UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                 THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED


For the fiscal year ended July 31, 2004           Commission File Number 0-12927


                         NATIONAL HOME HEALTH CARE CORP.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


         Delaware                                              22-2981141
         --------                                              ----------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                           Identification No.)


700 WHITE PLAINS ROAD, SCARSDALE, NEW YORK                              10583
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)

Registrant's telephone number, including area code: 914-722-9000

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 $.001 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  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X         No
                                              -----         -----

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

Indicate  by check mark  whether  the  Registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2).  Yes            No  X
                                         -----         -----

As of January 31, 2004,  the  aggregate  market value of the Common Stock of the
Registrant,  its only class of voting securities,  held by non-affiliates of the
Registrant was approximately  $30,721,968 calculated on the basis of the average
of the closing  price of such stock on the National  Association  of  Securities
Dealers  Automated  Quotation  System on that date,  as reported by the National
Association of Securities Dealers, Inc.

The number of shares of the Registrant's Common Stock outstanding on October 22,
2004 was 5,579,968.

Certain  information  to  be  included  in  the  Registrant's  definitive  proxy
statement,  to be filed not later than 120 days after the end of the fiscal year
covered by this report, for the Registrant's 2004 Annual Meeting of Stockholders
is incorporated by reference into Part III of this annual report on Form 10-K.

<PAGE>

<TABLE>
<CAPTION>

                                                  TABLE OF CONTENTS
                                                  -----------------

                                                                                                               Page
                                                                                                               ----
<S>            <C>                                                                                              <C>
Cautionary Statement..............................................................................................1

                                                       PART I

Item 1.        Business...........................................................................................1

Item 2.        Properties........................................................................................14

Item 3.        Legal Proceedings.................................................................................15

Item 4.        Submission of Matters to a Vote of Security Holders...............................................16


                                                       PART II

Item 5.        Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
               of Equity Securities..............................................................................17

Item 6.        Selected Financial Data...........................................................................19

Item 7.        Management's Discussion and Analysis of Financial Condition and Results of Operations.............19

Item 7A.       Quantitative and Qualitative Disclosures About Market Risk........................................27

Item 8.        Financial Statements and Supplementary Data.......................................................27

Item 9.        Changes In and Disagreements with Accountants on Accounting and Financial Disclosure..............27

Item 9A.       Controls and Procedures...........................................................................27

Item 9B.       Other Information.................................................................................28


                                                      PART III

Item 10.       Directors and Executive Officers of the Registrant................................................29

Item 11.       Executive Compensation............................................................................29

Item 12.       Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
               Matters...........................................................................................29

Item 13.       Certain Relationships and Related Transactions....................................................29

Item 14.       Principal Accountant Fees and Services............................................................29


                                                       PART IV

Item 15.       Exhibits, Financial Statement Schedules, and Reports on Form 8-K..................................29

Signatures     ..................................................................................................31

Exhibit Index  ..................................................................................................32
</TABLE>


                                                        -i-
<PAGE>


                                     PART I

Cautionary Statement

The Annual Report on Form 10-K contains certain forward-looking  statements that
involve a number of risks and uncertainties.  Forward-looking  statements may be
identified  by the use of  forward-looking  terminology  such as "may,"  "will,"
"expect," "believe," "estimate," "project," "anticipate," "continue," or similar
terms,  variations  of those  terms or the  negative of those  terms.  Important
factors  that  could  cause  actual  results  to differ  materially  from  those
indicated by such  forward-looking  statements  are set forth in this  document.
These include but are not limited to risks and uncertainties relating to whether
the  Company  can  identify,   consummate  and  integrate  on  favorable   terms
acquisitions or market penetrations;  market acceptance;  pricing and demand for
the Company's  services;  changing  regulatory  environment;  changing  economic
conditions;  whether the Company  can  attract and retain  qualified  personnel;
ability  to manage  the  Company's  growth;  and other  risks  detailed  in this
document. Please refer to the "Risk Factors" Section in Item 1 and "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  in
Item 7.

Item 1.   Business.

General

         National  Home  Health  Care  Corp.   (the  "Company")  is  a  Delaware
corporation which is a provider of home health care and staffing services in the
Northeast region.

Industry Overview

         United  States  health care  spending  continues to outpace the rate of
inflation,  and the  population of older  Americans  continues to increase.  The
Company  believes that  alternatives  to costly  hospital and nursing home stays
will  continue to create  demand for home health  care.  Medicare,  Medicaid and
other managed care insurance  companies  continue to look for a setting  whereby
the aged population can receive health care services most cost efficiently. Home
health care has evolved as the acceptable and most preferred alternative in this
continuum.  Patient  comfort  and  substantial  cost  savings can  generally  be
realized   through   treatment  at  home  as  an   alternative   to  traditional
institutional  settings.  Continuing  economic  pressures within the home health
care industry and the changes to Medicare reimbursement have forced providers to
modify  the  manner in which they  provide  home  health  care  services.  Those
companies that successfully  operate with efficient  business models can provide
quality patient care and manage costs under the current reimbursement system.

         The home health care industry has traditionally been highly fragmented,
comprised of not-for  profit and for profit  smaller local home health  agencies
offering  limited  services.  These smaller  agencies do not generally  have the
necessary capital to expand their operations or services and are often unable to
achieve the cost efficiencies to compete effectively.  The implementation of the
Medicare  Prospective  Payment system and other  legislation at the state levels
has created major industry consolidation.

Home Health Care Services

         Home health  care  services  include  four broad  categories:  (1) home
health nursing services,  (2) infusion therapy, (3) respiratory therapy, and (4)
home medical equipment. According to statistics from CMS' Office of the Actuary,


                                      -1-
<PAGE>

total  expenditures by payers on home health nursing services was  approximately
$33.0  billion in 2001.  Medicare is the largest  single payer,  accounting  for
$11.0  billion in 2002,  and this is projected to grow to $21.9  billion by 2012
according  to the home health care  spending  projections  by CMS' Office of the
Actuary.

         The Company currently  operates thirty offices consisting of one parent
corporate office, nineteen offices that coordinate home health care services and
ten satellite  offices.  The Company has two Medicare  provider numbers and is a
Medicaid  provider in each of the four states in which it operates.  The Company
provides a wide variety of home health care services including:

         o        Registered  nurses who provide clinical  nursing  assessments,
                  evaluations,  clinical  interventions,  medication supervision
                  and/or administration.

         o        Licensed  practical nurses who perform  technical  procedures,
                  administer   medications   and  change  surgical  and  medical
                  dressings.

         o        Physical and  occupational  therapists  who work to strengthen
                  muscles, restore range of motion and help patients perform the
                  activities of daily living.

         o        Speech    pathologists/therapists    who   work   to   restore
                  communication and oral skills.

         o        Medical social workers who help families  address the problems
                  associated with acute and chronic illnesses.

         o        Home health aides who perform personal care such as bathing or
                  assistance in walking.

         o        Private duty services such as continuous  hourly  nursing care
                  and sitter services.

         The Company has five principal operating subsidiaries:

         o        Health Acquisition Corp., formerly Allen Health Care Services,
                  Inc.  ("Allen  Health  Care"),  a New  York  corporation  that
                  conducts home health care operations in New York.

         o        New England Home Care,  Inc.  ("New  England"),  a Connecticut
                  corporation  that  conducts  home  health care  operations  in
                  Connecticut.

         o        Accredited Health Services, Inc. ("Accredited"),  a New Jersey
                  corporation  that conducts home health care  operations in New
                  Jersey.

         o        Connecticut Staffing Works Corp.  ("Connecticut  Staffing"), a
                  Connecticut  corporation  that  conducts  healthcare  staffing
                  operations in Connecticut.

         o        Medical Resources Home Health Corp. ("Medical  Resources"),  a
                  Delaware corporation that conducts home health care operations
                  in Massachusetts.

         During the fiscal year ended July 31, 2004, the Company  terminated its
healthcare staffing operations in both New York and New Jersey.

                                      -2-
<PAGE>

         Health Acquisition Corp. d/b/a Allen Health Care Services. Allen Health
Care is a provider  of personal  home  health  aide  services in New York State.
Services are provided by personal care aides,  home health aides and  homemakers
(collectively,  "caregivers"). Allen Health Care is licensed by the State of New
York   Department  of  Health.   Allen  Health  Care   maintains  its  principal
administrative  office  in  Jamaica,  New York and has a branch  office in Mount
Vernon,  New York.  Case  coordinating  of  patients is  performed  at these two
offices.  In  addition,  Allen  Health Care has  satellite  offices in Brooklyn,
Hempstead and the Bronx, New York. The satellite  offices are primarily used for
the recruitment and training of home health aides.  Services are provided in the
following counties in the State of New York: Nassau, Westchester, Queens, Kings,
New York and the Bronx.

         Home health care personnel are licensed or agency certified under a New
York State  approved  program and can be engaged on a  full-time,  part-time  or
live-in  basis.  Since  July  1996,  Allen  Health  Care has  required  criminal
background investigations for all new personnel. In addition, urine drug testing
is part of the pre-employment screening process and thereafter is performed both
annually and randomly.  In March 2002,  Allen Health Care was re-surveyed by the
Joint  Commission of Accreditation of Health Care  Organizations  ("JCAHO"),  an
accrediting  body for health care providers.  JCAHO  accreditation is associated
with  providing  quality  services.  This  status  is  required  by  many of the
certified home health care agencies that Allen Health Care  currently  services.
The  re-survey  resulted in Allen Health Care  extending its  accredited  status
through March 2005.

         Allen Health Care is reimbursed primarily by certified home health care
agencies  ("CHHAs") and long-term health care provider programs that subcontract
their home health aides from Allen Health Care, as well as by private payers and
the Nassau and  Westchester  Counties  Departments of Social  Services  Medicaid
Programs, for which Allen Health Care is a participating provider.

         Allen  Health Care  provides  home health aide  services to its clients
twenty-four  hours per day,  seven days per week.  Although  Allen Health Care's
offices  are  open  during  normal  business  hours,   personnel  are  available
twenty-four hours per day to respond to emergencies and to provide other service
requests.  The  registered  nurses of Allen Health Care, in accordance  with New
York State  Department of Health  regulations and contract  requirements,  visit
patients  regularly and review  records of service  completed by the home health
aide and  personnel  care aides daily.  These  records are  maintained  by Allen
Health  Care.  In addition,  a home care  coordinator  ensures that  appropriate
coverage is  maintained  for all patients  and acts as the liaison  among family
members, aides and professional staff.

         Allen  Health  Care has  expanded  in  recent  years  through  selected
acquisitions  of  complementary  businesses or assets in its geographic  region.
These  acquisitions  included the August 1998  acquisition  of certain assets of
Bryan  Employment   Agency,   Inc.,  d/b/a  Bryan  Home  Care  Services  ("Bryan
HomeCare"),  a New York  licensed  home health care  agency that  provided  home
health aide services in Westchester County, New York. This acquisition  expanded
the  geographic  presence  of Allen  Health  Care  and  enabled  it to  become a
participating  provider in the Westchester  County Department of Social Services
Medicaid Program.

         To a large extent,  Allen Health Care's  continued  growth  depends on,
among other  things,  its ability to recruit and maintain  qualified  personnel.
Allen Health  Care's  training  programs for home health aides and personal care
aides have been  approved  by the New York  State  Department  of Health.  Allen
Health Care believes that it offers competitive salaries and fringe benefits and
has been able to keep its caregivers working on a steady basis.



                                      -3-
<PAGE>

         New England Home Care,  Inc. In August 1995,  the Company  acquired New
England. New England is a Medicare certified and state licensed home health care
company in Connecticut.  In November 2001, New England was re-surveyed by JCAHO,
resulting in New England  extending its accredited status through November 2004.
New England provides services throughout  Connecticut.  Services include skilled
nursing,  physical therapy,  occupational therapy, medical social services, home
health aide and homemaker services. In addition,  New England provides specialty
services consisting of adult/geriatric,  pediatric,  post-acute  rehabilitation,
behavioral medicine and maternal/child health. New England provides full-service
home  health  care  twenty-four  hours per day,  seven days per week.  Weekends,
holidays and  after-hours  are  supported  by an on-call  system for each office
location with medical  supervision by a registered  nurse at all times. All home
health  care   personnel   are  licensed  or  certified   under  a   Connecticut
state-approved  program and can be engaged on a full-time,  part-time or live-in
basis. Since 1995, New England has performed criminal background  investigations
on all new personnel.

         New England maintains its principal  administrative  office in Milford,
Connecticut.  In addition,  New England has administrative  offices in Cromwell,
West Hartford and Waterbury and satellite offices in Norwalk,  Hamden,  Danbury,
Norwich and Guilford, Connecticut. Case coordinating of patients is performed at
the Milford,  Cromwell, West Hartford and Waterbury  administrative offices. The
satellite  offices are used as drop-off offices for paperwork,  recruitment,  in
services and orientation of personnel.  Reimbursement for New England's services
is primarily provided by the State of Connecticut  Department of Social Services
Medical  Care  Administration,   the  Federal  Medicare  Program,  managed  care
companies,  private  payers,  hospices and other Medicare  certified home health
agencies and long-term care providers that  subcontract  their home health aides
from New England.

         New England has expanded its operations  through increased  penetration
of market share in Connecticut and selected acquisitions of complementary assets
in its geographic  region. In November 1999, New England acquired certain assets
of  Optimum  Care  Services  of  Connecticut,   Inc.,  Optimum  Home  Health  of
Connecticut, Inc. and Optimum Home Care of Connecticut, Inc. (collectively,  the
"Optimum  Entities").  The Optimum  Entities  included a Medicare  certified and
licensed home health care company engaged in providing home health care services
in  Connecticut.  The assets  were  acquired  from a  court-appointed  Chapter 7
trustee.  The  acquisition  of  these  assets  was  coupled  with  a  successful
penetration of the market share made available as a result of the liquidation of
the Optimum Entities.

         In April 2000, New England  acquired  certain assets of the Connecticut
operations of U.S.  HomeCare  Corp.  ("U.S.  HomeCare-Connecticut"),  a Medicare
certified and licensed home health care company engaged in providing home health
care  services  in  Connecticut.  The  acquisition  complemented  the  Company's
existing operations in Connecticut.

         In March 2003, New England  acquired  certain assets from  Professional
Relief Nurses,  Inc. ("PRN"), a Medicare certified and licensed home health care
company engaged in providing home health care services in Hartford,  Litchfield,
New Haven and Middlesex Counties, Connecticut.

         In October  2004,  New  England  acquired  certain  assets from On Duty
Metropolitan  Connecticut,  LLC, a Medicare  certified  and licensed home health
care company  engaged in providing  nursing and home health care services in New
Haven and Fairfield Counties, Connecticut.

         The continued growth of New England depends on, among other things, its
ability to  recruit  and  retain  qualified  personnel.  New  England  primarily
recruits nurses through newspaper  advertisements.  New England believes that it
offers  competitive  salaries and fringe  benefits and has been able to keep its
employees working on a steady basis.



                                      -4-
<PAGE>

         New England, as a participant in the Medicare and Medicaid programs, is
subject to survey and audits of operational, clinical and financial records with
respect to proper applications of general regulations  governing  operations and
billing  of claims.  These  audits can  result in  retroactive  adjustments  for
payments  received from these programs  resulting in amounts due to governmental
agencies.

         Connecticut Staffing Works Corp.  Connecticut Staffing was organized in
October  1999 to  operate  certain  of the  assets  acquired  from  the  Optimum
Entities.  Connecticut  Staffing is a full-service health care staffing company.
It provides temporary staffing to hospitals,  skilled nursing  facilities,  home
health organizations, schools and other institutions. Staffing personnel include
registered nurses, licensed practical nurses, certified nursing assistants, home
health aides, homemakers,  opticians,  medical secretaries and emergency medical
technicians.  It  maintains  administrative  office  in  Cromwell,  Connecticut.
Staffing  services are provided  twenty-four hours per day, seven days per week.
Staffing  coordinators are available in the office Monday to Friday 6:00 a.m. to
7:00 p.m. Weekends,  holidays and after hours are supported by an on-call system
which pages a staffing  coordinator.  From inception,  Connecticut  Staffing has
performed criminal background investigations on all new personnel.

         Connecticut   Staffing  maintains  a  roster  of  quality  professional
personnel.  The continued success of Connecticut Staffing is dependent on, among
other  things,  its ability to maintain a steady  roster of per diem  workers to
meet the staffing  requirements of its clients.  Connecticut  Staffing  believes
that it offers  competitive  salaries  and fringe  benefits and has been able to
keep its personnel working on a steady basis.

         Accredited Health Services,  Inc. In October 1998, the Company acquired
Accredited. Accredited is a licensed home health care company that provides home
health aide services in Bergen, Hudson,  Passaic, Essex, Morris, Union, Somerset
and  Middlesex  Counties,   New  Jersey.   Accredited  maintains  its  principal
administrative  office in  Hackensack,  New  Jersey  and has a branch  office in
Verona,  New Jersey.  Case  coordinating  of patients is  performed  in both the
Hackensack and Verona offices.  Accredited also has a satellite  office in Union
City, New Jersey that is used for  recruitment,  in services and  orientation of
home health aides.

