SECURITIES AND EXCHANGE
                                   COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-K
(Mark One)

|X|  Annual report under Section 13 or 15(d) of the  Securities  Exchange Act of
     1934 (Fee required)

     For the fiscal year ended March 31, 1997

|_|  Transition report under Section 13 or 15(d) of the Securities  Exchange Act
     of 1934 (No fee required)

     For transition period from ___________________ to ____________________


                           Commission file No. 0-17292

                                ACCUHEALTH, INC.
                     (Exact name of registrant as specified)

                New York                               13-3176233
     (State or other jurisdiction           (I.R.S. Employer Identification No.)
   of incorporation or organization)

1575 Bronx River Avenue, Bronx, New York                  10460
(Address of principal executive offices)                (Zip Code)


        Registrant's telephone number, including area code (718) 518-9511

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
                     --------------------------------------
                                (Title of class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_  No__

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

     As of June 18, 1997, the aggregate market value of the Common Stock held by
non affiliates of the registrant was approximately $3,686,921.

     As of June 18,  1997,  there  were  1,787,598  shares of the  Common  Stock
outstanding.

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

                       DOCUMENTS INCORPORATED BY REFERENCE

Proxy  Statement for the Annual Meeting of  Stockholders to be held on September
26, 1997 in Part III of this Form 10-K.

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

<PAGE>


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

(a)  General Development of Business

     Accuhealth,  Inc.,  together with its wholly-owned  subsidiaries,  provides
comprehensive  home health care  services,  including  administration  of a wide
array of infusion therapies,  sales of oral medications and sales and rentals of
durable medical equipment ("DME") and related supplies.

     The Company was  incorporated  in the State of New York on August 25, 1983.
Effective  August 20, 1990,  the present  name,  Accuhealth,  Inc.,  was adopted
pursuant to an amendment to the  Company's  Certificate  of  Incorporation.  The
Company's  principal offices are located at 1575 Bronx River Avenue,  Bronx, New
York  10460,  and its  telephone  number is (718)  518-9511.  Unless the context
otherwise requires,  references herein to the "Company" include Accuhealth, Inc.
and all of its wholly-owned subsidiaries.

     On March 14, 1997, the Company entered into a merger agreement  whereby the
Company agreed to acquire  ProHealthCare  Infusion Services,  Inc. ("PHCIS") for
300,000 shares of Company Common Stock. PHCIS, based in Springfield, New Jersey,
specializes  in caring for complex  HIV/AIDS  patients and those  suffering from
cancer.  PHCIS  also has a strong  disease  management  capability  in  treating
patients suffering from congestive heart failure and cardiomyopathy.

(b)  Narrative Description of Business

Products and Services

     Home infusion therapy is the at-home  administration of nutrients,  fluids,
antibiotics and other drugs to patients.  The service consists of preparation of
prescription and non-prescription drugs by the Company's registered pharmacists,
delivery  of IV  solutions  to the  patient's  home,  supply  of pumps and other
apparatus to administer the drugs and the provision of certain  related  nursing
care. In addition,  the Company trains  patients in the self  administration  of
infusion  therapies and in many cases will also train another family member. The
Company  offers a wide array of infusion  services for  patients  ranging in age
from prenatal to geriatric.

     Home  care  results  in  significant   cost  savings  over   hospital-based
treatments,  enables  patients to undergo their treatments in a more comfortable
and  familiar  environment  and can be  continued  over  long  periods  of time.
Infusion therapies include the in-home administration of nutrients,  antibiotics
and other medications to patients  intravenously  (into a vein),  subcutaneously
(under  the  skin),  intramuscularly  (into  the  muscle),  through  respiratory
inhalation (into the lungs),  intrathecally or epidurally (via spinal routes) or
through feeding tubes. The principal  infusion therapies provided by the Company
are as follows:



<PAGE>



     Antibiotic Therapy.  Antibiotic therapy is the infusion of antibiotic drugs
into the patient's  bloodstream,  generally  through a catheter  inserted into a
vein in the  patient's  arm.  It is used to treat a variety  of  infections  and
diseases  including  osteomyelitis  (bone  infection),  lyme disease,  bacterial
endocarditis  (infection  of the lining  around the  heart),  septicemia  (blood
poisoning), wound infections and infections of the kidneys and urinary tract. In
addition,  patients with suppressed immune systems, including cancer patients on
chemotherapy and patients with AIDS, may require antibiotic therapies.

     Parenteral  Nutrition.  Total parenteral  nutrition,  or TPN,  involves the
intravenous  delivery of life sustaining  nutrients to patients unable to ingest
or absorb  nutrients due to a disorder of the  gastrointestinal  tract.  Certain
conditions  that  require  TPN include  intestinal  obstruction,  cancer,  AIDS,
inflammatory bowel disease, short bowel syndrome and many other gastrointestinal
disorders. TPN is administered through a catheter, which is surgically implanted
in a major blood vessel during hospitalization,  to permit required nutrients to
be fed directly  into the  patient's  blood  stream.  Many TPN patients  require
indefinite or permanent  treatment  because the illnesses from which they suffer
are recurring in nature.

     Enteral Nutrition Therapy.  Enteral nutrition therapy administers nutrients
to patients who cannot eat as a result of an obstruction to the digestive  tract
or  because  they  are  otherwise  unable  to feed  themselves  orally.  Enteral
nutrition is administered by direct infusion of nutrients through a feeding tube
into the portion of the patient's digestive tract that remains functional.

     Pain Management  Therapy.  Pain management therapy is the administration of
analgesic drugs to terminally or chronically  ill patients  suffering from acute
or chronic pain. Generally,  this therapy is administered under physician orders
in a way that  permits  the  patient to  regulate  the  intravenous  infusion of
analgesic drugs in proportion to the severity of the pain experienced.

     Chemotherapy.   Chemotherapy  is  the   administration   of  antineoplastic
pharmaceuticals to patients  suffering from various types of cancer.  Continuous
infusion chemotherapy is the administration of chemotherapeutic agents through a
catheter  inserted  into a  patient's  vein or a  catheter  which is  surgically
implanted in a major blood vessel.

     Intra-Dialytic Parenteral Nutrition ("IDPN"). IDPN is the provision of life
sustaining  nutrients to patients  suffering from end stage renal disease during
their dialysis treatment.

     Other  Therapies.   Other  therapies  provided  by  the  Company  currently
represent a small  percentage of its business.  These  therapies are  dobutamine
therapy,  blood  components,  IV gamma globulin,  hydration  therapy,  tocolytic
therapy and aerosol pentamidine.

     The Company also sells oral  medications to certain of its home health care
patients,  and it sells and rents,  with options to  purchase,  a broad range of
durable  medical   equipment   ("DME")  and  supplies  such  as  hospital  beds,
wheelchairs, walkers, canes, electronic monitoring equipment, surgical supplies,
ostomy and incontinence products, oxygen (ventilators,  concentrators and liquid
tanks) and other miscellaneous  products and services.  The Company both employs
and contracts

                                        2

<PAGE>



with registered  respiratory  therapists who instruct patients in the proper use
and maintenance of oxygen equipment.

     The Company has contracts  with three  hospices in New York City to provide
DME,  on a  non-exclusive  basis  to  patients  upon  their  discharge  from the
hospices.  The Company also has  contracts  to provide  DME, on a  non-exclusive
basis,  to patients of seven nursing  services whose trained  personnel  provide
out-patient care. In addition, the Company's name appears on "approved provider"
lists given to patients upon their discharge from  approximately 30 hospitals in
the New York metropolitan area.

     The  Company  also  provides   comprehensive  pharmacy  services  to  large
institutional   pharmacy  clients   including   sub-acute  and  long  term  care
facilities.  These  engagements  typically  involve the  Company's  managing and
operating the pharmacy  under  contract with the  institution  and providing the
drugs, medications, biologicals and supplies the patients require.

     Home Nursing.  The Company  provides a wide variety of nursing  services to
individuals with acute illnesses, long term chronic health conditions, permanent
disabilities,  terminal illnesses or post-surgical  needs. This care is normally
provided in conjunction with a variety of infusion  therapies and specialty care
regimens to patients in the home.  The nurses also  instruct  patients and their
families  in  the   self-administration   of  certain  infusion   therapies  and
procedures,  such as wound care and infection control,  emergency procedures and
the proper handling and usage of medications, medical supplies and equipment.

Sales and Marketing

     The Company  promotes its infusion  therapy and durable  medical  equipment
products  and services via contacts  with  physicians  whose  patients use these
services,  hospital discharge  planners,  social workers and hospital nurses who
work with patients requiring these services. The Company also works closely with
nursing  services and agencies  that provide home care to patients.  The Company
also  markets  its  products  and  services  to  insurance   companies,   Health
Maintenance   Organizations   (H.M.O.'s),   Preferred  Provider   Organizations
(P.P.O.'s)  and case  management  companies.  Marketing  efforts  emphasize  the
quality of the Company's services, cost containment and technological excellence
offered by the Company. In addition,  the Company participates in clinics run by
New York City hospitals.

     Because the Company can provide  oral  medications  to its home health care
customers,  the  Company  promotes  itself  as a "one stop  shop"  for  infusion
therapy,  durable  medical  equipment and  pharmaceuticals.  The Company  stocks
pharmaceuticals not widely used P by the general population to meet the needs of
critically  ill patients,  including  drugs used to treat AIDS and  AIDS-related
diseases.

     The Company has made special efforts to meet the needs of persons afflicted
with AIDS. The Company has a contract with a nursing  service  program to supply
DME for  persons  suffering  from  AIDS and  provides  special  instructions  to
employees who visit the homes of persons afflicted


                                        3

<PAGE>



with AIDS and other communicable  diseases.  The Company also markets to certain
free-standing  AIDS-specific  rehabilitation centers and hospitals.  The Company
currently  provides  products  and  services to patients in two such  facilities
(Rivington House and Phoenix House in Manhattan).

Reimbursement from Third-Party Payors

     The Company accepts  assignment of Medicare claims,  as well as claims with
respect to other  third-party  payors,  on behalf of its  patients  whenever the
reimbursement   coverage  is  adequate  to  ensure   payment  of  the  patient's
obligations.  The Company  processes its customers'  claims,  accepts payment at
prevailing  and  allowable  rates and assumes the risks of delay for  improperly
billed  services  or  non-payment  for  services  which  are  determined  by the
third-party payor as being medically  unnecessary.  Although no assurance can be
given that a significant number of future requests for reimbursement will not be
denied, the Company's  policies,  procedures and prices are intended to minimize
this risk.

     The Company works closely with the patients it serves to properly  document
and file claims for timely and direct  reimbursement from third party payors and
governmental agencies.  Generally, the Company contacts third-party payors prior
to the commencement of services or delivery of product in order to determine the
patient's  coverage and the  percentage of costs that the payor will  reimburse.
The Company's reimbursement specialists carefully review such issues as lifetime
limits,  pre-existing  condition  clauses,  the  availability  of special  state
programs  and  other  reimbursement-related   issues.  The  Company  will  often
negotiate with the third-party payor on the patient's behalf to help ensure that
coverage is available.  In addition, the Company typically obtains an assignment
of  benefits  from the patient  that  enables the Company to file claims for its
services with the third-party  payors. As a result,  third-party  payors pay the
Company directly for the reimbursable amounts of its charges. Once reimbursement
processing  for a patient has been  established by a third-party  payor,  claims
processing  and  reimbursement  tend to become  routine,  subject  to  continued
patient eligibility and other coverage limitations.

     Like other health care companies,  the Company's revenues and profitability
are  adversely  affected  by the  continuing  efforts of  third-party  payors to
contain  or reduce the costs of health  care by  lowering  reimbursement  rates,
increasing case management review of bills for services and negotiating  reduced
contract  pricing.   Home  health  care,  which  is  generally  less  costly  to
third-party  payors than  hospital-based  care,  has  benefitted  from such cost
containment  objective.  However, as expenditures in the home health care market
continue to grow, initiatives aimed at reducing costs of health care delivery at
non-hospital sites are increasing.

Competition

     The home  infusion  therapy  market is highly  competitive  and the Company
anticipates  that  competition  will  intensify.  There  are  many  small  local
providers,  some of whom do not offer the variety of  therapies  provided by the
Company.  There are also several large regional or national companies that offer
more therapies than the Company.  The primary competitive factors are quality of
care, including responsiveness of service and quality of professional personnel;
ability to establish


                                        4

<PAGE>



and  maintain  relationships  with  referring  physicians,   hospitals,   health
maintenance  organizations,  clinics and nursing services;  price and breadth of
infusion therapies offered;  general reputation with physicians,  other referral
sources and potential patients and the ability to function as a "one stop shop."

     The DME  business  is also very  competitive.  The  Company  competes  with
national,  regional and local specialty  suppliers of medical  equipment,  chain
drugstores and local independent drugstores.  Competitive factors in DME markets
generally track those stated above.

     Many of the Company's  competitors have greater name  recognition,  broader
geographic   markets  and  substantially   greater   marketing,   financial  and
administrative  resources  than the  Company.  Some of the larger  existing  and
future competitors can be expected to expand the varieties of therapies offered.

JCAHO Accreditation

     The Company is  accredited  by the Joint  Commission  on  Accreditation  of
Healthcare  Organizations  ("JCAHO").   Accreditation  by  JCAHO  has  become  a
prerequisite  for contracts from many hospices and hospitals,  certified  health
agencies ("CHHA's"), insurance companies, HMO's and PPO's.

Insurance

     Physicians,  hospitals and other participants in the health care market are
routinely subject to lawsuits alleging malpractice, product liability or related
legal  theories,  many of which  involve  large claims and  significant  defense
costs. The Company has in force general liability insurance with coverage limits
of  $1,000,000  per incident  and  $2,000,000  in the  aggregate  annually,  and
professional   liability  insurance  on  each  of  its  pharmacy  employees  and
professionals  with coverage limits of $1,000,000 per claim and in the aggregate
annually.  The Company has not experienced  difficulty in obtaining insurance in
the past,  and  management  believes  that the Company's  insurance  coverage is
reasonable given its claims history.

Customers

     During  the years  ended  March 31,  1997 and 1996,  services  provided  to
Rivington  House  accounted for 19% and 16%, respectively,  of the Company's net
sales for that year. No single customer accounted for more than 10% of net sales
in Fiscal 1995.

Suppliers

     The Company  does not depend  upon a limited  number of  suppliers  for the
conduct of its  continuing  business and generally has second sources for all of
the materials and products used in its business.  The Company  purchases  drugs,
solutions, medical equipment and other materials and leases certain equipment in
connection with the Company's business from many suppliers and


                                        5

<PAGE>



distributors.  The Company is not currently experiencing and does not anticipate
that it will  experience in the future any material  difficulty in purchasing or
leasing the required products, supplies and equipment used in its business.

     In the event  that  existing  suppliers  or  distributors  are unable to or
should  fail  to  deliver  products,  supplies  and  equipment  to the  Company,
management  believes that alternate sources are available to adequately meet its
needs at comparable prices.

Government Regulation

     The New York State Board of  Pharmacy  (the "State  Board")  regulates  the
Company's  pharmacists  by requiring each  pharmacist to be registered  with the
State Board. Each of the Company's pharmacy departments and its infusion therapy
center is licensed  and  regulated  by the State  Board as a  pharmacy,  and the
Company's  warehouse is  similarly  licensed  and  regulated as a wholesaler  of
prescription drugs. Each of the Company's pharmacy  departments and its infusion
therapy center is also registered with the United States Drug Enforcement Agency
as a supplier  of  controlled  substances.  Any  failure  to obtain or  maintain
required  licenses  or  registrations  could  prevent  or  limit  the  Company's
operation of one or more pharmacy  departments,  its infusion  therapy center or
its warehouse of prescription drugs.

