U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED November 30, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission File Number 1-10751
STAR MULTI CARE SERVICES, INC.
(Exact Name of Registrant as specified in its charter)
New York 11-1975534
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
33 Walt Whitman Road, Huntington Station, New York 11746
--------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (631) 423-6689
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of January 6, 2002:
Class Number of Shares
------------------------------ ----------------
Common Stock, $0.001 par value 1,032,865
STAR MULTI CARE SERVICES, INC.
INDEX
Page
PART I: FINANCIAL INFORMATION
Item 1
Consolidated Balance Sheets as of November 30, 2002 and May 31, 2002 ... 3
Consolidated Statements of Operations for the three months ended
November 30, 2002 and November 30, 2001 ................................ 4
Consolidated Statements of Cash Flows for the six months ended
November 30, 2002 and November 30, 2001 ................................ 5
Notes to Consolidated Financial Statements ............................. 6-8
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations .................................... 8-10
Item 4
Controls and Procedures ................................................ 11
PART II: OTHER INFORMATION
Item 6
Exhibits and Reports on Form 8-K ....................................... 11
Signatures ............................................................. 12
STAR MULTI CARE SERVICES, INC
CONSOLIDATED BALANCE SHEETS
November 30, May 31,
2002 2002
------------ ------------
ASSETS: Unaudited Audited
- -------
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 137,373 $ 74,235
Accounts receivable, net of allowance for doubtful accounts of
$2,425,000 at November 30, 2002 and May 31, 2002 ................... 1,825,138 1,613,540
Prepaid expenses and other current assets ............................ 77,653 83,206
Deferred income taxes ................................................ 206,000 206,000
------------ ------------
Total current assets ............................................. 2,246,164 1,976,981
PROPERTY AND EQUIPMENT, NET ............................................ 425,302 572,859
GOODWILL ............................................................... 1,307,444 1,307,444
OTHER INTANGIBLE ASSETS, NET ........................................... 338,685 351,860
DEFERRED INCOME TAXES .................................................. 1,404,000 1,404,000
OTHER ASSETS ........................................................... 19,449 50,647
------------ ------------
$ 5,741,044 $ 5,663,791
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accrued payroll and related expenses ................................. $ 530,747 $ 637,908
Accounts payable ..................................................... 362,964 586,629
Accrued expenses ..................................................... 703,617 758,368
Due Medicare ......................................................... 250,000 350,000
Note payable - related party ......................................... 50,000 --
Due officer .......................................................... 325,000 125,000
------------ ------------
Total current liabilities ......................................... 2,222,328 2,457,905
------------ ------------
LONG-TERM LIABILITIES:
Revolving credit line ................................................ 1,340,183 990,254
------------ ------------
SHAREHOLDERS' EQUITY:
Convertible preferred stock-aggregate liquidation value
$469,000 and $325,000; $1.00 par value, 5,000,000 shares authorized;
469 and 325 shares issued, respectively ............................ 469 325
Common stock, $.001 par value per share, 5,000,000 shares
authorized; 1,059,232 and 1,024,021 shares issued,
respectively ....................................................... 1,059 1,024
Additional paid-in capital ........................................... 21,821,685 21,669,864
Deficit .............................................................. (19,253,989) (19,064,891)
Treasury stock, 26,367 common shares, at cost ........................ (390,691) (390,691)
------------ ------------
Total shareholders' equity ........................................... 2,178,533 2,215,631
------------ ------------
$ 5,741,044 $ 5,663,790
============ ============
See accompanying notes to consolidated financial statements
3
STAR MULTI CARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
Three Months Ended Six Months Ended
November 30, November 30,
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
REVENUE, net .......................................... $ 2,562,210 $ 2,369,864 $ 4,951,563 $ 10,354,064
OPERATING EXPENSES:
Costs of revenue .................................. 1,565,252 1,564,734 3,006,119 6,937,872
Selling, general and administrative ............... 901,644 1,495,205 1,873,359 3,842,883
Depreciation and amortization ..................... 82,954 105,451 154,954 351,583
Provision for doubtful accounts ................... 16,789 13,887 27,674 94,227
------------ ------------ ------------ ------------
2,566,639 3,179,277 5,062,106 11,226,565
------------ ------------ ------------ ------------
OPERATING LOSS ........................................ (4,429) (809,413) (110,543) (872,501)
OTHER EXPENSE:
Gain (loss) on sale of business ................... -- 8,596 -- (12,986)
Interest expense, net ............................. (33,835) (85,503) (62,660) (533,236)
------------ ------------ ------------ ------------
