<PAGE>
 
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                    U.S. SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                              Form 10-KSB/A No. 1

[ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 [Fee Required]
       For the fiscal year ended     July 31, 1996
                                 -----------------------------------------------

[   ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 [No Fee Required]

       For the transition period from        to
                                      ------    -------------------------
     Commission file number     1-14382
                            ---------------------------------------------

                            SUNSTAR HEALTHCARE, INC.

                 (Name of small business issuer in its charter)
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               DELAWARE                           59-3361076
   (State or other jurisdiction of    (I.R.S. Employer Identification No.)
    incorporation or organization)

               521 East State Road 434, Longwood, Florida  32750
               (Address of principal executive offices/Zip Code)
                                 (407)339-4997
                          (Issuer's telephone number)
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         Securities registered under Section 12(b) of the Exchange Act:

     Title of each class        Name of each exchange on which registered
     -------------------        -----------------------------------------
     Common Stock               NASDAQ-Small-Cap Market and Boston
                                Stock Exchange

         Securities registered under Section 12(g) of the Exchange Act:

                                  Common Stock
                                (Title of class)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the 90 past days.

          YES       X                          NO
              ----------------                    ---------------- 

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB.  [   ]
<PAGE>
 
     State issuer's revenues for its most recent fiscal year $   5,080,850
                                                              ------------------

     The aggregate market value of voting stock of the Registrant held by non-
affiliates of the Registrant on October 15, 1996, was $  4,937,231    (based on
                                                       --------------
the average closing bid and asked prices of the Registrant's Class A Common
Stock on October 15, 1996 of   $3.625   and   $4.25   respectively).
                             ----------     ---------               

     As of September 30, 1996,   2,395,000  shares of the Registrant's Common
                               ------------                                  
Stock were issued and outstanding.



                      DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE

Transitional Small Business Disclosure Format (check one):  YES       NO   X
                                                                -----    -----

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<PAGE>
 
Item 9. Directors, Executive Officers and Significant Employees.

       The directors, executive officers and significant employees of the 
Company are as follows:

<TABLE>
<CAPTION>
      Name                  Age              Position
      ----                  ---              --------                   
<S>                        <C>    <C>
Warren D. Stowell           44    President, Chief Exec. Officer & 
                                  Chairman of Board of Directors
David Jesse                 47    Exec. Vice President, 
                                  Chief Operating Officer & Director
Lisa Tomei                  35    Controller and Chief Accounting Officer
Frederick H. Fialkow        65    Director
Steven Fialkow              37    Director
Bernard Levine, M.D.        67    Director
Dean L. Sloane              50    Director
Richard Seidelman, M.D.     38    Director
</TABLE>

          Warren D. Stowell has been President and Chief Executive Officer of
the Company since December 1995, Chairman of the Board of Directors of the
Company since March 1996, and President and Chief Executive Officer of each of
Brevard and First Health and SunStar Health Plan Inc. since November 1, 1995. 
From July 1993 through November 1995, Mr. Stowell served as Chief Operating
Officer, Insurance Division, for Ramsay HMO, Inc., an HMO operating in the State
of Florida. From June 1991 until July 1993, Mr. Stowell was President and Chief
Executive Officer of Care Florida, Inc. From May 1988 to May 1991, Mr. Stowell
served as President and Chief Executive Officer of H.I.P. Network of Florida.

          David Jesse has been Executive Vice President, Chief Operating Officer
and a director of the Company since January 1996.  Prior to his association with
the Company, Mr. Jesse had been a principal of Masters & Jesse Co., LPA, a legal
professional association, commencing March 1, 1993. From May 1992 to February
1993, he was Vice President and General Counsel of Care Florida, Inc., a health
maintenance organization based in Miami, Florida.  From 1988 to 1992, Mr. Jesse
was an associate with the law firm of Climaco, Climaco, Seminiatore, Lefkowitz &
Garofoli in its health care law department.  Prior thereto, from 1984 to 1987,
Mr. Jesse was the Vice President and General Counsel of HealthAmerica
Corporation of Ohio, a health maintenance organization based in Cleveland, Ohio.