     The Company is also  licensed  by the State of New York to lease,  sell and
sterilize  bedding and by the City of New York as a provider of products for the
disabled and as a dealer in used equipment. The failure to maintain any required
license could materially  adversely affect the Company by preventing or limiting
the continuation of some of the Company's home medical equipment operations.

     JCAHO has established  written standards for home care services,  including
standards for services provided by home infusion therapy companies.  Many payors
use this  criteria in order to select only the highest  quality  providers.  The
Company's  facility  presently  complies  with  JCAHO's  standards  and has been
accredited since February 1990. In addition,  the Company  received  approval in
1991 from the New York State Department of Health to provide nursing services in
New York State.

Concentrations of Credit Risk

     Concentrations  of credit risk with  respect to trade  accounts  receivable
include  amounts due from third party payors,  primarily  governmental  agencies
(Medicare  and  Medicaid).  At March  31,  1997,  gross  Medicare  and  Medicaid
receivables aggregated $2,415,732.

Employees

     As at March 31,  1997,  the Company  employed 99 persons,  of which 94 were
full-time  employees  and 5 were  part-time  employees.  The supply of qualified
staff  is  adequate  and  retainable  in the New York  City  area.  The  Company
considers its relations with its employees to be


                                        6

<PAGE>



satisfactory.  The Company's  employees are not  represented by a labor union or
other labor organization.

Disclosure Regarding Forward Looking Statements

     The  Private  Securities  Litigation  Reform  Act of 1995  provides a "safe
harbor" for forward looking statements. Certain information in Items 1, 2, 3, 6,
7, and 8 of this Form 10-K include information that is forward looking,  such as
the  Company's  opportunities  to increase  sales  through,  among other things,
increasing its number of patients,  its anticipated liquidity and the results of
legal  proceedings.  The matters referred to in forward looking statements could
be affected by the risks and uncertainties  involved in the Company's  business.
These  risks and  uncertainties  include,  but are not limited to, the effect of
economic and market  conditions,  the impact of the cost containment  efforts of
third-party  payors and the  Company's  ability to obtain and maintain  required
licenses,  as well as certain  other  risks  described  above in this Item under
"Competition"  and  "Government  Regulation,"  and  below  in  Item 3 in  "Legal
Proceedings" and in Item 7 in "Management's Discussion and Analysis of Financial
Condition  and  Results of  Operations."  Subsequent  written  and oral  forward
looking  statements  attributable to the Company or persons acting on its behalf
are expressly  qualified in their entirety by the cautionary  statements in this
paragraph and elsewhere in this Form 10-K.

ITEM 2. PROPERTIES

     The  Company's  offices,  pharmacy  and  warehouse  are located in a 31,000
square-foot  building (the "Facility") in the Bronx. The Company is lessee under
a  ten-year  capital  lease  dated as of April 1,  1989  with the New York  City
Industrial  Development Agency (the "IDA"), the lessor (the "Lease  Agreement").
The IDA acquired the property in April 1989 by issuing an Industrial Development
Bond (the "Bond").

     At the end of the term of the capital lease,  the Company,  upon payment in
full of the  outstanding  principal  and interest on the Bond,  may purchase the
Facility  for one  dollar  plus any fees and  expenses  in  connection  with the
redemption of the Bond. The Company also has the option to purchase the Facility
at any time during the term of the lease for the amount  necessary to redeem the
outstanding  Bond in  accordance  with  the  Indenture,  plus  all  expenses  of
redemption and one dollar.

     The Company  believes the Facility is in good  condition and is adequate to
meet its needs in Fiscal 1998.

ITEM 3. LEGAL PROCEEDINGS

     The Company is not a party to any material pending legal  proceedings other
than as  described  below.  See also Note 7 of Notes to  Consolidated  Financial
Statements.

     In June 1995, a former employee  commenced an action in Supreme Court,  New
York County,  New York against the Company and certain of its former and current
officers, directors and


                                        7

<PAGE>



shareholders.   The  action  alleges  that  the  Company  breached   plaintiff's
employment  agreement by withholding at least $750,000 in commissions  allegedly
owed to him. In addition to the breach of  contract  claim,  plaintiff  asserted
claims for violation of the Racketeering  Influence and Corruption Act ("RICO"),
violations of New York's Labor Law (stemming  from the Company's  alleged breach
of contract)  and fraud.  In or about  September  1995,  the  defendants  made a
pre-Answer motion to dismiss the RICO, fraud and conspiracy  claims. On June 18,
1996 the Court granted  defendants' motion effectively  dismissing the Complaint
as to the Company's current and former officers,  directors and shareholders and
leaving  plaintiff's  claim for breach of contract  and  violation of New York's
Labor Law solely against the Company. The Company has now served an Answer and a
Document Request. The plaintiff has not proceeded with discovery and the case is
currently dormant. The Company intends to deny the principal  allegations in the
Complaint and to defend this action  vigorously.  Management  believes that this
action will not have any  material  adverse  impact on the  Company's  financial
position, results of operations or cash flows.

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

     None.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market

     The Company's  common stock,  par value $.01 per share (the "Common Stock")
trades on the over-the-counter Bulletin Board under the symbol AHLT.U.

     The following table sets forth, for the periods indicated, the high and low
closing bid prices for the Common  Stock as reported by the NASDAQ  Stock Market
Trading and Market Services Department.  Such over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
do not necessarily represent actual transactions.

                                         Fiscal 1997              Fiscal 1996
                                    --------------------       -----------------
                                    High          Low          High        Low
                                    ----          ---          ----        ---
Quarter ended June 30               2            1             3-3/8       2-3/4
Quarter ended September 30          2            1-1/8         3           1-3/4
Quarter ended December 31           1-3/8        1-1/2         1-3/4       1
Quarter ended March 31              3-1/16       1-11/16       1-1/8       1
                                             
     The  Company's 6%  Redeemable  Cumulative  Convertible  Preferred  Stock is
subject to significant  restrictions  on sale and does not have a public trading
market.


                                        8

<PAGE>


Number of Shareholders

     Management has been advised by the Company's transfer agent that there were
56 holders of record of the Common Stock as of June 15, 1997. Since most holders
of the Company's  stock have placed their shares in street name,  this figure is
much lower than the actual number of beneficial  holders of common stock,  which
is estimated to be approximately 300 stockholders.

Dividends

     To date,  the Company has not paid any cash  dividends on the Common Stock.
The payment of dividends,  if any, in the future is within the discretion of the
Board of  Directors  and will depend upon the  Company's  earnings,  its capital
requirements and financial condition and other relevant factors.  The Board does
not intend to declare  any  dividends  on the  Common  Stock in the  foreseeable
future,  but  instead  intends to retain all  earnings,  if any,  for use in the
Company's business operations.

     The Company is obligated  to pay annual  dividends of $.12 per share on its
1,350,000 outstanding shares of 6% Redeemable  Cumulative  Convertible Preferred
Stock.  Such dividends accrue daily, are payable each June 1 and December 1 and,
at the election of the Company,  may be paid in shares of Common Stock valued in
accordance  with  the  terms  of  such  stock.  Dividends  on the  Company's  6%
Redeemable Cumulative  Convertible Preferred Stock are payable in preference and
priority to any payment of any dividends on the Common Stock.

     The Company satisfied its liability payable at June 1, 1996 and at December
1, 1996 by the  issuance of 52,856 and 104,509  shares of the  Company's  Common
Stock issued July 8, 1996 and April 11, 1997, respectively.

     The Company satisfied its liability payable at June 1, 1995 and at December
1, 1995 by the  issuance  of 25,440 and 54,793  shares of the  Company's  Common
Stock issued September 28, 1995 and May 7, 1996, respectively.

ITEM 6. SELECTED FINANCIAL DATA

     The  following   selected   financial  data  have  been  derived  from  the
consolidated  financial statements of Accuhealth,  Inc. and its subsidiaries for
the years ended March 31, 1997, 1996, 1995 and 1994, which have been audited and
reported upon by Ernst & Young LLP, and should be read in conjunction with "Item
7.  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations"  and the  consolidated  financial  statements  and the notes thereto
included  elsewhere in this Form 10-K.  The Company has not declared or paid any
cash dividends on the Common Stock.


                                        9

<PAGE>



Statement of Operations Data:

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                Fiscal Year
                                                                            1997           1996            1995            1994
                                                                       ------------    ------------    ------------    ------------
<S>                                                                    <C>             <C>             <C>             <C>         
Net sales                                                              $ 16,369,376    $ 15,112,071    $ 15,468,402    $ 15,380,043
Gross profit                                                              6,770,120       6,931,649       7,211,622       6,920,977
Selling, general and administrative expenses                              6,146,783       7,104,529       6,913,959       7,599,214
Interest expense                                                            496,606         605,452         635,848         270,833
Recovery (expenses) related to pre-investigation
  management off book cash practices                                             --              --         525,820        (454,065)
Debt surrendered in settlement of claims                                         --              --         488,500              --
Income (loss) from continuing operations before income taxes                126,731        (778,332)        676,135      (1,403,135)
Income (loss) from continuing operations                                    126,731        (778,332)        676,135      (1,358,651)
Discontinued operations                                                          --              --        (278,733)     (1,187,055)
Income (loss) before extraordinary item                                     126,731        (778,332)        397,402      (2,545,706)
Extraordinary gain on debt surrendered in settlement of claims                   --              --          60,000              --
Net (loss) income                                                           126,731        (778,332)        457,402      (2,545,706)
Net (loss) income applicable to common stockholders                         (35,269)       (982,168)        350,555      (2,545,706)

Net loss (income) per common share:
Primary:
     Loss (income) from continuing operations                                  (.03)           (.77)            .39            (.87)
     Income (loss) before extraordinary item                                   (.03)           (.77)            .20           (1.64)
     Extraordinary item                                                          --              --             .04              --
     Net (loss) income per share                                               (.03)           (.77)            .24           (1.64)
Fully Diluted:
     Income (loss) from continuing operations:                                 (.03)           (.77)            .36            (.87)
     Income (loss) before extraordinary item                                   (.03)           (.77)            .20           (1.64)
            Extraordinary item                                                   --              --             .04              --
     Net (loss) income per share                                               (.03)           (.77)            .24           (1.64)
Weighted average number of shares of common  stock
     and equivalents outstanding
     Primary                                                              1,400,423       1,273.274       1,472,854       1,550,000
     Fully diluted                                                        1,400,423       1,273,274       1,893,991       1,550,000
</TABLE>

<TABLE>
<CAPTION>
Balance Sheet Data
                                                                                       March 31,

                                                       1997             1996             1995              1994              1993
                                                   -----------      -----------      -----------       -----------       -----------
<S>                                                <C>              <C>              <C>               <C>               <C>        
Total assets                                       $ 8,500,165      $ 7,650,957      $ 7,294,898       $ 7,823,526       $13,018,469
Long-term liabilities                                  974,543          488,352          694,628         1,586,394         1,684,351
Total liabilities                                    7,078,786        6,356,309        5,277,090         8,242,117        10,917,730
Preferred stock                                             --               --        2,710,164                --                --
Stockholders' equity (deficiency)                    1,421,379        1,294,648         (692,356)         (418,591)        2,100,739
</TABLE>


                                       10

<PAGE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS
         OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     This  Management's  Discussion  and Analysis  should be read in conjunction
with the  consolidated  financial  statements  of the Company and related  notes
included elsewhere in this Form 10-K.

Results of Operations

Fiscal Year Ended March 31, 1997 as Compared to Fiscal Year Ended March 31, 1996

     Net sales for Fiscal 1997 increased approximately $1,257,000 to $16,369,000
from the $15,112,000  reported in Fiscal 1996. The increase was the result of an
increase of approximately  $2,143,000 and $81,000 in the Company's institutional
pharmacy business and oral medication revenues,  respectively,  offset partially
by decreases in the Company's  infusion  services and durable medical  equipment
revenues of $853,000 and $114,000, respectively.

     The revenues  from infusion  services  were lower than the previous  fiscal
year services  partially as a result of the Company's  marketing shift away from
treating a small number of high revenue  patients,  primarily  HIV/AIDS Medicaid
patients, to increased numbers of lower revenue patients referred to the Company
via insurance  companies and HMO's.  The strategy  derives from two trends:  the
HIV/AIDS   population   stabilizing  and  the  downward   pressure  on  Medicaid
reimbursements for infusion therapy services.

     Gross  profits for Fiscal  1997 were  approximately  $6.8  million and were
41.4% of total net sales as compared to approximately  $6.9 million or 45.9% for
Fiscal 1996.  The  decrease in gross  profits  reflects an overall  shift in the
Company's mix of business,  including expanded  institutional  pharmacy business
which carries lower margins.

     Selling,  general and  administrative  expenses ("SG&A") were approximately
$6.1  million or 37.6% of net sales for Fiscal 1997 as compared to $7.1  million
or 47.0% for Fiscal 1996. The decrease was  principally the result of reductions
in professional fees ($283,000),  marketing costs  ($190,000),  certain clinical
and  administrative   salaries   ($159,000),   and  other  administrative  costs
($368,000).

     Interest  expense in Fiscal  1997 was  $496,606  as compared to $605,452 in
fiscal 1996.

Fiscal Year Ended March 31, 1996 as Compared to Fiscal Year Ended March 31, 1995

     Net sales for Fiscal 1996 decreased  approximately  $356,000 to $15,112,000
from the  $15,468,000  reported in Fiscal 1995. The decrease was the result of a
reduction of  approximately  $2,544,000  and $321,000 in the Company's  revenues
from infusion services and oral medications,  respectively,  offset partially by
an increase in the Company's institutional pharmacy revenues of $2,423,000.

                                       11

<PAGE>



     The revenues from infusion  services and oral  medications  were lower than
the  previous  fiscal  year  services  partially  as a result  of the  Company's
marketing  shift away from  treating a small  number of high  revenue  patients,
primarily  HIV/AIDS  Medicaid  patients,  to increased  numbers of lower revenue
patients referred to the Company via insurance companies and HMO's. The strategy
derives from two trends:  the HIV/AIDS  population  stabilizing and the downward
pressure on Medicaid  reimbursements for infusion therapy services. In addition,
the Company lost a physician  referral  source  approximating  $1 million in net
sales.

     Gross  profits for Fiscal  1996 were  approximately  $6.9  million and were
45.9% of total net sales as compared to approximately  $7.2 million or 46.6% for
Fiscal 1995.  The  decrease in gross  profits  reflects an overall  shift in the
Company's mix of business,  including expanded  institutional  pharmacy business
which carries lower margins.

     Selling,  general and  administrative  expenses ("SG&A") were approximately
$7.1  million or 47.0% of net sales for Fiscal 1996 as compared to $6.9  million
or 44.7% for Fiscal 1995. The increase was primarily attributable to higher than
expected  legal fees and  marketing  costs and a  reduction  of  $387,000 in its
reserves  for  contingencies  in Fiscal  1995.  Legal  fees  were  approximately
$114,000  higher  than in the prior  period as a result of  certain  litigation,
which has now been either settled or closed.  Non-recurring marketing costs were
approximately  $117,000  higher  than  the  prior  period  due to the  Company's
attempts to increase the number of patients it serves.

     Actions taken in the second half of Fiscal 1996, principally a reduction in
compensation  costs,  were  directed to  bringing  the  Company's  level of SG&A
expenses into line with revenues.  As a result of these efforts,  fourth quarter
SG&A expenses were $1,587,000 compared to an average of $1,839,000 for the three
quarters ended December 31, 1995.

     Interest  expense in Fiscal  1996 was  $605,452  or 4.8% lower than  Fiscal
1995.  Fiscal  1995  included  interest  charges  of  $59,000  related  to  debt
surrendered in settlement of claims.


Financial Condition

     As of March 31,  1997,  the Company had  working  capital of  approximately
$63,000.