(33,835) (76,907) (62,660) (546,222)
------------ ------------ ------------ ------------
LOSS BEFORE PROVISION FOR INCOME TAXES ............... (38,264) (886,320) (173,203) (1,418,723)
PROVISION FOR INCOME TAXES ............................ -- -- -- --
------------ ------------ ------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM ........................ (38,264) (886,320) (173,203) (1,418,723)
EXTRAORDINARY ITEM -
Gain on extinguishment of debt, net of income taxes -- -- -- 1,607,824
------------ ------------ ------------ ------------
NET (LOSS) INCOME ..................................... $ (38,264) $ (886,320) $ (173,203) $ 189,101
============ ============ ============ ============
BASIC (LOSS) INCOME PER COMMON SHARE:
Loss before extraordinary item .................... $ (0.03) $ (1.17) $ (0.17) $ (1.89)
Extraordinary item ................................ -- 0.00 -- 2.12
------------ ------------ ------------ ------------
Net (loss) income ................................. $ (0.03) $ (1.17) $ (0.17) $ 0.23
============ ============ ============ ============
DILUTED (LOSS) INCOME PER COMMON SHARE:
Loss before extraordinary item .................... $ (0.03) $ (1.17) $ (0.17) $ (1.87)
Extraordinary item ................................ -- 0.00 -- 2.10
------------ ------------ ------------ ------------
Net (loss) income ................................. $ (0.03) $ (1.17) $ (0.17) $ 0.23
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic ............................................. 1,032,865 770,860 1,022,282 756,671
============ ============ ============ ============
Diluted ........................................... 1,032,865 770,860 1,022,282 766,167
============ ============ ============ ============
See accompanying notes to consolidated financial statements
4
STAR MULTI CARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Six Months Ended
November 30,
--------------------------
2002 2001
----------- -----------
Cash flow from operating activities:
Net (loss) income ...................................................... $ (173,203) $ 189,101
----------- -----------
Adjustments to reconcile net (loss) income to net cash used in operating
activities:
Extraordinary gain on extinguishment of debt ........................ -- (1,607,824)
Depreciation and amortization ....................................... 154,954 351,583
Provision for doubtful accounts ..................................... 27,674 94,227
Loss on disposal of assets .......................................... 3,557 12,986
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable ........................................... (239,272) 1,990,017
Prepaid expenses and other current assets ..................... 5,553 64,966
Other assets .................................................. 33,419 28,166
Increase (decrease) in liabilities:
Accrued payroll and related expenses .......................... (107,161) (1,147,601)
Accounts payable and other accrued expenses ................... (142,312) (785,051)
Due Medicare .................................................. (100,000) (250,000)
----------- -----------
Total adjustments ........................................ (363,588) (1,248,531)
----------- -----------
Net cash used in by operating activities .......................... (536,791) (1,059,430)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of business ................................. -- 3,458,000
Purchase of property and equipment ............................. -- (6,470)
Deposit on contract for sale of business ....................... -- 700,000
----------- -----------
Net cash provided by investing activities ......................... 0 4,151,530
----------- -----------
Cash flows from financing activities:
Proceeds from officer loan ..................................... 200,000 --
Proceeds from notes ............................................ 50,000 800,000
Borrowings under revolving credit line ......................... 441,172 --
Repayments under revolving credit line ......................... (91,243) (3,133,128)
Repayment of notes payable ..................................... -- (300,000)
Exercise of stock options ...................................... -- 62,646
----------- -----------
Net cash provided by (used in) financing activities ............... 599,929 (2,570,482)
----------- -----------
Net increase in cash and cash equivalents .............................. 63,138 521,618
Cash and cash equivalents at beginning of period ....................... 74,235 10,511
----------- -----------
Cash and cash equivalents at end of period ............................. $ 137,373 $ 532,129
=========== ===========
Supplemental disclosure:
Income taxes paid .............................................. $ -- $ --
=========== ===========
Interest paid .................................................. $ 62,000 $ 533,000
=========== ===========
See accompanying notes to consolidated financial statements
5
STAR MULTI CARE SERVICES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In the opinion of management, the accompanying unaudited interim consolidated
financial statements of Star Multi Care Services, Inc. and its subsidiaries (the
"Company") contain all adjustments necessary to present fairly the Company's
financial position as of November 30, 2002, results of its operations for the
three month and six month periods ended November 30, 2002 and November 30, 2001,
and cash flows for the six month periods ended November 30, 2002 and November
30, 2001.