         Accredited   provides   home  health  care   services  to  its  clients
twenty-four  hours  per  day,  seven  days  per  week.  Weekends,  holidays  and
after-hours are supported by an on-call system for each office.  All home health
aides are licensed under a New Jersey state-approved  program and can be engaged
on a full-time,  part-time or live-in basis. Accredited has been approved by the
New Jersey  Board of Nursing for the  training of home health aides in the State
of New Jersey. Effective November 2003, all home health aides of Accredited have
criminal background checks performed by the State of New Jersey.

         In  March  2004 ,  Accredited  was  re-surveyed  by the  Commission  on
Accreditation for Home Care (CAHC),  one of the accrediting  bodies required for
participation  as a Medicaid  provider in New  Jersey.  This  accreditation  was
extended for an additional  year.  Reimbursement  for  Accredited's  services is
primarily by the state of New Jersey Medicaid Program,  Medicare  certified home
health care agencies that  subcontract  their home health aides from  Accredited
and private payers.

         In August 2000,  Accredited completed the acquisition of certain assets
of Health Force Owned, Ltd. and its affiliates. The acquisition complemented the
Company's existing operations in New Jersey.



                                      -5-
<PAGE>

         In December  2002,  Accredited  completed  the  acquisition  of certain
assets of Mary Baker's Health Care Services,  Inc.  ("Mary  Baker").  Mary Baker
provided home health care services in Bergen and Passaic Counties, New Jersey.

         Accredited's  growth  depends on,  among other  things,  its ability to
recruit  and  retain  qualified  home  health  aides.  Recruiting  is  conducted
primarily  through  advertising,   direct  contact  with  community  groups  and
employment  programs,  and programs designed to encourage new employee referrals
by existing employees.  Accredited believes that it offers competitive  salaries
and fringe benefits and has been able to keep its home health aides working on a
steady basis.

         Medical  Resources  Home Health Corp. In September  2002,  the Company,
through a wholly-owned subsidiary, acquired certain assets of Medical Resources,
Inc. and related entities (collectively,  the "Medical Resources Entities"). The
Medical Resources Entities provided home health care services in Massachusetts.

         The  Massachusetts   State  Home  Care  Program  provides  services  to
approximately  33,000 frail,  low income elders  throughout the state. The funds
and  services are managed  through  twenty-seven  Aging  Service  Access  Points
("ASAPs")  that  are  not-for-profit   organizations   geographically  dispersed
throughout  the state.  Services  provided  through this state  program  include
homemaking,  personal care, chore, companion and shopping. Medical Resources has
contracts  with certain of these ASAPs to provide  homemaking  and personal care
services.  Services are provided twenty-four hours per day, seven days per week.
Weekends,  holidays and  after-hours are supported by an on-call system for each
office.  From inception,  Medical  Resources has performed  criminal  background
investigations on all new personnel.

         Medical  Resources  maintains  its principal  administrative  office in
Newton,  Massachusetts  and has satellite offices in Boston,  Lynn,  Framingham,
North Andover, Leominster,  Worcester, Chicopee, Bellingham, North Dartmouth and
North  Easton,  Massachusetts.  Case  coordinating  of patients is  performed in
Newton  and the  satellite  offices.  The  satellite  offices  are also  used as
drop-off  offices  for  paperwork,   recruitment,   in  services,  training  and
orientation of new personnel.

         In April 2003,  Medical Resources  received its Medicare  certification
from the  Department  of  Health  and  Human  Services.  In June  2003,  Medical
Resources  received  its  Medicaid  provider  number  from the  Commonwealth  of
Massachusetts. As a result of receiving these certifications,  Medical Resources
expanded  its  services  to  include  nursing,  physical  therapy,  occupational
therapy,  speech therapy,  medical social services and home health aide services
to Medicare and Medicaid recipients.

         The growth of Medical  Resources  depends on, among other  things,  its
ability to recruit and retain staff as well as its ability to generate referrals
of Medicare and Medicaid  patients.  Medical  Resources  believes that it offers
competitive salaries and fringe benefits and has been able to keep its personnel
working on a steady basis.

Organization

         The Company's corporate headquarters is located in Scarsdale, New York,
where all senior corporate administrative functions are performed. The Company's
operations  are  conducted  by its five  operating  subsidiaries.  Although  the
Company  maintains  separate   subsidiaries  in  its  various  jurisdictions  of
operations,  it reviews its  operations  primarily on an integrated  rather than
geographic or separate-subsidiary basis. Each subsidiary has a main


                                      -6-
<PAGE>

administrative  office where all management functions are performed and overseen
by the subsidiary President. Each administrative office performs intake and case
coordinating of patients, corporate compliance,  human resources,  marketing and
all financial and accounting functions.

Insurance

         The Company and its subsidiaries maintain casualty coverages for all of
its  operations,   including   professional  and  general  liability,   workers'
compensation,  automobile,  property,  fiduciary  liability  and  directors  and
officers insurance.  The Company reviews its insurance coverages  throughout the
year to insure that  adequate  coverages  are in place.  In New York State,  the
Company self insures up to specified  limits  certain  risks related to workers'
compensation. While the Company believes its insurance policies are adequate, in
the wake of the  terrorist  events  of  September  11,  2001,  the  Company  has
experienced  substantial  increases in the cost of its insurance coverage.  As a
result, there can be no assurance that coverage will continue to be available in
adequate amounts or at a reasonable cost.

Employees and Labor Relations

         As of October 25, 2004,  the Company had  approximately  3,350 full and
part-time employees. The Company currently employs the following classifications
of personnel: administrative employees which consist of a senior management team
(CEO and CFO) of the parent company and a COO, CFO and  vice-presidents  at each
subsidiary company;  office administrative staff, nursing directors and clinical
managers;  sales and marketing executives;  licensed and certified  professional
staff (RNs, LPNs,  therapists);  and  non-licensed  care givers (home health and
personal care aides).  The Company has  standardized  procedures for recruiting,
interviewing  and reference  checking  prospective  health care  personnel.  All
nurses and home  health  aides must be  licensed  or  certified  by  appropriate
authorities.

         Effective  May 1, 2004,  Allen Health Care and District  Council  1707,
American Federation of State, County and Municipal Employees (AFSCME), concluded
negotiations  on an  initial  three-year  labor  contract.  The  labor  contract
provides  "covered"  home health aides with some new benefits,  consisting of an
immediate  wage  increase,  eligibility  for paid time off,  increase in minimum
hourly  base  rates,  holiday  premium  pay and  representation  by the Union in
procedures and personnel matters.  The Company has no other union contracts with
any of its employees.  The Company believes its relationship  with its employees
is satisfactory.

         In a recent  court case (Coke v. Long  Island Care At Home,  Ltd),  the
United  States  Court  of  Appeals  for  the  Second  Circuit   invalidated  the
interpretation  by the United  States  Department  of Labor of certain  overtime
exemptions under the Fair Labor Standards Act regarding  companionship services.
As a result,  it appears that federal overtime pay  requirements  would apply to
all of the Company's  personnel that provide home health care  services.  Unless
the  aforementioned  decision is overturned on appeal, the Company's labor costs
would increase, but the Company does not believe that such increase would have a
material adverse affect on its operating results.

Risk Factors

         This section  summarizes  certain risks,  among others,  that should be
considered by  stockholders  and prospective  investors in the Company.  Many of
these risks are also discussed in other sections of this report.



                                      -7-
<PAGE>

Risk Related to the Company's Ability to Attract Qualified Caregivers.

         The Company relies  significantly  on its ability to attract and retain
caregivers who possess the skills, experience and licenses necessary to meet the
requirements of the Company's  customers.  The Company  competes for home health
care services  personnel with other providers of home health care services.  The
Company must  continually  evaluate and expand its network of caregivers to keep
pace with its  customers'  needs.  Currently,  there is a shortage of  qualified
nurses and a  diminishing  pool of home health  aides in the states in which the
Company conducts its business,  competition for nursing  personnel is increasing
and wages and benefit costs have risen. The Company may be unable to continue to
increase the number of  caregivers  that it recruits,  adversely  affecting  the
potential for growth of the Company's business. The Company's ability to attract
and retain  caregivers  depends  on several  factors,  including  the  Company's
ability to provide such caregivers with assignments that they view as attractive
and with  competitive  wages and  benefits.  There can be no assurance  that the
Company  will be  successful  in any of  these  areas.  The  cost of  attracting
caregivers and providing  them with  attractive  benefit  packages may be higher
than the  Company  anticipates  and,  as a  result,  if it is  unable  to obtain
increased  reimbursement  rates,  the  Company's  profitability  could  decline.
Moreover, if the Company is unable to attract and retain caregivers, the quality
of its services to its  customers  may decline  and, as a result,  it could lose
certain customers.

         In  addition,  effective  May 1, 2004,  Allen  Health Care and District
Council  1707,  American  Federation of State,  County and  Municipal  Employees
(AFSCME),  concluded negotiations on an initial three-year labor contract. There
can be no assurance that the terms of this collective  bargaining agreement will
not materially increase labor-related costs or otherwise have a material adverse
affect on the Company,  that further unionizing activity will not occur at other
subsidiaries  of the Company or that any such  activity will not have a material
adverse effect on the Company.

Risks Related to Competition.

         The home  health  care  business  is  highly  competitive.  Some of the
Company's competitors,  unlike the Company,  provide pharmaceutical products and
other home health care services that generate additional referrals.  Some of the
Company's  competitors also may have greater  marketing and financial  resources
than the Company.  The Company believes that the primary  competitive factors in
obtaining and retaining  customers are the quality of services  provided and the
pricing of such services.  Competition  for referrals may increase in the future
and,  as a result,  the Company  may not be able to remain  competitive.  To the
extent  competitors gain or retain market share by reducing prices or increasing
marketing  expenditures,  the  Company  could  lose  market  share or  otherwise
experience  a material  adverse  effect.  The  Company  does not have  long-term
agreements or exclusive  guaranteed  order  contracts  with its  customers.  The
success of the Company's  business is dependent  upon its ability to continually
secure new business from its customers and to service such new business with its
caregivers. The Company's customers are free to seek services from the Company's
competitors and to use caregivers that such competitors  offer them.  Therefore,
the Company must maintain positive  relationships with its customers,  otherwise
the Company may be unable to generate  new business  for its  caregivers,  which
could have a material adverse effect on the Company.

Risks Related to Medicare and Medicaid Retroactive Adjustments and Recoupments.

         The  Company,  as a  Medicare  and  Medicaid  provider,  is  subject to
retroactive  adjustments due to prior year audits,  reviews and  investigations,
government  fraud  and abuse  initiatives  and other  similar  actions.  Federal
regulations  also provide for  withholding  payments to recoup  amounts  payable
under the programs. While the Company believes it is in material compliance with
applicable  Medicare and  Medicaid  reimbursement  regulations,  there can be no


                                      -8-
<PAGE>

assurance that the Company, pursuant to such audits, reviews and investigations,
among other things,  will be found to be in compliance in all respects with such
reimbursement  regulations.  A determination that the Company is in violation of
any such reimbursement  regulations could result in retroactive  adjustments and
recoupments  and have a material  adverse  effect on the Company.  As a Medicaid
provider, the Company also is subject to routine,  unscheduled audits, which may
have an adverse impact on the Company's results of operations.

Risks Related to Federal and State Regulations.

         The Company is subject to substantial and frequently  changing federal,
state and local  regulations.  The Company must also comply with state licensing
along with  federal  and state  eligibility  standards  for  certification  as a
Medicare  and  Medicaid  provider.  In addition,  new laws and  regulations  are
adopted  periodically  to regulate new and existing  services in the health care
industry. Changes in laws or regulations or new interpretations of existing laws
or  regulations  can have a  dramatic  effect on  operating  methods,  costs and
reimbursement  amounts  provided by  government  and other  third-party  payers.
Federal laws governing the Company's  activities  include regulation of Medicare
reimbursement and certification and certain financial  relationships with health
care providers (collectively,  the "fraud and abuse laws"). Although the Company
intends to comply  with all  applicable  federal and state fraud and abuse laws,
these  laws are not  always  clear and may be  subject  to a range of  potential
interpretations.  (For  further  discussion  on such fraud and abuse  laws,  see
"Government  Regulation and Licensing - Medicare Fraud and Abuse"). There can be
no assurance that administrative or judicial  clarification or interpretation of
existing  laws  or  regulations,   or  legislative  enactment  of  new  laws  or
regulations,  will  not  have a  material  adverse  effect  on the  Company.  In
addition,  the Balanced  Budget Act of 1997,  as amended (the  "Balanced  Budget
Act"),  introduced  several government  initiatives  causing changes to Medicare
reimbursement. These changes have resulted in the Company experiencing a decline
in revenue from its Medicare  certified nursing agency.  (For further discussion
on  the  Balanced  Budget  Act,  see  "Government  Regulation  and  Licensing  -
Medicare").  There can be no assurance that federal,  state or local governments
will not change existing standards or impose additional  standards.  Any failure
to comply with existing or future standards could have a material adverse effect
on the Company.

         In October 2003, New England received a subpoena from the United States
Attorney's Office in New Haven,  Connecticut.  The subpoena sought production of
documents in  connection  with an  investigation  into  possible  violations  of
certain federal health care laws. The Company  believes that the  investigation,
which  the  Company   understands  is  being   conducted  in  parallel  with  an
investigation by state of Connecticut authorities, seeks evidence of potentially
fraudulent claims that may have been submitted by psychiatric nurses employed by
New  England.  The  Company  cannot  now  predict  the  course or outcome of the
investigation  or whether  additional  information  will be sought.  The Company
believes  that the  investigation  extends to certain other  competitors  in the
Connecticut market for psychiatric  nursing.  New England has produced documents
in response to the  subpoena  and  intends to  continue  to  cooperate  with the
investigation.

         In the event that the  government  investigation  uncovers a fraudulent
scheme and New  England is  convicted  of  participating  in such a scheme,  the
penalties could include (1) fines and  restitution in excess of $1,000,000,  (2)
organizational probation that could include requirements such as court-monitored
supervision and termination of responsible employees,  officers and/or directors
and (3)  suspension  or debarment  from  federally  funded  programs.  Ancillary
consequences could include: (1) criminal  prosecution of responsible  employees,
officers and  directors,  (2) civil  enforcement  and  penalties and (3) default
under loan and insurance covenants.



                                      -9-
<PAGE>

         On or about  October 8, 2004,  New England was notified by the Division
of Health  Systems  Regulation for the  Connecticut  Department of Public Health
("DPH")  of New  England's  alleged  lack  of  compliance  with a  Condition  of
Participation  and nine standards for continued  Certification for Participation
in the Title XVIII Medicare Program ("Summary  Statement of  Deficiencies").  On
October 12, 2004, New England received notice from DPH of alleged  violations of
Connecticut  state  regulations  based on substantially  the same grounds as the
Summary Statement of Deficiencies.  DPH notified New England that  consideration
for continued Medicare  certification would be based on New England's submission
of a Plan of Correction  addressing the cited  deficiencies and DPH's acceptance
of that Plan of Correction by November 12, 2004.  Although New England  disputes
certain of the  deficiencies  cited by DPH, New England  intends to comply fully
with DPH's direction and has submitted a Plan of Correction and expects that its
Plan of Correction  will be acceptable.  In the event that New England's Plan of
Correction is deemed  unacceptable,  New England would no longer be certified as
an approved provider of services reimbursed under the Medicare program and would
be  prohibited  from  participating  in that  program  as  well as the  Medicaid
program.  Revenues derived from New England's  participation in the Medicare and
Medicaid  programs  for the  fiscal  year  ended  July 31,  2004 were 32% of the
Company's total revenues for such period.

Risks Related to the Company's Exposure to Professional Liabilities.

         Provision  of home health  care  services  entails an inherent  risk of
liability.  Certain participants in the home health care industry may be subject
to lawsuits which may involve large claims and significant  defense costs. It is
expected that the Company periodically will be subject to such suits as a result
of the nature of its  business.  The Company  currently  maintains  professional
liability  insurance  intended to cover such claims in amounts which  management
believes are in accordance  with industry  standards.  There can be no assurance
that the  Company  will be able to obtain  liability  insurance  coverage in the
future on acceptable  terms, if at all. There can be no assurance that claims in
excess  of the  Company's  insurance  coverage  or  claims  not  covered  by the
Company's  insurance  coverage  will not arise.  A successful  claim against the
Company  in excess of the  Company's  insurance  coverage  could have a material
adverse effect on the Company.  Claims against the Company,  regardless of their
merit or  eventual  outcome,  may also  have a  material  adverse  effect on the
Company's ability to attract  customers or to expand its business.  In addition,
one of the Company's  subsidiaries is self-insured for its workers  compensation
and is at risk for claims up to certain levels.

Risks Related to Third Party Payers.

         For the  twelve  months  ended  July  31,  2004,  2003  and  2002,  the
percentage of the Company's revenues derived from Medicare and Medicaid was 48%,
47%, and 50%,  respectively.  The revenues and  profitability of the Company are
affected  by the  continuing  efforts  of all  third-party  payers to contain or
reduce the costs of health care by lowering  reimbursement rates,  narrowing the
scope of covered  services,  increasing case  management  review of services and
negotiating reduced contract pricing.  Any changes in reimbursement levels under
Medicare,  Medicaid  or  other  payer  sources  and any  changes  in  applicable
government  regulations could have a material adverse effect on the Company. See
Item 7 - "Certain  Trends  Expected  to Impact  Future  Results of  Operations".
Changes in the mix of the Company's patients among Medicare,  Medicaid and other
payer sources may also affect the Company's revenues and profitability.