     The  Company's  cash  provided by  financing  activities  of  approximately
$479,000 was primarily  attributable to the proceeds of  approximately  $869,000
under the Company's  revolving credit facility and term loan offset by principal
payments on capital leases.

     Accounts receivable include amounts due from third party payors,  primarily
governmental agencies (Medicare and Medicaid). At March 31, 1997, gross Medicare
and Medicaid receivables aggregated $2,415,732.


                                       12

<PAGE>



     On April 28, 1994, the Company  obtained a $2.5 million maximum  commitment
working  capital  facility from Rosenthal and Rosenthal  ("Rosenthal")  and used
funds  borrowed  under that  facility  to reduce its  indebtedness.  The loan is
secured  by  assets  of the  Company  including  its  receivables,  inventories,
equipment and fixtures.  The  Company's  ability to use this credit  facility is
dependent upon the level of its eligible  receivables as defined in the Loan and
Security Agreement.  Pursuant to the terms of a Loan and Security Agreement with
Rosenthal,  the Company granted Rosenthal  warrants to purchase 70,000 shares of
the Company's common stock.

     Effective  February 1, 1996, the Company agreed to an amendment of the Loan
and Security  Agreement.  The amendment extended the agreement through April 28,
1997 and allowed the Company to borrow,  under certain  conditions and terms, up
to $3,500,000 at an interest rate of prime plus 3 7/8%. In addition, the Company
granted  Rosenthal  warrants to purchase  30,000 shares of the Company's  common
stock.

     Effective  February 1, 1997, the Company agreed to an amendment of the Loan
and Security  Agreement.  This amendment  extends the agreement through April 1,
1998  and  allows  the  Company  to  borrow,  under  certain  conditions,  up to
$4,000,000  in the form of a Term Loan of $500,000 at an interest  rate of prime
plus 5% and a working  capital  facility of  $3,500,000  at an interest  rate of
prime plus 2 7/8%. In addition,  the expiration date of the 100,000 warrants was
amended to be the later of April 1, 2001 or thirty six months following the last
day of any term to which the loan  commitment has been extended and the exercise
price for all warrants was restated to $2.00 per share.

     The Company  operates under cash flow pressure  primarily due to losses and
insufficient  working  capital.  The Company believes that its cash position and
liquidity  will  continue  to require  careful  management  for the  foreseeable
future,  but that its existing credit facility,  together with cash generated by
operations,  will be sufficient to fund the  Company's  operations  and required
debt repayments at least through March 31, 1998.

     In February 1997, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"), which is required to be adopted beginning with the quarter ended December
31,  1997.  At that time,  the  Company  will be  required  to change the method
currently  used to compute  earnings per share and to restate all prior periods.
Under the new  requirements  for  calculating  primary  earnings per share,  the
dilutive effect of stock options and warrants will be excluded. The Company does
not anticipate  that the adoption of SFAS 128 will have a significant  impact on
the calculation of primary and fully diluted earnings per share.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Financial  statements and financial statement schedules are included in the
Consolidated  Financial  Statements,  as a separate section of this Report,  set
forth  on pages  F-1  through  F-25,  attached  hereto,  and  found  immediately
following the signature pages of this Report.


                                       13

<PAGE>



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Listed below are the  executive  officers  and  directors of the Company at
June 15, 1997:

<TABLE>
<CAPTION>
                                                                                                      Annual meeting
                                  Officer or                                                             at which
            Name                Director Since           Age                  Position               Term will Expire
            ----                --------------           ---                  --------               ----------------
<S>                                  <C>                 <C>        <C>                                    <C>
E. Virgil Conway                     1994                67         Director                               1999

Glenn C. Davis                       1994                48         President, Chief Executive             1997
                                                                    Officer and Director

Stanley Goldstein                    1994                61         Chairman and Director                  1998

Donald B. Louria, MD                 1994                68         Director                               1997

Sally Hernandez-Pinero               1994                44         Director                               1997

Corbett A. Price                     1994                47         Director                               1999
</TABLE>

     Set forth  below are brief  summaries  of the  business  experience  of the
persons who were directors as of June 15, 1997:

     E. Virgil Conway chairs the Company's Audit and Stock Option Committees and
was  elected  a  director  on April  29,  1994.  Mr.  Conway  is a member of the
Executive and  Compensation and Nominations  Committees.  Since May 16, 1995, he
has  served  as  Chairman  of  the  Board  of  the  Metropolitan  Transportation
Administration  of the City of New York  and,  from  1989 to 1996,  he served as
Chairman of the Audit  Committee  of the City of New York.  From 1992 until July
1995,  Mr.  Conway  served as Chairman  of the  Financial  Accounting  Standards
Advisory  Council.  From 1968 through  1988,  Mr.  Conway served as Chairman and
Chief Executive Officer and as a director of the Seamen's Bank for Savings, FSB.
From 1986 until  1989,  Mr.  Conway  also  served as Vice  Chairman  of Seamen's
Corporation. From 1967 to 1968, Mr. Conway served as an Executive Vice President
and Trustee at the Manhattan  Savings Bank. From 1964 to 1967, Mr. Conway served
as First Deputy  Superintendent  of Banks of the State of New York and Secretary
of the New York  State  Banking  Board.  Mr.  Conway  specializes  in  financial
consulting.  Mr.  Conway serves on several  corporate  boards,  including  Union
Pacific Corporation, Con Edison,


                                       14

<PAGE>



HRE, a real estate investment trust,  Trism, Inc., a specialized  trucking firm,
and mutual funds managed by Phoenix Home Life.

     Glenn C. Davis became  President of Accuhealth  Home Care, Inc. in December
1993,  and became a  director,  Chief  Executive  Officer and  President  of the
Company on February 3, 1994.  Mr. Davis is a member of the Executive  Committee.
Mr.  Davis  served as the  Treasurer  of the  Company  from April 29, 1994 until
August 5,  1994.  From June 1993 until June 30,  1995,  Mr.  Davis was a general
partner of  Capstone  Management  Company,  an  investment  partnership  engaged
principally in the  initiation,  acquisition and management of businesses in the
health care  industry.  Mr. Davis is a certified  public  accountant.  From 1980
until  January  1993,  Mr.  Davis  was a partner  with  Coopers  &  Lybrand,  an
international accounting and consulting firm.

     Stanley  Goldstein was elected Chairman of the Company's Board of Directors
on April 29, 1994. Mr. Goldstein has been a private investor from 1981 until the
present.  Mr. Goldstein is Chairman of the Executive  Committee.  From June 1993
until June 30, 1995, Mr. Goldstein was a general partner of Capstone  Management
Company,   an  investment   partnership   engaged   principally  in  initiation,
acquisition  and  management  of  businesses  in the health care  industry.  Mr.
Goldstein is a certified public accountant.  From 1964 until 1981, Mr. Goldstein
was the founder  and  Managing  Partner of  Goldstein  Golub  Kessler & Company,
Certified Public Accountants. Mr. Goldstein serves on the boards of directors of
Security  Mutual Life  Insurance  Company  and  Security  Equity Life  Insurance
Company.

     Donald B. Louria,  M.D., M.A.C.P. was elected a director on April 29, 1994.
He is a member of the  Professional  Conduct  Committee.  Dr.  Louria has been a
Professor and Chairman of the  Department  of Preventive  Medicine and Community
Health of the  University  of Medicine and  Dentistry of New  Jersey-New  Jersey
Medical  School from July 1969 until the present.  Over the same  period,  among
other appointments, Dr. Louria has served as a consultant in Infectious Diseases
to Memorial  Hospital for Cancer and Allied  Diseases  and,  from 1971 until the
present,  has served on the Consultant  Medical Staff in Infectious  Diseases at
St. Michael's Medical Center in Newark, New Jersey.

     Sally B. Hernandez-Pinero was elected a director on September 20, 1994. She
chairs  the  Compensation  and  Nominations  Committee  and also  serves  on the
Professional Conduct Committee. Ms. Hernandez-Pinero is a member of the law firm
of Kalkines  Arky Zall &  Bernstein,  where she is  primarily  engaged in public
finance,  housing  and  economic  development  projects,  low  income tax credit
syndications and intergovernmental  relations.  Ms.  Hernandez-Pinero  served as
Chairwoman of the New York City Housing  Authority from February 1992 to January
1994.  In  that  position  she had  direct  operational  responsibility  for the
nation's  largest  public  housing  program with 325  developments  housing over
600,000  people,  a staff of 16,000 and a budget of $1.45 billion.  From January
1990 to February  1992,  Ms.  Hernandez-Pinero  was Deputy Mayor for Finance and
Economic  Development,  in  which  position  she  designed  and  supervised  the
development   and   implementation   of  business,   industrial  and  commercial
development policies for the City of New York. From January 1988 to January 1990
she served as Commissioner/Chairwoman of the Board of Directors of the Financial
Services Corporation of


                                       15

<PAGE>



New York City  where she  developed  and  implemented  the  course of action and
priorities for that agency's  economic  development  programs.  Prior to January
1988,  Ms.  Hernandez-Pinero  served as Deputy  Borough  President of Manhattan;
General  Counsel to the State of New York  Mortgage  Agency,  and as an attorney
with a number of community  development  and legal  service  organizations.  Ms.
Hernandez-Pinero  is a director of Consolidated  Edison Corporation and the Dime
Savings Bank and National Income Realty Trust.

     Corbett A. Price was elected a director on September 20, 1994. Mr. Price is
a member of the Professional  Conduct and Audit  Committees.  He is the Chairman
and Chief Executive  Officer of KURRON,  a New York based health care management
company  which Mr. Price  founded in January  1990.  KURRON  specializes  in the
rehabilitation of distressed  hospitals and health care systems. Mr. Price began
his career in health care  management  in 1975 at the  Hospital  Corporation  of
America,  where he served  as a Vice  President  from  1983 to 1989.  As head of
Hospital  Corporation  of  America's  Mid-Atlantic  Division,  he  directed  the
operations of approximately  twenty hospitals in four states and the District of
Columbia. Mr. Price has advised the governments of Mexico,  Barbados and Jamaica
on health care delivery systems and facilities.

     The   Company  has  Audit,   Compensation   and   Nominations,   Executive,
Professional  Conduct  and  Stock  Options  Committees.   The  Compensation  and
Nominations Committee administers the Company's stock option plans.

Section 16(a) Beneficial Ownership Reporting Compliance

     Based  solely  on a review  of Forms  3, 4 and 5 (and  amendments  thereto)
furnished to the Company,  and certain written  representations  received by it,
the Company is not aware of any person who,  during the prior fiscal year, was a
director, officer or beneficial owner of more than 10% of its outstanding Common
Stock,  during  (or with  respect  to) the  prior or  (except  as may have  been
previously  reported)  previous fiscal year,  failed to file with the Securities
and Exchange  Commission on a timely basis reports required by Section 16 (a) of
the Securities  Exchange Act of 1934,  except that one Form 4 for Mr. Corbett A.
Price was  inadvertently  filed after the due date  thereof,  and one Form 5 for
Donald B. Louria, M.D. was inadvertently filed after the due date thereof.

ITEM 11. EXECUTIVE COMPENSATION

     From April 1, 1994 through May 31, 1994,  the Company  paid  directors  who
were not officers of the Company $2,000 per meeting attended.  In June 1994, the
Board of Directors established a policy of paying directors who are not officers
or consultants a fee of $6,000 per annum plus $1,000 per annum ($2,000 per annum
for the Chair) for each committee on which they serve. Messrs. Conway and Price,
Dr. Louria and Ms.  Hernandez-Pinero  are eligible for the foregoing  fees.  The
Company does not intend to pay any fee to officers or consultants for serving as
directors.  Effective  June 28,  1994,  the Company  entered  into a  Consulting
Agreement  with  Mr.  Goldstein  for  certain  services  to  be  rendered.  Such
consulting   agreement   calls  for  a  monthly   consulting   fee  and  expense
reimbursement of $5,000.


                                       16

<PAGE>



     The following table sets forth all compensation earned,  awarded or paid by
the Company to its Chief  Executive  Officer for the fiscal year ended March 31,
1997. No other person who was a director,  executive  officer or employee at any
time during the fiscal year ended March 31, 1997,  received  salary and bonus in
excess of $100,000 during or attributable to such fiscal year.


                           Summary Compensation Table
<TABLE>
<CAPTION>
                                                                                                                 Long Term
                                                                           Annual Compensation                 Compensation
                                                                 --------------------------------------     -------------------
             Name and                                                                                            All other
       Principal Position                  Year                       Salary                 Bonus             Compensation
--------------------------------      -----------------          -------------------    ----------------    -------------------
<S>                                        <C>                         <C>                 <C>                      <C>
Glenn C. Davis                             FY1997                      $200,000                  --                     --
  President and Chief Executive            FY1996                      $219,229                  --                 $1,854
  Officer                                  FY1995                      $150,000            $100,000                 $2,471
</TABLE>


Employment Agreement

     The Company  renewed its employment  agreement with its President and Chief
Executive  Officer  through May 2, 1998.  Under the  employment  agreement,  the
Company's  President and Chief Executive Officer is entitled to an annual salary
at a rate of $250,000  and 25,000  shares of the  Company's  common  stock.  The
agreement  also  provides  for a severance  payment  equal to 150% of his annual
compensation,   including   base   salary  and  any   initial   bonus   ("Annual
Compensation"),  at the date of  termination if (i) his employment is terminated
by him due to a breach of the  agreement by the Company,  (ii) the Company fails
to offer to extend his employment  for additional  terms of one year on the same
terms; or (iii) his employment  terminates due to disability.  If the employment
is terminated  due to his death,  the  severance  payment is equal to 50% of his
Annual  Compensation at the date of death. The agreement  further provides that,
in the  event of a merger  or sale of  substantially  all of the  assets  of the
Company,  either the  successor  corporation  or he may elect to  terminate  his
employment and that, if his employment is so terminated, he would be entitled to
receive a severance payment equal to 300% of his Annual Compensation at the date
of  termination.  In addition,  the agreement  provides that he will not compete
with the Company for 18 months after a  termination  of his  employment,  except
that,  if such  termination  is by the  Company for cause,  the  non-competition
period will be for 24 months.

Stock Options

     The following tables set forth information  concerning  exercisable options
during the fiscal year ended March 31, 1997,  with respect to the Common  Stock.
No stock options or stock appreciation rights were granted to executive officers
and no stock options or stock  appreciation  rights were  exercised by executive
officers during such year.

     Additional  information  required by this item is incorporated by reference
to the Company's Proxy Statement.


                                       17

<PAGE>


                          FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                               Number of Shares Underlying                 Value of Unexercisable in-the-Money
                          Unexercised Options at Fiscal Year-End               Options at Fiscal Year End
                        -------------------------------------------    -------------------------------------------
Name                       Exercisable            Unexercisable            Exercisable           Unexercisable
--------------------    --------------------   --------------------    --------------------   --------------------
<S>                         <C>                      <C>                         <C>                    <C>  
Glenn C. Davis              100,000                  100,000                     (1)                    --
</TABLE>

-----------------
(1)  The option exercise price of such shares is $2.00 per share.

     The  information  required by items 402(k) and 402(l) of Regulation  S-K is
incorporated  herein by reference to the Company's  Proxy  Statement to be filed
with the  Securities and Exchange  Commission  pursuant to Regulation 14A within
120 days after the end of the fiscal year covered by this report.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth  existing  stock  ownership as of June 15,
1997, with respect to the beneficial  ownership of shares of Common Stock by (i)
each person known by the Company to be the beneficial owner of 5% of more of the
outstanding  shares of Common Stock, (ii) each nominee for director,  (iii) each
director,  (iv) each current executive officer named in the Summary Compensation
Table above,  and (v) all officers and directors as a group,  and the percentage
of the outstanding shares of Common Stock represented thereby.


