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, 2001             mmission 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,  as amended,  during the  preceding 12 months (or for such shorter  period
that 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]

As of October 26, 2001,  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 $47,544,462, calculated on the basis of the average
closing  bid and  asked  prices 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 outstanding of the Registrant's common stock on October 26,
2001 was 5,200,151.

Portions of the  Registrant's  Proxy  Statement  for its 2001 Annual  Meeting of
Stockholders are incorporated by reference in Part III hereof.


<PAGE>


                                     PART I

ITEM 1.    BUSINESS.

GENERAL

     National Home Health Care Corp. (the  "Company") is a Delaware  corporation
which was  incorporated  in 1983 and completed its initial public  offering that
year.  Formerly Family Treatment Centers of America,  Inc. and then National HMO
Corp.,  in 1991 the Company  changed its name to National Home Health Care Corp.
The Company is a provider of home health care  services in New York,  New Jersey
and Connecticut.

     The Company has four 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.

     In January 1996, the outpatient  medical  service  business of the Company,
formerly  known as Brevard  Medical  Center,  Inc. and First Health,  Inc.,  was
reorganized  as  SunStar   Healthcare,   Inc.   ("SunStar"),   a   newly-formed,
wholly-owned  subsidiary  of the Company.  In May 1996,  SunStar  completed  its
initial public  offering (thus  reducing the Company's  ownership  percentage in
SunStar to  approximately  37.6%)  following a complete change in management and
the adoption of a business plan by new  management  for the  establishment  of a
health maintenance organization. As a result, SunStar was no longer consolidated
with the Company for  accounting  purposes  and the  Company  accounted  for its
investment in SunStar using the equity method of  accounting.  During the fiscal
year ended July 31, 1998,  the  Company's  ownership  percentage  in SunStar was
reduced to 30.5% as a result of the issuance by SunStar of additional  shares of
its common  stock  pursuant to a private  placement.  As of July 31,  2001,  the
Company's  ownership  percentage in SunStar was 21.6% and the Company's value of
its  investment in SunStar was $0. In February  2000,  SunStar's  sole operating
subsidiary effectively discontinued operations.

HEALTH ACQUISITION CORP.
D/B/A ALLEN HEALTH CARE SERVICES

     In October 1986, the Company acquired all of the outstanding  capital stock
of Allen  Health Care.  Allen Health Care is a provider of personal  home health
care  services in New York State.  Services are provided by  registered  nurses,
personal   care  aides,   home  health  aides  and   homemakers   (collectively,
"caregivers"). The Company is licensed by the Public Health Council of the State
of New York  Department  of Health.  Allen Health Care  maintains  its principal
administrative office



                                      -2-
<PAGE>


in Jamaica, New York and has branch offices in Lindenhurst and Mount Vernon, New
York.  Case  coordinating  of patients is performed at these three  offices.  In
addition,  the company 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, Suffolk, Westchester,  Queens, Kings,
New York and the Bronx.

     All 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  residential
criminal  background  investigations for all new personnel.  In addition,  urine
drug testing is part of the  pre-employment  screening  process and is performed
annually  and  randomly  thereafter.  In February  1999,  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 the year 2002.

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

     Allen  Health  Care  provides  home  health  care  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,  the 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 in its geographic  region.  In March
1997, Allen Health Care completed the acquisition of certain assets of C.J. Home
Care,  Inc.,  d/b/a Garden City Home Care, a New York  licensed home health care
agency that provided home health aide  services in Nassau  County,  New York. In
May 1997,  Allen Health Care completed the acquisition of certain assets of Home
Health Aides,  Inc. and H.H.A.  Aides,  Inc.,  two New York licensed home health
care agencies that provided home health aide services in both Nassau and Suffolk
Counties,  New York. The latter  acquisition gave the Company an entree into the
Shared Aide Program in Nassau  County.  The Shared Aide Program is a program for
Medicaid  patients that brings together a group of home health aides to care for
patients in one geographic  area, thus  increasing  operating  efficiencies  and
reducing costs.

     In August 1998,  Allen Health Care  completed  the  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. The acquisition  expanded
the geographic presence of the Company and enabled Allen


                                      -3-
<PAGE>

Health  Care 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 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 home health aides working on a steady basis.

NEW ENGLAND HOME CARE, INC.

     In August  1995,  the  Company  acquired  New  England in a stock  purchase
arrangement.  New England is a Medicare  certified and licensed home health care
company in  Connecticut.  In October 1998, New England was re-surveyed by JCAHO,
resulting in New England  extending its  accredited  status  through  2001.  New
England provides services throughout the state of 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 agency  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 an administrative office in Cromwell
and  satellite  offices  in  Norwalk,  Hamden,  Waterbury,   Danbury,  Branford,
Hartford, Norwich and Bridgeport,  Connecticut. Case coordinating of patients is
performed at the Milford  administrative  office. 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
Connecticut  Medicaid  Program,  the  Federal  Medicare  Program,  managed  care
companies,  private  payors,  hospices and other Medicare  certified home health
agencies and long-term  care providers  that  subcontract  their patients to New
England.

     New England has expanded its operations in the past year 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 final purchase price of $4,400,000 in cash was determined
through an auction process  conducted at the United States  Bankruptcy Court for
the District of Massachusetts.  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


                                      -4-
<PAGE>

care company engaged in providing home health care services in Connecticut,  for
$300,000 in cash. The acquisition complemented the Company's existing operations
in Connecticut.

     The continued  growth of New England  depends on its ability to recruit and
retain qualified personnel. New England's training program for home health aides
has been  approved  under a  Connecticut  state-approved  program.  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.

     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, cost
reporting  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  and 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.  The company maintains its administrative  office
in Cromwell,  Connecticut.  Staffing services are provided twenty-four hours per
day, seven days per week. Staffing coordinators are in the office from 6 a.m. to
10 p.m.  Weekends,  holidays and after hours are supported by an on-call  system
which pages a staffing coordinator.

     The  company  maintains  a roster of quality  professional  personnel.  The
continued  success  of  Connecticut  Staffing  is  dependent  on its  ability to
maintain  its  steady  roster  of per diem  workers  for  meeting  the  staffing
requirements  of its clients.  The company  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 all of the outstanding  capital stock
of  Accredited.  Accredited is a licensed home health care company that provides
home  health  aide  services  and skilled  nursing  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  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. In March 2001, 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 six months,  through October 2001.
Reimbursement for Accredited's  services is primarily


                                      -5-
<PAGE>

by the State of New Jersey Medicaid Program, Medicare certified home health care
agencies that subcontract their patients to Accredited and private payors.

     In August 2000,  Accredited  completed the acquisition of certain assets of
Health Force Owned, Ltd. and its affiliates (collectively,  "Health Force"). The
acquisition  complemented  the Company's  existing  operations in New Jersey and
also expanded its services to include skilled nursing. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations".

     Accredited's  growth depends on its ability to recruit and retain qualified
home health aides. The company believes that it offers competitive  salaries and
fringe  benefits  and has been able to keep its home health  aides  working on a
steady basis.

ORGANIZATION

     The Company's  corporate  headquarters are located in Scarsdale,  New York,
where all  corporate  administrative  functions  are  performed.  The  Company's
operations are divided among its four operating  subsidiaries,  which operate as
separate  entities  in each state.  Each  subsidiary  has a main  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   professional   malpractice
liability  coverage on  professionals  employed in the  rendering of health care
services providing coverage per occurrence and in the aggregate and coverage for
the customary  risks  inherent in the  operation of business in general.  Recent
market  conditions  with  respect  to  liability   insurance  have  caused  wide
fluctuations in the cost and availability of coverage.  The Company also carries
directors  and  officers  liability  insurance.  While the Company  believes its
insurance  policies  are  adequate  in the amount and  coverage  for its current
operations,  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  26,  2001,  the  Company  had  approximately  2,800 full and
part-time employees of whom approximately 19 were employed in various management
capacities and four (4) were employed in marketing  capacities.  The Company has
no  union  contracts  with  any of  its  employees.  The  Company  believes  its
relationship  with its employees is  satisfactory.  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.

     A majority  of the  employees  of Allen  Health Care have voted in favor of
AFSCME  District  Council 1707 as their  collective  bargaining  representative.
Negotiations  with  that  union  have  commenced,  although  the  terms  of  any
collective bargaining agreement have not been determined.



                                      -6-
<PAGE>

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  discussed  in  other  sections  of this  report.  Some of the
following statements are forward-looking  statements.  See "Item 7. Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Disclosure Regarding Private Litigation Reform Act of 1995."

IF THE  COMPANY IS UNABLE TO ATTRACT  QUALIFIED  CAREGIVERS  FOR ITS HOME HEALTH
CARE BUSINESS AT REASONABLE  COSTS,  IT COULD  INCREASE THE COMPANY'S  OPERATING
COSTS AND NEGATIVELY IMPACT ITS BUSINESS

     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 salaries and benefits  have risen.  The Company may be unable to continue to
increase the number of caregivers that it recruits, decreasing 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  benefits and wages. 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 pass  these  costs on to its
customers,  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,  a majority of the  employees of Allen Health Care have voted in favor
of AFSCME District Council 1707 as their collective  bargaining  representative.
Negotiations  with  that  union  have  commenced,  although  the  terms  of  any
collective  bargaining  agreement  have not  been  determined.  There  can be no
assurance that further unionizing  activity will not occur at other subsidiaries
of the  Company  nor that any such  activity  will not have a  material  adverse
effect on the Company.

THE COMPANY OPERATES IN A HIGHLY  COMPETITIVE  MARKET AND ITS SUCCESS DEPENDS ON
ITS ABILITY TO REMAIN  COMPETITIVE  IN OBTAINING  AND  RETAINING  REFERRALS  AND
CAREGIVERS

     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 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,   as  well  as  identifying  qualified  caregivers  for  specific  job
requirements and providing  qualified  employees in a timely manner. The Company
competes  for  caregivers  based  on the  quantity,  diversity  and  quality  of
assignments  offered,  compensation  packages and the benefits that it provides.
Competition  for referrals and  caregivers  may increase in the future and, as a
result,  the  Company  may not be  able to  remain  competitive.  To the  extent
competitors seek to gain or retain market share by reducing prices or increasing
marketing  expenditures,  the Company  could lose  revenues or customers and its
margins  could  decline,



                                      -7-
<PAGE>

which could have a material  adverse  effect on the Company.  In  addition,  the
development  of  alternative  recruitment  channels  could  lead  the  Company's
customers to bypass its services,  which would also cause the Company's revenues
and margins to decline.

THE COMPANY'S  BUSINESS DEPENDS UPON ITS ABILITY TO SECURE NEW BUSINESS FROM ITS
CUSTOMERS  BECAUSE THE COMPANY DOES NOT HAVE  LONG-TERM  AGREEMENTS OR EXCLUSIVE
CONTRACTS WITH THEM

     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  choose 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.

HEALTHCARE REFORM COULD NEGATIVELY IMPACT THE COMPANY'S BUSINESS  OPPORTUNITIES,
REVENUES AND MARGINS

     The U.S.  government has undertaken  efforts to control growing  healthcare
costs through legislation, regulation and voluntary agreements with medical care
providers  and  drug  companies.  In the  recent  past,  the U.S.  Congress  has
considered several comprehensive healthcare reform proposals. The proposals were
generally  intended to expand  healthcare  coverage for the uninsured and reduce
the growth of total  healthcare  expenditures.  While the U.S.  Congress did not
adopt any comprehensive reform proposals,  members of Congress may raise similar
proposals in the future.  If any of these proposals are approved,  the Company's
current  customers may react by spending less on home health care  services.  If
this were to occur, the Company would have fewer business  opportunities,  which
could have a material adverse effect on its business.

     Furthermore,  third  parties  such  as  health  maintenance  organizations,
increasingly  challenge  the prices  charged  for medical  care.  Failure by the
Company's  current  customers  to obtain  full  reimbursement  from those  third
parties could reduce the demand or the price paid for the Company's services.

IF  THE  COMPANY  IS  FOUND  TO  BE  IN   VIOLATION  OF  MEDICARE  AND  MEDICAID
REIMBURSEMENT  REGULATIONS,  IT COULD BECOME SUBJECT TO 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  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.



                                      -8-
<PAGE>

THE COMPANY  OPERATES  IN A REGULATED  INDUSTRY  AND CHANGES IN  REGULATIONS  OR
VIOLATIONS OF REGULATIONS  MAY RESULT IN INCREASED COSTS OR SANCTIONS THAT COULD
REDUCE ITS REVENUES AND PROFITABILITY

     The Company is subject to  substantial  and  frequently  changing  federal,
state and local  regulation.  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  payors.
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 " -
Medicare  Fraud and Abuse").  There can be no assurance that  administrative  or
judicial  clarification or  interpretation  of existing laws or regulations,  or
legislative  enactments  of new laws or  regulations,  will not have a  material
adverse  effect on the Company.  The Company is subject to state laws  governing
Medicaid,  professional  training,  licensure and financial  relationships  with
physicians.  The  Company's  operations  must comply with all  applicable  laws,
regulations and licensing  standards and all of the Company's  employees who are
caregivers must maintain licenses to provide services offered by 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, which 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 " - 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.

SIGNIFICANT LEGAL ACTIONS COULD SUBJECT THE COMPANY TO SUBSTANTIAL 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.



                                      -9-
<PAGE>

THE COMPANY IS DEPENDENT ON REIMBURSEMENT BY THIRD-PARTY PAYORS

     For the twelve months ended July 31, 2001, 2000 and 1999, the percentage of
the Company's  revenues derived from Medicare and Medicaid was 51%, 36% and 34%,
respectively.  The revenues and profitability of the Company are affected by the
continuing  efforts of all third-party  payors 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  payor  sources and any changes in  applicable  government  regulations
could have a material  adverse effect on the Company.  Changes in the mix of the
Company's  patients  among  Medicare,  Medicaid and other payor sources may also
affect the Company's revenues and profitability.  There can be no assurance that
the Company will continue to maintain its current payor or revenue mix.