          Lisa Tomei has been employed as Controller and Chief Accounting
Officer of the Company since June 1996.  From October 1995 to February 1996, Ms.
Tomei was employed by United Healthcare Corporation as Assistant Treasurer for
the MetraHealth Care Networks.  From May 1990 to September 1995, Ms. Tomei was
Accounting Manager for MetLife Healthcare Networks employed by MetraHealth and
Metropolitan Life Insurance Companies.  From 1986 to 1990, Ms. Tomei was
employed by Deloitte and Touche, LLP, as Senior Accountant.  Ms. Tomei is a
Certified Public Accountant.

                                       1
<PAGE>
 
          Frederick H. Fialkow has been a director of the Company since December
1995. Mr. Fialkow has been Chairman of the Board, President and Chief Executive
Officer of National since February 1988.  Mr. Fialkow is the father of Steven
Fialkow.

          Steven Fialkow has been a director of the Company since December 1995.
Mr. Fialkow has served as Secretary of National since September 1995, as
Executive Vice President of New England Home Care, Inc. since August 1995 and as
a director of National since December 1991. Prior thereto he served as Executive
Vice President of Health Acquisition Corp. from May 1994 to August 1995.  He has
served as President of National HMO (New York), Inc. from April 1989 to April
1994 and Vice President of National HMO (New York) Inc. from August 1984 to
March 1989.  Steven Fialkow is a certified public accountant.  He is the son of
Frederick H. Fialkow.

          Bernard Levine, M.D. has been a director of the Company since December
1995. Dr. Levine is a private investor, primarily in the healthcare industry.
Since 1962, he has been a Professor of Internal Medicine at New York University
School of Medicine with a sub-specialty in allergy and immunology.  Dr. Levine
also serves as a director of National and Cypros Pharmaceutical Corp.

          Dean L. Sloane has been a director of the Company since February 1996.
Mr. Sloane has served as Chairman of the Board, President, Chief Executive
Officer and a director of Community Medical Transport, Inc. since December 1988.
From 1973 to 1988, Mr. Sloane served as Chief Executive Officer of Prime Medical
Services Inc. (formerly known as C.P. Rehab. Corp.), a public specialty medical
management service company.  Mr. Sloane co-founded and served as Chairman of the
Board of National from 1983 to 1986.  Mr. Sloane also served as a director of
EPIC Health Group, Inc., a public mail order pharmaceutical company, from 1984
to 1986.

          Richard Seidelman, M.D. has been a director of the Company since
February 1996. Since June 1989, Dr. Seidelman has been a pulmonary care
physician in private practice in South Florida.  Dr. Seidelman is a graduate of
the University of Pennsylvania and received his M.D. degree from Hahnemann
University.  He completed his residency in internal medicine at Georgetown
University/VA Medical Center and his fellowship in pulmonary medicine at George
Washington University.

          All directors of the Company hold office until the next annual meeting
of the stockholders and until their successors have been elected and qualified.
The officers of the Company are elected by the Board of Directors at the first
meeting after each annual meeting of the Company's stockholders, and hold office
until their death, resignation or removal from office.

          The Company obtained "key-man" insurance covering the life of 
Warren D. Stowell in the amount of $1,000,000 prior to the consummation of the
Company's initial public offering.  The Company is the sole beneficiary under
this policy.  The Company also has obtained directors and officers liability
insurance in the amount of $2,000,000.

                                       2
<PAGE>
 
Compliance with Section 16(a) of the Securities Exchange Act of 1934.

          Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
(10) percent of the Company's Common Stock, to file with the SEC and NASDAQ
initial reports of beneficial ownership and reports of changes in beneficial
ownership of Common Stock of the Company.  Such persons are also required by SEC
regulations to furnish the Company with copies of all such Section 16(a) forms
they file.  Based solely on a review of the copies of such reports furnished to
the Company, the initial reports of beneficial ownership for National and
Messrs. Jesse, Stowell, Seidelman, Sloane, Levine, F. Fialkow and S. Fialkow
were inadvertently filed late.

