<PAGE>
As filed with the Securities and Exchange Commission on March 10, 2000
Registration No. 333-79847
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
STAR MULTI CARE SERVICES, INC.
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(Exact name of registrant as specified in its charter)
New York 11-1975534
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
33 Walt Whitman Road, Suite 302
Huntington Station, NY 11746
(516) 423-6689
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(Address, including zip code, and telephone number,
Including area code, of registrant's principal executive offices)
Stephen Sternbach
Star Multi Care Services, Inc.
33 Walt Whitman Road
Suite 302
Huntington Station, NY 11746
(516) 423-6689
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(Name, address, including zip code, and telephone number,
Including area code, of agent for service)
Copy to:
Lawrence A. Muenz, Esq.
Muenz & Meritz, P.C.
Three Hughes Place
Dix Hills, NY 11746
(212) 704-6000
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities on this Form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
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<PAGE>
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class Amount to be Offering Aggregate Registration
of Securities to be Registered Registered Price Offering Fee
per Share Price
<S> <C> <C> <C> <C>
Common Stock, $.001 par value
per share ................... 398,268 (2) $2.0625 (6) $821,428.00 $228.00 (8)
Common Stock, $.001 par value
per share ................... 16,667 (3) $ 5.175 (6) $86,250.00 $24.00 (8)
Common Stock, $.001 par value
per share ................... 5,487 (4) $2.0625 (6) $11,317 $3.00 (8)
Common Stock, $.001 par value
per share ................... 9,200 (5) $ 6.50 (6) $59,800 $15.00 (8)
Total Registration Fee ...... $270.00
</TABLE>
(1) Represents the shares of common stock being registered for resale by the
selling stockholders.
(2) Includes 398,268 shares of common stock issuable upon conversion of 575
shares of series A 8% preferred stock. The number of shares of common stock
indicated to be issuable in connection with such transaction and offered
for resale hereby was included in our initial filing of this registration
statement on June 2, 1999 and at that time was an estimate and was, based
on a registration rights agreement among us and one of the selling
stockholders, the number of shares that would be issuable upon conversion
of 398,268 shares of series A 8% preferred stock at a price of $2.0625 per
share. This presentation was not intended to constitute a prediction as to
the future market price of the common stock or as to the number of shares
of common stock into which the series A preferred stock would be converted.
(3) Pursuant to a registration rights agreement among us and the selling
stockholders, the number of shares represents the number of shares which
would be issuable upon exercise of warrants to purchase 16,667 shares of
common stock at 115% of the closing bid price on April 30, 1999 ($3.750),
after giving effect to a one-for three reverse stock split. This
presentation is not intended to constitute a prediction as to the future
market price of the common stock or as to the number of shares of common
stock issuable upon exercise of the warrants. See "Risk Factors --
Dilution"; and "Description of Securities."
(4) Common stock shares issued in lieu of the quarterly cash dividend payable
to the holder of the 575 shares of Series A 8% Convertible Preferred Stock
for the quarters ended June 30, 1999 and September 30, 1999.
(5) Common stock shares issued in lieu of the quarterly cash dividend payable
to the holder of the 575 shares of Series A 8% Convertible Preferred Stock
for the quarter ended December 31, 1999.
(6) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (g) of the Securities Act of 1933, as amended
(the "Securities Act");
(7) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g) of the Securities Act, based on the higher of (a)
the exercise price of the warrants or (b) the offering price of securities
of the same class included in this registration statement.
(8) Paid with the original filing of the registration statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE>
The information in this prospectus is not complete. We may not sell these
securities until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer to sell nor is
it seeking an offer to buy these securities in any state where the offer or sale
is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 2, 2000
PROSPECTUS
STAR MULTI CARE SERVICES, INC.
429,622 shares of common stock
The stockholders of Star Multi Care Services, Inc. listed on page 9 of this
prospectus are offering for sale 429,622 shares of common stock of Star Multi
Care under this prospectus.
The selling stockholders may offer their shares through public or private
transactions, at prevailing market prices, or at privately negotiated prices.
See "Plan of Distribution."
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NASDAQ SmallCap Market Symbol: "SMCS"
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On March 9, 2000, the closing price of one share of our common stock on the
NASDAQ SmallCap Market was $6.50.
This investment involves a high degree of risk. You should carefully consider
the factors described under the caption "risk factors" beginning on page 2 of
this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is 2000
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<PAGE>
RISK FACTORS
Before you buy shares of our common stock, you should be aware that there
are various risks associated with that purchase, including those described
below. You should consider carefully these risk factors, together with all of
the other information in this prospectus and the documents we have incorporated
by reference in the section "Where You Can Find More Information About Us,"
before you decide to purchase shares of our common stock.
----------------------------------------------------
Risks Associated with the Industry in Which We
Operate
----------------------------------------------------
A decline in the value of our receivables will reduce the amount we can borrow
under a secured loan to finance operations, resulting in a potential cash flow
shortage.
We are dependent upon a lending arrangement with Daiwa Securities to
finance our operations because many of our third party payers do not pay our
receivables in a timely manner. We use a loan from Daiwa, secured by all of our
assets, to finance our operating expenses while we await payment of our
receivables. The amount of the loan is based upon a percentage of eligible
receivables. If the value of the eligible receivables declines, we may not be
able to borrow enough money under the terms of the loan to cover our operating
expenses.
If we violate the covenants of our lending arrangement with Daiwa, Daiwa may opt
to foreclose on our assets.
If we violate the covenants of our lending arrangement with Daiwa, Daiwa
may not grant us a waiver. If we are not granted a waiver and we are unable to
correct the violation, Daiwa may foreclose on our assets. If Daiwa forecloses on
our assets, the company will be unable to service its clients, fulfill its
contracts, or successfully compete against its competitors and shareholder would
experience a sharp decline in the value of their shares.
We may have to lower prices or spend more money to effectively compete against
companies with greater resources than us which could result in lower revenues
and/or profits.
Our success in the marketplace depends on many factors, including quality
of care and price structure. Given these factors we cannot assure you that we
will be able to compete successfully with larger competitors with greater
resources. For example, if our competitors offer lower prices, we could be
forced to lower prices which would result in reduced margins and a decrease in
revenues. If we do not lower prices we could lose sales and market share. In
either case, if we are unable to compete against our main competitors we would
not be able to generate sufficient revenues to grow the company.
In addition, we may have to spend more money to effectively compete for
market share, including funds to expand our infrastructure, which is a capital
and time extensive process. Further, if other companies want to aggressively
compete against us, we may have to spend more money on advertising, promotion,
trade shows, marketing and overhead expenses, hiring and retaining personnel.
These higher expenses would hurt our net income and profits.
If our customers implement alternative payment structures, we may experience
a decline in revenue.
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We are reimbursed for our services primarily by the Medicaid programs,
insurance companies, managed care companies and other third-party payers, such
as managed care companies. Generally, managed care companies have sought to
contain costs by reducing payments to providers. Continued cost reduction
efforts by managed care companies could adversely affect our results of
operations and future profitability. The implementation of alternative payment
methodologies by any of these payers could have an adverse impact on revenues
and profit margins.
The Company has four types of customers, which form the base of its
referral source. The customer base includes state funded public assistance
programs (Medicaid), other third party payers (subcontracts), insurance
companies and private pay customers. Reductions or loss of customers that would
result in lost revenue could occur through:
o The loss of contract and/or subcontract relationships.
o Loss of approval or lack of renewal by state and/or county
administrative agencies.
o Loss of or reduction in referral sources for new cases.
o New regulatory compliance parameters that we cannot meet.
We may acquire companies in the future and these acquisitions could result in
the dilution of our shareholders and a disruption of our business.
