SECURITIES
AND EXCHANGE COMMISSIONWASHINGTON,
D.C. 20549 
 FORM 10-Q x
  QUARTERLY
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For
the period ended March 31, 2001 Commission
file number 0-19878 
 OPTION
CARE, INC.(Exact name of registrant as specified in its charter) Delaware
  36-3791193(State or other jurisdiction of
  incorporation or organization)
  (IRS Employer Identification No.)100
  Corporate North, Suite 212 Bannockburn,
  Illinois
  60015(zip code)(Address of principal executive office)
 (847) 615-1690(Registrant's telephone number,
including area code)  Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15
(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days. YesxNo ̈ Indicate the number of shares outstanding of
each of the issuer's classes of common stock, as of the latest practicable
date. Class
  Issued
  and Outstanding
  as of April 30, 2001Common Stock.01 par value
  12,344,546
    INDEX

OPTION
CARE, INC. & SUBSIDIARIES



PART I
  FINANCIAL INFORMATIONItem 1.
  Financial Statements (Unaudited)Condensed consolidated
  balance sheetsMarch 31, 2001 and December 31, 2000Condensed consolidated
  statements of incomeThree months ended March 31, 2001 and 2000Condensed consolidated
  statements of cash flowsThree months ended March 31, 2001 and 2000Notes to condensed
  consolidated financial statementsMarch 31, 2001Item 2.
  Management's Discussion and
  Analysis of Financial Condition and Results of OperationsItem 3.
  Quantitative and Qualitative
  Disclosures of Market RiskPART II
  OTHER INFORMATIONItem 1.
  Legal ProceedingsItem 2.
  Changes in Securities and
  Use of ProceedsItem 3.
  Defaults Upon Senior
  SecuritiesItem 4.
  Submission of Matters to a
  Vote of Security HoldersItem 5.
  Other InformationItem 6(a).
  ExhibitsItem 6(b).
  Reports on Form 8-KPART I.  FINANCIAL
INFORMATION



Item 1. 
Financial Statements

Option Care, Inc. and SubsidiariesCondensed Consolidated Balance
Sheets(in thousands,
except share and per share amounts)



March 31, 2001
  December 31, 2000(Unaudited)
  (Note 1)AssetsCurrent assets:Cash and cash
  equivalents
  $
  $Accounts
  receivable, net
  34,485
  28,845Inventories,
  net
  3,215
  2,320Other current
  assets
  4,497
  4,208Total current assets
  42,197
  35,373Equipment and other fixed assets, net
  4,409
  4,182Goodwill, net
  28,666
  25,859Other assets
  1,430
  1,411Total assets
  $76,702
  $66,825Liabilities and Stockholders' EquityCurrent liabilities:Cash
  overdraft
  $2,289
  $770Current
  portion of long-term debt
  18,523
  833Trade
  accounts payable
  6,111
  5,854Other current
  liabilities
  6,598
  6,922Total current liabilities
  33,521
  14,379Long–term debt, excluding current portion
  120
  11,951Other liabilities
  1,497
  1,423Minority interest
  432
  404Total liabilities
  35,570
  28,157Stockholders' equity:Common stock,
  $.01 par value per share, 30,000,000 shares authorized, 12,323,922 and
  12,134,961 shares issued and outstanding, respectively
  123
  121Common stock
  to be issued, 25,094 and 124,901 shares, respectively
  128
  352Other stockholders'
  equity
  40,881
  38,195Total stockholders' equity
  41,132
  38,668Total liabilities and stockholders' equity
  $76,702
  $66,825See notes to condensed consolidated financial statements.