Item 10.  Executive Compensation.

Compensation Summary.

          No executive officer of the Company received compensation in excess of
$100,000 during fiscal 1995 or 1996 in connection with services rendered to or
on behalf of the Company.  Except as set forth in the table below, no bonuses or
other compensation was paid during the fiscal year ended July 31, 1996.  The
summary compensation for the Company's Chief Executive Officers is as follows:

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                       Annual Comp.                  Long Term Comp.
                                       -----------                   ---------------
<S>                         <C>      <C>         <C>        <C>        <C>         <C>             <C>
 
                            Fiscal                                     Restricted
                             Year                           Other        Stock                     LTIP
                            Ended                           Annual      Awards       Options/      Payouts
Name and Position           07/31     Salary     Bonus      Comp.        ($)         SARs (#)        ($)
-----------------           -----     ------     -----      ------       ---         --------        ---
 
Warren D. Stowell           1996     $95,193     $ ---      $ ---       $ ---       250,000(3)     $ ---
    President, CEO (1)      1995         ---       ---        ---         ---          ---           ---
                            1994         ---       ---        ---         ---          ---           ---
 
Gerald Kline                1996     $49,140     $ ---      $ ---       $ ---      $   ---         $ ---
    President, CEO (2)      1995      98,280       ---        ---         ---          ---           ---
                            1994      93,600       ---        ---         ---          ---           ---
</TABLE>
     (1)  Mr. Stowell is President and CEO of SunStar Healthcare, Inc., and its
          subsidiaries, Brevard Medical Centers, Inc., First Health, Inc., and
          SunStar Health Plan, Inc.

     (2)  Mr. Kline received such compensation as the President and CEO of
          Brevard and First Health.  He resigned from those offices in October
          1995.

     (3)  Granted pursuant to Mr. Stowell's employment agreement.  One-fourth of
          the options are exercisable immediately, and shall be exercisable as
          to one-fourth of the remaining shares thereby 

                                       3
<PAGE>
 
          on each of three (3) successive anniversaries of the date of grant,
          subject to Mr. Stowell's employment by the Company. (See section
          entitled "Employment Agreement".)

Stock Options.

     The following table sets forth information concerning options granted
during the fiscal year ended July 31, 1996 to those persons named in the
preceding Summary Compensation Table:

                       OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
                           Numbers of            % of Total
                           Securities         Options Granted
                           Underlying         to Employees in       Exercise Price      Expiration
      Name               Options Granted        Fiscal Year         ($ per share)          Date
      ----               ---------------        -----------         -------------          ----     
<S>                     <C>                    <C>                 <C>                 <C>
Warren D. Stowell         250,000(1)(3)            71.43%                $.25             none(2)
</TABLE>

     (1)  This represents a non-qualified stock option granted exclusive of the
          Company's 1996 Stock Option Plan.

     (2)  Subject to conditions of employment with the Company.

     (3)  Granted pursuant to Mr. Stowell's employment agreement.  One-fourth 
          of the options are exercisable immediately, and shall be exercisable
          as to one-fourth of the remaining shares thereby on each of three (3)
          successive anniversaries of the date of grant, subject to Mr.
          Stowell's employment by the Company. (See section entitled "Employ-
          ment Agreement".)

     The following table sets forth information concerning the value of
unexercised stock options at July 31, 1996 for those persons named in the
Summary Compensation Table:

                  AGGREGATED OPTIONS IN LAST FISCAL YEAR AND
                        FISCAL YEAR END OPTION VALUES 

<TABLE> 
<CAPTION> 
                       Number of Securities           Value of Unexercised
                       Underlying Unexercised         In-The-Money Options
                       Options at Fiscal Year End      at Fiscal Year End
Name                   Exercisable/Unexercisable    Exercisable/Unexercisable
----                   -------------------------    -------------------------
<S>                    <C>                          <C>   
Warren D. Stowell          62,500/187,500              $278,320/$834,961(1)
</TABLE> 

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

(1)  The dollar values were calculated by determining the difference between the
     fair market value at fiscal year-end of the Common Stock underlying the
     options and the exercise price of the options.  The last sale price of a
     share of the Company's Common Stock on July 31, 1996 as reported by Nasdaq
     was $ 4  45/64.

