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

For the fiscal year ended July 31, 1996           Commission File Number 0-12927

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

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

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

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

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.001 per share

Indicate  by check  mark  whether  the  Registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the preceding 12 months (or for such shorter period that  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. [_]

As of October 25, 1996,  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 $19,228,699, 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 25,
1996 was 4,806,907.

Portions of the  Registrant's  Proxy  Statement  for its 1996 Annual  Meeting of
Stockholders  (which  Proxy  Statement  will be filed  with the  Securities  and
Exchange  Commission  on or  before  November  28,  1996)  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  on July 27,  1983 under the name of Family
Treatment  Centers of America,  Inc.  Effective  December 14, 1984,  the Company
changed its name to National HMO Corp.  and  effective  December  20, 1991,  the
Company  changed  its name to  National  Home  Health  Care  Corp.  The  Company
completed  its  initial  public  offering  in  December  1983.  The Company is a
provider of home health care services  throughout the New York City metropolitan
area and Long  Island  in the  State of New York and in both  Fairfield  and New
Haven Counties in the State of Connecticut.

           The Company has three operating subsidiaries:

           *          Health  Acquisition  Corp.,  formerly  Allen  Health  Care
                      Services,  Inc.,  a New York  corporation,  of which Allen
                      Health Care  Services  ("Allen  Health  Care") is the sole
                      operating division.

           *          New England  Home Care,  Inc., a  Connecticut  corporation
                      ("New England"),  which conducts  business in the State of
                      Connecticut.

           *          Nurse  Care,  Inc.,  a  Connecticut   corporation  ("Nurse
                      Care"),   which   conducts   business   in  the  State  of
                      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.  On May 21, 1996,  the initial  public
offering of common stock by SunStar was consummated, thus reducing the Company's
ownership percentage of SunStar to approximately 37.6%. As a result,  SunStar is
no longer  consolidated with the Company for accounting purposes and the Company
accounts for its investment in SunStar using the equity method of accounting.

HEALTH ACQUISITION CORP.
ALLEN HEALTH CARE SERVICES

           Allen Health Care  maintains its principal  administrative  office in
Jamaica,  New York and has  satellite  offices  in New York  City,  Farmingdale,
Mineola and Hempstead,  New York. The Company provides personal home health care
services,  including  registered nurses,  personal care aides, home health aides
and  homemakers  in the  following  counties  in the State of New York:  Nassau,
Suffolk,  Queens,  Kings,  New York and the Bronx. All personnel are licensed or
are agency  certified under a New York State approved program and can be engaged
on a full-time, part-time or live-in basis.

        
                                       -2-

<PAGE>



Allen  Health  Care is a  participating  provider in both the Nassau and Suffolk
Counties  Department of Social  Services  Medicaid  Programs.  The Public Health
Council  of the  State  of New  York  Department  of  Health  has  approved  the
application for licensure of Health  Acquisition  Corp.  d/b/a Allen Health Care
with no limited life restrictions.

           Allen Health Care was  resurveyed  during the past fiscal year by the
Joint  Commission of  Accreditation of Health Care  Organizations  (JCAHO),  the
accrediting  body  for  all  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 resurvey resulted in Allen Health Care extending their accredited
status  through  the year 1999.  Reimbursement  for the  company's  services  is
primarily  provided  by the  Department  of Social  Services  of both Nassau and
Suffolk  Counties,  New York, as well as by certified  home health care agencies
and long term health care provider programs which contract with the company.  In
addition, services of this subsidiary were expanded in 1995 to include home care
pediatric skilled nursing for medically fragile children and their families.

           Allen Health Care  provides  home health care services to its clients
twenty-four  hours per day, seven days per week.  Although the company'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 the  records of service  which are  completed  by the home
health and personal  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 the professional staff.

           To a large extent,  Allen Health Care's growth potential depends upon
its ability to recruit and maintain qualified personnel.  The company's training
programs for home health aides and personal care aides have been approved by the
New York  State  Department  of  Health.  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.

NEW ENGLAND HOME CARE

           On August 4, 1995, the Company consummated the acquisition of 100% of
the capital stock of Nurse Care, Inc. ("Nurse Care"),  the parent company of New
England Home Care ("New  England") for  $3,150,000 in cash. In addition,  one of
the two former  shareholders  of Nurse Care entered  into a one-year  employment
contract as the Administrator of New England with a base salary of $125,000. The
other former shareholder entered into a one-year consulting agreement to provide
certain  consulting  services  with respect to the  operations of New England in
consideration of $20,000 in consulting  fees.  During the fiscal year ended July
31, 1996, Nurse Care contributed all of the outstanding shares of New England to
National  Home  Health  Care  Corp.,  whereby New England as well as Nurse Care,
became a direct, wholly-owned subsidiary of the Company.

        
                                       -3-

<PAGE>



           New England is a Medicare  certified  and  licensed  home health care
company in the State of  Connecticut.  In December  1995,  New England  received
JCAHO  accreditation  through the year 1998. The company provides a wide variety
of  skilled  nursing  services  including  physical  therapy,   speech  therapy,
occupational therapy and social work throughout Fairfield and New Haven Counties
in the State of Connecticut.  In addition, the Company has recently added mental
health,   pediatric  and  perinatal  specialty  nursing  services.  New  England
maintains its principal administrative office in Milford,  Connecticut,  and has
branch  offices in  Norwalk,  Hamden and  Waterbury,  and  satellite  offices in
Danbury and  Seymour.  Reimbursement  for New  England's  services is  primarily
provided by the Federal Medicare  Program and the State of Connecticut  Medicaid
Programs.  Additional  sources of revenue are from  managed  care  programs  and
commercial insurance carriers.

NURSE CARE

           Nurse Care is a licensed  home health  care  company  providing  home
health aide services throughout  Fairfield and New Haven Counties,  Connecticut.
In December 1995, Nurse Care received JCAHO accreditation through the year 1998.
Similar to the  operations  of New England,  Nurse Care  maintains its principal
administrative  office in  Milford,  Connecticut  and has  satellite  offices in
Norwalk, Hamden, Waterbury, Danbury and Seymour.  Reimbursement for Nurse Care's
services is primarily  provided by New England,  which  subcontracts  all of its
home health aide services from Nurse Care and from hospices and other  certified
home care agencies.

NATIONAL HMO (NEW YORK), INC.

           On April 30,  1994,  Boro Medical P.C. and Boro Health Care of Union,
P.C.  (collectively  "Boro  Medical"),  a medical provider to which National HMO
(New York), Inc. ("National New York") and National HMO Corp. of Elizabeth, Inc.
("National  Elizabeth")  provided  non-medical  and  administrative   management
services,  terminated  its  relationship  with  National  New York and  National
Elizabeth.  In  addition,  on April 30,  1994,  National  New York and  National
Elizabeth entered into an asset purchase agreement with Boro Medical.  Under the
terms of the agreement,  as consideration  for the sale by National New York and
National  Elizabeth of certain  assets,  Boro  Medical  agreed to pay a purchase
price of $750,000,  as well as all  outstanding  management fees due to National
New York  through  April 30,  1994 in the  aggregate  amount of  $500,000.  Boro
Medical  delivered at closing  five-year and three-year  promissory notes in the
aggregate  amounts of $750,000 and $500,000,  respectively,  each at an interest
rate of seven percent.  In May 1996, the promissory notes were paid in full. The
leases at all of the medical  offices  subject to the former  relationship  were
assumed by Boro  Medical  and  National  New York and  National  Elizabeth  were
released from any further obligations under the applicable lease agreements.  In
addition,  National New York, National Elizabeth and certain of its officers and
Boro Medical and certain of its officers  delivered mutual releases with respect
to all prior claims that may have existed  between them relating to their former
relationship  and  further  agreed  not to compete  with one  another in certain
operations and in specific areas relating to their respective businesses.


        
                                       -4-

<PAGE>



           In  addition,   in  July  1994,  National  New  York  terminated  its
management  agreement  with the dental  practitioner  to which it also  provided
administrative   and   management   services.   Accordingly,   the  Company  has
reclassified  its  financial  statements  to  show  separately  the  results  of
discontinued  operations.  See "Notes to  Financial  Statements  -  Discontinued
Operations".

INSURANCE

           The Company and its subsidiaries  maintain  professional  malpractice
liability  coverage on  professionals  employed in the  rendering of health care
services  providing coverage in an amount of up to $1,000,000 per occurrence and
up to $6,000,000 in the aggregate and coverage for the customary  risks inherent
in the operation of business in general.  Recent market  conditions with respect
to  liability   insurances  have  caused  wide  fluctuations  in  the  cost  and
availability of coverage.  The Company carries directors and officers  liability
with a limit of $2,000,000.  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 27, 1996, the Company had approximately  1,600 full and
part-time  employees of whom 15 were employed in various  management  capacities
and 3 were employed in marketing capacities.  None of the Company's employees is
represented by a labor organization.  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 the
appropriate authorities.

COMPETITION

           The home  health  care field is highly  competitive.  The  Company is
competing  with numerous  other  licensed as well as certified  home health care
agencies. In addition,  the Company competes with companies that, in addition to
providing  home health  aide and  skilled  nursing  services,  also,  unlike the
Company,  provide  pharmaceutical  products and other home health care  services
that generate additional referrals.

           The Company'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 referral from existing personnel
and through newspaper advertisements.



        
                                       -5-

<PAGE>


CUSTOMERS

           One or more  customers  have each  accounted for more than 10% of the
Company's revenues. For the fiscal years ended July 31, 1996, 1995 and 1994, VNS
Home Care, a non-profit  Medicare  certified home health care agency,  accounted
for 24%, 40% and 39%,  respectively,  and the State of New York,  Department  of
Social Service personal care aide program for the counties of Suffolk and Nassau
accounted for 7%, 13% and 17%,  respectively,  of the Company's consolidated net
patient  revenues  from  continuing  operations.  The  total  loss of any of the
foregoing customers would have a material adverse effect on the Company.