THERE IS NO  ASSURANCE  THAT THE COMPANY WILL BE ABLE TO COMPLY WITH NEW FEDERAL
HEALTH CARE INITIATIVES, PARTICULARLY CONCERNING MEDICARE AND MEDICAID

     The health care industry  continues to undergo dramatic  changes.  With the
change in  administration,  new federal  health care  initiatives,  particularly
concerning  Medicare  and  Medicaid,  may be launched.  For example,  the Health
Insurance  Portability and Accountability  Act, introduced in 1996, has mandated
an extensive set of  regulations to protect the privacy of  identifiable  health
information, and is currently scheduled to become effective in early 2002. There
can be no assurance that other equally  sweeping federal health care legislation
will not be adopted in the future.  It is also possible  that  proposed  federal
legislation will include language that provides  incentives to further encourage
Medicare  recipients to shift to Medicare  at-risk  managed care programs.  Some
states are adopting  health care programs and  initiatives as a replacement  for
Medicaid.  There can be no assurance  that the adoption of such  legislation  or
other changes in the  administration or  interpretation  of governmental  health
care  programs or  initiatives  will not have a material  adverse  effect on the
Company.

THERE CAN BE NO  ASSURANCE  (I) THAT THE  COMPANY  WILL BE ABLE TO  SUCCESSFULLY
COMPLETE THE INTEGRATION OF ITS RECENT ACQUISITIONS AND MARKET PENETRATIONS,  OR
(II) THAT THE COMPANY WOULD BE SUCCESSFUL IN CLAIMS, IF ANY, FOR INDEMNIFICATION
FROM SELLERS IN SUCH TRANSACTIONS

     In recent years,  the Company's  strategic  focus was on the acquisition of
small to medium  sized home health care  providers  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  either  of these  businesses  could  have a
material adverse effect on the Company.  In addition,  the Company's growth over
the last  several  years  principally  has been the result of  acquisitions  and
penetrations 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



                                      -10-
<PAGE>

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 generally
has the  right to seek  indemnification  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.

DIFFICULTIES   IN  MAINTAINING   THE  COMPANY'S   MANAGEMENT   INFORMATION   AND
COMMUNICATIONS  SYSTEMS  MAY  RESULT IN  INCREASED  COSTS  THAT MAY  REDUCE  THE
COMPANY'S PROFITABILITY

     The  Company's  ability to deliver  its home  health  care  services to its
customers  and manage its  internal  systems  depends to a large extent upon the
performance of the Company's management information and communications  systems.
If these systems do not adequately support the Company's  operations,  or if the
Company is required to incur significant  additional costs to maintain or expand
these systems,  its business and financial results could be materially adversely
affected.

THE LOSS OF KEY SENIOR MANAGEMENT PERSONNEL COULD ADVERSELY AFFECT THE COMPANY'S
ABILITY TO REMAIN COMPETITIVE

     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 become
unable or unwilling to continue in his 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. Competition also involves the quality of services provided
and  the  pricing  for  such  services.  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 recruits  personnel  principally  through newspaper  advertisements  and
through referrals from existing personnel.



                                      -11-
<PAGE>

CUSTOMERS

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

     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  came up for  bid,  it  could  have a
materially adverse effect on the Company's results of operations.

     One or  more  customers  have  each  accounted  for  more  than  10% of the
Company's  revenue.  For the fiscal  years ended July 31,  2001,  2000 and 1999,
Visiting  Nurse  Service of New York,  a  non-profit  Medicare  home health care
agency,  accounted for 6%, 10% and 16%, respectively,  of the Company's revenue;
the State of New York Department of Social  Services  personal care aide program
for the counties of Nassau,  Suffolk and  Westchester  accounted for 10%, 9% and
16%,  respectively,  of the  Company's  revenue;  and the  State of  Connecticut
Department of Social Services medical  assistance program accounted for 32%, 17%
and 6%, respectively, of the Company's revenue. The loss of any of the foregoing
customers would have a material adverse effect on the Company.

     Although the Company had been  notified in October  1999 by Visiting  Nurse
Service of New York that commencing in 2000 it would not continue to subcontract
home health aides from Allen  Health  Care,  in each of the last two years Allen
Health Care had its contract with Visiting Nurse Service of New York renewed for
an additional year.

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.



                                      -12-
<PAGE>

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.
Approximately 2%, 6% and 8% of revenue for the fiscal years ended July 31, 2001,
2000 and 1999, respectively, were derived from the Medicare program.

     The Balanced  Budget Act was signed into law in August  1997.  The Balanced
Budget Act made  significant  changes in the  reimbursement  system for Medicare
home  health  services.  The  primary  change  that  affects  the  Company  is a
restructuring  of the  reimbursement  system related to Medicare  certified home
care agencies.

     Under the Balanced  Budget Act,  Medicare home care  reimbursement  changes
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,
Medicare  home  health care  providers  were  reimbursed  the lower 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
98% of 1994 costs  adjusted for  inflation.  Under IPS, most Medicare  providers
were reimbursed under an  agency-specific  per patient cost limit.  Prior to the
implementation  of IPS, Medicare  reimbursed  providers on reasonable cost basis
subject to  program-imposed  cost per visit  limitations.  Effective  October 1,
2000, under the prospective  payment system,  the last remaining phase under the
Balanced  Budget Act,  Medicare now reimburses  providers a  predetermined  base
payment.  The payment is adjusted for the health condition and care needs of the
beneficiary and also is adjusted for the geographic  differences in wages across
the country.  Medicare  provides  home health  agencies with payments for 60-day
"episodes of care". The 60-day episode is the basic unit of payment.  The 60-day
episode  coordinates with the 60-day physician  re-certification  of the plan of
care and with the 60-day  reassessment  of the patient  using the  Outcomes  and
Assessment  Information Set ("Oasis").  Oasis is the outcome study that Medicare
utilized  over a two-year  period to determine  the amount of  reimbursement  to
providers for each 60-day episode.

     As a  result  of the  changes  to  Medicare  reimbursement  imposed  by the
Balanced  Budget Act,  the  Company  experienced  a decline in revenue  from its
Medicare certified nursing agency. In addition,  the Company's operations in New
York and New  Jersey  are  dependent  upon  referrals  primarily  from  Medicare
certified  agencies,  whose  future  reimbursement  may be  adversely  affected.
Accordingly,  there can be no assurance that the Company's future referrals will
not result in reduced  reimbursement  rates or reduced  volume in  business.  To
date, the impact of the change to the  prospective  payment system has not had a
material effect on the Company's operations.

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



                                      -13-
<PAGE>

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  48%,  30% and 27% of revenue for the fiscal years ended July
31,  2001,  2000 and 1999,  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  and in  Nassau,  Suffolk  and
Westchester Counties,  New York. 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.

ITEM 2.    PROPERTIES.

     The  Company,  directly or through  certain  subsidiaries,  leases  various
office  facilities under lease agreements with various  expiration dates through
the year 2005. The following sets forth the location, approximate square footage
and use of each office, and the expiration date of each lease:
<TABLE>
<CAPTION>
<S>                               <C>               <C>                                 <C>


                                   Approximate                                                Expiration Date
Location                           Square Feet      Use                                             of Lease

Scarsdale, NY                         2,679         Corporate headquarters               October 31, 2003
Queens, NY                           12,300         Administrative office                January 31, 2005
Lindenhurst, NY                       1,250         Branch office                        July 31, 2002
Mount Vernon, NY                      2,400         Branch office                        December 31, 2001
Hempstead, NY                         3,800         Satellite office                     September 30, 2004
Brooklyn, NY                            800         Satellite office                     October 31, 2001
Bronx, NY                               648         Satellite office                     August 31, 2001
Milford, CT                          15,036         Administrative office                September 30, 2002
Cromwell, CT                         12,419         Administrative office                June 30, 2003
Norwalk, CT                           1,400         Satellite office                     September 30, 2001
Hamden, CT                              774         Satellite office                     July 31, 2002
Waterbury, CT                         2,000         Satellite office                     October 31, 2003
Danbury, CT                             780         Satellite office                     June 30, 2002
Branford, CT                            200         Satellite office                     August 31, 2001
Hartford, CT                            989         Satellite office                     April 30, 2002
Norwich, CT                           1,200         Satellite office                     April 30, 2002
Bridgeport, CT                          588         Satellite office                     April 30, 2002
Hackensack, NJ                        4,281         Administrative office                September 30, 2005
Verona, NJ                            1,765         Branch office                        October 31, 2001
</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



                                      -14-
<PAGE>

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.

ITEM 3.    LEGAL PROCEEDINGS.

     The Company,  certain of its officers and directors  (who  previously  were
outside directors of SunStar) (the "director defendants") and other parties were
named as defendants in In Re SunStar  Healthcare  Securities  Litigation (United
States  District Court for Middle  District of Florida),  a  consolidated  class
action  brought on behalf of a purported  class of  shareholders  of SunStar who
purchased  stock of SunStar  between June 15, 1998 and  December  14,  1999.  In
February  2001,  the Court  dismissed  the  Consolidated  Amended  Complaint and
granted plaintiffs leave to amend. The plaintiffs' Second  Consolidated  Amended
Complaint (the "Complaint") purported to assert claims under sections 10(b) (and
Rule 10b-5 promulgated  thereunder) and 20(a) of the Securities  Exchange Act of
1934, as amended,  based upon alleged acts or omissions of the  defendants  that
allegedly resulted in  misrepresentations  or omissions of material  information
concerning the financial condition of SunStar (and its subsidiary SunStar Health
Plan,  Inc., a Florida HMO presently in  receivership  ("Plan")).  The Complaint
also alleged that the Company (which  allegedly  held 30.5% of SunStar's  common
stock during  SunStar's fiscal year ended July 31, 1998 and reduced its holdings
to approximately 25% in 1999) and the director defendants exercised control over
SunStar and therefore are liable as "controlling persons" of SunStar. In October
2001,  the Court granted the  defendants'  motion to dismiss the Complaint  with
prejudice.  The Company does not know whether  plaintiffs  will  exercise  their
right to appeal this decision against them.

     In a related action, the director  defendants,  along with thirteen others,
are named as  defendants  in  Department of Insurance of the State of Florida v.
Warren D. Stowell et al. (Circuit Court, Seminole County,  Florida) in which the
plaintiff as the receiver of Plan brings  claims  purporting to arise out of the
same facts  forming the basis of the class  action  described  in the  paragraph
above and other alleged matters  relating to the insolvency of Plan. The Company
understands that a related action also has been brought by the plaintiff against
SunStar's and Plan's auditors.  The Company is not a party to these actions.  An
amended  complaint  relating to the action captioned above was filed on November
17,  2000,  and on February 12, 2001 the director  defendants  filed  motions to
dismiss the action.  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.  The Company  intends to  indemnify  the director  defendants  to the
fullest extent permitted under its by-laws and applicable law in connection with
all of the actions described herein. At this early stage of the action captioned
above,  it is premature to assess the  likelihood  of the Company  incurring any
loss by virtue of the foregoing.

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, 2001.


                                      -15-
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMPANY'S COMMON STOCK
         AND RELATED STOCKHOLDER MATTERS.

     (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, 2000
and 2001.  These  quotations  reflect the  inter-dealer  prices,  without retail
mark-up,  mark-down  or  commission  and may not  necessarily  represent  actual
transactions.
<TABLE>
<CAPTION>
<S>                                                                                <C>                 <C>

                                                                                          Market Prices
                                                                              --------------------------------------
                                                                                    High                Low
Year ended July 31, 2000

1st Quarter..............................................................           $4.75               $3.75
2nd Quarter..............................................................            4.25                3.50
3rd Quarter..............................................................            5.06                3.63
4th Quarter..............................................................            5.00                4.00

Year ended July 31, 2001

1st Quarter..............................................................           $6.94               $4.50
2nd Quarter..............................................................            5.75                5.06
3rd Quarter..............................................................            7.31                5.12
4th Quarter..............................................................           10.03                6.10
</TABLE>

     (B) HOLDERS

     There were  approximately  135  holders of record of the  Company's  common
stock as of October 26, 2001,  excluding shares held by depository companies for
certain beneficial owners.

     (C) Dividends

     The Company has not declared or paid any cash dividends on its common stock
during the last three fiscal  years.  It  anticipates  that for the  foreseeable
future all earnings will be retained for use in its business  and,  accordingly,
it does not  intend  to pay cash  dividends.  On March  13,  2001,  the Board of
Directors of the Company  declared a 5% stock dividend payable on March 23, 2001
to stockholders of record on March 16, 2001.

ITEM 6.  SELECTED FINANCIAL DATA.

     The following table, which presents selected financial data for the Company
for each of the last five fiscal  years,  has been  derived  from the  Company's
audited Consolidated  Financial  Statements.  The data set forth below should be
read in conjunction with the Consolidated Financial Statements in Item 8 of this
Report.