                                       4
<PAGE>
 
Director Compensation.

     Directors who are employees of the Company do not receive compensation for
serving as directors.  Each director who is not an employee of the Company will
receive a fee of $2,500 for attendance at each Board of Directors meeting.  All
directors will be reimbursed for their reasonable out-of-pocket expenses
incurred in connection with attending meetings of the Board of Directors and for
other expenses incurred in their capacity as directors of the Company.

     In accordance with the Company's 1996 Stock Option Plan, each non-employee
director of the Company has been granted nonqualified stock options to purchase
7,500 shares of Common Stock exercisable at a price equal to the fair market
value of the Common Stock on the date of grant.  (See "Stock Option Plan.")


Employment Agreements.

     The Company entered into an employment agreement, effective as of May 15,
1996, with Warren D. Stowell pursuant to which he is employed full-time as the
Company's President and Chief Executive Officer.  The agreement expires on the
second  anniversary of the date of May 15, 1996, provided that the agreement 
may be renewed for successive one (1) year periods unless, thirty (30) days 
prior to the expiration of the agreement, either party notifies the other of 
its election not to renew the agreement.  The agreement also provides that 
for so long as Mr. Stowell remains employed by the Company, he shall serve 
as a member of the Company's Board of Directors and shall have the right to 
designate one (1) additional member to the Board of Directors. David Jesse 
is Mr. Stowell's current designee.  The agreement provides for an annual 
salary of $125,000, payable commencing May 15, 1996, increasing to $150,000 
per annum on May 15, 1997.  Mr. Stowell's employment agreement contains a 
confidentiality provision and a covenant not to compete with the Company for 
a period of six (6) months following termination of employment.

     In addition, the Company granted to Mr. Stowell options to purchase an
aggregate of 250,000 shares of Common Stock at an exercise price equal to $.25
per share.  The options are currently exercisable as to one-fourth of the shares
covered thereby and shall be exercisable as to an additional one-fourth of the
shares covered thereby on each of the first, second and third anniversaries of
January 28, 1996, provided that Mr. Stowell is employed by the Company on such
dates.  Commencing two (2) years after May 15, 1996, the Company has agreed to
use its best efforts to file a registration statement under the Securities Act
to register the shares of Common Stock issuable to Mr. Stowell pursuant to the
exercise of such options.  No options have been exercised as of July 31, 1996.

     The Company entered into an employment agreement, effective as of May 15,
1996, with David Jesse pursuant to which he is employed full-time as the
Company's Executive Vice President and Chief Operating Officer.  The agreement
expires on May 15, 1998, provided that the agreement may be renewed for
successive one (1) year periods unless, at least thirty (30) days 

                                       5
<PAGE>
 
prior to the expiration of the agreement, either party notifies the other of its
election not to renew the agreement. The agreement provides for an annual salary
of $100,000, payable commencing on May 15, 1996, increasing to $135,000 per
annum on May 15, 1997. Mr. Jesse's employment agreement contains a confiden-
tiality provision and a covenant not to compete with the Company for a period
of six (6) months following termination of employment.