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 and
state authorities.  The Company must comply with state licensing requirements as
well as state eligibility standards for certification as a Medicare and Medicaid
provider.

           In recent years, a number of legislative  proposals have been made in
Congress and in state legislatures that could effect major changes in the health
care system. Many of the proposals include cost containment  features that could
lower  Medicare  and  Medicaid  reimbursement  rates and  otherwise  change  the
environment in which the Company  operates.  The Company cannot predict with any
certainty  what impact,  if any,  these  proposals  might have on the  Company's
business.

           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.

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 a state health care program. In July 1991, the federal government
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.

REGULATORY COMPLIANCE

           The Company  believes that health care  regulations  will continue to
change and, therefore,  regularly monitors  developments in health care law. The
Company expects to modify its agreements and operations from time to time as the
business and regulatory environment changes. While the

        
                                       -6-

<PAGE>



Company  believes it will be able to structure all its agreements and operations
in  accordance  with  applicable  law,  there  can  be  no  assurance  that  its
arrangements will not be successfully challenged.

ITEM 2.  PROPERTIES.

           The Company, directly or through certain subsidiaries, leases various
office  facilities under lease agreements with various  expiration dates through
the year  2000.  The  following  sets  forth the  location,  approximate  square
footage, use of each office and expiration date of each lease:


                     Approximate                            Expiration Date
    Location         Square Feet         Use                  of Lease
    --------         -----------    --------------          ---------------

Scarsdale, NY           2,095     Corporation headquarters  July 31, 1997
Queens, NY              5,200     Administrative office     January 31, 1998
Farmingdale, NY         3,519     Satellite office          April 30, 1997
Hempstead, NY             700     Satellite office          Month to Month
Mineola, NY             1,300     Satellite office          July 31, 1997
Manhattan, NY           1,265     Satellite office          April 30, 1997
Milford, CT             9,600     Administrative office     May 31, 1997
Norwalk, CT             2,772     Branch office             May 31, 1999
Hamden, CT              2,605     Branch office             July 31, 1998
Waterbury, CT           2,000     Branch office             July 31, 2000
Seymour, CT             2,000     Satellite office          May 31, 1997
Danbury, CT             1,200     Satellite office          November 30, 1996
                                               
           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 renew or find adequate  replacement offices for
all leases which will expire in the current fiscal year.

ITEM 3.  LEGAL PROCEEDINGS.

           In the ordinary course of business, the Company is subject, from time
to time, to claims and legal actions.  No material actions are currently pending
against the Company.

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, 1996.



        
                                       -7-

<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, 1995
and July 31, 1996. These quotations  reflect the  inter-dealer  prices,  without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.


                                                       Market Prices
                                           -------------------------------------
                                                High                    Low
Year ended July 31, 1995

1st Quarter                                    $3.75                  $2.00
2nd Quarter                                     3.88                   2.13
3rd Quarter                                     4.00                   2.75
4th Quarter                                     3.75                   2.75


Year ended July 31, 1996

1st Quarter                                    $4.38                  $3.13
2nd Quarter                                     7.13                   3.88
3rd Quarter                                     7.00                   4.50
4th Quarter                                     7.75                   5.50

           (B)       Holders

           There were  approximately 171 holders of record of Common Stock as of
October  25, 1996  excluding  shares held by  depository  companies  for certain
beneficial owners.

           (C)       Dividends

           The Company has not declared or paid any cash dividends on its shares
of 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 October 21, 1996, the
Board of Directors of the Company  declared a 6% stock dividend payable December
4, 1996 to stockholders of record on November 8, 1996.


        
                                       -8-

<PAGE>



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
Consolidated  Financial  Statements  of the Company,  which have been audited by
Richard A. Eisner & Company, LLP, independent auditors.

           The data set  forth  below  should  be read in  conjunction  with the
Consolidated Financial Statements in Item 8 of this Report.

<TABLE>
<CAPTION>
                                                                    Fiscal Years Ended July 31,
                                            --------------------------------------------------------------------------
                                                 1996           1995           1994            1993            1992
                                            --------------------------------------------------------------------------
<S>                                         <C>            <C>            <C>             <C>             <C>         
Revenues                                    $ 38,830,000   $ 24,556,000   $ 20,115,000    $ 18,059,000    $ 16,230,000
Net income from continuing operations
before gain resulting from subsidiary's
stock offering                                 2,336,000      1,426,000      1,218,000       1,309,000       1,189,000
Net income from continuing operations
before gain resulting from subsidiary's
stock offering per share                            0.46           0.28           0.24            0.25            0.23
Net income resulting from subsidiary's
stock offering                                 1,021,000           --             --              --              --
Net income resulting from subsidiary's
stock offering per share                            0.21           --             --              --              --
Net income from continuing operations          3,357,000      1,426,000      1,218,000       1,309,000       1,189,000
Net income from continuing operations per
share                                               0.67           0.28           0.24            0.25            0.23
New income (loss) from discontinued
operations                                          --             --       (3,472,000)       (461,000)        658,000
Net income (loss) from discontinued
operations per share                                --             --            (0.68)          (0.08)           0.13
Total Assets                                  24,421,000     18,865,000     17,926,000      20,309,000      19,106,000
Long Term Obligations                            524,000           --           40,000          77,000         146,000
</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 thereto appearing elsewhere herein.

           On May 21,  1996,  the initial  public  offering  of common  stock by
SunStar  Healthcare,  Inc.  ("SunStar") was consummated.  Prior to the offering,
SunStar had been a  wholly-owned  subsidiary  of the Company,  consisting of its
Florida outpatient medical center operations.  As a result of the offering,  the
Company currently owns approximately 37.6% of SunStar. The operations of SunStar
prior to the offering are  reflected in the  Company's  financial  statements as
continuing   operations.   See  "Notes  to   Financial   Statements   -  Segment
Information."

        
                                       -9-

<PAGE>



           On August 4, 1995, the Company  completed the purchase of Nurse Care,
Inc. ("Nurse Care"),  and it's wholly-owned  subsidiary,  New England Home Care,
Inc.  ("New  England").  During the fiscal year ended July 31, 1996,  Nurse Care
contributed  all of the  outstanding  stock of New England to the  Company.  New
England is a Medicare  certified  and a licensed  home health care  company that
provides a wide variety of skilled nursing  services in Connecticut  while Nurse
Care is a licensed home health care company  providing home health aide services
in Connecticut. See "Notes to Financial Statements-Acquisitions."

           On April 30, 1994, Boro Medical, a medical provider to which National
New  York  and  National  Elizabeth  provided   non-medical  and  administrative
services,  terminated its relationship with those subsidiaries.  In addition, in
July  1994,  National  New York  terminated  its  relationship  with the  dental
practice to which it also provided management services. See "Business - National
HMO (New  York),  Inc." The  results of  operations  for  National  New York and
National  Elizabeth  have  been  reflected  in  the  financial  statements  as a
discontinued   operation.   See  "Notes  to  Financial  Statements  Discontinued
Operations."

RESULTS OF OPERATIONS

YEAR ENDED JULY 31, 1996 COMPARED TO YEAR ENDED JULY 31, 1995

           Net patient revenue  increased by  approximately  $14,274,000 or 58%,
from  $24,556,000  for the fiscal  year ended July 31, 1995  ("fiscal  1995") to
$38,830,000 for the fiscal year ended July 31, 1996 ("fiscal 1996"). Net patient
revenue from home health care services  increased  approximately  $15,781,000 or
81%.  Approximately  $14,475,000 or 92% of this increase is  attributable to the
acquisition  of Nurse  Care  and New  England.  Health  Acquisition  Corp.,  the
licensed home health care company providing home health care services in the New
York  metropolitan  area had revenue  increase by  $1,306,000  or 7% from fiscal
1995.  Net  patient  revenue  recorded in fiscal  1996 from  outpatient  medical
operations  decreased  $1,507,000 or 29% from  $5,128,000  in fiscal 1995.  This
decrease is attributable to the Company recording only nine months of revenue in
fiscal 1996,  due to the change in ownership in the fourth  quarter from 100% to
approximately 37.6%.

           With the  completion of the initial public  offering of SunStar,  the
Company  is now  focused  in home  health  care.  Revenue  from  its  home  care
operations  have  accounted  for the  majority of  consolidated  revenue and has
historically  generated  the greatest  operating  margins for the  Company.  The
Company  believes  there will be a continued  increase in demand for home health
care services as health care payors seek to find cost-effective  alternatives to
the rising costs of institutional care. The Company's  acquisition of Nurse Care
and New England  reflects  the  Company's  commitment  to  devoting  significant
resources to the expansion of its home health care services.

           Cost of revenue as a percentage of revenue was 64% for fiscal 1996 as
compared to 61% in fiscal 1995. This increase is attributable to the acquisition
of New  England,  which  has  higher  cost of  revenue  as a result  of  revenue
generated  from  its  Medicare  patients  being  limited  to cost  reimbursement
principles. General and administrative expenses decreased from 29% of revenue in

        
                                      -10-

<PAGE>



fiscal 1995 to 27% of revenue in fiscal 1996.  This decrease is  attributable to
the increase in revenues being absorbed by existing  general and  administrative
costs.

           The  Company  recorded a  one-time  net gain on the  SunStar  initial
public offering in the amount of $1,024,000, adjusting its investment in SunStar
to reflect the book value of its current approximate 37.6% interest. The Company
also recorded a loss from equity investee of $10,000,  representing its share of
the SunStar loss for the quarter ended July 31, 1996.

