JONES MEDICAL INDUSTRIES INC /DE/, 424A, 1996-11-22

JONES MEDICAL INDUSTRIES INC /DE/
424A, 1996-11-22
PHARMACEUTICAL PREPARATIONS

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<PAGE> 1

ABANA PHARMACEUTICALS, INC.
P.O. BOX 360388
BIRMINGHAM, ALABAMA 35236-0388

Dear Fellow Shareholder:

As previously announced, on October 24, 1996, Abana Pharmaceuticals, Inc.
("Abana") entered into a Plan of Reorganization and Agreement (the "Agreement")
with Jones Medical Industries, Inc. ("JMED" or the "Company") providing for the
acquisition of Abana by means of a merger (the "Merger") of Abana with and into
a new subsidiary of JMED formed for that purpose. The undersigned, as the
founders and holders of more than a majority of the outstanding stock of Abana,
joined as parties to the Agreement and adopted the Agreement and Merger by
written consent as permitted under Delaware law in lieu of soliciting proxies
or consents from all shareholders.

BECAUSE THE MERGER HAS ALREADY BEEN APPROVED AND ADOPTED BY THE
UNDERSIGNED AS PRINCIPAL HOLDERS OWNING MORE THAN A MAJORITY OF THE OUTSTANDING
COMMON STOCK OF ABANA, YOU ARE NOT BEING ASKED TO VOTE UPON OR TO CONSENT TO
THE MERGER. UNDER THE TERMS OF THE AGREEMENT, THE MERGER IS TO BECOME
EFFECTIVE AS OF THE CLOSE OF BUSINESS ON DECEMBER 31, 1996, ASSUMING
FULFILLMENT OF CERTAIN CONDITIONS TO THE TRANSACTIONS AS OF THAT DATE.

Under the terms of the Merger, each outstanding share of the common stock
of Abana (other than the 362,519 shares, or approximately 16%, which have been
owned by JMED since June 1, 1992) is to be converted into 0.22 of a share of
the Common Stock of JMED. The Common Stock of JMED is traded over-the-counter
on the Nasdaq National Market maintained by the National Association of
Securities Dealers, Inc. The last reported sale price for the Common Stock of
JMED on November 21, 1996 was $ 38 1/8.

Details of the Merger and the Agreement are set forth in the accompanying
Notice and Prospectus together with other important information which you are
urged to read carefully. As more fully discussed elsewhere in this document,
we believe that the Merger is in the best interest of Abana and its
shareholders. Any shareholder not wishing to participate in the Merger may
elect to seek appraisal rights under Delaware law as discussed in the
accompanying Notice and Prospectus in order to receive in cash the "fair value"
of the shares of common stock of Abana held by any such shareholder.

In the event you elect to receive the Common Stock of JMED provided under
the terms of the Merger, you may complete and forward the enclosed Letter of
Transmittal, together with the certificate(s) representing your shares of the
common stock of Abana, in order to facilitate distribution of the merger
consideration promptly following the effective date of the Merger.

Yours sincerely,

Dale E. Eads Perry N. Cole

November 22, 1996

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ABANA PHARMACEUTICALS, INC.
P.O. BOX 360388
BIRMINGHAM, ALABAMA 35236-0388

NOTICE OF ACTION BY WRITTEN CONSENT OF HOLDERS
OF A MAJORITY OF THE OUTSTANDING COMMON STOCK

To the Stockholders of Abana Pharmaceuticals, Inc.:

NOTICE IS HEREBY GIVEN that on October 23, 1996, the holders of more than
a majority of the outstanding common stock of Abana Pharmaceuticals, Inc.
("Abana"), a Delaware corporation, adopted and approved a Plan of Reorganization
and Agreement dated as of October 24, 1996, (the "Agreement") by and among
Abana, Jones Medical Industries, Inc. ("JMED") and Messrs. Dale E. Eads and
Perry N. Cole. The Agreement provides for the merger (the "Merger") of Abana
with and into a wholly-owned subsidiary of JMED and pursuant to the Merger each
outstanding share of the common stock of Abana (other than shares already
beneficially owned by JMED or shares as to which dissenters' rights of
appraisal are exercised) will be converted into 0.22 of a share of the Common
Stock of JMED (the "Merger Consideration"). Fractional share interests in the
Common Stock of JMED arising from the Merger and conversion will be settled in
cash, based on the closing bid price per share of JMED Common Stock on the
effective date of the Merger. Subject to the fulfillment and satisfaction of
certain conditions to the Merger as set forth in the Agreement, the Merger will
become effective as of the close of business on December 31, 1996, a date
which is more than twenty days following the date upon which this Notice is
being sent to holders of record of the shares of the common stock of Abana by
certified mail, return receipt requested. Under Delaware law and the terms of
the Agreement, the action by consent of holders of a majority of the
outstanding common stock of Abana is sufficient to adopt the Agreement and
Merger on behalf of Abana and its stockholders and, accordingly, no holder of
the common stock of Abana is being asked to consent to or vote upon the Merger.
A copy of the Agreement is available for inspection at the offices of Abana.

The date of November 20, 1996, has been fixed as the record date for
holders of the common stock of Abana to receive this Notice together with the
accompanying Prospectus which sets forth certain information concerning JMED,
Abana, the Agreement and the Merger.

Holders of record of the common stock of Abana who do not wish to accept
the Merger Consideration and who comply with the requirements of Section 262 of
the Delaware General Corporation Law ("DGCL") have the right to seek an
appraisal by the Delaware Court of Chancery of the "fair value" of their Abana
common stock. For a description of the rights of holders pursuant to Section
262 and a description of the procedures to be followed in order to obtain such
appraisal, see "The Merger - Dissenters' Rights of Appraisal" in the
accompanying Prospectus and the copy of Section 262 of the DGCL which is
attached as Appendix B thereto.

By order of the Board of Directors,

Birmingham, Alabama
November 23, 1996 Perry N. Cole, Secretary

<PAGE> 3

JONES MEDICAL INDUSTRIES, INC

PROSPECTUS

This Prospectus is being furnished by Jones Medical Industries, Inc.("JMED"
or the "Company") to holders of the common stock, par value $.01 per share, of
Abana Pharmaceuticals, Inc. ("Abana"), a Delaware corporation, in connection
with the Notice to such holders in respect of the Plan of Reorganization and
Agreement (the "Agreement") dated as of October 24, 1996, by and among Abana,
JMED and Dale E. Eads and Perry N. Cole, as holders of more than a majority of
the outstanding shares of the common stock of Abana, providing for a merger
(the "Merger") of Abana with and into a subsidiary of JMED pursuant to which
each outstanding share of the common stock of Abana is to be converted into
0.22 of a share of the Common Stock, par value $.04 per share, of JMED.
Subject to the fulfillment of certain conditions thereto, the Merger is
expected to become effective as of the close of business on December 31, 1996
pursuant to the filing at that time of a certificate of merger with the
Secretary of State of Delaware.

This Prospectus relates to the shares of the Common Stock of JMED issuable
to holders of the common stock of Abana upon consummation of the Merger (other
than shares held by Messrs. Eads and Cole who as the "Principal Holders," by
their action on behalf of Abana by written consent, have heretofore irrevocably
agreed to the terms of the Merger and are deemed, subject to consummation of
the Merger, to have acquired the shares of the Common Stock of JMED issuable to
them in a transaction not involving any public offering of such stock as of the
date of the Agreement).

Although holders of the common stock of Abana, other than the Principal
Holders, are not being asked or provided the opportunity to vote upon or
consent to the Merger, such holders have appraisal rights under Section 262 of
the Delaware General Corporation Law. An election not to pursue such rights
may be deemed to involve an "investment decision" to acquire shares of the
Common Stock of JMED issuable upon consummation of the Merger and the Merger
may therefore be deemed to involve an "offer" and "sale" of shares of the
Common Stock of JMED to such holders. JMED has supplied all information
contained in this Prospectus relating to JMED and its subsidiaries and Abana
has supplied all information contained in this Prospectus relating to Abana.

This Prospectus is first being mailed to holders of the common stock of
Abana on or about November 23, 1996, twenty business days prior to the
expected effective date of the Merger on December 31, 1996.

SEE "INVESTMENT CONSIDERATIONS AND RISK FACTORS" BEGINNING ON PAGE 1 FOR A
DISCUSSION OF CERTAIN FACTORS CONCERNING JMED THAT SHOULD BE CONSIDERED BY
HOLDERS OF THE COMMON STOCK OF ABANA.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is November 22, 1996

<PAGE> 4

AVAILABLE INFORMATION

JMED is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by JMED with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission at Seven World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may also be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates. The Common Stock of
JMED is traded on the Nasdaq National Market and such reports, proxy statements
and other information can also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.

JMED has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
approximately 129,322 shares of the Common Stock of JMED to be issued pursuant
to the Merger to holders of the common stock of Abana (other than the Principal
Holders who have heretofore consented to the Merger). This Prospectus does not
contain all the information set forth in the Registration Statement, certain
portions of which have been omitted as permitted by the rules and regulations
of the Commission. Such additional information may be obtained from the
Commission's principal office in Washington, D.C.

The Registration Statement, including the exhibits thereto, and other
reports, proxy statements and filings made by JMED are also generally available
pursuant to the Commission's electronic data gathering, analysis and retrieval
system known as "EDGAR," and can be accessed through the Internet at
"http://www.sec.gov" by utilizing the following menu choices: at Menu 1 select
"EDGAR Database of Corporate Information"; at Menu 2 select "Search the EDGAR
Database"; at Menu 3 select "Search the EDGAR Archives"; at Menu 4 enter "jones
AND medical" as your search. A list of available filings will appear and you
may highlight and retrieve or print your selection(s).

Statements contained in this Prospectus as to the contents of any contract
or other document referred to herein or therein are not necessarily complete,
and in each such instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such
reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS RELATING TO JMED (INCLUDING
EXHIBITS UNLESS SPECIFICALLY INCORPORATED THEREIN) ARE AVAILABLE WITHOUT CHARGE
UPON WRITTEN OR ORAL REQUEST TO JUDITH A. JONES, SECRETARY, JONES MEDICAL
INDUSTRIES, INC., 1945 CRAIG ROAD, ST. LOUIS, MISSOURI 63146, TELEPHONE NUMBER
314-576-6100. JMED WILL ALSO PROVIDE TO ANY HOLDER OF COMMON STOCK OF ABANA SO
REQUESTING A COPY OF THE AGREEMENT AND THE EXHIBITS THERETO. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST FOR COPIES OF THE
AGREEMENT OR DOCUMENTS RELATING TO JMED SHOULD BE MADE BY DECEMBER 9, 1996.

The following documents, which have been filed by JMED with the
Commission, are hereby incorporated by reference in this Prospectus:

(1) JMED's Annual Report on Form 10-K for the year ended December 31,
1995;

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(2) JMED's Quarterly Reports on Form 10-Q for (i) the three months ended
March 31, 1996, (ii) the six months ended June 30, 1996, and (iii) the
nine months ended September 30, 1996 (as restated to reflect the
acquisition of Galen Drugs of Florida, Inc. and its principal operating
subsidiary, Daniels Pharmaceuticals, Inc.);

(3) JMED's Proxy Statement dated April 24, 1996 for its annual meeting
of shareholders on May 22, 1996;

(4) JMED's Current Reports on Form 8-K dated March 18, 1996 (relating to
the consummation of the acquisition of the Tapazole(R) product line from
Eli Lilly & Co.) and August 30, 1996 (relating to the consummation of the
acquisition of Galen Drugs of Florida, Inc and its principal operating
subsidiary, Daniels Pharmaceuticals, Inc.) and November 8, 1996
(providing restated selected financial data for calendar years 1991-1995
incorporating the results of Galen and Daniels on a pooling of interests
basis, a related restated Management's Discussion and Analysis of
Financial Condition and Results of Operations for the two years ended
December 31, 1995, and a related restatement of JMED's audited financial
statements for the periods included in JMED's Annual Report on Form 10-K
for the year ended December 31,1995).

All documents filed by JMED pursuant to Sections 13(c), 14 or 15(d) of the
Exchange Act after the date hereof and before the effective date of the Merger
shall be deemed to be incorporated herein by reference and to be a part hereof
from the date of filing of such documents. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for the purposes of this Proxy
Statement to the extent that a statement contained herein or in another
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY JMED, ABANA OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. THIS PROSPECTUS DOES NOT COVER ANY
RESALES OF THE SHARES OF THE COMMON STOCK OF JMED OFFERED HEREBY TO BE RECEIVED
BY ANY HOLDER OF THE COMMON STOCK OF ABANA WHO MAY BE DEEMED TO BE AFFILIATES
OF ABANA OR JMED UPON THE CONSUMMATION OF THE MERGER. NO PERSON IS AUTHORIZED
TO MAKE USE OF THIS PROSPECTUS IN CONNECTION WITH SUCH RESALES. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF JMED OR ABANA SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

iii
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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page

<S> <C>
Available Information.............................................................................. ii
Incorporation of Certain Documents by Reference.................................................... ii
Table of Contents.................................................................................. iv

Summary............................................................................................ vii
General....................................................................................... vii
The Parties to the Agreement and the Merger................................................... viii
The Merger.................................................................................... ix
The Agreement................................................................................. xi
Resales of Shares of Common Stock of JMED Received in the Merger.............................. xii
Market Price Data............................................................................. xiii
Comparative Unaudited Per Share Data.......................................................... xiv
Summary Consolidated Financial Data of JMED................................................... xv
Summary Financial Data of Abana............................................................... xvi

Investment Considerations and Risk Factors......................................................... 1
Important Developments to Date during 1996.................................................... 1
Dependence on Sales of Key Pharmaceuticals.................................................... 2
Reliance on Third-Party Manufacturers and Sole Source Suppliers............................... 3
Dependence on Acquisition Strategy............................................................ 4
Uncertainty of Future Financial Results; Fluctuations in Quarterly Operating Results ......... 4
Reimbursement Pricing Pressures Applicable to Pharmaceuticals................................. 5
Intense Competition; Uncertainty of Technological Change...................................... 5
Government Regulation......................................................................... 6
Risk of Price Adjustments and Product Returns................................................. 6
Potential Product Liability; Limited Insurance Coverage....................................... 7
Risk of Product Recall........................................................................ 7
Dependence Upon Certain Key Management........................................................ 7
Hazardous Materials........................................................................... 7
Volatility of Common Stock Price.............................................................. 7
Market Risk of Shares Eligible for Resale..................................................... 8
Market Price in Comparison to Book Value...................................................... 8
Anti-Takeover Effect of Charter Provisions and Delaware Law................................... 8

The Merger......................................................................................... 9
Adoption of the Merger by Written Consent..................................................... 9
Effective Time of the Merger.................................................................. 9
Effects of the Merger......................................................................... 9
Management of Abana after the Merger.......................................................... 10
Interest of the Principal Holders in the Merger............................................... 10
Regulatory Approvals.......................................................................... 10
Accounting Treatment.......................................................................... 10
Resales of Shares of Common Stock of JMED Received in the Merger.............................. 11
Procedures for Exchange of Abana Stock for Common Stock of JMED............................... 12
Certain Federal Income Tax Consequences....................................................... 12
Dissenters' Rights of Appraisal............................................................... 14
Background of the Transaction...................................................................... 17

</TABLE>

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<TABLE>
<S> <C>
The Agreement........................................................................................ 21
General......................................................................................... 21
Certain Representations and Warranties.......................................................... 21
Certain Covenants............................................................................... 22
Inconsistent Activities......................................................................... 22
Conditions to the Merger........................................................................ 23
Closing and Effectiveness....................................................................... 23
Termination of the Agreement; Amendment......................................................... 23
Agreements of Principal Holders................................................................. 23
Escrow and Indemnification................................................................. 24
Non-Competition Agreement.................................................................. 24
Fees and Expenses............................................................................... 24
Certain Information Concerning JMED.................................................................. 25
General......................................................................................... 25
Industry Background
The United States Pharmaceutical Market.................................................... 25
The United States Market for Nutritional Supplements....................................... 26
Business Strategy............................................................................... 26
Principal Products and Product Lines
1996 Acquisitions of Thyroid Treatment Pharmaceuticals..................................... 26
Critical Care Pharmaceuticals.............................................................. 27
Other Pharmaceuticals...................................................................... 28
Nutritional Supplements.................................................................... 28
Competition..................................................................................... 28
Certain Information Concerning Abana................................................................. 29
Business........................................................................................ 29
Summary Financial Data Regarding Abana.......................................................... 34
Abana's Management's Discussion and Analysis of Financial Condition and Results of Operations... 35
Management...................................................................................... 41
Principal Stockholders.......................................................................... 44
Comparison of Shareholder Rights..................................................................... 45
Description of Capital Stock of Abana................................................................ 45
Description of Capital Stock of JMED................................................................. 47
Legal Matters........................................................................................ 48
Experts.............................................................................................. 48

Index to Financial Information....................................................................... F-1

</TABLE>

Appendix A: Opinion of Sirote & Permutt, P.C., as to certain tax matters

Appendix B: Section 262 of the Delaware General Corporation Law

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SUMMARY

The following is a summary of certain information contained in this
Prospectus. This summary is not intended to be complete and is qualified in
all respects by the more detailed information included in this Prospectus and
its Exhibits. As used in this Prospectus, the term "JMED" or the "Company"
refers to Jones Medical Industries, Inc. and, where the context so requires,
its subsidiaries, and the term "Abana" refers to Abana Pharmaceuticals, Inc.
JMED has supplied all information concerning JMED and its subsidiaries herein,
and Abana has supplied all information concerning Abana included herein.

GENERAL

This Prospectus relates to the pending merger (the "Merger") of Abana
Pharmaceuticals, Inc. ("Abana"), a Delaware corporation, with and into Abana
Acquisition Corporation ("AAC"), a Delaware corporation which is a wholly-owned
subsidiary of Jones Medical Industries, Inc. ("JMED" or the "Company"), a
Delaware corporation, pursuant to a Plan of Reorganization and Agreement (the
"Agreement") dated October 24, 1996, by and among Abana, JMED and Messrs. Dale
E. Eads and Perry N. Cole. Messrs. Eads and Cole (individually a "Principal
Holder" and collectively the "Principal Holders") were the founders of Abana
and each currently holds an aggregate of 661,932 shares (approximately 29.2%)
of the outstanding common stock of Abana together with options to acquire an
additional 71,068 shares of such common stock of Abana. As parties to the
Agreement, the Principal Holders adopted the Agreement on behalf of Abana by
written consent in their collective capacity as holders of more than a majority
of the outstanding common stock of Abana.

NO MEETING OF THE HOLDERS OF THE COMMON STOCK OF ABANA IS NECESSARY OR
REQUIRED TO BE HELD IN CONNECTION WITH THE MERGER AND NO VOTE OR CONSENT OF
HOLDERS OF THE COMMON STOCK OF ABANA IS SOLICITED HEREBY.

As a result of the Merger, among other things, (1) Abana will be merged
with and into AAC which shall be the surviving corporation, (2) each
outstanding share of the common stock of Abana will, except as noted below, be
converted into 0.22 of a share of the Common Stock of JMED, and (3) each option
outstanding to acquire shares of the common stock of Abana will be converted,
to the nearest whole share, into an option to acquire 0.22 of a share of the
Common Stock of JMED and the option price per share of the Common Stock of JMED
in connection with such converted option, rounded to the nearest whole cent,
will be 4.55 times the option price per share of the common stock of Abana.
Shares of the common stock of Abana which are held in Abana's treasury or which
are beneficially owned by JMED will be canceled and retired in the Merger.
Fractional shares of the Common Stock of JMED arising from the Merger will not
be issued but any fractional share interest due a holder of the common stock of
Abana will be settled in cash based upon the last reported bid price per share
of Common Stock of JMED on the effective date of the Merger. Any shares of the
common stock of Abana as to which dissenters' rights of appraisal have been
duly demanded as permitted under Delaware law, and not withdrawn or abandoned,
will not be converted into shares of the Common Stock of JMED but will instead
represent the right to receive in cash the fair value thereof as may be agreed
to or appraised in accordance with Delaware law.

The close of business on November 20, 1996 has been fixed as the record
date for the determination of the holders of record of shares of the common
stock of Abana entitled to Notice of the Merger and its adoption by the written
consent of the Principal Holders as holders of a majority of the outstanding
common stock of Abana.

Subject to the satisfaction of the parties' respective conditions
precedent to their obligations under the Agreement, the Merger is expected to
become effective as of the close of business on December 31, 1996. In the
event that the closing of the transactions contemplated by the Agreement are
delayed to a date after December 31, 1996, the closing of such transaction will
occur as soon thereafter as all conditions are satisfied or waived unless a
party is entitled to and does elect to terminate the Agreement. In the event
that a closing of the transactions

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contemplated by the Agreement should occur after December 31, 1996, the
actual closing date will be the effective date of the Merger but the Agreement
provides that for certain tax and accounting purposes the effective date will
be deemed to be the close of business on the last day of the calendar month
preceding the effective date of the Merger.

THE PARTIES TO THE AGREEMENT AND THE MERGER

JONES MEDICAL INDUSTRIES, INC.

JMED is engaged in the manufacture, marketing and sale of pharmaceuticals
and nutritional supplements. Founded in 1981, the Company markets a wide
variety of pharmaceuticals and branded nutritional supplements under its own
trademarks and tradenames. The Company's product lines have been acquired
through a series of 15 acquisitions which complemented or expanded its existing
lines of business. The Company intends to leverage its existing marketing and
sales capabilities through additional strategic acquisitions of complementary
products and businesses, by expanding and increasing the penetration of its
existing customer base, and through the introduction of new formats for
pharmaceuticals and new formulations for nutritional supplements. During 1995,
sales of pharmaceuticals and nutritional supplements accounted for
approximately 59% and 41%, respectively, of the Company's total sales, as
restated to reflect the acquisition of Galen Drugs of Florida, Inc. (the
"Daniels Acquisition") in a pooling of interests transaction. For further
information concerning JMED, see "Investment Considerations and Risk Factors"
and "Certain Information Concerning JMED" elsewhere in this Prospectus.

Since June 1, 1992, JMED has been the holder of an aggregate of 362,519
shares of the common stock of Abana, representing approximately 16% of the
currently outstanding common stock of Abana. Dennis M. Jones, Chairman of the
Board and President of JMED, served as a director of Abana from June, 1992,
until October, 1996, in accordance with rights granted to JMED in connection
with its acquisition of shares of the common stock of Abana. See "Background
of the Transaction - Prior Investment by JMED in Abana Stock."

Although JMED is not a party to the Merger, as a party to the Agreement
JMED is obligated to deliver or contribute the shares of Common Stock of JMED
to be issued in the Merger.

The principal executive offices of JMED are located at 1945 Craig Road,
St. Louis, Missouri 63146, and the telephone number is (314) 576-6100.

ABANA ACQUISITION CORPORATION

AAC was incorporated on November 14, 1996, as a wholly-owned subsidiary of
JMED established for the purposes of the transactions contemplated by the
Agreement. AAC engages in no other business. The principal executive offices
of AAC are currently located at the Company at 1945 Craig Road, St. Louis,
Missouri 63146, and the telephone number is (314) 576-6100.

ABANA PHARMACEUTICALS, INC.

Abana was organized on March 7, 1988, to engage in the marketing,
distribution and sale of branded generic pharmaceuticals sold as prescription
drugs. Abana's product lines consist of antihistamine and decongestant
products for respiratory ailments, a topical analgesic for otitis, and weight
control products. At November 1, 1996, Abana had 47 sales representatives
calling on physicians in 17 states, primarily in the southeastern and south
central United States.

Abana's executive offices are located at Suite 260, 1 Chase Corporate
Drive, Birmingham, Alabama 35244. Its telephone number is (205) 988-4588 and
its mailing address is P.O. Box 360388, Birmingham, Alabama 35236.

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THE PRINCIPAL HOLDERS

Dale E. Eads and Perry N. Cole, each of whom is a founder, director and
executive officer of Abana and each of whom holds 661,932 shares (approximately
29.2%) of the common stock of Abana together with options to acquire an
additional 71,068 shares of such common stock, are parties to the Agreement.
As the Principal Holders of Abana, holding in excess of a majority of the
outstanding common stock of Abana, they adopted and approved the agreement by
written consent such that, under the Delaware General Corporation Law (the
"DGCL") no further vote or consent of the holders of common stock of Abana is
required.

As parties to the Agreement, the Principal Holders joined in the
representations and warranties made by Abana in the Agreement and agreed to use
their respective best efforts to cause Abana to fulfill the conditions to the
obligations of JMED under the Agreement. The Principal Holders also agreed (i)
to indemnify and hold JMED harmless from certain expenses, loses or claims
arising from any failure of the representations or covenants of Abana in the
Agreement, (ii) to secure such indemnification by placing in escrow an
aggregate of 60,000 shares of the Common Stock of JMED to be received by them
as a result of the Merger, and (iii) to execute and deliver non-competition
agreements. See "The Agreement - Agreements of Principal Holders" and "The
Merger - Interest of the Principal Holders in the Merger."

THE MERGER

EFFECTIVE TIME OF THE MERGER

The Merger will become effective upon, or as provided in, the filing of a
certificate of merger with the Secretary of State of Delaware. It is expected
that the Merger will become effective on December 31, 1996 or as promptly as
practicable thereafter subject to the satisfaction of the conditions to closing
under the Agreement (the "Closing Date"). See "The Merger - Effective Time of
the Merger."

EFFECTS OF THE MERGER

Fractional shares of the Common Stock of JMED will not be issued in
connection with the Merger. Holders of the common stock of Abana otherwise
entitled to a fractional share interest in Common Stock of JMED arising from
the conversion of their common stock of Abana will be entitled to receive, in
lieu of such fractional share interest, a cash payment for the value thereof
based on the closing bid price per share of the Common Stock of JMED on the
date the Merger becomes effective.

Shares of the common stock of Abana held by Abana as treasury stock when
the Merger becomes effective and shares of the common stock of Abana held,
directly or indirectly, by JMED when the Merger becomes effective will not be
converted into or exchanged for shares of the Common Stock of JMED but will be
canceled and retired.

Shares of the common stock of Abana held by any holder who has duly
demanded and exercised dissenter's rights of appraisal in accordance with the
DGCL, unless such exercise is withdrawn, will not be converted into shares of
the Common Stock of JMED in the Merger but will represent solely the right to
receive in cash the "fair value" of such shares in accordance with the DGCL.
See "The Merger - Dissenters' Rights of Appraisal."

ix
<PAGE> 11

MANAGEMENT OF ABANA AFTER THE MERGER

AAC, as the Surviving Corporation, will continue to be a wholly-owned
subsidiary of JMED following consummation of the Merger and will adopt the name
"JMI-Abana Pharmaceuticals, Inc." The directors and officers of AAC, each of
whom is an officer of JMED, will continue to serve as the initial directors and
officers of the Surviving Corporation upon consummation of the Merger. It is
anticipated that substantially all officers and employees of Abana will
continue as employees of the Surviving Corporation following the Merger without
employment agreements and will report to officers of JMED serving as officers
of AAC.

INTEREST OF THE PRINCIPAL HOLDERS IN THE MERGER

Upon effectiveness of the Merger, each Principal Holder will receive an
aggregate of 145,625 shares of the Common Stock of JMED upon conversion of the
shares of the common stock of Abana currently held. In addition, each
Principal Holder will receive, in conversion and exchange of presently held
options to acquire shares of the common stock of Abana, (i) an "incentive stock
option" to acquire 8,800 shares of the Common Stock of JMED at a price of
$10.00 per share and (ii) a non-qualified option to acquire 6,835 shares of the
Common Stock of JMED at a price of $5.91 per share. The options to be issued
bear the same terms and conditions as the options presently held and such
options are currently vested and exercisable in full. Each Principal Holder
has agreed not to exercise such options prior to the Closing Date. The
Agreement provides, however, that by notice to JMED and Abana given
prior to the Closing Date, a Principal Holder may elect to exercise and
surrender such option as of the first business day following the Closing Date
and, in lieu of paying the exercise price and receiving shares of the Common
Stock of JMED, receive in cash the value of such options based upon the last
reported bid price per share of JMED Common Stock as of such date reduced by
the applicable exercise price per share. The Agreement provides certain
registration rights under the Securities Act of 1933 to the Principal Holders
in respect of the shares of the Common Stock of JMED to be received by them
pursuant to the Merger. See "The Merger - Resales of Shares of Common Stock of
JMED Received in the Merger - Principal Holders."

The Principal Holders also agreed (i) to indemnify and hold JMED harmless
from certain expenses, loses or claims arising from any failure of the
representations or covenants of Abana in the Agreement, (ii) to secure such
indemnification by placing in escrow an aggregate of 60,000 shares of the
Common Stock of JMED to be received by them as a result of the Merger, and
(iii) to execute and deliver non-competition agreements. See "The Agreement -
Agreements of Principal Holders."

ACCOUNTING TREATMENT

JMED intends to treat the Merger as a "purchase" for accounting and
financial reporting purposes. The Agreement provides that in the event of a
closing date and effectiveness of the Merger as of a date subsequent to
December 31, 1996, the transactions will be deemed to be effective for
accounting, financial reporting purposes and tax purposes as of the close of
business on the last day of the calendar month preceding the month in which the
closing occurs. Accordingly, if the closing occurs as of any date between
December 31, 1996 through January 31, 1997, it will nevertheless be reflected
for such purposes as effective on December 31, 1996. See "The Merger -
Accounting Treatment."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

It is intended that the Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), such that the receipt of shares of the Common Stock of JMED upon
exchange and conversion of common stock of Abana will not give rise to a
taxable event. See "The Merger - Certain Federal Income Tax Consequences."

x
<PAGE> 12

DISSENTERS' RIGHTS OF APPRAISAL

Although, as a result of the adoption and approval of the Agreement and
Merger by the Principal Holders, other holders of the common stock of Abana do
not have the right to vote upon (and are not being asked to provide written
consent to) the Merger, such holders have the right to dissent from such
approval and adoption and, if the Merger is consummated and becomes effective
in accordance with the DGCL, to receive in cash payment of the fair value of
their shares of the common stock of Abana determined by appraisal or as
otherwise provided in the DGCL. Such dissenters' rights of appraisal require
compliance with the provisions of Section 262 of the DGCL, a copy of which is
provided as Appendix B to this Notice and Prospectus and is incorporated herein
by reference. Holders of the common stock of Abana are urged to read Section
262 of the DGCL carefully. See "The Merger - Dissenters' Rights of Appraisal."

The obligations of JMED under the Agreement are, among other conditions,
subject to a requirement that holders of not more than 56,000 shares of the
common stock of Abana elect to pursue rights of appraisal as dissenting
shareholders in respect of the Merger.

