

The pharmacy sales (revenues other than dispensing fees) increased $0.6 million or 3.7% to $17.0 million and $2.8 million or 5.9% to $51.2 million for the three and nine months ended March 31, 2009, respectively, as compared to $16.5 million and $48.4 million for the three and nine months ended March 31, 2008, respectively. The increase was attributable to the opening of the three new pharmacies. Sales slightly decreased at stores open more than one year due to our decision to transfer accounts with approximately $1.6 million and $4.9 million in sales for the three and nine months ended March 31, 2009, respectively, to two of the newly opened pharmacies. If the effect of the business transfer is taken into account, comparable sales increased approximately 4% and 7%, respectively, for the three and nine months ended March 31, 2009.

We attribute the increase in prescription dispensing to greater drug utilization on the part of an aging population, an overall increase in market share within certain communities and an increased utilization of pharmacy services by patients of FQHCs with whom the pharmacies have contracts to provide services. The pharmacies manage two pharmacies owned by FQHCs and additionally have contracts to provide pharmacy services to patients of five other FQHCs. The pharmacies maintain a segregated inventory owned by the FQHCs for the purpose of dispensing prescriptions to health center patients.

Dispensing fee revenue increased $0.7 million or 85.1% to $1.5 million and $1.7 million or 71.0% to $4.0 million for the three and nine months ended March 31, 2009, respectively, as compared to $0.8 million and $2.3 million for the three and nine months ended March 31, 2008, respectively. The increase is primarily attributable to the our new pharmacy contract with the East Boston Neighborhood Health Center in East Boston, as well as the expanded number of and increased demand for covered medications effectuated during the fiscal year by the Massachusetts Health Safety Net Office, an increased number of prescription benefit management contracts entered into by the FQHCs contracted with us, and marketing initiatives targeting the patients of the FQHCs.

Cost of Sales. The following table sets forth for the periods indicated cost of sales and profit margin rate for pharmacy net revenues:

                                  For the three months March 31,                             For the nine months ended March 31,
                                                               Change                                                        Change
                         2009             2008             $            %             2009             2008              $             %
Cost of sales        $ 13,485,181     $ 12,934,357     $ 550,824          4.3 %   $ 40,449,925     $ 37,988,752     $ 2,461,173          6.5 %

Profit margin rate           21.0 %           21.5 %                     -0.5 %           21.1 %           21.5 %                       -0.4 %

Cost of sales increased $0.6 million or 4.3% to $13.5 million and $2.5 million or 6.5% to $40.4 million for the three and nine months ended March 31, 2009, respectively, as compared to $12.9 million and $38.0 million for the three and nine months ended March 31, 2008, respectively, primarily due to the increase in pharmacy net revenues.

Pharmacy gross profit margins were 21.0% and 21.1% for the three and nine months ended March 31, 2009, respectively, as compared to 21.5% and 21.5% for the three and nine months ended March 31, 2008, respectively. Dispensing fees were not included in the calculation as no cost of sales is estimatable for dispensing fees. The decrease in gross profit margin was primarily due to declining insurance reimbursement rates.

Selling, General and Administrative Expenses. The following table set forth for the periods indicated selling, general and administrative expenses ("SG&A"):

                              For the three months ended March 31,                         For the nine months ended March 31,
                                                             Change                                                        Change
                        2009            2008             $            %             2009             2008              $             %

SG&A expenses        $ 5,290,214     $ 4,485,969     $ 804,245         17.9 %   $ 14,615,316     $ 12,911,868     $ 1,703,448         13.2 %

SG&A increased $0.8 million or 18.3% to $5.3 million and $1.7 million or 13.2% to $14.6 million for the three and nine months ended March 31, 2009, respectively, as compared to $4.5 million and $12.9 million for the three months ended March 31, 2008, respectively. The increase for the three months ended March 31, 2009, was primarily due to increased payroll costs of $0.8 million related to five newly opened locations, partially offset by a decrease in administrative expenses of $0.2 million. The increase for the nine months ended March 31, 2009, was primarily due to increased payroll costs of $1.8 million related to the five newly opened locations, $0.5 million related to increased payroll costs at existing pharmacies, partially offset by a decrease in administrative expenses of $0.7 million. The decrease in administrative expenses of approximately $0.2 million and $0.7 million for the three and nine months ended March 31, 2009, was primarily due to the elimination of fees paid to the minority shareholders and investment banker and other capital raising expenses related to the buy-out of the 20% minority interest of D.A.W., Inc., our now wholly owned pharmacy subsidiary ("D.A.W.")

