<PAGE>
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 February 28, 1999
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.)
99 Railroad Station Plaza, Hicksville, New York 11801
(Address of principal executive offices)
Registrant's telephone number, including area code: (516) 423-6688
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 the number of shares outstanding of each of the issuer's classes of
common stock as of April 15, 1999:
Class Number of Shares
Common Stock, $0.001 par value 5,257,363
<PAGE>
STAR MULTI CARE SERVICES, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I - Financial Information
Item 1
Consolidated Balance Sheets as of February 28, 1999 and May 31, 1998 ................................ 3
Consolidated Statements of Operations for the three months and nine months
ended February 28, 1999 and 1998. ................................................................ 4
Consolidated Statements of Cash Flows
for the nine months ended February 28, 1999 and 1998 ............................................ 5
Notes to Consolidated Financial Statements .......................................................... 6-7
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................................... 8-11
Part II - Other Information
Item 4
Submission of Matters to a Vote of Security Holders.................................................. 12
Item 6
Exhibits and Reports on Form 8-K .................................................................... 12
Signature............................................................................................ 13
</TABLE>
2
<PAGE>
STAR MULTI CARE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, May 31,
1999 1998
---------------- --------------
ASSETS: Unaudited Audited
<S> <C> <C>
Current Assets:
Cash and Cash equivalents $ 1,755,111 $ 1,867,286
Accounts receivable, less allowance for doubtful accounts of
$1,604,000 and $1,872,000 at February 28,1999 and May 31,
1998, respectively 11,257,479 10,108,879
Prepaid expenses and other current assets 430,034 382,899
Income taxes receivable - 1,225,946
Deferred income taxes 2,077,568 1,537,000
---------------- --------------
Total current assets 15,520,192 15,122,010
Property and equipment, net of accumulated depreciation and
amortization of $1,654,000 and $1,304,000 at
February 28, 1999 and May 31,1998, respectively 1,918,926 1,999,924
Notes receivable from officer 76,910 86,260
Intangible assets, net of accumulated amortization 11,625,487 11,857,698
Deferred income taxes 619,000 619,000
Other assets 208,127 185,715
------------- --------------
$ 29,968,642 $ 29,870,607
============= ==============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Revolving credit line $ 6,643,793 $ 6,207,852
Accrued payroll and related expenses 2,551,062 3,214,207
Accounts payable 880,314 1,018,322
Accrued expenses 680,810 339,142
Deferred revenues 2,593,324 1,017,287
Accrued regulatory costs 1,875,000 2,450,000
Current maturities of long-term debt 31,250 125,000
---------------- --------------
Total current liabilities 15,255,553 14,371,810
---------------- --------------
Long-Term Liabilities:
Other long-term liabilities 761,388 1,065,770
---------------- --------------
Total long-term liabilities 761,388 1,065,770
---------------- --------------
Shareholder's equity:
Preferred stock, $1.00 par value per share, 5,000,000 shares
authorized Common stock, $.001 par value per share, 10,000,000
shares authorized; 5,384,016 and 5,362,780 shares issued,
respectively 5,384 5,363
Additional paid-in capital 20,990,888 20,951,899
Subscription receivable (397,782) (397,782)
Deficit (6,367,867) (5,847,531)
Treasury stock, 137,500 common shares at February 28,
1999 and May 31,1998 (278,922) (278,922)
---------------- --------------
Total Shareholder's equity 13,951,701 14,433,027
------------- --------------
$ 29,968,642 $ 29,870,607
============= ==============
</TABLE>
See accompanying notes to consolidated financial statements
Page 3
<PAGE>
STAR MULTI CARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 28,
-------------------------------- --------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues $ 11,507,974 $ 12,854,038 $ 36,829,237 $ 35,903,775
------------ ------------ ------------ ------------
Operating Costs and expenses:
Costs of revenue 7,988,970 9,502,290 25,476,743 25,133,035
Selling, general and administrative 3,177,528 4,399,280 8,948,518 9,502,131
Depreciation and amortization 287,301 247,642 811,898 671,564