COMPARISON OF SHAREHOLDER RIGHTS

Upon consummation of the Merger, holders of the common stock of Abana
(other than holders who receive cash as dissenting shareholders) will become
holders of the Common Stock of JMED. Both Abana and JMED are incorporated in
Delaware and governed by the DGCL, but after the Merger the Certificate of
Incorporation and By-Laws of JMED will apply and holders will no longer be
subject to the terms of Abana's Stockholders' Agreement. See "Comparison of
Shareholder Rights."

THE AGREEMENT

CONDITIONS TO THE MERGER

The obligations of JMED, AAC and Abana to consummate the Merger and
related transactions in accordance with the Agreement are subject to the
satisfaction of certain conditions (any or all of which may be waived by the
party whose obligations are conditioned thereon). Each party's obligations are
conditioned upon (i) the accuracy, as of the date of the Agreement and as of
the Closing Date, of the other party's representations and warranties set forth
in the Agreement, (ii) the performance by other parties to the Agreement of
covenants applicable during the period between the date of the Agreement and
the Closing Date, (iii) the absence of litigation or proceedings seeking to
prevent the Merger or which involves a risk of a material adverse change in the
condition, financial or otherwise, of the other party, and (iv) the receipt of
satisfactory opinions of counsel as to certain matters. In addition, the
obligations of JMED and AAC are conditioned upon (a) the receipt of any
necessary regulatory approval, consent or authorization (including the
effectiveness of the Registration Statement of which this Prospectus is a
part), (b) the delivery at Closing by the Principal Holders of the
indemnification and escrow agreement and the non-competition agreements which
constitute exhibits to the Agreement and (c) the non-exercise of dissenters'
appraisal rights under the DGCL in excess of 56,000 shares of the common stock
of Abana. See "The Agreement - Conditions to the Merger."

INCONSISTENT ACTIVITIES

The Agreement provides that prior to the Closing or termination of the
Agreement Abana will not (i) solicit, directly or indirectly, or cause any
other person to solicit, any offer to acquire the assets of Abana, whether by
merger, purchase of assets, tender offer or similar transaction or (ii) enter
into any agreement which provides for the merger of Abana or the sale of the
capital stock of Abana or the assets of Abana to a person other than JMED or a
subsidiary of JMED.

xi
<PAGE> 13

TERMINATION OF THE AGREEMENT; AMENDMENT

The Agreement will terminate on the later of the Closing Date or March 31,
1997, and may be terminated prior thereto by the mutual agreement of the
parties. In addition, JMED may elect to terminate the Agreement in the event
that (i) Abana shall fail to observe certain covenants, (ii) Abana shall fail
to satisfy timely certain conditions to JMED's obligations, or (iii) in the
event that JMED so elects in good faith in the event of an action seeking to
restrain, prohibit or invalidate the transactions contemplated by the
Agreement. In lieu of seeking termination of the Agreement, a party otherwise
entitled to elect termination may elect to seek enforcement of the Agreement.

Although the representations and warranties of Abana in the Agreement do
not survive the Closing Date, the Agreement provides that in the event of
Closing the representations and warranties of JMED will survive the Closing
Date for three years notwithstanding the termination of the Agreement.

The Agreement may be amended at any time by written consent of the
parties, but no amendment which would reduce the number of shares of the Common
Stock of JMED issuable in the Merger shall be effective without the consent of
holders of a majority of the outstanding stock of Abana and the effectiveness
of an amendment to the Registration Statement of which this Prospectus is a
part and a revised Notice under the DGCL.

ESCROW AND INDEMNIFICATION

The Principal Holders have agreed to indemnify and hold JMED harmless
from and against certain claims, loss, damage or expense as a result of any
breach or failure of the representations of Abana set forth in the Agreement or
any failure of Abana to observe and perform its covenants pending Closing under
the Agreement. Such indemnification is to be secured by, and limited to, the
deposit in escrow on the Closing Date by the Principal Holders of an aggregate
of 60,000 shares of the Common Stock of JMED being received by them in the
Merger. On March 31, 1998, the number of shares held in escrow (and therefore
the exposure of the Principal Holders in respect of the indemnification
provided to JMED) will be reduced to an aggregate of 10,000 shares of the
Common Stock of JMED plus such additional number of shares of the Common Stock
of JMED as may be needed in respect of indemnification claims pending, but not
resolved, as of March 31, 1998. See "The Agreement - Agreements of the
Principal Holders - Escrow and Indemnification."

Holders of the common stock of Abana other than the Principal Holders are
not required to provide indemnification to JMED or to escrow any portion of the
shares of the Common Stock of JMED received pursuant to the Merger.

FEES AND EXPENSES

Each of JMED and Abana have agreed to bear their respective expenses
incurred in connection with the Merger. In the event the expenses incurred by
or on behalf of Abana in connection with the Agreement and Merger exceed
$75,000, JMED would have the right to make a claim against the escrow and
indemnification provided by the Principal Holders; however, the amount of such
expenses incurred by or on behalf of Abana will not reduce the number of shares
of Common Stock of JMED issuable in the transaction.

RESALES OF SHARES OF COMMON STOCK OF JMED RECEIVED IN THE MERGER

PRINCIPAL HOLDERS

xii
<PAGE> 14

any public offering. Unless registered under the Securities Act for
resale, such shares may not be resold in the absence of an exemption from
applicable registration requirements. In the Agreement, JMED has agreed to
provide to the Principal Holders upon request registration of such shares under
the Securities Act following the date upon which JMED files with the Commission
its Annual Report on Form 10-K for the year ending December 31, 1996. Under
the Exchange Act, the Annual Report on Form 10-K for the year ending December
31, 1996, is required to be filed on or before March 31, 1997. JMED has further
agreed, subject to certain conditions, to maintain any such registration
current and effective on behalf of the Principal Holders until the earlier of
(i) two years following the Closing or (ii) the date upon which Rule 144 under
the Securities Act becomes available to the Principal Holders as an exemption
from registration permitting resale. See "The Merger - Resales of Shares of
Common Stock of JMED Received in the Merger - Principal Holders."

OTHER HOLDERS

The shares of the Common Stock of JMED being received by holders of the
common stock of Abana other than the Principal Holders are included in the
Registration Statement of which this Prospectus is a part. Since no holder of
the common stock of Abana other than the Principal Holders and JMED may be
deemed to be an "affiliate," as that term is used under the Securities Act, of
either Abana or JMED, and since the Merger does not constitute a transaction
subject to Rule 145 under the Securities Act, the shares of the Common Stock of
JMED being received by such other holders are expected to be freely tradable
without subsequent registration under the Securities Act in accordance with the
exemption provided by Section 4(1) for transactions not involving "an issuer,
underwriter or dealer." See "The Merger - Resales of Shares of Common Stock of
JMED Received in the Merger - Other Holders."

MARKET PRICE DATA

The Common Stock of JMED is traded over-the-counter in the Nasdaq National
Market under the symbol "JMED." There is no public trading market for the
common stock of Abana. The following table sets forth the reported closing per
share price of the Common Stock of JMED and the "equivalent price per share"
(as defined below) of the common stock of Abana as of (i) October 23, 1996, the
last trading date before JMED and Abana announced execution of the Agreement
and (ii) November 21, 1996. The "equivalent per share price" of the common
stock of Abana as of each such date equals the reported closing per share price
of Common Stock of JMED on that date multiplied by 0.22, representing the
conversion rate in the Merger.

<TABLE>
<CAPTION>
Equivalent Per
Market Price Common Stock Share Price for
Per Share at: of JMED Abana
------------- ------------ ---------------
<S> <C> <C>
October 23, 1996 $ 43.50 $ 9.57

November 21, 1996 $ 38.125 $ 8.3875

</TABLE>

During the twelve months ending November 1, 1996, the reported closing price
per share of the Common Stock of JMED has ranged from $8 to $50 1/2. Holders
of the common stock of Abana are advised to obtain current market quotations
for the Common Stock of JMED. No assurance can be given as to the market price
of the Common Stock of JMED at any time before the Closing Date or at any time
thereafter.

xiii
<PAGE> 15
COMPARATIVE UNAUDITED PER SHARE DATA

The following table presents selected comparative unaudited per share data
with respect to the Common Stock of JMED on an historical basis and a pro forma
combined basis, and with respect to the common stock of Abana on an historical
basis and a pro forma equivalent basis, giving effect to the Merger as a
purchase transaction for accounting and financial reporting purposes. The pro
forma data assumes that the Merger became effective on December 31, 1995 or at
September 30, 1996 for the book value per share data and at December 31, 1995
for earnings per share and dividends declared data. The pro forma financial
data is presented for informational purposes only, and is not necessarily
indicative of the actual results that would have been achieved had the Merger
been consummated on the dates or prior to the periods presented. See
"Unaudited Pro Forma Condensed Combined Financial Information."

The historical per share data set forth in the following table are derived
from, and should be read in conjunction with, the historical consolidated
financial statements of JMED and Abana, including the notes thereto. The
financial data with respect to JMED reflects the restatement of its historical
financial statements (i) as a result of JMED's acquisition of Galen Drugs of
Florida, Inc. ("Galen", together with its principal operating subsidiary,
Daniels Pharmaceuticals, Inc., the "Daniels Acquisition") on August 30, 1996,
in a transaction accounted for as a pooling of interests and (ii) a
three-for-two stock split by means of a 50% stock dividend distributed June 10,
1996. The audited historical consolidated financial statements of JMED are
incorporated by reference into this Prospectus. The audited historical
financial statements of Abana are included in this Prospectus. See
"Incorporation of Certain Documents by Reference" and "Financial Statements of
Abana Pharmaceuticals, Inc."

Common Stock of JMED Abana Common Stock
------------------------- -------------------------
Pro Forma
Historical Pro Forma Historical Equivalent
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Book value per share:
December 31, 1995 $ 2.22 $ 2.80 $ 0.68 $ 0.62
September 30, 1996 $ 5.07(1) $ 5.99 $ 0.72 $ 1.32

Cash dividends declared per share:

Year ended December 31, 1995 $ 0.05 $ 0.05 $ 0.02 $ 0.011
Nine months ended September 30, 1996 $ 0.056 $ 0.056 $ 0.03 $ 0.012

Net income per share:

Year ended December 31, 1995 $0.50 $ 0.49 $ 0.36 $ 0.11
Nine months ended September 30, 1996 $0.41(2) $ 0.39 $ 0.07 $ 0.09
</TABLE>

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

(1) Includes the effect of net proceeds of $75 million from the public
sale and offering of 3,450,000 shares of the Common Stock of JMED during
1996 at a price of $23.33 per share.

(2) After giving effect to a one-time charge of $4.2 million, after tax,
or $0.15 per share for certain expenses associated with the acquisition of
Galen Drugs of Florida, Inc. (the "Daniels Acquisition") on August 30,1996,
in a transaction accounted for as a "pooling of interests". Prior to giving
effect to such one-time charges, the pro forma equivalent income per share
of Abana common stock would have been $0.11 for the period. See "Investment
Considerations and Risk Factors - Important Developments during 1996 - The
Daniels Acquisition" for a brief explanation of "pooling of interests"
accounting treatment and the nature of these one-time charges.

xiv
<PAGE> 16
SUMMARY CONSOLIDATED FINANCIAL DATA OF JMED

The following table summarizes certain selected consolidated financial
data of JMED which should be read in conjunction with the consolidated financial
statements of JMED, and the notes thereto, incorporated by reference into this
Prospectus. The financial data for the three years ended December 31, 1995
have been derived from the audited consolidated financial statements of JMED
restated to reflect (i) a three-for-two stock split pursuant to a 50% stock
dividend distributed on June 10, 1996 and (ii) the Daniels Acquisition on
August 30, 1996, in a transaction accounted for as a pooling of interests. The
financial data for each of the two years in the period ended December 31, 1992,
have been derived from JMED's historical audited consolidated financial
statements, restated to reflect the Daniels Acquisition using unaudited data
concerning Galen. In the opinion of management of JMED, all adjustments
necessary for a fair presentation of the restated results arising from the
pooling of interests are reflected.

The financial data as of and for the nine months ended September 30, 1996
and 1995 have been derived from the unaudited condensed combined financial
statements of JMED. In the opinion of JMED's management, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial data for the nine months ended September 30, 1996
and 1995 have been reflected therein. Operating results for the nine months
ended September 30, 1996 are not necessarily indicative of the results that may
be expected for the full year and reflect certain non-recurring expenses and
payments relating to the Daniels Acquisition. The summarized historical
financial data appearing below should be read in conjunction with the
consolidated financial statements of JMED, and the notes thereto, incorporated
by reference into this Prospectus. See "Incorporation of Certain Documents by
Reference."

<TABLE>
<CAPTION>
Years Ended December 31, Nine Months Ended
------------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 9/30/95 9/30/96 (1)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA

Sales $ 29,098 $ 34,590 $ 55,621 $ 62,154 $ 74,792 $ 52,893 $ 73,810

Cost of Sales 14,960 17,501 26,501 29,503 32,754 23,261 30,305
-------- -------- -------- -------- -------- -------- --------

Gross Profit 14,138 17,089 29,120 32,651 42,037 29,632 43,505

Selling, general and
administrative expenses 9,261 10,738 16,795 20,285 21,754 15,909 25,171

Other income
(expense), net 547 821 (80) (486) (484) (269) 1,199
-------- -------- -------- -------- -------- -------- --------

Income before taxes 5,425 7,172 12,245 11,880 19,799 13,454 19,533

Provision for taxes 1,984 2,672 4,660 4,360 7,410 4,953 8,157
-------- -------- -------- -------- -------- -------- --------

Net income (2) $ 3,441 $ 4,500 $ 7,585 $ 7,520 $ 12,389 $ 8,501 $ 11,376
======== ======== ======== ======== ======== ======== ========
Earnings per share (2) $ 0.10 $ 0.13 $ 0.21 $ 0.29 $0.50 $ 0.34 $ 0.41
======== ======== ======== ======== ======== ======== ========

Weighted average
shares outstanding (3) 34,916 35,212 35,229 26,361 24,844 24,749 27,776

Cash dividends
declared per share (4) $ 0.027 $ 0.033 $ 0.04 $ 0.045 $0.05 $ 0.036 $ 0.057

BALANCE SHEET DATA:

Total Assets $ 36,989 $ 39,581 $ 58,113 $ 63,342 $ 86,238 $ 82,363 $154,885

Long-term Obligations 2,889 652 5,400 6,778 11,420 13,019 0

Shareholders' Equity 29,362 33,396 40,832 44,478 55,939 52,007 141,408

</TABLE>

(1) After a one-time charge of approximately $4,250,000, after taxes, or $0.15
per share, for certain expenses of the Daniels Acquisition.

(2) Net income and earnings per share in 1993 do not reflect cumulative effect
of a change in accounting principle of $207,100.

(3) In a transaction in October 1993, Galen Drugs of Florida, Inc. repurchased
and retired approximately 78.6% of its then outstanding common stock in
exchange for consideration consisting of $3.4 million in cash and debt. As a
result of the Daniels acquisition, an aggregate of 10.9 million shares of the
Common Stock of JMED were deemed to be outstanding prior to the date of that
transaction.

(4) Represents historical dividends declared per JMED common share.

<PAGE> 17
SUMMARY FINANCIAL DATA OF ABANA

The following table summarizes certain selected historical financial data
of Abana. The balance sheet data presented below as of December 31, 1994 and
1995 and as of September 30, 1995 and 1996 and the statement of operations data
for each of the years in the three-year period ended December 31, 1995 and for
the nine months ended September 30, 1995 and 1996, are derived from Abana's
financial statements appearing elsewhere in this Prospectus. See "Financial
Statements of Abana." The financial data for the five years ended December 31,
1995 have been derived from audited annual financial statements of Abana. The
balance sheet data as of December 31, 1991, 1992 and 1993, and the statement of
operations data for the years ended December 31, 1991 and 1992, have been
derived from other financial statements of Abana and are not included in this
Prospectus. In the opinion of Abana's management, all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
financial data for the nine months ended September 30, 1995 and 1996 have been
reflected therein. Operating results for the nine months ended September 30,
1996 are not necessarily indicative of the results that may be expected for the
full year. The summarized historical financial data of Abana should be read in
conjunction with the financial statements and related notes thereto for Abana
and "Abana's Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. See "Certain
Information Concerning Abana" and "Financial Statements of Abana
Pharmaceuticals, Inc."

<TABLE>
<CAPTION>
Years Ended December 31, Nine Months Ended
--------------------------------------------------------- -------------------------
1991 1992 1993 1994 1995 9/30/95 9/30/96
---- ---- ---- ---- ---- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA

Sales $ 789 $1,176 $ 2,426 $2,948 $4,210 $2,868 $4,103

Cost of sales 260 347 608 656 619 470 736
------ ------ ------- ------ ------ ------ ------
Gross profit 529 829 1,818 2,292 3,590 2,398 3,367

Selling, general and
administrative expenses 536 897 1,853 2,391 2,718 1,939 3,194

Other income (expenses), net (42) - 10 11 17 11 23

Provision for taxes - - - - - - 35
------ ------ ------- ------ ------ ------ ------

Net income (loss) $ (49) $ (68) $ (25) $ (88) $ 889 $ 470 $ 161
====== ====== ======= ====== ====== ====== ======

Earnings (loss)per share $(0.03) $(0.03) $ (0.01) $(0.04) $ 0.36 $ 0.21 $ 0.07
====== ====== ======= ====== ====== ====== ======

Weighted average shares
outstanding 1,774 2,020 2,211 2,288 2,448 2,291 2,395

Cash dividends declared per share - - - - $ 0.02 - $ 0.03

BALANCE SHEET DATA:

Cash and cash equivalents $ 88 $ 283 $ 482 $ 336 $ 920 $ 486 $ 975

Total assets $ 260 $ 618 $ 993 $ 892 $1,640 $1,193 $1,987

Stockholders' equity $ 96 $ 526 $ 898 $ 793 1,542 $1,164 $1,633
</TABLE>

xvi

<PAGE> 18
INVESTMENT CONSIDERATIONS AND RISK FACTORS

The following discussion contains certain cautionary statements regarding
JMED's business and results of operations which should be considered by holders
of the common stock of Abana. These statements discuss matters which may in
part be discussed elsewhere in this Prospectus and which may have been
discussed in other documents prepared by JMED pursuant to federal or state
securities laws, including documents filed pursuant to the Exchange Act and
incorporated herein by reference. This discussion is intended to take
advantage of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. The following factors should be considered in conjunction
with any discussion of operations or results by JMED or its representatives,
including any forward-looking discussion, as well as comments contained in
press releases, presentations to securities analysts or investors, or other
communications by JMED. The discussion below should be read in conjunction
with JMED's "Management's Discussion and Analysis of Financial Conditions and
Results of Operations" in its annual and quarterly filings with the Commission
which are incorporated herein by reference. See "Incorporation of Certain
Documents by Reference."

In making these statements, JMED is not undertaking to address or update
each factor in future filings or communications regarding the Company's
business or results, and is not undertaking to address how any of these factors
may have caused changes to discussions or information contained in previous
filings or communications. In addition, any of the matters discussed below may
have affected the Company's past results and may affect future results.

IMPORTANT DEVELOPMENTS TO DATE DURING 1996

As a result of two significant acquisitions completed to date in 1996, the
Company currently derives a significant portion of its revenues from the sale
of pharmaceutical products relating to the treatment of thyroid conditions.
These pharmaceutical products represent new product lines in which the Company
has only limited marketing experience as of the date of this Prospectus. A
substantial percentage of the prescriptions for pharmaceutical products used in
the treatment of thyroid conditions historically have arisen from office-based
endocrinologists and internal medicine specialists rather than through
hospital pharmacies. In addition to expanding the marketing of these products
to hospital-based endocrinologists through the Company's traditional
hospital-directed sales and marketing staff, the Company intends to expand its
office-based sales and marketing staff arising from the Daniels Acquisition.
There can be no assurance that the Company will be successful in efforts to
integrate and expand its sales and marketing staff to accommodate these new
products and the failure to market and sell these new pharmaceutical product
lines successfully could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Background of
the Transaction - Reasons for the Transaction."

Acquisition of the Rights to Tapazole(R). On March 18, 1996, the Company
acquired from Eli Lilly and Company ("Lilly") the exclusive perpetual domestic
right to market and distribute Tapazole(R) (methimazole, USP) in the United
States. The purchase price for Tapazole(R) was $26.0 million, of which
one-third was paid in cash at closing and the remainder of which was paid,
without interest, in installments in June and September, 1996. In addition to
the purchase price, the Company will pay Lilly a royalty equal to 5% of the
Company's net sales of Tapazole(R) during the first 10 years following the
acquisition. The Company also entered into a 10-year manufacturing agreement
with Lilly pursuant to which Lilly will continue to manufacture Tapazole for
the Company.

Tapazole(R) is an anti-thyroid product used for the treatment of
hyperthyroidism; the extreme form of hyperthyroidism is commonly known as
Graves' Disease. Tapazole(R) is prescribed to inhibit the synthesis of thyroid
hormones and to reduce the size of the goiter (an abnormal growth resulting
from overactivity of the thyroid gland). Although the Company is not aware of
any generic forms of Tapazole(R) in the marketplace, Tapazole(R) faces
competition from the generic pharmaceutical, propylthiouracil ("PTU"). PTU is
sold by Lederle Labs, a division of American Cyanamid Company, which has
greater financial resources than the Company, and by a number of other

1
<PAGE> 19
independent generic pharmaceutical companies. From the date of acquisition on
March 18, 1996 through September 30, 1996, the Company had net sales of $8.4
million relating to Tapazole(R), equal to 11.3% of the Company's sales for the
nine months ended September 30, 1996.

The Daniels Acquisition. On August 30, 1996, the Company acquired Galen
Drugs of Florida, Inc. and its principal operating subsidiary, Daniels
Pharmaceuticals, Inc. ("Daniels"), and related assets in exchange for an
aggregate of 2,960,224 shares of the Common Stock of JMED and cash in the
amount of $4.0 million in a transaction accounted for as a "pooling of
interests." In a "pooling of interests" transaction, the historical results of
the combining companies are restated as if the entities had always been a
single company for financial reporting purposes and the expenses of the
acquisition transaction are charged against income for the period in which the
transaction occurs. Non-recurring expenses associated with the Daniels
Acquisition resulted in after-tax charges of approximately $4.2 million
($.15 per share) to the Company's earnings during the quarter ended September
30, 1996. Such expenses consist principally of compensatory payments to
certain former officers of Daniels and to business brokerage and financial
advisory fees incurred by Daniels in connection with the transaction.

Daniels is a St. Petersburg, Florida, based manufacturer and marketer of
prescription pharmaceutical products. Daniels' principal product is
Levoxyl(TM), a synthetic thyroid hormone for the treatment of hypothyroidism.
Levoxyl(TM) is reported to be the second most widely prescribed brand of
levothyroxine in the United States, within a $300 million domestic market
dominated by SynthroidTM which is manufactured by Knoll Pharmaceutical
Company, a subsidiary of Boots PLC, which has substantially greater sales,
marketing and financial resources than the Company. Competitive action in the
marketing and distribution of SynthroidTM could disrupt the Company's
strategies for market development of Levoxyl(TM) and have a material adverse
effect on the Company's business, financial condition and results of
operations. Daniels' sales of Levoxyl(TM) during 1995 were $10.9 million,
approximately 14.6% of the Company's 1995 reported sales as restated to reflect
the pooling of interests. During the nine months ended September 30, 1996,
sales of Levoxyl(TM) were $9.8 million, or approximately 13% of the Company's
reported sales for that period as restated to reflect the pooling of interests.

Equity Offering and Increase in Outstanding Common Stock. Pursuant to a
public offering commenced on March 28, 1996, the Company issued an aggregate of
3,450,000 shares of its Common Stock (including shares sold pursuant to the
exercise of over-allotment options issued to the underwriters) at a price of
$23.33 per share and received proceeds, net of underwriting discounts and other
expenses of the offering, aggregating $75 million. The Company has utilized
approximately $30 million of such proceeds in connection with payments to Lilly
arising from the acquisitions of the Tapazole(R) and Brevital(R) Sodium product
lines. An additional $5.5 million may be deemed to have been used in
connection with the Daniels Acquisition and expenses associated therewith.

The Company effected a three-for-two split of its outstanding Common Stock
on March 1, 1996, and a second three-for-two split of its outstanding Common
Stock on June 10, 1996. All references in this Prospectus to the Common Stock
of JMED are adjusted to reflect such stock splits, each of which was
distributed in the form of a 50% stock dividend.

DEPENDENCE ON SALES OF KEY PHARMACEUTICALS

In addition to the significance of the Company's Tapazole(R) and
Levoxyl(TM) thyroid treatment products arising from acquisitions completed in
1996, the Company derives a substantial portion of its revenue from sales of
two pharmaceutical products associated with critical care treatments The
Company's topical hemostat thrombin product line accounted for 19.5% of total
sales and 32.8% of pharmaceutical sales during fiscal 1995 as restated to
reflect the Daniels Acquisition. The Company's Brevital(R) Sodium line of
anesthetics, acquired on August 31, 1995, accounted for 3.2% of total sales and
5.0% of pharmaceuticals sales the last four months of fiscal 1995 as restated
to reflect the Daniels Acquisition.

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<PAGE> 20

The Company believes that sales of thrombin, Brevital(R)Sodium,
Tapazole(R) and Levoxyl(TM) products will continue to constitute a significant
portion of its revenue for the foreseeable future. Accordingly, any factor
adversely affecting thrombin or Brevital(R) Sodium sales could have a material
adverse effect on the Company's business, financial condition and results of
operations. Furthermore, the pharmaceutical industry is characterized by rapid
product development and technological change. The Company's pharmaceuticals
could be rendered obsolete or uneconomical by the development of new
pharmaceuticals to treat the conditions addressed by the Company's products or
as the result of either technological advances affecting the cost of production
or marketing or pricing pressure from one or more of the Company's
competitors. The Company's business, financial condition and results of
operations could be materially adversely affected by any one or more of such
developments.

Thrombin Products. Thrombin products must be manufactured in facilities
with biological licenses from the Center for Biologics Evaluation and Research
("CBER"), a division within the U.S. Food and Drug Administration ("FDA").
Thrombin-JMI(TM) is presently manufactured at the Company's GenTrac facility,
which is licensed to produce thrombin products to United States Pharmacopeia
("U.S.P.") standards and which the Company acquired in 1991 in order to achieve
greater control over its supply of thrombin product. GenTrac also produces
proprietary thrombin products for Johnson & Johnson as a contract manufacturer.
The Company's thrombin product lines compete with those produced for and
marketed by Johnson & Johnson and also compete with thrombin products
distributed by the Parke-Davis division of the Warner-Lambert Company. Each of
the Company's competitors in the market for thrombin-based hemostats has
substantially greater sales, marketing and financial resources than the
Company.

Under a product development agreement between GenTrac and Johnson &
Johnson in effect prior to the time at which the Company acquired GenTrac,
Johnson & Johnson acquired certain rights to new products developed by GenTrac.
Johnson & Johnson has notified the Company that it intends to assert claims
entitling it to exclusive distribution rights for Thrombin-JMI(TM) and a liquid
thrombin product for which FDA approval is currently pending. Although the
Company strongly disagrees with and will vigorously contest such claims by
Johnson & Johnson, any resolution of the claims in favor of Johnson & Johnson
could have a materially adverse effect upon the Company's business, financial
condition and results of operations.

Brevital(R)Sodium products. Brevital(R) Sodium pharmaceuticals are
manufactured for the Company by Lilly under a long-term contract. Lilly also
manufactures the product for its own account for distribution in the
international market. Domestic sales of Brevital(R)Sodium for 1995, including
sales by Lilly prior to the Company's acquisition of the product line,
represented approximately 1.2% of the $520 million domestic market for
anesthetics, a market which is dominated by Diprovan(R), produced and marketed
by Roche Labs, a division of Hoffmann-La Roche, Inc., and Zeneca(R), produced
and marketed by Zeneca Pharmaceuticals, a business unit of Zeneca, Inc., each
of which has substantially greater sales, marketing and financial resources
than the Company. Competitive action by any of these entities could disrupt
the Company's strategies for market development for Brevital(R)Sodium and have
a materially adverse effect upon the Company's business, financial condition
and results of operations.

RELIANCE ON THIRD-PARTY MANUFACTURERS AND SOLE SOURCE SUPPLIERS

The Company has historically relied on third party manufacturers to
produce many of its products, and currently relies on third party manufacturers
of the production of Brevital(R)Sodium and Tapazole(R). Although the Company
typically enters into long-term manufacturing contracts with such third party
manufacturers, unless alternative sources are readily available, there can be
no assurance that the Company will be able to obtain adequate supplies of such
products in a timely fashion, or at all. For example, prior to receiving FDA
approval in February 1995 for the production of Thrombin-JMI(TM) at its GenTrac
facility, the Company's thrombin products were manufactured for the Company
under a contract with Armour Pharmaceutical Company ("Armour") from whom the
Thrombinar(R) product line was acquired in 1989. In the fourth quarter of 1994
and first quarter of 1995 there was

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<PAGE> 21

a disruption in thrombin product availability from Armour resulting in the
Company's inability to provide product to customers and the loss of sales and
income.

The Company's Brevital(R)Sodium product is currently manufactured by Lilly
and manufacture of such product is dependent upon Lilly's ability to procure
certain raw materials used in the manufacture of Brevital(R) Sodium. Although,
the Company has no reason to believe that Lilly will be unable to procure
adequate supplies of such raw materials on a timely basis, disruptions in
supplies of Brevital(R) Sodium, including delays due to Lilly's inability to
procure raw materials, would have a material adverse effect on the Company's
business, financial condition and results of operations.

In addition, the Company faces the risk that upon expiration of the term
of any third-party manufacturing agreement it may not be able to renew or
extend the agreement with the third-party manufacturer, or to obtain an
alternative manufacturing source from other third parties or within the
Company, on commercially viable terms. In such circumstances the Company may
be unable to continue to market its products as planned and could be required
to abandon or divest itself of a product line on terms which would be
materially adverse to the business, financial conditions and results of
operations of the Company.

DEPENDENCE ON ACQUISITION STRATEGY

The Company has achieved significant increases in sales and net income
since its inception through a series of strategic acquisitions and related
internal growth initiatives intended to develop marketing opportunities with
respect to the acquired product lines.

