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, 1999           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. [X]

As of October 25, 1999,  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 $10,822,972, 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,
1999 was 5,065,250.

Portions of the  Registrant's  Proxy  Statement  for its 1999 Annual  Meeting of
Stockholders are incorporated by reference in Part III hereof.


<PAGE>

                                     PART I

ITEM 1.  BUSINESS.

GENERAL

         National  Home  Health  Care  Corp.   (the  "Company")  is  a  Delaware
corporation  which was  incorporated  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 in New York, New Jersey and 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.  (  "New  England"),  a  Connecticut
corporation which conducts business in Connecticut.

         In May  1998,  the  operations  of Nurse  Care,  Inc.  ("Nurse  Care"),
previously a wholly owned  subsidiary of the Company which  provided home health
aide services in Connecticut, were combined with the operations of New England.

         *  Accredited  Health  Services,  Inc.  ("Accredited"),  a  New  Jersey
corporation which conducts business in New Jersey.

         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.  During the
fiscal year ended July 31, 1998, the Company's  ownership  percentage of SunStar
was  reduced to 30.5% as a result of SunStar  issuing  additional  shares of its
common  stock  pursuant to a private  placement.  Subsequent  to the fiscal year
ended July 31, 1999,  the Company sold 127,114  shares of SunStar  common stock,
reducing its ownership percentage to 26%.


                                       -2-

<PAGE>

Health Acquisition Corp.
d/b/a Allen Health Care Services

         Allen Health Care is a provider of personal home health care  services.
Services are provided by registered  nurses,  personal  care aides,  home health
aides and  homemakers.  The Company is licensed by the Public Health  Council of
the State of New York  Department  of Health.  Allen Health Care  maintains  its
principal  administrative  office in Jamaica, New York and has branch offices in
Lindenhurst  and Mount  Vernon,  New York.  Case  coordinating  of  patients  is
performed at these three offices. In addition, the Company has satellite offices
in  Brooklyn,  Islandia  and  Hempstead,  New York.  The  satellite  offices are
primarily used for the recruitment  and training of home health aides.  Services
are  provided  in the  following  counties  in the  State of New  York:  Nassau,
Suffolk, Westchester, Queens, Kings, New York and the Bronx.

         All home health care personnel are licensed or agency certified under a
New York State approved program and can be engaged on a full-time,  part-time or
live-in basis.  Effective July 1, 1996, Allen Health Care instituted residential
criminal  background  investigations for all new personnel.  In addition,  urine
drug testing is part of the  pre-employment  screening  process and is performed
annually  and  randomly  thereafter.  In February  1999,  Allen  Health Care was
resurveyed by the Joint Commission of Accreditation of Health Care Organizations
("JCAHO"), an accrediting body for health care providers. JCAHO accreditation is
associated with providing quality  services.  This status is required by many of
the  certified  home  health care  agencies  that Allen  Health  Care  currently
services.  The resurvey  resulted in Allen Health Care  extending its accredited
status through the year 2002.

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

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

         The stock of Allen  Health Care was  acquired by the Company in October
1986.  Subsequent  to the  acquisition,  the agency has  broadened its home care
business by securing additional  contracts with CHHAs and expanding its services
and geographical presence through acquisitions.


                                       -3-

<PAGE>

         In March 1997,  Allen Health Care completed the  acquisition of certain
assets of C.J. Home Care, Inc., d/b/a Garden City Home Care, a New York licensed
home  health  care agency  that  provides  home  health aide  services in Nassau
County,  New York.  Annual  revenues  for  Garden  City  Home Care  approximated
$2,000,000 in 1996. In May 1997,  Allen Health Care completed the acquisition of
certain assets of Home Health Aides, Inc. and H.H.A.  Aides,  Inc., two New York
licensed  home health care  agencies  that provide home health aide  services in
both Nassau and Suffolk Counties,  New York. The two companies  collectively had
revenues of  approximately  $3,400,000 in 1996. The latter  acquisition gave the
Company an entree into the Shared Aide Program in Nassau County. The Shared Aide
Program is a relatively new program for Medicaid patients that brings together a
group of home health aides to care for  patients in one  geographic  area,  thus
increasing operating efficiencies and reducing costs.

         In August 1998,  Allen Health Care completed the acquisition of certain
assets of Bryan Employment Agency,  Inc., d/b/a Bryan Home Care Services,  a New
York licensed home health care agency that provides home health aide services in
Westchester  County, New York. The acquisition  expanded the geographic presence
of the Company and enabled Allen Health Care to become a participating  provider
in the Westchester County Department of Social Services Medicaid Program. Annual
revenues for Bryan Home Care approximated $5,700,000 in 1997.

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

New England Home Care, Inc.

         On August 4, 1995, the Company  consummated  the acquisition of 100% of
the  capital  stock of Nurse  Care,  the  parent  company  of 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.  Currently,  no  former  shareholder  is  affiliated  with the
operations  of New England.  During the fiscal year ended July 31,  1996,  Nurse
Care  transferred 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.

         New  England is a Medicare  certified  and  licensed  home  health care
company in  Connecticut.  In October 1998,  New England was resurveyed by JCAHO,
resulting in New England  extending its accredited  status through October 2001.
New England  provides  services  throughout  Fairfield  and New Haven  Counties,
Connecticut.  Services include skilled nursing,  physical therapy,  occupational
therapy, speech therapy,  medical social services and home health aide services.
In addition, New


                                       -4-

<PAGE>

England  offers  specialty  services  consisting  of mental health and wellness,
perinatal/high  risk  pregnancy  and disease  management.  New England  provides
full-service  home health care  twenty-four  hours per day, seven days per week.
Weekends,  holidays and  after-hours are supported by an on-call system for each
office location with medical supervision by a registered nurse at all times. All
home health care personnel are licensed or agency  certified under a Connecticut
state-approved  program and can be engaged on a full-time,  part-time or live-in
basis. Since 1995, New England has performed criminal background  investigations
on all new personnel.

         New England maintains its principal  administrative  office in Milford,
Connecticut   and  has  branch   offices  in  Norwalk,   Hamden  and  Waterbury,
Connecticut.  All case  coordinating  of  patients is  performed  in the Milford
office.  In addition,  New England has  satellite  offices in Danbury,  Seymour,
Meriden and Branford,  Connecticut.  Reimbursement for New England's services is
primarily  provided by the Federal Medicare  Program,  the Connecticut  Medicaid
Program,  private  payors,  hospices,  other  certified home health agencies and
long-term health care providers that subcontract their patients to New England.

Accredited Health Services, Inc.

         On October 30,  1998,  the Company  completed  the  acquisition  of the
outstanding  common  shares  of  Accredited  for  $1,949,000  in  cash,  whereby
Accredited became a wholly owned subsidiary of the Company.

         Accredited  is a licensed  home health care company that  provides home
health aide services in Bergen, Hudson,  Passaic, Essex, Morris, Union, Somerset
and  Middlesex  Counties,   New  Jersey.   Accredited  maintains  its  principal
administrative  office in  Hackensack,  New  Jersey  and has a branch  office in
Union,  New Jersey.  Case  coordinating  of patients is  performed  at these two
offices.

         Accredited   provides   home  health  aide   services  to  its  clients
twenty-four  hours  per  day,  seven  days  per  week.  Weekends,  holidays  and
after-hours are supported by an on-call system for each office.  All home health
aides are licensed under a New Jersey state-approved  program and can be engaged
on a  full-time,  part-time  or  live-in  basis.  In May  1999,  Accredited  was
resurveyed by the Commission on Accreditation  for Home Care (CAHC),  one of the
accrediting  bodies  required for  participation  as a Medicaid  provider in New
Jersey.  This  accreditation was extended for an additional year.  Reimbursement
for  Accredited's  services is primarily by certified  home health care agencies
that subcontract  their patients to Accredited as well as private payors and the
State of New Jersey Medicaid  Program,  for which  Accredited is a participating
provider.

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


                                       -5-

<PAGE>

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 $5,000,000.  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 15, 1999,  the Company had  approximately  1,900 full and
part-time  employees of whom 17 were employed in various  management  capacities
and four 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 each of the markets it serves.  In  addition,  the Company  competes
with  companies  that,  in  addition to  providing  home health aide and skilled
nursing services,  also, unlike the Company, provide pharmaceutical products and
other home health care services that generate additional referrals.  Competition
also involves the quality of services provided and the pricing for its services.
As a result of changes in Medicare  reimbursement and the competitive  pressures
of managed  care,  the home  health care  industry  is  expected  to  experience
consolidation  over the next few years. The Company believes that smaller,  less
financially  secure home health  agencies  will find it ever more  difficult  to
compete for market share and comply with regulatory compliance standards.

         The Company's ability to attract a staff of highly trained personnel is
a material element of its business.  There currently is intense  competition for
qualified  personnel  and there can be no  assurance  that the  Company  will be
successful in maintaining or in securing  additional  qualified  personnel.  The
Company recruits personnel  principally through referral from existing personnel
and through newspaper advertisements.


                                       -6-

<PAGE>

Customers

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

         A  substantial  portion of the  Company's  revenues  are  derived  from
subcontracts  that the Company has with CHHAs and long-term health care provider
programs that subcontract their patients to the Company. Recently, many of these
CHHAs  have  requested  bids  from  the  home  care  agencies  with  which  they
subcontract. If the Company is not successful in maintaining these contracts, it
could have a materially adverse effect on the Company's results of operations.

         One or more  customers  have  each  accounted  for more than 10% of the
Company's  revenues.  For the fiscal years ended July 31,  1999,  1998 and 1997,
Visting  Nurse  Service of New York,  a  non-profit  Medicare  home  health care
agency,  accounted  for 16%, 22% and 22%,  respectively,  of the  Company's  net
patient  revenues;  the State of New York Department of Social Services personal
care aide program for the counties of Nassau,  Suffolk and Westchester accounted
for 16%, 18% and 10%,  respectively,  of the Company's net patient revenues; and
the  federal  Medicare  program  accounted  for  approximately  8%, 13% and 22%,
respectively,  of the  Company's  net patient  revenues.  The loss of any of the
foregoing customers would have a material adverse effect on the Company.

        On October 26, 1999, the Company was  notified by Visiting Nurse Service
of New York that, after an extensive selection process, it would not continue to
subcontract  home  health  aides from Allen  Health  Care.  Existing  cases will
continue to be serviced  until an  implementation  plan between  Visiting  Nurse
Service of New York and Allen Health Care is completed.  The Company expects the
transition to occur in early 2000.  The Company is continuing  discussions  with
Visiting  Nurse  Service of New York and is assessing  the impact of the loss of
this contract on its operations.