                                      -16-
<PAGE>
<TABLE>
<CAPTION>


                                                                 Fiscal Years Ended July 31,
                                       --------------------------------------------------------------------------------
                                              2001            2000           1999             1998            1997
                                       --------------------------------------------------------------------------------
<S>                                    <C>            <C>            <C>             <C>             <C>

   STATEMENT OF OPERATIONS DATA:
   Revenue .........................   $ 74,492,000   $ 55,574,000   $ 38,518,000    $ 34,313,000    $ 35,070,000
   Operating expenses ..............     67,804,000     51,247,000     36,090,000      31,394,000      31,770,000
   Income from operations ..........      6,688,000      4,327,000      2,428,000       2,919,000       3,300,000
Other income (loss):
    Interest income ................        216,000        220,000        385,000         547,000         446,000
     Gain resulting from sale of
      Subsidiary's stock ...........           --        1,602,000           --              --              --
    Gain resulting from subsidiary's
     stock offering ................           --             --             --           331,000            --
    (Loss) from equity investee ....           --             --         (674,000)     (1,630,000)       (612,000)
   Income before income taxes ......      6,904,000      6,149,000      2,139,000       2,167,000       3,134,000
   Provision for income taxes ......      2,704,000      2,058,000      1,001,000         964,000       1,278,000
   Net income ......................      4,200,000      4,091,000      1,138,000       1,203,000       1,856,000
   Diluted net income per share of
   common stock ....................   $       0.78   $       0.77   $       0.21    $       0.22    $       0.33
</TABLE>

     The above results include the operations of SunStar through April 30, 1996.
Subsequent thereto,  the operations of SunStar are recorded on the equity method
and are reflected above as loss from equity investee.

<TABLE>
<CAPTION>

                                                                       At July 31,
                                    -----------------------------------------------------------------------------------
                                           2001             2000            1999             1998             1997
                                    -----------------------------------------------------------------------------------
<S>                                     <C>               <C>             <C>             <C>             <C>

BALANCE SHEET DATA:

Total assets......................       $37,250,000      $30,988,000     $26,092,000     $25,503,000      $25,224,000
Working capital...................        22,426,000       19,312,000      17,708,000      19,134,000       16,853,000
Retained earnings.................        14,784,000       12,274,000       8,183,000       7,045,000        5,842,000
Stockholders' equity..............        32,584,000       28,486,000      25,013,000      24,281,000       23,360,000
</TABLE>


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

     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 third party



                                      -17-
<PAGE>


payors 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.

     The  implementation  of IPS under the  Balanced  Budget Act  resulted  in a
decrease in Medicare revenue from the Company's  Medicare  certified agency. See
"Item 1. Business - General - Medicare".

     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.  The
acquisition was accounted for utilizing purchase accounting principles.

     On April 14, 2000, the Company  acquired through New England certain assets
of U.S.  HomeCare-Connecticut.  The  acquisition  was  accounted  for  utilizing
purchase  accounting  principles.  See "Item 1. Business - General - New England
Home Care, Inc.".

     On  November  1, 1999,  the Company  acquired  through New England  certain
assets of the Optimum  Entities.  The Company is operating  the acquired  assets
through New England and  Connecticut  Staffing.  The Optimum  Entities  had been
engaged in the  business of  providing  home health  care and  staffing  related
services in Connecticut.  The  acquisition was accounted for utilizing  purchase
accounting principles.  See "Item 1. Business - General - New England Home Care,
Inc.".

     On October 30, 1998, the Company acquired all the outstanding common shares
of  Accredited,  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.  The  acquisition  was accounted for utilizing
purchase  accounting  principles.  See "Item 1.  Business - General - Accredited
Health Services, Inc.".

     On August 10, 1998, the Company  acquired through Allen Health Care certain
assets of Bryan Home Care. The acquisition was accounted for utilizing  purchase
accounting  principles.  See "Item 1.  Business  - General - Health  Acquisition
Corp. d/b/a Allen Health Care Services".

     SunStar,  formerly a wholly owned subsidiary of the Company,  had comprised
the Company's Florida outpatient medical center operations. In May 1996, SunStar
completed its initial public offering  following a complete change in management
and the adoption of a business plan by new management for the establishment of a
health maintenance organization. As a result, SunStar was no longer consolidated
with the Company for  accounting  purposes.  The Company had utilized the equity
method of accounting for its investment in SunStar. In February 2000,  SunStar's
sole operating subsidiary effectively  discontinued  operations.  As of July 31,
2001, the Company's value of its investment in SunStar is $0.


                                      -18-
<PAGE>

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>

                           FISCAL YEAR ENDED JULY 31,

                                                           2001       2000          1999
                                                           ----       ----          ----

<S>                                                        <C>        <C>        <C>
Net patient revenue                                        100.0%     100.0%     100.0%

Cost of revenue                                             65.2       65.6       65.8

General and administrative                                  23.7       24.4       26.4

Bad debt expense                                              .8        1.0         --

Amortization of intangibles                                  1.3        1.2        1.4
                                                             ----       ----       ----

Total operating expenses                                    91.0       92.2       93.6

Income from operations                                       9.0        7.8        6.4

Gain resulting from sale of stock of equity investee          --        2.9         --

(Loss) from equity investee                                   --         --       (1.8)

Interest income                                               .3         .4        1.0
                                                             ----       ----       ----

Income before income taxes                                   9.3       11.1        5.6

Provision for income taxes                                   3.7        3.7        2.6
                                                             ----       ----       ----

Net income                                                   5.6%       7.4%       3.0%
                                                             ====       ====       ====
</TABLE>

YEAR ENDED JULY 31, 2001 COMPARED TO YEAR ENDED JULY 31, 2000

     For the fiscal  year ended  July 31,  2001  ("fiscal  2001"),  net  patient
revenue increased  $18,918,000,  or 34%, to $74,492,000 from $55,574,000 for the
fiscal year ended July 31, 2000 ("fiscal  2000").  This increase is attributable
to  $8,190,000  of net  patient  revenue  realized  from  the  expansion  of the
Company's  operations in Connecticut through the opportunity  represented by the
liquidation of the Optimum Entities, the acquisition in November 1999 of certain
assets of the  Optimum  Entities,  the  acquisition  of  certain  assets of U.S.
HomeCare-Connecticut  in  April  2000  and  the  successful  penetration  of the
available  market share.  In addition,  as a result of the acquisition in August
2000 of certain assets of Health Force in New Jersey,  the Company's net patient
revenue  increased  $3,538,000  over fiscal 2000.  Further,  the  Company's  net
patient  revenue in New York  increased  $7,190,000  as a result of, among other
things, the Company's ability to capitalize on additional market share resulting
from the abandonment of Health Force's operations there.



                                      -19-
<PAGE>

     Gross  profit  margin  increased  to 34.8% for  fiscal  2001 from 34.4% for
fiscal 2000. This slight  increase is  attributable to the higher  reimbursement
rates realized from the expansion in the Connecticut and New Jersey markets.

     General  and  administrative  expenses  increased  $4,091,000,  or 30.2% to
$17,628,000  from  $13,537,000 in fiscal 2000.  This increase is attributable to
the additional  general and  administrative  expenses,  consisting  primarily of
additional  administrative  personnel and occupancy  related costs,  incurred in
connection with the expansion into the markets  previously served by the Optimum
Entities,  U.S.  HomeCare-Connecticut  and Health Force.  As a percentage of net
patient  revenue,  general and  administrative  expenses  decreased  to 23.7% in
fiscal 2001 from 24.4% in fiscal 2000.

     Amortization  of intangibles  increased  $296,000,  or 44.8% to $956,000 in
fiscal 2001 from $660,000 in fiscal 2000.  This increase is  attributable to the
amortization  of goodwill and intangibles  associated  with the  acquisitions of
certain assets of the Optimum Entities,  U.S. Home  Care-Connecticut  and Health
Force.

     The Company  recorded a bad debt  provision of $670,000 in fiscal 2001,  as
compared to $595,000 in fiscal 2000.  The Company has  experienced  increases in
accounts  receivable  with  certain  of  the  Medicare  certified  agencies  and
healthcare facilities with which it contracts.

     As a result of the foregoing,  income from operations increased $2,361,000,
or 54.6% to $6,688,000 in fiscal 2001 from $4,327,000 in fiscal 2000.

     Interest income decreased slightly to $216,000 in fiscal 2001 from $220,000
in fiscal 2000.  This decrease is  attributable to the decline in interest rates
during fiscal 2001.

     During fiscal 2000, the Company  recorded a gain resulting from the sale of
stock of equity investee of $1,602,000 resulting from the sale of 259,510 shares
of SunStar.

     The  Company's  effective  tax rate  increased  to 39.2% in fiscal  2001 as
compared  to 35.5% in fiscal  2000.  This  increase is  attributable  to a lower
effective  tax rate on the  gain  resulting  from  the  sale of stock of  equity
investee in fiscal 2000.  Excluding the gain resulting from the sale of stock of
equity  investee,  the effective tax rate  decreased  from 41.3% in fiscal 2000.
This  decrease  is the  result  of a  benefit  recorded  in  fiscal  2001 for an
over-accrual of taxes in fiscal 2000.

     Net income increased $109,000, or 2.7% to $4,200,000,  or $.78 per share in
fiscal 2001 from $4,091,000, or $.77 per share in fiscal 2000.

YEAR ENDED JULY 31, 2000 COMPARED TO YEAR ENDED JULY 31, 1999

     For fiscal 2000, net patient revenue  increased  $17,056,000,  or 44.3%, to
$55,574,000  from  $38,518,000  for the fiscal year ended July 31, 1999 ("fiscal
1999").  This increase was  attributable  to $17,877,000 of net patient  revenue
realized from the expansion of the Company's  operations in Connecticut  through
the  opportunity  represented by the  liquidation of the Optimum  Entities,  the
acquisition  on November 1, 1999 of certain  assets of the Optimum  Entities and
the successful  penetration of the available market share, offset by the decline
in same source net patient revenue of ($821,000). As a result of such expansion,
net  patient  revenue  from New


                                      -20-
<PAGE>

England  increased  $14,109,000,  or 145.7% to $23,627,000  for fiscal 2000 from
$9,685,000 for fiscal 1999. To a lesser degree,  net patient  revenue  generated
from New England also benefited  from the  acquisition of certain assets of U.S.
HomeCare-Connecticut.  Also as a result of such  expansion,  net patient revenue
from Connecticut Staffing generated net patient revenue of $3,768,000 for fiscal
2000 as compared to $0 for fiscal 1999.  During fiscal 2000, net patient revenue
from Allen Health Care decreased  ($1,282,000),  or (5.2%) to  $23,627,000  from
$24,909,000  for fiscal 1999.  This decrease was  attributable to the decline in
hours and, in some cases,  a decrease in  reimbursement  rates from the Medicare
certified home health care agencies that Allen Health Care contracts  with, as a
result of the  implementation  of IPS. Net patient  revenue from  Accredited for
fiscal 2000 was  $4,385,000  as compared to  $3,924,000  for fiscal  1999.  This
increase was attributable to twelve months of revenue in fiscal 2000 as compared
to nine months of revenue in fiscal 1999.

     Gross  profit  margin  increased  to 34.4% for  fiscal  2000 from 34.2% for
fiscal 1999. This increase was  attributable to the higher  reimbursement  rates
realized  in the  expansion  into the market  previously  served by the  Optimum
Entities and U.S. HomeCare-Connecticut.

     General and  administrative  expenses  increased  $3,354,000,  or 32.9%, to
$13,537,000 in fiscal 2000 from  $10,183,000  in fiscal 1999.  This increase was
attributable to the additional general and  administrative  expenses incurred in
connection with the expansion into the market  previously  served by the Optimum
Entities and U.S. HomeCare-Connecticut.  As a percentage of net patient revenue,
general and administrative expenses decreased to 24.4% in fiscal 2000 from 26.4%
in fiscal 1999.

     The Company  recorded a provision of $595,000 in bad debt expense in fiscal
2000 as compared to $0 in fiscal  1999.  As the Company did not have  experience
with many of the new payor sources with which it started contracting as a result
of the expansion into the new markets in Connecticut,  the Company established a
reserve against its accounts  receivable.  In addition,  the Company experienced
increases in accounts receivable balances with certain of the Medicare certified
agencies with which it contracted.  Accordingly,  the Company  reserved  against
accounts  receivable in the event that some of these  accounts  would have to be
written off.  The Company was closely  monitoring  the credit terms  extended to
these agencies.

     Amortization  of  intangibles  increased  $110,000,  or 20%, to $660,000 in
fiscal 2000 from $550,000 in fiscal 1999. This increase was  attributable to the
amortization  of goodwill and  intangibles  associated  with the  acquisition of
certain  assets of the Optimum  Entities  and U.S.  HomeCare-Connecticut  during
fiscal 2000.

     As a result of the foregoing,  income from operations increased $1,899,000,
or 78.2%, to $4,327,000 in fiscal 2000 from $2,428,000 in fiscal 1999.

     Interest income  decreased  ($165,000),  or (42.9%),  to $220,000 in fiscal
2000 from $385,000 in fiscal 1999.  This decrease was  attributable to cash used
in investing  activities resulting from the acquisition of certain assets of the
Optimum Entities and U.S. HomeCare-Connecticut.

     During fiscal 2000, the Company recorded a gain on sale of subsidiary stock
of  $1,602,000  resulting  from the sale of 259,510  shares of  SunStar.  During
fiscal 1999,


                                      -21-
<PAGE>

the Company recorded a loss from equity investee of ($674,000), representing the
Company's share of the net loss reported by SunStar for the same period.

     The  Company's  effective  tax rate  decreased  to 33.5% in fiscal  2000 as
compared to 46.8% in fiscal 1999. This decrease was attributable to both a lower
effective  tax rate on the sale of SunStar stock in fiscal 2000 and to no income
tax benefit  recorded in fiscal 1999  related to the loss from equity  investee.
Excluding the gain  resulting  from sale of  subsidiary  stock and the loss from
equity  investee,  the effective tax rate increased to 41.3% in fiscal 2000 from
35.6% in fiscal  1999.  This  increase  was the result of a benefit  recorded in
fiscal 1999 for an overacrrual of taxes in the fiscal year ended July 31, 1998.