Provision for doubtful accounts 157,469 962,055 542,392 1,095,790
Regulatory costs and related expenses -- 1,904,515 -- 1,930,511
Restructuring and termination expense 36,481 362,718 177,616 362,718
------------ ------------ ------------ ------------
11,647,749 17,378,500 35,957,167 38,695,749
------------ ------------ ------------ ------------
(Loss) income from operations (139,775) (4,524,462) 872,070 (2,791,974)
Interest expense, net (166,640) (131,164) (507,595) (325,356)
------------ ------------ ------------ ------------
(Loss) income before income taxes (306,415) (4,655,626) 364,475 (3,117,330)
Benefit (provision) for income taxes 202,331 1,508,307 (112,988) 877,606
------------ ------------ ------------ ------------
(Loss) income from continuing operations (104,084) (3,147,319) 251,487 (2,239,724)
Discontinued operations:
Loss from discontinued operations, net of
applicable income tax benefit (447,373) (1,038,000) (771,823) (1,038,000)
------------ ------------ ------------ ------------
Net Loss $ (551,457) $ (4,185,319) $ (520,336) $ (3,277,724)
============ ============ ============ ============
Net Income (Loss) per common share:
Basic:
(Loss) income from continuing operations (0.02) (0.59) 0.05 (0.47)
Loss from discontinued operations (0.09) (0.20) (0.15) (0.22)
------------ ------------ ------------ ------------
Net loss $ (0.11) $ (0.79) $ (0.10) $ (0.69)
============ ============ ============ ============
Diluted:
(Loss) income from continuing operations (0.02) (0.59) 0.05 (0.46)
Loss from discontinued operations (0.09) (0.20) (0.15) (0.21)
------------ ------------ ------------ ------------
Net loss $ (0.11) $ (0.79) $ (0.10) $ (0.67)
============ ============ ============ ============
Weighted average number of common shares:
Basic 5,246,516 5,296,940 5,243,482 4,756,939
============ ============ ============ ============
Diluted 5,246,516 5,296,940 5,243,482 4,891,963
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
Page 4
<PAGE>
STAR MULTI CARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended February 28,
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (520,336) $(3,277,724)
----------- -----------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Provision for doubtful accounts 542,392 1,095,790
Impairment of intangible assets - 380,000
Depreciation and amortization of property and equipment 303,791 295,341
Amortization of intangible assets 504,555 414,287
Deferred income taxes (540,568) (1,610,565)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Account receivable (1,690,992) (351,114)
Prepaid expenses and other current assets (47,135) 443,096
Income taxes receivable 1,225,946 73,738
Other assets (22,412) (3,729)
Increase (decrease) in liabilities:
Regulatory Costs and related expenses (575,000) 3,160,000
Accrued payroll and related expenses (663,145) (463,458)
Accounts payable and other accrued expenses 203,660 497,054
Deferred revenue 1,576,037 --
----------- -----------
Total adjustments 817,129 3,930,440
----------- -----------
Net Cash provided by operating activities 296,793 652,716
----------- -----------
Cash flows from investing activities:
Acquisition of a business, net of cash acquired -- (2,587,564)
Purchase of property and equipment (222,793) (885,447)
Repayment of note receivable from officer 9,350 7,488
Purchase of intangibles (272,345) --
----------- -----------
Net cash used in investing activities (485,788) (3,465,523)
----------- -----------
Cash flows from financing activities:
Proceeds from revolving credit line (Daiwa) 6,643,793 3,316,000
Repayment of revolving credit line (Chase) (6,207,852) --
Repayment of long term debt (398,132) (93,750)
Repayment of capital lease obligations -- (60,062)
Proceeds from issuance of common stock 39,011 124,580
----------- -----------
Net cash provided by financing activities 76,820 3,286,768
----------- -----------
Net (decrease) increase in cash and cash equivalents (112,175) 473,961
Cash and cash equivalents at beginning of period 1,867,286 139,400
----------- -----------
Cash and cash equivalents at end of period $ 1,755,111 $ 613,361
=========== ===========
Supplemental disclosures:
Income taxes paid 28,749 533,031
=========== ===========
Interest paid 466,758 317,570
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
Page 5
<PAGE>
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 February 28,1999, results of its
operations and cash flows for the three and nine months periods ended February
28,1999 and 1998.