Government Regulations and Licensing

         The health care industry is highly regulated. The Company's business is
subject to substantial and frequently changing regulations by federal, state and
local  authorities.  The Company  must comply  with state  licensing  along with
federal and state  eligibility  standards  for  certification  as a Medicare and
Medicaid provider.

         The  ability of the Company to operate  profitably  will depend in part
upon the Company  obtaining and  maintaining  all  necessary  licenses and other
approvals in compliance with applicable health care regulations.

Medicare

         Title  XVIII  of  the  Social  Security  Act  authorizes  Part A of the
Medicare  program,  the health insurance  program that pays for home health care
services for covered persons  (typically,  those aged 65 and older and long-term
disabled).  Home health care providers may  participate in the Medicare  program
subject to certain conditions of participation and upon acceptance of a provider
agreement by the Secretary of the Department of Health and Human Services.  Only
enumerated  services,  upon  satisfaction  of  certain  coverage  criteria,  are
eligible  for  reimbursement  as a Medicare  provider.  The Company is currently
Medicare certified in Connecticut.  Approximately 8%, 13% and 22% of net patient
revenue for the fiscal  years ended July 31,  1999,  1998 and 1997 were  derived
under the Medicare program.


                                       -7-

<PAGE>

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

         Under the Act,  Medicare home care payment changes are scheduled in two
phases.  A temporary  or interim  payment  system  ("IPS")  took effect for cost
reports  beginning  on or after  October 1, 1997.  Under IPS,  home  health care
providers  will be  reimbursed  the lower of (i) their actual  costs,  (ii) cost
limits based on 105% of median  costs of  freestanding  home health  agencies or
(iii) an  agency-specific  per  patient  cost  limit  based on 98% of 1994 costs
adjusted for inflation.  Under this new system, most Medicare providers now will
be  reimbursed  under an  agency-specific  per patient cost limit.  Prior to the
implementation  of IPS, Medicare  reimbursed  providers on reasonable cost basis
subject to program-imposed cost per visit limitations. Under the second phase of
the Act, IPS is to be replaced in October 2000 with a prospective payment system
in which  Medicare will pay a fixed fee per diagnosis to be  established  by the
Secretary of the Department of Health and Human Services.

         In passing these new rules,  Congress  expressed the intent of reducing
Medicare home care expenditures by approximately  $16.2 billion over five years.
These changes were enacted to slow the explosive  growth of Medicare home health
care  costs  and curb  fraud  and  abuse in the  industry.  As a result of these
changes,  home health  care  providers  will be forced to reduce  their costs of
providing services and the utilization of home care services per beneficiary has
declined.  Under certain conditions,  Medicare  beneficiaries who previously had
been  entitled  to  services  no longer  qualify  under  Medicare  reimbursement
guidelines.

         As a result of the  changes to  Medicare  reimbursement  imposed by the
Act, the Company  experienced a decline in revenues from its Medicare  certified
nursing agency. In addition, the Company's operations in New York and New Jersey
are dependent upon referrals,  primarily from Medicare certified agencies, whose
future  reimbursement may be adversely  affected.  Accordingly,  there can be no
assurance  that the  Company's  future  referrals  will not  result  in  reduced
reimbursement rates or reduced volume in business.

         Under  the  second  phase  of the  Act,  IPS is to be  replaced  with a
prospective  payment  system for home health care  providers by October 1, 2000.
However,  rules and  regulations  have not yet been developed by the Health Care
Financing  Administration  and there can be no assurance that such deadline will
be met. As the Company is unable to predict how the  prospective  payment system
will be ultimately designed and implemented,  it is unable to predict its impact
on the Company.

         The Act also initially required that Medicare providers purchase surety
bonds in an amount equal to 15% of annual  Medicare  reimbursement.  The Company
was required to have a surety bond in place no later than February 7, 1998.  The
Company successfully complied with this requirement, at an immaterial cost.


                                       -8-

<PAGE>

Medicare Fraud and Abuse

         Provisions  of the Social  Security  Act under  Medicare  and  Medicaid
generally  prohibit  soliciting,  receiving,  offering  or paying,  directly  or
indirectly,  any form of  remuneration in return for the referral of Medicare or
state health care program patients or patient care  opportunities,  or in return
for the purchase, lease or order of any facility item or service that is covered
by Medicare or state health care program.  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.

Medicaid

         Approximately  27%,  27% and 17% of net patient  revenue for the fiscal
years ended July 31, 1999, 1998 and 1997, respectively, were derived under state
sponsored  Medicaid  programs.  Reimbursement  for  home  health  care  services
rendered to eligible  Medicaid  recipients  is made in an amount  determined  in
accordance with procedures and standards  established by state law under federal
guidelines. States differ as to reimbursement policies and rates. The Company is
a licensed Medicaid provider in Connecticut,  New Jersey and in Nassau,  Suffolk
and Westchester Counties,  New York. Medicaid reimbursement rates may be reduced
in response to state economic and budgetary constraints,  as well as in response
to changes in the Medicare program.


                                       -9-

<PAGE>

ITEM 2.  PROPERTIES.

         The Company,  directly or through certain subsidiaries,  leases various
office  facilities under lease agreements with various  expiration dates through
the year  2004.  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            2,679    Corporate headquarters     October 31, 2003
Queens, NY               7,500    Administrative office      January 31, 2000
Lindenhurst, NY          1,250    Branch office              July 31, 2000
Hempstead, NY            3,800    Satellite office           September 30, 2004
Islandia, NY             2,100    Satellite office           June 30, 2001
Mount Vernon, NY         1,900    Branch office              December 31, 2000
Brooklyn, NY               800    Satellite office           October 31, 1999
Milford, CT              8,858    Administrative office      July 31, 2002
Norwalk, CT              1,386    Branch office              Month to Month
Hamden, CT                 750    Branch office              July 31, 2000
Waterbury, CT            2,000    Branch office              July 31, 2000
Seymour, CT                575    Satellite office           Month to Month
Danbury, CT                780    Satellite office           June 30, 2000
Meriden, CT                450    Satellite office           July 31, 2000
Branford, CT               200    Satellite office           August 31, 2000
Hackensack, NJ           3,340    Administrative office      October 31, 1999
Union, NJ                2,300    Branch office              December 31, 1999

         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  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, 1999.


                                      -10-

<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, 1998
and July 31, 1999. 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, 1998

1st Quarter...........................................    $5.75         $4.50
2nd Quarter...........................................     5.50          4.63
3rd Quarter...........................................     4.88          3.88
4th Quarter...........................................     5.00          4.03


Year ended July 31, 1999

1st Quarter...........................................    $4.75         $4.00
2nd Quarter...........................................     5.00          4.38
3rd Quarter...........................................     5.00          2.25
4th Quarter...........................................     4.75          3.13

         (B)   Holders

         There were  approximately  142 holders of record of Common  Stock as of
October 25, 1999,  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 10, 1997, the
Board of Directors of the Company  declared a 3% stock dividend payable December
8, 1997 to  stockholders  of record on  November  6, 1997.  The  Company did not
declare any cash or stock dividends  during the fiscal years ended July 31, 1998
and 1999.


                                      -11-

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

<TABLE>
<CAPTION>
                                                                        Fiscal Years Ended July 31,

                                     -------------    -------------     -----------   -----------    ------------
                                           1999             1998            1997          1996           1995
                                     -------------    -------------     -----------   -----------    ------------
<S>                                    <C>              <C>             <C>           <C>            <C>
STATEMENT OF OPERATIONS
  DATA:
Revenues.............................  $38,518,000      $34,313,000     $35,070,000   $38,830,000    $24,556,000
Operating expenses...................   36,090,000       31,394,000      31,770,000    35,564,000     22,414,000
Income from operations...............    2,428,000        2,919,000       3,300,000     3,266,000      2,142,000
Other income (loss):
    Gain resulting from
       subsidiary's stock offering             ---          331,000             ---     1,548,000            ---
    Interest income.............           385,000          547,000         446,000       412,000        410,000
    (Loss) from equity investee.          (674,000)      (1,630,000)       (612,000)      (10,000)           ---
Income before income taxes...........    2,139,000        2,167,000       3,134,000     5,216,000      2,552,000
Provision for income taxes...........    1,001,000          964,000       1,278,000     1,859,000      1,126,000
Net income...........................    1,138,000        1,203,000       1,856,000     3,357,000      1,426,000
Diluted net income per share of              $0.22            $0.23           $0.35         $0.64          $0.27
common stock.........................
</TABLE>

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


<TABLE>
<CAPTION>
BALANCE SHEET DATA:
<S>                                       <C>           <C>           <C>           <C>            <C>
Total assets.........................     26,092,000    25,503,000    25,224,000    24,421,000    18,865,000
Working capital......................     17,708,000    19,134,000    16,853,000    16,288,000    15,292,000
Retained earnings....................      8,183,000     7,045,000     5,842,000     4,789,000     3,307,000
Stockholders' equity.................     25,013,000    24,281,000    23,360,000    21,504,000    17,914,000
</TABLE>


                                      -12-

<PAGE>

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

         The following  discussion and analysis  provides  information which the
Company's  management believes is relevant to an assessment and understanding of
the Company's  results of operations and financial  condition.  This  discussion
should be read in conjunction  with the  consolidated  financial  statements and
notes appearing elsewhere herein.

         This discussion contains forward-looking statements that are subject to
a number of known and  unknown  risks that,  in  addition  to general  economic,
competitive  and  other  business   conditions,   could  cause  actual  results,
performance  and  achievements  to differ  materially  from those  described  or
implied in the forward-looking statements.

         The  Company is  subject to  significant  external  factors  that could
significantly  impact its business,  including  changes in Medicare and Medicaid
reimbursement,  government  fraud and abuse  initiatives  and other such factors
that are beyond the control of the  Company.  These  factors,  as well as future
changes in  reimbursement,  could cause future results to differ materially from
historical results.

         The Balanced  Budget Act of 1997,  as amended  (the "Act"),  was signed
into law on August 5, 1997.  Under the Act,  for cost  reports  beginning  on or
after  October  1,  1997,  Medicare  certified  home  health  agencies  will  be
reimbursed  under an interim  payment system ("IPS") for a two-year period prior
to the  implementation  of a  prospective  system.  Under IPS,  home health care
providers  will be  reimbursed  the lower of (i) their actual  costs,  (ii) cost
limits based on 105% of median costs of freestanding  home health  agencies,  or
(iii) an  agency-specific  per-patient  cost  limit,  based on 98% of 1994 costs
adjusted for inflation.  Prior to the implementation of IPS, Medicare reimbursed
providers on a reasonable cost basis subject to  program-imposed  cost per visit
limitations. The Act calls for payments to Medicare providers for cost reporting
periods  beginning on or after October 1, 2000 to be made in  accordance  with a
prospective  payment system to be established by the Secretary of the Department
of Health and Human Services.

