SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549
                              ---------------------

                                    FORM 10-Q

     (Mark one)

     [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997

                                       OR

     [ ]     TRANSITIONAL REPORT PURSUANT TO SECTION 13 0R 15(d) OF
             THE SECURITIES EXCHANGE ACT OF 1934

              FOR THE TRANSITION PERIOD FROM _________ TO __________

                         COMMISSION FILE NUMBER 0-17292


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


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


          1575 BRONX RIVER AVENUE                                    10460
              BRONX, NEW YORK                                      (Zip Code)
 (Address of principal executive offices)

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

Indicate by check mark (X) whether the registrant 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 [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding
of each of the issuer's  classes of common stock,  as of the latest  practicable
date.


               CLASS                            OUTSTANDING AT FEBRUARY 16, 1997
Common stock, par value $.01 per share                 2,133,154 Shares


<PAGE>


                        ACCUHEALTH, INC. AND SUBSIDIARIES

                                      INDEX


PART I.      FINANCIAL INFORMATION

                                                                        Page No.
--------------------------------------------------------------------------------

Item 1.      Condensed Consolidated Financial Statements

             Condensed Consolidated Balance Sheets as of
             December 31, 1997 and March 31, 1997............................3

             Condensed Consolidated Statements of Operations
             for the three and nine months ended December 31, 1997 and 1996..4

             Condensed Consolidated Statements of Cash Flows
             for the nine months ended December 31, 1997 and 1996............5

             Notes to Condensed Consolidated Financial
             Statements......................................................6

Item 2.      Management's Discussion and Analysis of
             Financial Condition and Results of Operations..................10

Item 3       Quantitative and Qualitative Disclosures About Market Risk.
             Not Applicable.................................................11

PART II.     OTHER INFORMATION..............................................11

SIGNATURES .................................................................12

                                       2

<PAGE>
<TABLE>
<CAPTION>
                        ACCUHEALTH, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

ASSETS:                                                  December 31,             March 31,
                                                              1997                  1997
                                                         ------------           ------------
Current Assets:
<S>                                                      <C>                    <C>         
    Cash                                                 $    205,475           $     31,548
    Accounts receivable, net                                6,083,673              5,279,369
    Inventories                                               933,107                665,335
    Prepaid expenses and other current assets                 132,991                191,323
                                                         ------------           ------------
    Total Current Assets                                    7,355,246              6,167,575

Revenue producing equipment, net                              462,370                485,305
Fixed assets, net                                           1,675,936              1,659,056
Goodwill ,net                                                 924,085                     --
                                                              284,242                188,229
                                                         ------------           ------------
Other assets
       Total Assets                                      $ 10,701,879           $  8,500,165
                                                         ============           ============

LIABILITIES AND STOCKHOLDERS'  EQUITY:

Current Liabilities:
    Notes payable - revolving credit facility            $  3,108,492           $  2,782,677
    Notes payable - term loan                                 500,000                     --
    Notes payable - other                                     432,799                224,869
    Accounts payable                                        2,204,502              1,801,120
    Accrued expenses and other current liabilities          1,376,762              1,128,828
    Current portion of capital lease facility                 321,750                 53,625
    Current portion of other capital lease obligations        111,881                113,124
                                                         ------------           ------------
       Total Current Liabilities                            8,056,186              6,104,243

Notes Payable - Term Loan                                          --                500,000
Notes Payable - Other                                          81,479                101,031
Capital lease - Facility, less current portion                303,875
Other capital lease obligations, less current portion         102,266                 69,637
                                                         ------------           ------------

       Total Liabilities                                    8,239,931              7,078,786
                                                         ------------           ------------

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; $2,713,500 liquidation
    preference, authorized, issued and outstanding
    1,350,000 shares                                           13,500                 13,500
Common stock, $.01 par value; authorized 15,000,000
    shares; issued 2,133,154 and 1,787,598 shares,
    respectively                                               21,332                 17,876
Additional paid-in capital                                  7,108,408              6,168,364
Deficit                                                    (4,056,972)            (4,154,041)
                                                         ------------           ------------
                                                            3,086,268              2,045,699
Less treasury stock (308,004 shares) at cost                  624,320                624,320
                                                         ------------           ------------
Total Stockholders' Equity                                  2,461,948              1,421,379
                                                         ------------           ------------

Total Liabilities and Stockholders' Equity               $ 10,701,879           $  8,500,165
                                                         ============           ============
</TABLE>

            See notes to condensed consolidated financial statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>

                                                  ACCUHEALTH, INC. AND SUBSIDIARIES
                                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                             (UNAUDITED)