The Company's strategy for growth is dependent upon its continued ability
to acquire, by purchase or exclusive license arrangements, pharmaceuticals
targeted at niche markets which can be promoted through marketing and
distribution channels presently developed by the Company and, when appropriate,
the enhancement of such marketing and distribution channels. Because the
Company is not engaged in proprietary research and development activities
leading to the introduction of new products, it must rely upon the
availability of product lines subject to divestiture or sale by other
manufacturers. Other companies, including those with substantially greater
financial, marketing and sales resources, are competing with the Company for
the right to acquire such products. There can be no assurance that the Company
will be able to acquire rights to additional products on acceptable terms, if
at all. The failure of the Company to effect such acquisitions would have a
material adverse effect on the Company's future business, financial condition
and results of operations.

UNCERTAINTY OF FUTURE FINANCIAL RESULTS; FLUCTUATIONS IN QUARTERLY OPERATING
RESULTS

The Company's results of operations may vary from quarter to quarter due to
a variety of factors including expenditures incurred to acquire or license and
promote additional pharmaceuticals, changing customer profiles, the availability
and cost of raw materials, interruptions in supply by third party manufacturers,
the introduction of new products by the Company or its competitors, the mix of
products sold by the Company, changes in sales and marketing expenditures,
competitive pricing pressures and general economic and industry conditions which
affect customer demand. These factors could also affect annual results of
operations. Because the Company's operating expenses are based on anticipated
revenue levels and a high percentage of the Company's expenses are relatively
fixed in the short-term, variations in the timing of recognition of revenue
could cause significant fluctuations from quarter to quarter and may result in
unanticipated quarterly earnings shortfalls or losses. There can be no
assurance that the Company will be successful in maintaining or improving its
profitability or avoiding losses in any future period.

In addition, the acquisition and licensing of products, the expansion of
the Company's sales force in response to the marketing and sales of additional
products, and possible expansion of the Company's facilities in connection with
the foregoing or in order to expand manufacturing capabilities and capacity
would require the commitment of

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<PAGE> 22

substantial capital resources. Depending upon the acquisition and licensing
opportunities available to it, the Company may need to raise additional funds
for such purposes. The Company may seek additional funding through public and
private financings, including equity financings. Adequate funds for these
purposes, whether through the financial markets or from other sources, may not
be available when needed or on terms acceptable to the Company. Insufficient
funds may require the Company to delay, scale back, or abandon some or all of
its product acquisition and licensing programs or marketing and manufacturing
opportunities. The Company anticipates that its existing capital resources,
together with cash expected to be generated from operations and available from
bank borrowings, should be sufficient to finance its current operations and
working capital requirements for the foreseeable future.

REIMBURSEMENT PRICING PRESSURES APPLICABLE TO PHARMACEUTICALS

The ability of the Company to maintain or increase profit margins for
pharmaceuticals will depend in part on the availability of adequate
reimbursement to the Company's customers from third-party health care payors,
such as government and private health insurers and managed care organizations.
Third-party payors are increasingly challenging the pricing of medical services
and products. There can be no assurance that reimbursement will be available
for the Company's products or that such third-party reimbursement will be
adequate. Hospital pharmacies, which are primarily the customers for many of
the Company's pharmaceuticals, are subject to reimbursement pressures and are
increasingly utilizing joint purchasing organizations to exercise control over
pricing and obtain price rebates based on volume usage. There can be no
assurance that the Company's products will continue to be included in the
purchasing arrangements of hospital buying organizations or that downward
pricing pressure on the industry generally will not have a material adverse
effect upon the Company's business, financial condition and results of
operations. Further, a number of legislative and regulatory proposals aimed at
changing the nation's health care system have been proposed in recent years.
While the Company cannot predict whether any such proposals will be adopted, or
the effect that any such proposal may have on its business, such proposals, if
enacted, could have a material adverse effect on the Company's business,
financial condition and results of operations.

INTENSE COMPETITION; UNCERTAINTY OF TECHNOLOGICAL CHANGE

The manufacture and sale of pharmaceuticals is highly competitive. Many
of the Company's competitors are large well-known pharmaceutical, chemical and
health care companies which have considerably greater financial, sales,
marketing and technical resources than those of the Company. Additionally,
many of the Company's present and potential competitors have research and
development capabilities that may allow such competitors to develop new or
improved products that may compete with the Company's products. The
pharmaceutical industry is characterized by rapid product development and
technological change. The Company's pharmaceuticals could be rendered obsolete
or uneconomical by the development of new pharmaceuticals to treat the
conditions addressed by the Company's products or as the result of either
technological advances affecting the cost of production or marketing or
pricing action by one or more of the Company's competitors. The Company's
business, financial condition and results of operations could be materially
adversely affected by any one or more of such developments.

The market for nutritional supplements is characterized by extensive
competition, frequent new product introductions, short product life cycles and
changing customer preferences. The Company is subject to competition with the
retail market for nutritional supplements as well as the mass-market direct
mail industry and there can be no assurance that the targeted direct market
approach utilized by the Company will remain a viable alternative within the
industry or that other competitors may not enter the targeted direct mail
market utilizing approaches and offering products similar to those offered by
the Company. Many of the Company's existing and potential competitors in the
nutritional supplements market have greater financial, marketing and research
capabilities than the Company.

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<PAGE> 23

GOVERNMENT REGULATION

Virtually all aspects of the Company's activities are regulated by federal
and state government agencies.

The manufacturing, processing, formulation, packaging, labeling and
advertising of the Company's products are subject to regulation by one or more
federal agencies, including the FDA, the Federal Trade Commission ("FTC"), the
Consumer Product Safety Commission, the United States Department of
Agriculture, the Drug Enforcement Agency ("DEA"), the United States Postal
Service and the United States Environmental Protection Agency ("EPA"). These
activities are also regulated by various agencies of the states and localities
in which the Company's products are sold.

While all of the Company's current pharmaceuticals have received all
requisite government approvals for manufacture and sale, such approvals are
subject to revocation by the applicable government agencies. In addition,
modifications to or enhancements of approved products are in many circumstances
subject to additional FDA approvals which may or may not be received and which
may be subject to lengthy application processes. The Company's manufacturing
facilities are continually subject to inspection by such governmental agencies
and manufacturing operations could be interrupted or halted in any such
facility if such inspections prove unsatisfactory.

The Dietary Supplement Act of 1992 required that the FDA issue final
regulations for dietary supplements, including vitamins, not later than
December 31, 1993, and, in connection therewith, the FDA made public proposed
regulations on June 15, 1993. Such regulations, among other items, require the
relabeling of dietary supplements with regard to nutrition labeling information
and nutrient content claims, the establishment of procedures and standards of
FDA approval of health claim messages for dietary supplements and request
comments for approaches to assure the safety of vitamins, minerals, amino
acids, herbs and other nutritional supplements offered for use as dietary
supplements. Such proposed regulations provide for a 60-day comment period and
the final regulations may result in additional or revised regulations for
dietary supplements. The Dietary Supplemental Act also requires that the
Comptroller General of the United States and the Director of the Office of
Technology Assessment undertake separate studies of FDA regulation of dietary
supplements and make recommendations concerning such regulation to the
Congress.

The Company cannot determine what effect the FDA's currently proposed or
revised regulations, when and if promulgated, will have on its business in the
future. Such regulations could, among other things, require expanded or
different labeling, the recall or discontinuance of certain products,
additional recordkeeping and expanded documentation of the properties of
certain products and scientific substantiation. In addition, the Company
cannot predict whether new legislation regulating its activities will be
enacted. Such new legislation could have a material adverse effect on the
Company's business, financial condition and results of operations.

RISK OF PRICE ADJUSTMENTS AND PRODUCT RETURNS

Under contracts with hospitals and hospital buying groups applicable to
the sale and distribution of the Company's pharmaceuticals, final sales prices
to distributors may be subject to retroactive adjustment based on volume or
other contractual discounts provided by the Company. While the Company
believes that it has adequate reserves to cover such adjustments, there can be
no assurance that the Company will not experience price adjustments in the
future that significantly exceed such reserves.

The Company permits customers to return unused pharmaceuticals under
certain conditions. In addition, the Company's nutritional supplements are
sold with an unconditional money-back guarantee permitting a full refund for
unused product within 30 days of purchase. Although product returns to date
under the foregoing policies have been less than 1% of sales, there can be no
assurance that actual levels of returns will not significantly exceed the
amounts anticipated by the Company.

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<PAGE> 24

POTENTIAL PRODUCT LIABILITY; LIMITED INSURANCE COVERAGE

The Company faces an inherent risk of exposure to product liability claims
in the event that the use of its product is alleged to have resulted in adverse
effects. Such risk exists even with respect to those products that are
manufactured in licensed and regulated facilities or otherwise possess
regulatory approval for commercial sale. While the Company has taken, and
continues to take, what it believes are appropriate precautions, there can be
no assurance that it will avoid significant product liability exposure. The
Company currently has product liability insurance in the amount of $20 million
per claim and $20 million in the aggregate and excess coverage of up to $5
million through an "umbrella" policy; however, there can be no assurance
that such insurance will be sufficient to cover potential claims. Further,
there can be no assurance that adequate insurance coverage will be available in
the future on commercially reasonable terms, if at all, or that a product
liability claim would not materially adversely affect the Company's business,
financial condition and results of operations.

RISK OF PRODUCT RECALL

Product recalls may be issued at the discretion of the Company, the FDA,
the FTC or other government agencies having regulatory authority for product
sales and may occur due to disputed labeling claims, manufacturing issues,
inaccurate tracking of distributed products or other reasons. No assurance can
be given that product recalls will not occur in the future. Any product recall
could materially adversely affect the Company's business, financial condition
and results of operations.

DEPENDENCE UPON CERTAIN KEY MANAGEMENT

The success of the Company to date has been largely dependent upon the
personal efforts and abilities of Dennis M. Jones. Should Mr. Jones cease to
be affiliated with the Company, the Company's strategic direction and
performance would be materially adversely effected. The Company is also
dependent upon a number of other key management personnel. The loss of the
services of one or more key employees, or the inability of the Company to
attract and retain skilled management and sales marketing personnel in the
future, could have a material adverse effect on the Company's business,
financial condition and results of operations.

HAZARDOUS MATERIALS

Certain of the Company's manufacturing and packaging activities involve
the controlled use of hazardous materials and compounds. Although the Company
believes that its procedures for handling and disposing of hazardous materials
and compounds comply with the standards prescribed by state and federal
regulations, the risk of contamination or injury cannot be eliminated. In the
event of an accident, the Company could be held liable for any damages or fines
that result and such liability could have a material adverse effect on the
Company's business, financial condition and results of operations.

VOLATILITY OF COMMON STOCK PRICE

The market price for the stocks of many publicly traded pharmaceutical
companies and manufacturers and marketers of nutritional supplements, including
the Company, is subject to periods of high volatility. A variety of events,
both concerning and unrelated to the Company and the markets in which it
participates, may have significant negative impact on the market price of the
Common Stock, including regulatory developments in the health care field
generally, the performance of other pharmaceutical or nutritional supplement
companies as well as matters affecting the Company's own products and financial
performance. Although the Common Stock trades on the Nasdaq National

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<PAGE> 25
Market, trading volume and the number of market makers has fluctuated and at
times has been quite low and both the price and volume of trading has been
sensitive to the number of analysts reporting on the Company and such analysts'
views of the Company and the industries in which it participates. The
realization of any of the risks described in these "Investment Considerations
and Risk Factors" could have a dramatic and adverse impact on the market price
for the Common Stock of JMED.

MARKET RISK OF SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock in the public market after
this offering could adversely affect the market price of the Common Stock.

Sales by officers and directors of the Company are generally subject to
the provisions of Rule 144 under the Securities Act of 1933 which, as to such
persons, requires notice of sale activity and limits the amount sold on behalf
of any such person (including persons acting in concert with one another) in
any 90-day period to the greater of 1% of the outstanding stock or the average
weekly trading volume preceding such notice. Such persons are also subject to
the short-swing trading provisions of the Exchange Act.

In connection with the Daniels Acquisition, the Company issued an
aggregate of 2,960,224 shares of its Common Stock in a transaction not
involving any public offering. The Company has granted registration rights
with respect to such stock to permit the sale of such stock in non-underwritten
offerings. Similarly, as a result of the Merger the Principal Holders (of
Abana) will acquire an aggregate of 291,250 shares of the Company's Common
Stock as to which the Company has also granted registration rights to permit
the sale thereof in non-underwritten offerings. The filing of a registration
statement with respect to such shares, by possibly creating a significant
apparent excess of supply over market demand for the Company's Common Stock, or
the actual sale of such Common Stock pursuant to a registration other than in
underwritten or privately negotiated block transactions could adversely impact
the market price for the Common Stock.

MARKET PRICE IN COMPARISON TO BOOK VALUE

The market price of the Common Stock offered hereby significantly exceeds
the current book value per share of the Common Stock. In addition, a
significant portion of the Company's assets are intangible and attributable
either to perceived value of trademarks and tradenames or to goodwill arising
in connection with the purchase of products or operations. Certain of these
intangible assets are subject to amortization and will be charged against
earnings in future years. In connection with the Merger, the Company will
recognize approximately $14 million in goodwill and other intangibles which
will be generally amortized over a period of 25 years. See "The Merger -
Accounting Treatment."

ANTI-TAKEOVER EFFECT OF CHARTER PROVISIONS AND DELAWARE LAW

The Company's Certificate of Incorporation authorizes the Board of
Directors to designate and issue, without stockholder approval, 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 Common Stock. The issuance of Preferred Stock or of rights to
purchase Preferred Stock could be used to discourage an unsolicited acquisition
proposal. In addition, certain provisions of Delaware law applicable to the
Company could also delay or make more difficult a merger, tender offer or proxy
contest involving the Company, including Section 203 of the DGCL, which
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years unless certain
conditions are met. The possible issuance of Preferred Stock and Delaware law
could have the effect of delaying, deferring or preventing a change in control
of the Company including, without limitation, discouraging a proxy contest,
making more difficult the acquisition of a substantial block of the Company's
Common Stock or limiting the price that investors might in the future be
willing to pay for shares of the Common Stock.

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<PAGE> 26

THE MERGER

The following information describes the material aspects of the Merger.
This description does not purport to be complete and is qualified in its
entirety by reference to the Agreement which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part and is incorporated
herein by reference. See also "The Agreement."

ADOPTION OF THE MERGER BY WRITTEN CONSENT

Under applicable provisions of the DGCL, the Merger may become effective
after adoption by written consent of holders of a majority of the outstanding
voting stock of Abana provided that written notice of such adoption is given to
all holders not less than twenty days prior to the effective date of the
Merger. A formal Notice relating to the adoption of the Merger accompanies
this Prospectus. The Merger is the principal transaction provided in the
Agreement and the Merger has been approved and adopted by the written consent
of the Principal Holders in lieu of submitting the Merger to a vote of all
holders of the common stock of Abana. The terms of the Merger and the
Agreement were negotiated directly by the Principal Holders and the management
of JMED. See "Background of the Transaction."

EFFECTIVE TIME OF THE MERGER

EFFECTS OF THE MERGER

When the Merger becomes effective, (1) Abana will be merged with and into
AAC, which will be the surviving corporation (the "Surviving Corporation"), (2)
the Surviving Corporation will succeed by operation of law to the respective
rights and obligations of each of Abana and AAC, (3) each outstanding share of
the common stock of Abana will (excepted as otherwise provided below) be
converted into and exchanged for 0.22 of a share of the Common Stock of JMED,
(4) each outstanding option to acquire a share of the common stock of Abana
will be converted into and exchanged for a like option to acquire 0.22 share of
the Common Stock of JMED at an exercise price per share equal to 4.55 times the
exercise price per share applicable to the Abana option (subject to rounding
the option issuable upon conversion to the nearest whole share of the Common
Stock of JMED and the exercise price to the nearest whole cent), and (5) the
Surviving Corporation will be a wholly-owned subsidiary of JMED.

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<PAGE> 27

MANAGEMENT OF ABANA AFTER THE MERGER

INTEREST OF THE PRINCIPAL HOLDERS IN THE MERGER

Upon effectiveness of the Merger, each Principal Holder will receive an
aggregate of 145,625 shares of the Common Stock of JMED upon conversion of the
shares of the common stock of Abana currently held. In addition, each
Principal Holder will receive, in conversion and exchange of presently held
options to acquire shares of the common stock of Abana, (i) an "incentive stock
option" to acquire 8,800 shares of the Common Stock of JMED at a price of
$10.00 per share and (ii) a non-qualified option to acquire 6,835 shares of the
Common Stock of JMED at a price of $5.91 per share. The options to be issued
bear the same terms and conditions as the options presently held and such
options are currently vested and exercisable in full. Each Principal Holder
has agreed not to exercise such options prior to the Closing Date. The
Agreement provides, however, that by notice to JMED and Abana given prior
to the Closing Date, a Principal Holder may elect to exercise and surrender
such option as of the first business day following the Closing Date and, in
lieu of paying the exercise price and receiving shares of the Common Stock of
JMED, receive in cash the value of such options as of such date. The Agreement
provides certain registration rights under the Securities Act of 1933 to the
Principal Holders in respect of the shares of the Common Stock of JMED to be
received by them pursuant to the Merger.

REGULATORY APPROVALS

Neither JMED nor Abana is aware of any material governmental approvals or
actions that may be required for consummation of the Merger other than the
effectiveness of the Registration Statement of which this Prospectus is a part.
Should any such approval or action be required, it is presently contemplated
that such approval or action would be sought. There can be no assurance,
however, that any such approval or action, if needed, could be obtained or, if
obtained, would not be conditioned in a manner that would cause the parties to
abandon the Merger.

ACCOUNTING TREATMENT

JMED intends to treat the Merger as a "purchase" for accounting and
financial reporting purposes. As a "purchase" for financial reporting
purposes, JMED will record the cost of the acquisition (consisting of the fair
value of the consideration paid to acquire Abana together with certain expenses
of the transaction) and allocate such costs to Abana's net assets. The fair
value of the Common Stock of JMED issued in the transaction will be added to

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<PAGE> 28

JMED's reported shareholders' equity. To the extent that the cost of the
acquisition exceeds the fair value of Abana's tangible net assets, the excess
will be recorded by JMED as "goodwill" or other intangible assets. Amounts
allocated to goodwill or other intangible assets will generally be amortized
and charged against income over a 25 year period from the date of the
acquisition. In connection with the Merger, JMED expects to recognize
approximately $14 million of goodwill. See "Unaudited Pro Forma Condensed
Combined Financial Information." Because the Merger is intended to qualify as
a "tax-free" reorganization, future amortization charges arising from such
goodwill are not expected to be deductible by JMED for federal or state income
tax purposes. See "The Merger - Certain Federal Income Tax Consequences."

The Agreement provides that in the event of a closing date and
effectiveness of the Merger as of a date subsequent to December 31, 1996, the
transactions will be deemed to be effective for accounting, financial reporting
purposes and tax purposes as of the close of business on the last day of the
calendar month preceding the month in which the closing occurs. Accordingly,
if the closing occurs as of any date between December 31, 1996 through January
31, 1997, it will nevertheless be reflected for such purposes as effective on
December 31, 1996.

RESALES OF SHARES OF COMMON STOCK OF JMED RECEIVED IN THE MERGER

MARKET FOR THE COMMON STOCK OF JMED

The Common Stock of JMED is traded over-the-counter in the Nasdaq National
Market. JMED has filed an application to the National Association of
Securities Dealers, Inc. to include, upon official notice of issuance, the
shares of its Common Stock issuable pursuant to the Merger.

PRINCIPAL HOLDERS

The aggregate of 291,250 shares of the Common Stock of JMED to be received
by the Principal Holders as a result of the conversion of the shares of common
stock of Abana held by them in the Merger will constitute "restricted
securities" under the Securities Act and will be deemed to have been issued in
a transaction not involving any public offering. Unless registered under the
Securities Act for resale, such shares may not be resold in the absence of an
exemption from applicable registration requirements. In the Agreement, JMED
has agreed to provide to the Principal Holders upon request registration of
such shares under the Securities Act following the date upon which JMED files
with the Commission its Annual Report on Form 10-K for the year ending December
31, 1996. Under the Exchange Act, the Annual Report on Form 10-K for the year
ending December 31, 1996, is required to be filed on or before March 31, 1997.
JMED has further agreed, subject to certain conditions, to maintain any such
registration current and effective on behalf of the Principal Holders until the
earlier of (i) two years following the Closing or (ii) the date upon which Rule
144 under the Securities Act becomes available to the Principal Holders as an
exemption from registration permitting resale.

OTHER HOLDERS

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PROCEDURES FOR EXCHANGE OF ABANA STOCK FOR COMMON STOCK OF JMED

As of the Closing Date, JMED will deposit, or will cause to be deposited,
with the transfer agent for the Common Stock of JMED (or another agent
designated by JMED and acceptable to Abana) (the "Exchange Agent") for the
benefit of the holders of common stock of Abana, for exchange in accordance
with the terms of the Merger certificates representing the shares of Common
Stock of JMED issuable pursuant to the Merger. The Exchange Agent will,
pursuant to irrevocable instructions, deliver the shares of Common Stock of
JMED against receipt and surrender of the shares of the common stock of Abana.

Accompanying this Prospectus is a form of Letter of Transmittal which may
be used by holders of the common stock of Abana to forward, either in advance
of or subsequent to the Closing Date, certificate(s) representing the shares of
common stock of Abana held of record. HOLDERS OF THE COMMON STOCK OF ABANA
MUST FORWARD AND SURRENDER TO THE EXCHANGE AGENT CERTIFICATE(S) REPRESENTING
ALL SHARES OF SUCH COMMON STOCK IN ORDER TO OBTAIN DELIVERY OF THE SHARES OF
THE COMMON STOCK OF JMED INTO WHICH SUCH SHARES ARE TO BE CONVERTED. Pending
receipt by the Exchange Agent of the certificate(s) representing the shares of
the common stock of Abana to be surrendered and exchanged in the Merger, the
Exchange Agent will hold and not distribute to any holder (i) any cash payment
due such holder in respect of any fractional share interest in Common Stock
of JMED arising from the Merger and (ii) any dividend payable with respect to
the Common Stock of JMED held by the Exchange Agent for delivery to such
holder. Any such cash amounts held for distribution to a former holder of the
common stock of Abana will not bear interest pending delivery.

The shares of the Common Stock of JMED issued upon conversion of the
shares of the common stock of Abana in the Merger will be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of common
stock of Abana.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

GENERAL

The following is a summary description of the material federal income tax
consequences of the Merger to holders of the common stock of Abana. This
summary is not a complete description of all of the consequences of the Merger
and, in particular, may not address federal income tax considerations
applicable to the treatment of a stockholder who, at the Closing Date, (i)
already owns shares of the Common Stock of JMED, (ii) is not a United States
citizen, (iii) is a tax-exempt entity, or (iv) holds shares of the common stock
of Abana as a nominee or representative rather than in his or her individual
capacity. In addition, no information is provided herein with respect to the
tax consequences of the Merger under applicable foreign, state or local laws.
Each holder of the common stock of Abana is urged to consult a tax advisor as
to the specific tax consequences of the transaction to that stockholder. The
following discussion is based on the Code, as in effect on the date of this
Prospectus, without consideration of the particular facts or circumstances of
any holder of shares of the common stock of Abana.

THE MERGER

Abana has received an opinion from Sirote & Permutt, P.C., Birmingham,
Alabama, counsel to Abana, which opinion is included as Appendix A to this
Prospectus. Stockholders are urged to read the opinion and to recognize the
assumptions and limitations set forth therein. The following summary of the
material federal income tax consequences of the Merger to holders of the common
stock of Abana is subject to such assumptions and limitations and is qualified
in its entirety by the matters specifically addressed in the opinion.

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The Merger will constitute a reorganization within the meaning of Section
368 of the Code such that no taxable gain or loss will be recognized by a
holder of the common stock of Abana except with respect to cash, if any, paid
to such holder pursuant to the Merger including cash received in lieu of
fractional share interests or cash received as a result of the exercise of
statutory dissenters' rights. Accordingly, except as to such cash
distributions, gain or loss on the investment in Abana of a holder of common
stock of Abana will generally be deferred until the holder sells the shares of
the Common Stock of JMED to be received in the Merger. The opinion assumes
that the former holders of common stock of Abana will not act in concert to
sell the shares of the Common Stock of JMED received in the Merger and will, in
the aggregate, retain sufficient shares of the Common Stock of JMED to satisfy
any "continuity of interests" test applicable to the Merger.

As no gain or loss will be recognized to holders of the common stock of
Abana upon the surrender, exchange and conversion of their Abana shares for
shares of the Common Stock of JMED, the tax basis of the shares of the Common
Stock of JMED received in the Merger will be the same as the holder's tax basis
in the shares of the common stock of Abana surrendered in exchange therefor.
For tax purposes and provided that the shares of the common stock of Abana were
held as a capital asset on the Closing Date, the holding period of the shares
of the Common Stock of JMED received in the Merger will include the period
during which the shares of the common stock of Abana surrendered in exchange
therefor were held.

The receipt of cash in lieu of a fractional share interest in the Common
Stock of JMED arising from the Merger will be a taxable transaction and,
assuming that the share is held as a capital asset, will constitute a capital
gain. A portion of the holder's basis in the common stock of Abana surrendered
in the Merger will offset or reduce the amount of such gain.

The receipt of cash in lieu of shares of the Common Stock of JMED pursuant
to the exercise of dissenters' rights under the DGCL will be a taxable event
whether the amount of such cash payment is negotiated and agreed with the
Surviving Corporation or results from an appraisal proceeding under Delaware
law. A holder of the common stock of Abana who exercises dissenters' rights
and receives cash for his or her common stock of Abana will be treated as
receiving the cash in redemption of such shares of the common stock of Abana.
Such a dissenting stockholder ordinarily will recognize gain or loss equal to
the difference between the amount of cash received and such stockholder's basis
in the shares of the common stock of Abana deemed redeemed. Such gain or loss
generally will be a capital gain or loss if the shares of the common stock of
Abana were held as a capital asset as of the Closing Date.

THE MERGER MAY HAVE CONSEQUENCES AFFECTING TAXES OTHER THAN THE FEDERAL
INCOME TAX CONSEQUENCES DISCUSSED ABOVE. HOLDERS OF THE COMMON STOCK OF ABANA
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING ALL TAX CONSEQUENCES OF
THE CONSUMMATION OF THE MERGER AS IT RELATES TO THEIR OWN CIRCUMSTANCES UNDER
FEDERAL, STATE AND LOCAL INCOME TAX AND OTHER TAX LAWS.

Neither JMED nor AAC, as the Surviving Corporation and successor to Abana,
will recognize taxable gain or loss in connection with the Merger. For tax
purposes, JMED and the Surviving Corporation will succeed to Abana's tax basis
in the assets of Abana transferred to the Surviving Corporation as a result of
the Merger. Because the Merger is intended to qualify as a "tax-free"
reorganization under the Code, JMED is generally not permitted to increase its
tax basis in the assets acquired to reflect the value of the consideration paid
in the transaction. Such an increase in the tax basis, if available, could be
beneficial to JMED either by reducing recognition of income at the time of sale
or disposition of such assets or by increasing available tax deductions
associated with depreciation or amortization of the value of such assets.

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DISSENTERS' RIGHTS OF APPRAISAL

Under Section 262 of the DGCL ("Section 262"), holders of the common stock
of Abana who do not wish to accept shares of the Common Stock of JMED pursuant
to the terms of the Merger have the right to seek appraisal of the fair value of
their shares of common stock of Abana in the Delaware Court of Chancery.
Section 262 is set forth in its entirety as Appendix B to this Prospectus. The
following discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by reference to Appendix B.
This discussion and Appendix B should be reviewed carefully by any holder who
wishes to exercise statutory appraisal rights or wishes to preserve the right to
do so, since failure to comply with the procedures set forth herein or therein
may result in a loss of such appraisal rights.

NOTICE REQUIREMENTS

A holder of record of the common stock of Abana who desire to exercise his
appraisal rights must satisfy all the following conditions: (1) a written
demand for appraisal of the shares of the common stock of Abana must be
delivered by the holder to the Secretary of Abana within twenty (20) days of
the date upon which the Notice of the adoption of the Merger has been mailed to
such holder, and (2) the holder must continue to hold the shares of common
stock of Abana as to which appraisal is sought and held on the date of making
the demand through the Closing Date, which is the effective date of the Merger.
THE NOTICE AND THIS PROSPECTUS ARE BEING MAILED TO RECORD HOLDERS OF THE
COMMON STOCK OF ABANA BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ON NOVEMBER
23, 1996; ACCORDINGLY, ANY WRITTEN DEMAND FOR APPRAISAL AND EXERCISE OF RIGHTS
UNDER SECTION 262 MUST BE RECEIVED BY THE SECRETARY OF ABANA AT OR BEFORE THE
CLOSE OF BUSINESS ON DECEMBER 13, 1996. Holders of the common stock of
Abana who wish to exercise or preserve their rights to appraisal under Section
262 should mail or deliver their written demands to: Perry N. Cole, Abana
Pharmaceuticals, Inc., P.O. Box 360388, Birmingham, AL 35236.

A written demand for appraisal in accordance with Section 262 will be
sufficient if it reasonably informs Abana of the identity of the holder and
indicates that the holder intends to demand the appraisal of his shares if the
Merger becomes effective under the DGCL. A demand for appraisal must be
executed by or for the holder of record, fully and correctly, as such holder's
name appears on the records of Abana. An authorized agent or representative,
including a fiduciary, may execute the demand for appraisal for a holder of
record; however, the agent must identify the record holder and expressly
disclose the fact that, in exercising the demand, such person is acting as
agent for the holder. Beneficial owners who are not record holders and who
intend to exercise appraisal rights should instruct their record holders to
comply strictly with the statutory requirements with respect to the exercise of
appraisal rights and within the time requirements set forth above.

Under Section 262, Abana or the Surviving Corporation must provide notice
to each holder who has properly given Abana notice of such holder's intent to
exercise or preserve appraisal rights and complied with the requirements of
Section 262 that such appraisal rights will be available to such holder as of
the Closing Date. In the context of the Merger, it is expected that any such
confirming notice will be provided by the Surviving Corporation promptly
following the Closing Date.

POSSIBLE VOLUNTARY RESOLUTION OF DISSENTERS' RIGHTS

Under the terms of the Agreement, the obligations of JMED and AAC to
complete the Merger are conditioned, among other requirements, upon appraisal
rights under Section 262 not being exercised as to more than 56,000 shares of
the common stock of Abana. Accordingly, in the event that Abana receives any
notice from any holder of its common stock of such holder's intention to
exercise appraisal rights under Section 262 either Abana or JMED may elect to
contact such holder prior to the Closing Date and endeavor to negotiate a
mutually agreeable cash settlement with respect to such holder. It is
anticipated that any such settlement would be conditioned upon

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consummation of the Merger and would be in full settlement of all claims of
such holder against Abana and would require the waiver of such holder's rights
under Section 262. In the event that appraisal rights should be asserted with
respect to more than 56,000 shares of the common stock of Abana, the ability to
reach such settlements in advance of the Closing Date could be a factor in any
determination by JMED to waive such condition to its obligations.