                                       18

<PAGE>


<TABLE>
<CAPTION>
                                               Amount of Nature
            Name of                             of Beneficial
      Beneficial Owner(1)                        Ownership(1)              Percent of Class(2)
---------------------------------            -----------------------   --------------------------
<S>                                                <C>                              <C>
Glenn C. Davis                                     313,951(3)(4)(5)                 19.3
c/o Accuhealth, Inc.
1575 Bronx River Ave.
Bronx, New York, 10460

Stanley Goldstein                                  349,147(3)(4)(6)                 21.1
c/o Accuhealth, Inc.
1575 Bronx River Ave.
Bronx, New York, 10460

E. Virgil Conway                                    22,287(11)(12)                   1.5

Donald B. Louria, M.D.                              36,000(7)                        2.4

Sally Hernandez-Pinero                               6,000(12)                         *

Corbett A. Price                                    27,262(11)                       1.8

Special Situation Fund III, L.P.                   603,054(8)                       31.7
153 East 53 Street
New York, New York 10022

Penfield Partners, L.P.                            278,200(9)                       16.7
153 East 53 Street
New York, New York 10022

Special Situations Cayman Fund,                    210,646(10)                      13.0
L.P.
153 East 53 Street
New York, New York 10022

CMNY Capital II, L.P.                              294,266(13)                      17.0

Emanuel Geduld                                      88,253(9)(14)                    5.7

All Directors and Executive                        763,981(15)                      40.3
Officers as a Group (10 persons)
</TABLE>

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

*    Percentage of shares beneficially owned does not exceed 1% of the class.


                                       19

<PAGE>


(1)  As used herein, the term "beneficial  ownership" with respect to a security
     is defined  by Rule  13d-3  under the  Securities  Exchange  Act of 1934 as
     consisting of sole or shared voting power  (including  the power to vote or
     direct the vote)  and/or sole or shared  investment  power  (including  the
     power to dispose or direct the  disposition  of the shares) with respect to
     the security through any contract, arrangement, understanding, relationship
     or otherwise, including a right to acquire such power(s) during the next 60
     days.  Unless  otherwise  noted,  beneficial  ownership  consists  of  sole
     ownership, voting and investment rights.

(2)  Percent  of class  assumes  issuance  of the shares  subject  to  currently
     exercisable options and shares issuable upon the conversion of 6% Preferred
     Stock,  as  well  as  an  equivalent  increase  in  the  number  of  shares
     outstanding.

(3)  Includes 100,000 shares issuable  pursuant to currently  exercisable  stock
     options.

(4)  Includes shares owned of record and beneficially for the following:

     Glenn C. Davis
     Stanley Goldstein

(5)  Includes  50,000  shares  issuable  upon  conversion of 50,000 shares of 6%
     Preferred Stock.

(6)  Includes  78,000  shares  issuable  upon  conversion of 78,000 shares of 6%
     Preferred Stock.

(7)  Includes 15,000 shares  issuable  pursuant to currently  exercisable  stock
     options  and 21,000 shares  owned  directly  or in trust for the benefit of
     members of Dr. Louria's family.

(8)  Includes 178,054 shares owned of record and beneficially and 425,000 shares
     issuable upon conversion of 425,000 shares of 6% Preferred Stock.

(9)  Includes 33,200 shares owned of record and  beneficially and 245,000 shares
     issuable upon conversion of 245,000 shares of 6% Preferred Stock.

(10) Includes 17,262 shares owned of record and  beneficially  and 73,146 shares
     owned  of  record  and   beneficially  and  137,500  shares  issuable  upon
     conversion of 137,500 shares of 6% Preferred Stock.

(11) Includes  10,000  shares  issuable  upon  conversion of 10,000 shares of 6%
     Preferred Stock.

(12) Includes  6,000 shares  issuable  pursuant to currently  exercisable  stock
     options.

(13) Includes 44,266 shares owned of record and  beneficially and 250,000 shares
     issuable upon conversion of 250,000 shares of 6% Preferred Stock.


                                       20

<PAGE>



(14) Includes 13,253 shares owned of record and  beneficially  and 75,000 shares
     issuable upon conversion of 75,000 shares of 6% Preferred Stock.

(15) Includes  349,647 shares owned of record and  beneficially,  266,334 shares
     issuable pursuant to currently exercisable stock options and 148,000 shares
     issuable upon conversion of 148,000 shares of 6% Preferred Stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     As of June 28, 1994, the Company  entered into a Consulting  Agreement with
Stanley Goldstein,  who is Chairman of the Board. Mr. Goldstein does not receive
compensation for services  provided as a director of the Company during the term
of his consulting agreement.

     Pursuant to such Consulting  Agreement,  Mr. Goldstein provides  consulting
services to the Company in, among other areas,  capital  financing,  mergers and
acquisitions.  The Company has agreed to pay consulting fees to Mr. Goldstein in
the amount of $4,000 per month and an office expense reimbursement of $1,000 per
month  for  use  of  Mr.  Goldstein's  offices  and  support  facilities  in the
performance  of his consulting  duties.  The foregoing fees were accrued but not
paid during the prior fiscal year. In further  consideration of Mr.  Goldstein's
consulting services,  the Company granted to Mr. Goldstein an option to purchase
100,000 shares of Common Stock at prices ranging from $2.00 to $3.00 per share.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1), (a)(2)   See the separate section of this report following Item 14 for a
                 list of financial statements and schedules filed herewith.

(a)(3)           Exhibits as required by Item 601 of  Regulation  S-K are listed
                 in Item 14(c) below.

(b)              The  Company  did not file any  Reports  on Form 8-K during the
                 last quarter of the fiscal year ended March 31, 1997.

(c)              Exhibits

3.1              Registrant's    Articles   of    Incorporation,    as   amended
                 (incorporated  herein  by  reference  to  Exhibit  3 (I) to the
                 Registrant's  Annual  Report on Form 10-K for the  fiscal  year
                 ended March 31, 1994)

3.2              Registrant's   By-laws,  as  amended  (incorporated  herein  by
                 reference to Exhibit 3(ii) to the Registrant's Annual Report on
                 Form 10-K for the fiscal year ended March 31, 1994)

10.1             Asset Purchase and Sale Agreement  dated  September 22, 1993 by
                 and  between  Em-Bee  Drug  Inc.,  Riverview  Pharmacy,   Inc.,
                 Westview Drug Co. Inc., Brittany Chemists, Inc.,


                                       21

<PAGE>



                 Villageview  Pharmacy,  Inc.,  Eastview 87th St. Inc.,  Midview
                 Drug,  Inc. and the Registrant and RXD  Acquisition  Group Inc.
                 (incorporated  herein by  reference  to Exhibit  (10)(a) to the
                 Registrant's  Quarterly  Report  on Form  10-Q for the  quarter
                 ended December 31, 1993)

10.2             Employment  Agreement  dated  March 17, 1993  between  Edwin T.
                 Veith and the Registrant  (incorporated  herein by reference to
                 Exhibit (10)(b) to the  Registrant's  Quarterly  Report on Form
                 10-Q for the quarter ended December 31, 1993)

10.3             Letter Agreement dated November 11, 1993 between the Registrant
                 and Edwin T. Veith (incorporated herein by reference to Exhibit
                 (10)(c) to the  Registrant's  Quarterly Report on Form 10-Q for
                 the quarter ended December 31, 1993)

10.4             Letter  Agreement dated February 3, 1994 between the Registrant
                 and Edwin T. Veith (incorporated herein by reference to Exhibit
                 (10)(d) to the  Registrant's  Quarterly Report on Form 10-Q for
                 the quarter ended December 31, 1993)

10.5             Option  Agreement  dated March 17, 1993 between  Edwin T. Veith
                 and the Registrant (incorporated herein by reference to Exhibit
                 (10)(e) to the  Registrant's  Quarterly Report on Form 10-Q for
                 the quarter ended December 31, 1993)

10.6             Stock Option Agreement  Alternative Benefits Letter dated March
                 17,   1993   between   Edwin  T.   Veith  and  the   Registrant
                 (incorporated  herein by  reference  to Exhibit  (10)(f) to the
                 Registrant's  Quarterly  Report  on Form  10-Q for the  quarter
                 ended December 31, 1993)

10.7             Employment  Agreement  dated  March 23, 1993  between  Allan E.
                 Johnson and the Registrant (incorporated herein by reference to
                 Exhibit (10)(g) to the  Registrant's  Quarterly  Report on Form
                 10-Q for the quarter ended December 31, 1993)

10.8             Letter Agreement dated November 11, 1993 between the Registrant
                 and  Allan E.  Johnson  (incorporated  herein by  reference  to
                 Exhibit (10)(h) to the  Registrant's  Quarterly  Report on Form
                 10-Q for the quarter ended December 31, 1993)

10.9             Letter  Agreement dated February 3, 1994 between the Registrant
                 and  Allan E.  Johnson  (incorporated  herein by  reference  to
                 Exhibit (10)(I) to the  Registrant's  Quarterly  Report on Form
                 10-Q for the quarter ended December 31, 1993)

10.10            Option  Agreement dated March 23, 1993 between Allan E. Johnson
                 and the Registrant (incorporated herein by reference to Exhibit
                 (10)(j) to the  Registrant's  Quarterly Report on Form 10-Q for
                 the quarter ended December 31, 1993)

10.11            Agreement  dated  February 3, 1994 between the  Registrant  and
                 Capstone Management Company  (incorporated  herein by reference
                 to Exhibit (10)(k) to the Registrant's Quarterly Report on Form
                 10-Q for the quarter ended December 31, 1993)


                                       22

<PAGE>



10.12            Loan and  Security  Agreement  dated  April  28,  1994  between
                 Rosenthal & Rosenthal,  Inc. and the Registrant,  Midview Drug,
                 Inc.,  Accuhealth  Home Care,  Inc. and Citiview Drug Co., Inc.
                 (the "Loan and  Security  Agreement")  (incorporated  herein by
                 reference to Exhibit 10 (l) to the  Registrant's  Annual Report
                 on Form 10-K for the fiscal year ended March 31, 1994)

10.13            Amendment No. 1 to the Loan and Security Agreement, dated as of
                 February 1, 1996

10.14            Warrant dated April 28, 1994 for the Registrant's  Common Stock
                 issued  by  the  Registrant  to  Rosenthal  &  Rosenthal,  Inc.
                 (incorporated  herein  by  reference  to  Exhibit  10(m) to the
                 Registrant's  Annual  Report on Form 10-K for the  fiscal  year
                 ended March 31, 1994)

10.15            Employment  Agreement  dated May 2, 1994 between Glenn C. Davis
                 and the Registrant (incorporated herein by reference to Exhibit
                 10.14 to the  Registrant's  Annual  Report on Form 10-K for the
                 year ended March 31, 1995)

10.16            Consulting  Agreement  dated  June 28, 1994  between  Donald B.
                 Louria,  M.D.  and   the  Registrant  (incorporated  herein  by
                 reference  to the  Registrant's  Annual Report on Form 10-K for
                 the year ended March 31, 1995)

10.17            Consulting   Agreement  dated  June 28,  1994  between  Stanley
                 Goldstein  and the Registrant (incorporated herein by reference
                 to  Exhibit  10.16 to the  Registrant's  Annual  Report on Form
                 10-K for the year ended March 31, 1995)

10.18            Asset Purchase  Agreement dated  as of December 1, 1994 between
                 Registrant and Citiview  Drug Co., Inc., Towerview, Inc., R & B
                 Pharmacy,  Inc. and P & S  Pharmacy,  Inc. (incorporated herein
                 by  reference  to  Exhibit  10.17  to the  Registrant's  Annual
                 Report on Form 10-K for the year ended March 31, 1995)

10.19            Amended  and  Restated  1988 Stock  Option  Plan  (incorporated
                 herein  by  reference  to  Exhibit B to the  Registrant's  1994
                 Notice of Annual Meeting and Proxy Statement)

10.20            Option  Agreement  dated September 20, 1994  between Corbett A.
                 Price and the Registrant  (incorporated herein  by reference to
                 Exhibit 10.19 to the  Registrant's  Annual Report  on Form 10-K
                 for the year ended March 31, 1995)

10.21            Option  Agreement  dated  September  20, 1994  between James E.
                 Bacon and the Registrant  (incorporated herein by  reference to
                 Exhibit 10.20 to the  Registrant's  Annual Report on  Form 10-K
                 for the year ended March 31, 1995)

10.22            Option  Agreement  dated  September 20, 1994  between E. Virgil
                 Conway and the  Registrant (incorporated herein by reference to
                 Exhibit 10.21 to  the  Registrant's  Annual Report on Form 10-K
                 for the year ended March 31, 1995)


                                       23

<PAGE>



10.23            Option   Agreement  dated  September  20,  1994  between  Sally
                 Hernandez-Pinero  and the  Registrant  (incorporated  herein by
                 reference to Exhibit 10.22 to the Registrant's Annual Report on
                 Form 10-K for the year ended March 31, 1995)

10.24            Option  Agreement  dated  September 20, 1994  between Harold D.
                 Reiter and  the Registrant (incorporated herein by reference to
                 Exhibit 10.23  to the  Registrant's  Annual Report on Form 10-K
                 for the year ended March 31, 1995)

10.25            Option Agreement dated June 28, 1994 between Glenn C. Davis and
                 the  Registrant  (incorporated  herein by  reference to Exhibit
                 10.24 to the  Registrant's Annual  Report  on Form 10-K for the
                 year ended March 31, 1995)

10.26            Option Agreement dated June 28, 1994 between Stanley  Goldstein
                 and the Registrant (incorporated herein by reference to Exhibit
                 10.25 to the  Registrant's Annual  Report  on Form 10-K for the
                 year ended March 31, 1995)

10.27            Option  Agreement  dated June 28, 1994  between Bob L. Wood and
                 the  Registrant  (incorporated  herein by  reference to Exhibit
                 10.26 to the  Registrant's Annual  Report  on Form 10-K for the
                 year ended March 31, 1995)

10.28            Option  Agreement dated June 28, 1994 between Donald B. Louria,
                 M.D. and  the Registrant  (incorporated  herein by reference to
                 Exhibit  10.27 to the  Registrant's  Annual Report on Form 10-K
                 for the year ended March 31, 1995)

10.29            Option  Agreement  dated  September  20, 1994  between  Gary S.
                 LaPorta  and the Registrant  (incorporated  herein by reference
                 to  Exhibit  10.28 to the  Registrant's  Annual  Report on Form
                 10-K for the year ended March 31, 1995)

10.30            Agreement  and Plan of Merger  dated as of March 14, 1997 among
                 Accuhealth,  Inc., ACH Acquiring  Corp.,  ProHealthCare,  Inc.,
                 ProHealthCare Infusion Services, Inc., Thomas Laurita and David
                 Brian Cohen.

11               Statement re Computation of Per-Share Earnings

21               Subsidiaries of the Registrant



                                       24

<PAGE>



                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                              ACCUHEALTH, INC.