We may attempt to grow Star in the future through a merger, acquisition,
joint venture or other structure. We may not be able to identify, acquire,
profitably manage or successfully integrate any acquired business without
substantial expense, delay, or other operational or financial problems. Entering
into an acquisition involves many risks, any of which could materially harm our
business, including:
o diversion of management's attention from other business concerns;
o failure to assimilate the acquired company with our pre-existing business;
o potential loss of key employees from either our pre-existing business or
the acquired business;
o dilution of our existing shareholders as a result of issuing common stock
or other securities; and
o assumption of liabilities of the acquired company.
We have no current agreements and are not involved in any negotiations
with respect to any acquisitions.
If we are unable to expand our business, we may not be able to successfully
compete against our competitors.
Our industry is characterized by increased consolidation of companies. If
we are unable to expand our business, we may not be able to compete successfully
against our larger competitors. Expansion of our operations will depend on the
following:
o obtaining new contracts and referrals;
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o servicing additional patients;
o retaining skilled management and personnel;
o successfully managing growth; and,
o the availability of adequate financing.
There can be no assurance that Star will be able to successfully expand
its business.
If the states in which we operate impose more restrictive regulatory
requirements, or we fail to comply with state licensing standards for
participation in the Medicare and Medicaid programs, our ability to generate
revenues could be adversely affected.
The imposition of more restrictive regulatory requirements or the denial
or revocation of any license, certification, Medicaid or Medicare approval, or
permit necessary for operation in a particular market could have a material
adverse effect on our operations. Our business is subject to substantial and
frequently changing regulations by federal, state, and local authorities, which
require significant compliance responsibilities by Star. Each state in which we
operate maintains its own form of licensing standards and may maintain
Certificate of Need ("CON") or other Medicare requirements specific to the state
which are above the minimum standard requirements established by the federal
government for participation in the Medicaid and Medicare programs.. In
addition, any future expansion into new markets would require us to comply with
all licensing, and/or CON requirements and other regulations pertinent to that
jurisdiction. If we are denied participation in the Medicare and Medicaid
programs, we will lose a significant source of revenues.
Star maintains all applicable licenses for provision of home care and
facility staffing services in the states of New York, New Jersey, Pennsylvania,
Ohio, and Florida. In addition, we maintain Medicare Certification in certain
offices and counties in the states of Ohio, Pennsylvania, and Florida, with
Florida maintaining CON requirements. As a provider of services under the
Medicare as well as some state Medicaid programs we are required by the U.S.
Health Care Financing Administration and/or state health departments to prepare
cost reports reflecting annual expenditures and development of capital
expenditure plans. The regulatory agencies of the states in which Star operates
require compliance with certain regulations and standards with respect to health
care personnel records, client records, nursing and administrative supervision,
incident and complaint monitoring and follow-up, and the establishment of
professional advisory boards. Additionally, both federal and state Anti-kickback
regulations exist which must be complied with.
Audits by Federal and State regulatory agencies may result in retroactive
adjustments to payments received from Medicare and Medicaid, and may have a
material effect on our profitability.
Due to our participation in the Medicare and Medicaid programs we
are subject to survey and audit of operational, clinical and financial records
with respect to proper applications of general regulations governing operation,
cost reporting criteria, and other payment formulas. These audits can result in
retroactive adjustments for payments received from these programs resulting in
either amounts due to governmental agencies from Star or amounts due to Star as
adjustments from the governmental agency. Any assessments made against Star for
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retroactive adjustment for previous payments received, could require us to
establish a reserve for this potential liability, adversely affecting
profitability in the period in which the reserve is made.
Effective in January 1998, Star was required to comply with a new payment
formula or reimbursement under the Medicare program. This payment formula,
termed the Interim Payment System ("IPS"), for Medicare was developed by the
U.S. Health Care Financing Administration (HCFA) to serve as a middle step, as
the government moved from a cost based reimbursement system to a episodic
disease based Prospective Payment System (PPS). In addition, to the imposition
of IPS, which set per patient limits on Medicare home care reimbursements, HCFA
also revised regional cost limits which combined with IPS had a material effect
in reducing revenue and reimbursement for Star's Florida based certified home
health agency from approximately $8.4 million in revenue during the fiscal year
ended May 31, 1998, to approximately $5.4 million in corresponding reimbursement
and revenue for fiscal year ended May 31, 1999. The Company has restructured its
Florida Medicare operation to function under both the IPS and the revised cost
limits. However, congressional debate over the appropriateness and fairness of
retroactive establishment and imposition of regulations associated with IPS and
the changes in the cost limits could bring further modification and or
adjustments that may have a material adverse effect on Star's operations.
In February 1998, Star was advised by its Regulatory Counsel that
jurisdiction with respect to a previously disclosed audit (the "1997 Audit") of
Star Multi Care Services of Florida, Inc. d/b/a American Health Care Services,
Star's Medicare agency, by the Office of Audit Services of the Office of
Inspector General of the United States Department of Health and Human Services,
which had previously been forwarded to the Civil Division of the United States
Attorney for the Southern District of Florida (the "US Attorney") by the
Medicare intermediary assigned to administer Medicare payments in Florida, has
been relinquished by the US Attorney to the Medicare intermediary for recovery
of an administrative overpayment.
Star was informed that the Medicare intermediary had assessed an administrative
overpayment against Star in the amount of $1,248,747 based on the 1997 Audit. We
have appealed the administrative overpayment determination by pursuing
administrative and judicial remedies. Such appeal could result in elimination or
reduction of the overpayment amount. Star's Regulatory Counsel has also advised
that Star has claims against third-parties (e.g., subcontractors and licensed
home health agencies) for a portion of any liability of Star in connection with
such administrative overpayment. Star had established a reserve, in the period
ended February 28, 1998, for $1.25 million, in connection with the
administrative overpayment. In preparation of its administrative appeal, Star's
Regulatory Counsel has retained an expert to review the government's statistical
methods used in assessing the overpayment against Star. The expert has advised
Star's Regulatory Counsel that the statistical sampling procedures used by the
government indicate significant errors and based upon these findings and in
consultation with Regulatory Counsel, the management of Star has reversed the
reserve of $1.25 million as of May 31, 1999. On February 29, 2000, Star
announced that based upon the Company's appeal, the Administrative Law Judge has
overturned the Medicare intermediary's assessment of an overpayment of
$1,248,747 to Star's Medicare agency, and that it is not liable for any portion
of this assessment. The reversal of this overpayment assessment was for the
fiscal 1993 period. The Departmental Appeals Board can decide to review the
Administrative Law Judges's decision on its own motion within sixty days of
February 23, 2000. Regulatory counsel has advised the Company, however, that
this would be highly unlikely. Although the Company had previously fully
reserved for this overpayment liability, in consultation with Regulatory
Counsel, the management of the Company had reversed the reserve of $1.25 million
as of May 31, 1999.
On July 16, 1998, Star was advised that an audit of Star Multi Care
Services of Florida, Inc. (d/b/a American Health Care Services) ("American"),
Star's Medicare agency, was commenced by the Office of Audit Services, Office of
Inspector General of the United States Department of Health and Human Services.
This audit was
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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 Broad and Cassel ("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 American's liability. Regulatory Counsel has advised
American 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 American. Management
anticipates that this matter should be satisfactorily resolved. This is grounded
upon the advice of Regulatory Counsel to Star 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 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 American
will have the right, whether or not this audit or claim is resolved in whole or
in part in American'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 American, even though there is no assurance
that any such claims would ultimately be collectible.
In August 1995, the Office of Deputy Attorney General for Medicaid Fraud
Control initiated a personnel, clinical and billing investigation for the years
1992 through 1995. On December 3, 1997, Star was advised by its counsel that the
investigation, which was previously reported as pending, may be expanded through
1997 and that Star was a target of a criminal investigation. In response to
this, Star conducted its own internal investigation and revised its systems and
has voluntarily disclosed the results of its internal investigation to the
Office of Deputy Attorney General for Medicaid Fraud Control. Star had
established a reserve of $1,000,000 in connection with this matter. The amount
accrued had been based upon information learned to date.