     Net income increased $2,953,000,  or 259%, to $4,091,000, or $.78 per share
in fiscal 2000 from $1,138,000, or $.21 per share in fiscal 1999.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

     Current assets increased to $27,092,000 and current  liabilities  increased
to $4,666,000,  respectively,  at July 31, 2001. This resulted in an increase in
working capital of $3,114,000  from  $19,312,000 at July 31, 2000 to $22,426,000
at July 31, 2001. Cash and cash equivalents  increased  $4,226,000 to $9,082,000
at July 31, 2001 from  $4,856,000  at July 31, 2000.  This  increase in cash and
working capital is primarily  attributable to the net cash provided by operating
activities, offset by the cash used to acquire certain assets of Health Force in
August 2000.

     Net cash provided by operating  activities was $6,513,000 in fiscal 2001 as
compared  to  $1,305,000  in fiscal  2000.  The  increase  in cash  provided  by
operating  activities of $5,208,000,  or 399%, is attributable to an increase in
operating  cash  flow of  $1,745,000,  net  decreases  in  operating  assets  of
$2,568,000 and net increases in operating liabilities of $895,000.

     Investing  activities in fiscal 2001 used cash of  ($2,185,000) as compared
to cash  used of  ($3,273,000)  in  fiscal  2000.  The  cash  used in  investing
activities in fiscal 2001  consisted of the purchase of certain assets of Health
Force and the purchase of  equipment,  offset by the  proceeds  from the sale of
assets.  The cash used in investing  activities in fiscal 2000  consisted of the
acquisitions  made by the Company and the purchase of  equipment,  offset by the
proceeds of sale of stock of equity  investee,  proceeds of investments  and the
sale of assets.

     Financing  activities in fiscal 2001 used cash of ($102,000) as compared to
($618,000) in fiscal 2000. The cash used in fiscal 2001 reflects the purchase of
treasury shares pursuant to the Company's stock repurchase  plan,  offset by the
proceeds  from the exercise of stock  options and the related tax  benefit.  Net
cash used in  financing  activities  in fiscal  2000  reflects  the  purchase of
treasury shares.

     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  on a basis  of 90 to 120  days  with  respect  to
contracted  and  insurance  business  and 15 to 45 days with  respect to certain
governmental payors, such as Medicare and Medicaid programs. Accounts receivable
turnover was 81 days in fiscal 2001 and 89 days in fiscal 2000.



                                      -22-
<PAGE>

     On October 24, 2001, the Company closed on a $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 on October 23,
2003 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.

     The Company  intends to meet its short term and long term  liquidity  needs
with its current  cash  balances,  cash flow from  operations  and its  existing
credit facility.

     In October 2001,  the Board of Directors  extended for one year its program
to  repurchase  its common  stock.  Purchases in the  aggregate  amount of up to
$1,000,000 in purchase  price during the one-year  extension  would 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 would be
financed out of existing cash or cash equivalents.

     Other than as set forth herein, the Company has no material commitments for
capital expenditures.

INFLATION AND SEASONALITY

     The rate of inflation had no material effect on operations for fiscal 2001.
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.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial  Accounting  Standards Board finalized the FASB
Statements No. 141, Business  Combinations (SFAS 141), and No. 142, Goodwill and
Other  Intangible  Assets (SFAS 142).  SFAS 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 141
also requires that the Company recognize  acquired  intangible assets apart from
goodwill if the  acquired  intangible  assets meet  certain  criteria.  SFAS 141
applies to all  business  combinations  initiated  after  June 30,  2001 and for
purchase  business  combinations  completed  on or after July 1,  2001.  It also
requires,  upon adoption of SFAS 142, that the Company  reclassify  the carrying
amounts of intangible assets and goodwill based on the criteria in SFAS 141.

     SFAS 142 requires,  among other things,  that companies no longer  amortize
goodwill,  but instead  test  goodwill  for  impairment  at least  annually.  In
addition,  SFAS 142 requires that the Company  identify  reporting units for the
purposes 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. An intangible
asset  with an  indefinite  useful  life  should be  tested  for  impairment  in
accordance  with the guidance in SFAS


                                      -23-
<PAGE>

142. SFAS 142 is required to be applied in fiscal years beginning after December
15, 2001 to all goodwill and other  intangible  assets  recognized at that date,
regardless of when those assets were initially recognized. SFAS 142 requires the
Company to complete a transitional  goodwill impairment test six months from the
date of adoption.  The Company is also  required to reassess the useful lives of
other intangible  assets within the first interim quarter after adoption of SFAS
142.

     The Company's  previous business  combinations were accounted for using the
purchase  method.  As of July 31, 2001,  the net carrying  amount of goodwill is
$7,166,000  and other  intangible  assets is  $1,817,000.  Amortization  expense
during the year ended  July 31,  2001 was  $956,000.  Currently  the  Company is
assessing but has not yet  determined  how the adoption of SFAS 141 and SFAS 142
will impact its financial position and results of operations.

DISCLOSURE REGARDING PRIVATE LITIGATION REFORM ACT OF 1995

     Except for  historical  information  contained in this report on Form 10-K,
certain  matters  set  forth  herein  are  forward-looking  statements  that are
dependent on certain risks and  uncertainties,  including  such  factors,  among
others,  as market  acceptance,  pricing and demand for the Company's  services,
changing  regulatory  environment,   changing  economic  conditions,   risks  in
connection with acquisitions, ability to attract and retain qualified personnel,
ability  to manage  the  Company's  growth,  and  other  risks  detailed  in the
Company's other filings with the Securities and Exchange Commission (the "SEC").
In particular,  in addition to the specific regulatory matters described herein,
the Company  generally,  as a participant in the home health care  industry,  is
subject  to  extensive  federal,  state and local  regulations.  There can be no
assurance that any of these regulations will not change from existing standards,
that  additional  standards  will not be  imposed or that the  Company  will not
experience  adverse  effects as a result of efforts  to comply  with  applicable
standards, which are extensive, complex and often-changing.

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-31.

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

     On June 22, 2001, the Company dismissed Holtz Rubenstein & Co., LLP ("Holtz
Rubenstein") as the Company's independent public accountants.

     On June 22, 2001, the Company selected BDO Seidman,  LLP ("BDO Seidman") to
replace Holtz Rubenstein as the Company's  independent public  accountants.  The
decision to change  auditors was approved by the Audit Committee of the Board of
Directors.



                                      -24-
<PAGE>

         Holtz Rubenstein's report on the financial statements of the Company
for each of the past two fiscal years did not contain any adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles.

     During  fiscal 1999 and fiscal  2000,  and the  subsequent  interim  period
through June 22, 2001, there were no disagreements  with Holtz Rubenstein on any
matter of accounting principles or practices, financial statement disclosure, or
auditing  scope  or  procedure,  which  disagreements,  if not  resolved  to the
satisfaction  of Holtz  Rubenstein,  would have caused Holtz  Rubenstein to make
reference to the subject  matter of the  disagreements  in  connection  with its
audit report with respect to financial statements of the Company.

     During  fiscal 1999 and fiscal  2000,  and the  subsequent  interim  period
through June 22, 2001,  there was no  disagreement or difference of opinion with
Holtz  Rubenstein  regarding any "reportable  event," as that term is defined in
Item 304(a)(1)(v) of Regulation S-K.

     On June 22,  2001,  the  Company  filed a Current  Report  on Form 8-K,  as
amended (the "Report") and provided Holtz Rubenstein with a copy of this Report,
requesting that Holtz Rubenstein  furnish the Company with a letter addressed to
the SEC stating whether it agreed with the statements made by the Company.  Such
letter was  attached to the Report as Exhibit 16 and is hereby  incorporated  by
reference.

     During  fiscal 1999 and fiscal  2000,  and the  subsequent  interim  period
through June 22,  2001,  neither the Company nor anyone on behalf of the Company
consulted BDO Seidman regarding either the application of accounting  principles
to a specified  transaction,  either completed or proposed, or the type of audit
opinion that might be rendered on the financial statements of the Company or any
matter that was either the subject of a disagreement, within the meaning of Item
304(a)(1)(iv)  of  Regulation  S-K,  or any  reportable  event,  as that term is
defined in Item 304(a)(1)(v) of Regulation S-K.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The  information  required by each of the items of Part III 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 2001 Annual
Meeting of  Stockholders  to be held on  December 6, 2001,  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, 2001.


                                      -25-
<PAGE>



                                     PART IV

ITEM 14.   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.

     (1)  Financial   Statements  (see  index  to  the  consolidated   financial
statements).



                                      -26-
<PAGE>


                        National Home Health Care Corp.
                                      and Subsidiaries




================================================================================
                                               CONSOLIDATED FINANCIAL STATEMENTS
                                                       AND SUPPLEMENTAL MATERIAL
                                             YEARS ENDED JULY 31, 2001 AND 2000


<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                                        CONTENTS

REPORT OF BDO SEIDMAN, LLP, INDEPENDENT
   CERTIFIED PUBLIC ACCOUNTANTS                                              F-3

REPORT OF HOLTZ RUBENSTEIN & Co., LLP, Independent
    Certified Public Accountants                                             F-4

CONSOLIDATED FINANCIAL STATEMENTS:
   Balance sheets                                                            F-5
   Statements of earnings                                                    F-6
   Statements of changes in stockholders' equity                             F-7
   Statements of cash flows                                                  F-8
   Summary of accounting policies                                     F-9 - F-14
   Notes to consolidated financial statements                        F-15 - F-27

SUPPLEMENTAL MATERIAL:
   Report of BDO Seidman, LLP, Independent
      Certified Public Accountants on supplemental material                 F-29
   Report of Holtz Rubenstein & Co., LLP, Independent
      Certified Public Accountants on schedule                              F-30
   Schedule II: Valuation and qualifying accounts                           F-31


                                      F-2
<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                     CONSOLIDATED BALANCE SHEETS


INDEPENDENT AUDITORS' REPORT



Board of Directors
National Home Health Care Corp.
Scarsdale, New York

We have audited the  accompanying  consolidated  balance  sheet of National Home
Health Care Corp. and Subsidiaries as of July 31, 2001 and related  consolidated
statements of earnings,  changes in stockholders'  equity and cash flows for the
year then ended. 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 audit.

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

In our opinion,  the 2001 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, 2001,  and the results of
their  operations  and their cash flows for the year then ended,  in  conformity
with accounting principles generally accepted in the United States of America.



/s/ BDO Seidman, LLP
September 28, 2001


                                      F-3
<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                     CONSOLIDATED BALANCE SHEETS


INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
National Home Health Care Corp.
Scarsdale, New York

We have audited the  accompanying  consolidated  balance  sheet of National Home
Health  Care  Corp.  and  Subsidiaries  as of July  31,  2000  and  the  related
consolidated  statements of earnings,  changes in stockholders'  equity and cash
flows for the two years then ended. 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
did  not  audit  the  financial  statements  of  SunStar  Healthcare,   Inc.,  a
corporation in which the Company had a 30.5% equity  interest,  which statements
reflect a net loss of ($1,631,000) for the period ended December 31, 1998. Those
statements were audited by other auditors whose report has been furnished to us;
insofar as our opinion on the 1999 consolidated  financial statements relates to
data included for SunStar Healthcare, Inc. it is based solely on their report.

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

In our  opinion,  based upon our audits and the report of other  auditors,  with
respect to  SunStar  Healthcare,  Inc.  as  described  above,  the  consolidated
financial statements referred to above present fairly, in all material respects,
the consolidated  financial  position of National Home Health Care Corp. and its
Subsidiaries  as of  July  31,  2000,  and the  consolidated  results  of  their
operations and their  consolidated  cash flows for the two years then ended,  in
conformity with generally accepted accounting principles.