           Interest income increased a nominal $2,000 to $412,000 in fiscal 1996
from $410,000 in fiscal 1995. Cash  equivalents at July 31, 1996 were $8,226,000
as compared to $8,422,000 at July 31, 1995.

           The Company's  effective tax rate  decreased to 36% in fiscal 1996 as
compared to 44% in the previous  fiscal year.  This decrease is  attributable to
the Company  utilizing  available  state net  operating  loss  deductions in the
current  fiscal  year.  The  Company  does not expect a similar  impact from net
operating loss deductions in the future.

           As a result of the foregoing, net income for fiscal 1996 increased to
$3,357,000 from $1,426,000 for fiscal 1995, an increase of 135%.

YEAR ENDED JULY 31, 1995 COMPARED TO YEAR ENDED JULY 31, 1994

           Net patient revenue  increased by approximately  $4,440,000,  or 22%,
from  $20,116,000  for the fiscal  year ended July 31, 1994  ("fiscal  1994") to
$24,556,000 for fiscal 1995. Approximately $3,270,000 or 74% of this increase is
attributable to Health  Acquisition Corp. During fiscal 1995, Health Acquisition
Corp. was again successful in increasing the volume with existing  customers and
securing eight (8) new provider  agreements.  Services of this  subsidiary  were
also expanded in April 1995 to include home care pediatric  skilled  nursing for
medically  fragile  children and their  families.  Revenues  generated from this
expansion of services  approximated  $293,000 for the period from April  through
July 1995. Revenue from Brevard Medical Center, Inc. ("Brevard"), the subsidiary
that operates outpatient medical centers in Brevard County,  Florida,  increased
approximately  $358,000,  or 9% from fiscal 1994. As a result of the health care
industry  shifting  toward  managed  care,  Brevard was  successful  in becoming
preferred  providers  for new managed  care plans  coming into the county.  This
increase  in revenue  is the direct  result of  additional  capitation  business
generated   from  managed  care  plans,   primarily   from  health   maintenance
organizations  (HMO's),  offset by a reduction  in  traditional  fee-for-service
business.  Revenue from First Health, Inc. ("First Health"), the subsidiary that
operates  outpatient  medical  centers in  Volusia  County,  Florida,  increased
approximately  $812,000 from the previous fiscal year, as only three months were
included in fiscal July 31, 1994 operations. The major source of revenue is from
a large health  maintenance  organization,  to which First Health is a preferred
provider.

           Cost of revenue as a  percentage  of revenue  was 61% for both fiscal
1995 and 1994. In preparation for becoming  preferred  providers for new managed
care plans in Florida, the Company

        
                                      -11-

<PAGE>



increased its medical  provider  costs in fiscal 1995 in expectation of securing
additional  managed care revenues.  The actual  increase was less than expected,
resulting  in a higher  cost of revenue as a  percentage  of revenue  from those
operations.  However, this higher percentage was offset by a decline in the cost
of revenue as a percentage of revenues from home health care operations. General
and administrative  expenses increased to 29% of revenue in fiscal 1995 from 28%
of revenue in fiscal 1994. This slight increase is primarily attributable to the
added operating costs of the outpatient medical operations.

           Interest  income  increased  approximately  $249,000 or 155% from the
previous  fiscal year.  This increase is attributable to interest earned on both
the notes  receivable  from Boro  Medical  and the  federal  income  tax  refund
received in fiscal 1995 of  approximately  $2,100,000  as a result of  carryback
claims.

           The Company's  effective tax rate decreased to  approximately  44% in
fiscal 1995 as  compared  to 47% in fiscal  1994.  This  decrease  is  primarily
attributable to federal income tax credits utilized in fiscal 1995.

           As a result of the foregoing, net income for fiscal 1995 increased to
$1,426,000 from $1,218,000 for fiscal 1994.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

           At July 31, 1996,  the Company had working  capital of $16,228,000 as
compared  to working  capital of  $15,292,000  at July 31,  1995.  Cash and cash
equivalents at July 31, 1996 was $8,929,000 as compared with  $9,237,000 at July
31, 1995.

           Net cash provided by operating  activities  was  $1,066,000 in fiscal
1996 as compared  with  $3,496,000  in fiscal  1995. A reduction in income taxes
receivable as a result of one-time tax carryback  claims received in fiscal 1995
and an  increase  in  estimated  third  party  payor  settlements  substantially
accounted  for the decrease  from fiscal 1995.  The Company  expects to generate
sufficient cash flow from operations to meet its working capital requirements.

           Investing  activities  in  fiscal  1996 used  cash of  $2,482,000  as
compared to cash provided from investing  activities of $681,000 in fiscal 1995.
The  acquisition  of Nurse Care and the  decrease  in  proceeds  of  investments
primarily accounted for the decrease from fiscal 1995.

           Cash provided from financing activities in fiscal 1996 was $1,108,000
as compared to $43,000 in fiscal  1995.  This  increase is  attributable  to the
increase in cash received on notes  receivable and proceeds from the exercise of
stock  options in fiscal  1996 over  fiscal  1995 and the  purchase  of treasury
shares in fiscal 1995,  offset by the cash  surrendered in the subsidiary  stock
offering in fiscal 1996.


        
                                      -12-

<PAGE>



           The nature of the Company's  business requires weekly payments to the
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  business  and 30 days with respect to certain  governmental  payors,
such as Medicare and Medicaid programs.  For the fiscal year ended July 31, 1996
accounts  receivable  turnover decreased to 73 days from 92 days in the previous
fiscal year. This decrease is attributable to the operations of New England as a
significant  amount of its revenue is derived  from both  Medicare  and Medicaid
programs.

           The Company has  available a  $2,000,000  secured line of credit with
its bank. In addition, a subsidiary of the Company has a secured advised line of
credit.  The maximum amount that can be borrowed under the secured  advised line
of credit  shall not  exceed  the  lesser of  eligible  accounts  receivable  or
$2,000,000.   Both  credit  facilities  bear  interest  at  the  alternate  base
commercial  lending rate of the bank and expire  December 31, 1996.  At July 31,
1996, there were no outstanding balances under either line of credit.

           The  Company  intends to meet both its short and long term  liquidity
needs with its current cash balances,  cash flow and available  lines of credit.
The Company  believes that its current cash  balances and available  credit will
also allow it to  continue  to make  acquisitions  in the home health care field
without affecting its liquidity needs.

           The Internal Revenue Services conducted an examination of federal tax
returns for the years ended July 31, 1991 through 1994.  The Company  received a
refund of  approximately  $2,100,000 as a result of net operating loss carryback
claims  made in fiscal  year ended July 31,  1994 and the years  affected by the
claims were examined. An immaterial preliminary  assessment,  subject to review,
has been proposed.

IMPACT OF INFLATION AND SEASONALITY

           The impact of  inflation on the Company was not material for the year
ended July 31, 1996.

           The Company's business is not seasonal.

ECONOMIC OUTLOOK

           The home health care industry has become increasingly competitive and
management believes this trend will continue in the future. This competition has
lead to mergers between large well  diversified  home health care companies over
the past  years.  Further,  such  companies  have more  acquisition  and  growth
opportunities available to them.  Additionally,  there is tremendous competition
for qualified  personnel in the home health care industry.  Management  believes
that it  offers  competitive  salaries  and  benefit  packages.  There can be no
assurance,  however,  that the Company  will be  successful  in  attracting  and
retaining  qualified  personnel.  If  unsuccessful,  this  could have a material
adverse effect on the Company's business.


        
                                      -13-

<PAGE>



           Other  than  as  set  forth  herein,  the  Company  has  no  material
commitments for capital expenditures as of July 31, 1996.

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


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Quarterly Results (unaudited)

           The following table presents unaudited  condensed  financial data for
the last eight fiscal  quarters.  In the opinion of  management,  all  necessary
adjustments (consisting of normal recurring accruals) considered necessary for a
fair  presentation  have  been  included.   The  following   selected  quarterly
information  should  be read in  conjunction  with  the  consolidated  financial
statements included elsewhere herein.

<TABLE>
<CAPTION>
                                                             First            Second            Third             Fourth
                                                            Quarter           Quarter          Quarter            Quarter
                                                        ---------------   ---------------   ----------------  ---------------
1995
----
<S>                                                          <C>               <C>               <C>               <C>       
Revenues                                                     $5,729,000        $6,045,000        $6,296,000        $6,486,000
Earnings from continuing operations                             265,000           334,000           401,000           426,000
Earnings per share from continuing operations                      0.05              0.07              0.08              0.08
Earnings per share                                                 0.05              0.07              0.08              0.08

1996
----

Revenues                                                     10,074,000         9,965,000         9,760,000         9,031,000
Earnings from continuing operations before gain
   resulting from subsidiary's stock offering                   452,000           471,000           533,000           887,000
Earnings resulting from subsidiary's stock
   offering                                                       - - -             - - -             - - -         1,014,000
Earnings from continuing operations before gain
   resulting from subsidiary's stock offering per
   share                                                           0.09              0.09              0.11              0.17
Earnings resulting from subsidiary's stock
   offering per share                                             - - -             - - -             - - -              0.21
Earnings per share                                                 0.09              0.09              0.11              0.38
</TABLE>


           The  other  information  required  by this  item is set  forth in the
Consolidated Financial Statements on pages F-1 through F-22.

        
                                      -14-

<PAGE>




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

           Not applicable.


                                    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 1996 Annual
Meeting of  Stockholders  to be held on  December 9, 1996,  and is  incorporated
herein by reference.  The Company intends to files such Proxy Statement with the
Securities and Exchange  Commission  not later than 120 days  subsequent to July
31, 1996.