Option Care, Inc. and SubsidiariesCondensed Consolidated
Statements of Income(Unaudited)
(in thousands, except per share amounts)

Three Months Ended
  March 31,2001
  2000Revenue
  $45,905
  $32,896Cost of revenue
  30,289
  19,838Gross profit
  15,616
  13,058Selling, general and administrative expenses
  11,020
  9,187Provision for doubtful accounts
  564
  788Amortization of goodwill
  224
  157Total operating expenses
  11,808
  10,132Operating income
  3,808
  2,926Interest expense
  (341)
  (251)Other income (expense), net
  9
  (79)Income before income taxes
  3,476
  2,596Income tax provision
  1,346
  986Net income
  $2,130
  $1,610Net income per common share:Basic
  $0.17
  $0.14Diluted
  $0.17
  $0.13Shares used in computing net income per share:Basic
  12,236
  11,849Diluted
  12,622
  12,389See notes to condensed consolidated financial statements

Option Care, Inc. and SubsidiariesCondensed Consolidated
Statements of Cash Flows(Unaudited)
(in thousands)

Three Months EndedMarch 31,2001
  2000Cash flows from operating activities:Net income
  $2,130
  $1,610Adjustments
  to reconcile net income to net cash (used in) provided by operating
  activities:Depreciation and amortization
  875
  779Provision
  for doubtful accounts
  564
  788Other
  123
  Changes in
  assets and liabilities:Accounts
  receivable
  (6,219)
  (939)Inventory
  (560)
  1,310Change in
  other current assets and current liabilities
  (2,202)
  (1,411)Net
  cash (used in) provided by operating activities
  (5,289)
  2,137Cash flows from investing activities:Purchases of
  equipment and other, net
  (512)
  (300)Additions to
  other assets, net
  (13)
  (8)Payments for
  acquisitions, net of cash acquired
  (1,867)
  (1,930)Net
  cash used in investing activities
  (2,392)
  (2,238)Cash flows from financing activities:Increase
  (decrease) in cash overdraft
  1,519
  (2,669)Net borrowing
  on credit agreements
  5,835
  2,588Payments on
  capital leases and other debt
  (6)
  (58)Proceeds from
  issuance of stock
  333
  240Net
  cash provided by financing activities
  7,681
  101Net decrease in cash and cash equivalents
  
  Cash and cash equivalents, beginning of period
  
  Cash and cash equivalents, end of period
  $
  $

See notes to condensed consolidated financial statements.

Option Care, Inc. and SubsidiariesNotes
to Condensed Consolidated Financial Statements(Unaudited)
(in thousands, except per share amounts)March 31, 2001

1.  Basis of Presentation

The accompanying
unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001.

The
balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000.

2.  Reclassifications

Certain
amounts in the condensed consolidated financial statements have been
reclassified to conform to the current year presentation.

3.  Long-Term Debt

On February 5, 1999, Option
Care entered into a $25 million Loan and Security Agreement with Banc of
America Commercial Finance Corporation. This agreement provided for borrowing
up to $25 million on revolving loans. On June 30, 2000, the agreement
was amended and restated to increase the total facility to $40 million,
consisting of $25 million available on revolving loans, plus
$15 million available under term loans. The purpose of the amendment was
to allow Option Care the available capital to acquire selected franchises and
other healthcare companies upon approval by the lenders and by the Board of
Directors. Under the revised agreement, Option Care may enter into term loans
from June 30, 2000 through June 30, 2001. Repayments under these term
loans will be made on a four year amortization schedule, with the first payment
due July 1, 2001, except that the entire $40 million facility is due
to expire in February 2002. Option Care would be subject to early
termination fees if the loan were terminated prior to its natural expiration.

The amended and restated agreement
requires Option Care to meet certain financial covenants including, but not
limited to: fixed charge coverage ratio; debt ratio; debt to operating cash
flow ratio; and limitations on annual capital expenditures. Under this
agreement, Option Care is prohibited from declaring any cash dividend on its
common stock. Option Care paid a facility fee of $185 when the original
agreement was signed in 1999, and paid an additional $150 upon signing the
amended and restated agreement on June 30, 2000.

Under the current facility
agreement, Option Care may elect interest rates on the revolving loan ranging
from LIBOR plus 2.125%, to the bank's reference rate. Interest on the term loan
ranges from LIBOR plus 3.200%, to the bank's reference rate plus 1%.

Availability under the
revolving loan portion of the facility is related to percentages of outstanding
accounts receivable and inventory balances, less certain ineligible amounts, as
defined within the amended and restated loan and security agreement. Overall
borrowings allowable under the revolving loan portion are limited to the lesser
of $25 million or the total allowable collateral base. The revolving loan
portion is secured by Option Care's assets, as well as by all of the issued and
outstanding Common Stock of each of Option Care's subsidiaries. Availability
under the term loan portion of the facility is limited to $15 million, and
is subject to approval by the lender. The term loan portion of our total
facility is unsecured.