APPRAISAL PROCEDURES

Within 120 days after the Closing Date, but not thereafter, either the
Surviving Corporation or any holder who has complied with the requirements of
Section 262 and is entitled to appraisal rights may file a petition in the
Delaware Court of Chancery demanding a determination of the value of the shares
as to which appraisal rights have been asserted (the "Dissenting Stock").

If a petition for appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine which former holders of
the common stock of Abana are entitled to appraisal and thereafter appraise the
"fair value" of the shares held by them exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest, if any, to be paid upon the amount determined to be the
fair value from the Closing Date.

Costs of the appraisal proceeding may be determined by the Delaware Court
of Chancery and taxed upon the parties as the Delaware Court of Chancery deems
equitable in the circumstances. Upon application from a holder of Dissenting
Stock, the Delaware Court of Chancery may order that all or a portion of the
expenses incurred, including, without limitation, reasonable attorneys' fees
and the fees and expenses of experts, be charged pro rata against the value of
all shares entitled to appraisal. In the absence of such a determination,
allocation or assessment, each party bears its own expenses.

If no petition for an appraisal is filed within 120 days after the Closing
Date, holders' rights to appraisal shall cease and all holders of Dissenting
Stock (other than any such holders who have reached a settlement with the
Surviving Corporation regarding the fair cash value of such holders' Dissenting
Stock) shall be entitled to receive the shares of the Common Stock of JMED to
which they would have been entitled in the Merger absent the exercise of
appraisal rights.

Inasmuch as the Surviving Corporation has no obligation to file such a
petition initiating appraisal proceedings, and has no present intention to do
so, any holder of Dissenting Stock who desires such a petition to be filed is
advised to file a petition on a timely basis. Once a petition has been timely
filed in the Delaware Court of Chancery demanding appraisal, the petition
cannot be dismissed as to holder of Dissenting Stock without the approval of
the Delaware Court of Chancery, and such approval may be conditioned upon such
terms as the Delaware Court of Chancery deems just.

ELEMENTS OF "FAIR VALUE"

In determining fair value, the Court of Chancery is to take into account
all relevant factors. In Weinberger v. UOP, Inc., et al., decided February 1,
1983, the Delaware Supreme Court discussed the factors which could be
considered in determining fair value in an appraisal proceeding, stating that
"proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered and that "[f]air price obviously requires consideration of all
relevant factors involving the value of a company." The Delaware Supreme Court
stated that in making a determination of fair value, the court must consider
"market value, asset value, dividends, earnings prospects, the nature of the
enterprise and any other facts which were known or which could be ascertained
as of the date of the merger which throw any light on future prospects of the
merged corporation. . . ." Section 262 provides that fair value is to be
"exclusive of any element of

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value arising from the accomplishment or expectations of the merger." In
Weinberger, the Delaware Supreme Court construed Section 262 to mean that
"elements of future value, including the nature of the enterprise, which are
known or susceptible as of the date of the merger and not the product of
speculation, may be considered."

The fair value of shares of the common stock of Abana as determined under
Section 262 could be more than, the same as or less than the value of the
shares of the Common Stock of JMED issuable in exchange therefor in the Merger.
In any appraisal arising from the Merger, the focus will be on the fair value
of the common stock of Abana and the Surviving Corporation may, among other
arguments, suggest that (i) the value of the shares of the Common Stock of JMED
issuable in the Merger, whether valued as of the date of the Agreement or as of
the Closing Date, includes "elements of value arising from the accomplishment
or expectations of the merger," (ii) any change in the value of the Common
Stock of JMED between the date of the Agreement and the Closing Date is
unrelated to any change in the value of the common stock of Abana apart from
the Merger, and/or (iii) that in the context of the Merger the market price for
the Common Stock of JMED issuable pursuant thereto exceeds the fair value in
cash of the common stock of Abana.

VOLUNTARY WITHDRAWAL OF DISSENTERS' RIGHTS

At any time within 60 days following the Closing Date, any holder of
Dissenting Stock shall have the right to withdraw his demand for appraisal and
to accept the shares of the Common Stock of JMED to which such holder would
have been entitled under the Merger. After this 60 day period, a holder of
Dissenting Stock may withdraw his demand for appraisal only with the consent of
the Surviving Corporation and in lieu of providing such consent the Surviving
Corporation could elect to file a petition to commence appraisal proceedings
before the Delaware Court of Chancery.

OTHER MATTERS

Any holder who has duly demanded an appraisal in compliance with Section
262 will not, after the Closing Date, be entitled to vote shares of the common
stock of Abana for any purpose or be entitled to the payment of dividends or
distributions on those shares.

If any holder who demands appraisal of his common stock of Abana under
Section 262 fails to perfect, or effectively withdraws or loses his right to
appraisal other than by means of a settlement with the Surviving Corporation as
to the fair value in cash of such Dissenting Stock, the shares of such holder
will be converted into shares of the Common Stock of JMED as provided in the
Merger. Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination of such rights. In view of the
complexity of the applicable provisions of the DGCL, holders who are
considering the assertion of rights under Section 262 should consult their
legal advisors. Such holders should also consider the related tax consequences
associated with the exercise of such rights. See "The Merger -Certain Federal
Income Tax Consequences - The Merger."

Until the Closing Date, dissenting holders of the common stock of Abana
should send any communications regarding their rights to Abana,
c/o Perry N. Cole, Abana Pharmaceuticals, Inc., P.O. Box 360388, Birmingham,
AL 35236. After the Closing Date, such holders should send any communications
to JMI-Abana Pharmaceuticals, Inc., c/o Edward A. Chod, Esq., Greensfelder,
Hemker & Gale, P.C., 2000 Equitable Building, 10 South Broadway, St. Louis,
Missouri 63102. All such communications should be signed by or on behalf of
the holder in the form in which the shares are registered on the books of
Abana.

The foregoing summary of Section 262 and its application to the Merger
does not purport to be complete and is qualified in its entirety by reference
to Section 262, a copy of which is included as Appendix B to this Prospectus
and incorporated herein by reference. All holders of the common stock of Abana
are urged to read Section 262 in its entirety.

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BACKGROUND OF THE TRANSACTION

A significant portion of the information appearing in this portion of the
Prospectus has been supplied to JMED by Abana and is included by JMED herein in
reliance upon the representations and warranties of Abana contained in the
Agreement.

PRIOR INVESTMENT BY JMED IN ABANA STOCK

In early 1992, Abana contacted a third party in Chattanooga, Tennessee for
the purpose of seeking assistance in obtaining capital through the sale of
shares of the common stock of Abana to fund its operations. Through this
contract, Abana was introduced to Dennis M. Jones, Chairman of the Board of
JMED. After negotiations between Abana and JMED, Abana and JMED entered into a
Stock Purchase Agreement on June 1, 1992, pursuant to which JMED purchased
362,519 shares of Abana common stock (approximately 16% of the outstanding
shares) for an aggregate investment of $500,000.

Under the Stock Purchase Agreement, JMED was granted certain rights,
including the right to elect one member of the board of directors of Abana and
pre-emptive rights to purchase additional shares of the common stock of Abana
in the event Abana offered additional shares in the future in order to permit
JMED the opportunity to maintain its percentage ownership of the outstanding
shares of such common stock. Mr. Jones was elected to the board of directors
of Abana in June of 1992 and has served on the board since that time.

As a result of JMED's investment in Abana and Mr. Jones' position as a
member of the board of directors of Abana, JMED has been familiar with the
development of Abana's product lines and marketing and sales efforts since
1992. Although JMED and Abana periodically discussed possible sale and
distribution of JMED products through the Abana sales force, such activity did
not develop primarily due to the fact that JMED's pharmaceuticals focused on
the critical care segment of the market, in which marketing efforts were
directed primarily to hospital pharmacies, whereas Abana's pharmaceutical
products were oriented toward generic prescription pharmaceuticals and its
marketing approach was directed primarily toward individual physician
prescribers.

CONSIDERATIONS AND EVENTS LEADING TO THE AGREEMENT

For approximately two years prior to entering the Agreement, Abana
management had considered various alternatives for maximizing shareholder
value and providing liquidity for its shareholders. Approaches considered by
Abana management included a public offering to raise additional capital funds
and permit expansion of its product lines and sales force, as well as possible
"strategic mergers" or alliances with similar firms and the possible sale of
Abana. During the course of these considerations, Mr. Jones indicated to Mr.
Eads on various occasions that JMED would consider a possible merger of Abana
with and into JMED when and if Abana achieved profitability and a satisfactory
level of sales volume and a product mix which appeared compatible with JMED's
other pharmaceutical activities. Although 1995, represented Abana's first year
of profitable operations, that development did not lead to immediate discussions
between JMED and Abana relating to a possible acquisition since the management
of JMED was engaged in other acquisition and financing activities and since the
management of Abana was exploring other alternatives.

PROPOSED TRANSACTION BETWEEN ABANA AND KV PHARMACEUTICAL COMPANY

During the early part of 1996, management of Abana met several times with
management of KV Pharmaceutical Company ("KV"), a manufacturer of
prescription pharmaceuticals. As a result of such discussions, Abana and
Messrs. Eads and Cole entered a letter of intent with KV relating to a proposed
transaction pursuant to which Abana would be acquired by KV in exchange for an
aggregate of approximately 1,000,000 shares of the

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common stock of KV in a transaction intended to qualify as a "tax free"
reorganization and to be accorded "pooling of interests" accounting treatment.
A "pooling of interests" transaction treats combining companies for certain
accounting purposes as if they had been a single company since inception and
avoids the requirement applicable to other business combinations, including the
Merger, that the excess of the purchase or acquisition price over the fair
value of the tangible assets being acquired be recognized as "goodwill" or
other intangibles subject to amortization against future income. Among other
conditions in order to qualify as a "pooling of interests," a transaction must
involve solely an exchange of common stock for common stock and no more than
10% of the shares, including shares held by dissenting shareholders, may be
acquired for cash.

At the time of the letter of intent between Abana and KV, the market value
of the shares of KV to be offered to the Abana stockholders was approximately
$15.75 per share, giving the transaction an indicated market value of
approximately $15,750,000. The proposed transaction included provisions
limiting the maximum value of the shares of KV stock to be issued to
$17,000,000 and creating a minimum value of $14,000,000; however, in the event
that KV was required to issue additional shares of its stock to achieve the
$14,000,000 price, KV (but not Abana) would have been permitted to terminate
its obligation to consummate the transaction if the market price for KV stock
fell below $12.50 per share. Under the terms proposed by KV, each share of the
common stock of Abana would have been converted into a fractional share of KV
stock having a market value between $6.17 and $7.50.

Subsequent to the letter of intent, representatives of KV and management
of Abana continued discussion of the terms of the proposed transaction and
Abana received a draft of a Agreement and Plan of Merger from KV in early
April, 1996.

As a member of the board of directors of Abana, Mr. Jones was provided
with a copy of the letter of intent between KV and Abana and participated in a
telephonic meeting of Abana's board of directors to discuss and authorize
entering into the letter of intent. Mr. Jones abstained from voting in favor
of or against the proposed transaction with KV and advised the other directors
that JMED would be willing to investigate and consider a possible proposal for
acquiring Abana but due to other commitments could not undertake any such
investigation until mid-April, 1996. Although Mr. Jones indicated that he
believed that if JMED determined to make an offer for Abana, such offer would
equal or exceed the terms proposed by KV, he also indicated that there was no
assurance that such an offer would be forthcoming. Mr. Jones also indicated
that in the event that Abana elected to pursue the transaction with KV, JMED
would be willing to agree with Abana and KV not to exercise its dissenter's
rights or to take other action which would cause such transaction to fail to
qualify for "pooling of interests" accounting treatment.

In early April, Mr. Jones and other representatives of JMED met with
management of Abana to review developments in Abana's operations with a view to
determining whether there appeared to be a strategic fit between Abana and JMED
and whether JMED wished to make a counter-offer to Abana in face of the
proposed transaction with KV. As a result of such discussions, JMED determined
not to make an offer at that time. JMED indicated that having recently
acquired domestic marketing rights to Tapazole(R) from Eli Lilly, it believed
that its energies would be focused more appropriately upon sales and marketing
strategies with respect to that product line.

Although management of Abana continued discussions of the terms of the
proposed merger with representatives of KV, they were unable to reach agreement
on certain terms set forth in the draft agreement submitted by KV and, in view
of subsequent developments at KV and a decline in the price of the KV stock
below the $12.50 level, the proposed transaction between Abana and KV was
abandoned in May, 1996. As of November 1, 1996, the market price for the
common stock of KV as reported on the American Stock Exchange was approximately
$11.75 per share.

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DISCUSSIONS AND NEGOTIATIONS LEADING TO THE AGREEMENT

In July, 1996, JMED entered into the agreements relating to the Daniels
Acquisition pursuant to which JMED would, inter alia, acquire ownership,
manufacturing and marketing rights to Levoxyl(TM). Tapazole(R) and Levoxyl(TM)
are, respectively, pharmaceuticals used in the treatment of hyperthyroidism and
hypothyroidism and the marketing efforts for both such products are focused
primarily upon individual endocrinologists and other prescribing physicians
rather than toward hospital pharmacies. In reviewing alternative strategies
for increasing its sales force to promote sales of these products, which in the
aggregate are expected to account for approximately 25% of JMED's 1996 sales
revenues, JMED believed that the physician-oriented marketing approach of
Abana's sales force was significantly more attractive than was the case during
prior discussions between the companies.

On August 20, 1996, Mr. Eads was contacted by Mr. Jones by telephone to
determine whether Abana was interested in exploring the possibility of the
acquisition of Abana by JMED. Abana management was receptive to the
preliminary discussion with Mr. Jones and several discussions followed. Abana
management believed that the preliminary terms offered by JMED could form the
basis of an acceptable transaction. Mr. Jones and other JMED representatives
met with Abana management on August 25, 1996, in Birmingham, Alabama, to
discuss the specifics of the JMED proposal. Abana management indicated its
willingness to entertain a written offer from JMED based on the terms discussed
during this meeting.

On September 10, 1996, JMED delivered a letter to Mr. Eads, proposing the
acquisition of Abana by JMED pursuant to a merger of Abana with and into AAC, a
to be formed wholly-owned subsidiary of JMED, in exchange for shares of classes
of preferred stock of JMED, convertible into common stock at future dates.
Under the terms of this proposal, holders of fewer than 5,000 shares of the
common stock of Abana would have received cash in the amount of $7.65 per share
and those holding 5,000 or more shares of common stock of Abana would have
received, for each 5,000 shares of Abana held, a package of preferred stocks
convertible into between 900 and 1,125 shares of JMED Common Stock with the
number of shares to be determined in part based upon the operations of Abana
during 1997. This structure was intended, in part, to allow the proposed
transaction to be accomplished as a so-called "private placement" in order to
avoid delays between the signing and closing of the transaction arising from
the need to register the shares of JMED under the Securities Act of 1933.

JMED delivered a draft of the definitive Agreement on or about September
19, 1996, and the parties commenced negotiations of the specific terms of the
Merger. Although the Principal Holders and Abana were receptive to the terms
and structure proposed, discussion continued between Abana and JMED
particularly with a view to increasing the number and level at which holders of
Abana's common stock would receive JMED securities rather than cash. Although
the proposed $7.65 cash per share of common stock of Abana was roughly
equivalent to the approximately $35 price per JMED share applicable at the time
the preliminary understandings between Abana and JMED had been reached,
subsequent increases in the market price for the Common Stock of JMED gave rise
to concerns that the apparent disparity between the cash price and the number of
shares of Common Stock of JMED potentially to be received by Abana's larger
shareholders upon conversion of the proposed preferred stock might lead to a
challenge to the transaction.

As a result of numerous discussions between JMED management and Abana
management and their respective legal counsel, and after exploring various
restructuring alternatives, JMED revised its offer on October 7, 1996, to
provide for a merger in which JMED would issue 0.22 shares of its Common Stock
in exchange for each share of the common stock of Abana. JMED's willingness to
revise the terms in this manner was conditioned in part upon the willingness of
the Principal Holders, as the holders of more than a majority of the
outstanding common stock of Abana, to approve and adopt the proposed merger by
written consent, thereby reducing any risk to JMED that the transaction would
not be consummated. In connection with the revised offer, JMED also requested
that the Principal Holders accept certain proposed indemnification and escrow
arrangements and that the Principal Holders agree to enter non-competition
agreements. In transmitting its revised offer, JMED indicated that it was
unwilling

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to incur the additional costs of implementing the transaction as restructured
unless Abana and the Principal Holders completed, as of the date of the
Agreement, all necessary corporation authorizations to give effect to the
Merger in a manner that would not require further action by the holders of the
common stock of Abana.

Abana's Management and the Principal Holders indicated their willingness
to accept JMED's revised proposal, and Abana management and JMED management
proceeded to negotiate the definitive terms of the Agreement following JMED's
submission of a revised draft agreement on October 10, 1996.

The Abana board of directors met on October 23, 1996, to review and
discuss the Agreement. The Abana board considered the specific terms of the
definitive Agreement and the effect of the Merger on the Abana stockholders. A
form of the definitive Agreement was reviewed by the Abana board. After
discussing the terms of the JMED offer and reviewing the form of the Agreement,
the Abana board voted unanimously, with Mr. Jones abstaining, to approve the
Agreement and the transactions contemplated therein, including the Merger. The
Board of Directors of JMED approved the Agreement on November 6, 1996.

REASONS FOR THE TRANSACTION

Abana and the Principal Holders believe that the transaction provides both
significant liquidity and significant shareholder value and return to the
holders of common stock of Abana and that the operations of Abana will benefit
from the availability of JMED's pharmaceutical product lines. JMED believes
that the addition of Abana's sales force will significantly enhance its ability
to develop marketing efforts for its current physician-oriented products and
that the addition of Abana's existing product lines complement JMED's existing
product lines and provide opportunities for further growth and product
development.

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THE AGREEMENT

The following is a brief summary of the material provisions of the
Agreement and certain exhibits thereto. This description does not purport to
be complete and is qualified in its entirety by reference to the Agreement
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. A copy of this Agreement is available for inspection at
the offices of Abana and will be provided upon request to any holder of the
common stock of Abana. See "Incorporation of Certain Documents by Reference."

GENERAL

The Agreement provides that, upon the satisfaction or waiver of certain
conditions, Abana will be merged with and into AAC, AAC will continue as the
Surviving Corporation and a wholly-owned subsidiary of JMED under the name
"JMI-Abana Pharmaceuticals, Inc.," and the separate existence of Abana will
cease. Pursuant to the Agreement, at the effective time of the Merger on the
Closing Date, among other things, each outstanding share of the common stock of
Abana will be converted into the right to receive 0.22 share of the Common
Stock of JMED; provided, however, that (i) shares of the common stock of Abana
held in its treasury or held, directly or indirectly by JMED, will not be so
converted but will be retired and canceled and (ii) shares of the common stock
of Abana which constitutes Dissenting Stock will be converted into the right to
receive the "fair value" thereof in cash or as otherwise determined in
accordance with Section 262 of the DGCL. See "The Merger - Effects of the
Merger" and "The Merger - Dissenters' Rights of Appraisal."

Based upon the aggregate of 2,274,213 shares of the common stock of Abana
outstanding as of the date of the Agreement, reduced by the 362,519 such shares
beneficially owned by JMED, it is expected that JMED will issue an aggregate of
420,572 shares of the Common Stock of JMED pursuant to the Merger subject to
such reductions in number of such shares as may arise from the settlement of
fractional share interests or from Dissenting Stock, if any. In addition,
based on the options to acquire shares of the common stock of Abana outstanding
on the date of the Agreement, options to acquire an aggregate of 40,070 shares
of the Common Stock of JMED are to be issued pursuant to the Merger.

The Principal Holders joined with JMED and Abana as parties to the
Agreement to confirm, as of the date of the Agreement, their irrevocable
intention (i) to be bound by the terms of the Merger and to deliver the related
indemnification and non-competition agreements as contemplated by the
Agreement, (ii) to cause Abana to take all necessary and appropriate action to
meet the conditions to the obligations of JMED under the Agreement, and (iii)
to adopt and approve the Agreement and the Merger by written consent as holders
of a majority of the common stock of Abana. See "Background of the Transaction
- - Discussions and Negotiations Leading to the Agreement."

CERTAIN REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains various representations and warranties made
by JMED and, jointly and severally, by Abana and the Principal Holders. The
representations and warranties contained in the Agreement are subject, in
certain cases, to specified exceptions. Each of the representations and
warranties is represented as being true as of the date of the Agreement and to
be true as of the Closing Date. The representations made by Abana expire as of
the Closing Date. The representations made by JMED survive the Closing Date
for a period of three years.

Representations and warranties relating to the following matters have been
made with respect to each of JMED and Abana: (i) their respective due
organization, corporate power, good standing and related matters; (ii) their
respective capital structures; (iii) receipt of necessary corporate authority
with respect to the transactions contemplated by the Agreement; (iv) the
respective financial statements referenced in the Agreement; (v) the absence of
any conflict with their respective corporate charters and by-laws, applicable
law or with certain contracts; (vi) representations intended to confirm the
absence of conditions which would prevent the Merger from qualifying as

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a tax-free reorganization under the Code; and (vi) the accuracy of certain
information provided in or pursuant to the Agreement.

JMED has made certain additional representations and warranties to Abana
relating, among other things, to (i) the authorization and validity of the
shares of the Common Stock of JMED to be issued in the Merger, (ii) the
organization, capitalization and ownership of AAC prior to the Closing Date,
and (iii) the eligibility and absence of impediments for certain filings by
JMED under the Securities Act.

Abana and the Principal Holders have made certain additional
representations to JMED relating to, among other things, the following matters:
(i) Abana's shareholders and related parties, (ii) filings and payments with
respect to certain tax matters, (iii) material contracts, (iv) the absence of
certain conduct, whether or not in the ordinary course of business, since
December 31, 1995, (v) litigation matters affecting Abana, (vi) possession of
certain licenses or other authorizations and compliance with applicable laws,
(vii) products manufactured by or produced for Abana, (viii) title to
properties, (ix) employee benefit matters, (x) intellectual property, (xi)
insurance, (xi) customers and supplemental financial information, (xii)
employees and employee relations matters, (xiii) environmental matters, and
(xiv) to the effect that Abana is an operating company and not an "investment
company" under the Code or federal securities laws.

CERTAIN COVENANTS

Abana has agreed to provide JMED access to its books, records and
properties and to provide information to JMED necessary to enable JMED to
prepare and complete any applicable statement or filing in respect of the
transactions contemplated by the Agreement, including the Registration
Statement of which this Prospectus is a part.

Abana and the Principal Holders have agreed to use their best efforts to
take or cause to be taken all actions necessary, proper or advisable to
consummate the Merger and the transactions contemplated by the Agreement.
Abana has further agreed to use its best efforts to maintain its properties and
business organization and to perform and comply with its obligations and duties
under contract or under applicable laws, rules, regulations and governmental
authority.

Abana has agreed pending the Closing Date not to take action, including
the making of certain payments or the entering or amending of certain
contracts, without prior written consent or authorization from JMED. Abana has
also agreed to provide JMED with prompt notice of events or issues which may
have an impact on the assets, financial condition, products or operations of
Abana either pending or following the Closing Date.

JMED has agreed not to take action which would interfere with its ability
to perform its obligations under the Agreement. JMED has also (i) agreed to
cause the filing of the Registration Statement of which this Prospectus is a
part and to cause such Registration Statement to become effective as promptly
as practicable thereafter and (ii) agreed to effect certain future filings
under the Securities Act and under the Exchange Act relating, directly or
indirectly, to the shares of the Common Stock of JMED to be received by the
Principal Holders pursuant to the Merger. See "The Merger - Resales of Shares
of the Common Stock of JMED Received in the Merger - Principal Holders." In
connection with registration statements filed under the Securities Act relating
to the Agreement or on behalf of the Principal Holders, JMED has agreed to
indemnify and hold the Principal Holders harmless against certain loss, claims,
damage or expense.

INCONSISTENT ACTIVITIES

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merger of Abana or the sale of the capital stock of Abana or the assets of
Abana to a person other than JMED or a subsidiary of JMED.

CONDITIONS TO THE MERGER

The obligations of JMED, AAC and Abana to consummate the Merger and
related transactions in accordance with the Agreement are subject to the
satisfaction of certain conditions (any or all of which may be waived by the
party whose obligations are conditioned thereon). Each party's obligations are
conditioned upon (i) the accuracy, as of the date of the Agreement and as of
the Closing Date, of the other party's representations and warranties set forth
in the Agreement, (ii) the performance by other parties to the Agreement of
covenants applicable during the period between the date of the Agreement and
the Closing Date, (iii) the absence of litigation or proceedings seeking to
prevent the Merger or which involves a risk of a material adverse change in the
condition, financial or otherwise of the other party, (iv) the receipt of
satisfactory opinions of counsel as to certain matters; and (v) the
transactions contemplated by the Agreement not giving rise to certain rights
under the Abana Stockholders' Agreement. In addition, the obligations of JMED
and AAC are conditioned upon (a) the receipt of any necessary regulatory
approval, consent or authorization (including the effectiveness of the
Registration Statement of which this Prospectus is a part), (b) the delivery at
Closing by the Principal Holders of the indemnification and escrow agreement
and the non-competition agreements which constitute exhibits to the Agreement
and (c) the non-exercise of dissenters' appraisal rights under the DGCL in
excess of 56,000 shares of the common stock of Abana.

CLOSING AND EFFECTIVENESS

It is expected that the Closing under the Agreement will occur, and the
Merger will become effective under the DGCL, on December 31, 1996 or as
promptly thereafter as practicable (the "Closing Date"), subject to the
satisfaction or waiver of the conditions to the Merger. The Agreement provides
that in the event of a closing date and effectiveness of the Merger as of a
date subsequent to December 31, 1996, the transactions will be deemed to be
effective for accounting, financial reporting purposes and tax purposes as of
the close of business on the last day of the calendar month preceding the month
in which the closing occurs. Accordingly, if the closing occurs as of any date
between December 31, 1996 through January 31, 1997, it will nevertheless be
reflected for such purposes as effective on December 31, 1996.

TERMINATION OF THE AGREEMENT; AMENDMENT

AGREEMENTS OF PRINCIPAL HOLDERS

In addition to being parties to the Agreement for purposes of adopting the
Merger by their written consent and joining in certain covenants,
representations and warranties of Abana contained in the Agreement, the
Principal Holders have agreed to deliver certain supplemental agreements to
JMED on the Closing Date.

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ESCROW AND INDEMNIFICATION

The Principal Holders have agreed to indemnify and hold JMED harmless from
and against certain claims, loss, damage or expense as a result of any breach
or failure of the representations of Abana set forth in the Agreement or any
failure of Abana to observe and perform its covenants pending Closing under the
Agreement. Such indemnification is to be secured by, and limited to, the
deposit in escrow on the Closing Date by the Principal Holders of an aggregate
of 60,000 shares of the Common Stock of JMED being received by them in the
Merger. On March 31, 1998, the number of shares held in escrow (and therefore
the exposure of the Principal Holders in respect of the indemnification
provided to JMED) will be reduced to an aggregate of 10,000 shares of the
Common Stock of JMED plus such additional number of shares of the Common Stock
of JMED, if any, as may be needed in respect of indemnification claims pending,
but not resolved, as of March 31, 1998. The indemnification and escrow
expires, other than as to pending claims, on September 15, 1999.

The Indemnification and Escrow Agreement provides that JMED will not be
entitled to indemnification unless and until the aggregate of all claims as to
which indemnification is otherwise applicable exceeds $50,000. The Escrow and
Indemnification Agreement further provides that (i) in the event that prior to
the Closing Date there is discovered a breach or failure of a representation or
warranty of Abana or the failure of Abana to comply with or perform a covenant
such that the conditions to the obligations of JMED to consummate the
transactions contemplated by the Agreement would not be fulfilled, and (ii) in
the further event that JMED is willing to waive such breach or failure, then
the claim of JMED pursuant to the Escrow and Indemnification Agreement shall be
limited to 60% of the total loss, claim, damage or expense incurred by JMED or
the Surviving Corporation as a result of such breach or failure.

Holders of the common stock of Abana other than the Principal Holders are
not required to provide indemnification to JMED or to escrow any shares of the
Common Stock of JMED received pursuant to the Merger.

NON-COMPETITION AGREEMENT

As an inducement to JMED to enter the Agreement and as a condition to
JMED's obligations thereunder, each Principal Holder has agreed to deliver to
JMED on the Closing Date a Non-Competition Agreement in which such Principal
Holder agrees, except as provided therein, (a) not to reveal Confidential
Information, as defined therein, relating to methods of operation, proprietary
information, intellectual property and trade secrets, (b) at any time during
the five years following the Closing Date or while employed by JMED or any
subsidiary of JMED, or within two years thereafter not (i) to solicit for his
own behalf or on behalf of or in conjunction with any other person, any
employees, agents, contractors or consultants to Abana or JMED, or (ii) to
engage in a business competitive with manufacturing, marketing or sale of
pharmaceutical products similar to or competitive with the therapeutic
categories of products marketed by Abana or JMED and (c) not to engage in
activity intended to take away or divert business from Abana or JMED as to any
customer of (i) Abana during the two years prior to the Closing Date or (ii)
JMED or any of its subsidiaries at any time after the Closing Date at a time
when such Principal Holder is employed by JMED or any of its subsidiaries.

No additional consideration is due or payable to the Principal Holders in
connection with the delivery of the Non-Competition Agreements.

FEES AND EXPENSES

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CERTAIN INFORMATION CONCERNING JMED

The following summary information with respect to the business of JMED is
intended to provide a general background concerning the Company, the markets
within which it operates, the Company's business strategy and principal
products and significant developments in the current year. The information
presented below with respect to JMED reflects the restatement of its financial
statements arising from the Daniels Acquisition accounts for a pooling of
interests but does not include other material information concerning the
Company's operations and management as set forth in filings under the Exchange
Act which are incorporated in this Prospectus by reference. See "Available
Information" and "Incorporation of Certain Documents by Reference." See also
"Investment Considerations and Risk Factors" elsewhere in this Prospectus for
additional information on factors affecting JMED's operations and financial
condition.