                                     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).

           (2)        Financial   Statement   Schedules   (see   index   to  the
                      consolidated financial statements).

           (3)        Exhibits


        
                                      -15-

<PAGE>




                         NATIONAL HOME HEALTH CARE CORP.

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

            FILED WITH THE ANNUAL REPORT OF THE COMPANY ON FORM 10-K



PART II ITEM 8:

   REPORT OF INDEPENDENT AUDITORS                              F-2

   CONSOLIDATED BALANCE SHEETS AS AT JULY 31, 1996
   AND 1995                                                    F-3

   CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
   YEARS ENDED JULY 31, 1996, 1995 AND 1994                    F-4

   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
   EQUITY FOR THE YEARS ENDED JULY 31, 1996, 1995
   AND 1994                                                    F-5

   CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS
   ENDED JULY 31, 1996, 1995 AND 1994                          F-6

   NOTES TO FINANCIAL STATEMENTS                               F-7

PART IV ITEM 14:

   REPORT OF INDEPENDENT AUDITORS ON SCHEDULE                  F-29

   II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS
        ENDED JULY 31, 1996, 1995 AND 1994                     F-30

Schedules Omitted

Other  schedules have been omitted as the conditions  requiring their filing are
not present or the information  required  therein has been included in the notes
to consolidated financial statements.

     
                                       F-1

<PAGE>



                         REPORT OF INDEPENDENT AUDITORS


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

           We have  audited  the  accompanying  consolidated  balance  sheets of
National Home Health Care Corp.  and  subsidiaries  as at July 31, 1996 and July
31, 1995,  and the related  consolidated  statements of  operations,  changes in
stockholders'  equity  and cash  flows for each of the  years in the  three-year
period ended July 31, 1996. These financial statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

           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  provide a  reasonable  basis for our
opinion.

           In our opinion,  the financial  statements  enumerated  above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
National Home Health Care Corp. and  subsidiaries  at July 31, 1996 and July 31,
1995, and the consolidated  results of their  operations and their  consolidated
cash flows for each of the years in the  three-year  period ended July 31, 1996,
in conformity with generally accepted accounting principles.


New York, New York
October 21, 1996

     
                                       F-2

<PAGE>
                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                July 31,
                                                A S S E T S                1996           1995
                                                -----------           ------------    ------------
<S>                                                                   <C>             <C>         
Current assets:
   Cash (including cash equivalents of $8,226,000 and
     $8,422,000) (Note 10)  .......................................   $  8,929,000    $  9,237,000
   Investments - available for sale ...............................        528,000         813,000
   Accounts receivable (less allowance for doubtful
     accounts of $414,000 and $99,000) (Note 10)  .................      8,499,000       5,338,000
   Notes receivable (Note 3)  .....................................                        349,000
   Income taxes receivable ........................................        203,000          72,000
   Prepaid expenses and other assets ..............................        218,000         354,000
   Deferred taxes .................................................        304,000          80,000
                                                                      ------------    ------------

          Total current assets ....................................     18,681,000      16,243,000

Furniture, equipment and leasehold improvements, net
   (Notes 1 and 2)  ...............................................        319,000         445,000
Notes receivable - noncurrent (Note 3)  ...........................                        690,000
Excess of cost over fair value of net assets of
   businesses acquired (Notes 1 and 4)  ...........................      2,557,000       1,036,000
Other intangible assets (Note 5)  .................................        132,000         342,000
Deposits and other assets .........................................        110,000         109,000
Investment in unconsolidated investee (Note 6)  ...................      2,622,000
                                                                      ------------    ------------


          T O T A L ...............................................   $ 24,421,000    $ 18,865,000
                                                                      ============    ============


              LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued expenses ..........................   $  1,315,000    $    951,000
   Estimated third-party payor settlements ........................      1,078,000
                                                                      ------------    ------------

          Total current liabilities ...............................      2,393,000         951,000

Deferred tax liability - noncurrent (Note 9)  .....................        524,000
                                                                      ------------    ------------

          Total liabilities .......................................      2,917,000         951,000
                                                                      ------------    ------------

Commitments, contingencies and other matters
   (Notes 9 and 12)

Stockholders' equity (Note 11):
   Common stock, $.001 par value; authorized 20,000,000
     shares, issued 6,050,321 and 5,673,075 shares ................          6,000           6,000
   Additional paid-in capital .....................................     17,660,000      15,552,000
   Retained earnings ..............................................      4,789,000       3,307,000
                                                                      ------------    ------------

                                                                        22,455,000      18,865,000

   Less treasury stock (955,000 shares) - at cost .................       (951,000)       (951,000)
                                                                      ------------    ------------

          Total stockholders' equity ..............................     21,504,000      17,914,000
                                                                      ------------    ------------


          T O T A L ...............................................   $ 24,421,000    $ 18,865,000
                                                                      ============    ============
</TABLE>
                 See accompanying notes to financial statements.

                                       F-3

<PAGE>
                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                     Year Ended July 31,
                                                        -------------------------------------------
                                                            1996            1995           1994
                                                        ------------    ------------   ------------
<S>                                                     <C>             <C>            <C>         
Net patient revenue (Note 10) .......................   $ 38,830,000    $ 24,556,000   $ 20,116,000
                                                        ------------    ------------   ------------

Operating expenses:
   Cost of revenue ..................................     24,798,000      15,032,000     12,178,000
   General and administrative .......................     10,472,000       7,213,000      5,618,000
   Amortization of intangibles ......................        294,000         169,000        186,000
                                                        ------------    ------------   ------------

          Total operating
            expenses ................................     35,564,000      22,414,000     17,982,000
                                                        ------------    ------------   ------------

Income from operations ..............................      3,266,000       2,142,000      2,134,000

Other income:
   Gain resulting from
     subsidiary's stock
     offering (Note 6)  .............................      1,548,000
   Interest income ..................................        412,000         410,000        161,000
   (Loss) from equity investee ......................        (10,000)
                                                        ------------    ------------   ------------


Income from continuing
   operations before taxes ..........................      5,216,000       2,552,000      2,295,000
Provision for income taxes
   (Note 9) .........................................      1,859,000       1,126,000      1,077,000
                                                        ------------    ------------   ------------

Income from continuing
   operations .......................................      3,357,000       1,426,000      1,218,000
                                                        ------------    ------------   ------------

Discontinued operations (Note 7):
     (Loss) from operations
       (net of income taxes
       of $40,000)  .................................                                       (32,000)
     (Loss) on disposals (net
       of income tax benefit of
       $2,734,000)  .................................                                    (3,440,000)
                                                        ------------    ------------   ------------
          T o t a l .................................                                    (3,472,000)
                                                        ------------    ------------   ------------

NET INCOME (LOSS) ...................................   $  3,357,000    $  1,426,000   $ (2,254,000)
                                                        ============    ============   ============


Net income (loss) per share of common stock (Note 1):
     Continuing operations ..........................   $        .67    $        .28   $        .24
     Discontinued operations ........................                                          (.68)
                                                        ------------    ------------   ------------

     Net income (loss) per
       share ........................................   $        .67    $        .28   $       (.44)
                                                        ============    ============   ============
</TABLE>

                 See accompanying notes to financial statements.

                                       F-4
<PAGE>
                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                     Common Stock                                                Treasury Stock
                                            -----------------------------    Additional                    -------------------------
                                              Number of                        Paid-In        Retained     Number of
                                               Shares          Amount          Capital        Earnings       Shares        Cost
                                            ------------    ------------    ------------    ------------   ---------   ------------ 
<S>                                            <C>          <C>             <C>             <C>              <C>       <C>          
Balance at July 31, 1993  .................    5,670,075    $      6,000    $ 15,544,000    $  4,135,000     891,000   $   (743,000)


Net (loss)  ...............................                                                   (2,254,000)
                                            ------------    ------------    ------------    ------------   ---------   ------------ 


Balance at July 31, 1994  .................    5,670,075           6,000      15,544,000       1,881,000     891,000       (743,000)


Net income ................................                                                    1,426,000


Acquisition of treasury shares, $3.25
   per share ..............................                                                                   64,000       (208,000)


Exercise of common stock options ..........        3,000                           8,000
                                            ------------    ------------    ------------    ------------   ---------   ------------ 


Balance at July 31, 1995  .................    5,673,075           6,000      15,552,000       3,307,000     955,000       (951,000)

Net income ................................                                                    3,357,000

Stock dividend declared on October 21, 1996      288,414                       1,875,000      (1,875,000)

Exercise of common stock options ..........       88,832                         233,000
                                            ------------    ------------    ------------    ------------   ---------   ------------ 


BALANCE AT JULY 31, 1996  .................    6,050,321    $      6,000    $ 17,660,000    $  4,789,000     955,000   $   (951,000)
                                            ============    ============    ============    ============   =========   ============
</TABLE>
                 See accompanying notes to financial statements.