                                      -10-
<PAGE>

Risks Related to the Company's Acquisition Strategy.

         In  recent  years,  the  Company's  strategic  focus  has  been  on the
acquisition of small to medium sized home health care agencies, or of certain of
their assets, in targeted markets.  These acquisitions involve significant risks
and uncertainties,  including  difficulties  integrating  acquired personnel and
other corporate cultures into the Company's business,  the potential loss of key
employees or customers of acquired companies,  the assumption of liabilities and
exposure to unforeseen  liabilities  of acquired  companies and the diversion of
management  attention from existing  operations.  The Company may not be able to
fully  integrate the  operations of the acquired  businesses  with its own in an
efficient and cost-effective manner. The failure to effectively integrate any of
these  businesses  could  have a  material  adverse  effect on the  Company.  In
addition,  the  Company's  growth over the last  several  years has  principally
resulted from  acquisitions and penetration of markets abandoned by competitors.
There can be no  assurance  that the Company  will be able to identify  suitable
acquisitions  or  available  market  share  in the  future  nor  that  any  such
opportunities,  if identified,  will be  consummated  on terms  favorable to the
Company, if at all. In the absence of such successful transactions, there can be
no assurance  that the Company will  experience  further  growth,  nor that such
transactions, if consummated, will result in further growth.

         In addition,  although the Company  attempted  in its  acquisitions  to
determine  the  nature  and  extent  of any  pre-existing  liabilities,  and has
obtained  indemnification  rights from the previous owners for acts or omissions
arising  prior to the date of the  acquisition,  resolving  issues of  liability
between the parties  could involve a  significant  amount of time,  manpower and
expense on the part of the  Company.  If the Company or any of its  subsidiaries
were to be  unsuccessful  in a claim for indemnity from a seller,  the liability
imposed on the Company or its subsidiary could have a material adverse effect on
the Company.

         The  Company  has grown  significantly  over the past few  years.  This
growth,  which has resulted  primarily from  acquisitions  and which  management
intends to continue to pursue,  poses a number of difficulties and risks for the
Company.  As the Company  has grown and may  continue to grow (as to which there
can be no  assurance)  in both  revenue  and  geographical  scope,  such  growth
stretches  the  various   resources  of  the  Company,   including   management,
information systems, regulatory compliance,  logistics and other controls. There
can be no assurance that such resources will keep pace with such growth.  If the
Company does not maintain  such pace,  then its  prospects  would be  materially
adversely affected.

Risks Related to the Company's Dependence on Senior Management.

         The Company believes that the success of its business  strategy and its
ability to operate profitably depends on the continued  employment of its senior
management  team. If any member of the Company's  senior  management team became
unable or  unwilling  to  continue in their  present  positions,  the  Company's
business and financial results could be materially adversely affected.

Competition

         The home health care field is highly competitive in each state in which
the Company  operates.  The Company is competing with numerous other licensed as
well as certified home health care agencies in each of the markets it serves. In
addition,  the Company  competes with  companies  that, in addition to providing
home health aide and skilled nursing services, also, unlike the Company, provide
pharmaceutical  products  and other home  health  care  services  that  generate
additional referrals.  The Company believes it is one of the largest competitors


                                      -11-
<PAGE>

in the  state of  Connecticut.  However,  the  Company  believes  that  numerous
competitors in the other  principal  markets  served by the Company  (i.e.,  the
states of  Massachusetts,  New York and New Jersey) have  substantially  greater
personnel,  financial and other  resources  than the Company.  Competition  also
involves the quality of services provided and the pricing for such services. The
Company's largest  competitors  include Gentiva Health Services,  Inc.,  Premier
Health  Services,  Patient Care,  Inc., New York Health Care,  Inc. and Personal
Touch Home Care, Inc. As a result of changes in Medicare  reimbursement  and the
competitive  pressures of managed care, the home health care industry  continues
to experience  consolidation.  In addition,  the Company  believes that smaller,
less financially  secure home health agencies will continue to find it difficult
to compete for market share and comply with regulatory compliance standards.

         The Company's ability to attract a staff of highly trained personnel is
a material element of its business.  There currently is intense  competition for
qualified  personnel  and there can be no  assurance  that the  Company  will be
successful in maintaining or in securing  additional  qualified  personnel.  The
Company's  competition for personnel comes from other industries as well. If and
to the extent that  reimbursement  rates and other factors  constrain  wages and
other  benefits  to  caregivers,   other  industries  offering  more  attractive
compensation  and other  benefits  also may  attract  eligible  home health care
personnel.   The  Company  recruits  personnel   principally  through  newspaper
advertisements and through referrals from existing personnel.

Customers

         The Company provides its services to four types of payer sources. These
sources include federal and state funded public  assistance  programs  (Medicare
and Medicaid), other third party payers (subcontracts),  insurance companies and
private payers.

         A  substantial  portion  of  the  Company's  revenue  is  derived  from
subcontracts  that the  Company  has with  Medicare  certified  home health care
agencies and long-term  health care provider  programs  that  subcontract  their
patients  to the  Company.  From  time to  time,  some of  these  agencies  have
requested  bids from the home care  agencies to which they  subcontract.  If the
Company is not  successful in  maintaining  these  contracts as they come up for
bid,  it could have a  materially  adverse  effect on the  Company's  results of
operations.

         For the fiscal years ended July 31, 2004,  2003 and 2002,  the State of
Connecticut  Department of Social Services Medical Care  Administration  program
accounted  for 27%,  29% and 32%,  respectively,  of the  Company's  net patient
revenue;  the New  Jersey  Department  of Human  Services  Division  of  Medical
Assistance and Health Services program accounted for 9%, 7% and 8% respectively,
of the Company's net patient  revenue;  and the State of New York  Department of
Social Services  personal care aide program for the counties of Nassau,  Suffolk
and Westchester  accounted for 5%, 5% and 7% respectively,  of the Company's net
patient revenue.  During fiscal year ended July 31, 2004, the Company exited the
Suffolk County  Department of Social Services  personal care aide program.  This
program  accounted  for less than 1% of Company's  net patient  revenue over the
past two  fiscal  years.  The loss of or a  significant  adverse  change  in the
business terms with any of the foregoing customers would have a material adverse
effect on the Company.



                                      -12-
<PAGE>

Government Regulations and Licensing

         The health care industry is highly regulated. The Company's business is
subject to substantial and frequently changing regulations by federal, state and
local  authorities.  The Company  must comply  with state  licensing  along with
federal and state  eligibility  standards  for  certification  as a Medicare and
Medicaid provider.  The ability of the Company to operate profitably will depend
in part upon the Company  obtaining and maintaining  all necessary  licenses and
other approvals in compliance with applicable health care regulations.

         The Health  Insurance  Portability and  Accountability  Act. The Health
Insurance  Portability  and  Accountability  Act  ("HIPAA")  was  enacted by the
Federal  government on August 12, 1996, and requires  organizations to adhere to
certain standards to protect data integrity,  confidentiality  and availability.
HIPAA  mandates,  among other  things,  that the  Department of Health and Human
Services  (the "DHHS") adopt  standards  for the exchange of  electronic  health
information in an effort to encourage overall administrative  simplification and
enhance  the   effectiveness   and  efficiency  of  the  health  care  industry.
Organizations  were required to be in compliance  with certain HIPAA  provisions
relating to security and privacy  beginning  April 14, 2003.  Organizations  are
subject to significant fines and penalties if found not to be compliant with the
provisions  outlined in the  regulations.  Regulations  issued pursuant to HIPAA
impose ongoing obligations relative to training, monitoring and enforcement, and
management  has  implemented   processes  and  procedures  to  ensure  continued
compliance with these regulations.

         Medicare.  Title XVIII of the Social  Security Act authorizes Part A of
the Medicare  program,  the health  insurance  program that pays for home health
care  services  for  covered  persons  (typically,  those  aged 65 and older and
long-term disabled).  Home health care providers may participate in the Medicare
program subject to certain  conditions of participation and upon acceptance of a
provider  agreement  by  the  Secretary  of  Health  and  Human  Services.  Only
enumerated  services,  upon  satisfaction  of  certain  coverage  criteria,  are
eligible  for  reimbursement  as a Medicare  provider.  The Company is currently
Medicare certified in Connecticut and Massachusetts. Approximately 5%, 5% and 3%
of  revenue  for  the  fiscal  years  ended  July  31,  2004,   2003  and  2002,
respectively,  were derived from the Medicare  program (see "Risk Factors -Risks
Related to Federal and State Regulations"  above for a discussion  regarding the
Company's participation in the Connecticut Medicare program).

         Medicare Fraud and Abuse.  Provisions of the Social  Security Act under
Medicare and Medicaid  generally  prohibit  soliciting,  receiving,  offering or
paying,  directly  or  indirectly,  any form of  remuneration  in return for the
referral of  Medicare or state  health  care  program  patients or patient  care
opportunities,  or in return for the  purchase,  lease or order of any  facility
item or service  that is covered by Medicare or state health care  program.  The
federal government has published  regulations that provide exceptions,  or "safe
harbors",  for  business  transactions  that will be deemed not to  violate  the
anti-kickback  statute.  Violations  of the  statute  may  result  in civil  and
criminal penalties and exclusion from participation in the Medicare and Medicaid
programs.  The Company believes that its current operations are not in violation
of the anti-kickback statute.

         Medicaid.  Approximately  43%,  42% and 47% of  revenue  for the fiscal
years ended July 31, 2004, 2003 and 2002, respectively,  were derived from state
sponsored  Medicaid  programs.  Reimbursement  for  home  health  care  services
rendered to eligible  Medicaid  recipients  is made in an amount  determined  in
accordance with procedures and standards  established by state law under federal
guidelines. States differ as to reimbursement policies and rates. The Company is
a licensed  Medicaid provider in Connecticut,  New Jersey,  Massachusetts and in


                                      -13-
<PAGE>

Nassau and Westchester Counties,  New York. Future Medicaid  reimbursement rates
may be reduced in response to state economic and budgetary constraints,  as well
as in response to changes in the  Medicare  program  (see "Risk  Factors  -Risks
Related to Federal and State Regulations"  above for a discussion  regarding the
Company's participation in the Connecticut Medicaid program).

         New  Jersey  Legislation.  During  fiscal  year  ended  July 31,  2003,
legislation was proposed in the state of New Jersey that would have  established
four regional councils to maintain registries of home health care workers and to
regulate various aspects of the home health care industry.

         During the fiscal year ended July 31, 2004,  this proposed  legislation
was defeated.

Item 2.   Properties.

         The Company,  directly or through certain subsidiaries,  leases various
office  facilities under lease agreements with various  expiration dates through
fiscal 2009. The following sets forth the location,  approximate  square footage
and use of each office, and the expiration date of each lease:

<TABLE>
<CAPTION>

                       Approximate                               Expiration Date
Location               Square Feet           Use                     of Lease
--------               -----------           ---                 ---------------
<S>                       <C>        <C>                         <C>
Scarsdale, NY             2,679      Corporate headquarters      October 31, 2008
Queens, NY               12,300      Administrative office       July 31, 2005
Mount Vernon, NY          2,500      Branch office               November 30, 2005
Hempstead, NY             1,528      Satellite office            November 30, 2007
Brooklyn, NY                800      Satellite office            Month-to-Month
Bronx, NY                   648      Satellite office            August 31, 2005
Milford, CT              18,441      Administrative office       March 31, 2006
Cromwell, CT             15,219      Administrative office       September 30, 2005
Norwalk, CT               1,400      Satellite office            Month-to-Month
Hamden, CT                1,875      Satellite office            Month-to-Month
Danbury, CT                 780      Satellite office            Month to Month
Norwich,  CT              1,200      Satellite office            Month to Month
Waterbury,  CT            3,986      Branch office               May 31, 2007
West Hartford, CT         4,455      Branch office               October 31, 2005
Guilford, CT                200      Satellite office            Month-to-Month
Hackensack, NJ            4,281      Administrative office       September 30, 2005
Hackensack, NJ              852      Satellite office            September 30, 2005
Verona, NJ                1,765      Branch office               December 14, 2005
Union City, NJ              300      Satellite office            Month to Month
Newton, MA                3,838      Administrative office       August 31, 2007
Bellingham, MA              260      Satellite office            Month to Month
North Andover, MA           220      Satellite office            July 31, 2005
Framingham, MA              525      Satellite office            Month to Month
Boston, MA                  795      Satellite office            January 31, 2005
Lynn, MA                    412      Satellite office            August 31, 2004*
North Dartmouth, MA         964      Satellite office            Month to Month
Chicopee, MA              1,340      Satellite office            November 30, 2004



                                      -14-
<PAGE>

                       Approximate                               Expiration Date
Location               Square Feet           Use                     of Lease
--------               -----------           ---                 ---------------
North Easton, MA            550      Satellite office            August 31, 2004*
Leominster, MA            1,000      Satellite office            August 31, 2004*
Worcester, MA             1,510      Branch office               October 31, 2006
</TABLE>


         The Company  believes that its office  facilities  are adequate for the
conduct  of  its  existing  operations.  The  Company  regularly  evaluates  the
suitability  and the  overall  adequacy  of its  various  offices.  The  Company
believes  that it will be able to either (i) renew any leases  that will  expire
during  the  current  fiscal  year or (ii) find  adequate  leases in lieu of any
leases that have expired or will expire during the current fiscal year.

         *The  Company is in the process of renewing  such leases for a one year
term and upon substantially the same terms and conditions.

Item 3.   Legal Proceedings.

         The Company and certain of its officers and  directors  (the  "director
defendants") were named as defendants in a consolidated  class action brought on
behalf of certain  shareholders of SunStar  Healthcare,  Inc.  ("SunStar").  The
lawsuit  asserted  alleged  acts  or  omissions,  which  allegedly  resulted  in
misrepresentations or omissions of material information concerning the financial
condition of SunStar. In addition,  the lawsuit alleged that the Company and the
director defendants  exercised control over SunStar. In February 2001, the Court
dismissed the complaint and granted the  plaintiffs  leave to amend.  In October
2001, the Court granted the defendants'  motion to dismiss the amended complaint
with prejudice. Plaintiffs did not appeal this decision.

         In a related  action,  the  director  defendants  were  named in a case
brought by the  Department  of Insurance of the State of Florida as receiver for
SunStar.  The  allegations  in this action were similar to those  alleged in the
class action lawsuit, which was subsequently dismissed. Although the Company was
not  named  in this  action,  the  Company  agreed  to  indemnify  the  director
defendants to the fullest extent  permitted  under its by-laws.  On May 7, 2001,
the Court  granted the  director  defendants'  motion to dismiss and granted the
plaintiff  leave to serve a further  amended  complaint.  On July 24, 2001,  the
plaintiff  served an amended  complaint.  On  September  24,  2001 the  director
defendants filed a motion to dismiss the amended  complaint.  In September 2002,
the director defendants (and certain other defendants) entered into a settlement
agreement  with the plaintiff to resolve this action.  The  settlement  payments
were made in March 2004.  The Company  indemnified  the director  defendants for
their  share  of the  settlement  payments.  Because  the  amount  paid had been
previously  reserved,  the payments had no impact on the Company's July 31, 2004
consolidated statement of earnings.

         In October 2003, New England received a subpoena from the United States
Attorney's Office in New Haven,  Connecticut.  The subpoena sought production of
documents in  connection  with an  investigation  into  possible  violations  of
certain federal health care laws. The Company  believes that the  investigation,
which  the  Company   understands  is  being   conducted  in  parallel  with  an
investigation by state of Connecticut authorities, seeks evidence of potentially
fraudulent claims that may have been submitted by psychiatric nurses employed by
New  England.  The  Company  cannot  now  predict  the  course or outcome of the
investigation  or whether  additional  information  will be sought.  The Company
believes  that the  investigation  extends to certain other  competitors  in the
Connecticut market for psychiatric  nursing.  New England has produced documents
in response to the  subpoena  and  intends to  continue  to  cooperate  with the
investigation.



                                      -15-
<PAGE>

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

         No matters  were  submitted  to a vote of  stockholders  of the Company
during the fourth quarter of the fiscal year ended July 31, 2004.
































                                      -16-
<PAGE>

                                    PART II

Item 5.   Market for Registrant's Common Equity, Related Stockholder Matters and
          Issuer Purchases of Equity Securities.

          (a)      Market Information

         The  Company's  Common  Stock is quoted on the NASDAQ  National  Market
under the symbol NHHC.  The following  table presents the quarterly high and low
bid  quotations  in the  over-the-counter  market,  as reported by the  National
Association  of Securities  Dealers for the two fiscal years ended July 31, 2003
and 2004.  These  quotations  reflect the  inter-dealer  prices,  without retail
mark-up,  mark-down  or  commission  and may not  necessarily  represent  actual
transactions.

<TABLE>
<CAPTION>

                                                                                          Market Prices
                                                                              --------------------------------------
                                                                                       High                 Low
                                                                                       ----                 ---
<C>                                                                                   <C>                  <C>
Year ended July 31, 2003
------------------------

1st Quarter..............................................................             $10.93               $8.25
2nd Quarter..............................................................              10.90                7.82
3rd Quarter..............................................................              10.34                6.35

4th Quarter..............................................................               7.83                6.50


Year ended July 31, 2004
------------------------

1st Quarter..............................................................             $10.40               $6.67
2nd Quarter..............................................................              11.09                8.29
3rd Quarter..............................................................              12.28                9.51
4th Quarter..............................................................              11.75                9.11
</TABLE>

          (b)      Holders

         There were  approximately 161 holders of record of the Company's Common
Stock as of October 22,  2004,  excluding  certain  beneficial  holders that own
their  shares in street  name,  but  including  each firm which holds  shares on
behalf of such beneficial owners.