         The new IPS cost limits were applied to the Company's Connecticut-based
Medicare  certified  nursing agency for the cost reporting period beginning July
1, 1998. The Company determined that these new limits would reduce reimbursement
for the Medicare  services it provides.  Accordingly,  in May 1998,  the Company
combined  its  operations  in  Connecticut  by merging  its  Medicare  certified
subsidiary  with  its  licensed  agency   subsidiary  to  increase   operational
efficiencies.

         The  implementation  of IPS resulted in a decrease in revenues from the
Company's  Medicare certified agency. In addition,  the Company's  operations in
New York and New Jersey are dependent  upon  referrals,  primarily from Medicare
certified  agencies,  whose  future  reimbursement  may be  adversely  affected.
Accordingly,  there can be no assurance that the Company's future referrals will
not result in reduced reimbursement rates or reduced volume of business.


                                      -13-

<PAGE>

         On October 30, 1998, the Company acquired all of the outstanding common
shares of  Accredited  Health  Services,  Inc.  ("Accredited").  Accredited is a
licensed  home health care company that  provides  home health aide  services in
Bergen, Hudson,  Passaic, Essex, Morris, Union, Somerset and Middlesex Counties,
New Jersey.  The  acquisition  was accounted for utilizing  purchase  accounting
principles.

         On August 10, 1998,  the Company,  through its wholly owned  subsidiary
Health  Acquisition  Corp.  ("Health  Acquisition"),  acquired certain assets of
Bryan  Employment  Agency,  Inc.,  d/b/a Bryan Home Care  Services  ("Bryan Home
Care"),  a New York licensed  home health care company which  provides home care
services in  Westchester  County,  New York. The  acquisition  was accounted for
utilizing purchase accounting principles.

         On March 25, 1997, Health  Acquisition  acquired certain assets of C.J.
Home Care, Inc. and on May 29, 1997, Health Acquisition  acquired certain assets
of Home Health Aides, Inc. and H.H.A.  Aides, Inc. These  acquisitions were from
New York State  licensed  home health care  companies  that provided home health
care services in both Nassau and Suffolk  Counties,  New York. The  acquisitions
have been accounted for utilizing purchase accounting principles.

         On May 21, 1996, the initial public offering of common stock by SunStar
Healthcare,  Inc. ("SunStar") was consummated.  SunStar, formerly a wholly owned
subsidiary  of the Company,  had  comprised  the  Company's  Florida  outpatient
medical  center  operations.  The Company  currently owns  approximately  26% of
SunStar and utilizes  the equity  method of  accounting  for its  investment  in
SunStar.  As of July 31, 1999, the Company's carrying value of its investment in
SunStar is $0.

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                        Fiscal Year Ended July 31,
                                                     --------------------------------
                                                     1999           1998         1997
                                                     ----           ----         ----
<S>                                                 <C>            <C>          <C>
Net patient revenue                                 100.0%         100.0%%      100.0%
Cost of revenue                                      65.8           64.5         65.3
General and administrative                           26.4           25.9         24.6
Amortization of intangibles                           1.4            1.1          0.7
                                                   ------         ------        -----
Total operating expenses                             93.6           91.5         90.6
Income from operations                                6.4            8.5          9.4
Gain resulting from subsidiary's stock offering       ---            1.0          ---
Interest income                                       1.0            1.6          1.2
(Loss) from equity investee                          (1.8)          (4.8)        (1.7)
                                                   ------         ------        -----
Income before income taxes                            5.6            6.3          8.9
</TABLE>


                                      -14-

<PAGE>

                                               Fiscal year ended July 31,
                                        -------------------------------------
                                        1999           1998            1997
                                        ----           ----            ----

Provision for income taxes               2.6            2.8             3.6
                                        ----          -----            ----
Net income                               3.0%           3.5%           5.3%
                                        ----          -----            ----


          YEAR ENDED JULY 31, 1999 COMPARED TO YEAR ENDED JULY 31, 1998

         For the fiscal year ended July 31, 1999  ("fiscal  1999"),  net patient
revenues increased  $4,205,000,  or 12%, to $38,518,000 from $34,313,000 for the
fiscal year ended July 31, 1998 ("fiscal 1998"). During fiscal 1999, net patient
revenue from Health  Acquisition  increased  $2,310,000,  or 10%, to $24,909,000
from  $22,599,000 for fiscal 1998. This increase is attributable to the revenues
generated  from the purchase in August 1998 of certain assets of Bryan Home Care
of $5,737,000,  offset by the decline in same source  revenues of  ($3,427,000).
The decline in same source revenues is attributable to the continued  decline in
hours and, in some cases,  a decrease in  reimbursement  rates from the Medicare
certified home health care agencies that Health Acquisition contracts with, as a
result of the  implementation  of IPS. Net patient revenue from New England Home
Care, Inc. ("New England") decreased over the periods ($2,029,000), or (17%), to
$9,685,000  from  $11,714,000.  This decrease is  attributable to the decline in
Medicare  revenue  of  ($1,605,000)  and a decline  in  non-Medicare  revenue of
($424,000). The decrease in both Medicare and non-Medicare revenue is the result
of the change in Medicare  reimbursement  from cost  reimbursement  to IPS.  Net
patient revenue from Accredited for fiscal 1999 was $3,924,000.

         Gross  profit  margin  decreased  to 34% for  fiscal  1999 from 35% for
fiscal  1998.  This  decrease  is  attributable  to  the  decreases  in  certain
reimbursement  rates from other  existing  Medicare  certified  home health care
agencies  that the  Company  contracts  with,  as a result of the  change in the
Medicare reimbursement system.

         General and administrative  expenses increased  $1,297,000,  or 15%, to
$10,183,000  in fiscal 1999 from  $8,886,000  in fiscal 1998.  This  increase is
attributable  to the  additional  general and  administrative  expenses of three
branch offices which the Company acquired in the acquisitions of both Bryan Home
Care and  Accredited,  offset  by the  decline  in  general  and  administrative
expenses  of New  England  as a result of the  combining  of the  operations  in
Connecticut to offset the  implementation of IPS. As a percentage of net patient
revenue, general and administrative expenses remained at 26% in both fiscal 1999
and 1998.

         Amortization of intangibles  increased $177,000, or 47%, to $550,000 in
fiscal 1999 from $373,000 in fiscal 1998.  This increase is  attributable to the
amortization  of goodwill and intangibles  associated  with the  acquisitions of
Bryan Home Care and Accredited in fiscal 1999.

         As  a  result  of  the  foregoing,  income  from  operations  decreased
($491,000),  or (17%),  to $2,428,000  in fiscal 1999 from  $2,919,000 in fiscal
1998.


                                      -15-

<PAGE>

         Interest income decreased  ($162,000),  or (30%), to $385,000 in fiscal
1999 from  $547,000  in fiscal  1998.  This  decrease is  attributable  to lower
average  outstanding  cash balances  resulting from cash used to acquire certain
assets of Bryan Home Care and the stock of Accredited.

         The Company  recorded a loss from  equity  investee  of  ($674,000)  in
fiscal 1999 as compared to a loss of  ($1,630,000)  in fiscal 1998. In addition,
in fiscal 1998,  as a result of a private  placement of common stock by SunStar,
the Company  adjusted the carrying  value of its  investment  in SunStar,  which
resulted in a gain of $331,000.  As of July 31,  1999,  the  Company's  carrying
value of its investment in SunStar is $0.

         The  Company's  effective  tax rate  increased to 47% in fiscal 1999 as
compared to 44% in fiscal 1998.  This increase is  attributable to no income tax
benefit  recorded in fiscal 1999, as compared to  ($306,000)  recorded in fiscal
1998 related to the  Company's  share of SunStar's  net loss.  Excluding the tax
effect of loss from equity investee and gain resulting from  subsidiary's  stock
offering,  the  effective tax rate  decreased  slightly to 36% in fiscal 1999 as
compared to 37% in fiscal 1998.

         Net income  decreased  ($65,000)  to  $1,138,000,  or $.22 per  diluted
share,  in fiscal 1999 from  $1,203,000,  or $.23 per diluted  share,  in fiscal
1998.

          YEAR ENDED JULY 31, 1998 COMPARED TO YEAR ENDED JULY 31, 1997

         For the fiscal year ended July 31, 1998, net patient revenues decreased
($757,000),  or (2%), to $34,313,000  from $35,070,000 for the fiscal year ended
July 31, 1997 ("fiscal 1997").  Over the period, net patient revenue from Health
Acquisition increased $2,037,000, or 10%, to $22,599,000 from $20,562,000.  This
increase is attributable to the  acquisitions  made by Health  Acquisition  that
were completed in March and May 1997. Over the period,  net patient revenue from
New England and Nurse Care,  Inc.,  respectively,  the  Medicare  certified  and
licensed home health care subsidiaries in Connecticut,  decreased  ($2,794,000),
or (19%), to $11,714,000  from  $14,508,000.  This decrease is attributable to a
decline  of  ($3,256,000)  in  Medicare  revenue,   offset  by  an  increase  in
non-Medicare revenue of $462,000.  The decline in Medicare revenue is the result
of a decline of (45%) in Medicare visits from the corresponding  period of 1997.
Medicare visits decreased as the Company began early  preparation for the change
in Medicare reimbursement to IPS costs limits.

         Gross profit margin remained at 35% in both fiscal 1998 and 1997.

         General  and  administrative  expenses  increased  $266,000,  or 3%, to
$8,886,000  in fiscal 1998 from  $8,620,000  in fiscal 1997.  As a percentage of
revenue,  general and  administrative  expenses  increased to 26% in fiscal 1998
from 25% in fiscal 1997.  This  increase is  attributable  to the decline in net
patient  revenues that was not offset by a corresponding  decline in general and
administrative expenses.


                                      -16-

<PAGE>

         Amortization of intangibles  increased $128,000, or 52%, to $373,000 in
fiscal 1998 from $245,000 in fiscal 1997.  This increase is  attributable to the
acquisitions made by Health Acquisition in fiscal 1997.

         As  a  result  of  the  foregoing,  income  from  operations  decreased
($381,000),  or (12%),  to $2,919,000  in fiscal 1998 from  $3,300,000 in fiscal
1997.

         Interest income increased $101,000,  or 23%, to $547,000 in fiscal 1998
from $446,000 in fiscal 1997.  This increase is  attributable to the increase in
cash and cash equivalents over the fiscal year.

