U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 FORM 10-KSB

[X] Annual report  pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required] For the fiscal year ended: December 31, 1996
                                                              ------------------
[ ]  Transition  report  pursuant  to  Section  13 or 15 (d)  of the  Securities
Exchange Act of 1934
                         For the transition period from ______

                          Commission file number 0-9836
                                                 ------

                        EXTENDED FAMILY CARE CORPORATION
                       ----------------------------------
              Exact name of registrant as specified in its charter

               New York                      22-2210547
            --------------                  -------------
     (State or other jurisdiction of I.R.S. Employer Identification Number
                         incorporation or organization)

            One Old Country Road, Suite 335, Carle Place, N.Y. 11514
          ------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                  Registrant's telephone number: 516-248-2273
                                                 -------------
        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
                      -------------------------------------

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 other 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. [ X ] Yes [ ] No

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B 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 llI of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ X ]

State the registrant's revenues for its most recent fiscal year: $8,929,330
                                                                 ----------
      The aggregate  market value of the  Company's  voting common stock held by
non-affiliates  computed by  reference to the average bid and ask price on March
31, 1997 was $625,469.

                         (ISSUERS INVOLVED IN BANKRUPTCY
                     PROCEEDING DURING THE PAST FIVE YEARS)
Check  whether the issuer has filed all  documents  and  reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes ___ No X

      Indicate  the  number of shares  outstanding  of each of the  registrant's
classes of common stock, as of the latest  practicable  date: 
 32,000,226 common shares as of March 31, 1997.
----------------------------------------------

Transitional Small Business Disclosure Format (check one): Yes ___ No X


<PAGE>


                

                                                      PART I

Item 1. Description of Business
        -----------------------
Background
----------
      Extended  Family  Care  Corporation  ("EFCC" or the  "Company")  is in the
business of providing home health care services,  principally  personal hygiene,
homemaking,  general  patient  safety,  and to a lesser extent nursing  services
("Home Care"),  primarily through  contracts with government  agencies under the
Medicaid program.  The Company is a holding company which derives 100 percent of
its operating revenues from the operation of TPC Home Care Services, Inc.
("TPC"), an 83 percent owned subsidiary.

      The  Company was  incorporated  in New York on May 10, 1978 under the name
M.A.E.  Enterprises,  Inc.  In 1980,  the name of the  Company  was  changed  to
Cosmetic Sciences,  Inc; which was changed again in 1996 to Extended Family Care
Corporation, its current name.

      In 1980, the Company  completed its initial public offering of 1.5 million
shares of common stock, raising gross proceeds of $1.5 million. Between 1980 and
1985, the Company engaged in research,  development,  marketing and distribution
of medical devices and cosmetics. These products never proved to be commercially
viable,   and  by  the  mid-1980's  the   development  of  these  products  was
discontinued and the  subsidiaries  through which these businesses were operated
were dissolved.

      In August 1984,  the Company  entered the Home Care  industry by acquiring
all of the outstanding  shares of TPC, which at the time was providing Home Care
services in New York and New Jersey.  In December 1984, the then shareholders of
the Company  received as a dividend  approximately 17 percent of the outstanding
common stock of TPC, leaving TPC as an approximately 83 percent owned subsidiary
of the Company.

      On April 25,  1985,  TPC entered  into an  agreement to acquire all of the
outstanding  stock of A-Round the Clock  Nursing  Services,  Inc.  ("A-Round the
Clock"),  a home health care company doing  business in New Jersey.  In December
1985, a Form S-1 Registration  Statement was declared  effective in anticipation
of an initial  public  offering  by TPC.  Proceeds  from this  offering  were to
provide the  funding for the  acquisition  of A-Round  the Clock.  However,  the
underwriter  terminated  the  offering  and TPC  was  unable  to  find  another
underwriter  to  complete  the  offering.  TPC was  forced to  borrow  the funds
required to consummate the  acquisition of A-Round the Clock.  The burden of the
additional debt service,  coupled with the increased demand for working capital,
further reduced cash flow.  Facing bank foreclosure of liens upon TPC's accounts
receivable,  significant  tax arrears and cash  shortfalls,  the Company and TPC
filed a petition  under  Chapter  11 of the U.S.  Bankruptcy  Code,  in the U.S.
Bankruptcy Court, Southern District, New York, in August 1986.

      Following the filing of the bankruptcy petition,  TPC continued to operate
its Home Care business as a debtor in possession. In July 1987, a secured lender
foreclosed  its  liens  on the  common  stock of  A-Round  the  Clock,  and took
possession  and control of the business of A-Round the Clock.  TPC  continued to
provide Home Care services with  operating  branches in Hempstead,  New York and
Hackensack, New Jersey.

      In 1992, the Company's headquarters were moved from Hempstead, New York
to Carle Place, New York.  In March 1994, TPC opened a branch office in
Irvington, New Jersey, which moved in March 1996 to East Orange, New Jersey.
In February

                                                         1

<PAGE>


  

1995, a satellite office of the Hackensack branch office was opened in Paterson,
New Jersey, which office was relocated to Clifton, New Jersey on or about April
15, 1996.In August 1995, a TPC  satellite office was opened in Jersey City, New
Jersey, which office was sold in December,  1996. In March 1996, a satellite
office was opened in Elizabeth, New Jersey, which office was closed in
September,  1996. In May 1996, a branch  office was opened in Allentown,
Pennsylvania. In the first quarter of 1997 (i) the East Orange office and
Hempstead  office were closed and its staff and patients  integrated into
existing  facilities of Star (as defined below);  and (ii) the Hackensack
office was closed and  integrated  into EFCC's Clifton office.

      In October 1993, and in connection with the Company's Amended Plan of
Reorganization adopted in 1992, an investment group, COSS Holding Corp.
("Coss"), invested cash of $250,000 in the Company and thereby became the
holder of approximately 66 percent or 12,749,658 shares of the Company's
common stock. See "Bankruptcy Proceedings"

      On October 31, 1995,  the Company,  TPC and Coss entered into an agreement
with Arbor Home Healthcare Holdings,  LLC. ("Arbor") (in which Ivan Kaufman owns
a 99%  interest),  pursuant  to which the  Company  granted  Arbor the option to
purchase 13 million  newly issued  shares of its common stock for $1.3  million,
($.10 per share). Arbor exercised this option in two installments, on August 21,
1996 and October 31, 1996, thus becoming the owner of  approximately  40% of the
Company's  outstanding  stock.  In  addition,  in June of 1996,  Coss placed its
holdings of the Company's  common stock in a voting trust,  providing  Arbor the
right to direct  the voting of such  shares and to thus elect a majority  of the
board of directors of the Company. The Company, Coss and Arbor have also entered
into various agreements with respect to certain actions that may be taken by the
Company, Coss and its shareholders,  but these agreements, as well as the voting
trust  arrangement  as to Coss' shares of the Company,  will  terminate upon the
completion of a proposed  merger with Star Multi Care Services,  Inc. (the "Star
Merger"), as discussed below. See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."

      On October 31, 1995,  the Company  entered  into an  agreement  with Arbor
Management,  LLC (in which Ivan  Kaufman  owns a 99%  interest),  for a two year
term,  pursuant to which EFCC will pay $7,500 a month to Arbor  Management,  LLC
for management  services,  including  accounting,  finance,  human resources and
marketing, rendered to the Company. This agreement will also terminate as of the
completion of the Star Merger.

      On  January 3, 1997,  the  Company,  EFCC  Acquisition  Corp.,  a New York
corporation  ("Merger  Sub") and Star  Multi  Care  Services,  Inc.,  a New York
corporation  ("Star"),  entered into an Agreement  and Plan of Merger (the "Star
Merger Agreement"), pursuant to which, among other things, (i) Star will acquire
100% of the outstanding  common stock of the Company;  and (ii) the Company will
be merged with and into Merger Sub and thereupon  the separate  existence of the
Company shall cease and Merger Sub, as the Surviving Corporation, shall continue
to exist (the "Star  Merger").  Star is engaged in providing  custodial and home
health care  services,  and staffing to hospitals and other  medical  facilities
throughout the New York City metropolitan  area, Long Island,  upstate New York,
New Jersey, southeastern Florida and Ohio.

      Under the terms of the Star  Merger  Agreement,  the holders of all of the
outstanding shares of the Company's common stock (after giving effect to the TPC
Merger, as discussed below) will receive  consideration of $2.4 million in cash,
or approximately 6.4 cents per share, and $4.85 million in Star common stock, or
approximately 12.9 cents per share, for total consideration of $7.25 million, or
approximately 19.3 cents per share, or, at Star's option, all cash consideration
of 19.3 cents per share. Pursuant to the Star Merger

                                                         2

<PAGE>


                    

Agreement,  on January 21, 1997,  the Company  paid a special  cash  dividend of
$750,000,  or 2.3 cents per share, to its  shareholders of record on January 13,
1997.  It is  anticipated  that the Star  Merger  will be  treated as a tax-free
reorganization  for  federal  income tax  purposes  to the extent of Star common
stock received by the Registrant's shareholders.

      The Star Merger is expected to be completed by August of 1997,  subject to
certain conditions set forth in the Merger Agreement, including, but not limited
to, approval by certain state regulatory  boards and by the shareholders of each
of Star and the Company, and consummation of the TPC Merger, as described below.
In addition,  either Star or the Company may terminate the Star Merger
Agreement under certain circumstances,  as set forth in the Star
Merger  Agreement. Coss and Arbor,  which together  will own 68% of the
outstanding  shares of the Company  after  giving effect to the
TPC Merger (see below),  have agreed with Star that they will vote
for the approval of the Star Merger.  This  percentage is  sufficient  under New
York law to approve  the Star  Merger on behalf of the  Company's  shareholders.
Star  shareholders must also vote to approve the Star Merger. A majority of Star
Common Stock at a duly  convened  meeting  voting in favor of the Star Merger is
required to approve the Star Merger on behalf of the Star stockholders  pursuant
to NASDAQ rules.  To the Company's  knowledge,  sufficient  votes to approve the
Star Merger on behalf of the Star  shareholders  have not yet  committed to such
approval,  although  the Company has  received  the proxy of Stephen  Sternbach,
President and Chairman of Star, to vote all of the shares  beneficially owned by
him, currently  constituting 20.77% of Star's outstanding shares, in favor of
the Star Merger.

      The above  figures give effect to a merger of TPC into the Company,  which
is expected to occur, subject to approval of the shareholders of the Company and
TPC, prior to the Star Merger.  The  merger of TPC into the Company
(the "TPC  Merger")  will not be  conditioned  upon the  completion  of the Star
Merger.  The Star Merger is conditioned upon, among other things, the completion
of the TPC  Merger.  The  Company  and TPC signed a Merger  Agreement  (the "TPC
Merger Agreement") on March 18, 1997 to effect the TPC Merger.

      Pursuant to the TPC Merger Agreement,  all shareholders of TPC, other than
the Company,  will receive  18.745545  shares of the  Company's  Common Stock in
exchange for each share of TPC they own. Stock certificates previously issued to
TPC  shareholders do not give effect to a 1:4 reverse stock split which occurred
in 1985.  Thus,  shareholders  of TPC  actually own only one share of TPC Common
Stock for every four shares for which they possess a share  certificate  for TPC
Common  Stock.  TPC shares owned by the Company will be cancelled as a result of
the TPC Merger and no shares of the Company will be issued in respect thereof. A
proxy statement/prospectus relating to a proposed meeting of stockholders of the
Company and TPC is expected to be furnished to the  shareholders  of the Company
and TPC in June,  1997. This proxy  statement/prospectus  is expected to solicit
the votes of the  stockholders of the Company and TPC to approve the TPC Merger.
Coss and Arbor,  which together own 80.47% of the Company's  outstanding  Common
Stock,  intend to vote for the  approval of the TPC  Merger.  In  addition,  the
Company,  as the owner of 83% of the outstanding Common Stock of TPC, intends to
vote for the  approval of the TPC Merger.  These votes  constitute  a sufficient
percentage  under  New York law to  approve  the TPC  Merger  on  behalf  of the
shareholders of the Company and TPC.



                                                         3

<PAGE>


                    

Consulting Agreement

      On  January  3,  1997,  Star and the  Company  entered  into a  consulting
agreement (the "Consulting  Agreement") pursuant to which Star agreed that, upon
the Company's request, it will render to the Company, by and through such of its
officers, employees and agents as Star, in its sole discretion,  designates from
time to time,  consulting  services with respect to the management and operation
of EFCC.  The  consulting  services to be rendered by Star under the  Consulting
Agreement  consist of those consulting  services  relating to the management and
operation  of the  Company's  Home Care  business  reasonably  requested  by the
Company.  The  Company  and  Star  have  agreed  that  Star's  role is that of a
consultant and advisor to, and not that of a manager of, the Company.  Under the
Consulting  Agreement,  Star has no duty or responsibility to manage the affairs
of the Company which duty and responsibility remains at all times with the Board
of Directors and management of the Company.

      For the consulting services to be rendered by Star, the Company has agreed
to pay Star fees in the amount of  Twenty-five  Thousand  Dollars  ($25,000) per
month,  payable (a) $15,000 in arrears on the last day of each month,  pro rated
for any partial month, and (b) the remaining  $10,000 on the earlier to occur of
the  consummation  of the Star  Merger  or the  termination  of the Star  Merger
Agreement.

      The Consulting  Agreement will terminate on the earlier of (i) the date on
which the Star Merger Agreement shall have been terminated pursuant to the terms
thereof other than by reason of the default of the Company thereunder,  (ii) the
Effective Date of the Management  Agreement (as described  below) or
(iii) the consummation of the Star Merger;  provided, that Star has the right to
terminate its obligation to render  services  under the Consulting  Agreement at
any time upon forty-five (45) days prior notice to the Company.