GENERAL

The Company is engaged in the marketing, distribution and manufacture of
pharmaceuticals and nutritional supplements. Founded in 1981, the Company
currently distributes approximately 160 branded pharmaceuticals and
approximately 375 branded nutritional supplements under its own trademarks and
tradenames. The Company manufactures pharmaceuticals at its facilities in
Canton, Ohio, Middleton, Wisconsin, St. Petersburg, Florida, and St. Louis,
Missouri and manufactures nutritional supplements at its facilities in Tempe,
Arizona. The Company also utilizes manufacturing capacity as a contract
manufacturer of pharmaceuticals and nutritional supplements for distribution
and sale by others under their labels and tradenames. During 1995, sales of
pharmaceuticals and nutritional supplements accounted for approximately 59% and
41%, respectively, of the Company's total sales, as restated to reflect the
acquisition of Galen Drugs of Florida, Inc. (the "Daniels Acquisition") in a
pooling of interests transaction.

INDUSTRY BACKGROUND

THE UNITED STATES PHARMACEUTICAL MARKET

The annual domestic market for pharmaceuticals has estimated sales in
excess of $60 billion. While the market is dominated by large multinational
firms which conduct substantial research and development on new drugs, it is
estimated that, within the domestic market, approximately 40% of sales are
derived from individual pharmaceuticals and product lines, each of which
generate less than $50 million of revenues annually. Industry consolidation
and pricing pressures from cost containment initiatives have raised the
threshold level of sales necessary for an individual product to justify active
domestic marketing and promotion from a major pharmaceutical producer. In
addition, major pharmaceutical companies have focused their marketing efforts
on new drugs in order to recover development costs. As a result, sales of
established pharmaceuticals may decline or become focused on a particular
market niche. Further, pricing and profit pressures are leading the major
pharmaceutical companies to consider divestitures of small product lines as a
more effective means of harvesting cash flow from products which are not
strategically important. While most of these products are no longer subject to
patent protection, the cost of establishing manufacturing may prove excessive,
raw materials may be difficult to obtain or the market size may be too small to
warrant competition from generic drug suppliers.

The result of the foregoing factors influencing the major pharmaceutical
companies has been the emergence of marketing-oriented niche pharmaceutical
companies willing to acquire and market established product lines. Products
which are perceived as having potential for acquisition by these emerging
pharmaceutical companies are those which share several, but not necessarily
all, of the following characteristics: (i) products which no longer fit the
strategic focus of the divesting company; (ii) products with annual sales in
the range of $1-$50 million; (iii) products which receive minimal promotion
from the divesting company but compete in promotion sensitive markets; (iv)
products which have stagnant or slowly declining sales in the hands of the
divesting company; (v) products which have sales levels that are less likely to
become targets of pricing pressure from managed care or third-party

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payors, or which have a clear price advantage over alternative treatments; and
(vi) products which can be leveraged with the existing sales force and
marketing efforts of the acquiring company.

THE UNITED STATES MARKET FOR NUTRITIONAL SUPPLEMENTS

Based on industry sources, the annual retail market for nutritional
supplements, including vitamins, minerals and herbal extracts, currently
exceeds $4.5 billion. The market has historically expanded due to increasing
consumer awareness of the health benefits of nutritional supplements and to the
increase in the elderly population. An important factor in the increased
awareness of benefits from nutritional supplements is the increased attention
and importance being given to nutritional supplements by health care and
dietary professionals.

BUSINESS STRATEGY

The Company's business strategy is to acquire speciality product lines or
operations that complement or expand the marketing or distribution of existing
product lines and to develop and apply marketing initiatives to such products.
The key elements of the Company's strategy include:

Acquire and Build Market Share in Specialty Pharmaceuticals. Since
inception, the Company has purchased domestic rights to certain specialty
pharmaceuticals addressing markets such as hemostasis and anesthesia. The
Company intends to continue to seek the rights to products that it believes can
benefit from a focused marketing effort.

Leverage Established Pharmaceutical Marketing and Sales Efforts. The
Company intends to maximize productivity of its sales force through replacement
of existing, lower-volume products with new, larger market opportunities. In
addition, the Company intends to raise the awareness of selected products
through targeted sales efforts focused on physicians, hospital pharmacists and
other health care professionals in the United States.

Expand Marketing Initiative for Nutritional Supplements to Health Care
Professionals. Since the Company acquired Bronson Pharmaceutical in early
1993, monthly orders have grown from 26,000 to 29,000, and the average order
has grown from $43 to $64. The Company intends to continue to expand its
marketing efforts for nutritional supplements by focusing on developing
recommendations and referrals to consumers through health care professionals
and introducing new products to its existing customer base.

Improve Margins Through Focus on High Margin Products and Cost Control.
Through efficient utilization of sales personnel, minimizing corporate overhead
and focusing on high margin products, the Company intends to increase gross and
operating margins. By focusing on a limited number of products, the Company
believes it can increase sales by maximizing the productivity of its sales
force and controlling overhead costs.

PRINCIPAL PRODUCTS AND PRODUCT LINES

1996 ACQUISITIONS OF THYROID TREATMENT PHARMACEUTICALS

Acquisition of the Rights to Tapazole(R). On March 18, 1996, the Company
acquired from Eli Lilly and Company ("Lilly") the exclusive perpetual domestic
right to market and distribute Tapazole(R) (methimazole, USP) in the United
States. The Company also entered into a 10-year manufacturing agreement with
Lilly pursuant to which Lilly will continue to manufacture Tapazole for the
Company. Tapazole(R) is an anti-thyroid product used for the

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treatment of hyperthyroidism; the extreme form of hyperthyroidism is commonly
known as Graves' Disease. Tapazole(R) is prescribed to inhibit the synthesis
of thyroid hormones and to reduce the size of the goiter (an abnormal growth
resulting from overactivity of the thyroid gland). Although the Company is not
aware of any generic forms of Tapazole(R) in the marketplace, Tapazole(R) faces
competition from the generic pharmaceutical, propylthiouracil ("PTU"). PTU is
sold by Lederle Labs, a division of American Cyanamid Company, which has
greater financial resources than the Company, and by a number of other
independent generic pharmaceutical companies. From the date of acquisition on
March 18, 1996 through September 30, 1996, the Company had net sales of $8.4
million relating to Tapazole(R), equal to 11% of the Company's sales for the
nine months ended September 30, 1996.

The Daniels Acquisition. On August 30, 1996, the Company acquired Galen
Drugs of Florida, Inc. and its principal operating subsidiary, Daniels
Pharmaceuticals, Inc. ("Daniels"). Daniels is a St. Petersburg, Florida,
based manufacturer and marketer of prescription pharmaceutical products.
Daniels' principal product is Levoxyl(TM), a synthetic thyroid hormone for the
treatment of hypothyroidism. Levoxyl(TM) is reported to be the second most
widely prescribed brand of levothyroxine in the United States, within a $300
million domestic market dominated by Synthroid(R) which is manufactured by
Knoll Pharmaceutical Company, a subsidiary of Boots PLC, which has
substantially greater sales, marketing and financial resources than the
Company. Daniels sales of Levoxyl(TM) during 1995 were $14.6 million,
approximately 10.9% of the Company's 1995 sales as restated to reflect the
pooling of interests. During the nine months ended September 30, 1996, sales
of Levoxyl(TM) were $9.8 million, or approximately 13% of the Company's reported
sales for that period as restated to reflect the pooling of interests.

CRITICAL CARE PHARMACEUTICALS

Prior to the 1996 acquisitions, the Company's principal branded
pharmaceuticals primarily served the critical care segment of the health care
industry and were as follows:

Thrombin-JMI and Thrombinar. Rapid, reliable hemostasis is an important
part of any surgical procedure. Surgeons may use gauze pads, sponges or
pressure bandages to achieve hemostasis or they may use topical hemostatic
agents to achieve a more rapid, complete hemostatic state. The U.S. market for
topical hemostatic products was more than $80 million in 1995. Less active
hemostatic agents such as Gelfoam and Surgicel are slower acting and should be
removed prior to closure, sometimes causing recurrence of bleeding. The
Company's products, Thrombin-JMI and Thrombinar are highly purified forms of
thrombin, derived from bovine blood, and can produce rapid hemostasis. Other
forms of topical bovine thrombin are non-purified products. The Company's
purified products, Thrombin-JMI and Thrombinar do not require removal prior to
closure and thus do not interfere with the natural healing process.
Thrombin-JMI and Thrombinar may also be applied with a spray apparatus for
direct application in liquid form. Thrombin-JMI was introduced in 1995 and
does not require refrigeration to maintain a two year shelf life. The
predecessor product, Thrombinar, was initially introduced by Armour in 1981,
and all domestic rights to the product were acquired by the Company in 1989.
The Company's branded thrombin products accounted for 19.5% of total Company
sales, 13.8% of the topical hemostatic market sales and 50.4% of the topical
bovine thrombin market sales in 1995. Thrombin-JMI is manufactured at the
Company's wholly-owned subsidiary, GenTrac, Inc. ("GenTrac"). Thrombinar was
produced for the Company under a contract with Armour which expired in
September 1995 and is being replaced by the Thrombin-JMI product line.

Brevital Sodium. Rapid, short-acting anesthesia is required when
performing short term procedures such as dental surgery, cardioversion and
electroconvulsive therapy. When inducing anesthesia, it is desirable to use an
anesthetic agent that has a rapid onset of action. I.V. anesthetic agents
generated industry-wide revenues of $500 million in 1994. Several I.V.
anesthetic agents are currently marketed for induction of anesthesia and for
general anesthesia with most agents causing varying degrees of side effects
such as nausea, headaches and muscle hyperactivity. The Company's product,
Brevital Sodium, is a rapid, ultrashort-acting intravenous anesthetic agent
used by anesthesiologists and other trained medical personnel to induce and
maintain anesthesia. The rapid onset of action and rapid recovery time
associated with Brevital Sodium make it suitable for short therapeutic and

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diagnostic procedures. Brevital Sodium was introduced by Lilly in 1961 and the
domestic rights thereto were licensed to the Company in August 1995. Brevital
Sodium is marketed by the Company under license from Lilly granting the Company
exclusive U.S. marketing rights in perpetuity. Brevital Sodium accounted for
3.2% of the Company's total sales in 1995 and 7% of the Company's total sales
for the nine months ended September 30, 1996.

OTHER PHARMACEUTICALS

The Company also manufactures and distributes other critical care products
and branded pharmaceuticals under numerous trademarks and tradenames, the most
prominent of which are Liqui-Char, a toxin antidote, Therevac, a mini-enema for
rehabilitation therapy, Derma-Scrub, an antimicrobial scrub, and Thyroid Strong
and Westhroid thyroid replacements. As a result of the Daniels Acquisition,
the Company also manufactures and distributes a line of levothyroxine and other
pharmaceuticals for veterinary use. Combined, all other pharmaceutical
products accounted for 20% of the Company's total sales in 1995.

NUTRITIONAL SUPPLEMENTS

The Company's principal nutritional supplement product lines accounted for
40.7% of the Company's total sales in 1995. The Company's branded nutritional
supplement products represented 33.6% of sales in 1995 and are marketed under
the Bronson and MD Pharmaceutical tradenames.

Bronson. The Bronson product line consists of over 260 branded vitamin,
mineral and herbal extract formulations. The products include multiple
vitamins, mineral formulations, individual vitamins, antioxidants, herbal
formulations and personal care products. The Bronson Pharmaceutical product
line accounted for 27.1% of the Company's total sales in 1995.

MD Pharmaceutical. These multiple vitamins, mineral formulations,
individual vitamins and antioxidants are sold exclusively through military base
retail outlets and accounted for 4.5% of the Company's total sales in 1995.

COMPETITION

The manufacture and sale of pharmaceuticals is highly competitive. Many
of the Company's competitors are large well-known pharmaceutical, chemical and
health care companies which have considerably greater financial, sales,
marketing and technical resources than those of the Company. Additionally,
many of the Company's present and potential competitors have research and
development capabilities that may allow such competitors to develop new or
improved products that may compete with the Company's products. The
pharmaceutical industry is characterized by rapid product development and
technical change. The Company's pharmaceuticals could be rendered obsolete or
uneconomical by the development of new pharmaceuticals to treat the conditions
addressed by the Company's products or as the result of either technological
advances affecting the cost of production of marketing or pricing action by
one or more of the Company's competitors. The Company's business, financial
condition and results of operations could be materially and adversely affected
by any one or more of such developments. See "Investment Considerations and
Risk Factors."

The market for nutritional supplements is characterized by extensive
competition, frequent new product introductions, short product life cycles and
changing customer preferences. The Company is subject to competition with the
retail market for nutritional supplements as well as the mass-market direct
mail industry, both of which offer products similar to the products offered by
the Company, and there can be no assurance that the targeted direct market
approach utilized by the Company will remain as a viable alternative within the
industry or that other competitors may not enter the targeted direct mail
market utilizing approaches similar to those employed by the Company. Many of
the Company's existing and potential competitors in the nutritional supplements
market have greater financial, marketing and research capabilities than the
Company.

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CERTAIN INFORMATION CONCERNING ABANA

The following information with respect to Abana's business, operations,
management and principal shareholders has been furnished by Abana to JMED in
accordance with the terms of the Agreement and is included in this Prospectus
by JMED in reliance upon the representations and warranties of Abana contained
in the Agreement.

BUSINESS

Abana, formed in 1988, is engaged in the marketing, distribution and sale
of branded generic pharmaceutical products sold as prescription drugs.
Abana's primary area of operations is in the southeastern and south-central
United States, where it markets its products through a network of trained
medical sales representatives. Abana currently distributes seven branded
generic pharmaceuticals under its own trademarks and trade names. Abana holds
licenses from the Drug Enforcement Agency (the "DEA"), the Food and Drug
Administration (the "FDA") and in numerous states to distribute drugs.

Abana is a distributor of its own brand name prescription pharmaceutical
products. Abana's customers are drug wholesale companies, which distribute the
products to retail pharmacies. Abana's sales representatives make sales
presentations and sample the products directly to the prescribing physicians.
Abana's product line is now categorized in three distinct areas: analgesics;
cough and cold products; and weight control products.

Although Abana manufactured some of its pharmaceutical products in the
past, currently all of Abana's products are manufactured by independent
pharmaceutical manufacturers. This enables Abana to concentrate exclusively on
its main goal of building a national distribution network, and eliminates the
capital needs of manufacturing.

Abana's principal office address is 1 Chase Corporate Drive, Suite 260,
Birmingham, Alabama 35244, and its telephone number is (205) 988-4588. Abana's
mailing address is Post Office Box 360388, Birmingham, Alabama 35236.

THE MARKET FOR BRANDED GENERIC PHARMACEUTICALS

Pharmaceutical manufacturers who engage in research and development
activities and the introduction of new drug formulations are permitted to
obtain patents and thereby obtain exclusive rights to the production and
marketing of such new drugs for a period of time extending beyond FDA approval
of the drug. Such patent protection allows manufacturers to recover research
and development costs associated with new drug products by affording a period
of time during which the product formulation is not subject to price
competition from other manufacturers or distributors.

The patent protection available for new drug formulations has expired with
respect to the overwhelming majority of prescription pharmaceuticals available
in the Untied States. Pharmaceutical products as to which patent protection
has expired are subject to replication by other pharmaceutical companies and
may be offered as generic products. If the pharmaceutical to be offered as a
generic product was the subject of a New Drug Application ("NDA") filed with
the FDA, generic replications of the drug are generally required to be the
subject of an Abbreviated New Drug Application ("ANDA") subject to approval by
the FDA prior to the commencement of marketing. Pharmaceutical products which
were originally introduced prior to the FDA's requirement for NDA authorization
and approval, either as a result of exemption or "grandfather" status, are
generally not subject to ANDA filings and approval prior to replication and
introduction to the market.

29
<PAGE> 47

Generic replications of pharmaceuticals may be offered either as "true
generics," which are marketed to pharmacies under chemical names without brand
identification, or as "branded generic pharmaceuticals." When generic
replications are available, physicians issuing prescriptions for patients may
elect to prescribe the original branded pharmaceutical formulation or a branded
generic equivalent and, in either event, may authorize substitution of a
non-branded generic equivalent product. Cost consciousness and concerns within
the health care industry generally, and medical insurance and reimbursement
policies and practices in particular, increasingly favor use of generic
pharmaceutical formulations when available.

Branded generic pharmaceuticals generally carry significantly lower prices
than the original branded formulation, but higher prices than "true generics"
which have significantly lower marketing and distribution costs. Accordingly,
branded generic pharmaceuticals, such as those marketed by Abana, are sensitive
to price competition not only from comparable branded generic products but also
to possible price reductions or marketing initiatives from the producer of the
original branded pharmaceutical formulation and to the possible availability of
"true generic" alternatives. Pharmacies often select "true generic"
pharmaceutical equivalents solely on the basis of price and immediate
availability and, therefore, "true generic" equivalents may differ from one
another in appearance, ease of use and, as to certain formulations, taste or
odor.

Unlike "true generics," branded generic pharmaceuticals are perceived as
offering a more consistent and reliable replication and pharmaceutical
equivalent to the original product. Accordingly, the ability successfully to
market and promote branded generic pharmaceuticals relies heavily on the
ability of the marketer in establishing not only a satisfactory replication of
the original branded pharmaceutical but also in establishing brand recognition
and a reputation for consistency of product.

ABANA'S BUSINESS STRATEGIES

Abana's principal business strategies are to develop a national
pharmaceutical distribution network, to acquire and develop additional
pharmaceutical products that complement Abana's existing products in its
therapeutic categories, and to increase net sales through an expansion of its
pharmaceutical sales representatives and an increase in the sales volume of its
products. The key elements of Abana's strategies include:

Acquire and Develop Additional Products. Abana has sought to acquire or
replicate and to develop branded generic pharmaceutical products which
complement its existing product lines and which have broad marketing potential
while facing only limited competition from "true generic" product equivalents.

Expand Sales Force. Abana markets its products primarily through its
network of trained sales representatives, utilizing the "pull-through"
marketing strategy. This strategy involves Abana's sales representatives
calling on physicians and persuading the physicians to prescribe Abana's
products. By increasing the demand for its products through increased
prescriptions, wholesale drug companies order increased levels of Abana's
products. To achieve this strategy, Abana must recruit and train additional
sales representatives to cover specific geographic territories. Since January
1, 1996, Abana has hired and trained 22 sales representatives and as of
November 1, 1996, had 47 sales representatives calling on physicians in 17
states.

Develop Highly Trained and Motivated Sales Force. Newly hired sales
representatives are required to attend two week initial training programs that
encompass the fundamentals of selling in the pharmaceutical environment and
provides detailed instruction regarding Abana's products, market, competition
and industry. Each sales representative must participate in role playing
scenarios and must pass a final presentation that is videotaped for grading.
In addition, each newly recruited sales representative is tested upon entrance
to the training class and retested prior to exiting the class, and each newly
hired sales representative must pass the exit exam to leave the training
program. Sales representatives must also participate in an advanced sales
training class and in a continuing

30
<PAGE> 48

education program. The advanced sales training program focuses on advanced
sales and marketing strategies in an interactive format to maximize the sales
potential of Abana's representatives.

ABANA'S CURRENT PRODUCTS

Abana's current product line of branded generic pharmaceuticals consists
of antihistamine and decongestant products for respiratory ailments, a topical
analgesic for pain relief, and weight control products. All products currently
marketed are prescription drugs and are manufactured in compliance with FDA
regulations.

Abana's primary products and a brief description of each are as
follows:

Nasabid(R) SR is a long acting, low dose decongestant/expectorant tablet
that is indicated for sinusitis. Nasabid(R) SR is formulated to moderate
the side effects found in most decongestant products.

Vanex(TM) Forte is a long acting antihistamine/decongestant tablet that is
indicated for symptoms related to the common cold, sinusitis, hay fever
and other allergic reactions. Vanex Forte's combination of antihistamines
and decongestants offers physicians a product that reduces the incidence
of drowsiness, a side effect found in most antihistamine products.

Vanex(TM) Grape is a liquid cough suppressant that contains an
antihistamine and a decongestant. The formula features a grape flavor and
was developed specifically for the pediatric and geriatric markets.

Vanex-HD(R) is also a liquid cough suppressant that contains an
antihistamine and a decongestant. The formula features a cherry flavor
and was also developed specifically for the pediatric and geriatric
markets.

Endagen(TM)-HD is Abana's generic version of Endal(R), a product marketed
by Forest Laboratories. Endagen- HD is a liquid cough syrup indicated for
cough control and to provide temporary relief from upper respiratory tract
congestion.

Otocain(TM) is a topical anesthetic ear drop. Otocain is indicated for
relief of pain and pruritus in the ear, acute swimmer's ear, and other
forms of earaches.

Obenix(R) is an orally effective appetite suppressant with a prescribed
dosage of one capsule daily. Physicians now treat obesity as a disease
rather than as an acute disorder. Therefore, centrally acting products
similar to Obenix(R) are being prescribed more frequently.

MARKETING AND DISTRIBUTION

As of November 1, 1996, Abana employed 47 sales representatives who market
Abana's products to practicing physicians in 17 states. Abana expects to hire
approximately 10 additional sales representatives during the remainder of 1996.
Management believes that Abana's sales increase is in direct relation to the
number of successful sales representatives working on Abana's behalf.
Accordingly, the development of a capable sales force is among Abana's highest
priorities.

Since Abana's products are available only in prescription form, marketing
activity focuses upon inducing physicians to prescribe Abana's products. In
addition to selling efforts based upon the merits and characteristics of its
products, Abana provides physicians with sample product packages for use by
patients. Prescriptions for Abana's products are filled by retail pharmacies,
which purchase the products from drug wholesale companies. The drug wholesale
companies are Abana's principal customers. Abana has established a
distribution network with all major drug wholesale companies in the United
States.

31
<PAGE> 49

MANUFACTURING

All of Abana's current products are manufactured under generic
formulations to Abana's specifications by independent third party contract
pharmaceutical manufacturers. Abana does not maintain long-term supply
contracts with such manufacturers. Although Abana has not experienced delays
in obtaining product inventories under such arrangements, the inability of a
third party contract manufacturer to produce and supply product could result in
product unavailability and interrupt the ability of Abana to distribute
product. Any such interruption could adversely affect Abana's business,
financial condition and results of operations and could have a longer term
adverse effect upon the perceived reliability of the brand. Management of
Abana believes that alternative sources of manufacturing for its products are
available within the industry.

COMPETITION

The manufacture and sale of pharmaceuticals is highly competitive. As a
marketer of branded generic pharmaceuticals, Abana faces competition from
original branded formulations of products and potential competition from
producers of unbranded generic equivalents of its products. Moreover, although
Abana's products are available only by prescription, its current product lines
also face competition from branded and generic non-prescription,
over-the-counter product formulations for treatment of similar ailments.

Many of Abana's competitors are large well-known pharmaceutical, chemical
and health care companies which have considerably greater financial, sales,
marketing and technical resources than those of Abana. Additionally, many of
Abana's present and potential competitors have research and development
capabilities that may allow such competitors to develop new or improved
products that may compete with Abana's products. The pharmaceutical industry
is characterized by rapid product development and technological change.
Abana's pharmaceuticals could be rendered obsolete or uneconomical by the
development of new pharmaceuticals to treat the conditions addressed by Abana's
products, as the result of the availability of similar generic equivalents in
the non-prescription market, or as the result of either technological advances
affecting the cost of production of marketing or pricing action by one or more
of Abana's competitors. Abana's business, financial condition and results of
operations could be materially and adversely affected by any one or more of
such developments.

SUPERVISION AND REGULATION

General. Abana's business is regulated by many federal and state laws,
regulations and agencies, including the Federal Food, Drug and Cosmetic Act;
the Prescription Drug Marketing Act of 1987; the FDA; the DEA; the Federal
Trade Commission; and the federal and state controlled substances acts. Abana
is in compliance with all applicable federal and state laws and regulations,
and has obtained all licenses and permits necessary to carry on its business.
The FDA and DEA licenses are in the name of Abana, but Dale E. Eads is listed
with the FDA and DEA as the responsible party.

The FDA. The FDA is responsible for enforcing the laws enacted by
Congress under the Federal Food, Drug and Cosmetic Act and the Prescription
Drug Marketing Act of 1987. The Federal Food, Drug and Cosmetic Act is the
basic drug law of the United States and is intended to assure consumers that
drugs are safe and effective for their intended uses as well as that all
labeling and packaging is truthful, informative and not deceptive. The Federal
Food, Drug and Cosmetic Act prohibits distribution of any drug required to be
approved by the FDA if such approval has not been given. Certain products, such
as new drugs, are required to be approved by the FDA for safety prior to sale
or use. Such approval is based on scientific data provided by manufacturers and
sponsors, subject to review and acceptance by FDA scientists for scope and
adequacy. Compliance with the Federal Food, Drug and Cosmetic Act is secured
through periodic inspections of facilities and products, analysis of samples,
educational activities and legal proceedings. One of the major means of
consumer protection utilized by the FDA is product recall. A recall may be
initiated by the manufacturer or shipper of the product, or may be requested by
the FDA.

32
<PAGE> 50
The Federal Food, Drug and Cosmetic Act requires owners or operators of
all establishments that distribute drugs in the United States to register the
establishment and the products with the FDA. Abana is currently registered and
in good standing with the FDA.

Classes of Drugs. For purposes of regulation under the Federal Food, Drug
and Cosmetic Act, drugs are divided into several major categories, each subject
to particular requirements. The largest category of drugs is defined as "new
drugs." A new drug is one that contains a newly developed chemical, a chemical
or substance not previously used in medicine, or one which has become
recognized by qualified experts as safe and effective before its intended use
as a result of investigational studies but has not otherwise been used to a
material extent or for a material time under such conditions.

A new drug may not be commercially marketed in the United States unless it
has been approved as safe and effective by the FDA. Such approval is based on
an NDA or ANDA submitted by the sponsor of the drug, containing acceptable
scientific data including the results of tests to evaluate its safety and
substantial evidence of effectiveness for the conditions for which the drug is
to be offered. Once an NDA or ANDA is approved by the FDA, the drug's formula,
manufacturing process, labeling, packaging, dosage, methods of testing, etc.,
generally may not be changed from those stated in the NDA or ANDA unless the
FDA approves a supplemental application. The one exception to this general rule
is a change which will increase assurance of safety and effectiveness of the
new drug which must be put into effect at the earliest possible time after the
drug is already on the market without waiting for approval.

Abana markets and distributes exclusively prescription drugs that may be
dispensed only by or on the prescription of a licensed practitioner, such as a
physician. Prescription drugs may not be shipped directly to the public by the
manufacturer or Abana. Prescription drugs may legally be shipped only to
persons and firms who are regularly and lawfully engaged in the wholesale and
retail distribution of prescription drugs, and to hospitals, clinics,
physicians or others licensed to prescribe such drugs. Prescription drugs may
only be shipped to consumers when dispensed either by a physician or a
pharmacist.

The Federal Food, Drug and Cosmetic Act also requires that all drugs be
properly labeled. Appropriate labeling includes the name and address of the
manufacturer or distributor, statement of the dosage strength, list of active
ingredients, expiration date, established or trade name, adequate directions
for use, adequate warnings and appropriate legends.

New Regulatory Initiatives. The United States Congress has recently held
hearings on certain promotional practices of the pharmaceutical industry, and
the FDA has recently begun scrutinizing product sampling and certain other
pharmaceutical marketing practices more closely. Although management of Abana
believes that no governmental regulations have been adopted to date that have
had an material adverse effect on Abana, Abana could be adversely affected by
future regulatory restrictions on the pharmaceutical industry. Restrictions on
product sampling in connection with the marketing of branded generic
pharmaceuticals, for example, could significantly and adversely impact the
ability of Abana to establish and build upon brand recognition of its generic
pharmaceutical formulations.

EMPLOYEES

Abana presently employs 64 individuals, including Dale E. Eads, Chairman
of the Board of Directors, President, Treasurer and Chief Executive Officer;
Perry N. Cole, Vice Chairman, Executive Vice President, Secretary and Director;
and 47 sales representatives.

33
<PAGE> 51

PROPERTIES

Abana maintains its administrative offices at 1 Chase Corporate Drive,
Suite 260, Birmingham, Alabama 35244 under a lease expiring February 28, 1999.
Abana's 17,670 square foot warehouse and shipping facilities are located at 105
Oxmoor Circle, Birmingham, Alabama 35209 under a lease expiring February 28,
1999.

LEGAL PROCEEDINGS AND INSURANCE

There are no material legal proceedings to which Abana is a party or to
which any of its property is subject. Abana maintains product liability
coverage of $3,000,000, which Management believes is adequate and is typical of
companies similarly situated. Abana also maintains general business liability
and property and casualty coverage.

SUMMARY FINANCIAL DATA REGARDING ABANA

The following table summarizes certain selected historical financial data
of Abana. The balance sheet data presented below as of December 31, 1994 and
1995 and as of September 30, 1995 and 1996 and the statement of operations data
for each of the years in the three-year period ended December 31, 1995 and for
the periods ending September 30, 1995 and 1996, are derived from Abana's
financial statements appearing elsewhere in this Prospectus. The balance
sheet data as of December 31, 1991, 1992 and 1993, and the statement of
operations data for the years ended December 31, 1991 and 1992, have been
derived from other financial statements of Abana and are not included in this
Prospectus. The financial data for the five years ended December 31, 1995
have been derived from audited annual financial statements of Abana. In the
opinion of Abana's management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial data
for the nine months ended September 30, 1995 and 1996 have been reflected
therein. Operating results for the nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the full year.
The summarized historical financial data should be read in conjunction with the
financial statements and related notes thereto for Abana included elsewhere in
this Prospectus and "Abana's Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, NINE MONTHS ENDED
--------------------------------------------- -----------------------
1991 1992 1993 1994 1995 9/30/95 9/30/96
------ ------ ------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------
STATEMENT OF OPERATIONS DATA

Sales $ 789 $1,176 $2,426 $2,948 $4,210 $2,868 $4,103

Cost of sales 260 347 608 656 619 470 736
------ ------ ------ ------ ------ ------ ------

Gross profit 529 829 1,818 2,292 3,590 2,398 3,367

Selling, general and
administrative expenses 536 897 1,853 2,391 2,718 1,939 3,194

Other income (expenses), net (42) - 10 11 17 11 23

Provision for taxes - - - - - - 35
------ ------ ------ ------ ------ ------ ------

Net income (loss) $ (49) $ (68) $ (25) $ (88) $ 889 $ 470 $ 161
====== ====== ====== ====== ====== ====== ======

Earnings (loss)per share $(0.03) $(0.03) $(0.01) $(0.04) $ 0.36 $ 0.21 $ 0.07
====== ====== ====== ====== ====== ====== ======

Weighted average shares
outstanding 1,774 2,020 2,211 2,288 2,448 2,291 2,395

Cash dividends declared per share - - - - $ 0.02 - $ 0.03

BALANCE SHEET DATA:

Cash and cash equivalents $ 88 $ 283 $ 482 $ 336 $ 920 $ 486 $ 975

Total assets $ 260 $ 618 $ 993 $ 892 $1,640 $1,193 $1,987

Stockholders' equity $ 96 $ 526 $ 898 $ 793 $1,542 $1,164 $1,633
</TABLE>

34
<PAGE> 52

ABANA'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the Financial Statements of Abana and the related Notes to Financial Statements
contained elsewhere herein.