                                                   Three Months Ended            Nine Months Ended
                                                      December 31,                 December 31,
                                                -------------------------    -------------------------
                                                    1997          1996           1997          1996
                                                -----------   -----------    -----------   -----------
<S>                                             <C>           <C>            <C>           <C>        
Net Sales                                       $ 4,476,939   $ 4,221,491    $13,359,784   $12,304,599
Cost of goods sold                                2,515,628     2,458,407      7,496,247     7,165,648
                                                -----------   -----------    -----------   -----------
Gross profit                                      1,961,311     1,763,084      5,863,537     5,138,951
Selling, general and administrative expenses
                                                  1,788,075     1,581,594      5,226,996     4,646,849
                                                -----------   -----------    -----------   -----------
Operating (loss) income                             173,236       181,490        636,541       492,102
Interest expense                                    146,373       122,200        417,972       373,235
                                                -----------   -----------    -----------   -----------

Net income (loss)                               $    26,863   $    59,290    $   218,569   $   118,867
                                                ===========   ===========    ===========   ===========

Net primary and fully diluted loss per share:

    Primary                                     $        --   $      (.01)   $       .05   $        --
    Fully diluted                               $        --   $      (.01)   $       .05   $        --
                                                ===========   ===========    ===========   ===========


Weighted number of common shares and
    equivalents outstanding
    Primary                                       2,458,988     1,410,300      1,969,281     1,374,513
                                                -----------   -----------    -----------   -----------
Fully diluted                                     2,458,988     1,410,300      1,969,281     1,374,513
                                                -----------   -----------    -----------   -----------


                      See notes to condensed consolidated financial statements.

                                                 4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                        ACCUHEALTH, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                                            Nine Months Ended
                                                                               December 31,
                                                                      ----------------------------
                                                                         1997            1996
                                                                      ------------    ------------
OPERATING ACTIVITIES
<S>                                                                       <C>        <C>         
Net income (loss)                                                         218,569    $    118,867

Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
     Depreciation and amortization                                        370,454         346,246
     Write off of Revenue Producing Equipment                                  --          15,800

CHANGES IN OPERATING ASSETS AND LIABILITIES:
     Accounts receivable                                                 (804,304)       (607,406)
     Inventories                                                         (267,772)       (128,867)
     Prepaid expenses and other current assets                             58,332          17,867
     Other assets                                                        (110,483)        (31,250)

     Accounts payable                                                     403,382         640,684
     Reserve for contingencies                                                 --        (200,000)
     Accrued expenses and other current liabilities                       247,934          59,372
                                                                     ------------    ------------
     Cash provided by (used in) operating activities                      116,112         231,313
                                                                     ------------    ------------

INVESTING ACTIVITIES

     Purchase of fixed assets - net                                      (318,065)        (23,740)
                                                                     ------------    ------------
     Cash (used in) provided by investing activities                     (318,065)        (23,740)
                                                                     ------------    ------------

FINANCING ACTIVITIES
     Proceeds from note payable - revolving credit facility            12,760,000         443,353
     Increase in principal payments on note payable - other               362,078        (271,957)
     Increase in capital lease obligations - other                        159,451              --
     Payments on note payable - revolving credit facility             (12,434,185)             --
     Payments on note payable - other                                    (173,700)             --
     Principal payments on capital lease - Facility                       (35,750)        (89,375)
     Payment on other capital lease obligations                          (128,065)       (290,740)
     Increase in common stock                                               3,456              --
     Increase in additional paid-in capital                               940,044              --
     Increase in other assets - goodwill                                 (955,949)             --
     Stock dividends                                                     (121,500)             --
     Cash provided (used) in financing activities                         375,880        (208,719)
                                                                     ------------    ------------

     Net increase (decrease) in cash                                      173,927          (1,146)
     Cash at beginning of period                                           31,548           2,694
                                                                     ------------    ------------
     Cash at end of period                                           $    205,475    $      1,548
                                                                     ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Interest paid                                                   $    417,972    $    331,743
                                                                     ============    ============

NONCASH INVESTING AND FINANCING ACTIVITIES:
     Additions to capital leases                                     $    159,451    $     96,633
                                                                     ============    ============
</TABLE>

                 See notes to consolidated financial statements.

                                        5
<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 1997


NOTE 1 - BASIS OF PRESENTATION

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

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information  and principally  with the  instructions to Form 10-Q and
Article 10 of  Regulation  S-X. In the opinion of  management,  all  adjustments
(consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
presentation of the periods reported have been included.  Operating  results for
the  six-month  period ended  September  30, 1997 may not be  indicative  of the
results for the full fiscal year.

These financial  statements  should be read in conjunction with the consolidated
financial  statements and notes thereto included in the Form 10-K for the fiscal
year ended March 31, 1997 filed with the Securities and Exchange Commission.