Management Agreement

      On January 3, 1997,  Star and the Company  also  entered into a management
agreement (the "Management  Agreement")  pursuant to which Star agreed to act as
manager of the Company.  The Management  Agreement is subject to approval of the
Commissioner  of the New York State  Department of Health (the  "Commissioner").
Pursuant  to  the  Management  Agreement,  Star  will  have  the  authority  and
responsibility  to conduct,  supervise  and  effectively  manage the  day-to-day
operation of the Company. In the absence of oral or written direction or written
policies  of the Board of  Directors  of the  Company,  Star will be expected to
exercise  the  reasonable  judgment of a  management  company in its  management
activities.   Star  will  specifically  have   responsibility  and  commensurate
authority,  subject  among  other  things to the  direction  of the Board of the
Company,  to  act  on  its  behalf  for  the  following   activities:   (i)  the
establishment,  maintenance, revision and administration of the overall "charge"
structure of the Company pursuant to pertinent regulations,  including,  but not
limited  to,  patient  charges,  charges  for  ancillary  services,  charges for
supplies and special services; (ii) (A) the hiring,  discharge,  supervision and
management of all employees of the Company,  including the  determination,  from
time to time,  of the  numbers and  qualifications  of  employees  needed in the
various departments and services of the Company, (B) the establishment, revision
and  administration of wage scales,  rates of compensation,  employee  benefits,
rates and conditions of employment,  in-service training, attendance at seminars
or  conferences,  staffing  schedules,  and job and position  descriptions  with
respect  to all  employees  of the  Company;  (iii)  the  issuance  of bills for
services and materials furnished by the Company,  and the collection of accounts
and monies

                                                         4

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owed to the Company,  including the  responsibility to enforce the rights of the
Company as creditor  under any contract or in  connection  with the rendering of
any service; (iv) the payment of payroll,  trade accounts,  amounts due on short
and  long-term  indebtedness,  taxes and all other  obligations  of the Company;
provided,  however,  that the responsibility  will be limited to the exercise of
reasonable  diligence and care to apply the funds  collected in the operation of
the Company to its obligations in a timely and prudent manner, and Star will not
become  personally  liable or act in a guarantor  capacity  with  respect to any
obligation  of  the  Company;   (v)  the  establishment  and  administration  of
accounting  procedures  and controls,  in  accordance  with  generally  accepted
accounting  principles and the establishment  and  administration of systems for
the  development,  preparation  and  safekeeping of records and books of account
relating  to the  business  and  financial  affairs  of the  Company;  (vi)  the
maintenance of accounts in such banks, savings and loan associations,  and other
financial  institutions  as the  Board of the  Company  may,  from time to time,
select (including certificates of deposit) with such balances therein (which may
be interest bearing or non-interest  bearing) as Star shall,  from time to time,
deem appropriate, taking into account the operating needs of the Company and the
disbursements  from such accounts of such amounts of the Company's funds as Star
shall,  from time to time,  determine  is  appropriate  in the  discharge of its
responsibilities  under the Management Agreement;  provided,  however, that Star
will not,  in any case,  have any  obligation  to supply,  out of its own funds,
working  capital for the Company;  (vii) the  management  of all  purchases  and
leases of real  property,  equipment,  supplies and all  materials  and services
which Star deems to be  necessary in the  operation  of the Company;  (viii) the
evaluation of all quality  control aspects of the Company's  operation,  and the
implementation,  with approval of the Board of the Company,  of quality  control
programs designed to meet standards imposed by appropriate  certifying  agencies
and to  bring  about a high  standard  of  health  care in  accordance  with the
Company's policies and resources available to the Company.

      Under the Management Agreement, Star will be empowered to negotiate, enter
into, terminate and administer on behalf of the Company,  contracts for services
by medical, paramedical and other persons and organizations.

      Notwithstanding any other provision of the Management Agreement, the Board
of the  Company  retains  and Star is  prohibited  from  exercising:  (i) direct
independent  authority to hire or fire Star or a qualified agency  administrator
of the Company;  (ii)  independent  control of the Company's  books and records;
(iii)  authority  over the  disposition  of assets and the authority to incur on
behalf of the Company  liabilities  not normally  associated with the day-to-day
operation of the Company;  and (iv) authority for the  independent  adoption and
enforcement of policies affecting the delivery of health care services.

      The  Management  Agreement  will  become  effective  upon  the  date it is
approved by the Commissioner (the "Effective  Date").  The Management  Agreement
may be terminated by the  Commissioner,  without financial penalty to the Board,
not  more  than  sixty  (60)  days  after  notification  to  the  parties  of  a
determination that the management of the Company is so deficient that the health
and safety of patients  would be threatened by  continuation  of the  Management
Agreement.  The  Management  Agreement can be terminated by the Company  without
cause on 60 days'  notice  and with  cause  on 14 day's  notice.  Unless  sooner
terminated in accordance with the terms of the Management Agreement, or extended
or renewed by mutual agreement of the parties thereto,  the Management Agreement
will remain in effect until the  consummation of the Star Merger or December 31,
1998, whichever is sooner.


                                                         5

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Home Care Services

      According  to  published  industry  data,  the home care  industry in 1994
constituted  a $23  billion  market  with an annual  growth  rate  exceeding  20
percent.  Primary reasons cited for such rapid growth  include:  (1) the general
aging of the United States' population;  (2) the cost savings achievable through
at-home   treatment  as  an  alternative  to  hospital  care;  (3)  medical  and
technological  advances  which  enable a  growing  number  of  treatments  to be
administered at home rather than in a medical facility;  and (4) insurance (both
government regulated and private)  reimbursement  policies which provide certain
incentives to minimize the length of in-patient hospital care.

      TPC provides its  patients  the services of certified  home health  aides,
personal care aides,  homemakers and to a lesser extent  registered and licensed
practical nurses.  These individuals are part-time employees of TPC who work for
TPC as needed. TPC's roster of active Home Care personnel includes approximately
487 paraprofessionals and 30 nurses.

      TPC requires its  paraprofessionals  and nurses to meet certain licensing,
certification,  and/or other  requirements.  TPC conducts  mandatory  in-service
classes  for its  nurses  and  paraprofessionals  both to meet  New York and New
Jersey  continuing  education  requirements  and to  fulfill  TPC's own  quality
assurance  standards.  These in-service classes typically last between three and
six  hours  and are  offered  periodically.  They  are  taught  by  health  care
professionals  selected by TPC for their  expertise in their  fields,  including
nurses,  physical therapists,  social workers and occasionally  physicians.  All
field staff  employees are subject to an internal  review not less than every 60
days.

      TPC was recently  surveyed by the Joint  Commission  on  Accreditation  of
Healthcare  Organizations  (JCAHO) and, in February  1996, was found to meet the
requirements for accreditation. JCAHO is the accrediting body for hospitals; its
accreditation  enhances TPC's contractual  business.  TPC's  accreditation  will
expire in October 1998,  at which time TPC must be resurveyed  for the following
three-year term.

Procedure for a Typical Home Care Placement

      When TPC accepts a new patient for service,  TPC's  Director of Nursing or
nursing  supervisor  confers with the patient's  physician and other medical and
health care  professionals  (collectively,  the patient's "Health Care Team") to
(1) obtain the  physician's  orders;  (2) acquire a detailed  description of the
patient's  medical  problem;  (3)  determine  the  patient's  specific home care
requirements   (the   "Protocol"),   including   the  plan  of   treatment   and
pharmaceutical  services,  products and equipment which will be needed;  and (4)
determine the type of personnel and the number of hours and shifts required. The
Director  of Nursing  and/or a nursing  supervisor  seeks to verify all  initial
information received and selects the appropriate Home Care personnel to care for
the patient.

      In a typical Home Care case,  TPC's  personnel  assigned to the case visit
the patient on a prescribed  schedule to administer  the Protocol and to provide
other  general  care to the  patient.  All Home Care cases are  supervised  by a
nursing  supervisor to ascertain  whether any problems have arisen in connection
with the services.  Occasionally  the Company acts as a subcontractor  for other
home  care  companies,  implementing  the  patient  Protocol  under  the  direct
supervision of the primary contractor. TPC's nurses and paraprofessionals are in
frequent contact with the patient's Health Care Team.


                                                         6

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Care Givers

    TPC employs a variety of clinical and ancillary personnel as follows:

1. Certified Home Health Aides ("CHHA") provide  assistance as prescribed by the
physician in  accordance  with the Protocol  and assist with  personal  hygiene,
housekeeping,  general patient safety and other supportive  tasks.  CHHAs hold a
higher  level of  education,  classroom  training  and  field  supervision  than
Personal Care Aides.

2.  Personal  Care Aides  ("PCA")  assist the  patient  with  personal  hygiene,
dressing,  bathing,  meal  preparation/feeding,  housekeeping,  general  patient
safety and other activities of daily living.

3.  Homemakers assist with light housekeeping, meal preparation and shopping.

4.  Registered  Nurses  ("RN")  supervise  and  implement  plans of treatment as
mandated by a physician,  administer medication, maintain required documentation
and supervise all other non-RN health care employees.

5.  Licensed Practical Nurses ("LPN") can administer certain medications and
assist the RN's in performing certain procedures.

ORGANIZATIONAL STRUCTURE

Branch Description

      TPC presently has two operating branches,  utilizes space in two of Star's
facilities  and has a corporate  headquarters.  The  branches are located in New
York, New Jersey and  Pennsylvania  with corporate  headquarters  located in New
York. Each operating branch is licensed by the appropriate  state agency for its
location.  Each  operating  branch is staffed by a director of nursing,  nursing
supervisors, a branch director, a personnel manager, staffing coordinator(s) and
clerical  personnel.  TPC  conducts  its own in house  state  approved  training
courses  to  prepare  qualified  employees  for  employment.  In  addition,  TPC
maintains a recruiting program to attract qualified personnel to its staff.

Customers

      TPC has four types of customers:  public assistance agencies,  other third
party payers, insurance companies and private pay customers.

      Public assistance  agencies,  which provided  approximately 80 percent, 81
percent  and 71  percent  of  total  TPC's  revenues  in 1996,  1995  and  1994,
respectively, are billed directly for Home Care services provided to individuals
who have qualified for Medicaid  benefits.  TPC's business in Nassau County, New
York is primarily  tied to a single  contract  between TPC and the Department of
Social Services in Nassau County. A substantial  portion of TPC's business would
be lost should this single  contract be  terminated.  The  contract  with Nassau
County is  renewable  on an annual  basis and has been in existence in excess of
ten years.  TPC has no reason to believe that this contract will not be renewed
in the future, however, there is no assurance that the contract will be renewed;
however,  if the Star Merger is  consummated,  TPC's contract with Nassau County
will not be renewed  because Star already has a contract with the  Department of
Social  Services  providing  Home Care  services  in Nassau  County.  Additional
disclosure  with regard to the effects of the Star Merger will be forthcoming in
the proxy\prospectus

                                                         7

<PAGE>


                    

relating to the Star Merger,  which is expected to be furnished to the Company's
and TPC's stockholders in June, 1997.

      In New Jersey, unlike New York, the New Jersey Department of Medicaid will
grant a Medicaid  contract  to any  accredited  home  health  care  agency.  New
business is obtained through referrals from physicians, county medical services,
community  organizations,  hospital social service  workers,  nurses,  insurance
companies and the patient's family.

      Other  third  party  payers,  such as  hospitals  and  other  health  care
institutions,  provided  14  percent,  11 percent  and 12 percent of TPC's total
revenues,  in  1996,  1995  and  1994,  respectively.   The  third  party  payer
subcontracts  with TPC for Home Care  services.  These  contracts  are generally
non-exclusive.

      The  insurance  segment  of TPC's  business  represented  approximately  1
percent, 2 percent and 7 percent of TPC's total revenues in 1996, 1995 and 1994,
respectively.  This business is dependent  upon the insurer's  decision to enter
into  various  preferred   provider  networks  ("PPO")  and  health  maintenance
organization  networks  ("HMO").  The insurance  segment has become more closely
linked to associations with various PPOs and HMOs.  Therefore,  TPC will have to
develop alliances with such networks or risk the loss of business.

      Private pay customers  represented  approximately 5 percent, 6 percent and
10  percent  of TPC's  revenues  in 1996,  1995 and  1994,  respectively.  These
customers have determined,  for a variety of reasons, including ineligibility of
public assistance,  or insurance  benefits,  to personally pay for the Home Care
services  provided by TPC. These customers are referred to TPC from a variety of
sources.

      The charts  below sets forth:  (a) the percent of total TPC's  revenues by
type of  customer;  (b)  percent of total TPC's  revenues by state;  and (c) TPC
Medicaid revenues as percentages of total state revenues.

Percent of Total TPC Revenues by Type of Customer

                                                         1996     1995     1994
                                                          ---      ---      ---

Medicaid (through public assistance agencies)              80       81%      71%
Other third party payers                                   14       11       12
Insurance                                                   1        2        7
Private pay                                                 5        6       10
                                                          ----     ---      ----
                                                          100%     100%     100%


Percent of Total TPC Revenues by State
                                                       1996      1995      1994
                                                        ---       ---       ---

New York                                                 15        25%       36%
New Jersey                                               84        75        64
Pennsylvania                                              1        NA        NA
                                                        ---       ---       ----
                                                        100%      100%      100%



                                                         8

<PAGE>


                     

TPC Medicaid Revenues as Percentages of
Total State Revenues
                                                          1996    1995  1994
                                                          ----    ----  ----

New York                                                   74     82%   84%
New Jersey                                                 81     80    63
Pennsylvania                                               65     NA    NA

Governmental Regulation and Licensing

      The Company's  business is subject to substantial  regulation by state and
local authorities.  These regulations can cause significant time delays, as well
as additional  costs,  as TPC must comply with state  eligibility  standards for
licensing and/or  accreditation as a Home Care provider.  The imposition of more
stringent regulatory  requirements or the denial,  revocation,  or suspension of
any license or accreditation necessary for TPC to operate in a particular market
could have a material adverse effect on TPC's operations.

      Medicaid reimbursement rates in New York and New Jersey are not negotiated
by TPC, but are established by the respective states. Recent budgetary pressures
at the  federal  and state  governmental  level  may in the  future  reduce  the
allocation of federal and state budgetary dollars  appropriated for the Medicaid
program.   Reductions  may  have  a  negative   impact  on  TPC's  revenues  and
profitability.  Federal and state budgetary  pressures may adversely  impact TPC
by: (1)  reducing  the  Medicaid  reimbursement  rates  paid by the  state;  (2)
reducing the number of hours that will be reimbursed  per case; and (3) reducing
the funding of one or more public  assistance  agencies with which TPC presently
does business. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION -
Industry  Information" and "DESCRIPTION OF BUSINESS - Forward Looking Statements
- Cautionary Factors"

      On July 9, 1996,  the State of New Jersey met to discuss the  reduction of
Medicaid  reimbursement  rates for the year July 1, 1996 to July 1,  1997.  This
meeting did not result in material reduction in the Medicaid reimbursement rates
for the period July 1, 1996 to July 1, 1997.  During the quarter ended March 31,
1996, a reduction in authorized Medicaid reimbursable hours per case was imposed
by New York State. The results of this reduction did not have a material adverse
effect on the Company's results of operations for the fiscal year ended December
31, 1996.  However,  if a similar Medicaid  reduction is imposed by the State of
New Jersey,  the results of this reduction would have a material  adverse effect
on the  Company's  results of  operations,  as the Company  currently  derives a
majority of its revenues from New Jersey  Medicaid  reimbursements.  The Company
cannot  predict  the  magnitude  of  future  reductions,  if  any,  in  Medicaid
reimbursement rates or reimbursable hours.