The accounting policies followed by the Company are set forth in Note 1 to the
Company's consolidated financial statements included in its Annual Report on
Form 10-K for the fiscal year ended May 31, 2002, which is incorporated herein
by reference. Specific reference is made to this report for the notes to
consolidated financial statements included therein.
The results of operations for the three-month and six-month periods ended
November 30, 2002 are not necessarily indicative of the results to be expected
for the full year.
NOTE 1: NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share and per common and common equivalent share is
based upon weighted-average common and common equivalent shares outstanding
during each period. Common equivalent shares include the dilutive effect of
stock options if any.
Net income available to common shareholders was computed as follows:
Three Months Ended Six Months Ended
November 30, November 30,
---------------------- ----------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Net income (loss) ......................... $ (38,264) $(886,320) $(173,203) $ 189,101
Dividends on preferred shares ............. (8,095) (9,100) (15,895) (15,100)
--------- --------- --------- ---------
Net income available to common shareholders $ (46,359) $ 895,420 $(189,098) $ 174,001
========= ========= ========= =========
NOTE 2: RECLASSIFICATIONS AND USE OF ACCOUNTING 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 and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenue and expenses during the
period. Such estimates primarily relate to accounts receivable valuation
allowances, recoverability of goodwill, realization of deferred tax assets, and
related valuation allowance and regulatory adjustments. Actual amounts may
differ from those estimates.
NOTE 3: GOODWILL AND INTANGIBLE ASSETS
In June 2002, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and
Intangible Assets." SFAS No. 141 requires the use of the purchase method of
accounting and prohibits the use of the pooling-of-interests method of
accounting for business combinations initiated after June 30, 2001. SFAS No. 141
also requires that the Company recognize acquired intangible assets apart from
goodwill if the acquired intangible assets meet certain criteria. It also
requires, upon adoption of SFAS No. 142 that the Company reclassify, if
necessary, the carrying amounts of intangible assets and goodwill based on the
criteria of SFAS No. 141.
SFAS No. 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS No. 142 requires that the Company identify reporting units for
the purpose of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets and cease
amortization of intangible assets with an indefinite useful life. No adjustments
for impairment losses were required.
The effect of adoption of SFAS No. 142 on the 2001 consolidated results of
operations were as follows:
Three Months Six Months
Ended Ended
November 30, November 30,
2001 2001
----------- ------------
Reported loss before extraordinary item ... $ (886,320) $ (1,418,723)
Add back: amortization of goodwill ....... 17,648 125,280
---------- ------------
Loss before extraordinary item, as adjusted $ (868,672) $ (1,293,443)
========== ============
Basic earnings per share:
Reported loss before extraordinary item $ (1.17) $ (1.89)
Amortization of goodwill .............. 0.02 0.17
---------- ------------
Basic earnings per share, as adjusted . $ (1.15) $ (1.72)
========== ============
Diluted earnings per share:
Reported loss before extraordinary item $ (1.17) $ (1.89)
Amortization of goodwill .............. 0.02 0.16
---------- ------------
Diluted earnings per share, as adjusted $ (1.17) $ (1.73)
========== ============
NOTE 4: CREDIT FACILITY
On August 31, 2001, the Company entered into a $2 million dollar credit facility
with Heller Healthcare Finance, Inc. The facility provides for the Company to
borrow up to 85% of eligible accounts receivable (as defined) that are aged less
than 150 days, at the lender's prime rate (4-1/4% at November 30, 2002) plus 1%.
The facility expires on August 31, 2004, and requires the Company to meet
certain financial ratios and covenants. All assets of the Company collateralize
the new credit facility.
On December 30, 2002, the Credit Facility was amended to allow the Company to
borrow up to an additional $176,000 in excess of eligible accounts receivable,
under substantially the same terms as the basic Credit Facility. This extension,
which expires on December 31, 2003, decreases each month by $41,667.