                                       F-5
<PAGE>



                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                           Year Ended July 31,
                                                                                -----------------------------------------
                                                                                    1996           1995           1994
                                                                                -----------    -----------    -----------
<S>                                                                             <C>            <C>            <C>        
Cash flows from operating activities:
   Income from continuing operations ........................................   $ 3,357,000    $ 1,426,000    $ 1,218,000
   Adjustments to reconcile income from continuing operations to net
     cash provided by operating activities:
       Depreciation and amortization ........................................       454,000        329,000        327,000
       (Settlement) provision for state income taxes ........................                     (300,000)        50,000
       Provision for doubtful accounts ......................................       123,000        173,000        141,000
       Deferred tax .........................................................       410,000        120,000        (20,000)
       (Gain) on subsidiary's stock offering ................................    (1,548,000)
       Loss from equity investee ............................................        10,000
       Changes in operating assets and liabilities:
         (Increase) in management fee receivable ............................                                     (52,000)
         (Increase) in accounts receivable ..................................      (544,000)      (688,000)      (323,000)
         (Increase) in prepaid expenses and other assets ....................       (65,000)      (130,000)      (146,000)
         (Decrease) increase in accounts payable, accrued expenses and
           other liabilities ................................................      (337,000)        13,000        190,000
         Decrease in income taxes receivable/payable ........................       207,000      2,553,000        445,000
         (Decrease) in estimated third party payor settlements ..............    (1,001,000)
         Cash provided by discontinued operations ...........................                                     985,000
                                                                                -----------    -----------    -----------
           Net cash provided by operating activities ........................     1,066,000      3,496,000      2,815,000
                                                                                -----------    -----------    -----------

Cash flows from investing activities:
   Purchase of furniture, equipment and leasehold improvements ..............      (172,000)       (94,000)       (76,000)
   Proceeds (purchase) of investments .......................................       285,000      1,000,000       (865,000)
   Purchase of assets of businesses .........................................                     (225,000)      (147,000)
   Purchase of Nurse Care, Inc., net of cash acquired .......................    (2,595,000)
   Cash (used in) discontinued operations ...................................                                    (174,000)
                                                                                -----------    -----------    -----------
           Net cash provided by (used in) investing activities ..............    (2,482,000)       681,000     (1,262,000)
                                                                                -----------    -----------    -----------

Cash flows from financing activities:
   Decrease in notes receivable .............................................     1,039,000        243,000
   Purchase of treasury shares ..............................................      (208,000)
   Proceeds from exercise of stock options ..................................       233,000          8,000
   Cash of subsidiary at date of stock offering (Note 6)  ...................      (164,000)
                                                                                -----------    -----------
           Net cash provided by financing activities ........................     1,108,000         43,000
                                                                                -----------    -----------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ........................      (308,000)     4,220,000      1,553,000

Cash and cash equivalents - beginning of year * .............................     9,237,000      5,017,000      3,464,000
                                                                                -----------    -----------    -----------

CASH AND CASH EQUIVALENTS - END OF YEAR .....................................   $ 8,929,000    $ 9,237,000    $ 5,017,000
                                                                                ===========    ===========    ===========

Supplemental  disclosures  of cash flow  information:
   Cash paid during the year for:
     Interest ...............................................................   $    14,000    $    13,000    $    12,000
     Taxes ..................................................................     1,677,000        618,000        651,000
</TABLE>

Supplemental  disclosure of noncash  investing  and  financing  activities - see
Notes 1[n], 6 and 8.


*  Includes cash of discontinued operations in 1994.

                 See accompanying notes to financial statements.

                                       F-6
<PAGE>
                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 1) - Nature of Business and Summary of Significant Accounting
           Policies and Acquisition:

           [a]  Nature of 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 therapies.  Up until May 1996, the Company was also engaged as
a provider of outpatient medical services, see Note 6.

           [b]  Principles of consolidation:

           The  consolidated   financial  statements  include  the  accounts  of
National  Home  Health  Care  Corp.  and  its  wholly  owned  subsidiaries.  All
significant  intercompany  accounts and transactions have been eliminated in the
consolidated financial statements. During the fourth quarter of fiscal 1996, the
Company's  interest in its previously  wholly-owned  subsidiary,  which provided
outpatient  medical  services,  was reduced to 37.6%.  Accordingly,  the Company
began accounting for this entity using the equity method.

           [c]  Revenue recognition:

           Net patient revenue  represents the estimated net realizable  amounts
from third party  payors and  patients.  Approximately  39%,  13% and 17% of net
patient  revenue  for the  fiscal  years  ended  July 31,  1996,  1995 and 1994,
respectively,  were derived  under federal and state  third-party  reimbursement
programs.  These revenues are based, in part, on cost  reimbursement  principles
and  are  subject  to  examination  and   retroactive   adjustment  by  agencies
administering  the programs.  Management  continuously  evaluates the outcome of
these  reimbursement  examinations  and provides  allowances  for any  potential
adjustments.  In the opinion of  management,  retroactive  adjustments,  if any,
would not be material to the financial  position or results of operations of the
Company.

           [d]  Cash equivalents:


(continued)


                                       F-7

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


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

           [e]  Furniture, equipment and leasehold improvements:

           Furniture,  equipment and leasehold  improvements are stated at cost.
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.

(continued)

                                       F-8

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 1) - Nature of Business and Summary of Significant Accounting
           Policies:  (continued)

           [f]  Excess of cost over fair value of net assets of
                business acquired:

           The  excess  of cost  over the  fair  value  of net  assets  acquired
(goodwill)  is  principally  being  amortized  over a  period  of 40  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.

           [g]  Earnings (loss) per common share:

           Earnings  (loss) per common  share are  computed  using the  weighted
average number of common shares and dilutive common stock equivalents  (options)
outstanding  during each period  after  giving  retroactive  effect to the stock
dividend  declared in October 1996.  During the three years ended July 31, 1996,
the  options  were not  materially  dilutive.  The number of shares  used in the
calculation  of earnings  (loss) per share are 5,033,960 for the year ended July
31, 1996,  5,049,119 for the year ended July 31, 1995 and 5,067,489 for the year
ended July 31, 1994.


(continued)


     
                                       F-9

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


           [h]  Investments:

           The  Company's  investments  are  accounted  for in  accordance  with
Statement of Financial  Accounting  Standards No. 115,  "Accounting  for Certain
Investments in Debt and Equity  Securities" which requires that, except for debt
securities classified as "held-to maturity securities",  investments in debt and
equity securities be reported at fair value.

           Investment  securities  available  for sale at July 31, 1996 and 1995
are summarized as follows:

                                                              1996       1995
                                                          Amortized  Amortized
                                                            Cost (1)   Cost (1)
                                                           ---------  --------
Certificate of deposit, maturing within one year. . . . .             $260,000
Floating rate debentures issued by New York State,
   maturing in one to five years. . . . . . . . . . . . .  $160,000    160,000
Floating rate debentures issued by New York State,
   maturing in five to ten years. . . . . . . . . . . . .   170,000    180,000
Floating rate debentures issued by New York State,
   maturity after ten years . . . . . . . . . . . . . . .   180,000    195,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . .    18,000     18,000
                                                           ---------  --------
                                                           $528,000   $813,000
                                                           ========   ========

(1)        Amortized cost approximates  market value.  Accordingly,  there is no
           unrealized holding gain or loss.

(continued)


     
                                      F-10

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 1) - Nature of Business and Summary of Significant Accounting
           Policies:  (continued)

           [i]  Reclassifications:

           Certain  items in the 1994 and 1995  financial  statements  have been
reclassified to conform to the 1996 presentation.

           [j]  Fair value of financial instruments:

           The carrying amount reported in the  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.

           [k]  Recently issued accounting pronouncements:

           In March 1995 and October 1995,  the Financial  Accounting  Standards
Board issued Statement of Financial  Accounting  Standards No. 121 ("SFAS 121"),
"Accounting  for the  Impairment  of Long  Lived  Assets  and for the Long Lived
Assets to be Disposed of", and Statement of Financial  Accounting  Standards No.
123 ("SFAS 123"), "Accounting for Stock-Based Compensation",  respectively. SFAS
121 is effective for the Company's  fiscal year ended July 31, 1997 and SFAS 123
has various  effective and transition  dates. The Company  believes  adoption of
SFAS  121 and  SFAS  123  will  not  have a  material  impact  on its  financial
statements.  The Company expects to continue to account for employee stock-based
compensation  in accordance  with  Accounting  Principles  Board Opinion No. 25,
"Accounting  for  Stock  Issued  to  Employees"   using  intrinsic  values  with
appropriate  disclosures in conformity with the fair values based method of SFAS
123.

           [l]  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

(continued)


     
                                      F-11

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


primarily to goodwill,  depreciable  assets and valuation  reserves for accounts
receivable and deferred tax assets.

           [m]  Workers compensation:

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

(continued)


     
                                      F-12

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 1) - Nature of Business and Summary of Significant Accounting
           Policies:  (continued)

           [n]   Stock dividend:

           On October 21, 1996 a 6% stock  dividend was declared by the Board of
Directors for  shareholders of record on November 8, 1996. The stock dividend is
payable  on  December  4, 1996 and all stock  related  data in the  consolidated
financial statements reflect the stock dividend for all periods presented.


(NOTE 2) - Furniture, Equipment and Leasehold Improvements:

           Furniture,  equipment and leasehold  improvements  are stated at cost
and are summarized as follows:
                                           July 31,
                                      1996         1995
                                      ----         ----
          Equipment, furniture
             and fixtures. . . . .  $604,000   $1,562,000
          Leasehold improvements .   140,000      368,000

                                     744,000    1,930,000
          Less accumulated
             depreciation and
             amortization. . . . .   425,000    1,485,000
                                   ---------   ----------

                    B a l a n c e.  $319,000   $  445,000
                                   =========   ==========

The net book value of furniture  and  equipment  held under  capital  leases was
$20,000  and  $79,000  at  July  31,  1996  and  July  31,  1995,  respectively.
Depreciation expense includes depreciation on assets held under capital leases.


(NOTE 3) - Notes Receivable:

           In April 1994, as a result of the sale of assets discussed in Note 7,
the Company received  promissory notes  aggregating  $750,000.  The Company also
received a promissory note for $500,000 for the balance of

(continued)


     
                                      F-13

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


management fees  previously due it. In May 1996, the promissory  notes were paid
in full.