         As a result of a private  placement  of common  stock by  SunStar,  the
Company  adjusted the carrying value of its investment in SunStar to reflect the
Company's  percentage  ownership  share  (30.5%) in the  increase  in  SunStar's
equity, which resulted in a gain of $331,000. In addition,  the Company recorded
a loss from equity investee of ($1,630,000) in fiscal 1998 as compared to a loss
of ($612,000) in fiscal 1997,  representing  the Company's share of the net loss
recorded by SunStar for the same periods.

         The  Company's  effective  tax rate  increased to 44% in fiscal 1998 as
compared to 41% in fiscal 1997. This increase is attributable to a lesser income
tax benefit on the net loss recorded by SunStar.  Excluding the loss from equity
investee and gain resulting from subsidiary's stock offering,  the effective tax
rate decreased to 37% in fiscal 1998 from 38% in fiscal 1997.

         Net income  decreased  ($653,000)  to  $1,203,000,  or $.23 per diluted
share,  in fiscal 1998 from  $1,856,000,  or $.35 per diluted  share,  in fiscal
1997.  The decrease is primarily  attributable  to the  increased  loss from the
equity investment in SunStar.

RECENT DEVELOPMENTS

        On October 26, 1999, the  Company was notified by Visiting Nurse Service
of New York that, after an extensive selection process, it would not continue to
subcontract  home  health  aides from Allen  Health  Care.  Existing  cases will
continue to be serviced  until an  implementation  plan between  Visiting  Nurse
Service of New York and Allen Health Care is completed.  The Company expects the
transition to occur in early 2000.  The Company is continuing  discussions  with
Visiting  Nurse  Service of New York and is assessing  the impact of the loss of
this contract on its operations.


FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

         Current  assets  decreased  to  $18,787,000  and  current   liabilities
decreased to  $1,079,000,  respectively,  at July 31, 1999.  This  resulted in a
decrease in working capital of ($1,426,000)  from  $19,134,000 to $17,708,000 at
July 31, 1999. Cash and cash equivalents decreased ($3,550,000) to $7,442,000 at
July 31,  1999  from  $10,992,000  at July  31,  1998  and  accounts  receivable
increased $2,190,000 to $10,459,000 at July 31, 1999 from $8,269,000 at July 31,
1998.  The  decrease  in both  working  capital  and the  increase  in  accounts
receivable  reflect the  acquisitions  of Bryan Home Care and Accredited  during
fiscal 1999. The combined acquisition costs were $3,892,000.

         Net cash provided by operating  activities  was $835,000 in fiscal 1999
as compared with  $2,016,000 in fiscal 1998. This decrease of  ($1,181,000),  or
(59%),  is  primarily  attributable  to an increase in  accounts  receivable  of
$1,307,000, a decrease in estimated third-party payors settlements of ($223,000)
as compared to fiscal 1998,  offset by a decrease in income taxes  receivable of
$153,000,  a decrease  in prepaid  expenses  and other  assets of $55,000 and an
increase in accounts payable and accrued expenses of $256,000.


                                      -17-

<PAGE>

         Investing  activities  in  fiscal  1999 used  cash of  ($3,558,000)  as
compared to cash used of ($66,000)  in fiscal  1998.  The cash used in investing
activities  consisted of the acquisitions made by the Company in fiscal 1999 and
the purchase of furniture and equipment in both periods,  offset by the proceeds
of investments.

         Financing activities in fiscal 1999 used cash of ($827,000) as compared
to cash used of ($282,000) in fiscal 1998. The cash used in investing activities
in fiscal  1999  consisted  of the  purchase of  treasury  shares of  ($406,000)
pursuant to the  Company's  stock  repurchase  plan and the  repayment  of notes
payable  ($421,000)  to the former  officers  of  Accredited.  The  purchase  of
treasury shares of ($331,000)  offset by the proceeds from the exercise of stock
options of $49,000,  resulted in the cash used in financing activities in fiscal
1998.

         The nature of the Company's business requires weekly payments to health
care personnel at the time services are rendered. The Company typically receives
payment  for  these  services  on a basis  of 90 to 120  days  with  respect  to
contracted  business  and 30 to 45 days with  respect  to  certain  governmental
payors, such as Medicare and Medicaid programs. Accounts receivable turnover was
92 days in fiscal 1999 and 91 days in fiscal 1998.

         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  may 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  January 31,  2000.  At July 31,
1999, there was no outstanding balance 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 also
will allow it to continue to make  acquisitions in the home health care industry
without affecting its liquidity needs.

         In  August  1998,  the  Board of  Directors  extended  for one year its
program to repurchase its Common Stock.  Purchases in the aggregate amount of up
to $1,000,000 in purchase price during the one-year extension would be made from
time to time in the open market and through privately  negotiated  transactions,
subject to general  market and other  conditions.  The buyback  program  will be
financed out of existing cash or cash equivalents.

         Other than as set forth herein, the Company has no material commitments
for capital expenditures as of July 31, 1999.

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


                                      -18-

<PAGE>

INFLATION AND SEASONALITY

         The rate of  inflation  had no material  effect on  operations  for the
fiscal year ended July 31, 1999. The effects of inflation on personnel  costs in
the future could have an adverse effect on operations, as the Company may not be
able to increase its charges for services  rendered.  The Company's  business is
not seasonal.

YEAR 2000 COMPLIANCE

         The Year 2000  issue is the  result of  computer  programs  which  were
written using two digits rather than four to define the applicable year. Certain
purchased  systems  used by the  Company,  and for  which the  Company  does not
control the  programming  code,  use two digits for the year. The current system
used by Health Acquisition is relatively old and has been slated for replacement
with a new system  that  better  meets the  information  needs as it expands and
deals with the current operating environment.  Health Acquisition's new computer
system is expected to be operational by November 1999,  with an expected cost of
approximately  $100,000.  The Company  anticipates  that this conversion will be
completed to provide  compliance  with the  requirements to handle the year 2000
issue with no significant  operational concerns.  The current system utilized by
New England is a relatively new operating  system.  The Company has been advised
by the system vendor that all required  changes  necessary to be compliant  with
the year 2000 issue have been  substantially  completed and will be  implemented
prior to the year 2000.  In August  1999,  Accredited  replaced its old computer
system  with a new  system  that  better  fits  the  needs  of  its  operations.
Accredited's  new computer system is year 2000 compliant.  Management  currently
believes  that  the  financial  resources  necessary  to  accomplish  year  2000
compliance will not be material to the Company's financial condition,  liquidity
or results of  operations.  However,  there is no guarantee  that the  Company's
expected  results will be achieved.  In addition,  actual  results  could differ
materially from those expected results.

         The Company  depends on receipt of payment for services  from its payor
sources, most of which utilize computer software to process those payments.  The
Company's  primary  payors  include  Medicare and Medicaid  programs,  insurance
companies,  other  certified  home health  agencies  and  long-term  health care
provider  programs.  The  Company  has  begun  formal  communications  with  its
significant  payors  to  determine  the  extent  to  which  the  Company  may be
vulnerable  to those payors'  failures to remediate  their own year 2000 issues.
The Company is currently  unable to predict  what


                                      -19-

<PAGE>


effect,  if any, the year 2000 issue may have on the  computer  systems of those
payors or, in turn, on the Company.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         None.


                                      -20-
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The  financial  information  required  by this item is set forth in the
Consolidated Financial Statements on pages F-1 through F-21.

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

         On July 7, 1999, the Company dismissed Richard A. Eisner & Company, LLP
("Eisner") as the Company's independent public accountants.

         On July 7, 1999,  the Company  selected  Holtz  Rubenstein  & Co.,  LLP
("Holtz  Rubenstein")  to replace  Eisner as the  Company's  independent  public
accountants. The decision to change auditors was approved by the Audit Committee
of the Board of Directors.

         Eisner's report on the financial  statements of the Company for the two
fiscal years ended July 31, 1998 and 1997 did not contain any adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles.

         During the Company's two fiscal years ended July 31, 1998 and 1997, and
the subsequent  interim period through July 7, 1999, there were no disagreements
with  Eisner on any matter of  accounting  principles  or  practices,  financial
statement disclosure,  or auditing scope or procedure,  which disagreements,  if
not resolved to the  satisfaction  of Eisner,  would have caused  Eisner to make
reference to the subject  matter of the  disagreements  in  connection  with its
audit report with respect to financial statements of the Company.

         During the Company's two fiscal years ended July 31, 1998 and 1997, and
the subsequent interim period through July 7, 1999, there was no disagreement or
difference of opinion with Eisner regarding any "reportable event," as that term
is defined in Item 304(a)(1)(v) of Regulation S-K.

         On July 7, 1999,  the  Company  filed a Current  Report on Form 8-K, as
amended  (the  "Report"),  and  provided  Eisner  with  a copy  of  the  Report,
requesting  that  Eisner  furnish  the Company  with a letter  addressed  to the
Securities and Exchange Commission stating whether it agreed with the statements
made by the Company.  Such letter is attached to the Report as Exhibit 16 and is
hereby incorporated by reference.

         During the  Company's two fiscal years ended July 31, 1998 and 1997 and
the  subsequent  interim  period  through July 7, 1999,  neither the Company nor
anyone on behalf of the Company consulted Holtz Rubenstein  regarding either the
application  of  accounting  principles  to  a  specified  transaction,   either
completed  or proposed,  or the type of audit  opinion that might be rendered on
the  financial  statements  of the  Company  or any  matter  that was either the
subject  of  a  disagreement,  within  the  meaning  of  Item  304(a)(1)(iv)  of
Regulation  S-K,  or any  reportable  event,  as that  term is  defined  in Item
304(a)(1)(v) of Regulation S-K.


                                      -21-

<PAGE>

                                    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 1999 Annual
Meeting of  Stockholders  to be held on  December 7, 1999,  and is  incorporated
herein by reference.  The Company  intends to file such Proxy Statement with the
Securities and Exchange  Commission  not later than 120 days  subsequent to July
31, 1999.