NOTE 5: CHANGE OF OWNERSHIP
On October 31, 2002, Stephen Sternbach, Chief Executive Officer of the Company,
and Matthew Solof, an unrelated party, purchased all of the issued and
outstanding Series B 7% Convertible Preferred Stock from the Shaar Fund Ltd.
This Preferred Stock is convertible into the Company's common stock. The
conversion would give Messrs. Sternbach and Solof more than a majority of the
outstanding common stock of the Company. Management has not evaluated the
effect, if any, on deferred income tax assets that might result as a consequence
of this transaction.
ITEM 2. 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 attached consolidated financial statements and
notes thereto, and with the Company's audited financial statements and notes
thereto for the fiscal year ended May 31, 2002.
The Company is subject to significant external factors that could have a
significant impact on its business, including changes in Medicare 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 and changes in interpretations of regulations, could cause future
results to differ materially from historical trends.
RESULTS OF OPERATIONS
QUARTER ENDED NOVEMBER 30, 2002 COMPARED TO QUARTER ENDED NOVEMBER 30, 2001.
Net revenue for the quarter ended November 30, 2002 increased $192,346 or 8% to
$2,562,210 from $2,369,864 for the quarter ended November 30, 2001. This
increase is primarily attributable to the aggressive marketing efforts of the
Company in securing new contracts and, to a lesser extent, rate increases on
certain of the Company's existing contracts.
Gross profit margin increased to 38.9% for the quarter ended November 30, 2002
from 34.0% for the quarter ended November 30, 2001. The increase in the gross
profit margin is primarily attributable to the increase in the mix of higher
profit margin contracts, and the elimination of certain lower profit margin
contracts.
Selling, general and administrative expenses ("SG&A") for the quarter ended
November 30, 2002 decreased $593,561 (39.7%) to $901,644, from $1,495,205 for
the quarter ended November 30, 2001. The decrease in SG&A is primarily
attributable to the Company's restructuring efforts, following the sale of the
New Jersey and New York operations. As a percentage of revenue, SG&A decreased
from 63.1% to 35.2% for the quarters ended November 30, 2001 and 2002,
respectively.
Loss from operations decreased $804,984 to $(4,429) for the quarter ended
November 30, 2002, from a loss of $(809,413) for the quarter ended November 30,
2001. The decrease in the operating loss is the result of the aforementioned
increases in revenue and gross margin, and decrease in SG&A and other operating
expenses.
Interest expense decreased to $33,835 for the quarter ended November 30, 2002,
from $85,503 for the quarter ended November 30, 2001. This decrease is the
result of a decrease in the borrowing rate and, to a lesser extent, lower
outstanding borrowings.
SIX MONTHS ENDED NOVEMBER 30, 2002 COMPARED TO SIX MONTHS ENDED NOVEMBER 30,
2001.
Net revenue for the six months ended November 30, 2002 decreased $5,402,501 or
52.2% to $4,951,563 from $10,354,064 for the six months ended November 30, 2001.
This decrease is primarily attributable to the sale of the New York and New
Jersey operations of the Company.
Gross profit margin increased to 39.3% for the six months ended November 30,
2002 from 33.0% for the six months ended November 30, 2001. The increase in the
gross profit margin is primarily attributable to the elimination of certain
lower profit margin contracts resulting from the sale of the New York and New
Jersey operations of the Company, and the increase in the mix of higher profit
margin contracts.
SG&A for the six months ended November 30, 2002 decreased $1,969,524 (51.3%) to
$1,873,359, from $3,842,883 for the six months ended November 30, 2001. The
decrease in SG&A is primarily attributable to the sale of the New Jersey and New
York operations, and subsequent restructuring efforts.
Loss from operations for the six months ended November 30, 2002 decreased
$761,958 to $(110,543), from $(872,501) for the six months ended November 30,
2001. The decrease is primarily attributable to the aforementioned decreases in
volume (net revenue) and SG&A expenses.
Interest expense decreased to $62,660 for the six months ended November 30,
2002, from $533,236 for the six months ended November 30, 2001. This decrease is
the result of lower outstanding borrowings commensurate with the decrease in net
revenue and, to a lesser extent, a decrease in the borrowing rate.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The nature of the Company's business requires weekly payments to its personnel
at the time they render services, while it receives payment for services
rendered over an extended period of time (60 to 120 days or longer),
particularly when the payor is an insurance company, medical institution or
governmental unit. Accounts receivable represents a substantial portion of
current and total assets at November 30, 2002 and May 31, 2002.