Star discovered errors in certain cost reports that we had previously
submitted to the New York State Department of Social Services during the years
1993-1995, the basis of which served to determine the Medicaid reimbursement
rates in respect of Star for the years 1994-1996. Amended cost reports
containing the correct data were submitted to the New York State Department of
Health (the "DOH") in February 1998, which were expected to result in the DOH's
retroactive recalculation of Star's Medicaid reimbursement rate and imposition
of a substantial overpayment assessment against Star. Star established a
reserve, in the period ended February 28, 1998, for $660,000, in connection with
this overpayment assessment.
On May 10, 1999 Star entered into a Settlement Agreement with the State of
New York whereby the State of New York will discharge and forever release Star,
including its officers, directors and employees, for any further liability
regarding Star's submission of claims for or receipt of Medicaid payments for
home health care services for the audited period of 1992 through 1996, as
discussed above. Star had previously accrued $1.66 million for this claim, but
subsequently settled this claim for $532,823 less than the initial accrual. The
Attorney General stated in his press release that Star has fully cooperated with
the State's investigation and immediately remedied the problems the Attorney
General's office pointed out by improving its personnel training procedures and
submitting revised cost reports.
The terms of this Settlement Agreement provided for:
(a) No admission by Star of any criminal or civil liability, guilt, wrongdoing
or unacceptable practice, nor a determination of guilt of any violation of any
Federal, State or Local statute, rule or regulation.
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(b) Star agreed to pay to New York State the total sum of $1,167,177, with an
initial payment of $200,000. The balance shall be payable over four years at 9%
interest.
As part of Star's restructuring program, Star relocated the offices of its
Medicare agency and Star's Florida operation center to smaller and less costly
facilities in Miramar, Florida from Miami Lakes, Florida. Unfortunately, Star
was unable to find sub-tenants for the vacated office space in Miami Lakes.
Therefore, the landlord of the Miami Lakes offices obtained a judgment against
Star's wholly owned subsidiary, Star Multi Care Services of Florida, Inc. for
the sum of $1,045, 342. Additionally, the landlord instituted a law suit against
Star Multi Care Services, Inc. seeking to enforce a guaranty that the landlord
alleged that Star had previously provided to the landlord at the initial term of
the Miami Lakes lease. Star and Star of Florida have entered into a settlement
agreement with the landlord for the sum of $300,000 which was paid in full as of
May 31, 1999.
If our liability insurance is insufficient to cover liabilities resulting from
claims arising from the conduct of our personnel, claims for negligence or
wrongful acts could have a materially adverse effect on our financial condition.
Star's employees and independent contractors routinely make decisions
which can have significant medical consequences to the patients in their care.
As a result, we are exposed to substantial liability in the event of negligence
or wrongful acts of our personnel. The Company maintains medical professional
liability insurance providing for coverage in a maximum amount of $1,000,000 per
claim, subject to a limitation of $10,000,000 for all claims in any single year.
In addition, Star requires that each independent contractor it refers to
institutions for employment supply a certificate of insurance evidencing that
such person maintains medical professional liability insurance providing for
coverage of no less than $1,000,000 per claim. There can be no assurance,
however, that we will be able to maintain our existing insurance at an
acceptable cost or obtain additional insurance in the future, as required. There
can be no assurance that Star's insurance will be sufficient to cover
liabilities resulting from claims that may be brought in the future. A partially
or completely uninsured claim, if successfully asserted and of significant
magnitude, could have a material adverse effect on Star and its financial
condition.
If we are unable to successfully complete an overhaul of our internal operations
to comply with new regulatory and reimbursement rules, we may experience a
decline in sales revenue.
We are restructuring our internal operations in the area of
information technology and personnel to comply with a variety of regulatory and
reimbursement changes as well as internal and governmental audit findings. There
can be no guarantee that the restructuring will be successful and that it will
be implemented without losing key personnel and sales revenue.
All field offices were placed on the same operating software for client
intake, scheduling, personnel and clinical database management, billing and
compliance. We chose an industry tested and respected product for front office
operations that is compatible with future regulatory and accreditation
requirements. This front office software product will transmit data to our
Resource Center into one new accounting system, which collects all financial,
accounting and general ledger data. If this computer system does not work as
expected, this could have a material adverse impact upon Star's billing, case
management and revenue which would result in a decline in our profitability.
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If we are unable to operate efficiently with a reduced workforce, we may
experience a material decline in results from operations.
Star has modified or replaced its accounting, operational and clinical
management teams to include known industry professionals with a variety of
health care skills and expertise. This includes the Resource Center which is
responsible for payroll, billing and collection activities for the organization
which was restructured in its entirety by reducing staff by more than 40% as the
result of automation and job description efficiencies, while simultaneously
initiating new operational policies and procedures designed to insure accuracy
and integrity in work processes. Failure to fully and/or properly integrate
these personnel changes could have a material adverse impact upon Star's
billing, case management and revenue.
If we are unable to attract or retain quality healthcare professionals, we will
be unable to meet our customer needs.
Our professional nurses and other health care personnel are also key
to the continued provision of quality care to our patients. The possible
inability to attract and retain qualified franchisees, skilled management and
sufficient numbers of credentialed health care professionals and
para-professionals could adversely affect our operations and quality of service.
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Risks Associated with
Our Internal Operations and Policies
----------------------------------------------------------
Since we do not intend to declare dividends in the foreseeable future, the
return on your investment will depend upon appreciation of the market price of
your shares.
We have never paid any dividends on our common stock. Our board of
directors does not intend to declare any dividends in the foreseeable future,
but intends to retain all earnings, if any, for use in our business operations.
As a result, the return on your investment in Star Multi Care will depend upon
any appreciation in the market price of the common stock. The holders of common
stock are entitled to receive dividends when, as and if declared by the board of
directors out of funds legally available for dividend payments. The payment of
dividends, if any, in the future is within the discretion of our board of
directors and will depend upon our earnings, capital requirements and financial
condition, and other relevant factors.
Our computer systems and those of our customers and suppliers may not recognize
the year 2000 which may affect our computer systems and disrupt our business.
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities.
We have believe that our internal computer systems are year 2000 compliant
and will properly utilize dates beyond December 31, 1999. As such, we are
compliant with the year 2000 issue. There can be no assurance,
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however, that year 2000 copliance problems will not be revealed in the future
which could have a material adverse effect ou our business.
We have contacted all of our significant suppliers and large customers to
determine the possible effect on our operations of their inability or failure to
remediate their own year 2000 issue. However, we cannot guarantee that the
systems of other companies on which our systems rely will be timely converted,
or that a failure to convert by another company, or a conversion that is
incompatible with our systems, would not have material adverse effect on our
operations. If our customers are affected by year 2000 issues, they may be
required to expend significant resources to modify or replace their existing
systems. This could result in customers having reduced funds to purchase Star's
products, and suppliers experiencing difficulties in producing or shipping key
components to Star on a timely basis or at all.
We noted no significant product or system failures or miscalculations
related to the year 2000 issue on or around January 1, 2000.
Our estimates of the cost of our year 2000 project are based on our best
estimates, which we derived utilizing numerous assumptions of future events
including the continued availability of certain resources, third party
modification plans and other factors. The costs and completion date of our year
2000 project could differ materially from our estimates due to the lack of
availability and cost of personnel trained in this area, our ability to locate
and correct all relevant computer codes, and similar uncertainties.
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Risks Which May Dilute the Value of Your Star Multi Care
Shares or Limit the Effect of Their Voting Power
---------------------------------------------------------------------
The price of our common stock is highly volatile.
The price of our common stock is highly volatile. During the period from
January 1, 1998 to February 16, 2000 the closing price of our common stock has
ranged from a high of $17.25 to a low of $0.75. Following periods of volatility
in the market price of a company's securities, securities class action
litigation has often been instituted against such a company. If similar
litigation were instituted against us, it could result in substantial costs and
a diversion of our management's attention and resources, which could have an
adverse effect on our business. The volatile fluctuations of the market price
are based on (1) the number of shares in the market at the time as well as the
number of shares we may be required to issue in the future, compared to the
market demand for our shares; (2) our performance and meeting expectations of
our performance, including the development and commercialization of our products
and proposed products; (3) changes in the home health care industry; and (4)
general economic and market conditions.