          (c)      Dividends

         The Company has not  declared or paid cash  dividends  for the last two
fiscal years.  The Board of Directors of the Company did declare a cash dividend
of $0.075 per share of Common  Stock in the fiscal  quarter  ending  October 31,
2004.  The  Company  anticipates  that this  amount  will be paid as a quarterly
dividend  going  forward,  subject  to  the  Board's  discretion,  based  on the
Company's cash requirements.



                                      -17-
<PAGE>

          (d)      Securities Authorized for Issuance Under Equity
                   Compensation Plans.
<TABLE>
<CAPTION>

====================================================================================================================
                                                                                           Number of Securities
                                                                                          Remaining Available for
                               Number of Securities to be   Weighted-Average Exercise      Future issuance Under
                                 Issued Upon Exercise of       Price of Outstanding      Equity Compensation Plans
                                  Outstanding Options,        Options, Warrants and        (Excluding Securities
        Plan Category              Warrants and Rights                Rights             Reflected in Column (a))
--------------------------------------------------------------------------------------------------------------------
                                           (a)                         (b)                           (c)
<S>                                      <C>                         <C>                           <C>
Equity compensation plans
approved by security holders             378,439                     $8.51                         332,011
--------------------------------------------------------------------------------------------------------------------
Equity compensation plans                    N/A                       N/A                             N/A
not approved by security
holders
--------------------------------------------------------------------------------------------------------------------
Total                                    378,439                      $8.51                        332,011
====================================================================================================================
</TABLE>


          (e)      Issuer Purchases of Equity Securities

<TABLE>
<CAPTION>

                                                                               Total Number of         Maximum Number (or
                                                                             Shares Purchased as    Approximate Dollar Value)
                                          Total Number of    Average Price     Part of Publicly     of Shares that may yet be
                Period                        Shares        Paid Per Share     Announced Plans      purchased under the Plans
                ------                        ------        --------------   -------------------    -------------------------
<S>                                               <C>            <C>                <C>                  <C>
May 1, 2004 - May 31, 2004                        1,213          $9.32              1,213                $2,988,694.84

June 1, 2004 - June 30, 2004                        700          $9.82                700                $2,981,820.84

July 1, 2004 - July 31, 2004                     14,399          $9.69             14,399                $2,842,294.53
                                         --------------------------------------------------------------------------------------
                  Total                          16,312          $9.67             16,312                $2,842,294.53
</TABLE>

Effective April 24, 2004, the Company's Board of Directors  extended its program
to repurchase shares for an additional year. Purchases up to $3,000,000 per year
will be made from time to time in open market  transactions,  subject to general
market and other conditions.



                                      -18-
<PAGE>

Item 6.   Selected Financial Data.

<TABLE>
<CAPTION>

                                                                  Fiscal Years Ended July 31,
                                      ------------------------------------------------------------------------------------
                                             2004              2003            2002              2001           2000
                                      ------------------------------------------------------------------------------------
<S>                                       <C>              <C>             <C>                <C>           <C>
   STATEMENT OF OPERATIONS DATA:
   Revenue...........................     $94,592,000      $97,235,000     $82,172,000        $74,492,000   $55,574,000
   Operating expenses................      86,975,000       87,694,000      73,792,000         67,804,000    51,247,000
   Income from operations............       7,617,000        9,541,000       8,380,000          6,688,000     4,327,000
Other income :
    Interest income.............              143,000          143,000         227,000            216,000       220,000
     Gain from sale of
      stock of equity investee...                 ---              ---             ---                ---     1,602,000
   Income before income taxes........       7,760,000        9,684,000       8,607,000          6,904,000     6,149,000
   Provision for income taxes........       3,040,000        3,901,000       3,336,000          2,704,000     2,058,000
   Net income........................       4,720,000        5,783,000       5,271,000          4,200,000     4,091,000
Primary net income per share of
   common stock......................            $.85            $1.04           $0.96              $0.77         $0.74
   Diluted net income per share of
   common stock......................            $.83            $1.01           $0.91              $0.75         $0.74


                                                                          At July 31,
                                      ------------------------------------------------------------------------------------
                                             2004              2003            2002              2001           2000
                                      ------------------------------------------------------------------------------------
BALANCE SHEET DATA:

Total assets.........................     $53,486,000      $48,473,000     $43,512,000        $37,250,000   $30,856,000
Working capital......................      35,169,000       29,551,000      28,232,000         22,138,000    19,312,000
Retained earnings....................      26,342,000       21,622,000      15,839,000         14,784,000    12,274,000
Stockholders' equity.................      49,039,000       43,866,000      38,679,000         32,584,000    28,486,000
</TABLE>

Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations.

General

         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  discussion
should be read in conjunction  with the  consolidated  financial  statements and
notes appearing elsewhere herein.

         The Company is subject to  external  factors  that could  significantly
impact its business,  including  potential  reductions in reimbursement rates by
Medicare,  Medicaid  and other third party  payers for the  Company's  services,
retroactive  adjustments due to prior year audits,  reviews and  investigations,
government  fraud and abuse  initiatives  and other such factors that are beyond
the control of the Company.  These factors could cause future  results to differ
materially from historical results.



                                      -19-
<PAGE>

         As a Medicaid provider, the Company is subject to routine,  unscheduled
audits.  These audits may result in the  application of a  statistically-derived
adjustment factor to the Company's revenues, which may have an adverse impact on
the  Company's  result  of  operations.  Although  the  audits  to date have not
resulted in any material adjustments,  such audits were conducted at a time when
the Company had significantly lower Medicaid revenues. There can be no assurance
that  future  Medicaid  audits  will not have a material  adverse  impact on the
Company.

The Impact of the Balanced Budget Act

         The  Balanced  Budget Act was signed into law in August  1997.  The Act
made significant  changes in the  reimbursement  system for Medicare home health
care services.  The primary change  affecting the Company was a restructuring of
the  reimbursement  system  related  to  Medicare  certified  home  health  care
agencies.  Prior to the Act, Medicare reimbursed  providers on a reasonable cost
basis subject to program-imposed cost per visit limitations.

         Under  the Act,  changes  in  Medicare  home  care  reimbursement  were
scheduled in two phases.  A temporary  or interim  payment  system  ("IPS") took
effect for cost reports  beginning on or after October 1, 1997.  Under IPS, home
health care providers were reimbursed the lowest of (i) their actual costs, (ii)
cost limits based on 105% of median costs of freestanding  home health agencies,
or (iii) an agency-specific per patient cost limit, based on 1994 costs adjusted
for inflation. Under IPS, most Medicare providers were actually reimbursed under
an agency-specific per patient cost limit.  Effective October 1, 2001, under the
prospective  payment system,  Medicare now reimburses  providers a predetermined
base payment. The payment is adjusted for the health condition and care needs of
the beneficiary and is also adjusted for geographic  differences in wages across
the country.  Medicare  provides  home health  agencies with payments for 60-day
"episodes of care".

         The  final  phase  of  the  Act  implemented  a  15%  cut  in  Medicare
reimbursement  rates effective October 1, 2002. In each of the last three fiscal
years,  less than five percent of the Company's net patient  revenue was derived
directly from Medicare,  and accordingly  the change to the prospective  payment
system has not, to date, had a material adverse impact on the Company.  However,
there can be no assurance that the Medicare  prospective payment system will not
adversely  impact the Company's  reimbursement  rates in the future or otherwise
have a material adverse effect on the Company.  The Company's  operations in New
York are dependent upon referrals, primarily from Medicare certified home health
care  agencies,   whose   reimbursement  has  been  adversely  affected  by  the
prospective payment system.  Under the prospective payment system,  there can be
no assurance  that the  Company's  future  referrals  will not result in reduced
reimbursement rates or reduced volume of business.

Recent Acquisitions

         The following  acquisitions were made either directly by the Company or
through one of the Company's  wholly owned  subsidiaries.  With the exception of
the Medical Resources and Accredited acquisitions described below, each of these
acquisitions   complemented   an  existing   business  of  the  Company  in  the
geographical  area in which the  entity  whose  assets  were  acquired  provided
services.  Each of the acquisitions  described below was accounted for utilizing
purchase accounting principles. At the time of its acquisition,  the revenues of
each acquired  business  constituted  less than ten percent of the  consolidated
revenues of the Company.



                                      -20-
<PAGE>

         On October 6, 2004, the Company  acquired  through New England  certain
assets of On Duty  Metropolitan  Connecticut,  LLC,  a  Medicare  certified  and
licensed home health care company  engaged in providing  nursing and home health
care services in New Haven and Fairfield Counties, Connecticut.

         On March 17, 2003,  the Company  acquired  through New England  certain
assets of  Professional  Relief Nurses,  Inc.  ("PRN"),  a licensed and Medicare
certified  home health care company in the state of  Connecticut  that  provided
nursing and home health aide  services in  Hartford,  Litchfield,  New Haven and
Middlesex Counties, Connecticut.

         On December 14, 2002, the Company acquired through  Accredited  certain
assets of Mary Baker's Health Care Services,  Inc.  ("Mary  Baker"),  a licensed
home health care  company in the state of New Jersey that  provided  home health
aide services in Bergen and Passaic Counties, New Jersey.

         On  September  3,  2002,  the  Company,  through  a  then  newly-formed
subsidiary Medical Resources,  acquired certain assets of Medical Resources Inc.
and related entities  ("Medical  Resources").  Medical  Resources  provided home
health aide services throughout Massachusetts.

         On August 25, 2000, the Company  acquired  through  Accredited  certain
assets of Health Force. Health Force's operations included the provision of home
health aide and skilled nursing services in northern and central New Jersey.

         On April 14, 2000,  the Company  acquired  through New England  certain
assets of the Connecticut  operations of U.S.  HomeCare-Connecticut,  a licensed
and Medicare certified home health care company in the state of Connecticut.

         On  November  1, 1999,  the  Company  acquired,  through  wholly  owned
subsidiaries in Connecticut,  certain assets of the Optimum Entities. The assets
were  acquired  from a  court-appointed  Chapter 7  Trustee,  through an auction
process  conducted  at the United  States  Bankruptcy  Court for the District of
Massachusetts.  The Company is operating  the acquired  assets under New England
and a  then  recently  formed  subsidiary,  Connecticut  Staffing.  The  Optimum
Entities  had been  engaged in the  business of  providing  home health care and
staffing related services in Connecticut.

         On October 30, 1998, the Company  acquired all the  outstanding  common
shares of  Accredited.  Accredited  is a licensed  home health care company that
provides home health care services in Bergen,  Hudson,  Passaic,  Essex, Morris,
Union, Somerset and Middlesex Counties, New Jersey.

Critical Accounting Policies

         The Company believes that the most critical accounting policies used in
the  preparation  of its  consolidated  financial  statements are those policies
relating to recognizing net patient  revenue,  determining the value of accounts
receivable, and assessing the value of goodwill and other long-lived assets.

         Net  Patient  Revenue.  The  Company  recognizes  net  patient  revenue
generally on the date services are provided to patients.  Net patient revenue is
recorded  at  amounts  the  Company  expects  to  receive  under   reimbursement
arrangements  with  third-party  payers,  including  private  insurers,  private
payers,  subcontractors,  Medicaid and Medicare.  Because the Company's business
depends upon third-party payers whose  reimbursement  rates and payment policies
are complex and subject to possible  change from time to time,  the Company must
make estimates with respect to certain  amounts it records as the net realizable


                                      -21-
<PAGE>

value of net patient revenue and accounts  receivable.  Because of the potential
for changes in these third-party  reimbursement rates and payment policies,  and
as a result of the  complexity  of  certain  of these  policies,  the  estimated
amounts originally  recorded as net patient revenue and accounts  receivable may
be subject to revision as additional information becomes known.

         Accounts  Receivable.  Accounts  receivable are reduced by an allowance
for possible  losses that provides a reserve with respect to those  accounts for
which net patient  revenue was recognized  but with respect to which  management
subsequently determines that payment is not expected to be received. The Company
analyzes the balances of accounts receivable to ensure that the recorded amounts
properly  reflect the amounts expected to be collected.  This analysis  involves
the  application  of varying  percentages to each accounts  receivable  category
based on the age and the  collectibility  of the receivable.  The result of this
aging  analysis  provides  the initial  estimate of the amount of  uncollectible
accounts receivable. The amount ultimately recorded as the reserve is determined
after  management  also  analyzes  the   collectibility  of  specific  large  or
problematic  accounts on an individual  basis,  as well as the overall  business
climate  and  other  factors.  The  Company's  estimate  of  the  percentage  of
uncollectible  accounts  may change from time to time and any such change  could
have a material  impact on the  Company's  financial  condition  and  results of
operations.

         Goodwill  and  Other  Long-Lived  Assets.  Goodwill  arising  from  the
acquisitions  of businesses is recorded as the excess of the purchase price over
the estimated fair value of the net assets of the businesses acquired. Statement
of  Financial  Accounting  Standards  No. 142  ("Goodwill  and Other  Intangible
Assets") provides that goodwill is to be tested for impairment annually, or more
frequently if circumstances indicate potential impairment.  Consistent with this
standard,  the Company reviews goodwill,  as well as other intangible assets and
long-term assets, for impairment  annually or more frequently as warranted,  and
if  circumstances  indicate  that the recorded  value of any such other asset is
impaired,  such asset is written down to its proper value. The Company currently
does not believe any  impairment of its goodwill or any such other asset existed
at July 31, 2004.  Nevertheless,  future  conditions  or events could  adversely
affect the  recorded  value of  goodwill  or such other  assets.  If any item of
goodwill or such other asset is  determined to be impaired,  an impairment  loss
would be recognized  equal to the amount by which the recorded value exceeds the
estimated fair market value.

Results of Operations
---------------------

(% of net patient revenue)                     Fiscal year ended July 31,
                                               --------------------------
                                       2004             2003               2002
                                       ----             ----               ----

Net patient revenue                     100.0%           100.0%           100.0%
Cost of revenue                          65.4             65.0             63.6
General and administrative               24.8             24.2             25.1
Allowance for possible losses             1.2               --               .1
Amortization of intangibles                .5              1.0              1.0
                                    ---------      -----------      -----------
Total operating expenses                 91.9             90.2             89.8
Income from operations                    8.1              9.8             10.2
Interest income                            .1               .1               .3
                                  ------------     ------------     ------------
Income before income taxes                8.2              9.9             10.5
Provision for income taxes                3.2              4.0              4.1
                                  -----------         --------         --------
Net income                                5.0%             5.9%             6.4%
                                  ===========         ========         ========



                                      -22-
<PAGE>

Certain Trends Expected to Impact Future Results of Operations

         Effective May 1, 2004, the  Connecticut  Department of Social  Services
increased  the  Medicaid  rate  for  certain  nursing  visits.  The  rate  for a
medication   administration   visit,   defined   as   administration   of  oral,
intramuscular    and/or    subcutaneous    medication    by   a   health    care
agency/professional,  was  increased  from $52 to $56.50 for initial  visits and
from $26 to $28.25 for subsequent  visits.  The increase in these rates was made
retroactive to July 1, 2003,  resulting in an increase in net patient revenue of
approximately  $916,000 for the period from July 1, 2003 through April 30, 2004,
all of which was recorded in the results of operations for the fiscal year ended
July 31, 2004. The rate change will impact periods following May 1, 2004, and at
current  levels of operations,  the Company  estimates that the rate change will
result  in an  increase  in net  patient  revenue  of  approximately  $1,050,000
annually. In May 2003, the rates for these nursing visits had been significantly
reduced from $85 to $52 per visit. The Connecticut Department of Social Services
analyzed  the  impact of this rate cut and as a result,  effective  May 1, 2004,
increased the rates retroactive to July 1, 2003.

         Health  Acquisition  Corp.,  d/b/a  Allen  Health  Care  Services,  the
Company's New York licensed home health care  subsidiary,  and District  Council
1707,  American  Federation of State,  County and Municipal  Employees (AFSCME),
concluded  negotiations  on an initial  three-year  labor  contract  that became
effective May 1, 2004. This labor contract provides  "covered" home health aides
with some new benefits,  consisting of an immediate wage  increase,  eligibility
for paid time off, an increase in minimum hourly base rates, holiday premium pay
and representation by the Union in procedures and personnel matters. The Company
does not believe that the labor contract will have a material  adverse effect on
the Company's future results of operations or financial condition.

Year Ended July 31, 2004 Compared to Year Ended July 31, 2003

         Net Patient  Revenue.  For the fiscal year ended July 31, 2004 ("fiscal
2004"), net patient revenue decreased  $2,643,000,  or 2.7%, to $94,592,000 from
$97,235,000  for the fiscal  year  ended July 31,  2003  ("fiscal  2003").  This
decrease  was  primarily  attributable  to (i) a decrease of  $1,879,000  in net
patient  revenue as a result of the  reduced  Medicaid  reimbursement  rates for
certain  nursing  visits in Connecticut  that was effective May 1, 2003,  (ii) a
decrease of  $3,428,000  as a result of fewer hours being  subcontracted  to the
Company from other Medicare  certified agencies in New York and (iii) a decrease
of  $1,246,000  in  staffing  revenue  primarily  as a  result  of  the  Company
terminating  its  staffing  operations  in New York in December  2003 and in New
Jersey in July  2004.  The  decline  in net  patient  revenue  was  offset by an
increase in net patient  revenue of $3,910,000  from the Company's  expansion in
New Jersey and the Company  attaining  Medicare  and Medicaid  certification  in
Massachusetts.