On August 31, 2001, the Company entered into a $2 million dollar credit facility
with Heller Healthcare Finance, Inc., which provides for the Company to borrow
up to 85% of eligible accounts receivable (as defined in the loan agreement)
that are aged less than 150 days, at the lender's prime rate plus 1%. The
facility expires on August 31, 2004.
As of November 30, 2002, the outstanding loan balance was $1,340,183.
On July 11, 2001, the Company entered into a Settlement Agreement with United
States Department of Justice and the Office of Inspector General of the
Department of Health and Human Services. In order to avoid the delay,
uncertainty, inconvenience, and the expense of protracted litigation of the
claims, both parties mutually agreed upon a settlement amount of $1,000,000
payable by Star, in quarterly installment payments (as amended), with the first
payment of $250,000 made on November 8, 2001. As of November 30, 2002, $250,000
remains payable under this Settlement Agreement.
As of November 30, 2002, cash and cash equivalents were $137,373, as compared to
$74,235 at May 31, 2002. The Company strives to maintain minimal cash balances,
in its continued efforts to keep its outstanding borrowings under its credit
facility to a minimum; however, a cash reserve was established to meet the
Company's obligation under the aforementioned Settlement Agreement. Under this
Agreement, a payment of $125,000 plus interest was made on December 5, 2002. The
Company believes it will have the available funds necessary to make the
remaining payment on its due date of April 5, 2003.
Other than the matters described above, the Company does not anticipate any
extraordinary material commitments for capital expenditures for the Company's
current fiscal year. The Company believes that its present cash position will
enable the Company to continue to support its operations for the next twelve
months.
FORWARD LOOKING STATEMENTS
Certain statements in this report on Form 10-Q constitute" forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are typically identified by their inclusion of phrases
such as "the Company anticipates", "the Company believes" and other phrases of
similar meaning. These forward-looking statements are based on the Company's
current expectations. Such forward-looking statements involve known and unknown
risks, uncertainties, and other factors that may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. The potential risks and uncertainties which could
cause actual results to differ materially from the Company's expectations
include the impact of further changes in the Medicare reimbursement system,
including any changes to the current IPS and/or the ultimate implementation of a
prospective payment system; government regulation; health care reform; pricing
pressures from third-party payors, including managed care organizations;
retroactive Medicare audit adjustments; and changes in laws and interpretations
of laws or regulations relating to the health care industry. This discussion
should be read in conjunction with: (i) the attached consolidated financial
statements and notes thereto, (ii) with the Company's audited financial
statements and notes thereto for the fiscal year ended May 31, 2002, and (iii)
with the section entitled Forward Looking Statements appearing in the Company's
Form 10-K which is hereby incorporated by reference.
ITEM 4. CONTROLS AND PROCEDURES.
a.) Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act)
as of a date (the Evaluation Date) within 90 days prior to the filing date of
this report. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that, as of the Evaluation Date, our disclosure
controls and procedures were effective in timely alerting them to the material
information relating to us (or our consolidated subsidiaries) required to be
included in our periodic SEC filings.
b.) Changes in internal controls.
There were no significant changes made in our internal controls during the
period covered by this report, or to our knowledge, in other factors that could
significantly affect these controls subsequent to the date of their evaluation.
PART II: OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
a. Exhibits:
10.1 Overline Loan and Amendment to the Loan and Security Agreement
dated December 30, 2002 by and among Heller Healthcare Finance,
Inc. ("Lender") and Star Multi Care Services, Inc., Amserv
Health Care of Ohio, Inc., Amserv Health Care of New Jersey,
Inc. and EFCC Acquisition Corp. dated as of August 31, 2001.
99.1 Chief Executive Officer Certification pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
99.2 Chief Financial Officer Certification pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
b. Reports on Form 8-K.
A Current Report on Form 8-K dated October 31, 2002 was filed
disclosing that Stephen Sternbach, Chairman of the Board, President
and Chief Executive Officer and Matthew Solof purchased all of the
outstanding Series B 7% Convertible Preferred Stock, par value $1.00
per share from the Shaar Fund Limited
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STAR MULTI CARE SERVICES, INC.