OVERVIEW

Abana was founded in 1988 and is engaged in the marketing, distribution and
sale of prescription drugs. Abana's primary area of operations is in the
southeastern United States, where it markets its products through a network of
trained sales representatives. Abana has achieved annual increases in sales by
increasing its number of sales representatives and by adding products. Total
sales have increased from $498,000 in 1990 to $4.3 million in 1995. Abana
incurred a net loss of $368,000 in 1990 and incurred net losses each year
thereafter until 1995, when it earned $889,000 in net income.

Sales are reported as gross total sales and any discounts given to
customers for early payment of their purchases are subtracted from gross total
sales to arrive at net sales. Early payment discounts given to customers
amounted to $85,456 for 1995, $59,602 for 1994, and $55,604 for 1993. Abana's
gross sales are net of any sales that are credited or refunded back to
customers under its returned goods policy.

RESULTS OF OPERATIONS - 1995 VERSUS 1994 VERSUS 1993

The following table sets forth certain data as a percentage of net sales
for the periods indicated.

<TABLE>
<CAPTION>
PERCENTAGE OF SALES
YEAR ENDED DECEMBER 31
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%

Cost of sales . . . . . . . . . . . . . . . . . 26.8 23.8 16.4
---- ---- ----

Gross profit on sales . . . . . . . . . . . . . 73.2 76.2 83.6

Selling, general & administrative expenses . . 74.6 79.5 63.3
---- ---- ----
Operating (loss) income . . . . . . . . . . . . (1.4) (3.3) 20.3

Other income . . . . . . . . . . . . . . . . . .4 .4 .4

(Loss) income before taxes . . . . . . . . . . (1.0) (2.9) 20.7
----- ----- ----
Net (loss) income . . . . . . . . . . . . . . (1.0) (2.9) 20.7
===== ===== ====
</TABLE>

Sales. Net sales for the year ended December 31, 1995 increased 42.8% to
$4.3 million from $3.0 million for the year ended December 31, 1994 and 21.2%
to $3.0 million from $2.4 million for the year ended December 31, 1993.
Abana's sales increases during the past three years are due primarily to unit
and dollar growth.

Gross Profit. Gross profit during 1995 increased 56.6% or $1.3 million to
$3.6 million from $2.3 million in 1994. As a percentage of net sales, margins
grew to 83.6% in 1995 from 76.2% in 1994. Gross profit during 1994 increased
26.1% or $474,000 to $2.3 million from 1993 gross profit of $1.8 million. The
increases in gross profit

<PAGE> 53

from 1993 to 1994 and from 1994 to 1995 were the result of increased sales of
higher margin products and ongoing efficiencies achieved in the cost of product
samples and literature.

Selling, General and Administrative Expenses. Selling expenses remained
essentially unchanged in 1995 at approximately $1.4 million, as compared to
1994. Selling expenses increased 17.6% or $202,000 to $1.4 million in 1994
from $1.2 million in 1993 as a result of an increase in the number of sales
representatives hired during an expansion program during 1994. As a percentage
of net sales, selling expenses amounted to 32.8% in 1995, 45.8% in 1994 and
47.3% in 1993.

General and administrative expenses increased 28.5% or $297,000 in 1995 to
$1.3 million from $1.0 million in 1994 due primarily to increases in personnel
and other administrative costs necessary to support the growth in Abana's sales
force. As a percentage of net sales, these expenses declined to 31.2% in 1995
from 34.6% in 1994.

General and administrative expenses increased 47.6% or $336,000 to $1.0
million in 1994 from $706,000 in 1993 as a result of increases in personnel,
additional warehouse space, and other administrative costs necessary to support
the expansion of the Abana's sales force.

Operating Income. Operating income during 1995 increased $971,000 to
$872,000 from the operating loss of $99,000 incurred during 1994. The increase
in sales and a higher gross profit margin helped to generate the operating
income increase.

The operating loss incurred during 1994 increased $64,000 to $99,000 from
the operating loss of $35,000 incurred during 1993. The operating loss
increase for 1994 was a result of the expansion of Abana's sales force and
related costs to support the expansion.

Other Income (Expense). Other income for 1995 includes interest income of
$23,000, which was 92.4% or $11,000 higher than the $12,000 of interest income
earned in 1994. The $12,000 of interest income earned in 1994 was 29.2% or
$3,000 higher than the $9,000 of interest income earned during 1993. The
increases in interest income from 1993 to 1994 and from 1994 to 1995 were due
to the increases in Abana's cash balances maintained in interest bearing
accounts.

Discounts earned amounted to $1,988 in 1995, which is a decrease of 45.1%
or $1,632 from the discounts earned of $3,620 in 1994. The discounts earned in
1994 were 42.5% or $2,677 less than the $6,297 of discounts earned in 1993.
Discounts earned are amounts received from vendors and contract manufacturers
for early payment of invoices. Due to changes in Abana's available suppliers,
the number of vendors and contract manufacturers that offer an early payment
discount have decreased.

During 1995 Abana incurred a loss on disposal of assets comprised mainly
of obsolete equipment, of $5,974. Abana had no disposals during 1994. Abana
had a net gain of $441 on disposals of assets during 1993.

Abana's interest expense for 1995 was $2,070, which was a decrease of
50.8% or $2,138 from $4,208 in 1994. Abana's interest expense for 1994 was
$4,208, which was a decrease of 29.4% or $1,750 from $5,958 in 1993. The
decrease in Abana's interest expense between 1993 and 1994, and between 1994
and 1995, was a result of the reduction of a note payable to a former
stockholder.

Provision of Income Taxes. Abana had no provision for income taxes for
1995, 1994 and 1993 due to the net operating loss carryforwards available
during those years that were used to offset any taxable income.

Net Income. Net income increased $976,000 to $889,000 in 1995 from a net
loss of $87,000 in 1994. The net loss of $87,000 in 1994 increased $62,000
from the net loss of $25,000 in 1993.

36
<PAGE> 54

The increase in net income for 1995 over the net loss for 1994 was due to
an increase in sales, higher gross profit margins and only a slight increase in
sales and marketing expenses. The increase in the net loss incurred during
1994 over the net loss incurred during 1993 was caused primarily by the
expansion of Abana's sales force and related costs to support the expansion.

BALANCE SHEET INFORMATION

Abana's current ratio at December 31, 1995 was 14:8:1, which increased
from the current ratio of 8.2:1 at December 31, 1994. Working capital at
December 31, 1995 increased $722,000 to $1.3 million from Abana's working
capital of $626,000 at December 31, 1994. The increase in Abana's current
ratio and working capital amounts for 1995 over 1994 was due primarily to
increases in Abana's cash and accounts receivable balances and only a slight
increase in its current liabilities.

Debt as a percentage of equity decreased to 0.8% at December 31, 1995,
from 4.5% at December 31, 1994 as a result of the increase in equity from the
net income earned in 1995 with no significant change in Abana's total debt from
1994 to 1995.

LIQUIDITY AND CAPITAL RESOURCES AT YEAR-END

Since its inception, Abana has financed its operation primarily through
cash flow from operations, private sales of equity securities and borrowings
under credit arrangements with banks. At December 31, 1995 and 1994, Abana had
cash and cash equivalents of $920,000 and $336,000, respectively.

Total assets increased $798,000 to $1.6 million at December 31, 1995 from
$892,000 at December 31, 1994 and total liabilities decreased $1,000 to $98,000
at December 31, 1995 from $99,000 at December 31, 1994.

Inventories decreased $51,000 to $219,000 at December 31, 1995 from
$270,000 at December 31, 1994. Accounts receivable increased $181,000 to
$277,000 at December 31, 1995 from $96,000 at December 31, 1994. Average days
in accounts receivable for 1995 was 11 days, which was an increase of 1 day over
1994 average days in accounts receivable of 10. The increase in average days
in accounts receivable was due to the increase in Abana's sales during 1995 over
1994.

Total fixed assets increased $25,000 to $219,000 at December 31, 1995 from
$194,000 at December 31, 1994, with the increase composed mainly of the
acquisition of new computer equipment. Net property and equipment decreased
$4,000 to $142,000 at December 31, 1995 from $146,000 at December 31, 1994, as
a result of an increase in depreciation expense, reflecting a full year of
depreciation during 1995 on some assets placed into service in late 1994.

Formulas and trademarks increased to $57,000 at December 31, 1995 from
$38,000 at December 31, 1994. This increase was net of 1995 amortization of
$811 and was a result of payments made to a contract manufacturer for
formulation and other costs incurred in an FDA filing for an Abbreviated New
Drug Application with respect to a new product for Abana.

Total stockholder's equity increased $749,000 to $1.5 million at December
31, 1995 from $793,000 at December 31, 1994 primarily due to the net income
earned during 1995.

37
<PAGE> 55

RESULTS OF OPERATIONS - INTERIM PERIODS ENDED SEPTEMBER 30, 1995 AND 1996

The following table sets forth, for the interim periods indicated, the
percentages which certain components of the Statement of Operations bear to
product net sales and the percentage change of such components (based on
aggregate dollars) as compared to the prior year.

<TABLE>
<CAPTION>
Three Months Ended Percentage Increase Nine Months Ended Percentage Increase
September 30, (Decrease)Aggregate September 30, (Decrease) Aggregate
-------------------- --------------------
Dollar Dollar
1995 1996 Amount 1995 1996 Amount
--------- --------- -------------------- --------- --------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 100.0 100.0 68.2 100.0 100.0 43.0
Cost of sales 14.0 23.2 178.5 16.4 17.9 56.6
Gross profit margin 86.0 76.8 50.2 83.6 82.1 40.4
Selling, general and
administrative expenses
Selling 46.4 55.0 99.4 37.3 49.5 89.7
General & administrative 31.0 31.4 70.1 30.3 28.4 33.9
Amortization -- -- -- -- -- --
Total selling, general
& administrative
expenses 77.4 86.4 87.6 67.6 77.9 64.7
Operating Income (loss) 8.5 (9.6) (290.3) 16.0 4.2 62.2
Other income (expense) .1 -- 153.1 .4 .6 115.0
Income before income
taxes 8.7 (9.6) (285.6) 16.4 4.8 (58.1)
Provision for taxes -- 2.5 -- -- .9 --
Net income 8.7 (12.1) (333.6) 16.4 3.9 (65.6)
</TABLE>

Sales. Sales for the three months ended September 30, 1996 increased 68.2%
or $568,000 to $1.4 million from $833,000 for the three months ended
September 30, 1995. The increase in Abana's sales for this period was due
primarily to increases in unit and dollar growth.

Sales for the nine months ended September 30, 1996 increased 43.0% or $1.2
million to $4.1 million from sales of $2.9 million during the nine months
ended September 30, 1995. Abana's sales increased as a result of the addition
of new sales representatives in early 1996 and from increases in unit and dollar
growth from maturing sales territories.

Gross Profit. Gross profit during the three months ended September 30,
1996 increased 50.2% or $360,000 to $1.1 million from $716,000 for the three
months ended September 30, 1995. Gross profit as a percentage of sales was
76.8% for the three months ended September 30, 1996, which was a decrease of
9.2% from the gross profit as a

38
<PAGE> 56

percentage of sales of 86.0% for the three months ended September 30, 1995.
The increase in gross profit was due to the increase in total sales and the
decrease in gross profit as a percentage of sales was due to increases in
product acquisition costs and increases in the volume of product samples and
literature distribution.

Gross profit for the nine months ended September 30, 1996 increased
40.4% or $969,000 to $3.4 million from $2.4 million for the nine months ended
September 30, 1995. Gross profit as a percentage of sales was 82.1% for the
nine months ended September 30, 1996, which was a decrease of 1.5% from the
gross profit percentage of sales of 83.6% for the nine months ended September
30, 1995. The increase in gross profit was due to the increase in total sales
and the decrease in gross profit as a percentage of sales was due primarily to
increases in product acquisition costs, increases in the volume of products
sampled, and literature costs.

Selling, General and Administrative Expenses. Selling expenses for the
three months ended September 30, 1996, increased 8.6% as a percentage of sales
and $384,000 in aggregate dollars to $771,000 compared to selling expenses of
$387,000 for the three months ended September 30, 1995. The increase in
aggregate dollars was due to the increase in the number of sales representatives
employed in the three months ended September 30, 1996, as compared to the number
employed during the three months ended September 30, 1995. Selling expenses as
a percentage of sales increased due to higher wage and other costs associated
with selling activities.

Selling expenses for the nine months ended September 30, 1996, increased
12.2% as a percentage of sales and $960,000 in aggregate dollars to $2.0 million
from $1.1 million for the nine months ended September 30, 1995. The increase in
aggregate dollars was due to the increase in the number of sales representatives
employed during the first nine months of 1996 as compared to the number employed
during the first nine months of 1995. Higher wage and other costs associated
with selling activities caused selling expenses as a percentage of sales to
increase.

General and administrative expenses for the three months ended September
30, 1996 increased 70.1% or $181,000 to $440,000 from $259,000 for the three
months ended September 30, 1995. General and administrative expenses as a
percentage of sales were 31.4% for the three months ended September 30, 1996 as
compared to 31.0% for the three months ended September 30, 1995. The increase
in the aggregate dollar amount was due primarily to an increase in general
administrative overhead costs including increased occupancy space and personnel
costs.

General and administrative expenses for the nine months ended September
30, 1996 increased 33.9% or $295,000 to $1.2 million from $869,000 for the nine
months ended September 30, 1995. As a percentage of sales, general and
administrative expenses for the nine months ended September 30, 1996 were 28.4%,
which was a decrease of 1.9% from general and administrative expense as a
percentage of sales of 30.3% for the nine months ended September 30, 1995. The
increase in aggregate dollar amounts was the result of increases in
administrative personnel, occupancy space, and general overhead costs necessary
to support the increase in the number of sales representatives employed during
the first nine months of 1996 as compared to the first nine months of 1995.
The decrease of 1.9% of general and administrative expense as a percent of
sales for the first nine months of 1996 as compared to the first nine months
of 1995 was due to the fixed costs included in the expenses that decrease as a
percentage of sales as sales increase.

Operating Income. Abana incurred an operating loss of $35,000 for the
three months ended September 30, 1996, which was a decrease of $206,000 from
Abana's operating income of $71,000 for the three months ended September 30,
1995. The operating loss for the three months ended September 30, 1996 was the
result of the accrual of approximately $132,000 in bonuses, an increase of
$7,275 in depreciation expense and an increase in cost of sales from product
acquisition costs, which amounted to approximately $63,000, and the write-off
of inventory of some discontinued products, which amounted to approximately
$15,800.

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<PAGE> 57

For the nine months ended September 30, 1996 operating income decreased
$286,000 to $173,000 from the operating income of $459,000 earned during the
nine months ended September 30, 1995. As a percentage of sales, operating
income for the nine months ended September 30, 1996 was 4.2% and 16.0% of sales
for the nine months ended September 30, 1995. The decrease in operating
income earned during the nine months ended September 30, 1996 from the
operating income earned during the nine months ended September 30, 1995 was the
result of the three months ended September 30, 1996 expenses previously
mentioned and an overall increase in selling and general and administrative
expenses incurred to support the growth in the number of sales representatives,
and from the increase in cost of sales that resulted from increased product
acquisition costs and the write-off of inventory of discontinued products
previously mentioned.

Other Income and Expense. Abana's Other Income and Expense for the three
months ended September 30, 1996 included interest income of $9,558, which
increased 46.5% or $3,032 from interest income of $6,526 earned during the three
months ended September 30, 1995. This increase was a result of an increase in
Abana's available cash balances. Interest expense for the three months ended
September 30, 1996 was $306, which decreased 38.2% or $189 from the $495 of
interest expense for the three months ended September 30, 1995. This decrease
was a result of the reduction in the principal balance of a note payable to a
former shareholder.

A loss on disposal of equipment amounted to $268 for the three months
ended September 30, 1996 as compared to a loss of $4,554 incurred during the
three months ended September 30, 1995.

Bad debt expense of $10,319 was incurred during the three months ended
September 30, 1996 as compared to no bad debt expense incurred during the three
months ended September 30, 1995. The bad debt expense was a result of the
bankruptcy filing of Foxmeyer, one of Abana's customers.

Other miscellaneous income, net of expense, amounted to $1,086 for the
three months ended September 30, 1996, which was an increase of $657 over the
$429 of net miscellaneous income for the three months ended September 30, 1995.
The net miscellaneous income was composed primarily of discounts earned from
early payment of trade accounts payable.

Interest income earned during the nine months ended September 30, 1996
increased 95% or $15,373 to $31,525 from interest income of $16,152 earned
during the nine months ended September 30, 1995. This increase was due to the
significantly higher cash balances available for earning interest during the
nine months ended September 30, 1996 as compared to the nine months ended
September 30, 1995.

Interest expense for the nine months ended September 30, 1996 decreased
$1,449 to $456 from the interest expense of $1,905 incurred during the nine
months ended September 30, 1995. The decline in interest expense was due to the
reduction in the principal amount of a note payable to a former shareholder.
The loss on disposal of equipment for the nine months ended September 30, 1996
remained at $268 and the loss incurred during the nine months ended September
30, 1995 remained at $4,554.

Bad debt expense of $10,319, as previously discussed, remained the same
for the nine months ended September 30, 1996 and Abana incurred no bad debt
expense during the nine months ended September 30, 1995.

Net miscellaneous income comprising mainly of discounts earned from early
payment of trade accounts payable for the nine months ended September 30, 1996
increased 145% or $1,749 to $2,955 from $1,206 of net miscellaneous income
earned during the nine months ended September 30, 1995. Discounts earned from
early payments of trade accounts payable have increased due to the increased
purchases necessary to support Abana's increased sales volume.

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<PAGE> 58

Income Taxes A provision of $35,000 for income taxes was made in the
three months ended September 30, 1996, which was based on an estimated
effective tax rate of approximately 18% of Abana's pre-tax income for the nine
months ended September 30, 1996. Abana had net operating loss carryforwards
available to offset taxable income earned during the three months ended
September 30, 1995 and for the nine months ended September 30, 1995. The net
operating loss carryforwards were used in full to offset taxable income during
the nine months ended September 30, 1996.

Net Income. Abana incurred a loss per share of $0.07 for the three months
ended September 30, 1996, which was a decrease of $.10 per share from the
earnings of $0.03 per share for the three months ended September 30, 1995.
Average shares outstanding for the three months ended September 30, 1996 and
1995 were 2,267,213 and 2,469,381, respectively.

Earnings per share for the nine months ended September 30, 1996 and 1995
were $0.07 per share on 2,394,917 average shares outstanding and $0.21 per share
on 2,291,176 average shares outstanding, respectively.

MANAGEMENT

The following table sets forth certain information with respect to the
Abana's Directors and executive officers as of November 1, 1996:

Name Age Position(s) with Abana
- ---- ---- ----------------------

Dale E. Eads 48 Chairman of the Board of Directors, President, Chief
Executive Officer and Treasurer

Perry N. Cole 40 Vice Chairman of the Board of Directors, Executive Vice
President, Chief Financial Officer and Secretary

John W. Fuqua 39 Vice President of Sales and Marketing

J. Dante Graham 36 Director of Sales

Angela E. Holley 26 Director of Technical & Education Services and Director

Dennis M. Jones 57 Director

Dale E. Eads joined Abana as its President, Chief Executive Officer,
Treasurer and Director in December 1988, and was elected Chairman of the Board
of Directors in 1993. Mr. Eads' experience includes over 20 years of service
in the pharmaceutical industry. From January 1988 to December 1988, he served
as Director of Sales of E.T.M., a company engaged in the electronic training
business. From 1983 through 1987, he served as National Sales Manager of Russ
Pharmaceuticals, Inc., a Birmingham, Alabama pharmaceutical company, where he
was in charge of recruiting, sales training and marketing. He personally
hired, trained and assisted in supervising over 80 sales representatives.
Prior to that time, he served as a medical sales representative and as a Field
Supervisor for Reid-Provident Laboratories and for Syntex Laboratories, Ltd.
His responsibilities include product development, public relations, and general
corporate officer functions.

Perry N. Cole is Vice Chairman of the Board of Directors, Executive Vice
President, Chief Financial Officer, and Secretary and is in charge of Abana's
administrative and operational functions. His experience includes twelve years
of service in the pharmaceutical industry. He has held the positions of
Executive Vice President, Secretary and

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<PAGE> 59

a Director since December 1988, and was Chairman of the Board until 1993 when
he was elected Vice Chairman. From February 1984 to December 1986, he served
as Treasurer and a Director of Russ Pharmaceuticals, Inc. where he was in
charge of the financial and administrative functions. At Russ he implemented a
computerized accounting and reporting system, assisted in two private placement
common stock offerings, managed the corporate finances, and supervised
administrative personnel. He graduated from Samford University in 1978 with a
Bachelor of Science degree in Business Administration, is a Certified Public
Accountant and practiced public accounting with a Birmingham, Alabama CPA firm
from 1978 to 1984.

John W. Fuqua has served as Vice President of Sales and Marketing of Abana
since January 1, 1996. He served as Regional Business Manager of
Hoechst-Roussel Pharmaceuticals from 1981 to 1996, and District Business
Manager in Birmingham, Alabama, and Montgomery, Alabama, where he built a top
producing district, from 1991 to 1993. He has been in the pharmaceutical
industry since 1981. His current responsibilities include the day-to-day sales
and marketing responsibilities.

J. Dante Graham has served as Director of Sales of Abana since March 1995.
From 1983 to 1989, he was in charge of district sales and sales management of
Wholesale Merchandise of Atlanta, Georgia. He was employed by Abana as a sales
representative in 1991 and was promoted to District Manager in July 1992. His
district was part of a major expansion during 1992 when he took District 2 to
over one million dollars in sales in two years. In July 1994 he was promoted
to head special projects and to Director of Sales in 1995. His current
responsibilities include direct supervision of the District Business Managers
and the sales force.

Angela E. Holley has served as Director of Technical & Education Services
since August, 1991. Her experience includes over six years of service in the
pharmaceutical industry and many successful sales achievements. She was
elected a Director of Abana in May 1993, and served as a sales representative
and as Sales Training Manager from 1991 to the present. From June 1987 to
August 1991, she was employed as the office manager of a retail pharmacy owned
by Harco Drug Company. With a background in public health, she is responsible
for the development of all patient education and medical information. Her
responsibilities also include the development of all training programs and
continuing education for the sales force.

Dennis M. Jones has served as a Director of Abana since June 1992 pursuant
to the Stock Purchase Agreement between Abana and JMED. See "Background of the
Transaction - Prior Investment by JMED in Abana Stock" and "Description of
Capital Stock of Abana - Other Matters - Stock Purchase Agreement." Mr. Jones
is the founder and has been the Chief Executive Officer and Chairman of the
Board of JMED since its organization in March 1981. JMED manufactures and
markets pharmaceutical and nutritional products. He is also a Director of Mark
Twain State Bank, a subsidiary of Mark Twain Bancshares, Inc., and has served
in that capacity since 1987.

There are no other arrangements or understandings known to Abana between
any of Abana's Directors or executive officers and any other person pursuant to
which such person was or is to be selected as a Director or an executive
officer of Abana. Dale E. Eads is the father of Angela E. Holley.

CERTAIN EMPLOYMENT AND COMPENSATION MATTERS

Although it is anticipated that each of Abana's officers will continue to
be employed by the Surviving Corporation following the Merger, and will serve
in substantially similar positions, none of such persons will have an
employment contract with either the Surviving Corporation or JMED and it is not
anticipated that any of such persons will become an officer or director of
JMED. Each of the Principal Holders will, as a condition to the Merger,
deliver to JMED a non-competition agreement. See "The Agreement - Agreements
of Principal Holders - Non- Competition Agreement."

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<PAGE> 60

Stock Options. The 1988 Stock Option Plan of Abana (the "Stock Option
Plan"), which was approved and adopted as of March 7, 1988, is designed to
qualify under Section 422A of the Internal Revenue Code with respect to options
granted thereunder which are designated as "incentive stock options." Under
the Stock Option Plan, options may be granted to purchase common stock of Abana
at not less than 100% of the fair market value of the underlying shares on the
date of grant (or 110% of such fair market value in the case of any optionee
who held more than 10% of the combined voting power of Abana's stock as of the
date of the grant). The Stock Option Plan is administered by the Stock Option
Plan Committee (the "Committee"), which consists of not less than two members,
at least one of whom must be a member of the Abana's Board of Directors. The
Committee is empowered to designate options granted under the Stock Option Plan
as "incentive stock options" ("ISOs") or as non-qualified stock options
("NQOs"). Options designated as ISOs will be issued subject to the requirements
of Section 422A of the Internal Revenue Code. All options not specifically
designated by the Committee as ISOs shall be deemed to be NQOs. The duration
of options granted under the Stock Option Plan is determined by the Committee,
but cannot exceed ten years (or five years in the case of optionees who held
more than 10% of the combined voting power of the Abana's stock as of the date
of the grant).

The aggregate fair market value (determined as of the time the option is
granted) of the common stock with respect to which ISOs are exercisable for the
first time by any person during any calendar year under the Stock Option Plan
shall not exceed $100,000 plus any unused limit carryover permitted pursuant to
Section 422A of the Internal Revenue Code.

As of November 1, 1996, Abana had outstanding ISO options to purchase
120,000 shares of Abana common stock at exercise prices ranging from $2.00 to
$7.50 per share under the Stock Option Plan and nonqualified options to
purchase 62,136 shares of Abana common stock at an exercise price of $1.30 per
share. Such options are held as follows:

Each of the Principal Holders holds options to purchase an aggregate of
71,068 shares of the common stock of Abana granted under Abana's 1988 Stock
Option Plan, which options are currently exercisable. Options to purchase
31,068 of such shares are "non-qualified options" exercisable at $1.30 per
share and options to purchase 40,000 of such shares are intended to qualify as
"incentive stock options" exercisable at $2.20 per share. The Principal
Holders have agreed not to exercise such options prior to the closing of the
Merger. Pursuant to the Merger, such options will be converted into (i) an
option to acquire 6,835 shares of the Common Stock of JMED at $5.91per share
and (ii) an option to acquire 8,800 shares of the Common Stock of JMED at
$10.00 per share.

John W. Fuqua holds an option granted under Abana's 1988 Stock Option Plan
for the purchase of 10,000 shares of the common stock of Abana at $2.00 per
share which will become exercisable on January 1, 1998 and expires on January
1, 2006. Pursuant to the Merger, such option will be converted into an option
to acquire 2,200 shares of the Common Stock of JMED at a price of $9.09 per
share with the same exercise and expiration terms.

On October 23, 1996, Abana granted additional options to purchase shares
of Abana's common stock at a price of $7.50 per share as follows: John W.
Fuqua, 15,000 shares; J. Dante Graham, 7,500 shares; and Angela E. Holley, 7,500
shares. As a result of the Merger such options will be converted into options
to acquire shares of Common Stock of JMED at $34.12 per share as follows: John
W. Fuqua, 3,300 shares; J. Dante Graham, 1,650 shares; and Angela E. Holley,
1,650 shares. Such options will become exercisable in five equal annual
installments, commencing on October 23, 1997, and will expire on October 22,
2002.

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<PAGE> 61

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to each
person, or group of persons, known by Abana to be the beneficial owner of any
of Abana's common stock, par value $.01 per share, its only outstanding class
of voting securities, and as to the beneficial ownership thereof of all Abana's
Directors and executive officers, individually, and all Abana's directors and
officers as a group, as at November 1, 1996:

<TABLE>
Name and Address Number of Percentage
of Beneficial Owner Shares Owned(1) Owned
------------------- --------------- ----------
<S> <C> <C>

Dale E. Eads 733,000(2) 31.25%
#1 Chase Corporate Drive,
Suite 260
Birmingham, Alabama 35244

Perry N. Cole 733,000(3) 31.25%
#1 Chase Corporate Drive,
Suite 260
Birmingham, Alabama 35244

Dennis M. Jones(4) 0 0
1945 Craig Road
St. Louis, Missouri 63146

Jones Medical Industries, Inc. 362,519 15.94%
1945 Craig Road
St. Louis, Missouri 63146

Angela E. Holley 12,000 *
1245 Tahiti Circle
Alabaster, Alabama 35007

All Officers and Directors as a Group (5 persons) 1,478,000(5) 61.17%
</TABLE>

- --------------------------
* less than 1 percent

(1) Abana understands that all of the shares listed are owned by the named
holder with sole voting power and sole investment power.

(2) Includes 71,068 shares of common stock reserved for issuance upon the
exercise of options exercisable by him within sixty days under Abana's
Stock Option Plan.

(3) Includes 71,068 shares of common stock reserved for issuance upon the
exercise of options exercisable by him within sixty days under Abana's
Stock Option Plan.

(4) Dennis M. Jones, a Director of Abana, is also the Chairman of the Board
and Chief Executive Officer of JMED, and is deemed to own beneficially
approximately 17.7% of the outstanding shares of the Common Stock of JMED
(including shares held by his wife, Judith A. Jones, who is also an
officer and director of JMED).

(5) Includes 142,136 shares of common stock reserved for issuance upon the
exercise of options exercisable within sixty days under Abana's Stock
Option Plan.

<PAGE> 62

COMPARISON OF SHAREHOLDER RIGHTS

Since both Abana and JMED are Delaware corporations, there are no
significant differences in the relative rights of shareholders of the two
companies except that holders of the common stock of Abana are currently
parties, together with each other and Abana, to a Stockholders' Agreement which
restricts the sale or transfer of shares of Abana, grants certain rights of
first refusal to Abana and other shareholders with respect to proposed sales
and other dispositions of such stock and provides rights to Abana and other
shareholders to purchase the shares in certain events, including a holder's
death or bankruptcy. See "Description of Capital Stock of Abana - Other
Matters - Stockholders' Agreement." The rights and restrictions arising under
the Stockholders' Agreement will not survive the Merger or otherwise apply to
the shares of the Common Stock of JMED to be issued in the Merger.