                                      -22-

<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

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

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

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


                                      -23-

<PAGE>

                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

              REPORT ON AUDITS OF CONSOLIDATED FINANCIAL STATEMENTS

                         THREE YEARS ENDED JULY 31, 1999

                                    CONTENTS

                                                                      Page

CONSOLIDATED FINANCIAL STATEMENTS:
     Report of Holtz Rubenstein & Co., LLP, Independent
        Certified Public Accountants                                  F-2
     Report of Richard A. Eisner & Company, LLP, Independent
        Certified Public Accountants                                  F-3
     Balance sheets                                                   F-4
     Statements of earnings                                           F-5
     Statements of changes in stockholders' equity                    F-6
     Statements of cash flows                                         F-7
     Notes to financial statements                                  F-8-F-18
FINANCIAL STATEMENT SCHEDULE:
     Independent Auditors' Report on Schedule,
       Holtz Rubenstein & Co., LLP                                    F-19
     Independent Auditors' Report on Schedule,
       Richard A. Eisner & Company, LLP                               F-20
     Schedule II - Valuation and qualifying accounts                  F-21


                                       F-1

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

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

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

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

In our  opinion,  based  upon our audit and the report of other  auditors,  with
respect to SunStar  Healthcare as described above,  the  consolidated  financial
statements  referred to above  present  fairly,  in all material  respects,  the
consolidated   financial  position  of  National  Home  Health  Care  Corp.  and
Subsidiaries  as of  July  31,  1999,  and the  consolidated  results  of  their
operations and their  consolidated  cash flows for the year ended July 31, 1999,
in conformity with generally accepted accounting principles.

/s/ Holtz Rubenstein & Co., LLP

Melville, New York
October 1, 1999


                                       F-2

<PAGE>

INDEPENDENT AUDITORS' REPORT

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

We have audited the  accompanying  consolidated  balance  sheet of National Home
Health  Care  Corp.  and  subsidiaries  as of July  31,  1998,  and the  related
consolidated  statements of earnings,  changes in stockholders'  equity and cash
flows  for each of the two  years in the  period  ended  July  31,  1998.  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 did not audit the financial  statements  of SunStar  Healthcare,
Inc. for the year ended July 31, 1997, a corporation  in which the Company had a
37.6% interest at July 31, 1997. Those statements were audited by other auditors
whose  report  has been  furnished  to us;  insofar  as our  opinion on the 1997
consolidated   financial   statements  relates  to  data  included  for  SunStar
Healthcare, Inc., it is based solely on their report.

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

In our  opinion,  based  upon  audits  and,  for 1997,  the  report of the other
auditors,  the financial  statements  enumerated  above present  fairly,  in all
material respects,  the consolidated  financial position of National Home Health
Care Corp. and subsidiaries as of July 31, 1998, and the consolidated results of
their operations and their  consolidated cash flows for each of the two years in
the period ended July 31, 1998, in conformity with generally accepted accounting
principles.

/s/ Richard A. Eisner & Company, LLP

New York, New York
October 7, 1998


                                       F-3

<PAGE>

                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                           July 31,
                                                           -------------------------------------
          ASSETS                                                1999                   1998
          ------                                           -----------------        ------------
<S>                                                        <C>                      <C>
CURRENT ASSETS:
   Cash (including cash equivalents of $6,664,000          $ 7,442,000              $10,992,000
      and $7,576,000)
   Investments - available for sale                            178,000                  488,000
   Accounts receivable, less allowance for doubtful         10,459,000                8,269,000
      accounts of $392,000 and $295,000
   Income taxes receivable                                     110,000                  123,000
   Prepaid expenses and other assets                           181,000                  195,000
   Deferred taxes                                              417,000                  289,000
                                                            ----------              -----------
   Total current assets                                     18,787,000               20,356,000

Furniture, equipment and leasehold improvements, net           543,000                  395,000
Excess of cost over fair value of net                        5,334,000                3,179,000
   assets of businesses acquired, net
Other intangible assets                                      1,239,000                  745,000
Deposits and other assets                                      189,000                  154,000
Investment in unconsolidated investee                             -                     674,000
                                                           -----------              -----------
                                                           $26,092,000              $25,503,000
                                                           ===========              ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable and accrued expenses                   $ 1,079,000               $1,013,000
   Estimated third-party payor settlements                        -                     209,000
                                                           -----------              -----------
        Total current liabilities                            1,079,000                1,222,000
                                                           -----------              -----------
COMMITMENTS, CONTINGENCIES
   AND OTHER MATTERS
STOCKHOLDERS' EQUITY:
   Common stock, $.001 par value, authorized                     6,000                    6,000
      20,000,000 shares, issued 6,228,746 shares
   Additional paid-in capital                               18,525,000               18,525,000
   Retained earnings                                         8,183,000                7,045,000
                                                           -----------              -----------
                                                            26,714,000               25,576,000
   Less treasury stock (1,124,936 and                        1,701,000                1,295,000
                                                           -----------              -----------
      1,028,879 shares) - at cost
        Total stockholders' equity                          25,013,000               24,281,000
                                                           -----------              -----------
                                                           $26,092,000              $25,503,000
                                                           ===========              ===========
</TABLE>


                 See notes to consolidated financial statements


                                       F-4
<PAGE>



                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                            Years Ended
                                                              July 31,
                                         ----------------------------------------------
                                            1999              1998             1997
                                         ----------       -----------     -------------
<S>                                      <C>              <C>               <C>
NET PATIENT REVENUE                     $38,518,000       $34,313,000     $35,070,000
                                         ----------       -----------      -----------
OPERATING EXPENSES:
   Cost of revenue                       25,357,000        22,135,000      22,905,000
   General and administrative            10,183,000         8,886,000       8,620,000
   Amortization of intangibles              550,000           373,000         245,000
                                         ----------        ----------      ----------
                                         36,090,000        31,394,000      31,770,000
                                         ----------        ----------      ----------
INCOME FROM OPERATIONS                    2,428,000         2,919,000       3,300,000
OTHER INCOME (LOSS):
   Gain resulting from subsidiary's
     stock offering                              -            331,000              -
   Interest income                          385,000           547,000         446,000
   Loss from equity investee               (674,000)       (1,630,000)       (612,000)
                                         ----------        ----------      ----------
                                           (289,000)         (752,000)       (166,000)
                                         ----------        ----------      ----------
INCOME BEFORE INCOME TAXES                2,139,000         2,167,000       3,134,000
PROVISION FOR INCOME TAXES                1,001,000           964,000       1,278,000
                                         ----------       -----------      ----------
NET INCOME                              $ 1,138,000       $ 1,203,000     $ 1,856,000
                                         ==========      ============      ==========
NET INCOME PER COMMON SHARE:
     Basic                                     $.22              $.23            $.35
                                               ====              ====            ====
     Diluted                                   $.22              $.23            $.35
                                               ====              ====            ====
WEIGHTED AVERAGE NUMBER
   OF SHARES OUTSTANDING:
     Basic                                5,160,470         5,231,248       5,250,242
                                          =========         =========       =========
     Diluted                              5,215,487         5,307,158       5,358,722
                                          =========         =========       =========
</TABLE>


                 See notes to consolidated financial statements

                                       F-5

<PAGE>

<TABLE>
<CAPTION>

                                  NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                             CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


                                           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, July 31, 1996                6,050,321     $ 6,000   $17,660,000     $4,789,000        955,000   $  (951,000)
Net income                                 -             -           -         1,856,000           -             -
Acquisition of treasury shares,
  $5.32 per share                          -             -           -              -             2,500       (13,000)
3% stock dividend                       153,025          -        803,000       (803,000)          -             -
Exercise of common stock options          5,300          -         13,000           -              -             -
                                     ----------     -------    ----------      ---------     ----------     ---------
Balance, July 31, 1997                6,208,646       6,000    18,476,000      5,842,000        957,500      (964,000)
Net income                                 -             -           -         1,203,000           -             -
Acquisition of treasury shares,
  $4.65 per share                          -             -           -             -             71,379      (331,000)
Exercise of common stock options         20,100          -         49,000          -               -             -
                                     ----------     -------    -----------     ---------     ----------     ---------
Balance, July 31, 1998                6,228,746       6,000    18,525,000      7,045,000      1,028,879    (1,295,000)
Net income                                 -             -              -      1,138,000             -           -
Acquisition of treasury shares,
  $4.23 per share                          -             -              -              -         96,057      (406,000)
                                      ---------     -------    ----------      ---------     ----------     ----------
Balance, July 31, 1999                6,228,746     $ 6,000   $18,525,000     $8,183,000     $1,124,936    $(1,701,000)
                                      =========     =======    ==========      =========     ==========     ==========
</TABLE>


                                  See notes to consolidated financial statements

                                                         F-6

<PAGE>


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

                                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                            Years Ended
                                                                              July 31,
                                                            ----------------------------------------------
                                                                 1999           1998              1997
                                                            -----------     -----------       ------------
<S>                                                         <C>             <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                               $ 1,138,000     $ 1,203,000       $ 1,856,000
  Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization                            682,000         479,000           355,000
       Provision for doubtful accounts                                -          32,000                -
       Deferred tax                                                   -        (375,000)         (133,000)
       Gain on subsidiary's stock offering                            -        (331,000)               -
       Loss from equity investee                                674,000       1,630,000          612,000
       Gain on sale of assets                                    (3,000)              -                -
       Changes in operating assets and liabilities:
         (Increase) decrease in assets:
           Accounts receivable                               (1,400,000)       (125,000)         323,000
           Prepaid expenses and other current assets              7,000         (48,000)          27,000
         Increase (decrease) in liabilities:
           Accounts payable, accrued expenses
              and other liabilities                             (62,000)       (318,000)          16,000
           Income taxes receivable (payable)                      8,000        (145,000)         225,000
           Estimated third-party payor settlements             (209,000)         14,000         (883,000)
                                                             ----------     -----------        ---------
       Net cash provided by operating activities                835,000       2,016,000        2,398,000
                                                             ----------     -----------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of furniture, equipment
     and leasehold improvements                                (195,000)       (123,000)       (134,000)
   Proceeds from sale of assets                                   6,000               -               -
   Proceeds of investments                                      310,000          20,000          20,000
   Purchase of assets of businesses                          (1,943,000)              -      (1,889,000)
   Purchase of Accredited Health Services, Inc.,
     net of cash acquired                                    (1,736,000)              -               -
   Proceeds from sale of subsidiary stock                             -          37,000               -
                                                             -----------    -----------      ----------
       Net cash used in investing activities                 (3,558,000)        (66,000)     (2,003,000)
                                                             ----------     -----------      ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Purchase of treasury shares                                 (406,000)       (331,000)        (13,000)
   Proceeds from exercise of stock options                            -          49,000          13,000
   Repayment of notes payable                                  (421,000)              -               -
                                                            ------------    -----------      ----------
       Net cash used in financing activities                   (827,000)       (282,000)              -
                                                            -----------     -----------      ----------
Net (decrease) increase in cash and cash equivalents         (3,550,000)      1,668,000         395,000
Cash and cash equivalents, beginning of year                 10,992,000       9,324,000       8,929,000
                                                             ----------     -----------      ----------
Cash and cash equivalents, end of year                      $ 7,442,000     $10,992,000     $ 9,324,000
                                                             ==========     ===========      ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the year for:
     Interest                                              $     4,000      $     2,000     $    11,000
                                                            ==========      ===========      ==========
     Income taxes                                          $ 1,100,000      $ 1,512,000     $ 1,584,000
                                                            ==========      ============     ==========
</TABLE>

Supplemental disclosure of noncash investing and financing activities (see Notes
6 and 7).