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, 1998, 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 and nine months periods ended
February 28,1999 is not necessarily indicative of the results to be expected
for the full year.
Note 1 - Net Income Per Common Share
Net income 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.
Note 2: Reclassifications and use of Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make assumptions that
affect the amounts reported in the financial statements and accompanying
notes. Such amounts include, among others, the allowance for doubtful
accounts, workers compensation and medical benefit reserves for its Self
Funded Plans, other asset valuation allowances and certain liabilities.
Management periodically re-evaluates the estimates inherent in certain
financial statement amounts and may adjust accordingly.
Note 3: Contingencies
On July 16, 1998, Star was advised that an audit of American Health
Services, Star's Medicare agency, was being commenced by the Office of Audit
Services, Office of Inspector General of the United States Department of
Health and Human Services. This audit was being conducted in conjunction with
the United States Attorney's Office for the Southern District of Florida and
involved a review of claims for home health services submitted by American
Health Care Services during 1995 and 1996. A similar audit commenced during
May of 1997 for its submitted claims during 1993. Star has been advised by its
regulatory counsel that they have been in contact with the Office of Inspector
General and the Assistant United States Attorney assigned to this matter, and
there is no way to determine at this time the extent of Star's liability.
Regulatory counsel has advised Star that it may litigate or appeal any
determination of liability and pursue claims against third parties (e.g.,
subcontractors and licensed home health agencies) for a portion of any
liability of Star. Management anticipates that this matter should be
satisfactorily resolved. This is grounded upon the advice of regulatory
counsel to the Company as to the (1) the resolution of similar types of audits
or claims based upon their experience in the health care industry, handling
appeals of these determinations and dealing with
6
<PAGE>
similar matters before the Office of Inspector General and the Department of
Justice, even though there has not been a final determination of liability,
and there can be no assurance as to the ultimate liability; and (2) the fact
that Star will have the right, whether or not this audit or claim is resolved
in whole or in part in Star's favor, to appeal or litigate any liability,
determination and pursue a claim against third-party independent contractors
and other parties that may have rendered services to Star, even though there
is no assurance that any such claims would ultimately be collectible.
Management anticipates that the matters will be satisfactorily resolved.
Note 4: Credit Facility
On November 9, 1998 the Company replaced its existing $8 million
revolving credit agreement with a new $10 million revolving credit facility
with Daiwa Securities America, Inc. This credit facility permits the Company
to borrow up to 80% of eligible accounts receivables that are aged less than
180 days at LIBOR +3, (approximately 7.93% at April 18, 1999) and the
remaining eligible receivables at LIBOR +6. The facility requires the Company
to meet certain financial ratios and covenants, including current ratio,
minimum tangible net worth, debt service coverage and interest coverage. All
loans under the credit facility are collateralized by all assets of the
Company. As of April 16, 1999, the outstanding loan balance is $6,630,000. The
credit facility matures on November 9, 2000. The Company is not in violation
of any of the covenants of the facility as of February 28, 1999.
Note 5: Stock Option Plan
On December 9, 1998, the Shareholders of the Company approved an
amendment to the Company's 1992 Stock Option Plan that increased the total
number of shares authorized to be issued therein by 300,000 shares. Stock
option grants were approved for certain executives and employees for 83,500
shares exercisable at price ranges of $1.25 to $1.375 per share and vesting
between immediate to over five years. Certain stock options under the 1992
Stock Option Plan expired and were canceled that were previously exercisable
for 221,583 shares.
On March 3, 1999, subsequent to the quarter ended February 28, 1999,
10,847 shares of Star Multi Care Services, Inc. common stock were issued to
participants in the 1998 Employee Stock Purchase Plan at a price of $1.22 per
share.