         Gross Profit.  Gross profit  margin  decreased to 34.6% for fiscal 2004
from 35% for fiscal  2003.  This  decrease  was  primarily  attributable  to the
reduced Medicaid  reimbursement  rates for certain nursing visits in Connecticut
and,  to a lesser  extent,  increases  in  direct  payments  to  caregivers  and
increased workers' compensation rates.

         General  and  Administrative.   General  and  administrative   expenses
decreased  $44,000,  or .2%, to $23,503,000  in fiscal 2004 from  $23,547,000 in
fiscal  2003.  This  decrease is primarily  attributable  to the  reductions  in
administrative  personnel  associated  with both the downsizing of the Company's
staffing  operations  and as a  result  of the  Connecticut  reimbursement  rate
reduction in certain  Medicaid  nursing  rates.  As a percentage  of net patient
revenue,  general and administrative  expenses increased to 24.8% in fiscal 2004
from 24.2% in fiscal 2003.



                                      -23-
<PAGE>

         Allowance for Possible  Losses.  The Company  recorded an allowance for
possible  losses of  $1,112,000 in fiscal 2004 as compared to $300,000 in fiscal
2003.  The increase in the allowance  for possible  losses is  attributable  the
Company  establishing  allowances for accounts  receivable balances from certain
Medicare certified home health care agencies and other health care institutions.
As many of these  agencies and  institutions  have been  experiencing  financial
difficulties  and have not made payments in accordance with contract terms,  the
Company  has  reserved  for  possible  future  losses.  The  Company  is closely
monitoring these accounts receivable balances.

         Amortization  of  Intangibles.  Amortization  of intangibles  decreased
$81,000, or 13.7%, to $510,000 in fiscal 2004 from $591,000 in fiscal 2003. This
decrease  is  attributable  to  previous  acquisitions  that have now been fully
amortized.

         Income  from  Operations.  As a result of the  foregoing,  income  from
operations  decreased  $1,924,000,  or 20.2%,  to $7,617,000 in fiscal 2004 from
$9,541,000 in fiscal 2003.

         Interest  Income.  Interest income remained flat at $143,000 for fiscal
2004 as compared to fiscal 2003.  Although the Company has generated higher cash
balances  over the fiscal years,  the decline in interest  rates has reduced the
Company's ability to maximize interest income.

         Income Taxes.  The Company's  effective tax rate  decreased to 39.2% in
fiscal 2004 as compared to 40.3% in fiscal 2003. This decrease was  attributable
to an over accrual of taxes in fiscal 2003.

         Net Income. Net income decreased  $1,063,000,  or 18.4%, to $4,720,000,
or $.83 per diluted share, in fiscal 2004 from $5,783,000,  or $1.01 per diluted
share, in fiscal 2003.

Year Ended July 31, 2003 Compared to Year Ended July 31, 2002

         Net Patient  Revenue.  For fiscal 2003, net patient  revenue  increased
$15,063,000, or 18.3%, to $97,235,000 from $82,172,000 for the fiscal year ended
July 31, 2002 ("fiscal 2002"). Of this increase,  $7,739,000 was attributable to
additional  revenue  generated by the business  acquired in September  2002 from
Medical  Resources;  $5,323,000 was attributable to additional revenue resulting
from  continued  successful  market  penetration  of  existing  markets  and the
Company's other  acquisitions;  and $2,001,000 was attributable to the expansion
of the  Company's  operations  to  include  the  staffing  of  nurses  and other
personnel to hospitals,  nursing  homes and other health care  facilities in New
York and New Jersey.

         Gross Profit.  Gross profit  margin  decreased to 34.6% for fiscal 2004
from 36.4% for fiscal 2002.  This decrease was primarily  attributable  to lower
gross  profit  margins  on  the  new  staffing   operations,   the   Connecticut
reimbursement  rate reduction  effective May 1, 2003,  and certain  increases in
direct payments to care givers.  During fiscal 2003, the Company did not benefit
by any increases in its Medicaid  reimbursement  rates until July 2003 (the last
month of the fiscal year),  when  Medicaid  reimbursement  rates in  Connecticut
increased 3.3% for  comprehensive  skilled nursing visits and 7% for home health
aide  visits;  these  July 2003 rate  increases  were  unrelated  to the type of
nursing visits for which  significant  rate reductions  were  implemented in May
2003.

         General  and  Administrative.   General  and  administrative   expenses
increased  $2,880,000,  or 13.9%, to $23,547,000 in fiscal 2003 from $20,667,000
in fiscal 2002. Of this  increase,  $2,071,000  was  attributable  to additional
administrative  personnel and occupancy  costs related to the business  acquired
from  Medical  Resources;  and the balance of $809,000 was  attributable  to the
opening of an additional  full-service  administrative  office in West Hartford,


                                      -24-
<PAGE>

Connecticut and increases in the Company's  insurance costs over fiscal 2002. As
a  percentage  of net  patient  revenue,  general  and  administrative  expenses
decreased to 24.2% in fiscal 2003 from 25.1% in fiscal 2002.  This  decrease was
primarily  attributable  to the fact that net  patient  revenue  increased  by a
greater percentage than the increase in general administrative expenses.

         Allowance for Possible  Losses.  The Company  recorded an allowance for
possible  losses of  $300,000  in fiscal  2003 as compared to $295,000 in fiscal
2002.

         Amortization  of  Intangibles.  Amortization  of intangibles  increased
$45,000,  or 8.2%, to $591,000 in fiscal 2003 from $546,000 in fiscal 2002. This
increase  resulted from  additional  amortization  attributable  to the business
acquisition  from  Medical   Resources,   offset  by  reduced   amortization  of
intangibles from previous acquisitions that have now been fully amortized.

         Income  from  Operations.  As a result of the  foregoing,  income  from
operations  increased  $1,161,000,  or 13.9%,  to $9,541,000 in fiscal 2003 from
$8,380,000 in fiscal 2002.

         Interest Income. Interest income decreased $84,000, or 37%, to $143,000
in fiscal 2003 from $227,000 in fiscal 2002.  This decrease was  attributable to
the  lower  cash  balances  of the  Company,  as a result  of the  current  year
acquisitions, as well as the continued decline in interest rates.

         Income Taxes.  The Company's  effective tax rate  increased to 40.3% in
fiscal 2003 as compared to 38.8% in fiscal 2002. This increase was  attributable
to higher state income tax rates and a decrease in work  opportunity tax credits
in the current fiscal year.

         Net Income. Net income increased $512,000,  or 9.7%, to $5,783,000,  or
$1.01 per diluted  share,  in fiscal 2003 from  $5,271,000,  or $.91 per diluted
share,  in fiscal 2002.  This  increase and the increase in net patient  revenue
over the fiscal year,  as well as over recent  fiscal  years,  was  attributable
principally to the Company's expansion of its operations through penetrations of
markets vacated by competitors  and the successful  integration of the Company's
acquisitions  over the recent fiscal years. Such increases would not be expected
to continue at the same rate, if at all, in the absence of future  acquisitions,
as to which there can be no assurance.

Financial Condition, Liquidity and Capital Resources

         Current  assets   increased   $5,458,000  to  $39,616,000  and  current
liabilities  decreased  $160,000 to $4,447,000  at July 31, 2004.  These changes
resulted in an increase in working  capital of $5,618,000 to $35,169,000 at July
31, 2004 from $29,551,000 at July 31, 2003. Cash and cash equivalents  increased
$5,933,000 to  $20,185,000  at July 31, 2004 from  $14,252,000 at July 31, 2003.
The increase in cash and working  capital was primarily  attributable to the net
cash provided by operating activities.

         Net cash provided by operating activities was $5,961,000 in fiscal 2004
as compared  with  $4,519,000  in fiscal 2003.  The increase in cash provided by
operating  activities of $1,442,000,  or 32.0%, is attributable to a decrease in
operating assets,  primarily  accounts  receivable,  of $2,459,000,  offset by a
decrease  in  operating  cash  flow of  $849,000  and a  decrease  in  operating
liabilities of $168,000 over fiscal 2003.

         Investing  activities  in fiscal 2004 used cash of $383,000 as compared
to  $5,012,000 in fiscal 2003.  The cash used in investing  activities in fiscal
2004 consisted of the purchase of equipment, offset by the proceeds from sale of
investments.  The cash used in investing  activities in fiscal 2003 consisted of
the purchase of equipment and the purchase of businesses.



                                      -25-
<PAGE>

         Financing  activities  in fiscal  2004  provided  cash of  $355,000  as
compared to cash used of $596,000 in fiscal 2003. The cash provided by financing
activities  in fiscal 2004  consisted of the proceeds from the exercise of stock
options,  offset by the purchase of treasury  stock.  The cash used in financing
activities in fiscal 2003 consisted of the purchase of treasury stock, offset by
the proceeds from the exercise of stock options.

         The nature of the Company's business requires weekly payments to health
care personnel at the time services are rendered. The Company typically receives
payment for these  services  in 90 to 120 days with  respect to  contracted  and
insurance business and 8 to 45 days with respect to certain governmental payers,
such as Medicare and Medicaid programs. Accounts receivable turnover was 74 days
in fiscal 2004, as compared to 68 days in fiscal 2003.

         The  Company has renewed its  $7,500,000  committed  revolving  line of
credit  facility  (the "credit  facility")  with its bank.  The credit  facility
provides  for the  Company  to borrow up to the lesser of  $7,500,000  or 80% of
eligible  accounts  receivable  that are aged less  than 120 days at the  bank's
prime rate or LIBOR plus 2.5%. The credit  facility  expires in October 2005 and
requires the Company to meet certain financial covenants and ratios. The Company
is required to pay .25% commitment fee on unused amounts,  payable  quarterly in
arrears.  At July 31, 2004,  there was no  outstanding  balance under the credit
facility.

         In June 2004, the Board of Directors  extended the Company's program to
repurchase  its  Common  Stock  for  an  additional  year.  Purchases  of  up to
$3,000,000  will be made  from  time to time  in the  open  market  and  through
privately  negotiated   transactions,   subject  to  general  market  and  other
conditions.  The buyback  program will be financed out of existing  cash or cash
equivalents.

         The Company  intends to incur  capital  expenditures  of  approximately
$1,000,000  during the fiscal year ending July 31, 2005 in  connection  with the
proposed  implementation of new computer software systems and hardware.  The new
hardware  would be designed to, among other  things,  update  certain data input
capability  regarding  services  rendered  at  certain  locations.  The  Company
believes  that the software  will  provide  efficiencies  in data  organization,
retrieval and analysis,  both for continuing  operations and in connection  with
certain audits. The Company intends to fund these expenditures, acquisitions and
cash  dividends  declared by the Board of Directors and otherwise meet its short
term and long term  liquidity  needs from its current cash  balances,  cash flow
from operations and its credit facility.

         In the opinion of management,  there will be no material  impact on the
financial  statements  of  the  Company  from  any  recently  issued  accounting
standards.

Inflation and Seasonality

         The rate of inflation had no material  effect on operations  for fiscal
2004.  The effects of inflation  on personnel  costs in the future could have an
adverse  effect on  operations,  as the Company may not be able to increase  its
charges for services rendered. The Company's business is not seasonal.



                                      -26-
<PAGE>

Contractual Obligations

         The Company rents various office facilities through 2008 under terms of
several lease  agreements  that include  escalation  clauses.  At July 31, 2004,
minimum annual rental commitments under  noncancellable  operating leases are as
follows:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------
                                                              Payments due by period
                          ----------------------------------------------------------------------------------------

                          Total           Less than 1 year        1-3 years    3-5 years         More than 5 years
------------------------------------------------------------------------------------------------------------------
<S>                       <C>              <C>                    <C>           <C>                 <C>
Operating Leases          $1,722,000       $1,051,000             $656,000      $15,000             - - - - -
------------------------------------------------------------------------------------------------------------------
Total                     $1,722,000       $1,051,000             $656,000      $15,000             - - - - -
------------------------------------------------------------------------------------------------------------------
</TABLE>

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

         None.

Item 8.   Financial Statements and Supplementary Data.

         The  financial  information  required  by this item is set forth in the
Consolidated Financial Statements on pages F-1 through F-29.

Item 9.   Changes In and Disagreements with Accountants
          on Accounting and Financial Disclosure.

         None.

Item 9A.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

         The Company  maintains  disclosure  controls  and  procedures  that are
designed to ensure that information required to be disclosed in the reports that
the Company is required to file under the  Securities  Exchange Act of 1934 (the
"Exchange Act Reports") is recorded,  processed,  summarized and reported within
the time  periods  specified  in the  SEC's  rules  and  forms,  and  that  such
information  is  accumulated  and  communicated  to  the  Company's  management,
including the principal  executive officer and principal  financial officer,  as
appropriate,  to allow  timely  decisions  regarding  required  disclosure.  The
Company's management necessarily has applied its judgment in assessing the costs
and benefits of such  controls  and  procedures,  which,  by their  nature,  can
provide only reasonable  assurance  regarding  management's  control objectives.
Management  believes that there are reasonable  assurances that our controls and
procedures will achieve management's control objectives.

         Prior to the filing date of this  report,  the  Company  carried out an
evaluation,  under the supervision and with the participation of its management,
including the President and Chief  Executive  Officer and the Vice  President of
Finance and Chief  Financial  Officer,  of the  effectiveness  of the design and
operation  of the  Company's  disclosure  controls  and  procedures  pursuant to
Exchange Act Rule 13a-15 as of July 31, 2004.  Based upon that  evaluation,  the
President  and Chief  Executive  Officer and the Vice  President  of Finance and
Chief Financial  Officer  concluded that the Company's  disclosure  controls and
procedures  are  effective  in  timely  alerting  them to  material  information
relating  to the  Company  (and its  consolidated  subsidiaries)  required to be
included in its Exchange Act Reports.



                                      -27-
<PAGE>

Changes in Internal Controls Over Financial Reporting

         The  evaluation  referred to above did not  identify any changes in the
Company's  internal  controls over financial  reporting that occurred during the
quarter ended July 31, 2004 that have  materially  affected,  or are  reasonably
likely to materially  affect,  the  Company's  internal  control over  financial
reporting.

Item 9B.  Other Information.

         On October  29,  2004,  the  Company's  Board of  Directors  adopted an
amendment  to the  Company's  By-Laws.  The  amendment  added a provision to the
By-Laws explicitly  providing that the directors shall be elected by a plurality
of the  votes of the  shares  present  in person  or  represented  by proxy at a
meeting for such purpose and entitled to vote on the election of directors.































                                      -28-
<PAGE>

                                    PART III

         The  information  required  by each of the items of Part III (Items 10,
11,  12,  13 and 14) is  omitted  from  this  Report.  Pursuant  to the  General
Instruction  G(3) to Form 10-K,  the  information  is included in the  Company's
Proxy  Statement for its 2004 Annual  Meeting of  Stockholders  to be held on or
about December 6, 2004,  and is  incorporated  herein by reference.  The Company
intends  to file  such  Proxy  Statement  with the SEC not  later  than 120 days
subsequent to July 31, 2004.

Item 10.  Directors and Executive Officers of the Registrant.

Item 11.  Executive Compensation.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and
          Related Stockholder Matters.

Item 13.  Certain Relationships and Related Transactions.

Item 14.  Principal Accountant Fees and Services.


                                    PART IV

Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

         (a) The  following  represents a listing of all  financial  statements,
financial statement  schedules and exhibits filed as part of this Report:

Pages F-1 through F-29:  Financial  Statements  and  Supplemental  Material (see
index to the consolidated financial statements).

       Exhibit
       Number                           Document
       ------                           --------

       3.1     Certificate of  Incorporation.  Incorporated  by reference to the
               Registrant's  Registration  Statement  on Form S-1 (No.  2-86643)
               filed September 20, 1983 (the "1983 Form S-1").

       3.2     Certificate  of  Amendment  to   Certificate  of   Incorporation.
               Incorporated  by reference to the  Registrant's  Annual Report on
               Form 10-K for the fiscal year ended July 31, 1992.

       3.3*    Amended By-laws.




                                      -29-
<PAGE>

       Exhibit
       Number                           Document
       ------                           --------

       10.1#   1992  Stock  Option  Plan.   Incorporated  by  reference  to  the
               Registrant's Annual Report on Form 10-K for the fiscal year ended
               July 31, 1993 (the "1993 Form 10-K").

       10.2#   1999  Stock  Option  Plan.   Incorporated  by  reference  to  the
               Registrant's Annual Report on Form 10-K for the fiscal year ended
               July 31, 2000.

       10.3#   Amended and Restated Employment Agreement dated as of November 1,
               2001  between  the   Registrant   and   Frederick   H.   Fialkow.
               Incorporated by reference to the Registrant's Quarterly Report on
               Form 10-Q for the fiscal  quarter  ended  January  31,  2002 (the
               "January 31, 2002 Form 10-Q").

       10.4#   Employment  Agreement  dated as of November  1, 2001  between the
               Registrant and Steven  Fialkow.  Incorporated by reference to the
               January 31, 2002 Form 10-Q.