      New York State  requires  approval of the Public Health Council of the New
York State  Department  of Health  ("NYPHC")  for any  change in a  "Controlling
Person" of an operator  of a licensed  health care  services  agency  ("LHCSA").
Control of an entity is presumed to exist if any person owns,  controls or holds
the power to vote 10% or more of the voting  securities  of such entity.  To the
extent TPC or the  Company  may seek to acquire  control of an LHCSA,  TPC would
have to be granted the  approval of the NYPHC prior to  exercising  control over
such LHCSA.  NYPHC approval is also required if any entity seeks control of more
than 10 percent of the voting  securities  of the Company or TPC.  The NYPHC has
approved the change of control that  occurred  from the  acquisition  by Coss of
approximately 66 percent of the Company's common stock and the change of control
which occurred when Arbor acquired 40 percent of the Company's  common stock. An
application has been filed to approve Star's

                                                         9

<PAGE>


                     


control over the Company  pursuant to the Star Merger  Agreement and approval on
that application is pending.

      Health regulatory agencies of New York and New Jersey, where TPC operates,
require  satisfaction of certain  standards with respect to personnel,  services
and supervision.  Health regulatory agencies also require the establishment of a
professional advisory group that includes at least one physician, one registered
nurse and other representatives from related disciplines or consumer groups. TPC
is currently in compliance with such standards.

      Applicable  federal  and  state  "anti-kickback"  regulations  in  general
provide that TPC may not make certain payments in order to receive  referrals of
patients. The Company believes that it and TPC are in compliance with both state
and Federal "anti-kickback" regulations.

Competitive Conditions

      TPC's health care  operations  face  competition  in recruiting  qualified
health care personnel,  securing customers and providing services, from numerous
proprietary health care agencies and not-for-profit organizations, many of which
are substantially larger and better financed than TPC.

      In New York,  TPC has an annual  contract  with the  Department  of Social
Services in Nassau County  representing  approximately 21 percent of TPC's total
revenue  in 1995 and 11  percent of TPC's  total  revenue in 1996.  This type of
contract  was awarded to  approximately  sixty home health  care  agencies,  and
currently,  no additional agencies are permitted to bid on this contract.  Cases
are  referred  to  agencies  on a  rotating  basis.  TPC  is  at  a  competitive
disadvantage  in other  locations  in New York  State,  since  TPC does not have
Medicaid contracts in areas other than Nassau County.

      In New Jersey, unlike New York, the New Jersey Department of Medicaid will
grant Medicaid contracts to any accredited home health care agency.  Each branch
office of TPC has a contract  with the New Jersey  Department  of  Medicaid  for
billing and administrative  purposes.  For New Jersey, new business is dependent
on  referrals   through   physicians,   county   medical   services,   community
organizations,  hospital social service workers, nurses, insurance companies and
the patient's family. Consequently,  all of TPC's New Jersey business is subject
to  numerous  competitive  factors.  TPC  believes  that prompt  service,  price
(excluding  Medicaid  which by virtue of fixed  reimbursement  rates cannot be a
differentiating  factor),  quality of service and the range of services  offered
are the  principal  factors  which enable it to compete  effectively  in the New
Jersey market.

Marketing and Sales

      TPC currently markets its health care personnel and services in Nassau and
Queens counties in New York, in the eastern and northern  counties in New Jersey
and in  Allentown,  Pennsylvania.  TPC's  services  are  marketed  by a team  of
professionals  headed  by a  Regional  Director,  in each  state.  All of  TPC's
services  are promoted  through  print and yellow page  advertising,  brochures,
direct mail and visual presentations through field sales calls. Targeted clients
are  hospitals,  nursing homes,  retirement  centers,  social service  agencies,
senior citizen centers and other home care companies for sub-contract referrals.
TPC's  representatives  maintain  telephonic  contact  not  only to  maintain  a
relationship with existing  referral sources,  but also to establish new sources
and markets. TPC's staff attend health care sponsored seminars and various trade
shows and exhibitions.

                                                        10

<PAGE>


                     


Liability Insurance

      TPC is  exposed  to  potential  liability  in the event of  negligence  or
wrongful acts of its  personnel.  TPC  maintains  liability  insurance  which it
believes to be adequate.  There can be no assurance,  however,  that TPC will be
able to  maintain  its  existing  insurance  at an  acceptable  cost  or  obtain
additional  insurance in the future as required.  There can be no assurance that
TPC's  insurance will be sufficient to cover  liabilities  resulting from claims
that may be brought in the future.

Employees

      The Company currently has approximately 557 active employees,  40 of which
are full-time  employees.  TPC has no union  contracts with any of its employees
and believes  that its  relationship  with its  employees is good.  TPC pays its
employees at rates that it believes are competitive.

      The Company is not aware of any current  efforts to unionize in any of its
branches.  If such an  effort  were  made,  it is  uncertain  if same  would  be
successful  and if successful  whether it would have a material  effect upon the
Company's operations or financial condition.

Forward Looking Statements - Cautionary Factors

      Except for the historical  information  and  statements  contained in this
Report, certain matters and items set forth in this Report are forward  looking
statements that involve  uncertainties  and risks some of which are discussed at
appropriate points in the Report and are also summarized below.

      Health Care Reform. As a result of the escalation of health care costs and
the  inability of many  individuals  and employers to obtain  affordable  health
insurance,  numerous  proposals  have been or may be  introduced  in the  United
States  Congress  and  state   legislatures,   and  other  proposals  are  being
considered,  relating to health care reform. Such proposals have included, among
other  things,  provision of  universal  access to health  care,  reforming  the
payment  methodology  for  health  care  goods and  services  by both the public
(Medicare and Medicaid)  and private  sectors,  and methods to control or reduce
public and private spending on health care. The ultimate timing or the effect of
such reforms may have on the Company cannot be predicted and no assurance can be
given  that any such  reforms  will not have a  material  adverse  effect on the
Company's revenues and/or earnings.  Short-term cost containment initiatives may
vary substantially from long-term reforms and may have a material adverse effect
on the Company.

      Regulatory  Environment.  The Company's business is subject to substantial
regulation  by  state  and  local  authorities.   These  regulations  can  cause
significant time delays, as well as additional costs, as the Company must comply
with state  eligibility  standards for licensing and/or  accreditation as a Home
Care provider.  The imposition of more stringent regulatory  requirements or the
denial,  revocation, or suspension of any license or accreditation necessary for
the  Company to operate in a  particular  market  could have a material  adverse
effect on the Company's operations.

      Medicaid reimbursement rates in New York and New Jersey are not negotiated
by TPC, but are established by the respective states. Recent budgetary pressures
at the  federal  and state  governmental  level  may in the  future  reduce  the
allocation of federal and state budgetary dollars  appropriated for the Medicaid
program.   Reductions  may  have  a  negative   impact  on  TPC's  revenues  and
profitability. Federal and state budgetary pressures

                                                        11

<PAGE>


                     


may adversely impact TPC by: (1) reducing the Medicaid reimbursement rates
paid by the state; (2) reducing the number of hours that will be reimbursed
per case; and (3) reducing the funding of one or more public assistance
agencies with which TPC presently does business. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OR PLAN OF OPERATION - Industry Information.

      On July 9, 1996,  the State of New Jersey met to discuss the  reduction of
Medicaid  reimbursement  rates for the year July 1, 1996 to July 1,  1997.  This
meeting did not result in material reduction in the Medicaid reimbursement rates
for the period July 1, 1996 to July 1, 1997.  During the quarter ended March 31,
1996, a reduction in authorized Medicaid reimbursable hours per case was imposed
by New York State. The results of this reduction did not have a material adverse
effect on the Company's results of operations for the fiscal year ended December
31, 1996.  However,  if a similar Medicaid  reduction is imposed by the State of
New Jersey,  the results of this reduction would have a material  adverse effect
on the  Company's  results of  operations,  as the Company  currently  derives a
majority of its revenues from New Jersey  Medicaid  reimbursements.  The Company
cannot  predict  the  magnitude  of  future  reductions,  if  any,  in  Medicaid
reimbursement rates or reimbursable hours.

      Securities  Filings.  Since filing its petition  for  bankruptcy  in 1986,
until the filing of its Form  10-KSB for period  ending  December  31, 1995 (the
"1995  10-KSB")  the  Company  had not  filed  any  required  reports  under the
Securities Exchange Act of 1934 (the "Exchange Act"). The last such report filed
was the Company's Form 10-K for the fiscal year ended December 31, 1985.  During
the years while in bankruptcy,  the Company did not possess  adequate  financial
and staffing resources to produce audited financial statements and other reports
as  required by the  Exchange  Act.  The Company has filed all reports  required
under the Exchange Act commencing with its 1995 10-KSB.

      As a result of the Company's  past  non-compliance  with the Exchange Act,
the Securities and Exchange  Commission (the "SEC") may determine to bring civil
and administrative proceedings against the Company. While the likelihood of such
proceedings  being brought is uncertain,  if such proceedings were brought,  the
Company  could  be  subject  to   substantial   monetary   penalties  and  other
administrative remedies.

      Competition.  The home health  care and  temporary  health care  personnel
placement  markets are highly  fragmented and significant  competitors are often
localized in particular  geographic markets. Some of the entities with which the
Company competes have  substantially  greater financial and other resources than
the Company.  Accordingly,  the Company may be unable to successfully compete in
this  environment.  In New York,  the  Company has an annual  contract  with the
Department of Social  Services in Nassau County  representing  approximately  11
percent of the  Company's  total  revenue  in 1996.  This type of  contract  was
awarded to  approximately  sixty home health care agencies,  and  currently,  no
additional agencies are permitted to bid on this contract. Cases are referred to
agencies on a rotating  basis.  The Company is at a competitive  disadvantage in
other  locations  in New York State,  since the Company  does not have  Medicaid
contracts in areas other than Nassau County.

      In New Jersey, unlike New York, the New Jersey Department of Medicaid will
grant Medicaid contracts to any accredited home health care agency.  Each branch
office of EFCC has a contract  with the New Jersey  Department  of Medicaid  for
billing and administrative  purposes.  For New Jersey, new business is dependent
on  referrals   through   physicians,   county   medical   services,   community
organizations,  hospital social service workers, nurses, insurance companies and
the patient's family. Consequently, all of EFCC's New Jersey business is subject
to numerous competitive factors. EFCC believes

                                                        12

<PAGE>


                     

that  prompt  service,  price  (excluding  Medicaid  which  by  virtue  of fixed
reimbursement rates cannot be a differentiating  factor), quality of service and
the range of  services  offered are the  principal  factors  which  enable it to
compete effectively in the New Jersey market.

      Shortage of Qualified  Personnel.  The Company's  business is dependent in
large part upon its ability to recruit and retain  qualified  personnel  to fill
positions in a timely manner.  The Company faces intense  competition from other
companies in recruiting  such qualified  health care personnel for its Home Care
and  temporary  placement  operations.  The  Company's  growth may depend,  to a
significant  degree,  on its  ability to  continue  to recruit  and retain  such
qualified  health care personnel.  There can be no assurance that such qualified
health  care  personnel  will  continue  to be  available  to the Company in the
future.  If the Company were unable to attract or retain such  qualified  health
care  personnel,  such  inability  would have a material  adverse  effect on the
business of the Company.

      Third Party Payors.  A significant  portion of the Company's  revenues are
generated  by third  party  payors.  Such  payments  are  subject  to audit  and
adjustment, including retroactive adjustment. During the fiscal years 1994, 1995
and 1996, such  adjustments  have been  insignificant.  In the event that future
audits result in adjustments that are not  insignificant,  then such adjustments
could have a material adverse effect on the Company.

      Possible  Need For  Additional  Financing.  The Company does not currently
have the benefit of a substantial amount of the $1.3 million in capital provided
by Arbor due to the payment of the special dividend of $750,000 in January 1997.
See  "DESCRIPTION OF BUSINESS - Background" and see "CERTAIN  RELATIONSHIPS  AND
RELATED TRANSACTIONS." If the Company's business expands, significant additional
financing may be required.  If the Company were unable to secure such  financing
on terms deemed  favorable by management,  such inability  would have a material
adverse effect on the Company's  financial  condition,  including its ability to
meet  certain  of its  obligations  as they  come  due.  If the Star  Merger  is
consummated, the Company's capital requirements would be provided by Star.

      Possible  Adverse  Impact if Star  Merger is not  Consummated.  Certain of
TPC's  operations have been integrated with Star in furtherance of the Star
Merger  Agreement.  If, for any reason,  the Star Merger were not to occur,
reversing these steps would be costly,  time-consuming and may  not  be
completely  effective  in  returning  EFCC  to the  status  of its
operations  prior to  entering into the Star Merger  Agreement and may have a
material adverse effect on EFCC.


Item 2. Description of Property
        -----------------------
      The Company's  corporate  office is located in Carle Place,  New York. The
lease expires on November 30, 2000.  The Company  leases 2,060 gross square feet
at an annual rental of $39,140, with annual escalations of 12%.

      TPC's New York  branch  is  located  in  Hempstead,  New  York.  The space
consists of 1,688 square feet for a rental  period  expiring on July 31, 2000 at
an annual rental of $20,286.  Employees of the Hempstead  office were integrated
into Star's Hicksville office during the first quarter of 1997.

      TPC leases space for three locations in New Jersey.


                                                        13

<PAGE>


                     


      The East Orange,  New Jersey branch office  occupies  approximately  2,250
square feet. The lease term runs from March 1, 1996 through February 28, 2001 at
an annual rental of $29,400.  The East Orange office's employees were integrated
into Star's South Orange, New Jersey office in the first quarter of 1997.

      The  Hackensack,  New Jersey branch office  occupies  approximately  2,000
square feet at an annual rental of $27,600,  pursuant to a lease that expires on
February 28, 2000. The employees of the Hackensack  office were  integrated into
EFCC's Clifton, New Jersey office in the first quarter of 1997.

      The Clifton, New Jersey location serves as the New Jersey Regional Office.
This location occupies  approximately 3,500 square feet with an annual rental of
$61,250.  The lease term expires  January 31, 2006.  The  Patterson,  New Jersey
satellite  office was integrated into the Clifton  Regional Office during April,
1997.

      TPC operates one office in Allentown,  Pennsylvania.  This office occupies
1,360 square  feet.  The base term runs from June 1, 1996 to June 30, 1999 at an
annual rental of $22,576, plus 2.7% of total operating expense.


Item 3. Legal Proceedings
        -----------------
 
Bankruptcy Proceedings

      In 1986 the Company and TPC filed for protection  from its creditors under
Chapter 11 of the U.S.  Bankruptcy Code in the Southern  District,  New York. An
Amended Joint Plan of  Reorganization  (the "Plan")  dated  February 5, 1992 was
filed for both the Company  and TPC.  The Plan was  approved on March 23,  1992.
Shareholders of the Company prior to the bankruptcy filing retained ownership of
their shares.