As of
March 31, 2001, the Company had $15,455 and $3,000 outstanding under the
revolving loans and term loans, respectively. The combined average interest
rate for the first quarter of 2001 on outstanding borrowings under revolving
loans and term loans was 8.5%.

On
April 13, 2001, GE Capital Commercial Finance, Inc. became the agent on Option
Cares $40 million credit facility, replacing Banc of America Commercial Finance
Corporation in this role.  There were no
material changes to the facility agreement resulting from this transaction.

4.  Earnings Per Share Data

The
following table sets forth the computation of basic and diluted earnings per
share for the periods indicated:

Three Months EndedMarch 31,2001
  2000Basic:Net income
  $2,130
  $1,610Average shares outstanding
  12,236
  11,849Basic earnings per share
  $0.17
  $0.14Diluted:Net income
  $2,130
  $1,610Average shares outstanding
  12,236
  11,849Net effect of dilutive stock optionsbased on the
  treasury stock method
  386
  540Total diluted shares
  12,622
  12,389Diluted earnings per share
  $0.17
  $0.135.  Operating Segments

Option
Care has two identifiable operating segments: infusion and services and
specialty pharmacy. The infusion and services operating segment derives revenue
primarily from home infusion and other home health care services, royalties
earned under franchise agreements, and software sales, support fees and training
charges. The specialty pharmacy operating segment derives revenue primarily
from the dispensing of injectable and other specialty pharmaceutical products
to patients and physicians under managed care contracts.  Inter-segment sales in 2000 were recorded at
cost and there is no profit or loss on inter-segment sales or transfers.  In 2001, no inter-segment sales have been
recorded, because sales from the specialty pharmacy segment to the infusion and
services segment are now being accounted for as cost of goods transfers.

Three Months Ended March 31, 2001
  Three Months Ended March 31, 2000Infusion &Services
  SpecialtyPharmacy
  Total
  Infusion &Services
  SpecialtyPharmacy
  TotalNet sales to external customers
  $34,089
  $11,816
  $45,905
  $24,056
  $8,840
  $32,896Inter-segment net sales
  
  
  
  
  1,512
  1,512Gross profit
  14,080
  1,536
  15,616
  11,692
  1,366
  13,058Operating income
  2,902
  906
  3,808
  2,231
  695
  2,926Total assets
  $71,518
  $5,184
  $76,702
  $52,307
  $4,296
  $56,603

In the third quarter of 2000, the Company reclassified
Human Growth Hormone operations from the infusion and services segment into the
specialty pharmacy segment. The revenue reclassified for the first quarter of
2000 was $1,631. Reclassifications of gross profit and operating profit related
to this revenue had no material impact.

6.  Acquisitions

On
January 16, 2001, the Company purchased certain assets and the ongoing
operations of the Option Care franchise office located in Columbus, Ohio.  The business purchased included a home
infusion franchise, a home health agency operating from sites in Columbus and
Fairborn (Dayton), Ohio, and a network management business.  In addition, effective February 1, 2001, the
Company acquired an independent home infusion and home health provider located
in the Los Angeles suburb of Thousand Oaks, California. The aggregate cash
purchase price paid at closing for these transactions, net of cash acquired,
was $1,653.  An additional $1,168 was
paid immediately subsequent to closing for the liquidation of liabilities
assumed under the purchase agreement. 
The company also paid $214 of additional consideration for prior
acquisitions.  The entire $3,035 was
paid with funds borrowed under the Company's revolving line of credit. In
addition to the amounts paid at closing, the Company entered into agreements
with the sellers of each acquired business, whereby additional consideration
will be payable in cash in 2001 and 2002 if certain financial targets are
reached. Any such amounts to be paid out under these agreements will be
recorded as additional goodwill in the period in which the amounts due become
certain.

The
purchase method of accounting was used to record the acquisitions and $2,173 of
goodwill was recorded. The accompanying condensed financial statements include
the results of operations of all acquired businesses from the date of
acquisition.