The balance sheet at March 31, 1997 has been derived from the audited  financial
statements at that date.

ACCOUNTS RECEIVABLE

Accounts  receivable  are  principally  due from third party  payers,  primarily
governmental  agencies  (Medicare and Medicaid),  managed care organizations and
private insurance companies.

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.

EARNINGS PER SHARE

For the three months and nine months ended  December 31, 1997 and 1996,  primary
income  (loss) per share has been  calculated  by dividing the net income (loss)
applicable  to common stock by the  weighted  average of common stock and common
stock equivalents  outstanding during the period.  Dividends attributable to the
redeemable  preferred  stock were $40,500,  and $40,500,  respectively,  for the
three  months  ended  December  31,  1997  and 1996 and  $21,500,  and  $21,500,
respectively,  for the nine months ended  December 31, 1997 and 1996. Net income
(loss) applicable to common stockholders for the three months ended December 31,
1997 and 1996,  respectively,  were  $26,863  and  ($59,290)  and  $218,569  and
($118,867) for the nine months ended  December 31, 1997 and 1996,  respectively.
On a fully diluted basis, both the net income (loss) 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, if applicable (See Note 4).

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."

                                       6

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 1997

MAJOR CUSTOMER

The  Company's  revenues  from  one  customer  accounted  for 28% and 30% of the
Company's  net sales for the three  months  ended  December  31,  1997 and 1996,
respectively,  and 30% and 26% for the nine months  ended  December 31, 1997 and
1996,   respectively.   At  December  31,  1997,   this   customer   represented
approximately 10% of the Company's gross receivables.

NOTE 2 - NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

NOTES PAYABLE - OTHER

The Company's notes payable outstanding are as follows:

(A)      The  Company  converted a portion of its  account  payable  into a note
         payable  to a  trade  creditor  in  the  principal  amount  aggregating
         $262,035. This note is payable in monthly installments of approximately
         $21,000 plus interest at 10.5% per annum.  The  outstanding  balance at
         December 31, 1997 was $262,035.

(B)      The Company  converted  several of its  capital  leases into notes to a
         trade creditor in the principal  amounts  aggregating  $310,055.  These
         notes are payable in monthly  installments  ranging from  approximately
         $2,000 to $8,000 with  interest  rates  ranging  from 9% to 14.5%.  The
         outstanding balance at December 31, 1997 was $191,650.

(C)      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 December 31,
         1997 of $60,614 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.

NOTES PAYABLE - REVOLVING CREDIT FACILITY

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.

Effective  February  1, 1996,  the Company  and  Rosenthal  amended the Loan and
Security  Agreement  (the  "Amendment").  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 (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
purchase an additional  30,000 shares of the Company's  common stock  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%.

                                       7
<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 1997

The revolving  credit  facility bears  interest at variable  market rates and as
such the carrying value approximates its fair value.

CAPITAL LEASE OBLIGATIONS

The Company leases its principal office and warehouse  facility (the "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 Facility 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.

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 such covenants was waived by Fleet through April
1, 1998 Since the Company has not  requested nor received from Fleet a waiver of
non-compliance  with such  covenants  occurring  after  April 1, 1998 the entire
balance outstanding has been classified as current on the accompanying condensed
consolidated balance sheet at December 31, 1997.

In  lieu  of  rent,  the  Company  pays  principal  on the  Bonds  in  quarterly
installments  of $17,875,  plus  interest at the rate of prime plus 1%. On April
28, 1994,  in  conjunction  with the  Rosenthal  financing,  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.

OTHER CAPITAL LEASES

The Company  leases durable  medical  equipment  under capital lease  agreements
which extend through March 31, 2000.

NOTE 3 - CONTINGENCIES

In June 1995,  a former  employee  commenced  an action  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.  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 served an Answer
and a Document Request.  Subsequently,  the Company and plaintiff have agreed to
submit the matter to arbitration, which is scheduled for March 1988. 

                                       8

<PAGE>

                        ACCUHEALTH, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                DECEMBER 31, 1997

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  paid an
assessment  approximating  $22,000,  and has not been  advised as to whether any
further claim will be made.

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

NOTE 4 - 6% REDEEMABLE CUMULATIVE 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 anti-dilution 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  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 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 December 1, 1997 Dividend will be paid out in 35,354 shares of common stock.
Accrued and unpaid  dividends are included in accrued expenses and other current
liabilities at December 31, 1997.

NOTE 5.  PROHEALTHCARE INFUSION SERVICES INC. ACQUISITION

Effective July 1, 1997 all of the conditions and requirements of the acquisition
were  satisfied.  As a result,  Accuhealth,  Inc.  completed the  acquisition of
ProHealthCare  Infusion  Services,  Inc. This represents the consummation of the
transaction that was conditionally agreed to and announced in March 1997.