(continued)


     
                                      F-14

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 4) - Excess of Cost Over Fair Value:

           Changes  in the  excess  of cost  over  fair  value of net  assets of
businesses  acquired and discontinued during the three years ended July 31, 1996
are as follows:

                                       Year Ended July 31,
                                 ------------------------------
                                 1996         1995         1994
                                 ----         ----         ----
Balance - beginning of
   year. . . . . . . . . . .  $1,036,000   $1,073,000   $ 6,868,000
Consideration for
   acquisition . . . . . . .   2,049,000                      5,000
Reduction from subsidiary
   stock offering (Note 6) .    (392,000)
Write-off due to
   discontinued operations .                             (5,671,000)
Amortization . . . . . . . .    (136,000)     (37,000)     (129,000)
                              ----------   ----------   -----------

Balance - end of year. . . .  $ 2,557,000  $ 1,036,000  $ 1,073,000
                              ===========  ===========  ===========


(NOTE 5) - Other Intangible Assets:

           Other intangible assets are as follows:

                                                  July 31,
                                              ---------------
                                              1996       1995
                                              ----       ----

     Covenants not to compete. . . . . . .  $400,000   $485,000
     Personnel files . . . . . . . . . . .   478,000    478,000
     Other . . . . . . . . . . . . . . . .     2,000      2,000
                                            --------   --------

                                             880,000    965,000
     Less accumulated amortization . . . .   748,000    623,000
                                            --------   --------

                                            $132,000   $342,000
                                            ========   ========

           Other  intangible  assets decreased during fiscal 1996 as a result of
the subsidiary  stock offering,  see Note 6. Other  intangible  assets are being
amortized using the straight-line method over a period of 3 to 5 years.


(continued)


     
                                      F-15

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 6) - Subsidiary Stock Offering:

           In January  1996,  the  outpatient  medical  service  business of the
Company was reorganized as SunStar Healthcare, Inc. ("SunStar"), a newly-formed,
wholly-owned  subsidiary  of the  Company.  The Company  reduced  its  ownership
percentage of SunStar to 37.6% through a public offering of 1,495,000  shares at
a price  of  $5.00  per  share,  aggregating  approximately  $6,083,000,  net of
expenses.  Subsequent  to the  offering,  the  Company  is  accounting  for  its
investment in SunStar

(continued)


     
                                      F-16

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 6) - Subsidiary Stock Offering:  (continued)

using the equity method of accounting. In connection with SunStar's public stock
offering, the Company recorded a gain before tax of $1,548,000  representing the
net increase in book value of the Company's  investment in SunStar at that date.
Deferred income taxes of $524,000 have been provided on the gain.

           Summarized financial data of SunStar for the year ended July 31, 1996
is as follows:

                     Total current assets. . . . . . . .  $6,403,000
                     Total assets. . . . . . . . . . . .  $7,499,000
                     Total current liabilities . . . . .  $  505,000
                     Total liabilities . . . . . . . . .  $  522,000
                     Total revenues. . . . . . . . . . .  $5,080,000
                     Net (loss). . . . . . . . . . . . .  $ (222,000)
                     (Loss) per share. . . . . . . . . .     $(.15)
                     Market value of the Company's
                        investment . . . . . . . . . . .  $4,233,000


(NOTE 7) - Discontinued Operations:

           [a] The Company's  National HMO (New York),  Inc. ("HMO")  subsidiary
provided  administrative and nonmedical  management services for a medical group
and a dental group. In March 1994 the medical group informed the Company that it
was terminating the management  arrangement between the parties. As a result, in
April 1994, the Company sold to the medical provider,  the assets related to the
management business for notes receivable  aggregating $750,000 (see Note 3). The
parties  mutually  agreed not to compete  with one  another  for a period of two
years. Subsequently,  the Company made a determination to discontinue all of its
management operation.  The loss on disposal consists primarily of a write-off of
goodwill  of  approximately  $5,700,000  net of a federal  income tax benefit of
approximately $2,550,000.

                     Results from discontinued operations related to HMO for the
year ended July 31, 1994 are as follows:

                     Net revenue . . . . . . . . . . . . . . .  $ 3,521,000
                                                                ===========

(continued)


     
                                      F-17

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


                     Income from operations before taxes . . .  $     8,000
                     Income tax provision. . . . . . . . . . .       40,000
                                                                ----------- 
                     (Loss) from operations. . . . . . . . . .      (32,000)
                     (Loss) on disposal. . . . . . . . . . . .   (6,174,000)
                     Income tax benefit. . . . . . . . . . . .    2,550,000
                     Deferred income tax benefit . . . . . . .       80,000
                                                                ----------- 

                     (Loss) from discontinued operations . . .  $(3,576,000)
                                                                =========== 

(NOTE 7) - Discontinued Operations:  (continued)

           [b] In May 1992,  the Company  purchased  certain  assets and assumed
certain liabilities of Hitech Registered Nurses of New Jersey, Inc.,  ("Hitech")
for $250,000.  In July 1993,  the Company made a  determination  to  discontinue
these operations, after concluding that the time and financial commitment needed
to turn  around  Hitech's  operations  (skilled  nursing  and  home  intravenous
therapy)  would be too great for it to  pursue.  During  the year ended July 31,
1993, in connection with the decision to discontinue the operation,  the Company
recorded a charge of  $514,000  (net of a  deferred  tax  benefit of  $319,000),
consisting of a provision for estimated loss on  disposition of Hitech's  assets
and a provision  for  estimated  operating  losses  through the expected time of
disposition.

           Results from discontinued  operations  related to Hitech for the year
ended July 31, 1994 relate to certain adjustments of tax accounts as follows:

                   Income tax benefit. . . . . . .  $ 423,000
                   Deferred income tax . . . . . .   (319,000)

                   Income from discontinued
                      operations . . . . . . . . .  $ 104,000


(NOTE 8) - Acquisitions:

           On August 4, 1995, the Company acquired all of the outstanding common
shares of Nurse Care,  Inc., the parent  company of New England Home Care,  Inc.
("New  England").  New England is a licensed and Medicare  certified home health
care agency providing services in Fairfield and

(continued)


     
                                      F-18

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


New Haven counties in the State of Connecticut. The purchase price of $3,150,000
was  generated  from  internal  funds.  The  acquisition  was accounted for as a
purchase and the excess of the purchase  price over the fair value of the assets
acquired, $2,049,000, was allocated to goodwill.

           The  following   unaudited  pro  forma   consolidated   statement  of
operations information gives effect to the acquisition described above as though
it had occurred on August 1, 1994,  after giving effect to certain  adjustments,
including  amortization of goodwill of $102,000,  decrease in interest income of
$189,000,  elimination of former shareholder  compensation of $250,000,  benefit
from  additional  third-party  reimbursement  of  $200,000  and income  taxes of
$104,000.  The unaudited pro forma  financial  information  may not  necessarily
reflect

(continued)


     
                                      F-19

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 8) - Acquisitions:  (continued)

the results of operations that would have occurred had the acquisition  occurred
on August 1, 1994:

                     Net patient revenue. . . . . . . .  $ 40,547,000
                     Operating expenses . . . . . . . .   (37,777,000)

                     Income from operations . . . . . .  $  2,770,000
                                                         ============

                     Net income . . . . . . . . . . . .  $  1,632,000
                                                         ============

                     Net income per share . . . . . . .       $.34
                                                              ====

           In March 1995,  the  Company  purchased  certain  assets of a company
engaged  in home  health  care  services  for an  aggregate  purchase  price  of
$250,000. The acquisition was accounted for as a purchase; $25,000 was allocated
to furniture and equipment, $200,000 to a covenant not to compete and $25,000 to
personnel files.

           Had the operations of the company been acquired as of August 1, 1993,
there would have been no material effect on the  consolidated  operations of the
Company for the years ended July 31, 1995 and July 31, 1994.


(NOTE 9) - Income Taxes:

           The provision for income taxes for 1996,  1995 and 1994 applicable to
continuing operations is summarized as follows:

                                           Year Ended July 31,
                                     ------------------------------
                                     1996         1995         1994
                                     ----         ----         ----

           Current:
              Federal . . . . .  $1,340,000   $  515,000   $  688,000
              State and local .     109,000      491,000      409,000
                                 ----------   ----------   ----------

                                  1,449,000    1,006,000    1,097,000

           Deferred . . . . . .     410,000      120,000      (20,000)
                                 ----------   ----------   ----------
                     T o t a l.  $1,859,000   $1,126,000   $1,077,000
                                 ==========   ==========   ==========

(continued)


                                      F-20

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 9) - Income Taxes:  (continued)

           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 laws and  regulations.  The principal  items
making up the deferred income tax expenses (benefit) are as follows:

                                                 Year Ended July 31,
                                             ---------------------------
                                             1996       1995        1994
                                             ----       ----        ----
     State tax and net operating
              loss carryforwards . . . .  $(114,000)  $120,000   $(20,000)

     Tax on gain from sale of
              subsidiary stock . . . . .    524,000

                                          $ 410,000   $120,000   $(20,000)
                                         ==========  =========  =========

           The deferred tax assets and  liabilities  as of July 31, 1996, are as
follows:

                                            Assets    Liabilities

           Accrued liability and
              reserves . . . . . . . . .  $190,000

           State net operating loss
              carryforwards. . . . . . .   114,000

           Investment in unconsolidated
              subsidiary . . . . . . . .              $524,000
                                          --------    --------

                                           304,000    $524,000
                                                      ========
           Valuation allowance . . . . .     -0-
                                          -------- 
                                          $304,000
                                          ========

           The Company and two  subsidiaries  have incurred  losses which can be
used to offset state taxable  income  through 2012.  Total net operating  losses
applicable to New York State and Connecticut amount to approximately  $3,300,000
and $300,000, respectively.