     In addition, the Company granted to Mr. Jesse options to purchase an
aggregate of 75,000 shares of Common Stock.  Options to purchase 25,000 shares
of Common Stock, at an exercise price of $.25 per share are currently
exercisable.  The remaining 50,000 options, which have been granted pursuant to
the Company's 1996 Stock Option Plan and which have an exercise price per share
equal to the initial public offering price, shall be exercisable as to one-
fourth of the shares covered thereby on each of the first four (4) anniversaries
of the date May 15, 1996, provided that Mr. Jesse is employed by the Company on
such dates.  Commencing two (2) years after May 15, 1996, the Company has agreed
to use its best efforts to file a registration statement under the Securities
Act to register the shares of Common Stock issuable to Mr. Jesse pursuant to the
exercise of such options.  No options have been exercised as of July 31, 1996.


Stock Option Plan.

     In February 1996, the Board of Directors of the Company adopted, and
National (the Company's sole stockholder at that time) approved, the Company's
1996 Stock Option Plan (the "Option Plan") pursuant to which 200,000 shares of
Common Stock currently are reserved for issuance upon the exercise of options
designated as either (i) options intended to constitute incentive stock options
("ISOs") under the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) nonqualified options.  ISOs may be granted under the Option Plan to
employees and officers of the Company.  Non-qualified options may be granted to
consultants, directors (whether or not they are employees), employees or
officers of the Company.

     The Option Plan is intended to qualify under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and is
administered by a committee of the Board of Directors, provided that the full
Board of Directors currently is administering the Option Plan.  The Board of
Directors or the committee, as the case may be, within the limitations of the
Option Plan, determines the persons to whom options will be granted, the number
of shares to be covered by each option, whether the options granted are intended
to be ISOs, the duration and rate of exercise of each option, the exercise price
per share and the manner of exercise and the time, manner and form of payment
upon exercise of an option.  Unless sooner terminated, the Option Plan will
expire on February 13, 2006.

     ISOs granted under the Option Plan may not be granted at a price less than
the fair market value of the Common Stock on the date of grant (or 110% of fair
market value in the case of persons holding 10% or more of the voting stock of
the Company).  The aggregate fair market value of shares for which ISOs granted
to any employee are exercisable for the first time by such employee during any
calendar year (under all stock option plans of the Company) may not 

                                       6
<PAGE>
 
exceed $100,000 and options to purchase no more than 50,000 shares may be
granted under the Option Plan to any single optionee in any calendar year. Non-
qualified options granted under the Option Plan may not be granted at a price
less than 90% of the fair market value of the Common Stock on the date of grant.
Options granted under the Option Plan will expire not more than ten (10) years
from the date of grant (five [5] years in the case of ISOs granted to persons
holding 10% or more of the voting stock of the Company). All options granted
under the Option Plan are not transferable during an optionee's lifetime but are
transferable at death by will or by the laws of descent and distribution. In
general, upon termination of employment of an optionee, all options granted to
such person which are not exercisable on the date of such termination
immediately terminate, and any options that are exercisable terminate ninety
(90) days following termination of employment.

     The Option Plan contains anti-dilution provisions authorizing appropriate
adjustments in certain circumstances.  Shares of Common Stock subject to options
which expire without being  exercised or which are canceled as a result of
cessation of employment are available for further grants.  No shares of Common
Stock may be issued to any optionee until the full exercise price has been paid.
The Board of Directors or the committee, as the case may be, may grant
individual options under the Option Plan with more stringent provisions than
those specified in the Option Plan.

     The Option Plan provides that each non-employee director automatically
receives, upon first becoming a non-employee director, a grant of an option to
purchase 7,500 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock.  Each non-employee director option expires
five (5) years from the date of grant.

     The Company has granted options to purchase an aggregate of 75,000 shares
under the Option Plan, exclusive of non-employee director options to purchase an
additional 37,500 shares granted as of May 15, 1996, none of which options has
been exercised.

                                       7
<PAGE>
 
                                  SIGNATURES

     In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, and Rule 12b-15 promulgated thereunder, the Registrant caused this amended
report to be signed on its behalf by the undersigned thereunto duly authorized
on November 13, 1996.

                                          SUNSTAR HEALTHCARE, INC.


                                     By:  /s/
                                        ------------------------
                                          Warren D. Stowell
                                          President & Chief Executive Officer