January 21, 2003 By: s/Stephen Sternbach
- ---------------- -----------------------------------------
Date Chairman of the Board, President and
Chief Executive Officer
January 21, 2003 By: s/David M. Schoenberg
- ---------------- -----------------------------------------
Date Director of Finance, Secretary and
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
PURSUANT TO REGULATION ss.240.15D-14 AS PROMULAGATED
BY THE SECURITIES AND EXCHANGE COMMISSION
In connection with the Quarterly Report of Star Multi Care Services, Inc. (the
"Company") on Form 10-Q for the period ended November 30, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Stephen Sternbach, Chairman of the Board, President and Chief Executive Officer
of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 pursuant to Regulation
ss.240.15d-14 as promulgated by the Securities and Exchange Commission, that:
(1) I have reviewed the Report being filed;
(2) Based on my knowledge, the Report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by the Report;
(3) Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of,
and for, the periods presented in the Report;
(4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (as such term
is defined in paragraph (c) of this section) for the issuer and have:
(i) Designed such disclosure controls and procedures to ensure that
material information relating to the issuer, including its consolidated
subsidiaries, is made known to them by others within those entities,
particularly during the period in which the periodic Reports are being
prepared;
(ii) Evaluated the effectiveness of the issuer's disclosure controls and
procedures as of a date within 90 days prior to the filing date of the
Report ("Evaluation Date"); and
(iii) Presented in the Report their conclusions about the effectiveness of
the disclosure controls and procedures based on their evaluation as of the
Evaluation Date;
(5) I and the other certifying officers have disclosed, based on their most
recent evaluation, to the issuer's auditors and the audit committee of the board
of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies in the design or operation of internal
controls which could adversely affect the issuer's ability to record,
process, summarize and Report financial data and have identified for the
issuer's auditors any material weaknesses in internal controls; and
(ii) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the issuer's internal controls;
and
(6) The registrant's other certifying officers and I have indicated in the
Report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of their most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
By /s/ STEPHEN STERNBACH
----------------------------------------
Stephen Sternbach
Chairman of the Board, President and
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
PURSUANT TO REGULATION ss.240.15D-14 AS PROMULAGATED
BY THE SECURITIES AND EXCHANGE COMMISSION
In connection with the Quarterly Report of Star Multi Care Services, Inc. (the
"Company") on Form 10-Q for the period ended November 30, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
David Schoenberg, Director of Finance, Secretary and Chief Financial Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 pursuant to Regulation
ss.240.15d-14 as promulgated by the Securities and Exchange Commission, that:
(1) I have reviewed the Report being filed;
(2) Based on my knowledge, the Report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by the Report;
(3) Based on my knowledge, the financial statements, and other financial
information included in the Report, fairly present in all material respects the
financial condition, results of operations and cash flows of the issuer as of,
and for, the periods presented in the Report;
(4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (as such term
is defined in paragraph (c) of this section) for the issuer and have:
(i) Designed such disclosure controls and procedures to ensure that
material information relating to the issuer, including its consolidated
subsidiaries, is made known to them by others within those entities,
particularly during the period in which the periodic Reports are being
prepared;
(ii) Evaluated the effectiveness of the issuer's disclosure controls and
procedures as of a date within 90 days prior to the filing date of the
Report ("Evaluation Date"); and
(iii) Presented in the Report their conclusions about the effectiveness of
the disclosure controls and procedures based on their evaluation as of the
Evaluation Date;
(5) I and the other certifying officers have disclosed, based on their most
recent evaluation, to the issuer's auditors and the audit committee of the board
of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies in the design or operation of internal
controls which could adversely affect the issuer's ability to record,
process, summarize and Report financial data and have identified for the
issuer's auditors any material weaknesses in internal controls; and
(ii) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the issuer's internal controls;
and
(6) The registrant's other certifying officers and I have indicated in the
Report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of their most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
By /s/ DAVID SCHOENBERG
-----------------------------------------
David Schoenberg
Director of Finance, Secretary
and Chief Financial Officer
INDEX OF EXHIBITS
10.1 Overline Loan and Amendment to the Loan and Security Agreement dated
December 30, 2002 by and among Heller Healthcare Finance, Inc. ("Lender")
and Star Multi Care Services, Inc., Amserv Health Care of Ohio, Inc.,
Amserv Health Care of New Jersey, Inc. and EFCC Acquisition Corp. dated as
of August 31, 2001.
99.1 Chief Executive Officer Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Chief Financial Officer Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.