Other Income (Expense), net. The following table sets forth for the periods indicated the breakdown of other income (expense), net:

                          For the three months ended March 31,                     For the nine months ended March 31,
                                                        Change                                                  Change
                      2009           2008           $            %            2009          2008            $            %

Interest expense   $   (43,546 )   $ (36,211 )   $ (7,335 )       20.3 %   $ (135,715 )   $ (52,138 )   $ (83,577 )      160.3 %
Interest income          2,552         1,740          812         46.7 %        6,956         8,574        (1,618 )      (18.9 )%
Other income             2,645         2,566           79          3.1 %        9,434        19,457       (10,023 )      (51.5 )%
                   $   (38,349 )   $ (31,905 )   $ (6,444 )       20.2 %   $ (119,325 )   $ (24,107 )   $ (95,218 )      395.0 %

Other Income (Expense), net increased $6,444 or 20.2% to $38,349 and $95,218 or 395.0% to $119,325 for the three and nine months ended March 31, 2009, respectively, primarily due to the interest on the related party notes issued in connection with the purchase of the remaining 20% of D.A.W.

Income Taxes. We recorded an income tax benefit from continuing operations of $160,901 and $169,480 for the three and nine months ended March 31, 2009, respectively, and $89,155 and $173,352 for the three and nine months ended March 31, 2008, respectively, primarily due to the losses from continuing operations for each of the periods presented. In addition, we recorded income tax benefit for discontinued operations of $33,104 and income tax expense of $154,452 for the three and nine months ended March 31, 2009, respectively, and $972 income tax benefit and $101,975 income tax expense for the three and nine months ended March 31, 2008, respectively, due to the disposal of discontinued operations.

Discontinued Operations. For the three months ended March 31, 2009, we recognized a loss of $66,113 from discontinued operations, which consisted of a loss on disposal of discontinued operations of $99,217 net of an income tax benefit of $33,104. For the three months ended March 31, 2008, we recognized a loss of $8,834 from discontinued operations, which consisted of a loss on discontinued operations of $9,806 net of an income tax benefit of $972. For the nine months ended March 31, 2009, we recognized a gain of $159,530 from discontinued operations, which consisted of a loss on discontinued operations of $13,883 net of income tax benefit of $2,652 and a gain on the disposal of the discontinued operations of $327,865 net of income taxes of $157,104. For the nine months ended March 31, 2008, we recognized a gain of $134,151from discontinued operations, which consisted of a loss on discontinued operations of $62,502 net of income tax benefit of $14,025 and a gain on the disposal of the discontinued operations of $298,628 net of income taxes of $116,000.

In connection with the sale of ADCO, we recorded a note receivable of $50,000. We and the buyer are currently in dispute over certain assets and liabilities that were included in the ADCO sale, and the note receivable has not been paid. As of March 31, 2009, we are unable to determine the final outcome of this dispute, but it may result in an additional loss on the disposal of discontinued operations.

Liquidity and Capital Resources

As of March 31, 2009, we had $42,317 of cash as compared to $140,688 at June 30, 2008, as cash was used to fund current operations. Our primary source of liquidity is cash provided by operations; and our principal uses of cash are operating expenses, acquisitions, capital expenditures, and repayments of debt.

Net Cash Used by Operating Activities from Continuing Operations. Net cash used by operating activities from continuing operations was $0.3 million for the nine months ended March 31 2009, and consisted of our net loss of $0.2 million adjusted for non-cash items of $0.5 million (including depreciation of $0.3 million, amortization and stock-based compensation expense of $0.1 million, and deferred income taxes of $0.1 million) and net cash used from changes in working capital of $0.6 million. The net cash used from changes in working capital was principally the result of an increase in inventories and accounts receivable partially offset by an increase in accounts payable. The increase in inventories was primarily the result of new pharmacy locations and the increase in accounts receivable and accounts payable was due to the increase in sales.

Net Cash Used in Investing Activities from Continuing Operations. Net cash used in investing activities from continuing operations was $0.4 million for the nine months ended March 31, 2009, and consisted of the purchase of equipment primarily due to the new pharmacy locations, the purchase of three new delivery trucks to meet the requirements of an increased delivery radius necessitated by one of our assisted living facility contracts, and the upgrade of some of our existing information technology equipment.

Net Cash Used in Financing Activities from Continuing Operations. Net cash used in financing activities was $0.2 million for the nine months ended March 31, 2009, and consisted of long-term debt repayments.

We recognized a net operating loss of $208,679 and $220,052 for the three and nine months ended March 31, 2009. Although it is our intention is to generate an operating profit in the future, there can be no assurance that we will not generate a net operating loss. We believe that we have adequate resources to fund our operations for at least the next 12 months.

Contractual Obligations

Asset security interest. The pharmacy has an agreement with its major supplier to purchase pharmaceuticals. This agreement terminates January 31, 2012. Payment for merchandise delivered is secured by a first primary interest in all assets of D.A.W.

Line of Credit. ADCO has a $300,000 line of credit, which is collateralized by the building and land owned by ADCO and guaranteed by us. The interest rate for the line of credit is 2% above the Wall Street Journal Prime rate; and repayment of the line of credit is in monthly payments of interest only, with the principal being due at maturity, unless renewed. The line of credit will expire on September 1, 2009. As of March 31, 2009, we have $300,000 of outstanding borrowings on the line of credit. The line of credit is classified in the liabilities to be disposed of from discontinued operations on our balance sheet.

We do not have any interest-bearing investments. The difference between the carrying amount and fair value of our long-term debt was immaterial as of March 31, 2009.