We have 902,576 shares of our common stock reserved for future issuances which
can dilute the value of your Star Multi Care common stock.
We have outstanding convertible securities, options and warrants that are
convertible into or exercisable for shares of common stock at discounts from
future market prices of the common stock. Those discounts could result in
substantial dilution to existing holders of common stock. The sale of the common
stock acquired at a discount
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could have a negative impact on the trading price of the common stock and could
increase the volatility in the trading price of the common stock.
To the extent the selling stockholders convert and then sell their
common stock, the common stock price may decrease due to the additional shares
in the market. This could allow the Shaar Fund to convert its convertible
preferred stock into greater amounts of common stock, the sales of which would
further depress the stock price. See the sections entitled "Dilution" and
"Description of Securities" for a summary of the number of shares which could be
issued upon conversion of the outstanding preferred stock at various market
prices.
The significant downward pressure on the price of the common stock as the
Shaar Funds converts and sell material amounts of common stock could encourage
short sales by the selling stockholders or others. This could place further
downward pressure on the price of the common stock.
In addition, we intend to seek additional financing which may result in
the issuance of additional shares of our capital stock and/or rights to acquire
additional shares of our capital stock. Those additional issuances of capital
would result in a reduction of your percentage interest in Star Multi Care.
If we cannot meet the NASDAQ SmallCap Market maintenance requirements, NASDAQ
may delist the common stock which could negatively affect the price of the
common stock and your ability to sell the common stock
In the future, we may not be able to meet the listing maintenance
requirements of the NASDAQ SmallCap Market and NASDAQ rules, which require,
among other things, minimum net tangible assets of $2 million, a minimum bid
price for our common stock of $1.00, and stockholder approval prior to the
issuance of securities in connection with a transaction involving the sale or
issuance of common stock equal to 20 percent or more of a company's outstanding
common stock before the issuance for less than the greater of book or market
value of the stock.
Although we currently comply with NASDAQ's listing maintenance
requirements, it is possible we may not meet the requirements in the future. For
example, the dilution resulting from the issuance of the convertible preferred
stock discussed above and subsequent conversion and sale of common stock could
have a substantial depressive effect on the common stock bid price causing it to
decrease below $1.00. If we were no longer in compliance with NASDAQ rules and
were unable to receive a waiver or achieve compliance, and if our common stock
were to be delisted from the SmallCap market, an investor in our company may
find it more difficult to sell our common stock. This lack of liquidity also may
make it more difficult for us to raise capital in the future.
If NASDAQ delists our common stock brokers would need to comply with the penny
stock regulations which could make it more difficult to sell your common stock
In the event that our securities are not listed on the NASDAQ SmallCap
Market, trading of the common stock would be conducted in the "pink sheets" or
through the NASD's Electronic Bulletin Board and covered by Rule 15g-9 under the
Securities Exchange Act of 1934. Under this rule, broker/dealers who recommend
these securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
purchaser and receive the purchaser's written agreement to a transaction prior
to sale. Securities are exempt from this rule if the market price is at least
$5.00 per share.
Although the Securities and Exchange Commission adopted regulations that
generally define a penny stock as any equity security that has a market price of
less than $5.00 per share, our common stock, albeit currently less than $5.00
per share, does not constitute penny stock because our common stock is quoted on
NASDAQ and our net tangible assets currently exceed $2.0 million. If in the
future our common stock falls within the definition of penny
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<PAGE>
stock, these regulations would require the delivery, prior to any transaction
involving our common stock, of a disclosure schedule explaining the penny stock
market and the risks associated with it. Furthermore, the ability of
broker/dealers to sell the common stock and the ability of purchasers in this
offering to sell their securities in the secondary market would be limited. As a
result, the market liquidity for the common stock would be severely and
adversely affected. These or other regulations in the future could negatively
affect the market for these securities.
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<PAGE>
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements which involve
substantial risks and uncertainties. These forward-looking statements can
generally be identified because the context of the statement includes words such
as "may," "will," "except," "anticipate," "intend," "estimate," "continue,"
"believe," or other similar words. Similarly, statements that describe our
future plans, objectives and goals are also forward-looking statements. Our
factual results, performance or achievements could differ materially from those
expressed or implied in these forward-looking statements as a result of certain
factors, including those listed in "Risk Factors" and elsewhere in this
prospectus.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C. New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public over
the Internet at the SEC's Website at "http://www.sec.gov."
We have filed with the SEC a registration statement on Form S-3 to
register the shares being offered. This prospectus is part of that registration
statement and, as permitted by the SEC's rules, does not contain all the
information included in the registration statement. For further information with
respect to us and our common stock, you should refer to the registration
statement and to the exhibits and schedules filed as part of the registration
statement, as well as the documents discussed below.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update or supersede this information.
This prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement or incorporated in the registration statement by
reference.
We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 (File No. 0-19041) until all of the shares
are sold:
o Annual Report on Form 10-KSB for the fiscal year ended May 31,
1999;
o Quarterly Reports on Form 10-QSB for the periods ended August 31,
1999 and November 30, 1999; and
o The description of our common stock contained in the registration
statement on Form S-4 filed on July 19, 1996, including all
amendments or reports filed for the purpose of updating that
description.
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<PAGE>
You may request a copy of these filings, at no cost, by writing to us at
33 Walt Whitman Road, Suite 302, Huntington Station, NY 11746, (516) 423-6689,
Attention: Stephen Sternbach.
You can review and copy the registration statement, its exhibits and
schedules, as well as the documents listed below, at the public reference
facilities maintained by the SEC as described above. The registration statement,
including its exhibits and schedules, are also available on the SEC's web site.
USE OF PROCEEDS
The selling stockholders are selling all of the shares covered by this
prospectus for their own accounts. Accordingly, we will not receive any proceeds
from the resale of the shares.
We will receive proceeds from the exercise, if any, of the warrants. We
will use those proceeds, if any, for working capital and general corporate
purposes.
We will bear the expenses relating to this registration, other than
discounts and commissions, which will be paid by the selling stockholders.
DILUTION
As of February 23, 2000, we had issued and outstanding 1,778,130 shares of
common stock. At that date, there were an additional 902,576 shares of common
stock reserved for possible future issuances as follows:
o options to purchase 487,642 shares at an exercise price between
$2.775 and $7.0625 per share. We have registered the shares
issuable upon exercise of the options under the Securities Act;
o warrants to purchase 16,666 shares at a price of $5.175 per share.
Of the 16,666 shares of common stock, 16,666 shares are covered by
this prospectus and will be freely tradable without restriction
(subject to prospectus delivery requirements) on the effective date
of the registration statement; and
o 398,268 shares issuable upon conversion of 575 shares of series A
8% preferred stock. Of the 398,268 shares of common stock,
shares relate to the conversion of 575 shares of series A 8%
preferred stock for which we have received conversion notices.
Of the 398,268 shares of common stock, 398,268 shares are covered
by this prospectus and will be freely tradable without
restriction (subject to prospectus delivery requirements) on the
effective date of the registration statement.
During the terms of the outstanding options, warrants and the unit
purchase option, we must give the holders the opportunity to profit from a rise
in the market price of the common stock. The existence of the options, the
warrants and the unit purchase option may adversely affect the terms on which we
may obtain additional equity financing. Moreover, the holders are likely to
exercise their rights to acquire common stock at a time when we would otherwise
be able to obtain capital with more favorable terms than we could obtain through
the exercise of such securities.