                 See notes to consolidated financial statements


                                       F-7
<PAGE>

                NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         THREE YEARS ENDED JULY 31, 1999


1.     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

       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.  Due to the similarities in services,  management
considers their operations to be one reportable segment.

       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.

       c.  Revenue recognition

           Net  patient  revenue is  recorded at the  estimated  net  realizable
amount from third-party payors and patients.

           Under Medicare and Medicaid cost reimbursement  programs, the Company
is reimbursed for services rendered to covered  patients.  Revenues derived from
these  programs  are  based  in part on cost  reimbursement  principles  and are
subject to  examination  and  retroactive  adjustment.  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.

           Approximately  34%, 40% and 39% of net patient revenue for the fiscal
years ended July 31,  1999,  1998 and 1997,  respectively,  were  derived  under
federal and state third-party reimbursement programs.

       d.  Cash equivalents

           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.


                                       F-8

<PAGE>

1.     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
       (Cont'd)

       f.  Excess of cost over fair value of net assets of businesses acquired

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

       g.  Net income per share

           The Company has adopted the  provisions  of  Statement  of  Financial
Accounting  Standards No. 128,  "Earnings  Per Share" ("SFAS 128").  It requires
dual  presentation  of basic and diluted  earnings  per share on the face of the
consolidated  statements  of earnings  for all  entities  with  complex  capital
structures and requires a reconciliation of the numerator and denominator of the
basic  earnings per share  computation  to the numerator and  denominator of the
diluted EPS computation.

           The  basic   calculation   is   determined  by  dividing  net  income
attributable to common shares  outstanding (the basic numerator) by the weighted
average number of common shares outstanding (the basic  denominator)  during the
period.

           The  diluted   calculation  is  determined  by  adjusting  the  basic
numerator  for any changes in income or loss that would  result from the assumed
exercise  of  potentially   issued  common  shares.   Additionally,   the  basic
denominator is increased to include the additional  number of common shares that
would be outstanding if the potentially issued common shares had been issued, if
dilutive.  Potentially  issued common  shares,  consisting  of options,  are not
included  in this  calculation  where  the  effect  of the  inclusion  would  be
antidilutive.  The treasury stock method is used to reflect the dilutive  effect
of outstanding options and warrants.

           The  reconciliation  for the years ended July 31, 1999, 1998 and 1997
are as follows:

<TABLE>
<CAPTION>
                                                   Years Ended July 31,
                        -----------------------------------------------------------------------------
                                  1999                       1998                       1997
                        ----------------------     -----------------------    -----------------------
                          Income       Shares        Income       Shares        Income        Shares
                        ----------    ---------    ----------    ---------    ----------    ---------
<S>                     <C>           <C>          <C>            <C>          <C>            <C>
Basic EPS:
   Net income           $1,138,000    5,160,470    $1,203,000    5,231,248    $1,856,000    5,250,242
Effect of dilutive
   securities -
   common
   stock options                 -       55,017             -       75,910           -        108,480
                        ----------   ----------    ----------    ---------    ----------    ---------
Diluted EPS             $1,138,000    5,215,487    $1,203,000    5,307,158    $1,856,000    5,358,722
                        ==========   ==========    ==========    =========    ==========    =========
</TABLE>

       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.


                                       F-9

<PAGE>

1.     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
       (Cont'd)

       h.  Investments  (Cont'd)

           Investment securities  available for sale  at July 31, 1999  and 1998
are summarized as follows:

                                                           Amortized Cost (1)
                                                          --------------------
                                                            1999        1998
                                                          -------     --------

  Floating rate debentures issued by New York State,
     maturing in one to five years                       $145,000    $160,000
  Floating rate debentures issued by New York State,
     maturing in five to ten years                         15,000     150,000
  Floating rate debentures issued by New York State,
     maturing after ten years                                   -     160,000
  Other                                                    18,000      18,000
                                                         --------     -------
                                                         $178,000    $488,000
                                                          =======     =======

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

       i.  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.

       j.  Accounting for stock options

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

       k.  Recently issued accounting pronouncements

           During  fiscal year 1999,  the  Company  adopted  the  provisions  of
Statement of Financial  Accounting  Standards No. 130, "Reporting  Comprehensive
Income"  ("SFAS  130"),  Statement  of  Financial  Accounting  Standard No. 131,
"Disclosure  About  Segments of an  Enterprise"  ("SFAS  131") and  Statement of
Financial  Accounting  Standard No. 132,  "Disclosure  About  Pensions and Other
Postretirement  Benefits" ("SFAS 132"). The provisions of SFAS 130, SFAS 131 and
SFAS  132  did  not  have  a  material  impact  on  the  consolidated  financial
statements.

           In April 1998,  the FASB  adopted  Statement  of Position  No.  98-5,
"Reporting on the Costs of Start-Up  Activities" ("SOP" No. 98-5) which requires
that  costs  previously  capitalized  as  start-up  costs  will be  expensed  as
incurred.  SOP No. 98-5  becomes  effective  for fiscal  years  beginning  after
December 15, 1998, with earlier application encouraged.  The adoption of SOP No.
98-5 will not have a material  effect,  if any,  on the  Company's  consolidated
financial statements.

           During 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards  (SFAS No. 133),  "Accounting  for
Derivative  Instruments and Hedging Activities." The Company does not expect the
adoption of this new accounting pronouncement to have a material effect, if any,
on its financial condition or results of operations.


                                       F-10

<PAGE>

1.     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
       (Cont'd)

       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  primarily to goodwill,  depreciable  assets,
third-party payor settlements 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 expected
future claims under the insurance program are accrued based upon historical loss
development  trends  and  may be  subsequently  revised  based  on  developments
relating to such claims.

       n.  Stock dividend

           On October 10, 1997, the Company's  Board of Directors  declared a 3%
stock  dividend  payable on  December 8, 1997 for  shareholders  of record as of
November  6, 1997.  A total of  153,025  shares of common  stock were  issued in
connection with the dividend.

       o.  Reclassifications

           Certain  reclassifications have been made to the financial statements
for the year ended July 31,  1998 to conform  with the  classifications  used in
1999.

2.     FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:

       Furniture,  equipment and leasehold  improvements  are stated at cost and
are summarized as follows:

                                                              July 31,
                                                     ------------------------
                                                         1999          1998
                                                     ----------    ----------

  Furniture and equipment                            $1,104,000    $  849,000
  Leasehold improvements                                212,000       186,000
                                                      ---------     ---------
                                                      1,316,000     1,035,000
  Less accumulated depreciation and amortization        773,000       640,000
                                                      ---------     ---------
                                                     $  543,000    $  395,000
                                                      =========     =========

3.     EXCESS OF COST OVER FAIR VALUE:

       Changes in the excess of cost over fair value of net assets of businesses
acquired during the two years ended July 31, 1999 are as follows:

                                                   Years Ended
                                                     July 31,
                                          ------------------------------
                                              1999               1998
                                          -----------         ----------

       Balance, beginning of year         $3,179,000          $3,350,000
       Consideration for acquisition       2,429,000                  -
       Amortization                         (274,000)           (171,000)
                                          ----------          ----------

       Balance, end of year               $5,334,000          $3,179,000
                                          ==========          ==========


                                      F-11

<PAGE>

4.     OTHER INTANGIBLE ASSETS:

       Other intangible assets are as follows:

                                                          July 31,
                                                 --------------------------

                                                      1999          1998
                                                 -----------     ----------
       Covenants not to compete                  $   975,000    $   775,000
       Personnel files                               963,000        678,000
       Patient files                                 637,000        352,000
                                                  ----------     ----------
                                                   2,575,000      1,805,000
       Less accumulated amortization               1,336,000      1,060,000
                                                  ----------     ----------

       Balance, end of year                      $ 1,239,000    $   745,000
                                                   =========     ==========

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

5.     ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

       Accounts payable and accrued expenses are as follows:

                                                          July 31,
                                                ---------------------------
                                                    1999            1998
                                                ----------      -----------

Trade accounts payable                          $  213,000      $  274,000
Accrued employee compensation and benefits         826,000         677,000
Other                                               40,000          62,000
                                                 ---------       ---------

                                                $1,079,000      $1,013,000
                                                 =========       =========


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 using the equity method of accounting.

       In fiscal 1998, the Company's ownership percentage of SunStar was reduced
to 30.5% as a result of SunStar  issuing  additional  shares of its common stock
pursuant  to a  private  placement  in  which  it  received  $1,318,000,  net of
expenses.  In connection  therewith,  the Company  recorded a gain before tax of
$302,000   representing  the  net  increase  in  book  value  of  the  Company's
investment.  Also in fiscal 1998,  the Company sold 10,000 shares of SunStar for
$37,000 and recorded a gain of $29,000. At July 31, 1999, the Company's carrying
value of its investment in SunStar is $0.


                                      F-12

<PAGE>

6.     SUBSIDIARY STOCK OFFERING:  (Cont'd)

       Summarized financial data of SunStar is as follow:

<TABLE>
<CAPTION>

                                                                   Years Ended
                                            Eleven                   July 31,
                                        Months Ended      ---------------------------
                                        June 30, 1999        1998             1997
                                        -------------     -----------      ----------
<S>                                     <C>              <C>              <C>
       Total current assets             $ 20,107,000     $  8,150,000     $ 5,105,000
       Total assets                       21,044,000        8,650,000       6,371,000
       Total current liabilities          17,353,000        6,319,000         881,000
       Total liabilities                  17,480,000        6,402,000         989,000
       Total shareholders' equity          3,564,000        2,248,000       5,382,000
       Total revenues                     71,071,000        9,079,000       4,729,000
       Net loss                           (2,902,000)      (4,567,000)     (1,631,000)
       Market value of the Company's
         investment                       4,450,000*        4,228,000*      4,500,000*
</TABLE>

        *The market value of the  Company's investment is based on quoted market
         prices  and does  not  necessarily  represent  the  amount  that may be
         realized upon disposition of the investment.

7.     ACQUISITIONS:

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

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

       (c) On March 25, 1997, the Company  acquired  certain assets of C.J. Home
Care, Inc., d/b/a Garden City Home Care, for approximately  $677,000,  including
acquisition costs of $27,000.  The assets purchased consisted of personnel files
of  $100,000,  patient  files of $50,000,  furniture  and  equipment of $10,000,
covenants not to compete of $200,000 and goodwill of $317,000.