The
unaudited pro-forma results of operations of the Company, presented as if the
acquisitions completed over the last three quarters had occurred as of January
1, 2000, are as follows:

Three Months Ended March 31,2001
  2000Net revenue
  $46,927
  $39,489Net income
  $2,186
  $1,914Net income per diluted share
  $0.17
  $0.15

7.  Subsequent Events

On
April 6, 2001, Option Care acquired the assets of the St. Louis, Missouri home
infusion pharmacy business of American Home Patient, Inc.  Also, on April 10, 2001, the Company
acquired the assets of Park Infusion Services, L.P., an independent business
operating a home infusion pharmacy in the Tampa/St.Petersburg, Florida
metropolitan area.  The aggregate
purchase price for these acquisitions was $1,024, paid in cash.  Additional consideration, up to a maximum of
$630, will be payable in cash in 2001, 2002, and/or 2003 if certain financial
targets are reached.

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

The
following discussion should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 2000. The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking statements. Certain information included in this Quarterly
Report on Form 10-Q and other materials filed or to be filed by the
Company with the Securities and Exchange Commission (as well as information
included in oral statements or other written statements made or to be made by
the Company) contains statements that are or will be forward-looking, such as
statements relating to acquisitions and other business developments activities,
future capital expenditures and the effects of future regulation and
competition. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the future
and, accordingly, such results may differ from those expressed in any
forward-looking statements made by, or on behalf of, the Company. These risks
and uncertainties include, but are not limited to, uncertainties affecting
businesses of the Company and its franchisees relating to acquisitions and
divestitures (including continuing obligations with respect to completed
transactions), sales and renewals of franchises, government and regulatory
policies (including federal, state and local efforts to reform the delivery of
and payment for healthcare services), general economic conditions (including
economic conditions affecting the healthcare industry in particular), the
pricing and availability of equipment and services, technological developments
and changes in the competitive environment in which the Company operates.

Discussion
of Results of Operations for the First Quarter ended March 31, 2001
(in thousands, expect per share amounts)

REVENUE

Three Months EndedMarch 31,2001
  % of total
  2000
  % of totalInfusion and services:Infusion
  therapy & other healthcare services
  $31,123
  67.8%
  $20,885
  63.4%Royalty fees
  2,125
  4.6%
  2,191
  6.7%Product sales
  and other
  841
  1.8%
  980
  3.0%Total
  infusion and services
  $34,089
  74.2%
  $24,056
  73.1%Specialty pharmacy
  11,816
  25.8%
  8,840
  26.9%Total revenue
  $45,905
  100.0%
  $32,896
  100.0%Growth over prior period
  $13,009
  39.5%

Total
revenue for the three months ended March 31, 2001 was $45,905, which is an
increase of $13,009, or 39.5%, over the total revenue of $32,896 reported for
the three months ended March 31, 2000. Total revenue for the three months ended
March 31, 2001 represents the ninth consecutive quarter of revenue growth
and represents an all time high of revenue for a quarter in the Company's
21 years of existence. The three-month period ended March 31, 2001
also represents the fifth straight quarter in which revenue grew by at least
10% over the same quarter of the prior year.

The
infusion and services segment revenue is comprised primarily of infusion
therapy and other healthcare services revenue, royalties from franchises, and
sales and support of healthcare software products.  Infusion therapy and other healthcare services revenue in the first
quarter of 2001 increased $10,238, or 49.0%, over the first quarter of
2000.  Of this increase, 51.9%, or
$5,315, was generated by offices acquired over the past three quarters.  The remaining $4,923 increase can be
attributed to same store sales growth generated by the Companys owned locations.

Royalty fee revenues in the first quarter of 2001
declined by $66, or 3.0%, over the first quarter of 2000. The Companys
acquisition of four Option Care franchises over the past three quarters was the
primary reason for the decline. Product sales and other revenue for the first
quarter of 2001 declined by $139, or 14.2%, compared to the first quarter of
2000.  The decline was primarily due to
slower sales of MBI software products.

Specialty
pharmacy revenue for the first quarter of 2001 increased by $2,976, or 33.7%,
over the first quarter of 2000.  This
increase is primarily due to new managed care contracts and increased orders on
existing managed care contracts.