Dilution Effects of the Conversion of Outstanding Preferred Stock
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<PAGE>
The outstanding series A 8% preferred stock is convertible into common
stock over time at the discretion of the holders. If the holders of this
preferred stock were able to fully convert their shares into common stock on
February 29, 2000 and elected to do so, approximately 174,078 additional shares
of common stock would be issued. In addition, you should note the following:
o The outstanding convertible series A 8% preferred securities are
convertible at a floating rate based on the historical market price
of the common stock. As a result, the lower the stock price
preceding the time the holder converts, the more common shares the
holder will receive upon conversion.
o To the extent the selling stockholders convert and then sell their
common stock, the common stock price may decrease due to the
additional shares in the market. This could allow the selling
stockholders to convert their convertible preferred stock into
greater amounts of common stock, the sales of which would further
depress the stock price.
o The significant downward pressure on the price of the common stock
as the Shaar Funds convert and sell material amounts of common stock
could encourage short sales by the selling stockholders or others.
This could place further downward pressure on the price of the
common stock.
o The conversion of the convertible preferred stock may result in
substantial dilution to the interests of other holders of common
stock since each holder of convertible preferred may ultimately
convert and sell the full amount issuable upon conversion. In
this regard, even though each selling stockholder may not covert
its preferred stock into more than 4.99% of the then outstanding
common stock, this restriction does not prevent a selling
stockholder from converting and selling some of its holding and
then converting the rest of its holdings. In this way, an
individual selling stockholder could sell more than 4.99% of the
outstanding common stock while never holding more than 4.99% of
the outstanding common stock at a time.
SELLING STOCKHOLDERS
This prospectus covers the resale by the selling stockholders of up
to 398,268 shares of our common stock to be issued upon the conversion of
our series A 8% preferred stock, which amount of shares is an estimate and
is not a prediction of the actual number or shares of common stock we will
issue upon conversion of the series A 8% preferred stock. This prospectus
also covers the resale by the selling stockholders of up to 16,667 shares
of our common stock issuable upon exercise of warrants issued in
connection with the private placement of series E preferred stock.
The following table lists certain information regarding the selling
stockholders' ownership of shares of our common stock as of January 21,
2000, and as adjusted to reflect the sale of the shares. Information
concerning the selling stockholders, their pledgees, donees and other
non-sale transferees who may become selling stockholders, may change from
time to time. To the extent the selling stockholders or any of their
representatives advise us of such changes, we will report those changes in
a prospectus supplement to the extent required. See "Plan of
Distribution."
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<PAGE>
<TABLE>
<CAPTION>
Shares of Percentage of Shares of ----------------
Common Stock Common Stock Common Shares of
Owned Prior Owned Prior to Stock to be Stock Owned
to Offering the Offering Sold after Offering
----------------
Number Percent
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shaar Fund, Ltd. (2) 14,687 (1) * 429,622 (1) 0 *
Total 14,687 * 429,622 0 *
</TABLE>
* Less than 1%
(1) Under the terms of a registration statement between Star Multi Care
and the Shaar Fund, we agreed to register 100% of the common stock
issuable upon conversion of 575 shares of series A preferred stock
and warrants to purchase 16,667 shares of common stock at $5.175 per
share.
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<PAGE>
Description of Private Placement Transactions
Series A 8% Preferred Stock
Shaar Fund, Ltd., the holder of the series A 8% preferred stock, acquired
its shares in a private placement transaction entered into on April 30, 1999.
The series A 8% preferred stock have the material rights and obligations
discussed below and under the section entitled "Description of Securities." We
have previously filed the agreements relating to these rights and obligations
with the SEC. We urge you to read them in their entirety.
Securities purchase agreement
On April 30, 1999, Star completed a private placement by the sale of
$575,000 Series A 8% Convertible Preferred Stock par value $1.00 per share to
the Shaar Fund, Ltd. ("Shaar"), providing Star net proceeds, after fees and
expenses, of $500,000. After sixty days, the preferred stock may be converted to
common stock equal to the lessor of: (a) 125% of the market price three trading
days immediately preceding the closing date, or (b) the market price of Star's
common stock discounted from 10% to 30%, such discount increasing with the
passage of time The preferred stock pays an 8% dividend payable quarterly that
may be converted into common stock at the option of Star. Shaar also received a
Common Stock Purchase Warrant for the right to purchase 16,667 common stock
shares of Star at 115% of the closing bid price on the trading day immediately
preceding the closing date of this sale. The common stock to be issued upon
conversion of preferred stock, the common stock to be issued upon exercise of
warrant, and common stock issued for payment of preferred stock dividend shall
be registered by Star under the Securities Act of 1933. By using the closing
price of Star's common stock on March 9, 2000 of $6.50, to calculate the number
of common stock share that may need to be issued should Shaar convert all of its
preferred stock, the preferred stock may be converted into 126,374 shares of
common stock.
Registration rights agreement
In connection with our sale of series A 8% preferred stock, we agreed to
file a registration statement covering the resale of the common stock issuable
upon conversion of the series A 8% preferred stock and exercise of the warrants
by May 30, 1999 and cause the registration statement to be declared effective by
the SEC by October 28, 1999.
[As long as the registration statement is not declared effective after
October 28, 1999, we would have to pay to the holders liquidated damages equal
to 2.0% of the total purchase price for the first 30 day period after October
28, 1999 until the registration statement has been declared effective and 2% of
the purchase price paid by all investors for all shares of series A 8% preferred
stock purchased and then outstanding for each subsequent 30 day period until the
registration statement was declared effective. In no event, however, shall
liquidated damages be less than $25,000.]
Warrants
We also issued warrants to purchase 16,667 shares of our common stock to
the purchasers of the series A 8% preferred stock. The warrants are exercisable
at $1.725. All of the warrants have adjustment provisions for standard dilution
events including stock splits, stock dividends and similar
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<PAGE>
transactions. Therefore, as a result of a one for three reverse stock split, we
have warrants to purchase 16,667 shares of common stock outstanding.
DESCRIPTION OF SECURITIES
The authorized capital stock of Star consists of 5,000,000 shares of
common stock $.001 par value per share. On December 10, 1999, there were issued
and outstanding 1,778,130 shares of common stock. Additionally, Star has
authorized 5,000,000 shares of preferred stock $1.00 par value per share. The
Company has authorized 600 shares of series A 8% preferred stock. On December
13, 1999, there were issued and outstanding 575 shares of the series A 8%
preferred stock. The holders of the series A 8% preferred stock have no voting
power, except as otherwise provided by the New York Business Corporation Law
("NYBCL"), and in Article 7 and Article 8 of Article Fifth of Star's Certificate
of Incorporation.
Series A 8% Preferred Stock
On April 30, 1999, Star completed a private placement by the sale of
$575,000 Series A 8% Convertible Preferred Stock par value $1.00 per share to
the Shaar Fund, Ltd., providing Star net proceeds, after fees and expenses, of
$500,000. After sixty days, the preferred stock may be converted to common stock
equal to the lessor of: (a) 125% of the market price three trading days
immediately preceding the closing date, or (b) the market price of Star's common
stock discounted from 10% to 30%, such discount increasing with the passage of
time, as set forth below on Schedule I. Under the terms of the Registration
Rights Agreement regarding the sale of the preferred stock, Star has an
obligation the file a registration statement with the Securities and Exchange
Commission within 30 days of the closing date of the sale of the preferred
stock. The registration statement must become effective within 150 days. The
method of conversion of the preferred stock to common stock is set forth above
under "Selling Shareholders".
NASDAQ Marketplace Rules require that a company obtain shareholder
approval prior to the sale of common stock, or stock convertible into common
stock that would represent twenty percent or more of the voting control of the
company. The sale of the preferred stock did not require shareholder approval,
as Article Fifth of Star's Certificate of Incorporation that sets forth the
designations, rights and preferences of the preferred stock specifically limits
the conversion of the preferred stock into common, should such conversion result
in the holders acquiring more than 19.99% of the voting control of Star.