Date:   June 30, 1997         By:   /s/ Glenn C. Davis
                                    ---------------------------------
                                    Glenn C. Davis
                                    President and
                                    Chief Executive Officer

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

Date:   June 30, 1997                By:   /s/ Stanley Goldstein
                                           ----------------------------------
                                           Stanley Goldstein,
                                           Chairman of the Board of Directors

Date:   June 30, 1997                By:   /s/ Glenn C. Davis
                                           ----------------------------------
                                           Glenn C. Davis,
                                           Chief Executive Officer,
                                           President and Director

Date:   June 30, 1997                By:   /s/ E. Virgil Conway
                                           ----------------------------------
                                           E. Virgil Conway, Director

Date:   June 30, 1997                By:   /s/ Donald B. Louria
                                           ----------------------------------
                                           Donald B. Louria, M.D., Director

Date:   June 30, 1997                By:   /s/ Sally Hernandez-Pinero
                                           ----------------------------------
                                           Sally Hernandez-Pinero, Director

Date:   June 30, 1997                By:   /s/ Corbett A. Price
                                           ----------------------------------
                                           Corbett A. Price, Director

                                       25

<PAGE>



                        ACCUHEALTH, INC. AND SUBSIDIARIES

                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                          FINANCIAL STATEMENT SCHEDULES



                                                                         Page
                                                                         ----

Report of Independent Auditors                                           F - 2

Consolidated Balance Sheets at
    March 31, 1997 and March 31, 1996                                    F - 3

Consolidated Statements of Operations for
    the Years Ended March 31, 1997, 1996 and 1995                        F - 4

Consolidated Statements of Stockholders'
    Equity/(Deficiency) for the Years Ended March 31, 1997, 1996
    and 1995                                                             F - 5

Consolidated Statements of Cash Flows for
    the Years Ended March 31, 1997, 1996
    and 1995                                                             F - 6

Notes to Consolidated Financial Statements                               F - 7


Financial Statement Schedules

II.  Valuation and Qualifying Accounts                                   F - 25


     All  other  schedules  for  which  provision  is  made  in  the  applicable
     accounting  regulation of the  Securities  and Exchange  Commission are not
     required under the related instructions or are inapplicable and, therefore,
     have been omitted.



                                       F-1

<PAGE>


REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Accuhealth, Inc.

We have audited the accompanying consolidated balance sheets of Accuhealth, Inc.
and  subsidiaries  as of March 31, 1997 and 1996,  and the related  consolidated
statements of operations,  stockholders'  equity/(deficiency) and cash flows for
each of the three  years in the period  ended  March 31,  1997.  Our audits also
included the  financial  statement  schedule  listed in the Index at Item 14(a).
These financial  statements and schedule are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and schedule based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Accuhealth,  Inc.  and  subsidiaries  at  March  31,  1997  and  1996,  and  the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended March 31, 1997,  in  conformity  with  generally
accepted  accounting  principles.  Also, in our opinion,  the related  financial
statement  schedule,   when  considered  in  relation  to  the  basic  financial
statements taken as a whole,  presents  fairly,  in all material  respects,  the
information set forth therein.


                                                               ERNST & YOUNG LLP

New York, New York
June 16, 1997


                                       F-2

<PAGE>


                        ACCUHEALTH, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

ASSETS                                                                                       March 31
                                                                                    --------------------------
                                                                                        1997          1996
                                                                                    -----------    -----------
<S>                                                                                 <C>            <C>        
Current Assets:
    Cash                                                                            $    31,548    $     2,694
    Accounts receivable, less allowance for doubtful
        accounts of $317,000 in 1997 and $292,000 in 1996                             5,279,369      4,459,693
    Inventories                                                                         665,335        621,838
    Prepaid expenses and other current assets                                           191,323        103,114
                                                                                    -----------    -----------

    Total Current Assets                                                              6,167,575      5,187,339

Revenue producing equipment, net                                                        485,305        670,352
Fixed assets, net                                                                     1,659,056      1,758,646
Other                                                                                   188,229         34,620
                                                                                    -----------    -----------

Total Assets                                                                        $ 8,500,165    $ 7,650,957
                                                                                    ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
    Notes payable - revolving credit facility                                       $ 2,782,677    $ 2,413,392
    Notes payable - other                                                               224,869        294,598
    Accounts payable                                                                  1,801,120      1,512,836
    Accrued expenses and other current liabilities                                    1,128,828      1,221,422
    Current portion of capital lease - Facility                                          53,625         71,500
    Current portion of other capital lease obligations                                  113,124        354,209
                                                                                    -----------    -----------

        Total Current Liabilities                                                     6,104,243      5,867,957

Notes payable - term loan                                                               500,000             --
Notes payable - other                                                                   101,031             --
Capital lease - Facility, less current portion                                          303,875        375,375
Other capital lease obligations, less current portion                                    69,637        112,977
                                                                                    -----------    -----------

        Total Liabilities                                                             7,078,786      6,356,309

Commitments and Contingencies (See Notes 7 and 10)

Stockholders' Equity:
    Preferred stock, $.01 par value; authorized 3,650,000 shares;
        no shares issued and outstanding
    6% Redeemable cumulative convertible preferred stock $.01 par value;
        $2,754,000 liquidation preference, authorized
        issued and outstanding 1,350,000 shares                                          13,500         13,500
    Common stock $0.1 par value; authorized 15,000,000 shares;
        1,787,598 (1997) and 1,630,233 (1996) shares issued                              17,876         16,302
    Additional paid-in capital                                                        6,168,364      6,007,938
    (Deficit)                                                                        (4,154,041)    (4,118,772)
                                                                                    -----------    -----------
                                                                                      2,045,699      1,918,968
    Less treasury stock (308,004 shares) at cost                                        624,320        624,320
                                                                                    -----------    -----------
Total Stockholders' Equity                                                            1,421,379      1,294,648
                                                                                    -----------    -----------

Total Liabilities and Stockholders' Equity                                          $ 8,500,165    $ 7,650,957
                                                                                    ===========    ===========
</TABLE>

                 See notes to consolidated financial statements.


                                       F-3

<PAGE>



                        ACCUHEALTH, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                    YEARS ENDED MARCH 31,
                                                                        --------------------------------------------
                                                                            1997            1996            1995
                                                                        ------------    ------------    ------------
<S>                                                                      <C>             <C>             <C>        
Net sales                                                                $16,369,376     $15,112,071     $15,468,402
Cost of goods sold                                                         9,599,256       8,180,422       8,256,780
                                                                        ------------    ------------    ------------
Gross profit                                                               6,770,120       6,931,649       7,211,622
Selling, general and administrative expenses                               6,146,783       7,104,529       6,913,959
                                                                        ------------    ------------    ------------
Operating (loss) income                                                      623,337        (172,880)        297,663
Interest expense                                                            (496,606)       (605,452)       (635,848)
Other income:
    Recovery related to pre-investigation
        management off book cash practices                                        --              --         525,820
    Debt surrendered in settlement of claims                                      --              --         488,500
                                                                        ------------    ------------    ------------

Income (loss) from continuing operations                                     126,731        (778,332)        676,135

Discontinued operations:
    Loss from discontinued retail drugstore
        operations                                                                --              --        (473,177)
    Gain on disposal of retail drug stores                                        --              --         194,444
                                                                        ------------    ------------    ------------

                                                                                  --              --        (278,733)
                                                                        ------------    ------------    ------------
Income (loss) before extraordinary item                                      126,731        (778,332)        397,402
Extraordinary gain on debt surrendered in
    settlement of claims                                                          --              --          60,000
                                                                        ------------    ------------    ------------
Net income (loss)                                                            126,731        (778,332)        457,402
                                                                        ------------    ------------    ------------
Redeemable preferred stock dividends
    and accretion                                                           (162,000)       (203,836)       (106,847)
                                                                        ------------    ------------    ------------
Net (loss) income applicable to common
    stockholders                                                            $(35,269)      $(982,168)       $350,555
                                                                        ============    ============    ============

Net (loss) income per common share applicable to common stockholders:
Primary:
    (Loss) income from continuing operations                                   $(.03)          $(.77)           $.39
    (Loss) income before extraordinary item                                    $(.03)          $(.77)           $.20
    Extraordinary item                                                            --              --            $.04
    Net (loss) income per share                                                $(.03)          $(.77)           $.24
Fully diluted:                                                                    --
    (Loss) income from continuing operations                                   $(.03)          $(.77)           $.36
    (Income) loss before extraordinary item                                    $(.03)          $(.77)           $.20
    Extraordinary item                                                            --              --            $.04
    Net (loss) income per share                                                $(.03)          $(.77)           $.24

Weighted number of common shares
    and equivalents outstanding:
        Primary                                                            1,400,423       1,273,274       1,472,854
        Fully diluted                                                      1,400,423       1,273,274       1,893,991
</TABLE>

                 See notes to consolidated financial statements.


                                       F-4

<PAGE>

<TABLE>
                                                      ACCUHEALTH, INC. AND SUBSIDIARIES
                                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIENCY)

                                                  YEARS ENDED MARCH 31, 1997, 1996 AND 1995

<CAPTION>
                                                  Preferred Stock             Common Stock                                       
                                             ------------------------    -----------------------                                 
                                               Number          $.01       Number          $.01    Additional Paid-               
                                             of Shares      Par Value    of Shares      Par Value   In Capital       Deficit     
                                             ---------      ---------    ---------      ---------   ----------       -------   
<S>                                          <C>         <C>             <C>             <C>        <C>            <C>           
Balance, March 31, 1994                             --   $        --     1,550,000       $15,500    $3,053,068     $(3,487,159)  

Surrender of shares by former officers &                                                                          
directors recorded as treasury stock                                                                              

Net income                                                                                                             457,402   

Accretion of redeemable preferred stock                                                                           
and preferred stock dividends accrued                                                                                 (106,847)  
                                             ---------        -------    ---------       -------    ----------     -----------   

Balance, March 31, 1995                             --            --     1,550,000        15,500     3,053,068      (3,136,604)  
Reclassification of redeemable preferred                                                                          
stock                                        1,325,000         13,250                                2,739,282       
            
Sale of preferred stock                         25,000            250                                   62,250
                   
Preferred stock dividends paid with                                                                               
common stock - September 28, 1995                                           25,440           254        72,886         (26,468)  

Preferred stock dividends paid with                                                                               
common stock - May 7, 1996                                                  54,793           548        80,452         (81,000)  

Accretion of redeemable preferred stock                                                                           
and preferred stock dividends accrued                                                                                  (96,368)  

Net loss                                                                                                              (778,332)
                                             ---------        -------    ---------       -------    ----------     -----------   

Balance, March 31, 1996                      1,350,000        $13,500    1,630,233       $16,302    $6,007,938     $(4,118,772)  
                                                                                                                  
Preferred stock dividends paid                                                                                    
with common stock - July 8, 1996                                            52,856           529        80,471         (81,000)  

Preferred stock dividends paid                                                                                    
with common stock- April 11, 1997                                          104,509         1,045        79,955         (81,000)  

Net Income                                                                                                             126,731  
                                             ---------        -------    ---------       -------    ----------     -----------  
Balance, March 31, 1997                      1,350,000        $13,500    1,787,598       $17,876    $6,168,364     $(4,154,041)  
                                             =========        =======    =========       =======    ==========     ===========   
                                                                                                                
<CAPTION>
                                                     Treasury Stock 
                                                   --------------------
                                                     Number                                                                      
                                                   of Shares       Cost           Equity          
                                                   ---------       ----           ------          
<S>                                                <C>           <C>           <C>        
Balance, March 31, 1994                                  --      $      --      $(418,591)
Surrender of shares by former officers &                                                  
directors recorded as treasury stock               (308,004)      (624,320)      (624,320)

Net income                                                                        457,402 

Accretion of redeemable preferred stock                                                   
and preferred stock dividends accrued                                            (106,847)
                                                   --------      ---------     ----------
Balance, March 31, 1995                            (308,004)      (624,320)      (692,356)

Reclassification of redeemable preferred                                                  
stock                                                                           2,752,532 

Sale of preferred stock                                                            62,500 

Preferred stock dividends paid with                                                       
common stock - September 28, 1995                                                  46,672 

Preferred stock dividends paid with                                                       
common stock - May 7, 1996                                                             -- 

Accretion of redeemable preferred stock                                                   
and preferred stock dividends accrued                                             (96,368)

Net loss                                                                         (778,332)         
                                                   --------      ---------     ----------
Balance, March 31, 1996                            (308,004)     $(624,320)    $1,294,648 

Preferred stock dividends paid                                                            
with common stock - July 8, 1996                                                       -- 

Preferred stock dividends paid                                                            
with common stock- April 11, 1997                                                      -- 

Net Income                                                                        126,731 
                                                   --------      ---------     ----------
Balance, March 31, 1997                            (308,004)     $(624,320)    $1,421,379 
                                                   ========      =========     ========== 
 </TABLE>


                 See notes to consolidated financial statements.


                                       F-5

<PAGE>

                                         ACCUHEALTH, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                               YEARS ENDED MARCH 31,
                                                                                               ---------------------
                                                                                        1997              1996              1995
                                                                                        ----              ----              ----
<S>                                                                                 <C>               <C>               <C>        
Operating activities
Net income (loss)                                                                   $   126,731       $  (778,332)      $   457,402
Adjustments to reconcile net (loss) income to net cash used
in operating activities:
    Recovery related to pre-investigation management off book
         cash practices                                                                      --                --          (624,320)
    Debt surrendered in settlement of claims                                                 --                --          (647,000)
    Amortization of financing costs                                                       7,688           142,251           126,885
    Depreciation and amortization                                                       343,761           410,354           359,022
    Write off of Revenue Producing Equipment                                                 --            53,376                --
    Reserve for contingencies                                                                --                --          (480,000)
    Deferred rent                                                                            --                --           168,000
    Loss on sale of drug store assets                                                        --                --          (194,444)
    Changes in operating assets and liabilities:
         Accounts receivable                                                           (819,676)         (795,446)          321,567
         Refundable income taxes                                                             --                --           200,000
         Inventories                                                                    (43,497)          (76,279)           39,660
         Prepaid expenses and other current assets                                      (88,209)          (23,040)          (39,391)
         Other assets                                                                    (4,297)          (49,530)         (202,721)
         Accounts payable                                                               288,284           225,260        (1,647,347)
         Notes payable, other                                                                --          (248,373)               --
         Accrued expenses and other current liabilities                                (249,594)          103,466           127,835
                                                                                    -----------       -----------       -----------
    Cash used in operating activities                                                  (438,809)       (1,036,293)       (2,034,852)
                                                                                    -----------       -----------       -----------

Investing activities
    Cash proceeds from sale of drug store assets                                             --                --            25,000
    Notes receivable                                                                         --            82,000                --
    Purchase of fixed assets and revenue producing equipment                            (11,295)          (32,629)          (91,892)
                                                                                    -----------       -----------       -----------
    Cash (used in) provided by
         investing activities                                                           (11,295)           49,371           (66,892)
                                                                                    -----------       -----------       -----------

Financing activities
    10% loans converted to redeemable convertible preferred shares                           --                --           400,000
    Proceeds from sale of redeemable convertible preferred shares                            --            62,500         2,250,000
    Proceeds from note payable - revolving credit facility, net                         369,285           916,227         1,497,165
    Proceed from notes payable - term loan                                              500,000                --                --
    Notes payable - other                                                                31,302           395,565        (1,189,294)
    Principal payments on note payable -Towerview                                            --                --           (56,635)
    Principal payments on capital lease - facility                                      (89,375)          (71,500)         (214,500)
    Payments on other capital lease obligations                                        (332,254)         (271,261)         (155,605)
    Due to prior officers                                                                    --          (189,222)         (310,778)
                                                                                    -----------       -----------       -----------
    Cash provided by financing activities                                               478,958           842,309         2,220,353
                                                                                    -----------       -----------       -----------

    Net increase (decrease) in cash                                                      28,854          (144,613)          118,609
    Cash at beginning of period                                                           2,694           147,307            28,698
                                                                                    -----------       -----------       -----------
    Cash at end of period                                                           $    31,548       $     2,694       $   147,307
                                                                                    ===========       ===========       ===========

Supplemental disclosure of cash flow information:
    Interest paid                                                                   $   500,000       $   613,000       $   522,771
                                                                                    ===========       ===========       ===========
    Income taxes paid                                                               $        --       $        --       $        --
                                                                                    ===========       ===========       ===========

Noncash investing and financing activities:
    Additions to capital leases                                                     $    48,000       $   212,000       $   609,000
                                                                                    ===========       ===========       ===========
</TABLE>


                 See notes to consolidated financial Statements.