      There were seven  classes of  creditors.  Some  creditors  withdrew  their
claims,  some received cash or negotiated  extended payment terms, and some were
offered an option of receiving  cash or newly issued  common  stock.  The latter
group of creditors  received  1,388,959  shares of newly issued  common stock in
exchange for their claims.

      As noted above,  COSS  received  12,749,658  shares of newly issued common
stock,  representing,  at that time,  66 percent  of the  Company's  outstanding
common stock for a $250,000 cash investment.

      A Final Decree was issued on January 13, 1995 confirming that the Plan has
been  consummated  permitting  the  Company  and TPC to emerge  from  bankruptcy
proceedings.

                                                        14

<PAGE>


                      



                                                      PART II


Item 5. Market for Common Equity and Related Stockholder Matters
        --------------------------------------------------------
(a) Market Information
    ------------------
    The Common  Stock of the Company has traded in the  over-the-counter  market
since November 1980.  Prices for the Company's common stock are quoted under the
symbol  "CXCS"  on the  NASDAQ  OTC  Bulletin  Board  and on the  "pink  sheets"
published by the National Quotation Bureau located in Cedar Grove, New Jersey.

    The high and low bid  quotations  for the common  stock for each  quarter of
1995 and 1996 are shown  below.  These  quotations  were  supplied  by  National
Quotation Bureau, Inc. The prices reported reflect inter-dealer  quotations that
may not  represent  actual  transactions  and do not  include  retail  mark-ups,
mark-downs or commissions.

                                   Bid Prices ($)
    1996                         High           Low
    ----                         ------------------

    First Quarter                $.437          $.250
    Second Quarter                .500           .187
    Third Quarter                 .250           .125
    Fourth Quarter                .156           .040


                                   Bid Prices ($)
    1995                         High           Low
    ----                         ------------------

    First Quarter                $.125          $.031
    Second Quarter                .250           .063
    Third Quarter                 .250           .063
    Fourth Quarter                .375           .063



(b) Holders
    -------
    There are 1,281 holders of record of the Company's  common stock as of April
8, 1997.

(c) Dividends
    ---------
    On January 21, 1997, pursuant to the Star Merger Agreement, the Company paid
a special cash dividend of $750,000 to its stockholders of record on January 13,
1997. Otherwise,  the Company has not paid dividends on its common equity in the
past two fiscal years.


Item 6. Management's Discussion and Analysis or Plan of Operation.
        ---------------------------------------------------------
      The following discussion and analysis provides information which the
Company's management believes is relevant to an assessment and understanding
of the Company's results of operations and financial condition. This

                                                        15

<PAGE>


                      

discussion should be read in conjunction with the audited consolidated financial
statements and related notes contained elsewhere in this filing.

Overview

      TPC's   revenues  are  derived  from   providing  Home  Care  services  to
individuals,  in New  York  and  New  Jersey,  through  various  contracts  with
government  agencies  (under  the  Medicaid  program)  and  to a  lesser  extent
hospitals, insurance companies, private pay and other third party payers.

Industry Information

      According  to  published  industry  data,  the home care  industry in 1994
constituted a $23 billion market with an annual growth rate exceeding 20 percent
for this industry  sector.  Primary reasons cited for such rapid growth include:
(1) the general aging of the United States' population; (2) the substantial cost
savings achievable through at-home treatment as an alternative to hospital care;
(3)  medical  and  technological  advances  which  enable a  growing  number  of
treatments to be administered at home rather than in a medical facility; and (4)
Insurance (both government regulated and private)  reimbursement  policies which
provide certain  incentives to minimize the length of in-patient  hospital care.
The Company  believes  that the factors  above will  continue to  contribute  to
steady growth for the home care industry.

Results of Operations

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Net Patient Service Revenue: Net patient service revenue increased $1,561,372 or
21% to $8,929,330 for the year ended  December 31, 1996 from  $7,367,958 for the
year ended  December  31,  1995.  The  addition  of three new  branches  in 1996
increased net patient  service  revenue by $1,358,545 or 18%. The balance of the
net  increase  in net  patient  service  revenue  resulted  from (a) one  branch
location which opened in August 1995 and, therefore, generated a full year
revenue in 1996 compared to four months of revenue in 1995; partially offset by
(b) an overall  decrease  in  pre-existing  branch net  patient service revenue.
The decrease in pre-existing branch net patient service revenue was mainly due
to an overall general decrease in authorized  Medicaid  reimbursable costs by
New York State (see "Forward Looking Statements - Cautionary Factors").

Cost of Services:  Cost of services  increased $937,358 or 20% to $5,643,554 for
1996 from $4,706,196 for 1995. The increase in cost of services is primarily due
to increases in field staff  payroll cost  resulting  from a 21% increase in net
patient service  revenue.  The Company's  growth in the number of cases serviced
increased the need for additional field staff to service these cases.

Selling,   General   and   Administrative   Expenses:   Selling,   general   and
administrative  expenses increased $1,064,337 or 50% to $3,192,769 for 1996 from
$2,128,432  for  1995.  Selling,   general  and  administrative  expenses  as  a
percentage  of net revenues  increased  to 36% for 1996 from 29% for 1995.  This
increase is due to (a) higher  administrative  salaries,  marketing and facility
expenses  associated  with the additional  branch  locations and the increase in
case volume; (b) the Company's investment in its corporate  infrastructure;  and
(c) increased professional fees due to the Company's commitment to resume filing
the reports required under the Securities Exchange Act of 1934.

Provision For Income taxes: Provision for income taxes decreased by $154,000
or 74% to $55,000 for the year ended December 31, 1996 from $209,000 for the
year ended December 31, 1995. The decrease is primarily due to a $403,645 or

                                                        16

<PAGE>


                      

84%  decrease  in pre-tax  income and  partially  offset by an  increase  in the
Company's effective tax rate from 1995 to 1996.

  Liquidity and Capital Resources

      The nature of the Company's  business requires weekly payments of wages to
its personnel at the time they render services,  while it receives  payments for
services  rendered over an extended  period of time (30 to 90 days). At December
31, 1996 and December 31, 1995, the Company's accounts  receivable balances were
$1,066,277 and $895,131, respectively. During 1996 and 1995, TPC's days sales in
accounts receivable was approximately 47 days and 49 days, respectively.

      At December  31,  1996,  the Company  had working  capital of  $1,527,503.
Historically,  the Company's cash  requirements  have been met  internally  from
operations.  The Company currently has no outstanding bank debt nor does it have
any agreements for a line of credit.

      The Company's  working capital was reduced on January 21, 1997 as a result
of the payment of a special  dividend in the amount of $750,000.  The  Company's
working capital should be sufficient to fund existing operations for the next 12
months,  but will not be  sufficient  to fund  expanded  activities  if the Star
Merger is not  consummated.  If the Star Merger is  consummated,  the  Company's
capital requirements would be provided by Star.

      In 1996,  the Company  used cash for operating  activities of $457,092
and in 1995, the Company  generated cash from operating  activities of $555,433,
respectively. The change in cash generated from operating activities in 1995 and
cash  used  for  operations  in 1996 was a result of  decreased  income from
operations,  increased professional fees related to the anticipated Star Merger,
increased accounts  receivable due to increased revenues and the settlement of a
pre-petition payroll tax claim by the IRS.

      During  1996,  the Company  invested  $122,979 in property  and  equipment
primarily for purchases of computers,  telecommunication equipment and furniture
and  equipment  associated  with  the  Company's  three  new  branch  locations,
including  a  regional  office in  Clifton,  New  Jersey,  as well as  increased
purchases of computer equipment throughout the Company.  During 1995 the Company
invested $57,373 in property and equipment primarily for purchases of computers,
telecommunication  equipment,  and furniture and equipment  associated  with the
Company's two new branch locations.

      In 1996,  the Company was provided  cash through  financing  activities of
$1,134,701  and in 1995,  the  Company  used  cash in  financing  activities  of
$83,687.  The  change  in cash  used in  financing  activities  in 1995 and cash
provided by financing activities in 1996 was primarily due to the $1,250,000 net
cash  proceeds  received by the  Company in 1996 from the  exercise of the Arbor
stock  options.  In 1995,  the Company  used cash to pay down $83,687 in various
loan and capital lease obligations.

Inflation and Seasonality

      Medicaid reimbursements, which represent the Company's principal source of
revenue, have historically been adjusted to keep pace with inflation.  There can
be  no  assurance  that  future  Medicaid  reimbursement  will  keep  pace  with
inflation.

    The Company's business is generally not subject to seasonal trends.


                                                        17

<PAGE>


                      


Item 7. Financial Statements.
        ---------------------
      The Company's financial statements and schedules appear at the end of this
Report.


Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure
         ---------------------------------------------------------------
      Effective February 19, 1996, the Company dismissed Rose, Michlin,  Karpf &
Co. ("Rose,  Michlin") as its independent auditor for the audit of its financial
statements.  The new  independent  auditor to be engaged by the Company to audit
the Company's financial statements,  effective February 19, 1996, is Carpenter &
Onorato, P.C.

      Rose,  Michlin  did not  complete  the  audit of the  Company's  financial
statements for the two most recent fiscal years 1994 and 1995.  However,  during
these  years  there were no  disagreements  with Rose,  Michlin on any matter of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedure. Further, the Company was not advised by Rose, Michlin during
this period of the existence of any of the events described in Item 304(a)(1)(B)
of Regulation S-B.

      The decision to change  accountants  was  recommended  and approved by the
Company's Board of Directors.


                                                     PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons;
        Compliance with Section 16(a) of the Exchange Act.
        -------------------------------------------------------------
      The  directors  and  executive  officers  of the  Company  and  TPC are as
follows:
<TABLE>
<CAPTION>


      Name                      Age                                         Position
      ----                      ---                                         --------

                                                  EFCC                                        TPC
                                                  ----                                        ---
<S>                             <C>               <C>                                         <C>

Mary Ann Page                   55                Former Chief Executive                      Former President/
                                                  Officer/Former Vice-President/              Former Director
                                                  Former Director

Patricia Cantalupo              37                Former Vice-President/                      Former Vice President/
                                                  Former Director                             Former Secretary

Peter P. Jackson                46                None                                        Former Chief Executive
                                                                                              Officer of TPC

Paul Elenio                     30                Director/Former Vice                        Director
                                                  President/Former Controller/
                                                  Former Principal Financial
                                                  Officer

Robert Kohlmeyer                42                Secretary/Treasurer/                        Secretary/Treasurer/
                                                  Director/                                   Director



                                                                 18

<PAGE>




Steven Gorenstein               53               Former President/Former                      None
                                                 Chief Executive Officer/
                                                 Former Director

Joseph Heller                   33               Vice President/Acting Chief
                                                 Executive Officer/Principal                  Director
                                                 Financial Officer/
                                                 Controller/Director

</TABLE>

Mary Ann Page

      Ms. Page was Acting Chief Executive Officer since January 1996; Vice
President and Director of the Company since June 1994.  Ms. Page was also
President and a Director of TPC.  From 1991 to 1993, Ms. Page held the position
of Director of Training for Health Force, a national home health care agency,
where she was responsible for training  new franchisees in all aspects of home
care personnel services.  From 1988 to 1991, she held the position of Director
of Franchising for Winston Franchising Corp.  Ms. Page's employment with the
Company and TPC ended on March 31, 1997.  Ms. Page resigned as a director in
April, 1997.

Patricia Cantalupo

      Vice President and Director since 1992.  Dr. Cantalupo is also a Vice
President and Secretary of TPC.  Dr. Cantalupo has been the principal owner of
Cantalupo Chiropractic Associates, a full service multi-disciplinary
Chiropractic Health Care Facility, since 1985.  Dr. Cantalupo resigned from
all positions with the Company and TPC in August, 1996.

Peter P. Jackson

      Mr. Jackson's employment with the Company and TPC ended in August, 1996.
Mr. Jackson had been Managing Director of Business Development since January
1996.  Mr. Jackson was Chief Executive Officer of TPC from July 1993 to
December 1995.

Paul Elenio

      Director of the Company and TPC since September, 1996. Mr. Elenio was Vice
President and  Controller  of the Company since January 1996,  but resigned from
this position in January,  1997.  From 1993 to 1995 Mr. Elenio held the position
of  Financial  Reporting  and Tax  Supervisor  for  BankAmerica  Mortgage,  FSB,
formally  Arbor  National  Mortgage,  Inc.,  a mortgage  banking  company  which
originated, sold and serviced residential and commercial mortgages. From 1991 to
1993,  Mr.  Elenio held the  position of Senior  Accountant  for Arbor  National
Mortgage, Inc.

Robert Kohlmeyer

      Secretary, Treasurer and Director of the Company since 1992.  Mr.
Kohlmeyer is also Secretary/Treasurer and a Director of TPC.  Mr. Kohlmeyer
has been President and Chief Operating Officer of CRK Contracting, a regional
large scale electrical contracting company, since 1987.

Steve Gorenstein

      President, Chief Executive Officer and Director of the Company since
1992.  Mr. Gorenstein resigned as an officer and director in January 1996.

                                                        19

<PAGE>




From 1991 to present,  Mr.  Gorenstein has been President of Career  Placements,
Inc., a temporary employment agency.

Joseph Heller

      Mr. Heller was  appointed  Vice  President of the Company in March,  1996,
principal  financial  officer and controller in January,  1997, and acting Chief
Executive Officer in April,  1997. Mr. Heller has been a director of the Company
and TPC since September,  1996. From August 1995 to the present, Mr. Heller also
has been a Vice  President  of Arbor  Home  HealthCare  Holding,  LLC, a holding
company which owns 40% of the currently  outstanding shares of the Company.  See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." From June 1995 to the present,
Mr.  Heller  also has been  Vice  President  of  Corporate  Planning  for  Arbor
Management, LLC. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." From 1991
to May 1995,  Mr. Heller has held the  positions of Vice  President of Financial
Analysis and Budgeting and Director of Shareholder  Relations for Arbor National
Mortgage,  Inc.  and  its  successor.  From  1990 to  1991,  Mr.  Heller  was an
Acquisition  Associate  for WinStar  Services,  Inc., a merchant and  investment
banking  firm.  From 1987 to 1990,  Mr.  Heller was a Senior  Analyst for Morgan
Stanley & Co., a leading  investment  banking firm,  and from 1985 to 1987,  Mr.
Heller  was a  Senior  Accountant  for  Ernst &  Young,  LLP,  an  international
accounting and consulting firm. Mr. Heller is a Certified Public Accountant;  in
1991,  he received a Masters  degree in  Business  Administration  from  Fordham
University.