/S/ HOLTZ RUBENSTEIN & Co., LLP
Melville, New York
October 3, 2000

                                      F-4
<PAGE>

<TABLE>
<CAPTION>
                                                   NATIONAL HOME HEALTH CARE CORP.
                                                          AND SUBSIDIARIES

                                                     CONSOLIDATED BALANCE SHEETS


 July 31,                                                                                 2001                  2000
 ------------------------------------------------------------------------ --------------------- ---------------------
<S>                                                                              <C>                   <C>
 ASSETS
 CURRENT:
    Cash, (including cash equivalents of $7,150,000 and $2,942,000,
       respectively) (Note 8)                                                     $  9,082,000          $  4,856,000
    Investments                                                                         18,000                18,000
    Accounts receivable, less allowance for doubtful accounts of
       $865,000 and $673,000, respectively (Note 8)                                 15,983,000            15,847,000
    Prepaid expenses and other                                                       1,199,000               589,000
    Deferred income taxes (Note 7)                                                     810,000               504,000
 ------------------------------------------------------------------------ --------------------- ---------------------
               TOTAL CURRENT ASSETS                                                 27,092,000            21,814,000
 ------------------------------------------------------------------------ --------------------- ---------------------
 FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET (NOTE 1)                         939,000               760,000
 EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, NET (NOTE 2)                 7,166,000             6,945,000
 OTHER INTANGIBLE ASSETS, NET (NOTE 3)                                               1,817,000             1,257,000
 DEPOSITS AND OTHER ASSETS                                                             236,000               212,000
 ------------------------------------------------------------------------ --------------------- ---------------------
                                                                                   $37,250,000           $30,988,000
 ------------------------------------------------------------------------ --------------------- ---------------------
 LIABILITIES AND STOCKHOLDERS' EQUITY
 CURRENT LIABILITIES:
    Accounts payable and accrued expenses (Note 4)                                $  3,268,000          $  2,203,000
    Estimated third-party payor settlements                                          1,090,000               132,000
    Deferred revenue                                                                   282,000                     -
    Income taxes payable                                                                26,000               167,000
 ------------------------------------------------------------------------ --------------------- ---------------------
            Total current liabilities                                                4,666,000             2,502,000
 ------------------------------------------------------------------------ --------------------- ---------------------
 COMMITMENTS AND CONTINGENCIES (NOTE 10)
 STOCKHOLDERS' EQUITY:
    Common stock, $.001 par value, shares authorized - 20,000,000;
       issued - 6,491,229 and 6,228,746, respectively                                    6,000                 6,000
    Additional paid-in capital                                                      20,306,000            18,525,000
    Retained earnings                                                               14,784,000            12,274,000
 ------------------------------------------------------------------------ --------------------- ---------------------
                                                                                    35,096,000            30,805,000
    Less treasury stock (1,310,679 and 1,276,788 shares)- at cost                    2,512,000             2,319,000
 ------------------------------------------------------------------------ --------------------- ---------------------
            TOTAL STOCKHOLDERS' EQUITY                                              32,584,000            28,486,000
 ------------------------------------------------------------------------ --------------------- ---------------------
                                                                                   $37,250,000           $30,988,000
 ------------------------------------------------------------------------ --------------------- ---------------------

                                                                            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 EARNINGS

<S>                                                                   <C>               <C>              <C>

 Years ended July 31,                                                  2001              2000               1999
                                                                       ----              ----               ----

 NET PATIENT REVENUE (Note 8)                                         $74,492,000        $55,574,000      $38,518,000
 --------------------------------------------------------------- ----------------- ------------------ -----------------
 OPERATING EXPENSES:
    Cost of revenue                                                    48,550,000         36,455,000       25,357,000
    General and administrative                                         17,628,000         13,537,000       10,183,000
    Amortization of intangibles                                           956,000            660,000          550,000
    Provision for doubtful accounts                                       670,000            595,000                -
 --------------------------------------------------------------- ----------------- ------------------ -----------------
            TOTAL OPERATING EXPENSES                                   67,804,000         51,247,000       36,090,000
 --------------------------------------------------------------- ----------------- ------------------ -----------------
            INCOME FROM OPERATIONS                                      6,688,000          4,327,000        2,428,000
 --------------------------------------------------------------- ----------------- ------------------ -----------------
 OTHER INCOME (EXPENSE):
    Interest income                                                       216,000            220,000          385,000
    Gain resulting from sale of stock of equity investee
       (Note 5)                                                                 -          1,602,000                -
    Loss from equity investee (Note 5)                                          -                  -         (674,000)
 --------------------------------------------------------------- ----------------- ------------------ -----------------
         TOTAL OTHER INCOME (EXPENSES)                                    216,000          1,822,000         (289,000)
 --------------------------------------------------------------- ----------------- ------------------ -----------------
         INCOME BEFORE INCOME TAXES                                     6,904,000          6,149,000        2,139,000
 PROVISION FOR INCOME TAXES (NOTE 7)                                    2,704,000          2,058,000        1,001,000
 --------------------------------------------------------------- ----------------- ------------------ -----------------
 NET INCOME                                                          $  4,200,000       $  4,091,000     $  1,138,000
 --------------------------------------------------------------- ----------------- ------------------ -----------------
 NET INCOME PER COMMON SHARE:
    Basic                                                        $            .81  $             .78  $             .21
    Diluted                                                      $            .78  $             .77  $             .21
 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
    Basic                                                               5,179,824          5,274,215        5,406,453
    Diluted                                                             5,351,203          5,287,345        5,461,470
 --------------------------------------------------------------- ----------------- ------------------ -----------------

                                                                            SEE  ACCOMPANYING  SUMMARY OF  ACCOUNTING  POLICIES  AND
                                                                                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>


                                                                F-6
<PAGE>


<TABLE>

                                                   NATIONAL HOME HEALTH CARE CORP.
                                                          AND SUBSIDIARIES

                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>

                                                    COMMON STOCK           ADDITIONAL                         TREASURY STOCK
                                               ------------------------     PAID-IN        RETAINED     -------------------------
                                                 SHARES      AMOUNT         CAPITAL        EARNINGS      SHARES         AMOUNT
 --------------------------------------------- ----------- ------------ -------------- ---------------  -----------  ------------
<S>                                             <C>             <C>        <C>            <C>           <C>          <C>
 Balance, July 31, 1998                         6,228,746       $6,000     $18,525,000    $7,045,000    1,028,879    $(1,295,000)
 Net income                                             -            -               -     1,138,000            -              -
 Acquisition of treasury stock                          -            -               -             -       96,057       (406,000)
 --------------------------------------------- ----------- ------------  -------------- -------------  ------------  ------------
 Balance, July 31, 1999                         6,228,746        6,000      18,525,000     8,183,000    1,124,936     (1,701,000)
 Net income                                             -            -               -     4,091,000            -              -
 Acquisition of treasury stock                          -            -               -             -      151,842       (618,000)
 --------------------------------------------- ----------- ------------  -------------- -------------  ------------  ------------
 Balance, July 31, 2000                         6,228,746        6,000      18,525,000    12,274,000    1,276,778     (2,319,000)
 Net income                                             -            -               -     4,200,000            -              -

 Stock dividend declared March 16, 2001           245,983            -       1,690,000   (1,690,000)            -              -
 Exercise of stock options                         16,500            -          69,000             -            -              -
 Tax Benefit of stock option exercise                   -            -          22,000             -            -              -
 Acquisition of treasury stock                          -            -               -             -       33,901       (193,000)
 --------------------------------------------- ----------- ------------  -------------- -------------  ------------  ------------
 BALANCE, JULY 31, 2001                         6,491,229       $6,000     $20,306,000   $14,784,000    1,310,679    $(2,512,000)
 --------------------------------------------- ----------- ------------  -------------- -------------  ------------  ------------

SEE  ACCOMPANYING  SUMMARY OF  ACCOUNTING  POLICIES  AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>


                                                                F-7
<PAGE>


<TABLE>
                                                   NATIONAL HOME HEALTH CARE CORP.
                                                          AND SUBSIDIARIES


                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
<S>                                                                   <C>              <C>               <C>
 Years ended July 31,                                                    2001              2000             1999
 ------------------------------------------------------------------ ---------------- ----------------- ----------------
 CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                         $ 4,200,000      $ 4,091,000       $ 1,138,000
 ------------------------------------------------------------------ ---------------- ----------------- ----------------
    Adjustments to reconcile net income to cash provided by operating
       activities:
         Depreciation and amortization                                   1,194,000          881,000           682,000
         Gain resulting from sale of equity investee stock                       -       (1,602,000)                -
         Provision for doubtful accounts, net of write-offs                192,000          281,000                 -
         Deferred income taxes                                            (306,000)         (87,000)                -
         Loss from equity investee                                               -                -           674,000
         (Gain) loss on sale of assets                                      31,000            2,000            (3,000)
         Changes in assets and liabilities:
            (Increase) decrease in assets:
               Accounts receivable                                        (328,000)      (3,099,000)       (1,400,000)
               Prepaid expenses and other                                 (634,000)        (431,000)            7,000
            (Increase) decrease in liabilities:
               Accounts payable, accrued expenses and other
                 liabilities                                             1,065,000        1,124,000           (62,000)
               Deferred revenue                                            282,000                -                 -
               Income taxes payable                                       (141,000)         277,000             8,000
               Estimated third party-payor settlements                     958,000         (132,000)         (209,000)
 ------------------------------------------------------------------ ---------------- ----------------- ----------------
               NET CASH PROVIDED BY OPERATING ACTIVITIES                 6,513,000        1,305,000           835,000
 ------------------------------------------------------------------ ---------------- ----------------- ----------------
 CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of furniture and leasehold improvements                      (470,000)        (257,000)         (195,000)
    Purchase of assets of business                                      (1,737,000)      (4,801,000)       (1,943,000)
    Purchase of Accredited Health Service, Inc., net of cash                                      -        (1,736,000)
       acquired                                                                  -
    Proceeds from sale of equity investee stock                                  -        1,602,000                 -
    Proceeds from sales of assets                                           22,000           23,000             6,000
    Proceeds of investments                                                      -          160,000           310,000
 ------------------------------------------------------------------ ---------------- ----------------- ----------------
               NET CASH USED IN INVESTING ACTIVITIES                    (2,185,000)      (3,273,000)       (3,558,000)
 ------------------------------------------------------------------ ---------------- ----------------- ----------------
 CASH FLOWS FROM FINANCING ACTIVITIES:
    Purchase of treasury stock                                            (193,000)        (618,000)         (406,000)
    Proceeds from exercise of stock options                                 69,000                -                 -
    Other                                                                   22,000                -                 -
    Repayment of notes payable                                                   -                -          (421,000)
 ------------------------------------------------------------------ ---------------- ----------------- ----------------
               NET CASH USED IN FINANCING ACTIVITIES                      (102,000)        (618,000)         (827,000)
 ------------------------------------------------------------------ ---------------- ----------------- ----------------
 Net increase (decrease) in cash and cash equivalents                    4,226,000       (2,586,000)       (3,550,000)
 Cash and cash equivalents, beginning of year                            4,856,000        7,442,000        10,992,000
 ------------------------------------------------------------------ ---------------- ----------------- ----------------
 Cash and cash equivalents, end of year                                $ 9,082,000      $ 4,856,000     $   7,442,000
 ------------------------------------------------------------------ ---------------- ----------------- ----------------
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: CASH PAID FOR:
       Interest                                                        $     1,000      $    16,000     $       4,000
       Income taxes                                                    $ 3,129,000      $ 1,870,000     $   1,100,000
 ------------------------------------------------------------------ ---------------- ----------------- ----------------
</TABLE>

SEE  ACCOMPANYING  SUMMARY OF  ACCOUNTING  POLICIES  AND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                      F-8
<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  and  other
                                      specialized  health  services.  Due to the
                                      similarities   in   services,   management
                                      considers  their   operations  to  be  one
                                      reportable business segment.

PRINCIPLES                            The  consolidated   financial   statements
CONSOLIDATION                         include  the  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  AND              Net   patient  revenue   is  reported   at
ALLOWANCE FOR DOUBTFUL                estimated   net  realizable  amounts  from
ACCOUNTS                              patients,  third-party  payors, and others
                                      for   services   rendered   and   includes
                                      estimated  retroactive revenue adjustments
                                      relating  to future  audits,  reviews  and
                                      investigations.    Estimated   retroactive
                                      adjustments are modified in future periods
                                      as  adjustments  based  on  reviews  or as
                                      years are no longer subject to reviews.  A
                                      provision   for   doubtful   accounts   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  for  doubtful
                                      accounts.

                                      Under   Medicaid,   Medicare   and   other
                                      cost-based   reimbursement  programs,  the
                                      Company   is   reimbursed   for   services
                                      rendered  to covered  program  patients as
                                      determined by reimbursement formulas. Laws
                                      and  regulations  governing these programs
                                      are  extremely   complex  and  subject  to
                                      interpretation.   As  a   result,   it  is
                                      possible  that  recorded   estimates  will
                                      change.


                                      F-9
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                  SUMMARY OF ACCOUNTING POLICIES


REVENUE RECOGNITION AND               Approximately  51%,  36%  and  34%  of net
ALLOWANCE FOR DOUBTFUL                patient  revenue for the fiscal  years for
ACCOUNTS (CONTINUED)                  ended  July  31,  2001,   2000  and  1999,
                                      respectively,  were derived  under federal
                                      and   state   third-party    reimbursement
                                      programs.

CASH AND CASH                         For the purposes of the statements of cash
EQUIVALENTS                           flows,  the 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
AND LEASEHOLD                         improvements    are    stated   at   cost.
IMPROVEMENTS                          Depreciation  is  being  provided  on  the
                                      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.


EXCESS OF COST OVER FAIR              The  excess of cost over the fair value of
VALUE OF NET ASSETS                   net assets  acquired  (goodwill)  is being
ACQUIRED                              amortized  principally over a period of 20
                                      years on a straight-line  basis.  Goodwill
                                      is evaluated  periodically and adjusted if
                                      necessary,  if  events  and  circumstances
                                      indicate that a permanent decline in value
                                      below the current  unamortized  historical
                                      cost has occurred


NET INCOME PER COMMON SHARE           Basic  net  income  per  common  share  is
                                      computed by dividing  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.


                                      F-10
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                  SUMMARY OF ACCOUNTING POLICIES


NET INCOME PER COMMON                 The  reconciliation  for the  years  ended
SHARE (CONTINUED)                     July  31,  2001,  2000  and  1999  are  as
                                      follows:

<TABLE>
<CAPTION>

                                                YEARS ENDED JULY 31,             2001            2000           1999
                                      <S>                                        <C>           <C>           <C>
                                      Average number of shares
                                      outstanding                                5,179,824     5,274,215     5,406,453
                                      Effect of dilutive securities -
                                      common stock options                         171,379        13,130        55,017
                                      Diluted shares outstanding                 5,351,203     5,287,345     5,461,470
</TABLE>

FAIR VALUE OF FINANCIAL               The  carrying   amount   reported  in  the
INSTRUMENTS                           consolidated   balance  sheets  for  cash,
                                      accounts receivable,  accounts payable and
                                      accrued   liabilities   approximates  fair
                                      value   because   of  the   immediate   or
                                      short-term   maturity  of  the   financial
                                      instruments.


ACCOUNTING FOR STOCK                  The   Company    accounts   for   employee
OPTIONS                               stock-based   compensation  in  accordance
                                      with Accounting  Principles  Board Opinion
                                      No. 25 (APB Opinion 25),  "Accounting  for
                                      Stock Issued to Employees" using intrinsic
                                      values  with  appropriate   disclosure  in
                                      conformity   with  the  fair  value  based
                                      method in accordance with the Statement of
                                      Financial   Accounting  Standard  No.  123
                                      ("SFAS 123").