GROSS PROFIT

Three
  Months EndedMarch 31,2001
  % of sales
  2000
  % of salesInfusion and services:Infusion
  therapy and other healthcare services
  $11,180
  35.9%
  $8,774
  42.0%Royalty fees
  2,125
  100.0%
  2,191
  100.0%Product sales
  and other
  775
  92.2%
  727
  74.2%Total
  infusion and services
  $14,080
  41.3%
  $11,692
  48.6%Specialty pharmacy
  1,536
  13.0%
  1,366
  15.5%Gross Profit
  $15,616
  34.0%
  $13,058
  39.7%Growth over prior period
  $2,558

The
gross profit margin for the first quarter of 2001 was 34.0%, which represents a
decline of 5.7% from the gross profit margin of 39.7% in the first quarter of
2000.  The gross profit margin realized
in the first quarter of 2001 for infusion therapy was 35.9%, representing a
decline of 6.1% from the 42.0% margin realized in the first quarter of 2000.
The decline was primarily due to an increase in the sale of high cost low
margin pharmaceuticals.

The
specialty pharmacy gross margin for the first quarter of 2001 declined to 13.0%
from 15.5% realized in the first quarter of 2000.  This was due to an increase in the sale of higher cost specialty
pharmaceuticals.

OPERATING EXPENSES

Three
  Months EndedMarch 31,2001
  % of revenue
  2000
  % of revenueS, G & A expenses
  $11,020
  24.0%
  $9,187
  28.0%Provision for doubtful accts
  564
  1.2%
  788
  2.4%Amortization of goodwill
  224
  0.5%
  157
  0.5%Total operating expenses
  $11,808
  25.7%
  $10,132
  30.9%Increase over prior period
  $1,676

Total operating expenses of $11,808 for the three months
ended March 31, 2001 were $1,676, or 16.5%, higher than for the three
months ended March 31, 2000. This increase is primarily attributable to a
$1,365 increase in salaries, wages, and related costs.  Acquisitions made over the last three
quarters account for $787, or 57.6%, of the increase.  Much of the remaining increase in salaries and related costs is
due to an increased focus on sales and marketing and on technology
improvements, resulting in increases in staffing to those areas.  An increase in the cost of Option Cares
health insurance benefits has also contributed to the growth in these expenses.
Most of the remaining increase in selling, general, and administrative expenses
is due to facility-related costs that have increased due to the Companys
recent acquisitions.

Despite
the overall dollar increase in operating expenses in the first quarter of 2001
over the first quarter of 2000, operating expenses have declined as a
percentage of revenue.  This is due to
the Companys increase in sales of specialty pharmaceuticals, which sales
typically have lower operating costs as a percentage of revenue.

The
provision for doubtful accounts declined as a percentage of revenue to 1.2% for
the first quarter of 2001 from 2.4% for the first quarter of 2000. The decline
is primarily attributable to the change in the Company's revenue mix toward
specialty pharmacy revenue. Historically, the specialty pharmacy operating
segment has incurred lower bad debt expense than the infusion and services
operating segment.

Goodwill
amortization increased in dollars by 42.7% primarily due to the Companys
acquisitions completed during the past three quarters.  However, due to the increase in revenues
over the same period, goodwill amortization remained equal to 0.5% of net
revenue.

INTEREST EXPENSE

Interest
expense increased by $90, or 35.9%, to $341 for the three months ended
March 31, 2001 from $251 for the corresponding period in the prior
year.  This was primarily due to the
additional borrowing incurred to fund the Company's acquisitions made in the
third and fourth quarters of 2000 and the first quarter of 2001.

INCOME TAXES

The
effective income tax rate for the first quarter of 2001 was 38.7%, which
represents a slight increase from the 38.0% effective income tax rate in the
first quarter of 2000.  This is due to
the projected increase in the Companys pre-tax income in 2001 versus 2000,
which would increase the Companys statutory federal income tax rate from 34%
to 35%.

EARNINGS PER SHARE

As a
result of the above noted increases, the Company reported earnings per diluted
share of $0.17 for the first quarter of 2001, an increase of $0.04, or 30.7%,
over the $0.13 earnings per diluted share for the same period in 2000.