Item 10.       EXECUTIVE COMPENSATION
               ----------------------

Summary Compensation Table
<TABLE>
<CAPTION>

                                            SUMMARY COMPENSATION TABLE

                                                Annual Compensation
                                                -------------------
(a)                                      (b)      (c)              (d)               (e)

Name and
Principal                                                                            Other
Position                                 Year     Salary($)        Bonus($)          Compensation($)
----------------------------------------------------------------------------------------------------
<S>                                       <C>      <C>             <C>              <C> 

Steve Gorenstein                          1996     $0              $0               $0
Chief Executive Officer                   1995     $0              $0               $0
President and Director


Mary Ann Page                             1996     $88,609         $5,000           $0
Acting Chief Executive                    1995     $82,210         $6,250           $0
Officer

</TABLE>

      No  officer  of the  Company  or TPC  received  compensation  in excess of
$100,000 from 1995 - 1996. All  compensation  specified above is paid by TPC for
services  rendered  to TPC.  Members  of the  Board  of  Directors  received  no
compensation of any kind for services provided as a director.

      There are no  employment  agreements  with any  officer or director of the
Company or TPC.

                                                        20

<PAGE>


                      


Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT
          --------------------------------------------------
(a)   Security Ownership of certain beneficial owners.

      The following sets forth the holdings of any person known by the issuer to
be the beneficial owner of more than five percent of the Company's Common Stock:
<TABLE>
<CAPTION>
                                                          Amount and Nature
                       Name and Address of                of Beneficial                       Percent
Title of Class         Beneficial Owner                   Ownership                           of Class
------------------------------------------------------------------------------------------------------
<S>                    <C>                                <C>                                 <C>


Common Stock           Coss Holding Corp.                 12,749,658                          39.84
                       1 Old Country Road
                       Suite 335
                       Carle Place, NY 11514

Common Stock           Arbor Home HealthCare              25,749,658 (1)                      80.47
                       Holding, LLC
                       333 Earle Ovington Blvd.
                       Uniondale, NY 11553

Common Stock           Ivan Kaufman                       25,749,658 (1)(2)                   80.47
                       c/o Arbor Home
                       HealthCare Holding, LLC
                       333 Earle Ovington Blvd.
                       Uniondale, NY 11553
---------------------------------------
</TABLE>

(1)   Includes 13 million shares owned directly and also includes voting power
      over 12,749,658 shares owned by Coss Holding Corp. pursuant to a voting
      trust.  (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").

(2)   Ivan Kaufman owns a 99 percent interest in Arbor Home HealthCare Holding
      LLC. and is its controlling member.


      The following  sets forth the holdings of all of the Company's  directors,
executive officers and director nominees,  as well as all directors and officers
as a group:

<TABLE>
<CAPTION>


                       Name and                                    Amount and
                       Address of                                  Nature of
    Title              Beneficial                                  Beneficial                 Percent
    of Class           Owner                                       Ownership                  of Class
    --------------------------------------------------------------------------------------------------
    <S>                <C>                                         <C>                         <C>

    Common Stock       Steven Gorenstein                           0                           0
                       16 Barrington Place
                       Dix Hills, NY  11747

    Common Stock       Robert Kohlmeyer (1)                        0                           0
                       86 Hilltop Drive
                       Smithtown, NY  11787

    Common Stock       Mary Ann Page                               0                           0
                       c/o Cosmetic Sciences, Inc.
                       1 Old Country Road
                       Carle Place, NY  11514



                                                        21

<PAGE>


                     


    Common Stock       Patricia Cantalupo                          0                          0
                       50 Harvard Drive
                       Westbury, NY  11590

    Common Stock       Peter P. Jackson                          110,000 (1)                  *
                       c/o Cosmetic Sciences, Inc.
                       1 Old Country Road
                       Carle Place, NY  11514

    Common Stock       Paul Elenio                                 0                          0
                       c/o Cosmetic Sciences, Inc.
                       1 Old Country Road
                       Carle Place, NY  11514

    Common Stock       Joseph Heller                               0                          0
                       c/o Arbor Management, LLC
                       333 Earle Ovington Blvd.
                       Uniondale, NY  11553

    Common Stock       All directors and                         110,000                      *
                       executive officers
                       as a group

-------------------------------------
</TABLE>

*Less than 1%

(1)   Owned by son, Steven Jackson.  Peter Jackson disclaims beneficial
      ownership of these shares.

(c)   Changes in control


      Coss has placed all of its 12,749,658 shares of the Company's Common Stock
(the "Coss  Shares"),  representing  approximately  40 percent of the  currently
outstanding  Company Common Stock,  in a voting trust.  Arbor  has   the right
under this  voting  trust to direct the voting of all of the Coss  Shares and to
nominate  a  majority  of  the  Company's  Board  of  Directors.  See  "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS".

      In addition,  pursuant to a certain Amended and Restated Option  Agreement
(the  "Option  Agreement"),  dated as of October 31,  1995,  by and among Arbor,
Coss, Coss' shareholders,  the Company, and TPC, Arbor acquired from the Company
an option to purchase up to 13 million  shares of the  Company's  Common  Stock.
This option has been exercised in full. Thus, Arbor has beneficial ownership and
voting rights to 80.47 percent of the  outstanding  Common Stock of the Company.
(See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".)


Item 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
              ----------------------------------------------
      Pursuant  to the Option  Agreement,  Arbor  acquired  from the  Company an
option to  purchase up to 13 million  shares of the  Company's  Common  Stock as
follows:  (a) Arbor had an irrevocable  option (the "First Option") to purchase,
by June 21,  1996  (which date was  extended  to August 21,  1996),  6.5 million
shares of the Company's Common Stock at an exercise price of $.10 per share; (b)
subject to Arbor's  timely  exercise of the First Option and the issuance of the
shares of Common  Stock  pursuant to such  exercise,  Arbor was given the option
(the "Second Option") to purchase,  by November 1, 1996, up to an additional 6.5
million  shares of the Company's  Common Stock at an exercise  price of $.10 per
share.  The First and Second  Options were subject to adjustment in the event of
stock splits and similar events.

      On August 21, 1996,  Arbor exercised the First Option by delivering to the
Company a notice of exercise of the First Option and by  depositing  $650,000 in
escrow, to be released to the Company upon approval of an

                                                        22

<PAGE>


                     


amendment to the Company's  Certificate of  Incorporation  providing  sufficient
authorized  capital to  exercise  the First and  Second  Option.  This  approval
occurred at the Company's  annual meeting on September 25, 1996 and the required
amendment was filed in October,  1996. On October 31, 1996,  Arbor exercised the
Second  Option by  delivering  to the Company a notice of exercise of the Second
Option and by paying $650,000 to the Company.

      The Option  Agreement also provides that Arbor's consent shall be required
before certain actions may be taken by Coss, its  shareholders,  the Company and
TPC. These remaining obligations of the Option Agreement will terminate upon the
consummation of the Star Merger.

      Coss has placed all of its  remaining  12,749,658  shares of the Company's
Common Stock (the "Coss Shares"),  representing  approximately 40 percent of the
currently  outstanding  Company Common Stock,  in a voting trust.  Arbor has the
right under this voting trust to direct the voting of all of the Coss Shares. In
addition,  under  certain  circumstances,  the  trustee of the  voting  trust is
required to observe  certain  restrictions  in the event Coss wishes to effect a
sale,  transfer or encumbrance of the Coss Shares. Coss will retain all economic
rights  in the  Coss  Shares,  including,  but not  limited  to,  its  right  to
dividends.  This Voting Trust Agreement will also terminate upon consummation of
the Star Merger.

      Pursuant to a Registration  Rights and  Conditional  Put Option  Agreement
(the  "Registration  Rights  Agreement"),  dated as of October 31, 1995, between
Coss and the  Company,  the Company  has agreed to register  the Coss Shares for
resale under the  Securities  Act,  upon the written  demand of Coss made at any
time  commencing one year after the date on which the Company's  Common Stock is
listed on the Nasdaq Stock Market  (whether as a SmallCap  Market  security or a
National  Market  System  security,  or  any  equivalent  or  successor  of  the
foregoing).  Pursuant to the Registration Rights Agreement,  the Company will be
obligated to file up to three registration  statements over a three-year period,
with  one-third  of the Coss  Shares  (subject  to  certain  adjustments)  to be
registered  in  each  year  of  such  three  year  period.  Notwithstanding  the
foregoing,  the  Company  has the right to reject the demand by Coss,  following
which Coss may require that the Company  redeem the Coss Shares at a price equal
to 75 percent of the average bid price in effect during the thirty  trading days
prior to the  demand  for  registration.  Upon the  Company's  rejection  of the
demand,  Coss, at its option, may sell the Coss Shares to a party other than the
Company, subject to the Company's right of first refusal on such sale. Arbor has
the right to  purchase  the Coss Shares in lieu of the Company on the same terms
and conditions granted the Company as described in the two preceding  sentences.
In addition,  Coss has been granted certain registration rights in the event the
Company  shall  register  any shares for sale under the  Securities  Act. In the
event the Star  Merger  occurs,  neither  the  Company  nor Arbor  will have any
further obligations under the Registration Rights Agreement.

       On October  31,  1995,  the  Company  entered  into a two year  Financial
Services  Agreement with Arbor  Management,  LLC ("Arbor  Mgt."),  in which Ivan
Kaufman  owns a 99%  interest.  This  Agreement  requires  Arbor Mgt. to provide
consulting services in the areas of finance, information systems, accounting and
marketing.  Arbor Mgt.  receives  a fee of $7,500 per month for these  services.
This  agreement  is subject  to early  termination  upon the  earlier of (i) the
listing of the  Company's  Common  Stock on the NASDAQ Stock Market or (ii) upon
the completion of the Star Merger.



                                                        23

<PAGE>


                     


      On January 3, 1997, the Company, Merger Sub and Star entered into the Star
Merger Agreement,  pursuant to which,  among other things, (i) Star will acquire
100% of the outstanding  common stock of the Company;  and (ii) the Company will
be merged with and into Merger Sub and thereupon  the separate  existence of the
Company shall cease and Merger Sub, as the Surviving Corporation, shall continue
to exist.

      Under the terms of the Star  Merger  Agreement,  the holders of all of the
outstanding shares of the Company's common stock, after giving effect to the TPC
Merger, will receive consideration of $2.4 million in cash, or approximately 6.4
cents per share, and $4.85 million in Star common stock, or  approximately  12.9
cents per share, for total consideration of $7.25 million, or approximately 19.3
cents per share, or at Star's option, all cash consideration of 19.3 cents per
share. As part of the Star Merger Agreement,  on January 21, 1997, the
Company paid a special cash dividend of $750,000, or 2.3 cents per share, to its
shareholders  of record on January 13, 1997..  It is  anticipated  that the Star
Merger  will be treated  as a tax-free  reorganization  for  federal  income tax
purposes  to the  extent  of Star  common  stock  received  by the  Registrant's
shareholders.

      The Star Merger is expected to be completed by August of 1997,  subject to
certain  conditions set forth in the Star Merger Agreement,  including,  but not
limited to, approval by certain state regulatory  boards and by the shareholders
of each of Star and the Company, and consummation of the TPC Merger. In
addition,  either Star or the Company may terminate the Star Merger Agreement
under certain circumstances, as set forth in the Star Merger Agreement.
Coss and Arbor,  which together  will own 68% of the  outstanding
shares of the Company  after  giving effect to the TPC Merger  (see  below),
will vote for the  approval of the Star Merger.  This  percentage is  sufficient
under New York law to approve the Star Merger on behalf of the  Company's
shareholders.  To the  Company's  knowledge, sufficient  votes to approve the
Star Merger on behalf of the Star  shareholders have not yet committed to such
approval.  However, the Company has received the proxy of Stephen Sternbach, 
President and Chairman of Star, to vote all of the shares beneficially owned by
him, currently constituting 20.77% of Star's outstanding shares, in favor of
the Star Merger.

      The above  figures  give  effect to the TPC  Merger,  which is expected to
occur,  subject to approval by the shareholders of the Company and TPC, prior to
the Star Merger.  The  TPC Merger will not be conditioned  upon the
completion  of the Star  Merger,  but is subject to  various  other  conditions,
including  declaration of effectiveness  by the SEC of a registration  statement
with respect to the  Company's  shares to be issued in the TPC Merger.  The Star
Merger is  conditioned  upon,  among other  things,  the  completion  of the TPC
Merger.

      Pursuant to the TPC Merger Agreement,  all shareholders of TPC, other than
the Company,  will receive  18.745545  shares of the  Company's  Common Stock in
exchange for each share of TPC they own. Stock certificates previously issued to
TPC  shareholders do not give effect to a 1:4 reverse stock split which occurred
in 1985.  Thus,  shareholders  of TPC  actually own only one share of the Common
Stock for every four shares for which they possess a share  certificate  for TPC
Common  Stock.  TPC shares owned by the Company will be cancelled as a result of
the TPC Merger and no shares of the Company will be issued in respect thereof. A
proxy statement/prospectus relating to a proposed meeting of stockholders of the
Company  and  TPC  is  expected  to be  furnished  in  June,  1997.  This  proxy
statement/prospectus is expected to solicit the votes of the stockholders of the
Company and TPC to approve the TPC Merger.  Coss and Arbor,  which  together own
80.47% shares of the Company, intend to vote for the approval of the TPC Merger.
In addition, the Company,

                                                        24

<PAGE>


                     


as the owner of 83% of the  outstanding  shares  of TPC,  intend to vote for the
approval of the TPC Merger. These votes constitute a sufficient percentage under
New York law to approve  and adopt the TPC Merger on behalf of the  shareholders
of the Company and TPC.

Consulting Agreement

      On January 3,  1997,  Star and the  Company  entered  into the  Consulting
Agreement  pursuant to which Star agreed that,  upon the Company's  request,  it
will render to the Company,  by and through such of its officers,  employees and
agents as Star, in its sole discretion, designates from time to time, consulting
services  with respect to the  management  and  operation  of the  Company.  The
consulting  services  to be  rendered  by Star  under the  Consulting  Agreement
consist of those consulting services relating to the management and operation of
the  Company's  healthcare  business  reasonably  requested by the Company.  The
Company  and Star have  agreed  that  Star's  role is that of a  consultant  and
advisor  to, and not that of a manager  of, the  Company.  Under the  Consulting
Agreement,  Star has no duty or  responsibility  to manage  the  affairs  of the
Company  which  duty and  responsibility  remains at all times with the Board of
Directors and management of the Company.