ESTIMATED THIRD-PARTY                 The amount  represents  overpayments  from
PAYOR SETTLEMENT                      third-party payors. The Company settlement
                                      anticipates  that  the  third-party  payor
                                      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 payor settlements
                                      and   valuation   reserves   for  accounts
                                      receivable.


                                      F-11
<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                  SUMMARY OF ACCOUNTING POLICIES


WORKER'S 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
                                      development trends and may be subsequently
                                      revised based on developments  relating to
                                      such claims.

INCOME TAXES                          The Company account for income taxes under
                                      as  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.

LONG-LIVED ASSETS                     Long-lived  assets,  such as goodwill  and
                                      property and equipment,  are evaluated for
                                      impairment   when  events  or  changes  in
                                      circumstances  indicate  that the carrying
                                      amount   of   the   assets   may   not  be
                                      recoverable    through    the    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.

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

                                      F-12
<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                  SUMMARY OF ACCOUNTING POLICIES


NEW ACCOUNTING                        In June  2001,  the  Financial  Accounting
PRONOUNCEMENTS                        Standards   Board   finalized   the   FASB
                                      Statements No. 141, Business  Combinations
                                      (SFAS  141),  and No.  142,  Goodwill  and
                                      Other  Intangible  Assets (SFAS 142). SFAS
                                      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 141
                                      also requires  that the Company  recognize
                                      acquired   intangible  assets  apart  from
                                      goodwill if the acquired intangible assets
                                      meet certain criteria. SFAS 141 applies to
                                      all business combinations  initiated after
                                      June 30,  2001 and for  purchase  business
                                      combinations completed on or after July 1,
                                      2001. It also  requires,  upon adoption of
                                      SFAS 142, that the Company  reclassify the
                                      carrying amounts of intangible  assets and
                                      goodwill  based  on the  criteria  in SFAS
                                      141.

                                      SFAS 142  requires,  among  other  things,
                                      that   companies   no   longer    amortize
                                      goodwill,  but instead  test  goodwill for
                                      impairment at least annually. In addition,
                                      SFAS  142   requires   that  the   Company
                                      identify  reporting units for the purposes
                                      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. An  intangible  asset with an
                                      indefinite  useful  life  should be tested
                                      for  impairment  in  accordance  with  the
                                      guidance in SFAS 142. SFAS 142 is required
                                      to be  applied in fiscal  years  beginning
                                      after  December  15, 2001 to all  goodwill
                                      and other intangible  assets recognized at
                                      that date, regardless of when those assets
                                      were   initially   recognized.   SFAS  142
                                      requires   the   Company  to   complete  a
                                      transitional  goodwill impairment test six
                                      months  from  the  date of  adoption.  The
                                      Company is also  required to reassess  the
                                      useful  lives of other  intangible  assets
                                      within  the first  interim  quarter  after
                                      adoption of SFAS 142.

                                      F-13

<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                  SUMMARY OF ACCOUNTING POLICIES


                                      The    Company's     previous     business
                                      combinations  were accounted for using the
                                      purchase method.  As of July 31, 2001, the
                                      net   carrying   amount  of   goodwill  is
                                      $7,166,000 and other intangible  assets is
                                      $1,817,000.  Amortization  expense  during
                                      the year ended July 31, 2001 was $956,000.
                                      Currently the Company is assessing but has
                                      not yet  determined  how the  adoption  of
                                      SFAS  141 and SFAS  142  will  impact  its
                                      financial    position   and   results   of
                                      operations.


                                      F-14
<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
1.          FURNITURE, EQUIPMENT     Furniture,  equipment  and  leasehold  improvements  are stated at cost and are
            AND LEASEHOLD            summarized as follows:
            IMPROVEMENTS             summarized as follows:

                                     JULY 31,                                              2001                2000
                                     ----------------------------------------- ------------------- ----------------
<S>                                  <C>                                             <C>                 <C>
                                     Furniture and equipment                         $1,776,000          $1,539,000
                                     Leasehold improvements                             369,000             212,000
                                     ----------------------------------------- ------------------- ----------------
                                                                                      2,145,000           1,751,000
                                     Less accumulated depreciation and
                                       amortization                                   1,206,000             991,000
                                     ----------------------------------------- ------------------- ----------------
                                                                                    $   939,000         $   760,000
                                     ----------------------------------------- ------------------- ----------------

2.          EXCESS OF COST OVER      Changes in the excess of cost over fair  value of net  assets  acquired  during
            FAIR VALUE OF NET        the two years ended July 31, 2001 and 2000 are as follows:
            ASSETS ACQUIRED

                                     JULY 31,                                              2001                2000
                                     ----------------------------------------- ------------------- ----------------
                                     Balance, beginning of year                      $6,945,000          $5,334,000
                                     Additions                                          722,000           1,978,000
                                     Amortization for year                             (501,000)           (367,000)
                                     ----------------------------------------- ------------------- ----------------
                                     Balance, end of year                            $7,166,000          $6,945,000
                                     ----------------------------------------- ------------------- ----------------


3.          OTHER INTANGIBLE         Other intangible assets are as follows:
            ASSETS

                                     JULY 31,                                              2001                2000
                                     ----------------------------------------- ------------------- ----------------
                                     Covenants not to compete                        $1,275,000         $   975,000
                                     Personnel files                                  1,519,000           1,119,000
                                     Patient files                                    1,192,000             792,000
                                     ----------------------------------------- ------------------- ----------------
                                                                                      3,986,000           2,886,000
                                     Less accumulated amortization                    2,169,000           1,629,000
                                     ----------------------------------------- ------------------- ----------------
                                     Balance, end of year                            $1,817,000          $1,257,000
                                     ----------------------------------------- ------------------- ----------------

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


                                                                F-15

<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

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

                                     JULY 31,                                              2001                2000
                                     ----------------------------------------- ------------------- ----------------
                                     <S>                                         <C>                 <C>
                                     Trade accounts payable                         $   857,000         $   276,000
                                     Employee compensation and
                                       benefits                                       2,070,000           1,826,000
                                     Other                                              341,000             101,000
                                     ----------------------------------------- ------------------- ----------------
                                                                                     $3,268,000          $2,203,000
                                     ----------------------------------------- ------------------- ----------------
</TABLE>


5.          INVESTMENT IN             During  fiscal 1996,  following an initial
            SUNSTAR                   public  offering and change in management,
            HEALTHCARE, INC.          the  Company  held a 37.6%  investment  in
                                      SunStar  Healthcare,   Inc.   ("SunStar"),
                                      which was  accounted  for under the equity
                                      method of accounting.

                                      In fiscal 1998,  the  Company's  ownership
                                      percentage of SunStar was reduced to 30.5%
                                      as a result of SunStar issuing  additional
                                      shares of its common  stock  pursuant to a
                                      private  placement  in which  it  received
                                      $1,318,000, net of expenses. In connection
                                      therewith,  the  Company  recorded  a gain
                                      before tax of  $302,000  representing  the
                                      net   increase   in  book   value  of  the
                                      Company's investment. Also in fiscal 1998,
                                      the Company sold 10,000  shares of SunStar
                                      for  $37,000   and   recorded  a  gain  of
                                      $29,000.

                                      During  the  fiscal  year  ended  July 31,
                                      2000,  the Company sold 259,510  shares of
                                      SunStar  for  $1,602,000,  resulting  in a
                                      gain of $1,602,000.

                                      In February 2000, SunStar's sole operating
                                      subsidiary    effectively     discontinued
                                      operations.  As  of  July  31,  2001,  the
                                      Company's ownership  percentage of SunStar
                                      was 21.6% and the Company's value  of  its
                                      investment in SunStar is $0.


                                      F-16
<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


6.          ACQUISITIONS              On November 1, 1999, the Company  acquired
                                      certain assets of Optimum Care Services of
                                      Connecticut  Inc.,  Optimum Home Health of
                                      Connecticut, Inc. and Optimum Home Care of
                                      Connecticut, Inc. The assets were acquired
                                      from a  court-appointed  Chapter 7 Trustee
                                      for a  purchase  price  of  $4,490,000  in
                                      cash,   including   acquisition  costs  of
                                      $90,000.  The  final  purchase  price  was
                                      determined   through  an  auction  process
                                      conducted at the United States  Bankruptcy
                                      Court for the  District of  Massachusetts.
                                      The assets acquired included certain,  but
                                      not all, machinery, equipment, intangibles
                                      and accounts  receivable and was allocated
                                      as   follows:   $2,307,000   to   accounts
                                      receivable,   $205,000  to  furniture  and
                                      equipment and $1,978,000 to excess of cost
                                      over fair value of net assets acquired.

                                      On April 14,  2000,  the Company  acquired
                                      certain assets of  Connecticut  operations
                                      of U.S.  Home Care Corp.  for  $311,000 in
                                      cash,   including   acquisition  costs  of
                                      $11,000. The assets purchased consisted of
                                      patient  files of  $156,000  and  employee
                                      files of $155,000.

                                      On August 25, 2000,  the Company  acquired
                                      certain assets of Health Force Owned, Ltd.
                                      and its affiliates for $1,822,000 in cash,
                                      including  acquisition  costs of  $42,000.
                                      The assets purchased consisted of patients
                                      files  of  $400,000,   employee  files  of
                                      $400,000,   covenant  not  to  compete  of
                                      $300,000  and  excess  of cost  over  fair
                                      value of net assets acquired of $722,000.

                                      On August 10, 1998,  the Company  acquired
                                      certain assets of Bryan Employment Agency,
                                      Inc.,   d/b/a   Bryan   Home   Care,   for
                                      approximately    $1,943,000,     including
                                      acquisition  costs of  $8,000.  The assets
                                      purchased  consisted of personnel files of
                                      $285,000,   patient   files  of  $285,000,
                                      furniture  and  equipment  of  $30,000,  a
                                      covenant  not to compete of  $200,000  and
                                      excess  of cost  over  fair  value  of net
                                      assets acquired of $1,143,000.



                                      F-17
<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


6.          ACUISITIONS               On October 30, 1998, the Company  acquired
            (CONTINUED)               all of the  outstanding  common  shares of
                                      Accredited    Health    Services,     Inc.
                                      ("Accredited").  Accredited  is a licensed
                                      home health  care  company  that  provides
                                      home  health  aide   services  in  various
                                      counties  in New Jersey.  The  purchase of
                                      $1,946,000  was  generated  from  internal
                                      funds.  The  acquisition was accounted for
                                      as a  purchase.  The  purchase  price  was
                                      allocated as follows:  $1,117,000 to total
                                      current  assets,  $58,000 to furniture and
                                      equipment,   $40,000   to  other   assets,
                                      $550,000  to  total  current  liabilities,
                                      $4,000 to other  liabilities and excess of
                                      cost  over  fair   value  of  net   assets
                                      acquired of $1,285,000.

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

                                      The   following    unaudited   pro   forma
                                      consolidated results of operations for the
                                      year  ended  July  31,  1999  assumes  the
                                      business   acquisitions   occurred  as  of
                                      August 1, 1998:

                                      July 31,                              1999
                                      --------------------------- --------------
                                      Revenues, net                 $ 39,849,000
                                      Net income                       1,181,000
                                      --------------------------- --------------
                                      Net income per common share:
                                        Basic                       $        .22
                                        Diluted                     $        .22
                                      --------------------------- --------------

                                      The effects of the above  acquisitions  on
                                      the 2001 and 2000 consolidated  results of
                                      operations were not significant.


7.          INCOME TAXES              The  Company  files  a  consolidated  U.S.
                                      federal  income  tax  return.   State  tax
                                      returns   are  filed  on  a  combined   or
                                      separate basis depending on the applicable
                                      laws.

                                      F-18
<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


7.          INCOME TAXES              The    provision   for   income  taxes  is
            (CONTINUED)               summarized as follows:
<TABLE>
<CAPTION>
                                     <S>                                 <C>            <C>            <C>

                                      Years ended July 31,                  2001            2000            1999
                                      --------------------------------- -------------- --------------- ---------------
                                      Current:
                                        Federal                          $2,275,000     $1,504,000     $   718,000
                                        State                               735,000        641,000         283,000
                                      --------------------------------- -------------- --------------- ---------------
                                                                          3,010,000      2,145,000       1,001,000
                                      Dferred                              (306,000)       (87,000)              -
                                      -------------------------------- -------------- --------------- ---------------
                                                                         $2,704,000     $2,058,000      $1,001,000
                                      -------------------------------- -------------- --------------- ---------------
</TABLE>


                                      Deferred  income  taxes  reflect  the  tax
                                      impact of  temporary  differences  between
                                      the amounts of assets and  liabilities for
                                      financial   reporting  purposes  and  such
                                      amounts as measured by tax regulations.