Total
diluted shares for the first quarter of 2001 increased to 12,622 from 12,389
for the first quarter 2000.  This 1.9%
increase was primarily due to the exercise of stock options and the issuance of
shares under the 2000 Employee Stock Purchase Plan.

Liquidity
and Capital Resources

CASH AND CASH
EQUIVALENTS

As of
March 31, 2001, the Company had no cash and cash equivalents, in line with
the amount of cash and cash equivalents at December 31, 2000.  The Company has instituted a policy of using
excess cash balances, if any, to retire outstanding debt under its revolving
credit agreement.

NET CASH FLOWS

Net
cash flow used by operations for the three months ended March 31, 2001 was
$5,289, compared to $2,137 provided by operations during the same period in
2000. This $7,426 decline was primarily due to an increase in accounts
receivable in the first quarter of 2001 resulting from the increased sales and
new business acquisitions over this period. 
Another factor was the assumption and subsequent payment of $1,171 of
accounts payable related to business acquisitions in the first quarter of 2001.
Also, the reduction in inventories of $1,310 in the first quarter of 2000 was
responsible for a portion of the period-to-period change. This inventory
reduction was a nonrecurring event that resulted from stocking up on inventory
at the end of 1999 as a hedge against possible Year 2000 issues.

Net cash flow used in investing activities in the first
quarter of 2001 was $2,392, a decrease of $154 over the $2,238 used in the
first quarter of 2000.  Payments for
equipment increased by $213 in the first quarter of 2001 over the first quarter
of 2000, primarily due to $211 spent for revenue-producing equipment (H.M.E.
rental equipment) and $82 spent for new software development projects.  Payments for acquisitions, net of cash
acquired, equaled $1,867 in the first quarter of 2001 compared to $1,930 in the
first quarter of 2000.  The 2001
payments consisted of $1,653 for the new acquisition of businesses in Columbus,
Ohio and Thousand Oaks, California, and $214 in additional consideration paid
for 1996 and 1997 acquisitions.  The
$1,930 paid in the first quarter of 2000 entirely consisted of additional
consideration paid on 1996 and 1997 acquisitions.

Net
cash flow provided by financing activities increased to $7,681 in the first
quarter of 2001 compared to $101 in the first quarter of 2000.   The increase was primarily due to
additional borrowings on the Companys revolving credit facility to fund
acquisitions completed in the first quarter of 2001.

LONG TERM DEBT

3/31/01
  % of total
  12/31/00
  % of total
  3/31/00
  % of totalRevolving credit agreement
  $15,455
  82.9%
  $9,609
  75.2%
  $10,904
  98.1%Acquisition line
  3,000
  16.1%
  3,000
  23.5%
  
  0.0%Capital leases
  78
  0.4%
  58
  0.4%
  82
  0.7%Other long term debt
  110
  0.6%
  117
  0.9%
  134
  1.2%Total debt outstanding
  $18,643
  100.0%
  $12,784
  100.0%
  $11,120
  100.0%Increase from prior period
  $5,859
  45.8%
  $1,664
  15.0%Total
debt outstanding of $18,643 as of March 31, 2001 increased by $5,859, or 45.8%,
over the amount of long-term debt held as of December 31, 2000. The increase
was largely the result of borrowings made by the Company in the first quarter
of 2001 to fund acquisitions and their associated operating cash needs. Also,
the increase in accounts receivable during the first quarter of 2001, which was
the result of higher company revenues during that period, resulted in reduced
cash flows from operations and higher borrowing requirements.  The total $18,643 debt outstanding as of
March 31, 2001 represents an increase of $7,523, or 67.7%, over the amount
of debt outstanding at March 31, 2000. 
Again, borrowings to fund acquisitions in the third and fourth quarters
of 2000 and the first quarter of 2001 were the primary reason for the increase.

Management
believes that cash flow from operations and availability under the Loan
Agreement will be sufficient to meet the cash needs of the business for the
immediate future. In the event that additional capital is required, management
cannot assure that such capital can be obtained on terms acceptable to the Company.