DESCRIPTION OF CAPITAL STOCK OF ABANA

Abana's authorized capital stock consists of 5,000,000 shares of common
stock, par value of $.01 per share. As of September 30, 1996, there were
2,274,213 shares of Abana common stock outstanding and held of record by
approximately 130 stockholders. Stockholders are entitled to one vote for each
share of common stock on matters to be voted on by the stockholders of Abana.
Stockholders will be entitled to receive dividends when, as and if declared by
the Board of Directors and to share ratably in the assets of Abana legally
available for distribution to its stockholders in the event of the liquidation,
dissolution or winding-up of Abana. Except for certain contract rights granted
to JMED, as described below under the caption "Other Matters," holders of Abana
common stock have no preemptive, subscription, redemption or conversion rights.
Also as described below in "Other Matters" all of the holders of Abana common
stock, except for JMED, have signed a Stockholders' Agreement restricting the
sale or hypothecation of the shares of Abana common stock owned by them unless
a right of first refusal is first given to Abana and then to Abana's other
stockholders on a pro-rata basis. All of the issued and outstanding shares of
Abana common stock are duly authorized, validly issued, fully paid and
nonassessable.

DELAWARE LAW

Abana is subject to Section 203 of the Delaware General Corporation Law
("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such
stockholder became an interested stockholder, unless: (i) prior to such date,
the Board of Directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by persons who
are directors and also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
(iii) on or subsequent to such date, the business combination is approved by
the Board of Directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66_% of the outstanding voting stock which is not owned by the interested
stockholder.

Subpart (c)(5) of Section 203 defines an "interested stockholder" as any
person (other than the corporation and any direct or indirect majority-owned
subsidiary of the corporation) that (i) is the owner of 15% or more of the
outstanding voting stock of the corporation, or (ii) is an affiliate or
associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the 3-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder; and the affiliates and
associates of such person; provided, however, that the term "interested
stockholder" shall not include (x) any person who (A) owned shares in excess of
the 15% limitation set forth herein as of, or acquired such shares pursuant to
a tender offer commenced prior to, December 23, 1987, or pursuant to an
exchange offer announced prior

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<PAGE> 63

to the aforesaid date and commenced within 90 days thereafter and either (I)
continued to own shares in excess of such 15% limitation or would have but for
action by the corporation or (II) is an affiliate or associate of the
corporation and so continued (or so would have continued but for action by the
corporation) to be the owner of 15% or more of the outstanding voting stock of
the corporation at any time within the 3-year period immediately prior to the
date on which it is sought to be determined whether such a person is an
interested stockholder or (B) acquired said shares from a person described in
item (A) of this paragraph by gift, inheritance or in a transaction in which no
consideration was exchanged; or (y) any person whose ownership of shares in
excess of the 15% limitation set forth herein is the result of action taken
solely by the corporation; provided that such person shall be an interested
stockholder if thereafter such person acquires additional shares of voting
stock of the corporation, except as a result of further corporate action not
caused, directly or indirectly, by such person.

By virtue of its ownership interest of approximately 16% of the
outstanding shares of Abana common stock, JMED is an "interested stockholder"
as to Abana. However, because JMED has been an interested stockholder in Abana
for more than three years and because JMED's initial acquisition of and
investment in the common stock of Abana was approved by the board of directors
of Abana, Section 203's prohibition on business combinations with interested
stockholders is not applicable to the Merger.

OTHER MATTERS

Stock Purchase Agreement. Pursuant to a Stock Purchase Agreement entered
into on June 1, 1992, between JMED and Abana, JMED was granted a 30-day right
of first refusal with respect to any offer to provide long-term equity
financing which Abana receives. The Stock Purchase Agreement also granted JMED
the preemptive right to purchase shares of Abana common stock in such amounts
as to preserve JMED's proportionate dividend and voting rights at prices no
less favorable than those at which shares are offered to others. Under the
Stock Purchase Agreement, JMED is also entitled to elect one member to Abana's
board of directors.

Stockholders' Agreement. Pursuant to the Stockholders' Agreement dated as
of March 7, 1988, each holder of Abana common stock has agreed to restrict the
transfer of Abana common stock owned by the stockholder. Notwithstanding the
general restriction or transfer of Abana common stock, the Stockholders'
Agreement provides that if a stockholder receives a bona fide third party
offer, then he may sell his Abana common stock but only after he has first
offered the Abana common stock to Abana, and if such offer is not accepted by
Abana within thirty (30) days, he must offer the Abana common stock to Abana's
other stockholders on a pro-rata basis. If the offer is not accepted by the
other holders of Abana common stock, then the stockholder may sell his Abana
common stock to the third party pursuant to the terms of the bona fide offer.
On the death of the holder of Abana common stock, Abana has the option to
purchase the Abana common stock from the estate of the deceased stockholder at
the fair market value of the Abana common stock as determined by an independent
appraiser. If Abana does not exercise its option, then the surviving holders
of Abana common stock may purchase the Abana common stock from the estate of
the deceased stockholder at the fair market value of the Abana common stock on
a pro-rata basis. If neither Abana nor the surviving holders of Abana common
stock exercise their options, then the shares of Abana common stock owned by
the deceased stockholder shall pass under the laws of descent and distribution.
By its terms, the Stockholders' Agreement remains in full force and effect
until terminated by (a) the written agreement among all holders of Abana common
stock, (b) the dissolution or bankruptcy of Abana, (c) Abana registers its
shares for a public offering of securities, or (d) there is only one holder of
Abana common stock.

In Shields v. Shields, 498 A.2d 161 (1985), the Court of Chancery of
Delaware ("Shields Court") held that the statutory conversion of stock in a
constituent corporation that is effected by a stock for stock merger does not
constitute a sale, transfer or exchange of that stock for purposes of an
agreement among shareholders restricting their power to transfer their stock.
The Shields Court further held that the effect of such a merger is to
extinguish and terminate the stock restriction agreement as of the effective
date of the merger since the security to which the

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<PAGE> 64

agreement applied no longer exists. Accordingly, by virtue of the Merger,
the Stockholders' Agreement will expire as of the Closing Date under the
Agreement.

DESCRIPTION OF COMMON STOCK OF JMED

The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, par value $.04 per share, and 1,000,000 shares of Preferred
Stock, par value $.01 per share.

COMMON STOCK

As of September 30, 1996, there were 27,998,325 shares of Common Stock of
JMED outstanding and held of record by 780 stockholders. Stockholders
are entitled to one vote for each share of Common Stock on matters to be voted
on by the stockholders of the Company. Stockholders will be entitled to
receive dividends when, as and if declared by the Board of Directors and to
share ratably in the assets of the Company legally available for distribution
to its stockholders in the event of the liquidation, dissolution or winding-up
of the Company. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. All of the issued and outstanding shares of
Common Stock are, and all shares of Common Stock to be issued in the Merger
will be, duly authorized, validly issued, fully paid and nonassessable.

PREFERRED STOCK

The Company's Board of Directors may without further action by the
Company's stockholders, from time to time, direct the issuance of shares of
Preferred Stock in series and may, at the time of issuance, determine the
rights, preferences and limitations of each series. The holders of Preferred
Stock would normally be entitled to receive a preference payment in the event
of any liquidation, dissolution of winding-up of the Company before any payment
is made to the holders of the Common Stock. As of September 30, 1996, there
were no shares of Preferred Stock currently designated or outstanding.

The ability of the Company's Board of Directors to issue Preferred Stock
could be exercised to render more difficult the accomplishment of mergers or
other takeover or change in control attempts. To the extent that this ability
has this effect, removal of the Company's incumbent Board of Directors and
management may be rendered more difficult. Further, this may have an adverse
impact on the ability of stockholders of the Company to participate in a tender
or exchange offer for the Common Stock and in so doing diminish the market
value of the Common Stock.

DELAWARE LAW

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such
stockholder became an interested stockholder, unless: (i) prior to such date,
the Board of Directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by persons who
are directors and also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
(iii) on or subsequent to such date, the business combination is approved by
the Board of Directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66_% of the outstanding voting stock which is not owned by the interested
stockholder.

47
<PAGE> 65

LEGAL MATTERS

The validity of the shares of the Common Stock of JMED to be issued in
connection with the Merger will be passed upon for JMED by Greensfelder, Hemker
& Gale, P.C., St. Louis, Missouri. Edward A. Chod, an officer and shareholder
of Greensfelder, Hemker & Gale, P.C. is a director and shareholder of the
Company. Greensfelder, Hemker & Gale, P.C., and certain of its officers
(including Mr. Chod) beneficially owned an aggregate of approximately 58,000
shares of the Common Stock of JMED as of November 1, 1996.

The opinion of counsel included as Appendix A to this Prospectus and
described under the caption "The Merger - Certain Federal Income Tax
Consequences" has been rendered by Sirote & Permutt, P.C., Birmingham, Alabama,
and is included in reliance upon such firm as counsel to Abana in connection
with the Agreement and the Merger.

EXPERTS

The consolidated financial statements of JMED appearing in its Form 10-K
for the year ended December 31, 1995, and the restated consolidated financial
statements of JMED as of December 31, 1994 and 1995, and for each of the three
years in the period ended December 31, 1995, appearing in JMED's Current
Report on Form 8-K dated November 8, 1996, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.

The balance sheets as of December 31, 1994 and 1995, and the statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1995 of Abana, have been audited by Martin
Stuedeman & Associates, P.C., certified public accountants, as indicated in
their report with respect thereto, in reliance upon the authority of said firm
as experts in accounting and auditing.

48
<PAGE> 66

INDEX TO FINANCIAL INFORMATION

FINANCIAL STATEMENTS OF ABANA PHARMACEUTICALS, INC.

FINANCIAL STATEMENTS

Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Balance Sheets as of December 31, 1994 and 1995 . . . . . . . . . . . . . . . . . . . . . . F-3
Statements of Operations for the years ended December 31, 1993, 1994 and 1995 . . . . . . . F-4
Statements of Stockholders' Equity for the years ended December 31, 1993, 1994 and 1995. . . F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 . . . . . . . F-6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

UNAUDITED INTERIM FINANCIAL STATEMENTS

Unaudited Balance Sheets as of December 31, 1995 and September 30, 1996 . . . . . . . . . . F-12
Unaudited Statements of Operations for the three months ended September 30, 1995 and 1996
and for the nine months ended September 30, 1995 and 1996 . . . . . . . . . . . . F-13

Unaudited Statement of Stockholders' Equity for the nine months ended
September 30, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14
Unaudited Statements of Cash Flows for the nine months ended
September 30, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-15
Notes to Unaudited Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . F-16

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Introduction and Notes to Unaudited Pro Forma
Condensed Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . F-18
Unaudited Pro Forma Condensed Combined Balance Sheets of
JMED and Abana as of September 30, 1996 . . . . . . . . . . . . . . . . . . . . . F-19
Unaudited Pro Forma Condensed Combined Statement of Income of
JMED and Abana for the nine months ended September 30, 1996 . . . . . . . . . . . F-20
Unaudited Pro Forma Condensed Combined Statement of Income of
JMED and Abana for the year ended December 31, 1995 . . . . . . . . . . . . . . . F-21

</TABLE>

F-1

<PAGE> 67

[MARTIN STUEDEMAN & ASSOCIATES, P.C. LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Abana Pharmaceuticals, Inc.

We have audited the accompanying balance sheets of Abana Pharmaceuticals, Inc.
(a Delaware corporation) as of December 31, 1994 and 1995, and the related
statements of operations, stockholders' equity, and cash flows for the years
ended December 31, 1993, 1994, and, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Abana Pharmaceuticals, Inc. as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

MARTIN STUEDEMAN & ASSOCIATES, P.C.

March 22, 1996
(except for Note 11, as to
which the date is October 24, 1996)

F-2
<PAGE> 68

ABANA PHARMACEUTICALS, INC.
BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
----------------------------
1994 1995
----------- ----------
<S> <C> <C>
Assets

Current assets:
Cash $ 335,501 $ 919,898
Accounts receivable 96,146 277,245
Inventories 269,935 218,902
Other 11,535 29,720
----------- ----------
Total current assets 713,117 1,445,765
Intangible assets:
Formulas and trademarks 37,650 57,103
Computer software 14,117 18,926
Leasehold improvements 3,315 3,315
----------- ----------
Less accumulated amortization 55,082 79,344
7,557 12,206
----------- ----------
Net intangible assets 47,525 67,138

Net property, plant and equipment 131,182 126,749

Other Assets 90 90
----------- ----------
Total assets $ 891,914 $1,639,742
=========== ==========
Liabilities and stockholders' equity

Current liabilities:
Accounts payable and accrued expenses $ 62,928 $ 40,189
Current portion of long-term debt 24,000 12,000
Dividends payable - 45,336
Other liabilities 25 100
----------- ----------
Total current liabilities 86,953 97,625
----------- ----------
Long-term debt, less current portion 12,000 -

Stockholders' equity:
Common stock, $0.01 par value, 5,000,000 shares
authorized,
2,299,770 and 2,316,770 shares issued, 22,998 23,168
2,290,520 and 2,266,999 shares outstanding 1,785,009 1,811,148
Contributed capital (994,846) (151,425)
Accumulated deficit (20,200) (140,774)
Treasury stock, at cost, 8,250 and 49,882 shares ----------- ----------

Total stockholders' equity 792,961 1,542,117
----------- ----------
Total liabilities and stockholders' equity $ 891,914 $1,639,742
=========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE> 69

ABANA PHARMACEUTICALS, INC.

STATEMENTS OF OPERATIONS

Years Ended December 31,
------------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Sales $2,481,724 $3,007,561 $4,295,152
Cost of sales 664,038 715,535 704,871
---------- ---------- ----------
Gross Profit 1,817,686 2,292,026 3,590,281

Selling, general and administrative expenses:
Selling 1,146,789 1,348,902 1,379,002
General and administrative 706,146 1,042,060 1,339,459
---------- ---------- ----------
Total selling, general and administrative expenses 1,852,935 2,390,962 2,718,461
---------- ---------- ----------

Operating income (loss) (35,249) (98,936) 871,820
---------- ---------- ----------
Other income (expense):
Interest income 9,248 11,950 22,993
Discounts earned 6,297 3,620 1,988
Gain (Loss) on disposal of assets 441 (5,974)
Interest expense (5,958) (4,208) (2,070)
---------- ---------- ----------

Net income (loss) $ (25,221) $ (87,574) $ 888,757
========== ========== ==========

Earnings per common and common equivalent share ($0.01) ($0.04) $ 0.36
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE> 70

ABANA PHARMACEUTICALS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995

<TABLE>
<CAPTION>
Number of Shares Treasury
Common Common Stock Contributed Capital Retained Earnings Shares Total
---------------- ------------ ------------------- ----------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 2,181,881 $21,819 $1,400,423 $(882,051) $ (14,440) $ 525,791
Proceeds from stock offering 100,000 1,000 378,357 - - 379,357
Exercise of stock options 12,639 126 17,547 - - 17,673
Net income (loss) - - - (25,221) - (25,221)

Balance at December 31, 1993 2,294,520 22,945 1,796,327 (907,272) (14,400) 897,600
Exercise of stock options 6,100 61 11,549 - - 11,610
Net income (loss) - - - (87,574) - (87,574)
Capital returned (850) (8) (22,867) - - (22,875)
Stock purchased for treasury - - - - (5,800) (5,800)

Balance at December 31, 1994 2,299,770 22,998 1,785,009 (994,846) (20,200) 792,961
Exercise of stock options 17,000 170 26,139 - - 26,309
Net income (loss) - - - 888,757 - 888,757
Stock purchased for treasury - - - - (120,574) (120,574)
Cash dividends paid - - - (45,336) - (45,336)

Balance at December 31, 1995 2,316,770 $23,168 $1,811,148 $(151,425) $(140,774) $1,542,117
</TABLE>

The acompanying notes are an integral part of these financial statements.

F-5

<PAGE> 71

ABANA PHARMACEUTICALS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
-------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES

Net income (loss) $(25,221) $ (87,574) $ 888,757

Noncash adjustments
Depreciation and amortization 11,867 24,062 33,646
(Gain) loss from disposal of assets (441) - 5,974

Change in assets and liabilities
Accounts receivable (66,723) 43,658 (181,099)
Inventories (70,335) (6,945) 51,033
Prepaid expenses (13,900) 4,738 (18,185)
Deposits - (50) -
Accounts payable (675) 43,343 (20,939)
Other liabilities (647) (280) 75
401(k) plan 17,705 (17,704) -
Interest payable (900) (1,238) (1,800)
-------- --------- ---------
Net cash from operating activities (149,270) 2,010 757,462
-------- --------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment (40,431) (102,077) (45,347)
Proceeds from sale of assets 4,000 - 10,000
Purchases of formulas and trademarks (1,208) (4,595) (19,453)
Purchases of leasehold improvements - (3,315) -
-------- --------- ---------
Net cash from investing activities (37,639) (109,987) (54,800)
-------- --------- ---------
FINANCING ACTIVITIES
Repayment of long-term debt (12,000) (21,000) (24,000)
Net proceeds from issuance of common stock 397,030 11,610 26,309
Purchase of treasury stock - (5,800) (120,574)
Capital returned - (22,875) -
-------- --------- ---------
Net cash from (used for) financing 385,030 (38,065) (118,265)
-------- --------- ---------

Increase (decrease) in cash and cash equivalents 198,121 (146,042) 584,397
Cash and cash equivalents, beginning of year 283,422 481,543 335,501
-------- --------- ---------
Cash and cash equivalents, end of year $481,543 $ 335,501 $ 919,898
======== ========= =========
Supplemental disclosure of cash flows information
Cash paid during the year for interest $ 6,858 $ 5,445 $ 3,870
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE> 72

ABANA PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Abana Pharmaceuticals, Inc. is a Delaware corporation, incorporated on March 7,
1988. The company is engaged in the business of marketing, distribution and
sale of prescription drugs.

ACCOUNTS RECEIVABLE

Management believes that all accounts receivable as of December 31, 1994 and
1995 are fully collectible; therefore, no allowance for doubtful accounts has
been established.

INVENTORIES

Inventories are valued at the lower of cost or market with cost determined on
the first-in, first-out method.

INCOME TAXES

The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," which requires recognition of
deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based on
the differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Expenditures for maintenance and
repairs are expensed currently, while renewals and betterments that materially
extend the life of an asset are capitalized. The cost of assets sold, retired
or otherwise disposed of and the related allowance for depreciation are
eliminated from the accounts, and any resulting gain or loss is included in
operations.

Depreciation is provided using the straight-line method for books and
accelerated methods for tax over the estimated useful lives of the assets which
are as follows:

Machinery and equipment 5-10 years
Leasehold improvements 5 years

Depreciation expense charged to operations for the years ended December 31,
1993, 1994, and 1995 was $10,032, $23,261, and $ 32,835, respectively.

FORMULAS AND TRADEMARKS

Formulas and trademarks are being amortized by the straight line method over
forty years. Amortization expense charged to operations for the years ended
December 31, 1993, 1994, and 1995 was $1,835, $801, and $811, respectively.

F-7
<PAGE> 73
ABANA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 1993, 1994 AND 1995

2. LINE OF CREDIT

The Company has available a $600,000 line of credit with The Bank of Vernon.
At December 31, 1994 and 1995, there were no outstanding balances associated
with this line.

3. LONG-TERM DEBT

Long-term debt consists of the following:

1994 1995
---------- ---------

Note payable to former shareholder in connection with
purchase of treasury stock. Principal payments due in
monthly installments of $1,000 beginning April 1, 1991
through March 1, 1994 and $2,000 beginning April, 1994.
Interest at 9% accrues monthly and is paid annually on
March 31.
$ 36,000 $ 12,000
--------- --------
Less current maturities (24,000) (12,000)
--------- --------
$ 12,000 $ -0-
========= ========

4. LEASE COMMITMENTS

The Company leases office and warehouse space under two noncancelable operating
lease agreements. The terms of the leases are for five years, with options to
renew.

Future minimum rental payments required under the leases as of December 31,
1995 as follows:

1996 $131,309
1997 132,133
1998 132,133
1999 22,022
--------
$417,597

Total rental expense for the years ended December 31, 1993, 1994, and 1995 were
$53,843, $119,002, and $127,172, respectively.

5. CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration of
credit risk consist principally of trade accounts receivables and cash on
deposit in financial institutions. Concentrations of credit risk with respect
to trade receivables are limited due to the large number of customers
comprising the Company's customer base and their dispersion across different
geographic areas. As of December 31, 1995, the Company had no significant
concentrations of credit risk with respect to collectibility of trade accounts
receivables.

F-8
<PAGE> 74
ABANA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 1993, 1994 AND 1995

The Company maintains its cash balances in financial institutions located in
Birmingham, Alabama. The balances are insured by the Federal Deposit Insurance
Corporation up to $100,000. At December 31, 1994 and 1995, the Company's
uninsured cash balances totaled $154,149 and $841,784, respectively.

6. 401(K) SAVINGS PLAN

During 1992 the Company established a 401(k) savings plan for the benefit of
its employees. Employees of the Company may participate in a 401(k) savings
plan, whereby employees may elect to make contributions pursuant to a salary
reduction agreement upon meeting age and length of service requirements. An
employee can contribute up to ten percent of their salary. The Company makes a
matching contribution of ten percent. The Company can also, at the discretion
of the officers, make an additional contribution based on the Company's
performance. The total administrative expense and Company contributions for
the years ended December 31, 1993, 1994, and 1995, were $21,032, $4,267, and
$7,368, respectively.

7. TREASURY STOCK

During the year ended December 31, 1994 and 1995 the Company purchased 2,050
and 40,623 shares of common stock for the treasury at a cost of $5,800 and
$120,574, respectively.

8. STOCK OPTION PLAN

Under the terms of the Company's Stock Option Plan the Company may grant
incentive or non-qualified options to officers and other key employees of the
Company. At December 31, 1994 and 1995, there were 401,261 and 384,261 shares,
respectively, reserved in the Plan for distributions. All options outstanding
at December 31, 1995 will expire no later than January 1, 2006 or at the time
of termination from the Company.

The table below summarizes stock option activity, over the past two years under
the current plan:

<TABLE>
<CAPTION>
Number of Option Price
Shares (range per share)
--------- ----------------
<S> <C> <C>
Outstanding at January 1, 1994 181,861 $1.30-2.20
Granted 10,000 $2.00
Exercised (6,100) $1.30-2.00
Cancelled or expired (9,700)
--------
Outstanding at December 31, 1994 176,061 $1.30-2.20
Granted 20,000 $2.00
Exercised (17,000) $1.30-2.00
Cancelled or expired (13,500)
--------
Outstanding at December 31, 1995 165,561 $1.30-2.20
======== ===========
</TABLE>

F-9
<PAGE> 75
ABANA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 1993, 1994 AND 1995

9. COMMITMENTS AND CONTINGENCIES

The Company, from time to time, becomes involved in various legal matters which
it considers to be in the ordinary course of business. While the Company is
not presently able to determine the potential liability, if any, related to
such matters, the Company believes none of the matters, individually or in the
aggregate, will have a material adverse effect on its financial position.

10. INCOME TAXES

The components of deferred tax assets and liabilities pursuant to SFAS
No. 109 are as follows:

1994 1995
---- ----
<S> <C> <C>
Deferred tax asset:
Net operating loss carryforwards $402,525 $27,478
Deferred tax liability:
Depreciation (7,800) (9,697)

Valuation Allowance (394,725) (17,781)
--------- --------

Net deferred tax asset $-0- $-0-

</TABLE>

The Company's effective tax rate differs from the expected federal income tax
rate as follows:

1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Income tax (benefit) at statutory rate $(4,539) $(15,763) $308,409

Increase (decrease) in valuation allowance 5,548 19,266 (376,944)

State income taxes (benefit), net of federal benefit $(1,009) $(3,503) $68,535
-------- -------- -------

Actual income taxes -0- -0- -0-
</TABLE>

The corporation has available, for tax purposes as benefits to reduce taxes on
future income, the following estimated carryforwards at December 31, 1995:

Year Year of Net
Originated Expiration Operating Loss
---------- ---------- --------------

1993 2008 211
1994 2009 70,253
--------

$ 70,466
========

F-10
<PAGE> 76
ABANA PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 1993, 1994 AND 1995

11. SUBSEQUENT EVENT

On October 24, 1996, the Company and its majority shareholders signed an
agreement to be acquired by merger into a subsidiary of Jones Medical
Industries, Inc. Under the terms of the agreement, Jones Medical Industries,
Inc. will issue approximately 420,000 shares of its common stock to Abana's
stockholders (other than Jones Medical Industries, Inc.) to acquire 100%
ownership of the Company. Management expects this transaction to be
consummated on or about December 31, 1996.

F-11
<PAGE> 77

ABANA PHARMACEUTICALS, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS

Current assets:

Cash and cash equivalents $ 919,818 $ 975,193

Accounts receivable 277,245 297,779

Inventories 218,902 436,012

Deferred income taxes - -

Prepaid expenses and other 29,720 19,991
---------- ----------

Total current assets 1,445,765 1,728,975

Net property, plant and equipment 126,749 190,516

Net intangible assets 67,138 67,423

Other assets 90 90
---------- ----------
$1,639,742 $1,987,004
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued expenses $ 40,289 $ 354,218

Current portion of long-term debt 12,000 -

Dividends payable 45,336 282
---------- ----------

Total current liabilities 97,625 354,499

Long-term debt - -

Deferred income taxes - -

Contingencies and commitments - -

Stockholders' equity:

Common stock 23,168 23,171

Contributed capital 1,811,148 1,811,795

Treasury stock, at cost, 9,250 and 49,882 shares (140,774) (144,774)

Accumulated deficit (151,425) (57,687)
---------- ----------

Total stockholders' equity 1,542,117 1,632,505
---------- ----------

$1,639,742 $1,987,004
========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-12
<PAGE> 78

ABANA PHARMACEUTICALS, INC.
STATEMENT OF OPERATIONS
(unaudited)

<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- --------------------------
1995 1996 1995 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $ 832,789 $1,400,833 $2,868,324 $4,103,136

Cost of sales 116,723 325,051 469,955 735,996
---------- ---------- ---------- ----------

Gross profit 716,065 1,075,781 2,398,369 3,367,140

Selling, general adminstrative expenses:

Selling 386,462 770,716 1,069,485 2,029,149

General and administrative 258,528 439,648 869,383 1,164,085

Amortization 200 265 599 664
---------- ---------- ---------- ----------

Total selling, general and administrative expenses 645,189 1,210,629 1,939,466 3,193,898
---------- ---------- ---------- ----------

Operating income (loss) 70,876 (134,847) 458,903 173,242

Other income (expense):

Interest income 6,526 9,558 16,152 31,525

Interest expense (495) (306) (1,905) (456)

Loss on disposal of equipment (4,554) (268) (4,554) (268)

Provision for bad debt - (10,319) - (10,319)

Other income (expense) 429 1,086 1,206 2,955
---------- ---------- ---------- ----------

Income (loss) before income taxes 72,782 (135,096) 469,802 196,678

Income taxes - 35,000 - 35,000

Net income (loss) $ 72,782 $ (170,096) $ 469,802 $ 161,678
========== ========== ========== ==========

Average shares outstanding 2,469,381 2,267,213 2,291,176 2,394,917

Earnings per common and common equivalent share $ 0.03 $ (0.07) $ 0.21 $ 0.07
========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-13
<PAGE> 79

ABANA PHARMACEUTICALS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE NINE MONTH ENDED SEPTEMBER 30, 1995 AND 1996

(UNAUDITED)

<TABLE>
<CAPTION>
Number of
Shares Common Contributed Retained Treasury
Common Stock Capital Earnings Shares Total
--------- ------ ------------ -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>

Balance at December 31, 1994 2,299,770 $ 22,998 $ 1,785,009 $(994,846) $ (20,200) $ 792,961
Exercise of stock options 3,000 30 5,970 - - 6,000
Net income (loss) - - - 469,801 - 469,801)
Stock purchased for treasury - - - - (104,688) (104,688
Cash dividends paid - - - - - -
---------- -------- ------------ --------- ---------- -----------
Balance at September 30, 1995 2,302,770 23,028 1,790,979 (525,045) (124,888) 1,164,074
========== ======== ============ ========= ========== ===========

Balance at December 31, 1995 2,316,770 23,168 1,811,148 (151,425) (140,774) 1,542,117
Exercise of stock options 325 3 647 - - 650
Net income (loss) - - - 161,678 - 161,678)
Stock purchased for treasury - - - - (4,000) (4,000)
Cash dividends paid - - - (67,940) - (67,940
---------- -------- ------------ --------- ---------- -----------
Balance at September 30, 1996 2,317,095 $ 23,171 $ 1,811,795 $ (57,687) $(144,774) 1,632,505
========== ======== ============ ========= ========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-14
<PAGE> 80

ABANA PHARMACEUTICALS, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1995 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES

Net income $469,801 $161,679
Noncash adjustments
Depreciation and amortization 23,459 32,213
Provision for uncollectibles - 10,319
Loss from disposal of assets 4,554 -
Change in assets and liabilities (127,152) (27,041)
Accounts receivable (19,806) (217,045)
Inventories (12,493) 9,729
Prepaid expenses and other assets (52,354) 265,064
Accounts payable and accrued expenses -------- --------
Net cash from operating activities 286,009 234,918
-------- --------
INVESTING ACTIVITIES
Additions to property and equipment (22,933) (96,334)
Proceeds from sale of property and equipment 10,000 -
Additions to formulas and trademarks (4,935) -
Additions to computer software - -
-------- --------
Net cash used for investing activities (17,868) (96,334)
-------- --------
FINANCING ACTIVITIES
Repayment of long-term debt (18,000) (12,000)
Payment of dividends - (67,939)
Proceeds from exercise of stock options 6,000 650
Purchase of treasury stock (104,687) (4,000)
-------- --------
Net cash used for financing (116,687) (83,289)
-------- --------
Increase in cash and temporary investments 151,454 55,295
Cash and temporary investments, beginning of 335,501 919,898
period -------- --------
Cash and temporary investments, end of period $486,955 $975,193
======== ========
Supplemental disclosure of cash flows
information:
Cash paid during the year for interest $ 1,905 $ 456
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-15
<PAGE> 81

ABANA PHARMACEUTICALS, INC.

NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1996
(UNAUDITED)

1. GENERAL

The unaudited interim financial information reflects all adjustments
(consisting of normal recurring accruals) which management considers necessary
for a fair presentation of the results of operations for such periods and is
subject to year end adjustments. Certain footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted from the unaudited interim
financial information as permitted by the rules and regulations of the
Securities and Exchange Commission. Management believes that the disclosures
made are adequate to make the information presented not misleading. The
results for the interim periods are not necessarily indicative of the results
for the full year. It is suggested that these financial statements be read in
conjunction with the Company's audited financial statements and notes thereto
for the year ended December 31, 1995.

2. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE

Earnings per common and common equivalent share are based on the weighted
average number of shares of common stock and common stock equivalents
outstanding during the period (2,469,381 and 2,291,176 for the three months and
nine months ended September 30, 1995; 2,267,213 and 2,394,917 for the three
months and nine months ended September 30, 1996.)

3. INVENTORIES

Inventories are valued at the lower of cost or market on a first in, first
out basis.

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are as follows:

December 31, September 30,
1995 1996
(Unaudited)
------------- -------------
<S> <C> <C>
Machinery and equipment . . . . . . . . . . $203,277 $292,216

Less accumulated depreciation
and amortization . . . . . . . . . . . . . . 76,528 101,700
-------- --------
$126.749 $190,516
======== ========
</TABLE>

F-16

<PAGE> 82

ABANA PHARMACEUTICALS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995 AND 1996
(UNAUDITED)

5. INTANGIBLE ASSETS

Intangible assets are as follows:

December 31, September 30,
1995 1996
(Unaudited)
------------ -------------
<S> <C> <C>
Leasehold improvements . . . . . . . . . $ 3,315 $ 3,315
Computer software . . . . . . . . . . . 18,926 19,721
Formulas and trademarks . . . . . . . . 51,493 50,829
-------- --------

73,734 73,865
Less accumulated
amortization . . . . . . . . . . . . . . 6,596 6,442
------- -------

$67,138 $67,423
======= =======
</TABLE>

6. INCOME TAXES

The provision for income taxes at September 30, 1996 of $35,000 is based
on an effective annual income tax rate of 18%.

7. COMMITMENTS AND CONTINGENCIES

The Company, from time to time becomes involved in various legal matters
which it considers to be in the ordinary course of business. While the
Company is not presently able to determine the potential liability, if
any, related to such matters, the company believes none of the matters,
individually or in the aggregate, will have a material adverse effect on
its financial position.

F-17
<PAGE> 83

JONES MEDICAL INDUSTRIES, INC.
ABANA PHARMACEUTICALS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

INTRODUCTION

The following unaudited pro forma condensed combined balance sheet of
Jones Medical Industries, Inc. ("JMED") at September 30, 1996 has been prepared
to give effect to the acquisition of Abana Pharmaceuticals, Inc. ("Abana") as
if the acquisition (the "Merger") had occurred on September 30, 1996. The
related pro forma condensed combined statements of income for the year ended
December 31, 1995 and the nine months ended September 30, 1996, have been
prepared to give effect to the acquisition of Abana as if the Merger had
occurred at the beginning of the respective periods.

These unaudited pro forma condensed combined financial statements do not
purport to represent what JMED's financial position or results of operations
for the indicated periods would actually have been had the transactions in fact
occurred on the indicated dates, or to project JMED's financial position or
results of operations for any future periods. The pro forma adjustments are
based upon available information and upon certain assumptions that management
of JMED believes are reasonable under the circumstances.

The pro forma condensed combined financial statements should be read in
conjunction with the historical financial statements and notes thereto for
Abana which are included elsewhere in this Prospectus and in conjunction with
(i) the historical consolidated financial statements and notes thereto for JMED
which are incorporated by reference in this Prospectus to the Company's Current
Report on Form 8-K dated November 8, 1996 (restating the historical financial
statements and notes thereto filed with in the Compnay's 10-K for the year
ended December 31, 1995, but reflecting the Daniels Acquistion on August 30,
1996, as a "pooling of interests" transaction) and (ii) the Company's Quarterly
Report on Form 10-Q for the three and nine months ended September 30, 1996.
See "Incorporation of Certain Documents by Reference."

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(A) To record the purchase of the common stock of Abana by JMED, to allocate
the purchase price to the fair value of the assets, less the liabilities
assumed and to eliminate Abana's equity accounts.

(B) To reclassify JMED's prior investment in the common stock of Abana.

(C) To record amortization expense for the acquired intangibles using
estimated economic lives of approximately 25 years.

(D) Pro forma combined earnings per common share and common equivalent share
reflect the adjustment in pro forma combined net income and the increase
in outstanding shares assuming the Common Stock of JMED to be issued in
the Merger were outstanding during the entire period.

(E) To record increase in tax provision due to net operating loss
carryforwards of Abana that would not be utilized by the combined
entities.

F-18

<PAGE> 84

JONES MEDICAL INDUSTRIES, INC. - ABANA PHARMACEUTICALS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET

SEPTEMBER 30, 1996
(in thousands)

<TABLE>
<CAPTION>
JMED Abana Combined
September September Before Pro Forma Pro Forma
30, 1996 30, 1996 Adjustments Adjustments Combined
--------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>

Assets

Current assets
Cash & cash equivalents $ 46,518 $ 975 $ 47,493 - $ 47,493
Marketable securities 120 - 120 - 120
Accounts receivable, net 10,325 298 10,623 - 10,623
Inventory 12,895 436 13,331 - 13,331
Deferred income taxes 1,694 - 1,694 - 1,694
Prepaid expenses and other 804 20 824 - 824
-------- ------ -------- -------------- --------
Total current assets $ 72,356 $1,729 $ 74,085 - $ 74,085

Non-current assets
Net plant, property & equip 22,748 187 22,935 - 22,935
Intangible assets, net 57,080 71 57,151 (A,B) $13,868 71,019
Other assets 2,701 - 2,701 (B) (500) 2,201
-------- ------ -------- -------------- --------

Total non-current assets $ 82,529 $ 258 $ 82,787 $13,368 $ 96,155
-------- ------ -------- -------------- --------

Total Assets $154,885 $1,987 $156,872 $13,368 $170,240
======== ====== ======== ============== ========
Liabilities & Stockholder Equity

Current liabilities
Accounts payable & accruals $ 5,384 $ 354 $ 5,738 - $ 5,738
Current portion long term debt 3,000 - 3,000 - 3,000
Income taxes payable 7 - 7 - 7
Dividends payable 560 - 560 - 560
-------- ------ -------- -------------- --------

Total current liabilities $ 8,951 $ 354 $ 9,305 - $ 9,305

Deferred income taxes 4,526 - 4,526 (A) 76 4,602

Total stockholders' equity 141,408 1,633 143,041 (A) 13,292 156,333
-------- ------ -------- -------------- --------

Total Liabilities &
Stockholders' Equity $154,885 $1,987 $156,872 $13,368 $170,240
======== ====== ======== ============== ========

</TABLE>

F-19

<PAGE> 85

JONES MEDICAL INDUSTRIES, INC. - ABANA PHARMACEUTICALS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
(in thousands, except per share amounts)
(unaudited)

<TABLE>
<CAPTION>
JMED Abana
9 months 9 months Pro Forma Pro Forma
9/30/96 9/30/96 Adjustments Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>

Net sales $73,810 $4,024 $77,834
Cost of sales 30,305 657 30,962
------- ------ -------
Gross margin $43,505 $3,367 $46,872

S, G & A expenses
Selling 11,122 1,908 13,030
General & administrative 6,178 1,284 7,462
Research & development 286 - 286
Amortization 1,920 - (C) $ 446 2,366
Acquisition costs(1) 5,665 - 5,665
------- ------ ----------- -------

Total S,G & A $25,171 $3,192 $ 446 $28,809
------- ------ ----------- -------

Operating Income $18,334 $ 175 $ (446) $18,063

Other income, net 1,199 24 - 1,223
------- ------ ----------- -------

Income before taxes $19,533 $ 199 $ (446) $19,286

Income taxes 8,158 35 (E) 45 8,238
------- ------ ----------- -------

Net Income $11,375 $ 164 $ (491) $11,048
======= ====== =========== =======

Average shares outstanding 27,776 (D) 421 28,197
======= ========== =======
Earnings per share $ 0.41 $ 0.39
======= =======
</TABLE>

(1) Reflecting expenses associated with the Daniels Acquisition

F-20

<PAGE> 86

JONES MEDICAL INDUSTRIES, INC. - ABANA PHARMACEUTICALS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(in thousands, except per share amounts)
(unaudited)

<TABLE>
<CAPTION>
JMED Abana
year ended year ended Pro Forma Pro Forma
12/31/95 12/31/95 Adjustments Combined
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>

Net sales $74,792 $4,210 $79,002
Cost of sales 32,754 620 33,374
------- ------ -------

Gross margin $42,038 $3,590 $45,628

S, G & A expenses
Selling 12,679 1,379 14,058
General & administrative 7,193 1,339 8,532
Research & development 453 - 453
Amortization 1,430 - (C) $595 2,025
------- ------ -------- -------

Total S,G & A $21,755 $2,178 $595 $25,068
------- ------ -------- -------

Operating Income $20,283 $ 872 $(595) $20,560

Other income, net (483) 17 - (466)
------- ------ -------- -------

Income before taxes $19,800 $ 889 $(595) $20,094

Income taxes 7,411 - (E) 330 7,741
------- ------ -------- -------

Net Income $12,389 $ 889 $(925) $12,353
======= ====== ======= =======

Average shares outstanding 24,844 (D) 421 25,265
======= ======== =======

Earnings per share $0.50 $0.49
===== =====

</TABLE>

F-21

<PAGE> 87

APPENDIX A

[SIROTE & PERMUTT LETTERHEAD]

November 20, 1996

Abana Pharmaceuticals, Inc.
Suite 260
One Chase Corporate Drive
Birmingham, Alabama 35244

Attn: Dale E. Eads

Re: Merger of Abana Pharmaceuticals, Inc. with and into Abana Acquisition
Corporation, a wholly-owned subsidiary of Jones Medical Industries, Inc.

Gentlemen:

You have requested our opinion with respect to certain federal income tax
consequences of the merger of Abana Pharmaceuticals, Inc., a Delaware
corporation (the "Company") with and into Abana Acquisition Corporation, a
Delaware corporation ("AAC"), a wholly-owned subsidiary of Jones Medical
Industries, Inc., a Delaware corporation ("JMED"), in exchange for shares of
JMED Common Stock, as hereinafter described. Our opinion is based on (i) the
Agreement of Reorganization and Agreement (the "Agreement") entered into as of
October 24, 1996, by and among the Company, JMED, Dale E. Eads ("Eads") and
Perry N. Cole ("Cole") (Eads and Cole are referred to herein as the "Principal
Holders"); (ii) the Form S-4 Registration Statement to be filed with the
Securities and Exchange Commission in connection with the Merger (the
"Registration Statement"); and (iii) the facts, representations, and
assumptions set forth below. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Agreement, as the case may be.

FACTS

The following facts were ascertained from our review of the Agreement and
the Registration Statement. In rendering our opinions below, we have assumed
all of the facts stated herein and therein are accurate, without independently
verifying the accuracy of any such facts. Furthermore, we are relying on the
truth of the covenants, representations, and warranties of the Company, JMED,
AAC, and the Principal Holders as set forth in the Agreement.

Capital Structure of the Company

The Company is a corporation duly organized and existing under the laws of
the State of Delaware with authorized capital consisting of 5,000,000 shares of
common stock, par value $.01 per share ("Company Common Stock"), of which
2,274,213 shares are issued and outstanding and held by approximately 130
shareholders ("Shareholders").

Appendix A - Page 1
<PAGE> 88

Capital Structure of AAC and JMED

AAC is a corporation duly organized and existing under the laws of the
state of Delaware with authorized capital consisting of 3,000 shares, of
common stock, par value $.01 per share, of which 1,000 shares are issued
and outstanding and held by JMED.

JMED is a corporation duly organized and existing under the laws of the
state of Delaware with authorized capital consisting of (i) 30,000,000 shares
of common stock, par value $.04 per share ("JMED Common Stock"), of which
27,998,325 were issued and outstanding as of September 30, 1996; and
(ii) 1,000,000 shares of preferred stock, of which no shares were issued and
outstanding as of September 30, 1996.

The Merger

The Agreement provides for the merger of the Company with and into AAC
pursuant to Section 251 of the Delaware General Corporation Law ("DGCL") (the
"Merger"). Upon consummation of the Merger, the separate corporate existence
of the Company shall cease, and AAC shall continue as the surviving
corporation. All property of the Company of every kind and description shall
be vested in and devolve upon AAC without further act and deed, and AAC shall
assume all of the liabilities of every kind and description of the Company.

On the Closing Date, each share of the Company Common Stock issued and
outstanding immediately before the Closing Date shall be converted into
approximately 0.22 shares of JMED Common Stock. The Agreement provides that the
Shareholders will receive cash in lieu of fractional shares of JMED Common
Stock.

In Section 2.3 of the Agreement, JMED agrees to file with the Securities
and Exchange Commission the Registration Statement on Form S-4 relating to the
shares of the JMED Common Stock to be issued to the Shareholders other than the
Principal Holders pursuant to the Agreement and to use its reasonable best
efforts to cause the Registration Statement to become effective. In Section
2.4 of the Agreement, JMED agrees to file a registration statement under which
JMED agrees to register the shares of JMED Common Stock to be issued to the
Principal Holders and to keep the prospectus that is a part of the registration
statement current for at least two years after the Closing Date.

To secure the Principal Holders' indemnification for breaches of
representations, warranties and covenants, the Principal Holders will each
deposit into escrow with a third party escrow agent 30,000 shares (the
"Indemnity Shares") of the JMED Common Stock to be received in the Merger
pursuant to Section 1.6 of the Agreement and the Indemnification and Escrow
Agreement attached thereto as Exhibit I (the "Escrow Agreement"). Under the
Escrow Agreement, the escrow agent will hold the Indemnity Shares in escrow
until March 31, 1998, at which time the escrow agent will disburse to the
Principal Holders all but 10,000 of the Indemnity Shares except to the extent
required to satisfy indemnification claims, if any, made by JMED under the
Agreement. All remaining Indemnity Shares shall be released from the escrow
and distributed to the Principal Holders on the later of: (i) the date upon
which all pending claims by JMED or AAC for indemnification have been resolved
or (ii) the earlier of (a) thirty (30) days following the completion of any and
all audits of the federal and state tax returns of Abana for periods ending on
or prior to the Closing Date or (b) September 15, 1999. During the term of the
Escrow Agreement, the escrow agent shall disburse any dividends received with
respect to the Indemnity Shares.

In connection with your request that we furnish this opinion, certain
representations have been made to us by the Company and the Principal Holders
and certain assumptions have been made by us with respect to the existence of
certain facts. These constitute material representations and assumptions
relied upon by us as a basis for our opinion, and our opinion is conditioned
upon the initial and continuing accuracy of these representations and
assumptions. These representations and assumptions are substantially the same
as the representations required by the Internal Revenue Service (the "IRS") in
order to seek a private letter ruling with respect to the applicability of
Section 368(a)(1)(A) and (2)(D) of the Internal Revenue Code of 1986, as
amended (unless otherwise stated, all

Appendix A - Page 2
<PAGE> 89

references to Sections refer to the Internal Revenue Code of 1986, as amended),
as set forth in Revenue Procedure 86-42, 1986-2 C.B. 722, section 7.03.
Although the IRS has announced that it will no longer issue advance rulings
under Section 368(a)(1)(A), it did not revoke Revenue Procedure 86-42.
Specifically, the Company and the Principal Holders have been represented to us
that:

1. As of the date of this opinion, the fair value of the JMED Common Stock
and other consideration receivable by the Shareholders will be
approximately equal to the fair value of the Company Common Stock to be
surrendered in the exchange.

2. There is no present plan or intention by the Principal Holders or, to the
best of the Principal Holders' knowledge, any of the other Shareholders to
sell, exchange or otherwise dispose of a number of shares of JMED Common
Stock to be received in the Merger that would reduce the aggregate
ownership of JMED Common Stock to a number of shares having a value, as of
the date of the Merger, of less than 50 percent of the value of all of the
formerly outstanding Company Common Stock as of the date of the Merger.
For purposes of this representation, shares of the Company Common Stock
and shares of JMED Common Stock held by the Shareholders and otherwise
sold, redeemed, or disposed of prior to, or with respect to which there is
a plan or intent to so sell, redeem or dispose of subsequent to, the
Merger will be considered in making this representation.

3. AAC will acquire at least 90 percent of the fair value of the net assets
and at least 70 percent of the fair value of the gross assets held by the
Company immediately prior to the Merger. For purposes of this
representation, the Company assets used to pay its reorganization expenses
and all redemptions and distributions (except for regular, normal
dividends) made by the Company immediately preceding the Merger will be
included as assets of the Company held immediately prior to the Merger.

4. The liabilities of the Company assumed by AAC and the liabilities to
which the transferred assets of the Company are subject were incurred by
the Company in the ordinary course of business.

5. Neither JMED nor AAC will pay the expenses of the Company or the
Shareholders incurred in connection with the Merger.

6. There is no intercorporate indebtedness existing between JMED and the
Company or between AAC and the Company that was issued, acquired, or will
be settled at a discount.

7. The Company is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of Section 368(a)(3)(A).

8. The fair value of the assets of the Company transferred to AAC will equal
or exceed the sum of the liabilities assumed by AAC, plus the amount of
liabilities, if any, to which the transferred assets are subject.

9. No stock of AAC will be issued in the Merger.

10. The following representations pertain to the terms and conditions
associated with the Escrow Agreement:

(a) There is a valid business reason for establishing such escrow;

(b) The Indemnity Shares will appear as issued and outstanding on the
balance sheet of JMED and such stock is legally outstanding under
applicable state law;

(c) All dividends paid on the Indemnity Shares during the period of
the Escrow Agreement will be distributed currently to
the Principal Holders;
Appendix A - Page 3

<PAGE> 90

(d) All voting rights of the Indemnity Shares will be exercisable by
or on behalf of the Principal Holders;

(e) None of the Indemnity Shares are subject to restrictions requiring
their return to JMED because of death, failure to continue
employment, or similar restrictions;

(f) All Indemnity Shares will be released from the escrow within 5
years from the Closing Date (except where there is a bona fide
dispute as to whom the stock should be released);

(g) The return of the Indemnity Shares will not be triggered by an
event the occurrence or nonoccurrence of which is within the
control of the Principal Holder;

(h) The return of Indemnity Shares will not be triggered by the
payment of additional tax or reduction in tax paid as a result
of an IRS audit of the Company or the Principal Holders with
respect to the Merger;

(i) The mechanism for the calculation of the number of shares of the
Indemnity Shares to be returned is objective and readily
ascertainable; and

(g) At least 50 percent of the number of shares of JMED Common Stock
issued initially to Company Shareholders in the merger is not
subject to such escrow arrangement.

In addition to the above factual representations, we have assumed the
existence of the following facts for purposes of rendering our opinion:

1. Prior to the Merger, JMED will be in control of AAC within the meaning
of Section 368(c).

2. Following the Merger, AAC will not issue additional shares of its stock
that would result in JMED losing control of AAC within the meaning of Section
368(c).

3. JMED has no plan or intention to reacquire any of the JMED Common Stock
issued in the Merger except for Indemnity Shares reacquired by JMED pursuant to
the Escrow Agreement.

4. JMED has no plan or intention to liquidate AAC; to merge AAC with and
into another corporation; to sell or otherwise dispose of the AAC stock; or to
cause AAC to sell or otherwise dispose of any of the assets of the Company
acquired in the Merger, except for dispositions made in the ordinary course of
business or transfers described in Section 368(a)(2)(C).

5. Following the Merger, AAC will continue the historic business of the
Company or use a significant part of the Company's historic business assets in
a business.

6. Neither the Company, JMED, nor AAC is an investment company as defined
in Sections 368(a)(2)(F)(iii) and (iv).

7. The JMED Common Stock exchanged by AAC in the Merger will be received
by AAC immediately prior to and in connection with the Merger.

8. The Merger will be carried out strictly in accordance with the terms of
the Agreement.

9. The Shareholders will receive cash in lieu of fractional shares of JMED
in the Merger in accordance with Section 1.3 of the Agreement.

Appendix A - Page 4
<PAGE> 91

10. There are no other agreements, arrangements, or understandings among
any of the Company, the Shareholders, JMED, and AAC other than those described
or referenced in the Agreement.

11. The Merger will constitute a statutory merger under the applicable
laws of the State of Delaware.

12. The Shareholders will not dispose of the JMED Common Stock received by
the Shareholders in the Merger to such extent as to cause the Merger to not
satisfy the continuity of proprietary interest requirement of Treasury
Regulation Section 1.368-1(b).

LEGAL AUTHORITIES

Section 368(a)(1)(A) defines a "reorganization" to include a statutory
merger. Treasury Regulation Section 1.368-2(b)(1) provides that in order to
qualify as a reorganization under Section 368(a)(1)(A) the transaction must be
a merger effected pursuant to the corporation laws of the United States or a
State or Territory or the District of Columbia.

Section 368(a)(2)(D) provides that a transaction otherwise qualifying
under Section 368(a)(1)(A) shall not be disqualified by reason of the fact that
stock of a corporation which is in control, within the meaning of Section
368(c), of the acquiring corporation is used in the transaction if (i) the
acquiring corporation acquires "substantially all of the properties" of the
acquired corporation as a result of the transaction, and (ii) no stock of the
acquiring corporation is used in the transaction.

Control is defined in Section 368(c) as the ownership of stock possessing
at least 80 percent of the total combined voting power of all classes of stock
entitled to vote and at least 80 percent of the total number of shares of all
other classes of stock of the corporation.

Treasury Regulation Section 1.368-2(b)(2) provides that the term
"substantially all" under Section 368(a)(2)(D) has the same meaning as it has
in Section 368(a)(1)(C). The IRS provided in Revenue Ruling 57-518, 1957-2
C.B. 253 that the test for substantially all under Section 368(a)(1)(C) will
depend on the facts and circumstances in each case rather than upon any
particular percentage. For advance ruling purposes, the IRS indicated in
Revenue Procedure 77-37, 1977-2 C.B. 568 that the "substantially all"
requirement will be satisfied if there is a transfer of assets representing at
least 90 percent of the fair market value of the net assets and at least 70
percent of the fair market value of the gross assets held by the acquired
corporation immediately prior to the transfer.

Treasury Regulation Section 1.368-1(b) provides that requisite to a
reorganization under Section 368(a) is a continuity of the business enterprise
under the modified corporate form. Treasury Regulation Section 1.368-1(d)(2)
provides that continuity of business enterprise requires that the acquiring
corporation either (i) continue the historic business of the acquired
corporation or (ii) use a significant portion of the acquired corporation's
historic business assets in a business.

Treasury Regulation Section 1.368-1(b) also provides that requisite to a
reorganization under Section 368(a)(1) is a continuity of interest in the
business enterprise on the part of those persons who, directly or indirectly,
were the owners of the enterprise prior to the reorganization. For advance
ruling purposes, the IRS provided in Revenue Procedure 77-37, 1977-2 C.B. 568
that the continuity of interest requirement is satisfied if there is a
continuing interest through stock ownership in the acquiring corporation (or a
corporation in control thereof) on the part of the direct or indirect former
owners of the acquired corporation which is equal in value, as of the effective
date of the reorganization, to at least 50 percent of the value of all of the
formerly outstanding stock of the acquired corporation as of the same date.
Sales, redemptions, and other dispositions of stock occurring prior or
subsequent to the plan of reorganization will be considered in determining
whether there is a 50 percent continuing interest

Appendix A - Page 5
<PAGE> 92
through stock ownership as of the effective date of the reorganization.
Revenue Procedure 77-37, by its terms, does not define, as a matter of law, the
lower limits of continuity of interest. See, e.g., John A. Nelson Co. v.
Helvering, 296 U.S. 374 (1935); Helvering v. Minnesota Tea Co., 296 U.S. 378
(1935); Miller v. Commissioner, 84 F.2d 415 (6th Cir. 1936).

The direct or indirect owners of the acquired corporation must not plan or
intend, at the time of the reorganization, to sell, exchange or otherwise
dispose of a number of shares of the stock of the acquiring corporation (or the
corporation in control thereof) received in the reorganization that would
negate the required continuity of interest in the acquiring corporation under
Treasury Regulation Section 1.368-1(b); if they do have such a plan or intent,
any post-reorganization sales of such stock will be taken into account in
determining whether the continuity of interest requirement is satisfied. See
e.g., McDonald's Restaurants of Illinois v. Commissioner, 688 F.2d 520 (7th
Cir. 1982); Penrod v. Commissioner, 88 T.C. 1415 (1987).

In Revenue Procedure 84-42, 1984-1 C.B. 521, the IRS stated that in
reorganization transactions a portion of the stock issued in exchange for the
requisite stock or property may be placed in escrow by the exchanging
shareholders for possible return to the issuing corporation under specified
conditions provided that: (i) there is a valid business reason for establishing
the arrangement; (ii) the stock subject to such arrangement appears as issued
and outstanding on the balance sheet of the issuing corporation and such stock
is legally outstanding under applicable state law; (iii) all dividends paid on
such stock will be distributed currently to the exchanging shareholders; (iv)
all voting rights of such stock are exercisable by or on behalf of the
shareholders or their authorized agent; (v) no shares of such stock are subject
to restrictions requiring their return to the issuing corporation because of
death, failure to continue employment, or similar restrictions; (vi) all such
stock is released from the arrangement within 5 years from the date of the
consummation of the transaction (except where there is a bona fide dispute as
to whom the stock should be released), (vii) at least 50 percent of the number
of shares of each class of stock issued initially to the shareholders is not
subject to the arrangement; (viii) the return of stock will not be triggered by
an event the occurrence or nonoccurrence of which is within the control of the
shareholders; (ix) the return of stock will not be triggered by the payment of
additional tax or reduction in tax paid as a result of an audit by the IRS of
the shareholders or the corporation; and (x) the mechanism for the calculation
of the number of shares of stock to be returned is objective and readily
ascertainable.

Section 354(a)(1) provides the general rule that no gain or loss shall be
recognized if stock or securities in a corporation a party to a reorganization
are, in pursuance of the plan of reorganization, exchanged solely for stock or
securities in such corporation or in another corporation a party to the
reorganization. Section 368(b)(2) defines a party to a reorganization to
include in the case of a reorganization under Section 368(a)(2)(D) the acquired
corporation, the acquiring corporation, and the corporation in control of the
acquiring corporation.

Section 1223(l) provides that in determining the period for which the
taxpayer has held property received in an exchange, there shall be included the
period for which he held the property exchanged if the property has, for the
purpose of determining gain or loss from a sale or exchange, the same basis in
whole or part in his hands as the property exchanged and the property exchanged
at the time of such exchange was a capital asset as defined in Section 1221.

Section 361(a) provides the general rule that no gain or loss shall be
recognized to a corporation if such corporation is a party to a reorganization
and exchanges property, in pursuance of the plan of reorganization, solely for
stock or securities in another corporation a party to the reorganization.

Section 358(a)(1) provides that in the case of an exchange to which
Section 354 applies, the basis of the property permitted to be received under
Section 354 without the recognition of gain or loss shall be the same as that
of the property exchanged.

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OPINIONS

Based upon the facts, representations, and assumptions set forth above,
the authorities and ruling policies of the IRS discussed above as applied to
those facts, representations, and assumptions and conditioned upon the initial
and continuing accuracy of the representations and assumptions set forth above,
it is our opinion that:

1. The Merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and (2)(D), and the Company, AAC, and JMED will each be a
party to the reorganization within the meaning of Section 368(b).

2. No gain or loss will be recognized by the Shareholders upon the receipt
of shares of JMED Common Stock in exchange for shares of the Company Common
Stock pursuant to the Merger.

3. Shareholders who receive cash in lieu of fractional shares of JMED
Common Stock will recognize gain to the extent the amount of cash received
exceeds the tax basis of the fractional JMED Common Stock interest or recognize
loss to the extent the tax basis of the fractional JMED Common Stock interest
exceeds the amount of cash received. Such gain or loss shall be long term
capital gain or loss, provided the Company Common Stock was held as a capital
asset for at least one year immediately prior to the Merger.

4. The tax basis of the shares of JMED Common Stock to be received by each
of the Shareholders in the Merger will be the same as the tax basis for its
Company Common Stock.

5. The holding period of the JMED Common Stock received by the Shareholders
in the Merger will include the holding period of the shares of the Company
Common Stock exchanged therefor, provided the Company Common Stock was held as
a capital asset immediately before the Merger.

6. No gain or loss will be recognized by the Company upon the transfer of
its assets to AAC pursuant to the Merger.

In rendering our opinions, we have considered and relied upon the
authorities and ruling policies of the IRS discussed above, all of which are
subject to change prospectively and retroactively. No assurance can be given
that the federal income tax consequences of the Merger under subsequent
legislation, Treasury Regulations, administrative rulings and interpretations,
or judicial decisions will be the same as the federal income tax consequences
stated in this opinion.

We have rendered the foregoing opinions as of the date hereof, and we do
not undertake to supplement our opinions with respect to factual matters or
changes in the law which may hereafter occur.

We express no opinion as to the tax treatment of the Merger under the
provisions of any other Sections of the Code which may also be applicable
thereto or to the tax treatment of any conditions existing at the time of, or
effects resulting from, the transactions which are not specifically addressed
in the foregoing opinions.

Our opinions expressed herein are given to you by us solely for your use
and are not to be quoted or otherwise referred to or furnished to any
governmental agency (other than to the Securities and Exchange Commission as an
exhibit to the Registration Statement or to the IRS in connection with an
examination of the Merger) or to other persons without our prior written
consent. We hereby consent to the use of our name under "Certain Federal
Income Tax Consequences" in the Registration Statement and the filing of a copy
of this opinion as an exhibit to the Registration Statement.

Sincerely,

Sirote & Permutt, P.C.

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APPENDIX B

DELAWARE GENERAL CORPORATION LAW

Section 262. APPRAISAL RIGHTS.

(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section
228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share"
mean and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251, Section 252, Section 254, Section 257,
Section 258, Section 263 or Section 264 of this title:

(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsections (f) or (g) of Section 251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to Section Section 251, 252, 254, 257, 258, 263 and 264 of this title to
accept for such stock anything except:

a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository
receipts in respect thereof;

b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of
stock or depository receipts at the effective date of
the merger or consolidation will be either listed on a
national securities exchange or designated as a national
market system security on an interdealer quotation
system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000
holders;

c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing
subparagraphs a. and b. of this paragraph; or

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<PAGE> 95
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or
fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.

(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned
by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware
corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights
are available pursuant to subsection (b) or (c) hereof that appraisal
rights are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of his shares shall
deliver to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of his shares. Such demand
will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or

(2) If the merger or consolidation was approved pursuant to Section 228
or 253 of this title, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.

(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the

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<PAGE> 96

consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after his written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.

(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.

(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.

(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.

(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.

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(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.

(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.

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