       10.5#   Employment  Agreement  dated as of November  1, 2001  between the
               Registrant and Robert P. Heller. Incorporated by reference to the
               January 31, 2002 Form 10-Q.

       10.6    Credit  Agreement  dated  October  24,  2001  by  and  among  the
               Registrant  and  certain of its  subsidiaries  and HSBC Bank USA,
               providing a $7.5 million revolving credit facility.  Incorporated
               by reference to the  Registrant's  Quarterly  Report on Form 10-Q
               for the fiscal quarter ended October 31, 2001.

       10.7*   Amendment No. 1, dated October 24, 2003, to Credit Agreement with
               HSBC Bank USA.

       21.1*   List of Subsidiaries.

       23.1*   Consent of Independent Registered Public Accounting Firm.

       31.1*   Rule  13a-14(a)/15d-14(a)  Certification  of Principal  Executive
               Officer.

       31.2*   Rule  13a-14(a)/15d-14(a)  Certification  of Principal  Financial
               Officer.

       32.1*   Section 1350 Certification of Principal Executive Officer.

       32.2*   Section 1350 Certification of Principal Financial Officer.

----------
#     Management contract or compensatory plan or arrangement.
*     Filed herewith


                                      -30-
<PAGE>





National Home Health Care Corp.
               and Subsidiaries








================================================================================
                                               Consolidated Financial Statements
                                                       and Supplemental Material
                                        Years Ended July 31, 2004, 2003 and 2002























                                                                             F-1
<PAGE>


                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                                                        Contents

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

        Report of Independent Registered Public Accounting Firm              F-3

        Consolidated financial statements:
           Balance sheets                                                    F-4
           Statements of earnings                                            F-5
           Statements of changes in stockholders' equity                     F-6
           Statements of cash flows                                          F-7
           Summary of accounting policies                                 F-8-14
           Notes to consolidated financial statements                    F-15-27

        Supplemental material:
           Report of Independent Registered Public Accounting
           Firm on supplemental material                                    F-28
           Schedule II valuation and qualifying accounts                    F-29







                                                                             F-2
<PAGE>


Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
National Home Health Care Corp.
Scarsdale, New York

We have audited the  accompanying  consolidated  balance sheets of National Home
Health Care Corp. and  Subsidiaries as of July 31, 2004 and 2003 and the related
consolidated  statements of earnings,  changes in stockholders'  equity and cash
flows for the years  ended  July 31,  2004,  2003 and 2002.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of National Home Health
Care Corp. and  Subsidiaries at July 31, 2004 and 2003, and the results of their
operations and their cash flows for the years then ended July 31, 2004, 2003 and
2002 in conformity with accounting  principles  generally accepted in the United
States of America.

BDO Seidman, LLP

Valhalla, New York
October 20, 2004


                                                                             F-3
<PAGE>

<TABLE>
<CAPTION>


                                                                                   National Home Health Care Corp.
                                                                                                  and Subsidiaries

                                                                                       Consolidated Balance Sheets
======================================================================================================================


 July 31,                                                                          2004                   2003
----------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                      <C>
 Assets
 Current:
    Cash, (including cash equivalents of $15,964,000 and
      $10,645,000, respectively) (Note 7)                                     $20,185,000              $14,252,000
    Investments                                                                    19,000                   22,000
    Accounts receivable, less allowance for possible losses of
      $1,122,000 and $622,000, respectively (Note 7)                           18,084,000               18,705,000
    Prepaid expenses and other
                                                                                  801,000                  804,000
    Deferred income taxes (Note 6)                                                527,000                  375,000
----------------------------------------------------------------------------------------------------------------------
            Total current assets                                               39,616,000               34,158,000
----------------------------------------------------------------------------------------------------------------------
 Furniture, equipment and leasehold improvements, net (Note 1)                  1,083,000                1,030,000
    Goodwill (Note 2)                                                          10,628,000               10,628,000
    Other intangible assets, net (Note 3)                                       1,589,000                2,099,000
    Deposits and other assets                                                     570,000                  395,000
    Deferred income taxes (Note 6)                                                      -                  163,000
----------------------------------------------------------------------------------------------------------------------
                                                                              $53,486,000              $48,473,000
======================================================================================================================
 Liabilities and Stockholders' Equity
 Current liabilities:
    Accounts payable and accrued expenses (Note 4)                            $ 3,322,000              $ 3,257,000
    Estimated third-party payer settlements                                       696,000                  756,000
    Deferred revenue                                                              402,000                  460,000
    Income taxes payable                                                           27,000                  134,000
----------------------------------------------------------------------------------------------------------------------
            Total current liabilities                                           4,447,000                4,607,000
----------------------------------------------------------------------------------------------------------------------
 Commitments and contingencies (Notes 9 and 10)
    Stockholders' equity (Note 8):
    Common stock, $.001 par value, shares authorized - 20,000,000;
      issued shares - 7,041,388 and 6,903,819, respectively                         7,000                    7,000
    Additional paid-in capital                                                 26,174,000               25,556,000
    Retained earnings                                                          26,342,000               21,622,000
----------------------------------------------------------------------------------------------------------------------
                                                                               52,523,000               47,185,000

    Less treasury stock (1,424,883 and 1,407,571 shares) -
    at cost (Note 11)                                                          (3,484,000)              (3,319,000)
----------------------------------------------------------------------------------------------------------------------
            Total stockholders' equity                                         49,039,000               43,866,000
----------------------------------------------------------------------------------------------------------------------
                                                                              $53,486,000              $48,473,000
======================================================================================================================
                                                                   See accompanying summary of accounting policies
                                                                   and notes to consolidated financial statements.
</TABLE>


                                                                             F-4

<PAGE>

<TABLE>
<CAPTION>

                                                                                         National Home Health Care Corp.
                                                                                                        and Subsidiaries

                                                                                     Consolidated Statements of Earnings
=======================================================================================================================


 Years ended July 31,                                                     2004               2003              2002
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>                <C>               <C>
 Net patient revenue (Note 7)                                         $94,592,000        $97,235,000       $82,172,000
-----------------------------------------------------------------------------------------------------------------------
 Operating expenses:
    Cost of revenue                                                    61,850,000         63,256,000        52,284,000
    General and administrative                                         23,503,000         23,547,000        20,667,000
    Allowance for possible losses                                       1,112,000            300,000           295,000
    Amortization of intangibles                                           510,000            591,000           546,000
-----------------------------------------------------------------------------------------------------------------------
         Total operating expenses                                      86,975,000         87,694,000        73,792,000
-----------------------------------------------------------------------------------------------------------------------
         Income from operations                                         7,617,000          9,541,000         8,380,000
 Other income:
    Interest                                                              143,000            143,000           227,000
-----------------------------------------------------------------------------------------------------------------------
         Income before income taxes                                     7,760,000          9,684,000         8,607,000
 Provision for income taxes (Note 6)                                    3,040,000          3,901,000         3,336,000
-----------------------------------------------------------------------------------------------------------------------
 Net income                                                           $ 4,720,000        $ 5,783,000       $ 5,271,000
=======================================================================================================================
 Net income per common share:
    Basic                                                                $    .85           $   1.04          $    .96
    Diluted                                                              $    .83           $   1.01          $    .91
 Weighted average number of shares outstanding:
    Basic                                                               5,541,730          5,545,953         5,516,689
    Diluted                                                             5,700,770          5,738,267         5,791,911
=======================================================================================================================
                                                                    See accompanying  summary of  accounting   policies
                                                                        and notes to consolidated financial statements.
</TABLE>


                                                                             F-5
<PAGE>

<TABLE>
<CAPTION>


                                                                                                     National Home Health Care Corp.
                                                                                                                    and Subsidiaries

                                                                          Consolidated Statements of Changes in Stockholders' Equity
====================================================================================================================================


                                                Common Stock          Additional                                 Treasury Stock
                                             --------------------      Paid-in        Retained           --------------------------
                                             Shares        Amount      Capital        Earnings              Shares       Amount
                                             ------        ------     ----------      --------              ------       ------
<S>           <C> <C>                      <C>            <C>       <C>            <C>                    <C>         <C>
Balance, July 31, 2001                     6,491,229      $ 6,000   $ 20,306,000   $ 14,784,000           1,310,679   $ (2,512,000)
Net income                                         -            -              -      5,271,000                   -              -
Stock dividend declared April 25, 2002       264,211        1,000      4,216,000     (4,216,000)                  -              -
Exercise of stock options                    147,379            -        554,000              -                   -              -
Tax benefit of stock option exercise               -            -        476,000              -                   -              -
Acquisition of treasury shares                     -            -              -              -              19,300       (207,000)
----------------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 2002                     6,902,819        7,000     25,552,000     15,839,000           1,329,979     (2,719,000)
Net income                                         -            -              -      5,783,000                   -              -
Exercise of stock options                      1,000            -          4,000              -                   -
Acquisition of treasury shares                     -            -              -              -              77,592       (600,000)
----------------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 2003                     6,903,819        7,000     25,556,000     21,622,000           1,407,571   $ (3,319,000)
Net income                                         -            -              -      4,720,000                   -              -
Exercise of stock options                    137,569            -        520,000              -                   -              -
Tax benefit of stock option exercise               -            -         98,000              -                   -              -
Acquisition of treasury shares                     -            -              -              -              17,312       (165,000)
----------------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 2004                     7,041,388      $ 7,000   $ 26,174,000   $ 26,342,000           1,424,883   $ (3,484,000)
==================================================================================================================================
                                                                                    See accompanying summary of  accounting policies
                                                                                     and notes to consolidated financial statements.
</TABLE>



                                                                             F-6
<PAGE>

<TABLE>
<CAPTION>

                                                                                         National Home Health Care Corp.
                                                                                                        and Subsidiaries


                                                                                   Consolidated Statements of Cash Flows
=======================================================================================================================
<S>                                                                    <C>              <C>               <C>
 Years ended July 31,                                                         2004             2003              2002
-----------------------------------------------------------------------------------------------------------------------
 Cash flows from operating activities:
    Net income                                                         $ 4,720,000      $ 5,783,000       $ 5,271,000
-----------------------------------------------------------------------------------------------------------------------
    Adjustments  to  reconcile  net  income to net cash
       provided  by  operating activities:
         Depreciation and amortization                                     847,000          884,000           813,000
         Allowance for possible losses, net of write-offs                  500,000           69,000           174,000
         (Gain) on sale of investments                                      (4,000)               -                 -
         Deferred income taxes                                              11,000          272,000                 -
         Unrealized loss on investments                                          -           13,000            49,000
         Tax benefit realized from the exercise of stock options            98,000                -           476,000
         Changes in assets and liabilities:
               Accounts receivable                                         121,000       (2,392,000)         (573,000)
               Prepaid expenses and other                                 (172,000)        (118,000)          354,000
               Income taxes payable                                       (107,000)         368,000          (259,000)
               Accounts payable and accrued expenses                        65,000         (324,000)          313,000
               Estimated third-party payer settlements                     (60,000)        (156,000)         (178,000)
               Deferred revenue                                            (58,000)         120,000            58,000
-----------------------------------------------------------------------------------------------------------------------
               Net cash provided by operating activities                 5,961,000        4,519,000         6,498,000
-----------------------------------------------------------------------------------------------------------------------
 Cash flows from investing activities:
    Purchase property, plant and equipment                                (390,000)        (306,000)         (185,000)
    Proceeds from sale of investments                                        7,000                -                 -
    Purchase of assets of businesses                                             -       (4,706,000)         (335,000)
    Others                                                                       -                -           (66,000)
-----------------------------------------------------------------------------------------------------------------------
               Net cash used in investing activities                      (383,000)      (5,012,000)         (586,000)
-----------------------------------------------------------------------------------------------------------------------
 Cash flows from financing activities:
    Purchase of treasury stock                                            (165,000)        (600,000)         (207,000)
    Proceeds from exercise of stock options                                520,000            4,000           554,000
-----------------------------------------------------------------------------------------------------------------------
               Net cash provided by (used in) financing activities         355,000         (596,000)          347,000
-----------------------------------------------------------------------------------------------------------------------
 Net increase (decrease) in cash and cash equivalents                    5,933,000       (1,089,000)        6,259,000
 Cash and cash equivalents, beginning of period                         14,252,000       15,341,000         9,082,000
-----------------------------------------------------------------------------------------------------------------------
 Cash and cash equivalents, end of period                              $20,185,000      $14,252,000       $15,341,000
=======================================================================================================================
 Supplemental disclosure of cash flow information:
    Cash paid for:
       Interest                                                        $    21,000      $    20,000       $    13,000
       Income taxes                                                    $ 3,037,000      $ 3,261,000       $ 3,119,000
=======================================================================================================================

                                                                      See accompanying summary of accounting policies
                                                                      and notes to consolidated financial  statements.
</TABLE>


                                                                             F-7
<PAGE>

                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                                  Summary of Accounting Policies
================================================================================


Business                 National Home Health Care Corp. and  Subsidiaries  (the
                         "Company") is a provider of home health care  services,
                         including  nursing care,  personal  care,  supplemental
                         staffing and other  specialized  health services in the
                         northeastern part of the United States.

Principles of            The  consolidated   financial  statements  include  the
Consolidation            accounts  of National  Home  Health Care Corp.  and its
                         wholly-owned subsidiaries. All significant intercompany
                         balances and  transactions  have been eliminated in the
                         consolidated financial statements.

Revenue  Recognition     Net patient  revenues  are  recorded at  estimated  net
and  Allowance           realizable  amounts from patients,  third-party  payers
for Possible Losses      and others for services rendered and includes estimated
                         retroactive  revenue  adjustments  relating  to  future
                         audits,    reviews   and   investigations.    Estimated
                         adjustments  are recorded as reviews are completed.  An
                         allowance  for possible  losses is recorded  based upon
                         management's evaluation of current industry conditions,
                         historical  collection  experience  and other  relevant
                         factors which,  in the opinion of  management,  require
                         recognition in estimating the allowance.

                         Under  Medicaid,   Medicare  and  other   reimbursement
                         programs,   the  Company  is  reimbursed  for  services
                         rendered to covered  program  patients as determined by
                         reimbursement  formulas and  regulations.  To date, the
                         Company  has  not  had  any  material   adjustments  to
                         previously  recorded  amounts.   Laws  and  regulations
                         governing  these  programs  are  complex and subject to
                         interpretation.  As  a  result,  it  is  possible  that
                         recorded estimates will change.

                         The Company is reimbursed by Medicare based on episodes
                         of care.  An  episode of care is defined as a length of
                         care up to sixty days with multiple continuous episodes
                         allowed.  Deferred revenue represents the unearned cash
                         received from an episode of care.


                                                                             F-8

<PAGE>

                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                                  Summary of Accounting Policies
================================================================================


Revenue Recognition      Approximately  48%, 47% and 50% of net patient  revenue
and Allowance for        for the  fiscal  years  ended July 31,  2004,  2003 and
Possible Losses          2002,  respectively,  were  derived  under  federal and
(continued)              state third-party reimbursement programs.

Cash and Cash            For the purposes of the  statements of cash flows,  the
Equivalents              Company   considers   all  highly   liquid   investment
                         instruments  purchased  with a maturity of three months
                         or less to be cash equivalents.

Furniture, Equipment     Furniture,  equipment  and leasehold  improvements  are
and Leasehold            stated at cost.  Depreciation  is being provided on the
Improvements             straight-line method over the estimated useful lives of
                         the assets (generally five to ten years).  Amortization
                         of  leasehold  improvements  is being  provided  on the
                         straight-line  method over the  various  lease terms or
                         estimated useful lives, if shorter.

Goodwill                 In August  2001,  the  Company  adopted  SFAS No.  141,
                         "Business  Combinations"  and No.  142,  "Goodwill  and
                         Intangible  Assets".  SFAS No. 141  requires the use of
                         the purchase method of accounting and prohibits the use
                         of the  pooling-of-interests  method of accounting  for
                         business  combinations  initiated  after June 30, 2001.
                         SFAS No. 141 also requires  that the Company  recognize
                         acquired  intangible  assets apart from goodwill if the
                         acquired  intangible assets meet certain  criteria.  It
                         also requires,  upon adoption of SFAS No. 142, that the
                         Company reclassify,  if necessary, the carrying amounts
                         of intangible assets and goodwill based on the criteria
                         of SFAS No. 141.

                         SFAS  No.  142  requires,   among  other  things,  that
                         companies no longer amortize goodwill, but instead test
                         goodwill for impairment at least annually. In addition,
                         SFAS  No.  142  requires  that  the  Company   identify
                         reporting units for the purpose of assessing  potential
                         future  impairments  of  goodwill,  reassess the useful
                         lives of other existing  recognized  intangible  assets
                         and cease  amortization  of  intangible  assets with an
                         indefinite  useful life. No adjustments  for impairment
                         losses were required.

                                                                             F-9
<PAGE>


                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                                  Summary of Accounting Policies
================================================================================

Goodwill (continued)     The  Company's  previous  business   combinations  were
                         accounted  for by using the purchase  method and, as of
                         August 2001,  the net carrying  amount of goodwill from
                         prior  purchase  transactions  was  approximately  $7.2
                         million.  Annual  amortization  of this  amount  ceased
                         effective August 1, 2001.