                                       F-6

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1997

1.   Organization and Summary of Significant Accounting Policies

     Description of Business

     Accuhealth  Inc.,  together  with  its  subsidiaries   (collectively,   the
     "Company"),  provides  comprehensive  home health care services,  including
     administration  of a wide  array  of  infusion  therapies,  sales  of  oral
     medications and sales and rentals of durable medical  equipment and related
     supplies.  The Company  operates  throughout  the New York,  New Jersey and
     Connecticut metropolitan area.

     Basis of Preparation

     The consolidated  financial  statements include the accounts of Accuhealth,
     Inc.  and its  subsidiaries,  all of which  are  wholly-owned.  Significant
     intercompany   accounts   and   transactions   have  been   eliminated   in
     consolidation.

     Management is formulating plans to strengthen the Company's working capital
     position and generate  sufficient  cash to meet its operating needs through
     at least  March  31,  1998 by among  other  actions,  obtaining  additional
     financing and attempting to increase its institutional pharmacy business.

     Inventories

     Inventories  consist of over-the-counter  and prescription drugs,  infusion
     products and supplies,  and home health care equipment and supplies and are
     priced  at the  lower  of cost or  market  using  the  first-in,  first-out
     ("FIFO") method.

     Contractual Allowances

     Certain  prescription  pharmaceutical  sales,  medical equipment and supply
     revenues are  recorded at the  Company's  established  rates and reduced by
     estimated  contractual  allowances  pursuant to  third-party  reimbursement
     arrangements.

     Reclassifications

     Certain  items  in the  March  31,  1996  financial  statements  have  been
     reclassified to conform to the March 31, 1997 presentation.


                                       F-7

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Fixed Assets and Revenue Producing Equipment

     Fixed  assets  and  revenue   producing   equipment  are  stated  at  cost.
     Depreciation is computed  principally by the straight-line  method over the
     estimated  useful lives of the assets and for revenue  producing  equipment
     and leasehold improvements,  over the shorter of the estimated useful lives
     or the term of the related leases.

     Earnings Per Share

     For Fiscal 1997 and 1996,  net loss per share was  computed by dividing the
     applicable net loss by the weighted  average  number of shares  outstanding
     during  the year.  Shares  of  common  stock  used to pay  preferred  stock
     dividends were considered  outstanding as of the declaration  date.  Common
     share  equivalents,  which represents  shares issuable upon the exercise of
     stock  options and  warrants,  were not  included as their  effect would be
     antidilutive.

     For Fiscal  1995,  primary  earnings  per common  share was  calculated  by
     dividing net earnings applicable to common stock by the weighted average of
     common stock and common stock equivalents  outstanding.  On a fully diluted
     basis,  both net  earnings  and  shares  outstanding,  if  applicable,  are
     adjusted to assume the conversion of convertible  preferred  stock from the
     date of issue and for the  incremental  option  shares  for  fully  diluted
     purposes.

     In February 1997 the Financial  Accounting  Standards Board ("FASB") issued
     Statement of Financial  Accounting  Standards No. 128, "Earnings Per Share"
     ("SFAS 128"),  which is required to be adopted  beginning  with the quarter
     ended  December  31,  1997.  At that time,  the Company will be required to
     change  the method  currently  used to  compute  earnings  per share and to
     restate  all prior  periods.  Under the new  requirements  for  calculating
     primary  earnings  per share,  the  dilutive  effect of stock  options  and
     warrants will be excluded.  The Company does not anticipate the adoption of
     SFAS 128 to have a  significant  impact on the  calculation  of primary and
     fully diluted earnings per share.

     Income Taxes

     The  Company  files  consolidated  Federal,  combined  New York  State  and
     combined  New York  City  income  tax  returns.  The  Company's  method  of
     accounting  for  income  taxes is the  liability  method  required  by FASB
     Statement No. 109 "Accounting for Income Taxes."

     Deferred  income  taxes  reflect the tax effects of  temporary  differences
     between  the  carrying  amounts of assets  and  liabilities  for  financial
     reporting purposes and the amounts used for income tax purposes.

                                       F-8

<PAGE>


                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Cash Equivalents

     The  Company  considers  all highly  liquid  financial  instruments  with a
     maturity of three months or less when purchased to be cash equivalents.  At
     March 31, 1997 and 1996, the Company had no cash equivalents.

     Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial statements and the reported amount of revenue and expenses during
     the reporting period. Actual results could differ from those estimates.

     Concentrations of Credit Risk

     Concentrations  of credit risk with  respect to trade  accounts  receivable
     include  amounts  due  from  third  party  payers,  primarily  governmental
     agencies  (Medicare  and  Medicaid).  At March  31,  1997 and  1996,  gross
     Medicare and Medicaid  receivables  aggregated  $2,415,732 and  $2,082,751,
     respectively.

     Laws and  regulations  governing  the Medicare  and  Medicaid  programs are
     complex and subject to  interpretation  for which action for  noncompliance
     includes  fines,  penalties,  and exclusion  from the Medicare and Medicaid
     programs. The Company believes that it is in compliance with all applicable
     laws and regulations.

     The Company's  revenues from one customer  accounted for 19% and 16% of the
     Company's  net  sales  for  the  years  ended  March  31,  1997  and  1996,
     respectively. At March 31, 1997 and 1996, 20% and 22%, respectively, of net
     accounts  receivable  was  due  from  this  customer.  No  single  customer
     accounted for more than 10% of net sales for the year ended March 31, 1995.

     Stock-Based Compensation

     In October 1995,  the Financial  Accounting  Standards  Board (FASB) issued
     Statement  of  Financial  Accounting  Standards  No. 123,  "Accounting  for
     Stock-Based  Compensation"  ("SFAS 123").  SFAS 123 is effective for fiscal
     years  beginning  after  December 31, 1995 and  prescribes  accounting  and
     reporting  standards  for all  stock-based  compensation  plans,  including
     employee stock options, restricted stock, employee stock purchase plans and
     stock appreciation  rights.  SFAS 123 requires  compensation  expense to be
     recorded  (i)  using  the new fair  value  method  or (ii)  using  existing
     accounting rules prescribed by Accounting  Principles Board Opinion No. 25,
     "Accounting for Stock Issued to

                                       F-9

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Employees" ("APB 25") and related interpretations with pro forma disclosure
     of what net income and  earnings  per share would have been had the Company
     adopted  the new fair value  method.  The  Company  intends to  continue to
     account  for its stock  based  compensation  plans in  accordance  with the
     provisions of APB 25.

2.   Sale of Drug Store Assets

     On  December  1, 1994 the  company  sold the  assets  of its two  remaining
     drugstore  subsidiaries  for  $665,000.  The  sale  resulted  in a gain for
     financial reporting purposes of $194,444.

     Net  sales  of  the   discontinued   retail   drugstores   operations  were
     approximately $3,332,000 for the year ended March 31, 1995.

3.   Revenue Producing Equipment, Net

     The  following  summarizes  the Company's  investment in revenue  producing
     equipment:


<TABLE>
<CAPTION>
                                                                 March 31,                  
                                                --------------------------------------------        Estimated        
                                                        1997                   1996                Useful Lives      
                                                -------------------------------------------------------------------- 
<S>                                                  <C>                    <C>                      <C>      
Revenue producing                                                                                                    
  equipment primarily under capital                                                                                  
  lease......................................        $1,957,661             $2,006,809               3-5 years

Less accumulated depreciation
  and amortization...........................         1,472,356              1,336,457
                                                     ----------             ----------
                                                     $  485,305             $  670,352
                                                     ==========             ==========
</TABLE>


                                      F-10

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.   Fixed Assets

<TABLE>
<CAPTION>
                                                                  March 31,                  
                                                ---------------------------------------------       Estimated       
                                                        1997                    1996               Useful Lives     
                                                --------------------------------------------------------------------
<S>                                                 <C>                       <C>                    <C>
Land under capital lease.....................       $  136,277                $136,277

Building under capital lease.................        1,226,498               1,226,498               40 years

Equipment, furniture and fixtures............          816,078                 778,863               5-10 years

Leasehold improvements.......................            3,838                   3,838               10-15 years

Equipment, furniture and fixture
  under capital leases.......................          164,953                 164,953               5-10 years

Building improvements........................          292,956                 285,463               40 years
                                                    ----------              ----------
                                                     2,640,600               2,595,892
Less accumulated depreciation and
  amortization, including $399,740 in
  1997 and $345,341 in 1996 attribut-
  able to assets under capital leases .......          981,544                 837,246
                                                    ----------              ----------
                                                    $1,659,056              $1,758,646
                                                    ==========              ==========
</TABLE>

5.   Notes Payable and Long-Term Debt

Notes payable - other
The  Company's  other  notes  which  arose in  connection  with the  purchase of
inventories are as follows:

(A)  In December  1995,  the Company issued an unsecured note payable to a trade
     creditor  in the  principal  amount  aggregating  $348,616.  The  note  was
     satisfied as of March 31, 1997. The outstanding  principal balance at March
     31, 1996 of $247,649 was payable in monthly  installments  of $36,808 which
     included interest at 12% per annum.

(B)  The Company converted a portion of its accounts payable into a note payable
     to a trade creditor in the principal amount aggregating $46,949.  This note
     is  payable in  monthly  installments  of  approximately  $4,200  beginning
     October 11, 1996 which includes  interest at 10.9% per annum.  At March 31,
     1996, the Company classified the principal balance as a note payable-other.
     The outstanding principal balance at March 31, 1997 was $20,183.

                                      F-11

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(C)  The Company converted several of its capital leases into notes payable to a
     trade creditor in principal amounts aggregating  $276,830.  These notes are
     payable in monthly installments ranging from approximately $2,000 to $8,000
     with interest rates ranging from 10.0% to 14.5%. Future minimum payments on
     the  outstanding  principal  balance  of  $233,767  at March  31,  1997 are
     $187,537 (fiscal 1998) and $46,230 (fiscal 1999).

(D)  In February  1997,  the Company  reached a settlement  with the City of New
     York relating to an audit of General  Corporation and Commercial Rent taxes
     for the years  1990  through  1992.  In  accordance  with  this  settlement
     agreement,  the outstanding  principal balance at March 31, 1997 of $71,950
     is payable in monthly installments of $1,976 which includes interest at 10%
     per annum. A final balloon payment of $18,146 is due on March 1, 2000.

The weighted average interest rate for notes  payable-other  was 12.51%,  10.94%
and 9.31% for the years ended March 31, 1997, 1996 and 1995,  respectively.  The
average amount of notes payable-other  outstanding for the years ended March 31,
1997 and 1996 was  approximately  $210,000  and  $122,000,  respectively.  Notes
payable - other are  principally  short-term  in  nature.  As such,  fair  value
approximates the carrying value.

Notes payable - revolving credit facility and term loan

In April 1994,  the Company  entered  into a Loan and  Security  Agreement  (the
"Agreement") with Rosenthal and Rosenthal ("Rosenthal") to borrow, under certain
conditions and terms, up to $2,500,000 at an interest rate of prime plus 4-7/8%.
Borrowings  under the  Agreement  are  collateralized  by certain  assets of the
Company,  including accounts receivables,  inventories,  equipment and fixtures.
The Company's  ability to use this revolving  credit  facility is dependent upon
the level of its eligible receivables, as defined in the Agreement. In addition,
the  Company  granted  Rosenthal  warrants  to  purchase  70,000  shares  of the
Company's common stock (see Note 11).

Effective  February  1, 1996,  the Company  and  Rosenthal  amended the Loan and
Security  Agreement  ("Amendment No. 1"). Amendment No. 1 extended the Agreement
through  April 28,  1997 and  allowed  the  Company  to  borrow,  under  certain
conditions and terms up to $3,500,000 (based on eligible accounts receivable, as
defined) at an interest rate of prime plus 3-7/8%.  Effective  February 1, 1997,
the Company and Rosenthal  amended the Loan and Security  Agreement  ("Amendment
No. 2") to extend the  Agreement  through  April 1, 1998 and reduce the interest
rate to prime (8 1/2% at March  31,  1997)  plus 2 7/8%  Rosenthal  warrants  to
purchase an additional  30,000  shares of the  Company's  common stock (see Note
11).  Commencing  April 28, 1996, the Company was required to pay a facility fee
of $35,000 per annum, which Amendment No. 2 has increased to $40,000 per annum.

Amendment  No. 2 also  provided a $500,000 term loan to the Company due on April
1, 1998 with interest payable monthly at a rate of prime plus 5%.

                                      F-12

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The revolving credit facility and the term loan bear interest at variable market
rates and as such the carrying value approximates their fair value.

The weighted  average  interest rate,  including the facility fee, for the years
ended March 31, 1997, 1996 and 1995 was 13.14%,  17.8% and 16.9%,  respectively.
The average amount  outstanding  for the years ended March 31, 1997 and 1996 was
$2,801,000 and $1,963,000, respectively.

6.   Capital Lease Obligations

The Company  leases its  principal  offices and  warehouse  facility and certain
equipment,  furniture and fixtures,  rental equipment and leasehold improvements
under capital lease agreements which extend through April 2000.

Capital lease-facility

The Company  occupies a pharmacy  warehouse and office facility (the "Facility")
which was obtained under a ten-year lease (the "Lease  Agreement")  with the New
York City  Industrial  Development  Agency (the "Agency") as lessor.  The Agency
issued to National  Westminster Bank, U.S.A. (now "Fleet") $1,072,500  principal
amount  of  its  Industrial  Development  bonds  (the  "Bonds")  pursuant  to an
Indenture of Mortgage and Agreement dated April 1, 1989 (the "Indenture")  which
created a lien on the facility.  The Company also paid $227,500 in order for the
Agency to purchase the warehouse.  This amount and other  acquisition  costs are
capitalized as land and building under capital lease (see Note 4).

At the end of the term of the lease,  the Company may  purchase the Facility for
one dollar so long as all terms and  conditions  of the lease have been met. The
Lease Agreement and Guaranty  Agreement require the Company and its subsidiaries
to comply with certain covenants,  including but not limited to, maximum debt to
worth ratio,  maximum  allowable  losses and debt service  coverage  ratio.  The
Company's  non-compliance  with the debt to worth ratio  covenant  was waived by
Fleet through April 1, 1998.

In  lieu  of  rent  the  Company  pays  principal  on  the  Bonds  in  quarterly
installments of $17,875, plus interest at the rate of prime (8 1/2% at March 31,
1997) plus 1%. On April 28, 1994, in  conjunction  with the Rosenthal  financing
(Note 5), the Company made an additional  principal payment of $143,000. A final
balloon payment of $232,375 plus interest  thereon is due on April 1, 1999. Each
of  the  Company's  wholly-owned   subsidiaries  has  guaranteed  the  Company's
obligations  under the lease.  The Lease  Agreement and Guaranty  Agreement also
restrict the payment of cash  dividends  in any one year to an aggregate  amount
not to exceed 25% of the  Company's  net income  for the  immediately  preceding
year.

The obligation  under capital  lease-facility  bears interest at variable market
rates and as such the carrying value approximates its fair value.

                                      F-13

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other capital leases

The Company  leases durable  medical  equipment  under capital lease  agreements
which extend  through March 31, 2000 with  interest  rates ranging from 9.00% to
16.71%.