       (d) On May 29, 1997, the Company  acquired  certain assets of Home Health
Aides,  Inc. and H.H.A.  Aides,  Inc., for approximately  $1,212,000,  including
acquisition costs of $77,000.  The assets purchased consisted of personnel files
of $100,000,  patient files of $300,000,  furniture and equipment of $25,000,  a
covenant not to compete of $175,000 and goodwill of $612,000.

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


                                      F-13

<PAGE>

7.     ACQUISITIONS:  (Cont'd)

       The following unaudited pro forma consolidated  results of operations for
the years ended July 31, 1999 and 1998  assume the  acquisitions  occurred as of
August 1, 1997:

                                                             July 31,
                                                  ---------------------------
                                                    1999              1998
                                                  --------          ---------
                                                      (in thousands, except
                                                       per share amounts)

       Revenues, net                             $39,849            $45,295
       Net income                                  1,181              1,438
       Net income per share:
         Basic                                      $.23               $.27
                                                    ====               ====
         Diluted                                    $.23               $.27
                                                    ====               ====

       Had the  Companies  referred  to in Notes 7(c) and 7(d) been  acquired on
August 1, 1996,  their  would have been no material  effect on the  consolidated
operations of the Company for the year ended July 31, 1997.

8.     INCOME TAXES:

       The Company  files a  consolidated  U.S.  federal  income tax return that
includes all 100% owned subsidiaries.  State tax returns are filed on a combined
or separate basis depending on the applicable laws.

       The provision for income taxes is summarized as follows:

                                               Years Ended
                                                 July 31,
                                --------------------------------------------
                                   1999             1998            1997
                                ----------      ------------      ---------
       Current:
         Federal               $   718,000      $    920,000     $1,156,000
         State and local           283,000           419,000        255,000
                                ----------        ----------     ----------
                                 1,001,000         1,339,000      1,411,000
       Deferred                          -          (375,000)      (133,000)
                                ----------       -----------      ---------
                               $ 1,001,000      $    964,000     $1,278,000
                                ==========       ===========      =========

       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 expense (benefit) are as follows:

                                                   Years Ended
                                                     July 31,
                                       ---------------------------------------
                                           1999          1998           1997
                                       -----------    ---------      ---------

       Loss from equity investee      $     -         $(316,000)    $(208,000)
       State tax net operating
         loss carryforwards                 -           (59,000)       75,000
                                       -----------     ---------     --------

                                      $     -         $(375,000)    $(133,000)
                                      ============     =========     ========


                                      F-14

<PAGE>

8.     INCOME TAXES:  (Cont'd)

       The deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>

                                                                            July 31,
                                                       ---------------------------------------------------
                                                                1999                        1998
                                                       ---------    -----------   ------------------------
                                                         Assets     Liabilities     Assets     Liabilities
                                                       ---------    -----------   ---------    -----------
<S>                                                    <C>          <C>           <C>            <C>
       Accrued liability and reserves                  $ 353,000    $     -       $  248,000     $   -
       Equity investment in subsidiary                   365,000          -          136,000         -
       State net operating loss carryforwards             64,000          -           41,000         -
                                                        --------     -------      ----------     ------
                                                         782,000          -          425,000         -
       Valuation allowance                              (365,000)         -         (136,000)        -
                                                        --------     -------        --------     ------

                                                        $417,000    $     -         $289,000     $   -
                                                        ========     =======        ========      =====
</TABLE>

       Two subsidiaries of the Company have incurred losses which can be used to
offset state  taxable  income  through  2018.  At July 31,  1999,  the total net
operating  loss  carryforward  as applicable  to  Connecticut  is  approximately
$540,000 and applicable to New Jersey is approximately $379,000.

       The  reconciliation  of the  statutory tax rate to the effective tax rate
for the three years ended July 31, 1999 is as follows:

                                           1999         1998         1997
                                         --------     --------     --------

       Statutory rate                      34%          34%          34%
       State and local taxes
         (net of federal tax effect)       11           12            5
       Federal tax credit                  (4)          (6)          (2)
       Permanent differences                8            8            4
       Other                               (2)          (4)          -
                                           --           ---          ---
       Effective rate                      47%          44%          41%
                                           ==           ==           ==

9.     CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS:

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

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

       At July 31, 1999, the Company maintains approximately 40% of its cash and
cash equivalents with one financial institution.

       Under certain federal and state third-party  reimbursement  programs, the
Company received net patient revenues approximating $13,281,000, $13,666,000 and
$13,610,000 for the years ended July 31, 1999, 1998 and 1997, respectively.  The
Company  also  received  net  patient  revenues  of  approximately   $6,095,000,
$7,488,000  and  $7,624,000  for the years ended July 31,  1999,  1998 and 1997,
respectively,  from a private  company.  At July 31,  1999,  the  Company had an
aggregate  outstanding  receivable  from the  federal  and  state  reimbursement
programs of $2,073,000  and an  outstanding  receivable  of $1,653,000  from the
private company.


                                      F-15

<PAGE>

10.    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  options  may be
granted under the 1992 Plan after August 16, 2002.

       At July 31, 1999,  419,476 shares of the Company's common stock have been
reserved for future issuance pursuant to the 1992 Plan.

       A summary of the  status of the  Company's  stock  options as of July 31,
1999,  1998 and 1997 and  changes  during  the years  ending  on those  dates is
presented below:


<TABLE>
<CAPTION>
                                             1999                     1998                       1997
                                   ----------------------   -------------------------   ------------------------
                                                 Weighted                   Weighted                   Weighted
                                                  Average                   Average                    Average
                                                 Exercise                   Exercise                   Exercise
                                     Shares        Price       Shares        Price        Shares        Price
                                   ----------    --------    ---------      --------     --------      --------
<S>                                <C>            <C>        <C>            <C>          <C>            <C>
       Outstanding, beginning
         of year                      241,758     $ 3.29       204,042(2)   $2.77(2)      203,982(1)    $2.85(1)
       Granted                        180,902       3.93          60,000      4.81               -        -
       Exercised                           -        -            (20,100)     2.47           (5,300)      2.47
       Forfeited                     (163,104)      2.57          (2,184)     5.70               -        -
                                   ----------               ------------                -----------
       Outstanding, end of year       259,556       4.19         241,758      3.29          198,682       2.86
                                   ==========               ============                ===========
       Options exercisable
         at year-end                  259,556     $ 4.19         241,758    $ 3.29          198,682     $ 2.86
                                   ==========               ============                ===========
       Weighted average fair
         value of options granted
         during the year                          $ 1.97                    $ 1.97                      $   -
                                                  ======                    ======                      ======
</TABLE>

(1)    Adjusted for 6% stock dividend declared in October 1996.

(2)    Adjusted for 3% Stock dividend declared in October 1997.

       The fair  value of  options  at date of grant  was  estimated  using  the
Black-Scholes  option  pricing model  utilizing the following  assumptions as of
July  31,  1999  and  1998:   risk-free   interest  rate  of  5.50%  and  5.75%,
respectively,  expected option life of 10 years, expected stock price volatility
of 33%  and  42%,  respectively,  and  expected  dividend  yield  of 0% and  3%,
respectively.

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


                                      F-16

<PAGE>

10.    STOCK OPTION PLAN:  (Cont'd)

       Since, the Company applies APB Opinion 25 and related  interpretations in
accounting for its options,  no  compensation  cost has been  recognized for its
stock option grants. The effect of applying SFAS No. 123 on pro forma net income
is not  necessarily  representative  of the effects on  reported  net income for
future years due to, among other things, (1) the vesting period of stock options
and (2) the fair value of  additional  stock  options in future  years.  Had the
Company  elected to recognize  compensation  cost based on the fair value of the
options at the date of grant as prescribed by SFAS 123, net income for the years
ended July 31, 1999 and 1998 would have been as follows:

                                                      Years Ended
                                                        July 31,
                                             -------------------------------
                                                 1999              1998
                                             ------------       ------------

       Proforma net income                   $  924,000         $1,085,000
       Pro forma income per share:
         Basic                                     $.18               $.21
                                                   ====               ====
         Diluted                                   $.17               $.20
                                                   ====               ====

       The  following   table   summarizes   information   about  stock  options
outstanding at July 31, 1999:

                                       Options Outstanding and Exercisable
                                  ----------------------------------------------
                                                    Weighted-
                                     Shares          Average      Weighted-
                                   Outstanding      Remaining     Average
                                   at July 31,     Contractual    Exercise
                                      1999            Life         Price
                                   -----------     -----------    ---------

       $3.76                          10,918         3 years       $ 3.76
       $5.70                           8,736         7 years         5.70
       $4.81                          60,000         8 years         4.81
       $3.63 - $4.56                 179,902         9 year          3.93
                                     -------
                                     259,556
                                     =======

11.    COMMITMENTS, CONTINGENCIES AND OTHER MATTERS:

       (a)  Effective  January 1, 1999,  the Company  amended and  restated  its
Employee Savings and Stock Investment Plan organized under Section 401(k) of the
Internal  Revenue Code.  Under the amended plan,  employees may contribute up to
15% of their salary,  limited to the maximum amount  allowable under federal tax
regulations.  The Company  will match an amount equal to 100% of the first 3% of
employees'  contributions  and 50% of the next 2% of  employees'  contributions,
provided  that in no event  shall the  matching  contributions  on behalf of any
employee  exceed  4% of  employees'  compensation.  The  Company  may also  make
additional  contributions  at its discretion.  An employee may invest in Company
stock and several mutual funds. The Company's matching contributions for each of
the years  ended  July 31,  1999,  1998 and 1997  were  $143,000,  $105,000  and
$135,000, respectively.

       (b) The Company has employment agreements with four officers which expire
through November 30, 2003. The aggregate commitment for future salary, excluding
bonuses,  under the  agreements is  $2,873,000.  One agreement also provides for
increases  based on increases in the consumer price index and additional  annual
compensation  of up to $150,000 based on 5% of pre-tax  income,  as defined,  in
excess of $3,000,000.  Another  agreement  provides for additional  compensation
based on 3% of income from operations, as defined, in excess of $3,000,000.


                                      F-17

<PAGE>

11.    COMMITMENTS, CONTINGENCIES AND OTHER MATTERS:  (Cont'd)

       (c) The Company rents various  office  facilities  through 2004 under the
terms of several lease agreements which include escalation clauses.