Schedule I
Conversion Rates
As used in this Schedule I, "Closing Bid Price" means the closing bid
price for the common stock, par value $.001 per share, as reported by the
National Association of Securities Dealers NASDAQ Stock Market (or any other
exchange or over-the-counter market upon which the common stock is admitted and
listed for trading) for any trading day.
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<PAGE>
Days after Funding Date Price
60-90 90% of the lowest Closing Bid Price for the 10
day period prior to conversion
91-120 85% of the lowest Closing Bid Price for the 13
day period prior to conversion
121-150 82.5% of the lowest Closing Bid Price for the
15 day period prior to conversion
151-180 80% of the lowest Closing Bid Price for the 17
day period prior to conversion
181-210 77.5% of the lowest Closing Bid Price for the
19 day period prior to conversion
211-240 75% of the lowest Closing Bid Price for the 22
day period prior to conversion
241-270 72.5% of the lowest Closing Bid Price for the
25 day period prior to conversion
271- maturity 70% of the lowest Closing Bid Price for the 28
day period prior to conversion
Warrant Shares
The investor purchasing the preferred stock discussed above, also received a
Common Stock Purchase Warrant for the right to purchase 16,667 common stock
shares of Star at 115% of the closing bid price on the trading day immediately
preceding the closing date of this sale. Under the terms of the Registration
Rights Agreement regarding the sale of the preferred stock and the issuance of
the warrant, Star has an obligation the file a registration statement with the
Securities and Exchange Commission within 30 days of the closing date of the
sale of the preferred stock. The registration statement must become effective
within 150 days.
Dividend Shares
The preferred stock pays an 8% dividend payable quarterly that may be converted
into common stock at the option of Star. Under the terms of the Registration
Rights Agreement regarding the sale of the preferred stock and the issuance of
the warrant, Star has an obligation the file a registration statement
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<PAGE>
with the Securities and Exchange Commission within 30 days of the closing date
of the sale of the preferred stock. The registration statement must become
effective within 150 days.
Transfer Agent and Registrar
Continental Stock Transfer & Trust Company is our Transfer Agent and
Registrar for our common stock and the redeemable warrants.
PLAN OF DISTRIBUTION
The selling stockholders and their pledgees, donees, transferees and other
subsequent owners, may offer their shares at various times in one or more of the
following transactions:
o on any U.S. securities exchange on which our common stock may be
listed at the time of sale
o in the over-the-counter market
o in privately negotiated transactions
o in connection with short sales; or
o in a combination of any of the above transactions.
The selling stockholders may offer their shares of common stock at
prevailing market prices at the time of sale, at prices related to those
prevailing market prices, at negotiated prices or at fixed prices.
The selling stockholders may also sell the shares under Rule 144 instead
of under this prospectus, if Rule 144 is available for those sales.
The transactions in the shares covered by this prospectus may be effected
by one or more of the following methods:
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o purchases by a broker or dealer as principal, and the resale by that
broker or dealer for its account under this prospectus, including
resale to another broker or dealer;
o block trades in which the broker or dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal in order to facilitate the transaction; or
o negotiated transactions between selling stockholders and
purchasers without a broker or dealer.
The selling stockholders and any broker-dealers or other persons acting on
the behalf of parties that participate in the distribution of the shares may be
deemed to be underwriters. Any commissions or profits they receive on the resale
of the shares may be deemed to be underwriting discounts and commissions under
the Securities Act.
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<PAGE>
As of the date of this prospectus, we are not aware of any agreement,
arrangement or understanding between any broker or dealer and any of the selling
stockholders with respect to the offer or sale of the shares under this
prospectus.
We have advised the selling stockholders that during the time each is
engaged in distributing shares covered by this prospectus, each must comply with
the requirements of the Securities Act and Rule 10b-5 and Regulation M under the
Exchange Act. Under those rules and regulations, they:
o may not engage in any stabilization activity in connection with
our securities;
o must furnish each broker which offers common stock covered by this
prospectus with the number of copies of this prospectus which are
required by each broker; and
o may not bid for or purchase any of our securities or attempt to
induce any person to purchase any of our securities other than as
permitted under the Exchange Act.
In the purchase agreements and warrants we executed in connection with the
transactions with the selling stockholders we agreed to indemnify and hold
harmless each selling stockholder against liabilities under the Securities Act,
which may be based upon, among other things, any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of a
material fact, unless made or omitted in reliance upon written information
provided to us by that selling stockholder. We have agreed to bear the expenses
incident to the registration of the shares, other than selling discounts and
commissions.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 722 of the New York Business Corporation Law allows companies to
indemnify their directors and officers against expenses, judgments, fines and
amounts paid in settlement under the conditions and limitations described in the
law. Our certificate of incorporation authorizes us to indemnify our officers,
directors and other agent to the fullest extent permitted under New York law.
Our certificate of incorporation provides that a director is not
personally liable for monetary damages to us or our stockholders for breach of
his or her fiduciary duties as a director. A director will be held liable for a
breach of his or her duty of loyalty to us or our stockholders, his or her
intentional misconduct or willful violation of law, actions or in actions not in
good faith, an unlawful stock purchase or payment of a dividend under New York
law, or transactions from which the director derives an improper personal
benefit. This limitation of liability does not affect the availability of
equitable remedies against the director including injunctive relief or
rescission.
We have purchased a directors and officers liability and reimbursement
policy that covers liabilities of our directors and officers arising out of
claims based upon acts or omissions in their capacities as directors and
officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, we have been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
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<PAGE>
LEGAL MATTERS
In connection with this registration statement, the validity of the shares
being registered will be passed upon for Star by Muenz & Meritz, P.C., Dix
Hills, New York.
EXPERTS
The consolidated balance sheet of Star as of May 31, 1999 and the
consolidated statement of operations, stockholder's equity and cash flows for
each of the three years for the periods ended December 31, 1999, 1998 and 1997,
incorporated by reference in this prospectus from Star's Annual Report on Form
10-K for the period ended May 31, 1999, have been incorporated herein in
reliance on the report of Holtz Rubenstein & Co., LLP given on the authority of
that firm as experts in accounting and auditing.
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======================================== =====================================
We have not authorized any
dealer, salesperson or any other 429,622
person to give any information or to SHARES OF COMMON STOCK
represent anything not contained in
this prospectus. You must not rely on
any unauthorized information. This
prospectus does not offer to sell or
buy any shares in any jurisdiction
where it is unlawful. The information
in this prospectus is current as of STAR MULTI CARE CORPORATION
_________________, 2000.
TABLE OF CONTENTS
Page
Risk Factors........................2
Where You Can Find More
Information About Us..........12
Use of Proceeds....................13
Dilution...........................13
Selling Stockholders ..............14
Description of Securities..........17 ------------
Plan of Distribution ..............19 PROSPECTUS
Indemnification for Securities ------------
Act Liabilities...............21
Legal Matters......................21
Experts ...........................21
________________________, 2000
======================================== =====================================
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses which will be
paid by us in connection with the issuance and distribution of the
securities being registered on this registration statement. The selling
stockholders will not incur any of the expenses set forth below. All
amounts shown are estimates.
Filing fee for registration statement.............$ 255.00
Legal fees and expenses...........................$10,000.00
Accounting expenses...............................$ 2,000.00
Printing and Publications .......................$ 500.00
----------
Total.............................................$12,755.00
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the New York State Business Corporation Law (the "NYBCL"),
indemnification of directors and officers may be provided to whatever extent
shall be authorized by a corporation's certificate of incorporation or a by-law
or vote adopted by the shareholders. However, the NYBCL does not permit
indemnification with respect to any matter as to which the director or officer
has been adjudicated not to have acted in good faith in the reasonable belief
that his action was in the best interest of the corporation. The NYBCL provides
that no indemnification of directors in shareholder derivative suits may be made
in respect of (i) a threatened action, or a pending action which is settled or
otherwise disposed of, or (ii) any claim, issue or matter as to which the
director or officer has been adjudged to be liable to the corporation, unless
and only to the extent that the court in which the action was brought or, if no
action is brought, any court of competent jurisdiction, determines upon
application that, in view of the circumstances of the case, the director or
officer is fairly and reasonably entitled to indemnity for such portion of the
settlement amount and expenses as the court deems proper. The statutory
provisions for indemnification and advancement of expenses are not exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled independently of the applicable statutory provision.