Note 6: Discontinued Operations
On February 26, 1999, the Company formally adopted a plan to abandon
its Medicare business being provided by one of its subsidiaries, Star Multi
Care Services of Florida, Inc. d/b/a American Healthcare Services. The
consolidated statements of operations for the three and nine month periods
ended February 28, 1999 and 1998, respectively, excludes revenue and expense
for its Medicare business on captions applicable to continuing operations.
Revenue for the discontinued operations were $1,241,000 and $7,430,000 for the
nine months ended February 28, 1999 and 1998, respectively.
7
<PAGE>
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, 1998.
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 which could
significantly impact its business, including changes in Medicare
reimbursement, government fraud and abuse initiatives and other such factors
which 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.
In recent years, an increasing number of legislative proposals have
been introduced or proposed to Congress and in some state legislatures that
would significantly affect the health care systems in the Company's markets.
The cost of certain proposals would be funded in significant part by
reductions in payments by government programs, including Medicare and
Medicaid, to health care providers. While the Company is unable to predict
which, if any, proposals for health care reform will be adopted, there can be
no assurance that proposals adverse to the business of the Company will not be
adopted.
On February 26, 1999, the Company formally adopted a plan to abandon
its Medicare business being provided by one of its subsidiaries, Star Multi
Care Services of Florida, Inc. d/b/a American Healthcare Services.
Year 2000 Compliance
Many currently installed computer systems and software products are
coded to accept only two digit entries to represent years. For example, the
"1999" would be represented by "99". These systems and products will need to
be able to accept four digit entries to distinguish years beginning with 2000
from prior years. As a result, systems and products that do not accept four
digit year entries will need to be upgraded or replaced to comply with such
"Year 2000" requirements. The Company believes that its internal systems are
Year 2000 compliant or will be upgraded or replaced in connection with
previously planned changes to information systems prior to the need to comply
with Year 2000 requirements without material cost or expense. The anticipated
costs of any Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to the
availability or cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and similar uncertainties. In
addition, there can be no assurance that Year 2000 compliance problems will
not be revealed in the future which could have a material adverse affect on
the Company's
8
<PAGE>
business, financial condition and results of operations. Many of the Company's
customers and suppliers may be affected by the Year 2000 issues that may
require them to expend significant resources to modify or replace their
existing systems. This may result in those customers having reduced funds to
purchase the Company's products or in those suppliers experiencing
difficulties in producing or shipping key components to the Company on a
timely basis at all.
Results of Operations.
Quarter ended February 28, 1999 compared to quarter ended February
28, 1998.
Net revenues for the quarter ended February 28, 1999 decreased
$1,346,000 or 10.5% to $11,508,000 from $12,854,000 for the quarter ended
February 28, 1998. The decrease in net revenue for the quarter ended February
28, 1999 from the quarter ended February 28, 1998 is primarily attributable to
a reduction in net revenues from its same store sales primarily in the New
York and Florida offices.
Gross profit margin increased to 30.6% for the quarter ended February
28, 1999 from 26.1% for the quarter ended February 28, 1998. The increase in
the gross profit margin is primarily attributable to lower costs in payroll
and payroll related benefits.
Selling, general and administrative costs decreased $1,222,000
(27.8%) to $3,178,000 for the quarter ended February 28, 1999, down from
$4,399,000 for the quarter ended February 28, 1998. Selling, general and
administrative costs decreased as a percentage of revenue from 34.2% for the
same quarter last year to 27.6% for the quarter ended February 28, 1999. The
decrease in selling, general, and administrative expenses is primarily
attributable to the results of the Company's divestiture efforts undertaken
during the quarter and the restructuring efforts during the past year. During
this period the Company consolidated branches and eliminated various positions
resulting from the integration of the Company's new computer technology.
Provision for Doubtful Accounts decreased $805,000 from $962,000 for
the quarter ended February 28, 1998 to $157,000 for the quarter ended February
28, 1999 and as a percentage of net revenues for the quarter ended February
28, 1999 was 1.4% compared to 7.5% for the quarter ended February 28, 1998.