                                       9

<PAGE>

ITEM 2.  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
condensed  consolidated  financial  statements  of the Company and related notes
included elsewhere in this Form 10-Q.

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996

Net  sales  increased  approximately  $255,000  or 6% from the  comparable  1996
quarter to $4.5  million for the three  months  ended  December  31,  1997.  The
increase was the result of increases of approximately $128,000, 174,000, 129,000
and $24,000 in the Company's infusion services revenues,  institutional pharmacy
business, oral medication and durable medical equipment revenues.

Gross  profit  for the  three  months  ended  December  31,  1997  and  1996 was
approximately $1.96 and $1.76 million, respectively,  representing approximately
44% of net sales for the three months ended December 31, 1997 as compared to 42%
for the comparable prior year. Gross profit increased primarily due to increased
margins in our institutional pharmacy and infusion services businesses.

Selling,  general and administrative  expenses ("SG&A") were approximately $1.78
and  $1.58  million  or  approximately  40.0% and 37% of net sales for the three
months  ended  December  31,  1997 and  1996,  respectively.  The  increase  was
primarily due to increases of approximately  $180,000 in pharmacy  marketing and
other salaries, and $27,000 in delivery, rent and other expenses.

NINE MONTHS ENDED DECEMBER 31, 1997 AND 1996

Net sales for the nine months ended  December 31, 1997  increased  approximately
$1,055,000 or 9% from the comparable 1996 period to $13.4 million.  The increase
was the result of an  increase of  approximately  $871,000  and  $338,000 in the
Company's  institutional  pharmacy business and oral medical revenue,  offset by
decreases  in the  Company's  infusion  service  revenues  and  durable  medical
equipment revenues of approximately $128,000 and $26,000.

Gross  profit  for the  nine  months  ended  December  31,  1997  and  1996  was
approximately $5.9 and $5.1 million,  respectively,  representing  approximately
44% of net sales for the nine months ended  December 31, 1997 as compared to 42%
for the nine months ended  December 31, 1996.  The increase was primarily due to
increased   margins  in  our   institutional   pharmacy  and  infusion  services
businesses.

Selling,  general and  administrative  expenses ("SG&A") were approximately $5.2
and $4.6 million or  approximately  39% and 38% of net sales for the nine months
ended December 31, 1997 and 1996,  respectively.  The increase was primarily due
to increases of approximately  $341,000 in pharmacy customer service,  marketing
and other salaries and $233,000 in delivery, rent and other expenses.

FINANCIAL CONDITION

The Company's cash provided by operating activities during the nine months ended
December  31, 1997 was  $116,112.  As of December  31,  1997,  the Company had a
working capital deficiency of $700,940 as compared to working capital of $63,332
at March 31,  1997.  As  described in Note 2 of the  financial  statements,  the
entire  capital lease  obligation  for the Company's  capital lease  facility of
$321,750 has been  classified as a current  liability at December 31, 1997.  The
Company's  working capital  deficiency at December 31, 1997 would be $379,190 if
the capital lease were not classified as a current liability on the

                                       10
<PAGE>

December 1997 balance sheet.  The Company is current in the payment of principal
and interest with respect to such capital lease.

Management has formulated certain planned actions to improve its working capital
position and generate  sufficient  cash to meet its  operating  needs.  The plan
includes, among other matters, obtaining additional financing.

Accounts  receivable  is  principally  due from third  party  payers,  primarily
governmental agencies (Medicare and Medicaid) and private insurance companies.

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 and 2 of Part I
of this Form 10-Q  include  information  that is  forward  looking,  such as the
Company's  plans to obtain  additional  financing.  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.  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-Q.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings
                  None

Item 2.  Changes in Securities
                  None

Item 3.  Default Upon Senior Securities
                  None

Item 4.  Submission of Matters to a Vote of Security Holders
                  None

Item 5.  Other Information
                  None

Item 6.  Exhibits and Reports on Form 8-K
         (a)      Exhibits
                  None

         (b)      Report on Form 8-K
                  The Company's  current report on Form 8-K, date of report July
                  2, 1997 and filed on July 16, 1997, reporting on Item 1 Note 5
                  to condensed consolidated financial statements.

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<PAGE>


                                   SIGNATURES


         In accordance with the requirements of the Exchange Act, the registrant
has duly  caused  this  report to be signed  on its  behalf by the  undersigned,
thereunto duly authorized.

                                ACCUHEALTH, INC.


Date: February 17, 1997        By: /s/ GLENN C. DAVIS
                                   --------------------------------
                                       Glenn C. Davis, as
                                       President and Chief Executive Officer



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