Future  minimum lease  payments  under capital  leases with initial or remaining
noncancellable lease terms in excess of one year are as follows:

<TABLE>
<CAPTION>
                                                                        Other
                                                  Capital              Capital
Fiscal Year                                    Lease Facility          Leases
-----------                                    --------------          ------
<S>                                               <C>                 <C>     
1998                                              $85,465             $143,693
1999                                               96,689               47,296
2000                                              234,215               13,571
                                                 --------             --------
                                                  416,369              204,560
Less interest                                      58,869               21,799
                                                 --------             --------
Present value of net minimum obligations          357,500              182,761
Less current portion                               53,625              113,124
                                                 --------             --------
Long term obligations at March 31, 1997          $303,875             $ 69,637
                                                 ========             ========
</TABLE>

7.   Contingencies

     In June 1995, a former employee  commenced an action in Supreme Court,  New
     York  County,  New York  against  the Company and certain of its former and
     current officers,  directors and shareholders.  The action alleges that the
     Company breached  plaintiff's  employment agreement by withholding at least
     $750,000 in commissions allegedly owed to him. In addition to the breach of
     contract claim, plaintiff asserted claims for violation of the Racketeering
     Influence and Corruption  Act ("RICO"),  violations of New York's Labor Law
     (stemming from the Company's  alleged breach of contract) and fraud.  In or
     about September  1995, the defendants  made a pre-Answer  motion to dismiss
     the RICO, fraud and conspiracy  claims.  On June 18, 1996 the Court granted
     defendants' motion effectively dismissing the Complaint as to the Company's
     current  and  former  officers,  directors  and  shareholders  and  leaving
     plaintiff's  claim for breach of contract and violation of New York's Labor
     Law solely against the Company.  The Company has now served an Answer and a
     Document  Request.  The plaintiff has not proceeded  with discovery and the
     case is  currently  dormant.  The  Company  intends  to deny the  principal
     allegations  in  the  Complaint  and  to  defend  this  action  vigorously.
     Management believes

                                      F-14

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     that this action will not have any material adverse impact on the Company's
     financial position, results of operations or cash flows.

     An  agency  of New York  State is  conducting  a  review  of the  Company's
     Medicaid reimbursement for the years 1990 through 1993. The Company has not
     been advised as to whether any claim will be made.

     Management  believes  that the above  matters  will be settled  without any
     material  adverse impact to the Company's  financial  position,  results of
     operations or cash flows.

8.   6% Convertible Preferred Stock

     On December 14, 1994 and January 30, 1995,  the Company  completed the sale
     at $2.00 per share, of 1,325,000 shares of redeemable convertible preferred
     stock (Preferred Stock) with a 6% per annum cumulative dividend. During the
     quarter  ended  December  31,  1995,  the Company  sold at $2.50 per share,
     25,000  additional  shares  of  Preferred  Stock to  certain  officers  and
     directors of the Company. The Preferred Stock is convertible at any time at
     the  option  of the  holder,  subject  to  antidilution  adjustments,  into
     1,350,000 shares of common stock. The Company has reserved 1,350,000 shares
     of common stock for such  conversion.  At any time on or after December 31,
     1995,  subject  to  certain  conditions,  such as the  registration  of the
     underlying  common stock under the Securities Act of 1933,  compliance with
     the terms of the Preferred  Stock and any other  agreement with the holders
     of the Preferred  Stock and the payment of all  dividends  that are accrued
     and unpaid on the Preferred  Stock as of the  Redemption  Date, the Company
     may redeem all or any portion of the Preferred Stock then outstanding.  For
     each share that is called for  redemption,  the Company shall pay $3.00 per
     share from December 31, 1995 through  December 31, 1997 and $4.00 per share
     on or after  January  1,  1998.  The  holders  of the  Preferred  Stock are
     entitled  to voting  rights  equivalent  to that of the common  stock.  The
     Preferred Stock is senior to the common stock in the event of a liquidation
     of the Company. The liquidation  preference is $2.00 per share plus accrued
     and unpaid dividends.

     The Preferred Stock was subject to mandatory redemption  requirements of up
     to $4.00 per share plus  accrued  dividends.  As of June 16,  1995,  the 6%
     Convertible  Preferred  shareholders  agreed  to modify  their  stockholder
     agreements  to  negate  the   mandatory   redemption   requirements.   This
     modification  eliminates the need for  recognition  of accretion  effective
     June 16, 1995,  and results in the 6%  Convertible  Preferred  Shares being
     classified as equity rather than debt.

     The Company is obligated  to pay annual  dividends of $.12 per share on its
     1,350,000  outstanding  shares of Preferred  Stock.  Such dividends  accrue
     daily,  are payable  each June 1 and December 1 and, at the election of the
     Company, may be paid in shares of

                                      F-15

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Common Stock valued in accordance  with the terms of such stock.  Dividends
     on the Company's  Preferred Stock are payable in preference and priority to
     any payment of any dividends on the common stock.

     The June 1, 1996  dividend was paid out in 52,856 shares of common stock on
     July 8, 1996.  The December 1, 1996 dividend was paid out in 104,509 shares
     of common stock  subsequent to year-end.  Accrued and unpaid dividends from
     December  1, 1996 to March 31,  1997 of  $54,000  are  included  in accrued
     expenses and other current liabilities at March 31, 1997.

9.   Recovery Related to Pre-Investigation Management

     The  Company's  prior  management  in place  through  February 26, 1993 had
     engaged in certain improprieties through such date. Such improprieties were
     the  subject  of  a  formal  SEC  investigation  which  resulted  in  prior
     management  making  restitution to the Company valued at $1,212,320 and the
     Company  agreeing  to an SEC order to cease and desist from  committing  or
     causing any violation or future violation of certain anti-fraud, reporting,
     record  keeping and internal  controls  provisions of the Securities Act of
     1933 and  Securities  Exchange  Act of 1934.  The order did not  impose any
     financial penalty on the Company.

     Effective October 12, 1994, settlements of the Company's restitution claims
     against its former Chief  Executive  Officer and  President  and two former
     officers and directors were concluded. The terms of the agreements include:
     the  surrender  to  the  Company  of  a  $588,000   promissory   note;  the
     surrendering  of 298,504  shares of  Company's  common  stock held by these
     individuals;  the  termination  of all stock  options and warrants  held by
     these individuals;  a restriction of their rights to sell voting securities
     for the next  two  years;  a  release  of  Accuhealth  from  any  financial
     obligations to them; and a release of these  individuals by Accuhealth from
     any claims,  damages or losses  that the Company may suffer  because of the
     actions claimed to have been committed.  The agreements also prohibit these
     individuals from acquiring shares of the Company for a period of 10 years.

     These  transactions  were  recorded  by the  Company in the  quarter  ended
     December 31, 1994. The restitution of 298,504 shares of stock was valued at
     $597,008,   the  estimated  fair  value  of  such  stock  at  the  time  of
     restitution. The determination of estimated fair market value of such stock
     at $2.00 per share on October 12, 1994 was principally based on the average
     closing price of the Company's common stock during the preceding 21 days of
     trading  ($2.75 a  share),  reduced  to  reflect  an  appropriate  blockage
     discount  for the large  amount  of stock in  relation  to the  outstanding
     common  shares of the Company.  The Company  believes that the valuation of
     the stock received is reasonable and was determined  using  appropriate and
     conservative methodologies. The restitution was offset by professional fees
     of approximately $98,500.

                                      F-16

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The loan from an  officer  and  director  of  $588,000  at March  31,  1994
     represented  the  amount of loans  previously  made to the  Company  by its
     former Chief Executive  Officer  and President.  The fair value of the note
     payable  surrendered  on October 12, 1994 was  $587,000  based on a rate of
     9.3% (difference  between the Company's  weighted average borrowing rate of
     16.9% and the stated rate in the note of 7.6%) and  assuming  that the note
     had a one year  extended  maturity.  The  difference  between the  carrying
     amount of the note ($647,000 including accrued interest of $59,000) and the
     fair  value  of  the  note   ($587,000)   or  $60,000  was   classified  as
     extraordinary  income.  The restitution was offset by professional  fees of
     $98,500.

     On March 31, 1995,  settlements of the Company's restitution claims against
     another  former  officer and  director of the Company was  concluded.  This
     individual  surrendered  9,500 shares of the Company's  common  stock.  The
     shares of stock were valued at $27,312,  the  estimated  fair value of such
     shares at the time of restitution,  and recorded in the quarter ended March
     31, 1995.

10.  Commitments

     Operating Leases

     Rent expense for the year ended March 31, 1995 was approximately  $335,000.
     This amount  represents  retail  drugstore  rents included in  discontinued
     operations.

     A  vendor  has a  security  interest  in  certain  assets  of the  Company,
     including accounts receivable,  inventories,  equipment and fixtures.  This
     security interest is subordinate and junior in all respects to the Loan and
     Security Agreement (See Note 5.)

     Related Party Transactions

     A  director  has a  consulting  arrangement  with the  Company  whereby  he
     receives $4,000 and an office expense reimbursement of $1,000 per month.

     Employment Agreement

     Subsequent to year-end,  the Company modified its employment agreement with
     its  President  and Chief  Executive  Officer  providing  for,  among other
     things,  annual compensation of $250,000 and 25,000 shares of the Company's
     common stock.

11.  Stock Options and Warrants

     In September 1988, the Company adopted,  and in September 1994 amended, the
     1988 Stock  Option  Plan  ("Stock  Option  Plan"),  under which  options to
     purchase an aggregate

                                      F-17

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     maximum of 300,000 shares of the Company's common stock may be granted. The
     Stock  Option  Plan is  administered  by the  Board of  Directors,  who are
     responsible for  determining  the individuals who will be granted  options,
     the  number of shares to be subject to each  option,  the option  price per
     share, and the exercise period of each option.  The option price may not be
     less than the fair market value of the  Company's  common  stock.  The fair
     market value is defined in the Stock Option Plan to be the mean between the
     closing  bid and the  closing  asked  prices  for the  common  stock of the
     Company  on the date of grant.  No option  may have a term in excess of ten
     years. As to any  stockholder who owns 10% or more of the Company's  common
     stock,  the  option  price per share  will be no less than 110% of the fair
     market  value of the  Company's  common stock on the date of grant and such
     options shall not have a term in excess of five years.

     Pursuant to the Stock  Option  Plan,  in February  1992 the former Board of
     Directors  granted  a total of 54,000  options  to  purchase  shares of the
     Company's common stock to fifteen employees with an exercise price of $4.75
     per share. In June 1996 and 1995, the Board of Directors granted a total of
     188,500  and  159,000  options,  respectively,  to  purchase  shares of the
     Company's  common stock to employees  with an exercise  price of $1.625 and
     $2.75 per share, respectively. These options are exercisable in three equal
     annual increments.

                                      F-18

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                                 Weighted
                                                                 Average
                                                              Exercise Price
                                                 Shares         Per Share
                                                --------      --------------
     <S>                                          <C>              <C>  
     Outstanding March 31, 1994                   30,500           $4.75
      
     Canceled                                    (20,000)           4.75
                                                 -------           -----
     Outstanding March 31, 1995                   10,500            4.75
      
     Granted                                     159,000            2.75
      
     Canceled                                    (52,000)           3.12
                                                 -------           -----
     Outstanding March 31, 1996                  117,500           $2.77
     
     Granted                                     188,500            1.63
      
     Canceled                                    (36,500)           2.31
                                                 -------          ------
     Outstanding at March 31, 1997               269,500          $ 2.03
                                                 =======          ======
      
     Exercisable at March 31, 1995                10,500          $ 4.75
                                                  ======          ======
     Exercisable at March 31, 1996                 1,000          $ 4.75
                                                  ======          ======
     Exercisable at March 31, 1997                32,500          $ 2.81
                                                  ======          ======
</TABLE>

     Separate from options issued under the Stock Option Plan, in June 1990, the
     Company  granted  options to purchase  60,500  shares of common  stock at a
     price of $5.00 per share ("1990 Options"). The 1990 Options vest and become
     exercisable  ratably after the first, second and third anniversaries of the
     grant date and expire after the fifth anniversary of the grant date.

     Options to purchase  shares of the Company's  common stock  pursuant to the
     1990 Options and related aggregate option prices were as follows:

<TABLE>
<CAPTION>
                                             Shares              Aggregate Price
<S>                                          <C>                     <C>    
Outstanding March 31, 1994 and 1995          22,500                  112,500

Expired                                      22,500                  112,550
                                             ------                  -------
Outstanding March 31, 1996                       --                       --
                                             ------                 --------
</TABLE>

     Separate from options issued under the Stock Option Plan, in February 1992,
     the Board of Directors  granted to three former  directors of the Company a
     total of 60,000  options to purchase  shares of the Company's  common stock
     ("1992 Options"). The exercise

                                      F-19

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     price of the 1992  Options  is the mean  between  the  closing  bid and the
     closing  asked  prices for the common  stock of the  Company on the date of
     grant, which was $4.75. These options may be exercised in 25% increments on
     the first,  second,  third and fourth anniversary of the date of issue, and
     have a term of ten years.  During the year ended March 31, 1995,  30,000 of
     these options were canceled, leaving 15,000 options outstanding as of March
     31, 1997 and 1996.

     During  fiscal 1995,  separate  from options  issued under the Stock Option
     Plan, the Company granted  options to purchase  352,500 of common shares to
     officers and directors  ("1995  Options").  The exercise prices of the 1995
     Options range from $2.00 to $3.00,  with options to purchase 135,000 shares
     vesting  immediately at $2.00 and the balance  vesting over five years from
     the date of  issuance.  During the fiscal  years  ended  March 31, 1997 and
     1996,  options to purchase an additional  79,167 shares and 104,167 shares,
     respectively,  vested at prices  ranging from $2.00 to $3.00 per share.  At
     March 31, 1997, these options remain unexercised and outstanding.

     In September  1995,  separate  from  options  issued under the Stock Option
     Plan,  the  Company  granted  options to purchase  37,500 of the  Company's
     common shares to directors ("1996 Options"). The exercise price of the 1996
     Options are $1.875 with the shares vesting over five years from the date of
     issuance.

     In June 1996, separate from options issued under the Stock Option Plan, the
     Company granted  options to purchase 37,500 of the Company's  common shares
     to directors ("1997  Options").  The exercise price of the 1997 Options are
     $1.625 with the shares vesting over five years from the date of issuance.

     In June 1996, separate from options issued under the Stock Option Plan, the
     Company granted  options to purchase 50,000 of the Company's  common shares
     to a director  ("June 1996  Options").  The exercise price of the June 1996
     Options are $1.625 with the shares  vesting  over three years from the date
     of issuance.

     As of March 31, 1997, an aggregate  898,000 shares of the Company's  common
     stock are reserved for issuance  under the Stock Option Plan, and the 1990,
     1992, 1995, 1996, June 1996 and 1997 Options.  As of March 31, 1997 options
     to purchase 238,334 of such shares are exercisable.

     Pro forma  information  regarding  net  income  and  earnings  per share is
     required SFAS 123, and has been  determined as if the Company had accounted
     for its employee stock options under the fair value method of SFAS 123. The
     fair  market  value for these  options was  estimated  at the date of grant
     using  a   Black-Scholes   option   pricing   model   with  the   following
     weighted-average assumptions for 1997 and 1996:

                                      F-20

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                             March 31,
                Assumption                             1997            1996
--------------------------------------------------    -----           ------
<S>                                                    <C>             <C> 
Risk-free rate                                         6.2%            6.0%
Dividend yield                                           0%              0%
Volatility factor of the expected market price of
    the Company's common stock                         1.7             1.7
Average life                                           4.9 years       4.8 years
</TABLE>

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
     estimating  the  fair  value  of  traded  options  which  have  no  vesting
     restrictions  and are fully  transferable.  In addition,  option  valuation
     models  require the input of highly  subjective  assumptions  including the
     expected  stock price  volatility.  Because the  Company's  employee  stock
     options have characteristics  significantly  different from those of traded
     options,  and  because  changes in the  subjective  input  assumptions  can
     materially  affect the fair value estimate,  in management's  opinion,  the
     existing models do not necessarily provide a reliable single measure of the
     fair value of its employee stock options.