The three month period in 1998 reflects an increase in the bad debt provision
rate for accounts receivable necessitated by billing and collection
difficulties that continued into 1998. (see Liquidity and Capital Resources).
Loss from continuing operations decreased to $104,000 for the quarter
ended February 28, 1999 from a loss of $3,147,000 for the quarter ended
February 28, 1998, a loss decrease of $3,043,000 or 96.7%. The decrease in
loss from continuing operations for the quarter ended February 28, 1999 from
the quarter ended February 28, 1998 is attributable to reductions in
restructuring and termination expenses of $326,000, an increase in the gross
profit margin of 4.5%, reductions in the provision for doubtful accounts of
$805,000, a decrease in regulatory costs of $1,905,000, and a reduction of
selling, general and administrative expenses of $1,222,000.
Nine Months ended February 28, 1999 compared to Nine Months ended February 28,
1998.
Net revenue from continuing operations for the nine months ended
February 28, 1999 increased $925,000 or 2.6% to $36,829,000 from $35,904,000
for the nine months ended February 28, 1998. The increase in net revenue for
the nine months ended February 28, 1999 from the nine months ended February
9
<PAGE>
28, 1998 is primarily attributable increased revenues from same store sales
from the Amserv Health Care offices located in New Jersey and Ohio.
Gross profit margin increased slightly to 30.8% for the nine months
ended February 28, 1999 from 30% for the nine months ended February 28, 1998.
The increase in the gross profit margin is primarily attributable to payroll
and payroll benefits.
Selling, general and administrative costs decreased $554,000 (5.8%)
to $8,949,000 for the nine months ended February 28, 1999, down from
$9,502,000for the nine months ended February 28, 1998. Selling, general and
administrative costs decreased as a percentage of revenue from 26.5% for the
same period last year to 24.3% for the nine months ended February 28, 1999 .
The decrease in selling, general, and administrative expenses is primarily
attributable to the results of the Company's restructuring efforts undertaken
during the year. During this period the Company consolidated branches and
eliminated various positions resulting from the integration of the Company's
new computer technology.
Provision for Doubtful Accounts decreased $553,000 from $1,096,000
for the nine months ended February 28, 1998 to $542,000 for the nine months
ended February 28, 1999 and as a percentage of net revenues for the nine
months ended February 28, 1999 was 1.5% compared to 3% for the nine months
ended February 28, 1998. The nine month period in 1998 reflects an increase in
the bad debt provision rate for accounts receivable necessitated by billing
and collection difficulties that continued into 1998. (see Liquidity and
Capital Resources).
Income from continuing operations increased to $251,000 for the nine
months ended February 28, 1999 from a loss of $2,240,000 for the nine months
ended February 28, 1998 , an increase of $2,491,000 or 111%. The increase in
income from continuing operations for the nine months ended February 28, 1999
from the nine months ended February 28, 1998 is attributable to reductions in
restructuring and termination expenses of $185,000, regulatory costs of
$1,931,000, selling, general and administrative expenses as a percentage of
revenue by 2.5% ,and a reduction in the provision for doubtful accounts for
$553,000, partially offset by a reduction in the gross profit margin of 2.2%
and an increase in depreciation and amortization expenses of $140,000.
Financial Condition, Liquidity and Capital Resources
As of February 28, 1999 cash and cash equivalents were $1,755,000 as
compared with $1,867,000 at May 31, 1998. The net decrease of $112,000
resulted primarily from the following events: overpayment by Medicare of
approximately $2,593,000 partially offset by payments to Medicare of
approximately $1,135,000 from prior overpayments that resulted from changes
associated with the reimbursement structure of Medicare reflected by both
changes in IPS and regional cost limits; $7,076,000 of proceeds from a new $10
million revolving credit facility partially offset by payments to the prior
credit facility of $6,208,000 and loan costs of $204,000; termination and
related expenses of $176,000, income tax refunds received of $976,000; and
funding the costs associated with an additional $1,690,000 of receivables.