      For the consulting services to be rendered by Star, the Company has agreed
to pay Star fees in the amount of  Twenty-five  Thousand  Dollars  ($25,000) per
month,  payable (a) $15,000 in arrears on the last day of each month,  pro rated
for any partial month, and (b) the remaining  $10,000 on the earlier to occur of
the  consummation  of the Star  Merger  or the  termination  of the Star  Merger
Agreement.

      The Consulting  Agreement will terminate on the earlier of (i) the date on
which the Star Merger Agreement shall have been terminated pursuant to the terms
thereof other than by reason of the default of the Company thereunder,  (ii) the
Effective Date of the Management Agreement or (iii) the consummation of the Star
Merger  provided,  that Star has the right to terminate its obligation to render
services under the Consulting  Agreement at any time upon  forty-five  (45) days
prior notice to the Company.

Management Agreement

      On January 3, 1997,  Star and the Company also entered into the Management
Agreement  pursuant to which Star agreed to act as manager of the  Company.  The
Management  Agreement is subject to approval of the Commissioner of the New York
State  Department  of Health (the  "Commissioner").  Pursuant to the  Management
Agreement, Star will have the authority and responsibility to conduct, supervise
and effectively manage the day-to-day  operation of the Company.  In the absence
of oral or written  direction  or written  policies of the Board of Directors of
the  Company,  Star will be expected to exercise  the  reasonable  judgment of a
management  company in its management  activities.  Star will  specifically have
responsibility  and  commensurate  authority,  subject among other things to the
direction  of the Board of the Company,  to act on its behalf for the  following
activities: (i) the establishment,  maintenance,  revision and administration of
the overall charge structure of the Company  pursuant to pertinent  regulations,
including,  but not limited to, patient charges, charges for ancillary services,
charges for  supplies  and  special  services;  (ii) (A) the hiring,  discharge,
supervision  and  management  of all  employees  of the Company,  including  the
determination, from time to time, of the numbers and qualifications of employees
needed  in the  various  departments  and  services  of  the  Company,  (B)  the
establishment,   revision  and   administration   of  wage   scales,   rates  of
compensation,  employee benefits, rates and conditions of employment, in-service
training, attendance at seminars or

                                                        25

<PAGE>


                     

conferences,  staffing schedules, and job and position descriptions with respect
to all  employees of the  Company;  (iii) the issuance of bills for services and
materials  furnished by the Company,  and the  collection of accounts and monies
owed to the Company,  including the  responsibility to enforce the rights of the
Company as creditor  under any contract or in  connection  with the rendering of
any service; (iv) the payment of payroll,  trade accounts,  amounts due on short
and  long-term  indebtedness,  taxes and all other  obligations  of the Company;
provided,  however,  that the responsibility  will be limited to the exercise of
reasonable  diligence and care to apply the funds  collected in the operation of
the Company to its obligations in a timely and prudent manner, and Star will not
become  personally  liable or act in a guarantor  capacity  with  respect to any
obligation  of  the  Company;   (v)  the  establishment  and  administration  of
accounting  procedures  and controls,  in  accordance  with  generally  accepted
accounting  principles and the establishment  and  administration of systems for
the  development,  preparation  and  safekeeping of records and books of account
relating  to the  business  and  financial  affairs  of the  Company;  (vi)  the
maintenance of accounts in such banks, savings and loan associations,  and other
financial  institutions  are the Board of the  Company  may,  from time to time,
select (including certificates of deposit) with such balances therein (which may
be interest bearing or non-interest  bearing) as Star shall,  from time to time,
deem appropriate, taking into account the operating needs of the Company and the
disbursements  from such accounts of such amounts of the Company's funds as Star
shall,  from time to time,  determine  is  appropriate  in the  discharge of its
responsibilities  under the Management Agreement;  provided,  however, that Star
will not,  in any case,  have any  obligation  to supply,  out of its own funds,
working  capital for the Company;  (vii) the  management  of all  purchases  and
leases of real  property,  equipment,  supplies and all  materials  and services
which Star deems to be  necessary in the  operation  of the Company;  (viii) the
evaluation of all quality  control aspects of the Company's  operation,  and the
implementation,  with approval of the Board of the Company,  of quality  control
programs designed to meet standards imposed by appropriate  certifying  agencies
and to bring about a high  standard of health care in  accordance  with Board of
the Company's policies and resources available to the Company.

      Under the Management Agreement, Star will be empowered to negotiate, enter
into, terminate and administer on behalf of the Company,  contracts for services
by medical, paramedical and other persons and organizations.

      Notwithstanding any other provision of the Management Agreement, the Board
of the  Company  retains  and Star is  prohibited  from  exercising:  (i) direct
independent  authority to hire or fire Star or a qualified agency  administrator
of the Company;  (ii)  independent  control of the Company's  books and records;
(iii)  authority  over the  disposition  of assets and the authority to incur on
behalf of the Company  liabilities  not normally  associated with the day-to-day
operation of the Company;  and (iv) authority for the  independent  adoption and
enforcement of policies affecting the delivery of health care services.

      The  Management  Agreement  will  become  effective  upon  the  date it is
approved by the Commissioner (the "Effective  Date").  The Management  Agreement
may be terminated by the  Commissioner,  without financial penalty to the Board,
not  more  than  sixty  (60)  days  after  notification  to  the  parties  of  a
determination that the management of the Company is so deficient that the health
and safety of patients  would be threatened by  continuation  of the  Management
Agreement.  The  Management  Agreement can be terminated by the Company  without
cause on 60 days'  notice  and with  cause  on 14 day's  notice.  Unless  sooner
terminated in accordance with the terms of the Management Agreement, or extended
or renewed by mutual agreement of the parties thereto,

                                                        26

<PAGE>


                     


the  Management  Agreement will remain in effect until the  consummation  of the
Star Merger or December 31, 1998, whichever is sooner.


                                              SECTION 16 REQUIREMENTS

      Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's  directors  and  officers,  and persons who own more than 10% of a
registered class of the Company's equity securities,  to file initial reports of
ownership and reports of changes in ownership  with the  Securities and Exchange
Commission  ("SEC").  Such persons are required by SEC regulation to furnish the
Company with copies of all Section 16(a) reports they file.

      Based  solely on its review of the copies of such  reports  received by it
with respect to fiscal 1996, or written  representations  from certain reporting
persons, the Company believes that all filing requirements in 1996 applicable to
its directors,  officers and persons who own more than 10% of a registered class
of the Company's equity securities have been timely complied with.


                                                      EXPERTS

      The consolidated  financial statements of Extended Family Care Corporation
and  subsidiaries  as of December 31, 1995 and 1996 and for each of the years in
the two-year  period ended  December 31, 1996  included in this Report have been
audited by Carpenter & Onorato,  P.C., independent certified public accountants,
as set forth in their report  appearing  elsewhere  herein,  and are included in
reliance  upon such report  given upon the  authority of said firm as experts in
accounting and auditing.


Item 13.     Exhibits and Reports on Form 8-K.
             ---------------------------------
   
<TABLE>
<CAPTION>

(a) Exhibits                                                                            Page
    --------                                                                            ----
<S>                                                                                     <C>

2.1   Agreement and Plan of Merger, dated as of January 3, 1997 among Star,
      Merger Sub and the Company, dated as of January 3, 1997. (6)

2.2   Plan and  Agreement of Merger  between TPC and the Company dated March 18,
      1997.                                                                             50

3.1   Amended and Restated Articles of Incorporation. (1)

3.2   By-Laws. (2)

3.3   Amendment No.1 to By-Laws dated October 1, 1996.                                  62

10.1  Amended and Restated Option Agreement by and among the Company, Arbor
      Home Healthcare Holding, LLC ("Arbor"), COSS Holding Corp. ("COSS"), TPC
      Home Care Services, Inc.("TPC"), et al., dated October 26, 1995. (3)

10.2  Registration Rights and Conditional Put Option between the Company and
      COSS dated October 26, 1995. (3)

10.3  Financial Services Agreement between the Company and Arbor Management,
      LLC, dated October 26, 1995. (2)


                                                        27

<PAGE>


     

10.4  Lease dated March 1, 1996 between the Company and Hawke Associates for
      TPC's Elizabeth, New Jersey office. (2)

10.5  Approval issued by the New York State Public Health Council of
      Application No. 9586 submitted by TPC dated November 27, 1995. (2)

10.6  Notice of Accreditation issued by the Joint Commission on Accreditation
      of Healthcare Organizations accrediting TPC d/b/a Extended Family Care,
      dated February 9, 1996. (2)

10.7  Lease dated February 17, 1994 between 10-20 Banta Associates and the
      Company for TPC's Hackensack, New Jersey office. (2)

10.8  Third Amendment of Lease dated July 1995, between TPC and Hempstead
      Associates Limited Partnership for TPC's Hempstead, New York office. (2)

10.9  Lease dated May 12, 1995 between TPC and Castle Ventures Limited for the
      Company's headquarters office. (2)

10.10 Agreement dated April 20, 1995 between TPC and the County of Nassau,
      Department of Social Services. (2)

10.11 Lease dated February 1, 1996 between TPC and Phyllis C. Hyacinthe for
      TPC's East Orange, New Jersey office. (2)

10.12 Lease dated February 8, 1996 between TPC and Clifton L&M Associates,
      Ltd. for TPC's Clifton, New Jersey office. (2)

10.13 Agreement dated June 20, 1996 extending First Option Termination date
      from June 21, 1996 to August 21, 1996. (4)

10.14 Voting Trust Agreement dated June 21, 1996. (5)

10.15 Stock Purchase Agreement dated June 30, 1996. (5)

10.16 Receivables Security Agreement between the Company and Arbor, dated as
      of September 6, 1996, including letter agreement with TPC. (1)

10.17 Promissory Note dated September 6, 1996 in the amount of $250,000 made
      by the Company to Arbor (1)

10.18 Stock Purchase Agreement between the Company and Arbor dated October 31,
      1996.                                                                             65

10.19 Asset Sale Agreement between TPC and Public Services, Inc. dated
      December 6, 1997.                                                                 77

16    Letter of Rose, Michlin, Karpf & Company. (7)

21    Subsidiaries of the Company.                                                      93

27    Financial Data Schedule.                                                          95
=============================================================
</TABLE>

(1)   Filed as an  Exhibit to the  Company's  Form  10-QSB for the period  ended
      September 30, 1996 and incorporated herein by reference thereto.

(2)   Filed as an  Exhibit to the  Company's  Form  10-KSB for the period  ended
      December 31, 1995 and incorporated herein by reference thereto.

                                                        28

<PAGE>


      


(3)   Filed as an Exhibit  to the  Company's  Form 8-K for event of October  31,
      1995 and incorporated herein by reference thereto.

(4)   Filed as an Exhibit to the  Company's  Form 8-K/A #2 for event of June 20,
      1996 and incorporated herein by reference thereto.

(5)   Filed as an Exhibit to the Company's Form 10-QSB for the period ended June
      30, 1996 and incorporated herein by reference thereto.

(6)   Included  as  Exhibit  1 to the  Amended  Schedule  13D  filed by  Stephen
      Sternbach  on  January  17,  1997 and  incorporated  herein  by  reference
      thereto.

(7)   Filed as an Exhibit to Company's Form 8-K for the period February 19, 1996
      and incorporated herein by reference thereto.



(b)  Current  Reports  on Form 8-K.  The  Company  filed a report on Form 8-K on
November 13, 1996 with respect to Arbor's exercise of the Second Option pursuant
to which it purchased 6.5 million  shares of Common Stock at a exercise price of
$.10 per share for a total  consideration of $650,000.  No financial  statements
were included in this report.  Item 1 (Change in Control of Registrant) and Item
7  (Financial  Statements  and  Exhibits)  were the only items  reported in this
filing.


                                                        29

<PAGE>


                 EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY

                     Consolidated Financial Statements

                          Years Ended December 31, 1996 and 1995



<PAGE>








                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                    EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY





                                                                Page
                  Independent Auditor's Report                    F - 2


Consolidated Balance Sheets as of December 31, 1996 and
    December 31, 1995 ........................................    F - 3


Consolidated Statements of Operations for the years ended
   December 31, 1996 and 1995 ................................    F - 4


Consolidated Statements of Shareholder's Equity for the
   years ended December 31, 1996 and 1995 ....................    F - 5


Consolidated Statements of Cash Flows for the years ended
   December 31, 1996 and 1995 ................................    F - 6


Notes to Consolidated Financial Statements ...................    F - 7 - F - 14
















                                                          F - 1



<PAGE>




                    INDEPENDENT AUDITORS' REPORT
                    ----------------------------


To The Board of Directors
Extended Family Care Corporation



We have  audited  the  accompanying  balance  sheets  of  Extended  Family  Care
Corporation  and  subsidiary,  as of December  31, 1996 and 1995 and the related
consolidated  statements of operations,  shareholders' equity and cash flows for
the years then ended.  These financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

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 audit provides 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
Extended  Family  Care  Corporation,  at  December  31,  1996  and  1995 and the
consolidated  results  of its  operations  and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.



/s/ Carpenter & Onorato, P.C.