(continued)


     
                                      F-21

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 9) - Income Taxes:  (continued)

           The  reconciliation  of the  statutory  tax rate to the effective tax
rate for the three years ended July 31, 1996 is as follows:

                                          Year Ended July 31,
                                          ------------------
                                          1996   1995   1994
                                          ----   ----   ----

          Statutory rate . . . . . . . .   34%    34%    34%

          State and local taxes (net of
             federal tax effect) . . . .    1     12     12

          Federal tax credit . . . . . .          (5)

          Other. . . . . . . . . . . . .    1      3      1
                                           ---    ---    --

          Effective rate . . . . . . . .   36%    44%    47%
                                           ===    ===    ===

           In 1995,  the Company and the New York State  Department  of Taxation
and Finance  entered into a  Stipulation  of  Discontinuance  regarding all open
taxable  years  for  which  the  Company   previously  had  been  assessed.   In
consideration for a payment of approximately  $333,000, this matter was settled.
The  Company  previously  established  a  provision  to cover  the  payment  and
interest.

           The Internal Revenue Service  conducted an examination of federal tax
returns for the years ended July 31, 1991  through  July 31,  1994.  The Company
received a refund of approximately  $2,100,000 as a result of net operating loss
carryback  claims made in fiscal year ended July 31, 1994 and the years affected
by the claims were examined. An immaterial  preliminary  assessment,  subject to
review, has been proposed.


(NOTE 10) - Concentrations of Credit Risk and Major Customers:

           Most of the Company's  business is with  customers  and  governmental
agencies who are in the health care industry.

           The  Company  provides  temporary  health care  personnel  to in-home
patients in the New York City metropolitan area and State of

(continued)


     
                                      F-22

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


Connecticut.  Credit losses relating to customers historically have been
minimal and within management's expectations.

           At July 31, 1996,  the Company  maintained  approximately  49% of its
cash and cash equivalents with one financial institution.

(continued)


     
                                      F-23

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 10) - Concentrations of Credit Risk and Major Customers:
             (continued)

           Under certain federal and state third-party  reimbursement  programs,
the Company received net patient revenues approximating $15,211,000,  $3,125,000
and  $3,427,000  for the years ended July 31,  1996,  July 31, 1995 and July 31,
1994,   respectively.   The  Company  also  received  net  patient  revenues  of
approximately $9,275,000, $9,933,000 and $7,842,000 July 31, 1996, July 31, 1995
and July 31, 1994,  respectively,  from a private company. At July 31, 1996, the
Company  had an  aggregate  outstanding  receivable  from the  federal and state
reimbursement programs of $2,799,000 and an outstanding receivable of $2,199,000
from the private company.


(NOTE 11) - Stock Option Plan:

           In 1992,  the  stockholders  approved the 1992 Stock Option Plan (the
"1992  Plan")  designed  to provide an  incentive  to key  employees  (including
directors  and officers  who are key  employees)  and to  Directors  who are not
employees  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.

           The 1992 Plan is administered by the Compensation Committee which has
the  authority to determine  when options are granted,  the term during which an
option may be exercised (provided no option has a term exceeding ten years), the
exercise price and the exercise  period.  The exercise price shall generally not
be less  than the fair  market  value on the date of  grant.  No  option  may be
granted under the 1992 Plan after August 16, 2002.

           During 1995,  283,502 options  previously granted under another stock
option plan were  cancelled  upon  termination  of that plan and  replaced  with
283,502 options granted under the 1992 Plan.

           At July 31, 1996,  408,168 shares of the Company's  common stock have
been reserved for future issuance pursuant to the 1992 Plan.

(continued)


     
                                      F-24

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 11) - Stock Option Plan:  (continued)

           Listed  below is a summary  of stock  option  activity  for the three
years ended July 31, 1996:

                               Number of Shares         Exercise
                          1996      1995       1994      Price
                        --------  ---------  --------  ----------

     Outstanding -
        beginning of
        period . . . .  295,502    300,502   313,502   $2.63 - $4.75
     Options granted .   12,000    286,502              2.63 -  6.25
     Options exercised  (88,832)    (3,000)                 2.63
     Options forfeited  (26,234)  (288,502)  (13,000)   2.63 -  4.75
                       --------  ---------  --------
     Options
        outstanding. .  192,436    295,502   300,502    2.63 -  4.75
                       ========  =========  ========

     Options
        exercisable. .  192,436    295,502   300,502
                       ========  =========  ========


(NOTE 12) - Commitments, Contingencies and Other Matters:

           [a] The  Company has an Employee  Savings and Stock  Investment  Plan
organized  under Section  401(k) of the Internal  Revenue Code.  Under the plan,
employees may contribute up to 10% of their salary into the plan, limited to the
maximum amount allowable under federal tax  regulations.  The Company will match
employee  contributions  invested  in  Company  common  stock  up to  5% of  the
employee's salary and may also make additional  contributions at its discretion.
In addition to  investing  in Company  stock,  an employee may invest in several
mutual funds.  The Company's  contribution  for each of the years ended July 31,
1996,  July 31,  1995 and July 31,  1994  was  $122,000,  $59,000  and  $74,000,
respectively.

           [b] The Company and its subsidiaries have employment  agreements with
five  officers  which  provide for aggregate  annual  salaries of $796,000.  The
employment  agreements expire through April 1998. One of the agreements provides
for additional  compensation of up to $150,000 based on 5% of pre-tax income, as
defined, in excess of $3,000,000.

           [c] The Company rents various  office  facilities  through 2000 under
the terms of several lease agreements which include escalation clauses.

(continued)
                                      F-25
<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 12) - Commitments, Contingencies and Other Matters:  (continued)

           [c]  (continued)

           At  July  31,  1996,   minimum   annual  rental   commitments   under
noncancellable operating leases are as follows:

                               Year Ending
                                 July 31,

                  1997. . . . . . . . . . . . .  $380,000
                  1998. . . . . . . . . . . . .   143,000
                  1999. . . . . . . . . . . . .    54,000
                  2000. . . . . . . . . . . . .    27,000
                                                 --------
                            T o t a l . . . . .  $604,000
                                                 ========

           Rent expense (including discontinued  operations) for the years ended
July 31,  1996,  July 31,  1995 and July 31,  1994 was  approximately  $655,000,
$584,000 and $859,000, respectively.

           One  lease  is  with a  company  controlled  by the  Company's  Chief
Executive Officer. Rent expense under such lease approximates $120,000 per year.

           [d]  The  Company  has a line  of  credit  with  its  bank  totalling
$2,000,000.  Advances against the line are to be collateralized by the assets of
the Company. In addition, a subsidiary of the Company has a secured advised line
of credit.  The maximum  amount that can be borrowed  under the secured  advised
line of credit shall not exceed the lesser of eligible  accounts  receivable  or
$2,000,000.   Both  credit  facilities  bear  interest  at  the  alternate  base
commercial  lending rate of the bank and expire  December 31, 1996.  At July 31,
1996, there were no outstanding balances under either line of credit.


(NOTE 13) - Segment Information:

           The  Company's  operations  are in home  health  care  services  and,
through May 1996,  outpatient  medical  services.  Home health care services are
performed in the New York metropolitan area and in the

(continued)


     
                                      F-26

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


State of Connecticut.  Outpatient medical services were performed in Brevard and
Volusia  County,  Florida.  Subsequent  to the  Company's  sale of its  majority
ownership in SunStar Healthcare, Inc., during the fourth quarter of fiscal 1996,
such operations are not consolidated and,  accordingly,  are not included in the
following segment information.

(continued)


     
                                      F-27

<PAGE>


                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                          NOTES TO FINANCIAL STATEMENTS


(NOTE 13) - Segment Information:  (continued)

           Revenue,  operating expenses and income from operations pertaining to
the Company's operations are as follows:

                                          Year Ended July 31,
                                    ------------------------------
                                    1996         1995         1994
                                    ----         ----         ----

Net patient revenue:
   Home health care services .  $35,209,000  $19,428,000  $16,233,000
   Outpatient medical services    3,621,000    5,128,000    3,883,000
                                -----------  -----------  -----------

                                 38,830,000   24,556,000   20,116,000
                                -----------  -----------  -----------

Operating expenses:
   Home health care services .   31,968,000   17,379,000   14,314,000
   Outpatient medical services    3,596,000    5,035,000    3,668,000
                                -----------  -----------  -----------

                                 35,564,000   22,414,000   17,982,000
                                -----------  -----------  -----------

Income from operations:
   Home health care services .    3,241,000    2,049,000    1,919,000
   Outpatient medical services       25,000       93,000      215,000
                                -----------  -----------  -----------

                                $ 3,266,000  $ 2,142,000  $ 2,134,000
                                ===========  ===========  ===========

     
                                      F-28

<PAGE>



                   REPORT OF INDEPENDENT AUDITORS ON SCHEDULE



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


           The audits  referred to in our report  dated  October 21, 1996 on the
consolidated  financial  statements  of  National  Home  Health  Care Corp.  and
subsidiaries,  which  appears in Part II,  includes  Schedule II for each of the
years in the  three-year  period  ended  July 31,  1996.  In our  opinion,  such
schedule  presents  fairly the  information set forth therein in compliance with
the applicable accounting regulation of the Securities and Exchange Commission.