           At  July  31,  1999,   minimum   annual  rental   commitments   under
noncancellable operating leases are as follows:

                        Year Ending
                         June 31,
                        -----------

                           2000              $  392,000
                           2001                 217,000
                           2002                 190,000
                           2003                  92,000
                           2004                  47,000
                        Thereafter                5,000
                                             ----------
                                             $  943,000
                                             ==========

           Rent  expense  for the years ended July 31,  1999,  1998 and 1997 was
approximately $594,000, $527,000 and $435,000, respectively.

           One  lease  is  with a  company  controlled  by the  Company's  Chief
Executive Officer. Rent expense under such lease approximates $129,000 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  line of credit.  The
maximum  amount that can be borrowed  under the secured 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  January 30, 2000. At July 31, 1999,  there were no  outstanding
balances under either line of credit.

12.    SUBSEQUENT EVENT:

       Subsequent  to July 31, 1999,  the Company sold 127,114  shares of common
stock of SunStar reducing the Company's ownership to 26%. Proceeds from the sale
of stock approximated $784,000.


                                      F-18

<PAGE>

                    INDEPENDENT AUDITORS' REPORT ON SCHEDULE


The audit  referred to in our report dated  October 1, 1999 on the  consolidated
financial statements of National Home Health Care Corp. and Subsidiaries,  which
appears in Part II, also included  Schedule II for the year ended July 31, 1999.
This  schedule  is  the   responsibility  of  the  Company's   management.   Our
responsibility is to express an opinion based on our audit. In our opinion,  the
financial  statement  schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the  information  set forth therein,  in compliance with the applicable
accounting regulations of the Securities and Exchange Commission.

/s/ Holtz Rubenstein & Co., LLP

Holtz Rubenstein & Co., LLP
Melville, New York
October 1, 1998


                                      F-19


<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE

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

The audits  referred to in our report dated October 7, 1998 on the  consolidated
financial statements of National Home Health Care Corp. and subsidiaries,  which
appears in Part II, also  include  Schedule II for the years ended July 31, 1998
and 1997. This schedule is the responsibility of the Company's  management.  Our
responsibility is to express an opinion based on our audits. In our opinion, the
financial  statement  schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the  information  set forth therein,  in compliance with the applicable
accounting regulations of the Securities and Exchange Commission.

/s/ Richard A. Eisner & Company, LLP

New York, New York
October 7, 1998


                                      F-20


<PAGE>


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

                                                    SCHEDULE II

                                         VALUATION AND QUALIFYING ACCOUNTS

           Column A                          Column B               Column C                  Column D            Column E
           --------                          --------        -------------------------        ---------           --------
                                                                    Additions
                                                             ------------------------
                                                                (1)            (2)
                                                             ---------      ---------
                                                                            Charged
                                              Balance,       Charged to     to Other                              Balance,
                                              Beginning      Costs and      Accounts -        Deductions            End
            Description                       of Period       Expenses      Describe           Describe           of Period
            -----------                       ---------      ----------     --------          ----------          ---------
<S>                                           <C>            <C>            <C>               <C>                 <C>
Year ended July 31, 1999:
   Allowance deducted from asset account
  Allowance for uncollectible accounts         $295,000                     $196,500(b)        $  99,500 (a)      $392,000
                                               ========                      =======           =========          ========
Year ended July 31, 1998:
   Allowance deducted from asset account
   Allowance for uncollectible accounts        $327,000       $32,000                          $ (64,000)(a)      $295,000
                                               ========       =======                            =======          ========
Year ended July 31, 1997:
   Allowance deducted from asset account
   Allowance for uncollectible accounts        $414,000                                        $ (87,000)(a)      $327,000
                                               ========                                          =======           =======
</TABLE>

(a)  Represents actual write-offs.

(b) Represents  allowance acquired in acquisition of Accredited Health Services,
Inc.


                                      F-21

<PAGE>

          (3)  Exhibits

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

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

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

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

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

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

10.3     Agreement  dated January 1, 1994 between Allen Health Care Services and
         Visiting Nurse Service of New York.  Incorporated  by reference to  the
         Registrant's Annual Report on Form 10-K for the fiscal  year ended July
         31, 1994 (the "1994 Form 10-K").

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

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

10.6*    First Amendment to Amended and Restated  Employment  Agreement dated as
         of December 1, 1998 between the Registrant and Frederick H. Fialkow.


                                      -24-

<PAGE>

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

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

10.8     Employment   Agreement  dated  as  of  November  1,  1997  between  the
         Registrant and Frederick H. Fialkow.  Incorporated  by reference to the
         January 31, 1998 Form 10-Q.

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

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

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

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

10.13    Agreement  between  Division of Social  Services of Suffolk  County and
         Health Acquisition Corp.  Incorporated by reference to the Registrant's
         Annual Report on Form 10-K for the fiscal year ended July 31, 1991.

10.14    Agreement between Nassau County Department of Social Services and Allen
         Health Care Services. Incorporated by reference to the 1992 Form 10-K.

10.15    Agreement  dated  January 1, 1994 between  Catholic  Medical  Center of
         Brooklyn and Queens, Inc. Incorporated by reference to the Registrant's
         Annual Report on Form 10-K for the fiscal year ended July 31, 1994.

10.16    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. Incorporated by reference to the 1992 Form 10-K.


                                      -25-

<PAGE>
EXHIBIT
NUMBER                           DOCUMENT
-------                          --------

10.17    Letter  from  Joint   Commission   on   Accreditation   of   Healthcare
         Organizations  awarding  accreditation  to  Allen  Health  Care,  dated
         September 20, 1993. Incorporated by reference to the 1993 Form 10-K.

10.18    The  Registrant's  Employee  Savings  and Stock  Investment  Plan under
         Section 401(k) of the Internal Revenue Code.  Incorporated by reference
         to the  Registrant's  Annual  Report on Form 10-K for the  fiscal  year
         ended July 31, 1997 (the "1997 Form 10-K").

10.19    Letter  Agreement  dated February 20, 1999 providing a Secured  Advised
         Line of Credit from the Bank of New York to  National  Home Health Care
         Corp. Incorporated by reference to the January 31, 1999 Form 10-Q.

10.20    Letter  Agreement  dated February 20, 1999 providing a Secured  Advised
         Line of Credit from the Bank of New York to New England Home Care, Inc.
         Incorporated by reference to the January 31, 1999 Form 10-Q.

21.1*    List of Subsidiaries.

23.1*    Consent of  Richard A. Eisner & Company, LLP

23.2*    Consent of  Holtz Rubenstein & Co., LLP

27.1*    Financial Data Schedule

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

         (b)  Reports on Form 8-K.

         1. Form 8-K,  Item 4. Changes in  Registrant's  Certifying  Accountant,
dated July 7, 1999.

         2. Form 8-K/A, Item 4. Changes in Registrant's  Certifying  Accountant,
filed July 28, 1999.


                                      -26-

<PAGE>

                                   SIGNATURES

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

                                       NATIONAL HOME HEALTH CARE CORP.

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


Dated:  October 28, 1999


         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 and
-----------------------------           Chief Executive Officer
    Frederick H. Fialkow

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

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

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

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

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

<PAGE>

                           Commission File No. 0-12927


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    EXHIBITS

                                       to

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
                         FISCAL YEAR ENDED JULY 31, 1999

                         NATIONAL HOME HEALTH CARE CORP.


<PAGE>
<TABLE>
<CAPTION>
EXHIBIT                                                                            PAGE
NUMBER                            DOCUMENT                                         NUMBER
-------                           --------                                         ------
<S>      <C>                                                                       <C>
3.1      Certificate  of   Incorporation.   Incorporated  by  reference  to  the
         Registrant's  Registration  Statement on Form S-1 (No.  2-86643)  filed
         September 20, 1983 (the "1983 Form S-1").

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

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

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

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

10.3     Agreement  dated January 1, 1994 between Allen Health Care Services and
         Visiting Nurse Service of New york.  Incorporated  by  reference to the
         Registrant's  Annual Report on Form 10-K for the fiscal year ended July
         31, 1994 (the "1994 Form 10-K").

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

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

10.6*    First Amendment to Amended and Restated  Employment  Agreement dated as
         of December 1, 1998 between the Registrant and Frederick H. Fialkow.

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

10.8     Employment   Agreement  dated  as  of  November  1,  1997  between  the
         Registrant and Frederick H. Fialkow.  Incorporated  by reference to the
         January 31, 1998 Form 10-Q.
</TABLE>



<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                                                            PAGE
NUMBER                            DOCUMENT                                         NUMBER
-------                           --------                                         ------
<S>      <C>                                                                       <C>
10.9     Form of First Amendment to Employment Agreement dated as of December 1,
         1998  between the  Registrant  and Robert P.  Heller.  Incorporated  by
         reference to the January 31, 1999 Form 10-Q.

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

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

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

10.13    Agreement  between  Division of Social  Services of Suffolk  County and
         Health Acquisition Corp.  Incorporated by reference to the Registrant's
         Annual Report on Form 10-K for the fiscal year ended July 31, 1991.

10.14    Agreement between Nassau County Department of Social Services and Allen
         Health Care Services. Incorporated by reference to the 1992 Form 10-K.

10.15    Agreement  dated  January 1, 1994 between  Catholic  Medical  Center of
         Brooklyn and Queens, Inc. Incorporated by reference to the Registrant's
         Annual Report on Form 10-K for the fiscal year ended July 31, 1994.

10.16    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. Incorporated by reference to the 1992 Form 10-K.

10.17    Letter  from  Joint   Commission   on   Accreditation   of   Healthcare
         Organizations  awarding  accreditation  to  Allen  Health  Care,  dated
         September 20, 1993. Incorporated by reference to the 1993 Form 10-K.

10.18    The  Registrant's  Employee  Savings  and Stock  Investment  Plan under
         Section 401(k) of the Internal Revenue Code.  Incorporated by reference
         to the  Registrant's  Annual  Report on Form 10-K for the  fiscal  year
         ended July 31, 1997 (the "1997 Form 10-K").

10.19    Letter  Agreement  dated February 20, 1999 providing a Secured  Advised
         Line of Credit from the Bank of New York to  National  Home Health Care
         Corp. Incorporated by reference to the January 31, 1999 Form 10-Q.
</TABLE>



<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                                                            PAGE
NUMBER                            DOCUMENT                                         NUMBER
-------                           --------                                         ------
<S>      <C>                                                                       <C>
10.20    Letter  Agreement  dated February 20, 1999 providing a Secured  Advised
         Line of Credit from the Bank of New York to New England Home Care, Inc.
         Incorporated by reference to the January 31, 1999 Form 10-Q.

21.1*    List of Subsidiaries.

23.1*    Consent of  Richard A. Eisner & Company, LLP

23.2*    Consent of  Holtz Rubenstein & Co., LLP

27.1*    Financial Data Schedule

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

*     Filed herewith