Net Income Per           Basic net  income  per share is  computed  by  dividing
Common Share             income   available  to  common   shareholders   by  the
                         weighted-average  number of common shares  outstanding.
                         Diluted earnings per share reflect, in periods in which
                         they  have a  dilutive  effect,  the  impact  of common
                         shares issuable upon exercise of stock options.

                         The  reconciliation  for the years ended July 31, 2004,
                         2003 and 2002 is as follows:

Years ended July 31,                         2004          2003          2002
--------------------------------------------------------------------------------
                                            Shares        Shares        Shares
--------------------------------------------------------------------------------
Average number of shares outstanding       5,541,730     5,545,953     5,516,689
Effect of dilutive securities - common
   stock options                             159,040       192,314       275,222
--------------------------------------------------------------------------------
Diluted shares outstanding                 5,700,770     5,738,267     5,791,911
================================================================================

                         The  number  of  options  that were  anti-dilutive  and
                         excluded from the  computation  for the year ended July
                         31,  2004 was  168,000 and for the years ended July 31,
                         2003 and 2002 was 183,750.

Fair Value of            The  carrying  amount  reported  in  the   consolidated
Financial Instruments    balance sheets for cash, accounts receivable,  accounts
                         payable and  accrued  expenses  approximate  fair value
                         because of the immediate or short-term  maturity of the
                         financial instruments.





                                                                            F-10
<PAGE>


                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                                  Summary of Accounting Policies
================================================================================

Estimated Third-Party    The  amount   represents   overpayments   from  certain
Payer Settlement         third-party  payers.  The Company  anticipates that the
                         third-party payer will recoup these funds in subsequent
                         periods.


Use of Estimates         The  preparation of financial  statements in conformity
                         with generally accepted accounting  principles requires
                         management  to  make  estimates  and  assumptions  that
                         affect the reported  amounts of assets and  liabilities
                         at  the  date  of  the  financial  statements  and  the
                         reported  amounts of revenues and  expenses  during the
                         reporting  period.  Actual  results  could  differ from
                         those  estimates.  Such estimates  relate  primarily to
                         third-party  payer  settlements and valuation  reserves
                         for accounts receivable.

Workers' Compensation    The Company self-insures up to specified limits certain
                         risks related to workers' compensation  liability.  The
                         estimated  costs of existing and expected future claims
                         under the  insurance  program  are  accrued  based upon
                         historical loss trends and may be subsequently  revised
                         based on developments relating to such claims.

Income Taxes             The Company  accounts  for income  taxes under an asset
                         and liability approach that requires the recognition of
                         deferred  tax assets and  liabilities  for the expected
                         future  tax  consequences  of  events  that  have  been
                         recognized in the Company's financial statements or tax
                         returns.   The  effect  on  deferred   tax  assets  and
                         liabilities  of changes in tax rates will be recognized
                         as income or expense in the period  that  includes  the
                         enactment   date.  The  Company  files  a  consolidated
                         federal income tax return with its subsidiaries.






                                                                            F-11
<PAGE>


                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                                  Summary of Accounting Policies
================================================================================

Long-Lived Assets        Long-lived   assets,   such   as   intangible   assets,
                         furniture,  equipment and leasehold  improvements,  are
                         evaluated  for  impairment  when  events or  changes in
                         circumstances  indicate that the carrying amount of the
                         assets  may  not  be  recoverable   through   estimated
                         undiscounted  future  cash  flows from the use of these
                         assets.  When any such impairment  exists,  the related
                         assets will be written down to fair value.

Stock Based              As of July 31,  2004,  the  Company  has a  stock-based
Compensation             employee  compensation plan, which is described in Note
                         9. As allowed by SFAS No. 148  the Company, has elected
                         not to use one of the alternative methods of transition
                         available  for a  voluntary  change  to the fair  value
                         based method of  accounting  for  stock-based  employee
                         compensation.

                         All stock  options have been  granted to employees  and
                         non-employees  at exercise prices equal to or in excess
                         of the market value on the date of the grant.

                         The  Company  has  elected to account  for stock  based
                         compensation following the intrinsic value method under
                         APB Opinion  No. 25,  "Accounting  for Stock  Issued to
                         Employees",  and related  interpretations in accounting
                         for its stock option plan by recording as  compensation
                         expense  the  excess  of the fair  market  value of the
                         underlying  common  stock over the  exercise  price per
                         share as of the date of  grant.  Because  the  exercise
                         price of the Company's  employee  stock options  equals
                         the market price of the underlying stock on the date of
                         grant, no compensation expense was recognized.




                                                                            F-12
<PAGE>


                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                                  Summary of Accounting Policies
================================================================================

Stock Based              SFAS No. 123  requires the Company to provide pro forma
Compensation             information  regarding  net  income  and net income per
(continued)              share as if  compensation  cost for the Company's stock
                         option plan had been  determined in accordance with the
                         fair value based method prescribed in SFAS No. 123. The
                         Company  estimates  the fair value of each stock option
                         at  the   grant   date  by  using   the   Black-Scholes
                         option-pricing   model  with  the  following   weighted
                         average assumptions used for grants since 1992:

Years ended July 31,                        2004           2003           2002
--------------------------------------------------------------------------------
Assumptions
 Dividend yield                              -              -              0.00%
 Volatility                                  -              -             66.00%
 Risk free interest rate                     -              -              5.04%
 Expected lives                              -              -           10 years
================================================================================


                         Under the  accounting  provisions of FASB Statement No.
                         123, the  Company's net income and net income per share
                         would  have  been  adjusted  to the pro  forma  amounts
                         indicated below:


  Years ended July 31,                      2004           2003           2002
--------------------------------------------------------------------------------
Pro forma results
 Net income:
    As reported                         $4,720,000     $5,783,000     $5,271,000
    Pro forma                                  (a)            (a)      5,050,000
 Income per common share-basic:
      As reported                              .85           1.04           0.96
      Pro forma                                (a)            (a)           0.92
 Income per common share-diluted:
      As reported                              .83           1.01           0.91
      Pro forma                                (a)            (a)           0.87
================================================================================
    (a)  No pro forma since  options  were not granted.




                                                                            F-13
<PAGE>



                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                                  Summary of Accounting Policies
================================================================================

Segments                 The Company's management considers its business to be a
                         single  segment  -  Home  Healthcare   Services.   Home
                         Healthcare  Services net patient revenue is provided by
                         health care personnel,  and the Company's customers are
                         similar  for  all  sources  of  net  patient   revenue.
                         Management   evaluates  its  operating  results  on  an
                         integrated basis.

Reclassifications        Certain  reclassifications  have  been  made  in  prior
                         years'    financial    statements    to    conform   to
                         classifications used in the current year.



















                                                                            F-14
<PAGE>


                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================

1.  Furniture,           Furniture,  equipment  and  leasehold  improvements are
    Equipment            stated at cost and are and summarized as follows:
    and Leasehold
    Improvements

 July 31,                                           2004                 2003
--------------------------------------------------------------------------------
 Furniture and equipment                        $ 2,715,000         $ 2,369,000
 Leasehold improvements                             470,000             426,000
--------------------------------------------------------------------------------
                                                  3,185,000           2,795,000
 Less accumulated depreciation and
   amortization                                   2,102,000           1,765,000
--------------------------------------------------------------------------------
                                                $ 1,083,000          $1,030,000
================================================================================


                         Depreciation   expense  in  2004,  2003  and  2002  was
                         $337,000, $292,000 and $267,000, respectively.


2.  Goodwill             Changes in goodwill are as follows:

July 31,                                            2004                 2003
--------------------------------------------------------------------------------
Balance, beginning of year                      $10,628,000         $ 7,366,000
Additions                                                -            3,262,000
--------------------------------------------------------------------------------
Balance, end of year                            $10,628,000         $10,628,000
================================================================================










                                                                            F-15
<PAGE>

                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================

3.  Other Intangible     Other tangible assets are as follows:
    Assets

 July 31,                                           2004                2003
--------------------------------------------------------------------------------
 Gross carrying amount:
    Covenants not to compete                     $1,375,000          $1,375,000
    Patient and other files                       2,796,000           2,796,000
    Contracts                                     1,234,000           1,234,000
--------------------------------------------------------------------------------
                                                  5,405,000           5,405,000
--------------------------------------------------------------------------------
 Accumulated amortization:
    Covenants not to compete                      1,248,000           1,168,000
    Patient and other files                       2,331,000           2,026,000
    Contracts                                       237,000             112,000
--------------------------------------------------------------------------------
                                                  3,816,000           3,306,000
--------------------------------------------------------------------------------
 Balance, end of year                            $1,589,000          $2,099,000
================================================================================


                         The aggregate  amortization expense for the years ended
                         July 31, 2004, 2003 and 2002 was $510,000, $592,000 and
                         $546,000, respectively.


                         Estimated amortization expense is as follows:

Years ending July 31,
--------------------------------------------------------------------------------
2005                                                               $   488,000
2006                                                                   242,000
2007                                                                   199,000
2008                                                                   155,000
2009                                                                   123,000
--------------------------------------------------------------------------------
                                                                    $1,207,000

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








                                                                            F-16
<PAGE>


                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================

3.  Other Intangible     The remaining  weighted-average amortization  period is
    Assets (continued)   as follows:

Year ended July 31,                                              2004
--------------------------------------------------------------------------------
Covenants not to compete                                      2.20 years
Patient and other files                                       2.55 years
Contracts                                                     8.91 years
--------------------------------------------------------------------------------
                                                              2.33 years
================================================================================

                         Other  intangible  assets are being amortized using the
                         straight-line  method  over a  period  of  three to ten
                         years.

4.  Accounts Payable     Accounts payable and accrued expenses are as follows:
    and Accrued
    Expenses

July 31,                                           2004                 2003
--------------------------------------------------------------------------------
Trade accounts payable                          $  174,000          $  299,000
Accrued employee compensation and
  benefits                                       2,644,000           2,432,000
Other                                              504,000             526,000
--------------------------------------------------------------------------------
                                                $3,322,000          $3,257,000
================================================================================





                                                                            F-17

<PAGE>


                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================

5.  Acquisitions         On  September  3, 2002,  the Company  acquired  certain
                         assets of Medical Resources,  Inc. and related entities
                         for $2,623,000 in cash, including  acquisition costs of
                         $73,000. The assets purchased consisted of contracts of
                         $1,235,000,  furniture  and  equipment  of $50,000  and
                         goodwill of $1,338,000.

                         On December  14,  2002,  the Company  acquired  certain
                         assets of Mary Baker's Health Care  Services,  Inc. for
                         $434,000  in  cash,  including   acquisition  costs  of
                         $14,000.  The assets  purchased  consisted of furniture
                         and equipment of $20,000 and goodwill of $414,000.

                         On March 17, 2003, the Company  acquired certain assets
                         of Professional  Relief Nurses,  Inc. for $1,248,000 in
                         cash,  including  acquisition  costs  of  $98,000.  The
                         assets  purchased  consisted of furniture and equipment
                         of $89,000 and goodwill of $1,159,000.

                         The above  acquisitions  have been  recorded  using the
                         purchase method of accounting. Accordingly, the results
                         of  these   operations   have  been   included  in  the
                         accompanying  consolidated  financial  statements since
                         the dates of acquisition.

                         The   effects   of  the  above   acquisitions   on  the
                         consolidated    results   of   operations    were   not
                         significant.















                                                                            F-18
<PAGE>

                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================


6.  Income Taxes         The   provision  for  income  taxes  is  summarized  as
                         follows:

Years ended July 31,                    2004           2003            2002
--------------------------------------------------------------------------------
Current:

   Federal                          $2,205,000     $2,805,000      $2,500,000
   State                               824,000        824,000         836,000
--------------------------------------------------------------------------------
                                     3,029,000      3,629,000       3,336,000
Deferred                                11,000        272,000               -
--------------------------------------------------------------------------------
                                    $3,040,000     $3,901,000      $3,336,000
================================================================================


                         The deferred tax asset consists of the following:


July 31,                                                2004               2003
--------------------------------------------------------------------------------
Current:
    Accrued liabilities and reserves                $527,000           $375,000
Long term:
    Amortization of intangible assets                      -            163,000
--------------------------------------------------------------------------------
                                                    $527,000           $538,000
================================================================================


                         The  reconciliation  of the  statutory  tax rate to the
                         effective tax rate is as follows:

Years ending July 31,                        2004          2003          2002
--------------------------------------------------------------------------------
 Statutory rate                               34%           34%           34%
 State and local taxes
  (net of federal tax effect)                  7             6             6
Federal tax credit                            (1)           (1)           (1)
Other                                         (1)            1             -
--------------------------------------------------------------------------------
Effective rate                                39%           40%           39%
================================================================================




                                                                            F-19
<PAGE>

                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================


7.  Concentrations of    The Company's business is with customers who are in the
    Credit Risk and      healthcare industry or with governmental agencies.
    Major Customers

                         The Company provides temporary health care personnel to
                         in-home  patients and  facilities  in the New York City
                         metropolitan   area,   Connecticut,   New   Jersey  and
                         Massachusetts.  Credit  losses  relating  to  customers
                         historically have been minimal and within  management's
                         expectations.

                         At July 31, 2004, the Company maintained  approximately
                         35% of its cash and cash equivalents with one financial
                         institution.

                         Under   certain    federal   and   state    third-party
                         reimbursement   programs,   the  Company  received  net
                         patient   revenue   of    approximately    $45,159,000,
                         $45,565,000  and  $41,253,000  for the years ended July
                         31, 2004, 2003 and 2002, respectively. At July 31, 2004
                         and  2003,   the  Company  had  aggregate   outstanding
                         receivables   from   federal  and  state   agencies  of
                         $4,852,000 and $4,048,000, respectively.

8.  Stock Options        In 1992,  the Company  adopted an Employee Stock Option
                         Plan (the "Plan") designed to provide incentives to key
                         employees (including directors and officers who are key
                         employees)  and  to   non-employee   directors  of  the
                         Company.  The  Plan  authorizes  the  granting  of both
                         incentive and  non-qualified  stock options to purchase
                         up to 500,000 shares of the Company's  common stock. As
                         of August 1, 2003 and July 31, 2004,  318,139 shares of
                         the  Company's  common  stock  have been  reserved  for
                         future issuance upon the exercise of options designated
                         at either (i) options intended to constitute  incentive
                         stock options  ("ISOs") under the Internal Revenue Code
                         of 1986, as amended, or (ii) nonqualified  options. The
                         Plan expired in July of 2002. Options granted under the
                         Plan  expire  not more than ten years  from the date of
                         grant and vest immediately.




                                                                            F-20
<PAGE>

                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================


8.  Stock Options        In 1999,  the Company  adopted a second  Employee Stock
    (continued)          Option  Plan  (the  "1999  Plan").  The  1999  Plan was
                         adopted in  anticipation of expiration of the Plan. The
                         1999 Plan was also  designed to provide  incentives  to
                         key employees (including directors and officers who are
                         key  employees)  and to  non-employee  directors of the
                         Company.  The  Plan  authorizes  the  granting  of both
                         incentive and  non-qualified  stock options to purchase
                         up to 551,250 shares of the Company's  common stock. As
                         of July  31,  2004,  392,311  shares  of the  Company's
                         common stock have been  reserved  for future  issuance.
                         The provisions of the 1999 Plan are consistent with the
                         Plan.  Unless  sooner  terminated,  the 1999  Plan will
                         expire in October 2009.  Options granted under the 1999
                         Plan  expire  not more than ten years  from the date of
                         grant and vest immediately.

                         A summary of the status of the  Company's  stock option
                         plans as of July 31,  2004,  2003 and 2002 and  changes
                         for the years ending on those dates is presented below:

                                                                     Weighted
                                                                     Average
                                        Number of     Expiration     Exercise
                                         Shares         Date          Price
--------------------------------------------------------------------------------
Options outstanding at July 31, 2001     507,966      2004-2009           $ 3.85
Options exercised                       (153,445)         -                 3.61
Options forfeited                         (5,513)         -                 3.65
Options granted                          183,750      2004-2011            13.31
--------------------------------------------------------------------------------
Options outstanding at July 31, 2002     532,758          -                 7.43
Options exercised                         (1,000)       2009                3.84
--------------------------------------------------------------------------------
Options outstanding at July 31, 2003     531,758      2004-2011             7.23
Options exercised                       (137,569)     2004-2009             3.77
Options forfeited                        (15,750)       2011               13.58
--------------------------------------------------------------------------------
Options outstanding at July 31, 2004     378,439      2004-2011           $ 8.51
================================================================================


                              Weighted
                              average     Weighted                    Weighted
                             Remaining    average                     average
   Range of       Number    Contractual   exercise       Number       exercise
Exercise Price  Outstanding    Price        price     excercisable     price
--------------------------------------------------------------------------------
$          3.66    11,024     4.25 years    $  3.66        11,024       $  3.66
$ 3.84  -  4.22   155,315     4.91 years    $  4.04       155,315       $  4.04
$          4.34    44,100     2.42 years    $  4.34        44,100       $  4.34
$13.58  - 14.94   168,000     4.83 years    $ 14.05       168,000       $ 14.05
================================================================================





                                                                            F-21
<PAGE>

                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================


8.  Stock Options        The stock  options  plans are  exercisable  at  various
    (continued)          prices,  none of which  were in  excess  of 110% of the
                         fair  market  value of the  Company's  common  stock at
                         the date of grant.