Carpenter & Onorato, P.C.
Certified Public Accountants
Garden City, NY 11530
February 18, 1997





                                                           F - 2


                 



<PAGE>


                       EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
                                  Consolidated Balance Sheets
 
    
<TABLE>
<CAPTION>
                                         
                                                     December 31,
                                                                                                         1996               1995
                                                                                                         -----              ----
                                                                Assets
                                                                ------
<S>                                                                                                       <C>             <C>

Current assets:
         Cash                                                                                             $1,066,193      $  511,563
         Accounts receivable, net of allowance for doubtful accounts
               of $100,000 for 1996 and 1995 (note 2)                                                      1,066,277         895,131
         Prepaid expenses and other current assets (note 9)                                                  496,185         146,809
                                                                                                          ----------      ----------
               Total current assets                                                                        2,628,655       1,553,503

Property and equipment, net (note 5)                                                                         233,644         118,591

Other assets:
         Deferred tax asset (note 6)                                                                         204,000         259,000
         License, net (notes 3)                                                                              476,153         515,832
         Other                                                                                                29,410          11,197
                                                                                                          ----------      ----------
               Total assets                                                                               $3,571,862      $2,458,123
                                                                                                          ==========      ==========
                                                 Liabilities and Shareholders' Equity
                                                 ------------------------------------
Current liabilities:
         Accounts payable                                                                                 $  223,362      $  222,677
         Accrued expenses (note 8)                                                                           586,396         543,974
         Customer deposits                                                                                    73,374          59,146
         Notes payable (note 4)                                                                               43,449         148,449
         Payroll taxes payable (note 8)                                                                      151,721         280,584
         Current portion of obligations under capital leases                                                  22,850          12,845
                                                                                                          ----------      ----------
               Total current liabilities                                                                   1,101,152       1,267,675

Non-current liabilities
         Long-term debt (note 4)                                                                              36,500          54,500
         Obligations under capital leases                                                                     69,717          40,010
                                                                                                          ----------      ----------
               Total non-current liabilities                                                                 106,217          94,510
                                                                                                          ----------      ----------
                       Total liabilities                                                                   1,207,369       1,362,185

Commitments and contingencies (notes 7, 8, 10 and 12)

Minority interest in subsidiary                                                                              139,649         140,008
                                                                                                          ----------      ----------

Shareholders' equity
         Preferred stock,  $.01 par value,  10,000,000 shares authorized in 1996
         Common stock, $.01 par value, 50,000,000 shares authorized, 30,000,000
               in 1996; 32,000,226 and 19,300,229 shares issued and
               outstanding,
               respectively                                                                                  320,002         194,506
         Additional paid-in-capital                                                                        1,763,348         638,844
         Retained earnings                                                                                   141,494         122,580
                                                                                                          ----------      ----------
               Total shareholders' equity                                                                  2,224,844         955,930
                                                                                                          ----------      ----------
                       Total liabilities and shareholders' equity                                         $3,571,862      $2,458,123
                                                                                                          ==========      ==========
</TABLE>

                  See accompanying notes to consolidated financial statements.
                                                                F - 3




<PAGE>



                      EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
                                 Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                      Years Ended December 31,

                                                                                                    1996                  1995
                                                                                                    -----                 ----
<S>                                                                                         <C>                         <C>

Net patient service revenue (note 2)                                                        $  8,929,330                $  7,367,958
                                                                                            ------------                ------------

Cost of services:
        Salaries                                                                               4,806,668                   4,058,749
        Payroll taxes and other                                                                  836,886                     647,447
                                                                                            ------------                ------------

                Total cost of services                                                         5,643,554                   4,706,196
                                                                                            ------------                ------------

        Gross profit                                                                           3,285,776                   2,661,762

Selling, general and administrative expenses                                                   3,192,769                   2,128,432

Provision for doubtful accounts                                                                   25,000                      51,810
                                                                                            ------------                ------------

        Income from operations                                                                    68,007                     481,520

Interest (income) expense, net                                                                    (5,548)                      4,320
                                                                                            ------------                ------------

        Income before provision for income
                taxes and minority interest                                                       73,555                     477,200

Provision for income
        taxes (note 6 )                                                                           55,000                     209,000
                                                                                            ------------                ------------

        Net income before minority interest                                                       18,555                     268,200

Minority interest in subsidiary net income                                                          (359)                     46,398
                                                                                            ------------                ------------

        Net income                                                                          $     18,914                $    221,802
                                                                                            ============                ============


Primary earnings per share                                                                  $     0.0009                $     0.0107
                                                                                            ============                ============

Fully diluted earnings per share                                                            $     0.0009                $     0.0105
                                                                                            ============                ============

Weighted average number of shares outstanding:
        Primary                                                                               21,808,560                  20,823,555
                                                                                            ============                ============

        Fully diluted                                                                         21,808,560                  21,033,562
                                                                                            ============                ============
</TABLE>

                   See accompanying notes to consolidated financial statements.
                                                                F - 4

 

<PAGE>


                           EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
                             Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
   
                                                                Years Ended December 31, 1996 and 1995

                                                                   Common Stock                                            Total
                                                                                             Additional    Retained  Shareholders'
                                                             Shares            Amount         Paid-in       Earnings          Equity
                                                             -----------------------------------------------------------------------
<S>                                                       <C>                 <C>            <C>             <C>             <C>


December 31, 1994                                          19,300,229         194,506         638,844        (99,222)        734,128


Net income                                                       --              --              --          221,802         221,802
                                                          -----------     -----------     -----------    -----------     -----------


December 31, 1995                                          19,300,229         194,506         638,844        122,580         955,930



Retired shares                                               (300,003)         (4,504)          4,504           --              --


Exercise of stock
options                                                    13,000,000         130,000       1,120,000           --         1,250,000


Net income                                                       --              --              --           18,914          18,914
                                                          -----------     -----------     -----------    -----------     -----------


       December 31, 1996                                   32,000,226     $   320,002     $ 1,763,348    $   141,494     $ 2,224,844
                                                          ===========     ===========     ===========    ===========     ===========



</TABLE>






              See accompanying notes to consolidated financial statements.
                                                                 F - 5
<PAGE>

                         EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
<TABLE>
<CAPTION>

                                                 Statements of Cash Flows

                                                      Years Ended December 31,
                                                                                                    1996                  1995
                                                                                                    -----------         -----------
<S>                                                                                                 <C>                 <C>

Cash flow from operating activities:
------------------------------------
        Net income                                                                                  $    18,914         $   221,802
        Adjustments to reconcile net income to net
                cash provided by (used in) operating activities:
                Allowance for doubtful accounts                                                            --                51,810
                Depreciation and amortization                                                            62,107              36,273
                Amortization of intangible assets                                                        39,680              39,679
                Provision for income taxes                                                               55,000             209,000
                Minority interest in subsidiary net income                                                 (359)             46,398
        Change in operating assets and liabilities:
                (Increase) in assets:
                       Accounts receivable                                                             (171,146)           (143,276)
                       Prepaid expenses                                                                (349,376)            (74,053)
                       Security deposits                                                                (18,213)             (4,074)
                Increase (decrease) in liabilities:
                       Accounts payable                                                                 (21,486)             17,982
                       Accrued expenses                                                                  42,422             218,290
                       Customer deposits                                                                 14,228             (12,124)
                       Payroll taxes payable                                                           (128,863)            (52,274)
                                                                                                    -----------         -----------
                Net cash (used in) provided by operating activities                                    (457,092)            555,433
                                                                                                    -----------         -----------

Cash flow from investing activity:
----------------------------------
        Purchase of property and equipment                                                             (122,979)            (57,373)
                                                                                                    -----------         -----------
                Net cash (used in) investing activity                                                  (122,979)            (57,373)
                                                                                                    -----------         -----------

Cash flow from financing activities:
------------------------------------
        Proceeds from exercise of stock options                                                       1,250,000                --
        Payment of obligations under capital leases                                                     (14,471)             (6,187)
        Repayment of loans                                                                             (100,828)            (77,500)
                                                                                                    -----------         -----------
                Net cash provided by (used in) by financing activities                                1,134,701             (83,687)
                                                                                                    -----------         -----------

        Increase in cash                                                                                554,630             414,373

        Cash balance at beginning of year                                                               511,563              97,190
                                                                                                    -----------         -----------

        Cash balance at end of year                                                                 $ 1,066,193         $   511,563
                                                                                                    ===========         ===========

        Supplemental disclosures:
                       Equipment acquired under capital lease obligation                            $    54,183         $    59,042
                                                                                                    ===========         ===========
                Cash paid during the year for:
                       Interest                                                                     $     7,080         $     5,825
                                                                                                    ===========         ===========
                       Income taxes                                                                 $    14,638         $       654
                                                                                                    ===========         ===========
</TABLE>

              See accompanying notes to consolidated financial statements.
                                                                F - 6

                               

<PAGE>

      EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY


                         Notes to Consolidated Financial Statements
                                 December 31, 1996

(1)      Significant Accounting Policies
         --------------------------------

         (a)    Description of Business
                -----------------------
                Extended Family Care Corporation  (EFCC) or (the Company),  
                is primarily engaged in the  business of providing  health care
                services in the home through its 83% majority owned subsidiary,
                T.P.C.  Home Care Services,  Inc. (TPC). EFCC is the
                holding company for TPC.

                TPC is a licensed home care provider  servicing  patients  since
                1980.  TPC has  offices  in New York and New  Jersey,  providing
                twenty four hour home care services.  On August 5, 1986, TPC and
                its parent,  EFCC, filed voluntary  petitions for reorganization
                under Chapter 11 of the United States  Bankruptcy Code. On March
                23,  1992,  this plan of  reorganization  was  confirmed  by the
                United  States  Bankruptcy  Court.  On  January  13,  1995,  the
                bankruptcy court issued a final decree.

                As part of the plan of  reorganization,  on October 8, 1993, per
                an agreement  between  C.O.S.S.  Holding  Corp.  (C.O.S.S.),  an
                investor  group,  and EFCC dated  March 23,  1992,  EFCC  issued
                12,749,658  shares of stock to  C.O.S.S.  for  $250,000  in cash
                which resulted in C.O.S.S.  owning a 66% interest in EFCC. Also,
                unsecured  creditors were given the option to receive a pro rata
                share of EFCC's  common  stock or 12% of the  allowed  amount of
                their  respective  claims.   Creditors  exercising  this  option
                resulted in EFCC issuing 1,388,959 shares of common stock to the
                unsecured creditors.

                On October 31, 1995,  EFCC entered into an agreement  with Arbor
                Home  Healthcare  Holdings,  LLC (Arbor) (in which Ivan  Kaufman
                owns a 99% interest), by which EFCC granted Arbor an irrevocable
                option  exercisable  in two  installments  for  EFCC to issue in
                total  13,000,000  shares of EFCC common  stock to Arbor at $.10
                per share. The first and second  installments of the option were
                exercised  by Arbor on August 21,  1996 and  October  31,  1996,
                respectively.  Shares were not issued with  respect to the first
                installment until October,  1996, when the Company's certificate
                of incorporation  was amended to provide  sufficient  authorized
                capital to issue such  shares.  Arbor owns  approximately  a 40%
                interest  in  EFCC.  In  addition,  per  the  option  agreement,
                C.O.S.S.  placed  all of its  12,749,658  shares of EFCC  common
                stock in a voting  trust.  Arbor  has the  right to  direct  the
                voting of all of the C.O.S.S.  shares and to nominate a majority
                of the EFCC Board of Directors.

         (b)    Principles of Consolidation
                ---------------------------
                The consolidated  financial  statements  include the accounts of
                EFCC  and  its  majority  owned   subsidiary.   All  significant
                intercompany  balances and transactions  have been eliminated in
                consolidation.

         (c)    Revenue Recognition and Allowance for Doubtful Accounts
                -------------------------------------------------------
                Net  patient  service  revenue  is  recorded  at  the  Company's
                reimbursement   rates  or  contracted  rates.  Such  revenue  is
                received  from  patients,  third  party  payors  and  others for
                services  rendered.  A  significant  portion  of  the  Company's
                revenue is received from third-party payors (i.e.  Medicaid) and
                is subject to audit and adjustment by those payors. A provision

                                         F - 7 (Continued)


<PAGE>




                                         
                         EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
                    Notes to Consolidated Financial Statements, Continued


               for doubtful accounts is made for accounts receivable estimated 
               to be uncolllectible; which is based  upon  management's
               evaluation  of  relevant  facts that  effect  the collectibility
               of accounts receivable.

         (d)    Property and Equipment
                ----------------------
                Property and equipment are recorded at cost. The carrying amount
                of  the  assets  and  related   accumulated   depreciation   and
                amortization  are removed from the accounts when such assets are
                disposed  of and the  resulting  gain or  loss  is  included  in
                operations.  Depreciation  and  amortization  of  equipment  and
                leasehold  improvements are computed using the declining balance
                method for the following useful lives of the assets:

Furniture and fixtures                       5 - 7    years
Equipment                                      5     years
Leasehold improvements                     lesser of the useful life of the
                                           asset or the remaining lease period.


                For assets  acquired in 1996, the straight line method was used.
                Management believes that the difference is immaterial.

         (e)    Post-retirement Health Care and Life Insurance Benefits
                -------------------------------------------------------
                The Company  does not provide  post-retirement  benefits for its
                employees.

         (f)    Income Taxes
                ------------
                The  Company is a C  corporation  for the  taxable  years  ended
                December 31, 1996 and 1995, respectively.

         (g)    Net Income per Common Share
                ---------------------------
                Net income per common  share is computed by dividing  net income
                by the weighted  average number of common stock and common stock
                equivalents   outstanding  during  each  period.   Common  stock
                equivalents   represent  the  dilutive  effect  of  the  assumed
                exercise of certain outstanding stock options.

         (h)    Use of Estimates
                ----------------
                Management  of the  Company has made a number of  estimates  and
                assumptions  relating to the reporting of assets and liabilities
                and the  disclosure  of  contingent  assets and  liabilities  to
                prepare these financial  statements in conformity with generally
                accepted accounting principles. Actual results could differ from
                those estimates.

         (i)    Reclassification
                ----------------
                Certain prior year amounts have been  reclassified to conform to
                the current year presentation.

                                    F - 8         (Continued)

<PAGE>

                            EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
                          Notes to Consolidated Financial Statements, Continued





(2)      Concentration of Segment Risk
         -----------------------------
         TPC provides temporary health care personnel to in-home patients in New
         York and New Jersey.  TPC grants credit to its patients who are insured
         under  third-party  payor  agreements.  Deposits  are  required for all
         private  business.  The mix of  accounts  receivable  from  private and
         third-party payors at December 31 were as follows:

                                             1996                      1995
                                             ----                      ----
Medicaid                                      54   %                    62   %
Insurance                                      3                         2
Other third-party payors                      34                        29
Private                                        8                         7
Medicare                                       1                         -
                                   ------------------     ---------------------
                                             100   %                   100   %
                                 ====================     =====================

         Historically,  credit  losses  relating  to  customers  have  not  been
         significant and have been within management's expectations.