Additionally, repayments of long-term obligations of $398,000 and accrued
payroll and related expenses of $663,000 occurred in the nine-month period
ended February 28, 1999.
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 180 days or longer),
particularly when the payor is an insurance company, medical institution or
governmental unit.
10
<PAGE>
Accounts receivable represents a substantial portion of current and total
assets at February 28, 1999 and 1998.
The Company currently has available a line of credit with a bank
which allows for borrowings of up to $10,000,000 (the ACredit Facility@).
Pursuant to the Credit Facility, the amount the Company may borrow is limited
up to 80 percent of eligible accounts receivables that are aged less than 180
days at LIBOR +3 and the remaining eligible receivables at LIBOR +6. The
Credit Facility provides for the lender to receive a security interest in all
of the assets of the Company and its subsidiaries. As of April 16, 1999, the
outstanding loan balance is $6,630,000. The credit facility matures on
November 9, 2000. The Company is not in violation of any of the covenants of
the facility as of February 28, 1999.
The Company intends to meet its long-term liquidity needs through
available cash, cash flow and the new credit facility. To the extent that such
sources are inadequate, the Company will be required to seek additional
financing. In such event, there can be no assurance that additional financing
will be available to the Company on satisfactory terms.
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.
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 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, 1998.
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) On December 9, 1998, at 4:00 PM, the Company held its
Annual Meeting of Shareholders at the Huntington Hilton Hotel.
(b) All of the members of the Board of Directors stood for
reelection.
(c) The following items were voted upon at that Annual
Shareholders Meeting:
11
<PAGE>
(1) The election of a board of eight directors
to serve until the next annual meeting of
shareholders and until their respective
successors are elected and qualified;
Vote
For Withheld
Stephen Sternbach 4,206,627 274,106
Gregory Turchan 4,206,513 274,220
Charles Berdan 4,204,898 275,835
John P. Innes II 4,205,419 275,314
Matthew Solof 4,205,423 275,310
Melvin L. Katten 4,212,969 267,764
Gary L. Weinberger 4,206,705 274,028
Ivan Kaufman 4,207,080 273,653
(2) The ratification and approval of the
appointment of Holtz Rubenstein & Co., LLP
as the Company's independent certified
public accountants for the fiscal year
ending May 31, 1999;
Vote
For Against Abstain
4,033,902 394,054 52,777
(3) To approve an amendment to the Company's
1992 Stock Option Plan that would increase
the total number of shares authorized to
be issued therein by 300,000 shares.
Vote
For Against Abstain Not Voted
2,486,493 602,616 18,101 1,373,523
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits:
27. Financial Data Schedule
b Reports on From 8-K.
None
12
<PAGE>
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.
April 19, 1999 By: /s/ Eric B. Sargent
Date -----------------------------------------
Eric B. Sargent
Controller and Treasurer
(Principal Financial Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements and is Qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 1,755,111
<SECURITIES> 0
<RECEIVABLES> 12,861,479
<ALLOWANCES> 1,604,000
<INVENTORY> 0
<CURRENT-ASSETS> 15,520,192
<PP&E> 3,572,926
<DEPRECIATION> 1,654,000
<TOTAL-ASSETS> 29,968,642
<CURRENT-LIABILITIES> 15,525,553
<BONDS> 0
5,384
0
<COMMON> 0
<OTHER-SE> 13,946,317
<TOTAL-LIABILITY-AND-EQUITY> 29,968,642
<SALES> 36,829,237
<TOTAL-REVENUES> 36,829,237
<CGS> 25,476,743
<TOTAL-COSTS> 25,476,743
<OTHER-EXPENSES> 10,480,424
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 507,595
<INCOME-PRETAX> 364,475
<INCOME-TAX> 112,988
<INCOME-CONTINUING> 251,487
<DISCONTINUED> (771,823)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (520,336)
<EPS-PRIMARY> 0.05
<EPS-DILUTED> (0.15)
</TABLE>