                         Data  summarizing   year-end  options  exercisable  and
                         weighted  average fair value of options  granted during
                         the years ended July 31,  2004,  2003 and 2002 is shown
                         below:

Options Exercisable                           2004          2003          2002
-------------------------------------- ------------- ------------- -------------
Options exercisable at year-end             378,439       531,758       532,758
Weighted average exercise price              $ 8.51      $   7.23      $   7.43
Weighted average fair value of
  options granted during the year                 -             -          9.61
Weighted average remaining
  contractual life                       5.07 years    6.07 years    7.07 years
-------------------------------------- ------------- ------------- -------------

9.  Commitments,         Employee Savings and Stock Investment Plan
    Contingencies and
    Other Matters        Effective  January 1, 1999,  the  Company  amended  and
                         restated its Employee Savings and Stock Investment Plan
                         organized under Section 401(k) of the Internal  Revenue
                         Code. Under the amended plan,  employees may contribute
                         up to 15%  of  their  salary,  limited  to the  maximum
                         amount  allowable  under federal tax  regulations.  The
                         Company  will match 100% of the first 3% of  employees'
                         contributions  and  50% of the  next  2% of  employees'
                         contributions, provided that the matching contributions
                         on  behalf  of  any  employee  does  not  exceed  4% of
                         employees'  compensation.  The  Company  may also  make
                         additional contributions at its discretion. An employee
                         may invest in Company  stock and several  mutual funds.
                         The  Company's  matching  contributions  for the  years
                         ended  July 31,  2004,  2003 and  2002  were  $676,000,
                         $653,000, and $617,000, respectively.



                                                                            F-22
<PAGE>

                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================


9.  Commitments,         Employment Agreements
    Contingencies and
    Other Matters        The  Company  has  employment   agreements   with  four
    (continued)          executives,  which expire through October 31, 2006. The
                         aggregate  commitment  for  future  salary,   excluding
                         bonuses, is $1,840,000. One agreement also provides for
                         increases  based on  increases  in the  consumer  price
                         index and additional annual compensation based on 4% of
                         pre-tax  income,  as defined,  in excess of $3,000,000.
                         Two   other    agreements    provide   for   additional
                         compensation   based  on  4%  and  1%  of  income  from
                         operations,  as defined,  in excess of  $3,300,000.  In
                         addition,  these  two  agreements  provide  for  annual
                         reviews  and   adjustments  of  the   respective   base
                         salaries.

                         Leases

                         The Company rents  various  office  facilities  through
                         2008 under the terms of several lease  agreements  that
                         include escalation clauses.

                         At July 31, 2004,  minimum  annual  rental  commitments
                         under noncancellable operating leases are as follows:

                         Years ending July 31,
                         -------------------------------------------------------
                         2005                                        $1,051,000
                         2006                                           409,000
                         2007                                           174,000
                         2008                                            73,000
                         2009                                            15,000
                         -------------------------------------------------------
                                                                      $1,722,000
                         =======================================================

                         Rent  expense for the years ended July 31,  2004,  2003
                         and 2002 was approximately $1,187,000,  $1,110,000, and
                         $853,000, respectively.

                         One lease agreement is with a company controlled by the
                         Company's Chairman of the Board. Net rent expense under
                         such lease agreement approximates $213,000 per year.


                                                                            F-23
<PAGE>


                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================

9.  Commitments,         Litigation
    Contingencies and
    Other Matters        The Company and certain of its officers  and  directors
    (continued)          (the "director defendants") were named as defendants in
                         a  consolidated  class  action  brought  on  behalf  of
                         certain   shareholders  of  SunStar  Healthcare,   Inc.
                         ("SunStar").  The  lawsuit  asserted  alleged  acts  or
                         omissions,      which     allegedly     resulted     in
                         misrepresentations or omissions of material information
                         concerning  the  financial  condition  of  SunStar.  In
                         addition,  the lawsuit alleged that the Company and the
                         director defendants  exercised control over SunStar. In
                         February  2001,  the Court  dismissed the complaint and
                         granted the plaintiffs leave to amend. In October 2001,
                         the Court granted the defendants' motion to dismiss the
                         amended  complaint with  prejudice.  Plaintiffs did not
                         appeal this decision.

                         In a related action, the director defendants were named
                         in a case brought by the Department of Insurance of the
                         State  of  Florida  as  receiver   for   SunStar.   The
                         allegations  in  this  action  were  similar  to  those
                         alleged  in  the  class  action   lawsuit,   which  was
                         subsequently  dismissed.  Although  the Company was not
                         named in this action,  the Company  agreed to indemnify
                         the director defendants to the fullest extent permitted
                         under its by-laws.  On May 7, 2001,  the Court  granted
                         the director  defendants' motion to dismiss and granted
                         the  plaintiff   leave  to  serve  a  further   amended
                         complaint.  On July 24, 2001,  the plaintiff  served an
                         amended complaint.  On September 24, 2001, the director
                         defendants  filed  a  motion  to  dismiss  the  amended
                         complaint.  In September 2002, the director  defendants
                         (and   certain   other   defendants)   entered  into  a
                         settlement agreement with the plaintiff to resolve this
                         action.  The  settlement  payments  were  made in March
                         2004. The Company  indemnified the director  defendants
                         for their share of the settlement payments. Because the
                         amount paid had been previously reserved,  the payments
                         had  no  impact  on  the   Company's   July  31,   2004
                         consolidated statements of earnings.


                                                                            F-24

<PAGE>

                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================

9.  Commitments,         Litigation (continued)
    Contingencies and
    Other Matters        In October 2003,  the Company's  Connecticut  Home Care
    (continued)          subsidiary  received a subpoena  from the United States
                         Attorney's  Office  in  New  Haven,  Connecticut.   The
                         subpoena  seeks  production  of documents in connection
                         with  an  investigation  into  possible  violations  of
                         certain federal health care laws. The records sought by
                         the  subpoena  relate to the  subsidiary's  psychiatric
                         nurses.

                         Credit Facility

                         The Company has a $7,500,000  committed  revolving line
                         of credit  facility  (the "credit  facility")  with its
                         bank. The credit  facility allows the Company to borrow
                         up to the  lesser  of  $7,500,000  or  80% of  eligible
                         accounts  receivable  at the bank's prime rate or LIBOR
                         plus 2.5%. The credit  facility  expires on October 23,
                         2005 and requires the Company to meet certain financial
                         covenants and ratios.  The Company is required to pay a
                         .25% commitment fee on unused amounts. At July 31, 2004
                         and 2003  there was no  outstanding  balance  under the
                         credit facility.

10. Stock Dividend       The Board  announced on April 25, 2002 the  declaration
                         of  a  5%  stock  dividend  payable  May  17,  2002  to
                         shareholders  of record on May 10, 2002.  The basic and
                         diluted weighted  average number of shares  outstanding
                         and net  income  per  share  information  for all prior
                         reporting  periods  have been  restated  to reflect the
                         effect of the stock dividend.

11. Treasury Stock       In April 2003,  the Board of  Directors  increased  its
                         annual  program to  repurchase  its  Common  Stock from
                         $1,000,000 to $3,000,000.  Purchases would be made from
                         time to time  in the open market and through  privately
                         negotiated transactions,  subject to general market and
                         other conditions.





                                                                            F-25
<PAGE>

                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================

12. Summarized           Presented   below  is  a  summary   of  the   unaudited
    Quarterly Data       consolidated  quarterly  financial  information for the
    (unaudited)          years  ended  July 31,  2004  and  2003 (in  thousands,
                         except per share data):

                                                    2004
--------------------------------------------------------------------------------
 Quarter                           First      Second        Third        Fourth
--------------------------------------------------------------------------------
 Net patient revenue              $24,414    $22,869      $23,739(a)  $23,570(a)
--------------------------------------------------------------------------------
 Cost of revenue                   16,419     15,105       15,163      15,163
 General and administrative
    expenses                        5,887      5,786        5,895       5,935
 Amortization of intangibles          127        128          128         127
 Allowance for possible
  losses                              105         55          680(b)      272
--------------------------------------------------------------------------------
         Total operating expenses  22,538     21,074       21,866      21,497
--------------------------------------------------------------------------------
 Income from operations             1,876      1,795        1,873       2,073
 Interest income                       25         31           43          44
--------------------------------------------------------------------------------
 Income before income taxes         1,901      1,826        1,916       2,117
 Provision for income taxes           746        693          703         898
--------------------------------------------------------------------------------
 Net income                       $ 1,155    $ 1,133      $ 1,213     $ 1,219
================================================================================
 Net income per common
  share:
   Basic                          $   .21        .21          .22         .22
   Diluted                        $   .20        .20          .21         .21
================================================================================

(a)      includes $790,000 and $126,000 retroactive rate adjustment in the third
         and fourth quarters, respectively.
(b)      includes $600,000 of additional provision for possible losses. 2003

                                                    2003
--------------------------------------------------------------------------------

 Quarter                           First      Second        Third        Fourth
--------------------------------------------------------------------------------
 Net patient revenue              $22,939    $24,643      $25,120     $24,533
--------------------------------------------------------------------------------
 Cost of revenue                   14,740     15,956       16,374      16,186
 General and administrative
    expenses                        5,603      5,982        6,020       5,942
 Amortization of intangibles          140        151          150         150
 Allowance for possible losses         50         50           75         125
--------------------------------------------------------------------------------
         Total operating expenses  20,533     22,139       22,619      22,403
--------------------------------------------------------------------------------
 Income from operations             2,406      2,504        2,501       2,130
 Interest income                       55         35           31          22
--------------------------------------------------------------------------------
 Income before income taxes         2,461      2,539        2,532       2,152
 Provision for income taxes           987      1,065        1,038         811
--------------------------------------------------------------------------------
 Net income                       $ 1,474    $ 1,474      $ 1,494     $ 1,341
================================================================================
 Net income per common share:
   Basic                          $   .26    $   .26      $   .27     $   .24
   Diluted                        $   .26    $   .26      $  .26      $   .24
================================================================================

                                                                            F-26
<PAGE>


                                                 National Home Health Care Corp.
                                                                and Subsidiaries

                                      Notes to Consolidated Financial Statements
================================================================================

13. Subsequent           On October 6, 2004, the Company, through a wholly owned
    Events               subsidiary   acquired   certain   assets   of  On  Duty
                         Metropolitan  Connecticut,  LLC  ("On  Duty").  On Duty
                         provides home health care services in Connecticut.  The
                         purchase  price of  $1,079,000,  including  acquisition
                         costs of $104,000 was financed  using  internal  funds.
                         The acquisition was accounted for as a purchase.

                         On October 12, 2004,  the Company's  Board of Directors
                         declared  a cash  dividend  of $.075  per  share on its
                         common stock, payable on November 5, 2004 to holders of
                         record of its  outstanding  common stock on October 22,
                         2004.




























                                                                            F-27
<PAGE>

                                                           Supplemental Material







































================================================================================
<PAGE>

Report of Independent Registered Public Accounting Firm
   on Supplemental Material

The audits  referred to in our report  dated  October  20, 2004  relating to the
consolidated  financial  statements  of  National  Home  Health  Care Corp.  and
Subsidiaries,  which is  contained  in Item 8 of this Form  10-K,  included  the
audits of the financial  statement schedule listed in the accompanying  Schedule
II for the years ended July 31, 2004,  2003 and 2002.  This financial  statement
schedule is the responsibility of the Company's  management.  Our responsibility
is to express an opinion on this  financial  statement  schedule  based upon our
audits.

In our  opinion  such  financial  statement  schedule  presents  fairly,  in all
material respects, the information set forth therein.

BDO Seidman, LLP

Valhalla, New York
October 20, 2004





















                                                                            F-28
<PAGE>

<TABLE>
<CAPTION>


                                                                                                     National Home Health Care Corp.
                                                                                                                    and Subsidiaries

                                                                                       Schedule II Valuation and Qualifying Accounts


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

         Column A                             Column B                 Column C             Column D          Column E
------------------------------------------------------------------------------------------------------------------------------------
                                                                      Additions
                                                               -----------------------

                                                                               Charged
                                               Balance,        Charged to      to other                        Balance,
                                              beginning         costs and      accounts     Deductions          end of
                 Description                  of period         expenses       describe      describe           period
------------------------------------------------------------------------------------------------------------------------------------

<S>                                            <C>            <C>              <C>          <C>               <C>
Year ended July 31, 2004:
  Allowance deducted from asset account
  Allowance for possible losses                $622,000       $1,112,000       $     -      $612,000(a)       $1,122,000
------------------------------------------------------------------------------------------------------------------------------------
Year ended July 31, 2003:
  Allowance deducted from asset account
  Allowance for possible losses                $691,000       $  300,000       $     -      $369,000(a)       $  622,000
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Year ended July 31, 2002:
  Allowance deducted from asset account
  Allowance for possible losses                $865,000       $  295,000       $     -      $469,000(a)       $  691,000
------------------------------------------------------------------------------------------------------------------------------------

  (a) Represents actual write-offs.                       See accompanying independent accountants' report on supplemental material.
</TABLE>








                                                                            F-29

<PAGE>


                                   SIGNATURES
                                   ----------

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                            NATIONAL HOME HEALTH CARE CORP.



                                            By:  /s/ Robert P. Heller
                                                 -------------------------------
                                                 Robert P. Heller
                                                 Vice President of Finance
                                                 and Chief Financial Officer

Dated:  October 29, 2004

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  this report has been signed on the above date by the following persons
on behalf of the Registrant and in the capacities indicated.

<TABLE>
<CAPTION>

<S>                                     <C>                            <C>

/s/ Frederick H. Fialkow                    October 29, 2004           Chairman of the Board of Directors
---------------------------------
Frederick H. Fialkow



/s/ Steven Fialkow                          October 29, 2004           President, Chief Executive Officer,
---------------------------------                                      Secretary and Director (principal
Steven Fialkow                                                         executive officer)



/s/ Robert P. Heller                        October 29, 2004           Vice President of Finance, Chief
---------------------------------                                      Financial Officer and Treasurer (principal
Robert P. Heller                                                       financial and accounting officer)



/s/ Ira Greifer, M.D.                       October 29, 2004           Director
---------------------------------
Ira Greifer, M.D.



/s/ Bernard Levine, M.D.                    October 29, 2004           Director
---------------------------------
Bernard Levine, M.D.



/s/ Robert Pordy, M.D.                      October 29, 2004           Director
---------------------------------
Robert Pordy, M.D.



/s/ Harold Shulman                          October 29, 2004           Director
---------------------------------
Harold Shulman
</TABLE>


                                      -31-
<PAGE>


                                            Commission File No. 0-12927



                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    EXHIBITS



                                       to



                                    FORM 10-K



                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
           OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, FOR THE
                         FISCAL YEAR ENDED JULY 31, 2004



                         NATIONAL HOME HEALTH CARE CORP.


                                      -32-
<PAGE>

       Exhibit
       Number                           Document
       ------                           --------

       3.1     Certificate of  Incorporation.  Incorporated  by reference to the
               Registrant's  Registration  Statement  on Form S-1 (No.  2-86643)
               filed September 20, 1983 (the "1983 Form S-1").

       3.2     Certificate  of  Amendment  to   Certificate  of   Incorporation.
               Incorporated  by reference to the  Registrant's  Annual Report on
               Form 10-K for the fiscal year ended July 31, 1992.

       3.3*    Amended By-laws.

       10.1    1992  Stock  Option  Plan.   Incorporated  by  reference  to  the
               Registrant's Annual Report on Form 10-K for the fiscal year ended
               July 31, 1993 (the "1993 Form 10-K").

       10.2    1999  Stock  Option  Plan.   Incorporated  by  reference  to  the
               Registrant's Annual Report on Form 10-K for the fiscal year ended
               July 31, 2000.

       10.3    Amended and Restated Employment Agreement dated as of November 1,
               2001  between  the   Registrant   and   Frederick   H.   Fialkow.
               Incorporated by reference to the Registrant's Quarterly Report on
               Form 10-Q for the fiscal  quarter  ended  January  31,  2002 (the
               "January 31, 2002 Form 10-Q").

       10.4    Employment  Agreement  dated as of November  1, 2001  between the
               Registrant and Steven  Fialkow.  Incorporated by reference to the
               January 31, 2002 Form 10-Q.

       10.5    Employment  Agreement  dated as of November  1, 2001  between the
               Registrant and Robert P. Heller. Incorporated by reference to the
               January 31, 2002 Form 10-Q.

       10.6    Credit  Agreement  dated  October  24,  2001  by  and  among  the
               Registrant  and  certain of its  subsidiaries  and HSBC Bank USA,
               providing a $7.5 million revolving credit facility.  Incorporated
               by reference to the  Registrant's  Quarterly  Report on Form 10-Q
               for the fiscal quarter ended October 31, 2001.

       10.7*   Amendment No. 1, dated October 24, 2003, to Credit Agreement with
               HSBC Bank USA.

       21.1*   List of Subsidiaries.

       23.1*   Consent of Independent Registered Public Accounting Firm.

       31.1*   Rule  13a-14(a)/15d-14(a)  Certification  of Principal  Executive
               Officer.


                                      -33-


<PAGE>

       Exhibit
       Number                           Document
       ------                           --------

       31.2*   Rule  13a-14(a)/15d-14(a)  Certification  of Principal  Financial
               Officer.

       32.1*   Section 1350 Certification of Principal Executive Officer.

       32.2*   Section 1350 Certification of Principal Financial Officer.

----------
*   Filed herewith
























                                      -34-