                                      The deferred tax asset is as follows:
<TABLE>
<CAPTION>
                                        <S>                                 <C>             <C>

                                      Years ended July 31,                       2001           2000
                                      --------------------------------------------------------------
                                      Accrued liabilities and reserves       $510,000      $ 248,000
                                      Amortization of intangible
                                       assets                                 288,000        210,000
                                      State net operating loss
                                       carryforwards                           12,000         46,000
                                      --------------------------------------------------------------
                                                                             $810,000       $504,000
                                      --------------------------------------------------------------
</TABLE>

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


                                      F-19
<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


7.          INCOME TAXES              The  reconciliation  of the  statutory tax
            (CONTINUED)               rate to the  effective  tax  rate  for the
                                      three  years  ended  July  31,  2001 is as
                                      follows:
<TABLE>
<CAPTION>
                                      <S>                                     <C>           <C>          <C>

                                      Years ended July 31,                           2001          2000        1999
                                      -------------------------------------- ------------- ------------- -------------
                                      Statutory rate                                  34%            34%           34%
                                      State and local taxes
                                         (net of federal tax effect)                   6             10            11
                                      Federal tax credit                              (2)            (2)           (4)
                                      Permanent differences                            1              1             8
                                      Change in valuation allowance                    -             (5)            -
                                      Adjustments to prior years tax
                                        liabilities                                    -             (2)            -
                                      Other                                            -             (3)           (2)
                                      -------------------------------------- ------------- ------------- -------------
                                      Effective rate                                  39%            33%           47%
                                      -------------------------------------- ------------- ------------- -------------
</TABLE>



8.          CONCENTRATIONS OF         The Company's  business is with  customers
            CREDIT RISK AND           who are in the healthcare industry or with
            MAJOR CUSTOMERS           governmental agencies.

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

                                      At July 31,  2001,  the Company  maintains
                                      approximately  39% of its  cash  and  cash
                                      equivalents     with     one     financial
                                      institution.

                                      Under    certain    federal    and   state
                                      third-party  reimbursement  programs,  the
                                      Company  received net patient  revenues of
                                      approximately $37,788,000, $19,955,000 and
                                      $13,281,000  for the years  ended July 31,
                                      2001,  2000 and  1999,  respectively.  The
                                      Company also received net patient revenues
                                      of  approximately  $4,610,000,  $5,663,000
                                      and  $6,095,000  for the years  ended July
                                      31,  2001,  2000 and  1999,  respectively,
                                      from a private company.  At July 31, 2001,
                                      the Company had an  aggregate  outstanding
                                      receivable from federal and state agencies
                                      of   $5,058,000    and   an    outstanding
                                      receivable of $1,142,000  from the private
                                      company.


                                      F-20
<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


9.          STOCK OPTION PLAN         Option  Plan  In  1999,  the  stockholders
                                      approved  the 1999 Stock  Option Plan (the
                                      "1999    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 1999 Plan  authorizes
                                      the   granting  of  both   incentive   and
                                      non-qualified stock options to purchase up
                                      to 525,000 shares of the Company's  common
                                      stock.

                                      At July 31,  2001,  515,600  shares of the
                                      Company's  common stock have been reserved
                                      for future  issuance  pursuant to the 1999
                                      Plan.

                                      The Company  has a Stock  Option Plan (the
                                      "1992    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 1992 Plan  authorizes
                                      the   granting  of  both   incentive   and
                                      nonqualified  stock options to purchase up
                                      to 500,000 shares of the Company's  common
                                      stock.

                                      At July 31,  2001,  433,350  shares of the
                                      Company's  common stock have been reserved
                                      for future  issuance  pursuant to the 1992
                                      Plan.

                                      The  following  is a summary of the status
                                      of the Company's stock options.
<TABLE>
<CAPTION>
<S>                             <C>           <C>          <C>          <C>         <C>                 <C>

                                     2001                       2000                         1999
                            ------------------------  -------------------------   ---------------------------
                               Weighted Average           Weighted Average             Weighted Average
                            ------------------------  -------------------------   ---------------------------
                                   Exercise                   Exercise                     Exercise
                            ------------------------  -------------------------   ---------------------------
                              Shares       Price         Shares       Price         Shares        Price
-------------------------------------------------------------------------------------------------------------
Outstanding, beginning of
   year                         500,277    $   4.06        272,534       $3.98        253,846          $3.13
Granted                               -           -        258,300        4.15        189,947           3.73
Exercised                       (16,500)       4.17              -           -              -              -
Forfeited                             -           -       (30,557)        4.09      (171,259)           2.44
                            ------------              -------------               ------------
Outstanding, end of year        483,777        4.05       500,277         4.06       272,534            3.98
                                           --------                    --------                       -------

Options exercisable at
   year-end                     483,777        4.05       500,277         4.06       272,534            3.98
                            ------------              -------------               ------------

Weighted average fair
   value of options
   granted during the year                 $      -                      $2.36                         $1.87
                                           --------                    --------                       -------
</TABLE>


                                      F-21
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


9.          STOCK OPTION PLAN         The following table summarizes information
            (CONTINUED)               about stock  options  outstanding  at July
                                      31, 2001:
<TABLE>
<CAPTION>

                                                            Options Outstanding and Exercisable
                                      --------------------------------------------------------------------------------
                                                                  Shares          Weighted Average     Weighted Average
                                                              Outstanding at         Remaining
                                                               July 31, 2001      Contractual Life      Exercise Price
                                      ------------------ --- ----------------    -----------------    -----------------
                                      <S>                        <C>                <C>                    <C>

                                      $3.45 - $3.79              159,497            7.75 years             $3.62
                                      $3.86 - $4.04              165,950            8.19 years             $4.02
                                      $4.33 - $4.57              151,450            7.47 years             $4.49
                                      $5.42                        6,880            4.71 years             $5.42
                                      ------------------ --- ---------------- -- ----------------- -- -----------------
</TABLE>

                                      The fair value of options at date of grant
                                      was  estimated  using  the   Black-Scholes
                                      option   pricing   model   utilizing   the
                                      following  assumptions as of July 31, 2000
                                      and 1999:
<TABLE>
<CAPTION>
                                      <S>                               <C>             <C>

                                      Years ended July 31,                  2000            1999
                                      --------------------------------- -------------- ---------------
                                      Dividend yield                        0.00%            0.00%
                                      Volatility                           35.00%           33.00%
                                      Risk-free interest rate               6.20%            5.50%
                                      Expected life                     10 years         10 years
                                      --------------------------------- -------------- ---------------
</TABLE>

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



                                      F-22
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


9.          STOCK OPTION PLAN         Since   the Company applies APB Opinion 25
            (CONTINUED)               and related  interpretations in accounting
                                      for its options,  no compensation cost has
                                      been   recognized  for  its  stock  option
                                      grants.  The effect of  applying  SFAS No.
                                      123  on  pro  forma  net   income  is  not
                                      necessarily  representative of the effects
                                      on  reported  net income for future  years
                                      due  to,  among  other  things,   (1)  the
                                      vesting  period of stock  options  and (2)
                                      the fair value of additional stock options
                                      in future years.  Had the Company  elected
                                      to  recognize  compensation  cost based on
                                      the fair value of the  options at the date
                                      of grant as  prescribed  by SFAS 123,  net
                                      income for the years  ended July 31,  2000
                                      and 1999 would have been as follows:
<TABLE>
<CAPTION>
                                      <S>                                   <C>           <C>
                                      Years ended July 31,                       2000          1999
                                      ----------------------------------    ------------- -------------
                                      Proforma net income                    $3,843,000    $1,085,000
                                      Proforma net income per common share:
                                            Basic                            $      .76    $      .18
                                            Diluted                          $      .76    $      .17
                                     ----------------------------------    ------------- -------------
</TABLE>

10.         COMMITMENTS,          a)  Effective  January  1, 1999,  the  Company
            CONTINGENCIES AND         amended and restated its Employee  Savings
            OTHER MATTERS             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 an amount  equal to 100% of the
                                      first 3% of employees'  contributions  and
                                      50%  of   the   next   2%  of   employees'
                                      contributions,  provided  that in no event
                                      shall the matching contributions on behalf
                                      of any  employee  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
                                      each of the  years  ended  July 31,  2001,
                                      2000 and 1999 were $495,000, $226,000, and
                                      $143,000, respectively.

                                      F-23
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


10.         COMMITMENTS,          b)  The  Company  has  employment   agreements
            CONTINGENCIES AND         with five officers, which 10. Commitments,
            OTHER MATTERS             expire  through  November  30,  2003.  The
                                      aggregate commitment for Contingencies and
                                      Other future  salary,  excluding  bonuses,
                                      under   the    agreements    is    Matters
                                      $1,655,000.  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.

                                  c)  The   Company   rents    various    office
                                      facilities through 2006 under the terms of
                                      several  lease   agreements  that  include
                                      escalation clauses.

                                      At July 31, 2001,  minimum  annual  rental
                                      commitments under noncancellable operating
                                      leases are as follows:

                                      Years ended July 31,
                                      --------------------------------------
                                      2002                     $   774,000
                                      2003                         598,000
                                      2004                         391,000
                                      2005                         340,000
                                      2006                          12,000
                                      --------------------------------------
                                                                $2,115,000
                                      --------------------------------------

                                      Rent  expense for the years ended July 31,
                                      2001,  2000  and  1999  was  approximately
                                      $858,000,    $636,000,    and    $594,000,
                                      respectively.

                                      One lease is with a company  controlled by
                                      the Company's  Chairman of the Board. Rent
                                      expense  under  such  lease   approximates
                                      $226,000 per year.


                                      F-24
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


10.         COMMITMENTS,          d)  The Company  and  certain of its  officers
            CONTINGENCIES AND         and   directors   have   been   named   as
            OTHER MATTERS             defendants in a consolidated  class action
            (CONTINUED)               brought on behalf of certain  shareholders
                                      of SunStar Healthcare,  Inc.  ("SunStar").
                                      The  lawsuit   asserts   alleged  acts  or
                                      omissions,      which      resulted     in
                                      misrepresentations    or    omissions   of
                                      material   information    concerning   the
                                      financial   condition   of   SunStar.   In
                                      February  2001,  the Court  dismissed  the
                                      complaint and granted the Plaintiffs leave
                                      to amend. In addition, the lawsuit alleges
                                      that the  Company  and  certain  directors
                                      exercised control over SunStar. In October
                                      2001,  the Court  granted the  defendants'
                                      motion  to  dismiss  the  Complaint   with
                                      prejudice.  The Company is not aware as to
                                      whether the Plaintiffs will exercise their
                                      right to appeal this decision.

                                      In  a   related   action,   the   director
                                      defendants  are named in a case brought by
                                      the  Department  of Insurance of the State
                                      of Florida. The allegations in this action
                                      are similar to those  alleged in the class
                                      action  lawsuit,  which  was  subsequently
                                      dismissed.  Although  the  Company  is not
                                      named in this action,  the Company intends
                                      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.   The
                                      defendants have not received a response to
                                      their motion to dismiss.  The  defendants'
                                      believe  that the  complaints  are without
                                      merit  and  intend  to  vigorously  defend
                                      them. At this time, any possible liability
                                      to the Company cannot be determined.


                                      F-25
<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


11.         STOCK DIVIDEND            The Board  announced on March 13, 2001 the
                                      declaration of a 5% stock dividend payable
                                      on  March  23,  2001  to  shareholders  of
                                      record  on March 16,  2001.  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
                                      effects of the stock dividend.

12.         SUMMARIZED                Presented   below  is  a  summary  of  the
            QUARTERLY DATA            unaudited consolidated quarterly financial
            (UNAUDITED)               information  for the years  ended July 31,
                                      2001 and 2000 (in  thousands,  except  per
                                      share data):
<TABLE>
<CAPTION>
                                      <S>                             <C>          <C>           <C>           <C>
                                                                                           2001
                                      ---------------------------------------------------------------------------------
                                      Quarter                         First       Second        Third        Fourth
                                      ---------------------------- ------------ ------------ ------------- ------------
                                      Net patient revenue              $17,518      $18,479       $18,944      $19,551

                                      Income from operations             1,484        1,632         1,741        1,831
                                      Net income                           872          959         1,065        1,304
                                      Net income per
                                         common share:
                                         Basic                             .17          .19           .21          .25
                                         Diluted                           .16          .18           .20          .24
                                     ----------------------------      -------      -------       -------      -------

                                                                                           2000
                                     ---------------------------------------------------------------------------------
                                     Quarter                      First        Second       Third         Fourth
                                     ---------------------------- ------------ ------------ ------------- ------------
                                     Net patient revenue               $9,494      $15,041       $15,245      $15,794
                                     Income from operations               631        1,303         1,334        1,059
                                     Gain resulting from sale
                                       of stock of equity
                                       investee (a)                       943          659             -            -
                                     Net income                         1,091        1,459           776          765
                                     Net income per common share
                                        Basic                             .20          .28           .15          .15
                                        Diluted                           .20          .27           .15          .15
                                     ----------------------------      -------      -------       -------      -------

</TABLE>

(a) The Company sold 259,510 shares of SunStar resulting in a financial
statement gain of $1,602,000.

                                      F-26
<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES

                                                   NOTES TO FINANCIAL STATEMENTS


13.         EVENT SUBSEQUENT TO       On October 24, 2001, the Company closed on
            AUDITORS' OPINION         a new  revolving  line of credit  facility
                                      ("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
                                      banks  prime rate or LIBOR plus 2.5%.  The
                                      credit  facility  expires on  October  23,
                                      2003  and  requires  the  Company  to meet
                                      certain financial covenants and ratios.



                                      F-27
<PAGE>

                             SUPPLEMENTAL MATERIAL


<PAGE>


Independent Auditors' Report
   on Supplemental Material




The audit referred to in our report dated September 28, 2001 on the consolidated
financial statements of National Home Health Care Corp. and Subsidiaries,  which
appears in Part II, also included  Schedule II for the year ended July 31, 2001.
This  schedule  is  the   responsibility  of  the  Company's   management.   Our
responsibility is to express an opinion based on our audit. In our opinion,  the
financial  statement  schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the  information  set forth therein,  in compliance with the applicable
accounting regulations of the Securities and Exchange Commission.