The STAR By-laws currently provide for indemnification of directors and officers
and advancement of indemnified expenses to the full extent now or hereafter
permitted by the NYBCL
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to officers, directors or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
II-1
<PAGE>
ITEM 16. EXHIBITS.
NUMBER DESCRIPTION OF EXHIBIT
2. (a) Agreement and Plan of Merger Among Star Multi
Care Services, Inc., EFCC Acquisition Corp. and
EXTENDED FAMILY CARE CORPORATION, dated as of January
3, 1997. Incorporated by reference to Exhibit 2(a)
to the Company's Registration Statement on Form S-4
dated July 29, 1997 (Registration No. 333-32171).
(b) First Amendment to Agreement and Plan of Merger among
the Company, EFCC Acquisition Corp. and Extended
Family Care Corporation, dated as of April 6, 1997.
Incorporated by reference to Exhibit 2(a) to the
Company's Registration Statement on Form S-4 dated
July 29, 1997 (Registration No. 333-32171).
3. (a) * The Company's Certificate of Incorporation
filed April 25, 1961.
(b) * The Company's Certificate of Amendment to Certificate
of Incorporation filed February 22, 1989.
(c) * The Company's Certificate of Amendment to Certificate
of Incorporation filed December 4, 1990.
(d) The Company's Certificate of Amendment to Certificate of
Incorporation filed February 3, 1994. (Incorporated by
reference to Exhibit 3 (d) to the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31,
1994.)
(e) The Company's Certificate of Change filed March 2, 1995.
(Incorporated by reference to Exhibit 3(e) to the
Company's Annual Report on Form 10-KSB for the fiscal
year ended May 31, 1995.)
(f) The Company's By-Laws, as amended on November 18, 1992
and September 13, 1993. (Incorporated by reference to
Exhibit 3 (e) to the Company's Annual Report on Form
10-KSB for the fiscal year ended May 31, 1994.)
(g) Amendment to the Certificate of Incorporation filed
on April 28, 1999.
(h) Amendment to the Certificate of Incorporation filed
February 14, 2000.
4.1 Registration Rights Agreement between the Company and
the Shaar Fund Ltd. dated April 26, 1999.
5.1 Legal opinion of Muenz & Meritz, P.C.
9. (a) Sternbach Proxy
(b) Voting Trust Agreement dated as of June 20, 1996 by and
among EFCC, Coss, Arbor, the Voting Trustee of the
Issuer and Kaufman.
10. (a) * Form of Indemnification Agreement between the Company
and Stephen Sternbach.
(b) Employment Agreement, dated as of December 3, 1995
between the Company and Stephen Sternbach. (Incorporated
by reference to
II-2
<PAGE>
Exhibit 10.(x) to the Company's Quarterly Report on Form
10-QSB for the quarterly period ended February 29,
1996.)
(c) * The Company's 1991 Incentive Stock Option Plan
(d) The Company's 1992 Incentive Stock Option Plan (as
amended and restated September 13, 1993). (Incorporated
by reference to Exhibit 10 (h) to the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31,
1994.)
(e) Amendment No. 1 to the Company's 1992 Stock Option
Plan. (Incorporated by reference to Exhibit 10.(z)
to the Company's Quarterly Report on Form 10-QSB for
the quarterly period ended February 29, 1996.)
(f) The Company's Employee Stock Purchase Plan, as amended
on December 15, 1995. (Incorporated by reference to
Exhibit 10.(y) to the Company's Quarterly Report on Form
10-QSB for the quarterly period ended February 26,
1996.)
(g) Form of Incentive Stock Option Contract (Incorporated by
reference to Exhibit 10(j) to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31,
1993.)
(h) * Agreement relating to purchase of the Company among
Stephen Sternbach, Renee the Company and Leonard
Taubenblatt dated December 31, 1986.
(i) * New York State Department of Consumer Affairs
Employment Agency License.
(j) * New York State Health Department Home Care License.
(k) * New Jersey Employment agency License.
(l) Form of Indemnification Agreement between the Company
and directors and officers. (Incorporated by reference
to Exhibit 10(k) to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1992.)
(m) Asset Purchase Agreement dated as of November 1, 1991
by and among Unity Care Services, Inc., Unity
Healthcare Holding Company, Inc. and the Company.
(Incorporated by reference to Exhibit 10 (l) to the
Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1992.)
(n) Asset Purchase Agreement dated January 30, 1992 by
and among Unity Healthcare Holding Company, Inc.,
Unity Care Services, Inc. and the Company.
(Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K dated May 26,
1992.)
(o) Asset Purchase Agreement dated January 30, 1992 by
and between Unity Home Care of Florida, Inc. and the
Company. (Incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form 8-K dated May
26, 1992.)
(p) Employment Agreement dated February 15, 1990, between
Alan Spector and the Company, as assignee of Unity Home
Care of Florida, Inc. (Incorporated by reference to
Exhibit 10(o) to the
II-3
<PAGE>
Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1992.)
(q) Asset Purchase Agreement dated November 8, 1993 by
and between DSI Health Care Services, Inc. and Star
Multi Care Services of Long Island, Inc., a wholly
owned subsidiary of the Company. (Incorporated by
reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K dated November 22, 1993.)
(r) Asset Purchase Agreement dated as of January 6, 1995, as
amended, by and between Long Island Nursing Registry,
Inc. and the Company. (Incorporated by reference to
Exhibit 21 to the Company's Current Report on Form 8-K
dated May 19, 1995.)
(s) (s) Employment Agreement dated May 19, 1995 by and
between the Company and Gregory Turchan. (Incorporated
by reference to Exhibit 99.1 to the Company's Current
Report on Form 8-K dated May 19, 1995.)
(t) Loan Agreement dated November 1, 1995 by and between the
Company and Chase Manhattan Bank, N.A. (Incorporated by
reference to Exhibit 10.(w) to the Company's Quarterly
Report on Form 10-QSB for the quarterly period ended
November 30, 1995.)
(u) Lease dated December 7, 1998 between Lighthouse
Hicksville Limited Partnership, a New York limited
partnership, and Star Multi Care Services, Inc., a
Delaware corporation, for the Company's office space in
Hicksville incorporated to the Company's Form 10-Q for
period ended November 30, 1998 as Exhibit 10.1 therein.
(v) Securities Purchase Agreement between the Company and
the Shaar Fund, Ltd. dated April 26, 1999 filed as
Exhibit 10(v) in Form S-3/Amendment 2 filed December 14,
1999 filed as Exhibit 10(w) n Form S-3/Amendment 2 filed
December 14, 1999.
(w) Common Stock Purchase Warrant issued to the Shaar
Fund, Ltd pursuant to the Securities Purchase
Agreement between the Company and the Shaar Fund,
Ltd. dated April 26, 1999
16. (a) Letter dated April 25, 1995, as amended, from
Deloitte & Touche LLP to the Securities and Exchange
Commission. (Incorporated by reference to EFCC's
Current Report on Form 8-K/A dated March 21, 1995.)
21. List of subsidiaries.
23. (a) Consent of Holtz Rubenstein & Co., LLP.
(b) Consent of Ernst & Young LLP.
(c) Consent of Muenz & Meritz, P.C. included in Exhibit
5.1.
- ----------------------
* Incorporated by reference to the Company's Registration Statement on Form
S-18 dated May 14, 1991. (Registration No. 33-39697-NY)
ITEM 17. UNDERTAKINGS.
II-4
<PAGE>
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
II-5
<PAGE>
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of the issue.
The undersigned small business issuer hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement will be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time will be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Huntington Station, the State of New York on February
23, 2000.