     For  purposes of pro forma  disclosures,  the  estimated  fair value of the
     options is amortized to expense over the vesting period of the options. The
     Company's pro forma information follows:

<TABLE>
<CAPTION>
                                                    Years Ended March 31,
                                                  1997                  1996
                                               --------------------------------
<S>                                            <C>                   <C>        
Pro forma net loss                             $ (91,725)            $ (900,140)
Pro forma net loss per share                        (.18)                  (.87)
</TABLE>

     The weighted  average fair value of options  granted during the years ended
     March 31,  1997 and 1996 were  $1.53 and  $2.60  respectively,  for  shares
     granted  with an exercise  price  equal to the market  price on the date of
     grant.  The weighted  average fair value of options granted during the year
     ended March 31, 1996 for which the exercise  price was less than the market
     price  on the date of  grant  was  $1.83.  The  weighted-average  remaining
     contractual life of options exercisable at March 31, 1997 is 4.3 years. The
     exercise  prices  range from $1.63 to $4.95 for options  outstanding  as of
     March 31, 1997.

     In April 1994,  pursuant to the terms of a Loan and Security Agreement (see
     Note 5), the Company  granted to a financing  company  warrants to purchase
     70,000 shares of common stock at a price of $2.00 per share. On February 1,
     1996, the Company granted warrants to purchase an additional  30,000 shares
     of common stock at $2.50 per share  expiring on April 28, 1998. On February
     1, 1997, the expiration date of the

                                      F-21

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     100,000 warrants was amended to be the later of April 1, 2001 or thirty-six
     months  following the last day of any term to which the Loan Commitment has
     been extended and the exercise price for all warrants was restated to $2.00
     per share.  As of March 31, 1997,  no warrants  have been  exercised and an
     aggregate  of  100,000  of the  Company's  common  stock are  reserved  for
     issuance under warrants.

12.  Employee Savings and Profit Sharing Plan

     In December 1986, the Company  established a profit sharing and thrift plan
     (the  "Plan")  covering  substantially  all  eligible  employees.  The Plan
     qualifies  under Section  401(k) of the Internal  Revenue Code. The Company
     matches  contributions  equal to 50%  (25%  effective  July 1,  1996) of an
     eligible employee's pre-tax 401(k) contribution.  The matching contribution
     is  limited  for  any  part  of  an  eligible   employee's  pre-tax  401(k)
     contribution which exceeds 10% of their compensation.  At the discretion of
     the Board of Directors,  the Company may also make additional contributions
     dependent on profits each year for the benefit of eligible  employees under
     the Plan. The Company's contribution to the Plan was approximately $35,000,
     $47,000 and $67,000  for the years  ended  March 31,  1997,  1996 and 1995,
     respectively.

     In August 1995, the Company  adopted a deferred  compensation  plan for the
     Board of Directors  (the  "Directors  Plan").  Under the Directors  Plan, a
     director may elect to defer receipt of all or a specified portion of his or
     her  compensation.  As of March 31, 1997,  no director had elected to defer
     any portion of his or her compensation.

                                      F-22

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13.  Income Taxes

     The Company had net deferred assets as follows:

<TABLE>
<CAPTION>
                                                         March 31
                                               -----------------------------
                                                  1997               1996
                                                  ----               ----
<S>                                            <C>                <C>       
Federal, State and Local Net Operating      
  Loss Carryforwards                           $1,726,000         $1,570,000
Reserve for Doubtful Accounts                     143,000            132,000
Business Credit Carryforwards                      52,000             52,000
Other                                             (16,000)           214,000
                                               ----------         ----------
Total                                           1,905,000          1,968,000
Less:  Valuation Allowance                      1,905,000          1,968,000
                                               ----------         ----------
Net Deferred Assets                            $      -0-         $      -0-
                                            =============         ==========
</TABLE>

     The following is a  reconciliation  of the amount of the income tax expense
     (benefit) attributable to continuing operations to the amount of income tax
     that would  result from  applying  the federal  rate to pretax  income from
     continuing operations:

<TABLE>
<CAPTION>
                                                   1997                       1996                      1995
                                          ------------------------   ----------------------    ------------------------
                                                       (Benefit)                (Benefit)                   (Benefit)
                                           Percent     Liability      Percent   Liability       Percent     Liability
                                          ---------- -------------   --------- ------------    ---------- -------------
<S>                                           <C>       <C>            <C>      <C>               <C>       <C>     
Income tax (benefit) at statutory rate        34%       $43,000        (34%)    $(265,000)        34%       $300,000
Permanent Differences                        5.1%         6,500          --            --          --             --
Other decrease in valuation
allowances related to the Federal
portion of continuing operations             (39.1%)    (49,500)                                 (34%)      (300,000)
Loss producing no current benefit              --            --         34%       265,000          --             --
                                            -------     -------       -----     ---------      ------       --------
                                               --       $    --          --     $      --          --       $     --
                                            =======     =======       =====     =========      ======       ========
</TABLE>

     At March 31,  1997,  based  upon tax  returns  filed  and to be filed,  the
     Company has net  operating  loss carryforwards  for U. S.  tax  purposes of
     approximately  $3,528,000  which will begin to expire in 2009 and a general
     business tax credit  carryforward  of  approximately  $52,000  available to
     reduce future  payments of federal  income taxes.  The Company also has net
     operating  loss carryforwards  for  New York State and City tax purposes of
     approximately $4,481,000 and $4,487,000, respectively.

                                      F-23

<PAGE>


                        ACCUHEALTH, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The valuation  allowances  decreased $63,000 in 1997, increased $265,000 in
     1996 and  decreased  $214,000  in 1995,  amounts  equal to the  changes  in
     deferred tax assets to reflect the  uncertainty  as to  realization of such
     assets.

     The  availability of net operating loss Carry forwards and general business
     tax  carryforwards  is subject to various  limitations  under the  Internal
     Revenue Code of 1986 as amended (the  "Code").  Although a formal study has
     not been  performed,  it appears that as of March 31, 1995, the Company may
     have  undergone an ownership  change as defined by Section 382 of the Code.
     The  effect of such an  ownership  change is to limit the amount of taxable
     income  and tax  liability  that can be  offset  in any tax year by the net
     operating loss and credit carryovers.

14.  Acquisition

     The Company has entered  into an  agreement,  subject to certain  terms and
     conditions,  to acquire the stock of ProHealth Care Infusion Services, Inc.
     in  exchange  for  300,000  shares  of  the  Company's  common  stock.  The
     acquisition is expected to close after June 16, 1997.

                                      F-24

<PAGE>

                 SCHEDULE II - Valuation and Qualifying Accounts

                        Accuhealth, Inc. and Subsidiaries


<TABLE>
<CAPTION>
Column A                                   Column B           Column C            Column D           Column E
--------                                   --------           --------            --------           --------

                                                              Additions
                                                               Charged
                                          Balance at           to Cost                              Balance at
                                         Beginning of            and                                  End of
Description                                 Period            Expenses          Deductions(1)         Period
-----------                                 ------            --------          ----------            ------
<S>                                        <C>                <C>                <C>                 <C>     
Year Ended March 31, 1995
Allowance for Doubtful
Accounts                                   $454,000           $145,752           $289,752            $310,000

Year Ended March 31, 1996
Allowance for Doubtful
Accounts                                   $310,000            $93,000           $111,000            $292,000

Year Ended March 31, 1997                  
Allowance for Doubtful
Accounts                                   $292,000            $82,000            $57,000            $317,000
</TABLE>

---------------
(1)  Uncollected accounts written off.

                                      F-25

<PAGE>

                                  EXHIBIT INDEX


3.1      Registrant's Articles of Incorporation, as amended (incorporated herein
         by reference to Exhibit 3 (I) to the Registrant's Annual Report on Form
         10-K for the fiscal year ended March 31, 1994)

3.2      Registrant's  By-laws, as amended  (incorporated herein by reference to
         Exhibit  3(ii) to the  Registrant's  Annual Report on Form 10-K for the
         fiscal year ended March 31, 1994)

10.1     Asset  Purchase  and Sale  Agreement  dated  September  22, 1993 by and
         between Em-Bee Drug Inc.,  Riverview Pharmacy,  Inc., Westview Drug Co.
         Inc., Brittany Chemists,  Inc.,  Villageview  Pharmacy,  Inc., Eastview
         87th  St.  Inc.,   Midview  Drug,  Inc.  and  the  Registrant  and  RXD
         Acquisition  Group Inc.  (incorporated  herein by  reference to Exhibit
         (10)(a)  to the  Registrant's  Quarterly  Report  on Form  10-Q for the
         quarter ended December 31, 1993)

10.2     Employment  Agreement  dated March 17, 1993 between  Edwin T. Veith and
         the Registrant  (incorporated herein by reference to Exhibit (10)(b) to
         the  Registrant's  Quarterly  Report on Form 10-Q for the quarter ended
         December 31, 1993)

10.3     Letter  Agreement  dated  November 11, 1993 between the  Registrant and
         Edwin T. Veith (incorporated  herein by reference to Exhibit (10)(c) to
         the  Registrant's  Quarterly  Report on Form 10-Q for the quarter ended
         December 31, 1993)

10.4     Letter  Agreement  dated  February 3, 1994 between the  Registrant  and
         Edwin T. Veith (incorporated  herein by reference to Exhibit (10)(d) to
         the  Registrant's  Quarterly  Report on Form 10-Q for the quarter ended
         December 31, 1993)

10.5     Option  Agreement  dated March 17, 1993 between  Edwin T. Veith and the
         Registrant  (incorporated herein by reference to Exhibit (10)(e) to the
         Registrant's  Quarterly  Report  on Form  10-Q  for the  quarter  ended
         December 31, 1993)

10.6     Stock Option Agreement Alternative Benefits Letter dated March 17, 1993
         between  Edwin T.  Veith  and the  Registrant  (incorporated  herein by
         reference to Exhibit (10)(f) to the  Registrant's  Quarterly  Report on
         Form 10-Q for the quarter ended December 31, 1993)

10.7     Employment  Agreement dated March 23, 1993 between Allan E. Johnson and
         the Registrant  (incorporated herein by reference to Exhibit (10)(g) to
         the  Registrant's  Quarterly  Report on Form 10-Q for the quarter ended
         December 31, 1993)


<PAGE>

10.8     Letter  Agreement  dated  November 11, 1993 between the  Registrant and
         Allan E. Johnson  (incorporated  herein by reference to Exhibit (10)(h)
         to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
         December 31, 1993)

10.9     Letter  Agreement  dated  February 3, 1994 between the  Registrant  and
         Allan E. Johnson  (incorporated  herein by reference to Exhibit (10)(I)
         to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
         December 31, 1993)

10.10    Option  Agreement dated March 23, 1993 between Allan E. Johnson and the
         Registrant  (incorporated herein by reference to Exhibit (10)(j) to the
         Registrant's  Quarterly  Report  on Form  10-Q  for the  quarter  ended
         December 31, 1993)

10.11    Agreement  dated  February 3, 1994 between the  Registrant and Capstone
         Management Company (incorporated herein by reference to Exhibit (10)(k)
         to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
         December 31, 1993)

10.12    Loan and Security  Agreement  dated April 28, 1994 between  Rosenthal &
         Rosenthal, Inc. and the Registrant, Midview Drug, Inc., Accuhealth Home
         Care,  Inc.  and  Citiview  Drug Co.,  Inc.  (the  "Loan  and  Security
         Agreement")  (incorporated herein by reference to Exhibit 10 (l) to the
         Registrant's Annual Report on Form 10-K for the fiscal year ended March
         31, 1994)

10.13    Amendment  No.  1 to  the  Loan  and  Security  Agreement,  dated as of
         February 1, 1996

10.14    Warrant dated April 28, 1994 for the  Registrant's  Common Stock issued
         by the Registrant to Rosenthal & Rosenthal,  Inc.  (incorporated herein
         by reference to Exhibit 10(m) to the Registrant's Annual Report on Form
         10-K for the fiscal year ended March 31, 1994)

10.15    Employment  Agreement  dated May 2, 1994 between Glenn C. Davis and the
         Registrant  (incorporated  herein by reference to Exhibit  10.14 to the
         Registrant's  Annual  Report on Form 10-K for the year ended  March 31,
         1995)

10.16    Consulting Agreement dated June 28, 1994 between Donald B. Louria, M.D.
         and the Registrant  (incorporated  herein by reference to Exhibit 10.15
         to the Registrant's Annual Report on Form 10-K for the year ended March
         31, 1995)

10.17    Consulting  Agreement dated June 28, 1994 between Stanley Goldstein and
         the  Registrant  (incorporated  herein by reference to Exhibit 10.16 to
         the  Registrant's  Annual Report on  Form 10-K for the year ended March
         31, 1995)

10.18    Asset  Purchase   Agreement  dated  as  of  December  1,  1994  between
         Registrant  and  Citiview  Drug  Co.,  Inc.,  Towerview,  Inc.,  R  & B
         Pharmacy, Inc. and P & S Pharmacy,


<PAGE>

         Inc.  (incorporated  herein  by  reference  to  Exhibit  10.17  to  the
         Registrant's  Annual Report on Form 10-K  for the year ended  March 31,
         1995)

10.19    Amended and  Restated  1988 Stock Option Plan  (incorporated  herein by
         reference  to  Exhibit  B to the  Registrant's  1994  Notice  of Annual
         Meeting and Proxy Statement)

10.20    Option  Agreement dated September 20, 1994 between Corbett A. Price and
         the  Registrant  (incorporated  herein by reference to Exhibit 10.19 to
         the  Registrant's Annual  Report on Form 10-K  for the year ended March
         31, 1995)

10.21    Option  Agreement  dated  September 20, 1994 between James E. Bacon and
         the  Registrant  (incorporated  herein by reference to Exhibit 10.20 to
         the  Registrant's  Annual Report on Form  10-K for the year ended March
         31, 1995)

10.22    Option  Agreement dated September 20, 1994 between E. Virgil Conway and
         the  Registrant  (incorporated  herein by reference to Exhibit 10.21 to
         the  Registrant's Annual Report on  Form 10-K for  the year ended March
         31, 1995)

10.23    Option    Agreement    dated   September   20,   1994   between   Sally
         Hernandez-Pinero  and the Registrant  (incorporated herein by reference
         to Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the
         year ended March 31, 1995)

10.24    Option  Agreement dated September 20, 1994 between Harold D. Reiter and
         the  Registrant  (incorporated  herein by reference to Exhibit 10.23 to
         the  Registrant's Annual  Report on  Form 10-K for the year ended March
         31, 1995)

10.25    Option  Agreement  dated June 28, 1994  between  Glenn C. Davis and the
         Registrant  (incorporated  herein by reference to Exhibit  10.24 to the
         Registrant's  Annual Report on Form 10-K for the year  ended  March 31,
         1995)

10.26    Option Agreement dated June 28, 1994 between Stanley  Goldstein and the
         Registrant  (incorporated  herein by reference to Exhibit  10.25 to the
         Registrant's  Annual Report on Form 10-K for the year  ended  March 31,
         1995)

10.27    Option  Agreement  dated  June 28,  1994  between  Bob L.  Wood and the
         Registrant  (incorporated  herein by reference to Exhibit  10.26 to the
         Registrant's  Annual Report on Form 10-K for the year  ended  March 31,
         1995)

10.28    Option Agreement dated June 28, 1994 between Donald B. Louria, M.D. and
         the  Registrant  (incorporated  herein by reference to Exhibit 10.27 to
         the  Registrant's Annual Report on Form  10-K for  the year ended March
         31, 1995)



<PAGE>

10.29    Option  Agreement  dated September 20, 1994 between Gary S. LaPorta and
         the  Registrant  (incorporated  herein by reference to Exhibit 10.28 to
         the Registrant's Annual Report on Form 10-K for the year ended March
         31, 1995)

10.30    Agreement  and  Plan  of  Merger  dated  as of  March  14,  1997  among
         Accuhealth,   Inc.,   ACH   Acquiring   Corp.,   ProHealthCare,   Inc.,
         ProHealthCare  Infusion  Services, Inc. Thomas  Laurita and David Brian
         Cohen.

11       Statement re Computation of Per-Share Earnings

21       Subsidiaries of the Registrant