/s/ BDO Seidman, LLP
--------------------
BDO Seidman, LLP
Valhalla, New York
September 28, 2001




                                      F-29
<PAGE>




                    INDEPENDENT AUDITORS' REPORT ON SCHEDULE


The audits  referred to in our report dated October 3, 2000 on the  consolidated
financial statements of National Home Health Care Corp. and Subsidiaries,  which
appears in Part II, also included  Schedule II for the years ended July 31, 2000
and 1999. This schedule is the responsibility of the Company's  management.  Our
responsibility is to express an opinion based on our audit. In our opinion,  the
financial  statement  schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the  information  set forth therein,  in compliance with the applicable
accounting regulations of the Securities and Exchange Commission.





/s/ Holtz Rubenstein & Co., LLP
-------------------------------
Holtz Rubenstein & Co., LLP
Melville, New York

October 3, 2000

                                      F-30
<PAGE>




<TABLE>
<CAPTION>
                   Column A                   Column B                  Column C                 Column D       Column E
------------------------------------------------------------------------------------------------------------------------------------
                                                                      Additions
                                                          ----------------------------------
                     Description              Balance,        Charged to         Charged to
                                              beginning       costs and          other accounts        Deductions       Balance,
                                              of period       expenses           describe              describe      end of period
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>              <C>              <C>                   <C>                <C>
Year ended July 31, 2001:
 Allowance deducted from asset account
 Allowance for doubtful accounts               $673,000         $670,000         $        -            $478,000(a)        $865,000
------------------------------------------------------------------------------------------------------------------------------------
Year ended July 31, 2000:
 Allowance deducted from asset account
 Allowance for doubtful accounts               $392,000         $595,000         $        -            $314,000(a)        $673,000
------------------------------------------------------------------------------------------------------------------------------------
Year ended July 31, 1999:
 Allowance deducted from asset account
 Allowance for doubtful accounts               $295,000         $      -         $196,500 (b)          $ 99,500(a)        $392,000
------------------------------------------------------------------------------------------------------------------------------------

                                                                        SEE ACCOMPANYING INDEPENDENT ACCOUNTANTS' COMPILATION REPORT
                                                                                      AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

</TABLE>

(a)  REPRESENTS  ACTUAL  WRITE-OFFS.
(b)  REPRESENTS ALLOWANCE ACQUIRED IN ACQUISITION OF ACCREDITED HEALTH SERVICES,
     INC.


                                      F-31

<PAGE>

(3)  Exhibits

EXHIBIT                             DOCUMENT
NUMBER                              --------
------

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            By-laws. Incorporated by reference to the 1983 Form S-1.

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           Incentive  Stock  Option Plan.  Incorporated  by reference to the
               1993 Form 10-K.

10.3           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 (the "2000 Form 10-K").

10.4*          Fourth  Amendment,  dated as of August  1,  2001,  to  Employment
               Agreement between the Registrant and Steven Fialkow.

10.5           Third  Amendment,  dated as of  August  1,  2000,  to  Employment
               Agreement between the Registrant and Steven Fialkow. Incorporated
               by reference to the 2000 Form 10-K.

10.6           Second  Amendment,  dated as of October 7,  1999,  to  Employment
               Agreement between the Registrant and Steven Fialkow. Incorporated
               by reference to the  Registrant's  Quarterly  Report on Form 10-Q
               for the fiscal  quarter  ended October 31, 1999 (the "October 31,
               1999 Form 10-Q").

10.7           First  Amendment,  dated as of  December 1, 1998,  to  Employment
               Agreement between the Registrant and Steven Fialkow. Incorporated
               by reference to the  Registrant's  Quarterly  Report on Form 10-Q
               for the fiscal  quarter  ended January 31, 1999 (the "January 31,
               1999 Form 10-Q").

10.8           Employment  Agreement  dated as of November  1, 1997  between the
               Registrant and Steven  Fialkow.  Incorporated by reference to the
               Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
               ended January 31, 1998 (the "January 31, 1998 Form 10-Q").

10.9*          Third  Amendment,  dated as of August 1,  2001,  to  Amended  and
               Restated   Employment   Agreement   between  the  Registrant  and
               Frederick H. Fialkow.

10.10          Second  Amendment,  dated as of August 1, 2000,  to  Amended  and
               Restated   Employment   Agreement   between  the  Registrant  and
               Frederick H. Fialkow.  Incorporated by reference to the 2000 Form
               10-K.

10.11          First  Amendment,  dated as of December  1, 1998,  to Amended and
               Restated   Employment   Agreement   between  the  Registrant  and
               Frederick   H.   Fialkow.   Incorporated   by  reference  to  the
               Registrant's Annual Report on Form 10-K for the fiscal year ended
               July 31, 1999.

                                       27

<PAGE>


EXHIBIT                             DOCUMENT
NUMBER                              --------
------

10.12          Amended and Restated Employment Agreement dated as of December 1,
               1998  between  the   Registrant   and   Frederick   H.   Fialkow.
               Incorporated by reference to the January 31, 1999 Form 10-Q.

10.13          Second  Amendment,  dated as of August  1,  2000,  to  Employment
               Agreement   between  the   Registrant   and  Robert  P.   Heller.
               Incorporated by reference to the 2000 Form 10-K.

10.14          First  Amendment,  dated as of  December 1, 1998,  to  Employment
               Agreement   between  the   Registrant   and  Robert  P.   Heller.
               Incorporated by reference to the January 31, 1999 Form 10-Q.

10.15          Employment  Agreement  dated as of November  1, 1997  between the
               Registrant and Robert P. Heller. Incorporated by reference to the
               January 31, 1998 Form 10-Q.

10.16          Second  Amendment,  dated as of August  1,  2000,  to  Employment
               Agreement   between  the   Registrant   and   Richard   Garofalo.
               Incorporated by reference to the 2000 Form 10-K.

10.17          First  Amendment,  dated as of  December 1, 1998,  to  Employment
               Agreement   between  the   Registrant   and   Richard   Garofalo.
               Incorporated by reference to the January 31, 1999 Form 10-Q.

10.18          Employment  Agreement  dated as of November  1, 1997  between the
               Registrant and Richard Garofalo. Incorporated by reference to the
               January 31, 1998 Form 10-Q.

                                       28
<PAGE>

EXHIBIT                             DOCUMENT
NUMBER                              --------
------

10.19          Amended and Restated Asset Purchase  Agreement  dated October 15,
               1999 among Charles L. Glerum as Trustee for Optimum Care Services
               of Connecticut,  Inc., Optimum Home Health of Connecticut,  Inc.,
               Optimum Home Care of  Connecticut,  Inc.,  New England Home Care,
               Inc.,  Connecticut  Staffing  Works  Corp.  and  the  Registrant.
               Incorporated by reference to the  Registrant's  Current Report on
               Form 8-K dated November 11, 1999.

10.20          The Registrant's Employee Savings and Stock Investment Plan under
               Section  401(k) of the  Internal  Revenue  Code,  effective as of
               January 1, 1999.  Incorporated  by  reference  to the October 31,
               1999 Form 10-Q.

10.21          Letter  Agreement  dated  February  20, 2000  providing a Secured
               Advised Line of Credit from the Bank of New York to National Home
               Health Care Corp.  Incorporated by reference to the  Registrant's
               Quarterly  Report  on Form  10-Q  for the  fiscal  quarter  ended
               January 31, 2000 (the "January 31, 2000 Form 10-Q").

10.22          Letter  Agreement  dated  February  20, 2000  providing a Secured
               Advised  Line of Credit  from the Bank of New York to New England
               Home Care, Inc. Incorporated by reference to the January 31, 2000
               Form 10-Q.

21.1*          List of Subsidiaries.

23.1*          Consent of Holtz Rubenstein & Co., LLP.

23.2*          Consent of BDO Seidman, LLP.

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

    (b)  Reports on Form 8-K.
         -------------------

          Form 8-K, Item 4. Changes in Registrant's Certifying Accountant, dated
          June 22, 2001.

                                       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.

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

Dated:  October 29, 2001

     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.


/s/ Frederick H. Fialkow                Chairman of the Board of Directors
------------------------
Frederick H. Fialkow


/s/ Steven Fialkow                      President, Chief Executive Officer,
----------------------------            Secretary and Director
Steven Fialkow


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



/s/ Ira Greifer                         Director
----------------------------
Ira Greifer, M.D.


/s/ Bernard Levine                      Director
----------------------------
Bernard Levine, M.D.


/s/ Robert Pordy                        Director
----------------------------
Robert Pordy, M.D.


<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, 2001


                         NATIONAL HOME HEALTH CARE CORP.



<PAGE>


EXHIBIT                             DOCUMENT
NUMBER                              --------
------

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            By-laws. Incorporated by reference to the 1983 Form S-1.

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           Incentive  Stock  Option Plan.  Incorporated  by reference to the
               1993 Form 10-K.

10.3           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 (the "2000 Form 10-K").

10.4*          Fourth  Amendment,  dated as of August  1,  2001,  to  Employment
               Agreement between the Registrant and Steven Fialkow.

10.5           Third  Amendment,  dated as of  August  1,  2000,  to  Employment
               Agreement between the Registrant and Steven Fialkow. Incorporated
               by reference to the 2000 Form 10-K.

10.6           Second  Amendment,  dated as of October 7,  1999,  to  Employment
               Agreement between the Registrant and Steven Fialkow. Incorporated
               by reference to the  Registrant's  Quarterly  Report on Form 10-Q
               for the fiscal  quarter  ended October 31, 1999 (the "October 31,
               1999 Form 10-Q").

10.7           First  Amendment,  dated as of  December 1, 1998,  to  Employment
               Agreement between the Registrant and Steven Fialkow. Incorporated
               by reference to the  Registrant's  Quarterly  Report on Form 10-Q
               for the fiscal  quarter  ended January 31, 1999 (the "January 31,
               1999 Form 10-Q").

10.8           Employment  Agreement  dated as of November  1, 1997  between the
               Registrant and Steven  Fialkow.  Incorporated by reference to the
               Registrant's Quarterly Report on Form 10-Q for the fiscal quarter


<PAGE>


EXHIBIT                             DOCUMENT
NUMBER                              --------
------

               ended January 31, 1998 (the "January 31, 1998 Form 10-Q").

10.9*          Third  Amendment,  dated as of August 1,  2001,  to  Amended  and
               Restated   Employment   Agreement   between  the  Registrant  and
               Frederick H. Fialkow.

10.10          Second  Amendment,  dated as of August 1, 2000,  to  Amended  and
               Restated   Employment   Agreement   between  the  Registrant  and
               Frederick H. Fialkow.  Incorporated by reference to the 2000 Form
               10-K.

10.11          First  Amendment,  dated as of December  1, 1998,  to Amended and
               Restated   Employment   Agreement   between  the  Registrant  and
               Frederick   H.   Fialkow.   Incorporated   by  reference  to  the
               Registrant's Annual Report on Form 10-K for the fiscal year ended
               July 31, 1999.

10.12          Amended and Restated Employment Agreement dated as of December 1,
               1998  between  the   Registrant   and   Frederick   H.   Fialkow.
               Incorporated by reference to the January 31, 1999 Form 10-Q.

10.13          Second  Amendment,  dated as of August  1,  2000,  to  Employment
               Agreement   between  the   Registrant   and  Robert  P.   Heller.
               Incorporated by reference to the 2000 Form 10-K.

10.14          First  Amendment,  dated as of  December 1, 1998,  to  Employment
               Agreement   between  the   Registrant   and  Robert  P.   Heller.
               Incorporated by reference to the January 31, 1999 Form 10-Q.

10.15          Employment  Agreement  dated as of November  1, 1997  between the
               Registrant and Robert P. Heller. Incorporated by reference to the
               January 31, 1998 Form 10-Q.

10.16          Second  Amendment,  dated as of August  1,  2000,  to  Employment
               Agreement   between  the   Registrant   and   Richard   Garofalo.
               Incorporated by reference to the 2000 Form 10-K.

10.17          First  Amendment,  dated as of  December 1, 1998,  to  Employment
               Agreement   between  the   Registrant   and   Richard   Garofalo.
               Incorporated by reference to the January 31, 1999 Form 10-Q.

10.18          Employment  Agreement  dated as of November  1, 1997  between the
               Registrant and Richard Garofalo. Incorporated by reference to the
               January 31, 1998 Form 10-Q.


<PAGE>

EXHIBIT                             DOCUMENT
NUMBER                              --------
------

10.19          Amended and Restated Asset Purchase  Agreement  dated October 15,
               1999 among Charles L. Glerum as Trustee for Optimum Care Services
               of Connecticut,  Inc., Optimum Home Health of Connecticut,  Inc.,
               Optimum Home Care of  Connecticut,  Inc.,  New England Home Care,
               Inc.,  Connecticut  Staffing  Works  Corp.  and  the  Registrant.
               Incorporated by reference to the  Registrant's  Current Report on
               Form 8-K dated November 11, 1999.

10.20          The Registrant's Employee Savings and Stock Investment Plan under
               Section  401(k) of the  Internal  Revenue  Code,  effective as of
               January 1, 1999.  Incorporated  by  reference  to the October 31,
               1999 Form 10-Q.

10.21          Letter  Agreement  dated  February  20, 2000  providing a Secured
               Advised Line of Credit from the Bank of New York to National Home
               Health Care Corp.  Incorporated by reference to the  Registrant's
               Quarterly  Report  on Form  10-Q  for the  fiscal  quarter  ended
               January 31, 2000 (the "January 31, 2000 Form 10-Q").

10.22          Letter  Agreement  dated  February  20, 2000  providing a Secured
               Advised  Line of Credit  from the Bank of New York to New England
               Home Care, Inc. Incorporated by reference to the January 31, 2000
               Form 10-Q.

21.1*          List of Subsidiaries.

23.1*          Consent of Holtz Rubenstein & Co., LLP.

23.2*          Consent of BDO Seidman, LLP.

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