New York, New York
October 21, 1996

     
                                      F-29

<PAGE>



                                                                     SCHEDULE II

                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
       FOR THE YEARS ENDED JULY 31, 1996, JULY 31, 1995 AND JULY 31, 1994

<TABLE>
<CAPTION>

           Column A                     Column B                   Column C           Column D            Column E
           --------                     --------                   --------           --------            --------
                                                                  Additions
                                         Balance             (1)           (2)
                                           at                           Charged to                         Balance
                                        beginning         Charged to      other                               at
                                           of              costs and    accounts -   Deductions -           end of
          Description                    period             expenses     describe     describe              period
          -----------                   ---------          ---------    ----------    ---------           ---------
<S>                                     <C>         <C>    <C>                       <C>           <C>   <C>      
Year ended July 31, 1996:                                                   
   Reserve and allowance deducted                                           
     from asset account and allowance                                       
     for uncollectible accounts .....   $ 439,000   (2)    $ 123,000                 $(148,000)    (1)   $ 414,000
                                        =========          =========                 =========           =========
                                                                                 
                                                                                 
Year ended July 31, 1995:                                                        
   Reserve and allowance deducted                                                
     from asset account and allowance                                            
     for uncollectible accounts .....   $  84,000          $ 173,000                 $(158,000)    (1)   $  99,000
                                        =========          =========                 =========           =========
                                                                                 
Year ended July 31, 1994:                                                        
   Reserve and allowance deducted                                                
     from asset account and allowance                                            
     for uncollectible accounts .....   $  54,000          $ 141,000                 $(111,000)    (1)   $  84,000
                                        =========          =========                 =========           =========
                                                                            
</TABLE>


(1)  Represents actual write-offs.

(2)  Includes $340,000 acquired in acquisition of Nurse Care, Inc.



                 See accompanying notes to financial statements.

     
                                      F-30

<PAGE>


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

3.1       Certificate of Incorporation (1)

3.2       Certificate of Amendment to Certificate of Incorporation (2)

3.3       By-laws (1)

10.1      1992 Stock Option Plan (3)

10.2      Incentive Stock Option Plan (3)

10.3      Agreement dated January 1, 1994 between Allen Health Care Services and
          VNS Home Care (4)

10.4      Employment  Agreement  dated  August 1993 between the  Registrant  and
          Steven Fialkow (3)

10.5      First Amendment dated as of July 1, 1996 to Employment Agreement dated
          August 1993 between the Registrant and Steven Fialkow

10.6      Employment  Agreement  dated as of July 1, 1996 between the Registrant
          and Robert P. Heller

10.7      Employment  Agreement  dated  August 1993 between the  Registrant  and
          Richard Garofalo (3)

10.8      First Amendment dated as of July 1, 1996 to Employment Agreement dated
          August 1993 between the Registrant and Richard Garofalo

10.9      Employment  Agreement  dated  August 1993 between the  Registrant  and
          Thomas Smith (3)

10.10     First Amendment dated as of July 1, 1996 to Employment Agreement dated
          August 1993 between the Registrant and Thomas Smith

10.11     Agreement  between  Division of Social  Services of Suffolk County and
          Health Acquisition Corp. (5)

10.12     Agreement  between  Nassau County  Department  of Social  Services and
          Allen Health Care Services (2)

10.13     Agreement  dated January 1, 1994 between  Catholic  Medical  Center of
          Brooklyn and Queens, Inc. (4)


        
                                                                 -16-

<PAGE>

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

10.14     Letter  Agreement  dated March 15, 1995 securing a line of credit from
          the Bank of New York (7)

10.15     Letter dated June 1, 1992 from Public  Health  Council of the State of
          New York Department of Health to Health  Acquisition Corp. d/b/a Allen
          Health Care Services (2)

10.16     Letter  from  Joint   Commission   on   Accreditation   of  Healthcare
          Organizations  awarding  accreditation  to Allen  Health  Care,  dated
          September 20, 1993 (3)

10.17     1993 401(k) Plan (3)

10.18     Letter  Agreement  between  National  HMO (New  York),  Inc.  and Boro
          Medical, P.C. dated November 12, 1993 (3)

10.19     Asset Purchase Agreement among National HMO (New York), Inc., National
          HMO Corp. of Elizabeth,  Inc., Boro Medical, P.C. and Boro Health Care
          of Union, P.C. dated April 30, 1994 (4)

10.20     Agreement  for the  Purchase  of the  Stock of Nurse  Care,  Inc.  and
          Related Transactions (6)

10.21     Employment  Agreement  dated as of August 1, 1995  between New England
          and Aileen O'Connell (6)

10.22     Letter  Agreement  dated  December 27, 1995  securing a line of credit
          from the Bank of New York

21.1      List of Subsidiaries

23.1      Consent of Richard A. Eisner & Co., LLP

27        Financial Data Schedule

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

(2)    Incorporated by reference to the Registrant's  Annual Report on Form 10-K
       for the fiscal year ended July 31, 1992.

(3)    Incorporated by reference to the Registrant's  Annual Report on Form 10-K
       for the fiscal year ended July 31, 1993.

(4)    Incorporated by reference to the Registrant's  Annual Report on Form 10-K
       for the fiscal yeard ended July 31, 1994.

        
                                      -17-

<PAGE>



(5)    Incorporated by reference to the Registrant's  Annual Report on Form 10-K
       for the fiscal yeard ended July 31, 1991.

(6)    Incorporated  by reference to the  Registrant's  Report on Form 8-K dated
       August 4, 1995.

(7)    Incorporated by reference to the Registrant's  Annual Report on Form 10-K
       for the fiscal yeard ended July 31, 1995.


       (b)    Reports on Form 8-K.  None have been filed  during the last fiscal
              quarter.

        
                                      -18-

<PAGE>


                                   SIGNATURES

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

                                     NATIONAL HOME HEALTH CARE CORP.


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

Dated:  October 29, 1996

Pursuant to the requirements of the Securities Exchange Act of 1934, 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,
------------------------------      President & CEO
Frederick H. Fialkow


/s/ Robert P. Heller               Vice President of Finance and Chief Financial
------------------------------       Officer (Principal Financial and Accounting
Robert P. Heller                      Officer)
                                                    

/s/ Steven Fialkow                 Director
------------------------------
Steven Fialkow                     


/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 FOR THE
                         FISCAL YEAR ENDED JULY 31,1996

                         NATIONAL HOME HEALTH CARE CORP.




<PAGE>



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

3.1       Certificate of Incorporation (1)

3.2       Certificate of Amendment to Certificate of Incorporation (2)

3.3       By-laws (1)

10.1      1992 Stock Option Plan (3)

10.2      Incentive Stock Option Plan (3)

10.3      Agreement dated January 1, 1994 between Allen Health Care Services and
          VNS Home Care (4)

10.4      Employment  Agreement  dated  August 1993 between the  Registrant  and
          Steven Fialkow (3)

10.5      First Amendment dated as of July 1, 1996 to Employment Agreement dated
          August 1993 between the Registrant and Steven Fialkow

10.6      Employment  Agreement  dated as of July 1, 1996 between the Registrant
          and Robert P. Heller

10.7      Employment  Agreement  dated  August 1993 between the  Registrant  and
          Richard Garofalo (3)

10.8      First Amendment dated as of July 1, 1996 to Employment Agreement dated
          August 1993 between the Registrant and Richard Garofalo

10.9      Employment  Agreement  dated  August 1993 between the  Registrant  and
          Thomas Smith (3)

10.10     First Amendment dated as of July 1, 1996 to Employment Agreement dated
          August 1993 between the Registrant and Thomas Smith

10.11     Agreement  between  Division of Social  Services of Suffolk County and
          Health Acquisition Corp. (5)

10.12     Agreement  between  Nassau County  Department  of Social  Services and
          Allen Health Care Services (2)

10.13     Agreement  dated January 1, 1994 between  Catholic  Medical  Center of
          Brooklyn and Queens, Inc. (4)


                                       -2-

<PAGE>



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

10.14     Letter  Agreement  dated March 15, 1995 securing a line of credit from
          the Bank of New York (7)

10.15     Letter dated June 1, 1992 from Public  Health  Council of the State of
          New York Department of Health to Health  Acquisition Corp. d/b/a Allen
          Health Care Services (2)

10.16     Letter  from  Joint   Commission   on   Accreditation   of  Healthcare
          Organizations  awarding  accreditation  to Allen  Health  Care,  dated
          September 20, 1993 (3)

10.17     1993 401(k) Plan (3)

10.18     Letter  Agreement  between  National  HMO  (New  York),Inc.  and  Boro
          Medical, P.C. dated November 12, 1993 (3)

10.19     Asset Purchase Agreement among National HMO (New York), Inc., National
          HMO Corp. of Elizabeth,  Inc., Boro Medical, P.C. and Boro Health Care
          of Union, P.C. dated April 30, 1994 (4)

10.20     Agreement  for the  Purchase  of the  Stock of Nurse  Care,  Inc.  and
          Related Transactions (6)

10.21     Employment  Agreement  dated as of August 1, 1995  between New England
          and Aileen O'Connell (6)

10.22     Letter  Agreement  dated  December 27, 1995  securing a line of credit
          from the Bank of New York

21.1      List of Subsidiaries

23.1      Consent of Richard A. Eisner & Co., LLP

27        Financial  Data  Schedule

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

(2)     Incorporated by reference to the Registrant's Annual Report on Form 10-K
        for the fiscal year ended July 31, 1992.

(3)     Incorporated by reference to the Registrant's Annual Report on Form 10-K
        for the fiscal year ended July 31, 1993.


                                       -3-

<PAGE>



(4)     Incorporated by reference to the Registrant's Annual Report on Form 10-K
        for the fiscal year ended July 31, 1994.

(5)     Incorporated by reference to the Registrant's Annual Report on Form 10-K
        for the fiscal year ended July 31, 1991.

(6)     Incorporated by reference to the  Registrant's  Report on Form 8-K dated
        August 4, 1995.

(7)     Incorporated by reference to the Registrant's Annual Report on Form 10-K
        for the fiscal year ended July 31, 1995.


                                       -4-