STAR MULTI CARE CORPORATION
By: /s/ Stephen Sternbach
-----------------------------
Stephen Sternbach
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed below by the following
persons in the capacities and on February 23, 2000.
/s/ Stephen Sternbach Chairman of the Board,
- --------------------------------
Stephen Sternbach President and Chief Executive Officer
/s/ John P. Innes II Director
- --------------------------------
John P. Innes II
/s/ Matthew Solof Director
- --------------------------------
Matthew Solof
/s/ Charles Berdan Director
- --------------------------------
Charles Berdan
/s/ Gary L. Weinberger Director
- --------------------------------
Gary L. Weinberger
/s/ Gregory Turchan Senior Vice President, Chief Operating
- -------------------------------- Officer and Director
Gregory Turchan
II-7
<PAGE>
SECURITIES AND
EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
-------------
EXHIBITS TO AMENDMENT NO. 4 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
STAR MULTI CARE CORPORATION
(EXACT NAME OF ISSUER AS SPECIFIED
IN ITS CHARTER)
January 27, 2000
E-1
<PAGE>
NUMBER DESCRIPTION OF EXHIBIT
2. (a) Agreement and Plan of Merger Among Star Multi
Care Services, Inc., EFCC Acquisition Corp. and
EXTENDED FAMILY CARE CORPORATION, dated as of January
3, 1997. Incorporated by reference to Exhibit 2(a)
to the Company's Registration Statement on Form S-4
dated July 29, 1997 (Registration No. 333-32171).
(b) First Amendment to Agreement and Plan of Merger among
the Company, EFCC Acquisition Corp. and Extended
Family Care Corporation, dated as of April 6, 1997.
Incorporated by reference to Exhibit 2(a) to the
Company's Registration Statement on Form S-4 dated
July 29, 1997 (Registration No. 333-32171).
3. (a) * The Company's Certificate of Incorporation
filed April 25, 1961.
(b) * The Company's Certificate of Amendment to Certificate
of Incorporation filed February 22, 1989.
(c) * The Company's Certificate of Amendment to Certificate
of Incorporation filed December 4, 1990.
(d) The Company's Certificate of Amendment to Certificate of
Incorporation filed February 3, 1994. (Incorporated by
reference to Exhibit 3 (d) to the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31,
1994.)
(e) The Company's Certificate of Change filed March 2, 1995.
(Incorporated by reference to Exhibit 3(e) to the
Company's Annual Report on Form 10-KSB for the fiscal
year ended May 31, 1995.)
(f) The Company's By-Laws, as amended on November 18, 1992
and September 13, 1993. (Incorporated by reference to
Exhibit 3 (e) to the Company's Annual Report on Form
10-KSB for the fiscal year ended May 31, 1994.)
(g) Amendment to the Certificate of Incorporation filed
on April 28, 1999.
(h) Amendment to the Certificate of Incorporation filed
on February 14, 2000.
4.1 Registration Rights Agreement between the Company and
the Shaar Fund Ltd. dated April 26, 1999.
5.1 Legal opinion of Muenz & Meritz, P.C.
9. (a) Sternbach Proxy
(b) Voting Trust Agreement dated as of June 20, 1996 by and
among EFCC, Coss, Arbor, the Voting Trustee of the
Issuer and Kaufman.
10. (a) * Form of Indemnification Agreement between the Company
and Stephen Sternbach.
(b) Employment Agreement, dated as of December 3, 1995
between the Company and Stephen Sternbach. (Incorporated
by reference to
E-2
<PAGE>
Exhibit 10.(x) to the Company's Quarterly Report on Form
10-QSB for the quarterly period ended February 29,
1996.)
(c) * The Company's 1991 Incentive Stock Option Plan
(d) The Company's 1992 Incentive Stock Option Plan (as
amended and restated September 13, 1993). (Incorporated
by reference to Exhibit 10 (h) to the Company's Annual
Report on Form 10-KSB for the fiscal year ended May 31,
1994.)
(e) Amendment No. 1 to the Company's 1992 Stock Option
Plan. (Incorporated by reference to Exhibit 10.(z)
to the Company's Quarterly Report on Form 10-QSB for
the quarterly period ended February 29, 1996.)
(f) The Company's Employee Stock Purchase Plan, as amended
on December 15, 1995. (Incorporated by reference to
Exhibit 10.(y) to the Company's Quarterly Report on Form
10-QSB for the quarterly period ended February 26,
1996.)
(g) Form of Incentive Stock Option Contract (Incorporated by
reference to Exhibit 10(j) to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31,
1993.)
(h) * Agreement relating to purchase of the Company among
Stephen Sternbach, Renee the Company and Leonard
Taubenblatt dated December 31, 1986.
(i) * New York State Department of Consumer Affairs
Employment Agency License.
(j) * New York State Health Department Home Care License.
(k) * New Jersey Employment agency License.
(l) Form of Indemnification Agreement between the Company
and directors and officers. (Incorporated by reference
to Exhibit 10(k) to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1992.)
(m) Asset Purchase Agreement dated as of November 1, 1991
by and among Unity Care Services, Inc., Unity
Healthcare Holding Company, Inc. and the Company.
(Incorporated by reference to Exhibit 10 (l) to the
Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1992.)
(n) Asset Purchase Agreement dated January 30, 1992 by
and among Unity Healthcare Holding Company, Inc.,
Unity Care Services, Inc. and the Company.
(Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K dated May 26,
1992.)
(o) Asset Purchase Agreement dated January 30, 1992 by
and between Unity Home Care of Florida, Inc. and the
Company. (Incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form 8-K dated May
26, 1992.)
(p) Employment Agreement dated February 15, 1990, between
Alan Spector and the Company, as assignee of Unity Home
Care of Florida, Inc. (Incorporated by reference to
Exhibit 10(o) to the
E-3
<PAGE>
Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1992.)
(q) Asset Purchase Agreement dated November 8, 1993 by
and between DSI Health Care Services, Inc. and Star
Multi Care Services of Long Island, Inc., a wholly
owned subsidiary of the Company. (Incorporated by
reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K dated November 22, 1993.)
(r) Asset Purchase Agreement dated as of January 6, 1995, as
amended, by and between Long Island Nursing Registry,
Inc. and the Company. (Incorporated by reference to
Exhibit 21 to the Company's Current Report on Form 8-K
dated May 19, 1995.)
(s) Employment Agreement dated May 19, 1995 by and between
the Company and Gregory Turchan. (Incorporated by
reference to Exhibit 99.1 to the Company's Current
Report on Form 8-K dated May 19, 1995.)
(t) Loan Agreement dated November 1, 1995 by and between the
Company and Chase Manhattan Bank, N.A. (Incorporated by
reference to Exhibit 10.(w) to the Company's Quarterly
Report on Form 10-QSB for the quarterly period ended
November 30, 1995.)
(1) Lease dated December 7, 1998 between Lighthouse
Hicksville Limited Partnership, a New York limited
partnership, and Star Multi Care Services, Inc., a
Delaware corporation, for the Company's office space in
Hicksville incorporated to the Company's Form 10-Q for
period ended November 30, 1998 as Exhibit 10.1 therein.
(v) Securities Purchase Agreement between the Company and
the Shaar Fund, Ltd. dated April 26, 1999.
16. (a) Letter dated April 25, 1995, as amended, from
Deloitte & Touche LLP to the Securities and Exchange
Commission. (Incorporated by reference to EFCC's
Current Report on Form 8-K/A dated March 21, 1995.)
21. List of subsidiaries.
23. (a) Consent of Holtz Rubenstein & Co., LLP.
(b) Consent of Ernst & Young LLP.
(c) Consent of Muenz & Meritz, P.C. included in Exhibit
5.1.
- ---------------------
* Incorporated by reference to the Company's Registration Statement on
Form S-18 dated May 14, 1991. (Registration No. 33-39697-NY)
E-4