(3)      Intangible Assets
         -----------------
         Intangible assets at December 31 are as follows:

                                                             1996           1995
                                                         --------       --------
License                                                  $595,190       $595,190
    less accumulated amortization                         119,037         79,358
                                                         --------       --------
                                                         $476,153       $515,832
                                                         ========       ========




                                          
                                                          F - 9   (Continued)


<PAGE>



               EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
            Notes to Consolidated Financial Statements, Continued



(4)      Notes Payable and Long-Term Debt
         --------------------------------
         Notes payable and  long-term  debt consist of the following at December
         31:

<TABLE>
<CAPTION>
                                                                                                               1996             1995
                                                                                                          ---------        ---------
<S>                                                                                                       <C>              <C>

Note payable,  non-interest  bearing,  payable in monthly installments of $1,500
with a final balloon  payment of $26,000 due in August,                                                                    
1998.  Interest on this
note was not imputed, as the
Company considers the amount to be                                                                        $  54,500        $  72,500
immaterial 

Notes payable, non-interest bearing and
payable on demand                                                                                              --             80,000

Due to Affiliated Parties (see note 7)                                                                       25,449           50,449
                                                                                                          ---------        ---------


           Notes payable and long-term debt                                                                  79,949          202,949

           Less current portion                                                                              43,449          148,449
                                                                                                          ---------        ---------

           Long-term debt                                                                                 $  36,500        $  54,500
                                                                                                          =========        =========


                                                                                                                 
(5)       Property and Equipment
          ----------------------
          Property and equipment consist of the following:

                                                                                                               1996             1995
                                                                                                          ---------        ---------
Furniture and fixtures                                                                                    $  64,095        $  18,751
Machinery and equipment                                                                                     229,872          167,108
Leasehold improvements                                                                                       15,539            7,039
Equipment held under capital leases                                                                         113,225           59,042
                                                                                                          ---------        ---------
                                                                                                            422,731          251,940
                                                                                                                   

      less accumulated depreciation and
          amortization                                                                                      189,087          133,349

                                                                                                          ---------        ---------
                                                                                                          $ 233,644       $  118,591
                                                                                                          =========        =========
</TABLE>

                               F - 10 (Continued)

<PAGE>

                       EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
                    Notes to Consolidated Financial Statements, Continued

(6)      Income Taxes
         ------------
         The provision for income taxes consists of the following:
<TABLE>
<CAPTION>

                                                                                                                1996            1995
                                                                                                                ----           -----

<S>                                                                                                         <C>             <C>
Current

        Federal                                                                                             $   --          $   --
        State                                                                                                   --              --

                                                                                                            --------        --------
                                                                                                            $   --          $   --
                                                                                                            --------        --------

Deferred

        Federal                                                                                             $ 42,000        $160,500
        State                                                                                                 13,000          48,500
                                                                                                            --------        --------
                                                                                                              55,000         209,000
                                                                                                            --------        --------
                                                                                                            $ 55,000        $209,000
                                                                                                            ========        ========

         Deferred tax assets consist of the following:

Pre-reorganization net operating loss                                                                       $100,000        $221,000
carryforward
Allowance for doubtful accounts                                                                               38,000          38,000
Other                                                                                                         66,000            --
                                                                                                                            --------
                                                                                                                            --------
        Total deferred tax assets                                                                           $204,000        $259,000
                                                                                                            ========        ========

         The following is a  reconciliation  of the effective income tax rate to
         the Federal statutory rate:

Computed income tax (benefit) expense at 34%                                                                $ 25,000        $162,000
Increase in taxes resulting from:

         Nondeductible expenses                                                                               22,000          15,000
         State income taxes, net of federal  tax benefit                                                       8,000          32,000
         Other - effect of graduated tax rates                                                                  --              --
                                                                                                            --------        --------
                                                                                                            $ 55,000        $209,000
                                                                                                            ========        ========

         At December 31, 1996, the Company has a net operating loss carryforward
         (NOL) of approximately  $575,000 for tax purposes,  expiring  beginning
         with the year 2000 through 2008.




</TABLE>



                                          
                             F - 11  (Continued)
<PAGE>

                    EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
        Notes to Consolidated Financial Statements, Continued

(7)      Related Party Transactions
         ---------------------------
         Notes payable consist of the following at December 31:

<TABLE>
<CAPTION>

                                                                                                         1996                   1995
                                                                                                      -------                -------
<S>                                                                                                   <C>                    <C>

C.O.S.S. holds a note which is non-interest
bearing, and payable upon demand                                                                      $25,449                $25,449

An officer of the Company  holds a note
which bears an interest  rate of 11% and
is payable upon demand. Annual interest expense
amounted to $1,840 and $3,238, respectively                                                              --                   25,000
                                                                                                      -------                -------
                                                                                                      $25,449                $50,449
                                                                                                      =======                =======
</TABLE>


         The landlord for the Company's  corporate  office is an entity owned by
         C.O.S.S.  The annual rental is $43,837 per year, and shall be increased
         by 12% over the prior  year's  fixed  minimum  annual  rent.  The lease
         expires November 30, 2000.

         On  October  31,  1995,  EFCC  entered  into an  agreement  with  Arbor
         Management,  LLC (in which Ivan Kaufman owns a 99%  interest),  for two
         years by which  EFCC will pay $7,500 a month to Arbor  Management,  LLC
         for management services, including accounting, finance, human resources
         and marketing, rendered to the Company.

(8)      Payroll Taxes Payable/Accrued Expenses
         --------------------------------------
         Federal  pre-petition  payroll tax  liabilities  were  settled with the
         Internal  Revenue  Service for $175,000 in cash on September  16, 1996,
         which  approximated  the amounts  recorded as payroll taxes payable and
         accrued interest and penalties for this claim. As of December 31, 1996,
         payroll taxes payable and accrued expenses  included tax liabilities to
         various state government agencies in the amounts of $52,437 and $5,775,
         respectively.



(9)      Sale of Branch Operations
         -------------------------
         On December 5, 1996, TPC sold certain assets and  liabilities;  and its
         operations of its Jersey City branch to Public  Services,  Inc (P.S.I.)
         for a $175,000,  six month, 9% promissory note, plus an amount equal to
         12% of the gross revenues of P.S.I.  in excess of $90,000 per month for
         a 24 month period commencing on October 6, 1997. The Company recognized
         a gain of $24,617  on the sale of these  assets.  The assets  from this
         branch,  remaining in the company,  included cash and substantially all
         of its security deposits.





                                          
                                  F - 12 (Continued)

<PAGE>

             EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued

         (10)     Commitments and Contingencies
                  -----------------------------
         TPC conducts its operations  from leased office spaces in New York, New
         Jersey and  Pennsylvania.  These leases expire at various dates through
         the  year  2000.  Management  expects  that  in the  normal  course  of
         business,  these  leases will be renewed or  replaced by other  leases.
         Rent  expense for the years ended  December 31 amounted to $208,973 and
         $104,965, respectively.

         The Company is also the lessee of machinery and equipment under capital
         leases expiring in various years through 2001.

         As of December 31, future net minimum lease  payments under capital and
         operating leases are as follows:
<TABLE>
<CAPTION>

                                                                                            Capital                        Operating
                                                              <S>                        <C>                              <C>
                                                              
                                                              1997                       $   22,850                       $  203,482
                                                              1998                           22,850                          208,567
                                                              1999                           21,984                          201,093
                                                              2000                           18,769                          149,371
                                                              2001                            6,116                           66,150
                                                              Thereafter                        --                           260,313
                                                                                         ----------                       ----------

                                                                                         $   92,569                       $1,088,976
                                                                                         ==========                       ==========
</TABLE>


         The gross amount of assets recorded under capital lease obligations was
         $113,225  at  December  31,  1996.   Interest  on  the  capital   lease
         obligations  was  imputed and the  Company  considers  the amount to be
         immaterial.

(11)     Fair Value of Financial Instruments
         -----------------------------------
         FASB  Statement  No. 107,  "Disclosures  about Fair Value of  Financial
         Instruments",  defines the fair value of a financial  instrument as the
         amount  at  which  the  instrument  could  be  exchanged  in a  current
         transaction  between  willing  parties.   The  carrying  value  of  the
         Company's  financial  instruments  in the  accompanying  balance sheets
         approximates their fair value.

(12)     Subsequent Events
         -----------------
         An "Agreement and Plan of Merger" (Merger), was entered into on January
         3, 1997 between the Company and Star Multi Care Services,  Inc. (Star),
         pursuant  to which Star will  acquire  100% of the  outstanding  common
         shares of the  Company.  Under the terms of the merger  agreement  EFCC
         shareholders will receive $2,400,000 in cash or approximately $.064 per
         share and  $4,850,000 in Star common stock or  appromixately  $.129 per
         share for total  consideration of $7,250,000 or approximately $.193 per
         share, after giving effect to the merger of TPC with and into EFCC (see
         below). As part of the merger  agreement,  EFCC paid a $.0234 per share
         cash  dividend on January 21,  1997 to all its common  shareholders  of
         record on January 13, 1997.



                                       
                                     F - 13  (Continued)

<PAGE>

                        EXTENDED FAMILY CARE CORPORATION AND SUBSIDIARY
                         Notes to Consolidated Financial Statements, Continued

         It is  anticipated  that  the  Merger  will be  treated  as a tax  free
         reorganization  for Federal income tax purposes to the extent of Star's
         common stock received by EFCC shareholder's. This merger is expected to
         be  completed  by August  1997,  subject to  approval  of EFCC and Star
         shareholders, certain state regulatory boards and other conditions.

         In  connection  with the  Merger,  EFCC and Star  have  entered  into a
         Consulting  Agreement  pursuant  to  which  Star  will  render  to EFCC
         consulting  and advisory  services in connection  with the  management,
         operation and supervision of EFCC. The term of the Consulting Agreement
         shall  end on the  earlier  of (i) one  year  from the  signing  of the
         Merger,  (ii) the closing of the merger or (iii) the termination of the
         Merger. In consideration for the consulting  services to be rendered by
         Star,  EFCC will pay Star  $25,000  per month,  payable  (a) $15,000 in
         arrears on the last day of each month and (b) the remaining  $10,000 on
         the  earlier to occur of the  closing  date or the  termination  of the
         Merger Agreement.

         On  January  3,  1997,  Star and EFCC also  entered  into a  management
         agreement (the "Management Agreement") pursuant to which Star agreed to
         act as manager of EFCC. The Management  Agreement will become effective
         upon approval of the  Commissioner of the New York State  Department of
         Health (the "Commissioner").  Pursuant to the Management Agreement Star
         will have the authority and  responsibility  to conduct , supervise and
         effectively  manage  the  day-to-day  operation  of EFCC.  Star will be
         expected to exercise the reasonable judgment of a management company in
         its management activities.

         The Management Agreement may be terminated by the Commissioner, without
         financial  penalty  to the  Board,  not more than sixty (60) days after
         notification to the parties of a  determination  that the management of
         EFCC is so  deficient  that the health and safety of patients  would be
         threatened by continuation of the Management Agreement.  The Management
         Agreement  may be  terminated  by the  Company  with  cause on 14 days'
         notice or without cause on 60 days' notice. Unless sooner terminated in
         accordance  with terms of the  Management  Agreement,  or  extended  or
         renewed by mutual  agreement  of the parties  thereto,  the  Management
         Agreement will remain in effect until the closing of the Star Merger or
         December 31, 1998, whichever is sooner.

         On March 18, 1997 the company entered into a merger  agreement with its
         83% owned subsidiary,  TPC, where EFCC will be the surviving entity. It
         is  anticipated  that the  minority  shareholders  of TPC will  receive
         5,601,975  common shares of EFCC or 18.745545 common shares of EFCC for
         each common share of TPC upon the completion of the merger.  TPC common
         stock owned by EFCC will be  cancelled as a result of the merger and no
         EFCC common stock shall be issued to EFCC. This anticipated merger will
         not be conditioned  upon the completion of the merger of EFCC and Star.
         This merger is expected to close prior to the merger of EFCC and Star.

                        
                                        F - 14



<PAGE>



In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of 1934,
the  registrant  caused  this  report  10-KSB to be signed on its  behalf by the
undersigned, thereunto duly authorized.

(Registrant) EXTENDED FAMILY CARE CORPORATION


 By:  /s/ Joseph Heller
      Joseph Heller
      Acting Chief Executive Officer,
      Vice President, Principal
      Financial Officer, Controller and Director

Date: April 15, 1997


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
dated indicated.


By:   /s/ Joseph Heller                                   Date: April 15, 1997
      Joseph Heller
      Acting Chief Executive Officer,
      Vice President, Principal
      Financial Officer, Controller and Director


By:   /s/ Paul Elenio                                     Date: April 15, 1997
      Paul Elenio, Director


<PAGE>

                    INDEX OF EXHIBITS


Page              2.1      Agreement and Plan of Merger, dated as of January
----                       3, 1997 among Star, Merger Sub and the Company,
                           dated as of January 3, 1997. (6)

50                2.2      Plan and Agreement of Merger between TPC and the
                           Company dated March 18, 1997.

                  3.1      Amended and Restated Articles of Incorporation. (1)

                  3.2      By-Laws. (2)

62                3.3      Amendment No.1 to By-Laws dated October 1, 1996.

                  10.1     Amended and Restated Option Agreement by and among
                           the Company, Arbor Home Healthcare Holding, LLC
                           ("Arbor"), COSS Holding Corp. ("COSS"), TPC Home
                           Care Services, Inc.("TPC"), et al., dated October
                           26, 1995. (3)

                  10.2     Registration Rights and Conditional Put Option
                           between the Company and COSS dated October 26,
                           1995. (3)

                  10.3     Financial Services Agreement between the Company
                           and Arbor Management, LLC, dated October 26, 1995.
                           (2)

                  10.4     Lease dated March 1, 1996 between the Company and
                           Hawke Associates for TPC's Elizabeth, New Jersey
                           office. (2)

                  10.5     Approval issued by the New York State Public Health
                           Council of Application No. 9586 submitted by TPC
                           dated November 27, 1995. (2)
 
                  10.6     Notice of Accreditation issued by the Joint
                           Commission on Accreditation of Healthcare
                           Organizations accrediting TPC d/b/a Extended Family
                           Care, dated February 9, 1996. (2)

                  10.7     Lease dated February 17, 1994 between 10-20 Banta
                           Associates and the Company for TPC's Hackensack,
                           New Jersey office. (2)

                  10.8     Third Amendment of Lease dated July 1995, between
                           TPC and Hempstead Associates Limited Partnership
                           for TPC's Hempstead, New York office. (2)



<PAGE>




              10.9         Lease dated May 12, 1995 between TPC and Castle
                           Ventures Limited for the Company's headquarters
                           office. (2)

             10.10         Agreement  dated April 20,  1995  between TPC and the
                           County of Nassau, Department of Social Services.
                           (2)

             10.11         Lease dated February 1, 1996 between TPC and
                           Phyllis C. Hyacinthe for TPC's East Orange, New
                           Jersey office. (2)

             10.12         Lease dated February 8, 1996 between TPC and
                           Clifton L&M Associates, Ltd. for TPC's Clifton, New
                           Jersey office. (2)

             10.13         Agreement dated June 20, 1996 extending First
                           Option Termination date from June 21, 1996 to
                           August 21, 1996. (4)

             10.14         Voting Trust Agreement dated June 21, 1996. (5)

             10.15         Stock Purchase Agreement dated June 30, 1996. (5)

             10.16         Receivables Security Agreement between the Company
                           and Arbor, dated as of September 6, 1996, including
                           letter agreement with TPC. (1)

             10.17         Promissory Note dated September 6, 1996 in the
                           amount of $250,000 made by the Company to Arbor (1)

65           10.18         Stock Purchase Agreement between the Company and
                           Arbor dated October 31, 1996.

77           10.19         Asset Sale Agreement between TPC and Public
                           Services, Inc. dated December 6, 1997.

                  16       Letter of Rose, Michlin, Karpf & Company. (7)

93                21       Subsidiaries of the Company.

95                27       Financial Data Schedule.