GOODWILL AND OTHER
INTANGIBLE ASSETS

Goodwill
and other intangible assets, net, at March 31, 2001 was $29,839, an
increase of $2,815 over the $27,024 at December 31, 2000. The increase was
primarily due to the Company's acquisitions made during the first quarter of
2001, plus additional consideration calculated on one of the Companys 2000
acquisition agreements. The goodwill and other intangible assets generated from
the Companys acquisitions in the first quarter of 2001 were equal to the
excess of the purchase price over the fair market value of the tangible assets
acquired.

Total
net goodwill and other intangible assets declined as a percentage of total
assets from 40.4% at December 31, 2000 to 38.9% at March 31,
2001.  This decline occurred primarily
because accounts receivable and various other tangible assets increased due to
revenue growth at a faster pace than the increase in goodwill and other
intangible assets. Total net goodwill and other intangible assets increased as
a percentage of stockholders' equity from 69.9% at December 31, 2000 to
72.5% at March 31, 2001, due primarily to the acquisitions completed in
the first quarter of 2001.



REGULATORY AND OTHER
DEVELOPMENTS

Recent
government investigations into how the average wholesale price
("AWP") for certain pharmaceuticals are determined could result in
reduced pricing and margins on certain drugs that we currently supply. Various
federal and state governmental agencies have been investigating whether the AWP
of many drugs is an appropriate or accurate measure of market prices from which
governmental payors determine how much they reimburse for the drug. Many
governmental payors pay us for some drugs based on that drug's AWP, or at a
percentage off AWP. In addition, we have also contracted with a number of
private payors to sell at AWP or at a percentage discount off AWP.

AWP
for most drugs is compiled and published by private companies. First DataBank,
Inc. is one of these companies. It has been reported that there are currently
several lawsuits pending against manufacturers of certain drugs. These
government investigations and lawsuits involve allegations that manufacturers
have misrepresented the actual selling price of certain drugs to First
DataBank. First DataBank has announced that it will base AWP on market prices
certified by the manufacturer. First DataBank has published a Market Price
Survey that reduces the AWP significantly for a number of the products Option
Care currently supplies to patients. We cannot predict the eventual results of
these investigations, nor the changes made in AWP by First DataBank.

If a reduced set of average
wholesale prices became the standard by which we are reimbursed by government
payors or private payors, this could have a material adverse effect on our
business, financial condition, and results of operations, including reducing
the pricing and margins on certain of our products. In addition, there are
currently various proposals under development to enact healthcare reform on
national, state and local levels. It is not possible at this time to predict
the cash flow impact, if any, which any such changes may have on Option Care or
any other providers of home healthcare services. For the three months ended
March 31, 2001, approximately 16% of the Company's total revenue was
generated from governmental agencies.

ITEM
3.  Quantitative and Qualitative
Disclosures About Market Risk

Not
applicable.

PART II.  OTHER
INFORMATION

ITEM 1. 
Legal Proceedings

None

ITEM 2.  Changes in Securities and Use of Proceeds

None

ITEM
3.  Defaults Upon Senior Securities

None

ITEM
4.  Submission of Matters to a Vote of
Security Holders

None

ITEM 5. 
Other Information

None

ITEM 6(a).  Exhibits

See
Exhibit Index

ITEM 6(b).  Reports on
Form 8-K

Option
Care did not file any reports on Form 8-K during the three months ended March
31, 2001.



SIGNATURE

Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

OPTION CARE, INC.Date: May 15, 2001
  By:
  Carla M. PondelChief Financial Officer(Principal Accounting Officer andPrincipal Financial Officer)Exhibit Index



ExhibitNumber3.1
  Certificate of Incorporation of the Registrant,
  together with Certificate of Amendment thereto filed February 18, 1992.
  Filed as Exhibit 3(a) to the Company's Registration Statement
  (No. 33–45836) dated April 15, 1992 and incorporated by
  reference herein.3.2
  Certificate of Amendment to Certificate of Incorporation
  of the Registrant filed March 25, 1992. Filed as Exhibit 3(c) to
  the Company's Registration Statement (No. 33–45836) dated
  April 15, 1992 and incorporated by reference herein.3.3
  Restated By–laws of the Registrant dated
  June 1, 1994. Filed as Exhibit 10.5 to the Company's Annual Report on
  Form 10–K for the year ending December 31, 1994 and incorporated
  by reference herein.